Tags: W.R. | Berkley | black | WRB

W.R. Berkley Stays in the Black in Tough Market

By    |   Tuesday, 28 February 2012 06:22 AM

W.R. Berkley (WRB) is not only one of the biggest underwriters of commercial insurance in the United States but also one of the most flexible, able to bend the top line of its income statement without breaking on the bottom line. Unlike most insurers of late, it stays in the black in a tough insurance market.

W.R. Berkley has generated less annual revenue in every year since the top line crested in 2007. But the Greenwich, Conn., company also has remained profitable and raised its dividend.

Berkley is a holding company for dozens of commercial insurance company subsidiaries in the United States and abroad. Subsidiaries drive pricing decisions, not the home office in Greenwich, an approach that can make Berkley nimbler compared to competitors who centralize pricing.

The company lists more than 40 operating units on its website, among them Berkley Oil & Gas Specialty Services, Berkley Life Sciences, Berkley Canada and other insurance subsidiaries that share the corporate parent's name.

The largest of Berkley's five business segments is composed of specialty insurers that cover commercial autos and other property, plus product liability and professional liability. Berkley also has a collection of domestic regional insurance companies that underwrite property casualty risk in more than 40 states. The other three business segments are reinsurance, international underwriting and alternative services, such as helping organizations administer self-insurance programs.

Fitch Ratings this month affirmed its A- issuer default rating and all other ratings for W.R. Berkley and said that the rating outlook for the holding company is stable.

Fitch analysts Gretchen K. Roetzer and Dafina M. Dunmore credited managerial strengths, including "Berkley's willingness to shrink its top line when prices do not support underwriting guidelines." The chairman and chief executive officer of the company since its formation in 1967 has been its namesake, William R. Berkley. His son, W. Robert Berkley, Jr., is the company's president and chief operating officer.

Roetzer and Dunmore also said in their Feb. 7 report that the Fitch ratings affirmation "reflects Berkley's strong niche market positions in several lines with strong underwriting culture, modest exposure to catastrophe losses and favorable long-term financial results, partially offset by average (albeit improved) capitalization and relatively high financial leverage."

Dividend increase

Berkley raised its dividend payout to 31 cents last year from 27 cents per share in 2010, one in a series of annual dividend hikes in recent years. But Wall Street is generally nonplussed. Most stock analysts following Berkley in late February had neutral ratings on the stock.

Berkley generated annual revenue of $5.15 billion last year, up 9 percent from 2010 but still below the $5.58 billion high point in 2007. Annual net income fell to $394 million last year, down 12 percent from 2010, largely because of a substantial increase in underwriting losses and loss expenses.

Berkley will release its first quarter financial report around May 1.

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Tuesday, 28 February 2012 06:22 AM
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