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GREENWICH, Conn., Apr 27, 2009 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: WRB) today reported a net loss for the first quarter of 2009 of $20 million, or 13 cents per share, compared to net income of $188 million, or $1.03 per share, for the first quarter of 2008. Net operating income for the first quarter of 2009 was $42 million, or 25 cents per share, compared with $153 million, or 83 cents per share, for the first quarter of 2008. 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 | |||||||
| 2009 | 2008 | ||||||
| Gross premiums written | $ | 1,148,242 | $ | 1,285,173 | |||
| Net premiums written | 1,023,472 | 1,157,565 | |||||
| Net income (loss) | (20,346 | ) | 188,438 | ||||
| Net income (loss) per diluted share | (0.13 | ) | 1.03 | ||||
| Net operating income | 42,498 | 153,326 | |||||
| Net operating income per diluted share | 0.25 | 0.83 | |||||
First quarter 2009 highlights included:
Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "The results for the quarter were generally in line with our expectations. Continued underwriting profitability and improved market values of our core fixed maturity securities more than offset previously announced investment losses, resulting in book value per share growth of approximately 2%.
"We continue to see our investment risks diminish and our underwriting opportunities improve. Our view of pricing trends remains unchanged as price declines have slowed significantly. By the end of the quarter, prices were increasing in some lines of business and the rate of decline was approaching zero in several others. Our pricing discipline has resulted in a loss of business to our top-line focused competitors. As the overall industry results suffer from aggressive competition, we expect pricing to improve in the latter half of the year.
"We are beginning to see greater contributions from our start-up ventures and anticipate they will provide a significant benefit to earnings by the first quarter of 2010. The combination of our start-ups and an improving cycle will substantially increase our momentum.
"In addition, the adjustment of the duration of our bond portfolio over the next nine months to more closely match the duration of our liabilities should increase our investment income significantly. Our positive view remains unabated and we believe the cyclical change is underway," 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 28, 2009 at 9:00 a.m. eastern time. The conference call will be webcast live on the Company's website at www.wrberkley.com, and related charts will be posted there prior to the call. 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 2009 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 potential impact of the current conditions in the financial markets and the ongoing economic downturn on our results and financial condition, particularly if such conditions continue; the potential impact of current legislative, regulatory, accounting and other initiatives taken or which may be taken in response to the current conditions in the financial markets and the ongoing economic downturn; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, merger arbitrage and private equity investments; 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 significant and increasing 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 Programs Reauthorization Act of 2007; the ability of our reinsurers to pay reinsurance recoverables owed to us; the impact of current conditions in the financial markets and the ongoing economic downturn on our ability to raise debt or equity capital if needed; foreign currency and political risks relating to our international operations; other 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 or our insurance company subsidiaries by rating 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 and uncertainties could cause our actual results for the year 2009 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our 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 | ||||||||
