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W.R. Berkley (WRB) Up 3.6% Since Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for W.R. Berkley Corporation (WRB - Free Report) . Shares have added about 3.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is WRB 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 (WRB - Free Report) Q1 Earnings and Revenues Beat Estimates

W.R. Berkley Corporation’s first-quarter 2018 operating income of $1 per share beat the Zacks Consensus Estimate of 89 cents by 12.4%. Also, the bottom line surged 42.9% year over year.

The company witnessed improved revenues attributable to higher premiums as well as increase in net investment income. Also, expenses slightly declined in the reported quarter.

Including net realized and unrealized pre-tax gains, net income improved 35.4% from the year-ago quarter to $1.30 per share.

Behind the Headlines

W.R. Berkley’s net premiums written for the quarter under review were $1.7 billion, up 1.1% year over year. Higher premiums written at the Insurance segment resulted in the upside. However, lower premiums written at the Reinsurance segment partially offset this improvement.

Operating revenues came in at $1.8 billion, up 1.1% year over year, mainly owing to higher net premiums earned and improved net investment income. Moreover, the top line beat the Zacks Consensus Estimate by 1.2%.

Investment income rose 17.2% year over year to $174.5 million.

Total expenses dipped 0.3% to $1.7 billion, primarily on lower loss and loss expenses.

Catastrophe loss totaled $7 million in the quarter. Consolidated combined ratio (a measure of underwriting profitability) came in at 94.6%, improving 110 basis points (bps) from the prior-year quarter.

Segment Details

Net premiums written in the Insurance segment grew 3.3% year over year to $1.5 billion in the quarter. This increase was attributable to higher premiums written under other liability, short-tail lines, commercial automobile and professional liability. Combined ratio in this segment improved 40 bps year over year to 93.4%.

Net premiums written in the Reinsurance segment decreased 19.9% year over year to $122.3 million due to substantially lower premiums written under property and casualty reinsurance. Combined ratio improved 550 bps to 107.4%.

Financial Update

W.R. Berkley exited the first quarter with total assets worth $24.6 billion, up 1.2% from the year-end 2017.

Book value per share inched up 0.7% from the year-end 2017 to $44.85 as of Mar 31, 2018.

Cash flow from operations came in at (20.0 million), comparing unfavorably with $75.5 million from the year-ago quarter.

The company’s return on equity improved 250 bps to 12.3%.

Share Repurchase Update

In the reported quarter, the company bought back 0.1 million shares for $6.8 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared with three lower.

VGM Scores

At this time, WRB has a poor Growth Score of F. Its Momentum is doing a lot better with a B. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, WRB has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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