A.M. Best has affirmed the issuer credit rating of “a-” of W.R.
Berkley Corporation (W.R. Berkley) (Greenwich, CT) [NYSE:WRB].
Concurrently, A.M. Best has affirmed the financial strength rating (FSR)
of A+ (Superior) and the ICRs of “aa-” of Berkley Insurance Company
(BIC) (Wilmington, DE) and 26 of its reinsured subsidiaries and
affiliates, collectively referred to as W.R. Berkley Insurance Group.
A.M. Best has also affirmed the FSR of A+ (Superior) and the ICR of
“aa-” of Berkley Life and Health Insurance Company (Berkley Life
and Health) (Urbandale, IA).
At the same time, A.M. Best has affirmed the issue ratings of “a-” for
the senior unsecured notes, “bbb+” for subordinated debentures and “bbb”
for trust preferred securities issued by W.R. Berkley. The outlook for
all ratings is stable. In addition, A.M. Best has assigned an issue
rating of “bbb+” to $100 million, 5.9% subordinated debentures due 2056
recently announced by W.R. Berkley. The outlook assigned is stable. (See
link below for a detailed list of the companies and ratings).
The rating affirmations of the members of the W.R. Berkley Insurance
Group reflect the group’s excellent underwriting and operating
profitability, solid risk-adjusted capitalization, disciplined
underwriting culture and diverse business operations. The ratings also
acknowledge the group’s moderate risk profile, with lower than average
catastrophe and reinsurance exposure. These positive factors are
supported by the group’s business strategy, which combines independently
managed specialty business units with centralized oversight of
underwriting appetite and authority, investments and risk management.
Partially offsetting these positive factors are the higher start-up
costs associated with generating new business, as the group tends to
develop capabilities internally rather than buying existing businesses.
The group’s ability to grow revenues will be challenged by increasing
competitiveness in its key commercial lines and reinsurance markets, as
well as by macroeconomic factors. These offsetting factors
notwithstanding, A.M. Best expects the W.R. Berkley Group to continue
producing favorable underwriting and operating results that outperform
its peers through utilization of its proven risk selection, underwriting
and pricing practices.
At Dec. 31, 2015, W.R. Berkley’s unadjusted financial leverage had
moderated to 31.9%, down from earlier years when it exceeded 35%. While
financial leverage remains within A.M. Best’s tolerance for the rating
level, it is elevated relative to its peers. With the issuance of the
subordinated debentures, unadjusted leverage will increase to 32.9% on a
pro forma basis. Adjusted leverage will increase more modestly, to 30.3%
from 29.9%. Rating concerns with respect to the leverage metrics is
substantially offset by the group’s consistency of earnings, the modest
exposure to shock losses and significant cash flows generated annually.
A.M. Best expects W.R. Berkley’s earnings to remain strong, with its
interest coverage and financial leverage remaining supportive of the
ratings.
Although positive rating actions are unlikely in the near term for the
W.R. Berkley Insurance Group, a sustained improvement in its operating
performance metrics relative to its peers could result in favorable
change in its ratings over the longer term. Negative ratings pressure
could result from a sustained deterioration in the group’s underwriting
or operating performance, driven by either current accident-year results
or adverse development of prior years’ loss reserves. Negative movement
in the ratings could also result from a change in W.R. Berkley’s
financial position that results in the withdrawal of capital from the
operating companies or causes deterioration in financial leverage or
interest coverage to a level that does not support the current rating.
The affirmation of the ratings and the outlook of Berkley Life and
Health reflects the financial and operational support of the parent
company, continued profitable growth in net premium revenue and a
favorable risk-adjusted capital position. Berkley Life and Health
continues to strategically expand the organization’s presence in the
accident and health market, primarily in the medical stop-loss space.
For a complete listing of the members of W.R. Berkley Corporation’s
FSRs, ICRs and issue ratings, please visit W.R.
Berkley.
This press release relates to rating(s) that have been published on
A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s Recent
Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2016 by A.M. Best Company, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
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