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W.R. Berkley (WRB) Up 5.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for W.R. Berkley (WRB - Free Report) . Shares have added about 5.8% 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 the most recent earnings report in order to get a better handle on the important drivers.

W.R. Berkley Q3 Earnings and Revenues Beat Estimates

W.R. Berkley Corporation’s third-quarter 2020 operating income of 65 cents per share beat the Zacks Consensus Estimate of 62 cents by 4.8%. However, the bottom line plunged 22.6% year over year due to higher catastrophe losses. The COVID-19 pandemic had an adverse impact on the company’s results.

Behind the Headlines

W.R. Berkley’s net premiums written for the quarter under review were $1.9 billion, up 7.4% year over year, primarily due to higher premiums written at the Insurance and Reinsurance & Monoline Excess segment.

Operating revenues came in at $2 billion, up 1.9% year over year, on the back of higher net premiums written. Moreover, the top line beat the consensus estimate by 0.4%.

Investment income decreased 11.8% year over year to $142.7 million.

Total expenses increased 4% to $1.8 billion, primarily due to higher losses and loss expenses, other operating costs and expenses and interest expense.

Catastrophe losses of $72.7 million in the quarter widened from $31.5 million incurred in the year-ago quarter. Consolidated combined ratio (a measure of underwriting profitability) was 93.7%, deteriorated 10 basis points (bps) year over year.

Segment Details

Net premiums written at the Insurance segment increased 6.5% year over year to $1.6 billion in the quarter, primarily due to higher short-tail lines, commercial automobile and professional liability. Combined ratio deteriorated 110 bps to 94.1%.

Net premiums written in the Reinsurance & Monoline Excess segment increased 13.7% year over year to $251 million on higher casualty reinsurance, monoline excess, and property reinsurance. Combined ratio improved 800 bps to 90.3%.

Financial Update

W.R. Berkley exited the third quarter with total assets worth $28.2 billion, up 5.9% from year-end 2020.

Tangible book value per share increased 1.6% from 2019 end to $32.38 as of Sep 30, 2020.

Cash flow from operations was $557 million in the third quarter of 2020, up 41.9% year over year.

The company’s return on equity contracted 220 bps to 10%.

The company repurchased shares for $13 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, W.R. Berkley has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

W.R. Berkley has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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