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GREENWICH, Conn., Feb 11, 2008 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: BER) today reported net income for 2007 of $3.78 per share, or $744 million, compared to $3.46 per share, or $700 million, for 2006. Net operating income for 2007 was $3.73 per share, or $734 million, compared with $3.43 per share, or $692 million, for 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)
Fourth Quarter Full Year
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Gross premiums written $1,160,080 $1,218,542 $5,053,230 $5,276,914
Net premiums written 1,051,964 1,113,571 4,575,989 4,818,993
Income before income taxes 261,565 282,431 1,057,634 988,645
Net income 184,124 198,056 743,646 699,518
Net income per diluted
share 0.97 0.98 3.78 3.46
Net operating income 183,213 193,666 734,005 692,404
Net operating income per
diluted share 0.97 0.96 3.73 3.43
Full year 2007 highlights included:
-- Return on equity was 22.3%.
-- GAAP combined ratio was 88.1%.
-- Net investment income grew 15% to $673 million.
-- Paid loss ratio was 42%.
-- Repurchased 15.2 million shares of the Company's common stock, including 3.2 million shares in the fourth quarter.
Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We are pleased with our financial results for the fourth quarter and full year, having achieved a twenty-two percent return on equity after tax for both periods. The Company continued to have strong underwriting performance with a combined ratio of 88.1% and a paid loss ratio of 42%. While we anticipate 2008 will be increasingly competitive from an underwriting perspective, we still expect to deliver excellent returns.
"Investment income grew by fifteen percent in 2007, without any sacrifice to the quality of the investment portfolio. We have virtually no sub-prime exposure. It is likely that investment returns will continue to be under pressure due to current economic uncertainties and the shape of the yield curve.
"In the current environment, capital oversight is an important part of management's responsibility. We repurchased over fifteen million shares of our common stock in 2007, representing eight percent of our outstanding shares.
"In the long-run, every business succeeds because of its people, its relationships with its distribution and its ultimate customers. We continue to believe that we will be able to deliver outstanding returns to our shareholders and exceed our minimum targeted return of fifteen percent after tax for the foreseeable future," 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 Monday, February 11, 2008 at 8:30 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 2008 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 Program Reauthorization Act of 2007 ("TRIPRA"), 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 or reinsurance 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 2008 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)
Fourth Quarter Full Year
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Revenues:
Net premiums written $1,051,964 $1,113,571 $4,575,989 $4,818,993
Change in unearned
premiums 109,600 52,137 87,712 (126,371)
----------- ----------- ----------- -----------
Premiums earned 1,161,564 1,165,708 4,663,701 4,692,622
Net investment
income 172,506 163,827 672,660 586,175
Insurance service
fees 22,663 24,630 97,689 104,812
Realized investment
gains 1,456 5,912 14,938 9,648
Revenues from
wholly-owned
investees 41,619 - 102,846 -
Other revenues 195 366 1,805 1,574
----------- ----------- ----------- -----------
Total revenues 1,400,003 1,360,443 5,553,639 5,394,831
----------- ----------- ----------- -----------
Expenses:
Losses and loss
expenses 684,388 689,249 2,779,578 2,864,498
Operating costs and
