W.R. Berkley Corp.’s Growth Led by Rate Increases & New Units

On Mar 13, we issued an updated research report on W. R. Berkley Corporation WRB.

W.R. Berkley Corp. qualifies as one of the leading commercial lines property and casualty insurance providers in the U.S. that has been maintaining a trend of premium growth over the past several quarters. The company has positioned itself well to take advantage of the hardening insurance market through inorganic and organic growth.

Of its 49 operating units, 42 have been organized and developed internally, while seven were added through acquisitions. Of these units, 24 have been formed since 2006.

W.R. Berkley Corp. is witnessing an increase in premium rates in its core business. Also, the new units are accretive to earnings. Average renewal rates are on the rise and so is the price trend. With these units continuing to grow and established businesses no longer losing volume (retention rate had been 80% for many quarters in the past), overall growth is visible.

W.R. Berkley Corp.'s international business is also showing impressive growth. Premium accrual in the international unit is mainly from the emerging markets of Asia, South America and the Nordic region in Europe. We expect the company’s international segment to post increasing premium, going forward.

W.R. Berkley Corp. also maintains a solid balance sheet with sufficient liquidity. Moreover, W.R. Berkley’s commendable dividend track reflected by the fact that it has been increasing dividend for the past 10 years. Its reserving discipline is also impressive given that the company has experienced a favorable reserve release for 31 consecutive quarters.

However, low interest rates, which lead to reduced investment yields, are producing weaker returns on float, thereby hampering results.

A competitive reinsurance market will keep earnings from the reinsurance segment under pressure.

W.R. Berkley currently holds a Zacks Rank #4 (Sell).

Some better-ranked companies in the same industry are AmTrust Financial Services, Inc. AFSI, Arch Capital Group Ltd. ACGL and Allied World Assurance Company Holdings, AG AWH. All these stocks sport a Zacks Rank #1 (Strong Buy).