W. R. Berkley has reported a roughly 67% year-on-year decline in net income to $71 million for the second-quarter of 2020, while its combined ratio deteriorated to 98.7% in the period.
In mid-July, the company warned of expected net catastrophe losses of approximately $145 million, pre-tax for Q2 2020, comprised of an $85 million COVID-19 hit, $20 million for losses related to civil unrest in the U.S., and $40 million primarily attributable to severe weather-related events in the U.S.
In Q2, catastrophe losses added 8.7 loss ratio points to the reported combined ratio, including 5.1 loss ratio points for losses related to the COVID-19 pandemic. Prior to cat losses, the accident year combined ratio was 90.2%.
Gross premiums written increased year-on-year in Q2 2020, to $2.13 billion versus $2.08 billion a year earlier. At the same time, net premiums written fell slightly from $1.74 billion in Q2 2019 to $1.73 billion in Q2 2020.
As well as the year-on-year decline in net income from roughly $217 million to $71 million, W. R. Berkley has reported that its operating income also fell significantly, from $159 million in Q 20219 to $11.5 million in Q2 2020.
“In spite of the current challenges, positive rate momentum persisted,” says W. R. Berkley in its results announcement.
The firm reports average rate increases, excluding workers’ compensation, in Q2 2020 of around 13%, which it says helped to mitigate the top-line impact of the shrinking economy.
“The primary impetus for this continued momentum is the growing industry concern over the low interest rate environment and social inflation, which has shown no signs of abating. We believe that the current environment has heightened risk awareness and further reinforced this trend,” says the firm.
Adding, “While re-opening the global economy is unlikely to be a smooth process, we anticipate that it will have a meaningful favorable impact on our future growth.”
The COVID-19 pandemic also had an adverse effect on the firm’s investments, with net investment income taking a $58 million loss from investment funds. In light of the pandemic and ongoing uncertainty, W. R. Berkley explains that it has taken a defensive stance in order to enhance its liquidity by investing in high-quality shorter-term assets, including cash and cash equivalents.
