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).
The assessment of the group’s balance sheet strength is based in its risk-adjusted capitalization, which is also at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). It also reflects the group’s well-managed and generally conservative investment portfolio. The group’s high-risk asset 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 consistently outperforms peers’ underwriting and operating results, and produces consistently more favorable returns on revenue and equity, supporting its strong operating performance assessment. The group has demonstrated an ability to grow stockholders’ equity organically through the generation of favorable levels of pre-tax operating income and total returns. The group’s business profile assessment reflects its strong market position, as it ranks among the top 20 U.S. property/casualty organizations and holds a leading position in many of its targeted market niches, along with its experienced management team. 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 2018 and 2019.
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.
Offsetting factors considered in the rating include current insurance market and macroeconomic conditions. Although pricing and underwriting were generally improving across the group’s key lines of business in recent quarters, there is uncertainty about future conditions. Volatility in investment markets and changes in demand for commercial real estate may impact the group’s investment holdings. In addition, the group’s approach to development of new product lines, which historically has focused on startup operations rather than acquisitions, is an offsetting factor to the ratings, as it contributes to an above-average underwriting expense ratio. However, the modestly elevated expense ratio is expected to continue to be more than offset by the Berkley Group’s significantly lower-than-average loss and loss adjustment ratio.
At Dec. 31, 2019, W. R. Berkley’s unadjusted debt-to-total capital ratio measured 29.3%. Adjusting for the equity component of hybrid securities, financial leverage measures 20.6%. 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 from 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 ratings of Berkley Life and Health reflect its balance sheet strength, which AM Best categorizes as strongest, adequate operating performance, limited business profile and appropriate ERM, as well as the financial and operational support of the parent company.
Berkley Life and Health’s balance sheet strength assessment of strongest is supported by its strongest level of risk-adjusted capitalization, as measured by BCAR, as well as the company’s conservative, high quality investment portfolio and favorable liquidity measures.
Berkley Life and Health’s net premium growth slowed in 2019 due to a greater percentage of business ceded after reporting material growth in 2018 driven by sales of medical stop-loss and group captive products. In addition, the company reported higher earnings over the last two years compared with 2017, mainly due to a larger ratio of higher margin group captive premium in its business mix.
Berkley Life and Health continues to grow its moderate share of the highly competitive medical stop-loss insurance market, a space where its business is concentrated. The company receives implicit and explicit support from W. R. Berkley and is fully integrated into the parent organization’s operations and strategic plans.
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
- Nautilus 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:
W. R. Berkley Corporation-
— “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
— “a” on $300 million, 4.0% senior unsecured notes, due 2050
— “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
— “bbb+” on $300 million, 5.1% subordinated debentures, due 2059
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
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