01—Abstract
Summary
Summary of the 10-K filed February 28, 2013. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation, an insurance holding company among the largest commercial lines writers in the United States, reported net income to common stockholders of $510.6 milliona ($3.56 diluted EPS) for 2012, up from $391.2 million ($2.69) in 2011. Total revenues rose to $5.82 billion from $5.16 billion, driven by net premiums written of $4.90 billion versus $4.36 billion in 2011.
Gross premiums written were $5.78 billionb, with growth attributed to rate increases and expanded exposures, and the Company noted that prices increased in 2012 but loss costs are also rising and some lines remain below the pricing needed to meet long-term return objectives. The consolidated GAAP combined ratio improved to 97.2% from 98.5%, with favorable prior-year reserve development of $103 million and catastrophe losses of $80 million. The company operates five segments: Specialty, Regional, Alternative Markets, Reinsurance and International.
Net investment income rose to $586.8 millionc, supported by investment funds income, while net investment gains were $210.5 million. Total investments were $14.47 billion, with fixed maturity securities at $11.94 billion and a portfolio average duration of 3.4 years. Shareholders' equity reached $4.31 billion, or $31.66 per share, and the Company paid a special dividend of $1.00 per share in December 2012 alongside regular dividends, totaling $184 million in dividends paid during 2012.
Key risks highlighted in the filing include cyclical industry pricing, competitive pressure, reserve adequacy, catastrophe exposure, reliance on reinsurers (about $1.45 billiond due from reinsurers at year-end), and regulatory developments including the Dodd-Frank Act and Solvency II. The company also disclosed that its savings and loan holding company status is expected to end after the planned sale of InsurBanc's assets and deposits, with closing expected in the first half of 2013.
02—Key points
Key Highlights
- Net income to common stockholders rose to $510.6 million, or $3.56 per diluted share, from $391.2 million, or $2.69 per diluted share, in 2011.
- Gross premiums written increased to $5.78 billion from $5.08 billion, with net premiums written of $4.90 billion versus $4.36 billion in 2011.
- Consolidated GAAP combined ratio improved to 97.2% in 2012 from 98.5% in 2011, with a loss ratio of 63.1% and an expense ratio of 34.1%.
- Favorable prior-year reserve development of $103 million and catastrophe losses of $80 million in 2012, compared with $182 million and $153 million in 2011.
- Net investment income increased to $586.8 million from $526.4 million, while net investment gains rose to $210.5 million from $125.5 million.
- Common stockholders' equity reached $4.31 billion, or $31.66 per share, and the Company paid a $1.00 per share special dividend in December 2012.
- Management noted that prices increased in 2012 but loss costs are also rising, and some lines remain below the pricing required to meet long-term return objectives.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 28, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $5.82B$5.16B | +12.9% |
| Interest Expense | $126.30M$112.51M | +12.3% |
| Net Income | $510.59M$391.21M | +30.5% |
| EPS (Basic) | $3.72$2.80 | +32.9% |
| EPS (Diluted) | $3.56$2.69 | +32.3% |
| Shares Outstanding (Basic) | 137.10M139.69M | −1.9% |
| Shares Outstanding (Diluted) | 143.31M145.67M | −1.6% |
05—Questions
Frequently Asked Questions
How did W. R. Berkley perform in 2012 compared with 2011?
Net income to common stockholders was $510.6 million, or $3.56 per diluted share, compared with $391.2 million, or $2.69 per diluted share, in 2011. Total revenues rose to $5.82 billion from $5.16 billion, and income before income taxes was $701.9 million versus $513.1 million.
What drove premium growth in 2012?
Gross premiums written increased to $5.78 billion from $5.08 billion, attributed to a combination of rate increases and increased exposures, including expansion into new geographic and product markets. The average rate for policies renewed in 2012 increased 6.4%. Specialty and International were significant contributors.
Is the company's underwriting profitable?
The consolidated GAAP combined ratio was 97.2% in 2012, improved from 98.5% in 2011, indicating an underwriting profit excluding investment income. Reinsurance (100.6%) and International (100.1%) were above 100, while Specialty (95.5%), Regional (96.1%) and Alternative Markets (97.3%) were below it.
What are the main risks the filing identifies?
The filing cites cyclical industry pricing, intense competition, the possibility that claims exceed reserves, catastrophe losses, reliance on reinsurers (about $1.45 billion due at year-end 2012), investment market volatility, and regulatory changes including the Dodd-Frank Act and Solvency II. Ratings downgrades and dependence on dividends from insurance subsidiaries are also flagged.
What capital return actions did the company take?
The company repurchased 3,428,175 shares in 2012 at an aggregate cost of $128 million and paid a special dividend of $1.00 per share in December 2012. Total dividends paid in 2012 were $184 million, and the company had 9,068,093 shares remaining authorized for repurchase at year-end.
06—Continue