| 2009 | 2008 | |||||||
| Revenues: | ||||||||
| Net premiums written | $ | 1,023,472 | $ | 1,157,565 | ||||
| Change in unearned premiums | (44,264 | ) | (33,256 | ) | ||||
| Premiums earned | 979,208 | 1,124,309 | ||||||
| Net investment income | 138,216 | 138,771 | ||||||
| Income (loss) from investment funds | (115,074 | ) | 5,726 | |||||
| Insurance service fees | 26,583 | 27,112 | ||||||
| Realized investment gains (losses), | ||||||||
| including other than temporary impairments | (96,808 | ) | 54,026 | |||||
| Revenues from wholly-owned investees | 30,903 | 24,888 | ||||||
| Other revenues | 593 | 372 | ||||||
| Total revenues | 963,621 | 1,375,204 | ||||||
| Expenses: | ||||||||
| Losses and loss expenses | 610,445 | 683,041 | ||||||
| Operating costs and expenses | 357,347 | 380,173 | ||||||
| Expenses from wholly-owned investees | 29,954 | 24,935 | ||||||
| Interest expense | 20,224 | 22,744 | ||||||
| Total expenses | 1,017,970 | 1,110,893 | ||||||
| Income (loss) before income taxes | (54,349 | ) | 264,311 | |||||
| Income tax (expense) benefit | 34,065 | (75,706 | ) | |||||
| Net income (loss) before | ||||||||
| noncontrolling interests | (20,284 | ) | 188,605 | |||||
| Noncontrolling interests | (62 | ) | (167 | ) | ||||
| Net income (loss) attributable | ||||||||
| to common shareholders | $ | (20,346 | ) | $ | 188,438 | |||
| Net income (loss) per share: | ||||||||
| Basic | $ | (0.13 | ) | $ | 1.07 | |||
| Diluted | $ | (0.13 | ) | $ | 1.03 | |||
| Average shares outstanding: | ||||||||
| Basic | 161,090 | 176,699 | ||||||
| Diluted (1) | 161,090 | 183,804 | ||||||
| (1) | For the three months ended March 31, 2009, the anti-dilutive effects of 7,001 potential common shares outstanding were excluded from the outstanding diluted shares due to the first quarter net loss. |
| Operating Results by Segment | ||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||
First Quarter | ||||||||
| 2009 | 2008 | |||||||
| Specialty: | ||||||||
| Gross premiums written | $ | 364,894 | $ | 428,142 | ||||
| Net premiums written | 322,557 | 397,787 | ||||||
| Premiums earned | 357,928 | 429,336 | ||||||
| Pre-tax income | 27,744 | 112,786 | ||||||
| Loss ratio | 62.8 | % | 58.1 | % | ||||
| Expense ratio | 30.7 | % | 27.6 | % | ||||
| GAAP combined ratio | 93.5 | % | 85.7 | % | ||||
| Regional: (2) | ||||||||
| Gross premiums written | $ | 322,801 | $ | 372,995 | ||||
| Net premiums written | 282,035 | 323,576 | ||||||
| Premiums earned | 285,616 | 311,269 | ||||||
| Pre-tax income | 18,365 | 37,804 | ||||||
| Loss ratio | 61.0 | % | 63.6 | % | ||||
| Expense ratio | 33.1 | % | 31.1 | % | ||||
| GAAP combined ratio | 94.1 | % | 94.7 | % | ||||
| Alternative Markets: | ||||||||
| Gross premiums written | $ | 248,874 | $ | 268,084 | ||||
| Net premiums written | 225,715 | 238,037 | ||||||
| Premiums earned | 151,993 | 155,209 | ||||||
| Pre-tax income | 30,434 | 60,982 | ||||||
| Loss ratio | 62.2 | % | 57.5 | % | ||||
| Expense ratio | 24.1 | % | 23.8 | % | ||||
| GAAP combined ratio | 86.3 | % | 81.3 | % | ||||
| Reinsurance: | ||||||||
| Gross premiums written | $ | 107,856 | $ | 136,465 | ||||
| Net premiums written | 100,833 | 129,646 | ||||||
| Premiums earned | 105,623 | 152,434 | ||||||
| Pre-tax income | 2,999 | 33,289 | ||||||
| Loss ratio | 63.4 | % | 64.0 | % | ||||
| Expense ratio | 35.6 | % | 34.6 | % | ||||
| GAAP combined ratio | 99.0 | % | 98.6 | % | ||||
| International: | ||||||||
| Gross premiums written | $ | 103,817 | $ | 79,487 | ||||
| Net premiums written | 92,332 | 68,519 | ||||||
| Premiums earned | 78,048 | 76,061 | ||||||
| Pre-tax income | 6,168 | 10,646 | ||||||
| Loss ratio | 64.1 | % | 64.0 | % | ||||
| Expense ratio | 37.6 | % | 36.5 | % | ||||
| GAAP combined ratio | 101.7 | % | 100.5 | % | ||||
| Operating Results by Segment (Continued) | ||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||
First Quarter | ||||||||
| 2009 | 2008 | |||||||
| Corporate and Eliminations: | ||||||||
| Realized investment gains (losses), | ||||||||
