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Here's Why Investors Should Retain W.R. Berkley (WRB) Now

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W.R. Berkley Corporation (WRB - Free Report) is well-poised to gain from higher premiums, lower claims frequency in certain lines of business, growth in exposure, effective capital deployment and sufficient liquidity.

Growth Projections

The Zacks Consensus Estimate for W.R. Berkley’s 2024 earnings per share indicates an increase of 22.3% from the year-ago reported number. The consensus estimate for revenues is pegged at $13.49 billion, implying a year-over-year improvement of 11.5%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 6% and 6.9%, respectively, from the corresponding 2024 estimates.

Earnings have grown 24.3% in the past five years, better than the industry average of 10.5%

Earnings Surprise History

WRB has a decent earnings surprise history. It surpassed earnings estimates in each of the last four quarters, the average being 11.43%.

Estimate Revision

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 3.3% and 0.9% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.

Zacks Rank & Price Performance

W.R. Berkley currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 34.3% compared with the industry’s growth of 21.3%.

Zacks Investment Research
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Style Score

WRB has a VGM Score of B. The VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

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.

WRB is one of the largest commercial line 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. 

Net investment income should continue to improve as WRB also invests in alternative assets, such as private equity funds and direct real estate opportunities. The combination of a high-quality fixed maturity portfolio, along with solid operating cash flow, enabled the insurer to invest at higher interest rates.

W.R. Berkley has a solid balance sheet with sufficient liquidity and strong cash flows, given its operational strength. A strong capital position enables the nation’s largest commercial line property casualty insurance provider to deploy capital via share repurchases, special dividends and dividend hikes that enhance shareholders' value.

In June 2024, the board approved a special cash dividend of 50 cents per share. The board also approved a 9.1% hike in annual cash dividend to 48 cents. The recent dividend hike is the 19th straight increase by the insurer. It also pays special dividends. Notably, WRB has continually paid dividends for nearly five decades.

In the first half of 2024, the operating return on equity expanded 520 basis points to 22.6%. The company targets a return on equity of 15% over the long term. 

However, catastrophe loss had a significant impact on the company’s results, inducing volatility in underwriting profitability. The losses stem from winter storms and wildfires. Exposure to catastrophe loss remains a concern as the unpredictability of a natural disaster and the occurrence of the same hampers results.

Stocks to Consider

Some better-ranked stocks from the property and casualty insurance industry are NMI Holdings Inc (NMIH - Free Report) , Root, Inc. (ROOT - Free Report) and The Progressive Corporation (PGR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NMI Holdings’ earnings surpassed estimates in each of the last four quarters, the average surprise being 10.15%. In the past year, shares of NMIH have jumped 25.7%. The Zacks Consensus Estimate for NMIH’s 2024 and 2025 earnings implies year-over-year growth of 15.6% and 5.5%, respectively. 

Root’s earnings surpassed estimates in each of the last four quarters, the average surprise being 47.87%. In the past year, shares of ROOT have jumped 396.1%. The Zacks Consensus Estimate for ROOT’s 2024 and 2025 earnings implies year-over-year growth of 60.6% and 37.5%, respectively. 

The Progressive’s earnings surpassed estimates in each of the last four quarters, the average surprise being 24.08%. In the past year, shares of PGR have jumped 76.1%. The Zacks Consensus Estimate for PGR’s 2024 and 2025 earnings implies year-over-year growth of 96.7% and 5.3%, respectively.

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