Monday, July 6, 2009

Watchlist: WRB

Because the market risk is very high, I am concentrating on low-beta shares (low correlation with the market). Among these, I found very interesting William R. Berkley (WRB).

W. R. Berkley Corporation (W. R. Berkley) is an insurance holding company. The Company operates in five segments of the property casualty insurance business: specialty, regional, alternative markets, reinsurance and international. The specialty segment underwrites complex and third-party liability risks, principally within excess and surplus lines, and includes specialty lines of insurance. The regional segment provides commercial property casualty insurance. The Company's alternative markets operations specialize in insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Its reinsurance operations consist of seven operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. The international segment has operations in Australia, South America, the United Kingdom and Continental Europe.

Beta: 0.9
Dividend yield: $0.24 - 1.1% (very low)
Average volume (10 days): 1.9 m.

WRB reported 1st quarter 2009 earnings of $0.25 per share on April 27, 2009. This missed the $0.37 consensus expectations of the 13 analysts following the company.
The next earnings announcement from WRB is expected the week of July 27, 2009. $0.62 is expected by analysts.

Valuation Ratios:
Price/Earnings (TTM) 54.41x
Price/Sales (TTM) 0.8x
Price/Book (MRQ) 1.12x
Price/Cash Flow (TTM) 24.2x

WRB's debt to total capital ratio, at 29.22%, is in-line with the Insurance (Prop. & Casualty) industry's norm despite its increase over the last year.

This is basic information. You can look in many web pages to analyze the rest of the fundamentals.

Form 10-Q
Quarterly Report:

Daily Chart:

Weekly Chart:

Long Term WRB arithmetic chart and Fibonacci proportions:

Short Term Logarithmic chart and Fibonacci proportions:

NEWS: Negative for WRB.

Stock Market Impact of the state budget gaps:

Banks have enough trouble without defaults on muni bonds on top, but that is a possibility to keep on the radar screen.

P&C insurance companies are perhaps more at risk. According to Morningstar, 40% of P&C insurance company assets are in muni bonds, and for Travelers (TRV), Chubb (CB), WR Berkely (WRB) and Mercury General (MCY), the holdings are 50% or more. Expectation of significant muni payment deferrals (sounds better than default) would have adverse stock price impact on P&C insurance companies.


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