Author Topic: WRB - WR Berkley  (Read 21238 times)

onyx1

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Re: WRB - WR Berkley
« Reply #20 on: February 24, 2011, 08:20:50 AM »
Here is a good write up on WRB from the VIC (it's available to non-members after a 45-day delay).

http://www.valueinvestorsclub.com/value2/Idea/ViewIdea/42754

The author's thesis is that WRB is among the best (if not, The Best) positioned to benefit from a cycle turn due to the way Bill Berkley operates in soft markets (pulling in underwriting but not capacity, buying back stock, etc.) and hard markets (using pentup capacity to re-lever the firm).  WRB can lever more than most P&C's because they are diversified by geography, line of business, end market and they have no Cat risk as they reinsure individual risk over $5mm.  This has been a very successful strategy over the 30 year operating history of WRB and has made Bill Berkley a rich man (he owns 18% of the company worth $780mm).

If you are a member, you can view the Q&A that follows the write up.  It is equally good and I learned several things about WRB including:

They have $60mm in real estate asset booked at cost on the BS purchased decades ago.
They have grown staff actuaries from 10 to 80 in the last decade and employ them at both the sub and parent level.
The author believes Bill Berkley would sell the company at cycle peak and with a robust valuation.


Enjoy!
« Last Edit: February 24, 2011, 10:04:08 AM by onyx1 »


Bronco

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Re: WRB - WR Berkley
« Reply #21 on: February 24, 2011, 08:58:50 AM »
I seem to remember a few years back that this guy was making tons of $$ in executive salary.  Maybe 50m or so?

If true, he makes Biglari look like WEB.

benhacker

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Re: WRB - WR Berkley
« Reply #22 on: February 24, 2011, 09:58:51 AM »
Quote
I seem to remember a few years back that this guy was making tons of $$ in executive salary.  Maybe 50m or so?

If true, he makes Biglari look like WEB.

A quick summary of Mr. Berkeley's comp (may be some errors, I just pulled this real quick... don't have my notes handy).

Total comp:
'01 - ~$3-4m
'02 - ~$6.5m
'03 - ~$20m
'04 - ~$11m
'05 - ~$18m
'06 - ~$30m
'07 - ~$27m
'08 - ~$15m
'09 - ~$17m

Ben

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onyx1

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Re: WRB - WR Berkley
« Reply #23 on: February 24, 2011, 10:01:52 AM »
His total comp has been running around $20mm per year.  This is my biggest beef with WRB, and probably the biggest reason the firm has not attracted a more robust following among the value investment community.  If he paid himself $100k he would certainly attract a cult following, as there aren't many other insurance owner/operators with as good a long term record as Bill Berkley.  He is shareholder friendly, passionate about risk, a very good capital allocator, and a leading thinker in the industry.  When the firm is valued by the market again at a significant multiple to BV (it closed at 2.9xBV in March 2006), I can only hope he will cap his compensation and reap the benefit of immediate appreciation of his (and my!) stockholdings.

In the meantime, I can only ask myself "Is he worth it?"  In my opinion, yes.  I'm getting an owner/operator who started the business in 1967 with years of experience in bull-bear-soft-hard-inflation-deflation markets.  He is solely responsible for the performance of WRB, and the bottom line is that he has grown Tangible Equity (adjusted for capital transactions and dividends) at 21% for the last 10 years, and 21% for the last 25 years.   

Bronco

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Re: WRB - WR Berkley
« Reply #24 on: February 24, 2011, 10:31:10 AM »
Ben - thanks for the more accurate #'s.  Certainly no WEB with compensation, but I guess not a reason to dismiss the stock.

Still, I'm passing on this.

Liberty

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Re: WRB - WR Berkley
« Reply #25 on: March 01, 2011, 06:36:31 PM »
WRB increasing share buybacks:

http://www.zacks.com/stock/news/48323/W.R.+Berkley+Ramps+Buyback+

Quote
Yesterday, property and casualty insurer W.R. Berkley Corp. (WRB - Analyst Report) announced an increase in repurchase authorization to 10 million shares. The increased authorization represents nearly 7% of the company’s 155.1 million outstanding shares as of December 31, 2010.
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biaggio

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Re: WRB - WR Berkley
« Reply #26 on: March 02, 2011, 04:27:40 AM »
Mr Berkley's compensation certainly seems generous.

How does one determine if pay is out of line? Is there a general rule of thumb?

$20 million per year to me is obviously dear.

What is a reasonable pay for  a company with  $1-2 billion market cap?

Proxy's I read always have the standard line that the amount paid is in line with what is paid to other executives at similar organization. Should we just go with that.

Bronco

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Re: WRB - WR Berkley
« Reply #27 on: March 02, 2011, 05:58:29 AM »
My criteria - and Myth knows this b/c he is the only one to read my book (not just on the board, but in the world) - is what is the incremental value added.

If you pay Michael Jordan 20 million and he will generate 40 million in marginal profits, it is a no brainer.

If you pay Steve Jobs 100 million it would be tough to argue that he isn't worth it.  His marginal value on an annual basis is probably much higher to Apple shareholders.

So at $20m, is Mr. Berkley adding more value than someone that can do the job for $10 million?  I can't speak intelligently to that (or anything else for that matter).  But I think that is what s/h's could look at.

Buffett compensation is often where the bar is set - since he is paid essentially nothing and has provided so much.  But the same logic is applying - big bang for the $$. 


stahleyp

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Re: WRB - WR Berkley
« Reply #28 on: March 02, 2011, 06:09:44 AM »
To me, the problem with huge compensation is not whether or not someone is worth it. It's more to do with love. What do they love more: running the business or the money?
Paul

Myth465

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Re: WRB - WR Berkley
« Reply #29 on: March 02, 2011, 06:16:40 AM »
To me, the problem with huge compensation is not whether or not someone is worth it. It's more to do with love. What do they love more: running the business or the money?

I think this will cause you to leave alot of money on the table. Many skipped out on CHK and SD due to compensation. I think Bronco has the right idea. I used to think everyone was simply overpaid, but I am slowly realizing that these guys can add incremental value. Sokol, Ward, and CHK CEO have all added billions of value which has nothing to do with just clocking in.