W.R. Berkley Q3 Profit Rises 36% to $137M; Rates on Renewed Policies Up 6.4%

October 22, 2013

W.R. Berkley Corp. reported $136.97 million net income for its 2013 third quarter, up 36 percent from $100.95 million income posted during the same period in 2012.

For the first nine months of this year, net income came in at $369.55 million, a 7 percent rise from $345.10 million income during the year-ago period.

W.R. Berkley — a Greenwich, Conn.-based insurance holding company that is among the largest commercial lines writers in the country — continues to report price increases. Its chairman and CEO William R. Berkley said in a statement Monday that his company is focusing on improving underwriting margins by continuing to increase rates and reducing the expense ratio.

The company said average rates on renewed policies rose 6.4 percent for the third quarter. (Looking at previous four quarters, Berkley had reported a 6.5 percent average rate hike for renewed policies for the 2013 second quarter, and a 7.3 percent average renewal rate hike for the 2013 first quarter. For the 2012 fourth quarter, the average rate increase on renewed policies was 6.5 percent, and for the 2012 third quarter, it was 7.0 percent.)

Net premiums written for the 2013 third quarter were $1.424 billion, rising 12 percent from $1.276 billion a year ago. Net premiums written for the first nine months of this year were $4.142 billion, up 13 percent from $3.670 billion a year ago.

The GAAP combined ratio for the latest third quarter was 93.9 percent, improving from 95.8 percent during the third quarter of 2012. The GAAP combined ratio for the first nine months of this year was 95.1 percent, also an improvement from 96.8 percent for the first nine months of 2012.

Investment income for the third quarter was $125.63 million, up 8 percent from $116.02 million a year ago. Investment income for the first nine months of this year was $405.30 million, a 7 percent decline from $434.89 million during the same period last year.

The return on equity was 12.7 percent for the latest quarter, the company said.

“The third quarter moved us forward in many ways. We continued to see our loss ratio improve and our return on equity increase,” said William R. Berkley, chairman and chief executive officer.

CEO Berkley said cumulative pricing in the company’s domestic insurance segment is up approximately 18 percent over the past three years. He said the company’s combined ratio should improve as these higher rates are fully reflected in earned premium. However, current prices on an inflation adjusted basis are still below the peak levels achieved in 2004, he added.

“Given current interest rates, we are focusing on improving underwriting margins by continuing to increase our rates and reducing our expense ratio,” Berkley said. “Our non-fixed income portfolio continued to generate substantial gains, driven by our equity securities. We are optimistic that overall investment returns will improve over the next eighteen months.”

He also commented that some standard markets “lacked the appropriate knowledge” to understand the risks they were assuming in the specialty arena during the softer part of the market. “Now a number of these overly aggressive competitors are starting to pay the price for their lack of underwriting discipline,” he said. “Price alone will not solve their problems. This will create further opportunities.”

“We expect continued improvement in our combined ratio over the coming year,” Berkley said.

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