Insurance companies aren’t known as the sexiest names on Wall Street, but shareholders of W. R. Berkley Corp (NYSE:WRB) don’t seem to be complaining.
On Wednesday, May 25, the commercial and property insurer announced an eight percent increase in its dividend to an annual rate of $0.52 per share. (Source: “W. R. Berkley Corporation Increases Dividend 8%,” W. R. Berkley Corp, May 25, 2016.)
With the dividend hike, the company now has an annual dividend yield of 0.92%. In the last five years, W.R. Berkley has increased its dividend payout by 62.5%.
The company has also been returning value to shareholders through stock buybacks. In the first quarter of 2016, it repurchased 734,055 of its shares for $37.4 million. Last year, it repurchased 4.5 million shares for $224 million.
For shareholders, the announcement is just the latest sign of the good times at W. R. Berkley. Even though spring often comes with storm losses, the company still managed to improve its profits. In the first quarter of 2016, W. R. Berkley’s operating income per share increased by 11% year-over-year. (Source: “W. R. Berkley Corporation Reports First Quarter Results,” W. R. Berkley Corp, April 26, 2016.)
Note that one of the hurdles faced by insurance companies today is the low interest rate environment. In its earnings press release, W. R. Berkley admits this challenge, but said that “though the ongoing decline in interest rates presents challenges to our investment income, we have been able to maintain the quality and yield of our portfolio, while at the same time shortening our duration and reducing the concomitant risk.” (Source: Ibid.)
Executives are eyeing expansion to keep the dividend growing.
Earlier this month, the company announced the formation of a new operating unit—Berkley Insurance Asia. The unit will have offices in Hong Kong and Singapore. The Hong Kong office will be offering specialty commercial insurance coverage to clients in North Asia, while the Singapore office will serve clients in Southeast Asia. (Source: “W. R. Berkley Corporation Forms Berkley Insurance Asia,” W. R. Berkley Corp, May 11, 2016.)
Shareholders will be watching these moves closely. If management can get a toehold in these new markets, it will likely translate into many more dividend hikes in the years to come.