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W.R. Berkley Beats Q3 Earnings Ests

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Property and casualty insurer W.R. Berkley Corp. (WRB - Free Report) reported third-quarter core operating earnings of 77 cents per share, 5 cents ahead of the Zacks Consensus Estimate. Earnings were also up by 26.2% year over year.

W.R. Berkley's earnings beat came on the back of higher premium written, pricing gains and a lower share count.

On a GAAP basis, W.R. Berkley's net income increased 36.6% year over year to 97 cents per share.

Revenue in the quarter, came in at $1.63 billion, up 15.0% year over year. The year-over-year increase was attributable to higher premiums earned, higher income from wholly owned investees and increased investment income.

W.R. Berkley’s net written premium for the quarter was approximately $1.42 billion, an increase of 11.6% year over year. The company saw broad-based growth with each of its operating segments reporting higher premium.

W.R. Berkley's total expenses also increased 11.6% year over year to $1.44 billion, due to an increase in loss and loss expenses, other operating cost and expenses from wholly-owned investees partly offset by lower interest expenses.

Consolidated combined ratio improved 190 basis points year over year to 93.9%.

Segment Details

Net premiums written in W.R. Berkley's Domestic Insurance segment increased 10.7% year over year to $1.05 billion. Combined ratio improved 220 basis points to 92.5% in the quarter.

Net premiums written in the International Insurance segment climbed 18.2% year over year to $166.1 million. Combined ratio improved 170 basis points year-over-year to 97.4%.

The Global Reinsurance segment reported a 10.9% increase in net premiums written to $203.1 million in the quarter. Combined ratio improved 80 basis points year-over-year to 97.5%.

Financial Update

W.R. Berkley's return on equity increased to 12.7% from 10.2% in the year ago quarter.

Book value per share as of Sep 30, 2013 increased to $32.32 from $31.66 as of Dec 31, 2012.

During the reported quarter, W.R. Berkley repurchased 194,838 shares at an aggregate cost of $8 million.

Our Take

W.R. Berkley has been reporting ahead of the expectations for the past several quarters. The company has maintained its trend of beating earnings estimates in the reported quarter as well. We expect the trend to continue going forward.

The company has positioned itself well to take advantage of hardening in the insurance market 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.

W.R. Berkley’s balance sheet, which is adequately capitalized, is another major company’s strength. The company has maintained its practice of increasing yearly dividends. In our view, the company is well poised to return value to its shareholders over the long term.

W.R. Berkley retains a Zacks Rank #3 (Hold).

The Chubb Corp. (CB - Free Report) , with a Zacks Rank #1 (Strong Buy), is slated to release their third-quarter earnings on Oct 23, also ACE Ltd with Zacks Rank #2 (Buy)  will release its results on the same day. Another player Everest Re Group Ltd. (RE - Free Report) with Zacks Rank #2 (Buy) is scheduled to report its third-quarter earnings on Oct 24.

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