W.R. Berkley Affirmed

Standard & Poor’s Rating Service affirmed its “A+” counterparty credit and financial strength ratings on W.R. Berkley Corp.’s operating companies. The “BBB+” counterparty credit and senior debt ratings and the “BBB-” preferred stock rating on W.R. Berkley Corp. were also affirmed. The outlook on all these companies is negative.

The ratings agency assigned its preliminary “BBB+” senior debt, “BBB” subordinated debt, and “BBB-‘ preferred stock ratings to W.R. Berkley Corp.’s $700 million universal shelf, the net proceeds of which will be used for general corporate purposes.

Berkley’s strong business position with its diversified revenue profile; its conservative investment portfolio that supports strong liquidity; and strong financial flexibility are reflected in the ratings. Although the company’s low capital adequacy is below the level expected for the rating, an S&P’s analyst said Berkley’s operating performance is significantly improving and supports the rating.

Rate increases within all segments—including commercial, reinsurance, and specialty—will increase earnings, lower combined ratios, and improve liquidity. The combined ratio is expected to be about 95 percent at year-end 2002, with further improvement in 2003. Net premiums are projected to grow 34 percent in 2003 and 24 percent in 2004. The high growth might be mitigated by strong earnings that maintain capital adequacy near current levels of 125 percent.

Berkley’s business position is viewed as strong based on its diversified revenue profile, long-standing relationships with producers, economies of scale, and market position. The company has a very diversified earnings profile, with operations in five segments of the property/casualty market: specialty lines (excess & surplus as well as commercial transportation), alternative markets, reinsurance, regional, and international. In 2001, Berkley was the 37th largest property/casualty insurance company in the U.S. based on net premiums written. Its long-term relationship with brokers and agents has allowed it to compete effectively against larger peers.