W. R. Berkley CorporationWRBNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $143.19 per share(market-calibrated)

+105.8%

Upside to Fair Value

Current

$69.57

Pure Model

$156.48

Fair Value

$143.19

Bull Case

$181.40

Bear Case

$134.06

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $156.48.

What's Driving This Ratingfor WRB

✓

CapEx already efficient

CapEx at 0.61% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 18.05% — below the sector mature average of 28.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.5B (25.91% margin).

→

Moderate revenue growth

Analyst consensus projects -11.70% revenue growth, fading to 2.50% by Year 10. Revenue reaches $17.4B (vs $14.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $191.17/share (31.2x terminal FCF) while exit multiple gives $121.80/share (16.4x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 73.01% indicates efficient cash generation. FCF reaches $3.3B by Year 10 (18.86% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.34

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)6.01%

Cost of Debt

Pre-tax Cost of Debt4.64%

Tax Rate21.74%

After-tax Cost of Debt3.63%

Equity Weight (E/V)90.67%

Debt Weight (D/V)9.33%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (90.67% × 6.01%) + (9.33% × 3.63%)

= 5.79%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$13.0B	$14.4B	$15.4B	$16.2B	$17.4B
EBIT	$2.3B	$2.6B	$3.3B	$3.9B	$4.5B
Tax	$509M	$565M	$723M	$840M	$980M
NOPAT	$1.8B	$2.0B	$2.6B	$3.0B	$3.5B
+ Depreciation	-$10M	-$11M	-$11M	-$12M	-$13M
- Capex	$79M	$88M	$94M	$98M	$106M
- Δ NWC	-$516M	$237M	$113M	$118M	$127M
Free Cash Flow	$2.3B	$1.7B	$2.4B	$2.8B	$3.3B
Discount Factor	0.945	0.845	0.755	0.674	0.570
Present Value	$2.1B	$1.4B	$1.8B	$1.9B	$1.9B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.3B

Terminal Growth Rate2.50%

WACC5.79%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$102.3B

PV of Terminal Value$58.3B

Exit Multiple Method

Year 10 EBITDA$4.5B

Exit Multiple (EV/EBITDA)12.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$54.0B

PV of Terminal Value$30.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$17.9B

PV of Terminal Value$58.3B

Enterprise Value$76.1B

(-) Net Debt$300M

Equity Value$75.8B

Shares Outstanding397M

Price per Share$191.17

Exit Multiple Method

PV of Projected FCFs$17.9B

PV of Terminal Value$30.7B

Enterprise Value$48.6B

(-) Net Debt$300M

Equity Value$48.3B

Shares Outstanding397M

Price per Share$121.80

Pure Model Fair Value

$156.48

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
3.79%	$222.79	$237.40	$227.89	$218.83	$210.18
4.79%	$169.35	$184.14	$205.39	$218.83	$210.18
5.79%	$138.82	$146.49	$156.48	$170.06	$189.57
6.79%	$118.44	$122.96	$128.54	$135.58	$144.77
7.79%	$103.55	$106.44	$109.88	$114.04	$119.16

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$134.06

92.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 0.42

Base Case

$156.48

124.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.34

Bull Case

$181.40

160.7% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.30

Key Assumptions & Drivers• Financial Services Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-11.70%

Year 3 Revenue Growth5.81%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin18.05%

Terminal EBIT Margin28.00%

Tax Rate21.74%

Historical Capex / Rev0.61%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 12x EV/EBITDA (Financial Services sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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