W.R. Berkley Corp. (WRB) announced that its board of directors has increased its share repurchase authorization to 10 million shares. This translates into approximately 7% of the company’s outstanding shares as of Sep 30, 2013.
Share buybacks increase a company’s earnings per share by reducing the number of shares outstanding. They also indicate that the company’s financial position is strong enough to enhance shareholder value.
W.R. Berkley has been aggressively repurchasing shares for quite some time now. Since 2007, it has bought back nearly 30% of its outstanding shares.
The latest share repurchase marks the first share buyback program adopted by the company for this year. The last time it took a similar action was in Aug 2012.
W.R. Berkley has been actively involved in share buybacks to support its bottom-line. Moreover, a quiet hurricane season has allowed the company to use cash saved from paying out cat claims, to further share buybacks. A benign cat season has also allowed other players like Montpelier Re Holdings Ltd. (MRH), AXIS Capital Holdings Limited (AXS) and ACE Limited (ACE) to upgrade their share buyback programs.
Going forward, we expect improving operating fundamentals in the industry to allow W.R. Berkley to continue with its disciplined share repurchase strategy. The company has witnessed improvement in insurance rates in certain lines of businesses. Moreover, Fed taper expected early next year will likely push up interest rates thus relieving pressure on investment income.
Along with buying back shares, W.R.Berkley also rewards its shareholders with increased dividend payouts. In May, the company had approved an 11% dividend hike representing a new annualized rate of 40 cents per share, which marked the company’s eighth dividend increase since 2005.
With more share buybacks on board that in turn will boost the bottom-line, we expect analysts to raise their estimates exerting upward pressure on the Zacks Rank. W.R. Berkley presently carries a Zacks Rank # 3 (Hold).
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