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BERKLEY W R CORP (WRB) Q1 2025 Earnings Summary

Executive Summary

  • Delivered strong profitability despite heavy catastrophe losses: ROE 19.9%, operating ROE 19.3%, combined ratio 90.9%, record net premiums written of $3.13B; net investment income rose 12.6% to $360.3M .
  • EPS (operating) was $1.01 versus S&P Global consensus $0.99*, and GAAP diluted EPS was $1.04; total revenues of $3.55B materially exceeded consensus $3.02B*, aided by higher new-money yields and investment fund income; catastrophe losses were $111.1M .
  • Sequentially versus Q4 2024: revenues moderated to $3.55B from $3.67B and the combined ratio rose to 90.9% from 90.2%; YOY, revenues grew and net investment income accelerated while cat losses stepped up sharply .
  • Guidance signals: 2025 effective tax rate ~23% (+/−), full‑year expense ratio expected comfortably below 30%, and next quarter investment fund income likely at the lower end of the $10–$20M range, with catalysts from higher new‑money rates vs. book yield and growing invested assets .

What Went Well and What Went Wrong

What Went Well

  • Record net premiums written ($3.13B) and strong operating ROE (19.3%), demonstrating resilience amid elevated industry catastrophe activity .
  • Investment engine “firing on all cylinders”: book yield ~4.7% with new money around ~5.2%, duration extended to 2.7 years, and AA‑ credit quality maintained—positioning for further net investment income growth .
  • Expense ratio improved 80 bps YOY to 27.8%, with half of the improvement from a nonrecurring compensation-related benefit; management expects the expense ratio “comfortably below 30%” for FY 2025 .

What Went Wrong

  • Catastrophe losses of $111.1M (3.7 points) drove the reported combined ratio to 90.9% and raised the current accident year loss ratio ex-cat by ~30 bps YOY due to business mix .
  • Insurance segment loss ratio deteriorated YOY (63.9% vs. 61.8%), with competitive pressure in professional liability (including D&O and cyber); management curtailed certain casualty reinsurance treaties on economics .
  • FX losses: net foreign currency losses were $19.4M; while equity translation improved, FX remains a headwind .

Financial Results

Sequential performance and estimates comparison

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Billions)$3.400 $3.668 $3.547
Diluted EPS (GAAP) ($)$0.91 $1.44 $1.04
Operating EPS (“Primary EPS”) ($)$0.93 $1.13 $1.01
Combined Ratio (%)90.9% 90.2% 90.9%
Net Premiums Written ($USD Billions)$3.057 $2.937 $3.133
Net Investment Income ($USD Millions)$323.8 $317.4 $360.3
Catastrophe Losses ($USD Millions)$97.8 $79.6 $111.1

Year-over-year (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Total Revenues ($USD Billions)$3.257 $3.547
Diluted EPS (GAAP) ($)$1.09 $1.04
Operating EPS (“Primary EPS”) ($)$1.04 $1.01
Combined Ratio (%)88.8% 90.9%
Net Premiums Written ($USD Billions)$2.851 $3.133
Net Investment Income ($USD Millions)$319.8 $360.3
Catastrophe Losses ($USD Millions)$30.5 $111.1
Avg. Rate Increase ex. Workers’ Comp (%)—8.3%

Consensus vs. actuals (S&P Global)

MetricQ3 2024Q4 2024Q1 2025
Primary EPS Consensus Mean ($)0.92063*0.95365*0.98645*
Primary EPS Actual ($)0.93 1.13 1.01
Revenue Consensus Mean ($USD Billions)$2.928*$2.978*$3.016*
Revenue Actual ($USD Billions)$3.400 $3.668 $3.547
Primary EPS – # of Estimates13*15*13*
Revenue – # of Estimates4*5*4*

Values with an asterisk (*) are retrieved from S&P Global.

Segment performance (Q1 2025 vs Q1 2024)

Segment MetricQ1 2024Q1 2025
Insurance – Net Premiums Written ($USD Billions)$2.446 $2.694
Insurance – Net Premiums Earned ($USD Billions)$2.399 $2.643
Insurance – Pre‑Tax Income ($USD Millions)$478.1 $509.5
Insurance – Loss Ratio (%)61.8% 63.9%
Insurance – Expense Ratio (%)28.4% 27.8%
Insurance – Combined Ratio (%)90.2% 91.7%
Reinsurance & Monoline Excess – Net Premiums Written ($USD Millions)$405.6 $438.8
Reinsurance & Monoline Excess – Net Premiums Earned ($USD Millions)$365.6 $369.9
Reinsurance & Monoline Excess – Pre‑Tax Income ($USD Millions)$127.6 $120.4
Reinsurance & Monoline Excess – Loss Ratio (%)49.8% 57.7%
Reinsurance & Monoline Excess – Expense Ratio (%)29.8% 27.7%
Reinsurance & Monoline Excess – Combined Ratio (%)79.6% 85.4%

