FEBRUARY 26, 2016 11:38 AM (EST)
A.M. Best Affirms Ratings of W.R. Berkley Corporation and Its Subsidiaries; Assigns Rating to Subordinated Debentures
FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 26, 2016 11:38 AM (EST)
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.
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