Premium companies deserve premium valuations, and I believe it is beyond argument that W. R. Berkley (WRB) is an exceptionally-run insurance company. With a remarkably strong historical track record of underwriting profits and a more aggressive (but successful) approach to investments, W. R. Berkley ("Berkley") has consistently generated above-average returns from its core specialty insurance business without needing to take on undue risk in underwriting.
While it's easy to say that premium companies deserve premium valuations, dealing with that as an investor isn't easy. A 2.1x multiple to book value doesn't seem unreasonable now relative to where other insurers trade (and would support a fair value around $75), but that's quite bit higher than the long-term average for an insurer with a 10% to 12% ROE and I am concerned about what happens when multiples eventually normalize in the sector.
Read more here:
W. R. Berkley Reaping The Rewards Of Other Insurers' Mistakes
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