expenses 391,232 366,275 1,530,987 1,449,166
Expenses from
wholly-owned
investees 39,929 - 96,444 -
Interest expense 22,889 22,488 88,996 92,522
----------- ----------- ----------- -----------
Total expenses 1,138,438 1,078,012 4,496,005 4,406,186
----------- ----------- ----------- -----------
Income before
income taxes
and minority
interest 261,565 282,431 1,057,634 988,645
Income tax expense (76,050) (83,147) (310,905) (286,398)
Minority interest (1,391) (1,228) (3,083) (2,729)
----------- ----------- ----------- -----------
Net income $ 184,124 $ 198,056 $ 743,646 $ 699,518
=========== =========== =========== ===========
Net income per share:
Basic $ 1.01 $ 1.03 $ 3.94 $ 3.65
=========== =========== =========== ===========
Diluted $ 0.97 $ 0.98 $ 3.78 $ 3.46
=========== =========== =========== ===========
Average shares
outstanding:
Basic 181,930 191,745 188,981 191,809
Diluted 189,167 201,557 196,698 201,961
Operating Results by Segment
(Amounts in thousands, except ratios (1))
Fourth Quarter Full Year
------------------- -----------------------
2007 2006 2007 2006
--------- --------- ----------- -----------
Specialty:
Gross premiums written $450,323 $467,560 $1,816,727 $1,918,521
Net premiums written 415,963 438,139 1,704,880 1,814,479
Premiums earned 445,038 444,597 1,772,547 1,752,507
Pre-tax income 127,985 140,389 516,931 479,105
Loss ratio 57.6% 56.4% 57.3% 59.1%
Expense ratio 27.7% 24.6% 26.7% 25.0%
GAAP combined ratio 85.3% 81.0% 84.0% 84.1%
Regional: (2)
Gross premiums written $336,646 $328,811 $1,441,077 $1,415,311
Net premiums written 299,305 291,597 1,267,451 1,235,302
Premiums earned 321,377 308,074 1,250,914 1,205,912
Pre-tax income 54,497 51,796 215,228 201,417
Loss ratio 59.2% 60.3% 59.1% 59.7%
Expense ratio 31.7% 30.5% 31.4% 30.6%
GAAP combined ratio 90.9% 90.8% 90.5% 90.3%
Alternative Markets:
Gross premiums written $139,631 $140,715 $ 758,285 $ 747,680
Net premiums written 114,791 119,569 656,369 651,255
Premiums earned 164,293 167,157 651,909 658,805
Pre-tax income 56,764 73,081 248,080 291,416
Loss ratio 62.9% 55.7% 59.2% 53.5%
Expense ratio 22.5% 21.4% 23.1% 22.1%
GAAP combined ratio 85.4% 77.1% 82.3% 75.6%
Reinsurance:
Gross premiums written $139,800 $201,717 $ 732,233 $ 940,797
Net premiums written 134,120 192,840 682,241 892,769
Premiums earned 167,616 192,834 740,439 859,411
Pre-tax income 41,109 40,137 178,302 135,424
Loss ratio 60.3% 66.8% 65.3% 72.0%
Expense ratio 37.1% 31.6% 31.3% 27.8%
GAAP combined ratio 97.4% 98.4% 96.6% 99.8%
International:
Gross premiums written $ 93,680 $ 79,739 $ 304,908 $ 254,605
Net premiums written 87,785 71,426 265,048 225,188
Premiums earned 63,240 53,046 247,892 215,987
Pre-tax income 17,880 12,676 44,457 34,447
Loss ratio 53.3% 57.3% 62.6% 64.2%
Expense ratio 34.6% 32.3% 32.4% 32.0%
GAAP combined ratio 87.9% 89.6% 95.0% 96.2%
(Continued)
Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
Fourth Quarter Full Year
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Corporate and
Eliminations:
Realized investment
gains $ 1,456 $ 5,912 $ 14,938 $ 9,648
Interest expense (22,889) (22,488) (88,996) (92,522)
Other revenues and
expenses (3) (15,237) (19,072) (71,306) (70,290)
Pre-tax loss (36,670) (35,648) (145,364) (153,164)
Total:
Gross premiums
written $1,160,080 $1,218,542 $5,053,230 $5,276,914
Net premiums written 1,051,964 1,113,571 4,575,989 4,818,993
Premiums earned 1,161,564 1,165,708 4,663,701 4,692,622
Pre-tax income 261,565 282,431 1,057,634 988,645
Loss ratio 58.9% 59.1% 59.6% 61.0%
Expense ratio 29.8% 27.4% 28.5% 27.0%
GAAP combined ratio 88.7% 86.5% 88.1% 88.0%
(1) Loss ratio is losses and loss expenses 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. GAAP combined ratio is the sum of
the loss ratio and the expense ratio.
