Compass Point Lowers Price Target On W.R. Berkley On Energy Investments

In a report published Tuesday, Compass Point analyst Ken Billingsley reiterated a Neutral rating on

, but lowered the price target from $53.00 to $51.00. In the report, Compass Point noted, “We maintain our Neutral rating and are lowering our price target to $51 from $53. We are lowering our 4Q14E EPS to $0.73 from $0.84 as the negative impact from the company's energy investment portfolio will likely impact the company for the next two quarters as the investment funds are reported on a one quarter lag. We have lowered our overall yield assumptions for the investment funds through 2016, which have reduced our 2015E and 2016E to $3.50 and $3.75 from $3.75 and $3.95 respectively. WRB remains one of the higher levered insurance companies in the industry, which means the company's ROATE is more sensitive to changes in underwriting performance and investment returns. We expect premium pricing will remain competitive in 2015 though we anticipate Workers' Comp rates to maintain positive through the year. Our model assumes underwriting profitability will trend higher as the combined ratio ticks lower (with the help of reserve releases), while the investment portfolio will provide the most opportunity for earnings surprises in 2015.” W.R. Berkley closed on Friday at $50.25.