September 2016
www.bestreview.com
A.M. Best’s Monthly Insurance Magazine
Growth Leaders
Growth
Strategy
By focusing on specialty insurance, where expertise is a must, insurer
W.R. Berkley has seen its market share grow dramatically. As William R.
Berkley hands the reins over to his son Robert, both expect a seamless
transition.
by Kate Smith
Kate Smith is a senior associate editor. She can be reached at [email protected].
Growth Leaders
W
illiam R. Berkley handed his 7-year-old son
territory or product.
a broom and asked him to help sweep the
“We narrowed down the areas of growth to
garage floor. Five years later, he brought
places where we had expertise in underwriting
the 12-year-old boy to his office in Greenwich,
particular lines of business,” Bill Berkley said.
Connecticut, and put him to work helping out with
“We effectively said that to be able to grow in
the family business, W.R. Berkley.
commercial lines, we had to be
“The concept of child labor laws
able to deliver expertise to our
was lost on my father,”W. Robert
customers. And that’s where we
Berkley joked.
focused.”
Rob Berkley grew up working
with his dad, Bill. And for nearly
Early Days
two decades now, he has helped
Bill Berkley started the
his father build W.R. Berkley into
company in 1967, while a
a powerhouse in the commercial
21-year-old graduate student
lines segment.
at Harvard Business School.
Rob Berkley joined W.R. Berkley
He had graduated from New
in 1998 after three years as an
York University at age 19 and
investment banker. Last October,
continued directly for his MBA.
Bill Berkley handed over the reins
While at Harvard, he and a
“I don’t think it’s the
to his son, with Rob assuming the
partner decided to form their
position of chief executive officer
own investment management
typical transition
and Bill taking on the role of
firm, which they called Berkley
you may see in
executive chairman.
Dean & Company.They had a
other good-sized
The transition, they say, has
$2,500 investment to get their
been seamless. That’s in large
venture off the ground.
organizations, where
part because the two have been
Among their early clients were
somebody is in and
running the company hand in hand
Lloyd’s syndicates and insurance
somebody is out. Our companies, and Bill Berkley
for years.
Since father and son teamed
quickly surmised insurance
goal has been that
up 18 years ago, W.R. Berkley has
be a promising industry
this would be more of could
tripled its market share in the
for someone with his investing
an evolution both for
commercial property and casualty
background.
space, becoming the 12th largest
“When I started in the
us and the business.”
writer in the U.S. In 2015, the
business,” he recalled,“I looked
Rob Berkley
company claimed 1.84% of the
W.R. Berkley at all the great regional insurance
market, up from 1.6% a decade
companies—Ohio Casualty,
ago and 0.57% two decades ago,
Western Casualty, Indiana
according to A.M. Best data (see
Insurance Group. None of whom
pages 54 and 55).
are around anymore. But these were great regional
The Berkleys credit much of that success to
companies that had unbelievably good returns
their shared vision and a shift in strategy at the
and great results. I looked at those companies and
turn of the century, when the company withdrew
thought,‘We can do that, I can do that.You can even
from personal lines and began to zero in on
do better than that by being a good investor.’ So that
commercial lines and targeted niches.
was the goal.”
“We just didn’t see, in a long-run strategy,
In 1972, he entered the insurance market
personal lines as a place where we could
through the acquisition of Houston General
continue to compete,” Bill Berkley said. “The
Insurance Company.The following year, Berkley
broad-based personal lines business wasn’t a
Dean went public as W.R. Berkley Corporation, with
place where we added value.”
shares costing a split-adjusted 17 cents. W.R. Berkley
Where they could add value was in niche
stock now trades at close to $60 a share.
markets requiring specialized knowledge about a
Bill Berkley soon found another segment of
BEST’S REVIEW • SEPTEMBER 2016
the industry that had high returns—specialty
“We’re always looking to meet and find great
companies.
people,” Bill Berkley said. “The cornerstone is
“The small regional insurance companies and
finding great teams of people who are dissatisfied
specialty companies generated much better returns
with their current status or who are in part doing
than the national companies,” he said.“And it was
something that represents an opportunity and
a place where capital wasn’t the
would like to do it exclusively.
driving force; expertise was the
So it’s really geared toward
driving force to get higher returns.”
finding the people who
W.R. Berkley entered the specialty
see a marketplace, see an
space through the acquisition of the
opportunity.”
