Wayman Value Investing - New Stock Recommendation - January 2025
A new position is being added to the Wayman portfolio
# # # New Position # # #
W. R. Berkley Corporation (WRB)
Recent Price: 56.53
Market Cap: 21.86B
P/FCF: 6.36
P/E: 14.72
P/S: 1.66
LT Debt/Eq: 0.36
Projected 4yr FCF: 12.34B
Wayman Portfolio Tier: Gather
W. R. Berkley Corporation (WRB), founded in 1967 by William R. Berkley with just $2,500 in capital, has grown into one of the nation's leading commercial lines property and casualty insurers. Headquartered in Greenwich, Connecticut, the company operates through a network of decentralized operating units, writing a diverse portfolio of insurance including commercial casualty, professional liability, and specialty lines. What sets WRB apart is its entrepreneurial culture – each operating unit functions with significant autonomy while benefiting from centralized capital and investment management.
The investment case for WRB rests primarily on its remarkable long-term track record of compound value creation through disciplined underwriting and skilled investment management. Over the past decade, the company has consistently delivered combined ratios below industry averages (89.7% in 2023), indicating superior underwriting proficiency. This technical excellence isn't a recent phenomenon – it's deeply embedded in the company's DNA and validated through multiple insurance cycles. In a business where most competitors struggle to consistently earn their cost of capital, Berkley's ability to generate underwriting profits sets it apart.
What I find particularly compelling is the company's focus on specialty lines and niche markets where pricing power tends to be more durable. Unlike many peers who chase premium growth at the expense of profitability, Berkley has shown remarkable discipline in walking away from underpriced business. This approach, while sometimes resulting in slower top-line growth, has protected the company's balance sheet and enabled superior returns on equity – averaging 16.8% over the past five years compared to the industry average of 11.2%.
The company's investment portfolio, conservatively positioned with a focus on fixed income, provides additional stability and potential upside as interest rates normalize. Moreover, with insider ownership north of 15%, management's interests are well-aligned with shareholders.
The insurance industry is entering what appears to be a hardening market cycle, with rising rates across multiple lines of business. Berkley's strong capital position and disciplined underwriting culture position it well to capitalize on these improving market conditions. While short-term results may fluctuate with catastrophe losses or investment market volatility, the company's long-term value creation thesis remains intact. Patient investors who understand that superior businesses rarely trade at bargain-basement prices may find WRB an attractive addition to their portfolios at current levels.
Please keep in mind that while some investors might rely on market catalysts when considering what new positions to take, Wayman considers its style to be “catalyst-free investing.” Our reason for purchasing will always be based on our calculations which show a business is worth far more than where the market is pricing it. - Frank Memcaj, Founder of Wayman Value Investing