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W.R. Berkley (WRB) Rides on Strong Segmental Performance

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W.R. Berkley Corporation (WRB - Free Report) is well-poised for growth on the back of higher premiums at professional liability, short-tail lines, lower underwriting expenses and solid financial position.

The stock has seen its estimates for 2021 move up nearly 0.3% in the past 30 days, reflecting investor optimism.

This Zacks Rank #3 (Hold) property and casualty insurer continues to expect growth from its Insurance business, which contributed almost 87% of net premium written in the first nine months of 2020. Its premiums should benefit from higher premiums at other liability, professional liability, short-tail lines, commercial auto and workers' compensation.

Also, premium growth at Reinsurance & Monoline Excess segment continues to gain from higher premiums at casualty reinsurance, property reinsurance and monoline excess.

Investment income, affecting the company’s profitability, should benefit from higher income from investment funds, increase in real estate, and increase in arbitrage trading account and equity securities.

Higher net premiums earned and lower underwriting expenses continue to improve the expense ratio as well.

The company had strong cash flow from operations of $557 million at the end of the third quarter 2020. The liquidity remained strong at the holding company with more than $1.6 billion in cash and liquid investments. Despite the effects of COVID-19 so far, its financial position and liquidity has improved commencing in the second quarter.

Banking on its stable cash flow, W.R. Berkley has raised its dividend at a 13-year (2006-2019) CAGR of 11.9%. Its current dividend yield of 0.7% is better than the industry average of 0.4%, which makes the stock an attractive pick for yield-seeking investors.

Moreover, the company’s 6.9% return on equity (ROE) is better than the industry average of 5.6%, reflecting its efficiency in utilizing shareholders’ funds. The company targets long-term ROE of 15%.

However, shares of W.R. Berkley has lost 6.8% year to date compared with the  industry’s decline of 4.9%.

Nevertheless, the Zacks Consensus Estimate for 2021 earnings per share is pegged at $3.35, indicating a rise of 55.6% from the year-earlier reported numbers. The expected long-term earnings growth rate is 9%, which is better than the industry average of 8.8%.

Stocks to Consider

Some better-ranked property and casualty insurers include Alleghany (Y - Free Report) , Fidelity National Financial (FNF - Free Report) and Arch Capital Group (ACGL - Free Report) . While Alleghany sports a Zacks Rank #1 (Strong Buy), Fidelity National and Arch Capital carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany’s bottom-line surpassed estimates in two of the last four quarters (missed in the other two), the average beat being 34.08%.

Fidelity National Financial surpassed earnings estimates in each of the last four quarters, with the average being 30.48%.

Arch Capital surpassed estimates in three of the last four quarters, with the average earnings surprise being 31.76%.

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