A.M. Best Co. has assigned a debt rating of “a-” to the $350 million 4.625% senior unsecured notes, due 2022 issued by W. R. Berkley Corporation (W. R. Berkley) (Greenwich, CT) [NYSE: WRB]. The assigned outlook is stable.
The total net proceeds for the offering are expected to be used for general corporate purposes, including the repayment of indebtedness. The existing ratings of W. R. Berkley and its insurance subsidiaries are unchanged.
At December 31, 2011, W. R. Berkley’s unadjusted debt-to-capital (including trust preferred securities) stood at 30%, the midpoint of its target range of 25% to 35%, and within A.M. Best’s financial leverage guidelines for W. R. Berkley’s current rating level. The company’s financial leverage has moderated in this range over the last couple of years, a noted decrease from several years ago. However, its leverage has remained above industry peers. Offsetting these concerns are the consistency of W. R. Berkley’s operating earnings, excellent financial flexibility and carefully managed capital structure.
With the inclusion of this new $350 million senior note and the anticipated repayment of indebtedness coming due in 2013, A.M. Best expects W. R. Berkley’s proforma unadjusted debt-to-capital, including trust preferred debt at year-end 2012 will decease to approximately 30%.
While the competitive market environment for specialty commercial lines property/casualty insurance products will continue to place pressure on underwriting results in 2012, W. R. Berkley’s earnings are expected to remain solid and its cash coverage ratios should remain supportive of the assigned rating.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “A.M. Best’s Ratings & the Treatment of Debt” and “Equity Credit for Hybrid Securities.” Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology.