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WR Berkley WACC %

:6.42% (As of Today)
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As of today (2021-11-28), WR Berkley's weighted average cost of capital is 6.42%. WR Berkley's ROIC % is 4.29% (calculated using TTM income statement data). WR Berkley earns returns that do not match up to its cost of capital. It will destroy value as it grows.


WR Berkley WACC % Historical Data

The historical data trend for WR Berkley's WACC % can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

WR Berkley Annual Data
Trend Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 Dec19 Dec20
WACC %
Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 7.21 6.11 7.20 5.37 5.36

WR Berkley Quarterly Data
Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18 Mar19 Jun19 Sep19 Dec19 Mar20 Jun20 Sep20 Dec20 Mar21 Jun21 Sep21
WACC % Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 5.15 5.36 6.36 6.10 6.06

Competitive Comparison

For the Insurance - Property & Casualty subindustry, WR Berkley's WACC %, along with its competitors' market caps and WACC % data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

WR Berkley WACC % Distribution

For the Insurance industry and Financial Services sector, WR Berkley's WACC % distribution charts can be found below:

* The bar in red indicates where WR Berkley's WACC % falls into.



WR Berkley WACC % Calculation

The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. The WACC is commonly referred to as the firm's cost of capital. Generally speaking, a company's assets are financed by debt and equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances.

WACC=E/(E + D)*Cost of Equity+D/(E + D)*Cost of Debt*(1 - Tax Rate)

1. Weights:
Generally speaking, a company's assets are financed by debt and equity. We need to calculate the weight of equity and the weight of debt.
The market value of equity (E) is also called "Market Cap". As of today, WR Berkley's market capitalization (E) is $14214.256 Mil.
The market value of debt is typically difficult to calculate, therefore, GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding the latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together. As of Sep. 2021, WR Berkley's latest two-year average Short-Term Debt & Capital Lease Obligation was $0 Mil and its latest two-year average Long-Term Debt & Capital Lease Obligation was $2675.8065 Mil. The total Book Value of Debt (D) is $2675.8065 Mil.
a) weight of equity = E / (E + D) = 14214.256 / (14214.256 + 2675.8065) = 0.8416
b) weight of debt = D / (E + D) = 2675.8065 / (14214.256 + 2675.8065) = 0.1584

2. Cost of Equity:
GuruFocus uses Capital Asset Pricing Model (CAPM) to calculate the required rate of return. The formula is:
Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)
a) GuruFocus uses 10-Year Treasury Constant Maturity Rate as the risk-free rate. It is updated daily. The current risk-free rate is 1.64000000%. Please go to Economic Indicators page for more information. Please note that we use the 10-Year Treasury Constant Maturity Rate of the country/region where the company is headquartered. If the data for that country/region is not available, then we will use the 10-Year Treasury Constant Maturity Rate of the United States as default.
b) Beta is the sensitivity of the expected excess asset returns to the expected excess market returns. WR Berkley's beta is 0.86.
c) (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.
Cost of Equity = 1.64000000% + 0.86 * 6% = 6.8%

3. Cost of Debt:
GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.
As of Dec. 2020, WR Berkley's interest expense (positive number) was $150.537 Mil. Its total Book Value of Debt (D) is $2675.8065 Mil.
Cost of Debt = 150.537 / 2675.8065 = 5.6259%.

4. Multiply by one minus Average Tax Rate:
GuruFocus uses the latest two-year average tax rate to do the calculation. The calculated average tax rate is limited to between 0% and 100%. If the calculated average tax rate is higher than 100%, it is set to 100%. If the calculated average tax rate is less than 0%, it is set to 0%.
The latest Two-year Average Tax Rate is 22.095%.

WR Berkley's Weighted Average Cost Of Capital (WACC) for Today is calculated as:

WACC=E / (E + D)*Cost of Equity+D / (E + D)*Cost of Debt*(1 - Tax Rate)
=0.8416*6.8%+0.1584*5.6259%*(1 - 22.095%)
=6.42%

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.


WR Berkley  (NYSE:WRB) WACC % Explanation

Because it costs money to raise capital. A firm that generates higher ROIC % than it costs the company to raise the capital needed for that investment is earning excess returns. A firm that expects to continue generating positive excess returns on new investments in the future will see its value increase as growth increases, whereas a firm that earns returns that do not match up to its cost of capital will destroy value as it grows.

As of today, WR Berkley's weighted average cost of capital is 6.42%. WR Berkley's ROIC % is 4.29% (calculated using TTM income statement data). WR Berkley earns returns that do not match up to its cost of capital. It will destroy value as it grows.


Be Aware

1. GuruFocus uses book value of debt (D) to do the calculation. It is simplified by adding latest two-year average Short-Term Debt & Capital Lease Obligation and Long-Term Debt & Capital Lease Obligation together.

2. The WACC formula discussed above does not include Preferred Stock. Please adjust if preferred stock is considered.

3. (Expected Return of the Market - Risk-Free Rate of Return) is also called market premium. GuruFocus requires market premium to be 6%.

4. GuruFocus uses last fiscal year end Interest Expense divided by the latest two-year average debt to get the simplified cost of debt.


Related Terms

WR Berkley Business Description

WR Berkley logo
Industry
Financial Services » Insurance NAICS : 524126 SIC : 6331
Traded in Other Exchanges
Address
475 Steamboat Road, Greenwich, CT, USA, 06830
W.R. Berkley is an insurance holding company with a host of subsidiaries that primarily write commercial casualty insurance. The firm specializes in niche products that include various excess and surplus lines, workers' compensation insurance, self-insurance consulting, reinsurance, and regional commercial lines for small and midsize businesses.
Executives
Brockbank Mark Ellwood director ROC FLEURI APT C41 1 RUE DU TENAO MONTE CARLO O9 98000
Augostini Christopher L director C/O W. R. BERKLEY CORPORATION 475 STEAMBOAT ROAD GREENWICH CT 06830
Pusey Leigh Ann director LILLY CORPORATE CENTER INDIANAPOLIS IN 46285
Berkley William R director, 10 percent owner, officer: Executive Chairman 165 MASON STREET GREENWICH CT 06830
Shiel James G officer: EVP - Investments C/O W R BERKLEY CORP 475 STEAMBOAT RD GREENWICH CT 06830
Berkley William R Jr director, officer: President and CEO C/O W R BERKLEY CORP 475 STEAMBOAT RD GREENWICH CT 06830
Baio Richard Mark officer: EVP, CFO & Treasurer C/O W. R. BERKLEY CORPORATION 475 STEAMBOAT ROAD GREENWICH CT 06830
Sgaglione Lucille T officer: Executive Vice President C/O W. R. BERKLEY CORPORATION 475 STEAMBOAT ROAD GREENWICH CT 06830
Welt Philip S officer: EVP & General Counsel W. R. BERKLEY CORPORATION 475 STEAMBOAT ROAD GREENWICH CT 06830
Talisman Jonathan director 475 STEAMBOAT ROAD W R BERKLEY CORPORATION GREENWICH CT 06830
Blaylock Ronald E director PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> Ownership Information: BLAYLOCK RONALD E a.header:link {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:visited {color: #3b4fae; font-weight: bold; text-decoration: underline;} a.header:hover {color: #191970;}
Farrell Mary C director C/O W. R. BERKLEY CORPORATION 475 STEAMBOAT ROAD GREENWICH CT 06830
Ferre Maria Luisa director PO BOX 9066590 SAN JUAN PR 00906-6590
Shapiro Mark L director 141 STONE FENCE ROAD BERNARDSVILLE NJ 07924
Nusbaum Jack H director WILLIE FARR GALLAGER 787 SEVENTH AVE NEW YORK NY 10010 6099

WR Berkley Headlines

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