March 13, 2017 / 6:40 PM / 9 months ago

Fitch Affirms W.R. Berkley's Ratings; Stable Outlook

(The following statement was released by the rating agency) NEW YORK, March 13 (Fitch) Fitch Ratings has affirmed and removed from Negative Watch the ratings of W.R. Berkley Corporation (Berkley) including its 'A-' Issuer Default Rating (IDR), senior and subordinated debt. Berkley's property/casualty operating subsidiaries' Insurer Financial Strength (IFS) ratings have been also been affirmed. The Rating Outlook is Stable. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS The resolution of the Negative Watch and affirmation of Berkley's holding company ratings reflect a financial leverage ratio of 33.5%, as of Dec. 31, 2016, since leverage has decreased over the last six months as the company repaid $87 million of debt on various issuances and increased shareholders' equity. Berkley's financial flexibility remains adequate for the rating category with fixed charge coverage of 5.5x in 2016, down modestly from 5.6x reported for full-year 2015. The affirmation of Berkley's operating subsidiaries' IFS ratings reflects favorable long-term financial results with very strong statutory capitalization, a diverse underwriting portfolio, and modest exposure to catastrophe losses. These positive factors are partially offset by the parent company's relatively high financial leverage and reserve risk stemming from long-tail casualty lines. Berkley maintains a 'strong' business profile with varied business lines and a broad commercial insurance product portfolio that provides diversified sources of revenue and the flexibility to emphasize various products when market conditions are favorable, thus reducing the company's dependence on any single product line. Berkley generated solid GAAP underwriting results in 2016 with a 94.3% combined ratio, following 93.7% for full-year 2015. Fitch believes underwriting profits are not likely to improve for full-year 2017 due to continued competitive insurance market conditions. Berkley remains positioned to expand premium opportunistically with underwriting exposure growth at a time when premium rate competition is increasing. Common shareholders' equity increased by approximately 9.7% in 2016 to over $5 billion, reflecting solid earnings and investment gains. GAAP operating leverage remains relatively low at under 1.3x. GAAP net leverage was roughly 4x at Dec. 31, 2016, similar to recent years. Berkley's capitalization is considered 'Very Strong' as measured by Fitch's Prism capital model based on year-end 2015 results. RATING SENSITIVITIES Key rating triggers that could lead to a negative rating action include: --Financial leverage ratio of 35% or greater could lead Fitch to expand the notching between Berkley's IDR and debt rating, resulting in a one-notch downgrade to the senior and subordinated debt ratings; --GAAP fixed charge coverage below 5.5x; --Net leverage moving above 5x; --A deterioration of operating performance including a consistent underwriting loss. Key rating triggers that could lead to a positive rating action include: --A sustained reduction in financial leverage to the low- to mid-20% range, combined with: continued profitable operating performance including a sustained combined ratio around mid-90% and maintenance of aggregate loss reserve adequacy, and maintenance of Fitch's Prism capital model score of 'Very Strong'. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings with a Stable Outlook: W.R. Berkley Corporation --IDR at 'A-'; --$150 million 6.15% senior debt due 2019 at 'BBB+'; --$300 million 7.375% senior debt due 2019 at 'BBB+'; --$300 million 5.375% senior debt due 2020 at 'BBB+'; --$76 million 8.7% senior debt due 2022 at 'BBB+'; --$350 million 4.625% senior debt due 2022 at 'BBB+'; --$250 million 6.25% senior debt due 2037 at 'BBB+'; --$350 million 4.75% senior debt due 2044 at 'BBB+'; --$350 million 5.625% subordinated debentures due 2053 at 'BBB-'. --$110 million 5.9% subordinated debentures due 2056 at 'BBB-'. --$290 million subordinated debt 5.75% due 2056 'BBB-'. Acadia Insurance Company Admiral Insurance Company Berkley Insurance Co. Berkley National Insurance Co. Berkley Regional Insurance Company Berkley Regional Specialty Insurance Co. Carolina Casualty Insurance Co. Continental Western Insurance Co. Firemens Ins Co of Washington DC Nautilus Insurance Company Tri State Insurance Co. of Minnesota Union Insurance Company Union Standard Lloyds --IFS at 'A+'. Contact: Primary Analyst Christopher A. Grimes, CFA Director +1-312-368-3263 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Douglas Pawlowski, CFA Senior Director +1-312-368-2054 Committee Chairperson Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 15 Sep 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1020493 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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