01—Abstract
Summary
Summary of the 10-K filed February 23, 2024. 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 2023 net premiums written rose to $10.95 billiona from $10.00 billion in 2022, and net premiums earned reached $10.40 billion.
The Insurance segment's GAAP combined ratio was 90.7% and the Reinsurance & Monoline Excess segment's was 82.1%, yielding a consolidated GAAP combined ratio of 89.7%, compared with 89.3% in 2022. Net income to common stockholders was $1.381 billionb in both 2023 and 2022, while diluted earnings per share rose to $5.05 from $4.94, reflecting fewer weighted average diluted shares. Net investment income increased 35% to $1.05 billion, driven mainly by higher yields on fixed maturity securities (4.4% average annualized yield versus 2.9% in 2022) and a larger portfolio.
Total investments were $26.64 billionc at December 31, 2023, with 75.8% in fixed maturity securities, and the fixed maturity portfolio's effective duration was 2.4 years. Stockholders' equity reached $7.46 billion. The company repurchased shares for $537 million and paid $501 million in dividends, including special dividends of $0.50 per share in three quarters of 2023.
The filing also flags risks that bear on investors: net unfavorable prior-year reserve development of $19 milliond in 2023, including adverse development in general liability and commercial auto liability for accident years 2016 through 2019 that management attributes partly to social inflation. Gross loss reserves were $18.74 billion, and the company had recorded about $384 million in COVID-19-related losses.
Catastrophe losses net of reinsurance were $195 million in 2023. A subsidiary also filed a lawsuit in December 2023 against certain reinsurers to recover more than $90 million in event cancellation losses.
02—Key points
Key Highlights
- Net premiums written grew to $10.95 billion in 2023 from $10.00 billion in 2022, with Insurance contributing $9.66 billion.
- Consolidated GAAP combined ratio was 89.7% in 2023 versus 89.3% in 2022; the Reinsurance & Monoline Excess segment improved to 82.1% from 89.7%.
- Net income to common stockholders was $1.381 billion in both 2023 and 2022; diluted EPS rose to $5.05 from $4.94.
- Net investment income rose 35% to $1.05 billion, with the fixed maturity yield increasing to 4.4% from 2.9%.
- Gross premiums written reached $12.97 billion, up 9% from $11.91 billion, with average renewal premium rates up 7.1% in 2023.
- Net unfavorable prior-year reserve development was $19 million, driven by adverse development on 2016–2019 accident years that management links to social inflation.
- The company returned capital through $537 million of share repurchases and $501 million of dividends, including special dividends of $0.50 per share in three quarters.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2023filed February 23, 2024Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $12.14B$11.17B | +8.7% |
| Interest Expense | $127.46M$130.37M | −2.2% |
| Net Income | $1.38B$1.38B | 0.0% |
| EPS (Basic) | $3.40$3.33 | +2.1% |
| EPS (Diluted) | $3.37$3.29 | +2.4% |
| Shares Outstanding (Basic) | 406.50M415K | +97786.2% |
| Shares Outstanding (Diluted) | 409.95M419K | +97694.8% |
05—Questions
Frequently Asked Questions
How profitable were W. R. Berkley's underwriting operations in 2023?
Consolidated GAAP combined ratio was 89.7% in 2023, up slightly from 89.3% in 2022, where a figure below 100 indicates an underwriting profit. The Insurance segment's combined ratio was 90.7%, while the Reinsurance & Monoline Excess segment improved to 82.1% from 89.7%. The loss ratio was 61.3% in both years, and the expense ratio rose to 28.4% from 28.0%.
Why did net income stay flat while investment income rose?
Net income to common stockholders was $1.381 billion in both years. The filing attributes the increase in net investment income to rising interest rates and a larger fixed maturity portfolio, but this was offset by lower net investment gains (a decline of $123 million after tax, largely due to a 2022 real estate sale gain), higher foreign currency losses, increased corporate expenses and a higher effective tax rate of 21.1% versus 19.5%.
What reserve risks does the company face?
Gross reserves for losses and loss expenses were $18.74 billion at year-end 2023. The company recorded unfavorable prior-year development of $19 million, mainly on general liability and commercial auto liability for 2016–2019 accident years, which it attributes partly to social inflation. The company also recorded about $384 million in COVID-19-related losses and noted that reserves may prove inadequate.
How is the company's capital position and shareholder return?
Total common stockholders' equity was $7.46 billion, or $29.06 per outstanding share. Total capitalization was $10.3 billion, with debt and subordinated debentures representing 28% of capital. The company repurchased 8,707,676 shares for $537 million and paid $501 million in dividends in 2023. Berkley Insurance Company's total adjusted capital was 391% of its RBC authorized control level.
Does the company have exposure to reinsurance counterparty risk?
Yes. Amounts due from reinsurers totaled $3.53 billion at December 31, 2023, net of an $8.4 million allowance. Most are with rated reinsurers, including Lloyd's of London ($402 million), Lifson Re ($335 million) and Partner Re ($314 million). In December 2023, a subsidiary sued certain reinsurers to recover more than $90 million in event cancellation losses, which the company expects to resolve positively.
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