Admiral Insurance Company in 1979
Autonomy and accountability
and continued to steadily expand
also play key roles in their
into the 1990s, with revenues
strategy. Management teams
passing the $1 billion mark in 1995.
are given broad control of their
But the biggest growth came when
businesses.
the company decided in 1999 to exit
“We are great believers in the
personal lines.
idea that the intellectual capital
“There were niches we liked. For
and expertise our people have
instance, we stayed in the antique
are the great differentiators,
“We effectively said
automobile business, which was a
especially in the parts of the
personal lines business,” Bill Berkley
market we choose to focus on,”
that to be able to
said.“But by and large we wanted to
Rob Berkley said. “We also are
grow in commercial
stay in places where we thought we
an organization that believes
lines, we had to
could add competitive value for the
very much in accountability.
customer. We recently announced
And we think if you’re going
be able to deliver
that we will be starting a high net
to hold people accountable for
expertise to our
worth personal lines business. We
the outcomes, you have to give
customers. And that’s them authority.
view that as a specialty business,
where knowledge and service are
“The people who are most
where we focused.”
highly valued.”
well-positioned to make
Bill Berkley
decisions are the ones who
W.R. Berkley
Renewed Focus
have the best information, and
Refining the strategy to focus on
oftentimes it’s those who are
specialty areas paid off.
closest to the marketplace who
In its 2015 annual report, W.R. Berkley said
have that information.”
that over the past five years its total revenue has
increased 49% to $7.2 billion while its combined
Moving Forward
ratio has averaged 95.7%. Over the past 10 years,
The direction of W.R. Berkley is unlikely to
its return on stockholders’ equity averaged 14%.
change drastically under Rob Berkley. The new
Since 2005, W.R. Berkley has added 35 new
CEO’s vision as a leader has been shaped by his
business units, bringing its total to 51.
experience, and the bulk of that experience has
“We define the business as putting capital and
come from working with his father.
people together in a way that can best serve the
Although he grew up around the family
customer,” Bill Berkley said. “As we started to find
business, Rob Berkley didn’t go straight into
outstanding people, we provided the capital and
it. After college he worked in New York as an
the structure to help them build. And it gave us
investment banker for Merrill Lynch.
the opportunity to expand.”
“I did that for a little less than three years.
The bulk of that expansion has been organic.
Long enough to realize I didn’t want to be an
Only seven of W.R. Berkley’s 51 business units
investment banker,” he said. “After that experience,
have come through acquisition; the remaining 44
my father and I decided it was worth giving it a
were developed internally.
shot to see if this business was a fit or not.”
BEST’S REVIEW • SEPTEMBER 2016
Growth Leaders
envision,” Rob Berkley said.
It was a fit from the
By
the
Numbers:
W.R.
Berkley
“I think our situation is a
start.
little bit unique. My father
While father and son
49% increase in revenue, 2011-15
and I have been working
don’t always agree on
billion
in
revenue
in
2015
$7.2
together for a long time,
tactics—“It would be a
and it’s been for some
shame if we agreed on
average combined ratio, 2011-2015
95.7%
number of years that we’ve
everything; it would be
new
business
units
since
2005
been working together
a disappointment,” Bill
35
hand in hand. As a result
Berkley said—they share
average return on stockholders’ equity, 2005-2015
14%
of that, the vision, the
the same cornerstone
Source:
W.R.
Berkley
strategy and the execution
values.
are things that we’ve
“At a high level, or
been
collaborating
on
for
several
years. It’s certainly
directionally, we agree the vast, vast majority of
my
expectation,
and
I
believe
it’s
his,
that that will
the time,” Rob Berkley said. “That probably in part
continue
to
be
the
case.
stems from the experiences I had in the business
“So I don’t think it’s the typical transition you
and how I learned the business. Ultimately, the
may
see in other good-sized organizations, where
way I view and approach the industry and the
somebody is in and somebody is out.
business has been greatly impacted by
Our goal has been that this would
my father.”
Learn More
be more of an evolution both for
The two still talk for at least an hour a
W.R. Berkley
us and the business. Ultimately we
day—just as they did when Bill Berkley
Insurance Group
think that makes sense because
was CEO.
A.M. Best # 018252
A, we work well together; and B, a
“People are used to a CEO coming
For ratings and other financial
seamless transition is in the best
in and looking to put their mark on
strength information visit
interest of both internal and external
the company, take control and take the
www.ambest.com.
BR
stakeholders.”
business in whatever direction they
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BEST’S REVIEW • SEPTEMBER 2016