01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. 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 $499.9 milliona in 2013, compared with $510.6 million in 2012, and diluted EPS of $3.55 versus $3.56. The decline was attributed primarily to lower after-tax net investment gains and net investment income, partly offset by higher after-tax underwriting income.
Gross premiums written rose to $6.51 billionb from $5.78 billion, and net premiums written reached $5.50 billion from $4.90 billion, reflecting rate increases and expanded exposures. Total revenues were $6.41 billion and the GAAP combined ratio improved to 95.1% from 97.2%. The company operates three segments: Insurance-Domestic (pre-tax income of $648.7 million, combined ratio 94.0%), Insurance-International (pre-tax income of $56.9 million, combined ratio 98.4%), and Reinsurance-Global (pre-tax income of $110.4 million, combined ratio 97.0%).
Net investment income fell to $544.3 millionc from $586.8 million as fixed maturity yields declined, and the average duration of the fixed maturity portfolio was 3.3 years. Reserves for losses and loss expenses were $10.08 billion gross and $8.68 billion net, and the company recorded $98 million of favorable prior-year reserve development. Balance sheet items include total assets of $20.55 billion and common stockholders' equity of $4.34 billion, or $32.79 per outstanding share.
The company issued $350 milliond of 5.625% subordinated debentures due 2053 and prepaid $250 million of 6.750% subordinated debentures, incurring a $7 million loss on early redemption. Cash dividends declared were $0.39 per share in 2013, compared with $1.35 in 2012, and the company repurchased 3,924,355 shares for $127 million during the year.
02—Key points
Key Highlights
- Net income to common stockholders was $499.9 million ($3.55 diluted EPS) in 2013, down slightly from $510.6 million ($3.56) in 2012.
- Gross premiums written grew 13% to $6.51 billion; net premiums written rose 12% to $5.50 billion, driven by rate increases and increased exposures.
- The GAAP combined ratio improved to 95.1% from 97.2%, with Insurance-Domestic at 94.0%, Insurance-International at 98.4% and Reinsurance-Global at 97.0%.
- Net investment income declined 7% to $544.3 million as the average annualized yield on fixed maturity securities fell from 3.7% to 3.5%.
- Favorable prior-year reserve development was $98 million, and net loss reserves totaled $8.68 billion at December 31, 2013.
- Common stockholders' equity was $4.34 billion, or $32.79 per share, and the company repurchased 3,924,355 shares for $127 million during 2013.
- Cash dividends declared fell to $0.39 per share in 2013 from $1.35 in 2012, and the maximum dividend payable by the lead insurer without regulatory approval in 2014 is approximately $491 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $6.41B$5.82B | +10.0% |
| Interest Expense | $123.18M$126.30M | −2.5% |
| Net Income | $499.93M$510.59M | −2.1% |
| EPS (Basic) | $3.69$3.72 | −0.8% |
| EPS (Diluted) | $3.55$3.56 | −0.3% |
| Shares Outstanding (Basic) | 135.30M137.10M | −1.3% |
| Shares Outstanding (Diluted) | 140.74M143.31M | −1.8% |
05—Questions
Frequently Asked Questions
How did W. R. Berkley's profitability change in 2013?
Net income to common stockholders was $499.9 million in 2013 compared with $510.6 million in 2012. The filing attributes the 2% decrease primarily to lower after-tax net investment gains ($63 million lower) and after-tax net investment income ($31 million lower), largely offset by an $82 million increase in after-tax underwriting income.
What drove premium growth in 2013?
Gross premiums written increased 13% to $6.51 billion, attributed to a combination of rate increases and increased exposures, including expansion into new geographic and product markets. Average renewal premium rates increased 6.5% in 2013, and the renewal retention rate was approximately 76%.
What are the main risks flagged in the filing?
The filing highlights cyclical pricing in the property casualty industry, intense competition, reserve adequacy uncertainty, catastrophe exposure (weather-related losses of $65 million in 2013), exposure to terrorism with TRIA scheduled through December 31, 2014, reliance on reinsurers, and dependence on dividends from insurance subsidiaries. It also notes a 75% fixed maturity share of the investment portfolio and 17% in equity, merger arbitrage, investment funds, private equity, loans and real estate.
How strong is the company's balance sheet and capital position?
Total assets were $20.55 billion and total equity was $4.37 billion at year-end 2013. Senior notes and other debt totaled $1.69 billion and junior subordinated debentures were $339.8 million. The lead insurer, Berkley Insurance Company, reported statutory capital and surplus of $4.91 billion. Twenty-six of twenty-seven A.M. Best-rated insurance subsidiaries carry an A+ (Superior) rating.
What did the company do with its capital in 2013?
The company issued $350 million of 5.625% subordinated debentures due 2053 and prepaid $250 million of 6.750% subordinated debentures due 2045, recording a $7 million loss on early redemption. It repurchased 3,924,355 shares for $127 million and declared $0.39 per share in dividends, down from $1.35 in 2012, which included a larger payout in that year.
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