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BERKLEY W R CORP (WRB) Q4 2024 Earnings Summary

Executive Summary

  • WRB delivered a strong Q4: ROE 30.9% and operating ROE 24.3%, with net income up 45% YoY to $576M ($1.44 diluted EPS) and record operating income up 15.5% to $453M ($1.13) .
  • Underwriting remained disciplined: reported combined ratio 90.2%; current accident year ex-cat 87.7%; average rate increases ex-workers’ comp 7.7% .
  • Investment income continues to underpin results: core portfolio income $317.4M; unrealized equity gains $163.2M; management increased duration to ~2.6 years, with new money rates above book yield (5.4%+ per CFO; ~5.25%+ noted in transcript) .
  • Capital return remains a catalyst: Q4 total capital returned $287.8M (including $190M special dividends, $67.4M buybacks, $30.4M regular dividends); regular dividend maintained at $0.08 in Feb 2025 .
  • Street consensus comparisons were unavailable due to S&P Global access limits; we note this constraint and recommend updating once available (Values retrieved from S&P Global were unavailable).

What Went Well and What Went Wrong

What Went Well

  • Record operating earnings and strong ROE/operating ROE; underwriting income of ~$294M in the quarter with favorable prior-year development ($1.6M) .
  • Rate momentum and retention remained healthy: rate ex-workers’ comp 7.7%, renewal retention a little above 80% per management .
  • Investment tailwinds: robust net investment income from fixed maturities; unrealized equity gains of $163.2M; duration extended to ~2.6 years; new money yields above book yield (domestic book ~4.6%; new money 5.4%+ per CFO) .
    • Quote: “Our domestic book yield for the quarter was approximately 4.6%. Our new money rate today is 5.4% plus.”

What Went Wrong

  • Catastrophe losses rose versus prior year; current accident-year cat losses were $79.6M, lifting the reported combined ratio to 90.2% .
  • Insurance underlying loss ratio ticked up ~0.5 point due to mix; management cautioned not to over-read .
  • Property reinsurance and retro pricing headwinds: risk-adjusted down ~15%-ish at 1/1; management tightened casualty reinsurance, shrinking the book ~15.5% due to inadequate discipline .

Financial Results

Consolidated Sequential Trend (Oldest → Newest)

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($MM)$3,314.0 $3,400.4 $3,667.6
Net Premiums Written ($MM)$3,126.8 $3,057.3 $2,936.8
Net Premiums Earned ($MM)$2,846.4 $2,926.8 $3,010.9
Net Investment Income ($MM)$372.1 $323.8 $317.4
Diluted EPS ($)$0.92 $0.91 $1.44
Operating EPS ($)$1.04 $0.93 $1.13
Combined Ratio (%)91.1 90.9 90.2
Loss Ratio (%)62.6 62.4 61.8
Expense Ratio (%)28.5 28.5 28.4
Cat Losses ($MM)$89.7 $97.8 $79.6

Year-over-Year Comparison

MetricQ4 2023Q4 2024
Total Revenues ($MM)$3,221.4 $3,667.6
Net Premiums Written ($MM)$2,719.7 $2,936.8
Net Premiums Earned ($MM)$2,714.6 $3,010.9
Net Investment Income ($MM)$313.3 $317.4
Diluted EPS ($)$0.98 $1.44
Operating EPS ($)$0.96 $1.13
Combined Ratio (%)88.4 90.2
Loss Ratio (%)60.0 61.8
Expense Ratio (%)28.4 28.4
Cat Losses ($MM)$32.0 $79.6

Segment Breakdown (Q4 2024 vs Q4 2023 vs Q3 2024)

SegmentMetricQ3 2024Q4 2023Q4 2024
InsuranceNet Premiums Written ($MM)$2,673.3 $2,384.6 $2,620.1
InsuranceNet Premiums Earned ($MM)$2,564.5 $2,357.3 $2,638.5
InsurancePre-tax Income ($MM)$469.4 $480.0 $504.5
InsuranceLoss Ratio (%)63.1 61.0 62.2
InsuranceExpense Ratio (%)28.4 28.4 28.3
InsuranceCombined Ratio (%)91.5 89.4 90.5
Reinsurance & Monoline ExcessNet Premiums Written ($MM)$384.0 $335.0 $316.6
Reinsurance & Monoline ExcessNet Premiums Earned ($MM)$362.3 $357.3 $372.4
Reinsurance & Monoline ExcessPre-tax Income ($MM)$105.2 $132.1 $109.3
Reinsurance & Monoline ExcessLoss Ratio (%)57.0 53.0 58.9
Reinsurance & Monoline ExcessExpense Ratio (%)29.7 28.5 29.5
Reinsurance & Monoline ExcessCombined Ratio (%)86.7 81.5 88.4

KPIs

KPIQ4 2023Q4 2024
ROE (annualized)23.6% 30.9%
Operating ROE (annualized)23.2% 24.3%
Rate Change ex Workers’ Comp—7.7%
Operating Cash Flow ($MM)$698.1 $810.0
Total Capital Returned ($MM)—$287.8
Current Accident Year ex-cat Combined Ratio (%)—87.7
Cat Losses ($MM)$32.0 $79.6
Book Value per Share ($)19.37 22.09

