In A Tougher Market, W.R. Berkley Has Outperformed

Insurance stocks are not in favor, with well-run companies like Arch Capital Group (NASDAQ:ACGL) and Chubb (NYSE:CB) looking at double-digit year-over-year price declines in their stocks, while Hartford Financial Services Group (NYSE:HIG) and Travelers (NYSE:TRV) are down more modestly. W.R. Berkley (NYSE:WRB), though, keeps on keeping on, with the shares up about 5% over the past year - weaker than the S&P 500, certainly, but above the sector averages for insurance in general and P&C insurance in particular.

This is a tough stock to recommend. While management has put up a very strong track record, and I like the company’s diverse specialty and small-client exposure, as well as its closer-to-the-client decentralized model, I’m concerned about the long-term impact of claims inflation and today’s valuation. I’ve learned over the years not to bet against W.R. Berkley, and the company’s strong investment operations can generate income growth at a time when underwriting profit growth is more challenging, but it’s hard to favor this pricey-looking name when there are rivals trading at what look to be substantial discounts to long-term fair value.

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In A Tougher Market, W.R. Berkley Has Outperformed