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.

On October 26, W.R. Berkeley reported third quarter earnings of 67 cents a share, 2 cents a share above Wall Street projections. Revenues came in $20 million short of analyst expectations but still showed a 7.6% increase from the third quarter of 2008.

But here’s the big problem and it’s one that’s outside of the company’s control. “At current pricing levels with existing low interest rates, we believe the industry is operating at as net loss on an accident year basis,” the company said.

That leaves W.R. Berkley with an unpleasant choice: Write business at a loss to keep revenues from falling (as American International Group looks like it is doing) putting the company’s future at risk in case of a big payout, or continue its traditional emphasis on writing policies only when the premium makes sense and seeing volumes fall.

I think this situation will eventually resolve itself in favor of W.R. Berkley and other conservative insurers. I was willing to wait for that “eventually” when it looked it would arrive in the first half of 2010.

Now that I can’t predict when “eventually” will come, except that it’s not likely in the first half of 2010, so I’m selling these shares with this post. I have a 5.2% loss in this position since I added W.R. Berkley to the Jubak’s Picks portfolio on October 7, 2009.