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Here's Why W.R. Berkley (WRB) Stock is an Attractive Bet Now

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W.R. Berkley Corporation (WRB - Free Report) has been in investors' good books on the back of higher premiums from lines of business, international business expansion, rate improvement and effective capital deployment.

Growth Projections

The Zacks Consensus Estimate for W.R. Berkley’s 2022 and 2023 earnings per share is pegged at $4.29 and $4.75, indicating a year-over-year increase of 26.2% and 10.7%, respectively. The expected long-term earnings growth rate is pegged at 9%.

Northbound Estimate Revision

The Zacks Consensus Estimate for W.R. Berkley’s 2022 and 2023 earnings has moved 5.1% and 4.8% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.

Earnings Surprise History

W.R. Berkley has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average beat being 25.63%.

Zacks Rank & Price Performance

W.R. Berkley currently has a Zacks Rank #1 (Strong Buy). In the past year, the stock has rallied 35.8%, outperforming the industry’s increase of 4.4%.

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Return on Equity (ROE)

W.R. Berkley’s trailing 12-month return on equity  of 17.9% reflects its growth potential. It compares favorably with the industry average of 6.4% and expanded 500 basis points year over year. ROE reflects its efficiency in using its shareholders’ funds.

Style Score

W.R. Berkley has a favorable VGM Score of B. VGM Score helps to identify stocks with the most attractive value, the best growth and the most promising momentum.

Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy) offer the best investment opportunities.

Business Tailwinds

The Insurance business of W.R. Berkley is well poised to grow, given higher premiums from other liability, short-tail lines, workers' compensation, commercial automobile, and professional liability.

Higher premiums at casualty reinsurance, property reinsurance and monoline excess are likely to drive the performance of the Reinsurance & Monoline Excess segment.

Underwriting income should gain from the compounding rate improvement above loss cost trends along with growth in exposure and lower claims frequency in certain lines of business.

In October 2022, W. R. Berkley expanded its Product Recall Business, which will include new liability coverages for medium- to high-hazard risks for manufacturers, wholesalers and importers. WRB has been establishing new units or expanding portfolios to cater to demands in emerging markets or risks or increasingly important sectors of the economy. The establishment of new units and the expansion of the company’s portfolio helps consolidate its geographical presence as well as grab market opportunities.

With the Fed raising the interest rate already five times this year, with more increases in the cards, net investment income is expected to increase as the company also invests in alternative assets. Net investment income increased in the first nine months of 2022 as investment funds continued to outperform and fixed-maturity income benefited from higher yields.

W.R. Berkley is one of the largest commercial lines property and casualty insurance providers. It has a solid balance sheet with sufficient liquidity and robust cash flows that support growth initiatives and effective capital deployment.

W.R. Berkley has raised dividends 17 times since 2005 and paid 14 special dividends since 2012. Its current dividend yield of 0.5% is better than the industry average of 0.3%, which makes WRB stock an attractive pick for yield-seeking investors.

Other Stocks to Consider

Some other top-ranked stocks from the property and casualty insurance industry are Berkshire Hathaway (BRK.B - Free Report) , American Financial Group, Inc. (AFG - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) . While Berkshire Hathaway sports a Zacks Rank #1, American Financial and Kinsale Capital carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Berkshire Hathaway delivered a four-quarter average earnings surprise of 22.18%.  In the past year, Berkshire Hathaway has gained 1.4%.

The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings implies a respective increase of 15% and 6.2% from the year-ago reported number.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 28.16%. In the past year, American Financial has gained 0.6%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 0.6% and 1.8% north, respectively, in the past seven days.

The bottom line of Kinsale Capital surpassed earnings estimates in each of the last four quarters, the average beat being 15.16%. In the past year, the insurer has gained 58.2%.

The Zacks Consensus Estimate for Kinsale Capital’s 2022 and 2023 earnings has moved 1.2% and 5.9% north, respectively, in the past 30 days.

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