Print page
Email page
Download PDF
« Previous Release | Next Release »
GREENWICH, Conn.--(BUSINESS WIRE)--July 25, 2006--W. R. Berkley Corporation (NYSE: BER) today reported net income for the second quarter of 2006 of $165 million, or 82 cents per share, a 23% increase from $134 million, or 67 cents per share, for the second quarter of 2005. Net operating income for the second quarter of 2006 increased 27% to $166 million, or 82 cents per share, compared with $130 million, or 65 cents 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)
Second Quarter Six Months
---------------------- -----------------------
2006 2005 2006 2005
---------------------- ----------- -----------
Gross premiums written $1,341,347 $1,249,812 $2,752,182 $2,592,902
Net premiums written 1,217,985 1,135,011 2,496,516 2,323,179
Net income 165,452 134,079 327,154 254,950
Net income per diluted
share 0.82 0.67 1.62 1.28
Net operating income 165,986 130,310 325,935 251,274
Net operating income per
diluted share 0.82 0.65 1.61 1.26
Second quarter highlights included:
-- Return on equity was 25.8% on an annualized basis.
-- GAAP combined ratio was 88.9%.
-- Net investment income grew 55% to $145 million.
-- Net premiums written increased 7% to $1.2 billion.
-- Paid loss ratio was 38.0%.
Commenting on the Company's activities, William R. Berkley, chairman and chief executive officer, said: "Our business continues to perform extremely well with overall pricing levels down slightly but still adequate to allow for substantial underwriting profits. In spite of typical second quarter storm activity in our regional segment, we were able to deliver a return to shareholders in excess of 25%. While we expect results to vary within each segment, we continue to be confident that we will be able to deliver returns in excess of 20% at least through 2007. As we begin to generate more capital than opportunities to grow revenues, we will manage our balance sheet as we have in the past. At the end of June, we repurchased 1.4 million shares of the Company's stock for $31.73 per share.
"While we see new opportunities, they generally do not offer rational risk-adjusted returns -- naive capital continues to abound. We expect to receive more significant contributions from our new ventures in the second half of the year, and we remain enthusiastic about our ability to deliver outstanding returns," 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 Wednesday, July 26, 2006 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 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)
Second Quarter Six Months
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Revenues:
Net premiums written $1,217,985 $1,135,011 $2,496,516 $2,323,179
Change in unearned
premiums (31,305) (43,138) (163,459) (191,331)
----------- ----------- ----------- -----------
Premiums earned 1,186,680 1,091,873 2,333,057 2,131,848
Net investment income 145,067 93,622 276,564 183,180
Service fees 26,966 28,662 53,560 58,961
Realized investment
gains (losses) (673) 6,126 2,002 5,765
Other income 306 501 697 1,018
----------- ----------- ----------- -----------
Total revenues 1,358,346 1,220,784 2,665,880 2,380,772
----------- ----------- ----------- -----------
Expenses:
Losses and loss
expenses 742,110 675,326 1,443,308 1,316,472
Other operating
expenses 358,926 334,600 714,580 661,405
Interest expense 23,272 19,217 46,741 37,342
----------- ----------- ----------- -----------
Total expenses 1,124,308 1,029,143 2,204,629 2,015,219
----------- ----------- ----------- -----------
Income before income
taxes and minority
interest 234,038 191,641 461,251 365,553
Income tax expense (67,883) (56,095) (132,806) (108,824)
Minority interest (703) (1,467) (1,291) (1,779)
----------- ----------- ----------- -----------
Net income $165,452 $134,079 $327,154 $254,950
=========== =========== =========== ===========
Net income per share: (1)
Basic $0.86 $0.70 $1.70 $1.34
=========== =========== =========== ===========
Diluted $0.82 $0.67 $1.62 $1.28
=========== =========== =========== ===========
Average shares
outstanding: (1)
Basic 192,337 190,300 192,041 190,070
Diluted 202,450 200,051 202,450 199,915
(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))
Second Quarter Six Months