Additional KPIs

KPIQ1 2025
Avg. Rate Increase ex. Workers’ Comp (%)8.3%
Book Value per Share ($)$23.50
Tangible Book Value per Share ($)$22.88
Net Invested Assets ($USD Billions)$30.73
Cash Flow from Operations ($USD Millions)$743.8
Effective Tax Rate (%)22.5%
FX Loss ($USD Millions)$19.38
Shares Repurchased (shares / $USD Millions)0.85M / $49.2
Cession Rate (%)High‑14% to Low‑15% (management comment)
Cat Losses ($USD Millions)$111.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY 2025n/a~23% (+/−) Stated
Expense RatioFY 2025n/a“Comfortably below 30%” Stated
Investment Fund IncomeQ2 2025$10–$20M quarterly range (historical) “Lower end” of $10–$20M expected next quarter Lowered within range
Net Investment Income Outlook2025n/aFurther growth expected from higher new‑money rates vs. book yield and larger investable assets Positive commentary
Segment posture (Property/Cat)2025n/aOpportunistic expansion where risk‑adjusted returns are adequate; no “sea change” in cat appetite Maintained discipline

Note: Prior guidance not explicitly available in Q3/Q4 documents reviewed; current guidance reflects management commentary this quarter .

Earnings Call Themes & Trends

TopicQ3 2024 (Prior Mentions)Q4 2024 (Prior Mentions)Q1 2025 (Current)Trend
Catastrophe & underwriting volatility3.3 pts cat; combined ratio 90.9% Combined ratio 90.2%; record underwriting income 3.7 pts cat; combined ratio 90.9%; resilience emphasized Elevated cat headwind; resilient margins
Investment income & ratesNew money above book; NII +19.5% YoY Portfolio positioned for rising reinvestment; NII record Book yield ~4.7% vs new money ~5.2%; duration 2.7; AA‑; upside to NII Continued tailwind
Rates & pricing disciplineAvg. ex‑comp +8.4% Avg. ex‑comp +7.7% Avg. ex‑comp +8.3%; focus on auto liability/umbrella Stable/firm
Workers’ comp (specialty)Stable growth context Strong segment results Growth driven by higher‑hazard specialty comp; wage inflation tailwind can cut both ways Selective growth
Professional liability/D&O/cyber——Competitive; pulled back on casualty re treaties not meeting economics Discipline tightening
Tariffs/macro——Active assessment; potential loss cost impact across property/auto and even workers’ comp (pharma) Emerging risk
Foreign exchange——$19M FX loss; equity translation improved $24M Volatile

Management Commentary

  • “The resilience of our business model was once again demonstrated… built to continue to excel during more challenging environment circumstances” .
  • “Operating earnings were $405 million or $1.01 per share… current accident year combined ratio, excluding cat losses, was 87.2%” .
  • “We have a book yield… ~4.7%… new money… ~5.2%… take 50+ bps on ~$27B interest‑sensitive—gives you a sense of earnings power” .
  • “Professional liability… particularly competitive… cyber… transactional liability… probably gets the stupid award” (on market dynamics) .
  • “No sea change in our appetite for cat… opportunistically modestly expanded property where well priced” .

Q&A Highlights

  • Short‑tail strength: Opportunities in property risk and A&H; Berkley One taking “healthy rate” while expanding footprint .
  • Reinsurance durability: Combined ratio 85.4% even with 10.9 cat points; portfolio positioned on “firm ground” .
  • Reserve development: Insurance ($11M) unfavorable; Reinsurance favorable ($12M); net about ~$1M favorable overall .
  • Tariffs: Assessing broad impacts on property, auto physical damage and workers’ comp (pharma supply chain); potential need for higher loss picks and rate .
  • Specialty comp: Growth in higher‑hazard niches where standard market less inclined; tools tailored to specialized units .
  • Casualty reinsurance discipline: Non‑renewals where economics do not make sense (D&O, cyber, transactional) .

Estimates Context

  • EPS: Q1 2025 Primary EPS (operating) of $1.01 beat consensus $0.986*; Q4 2024 $1.13 vs $0.954*; Q3 2024 $0.93 vs $0.921* (Primary EPS refers to operating EPS per diluted share) .
  • Revenue: Q1 2025 revenues of $3.547B beat consensus $3.016B*; Q4 2024 $3.668B vs $2.978B*; Q3 2024 $3.400B vs $2.928B* .
  • Drivers of beats: Higher net investment income (new‑money rates above book yield), strong insurance growth (short‑tail and specialty comp), partially offset by elevated catastrophe losses .

Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Quality compounding in a volatile quarter: WRB sustained ~20% ROE and expanded book value per share 7.1% despite elevated cats—evidence of underwriting discipline and balance sheet strength .
  • Investment income tailwind remains: duration extended to 2.7 years, AA‑ quality, and new money rates above book yield should continue to lift NII and earnings power .
  • Underwriting mix: Insurance segment growth broad‑based but professional liability competitive; expect disciplined pullbacks in casualty re where economics deteriorate .
  • Watch tariffs as an emerging risk: management is modeling potential loss cost impacts across property, auto physical damage and workers’ comp; may necessitate pricing actions .
  • Near‑term modeling: Incorporate higher cat load and FX volatility; expense ratio below 30% for FY 2025 supports margin stability .
  • Estimates path: Consensus likely moves up on NII trajectory and NPW strength, but mix and cat volatility temper underwriting margin outlook—focus on operating EPS (“Primary EPS”) vs GAAP diluted when benchmarking .
  • Trading lens: Positive bias on NII momentum and rate adequacy; monitor next quarter’s investment fund income (likely lower‑end of $10–$20M) and tariff clarity as incremental catalysts .

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