(The following statement was released by the rating agency)
CHICAGO, March 22 (Fitch) Fitch Ratings has affirmed all ratings
Berkley Corporation (Berkley) and its related property/casualty
subsidiaries. These ratings include Berkley's 'A-' Issuer
Default Rating (IDR),
as well as its senior debt, subordinated debt, and Insurer
(IFS) ratings. A complete list of rating actions follows at the
end of this
release. The Rating Outlook is Stable.
KEY RATING DRIVERS
Fitch's rating affirmation reflects Berkley's favorable
results, modest exposure to catastrophe losses, and its strong
culture and niche market positions in several lines, partially
offset by average
capitalization and relatively high financial leverage.
Berkley continued to generate solid underwriting results in 2012
with a 97.2%
GAAP combined ratio compared to 98.5% in 2011. Results improved
partially due to
lower catastrophe losses of $80 million in 2012 versus $153
million in 2011,
offset by lower favorable reserve development from increased
observed by the company. Although the company has experienced
increases, Fitch believes underwriting profits are likely to
modestly in 2013 due to continued competitive insurance market
recognizing the lag time between premiums written and earned.
Over the past five years, shareholders' equity has increased by
including 9% in 2012, to $4.3 billion despite share repurchases
and a special
dividend paid at year-end 2012, reflecting solid earnings and
investment performance. Fitch believes the company remains
capitalized when examined against traditional measures on an
absolute basis and
relative to peers due in part to the inherent uncertainty
long-tail loss reserves for which ultimate liabilities are
Berkley's debt-to-total capital ratio of 32.9% as of Dec. 31,
2012 is above peer
averages and is up from 30.6% in 2011 due to its $350 million
issuance which prefunded the refinancing of debt that matured in
2013. The spike
in leverage was temporary and remains reasonable for the rating
category and for
a company with Berkley's profile. Pro forma year-end
debt-to-total capital was
30.8% following the debt repayment. Fitch expects run-rate
leverage to stay near
30% and earnings-based interest coverage in the mid-upper single
digits in the
Fitch believes that Berkley is positioned to grow
increased premium growth and rate increases in all lines.
growth in 2012, GAAP operating leverage (net premiums written to
remained relatively low at 1.1 times (x) reflecting Berkley's
shrink its top line when prices do not support its underwriting
which Fitch views favorably.
Key rating triggers that could lead to a positive rating action
include: 1) a
sustained material reduction in debt-to-total capital to low
double-digits; 2) a
material increase in risk-adjusted capitalization; and 3)
operating performance including maintenance of loss reserve
adequacy and solid
underwriting performance on an absolute basis and relative to
Key rating triggers that could lead to a negative rating action
include: 1) a
material reduction in capitalization due to higher than expected
losses in its
investment portfolio, material adverse reserve development, or
results; 2) a sustained deterioration of operating performance
on an absolute
basis or relative to peers.
Additionally, a material increase in Berkley's run-rate
ratio to 35% could lead to Fitch expanding the notching between
and its debt rating, resulting in a one-notch downgrade to the
and subordinated debt ratings.
Fitch has affirmed the following ratings:
W.R. Berkley Corporation
--IDR at 'A-';
--$200 million 5.6% senior debt due 2015 at 'BBB+';
--$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+'.
W.R. Berkley Capital Trust II
--Trust preferred securities at 'BBB-'.
Acadia Insurance Company
Admiral Insurance Company
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+'.
Berkley Insurance Company
--IFS at 'A'.
The Rating Outlook is Stable.
Gretchen K. Roetzer
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
Dafina M. Dunmore, CFA
R. Andrew Davidson, CFA
Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549,
Additional information is available at 'www.fitchratings.com'.
The ratings above
were unsolicited and have been provided by Fitch as a service to
issuer did not participate in the rating process, or provide
information, beyond the issuer's available public disclosure.
Applicable Criteria & Related Research:
--'Insurance Rating Methodology' (Jan. 11, 2013).
Applicable Criteria and Related Research
Insurance Rating Methodology â€” Amended
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