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Here's Why You Should Retain W.R. Berkley in Your Portfolio

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W.R. Berkley Corporation (WRB - Free Report) has made a name for itself as an industry-leading commercial lines property casualty (P&C) insurance provider. The P&C insurer’s international business expansion, strong underwriting performance, solid inorganic growth and a robust capital position should continue to drive favorable results in the near term.  

Growth Drivers

W.R. Berkley displayed its operational strength by investing in startup units and also extended its geographical footprint, which has allowed it to take advantage of market opportunities. Given its consistent growth in existing businesses and emergence of new units, the insurer is anticipated to experience overall growth in the near term.

Additionally, with the growing international presence, the company has been able to deliver increasing premiums over a considerable period of time and we expect this momentum to continue in the upcoming quarters owing to increased market penetration, higher rates and an improving economy.

With gradual improvement in interest rates, the insurer has been able to witness higher investment income in the past few quarters and this trend sustained in the first half of the current year as well. Apart from higher interest rates, increase in the yield on fixed maturity securities as well as higher base of invested assets are likely to aid investment results in the near term.

Riding on better investment results and premium growth, the company has been experiencing higher revenues over the past few years and this favorable phase continued into the first half as well. We expect this top-line improvement to further accelerate the company’s overall growth.

W.R. Berkley’s solid liquidity position and balance sheet strength enabled the insurer to enhance shareholder value through share buybacks and dividend hikes. Also, the company successfully paid special dividends in order to share more profit with its shareholders. This will further help the insurer emerge as an attractive pick for yield-seeking investors.

With respect to capital deployment, the company effectively returned $79 million in total capital, which included $61 million as special dividends.

Near-Term Headwinds

However, rising expenses pose a challenge as it might restrict operating margin expansion, thereby hampering the stock’s overall performance. Also, exposure to catastrophe loss remains a concern for the insurer rendering volatility to the company’s earnings.

Other Noteworthy Factors

Shares of this Zacks Rank #3 (Hold) P&C insurer have gained nearly 9.4% year to date, outperforming the industry’s 5.8% rise.



Estimates have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 bottom line being revised 3.3% upward to $3.75.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.75, representing a significant year-over-year increase of about 52.4% on 1.7% stronger revenues of $7.2 billion.

W.R. Berkley’s surprise history depicts its diligent operational efficiency with the company having delivered positive surprises in all the last four quarters, the average beat being 11.8%.

Stocks to Consider

Investors interested in better-ranked stocks from the insurance industry can consider The Progressive Corporation (PGR - Free Report) , NMI Holdings Inc. (NMIH - Free Report) and The Navigators Group, Inc. (NAVG - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance plus related services, primarily in the United States. The company delivered positive surprises in all the preceding four quarters with an average earnings surprise of 9.19%.  
 
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company pulled off positive surprises in all the trailing four quarters with an average positive surprise of 29.85%.

Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and globally. The company came up with positive surprises in three of the preceding four quarters with an average beat of 19.54%.

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