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W.R. Berkley Corp.  (WRB - Analyst Report) reported third-quarter core operating earnings of 61 cents per share, beating the Zacks Consensus Estimate by 7 cents. The earnings beat came on the back of higher premium written, pricing gains, higher investment income and a lower share count. Earnings were also up 18% year over year.

On a GAAP basis, net income surged 32% year over year to 71 cents per share.
 
Revenue, in the quarter, came in at $1.42 billion, up 11% year over year. The year-over-year increase was attributable to higher premiums earned, investment income, insurance fee service and investment gains.
 
Berkley’s net written premium for the quarter was approximately $1.28 billion, an increase of 13.3% year over year. The company saw broad-based growth with each of its operating segments reporting higher premium.
 
Net investment income was $116.0 million in the quarter, up 1.8% year over year.
 
Total expenses also increased 9.3% year over year to $1.29 billion due to an increase in loss and loss expenses, other operating costs, and interest expenses.
 
Berkley recorded a combined ratio of 95.8%, better than 99 .3% in the prior-year quarter.
 
Segment Details
 
The Specialty segment’s net premium written escalated 18.2% year over year to $452.0 million. Combined ratio improved 330 basis points to 94.5% in the quarter.
 
Net premiums written in the Regional segment climbed 6.5% year over year to $295.0 million. Combined ratio improved substantially to 93.1% from 110.1% in the year-ago period.
 
The Alternative Markets reported a 17% increase in net premiums written to $205.2 million in the quarter. Combined ratio remained unchanged compared with the prior year quarter’s level of 97.7%.
 
Net premiums written in the Reinsurance segment increased 8.3% year over year to $123.1 million. Combined ratio improved 430 basis points year over year to 98.1%.
 
The International segment recorded net premiums written growth of 12.5% year over year to $200.5 million. Combined ratio remained in line with the year-ago period at 99.1%.
 
Book value per share, a measure of net worth, increased to $31.81 from $28.75 per share, at the end of 2011. Return on equity increased 180 basis points year over year to 10.2%, signifying improved profitability.
 
Berkley repurchased 3.3 million shares of its common stock at an average cost of $37.25 per share.
 
Our Take
 
Berkley has maintained its trend of beating earnings estimates in the reported quarter as well. The company has positioned itself well by forming several new units over the past few years. Premiums written for its core business have increased and the new units are accruing to earnings. Average renewal rates are on the rise and so is the price trend.
 
Berkley’s balance sheet is one of its major strengths. The company has maintained its practice of increasing yearly dividends. In our view, Berkley is well poised to return value to its shareholders over the long term.
 
Berkley currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are also maintaining our long-term ‘Neutral’ recommendation on the shares.
 
Last week, Berkley’s peer The Travelers Companies (TRV - Analyst Report) reported operating earnings of $2.22 per share, outshining the Zacks Consensus Estimate of $1.61 per share

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