Late last week, rating agency A.M. Best affirmed the issuer
credit ratings ("ICR") and debt ratings of
W.R. Berkley Corp.
). The company's senior unsecured notes were affirmed at 'a'
while the trust preferred securities were affirmed at 'bbb'.
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A.M.Best acknowledges Berkley's consistent strong earnings
performance, pricing momentum and a stable growth environment
going forward. The company's easy accessibility to capital
markets is also viewed favorably by the rating agency.
The rating agency noted that the company's debt ratio stands at
33%, which is near the high end of its expected range of 25%-
35%. However, this is anticipated to come down once the company
pays its debt due in early 2013.
In addition, A.M. Best has affirmed the financial strength
ratings ("FSR") and ICR of four of Berkley's operating units -
Berkley Insurance Group (Berkley Insurance), Admiral Insurance
Group (Admiral), Berkley Regional Group (Berkley Regional) and
Nautilus Insurance Group (Nautilus).
All ratings carry stable outlook.
The rating affirmation for Berkley Insurance and Berkley Regional
comes on the back of their robust operating fundamentals. This
includes disciplined underwriting, adequate capitalization,
significant market diversification, wide product portfolio and
unique market positioning. Moreover, prudent catastrophe risk
managements at these units have led to a below-average exposure
to cat loss, thereby limiting earnings volatility.
Also, Admiral and Nautilus ratings reflect the units' favorable
and consistent operations, adequate capitalization and well
established market position in the surplus lines market.
The rating affirmation for its Life and Health unit comes on the
back of a consistently strong capital position, which is
essential for business growth.
Going forward a positive rating action may be seen if the units
perform better than the expectations and strengthen their
capitals further. A reverse rating action is likely if
adverse reserve development, deterioration in operating results
and weakening of capital levels are witnessed.
Berkley also announced its estimate of cat loss from Hurricane
Sandy for fourth quarter 2012. It expects the loss to be in the
range of $40-$50 million, before tax. The figures have been
reached after taking into account reinsurance and reinstatement
Insurers such as
The Travelers Companies Inc.
XL Group plc
Tower Group Inc.
) have also been affected by Sandy.
Berkley currently retains a Zacks #3 Rank, which translates into
a short-term Hold rating. Considering the fundamentals, we are
also maintaining our long-term Neutral recommendation on the