W.R. Berkley Surpasses Estimates

W.R. Berkley’s (NYSE:WRB) fourth quarter earnings of 71 cents per share were ahead of the Zacks Consensus Estimate of 68 cents. In the year-ago quarter, the company had reported earnings of 74 cents per share. Earnings for the reported quarter were helped by an increase in net investment income, partially offset by lower premiums earned.

Net income was $134.3 million or 81 cents, compared with $40.3 million or 24 cents in the prior-year quarter. The results benefited from investment gains of $13.3 million coupled with an income of $3.3 million from investment funds.

Net premium written declined 6.8% on a year-over-year basis to $828.4 million. Premium compression was led by lower business written in Regional, Alternative and Specialty segments. W.R. Berkley has been experiencing pressure on net premiums written since the fourth quarter of 2006.

New business volume moderated during the reported quarter. These declines have been the result of increased competition, downward pressure on pricing and a disciplined underwriting approach.

Net investment income increased 24.3% year-over-year to $141.2 million. Net invested assets increased to $13.7 billion from $12.5 billion in the prior-year quarter.

Combined ratio remained unchanged at 92.6% on a sequential basis, though it deteriorated 110 basis points year-over-year to 94.2%.

Berkley enjoys a strong balance sheet and a lack of material exposure from legacy issues such as asbestos and environmental liabilities, which has resulted in additional visibility to the company’s earnings stream in the recent years. Operating return on equity improved during the quarter to 15.5% from 13.8% in the prior-year period.

The company’s disciplined underwriting culture and conservative investment philosophy have led to book value growth to $22.97 per share, compared to $18.87 per share at the end of 2008. 

Berkley also increased its share repurchase authorization by 10 million shares, to 11.5 million shares. The company has been making share repurchases from time to time, displaying prudent capital management.

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