W.R. Berkley Posts $101M Q3 Profit; Rates on Renewed Policies Up 7%

By | October 23, 2012

Commercial lines insurer W.R. Berkley Corp. reported $100.95 million net profit for its third quarter, up 32.1 percent from $76.41 million reported during the same period one year ago.

The Greenwich, Conn.-based insurer said its quarterly results benefited from “significant rate increases” and positive trends in most lines of business. The earnings also got a boost from smaller catastrophe losses.

The net premiums written for the quarter were $1.276 billion, up 13.3 percent from $1.126 billion reported during the same period one year ago.

The GAAP combined ratio came in at 95.8 percent, improving from 99.3 percent one year ago.

Losses from catastrophes were $8.75 million, down significantly from the $51.15 million losses posted one year ago.

Net investment income was $116 million, improving 1.7 percent from $114 million one year ago.

W.R. Berkley — one of the largest commercial lines writers in the country — said average rates on renewed policies increased 7.0 percent in the third quarter.

Bullish on Rates Momentum

In his earnings commentary, CEO William R. Berkley provided a bullish view on the rates momentum. “It is clear, as we enter the second year of significant rate increases, that the cyclical change is no longer hypothetical,” he said.

Berkley said the rate increases continue to be available for disciplined companies that recognize the need for adequate returns. The consequence of declining fixed income yields has heightened the need for meaningful improvement in underwriting margin, he said.

“We anticipate continued price increases over the next 12 months,” Berkley said.

And while the company’s current yields were virtually unchanged from a year ago, investment returns still represent the most serious obstacle to achieving adequate returns, he said.

“With 10-year Treasury yields hovering around two percent, it is a challenge to maintain our current portfolio yield,” Berkley said. “Our shift in focus toward investing more for capital gains has rewarded us as we achieved significant income in the first three quarters and anticipate gains in excess of $75 million in the fourth quarter.”

“We remain confident that we will be able to grow and raise prices for the foreseeable future.”

Looking at individual business segments:

• The Specialty segment had $452.00 million in net premiums written, increasing from $382.54 million a year ago. But the GAAP combined ratio deteriorated to 94.5 percent, compared to 91.2 percent reported one year ago.

• The Regional segment had $295.12 million in net premiums written, up from $277.18 million a year ago. The GAAP combined ratio improved to 93.1 percent, from 110.1 percent one year ago.

• The Alternative Markets segment had $205.21 million in net premiums written, up from $174.74 million last year. The GAAP combined ratio rose slightly to 97.7 percent, from 97.6 percent one year ago.

• The Reinsurance segment had $123.10 million in net premiums written, up from $113.62 million one year ago. The GAAP combined ratio improved to 98.1 percent, from 102.4 percent.

• The International segment reported $200.46 million in net premiums written, up from $178.06 million one year ago. The GAAP combined ratio stayed the same at 99.1 percent.

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