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GREENWICH, Conn., Apr 24, 2006 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: BER) today reported net income for the first quarter of 2006 of $162 million, or $.80 per share, a 34% increase from $121 million, or $.61 cents per share, for the first quarter of 2005. Net operating income for the first quarter of 2006 increased 32% to $160 million, or $.79 per share, compared with $121 million, or $.61 per share, for the corresponding quarter of 2005. Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses. All per share amounts in this release reflect the 3-for-2 common stock split effected on April 4, 2006.
Summary Financial Data
(Amounts in thousands, except per share data)
First Quarter
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2006 2005
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Gross premiums written $1,410,835 $1,343,090
Net premiums written 1,278,531 1,188,168
Net income 161,702 120,871
Net income per diluted share 0.80 0.61
Net operating income 159,949 120,964
Net operating income per diluted share 0.79 0.61
First quarter highlights included:
-- Return on equity was 25.2% on an annualized basis.
-- GAAP combined ratio improved to 88.2% from 89.2% in the prior year period.
-- Net investment income grew 47% to $131 million.
-- Net premiums written increased 8% to $1.3 billion.
-- Paid loss ratio was 38%.
Commenting on the Company's activities, William R. Berkley, chairman and chief executive officer, said: "We are pleased that we achieved a 25% annualized after-tax return for our shareholders this quarter. The first quarter of 2006 represents our 21st consecutive quarter with a year-over-year increase in net premiums written, demonstrating our focus on improving revenue when adequate insurance pricing is available. Selective growth, both internally and through new strategic directions, continues to be a cornerstone of our competitive strategy.
"Our outstanding underwriting results have continued, and we expect reported underwriting results in 2006 will at least match 2005. Increasing short-term interest rates and our strong cash flow resulted in a dramatic increase in investment income.
"Once again, our paid loss ratio is under 40%, and we are confident in the overall strength of our balance sheet. We expect to exceed a 20% return in 2006, and we continue to feel positive about 2007," Mr. Berkley concluded.
Webcast Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Tuesday, April 25, 2006 at 10:00 a.m. EDT. The conference call will be webcast live on the Company's website at www.wrberkley.com. A recording of the call will be available on the Company's website approximately two hours after the end of the conference call.
About W. R. Berkley Corporation
Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates in five segments of the property casualty insurance business: specialty insurance, regional property casualty insurance, alternative markets, reinsurance and international.
Forward Looking Information
his is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2006 and beyond, are based upon the Company's historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to, the cyclical nature of the property casualty industry, the long-tail and potentially volatile nature of the reinsurance business, product demand and pricing, claims development and the process of estimating reserves, the uncertain nature of damage theories and loss amounts, the increased level of our retention, natural and man-made catastrophic losses, including hurricanes and as a result of terrorist activities, the impact of competition, the availability of reinsurance, exposure as to coverage for terrorist acts, our retention under The Terrorism Risk Insurance Act of 2002, as amended ("TRIA"), the ability of our reinsurers to pay reinsurance recoverables owed to us, investment risks, including those of our portfolio of fixed income securities and investments in equity securities, including merger arbitrage investments, exchange rate and political risks relating to our international operations, legislative and regulatory developments, including those related to alleged anti-competitive or other improper business practices in the insurance industry, changes in the ratings assigned to us by ratings agencies, the availability of dividends from our insurance company subsidiaries, our ability to successfully acquire and integrate companies and invest in new insurance ventures, our ability to attract and retain qualified employees, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause actual results of the industry or our actual results for the year 2006 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Any projections of growth in the Company's net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Consolidated Financial Summary
(Amounts in thousands, except per share data)
First Quarter
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2006 2005
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Revenues:
Net premiums written $1,278,531 $1,188,168
Change in unearned premiums (132,154) (148,193)
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Premiums earned 1,146,377 1,039,975
Net investment income 131,497 89,558
Service fees 26,594 30,299
Realized investment gains (losses) 2,675 (361)
Other income 391 517
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Total revenues 1,307,534 1,159,988
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Expenses:
Losses and loss expenses 701,198 641,146
Other operating expenses 355,654 326,805
Interest expense 23,469 18,125
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Total expenses 1,080,321 986,076
----------- -----------
Income before income taxes
and minority interest 227,213 173,912
Income tax expense (64,923) (52,729)
Minority interest (588) (312)
----------- -----------
Net Income $161,702 $120,871
=========== ===========
Net income per share (1):
Basic $0.84 $0.64
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Diluted $0.80 $0.61
=========== ===========
Average shares outstanding (1):
Basic 191,741 189,837
Diluted 202,331 199,686
(1) Per share amounts reflect the 3-for-2 common stock split effected on April 4, 2006.
