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GREENWICH, Conn., Apr 24, 2008 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the first quarter of 2008 of $1.03 per share, or $188 million, compared with 93 cents per share, or $188 million, for the first quarter of 2007. Operating income for the first quarter of 2008 was 83 cents per share, or $153 million, compared with 91 cents per share, or $184 million, for the corresponding quarter of 2007. 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
---------------------
2008 2007
---------- ----------
Gross premiums written $1,285,173 $1,383,362
Net premiums written 1,157,565 1,254,772
Income before income taxes 264,311 267,943
Net income 188,438 188,426
Net income per diluted share 1.03 0.93
Operating income 153,326 183,630
Operating income per diluted share 0.83 0.91
First quarter 2008 highlights included:
-- Return on equity was 21.1% on an annualized basis.
-- GAAP combined ratio was 90.2%.
-- Paid loss ratio was 46.5%.
-- The Company repurchased 10.4 million shares of its common stock.
Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We were generally pleased with our overall performance for the quarter. Our underwriting results were in line with our expectations. The quarterly decline in our investment income was a result of lower returns on our alternative investment portfolio, principally from reduced profits from our arbitrage accounts. In addition, investment income was impacted by the $750 million we utilized over the past twelve months to repurchase our stock.
"Our operating units continue to perform well and are maintaining the appropriate level of underwriting discipline. We remain risk averse investors, constantly adjusting our portfolio mix to reflect the current economic climate. We have invested a somewhat larger portion of our portfolio with a focus on achieving capital gains as well as ordinary investment income. We believe this will give us a better total return in the current environment. We are optimistic that our return on equity after tax in the current year will continue to comfortably exceed our long-term targeted return," 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 Friday, April 25, 2008 at 9:30 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)
First Quarter
-----------------------
2008 2007
----------- -----------
Revenues:
Net premiums written $1,157,565 $1,254,772
Change in unearned premiums (33,256) (99,839)
----------- -----------
Premiums earned 1,124,309 1,154,933
Net investment income 144,497 165,421
Service fees 27,112 25,993
Realized investment gains 54,026 7,390
Revenues from wholly owned investees 24,888 4,804
Other income 372 480
----------- -----------
Total revenues 1,375,204 1,359,021
----------- -----------
Expenses:
Losses and loss expenses 683,041 685,147
Other operating expenses 380,173 380,621
Expenses from wholly-owned investees 24,935 4,610
Interest expense 22,744 20,700
----------- -----------
Total expenses 1,110,893 1,091,078
----------- -----------
Income before income taxes
and minority interest 264,311 267,943
Income tax expense (75,706) (79,135)
Minority interest (167) (382)
----------- -----------
Net Income $ 188,438 $ 188,426
=========== ===========
Earnings per share:
Basic $ 1.07 $ 0.98
=========== ===========
Diluted $ 1.03 $ 0.93
=========== ===========
Average shares outstanding:
Basic 176,699 193,199
Diluted 183,804 202,076
Operating Results by Segment
(Amounts in thousands, except ratios (1))
First Quarter
-------------------
2008 2007
--------- ---------
Specialty:
Gross premiums written $428,142 $457,852
Net premiums written 397,787 433,975
Premiums earned 429,336 443,455
Pre-tax income 112,786 127,712
Loss ratio 58.1% 58.0%
Expense ratio 27.6% 26.0%
GAAP combined ratio 85.7% 84.0%
Regional (2):
Gross premiums written $372,995 $377,418
Net premiums written 323,576 325,373
Premiums earned 311,269 304,367
Pre-tax income 37,804 55,321
Loss ratio 63.6% 58.6%
Expense ratio 31.1% 31.0%
GAAP combined ratio 94.7% 89.6%
Alternative Markets:
Gross premiums written $268,084 $280,428
Net premiums written 238,037 250,523
Premiums earned 155,209 162,664
Pre-tax income 60,982 67,718
Loss ratio 57.5% 56.2%
Expense ratio 23.8% 22.6%
GAAP combined ratio 81.3% 78.8%
Reinsurance:
Gross premiums written $136,465 $205,182
Net premiums written 129,646 190,861
Premiums earned 152,434 185,278
Pre-tax income 33,289 46,407
Loss ratio 64.0% 64.6%
Expense ratio 34.7% 32.2%
GAAP combined ratio 98.7% 96.8%
International:
Gross premiums written $ 79,487 $ 62,482
Net premiums written 68,519 54,040
Premiums earned 76,061 59,169
Pre-tax income 10,646 7,371
Loss ratio 64.0% 65.2%
Expense ratio 34.0% 31.9%
GAAP combined ratio 98.0% 97.1%
Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
First Quarter
---------------------
2008 2007
---------- ----------
Corporate and Eliminations:
Realized investment gains $54,026 $7,390
Interest (22,744) (20,700)
Other revenues and expenses (3) (22,478) (23,276)
Pre-tax income (loss) 8,804 (36,586)
Total:
Gross premiums written $1,285,173 $1,383,362
Net premiums written 1,157,565 1,254,772
Premiums earned 1,124,309 1,154,933
Pre-tax income 264,311 267,943
Loss ratio 60.8% 59.3%
Expense ratio 29.4% 28.2%
GAAP combined ratio 90.2% 87.5%
(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 first quarter of 2008 and 2007, weather-related losses
were $14 million and $6 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)
March 31, December 31,
2008 2007
------------- ------------
Net invested assets (1) $13,055,869 $13,188,302
Total assets 16,834,811 16,832,170
Reserves for losses and loss expenses 8,835,741 8,678,034
Senior notes and other debt 1,110,318 1,121,793
Junior subordinated debentures 249,431 249,375
Stockholders' equity (2) 3,448,740 3,569,775
Shares outstanding (2) 170,472 180,321
Stockholders' equity per share 20.23 19.80
(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 $52 million
and $67 million as of March 31, 2008 and December 31, 2007,
respectively. During the first quarter of 2008, the Company
repurchased 10.4 million shares of its common stock for $294
million.
Supplemental Information
(Amounts in thousands)
First Quarter
-------------------
2008 2007
--------- ---------
Reconciliation of operating income
to net income:
Operating income (1) $153,326 $183,630
Realized investment gains,
net of taxes 35,112 4,796
--------- ---------
Net income $188,438 $188,426
========= =========
Return on equity (2):
Net income 21.1% 22.6%
Operating income 17.2% 22.0%
Cash flow from operations $201,720 $357,221
========= =========
Investments
--------------------------------------------------
Fixed income $122,031 $119,812
Arbitrage trading account 4,015 22,200
Equities, including affiliates 18,451 23,409
--------- ---------
Total investment income 144,497 165,421
Realized gains 72,705 7,390
Other than temporary impairments (18,679) -
--------- ---------
Total return $198,523 $172,811
========= =========
(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.
SOURCE: W. R. Berkley Corporation
W. R. Berkley Corporation Karen A. Horvath, 203-629-3000 Vice President - External Financial Communications
Copyright Business Wire 2008
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