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Specialty: (2)
Gross premiums written $521,825 $513,297 $996,126 $956,770
Net premiums written 496,017 490,557 943,580 906,496
Premiums earned 443,212 406,301 861,457 778,222
Pre-tax income 112,732 80,533 219,218 160,558
Loss ratio 60.7% 62.6% 60.3% 62.0%
Expense ratio 25.0% 25.3% 25.2% 25.2%
GAAP combined ratio 85.7% 87.9% 85.5% 87.2%
Regional (3):
Gross premiums written $372,481 $356,491 $737,147 $723,864
Net premiums written 322,910 305,005 634,291 618,830
Premiums earned 299,613 292,037 589,575 572,336
Pre-tax income 43,930 48,592 98,560 107,655
Loss ratio 62.0% 57.6% 59.4% 55.4%
Expense ratio 30.2% 30.4% 30.6% 30.4%
GAAP combined ratio 92.2% 88.0% 90.0% 85.8%
Alternative Markets: (2)
Gross premiums written $123,843 $143,702 $397,291 $426,964
Net premiums written 102,709 116,867 341,131 349,448
Premiums earned 162,028 161,029 324,769 316,296
Pre-tax income 74,520 55,060 141,642 97,124
Loss ratio 51.8% 60.7% 53.6% 64.3%
Expense ratio 23.1% 20.5% 22.2% 20.6%
GAAP combined ratio 74.9% 81.2% 75.8% 84.9%
Reinsurance: (2)
Gross premiums written $258,628 $192,038 $505,661 $394,520
Net premiums written 242,957 182,529 478,766 370,073
Premiums earned 226,307 185,914 451,549 373,767
Pre-tax income 34,037 25,361 64,096 45,636
Loss ratio 74.5% 67.2% 73.6% 68.1%
Expense ratio 25.1% 31.0% 26.3% 31.4%
GAAP combined ratio 99.6% 98.2% 99.9% 99.5%
International: (2)
Gross premiums written $64,570 $44,284 $115,957 $90,784
Net premiums written 53,392 40,053 98,748 78,332
Premiums earned 55,520 46,592 105,707 91,227
Pre-tax income 10,820 6,118 16,732 10,602
Loss ratio 62.4% 64.0% 64.0% 64.6%
Expense ratio 30.1% 30.2% 31.7% 30.6%
GAAP combined ratio 92.5% 94.2% 95.7% 95.2%
Corporate and
Eliminations:
Realized investment gains
(losses) $(673) $6,126 $2,002 $5,765
Interest and other, net (41,328) (30,149) (80,999) (61,787)
Pre-tax loss (42,001) (24,023) (78,997) (56,022)
Total:
Gross premiums
written $1,341,347 $1,249,812 $2,752,182 $2,592,902
Net premiums written 1,217,985 1,135,011 2,496,516 2,323,179
Premiums earned 1,186,680 1,091,873 2,333,057 2,131,848
Pre-tax income 234,038 191,641 461,251 365,553
Loss ratio 62.5% 61.9% 61.9% 61.8%
Expense ratio 26.4% 27.3% 26.7% 27.4%
GAAP combined ratio 88.9% 89.2% 88.6% 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 second quarters of 2006 and 2005, weather-related losses
were $20 million and $12 million, respectively. For the six months
of 2006 and 2005, weather-related losses were $25 million and $18
million, respectively.
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
June 30, December 31,
2006 2005
------------ ------------
Total investments (1) $10,928,051 $10,378,250
Total assets 14,691,916 13,896,287
Reserves for losses and loss expenses 7,276,382 6,711,760
Senior notes and other debt 868,509 967,818
Junior subordinated debentures 451,317 450,634
Stockholders' equity (2) 2,800,823 2,567,077
Shares outstanding 191,282 191,265
Stockholders' equity per share 14.64 13.42
(1) Total investments include 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 losses from
investments and currency translation adjustments of $33 million as
of June 30, 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)
Second Quarter Six Months
------------------- -------------------
Reconciliation of net operating
income to net income: 2006 2005 2006 2005
--------- --------- --------- ---------
Net operating income (1) $165,986 $130,310 $325,935 $251,274
Realized investment gains
(losses), net of taxes (534) 3,769 1,219 3,676
--------- --------- --------- ---------
Net income $165,452 $134,079 $327,154 $254,950
========= ========= ========= =========
Return on equity:
Net Income (2) 25.8% 25.4% 25.5% 24.2%
Net operating income (2) 25.9% 24.7% 25.4% 23.8%
Cash flow:
Cash flow from operations
before cash transfers
to/from trading account (3) $348,068 $368,387 $787,024 $816,994
Trading account transfers (25,000) (50,000) (225,000) (75,000)
--------- --------- --------- ---------
Cash flow from operations $323,068 $318,387 $562,024 $741,994
========= ========= ========= =========
(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.
CONTACT: W. R. Berkley Corporation
Karen A. Horvath,
Vice President - External Financial Communications
203-629-3000
SOURCE: W. R. Berkley Corporation