A.M. Best has affirmed the long-term issuer credit rating of “a-” of W. R. Berkley Corporation (Greenwich, Connecticut) and all associated long-term issue credit ratings and indicative long-term issue ratings for securities issued by W. R. Berkley.
Additionally, A.M. Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit ratings of “aa-” of Berkley Insurance Company (BIC) (Wilmington, Delaware) and its reinsured subsidiaries and affiliates, collectively referred to as the W. R. Berkley Insurance Group (the Berkley Group).
The rating firm also has affirmed the financial strength rating of A+ (Superior) and the long-term issue credit ratings of “aa-” of Berkley Life and Health Insurance Company (Berkley Life and Health) (Urbandale, Iowa). The outlook of these credit ratings is stable.
A.M. Best suggested that the ratings of the Berkley Group reflect its balance sheet strength, which they categorised as strongest, they also state its strong operating performance, favourable business profile and appropriate enterprise risk management.
The assessment of the group’s balance sheet strength is based on its risk-adjusted capitalisation, which is also at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
A.M. Best stated 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, while the group’s loss reserves generally have developed favourably in most recent accident years, according to the rating company.
A.M. Best said: "The Berkley Group consistently outperforms peers’ underwriting and operating results, and produces consistently more favourable 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 favourable 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 US property/casualty organisations and holds a leading position in many of its targeted market niches, along with its experienced management team”, it added.
The group managed its exposure to catastrophes, demonstrated by its favourable results in 2018 and 2019.
At the end of 2019, W. R. Berkley’s unadjusted debt-to-total capital ratio measured 29.3 percent. Adjusting for the equity component of hybrid securities, financial leverage measures 20.6 percent.
In recent years, A.M. Best explained the group’s financial leverage has been trending downward, and, while still modestly elevated relative to peers, the metrics are comfortably within guidelines. The group’s consistent earnings, controlled exposure to catastrophe losses and strong cash flows offset any concern regarding leverage.
It is anticipated that the continuation of W. R. Berkley’s strong earnings, with interest coverage and financial leverage levels remaining supportive of the ratings.
A.M. Best suggested the ratings of Berkley Life and Health reflect its balance sheet strength, which they categorise as strongest, adequate operating performance, limited business profile and appropriate enterprise risk management, 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 capitalisation, as measured by BCAR, as well as the company’s conservative, high-quality investment portfolio and favourable liquidity measures.
Berkley Life and Health 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. The company also 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.
A.M. Best explained that Berkley Life and Health will continue to grow its moderate share of the highly competitive medical stop-loss insurance market, space where its business is concentrated. The company receives implicit and explicit support from W. R. Berkley and is fully integrated into the parent organisation’s operations and strategic plans.