01—Abstract
Summary
Summary of the 10-K filed February 24, 2023. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation is an insurance holding company and one of the largest commercial lines writers in the United States, operating in two segments: Insurance and Reinsurance & Monoline Excess. In 2022, net premiums written rose to $10.00 billiona from $8.86 billion in 2021, and net income to common stockholders increased to $1.38 billion ($4.94 per diluted share) from $1.02 billion ($3.66 per diluted share).
The consolidated GAAP combined ratio improved to 89.3% from 89.6%, and the consolidated loss ratio was 61.3% versus 61.1% a year earlier. Net investment income rose to $779 millionb from $672 million, helped by rising interest rates and a larger fixed maturity portfolio, while a $251 million after-tax gain on the sale of a London office building boosted net investment gains. Gross premiums written grew 11% to $11.91 billion, with average renewal premium rates for insurance and facultative reinsurance up 6.4% in 2022 after 9.1% in 2021.
Results were offset by unrealized investment losses: the change in unrealized investment losses was $1.25 billionc pre-tax, which pushed accumulated other comprehensive loss to $1.26 billion and total common stockholders' equity to $6.75 billion at year-end. Book value per outstanding share was $25.51. Unfavorable prior-year reserve development of $36 million and COVID-19-related losses of approximately $341 million were also disclosed, with reserves for losses and loss expenses totaling $17.01 billion gross.
Capital returns included regular quarterly dividends of $0.09d and $0.10 per share, special dividends of $0.50 per share in the second quarter of 2022, and a $0.50 special dividend declared in January 2023. The company repurchased 1,370,394 shares in 2022 for $94 million, and it had no borrowings under its $300 million revolving credit facility at year-end. Total debt carrying value was $2.84 billion.
02—Key points
Key Highlights
- Net income to common stockholders rose to $1,381 million ($4.94 diluted EPS) in 2022 from $1,022 million ($3.66) in 2021.
- Gross premiums written increased 11% to $11,909 million; net premiums written increased 13% to $10,004 million.
- Consolidated GAAP combined ratio was 89.3% in 2022 versus 89.6% in 2021; the loss ratio was 61.3%.
- Net investment income increased 16% to $779 million, with the fixed maturity average annualized yield rising to 2.9% from 2.2%.
- Unrealized investment losses of $1,248 million pre-tax reduced total common stockholders' equity to $6,748 million (book value of $25.51 per share).
- Average renewal premium rates for insurance and facultative reinsurance increased 6.4% in 2022, after 9.1% in 2021.
- Shareholder returns included $235 million in dividends and $94 million in share repurchases during 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 24, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $11.17B$9.46B | +18.1% |
| Interest Expense | $130.37M$147.18M | −11.4% |
| Net Income | $1.38B$1.02B | +35.1% |
| EPS (Basic) | $3.33$3.69 | −9.8% |
| EPS (Diluted) | $3.29$3.66 | −10.1% |
| Shares Outstanding (Basic) | 415K277K | +49.7% |
| Shares Outstanding (Diluted) | 419K280K | +49.8% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in 2022?
Net income rose $359 million, mainly from an after-tax increase in underwriting income of $145 million, an after-tax increase in net investment gains of $90 million (primarily from the sale of a London real estate investment), and an after-tax increase in net investment income of $87 million. Corporate expenses partly offset these gains, increasing by $17 million after tax, mainly due to performance-based compensation.
How did the company's investment portfolio perform?
Net investment income was $779 million in 2022, up from $672 million, reflecting rising interest rates and a larger fixed maturity portfolio. However, the change in unrealized investment losses was $1,248 million pre-tax, reflecting the decline in fair value of available-for-sale securities. The effective duration of the fixed maturity portfolio was 2.4 years at both December 31, 2022 and 2021.
What were the company's COVID-19-related losses?
As of December 31, 2022, the company had recognized net COVID-19-related losses of approximately $341 million, of which $290 million related to the Insurance segment and $51 million to the Reinsurance & Monoline Excess segment. Most of these losses involved short-tailed lines such as contingency and event cancellation, business interruption, and film production delay.
What are the company's dividend and capital return plans?
In 2022, the Board declared regular quarterly dividends of $0.09 per share in the first quarter and $0.10 per share in each remaining quarter, plus special dividends of $0.50 per share in the second quarter. The Board stated it currently expects to continue regular quarterly dividends. On January 3, 2023, it declared another $0.50 special dividend, paid January 24, 2023. The company also had 13,629,606 shares remaining under its repurchase authorization at the end of 2022.
How much of the company's reserves are at risk of adverse development?
Net reserves for losses and loss expenses were $14.25 billion at December 31, 2022, and gross reserves were $17.01 billion. Net prior-year development was unfavorable by $36 million in 2022 (after premium offsets), driven by Insurance segment COVID-19 event cancellation and film production losses and by social inflation affecting 2015 to 2019 accident years. The company states that reserves may prove inadequate.
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