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Net Income up 17% to $188 MillionGREENWICH, Conn., Apr 23, 2007 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: BER) today reported net income for the first quarter of 2007 of $188 million, or 93 cents per share, a 17% increase from $162 million, or 80 cents per share, for the first quarter of 2006. Net operating income for the first quarter of 2007 increased 15% to $184 million, or 91 cents per share, compared with $160 million, or 79 cents per share, for the corresponding quarter of 2006. Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses.
Summary Financial Data
(Amounts in thousands, except per share data)
First Quarter
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2007 2006
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Gross premiums written $1,383,362 $1,410,835
Net premiums written 1,254,772 1,278,531
Net income 188,426 161,702
Net income per diluted share 0.93 0.80
Net operating income 183,630 159,949
Net operating income per diluted share 0.91 0.79
First quarter highlights included:
-- Return on equity was 22.6% on an annualized basis.
-- GAAP combined ratio improved to 87.5% from 88.2% in the prior year period.
-- Net investment income grew 26% to $165 million.
-- Paid loss ratio was 41.7%.
Commenting on the Company's results, William R. Berkley, chairman and chief executive officer, said: "Our first quarter performance was generally in line with our expectations. We are pleased that our return on equity was over 22% in spite of the substantial increase in our capital base as a result of last year's earnings. In the current environment, we have not been able to fully leverage our capital as rapidly as it is currently being generated. We remain cognizant of the desirability of maintaining only the "right" amount of capital. However, we continue to explore opportunities that we believe may represent attractive investments in our business.
"The slight decrease in our premium volume reflects continuing competition and modestly declining rates. Nevertheless, we believe new business is being written at attractive underwriting margins. We remain cautious in establishing our loss reserves and believe that returns in excess of twenty percent are likely to continue through the rest of the year and into next year," 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 24, 2007 at 9:00 a.m. eastern time. 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
This 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 2007 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 insurance and reinsurance business, product demand and pricing, claims development and the process of estimating reserves, the uncertain nature of damage theories and loss amounts, natural and man-made catastrophic losses, including as a result of terrorist activities, the impact of competition, the success of our new ventures or acquisitions and the availability of other opportunities, the availability of reinsurance, exposure as to coverage for terrorist acts, our retention under The Terrorism Risk Insurance Act of 2002, as amended ("TRIA"), and the potential expiration of 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 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 2007 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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2007 2006
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Revenues:
Net premiums written $1,254,772 $1,278,531
Change in unearned premiums (99,839) (132,154)
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Premiums earned 1,154,933 1,146,377
Net investment income 165,421 131,497
Service fees 25,993 26,594
Realized investment gains 7,390 2,675
Other income 5,284 391
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Total revenues 1,359,021 1,307,534
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Expenses:
Losses and loss expenses 685,147 701,198
Other operating expenses 385,231 355,654
Interest expense 20,700 23,469
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Total expenses 1,091,078 1,080,321
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Income before income taxes and minority
interest 267,943 227,213
Income tax expense (79,135) (64,923)
Minority interest (382) (588)
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Net income $ 188,426 $ 161,702
=========== ===========
Earnings per share:
Basic $ 0.98 $ 0.84
=========== ===========
Diluted $ 0.93 $ 0.80
=========== ===========
Average shares outstanding:
Basic 193,199 191,741
Diluted 202,076 202,331
Operating Results by Segment
(Amounts in thousands, except ratios (1))
First Quarter
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2007 2006
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Specialty:
Gross premiums written $457,852 $474,301
Net premiums written 433,975 447,563
Premiums earned 443,455 418,245
Pre-tax income 127,712 106,486
Loss ratio 58.0% 59.9%
Expense ratio 26.0% 25.3%
GAAP combined ratio 84.0% 85.2%
Regional (2):
Gross premiums written $377,418 $364,666
Net premiums written 325,373 311,381
Premiums earned 304,367 289,962
Pre-tax income 55,321 54,630
Loss ratio 58.6% 56.6%
Expense ratio 31.0% 31.0%
GAAP combined ratio 89.6% 87.6%
Alternative Markets:
Gross premiums written $280,428 $273,448
Net premiums written 250,523 238,422
Premiums earned 162,664 162,741
Pre-tax income 67,718 67,122
Loss ratio 56.2% 55.4%
Expense ratio 22.6% 21.2%
GAAP combined ratio 78.8% 76.6%
Reinsurance:
Gross premiums written $205,182 $247,033
Net premiums written 190,861 235,809
Premiums earned 185,278 225,242
Pre-tax income 46,407 30,059
Loss ratio 64.6% 72.6%
Expense ratio 32.2% 27.4%
GAAP combined ratio 96.8% 100.0%
International:
Gross premiums written $62,482 $51,387
Net premiums written 54,040 45,356
Premiums earned 59,169 50,187
Pre-tax income 7,371 5,912
Loss ratio 65.2% 65.7%
Expense ratio 31.9% 33.5%
GAAP combined ratio 97.1% 99.2%
Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
First Quarter
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2007 2006
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Corporate and Eliminations:
Realized investment gains $ 7,390 $ 2,675
Interest and other, net (43,976) (39,671)
Pre-tax loss (36,586) (36,996)
Total:
Gross premiums written $1,383,362 $1,410,835
Net premiums written 1,254,772 1,278,531
Premiums earned 1,154,933 1,146,377
Pre-tax income 267,943 227,213
Loss ratio 59.3% 61.2%
Expense ratio 28.2% 27.0%
GAAP combined ratio 87.5% 88.2%
(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) For the first quarter of 2007 and 2006, weather-related losses for
the regional segment were $6.3 million and $4.6 million,
respectively.
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
March 31, December 31,
2007 2006
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Net invested assets (1) $12,543,325 $12,012,298
Total assets 16,538,194 15,656,489
Reserves for losses and loss expenses 8,002,547 7,784,269
Senior notes and other debt 1,121,523 869,187
Junior subordinated debentures 242,005 241,953
Stockholders' equity (2) 3,537,028 3,335,159
Shares outstanding, net of treasury stock 194,012 192,772
Stockholders' equity per share 18.23 17.30
(1) Net invested assets include investments, cash and cash
equivalents, trading accounts receivable from brokers and clearing
organizations, trading account securities sold but not yet
purchased and unsettled purchases.
(2) Stockholders' equity includes after-tax unrealized gains from
investments and currency translation adjustments of $126 million
as of March 31, 2007 and December 31, 2006.
Supplemental Information
(Amounts in thousands)
First Quarter
---------------------
Reconciliation of net operating income to net
income: 2007 2006
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Net operating income (1) $ 183,630 $ 159,949
Realized investment gains net of taxes 4,796 1,753
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Net income $ 188,426 $ 161,702
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Return on equity (2):
Net income 22.6% 25.2%
Net operating income 22.0% 24.9%
Reconciliation of cash flow:
Cash flow before trading account transfers (3) $ 357,221 $ 436,166
Trading account transfers - (200,000)
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Cash flow from operations $ 357,221 $ 236,166
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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 Vice President - External Financial Communications