The insurer earned $1.17 a share on an operating basis, slightly above consensus, with a combined ratio of 90.8%. Revenue fell 0.8% to $3.74 billion, below expectations, as net premiums written rose just 1.3%. Net premiums written in reinsurance fell 11.6%.
W. R. Berkley's profitability is holding up. The pricing that drove it is slowing.
The commercial property and casualty insurer reported third-quarter operating income of $456.5 million, or $1.17 a share, up 6.4% per share from a year earlier and slightly above the consensus of about $1.15 compiled by Financial Modeling Prep. Net income was $446.0 million, or $1.14 a share, down from $511.0 million, or $1.28. Total revenue was $3.74 billion, down 0.8% from $3.77 billion and below FMP's consensus of $3.83 billion.
Shares fell about 2.4% in extended trading to $72.31, from Monday's close of $74.11.
The underwriting
The core business remains highly profitable. The combined ratio, which measures claims and expenses as a share of premiums, was 90.8%, compared with 90.9% a year earlier; anything below 100% means an underwriting profit. Excluding catastrophes and prior-year reserve changes, the current accident-year combined ratio was 88.1%, and catastrophe losses added 2.7 points. Underwriting income in the insurance segment rose 10.6% to $237.7 million. Return on equity was 18.4%.
Investment income was the other support. Net investment income was $383.5 million, and income from the core portfolio rose 12%.
The pricing
The weak spot is growth. Gross premiums written rose 3.0% to $3.95 billion, and net premiums written rose just 1.3% to $3.27 billion. Average rate increases, excluding workers' compensation, were about 4.0% in the quarter, compared with about 7.2% in the first quarter, according to the company's reported figures. Price increases have slowed by about 44% in two quarters, by this publication's arithmetic. In the reinsurance business, net premiums written fell 11.6% to $368.6 million from $417.2 million.
According to a TradingKey summary of the company's conference call, executives expect insurance premium growth in the mid-single digits or better, and reinsurance premiums to decline by about 10% to 20% for the foreseeable future.
Why the pricing matters
For an insurer, rate increases are the leading indicator of margins. When prices rise faster than claims costs, combined ratios improve; when price increases slow while claims costs keep rising, margins eventually narrow. Berkley's combined ratio was essentially unchanged, so the slowdown in pricing has not yet shown up in underwriting results. A shrinking reinsurance book may indicate that Berkley sees less attractive pricing in that market.
Market implications
One reading is that Berkley is managing a softer market well. It is choosing to write less reinsurance rather than accept weaker prices, its margins are stable, and higher interest rates are lifting investment income enough to support returns.
A second reading is that the cycle is turning. Rate increases have slowed sharply, revenue fell, premium growth is low, and margins tend to follow pricing with a lag.
What to watch
Rate trends by line in the next quarter; the pace of the reinsurance decline; results from Chubb after Tuesday's close; reserve developments; and the regular-session reaction. A further slowdown in rate increases toward the low single digits would point to margin pressure in 2027.