[December 14, 2012]

A.M. Best Affirms Ratings of W. R. Berkley Corporation and Its Subsidiaries

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

A.M. Best also has affirmed the FSR of A+ (Superior) and ICR of "aa-" of Berkley Life and Health Insurance Company (Berkley Life and Health) (Urbandale, IA).

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. (See link below for a detailed list of the companies and ratings.)

The rating affirmations follow W.R. Berkley's third quarter earnings release and take into consideration the group's solid pricing momentum in the quarter, sustained year-to-date underwriting profits, solid overall earnings and earnings prospects going forward. W. R. Berkley's ratings further recognize the organization's financial flexibility as evidenced by its ability to access capital. While W. R. Berkley has historically maintained above average financial leverage, strong earnings have fueled the improved capital levels of its subsidiaries and led to the company's debt-to-total capital trending lower over the last several years. However, its leverage has remained above that of industry peers.

At September 30, 2012, W. R. Berkley's unadjusted debt to capital (including trust preferred securities) stood at 33%, near the high end of the company's stated target range for financial leverage of 25% to 35%. W. R. Berkley's financial leverage is expected to improve following repayment of the $200 million unsecured senior notes at their maturity on February 15, 2013. While weather-related losses from Hurricane Sandy are expected to place only slight pressure on 2012 underwriting results, W. R. Berkley's earnings are expected to remain solid, and both its cash coverage ratios and financial leverage should remain supportive of its ratings. A.M. Best will continue to closely monitor both measures, particularly financial leveage, to ensure that all remain in line with A.M. Best's expectations, and more importantly, continue to support the ratings.

The rating affirmations for Berkley Insurance and Berkley Regional reflect their historically favorable underwriting and operating performance, well-established market profile and solid risk-adjusted capitalization. The excellent operating cash flow and the considerable business diversification of both groups, in addition to their below average catastrophe exposure, were notable rating considerations as well.

The rating affirmations of Admiral and Nautilus recognize the extremely profitable underwriting and operating performance, strong capitalization, excellent operating cash flow and demonstrated expertise in the surplus lines market of each group.

A.M. Best believes the favorable performances of all four insurance groups are largely owed to their successfully executed, well-developed business strategies, which feature individual operating units focused on specific niche markets, primarily defined by types of customer, product orientation and distribution channel. Their demonstrated market expertise has led to excellent operating results over the long term that have fostered the long-term stability, which is a major reason for the above average retentions of each group.

Partially offsetting these positive rating factors are the effects of weak macroeconomic conditions, competitive market pressures impacting both the surplus lines and specialty commercial markets, declining investment yields and above-average net underwriting leverage of the groups. These ratings also recognize the favorable prior year loss reserve development reported in recent years and the earnings garnered from these redundancies. The ratings of all the affiliated property/casualty 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.

The affirmation of the ratings for Berkley Life and Health acknowledges its continued favorable risk-adjusted capital position, which is expected to support the company's growing business going forward, and the financial and operational support of W. R. Berkley. Berkley Life and Health is strategic in W. R. Berkley's expansion in the accident and health market, primarily medical stop-loss coverage.

Potential upward movement in the ratings of the property/casualty groups or favorable change in the rating outlook could possibly occur if any of the groups exhibit notably enhanced operating results that lead to strengthened risk-adjusted capitalization. Possible negative pressure on the ratings or rating outlook could result from material deterioration in the risk-adjusted capitalization of any group, especially if it is caused by less favorable or unfavorable underwriting or operating results, or adverse prior year loss reserve development.

For a complete listing of W. R. Berkley Corporation and its subsidiaries' FSRs, ICRs and debt ratings, please visit www.ambest.com/press/121406wrberkleyus.pdf.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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