Back to top

Image: Bigstock

Reasons Why W.R. Berkley (WRB) Stock is an Attractive Pick

Read MoreHide Full Article

W.R. Berkley Corporation (WRB - Free Report) has been in investors' good books on the back of high retention, higher premiums and prudent capital deployment.

Growth Projections

The Zacks Consensus Estimate for W.R. Berkley’s 2022 and 2023 earnings per share is pegged at $5.43 and $6.02, indicating a year-over-year increase of 6.4% 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 2.4% and 2% north in the past seven 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, with the average being 27.5%.

Zacks Rank & Price Performance

W.R. Berkley currently has a Zacks Rank #1 (Strong Buy). In the past year, the stock has rallied 32.6%, outperforming the industry’s increase of 23.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

Return on Equity (ROE)

W.R. Berkley’s trailing 12-month return on equity (ROE) of 14.4% reflects its growth potential. It compares favorably with the industry average of 5.9% and expanded 710 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 identify stocks with the most attractive value, 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 opportunities in the value investing space

Business Tailwinds

The Insurance business of W.R. Berkley is likely to gain from higher premiums at other liability, professional liability, short-tail lines, commercial auto and workers' compensation, rate increases, several new startup units in varied business lines, benefits derived from market dislocations and high retention.

By virtue of an increase in equity securities, arbitrage trading account, higher income from fixed maturity securities, increase in real estate and higher income from investment funds, net investment income is expected to increase in the long run.

Underwriting profitability is likely to benefit from growth in premium rates and exposure as well as reductions in loss ratio.

Continued growth in premium and expansion in underwriting profits are likely to boost the operations of the insurer.

Solid Capital Deployment

The property and casualty insurer has a solid track record of increasing dividends for 16 straight years and has paid 13 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 insurers include Kinsale Capital Group, Inc. (KNSL - Free Report) , United Fire Group, Inc. (UFCS - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) . While Kinsale Capital and United Fire Group sport a Zacks Rank #1, Cincinnati Financial carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 41.5%.

The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, United Fire has declined 10.1%.

The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 60 days.

The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 25.8%.

The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 60 days.

Published in