W. R. Berkley Corp.’s announcement on Feb 19, that its board of directors has increased its share repurchase authorization to 10 million shares, helped the stock price to gain 0.8% with shares closing at $40.76 on Feb 20.
The share buyback translates into about 8% of the company’s outstanding shares as of Dec 31, 2013.
Share buybacks increase a company’s earnings per share by reducing the number of shares outstanding. Besides, it also testifies a company’s financial position is strong enough to enhance shareholder value.
W. R. Berkley Corp. 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 repurchases approval marks the first share buyback program adopted by the company for this year. The last time it took a similar action was in Dec 2013.
W. R. Berkley Corp. 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. , AXIS Capital Holdings Ltd and ACE Ltd to upgrade their share buyback programs.
Going forward, we expect improving operating fundamentals in the industry to allow W. R. Berkley Corp. to continue with its disciplined share repurchase strategy. The company has witnessed improvement in insurance rates in certain lines of businesses. Moreover, the increase in interest rates expected soon, will relieve pressure of investment income.
W. R. Berkley Corp. also announced to pay a regular quarterly cash dividend of 10 cents per share on its common stock on Apr 1, 2014, to shareholders of record at the close of business on Mar 19, 2014. At the current dividend level the dividend yield stands at 0.98%.
Along with buying back shares, W. R. Berkley Corp. also rewards its shareholders with increased dividend payouts. In May last year, 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 Corp. presently carries a Zacks Rank #3 (Hold).