W.R. Berkley Corp.
) announced that its Board has increased its share repurchase
authorization to 10 million shares. This translates into
approximately 7% of the company's outstanding shares as of June 30,
Share buybacks increase a company's earnings per share by
reducing the number of shares outstanding. This step is also
indicative of the fact that the company's financial position is
strong enough to enhance its shareholders' value.
Berkley has been aggressively repurchasing shares for quite some
time. Since 2007, it has bought back about 30% of its outstanding
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 November 2011.
Berkley has been actively involved in share buybacks to support
its bottom line amid weak property and casualty market. The company
is facing premium declines since the onset of soft market
conditions in 2006. To position itself for growth, the company has
made a number of investments and started 21 new units in the last
Though the company has witnessed improvements in insurance rates in
certain lines of businesses, a sustainable turnaround in the
underwriting cycle is yet to be seen. Low interest rates are
adversely affecting its profitability, by limiting return on
investment. Until these conditions improve, we expect the company
to continue taking defensive actions like share buybacks.
On the other hand, the company announced a regular quarterly
dividend of 9 cents per share, which was raised by 36% during last
quarter. Dividends at Berkley have increased at a 5-year CAGR of
We maintain our Neutral recommendation on W.R. Berkley. The
stock also retains a Zacks #3 Rank, which translates into a
short-term Hold rating.
Berkley competes closely with a host of property and casualty
carriers, such as
The Chubb Corp.
The Travelers Companies, Inc.
XL Group plc
The Allstate Corp.
CHUBB CORP (CB): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
BERKLEY (WR) CP (WRB): Free Stock Analysis
XL GROUP PLC (XL): Free Stock Analysis Report
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