W.R. Berkley Corp. reports Q2 net income of $180 million, up from $116 million in 2013’s second quarter, as rate increases continued to outpace loss costs.
Net premiums written increased to $1.5 billion in the quarter compared to $1.3 billion for the same period last year.
In a statement, Chairman and CEO William R. Berkley says, “We were able to grow our top line by about 11%. Price increases for our domestic insurance businesses were approximately 4%; thus, for the twelfth quarter in a row, prices
increased at a rate in excess of loss costs. We believe that in such an environment our goal should be to grow selectively.”
The company’s GAAP combined ratio was 94.4, an improvement from 96.6 reported in Q2 2013.
W.R. Berkley saw a jump in net investment gains in the quarter: $109.2 million compared to $33.1 million a year ago. Berkley says, “"We have maintained the quality of our fixed-income portfolio, while at the same time investing an increasing portion of new funds into alternative investments with the goal of generating capital gains.
“As a result, we have sacrificed some ordinary investment income to achieve the level of capital gains currently flowing into our income statement. Our investment returns from our fixed-income portfolio declined slightly, reflecting both the current interest rate environment and the shortening of our portfolio duration, while other parts of our investment activities have generated attractive returns over the recent period.
“The sale of a property from our real-estate portfolio resulted in a substantial gain this quarter. We also continue to achieve gains from our common stock and private equity investments.”
State of the market
In a conference call, President and COO W. Robert Berkley said the market remains a “mixed bag,” with domestic casualty risks among the most promising as far as the ability for the insurer to get rate. He called workers’ comp a “bright point,” but also warned against painting any line with too broad of a brush.
Robert Berkley touched on the impact capacity in the reinsurance market was having on property catastrophe risks, and said professional lines are “flat-ish,” although he noted these risks vary greatly, adding there are opportunities to grow business.
Commercial auto, Robert Berkley said, remains an “area of concern,” and he reiterated comments made in the company’s Q1 conference call that this like is “poised for hardening.”
In general, Robert Berkley said the market is not experiencing a “classic insurance cycle,” but he said he remains encouraged by the opportunities that are available. W.R. Berkley, he said, is focused on striking the right balance between rate increase and exposure growth.
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