W. R. Berkley Corporation, a leading insurance holding company, has reported its third quarter 2023 results. Net income increased by 45.7% to $334 million, with operating return on equity at 21.7% and return on equity at 19.8%. The company also achieved a record quarterly net investment income of $271 million, driven by a 59.3% increase in the core portfolio. Additionally, the company reported record net premiums written, growing 10.5% to $2.8 billion.
In terms of financial data, gross premiums written for the third quarter were $3,353,205, an increase from $3,081,938 in the same period last year. Net premiums written also saw an increase, reaching $2,848,459 compared to $2,577,274 in the third quarter of 2022. Net income to common stockholders was $333,586, a significant increase from $228,879 in the previous year. The net income per diluted share was $1.23 for the quarter, compared to $0.82 in the same period in 2022.
The company highlighted several key points from the third quarter, including the operating return on equity and return on equity of 21.7% and 19.8%, respectively, as well as the record net investment income of $270.9 million. They also mentioned that underwriting income and net income grew 34.7% and 45.7% to $258.7 million and $333.6 million, respectively. The average rate increases, excluding workers' compensation, were approximately 8.5%.
The company expressed optimism about the remainder of 2023 and the foreseeable future. They mentioned that the higher interest rate environment contributed to a meaningful year-over-year increase in investment income and anticipated this trend to continue. They also emphasized the strong underwriting profits and attractive risk-adjusted profitability in expanding areas.
W.R. Berkley returned losses of -8.0% last year, with its stock price reaching a high of $76.99 and a low of $55.5. Over the same period, the stock underperformed the S&P 500 index by -24.0%. As of April 2023, the company's 50-day average price was $64.17. W. R. Berkley Corporation, an insurance holding company, operates as a commercial lines writer in the United States and internationally. Based in Greenwich, CT, the large-cap Finance company has 8,186 full time employees. W.R. Berkley has offered a 0.6% dividend yield over the last 12 months.
Positive EPS Trend Sustained Through Excessive Leverage:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $7,692 | $7,902 | $8,099 | $9,455 | $11,166 | $11,629 |
| Interest Income (MM) | $157 | $153 | $151 | $147 | $130 | $127 |
| Operating Margins | 11.0% | 11.0% | 9.0% | 14.0% | 15.0% | 14.0% |
| Net Margins | 8.0% | 9.0% | 7.0% | 11.0% | 12.0% | 11.0% |
| Net Income (MM) | $649 | $684 | $533 | $1,031 | $1,385 | $1,264 |
| Depreciation & Amort. (MM) | $131 | $113 | $135 | $130 | $56 | $52 |
| Earnings Per Share | $3.33 | $3.52 | $1.87 | $3.66 | $4.94 | $4.54 |
| Free Cash Flow (MM) | $570 | $1,083 | $1,556 | $2,184 | $2,569 | $2,717 |
| Net Current Assets (MM) | -$875 | -$1,046 | -$1,427 | -$1,678 | -$2,738 | -$3,489 |
| Long Term Debt (MM) | $19,324 | $20,457 | $22,221 | $25,350 | $26,979 | $28,400 |
| Net Debt / EBITDA | 19.62 | 20.11 | 23.63 | 16.84 | 14.38 | 16.11 |
W.R. Berkley has growing revenues and no capital expenditures, a pattern of improving cash flows, and decent operating margins with a stable trend. However, the firm suffers from EPS growth achieved by reducing the number of outstanding shares and a highly leveraged balance sheet.
W.R. Berkley Is Fairly Valued:
W.R. Berkley has a trailing twelve month P/E ratio of 12.9, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of $5.68, the company has a forward P/E ratio of 11.3. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 5.3%. On this basis, the company's PEG ratio is 2.44, which suggests that it is overpriced. Furthermore, W.R. Berkley is likely overvalued compared to the book value of its equity, since its P/B ratio of 2.53 is higher than the sector average of 1.57.
There's an Analyst Consensus of Some Upside Potential for W.R. Berkley:
The 11 analysts following W.R. Berkley have set target prices ranging from $62.0 to $83.0 per share, for an average of $73.64 with a buy rating. As of April 2023, the company is trading -12.9% away from its average target price, indicating that there is an analyst consensus of some upside potential.
W.R. Berkley has a very low short interest because 1.7% of the company's shares are sold short. Institutions own 71.2% of the company's shares, and the insider ownership rate stands at 24.64%, suggesting a large amount of insider shareholders. The largest shareholder is Vanguard Group Inc, whose 10% stake in the company is worth $1,680,288,419.
