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By Erik Kobayashi-Solomon | 03-16-2010 11:39 AM

A Compelling Value in Niche Insurance

Disciplined underwriting may be holding back this specialty insurer's stock in the short term, but its profitability could multiply when the market hardens.

Erik Kobayashi-Solomon: Hi, I'm Erik Kobayashi-Solomon, co-editor of Morningstar OptionInvestor, and today it's my great pleasure to welcome Drew Woodbury, who is an equity analyst covering insurance companies. Drew, thanks for coming.

Drew Woodbury: It's good to be here, Erik.

Kobayashi-Solomon: So, last week I wrote something about W.R. Berkley, a bullish article using option strategies. I just want to get a little more color on Berkley. So, when we were chatting before, you were telling me they're kind of a niche player, and they insure some interesting risks. Can you tell me a little bit about their niche business?

Woodbury: Well, the thing about Berkley is that they own a collection of subsidiaries where they are all involved in niche underwriting of their own.

Kobayashi-Solomon: They kind of grew by acquisition, right?

Woodbury: To some extent, and then some of them are homegrown, so it's a combination of both.

Kobayashi-Solomon: I see.

Woodbury: So, they insure anything from offshore oil rigs, to professional sports teams, to museum and art galleries. It's a wide range of products. The one thing that they do is they try and only underwrite things that are less commodity based. So, for example, they don't underwrite any personalized products, which they believe are more commodities.

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