W.R. Berkley Corporation’s (NYSE:WRB) first-quarter 2017 operating income of 70 cents per share missed the Zacks Consensus Estimate of 73 cents by 4.1%. Moreover, the bottom line deteriorated 12.5% year over year.
Increase in revenues was offset by the rise in expenses, which led to the underperformance. Reinsurance results remained affected by a competitive environment. However, the company witnessed growth in select areas where margins were attractive alongside gaining traction in some of its new ventures. Nonetheless, the company recorded improved investment results in the quarter.
Including net investment gains, net income inched up 3.2% year over year to 96 cents per share.
Behind the Headlines
W.R. Berkley’s net premiums written for the quarter were $1.6 billion, down 1% year over year. Lower premiums written at the Reinsurance segment resulted in the downside.
Operating revenues came in at $1.72 billion, up 3.7% year over year. However, the top line missed the Zacks Consensus Estimate of 1.77 billion.
Investment income climbed 14.4% year over year.
Total expenses increased 3.4% to $1.7 billion, primarily due to higher losses and loss expenses, interest expenses as well as other operating costs and expenses.
Consolidated combined ratio (a measure of underwriting profitability) deteriorated 220 basis points (bps) year over year to 95.7%.
Segment Details
Net premiums written in the Insurance segment inched up 1% year over year to $1.5 billion in the quarter. The increase was primarily driven by higher premiums written under workers’ compensation, commercial automobile and professional liability. Combined ratio in this segment deteriorated 80 bps year over year to 93.8%.
Net premiums written in the Reinsurance segment declined 17.2% year over year to $152.7 million due to substantially lower premiums written under casualty reinsurance and property reinsurance. Combined ratio deteriorated 1530 bps to 112.9%.
Financial Update
W.R. Berkley exited the first quarter with total assets worth $23.5 billion, up 0.8% from year-end 2016.
Book value per share rose 2.6% from year-end 2016 to $42.73 as of Mar 31, 2017.
Cash flow from operations plunged 46.4% year over year to $75.5 million.
The company’s return on equity deteriorated 60 bps to 9.8%.
Zacks Rank
Currently, W.R. Berkley has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other P&C Insurers
Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (NYSE:PGR) , The Travelers Companies, Inc. (NYSE:TRV) and RLI Corp. (NYSE:RLI) missed their respective Zacks Consensus Estimate.
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RLI Corp. (RLI): Free Stock Analysis Report
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
W.R. Berkley Corporation (WRB): Free Stock Analysis Report
Progressive Corporation (The) (PGR): Free Stock Analysis Report
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