| including other than temporary impairments | $ | (96,808 | ) | $ | 54,026 | |||
| Interest expense | (20,224 | ) | (22,744 | ) | ||||
| Other revenues and expenses (3) | (23,027 | ) | (22,478 | ) | ||||
| Pre-tax income (loss) | (140,059 | ) | 8,804 | |||||
| Total: | ||||||||
| Gross premiums written | $ | 1,148,242 | $ | 1,285,173 | ||||
| Net premiums written | 1,023,472 | 1,157,565 | ||||||
| Premiums earned | 979,208 | 1,124,309 | ||||||
| Pre-tax income (loss) | (54,349 | ) | 264,311 | |||||
| Loss ratio | 62.3 | % | 60.8 | % | ||||
| Expense ratio | 31.4 | % | 29.6 | % | ||||
| GAAP combined ratio | 93.7 | % | 90.4 | % | ||||
| (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) | Weather-related losses were $9 million and $14 million for the first quarter of 2009 and 2008, 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, | |||||
| 2009 | 2008 | |||||
| Net invested assets (1) | $ | 12,483,233 | $ | 12,522,360 | ||
| Total assets | 16,193,308 | 16,121,158 | ||||
| Reserves for losses and loss expenses | 9,041,703 | 8,999,596 | ||||
| Senior notes and other debt | 1,021,978 | 1,021,869 | ||||
| Junior subordinated debentures | 249,640 | 249,584 | ||||
| Total equity (2) (3) | 3,079,957 | 3,051,680 | ||||
| Common stockholders' equity (4) | 3,074,605 | 3,046,319 | ||||
| Common shares outstanding (4) | 159,968 | 161,467 | ||||
| Common stockholders' equity per share | 19.22 | 18.87 | ||||
| (1) | Net invested assets include investments, cash investments and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. | |
| (2) | The Company adopted FASB Statement 160 ("FAS 160"), "Non-controlling Interests in Consolidated Financial Statements" effective January 1, 2009. FAS 160 requires that noncontrolling (minority) interests in a subsidiary be reported as equity in the consolidated financial statements. The presentation requirements of FAS 160 were applied retrospectively to the 2008 financial statements. The effect of the adoption of FAS 160 was to increase total equity as of December 31, 2008 by $5 million. | |
| (3) | After-tax unrealized investment losses were $52 million and $142 million as of March 31, 2009 and December 31, 2008, respectively. Unrealized currency translation losses were $80 million and $72 million as of March 31, 2009 and December 31, 2008, respectively. | |
| (4) | During the first quarter 2009, the Company repurchased 1.6 million shares of its common stock for $32 million. |
Supplemental Information | ||||||||
| (Amounts in thousands) | ||||||||
First Quarter | ||||||||
| Reconciliation of net operating income to net income: | 2009 | 2008 | ||||||
| Net operating income (1) | $ | 42,498 | $ | 153,326 | ||||
| Realized investment gains (losses), net of taxes(2) | (62,844 | ) | 35,112 | |||||
| Net income (loss) | $ | (20,346 | ) | $ | 188,438 | |||
| Return on common equity (3): | ||||||||
| Net income | -- | 21.0 | % | |||||
| Net operating income | 5.6 | % | 17.1 | % | ||||
| Cash flow: | ||||||||
| Cash flow from operations before cash transfers | $ | 91,560 | $ | 213,360 | ||||
| to/from trading account (4) | ||||||||
| Trading account transfers | (70,000 | ) | - | |||||
| Cash flow from operations | $ | 21,560 | $ | 213,360 | ||||
| (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) | Realized losses include after-tax write-downs of securities determined to have other-than-temporary declines in fair value of $72 million and $12 million for the first quarter of 2009 and 2008, respectively. | |
| (3) | Return on equity represents net income and net operating income expressed on an annualized basis as a percentage of beginning of year common stockholders' equity. | |
| (4) | Cash flow before trading account transfers is a non-GAAP financial measure that excludes cash contributions to and withdrawals from the arbitrage trading account. Cash transfers to and withdrawals from the arbitrage trading account are the result of changes in investment allocations and management believes 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
Copyright Business Wire 2009
