01—Abstract
Summary
Summary of the 10-K filed February 27, 2015. 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 $648.9 milliona in 2014, up from $499.9 million in 2013, and diluted net income per share of $4.86 versus $3.55. Total revenues rose to $7.13 billion from $6.41 billion, and net premiums written reached $5.997 billion, up from $5.500 billion.
The company operates three segments: Insurance-Domestic (75.3% of 2014 net premiums written), Insurance-International, and Reinsurance-Global. The consolidated GAAP combined ratio was 93.8% in 2014 compared with 95.1% in 2013, and favorable prior-year reserve development was $85 millionb. Profitability improvements were driven mainly by Insurance-Domestic, whose combined ratio improved to 91.8% from 94.0%, and by higher net investment gains of $254.9 million, including an $86 million gain on the sale of a London office building.
Net investment income rose 10% to $601 millionc, aided by investment funds, though the fixed maturity yield declined to 3.4%. Insurance-International's combined ratio deteriorated to 102.8% from 98.4%, and Reinsurance-Global's premiums fell as gross written premiums declined 14%. The company's total investments were $15.6 billion, with 81.5% in fixed maturity securities, and stockholders' equity reached $4.59 billion, or $36.21 per share.
Management highlighted that current market price levels for certain lines remain below the prices required to achieve long-term return objectives, and the company paid a $1.00d special dividend in December 2014. Risk factors cited include cyclical pricing, reserve adequacy, catastrophe exposure, and regulatory and rating-agency risks.
02—Key points
Key Highlights
- Net income to common stockholders rose to $648.9 million in 2014 from $499.9 million in 2013; diluted EPS was $4.86 versus $3.55.
- Gross premiums written grew 8% to $7.06 billion, and net premiums written rose 9% to $5.997 billion.
- Consolidated GAAP combined ratio improved to 93.8% from 95.1%, with Insurance-Domestic improving to 91.8% from 94.0%.
- Insurance-International's combined ratio worsened to 102.8% from 98.4%, while Reinsurance-Global's gross premiums written fell 14%.
- Net investment gains increased to $254.9 million, including an $86 million gain on the sale of a London office building.
- Total investments were $15.6 billion, with 81.5% in fixed maturity securities; average duration was 3.2 years.
- Common stockholders' equity reached $4.59 billion ($36.21 per share), and the company paid a $1.00 per share special dividend in December 2014.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 27, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $7.13B$6.41B | +11.2% |
| Interest Expense | $128.17M$123.18M | +4.1% |
| Net Income | $648.88M$499.93M | +29.8% |
| EPS (Basic) | $5.07$3.69 | +37.4% |
| EPS (Diluted) | $4.86$3.55 | +36.9% |
| Shares Outstanding (Basic) | 127.87M135.30M | −5.5% |
| Shares Outstanding (Diluted) | 133.65M140.74M | −5.0% |
05—Questions
Frequently Asked Questions
What drove the increase in W. R. Berkley's 2014 net income?
Net income to common stockholders increased by $149 million, primarily due to after-tax net investment gains up $92 million, after-tax underwriting income up $64 million, and after-tax net investment income up $16 million, according to management's discussion. Fewer weighted average diluted shares from repurchases also boosted per-share results.
Which segment performed best and which weakened in 2014?
Insurance-Domestic performed best, with a GAAP combined ratio of 91.8% and pre-tax income of $796.3 million. Insurance-International weakened, with its combined ratio rising to 102.8% from 98.4% and pre-tax income falling to $29.8 million from $56.9 million, partly due to adverse prior-year reserve development of $23 million.
How did reserve development affect 2014 results?
Net favorable prior-year development was $85 million in 2014, compared with $98 million in 2013. Insurance-Domestic contributed $92 million of favorable development, mainly from other liability for accident years 2006 through 2010, while Reinsurance-Global contributed $16 million and Insurance-International recorded $23 million of adverse development.
What regulatory and catastrophe exposures does the filing highlight?
The company estimates its TRIA deductible for 2015 at approximately $786 million and says the federal government pays 85% of covered losses above that deductible. Weather-related losses were $87 million in 2014. The maximum dividend payable by insurance subsidiaries without regulatory approval in 2015 is approximately $631 million.
06—Continue