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY 2025—~23% ± (full year target) New
Expense RatioFY 2025—“Comfortably below 30%” New
Investment Portfolio DurationQ4 2024~2.4 years (Q3) ~2.6 years Increased
New Money Rate vs Book YieldQ4 2024 / 2025—New money > book yield; ~5.4%+ per CFO, ~5.25%+ elsewhere Positive spread maintained
Property Cat Reinsurance Pricing1/1 Renewals—Risk-adjusted down ~15%-ish; similar for retro Lower pricing / headwind
Growth OutlookFY 2025—Double-digit growth seen as achievable (qualitative) Constructive
Regular DividendQ4 2024$0.08 (prior) $0.08 (paid Dec 27, 2024) Maintained
Special DividendQ4 2024Prior specials in 2024 $0.50 (third special in 2024) Continued capital return
Regular DividendQ1 2025—$0.08 (to be paid Mar 12, 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4 2024)Trend
Pricing & Rate MomentumQ2 avg rate ex-WC ~8.3%; Q3 ~8.4% Rate ex-WC ~7.7%; renewal retention >80% Slightly moderating but strong
Combined Ratio & CatsQ2 CR 91.1%, cats 3.2 pts; Q3 CR 90.9%, cats 3.3 pts CR 90.2%; current accident-year ex-cat 87.7%; cats $79.6M Stable margins; cat volatility elevated
Investment Income & DurationQ2 NII record $372.1M; Q3 $323.8M; duration ~2.4 yrs NII $317.4M; duration ~2.6 yrs; new money > book yield Positive (portfolio growth and yield spread)
Casualty Reinsurance Discipline—Cut casualty reinsurance ~15.5% due to inadequate pricing discipline Tightening
Property MarketQ3: property tailwind present Primary property tailwind slowing; reinsurance/retro headwinds (risk-adjusted -15%) Mixed: primary moderating; reinsurance weaker
Expense Management (Tech/BPO)—Sub-30% expected; tech & BPO drive efficiency Improving
Workers’ Comp—Specialty niches growing; caution on medical trend; modestly negative rates but growth in specialized comp Stable-to-positive niches
E&S vs Admitted—E&S submissions robust; E&S growing faster than admitted; casualty strong; property moderating Favorable E&S momentum
Social Inflation & Jurisdictions—Elevated in bodily injury lines; geography/jurisdiction granularity increasingly critical (GA/TX noted) Persistent headwind

Management Commentary

  • Strategic posture: “We are unapologetic... in business to make good risk-adjusted returns… lean in when margin is there, defensive when not.”
  • Investment positioning: “We positioned our investment portfolio well... robust growth in net investment income… reinvestment rates continue to exceed annual book yield.”
  • Duration & yield: “Increased investment duration from 2.4 years to 2.6 years… new money rate today is 5.4% plus.”
  • Market views: “Property insurance still a tailwind, but slowing; property reinsurance/retro at 1/1 faced headwinds (risk-adjusted down ~15%-ish).”
  • Discipline example: “Casualty reinsurance… premium down just shy of 15.5%… market needs more discipline.”

Q&A Highlights

  • Growth vs margin: Management prioritizes returns; expects double-digit growth is achievable, but will pull back where margins are inadequate (e.g., casualty reinsurance) .
  • Property competition: Primary property still offers opportunity, but competition rising; reinsurance/retro pricing headwinds at 1/1 .
  • Expense outlook: Expense ratio expected “comfortably below 30%” with tech/BPO efficiencies .
  • Workers’ comp stance: Recognized misassessment of frequency trend earlier; now growing specialized comp cautiously, watchful on medical cost trend .
  • Social inflation: Heightened in bodily injury lines; geography/county-level legal environment driving selection and pricing .

Estimates Context

  • Wall Street consensus comparisons (EPS and revenue) for Q4 2024 and prior quarters were unavailable due to S&P Global daily request limits at time of analysis. Values should be refreshed from S&P Global once access resets.

Key Takeaways for Investors

  • Underwriting + investment dual-engine intact: Combined ratio near 90% with steady expense ratio and a growing, higher-yielding portfolio suggests continued earnings power into 2025 .
  • Rate adequacy and discipline: 7.7% rate ex-WC and selective retreat from casualty reinsurance underpin margin preservation; watch for continued discipline through 2025 renewals .
  • Property dynamics bifurcate: Primary property still constructive though moderating; property reinsurance/retro facing pricing pressure; expect selective offense/defense by segment .
  • Capital return: Special and regular dividends plus buybacks continue; regular dividend maintained in Feb 2025—supportive backdrop in absence of M&A needs .
  • Watch cat volatility and social inflation: Elevated cat losses this quarter and persistent social inflation in bodily injury lines warrant ongoing reserve vigilance and selection discipline .
  • 2025 setup: Management sees underwriting margins stable-to-improving and investment income rising with positive yield spread and larger investable assets, supporting above-trend growth potential .
  • Update Street comps: Refresh S&P Global consensus to gauge beats/misses and recalibrate near-term trading stance once available.

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