Bullish Stock to Watch: W. R. Berkley Corp (NYSE: WRB)

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W.R. Berkley Corp (NYSE: WRB) stock rose over 1.8% on 21st October, 2020 (as of 9:49 am GMT-4; Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. Gross premiums written rose by 8.1% in the third quarter despite limited economic growth. Net premiums written increased 7.4% to approximately $1.9 billion in the third quarter. The Insurance segment rose 6.5% to more than $1.6 billion, mainly due to most lines of business, with the exception of workers’ compensation. The growth in the third quarter was led by professional liability of 20.7% followed by 17% in commercial automobile, 9.6% in other liability, and 8% in short tail lines. The Reinsurance & Monoline Excess segment rose by 13.7% to $251 million in the third quarter driven by an improving market, as evidenced by an increase in property reinsurance of 26.6%, monoline excess of 18.9% and casualty reinsurance of 7.9%. Pre-tax underwriting income of $111 million improved 3.7% despite increased natural catastrophe losses in the quarter. There are on-above average number of windstorms, wind hurricanes making landfall and West Coast wildfires in the third quarter, resulting in approximately $73 million or 4.2 loss ratio points impacting our underwriting results. This compares with last year’s catastrophe losses of approximately $31 million or 1.9 loss ratio points. At the end of the quarter, cash and cash equivalents were more than $2.7 billion or approximately 13% of invested assets.

WRB in the third quarter of FY 20 has reported the adjusted earnings per share of 65 cents, beating the analysts’ estimates for the adjusted earnings per share of 62 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue of $2 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue by 5.16%.

Additionally, during the third quarter, the company managed the capital position through two record low financing transactions for Berkley. First, $170 million, 3.1% effective interest rate 30-year senior note, and second a 40-year subordinated hybrid debt offering of $250 million at coupon of 4.25%. The use of proceeds, mainly will be used to redeem $350 million of the 5% and 5.8% subordinated hybrid debt in October. Accordingly, the financial statements will be affected due to the reduced annual pre-tax interest expense of about $3 million and a non-recurring debt extinguishment cost in the fourth quarter of approximately $8.5 million pre-tax.

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