Fitch Affirms W.R. Berkley Corporation's Ratings.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the fixed income ratings on W.R. Berkley Corporation (Berkley). In addition, the insurer financial strength ratings of Berkley's major insurance underwriting subsidiaries were also affirmed. A full rating list is shown below. The Rating Outlook is Stable. The rating action is based on Berkley's performance and credit position aligning with Fitch's expectations. Berkley's strengths include a diverse source of operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before , strong niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. positions in several lines, a flexible operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. , good long-term financial results and a strong underwriting culture. In recent favorable market conditions since 2002, Berkley has recorded very strong operating results. Previously, during the most recent soft market, Berkley's five-year aggregated earnings were just slightly above break-even. Recent results indicate that Berkley's operating results are above average in favorable market conditions and below average in soft market conditions. Berkley has posted healthy top-line growth, averaging net written premium gains of more than 25% over the past five years largely through increased business retention and rate increases. Strong underwriting results for the 2002-2005 accident years have more than offset persistent prior year loss reserve strengthening, that could reflect management creating some reserve cushion prior to the next soft market. Nevertheless, Fitch continues to be modestly concerned that loss reserves for the 1998-2001 accident years continue to develop unfavorably, after being strengthened in each of the past several years. Berkley maintains above average leverage risk - financial and operational - on its balance sheet. Further, continued reserve strengthening indicates reported financial and operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. ratios have been understated in recent periods. This level of financial leverage is a primary reason why Berkley's long-term issuer rating is notched four rating levels from its operating companies' insurer financial strength (IFS) ratings. The leverage concerns are compounded by Berkley's modest capitalization of its insurance subsidiaries. The largest domestic insurance subsidiary's statutory capitalization is often near regulatory minimums as defined by the NAIC NAIC See National Association of Investors Corporation (NAIC). risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. . Along with Fitch's opinion that operating results and balance sheet measures will fluctuate, Berkley is also expected to generate very strong earnings in favorable markets. As such, the company's underwriting and profitability performance is expected to report very strong results during the remainder of 2005 and into 2006. Reported financial leverage will remain in the 25%-35% range long-term and subsidiary surplus and regulatory capital ratio levels are not expected to weaken. Entity/Issue/Type Action Rating/Outlook W.R. Berkley Corporation -- Long-term issuer / Affirm / 'BBB'/Stable; -- $200 million 5.6% senior debt due 2015 / Affirm / 'BBB'/Stable; -- $89 million 9.875% senior debt due 2008 / Affirm / 'BBB'/Stable; -- $150 million 5.125% senior debt due 2010 / Affirm / 'BBB'/Stable; -- $200 million 5.875% senior debt due 2013 / Affirm / 'BBB'/Stable; -- $150 million 6.15% senior debt due 2019 / Affirm / 'BBB'/Stable; -- $77 million 8.7% senior debt due 2022 / Affirm / 'BBB'/Stable; W.R. Berkley Capital Trust -- Trust preferred securities / Affirm / 'BBB-'/Stable. W.R. Berkley Capital Trust II -- Trust preferred securities / Affirm / 'BBB-'/Stable. Berkley Insurance Company -- Insurer financial strength Affirm 'A+'/Stable. Berkley Regional Insurance Company -- Insurer financial strength Affirm 'A+'/Stable. Admiral Insurance Set up in 1993, Admiral, part of the Admiral Group, is a car insurance specialist mainly targeting those who traditionally pay higher than average premiums, including drivers under 35 and those living in big cities and in Scotland. Company -- Insurer financial strength Affirm 'A+'/Stable. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion