Profits at WR Berkley plummet 67% in Q2 after high COVID-19 losses

Property/casualty insurer WR Berkley saw a sharp decline in its profits in the  second quarter of 2020, driven by the global COVID-19 pandemic, severe weather events and losses related to civil unrest in the US.

The insurer reported that its second quarter net income fell to $71.3 million, a 67 percent decline from $216.7 million in Q1 2019. The net income in the first half of 2020 dropped to $66.8 million from $397.4 million in H1 2019.

Gross premiums written increased year-on-year to $2.13 billion in Q2 2020, compared with $2.09 billion a year earlier. The gross premiums written for H1 2020 was $4.36 billion, compared with $4.13 billion in H1 2019.

The company reported a combined ratio of 98.7 percent in the quarter. Catastrophes added 8.7 loss ratio points to the combined ratio, including 5.1 loss ratio points for COVID-19 related losses.

The company incurred $85 million of net COVID-19 related losses during the period.

Total catastrophe losses also included $20 million for losses related to civil unrest and $40 million primarily attributable to severe weather-related events in the US.

WR Berkley said the second quarter of 2020 was most notably characterized by the COVID-19 pandemic and its impact on the US and global economies.

"In spite of the current challenges, positive rate momentum persisted. 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," the insurer said in a statement.

"We believe that the current environment has heightened risk awareness and further reinforced this trend. Average rate increases excluding workers' compensation in the second quarter of 2020 of approximately 13% mitigated the top-line impact of the shrinking economy."

It added: "Consequently, gross premiums written grew despite the current economic environment. 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 first half of 2020 has been highly unusual in many regards. Our Company has performed relatively well and our people have demonstrated tremendous resiliency.

"Much remains unknown as we move into the second half of the year, yet often the best opportunities for the market to correct itself and provide an appropriate risk-adjusted return arise from periods of the greatest uncertainty. We see this as one of those moments, and we are well positioned to realize these opportunities as the economy improves."