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Why Is W.R. Berkley (WRB) Down 3% Since Last Earnings Report?

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It has been about a month since the last earnings report for W.R. Berkley (WRB - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is W.R. Berkley due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

W.R. Berkley Q3 Earnings Beat Estimates, Improve Y/Y

W.R. Berkley Corporation’s third-quarter 2019 operating income of 85 cents per share beat the Zacks Consensus Estimate by 26.5%. Also, the bottom line improved 6.3% year over year on higher, pre-tax underwriting profits and premiums written.

Behind the Headlines

W.R. Berkley’s net premiums written were $1.7 billion, up 7.7% year over year. Higher premiums written at both the Insurance and Reinsurance & Monoline Excess segments contributed to this upside.

Operating revenues came in at $96 billion, up 1.4% year over year, mainly owing to higher net premiums earned, partly offset by decline in investment income. Revenues beat the consensus estimate by 5.8%.

Investment income decreased 13.1% year over year to $161.7 million due to average performance of investment fund compared to strong returns in the year-ago quarter.

Total expenses increased nearly 2% to $1.8 billion, primarily on higher losses and loss expenses, costs from non-insurance businesses plus other operating costs and expenses.

Catastrophe loss totaled $31.5 million in the quarter, reflecting decrease of 19.3% year over year. Consolidated combined ratio (a measure of underwriting profitability) was 93.6%, reflecting 230 basis points (bps) improvement year over year.

Segment Details

Net premiums written at the Insurance segment grew 5.1% year over year to $1.5 billion in the quarter, driven by higher premiums at commercial automobile, professional liability, other liability and short-tail lines. Combined ratio improved 260 bps to 93%.

Net premiums written in the Reinsurance & Monoline Excess segment increased 30.7% year over year to $220.7 million on higher casualty reinsurance, monoline excess and property reinsurance premium. Combined ratio remained unchanged year over year at  98.3%.

Financial Update

W.R. Berkley exited the third quarter with total assets worth $26.2 billion, up 5.3% from year-end 2018.

Book value per share improved 10.9% from 2018 end to $32.97 as of Sep 30, 2019.

Cash flow from operations totaled $392.4 million for the quarter, up 75.8% year over year.

The company’s return on equity expanded 20 bps to 12.2%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 5.07% due to these changes.

VGM Scores

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise W.R. Berkley has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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