Fitch Ratings has announced that it has upgraded W.R. Berkley Corporation’s property and casualty (P&C) operating subsidiaries Insurer Financial Strength ratings to ‘AA-‘ (Very Strong) from ‘A+’.
At the same time, Fitch has also upgraded Berkley’s senior debt rating to ‘A-‘ from ‘BBB+’. The rating outlook is stable.
Fitch stated that the upgrades reflect improving capitalization with a downward trend in financial leverage, improving debt service and consistently strong financial performance with limited long-term volatility relative to peers.
In upgrading the ratings, Fitch noted that it expects that in a period of ongoing high economic inflation, rising interest rates and a likely recession, within the US, Berkley will be able to remain within rating sensitivities with respect financial performance and capital.
Moreover, Fitch highlighted Berkley’s favourable business profile, owing to the company’s competitive positioning across varied business lines and geographies.
The company’s broad commercial insurance product portfolio provides diversified sources of revenue and the flexibility to emphasize various products when market conditions are favourable, therefore reducing the company’s dependence on any single product line.
Additionally, Berkley reported a 1H22 GAAP calendar-year combined ratio of 88.2% as the company’s results continue to benefit from a hardening market in commercial lines and more favourable terms and conditions on new and renewal policies.
Fitch also noted that on an accident-year basis, excluding the impact of catastrophes and coronavirus-related losses, Berkley’s loss ratio improved to 58.4% through 1H22, from a five-year average (2017-2021) of 60.0%.
Furthermore, Berkley’s fixed-charge coverage through 6M22 was 12.4x, up from 9.1x in full-year 2021 as operating earnings benefited from strong underwriting results and growing net investment income.
Fitch also noted that Berkley’s capitalization is considered ‘Extremely Strong’ based on YE 2021 results.
Fitch concludes that Berkley maintains a large balance of holding company cash and marketable invested assets of approximately $1.5 billion at YE 2021. Berkley generated strong operating cash flow of $1.0 billion through 1H22, and at least $600 million in each of the most recent five years.
