Sell W.R. Berkley (WRB)

It’s like some insurance industry version of “Night of the Living Dead.”

Zombies keep eating insurance premium increases.

In this case it’s not hordes of zombies that are the menace, but one great big one, American International Group (AIG). The crippled insurer, saved from collapse by a huge infusion of tax payer cash, is hanging onto market share in the businesses that it hasn’t sold off by cutting rates.

And that has had the effect of delaying—no one knows for how long—the recovery in premiums predicted by healthy, conservative insurers such as W.R. Berkley.

I don’t see a quick solution to the zombie problem—Where is Woody Harrelson when you need him?—so I’m going to sell W.R. Berkley out of Jubak’s Picks with this post. (I know by selling now, before the December 14 record date, I’ll miss the 6 cents a share dividend payable on January 5, but the dividend is so small that I don’t think it is a good reason for holding onto the shares for another two weeks. Your opinion may differ. Your call.)

Sometimes doing an excellent job running your own business isn’t enough. Read more

Buy W.R. Berkley (WRB)

I’m buying these common shares of insurer W.R. Berkley (WRB) as a replacement for the preferred shares that I sold out of Jubak’s Picks on October 6. I think they offer almost twice the upside with just slightly more risk.

I’m a big fan of the very conservative ship run by CEO William Berkley. No financial company has escaped all damage from the recent (and in my mind on-going) financial crisis, but W.R. Berkley has dodged most of the big bullets. The $108 million write-down that WR Berkley took in the fourth quarter, for example, was on invested assets of $12.5 billion. Read more