Berkley Forms New Unit

Last week, property and casualty insurer W.R. Berkley Corp.(WRB - Analyst Report) announced the formation of a new unit called Berkley Technology Underwriters, LLC with headquarters in Minneapolis, Minnesota. The new company will act as a leading provider of insurance solutions for small and mid-sized technology businesses by underwriting casualty and property, professional liability insurance for them.

Matthew A. Mueller, carrying an experience of more than 30 years in the property and casualty insurance industry, will be appointed as the president of Berkley Technology Underwriters. 

Berkley has started 19 businesses since 2006 (when the soft market cycle started) to strengthen its position and take advantage of the eventual market turn. These newer units not only concentrate on important parts of the U.S economy, including healthcare, energy and agriculture, but also focus on the growing international markets such as Australia, Southeast Asia and South America.

We believe the new ventures are bearing fruit and mitigating losses from old businesses. It is especially testified by the steady year-over-year growth in net premium written since 2006. These new businesses are eventually expected to benefit from a turn in the insurance cycle. Besides, share buybacks and dividend payments would add value to shareholders’ wealth. Moreover, strong financial strength ratings also contribute to the positives.

Berkley is expected to release its second quarter earnings report on July 25, 2011, after the closure of the market. The Zacks Consensus estimates Berkley’s second quarter earnings at 62 cents per share. We anticipate second quarter earnings to be adversely affected by higher-than-expected catastrophe losses and therefore, it might trend below our estimate.

W.R. Berkley Corporation retains Zacks # 3 Rank, which translates into a short-term Hold rating. Also, over the longer term, we maintain our Neutral recommendation on the company.

Another significant player that offers insurance in the technology market place is Worcester, Massachusetts-based Hanover Insurance Group Inc. (THG - Snapshot Report).

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Read the full analyst report on THG