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WR Berkley Corp (NYSE:WRB)
Return on Equity
15.60% (As of Jun. 2014)

Return on equity is calculated as net income divided by its total shareholder equity. WR Berkley Corp's annualized net income for the quarter that ended in Jun. 2014 was $720 Mil. WR Berkley Corp's total shareholder equity for the quarter that ended in Jun. 2014 was $4,620 Mil. Therefore, WR Berkley Corp's annualized return on equity (ROE) for the quarter that ended in Jun. 2014 was 15.60%.

WRB' s 10-Year Return on Equity Range
Min: -9.83   Max: 21.23
Current: 11.53

-9.83
21.23

During the past 13 years, WR Berkley Corp's highest Return on Equity (ROE) was 21.23%. The lowest was -9.83%. And the median was 11.00%.

WRB's Return on Equityis ranked higher than
81% of the 192 Companies
in the Global Insurance - Property & Casualty industry.

( Industry Median: 9.70 vs. WRB: 11.53 )

Definition

WR Berkley Corp's annualized Return on Equity (ROE) for the fiscal year that ended in Dec. 2013 is calculated as

Return on Equity (ROE)=Net Income (A: Dec. 2013 )/Total Shareholder Equity (A: Dec. 2013 )
=499.925/4336.035
=11.53 %

WR Berkley Corp's annualized Return on Equity (ROE) for the quarter that ended in Jun. 2014 is calculated as

Return on Equity (ROE)=Net Income (Q: Jun. 2014 )/Total Shareholder Equity (Q: Jun. 2014 )
=719.844/4619.713
=15.58 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

In the calculation of annual return on equity, the net income of the last fiscal year issued. The Total Shareholder Equity is from the end of year data. Strictly speaking, average Total Shareholder Equity should be used. In calculating the quarterly data, the Net Income data used here is four times the quarterly (Jun. 2014) net income data. Return on equity is displayed in the 10-year financial page.


Explanation

Return on Equity (ROE) measures the rate of return on the ownership interest (shareholder's equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are considered desirable.

The factors that affect a company’s Return on Equity (ROE) can be illustrated with the Du Pont Formula:

Return on Equity (ROE)(Q: Jun. 2014 )
=Net Income/Total Shareholder Equity
=719.844/4619.713
=(Net Income / Revenue)*(Revenue / Total Assets)*(Total Assets / Total Shareholder Equity)
=(719.844 / 1796.989)*(1796.989 / 21167.194)*(21167.194 / 4619.713)
=Net Profit Margin*Asset Turnover*Leverage Ratio
=0.4006*0.0849*4.5819
=Return on Assets*Leverage Ratio
=0.034*4.5819
=15.58 %

Note: The Net Income data used here is four times the quarterly (Jun. 2014) net income data.

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

With this breakdown, it is clear that if a company grows its Net Profit Margin, its Asset Turnover, or its Leverage, it can grow its return on equity.


Be Aware

Because a company can increase its return on equity by having more financial leverage, it is important to watch the leverage ratio when investing in high ROE companies. Like ROA, ROE is calculated with only 12 months data. Fluctuations in company’s earnings or business cycles can affect the ratio drastically. It is important to look at the ratio from a long term perspective. ROA can be affected by events such as stock buyback or issuance, as well as by goodwill, the company’s tax rate and its interest payment. Return on assets may not reflect the true earning power of the assets. A more accurate measurement is Return on Capital (ROC).

Asset light businesses require very few assets to generate very high earnings. Their ROEs can be extremely high.


Related Terms

Return on Assets, Return on Capital, Return on Capital - Joel Greenblatt, Total Equity


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

WR Berkley Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
ROE 20.7721.2320.9720.839.238.5912.139.8511.8611.53

WR Berkley Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
ROE 13.1210.369.3215.3610.6410.9612.5612.0415.5215.60
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