- W. R. Berkley Corporation’s valuation is high compared to the rest of the sector, making it an overpriced investment.
- The company’s specialty insurance business and diverse portfolio have contributed to its impressive return on equity of 21.1%.
- WRB has managed to avoid volatility in the catastrophe insurance sector, leading to consistent earnings and a premium share price.
Introduction
I think that W. R. Berkley Corporation (NYSE:WRB) has been awarded an almost growth stock valuation right now, especially when compared to the rest of the sector when it’s trading at a p/e of over 13. Investors that seek an undervalued play may want to look elsewhere right now, as the premium I don’t think is quite worth paying for, unfortunately. With insurance companies, I don’t like paying too much for the book value, and right now WRB has a p/b over 2. My preferred range is between 0.8 (ideally) to around 1.2 at the higher end. That way, I am ensuring myself I am not overpaying for the asset base the company has collected. But the quality of WRB feels quite obvious right now, as the company has managed to achieve an ROE of 21.1% in the most recent quarter. That, in my opinion, is very impressive and if it’s able to be maintained then perhaps a slight premium could be attached to the share price. For now, though, it’s too high, and a hold rating will be my view on WRB.
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