Operating Results by Segment
(Amounts in thousands, except ratios (1))
First Quarter
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2006 2005
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Specialty (2):
Gross premiums written $474,301 $443,473
Net premiums written 447,563 415,939
Premiums earned 418,245 371,921
Pre-tax income 106,486 80,025
Loss ratio 59.9% 61.3%
Expense ratio 25.3% 25.1%
GAAP combined ratio 85.2% 86.4%
Regional (3):
Gross premiums written $364,666 $367,373
Net premiums written 311,381 313,825
Premiums earned 289,962 280,299
Pre-tax income 54,630 59,063
Loss ratio 56.6% 53.1%
Expense ratio 31.0% 30.5%
GAAP combined ratio 87.6% 83.6%
Alternative Markets (2):
Gross premiums written $273,448 $283,262
Net premiums written 238,422 232,581
Premiums earned 162,741 155,267
Pre-tax income 67,122 42,064
Loss ratio 55.4% 68.1%
Expense ratio 21.2% 20.8%
GAAP combined ratio 76.6% 88.9%
Reinsurance (2):
Gross premiums written $247,033 $202,482
Net premiums written 235,809 187,544
Premiums earned 225,242 187,853
Pre-tax income 30,059 20,275
Loss ratio 72.6% 68.9%
Expense ratio 27.4% 31.8%
GAAP combined ratio 100.0% 100.7%
International (2):
Gross premiums written $51,387 $46,500
Net premiums written 45,356 38,279
Premiums earned 50,187 44,635
Pre-tax income 5,912 4,484
Loss ratio 65.7% 65.2%
Expense ratio 33.5% 31.1%
GAAP combined ratio 99.2% 96.3%
Corporate and Eliminations:
Realized investment gains (losses) 2,675 (361)
Interest and other, net (39,671) (31,638)
Pre-tax loss (36,996) (31,999)
Total:
Gross premiums written 1,410,835 1,343,090
Net premiums written 1,278,531 1,188,168
Premiums earned 1,146,377 1,039,975
Pre-tax income 227,213 173,912
Loss ratio 61.2% 61.7%
Expense ratio 27.0% 27.5%
GAAP combined ratio 88.2% 89.2%
(1) Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses. For the international segment, the loss and expense ratios do not include life insurance business. GAAP combined ratio is the sum of the loss ratio and the expense ratio.
(2) Prior period operating results by segment have been reclassified to reflect a change in the segment designation for the following companies: Berkley Underwriting Partners, LLC from reinsurance to specialty; W. R. Berkley Insurance (Europe), Limited from specialty to international; and Berkley Medical Excess Underwriters, LLC from specialty to alternative markets.
(3) For the first quarter of 2006 and 2005, weather-related losses for the regional segment were $4.6 million and $2.3 million, respectively.
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
March 31, December 31,
2006 2005
------------ -------------
Total investments (1) $10,669,645 10,378,250
Total assets 14,524,134 13,896,287
Reserves for losses and loss expenses 7,003,243 6,711,760
Senior notes and other debt 868,170 967,818
Junior subordinated debentures 450,975 450,634
Stockholders' equity (2) 2,708,363 2,567,077
Shares outstanding, net of treasury stock 192,298 191,265
Stockholders' equity per share 14.08 13.42
(1) Total investments include cash and cash equivalents, trading account receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.
(2) Stockholders' equity includes after-tax unrealized losses from investments and currency translation adjustments of $3 million as of March 31, 2006 and after-tax unrealized gains from investments and currency translation adjustments of $25 million as of December 31, 2005.
Supplemental Information
(Amounts in thousands)
First Quarter
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Reconciliation of net operating
income to net income: 2006 2005
---- ----
Net operating income (1) $159,949 $120,964
Realized investment gains (losses),
net of taxes 1,753 (93)
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Net income $161,702 $120,871
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Return on equity (2):
Net income 25.2% 22.9%
Net operating income 24.9% 22.9%
Reconciliation of cash flow:
Cash flow before trading account
transfers (3) $438,956 $448,607
Trading account transfers (200,000) (25,000)
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Cash flow from operations $238,956 $423,607
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(1) Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses. Management believes that excluding realized investment gains and losses, which result primarily from changes in general economic conditions, provides a useful indicator of trends in the Company's underlying operations.
(2) Return on equity represents net income and net operating income expressed on an annualized basis as a percentage of beginning of year stockholders' equity.
(3) Cash flow before trading account transfers is a non-GAAP financial measure that excludes cash contributions to and withdrawals from the arbitrage trading account. Management believes that cash transfers to and withdrawals from the arbitrage trading account are the result of changes in investment allocations and that excluding such transfers provides a useful measure of the Company's cash flow.
SOURCE: W. R. Berkley Corporation
W. R. Berkley Corporation
Karen A. Horvath, 203-629-3000