Reasons Why Investors Should Retain W.R. Berkley (WRB) Stock
W.R. Berkley Corporation WRB has been favored by investors on the back of higher premiums, lower claims frequency in certain lines of business and sufficient liquidity.
Growth Projections
The Zacks Consensus Estimate for W.R. Berkley’s 2023 earnings is pegged at $4.52 per share, indicating a 3.2% increase from the year-ago reported figure on 9.4% higher revenues of $12 billion. The consensus estimate for 2024 earnings is pegged at $5.53 per share, indicating a 22.2% increase from the year-ago reported figure on 6.2% higher revenues of $12.75 billion.
Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 earnings has moved 2.2% and 1.6% north, respectively, in the past 60 days. This should instill investors' confidence in the stock.
Earnings Surprise History
WRB has a decent earnings surprise history. It beat estimates in six of the last seven quarters and missed in one.
Zacks Rank & Price Performance
W.R. Berkley currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 8.9% against the industry’s rise of 19.8%.
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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 lines 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 witnessed a CAGR of 5.4% in the past eight years (2015-2022). The combination of high-quality fixed maturity portfolio, along with solid operating cash flow, enabled the insurer to invest at higher interest rates in the first half of 2023. The metric should continue to improve as WRB also invests in alternative assets, such as private equity fund and direct real estate opportunities.
W.R. Berkley maintains a solid balance sheet with sufficient liquidity and strong cash flows. The company has more than 58 straight quarters of favorable reserve development.
A strong capital position helps WRB deploy capital via share repurchases, special dividends and dividend hikes that enhance shareholders value. In June 2023, the insurer approved a 10% hike in its quarterly dividend, marking the 18th consecutive increase since 2005. Its dividend yield of 0.7% is higher than the industry average of 0.3%. In addition, the board has increased the share repurchase authorization to 15 million shares.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, Axis Capital Holdings Limited AXS and Cincinnati Financial Corporation CINF. While Arch Capital and Axis Capital sport a Zacks Rank #1 (Strong Buy) each, Cincinnati Financial carries Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a decent history of delivering earnings surprises in the last four quarters, the average being 26.83%. In the past year, ACGL has gained 64.1%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 has moved 7.6% and 6.5% north, respectively, in the past 60 days, reflecting analysts’ optimism.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has lost 1.2%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 2.3%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
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