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Berkley gets feet wet in property catastrophe reinsurance; P&C stocks up


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Berkley gets feet wet in property catastrophe reinsurance; P&C stocks up

W. R. Berkley Corp. took advantage of some opportunities in the property catastrophe space during the most recent reinsurance renewal season but is holding off on taking a deeper dive into the market for now.

"We put more than a toe in the water, but not more than a foot, and that's just because of our view of volatility," CEO Rob Berkley said during an during a conference call. "In addition to that, we're going to see what type of opportunities there are in the first quarter and the balance of the year, particularly with some shortfalls in certain market participants' covers."

During the company's third-quarter 2022 call, Berkley had said a move into the property catastrophe market depended "on how attractive the market gets."

That market "is poised for material hardening," the CEO said on the latest earnings call, and he is confident in Berkley's ability to succeed in it.

"While we have been and are having more of a liability bent, it would be a mistake to think that we do not have the skills and the appetite for property when we think it makes sense [and] when we believe it is a good risk-adjusted return," he said. "And there is a better-than-average chance from our perspective, the marketplace is moving in that direction."

Berkley feels pricing discipline is returning "in a much more pronounced manner" to the reinsurance marketplace, but it remains to be seen how long that discipline will last.

"I think perhaps the expression that even a broken clock is right twice a day, well, this is one of those moments when the clock is right," he said. "We will see, with time, how much discipline really is in the market."

The company reported net income of $382.2 million, or $1.37 per share, for the fourth quarter of 2022, compared with $294.4 million, or $1.06 per share, a year earlier. Net income for full year 2022 came in at $1.38 billion, or $4.94 per share, up from $1.02 billion, or $3.66 per share, in 2021.

Net investment income grew 40.2% to a record $231.3 million, while quarterly pretax underwriting income came in at $291.9 million, also a record.

Through midafternoon trading on Jan. 27, Berkley's shares were down fractionally on the week.

The "Big Three" in the reinsurance space had a positive week. Everest Re Group Ltd. gained 4.37%, RenaissanceRe Holdings Ltd. rose 2.93%, and Reinsurance Group of America climbed 5.07%.

Insurance stocks generally underperformed the broader market but still posted gains, as the S&P 500 Insurance index was up just under 2% for the week as of midafternoon on Jan. 27. The S&P 500 added about 2.8%.

Red Umbrella rises

The Travelers Cos. Inc. made back some of its losses last week in the wake of a positive fourth-quarter 2022 earnings report.

Solid performance in its commercial insurance lines offset by troubles in personal lines preceded a 2% rise in Travelers' shares, a reversal of fortune from the previous week when the share price dipped 4.43%.

That decline came after the insurer's preannounced results for the quarter included a 39% year-over-year decline in net income and heavier-than-expected pretax catastrophe losses of $459 million, the bulk of which were attributed to the winter storm in late December 2022 that affected 37 states.

The storm's effect on the commercial side included a 16% year-over-year decline in income to $725 million from $867 million. However, that was offset by an increase in net favorable prior-year reserve development and higher underlying underwriting gain.

The underlying combined ratio for commercial lines improved year over year to 89.5% from 89.8%, which included an underlying loss ratio of 60.4% and a lower expense ratio of 29.1%.

Those results were a marked contrast from the numbers in the personal lines of business, which booked a loss of $61 million in the quarter, compared with net income of $327 million a year ago. The combined ratio for the segment spiked 14.2 percentage points in the quarter to 105.3%.

Most of the big property and casualty carriers saw their share prices rise this week as well. Progressive Corp. rose 5.95% for the week as of midafternoon trading on Jan. 27, while Chubb Ltd. and Kemper Corp. were up 3.43% and 4.83%, respectively.