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W. R. Berkley (WRB) Gains 21% YTD: Can It Retain the Momentum?

Shares of W. R. Berkley Corporation WRB have rallied 20.8% year to date against the industry’s decrease of 4.8%. The Finance sector and the Zacks S&P 500 composite have declined 15.5% and18.9%, respectively in the same time frame. With a market capitalization of $17.6 billion, the average volume of shares traded in the last three months was 1.2 million.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Solid insurance business, strong international business and sturdy financial position continue to drive this Zacks Rank #2 (Buy) company. This largest commercial lines property casualty insurance provider in the nation has a decent history of delivering positive surprises in the last eight reported quarters.

WRB has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.

The Zacks Consensus Estimate for 2022 and 2023 has moved 3% and 2.5% north, respectively in the past 60 days, reflecting analysts’ optimism.  

Return on equity in the trailing 12 months was 17.3%, better than the industry average of 5.7%. WRB aims to achieve a 15% ROE over the long term.

Can WRB Retain the Momentum?

The Zacks Consensus Estimate for 2022 earnings is pegged at $4.10, indicating an increase of 20.6% on 16.7% higher revenues of $10.8 billion. The consensus estimate for 2023 earnings is pegged at $4.53, indicating an increase of 10.4% on 11.1% higher revenues of $12 billion. The long-term earnings growth rate is currently pegged at 9%.

Several new startup units in various business lines, expansion of international business that offers diversification benefits, rate increase, benefits derived from market dislocations, and high retention should drive the Insurance business. WRB primarily focuses on commercial lines, including excess and surplus lines, admitted lines and specialty personal lines.

Premium growth in the international unit is mainly supported by the emerging markets of the United Kingdom, Continental Europe, South America, Canada, Scandinavia, Asia and Australia.

With an improving interest rate environment, we expect to see an increase in net investment income. WRB also invests in alternative assets such as private equity fund and direct real estate opportunities.

Banking on its stable cash flow, W.R. Berkley has raised dividends 17 times since 2005 and paid 14 special dividends since 2012.  Its current dividend yield of 0.7% is better than the industry average of 0.3%, which makes the stock an attractive pick for yield-seeking investors.

WRB has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offers better returns.

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are Berkshire Hathaway (BRK.B), American Financial Group AFG and Arch Capital Group (ACGL), each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 14.4% and 5.9% year-over-year growth, respectively. The average four-quarter surprise is 17.55%.

The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 7.6% and 8.8% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 6.7%.

American Financial’s earnings surpassed estimates in the last four quarters, the average earnings surprise being 37.09%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 1% north each in the past 30 days. Year to date, shares of AFG have lost 5.2%.

The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings implies 29.6% and 18.1% year-over-year growth, respectively. The average four-quarter surprise is 33.64%.

The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 9.2% and 7.2% north in the past 60 days, respectively. Year to date, shares of ACGL have risen 6.8%.


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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report
 
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
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