W.R. Berkley Earnings: Higher Interest Rates and a Hard Market Boost Returns

Coming into the year, we thought narrow-moat W.R. Berkley was the best-positioned P&C insurer in our coverage, and we think the company’s fourth-quarter results further justify that opinion. The company continues to see strong underwriting results amid a hard market, and higher interest rates are boosting investment returns. The net result was an annualized ROE of 24% for the quarter and 21% for the full year. We will maintain our $65 per share fair value estimate and view the shares as modestly overvalued right now. We think the near-term strength is leading the market to an overly optimistic view from a long-term perspective, and the stock currently trades at a hefty premium to its average historical book multiple.