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Best’s News & Research Service - May 10, 2019 12:27 PM (EDT)

AM Best Affirms Credit Ratings of W. R. Berkley Corporation and Its Subsidiaries

  • May 10, 2019 12:27 PM (EDT)

Oldwick //BestWire// - AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of W. R. Berkley Corporation (W. R. Berkley) (Greenwich, CT) [NYSE:WRB] and all associated Long-Term Issue Credit Ratings (Long-Term IRs) and indicative Long-Term IRs for securities issued by W. R. Berkley. At the same time, AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term ICRs of “aa-” of Berkley Insurance Company (BIC) (Wilmington, DE) and its reinsured subsidiaries and affiliates, collectively referred to as the W. R. Berkley Insurance Group (the Berkley Group). AM Best also has affirmed the FSR of A+ (Superior) and the Long-Term ICR of “aa-” of Berkley Life and Health Insurance Company (Berkley Life and Health) (Urbandale, IA). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and ratings).

The ratings of the Berkley Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

AM Best assesses the group’s balance sheet strength as strongest, underpinned by risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), that is also at the strongest level. It also reflects the group’s well-managed and generally conservative investment portfolio. The group’s investments include an above-average level of high-risk assets, but these holdings are diversified and represent a modest portion of the overall invested asset base. The group’s loss reserves generally have developed favorably in most recent accident years.

The Berkley Group’s strong operating performance reflects its consistent outperformance of peers in underwriting and operating results, as well as consistently more favorable returns on revenue and equity. The group has demonstrated an ability to grow policyholder surplus organically through the generation of favorable levels of pre-tax operating income and total returns. This performance is supported by the group’s favorable business profile, ranking among the top 25 U.S. property/casualty organizations and holding a leading position in many of its targeted market niches. The group provides insurance coverages throughout the United States and internationally for a variety of business lines, producing a beneficial level of diversification. The group managed its exposure to catastrophes, demonstrated by its favorable results in 2017 and 2018.

W. R. Berkley has implemented an appropriately designed and embedded ERM program to address the organization’s risks. A formal framework is in place, and the continual evaluation and monitoring of key risks and tolerances is well-established.

The group’s positive rating factors are offset partially by competitive conditions in its key commercial lines and reinsurance segment. As reinsurance market conditions have not enabled the group to meet return requirements in this business line, reinsurance writings have been reduced. The group’s approach to growth, which typically involves developing its own start-up operations rather than making acquisitions, are also an offsetting factor to the ratings, as they contribute to an above-average underwriting expense ratio. However, the modestly elevated expense ratio is more than offset by the Berkley Group’s much-better-than-average loss and loss adjustment expense ratio.

At Dec. 31, 2018 W. R. Berkley’s unadjusted debt-to-total capital ratio measured 31.9%. Adjusting for the equity component of hybrid securities, financial leverage measures 25.2%. In recent years, the group’s financial leverage has been trending downward and, while still modestly elevated relative to peers (particularly unadjusted leverage), the metrics are comfortably within guidelines. The group’s consistent earnings, controlled exposure to catastrophe losses and strong cash flows offset any concern by AM Best regarding leverage. AM Best anticipates the continuation of W. R. Berkley’s strong earnings, with interest coverage and financial leverage levels remaining supportive of the ratings.

The affirmation of the ratings and the outlook of Berkley Life and Health reflect the financial and operational support of the parent company, its balance sheet strength assessment, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile, and appropriate ERM.

Berkley Life and Health’s balance sheet strength is derived from its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). It also reflects the company’s conservative, high quality investment portfolio and favorable liquidity metrics.

In 2018, Berkley Life and Health grew net premium materially, driven by sales of medical stop-loss and group captive products after net premium growth slowed in the prior year due to more ceded business. In addition, the company reported better earnings versus the previous year driven by a larger ratio of higher margin group captive premium in its business mix.

Berkley Life and Health continues to grow its relatively nominal share of the extremely competitive medical stop-loss market, an area in which its business is concentrated.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed with a stable outlook for the following members of the W. R. Berkley Insurance Group:

  • Acadia Insurance Company

  • Admiral Indemnity Company

  • Admiral Insurance Company

  • Berkley Casualty Company

  • Berkley Assurance Company

  • Berkley Insurance Company

  • Berkley National Insurance Company

  • Berkley Regional Insurance Company

  • Berkley Specialty Insurance Company

  • Carolina Casualty Insurance Company

  • Clermont Insurance Company

  • Continental Western Insurance Company

  • Firemens Insurance Company of Washington, D.C.

  • Gemini Insurance Company

  • Great Divide Insurance Company

  • Intrepid Insurance Company

  • Key Risk Insurance Company

  • Midwest Employers Casualty Company

  • Nautilis Insurance Company

  • Preferred Employers Insurance Company

  • Queen’s Island Insurance Company, Ltd.

  • Riverport Insurance Company

  • StarNet Insurance Company

  • Tri-State Insurance Company of Minnesota

  • Union Insurance Company

  • Union Standard Lloyds

  • W. R. Berkley Europe AG

  • Berkley International Seguros Mexico S.A.

  • Berkley International Fianzas Mexico S.A.

The FSR of A+ (Superior) and the Long-Term ICR of “aa-” have been affirmed with a stable outlook for Berkley Life and Health Insurance Company.

The Long-Term ICR of “a-” has been affirmed for W. R. Berkley Corporation.

The following Long-Term IRs have been affirmed with a stable outlook:

— “a-”on $150 million, 6.15% senior unsecured notes, due 2019

— “a-”on $300 million, 7.375 % senior unsecured notes, due 2019

— “a-”on $300 million, 5.375% senior unsecured notes, due 2020

— “a-”on $100 million, 8.7% senior unsecured debentures, due 2022

— “a-”on $350 million, 4.625% senior unsecured notes, due 2022

— “a-”on $250 million, 6.25% senior unsecured notes, due 2037

— “a-”on $350 million, 4.75% senior unsecured notes, due 2044

— “bbb+”on $350 million, 5.625% subordinated debentures, due 2053

— “bbb+” on $100 million, 5.9% subordinated debentures, due 2056

— “bbb+” on $290 million, 5.75% subordinated debentures, due 2056

— “bbb+” on $175 million, 5.7% subordinated debentures, due 2058

The following indicative Long-Term IRs under the shelf registration have been affirmed with a

stable outlook:

W. R. Berkley Corporation—

— “a-” on senior debt

— “bbb+” on subordinated debt

— “bbb” on preferred stock

W. R. Berkley Capital Trust III—

— “bbb” on preferred securities

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

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