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AM Best Affirms WR Berkley Ratings

Posted on 18 May 2010

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A.M. Best Co. has affirmed the financial strength ratings (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of Berkley Insurance Group (Berkley Insurance), Admiral Insurance Group (Admiral), Berkley Regional Group (Berkley Regional) and Nautilus Insurance Group (Nautilus) (Scottsdale, AZ) and their respective property/casualty members.

Concurrently, A.M. Best has affirmed the ICR and debt ratings of "a-" on senior unsecured notes and "bbb" on trust preferred securities of the parent company, W. R. Berkley Corporation (W. R. Berkley) (Greenwich, CT) [NYSE: WRB]. The outlook for all ratings is stable.

The rating affirmations for Berkley Insurance and Berkley Regional reflect their highly favorable underwriting and operating performance, adequate capitalization, strong operating cash flow and considerable business diversification. Below average catastrophe exposure, narrow volatility, moderate risk profile and more conservative loss reserve levels were significant rating considerations, as well.

A.M. Best believes the excellent performance of Berkley Insurance and Berkley Regional is largely owed to well-established business strategies featuring individual operating units, which focus on specific niche markets primarily defined by geography and product orientation. The demonstrated market expertise that has led to favorable operating results, also has helped long-term stability resulting in above average retention. Based on the aforementioned, A.M. Best expects these favorable operating results will continue, as both groups maintain their established market position despite the continued competitive pressures.

Partially offsetting these positive rating factors is the adverse loss reserve development in older accident years, which has been experienced by both groups and their slightly above-average net underwriting leverage. The consistent generation of profitable operating results by both groups and the more favorable development on reserves of recent accident years for both, has helped overcome these negative issues.

The rating affirmations of Admiral and Nautilus recognize their historically profitable underwriting and operating performance, strong capitalization, excellent operating cash flows and well-established expertise in the surplus lines market.

Partially offsetting these positive risk factors is Admiral and Nautilus' slightly above-average underwriting leverage and the largely unfavorable loss reserve development in Admiral's older accident years. However, more effective management during the current soft part of the market cycle has, at this point, led to very favorable reserve development of the most recent accident years' loss reserves for both groups.

The ratings of all the affiliated groups consider the role and strategic importance of each within the W. R. Berkley organization. As such, A.M. Best views these groups as core business units of W. R. Berkley, which are afforded implicit and explicit support by the parent.