It has been about a month since the last earnings report for W.R. Berkley (WRB). Shares have added about 4.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is W.R. Berkley due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
W.R. Berkley Q2 Earnings Beat Estimates, Revenues Miss
W.R. Berkley's second-quarter 2019 operating income of 82 cents per share beat the Zacks Consensus Estimate of 64 cents by 28.1%. Also, the bottom line improved 26.2% year over year on higher pre-tax underwriting profits and net investment income.
Behind the Headlines
W.R. Berkley’s net premiums written for the quarter under review were $1.7 billion, up 7.3% year over year. Higher premiums written at both the Insurance and Reinsurance & Monoline Excess segments contributed to this upside.
Operating revenues came in at $1.9 billion, up 5.4% year over year, mainly owing to higher net premiums earned and investment income. However, the top line missed the consensus estimate by 3%.
Investment income increased 22.5% year over year to $188.3 million, driven by better-than-average investment fund performance.
Total expenses increased 4% to $1.7 billion, primarily on higher losses and loss expenses, costs from non-insurance businesses plus interest expenses.
Catastrophe loss totaled $25.5 million in the quarter, reflecting an increase of 88.1% year over year. Consolidated combined ratio (a measure of underwriting profitability) was 93.9%, up 100 basis points (bps) year over year.
Segment Details
Net premiums written at the Insurance segment grew 5.6% year over year to $1.6 billion in the quarter, driven by higher premiums at commercial automobile, professional liability, other liability and short-tail lines. Combined ratio improved 150 bps to 93.8%.
Net premiums written in the Reinsurance & Monoline Excess segment increased 27.3% year over year to $168.9 million on higher casualty reinsurance, monoline excess and property reinsurance premium. Combined ratio deteriorated 380 bps to 95.2%.
Financial Update
W.R. Berkley exited the second quarter with total assets worth $26.5 billion, up 6.4% from year-end 2018.
Book value per share improved 10.3% from 2018 end to $31.36 as of Jun 30, 2019.
Cash flow from operations totaled $324.3 million in the first half of 2019, up 132.7% year over year.
The company’s return on equity expanded 260 bps to 15.9%.
The company returned $112 million to shareholders in the reported quarter, including $92 million of special dividends.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 5.18% due to these changes.
VGM Scores
Currently, W.R. Berkley has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise W.R. Berkley has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
W.R. Berkley Corporation (WRB): Free Stock Analysis Report
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