(2) For the fourth quarters of 2007 and 2006, weather-related losses
were $3 million and $8 million, respectively. For the full year
of 2007 and 2006, weather-related losses were $34 million and $39
million, respectively.
(3) Other revenues and expenses include corporate investment income,
expenses not allocated to the business segments and revenues and
expenses from investments in wholly-owned, non-insurance
subsidiaries that are consolidated for financial reporting
purposes.
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
December 31, December 31,
2007 2006
------------ ------------
Net invested assets (1) $ 13,182,991 $ 12,012,298
Total assets 16,828,718 15,656,489
Reserves for losses and loss expenses 8,678,034 7,784,269
Senior notes and other debt 1,121,793 869,187
Junior subordinated debentures 249,375 241,953
Stockholders' equity (2) 3,566,323 3,335,159
Shares outstanding 180,321 192,772
Stockholders' equity per share 19.78 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 $67 million
and $126 million as of December 31, 2007 and December 31, 2006,
respectively.
Supplemental Information
(Amounts in thousands)
Fourth Quarter Full Year
------------------- -----------------------
Reconciliation of net
operating income to net
income: 2007 2006 2007 2006
--------- --------- ----------- -----------
Net operating income (1) $183,213 $193,666 $ 734,005 $ 692,404
Realized investment
gains, net of taxes 911 4,390 9,641 7,114
--------- --------- ----------- -----------
Net income $184,124 $198,056 $ 743,646 $ 699,518
========= ========= =========== ===========
Return on equity (2):
Net Income 22.1% 30.9% 22.3% 27.2%
Net operating income 22.0% 30.2% 22.0% 27.0%
Cash flow:
Cash flow from
operations before cash
transfers to/from
trading account (3) $349,718 $452,611 $1,479,767 $1,789,014
Trading account
transfers - - - (225,000)
--------- --------- ----------- -----------
Cash flow from
operations $349,718 $452,611 $1,479,767 $1,564,014
========= ========= =========== ===========
(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.
Investments
(Amounts in thousands)
December 31, 2007
With With
Insured Underlying
Municipal Fixed Income Securities Rating Rating
--------------------------------------------- ----------- ----------
AAA (1) $ 4,017,912 $2,001,492
AA+ 400,734 642,457
AA 343,708 747,144
AA- 237,874 620,113
A+ 60,925 480,193
A 35,863 220,487
A- 37,764 186,895
BBB+ 45,499 47,845
BBB 28,901 95,397
BBB- 26,145 37,562
B- 8,963 8,963
Not rated (2) - 155,740
------------------------
Total $ 5,244,288 $5,244,288
========================
Overall credit quality AA+ AA
(1) Includes $1,107,721 of escrowed to maturity and pre-refunded
bonds.
(2) Represents insured bonds for which the underlying securities are
not rated. Based on ratings for similar securities of the same
issuer, the Company considers these securities to be investment
grade with an average rating of A. In the interest of
conservatism, a BBB- rating was applied to these securities in
computing the overall credit quality of the portfolio.
Residential mortgage-backed securities
------------------------------------------------
US Government or government sponsored entity $ 1,242,274
Prime 270,711
Alt A (1) 114,523
--------------
Total $ 1,627,508
==============
(1) The Company defines Alt A securities as securities issued by
dedicated Alt A shelves and backed by loans made to borrowers
with credit ratings that fall below prime (the highest rated
borrowers) but above sub-prime. The Company's Alt A securities
are backed by fixed rate loans that were issued in 2003 and 2004
and have demonstrated good payment history and solid credit
support characteristics to date.
SOURCE: W. R. Berkley Corporation
W. R. Berkley Corporation Karen A. Horvath, 203-629-3000 Vice President - External Financial Communications
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