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W. R. Berkley Corporation Reports Third Quarter Results Net Income Per Share up 7% to 93 Cents

GREENWICH, Conn.--(BUSINESS WIRE)--Oct. 22, 2007--W. R. Berkley Corporation (NYSE: BER) today reported net income for the third quarter of 2007 of 93 cents per share, or $180 million, a 7% increase from 87 cents per share, or $174 million, for the third quarter of 2006. Net operating income for the third quarter of 2007 increased 8% to 93 cents per share, or $180 million, compared with 86 cents per share, or $173 million, 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)

                               Third Quarter          Nine Months
                           --------------------- ---------------------
                              2007       2006       2007       2006
                           ---------- ---------- ---------- ----------

Gross premiums written     $1,244,109 $1,306,190 $3,893,150 $4,058,372
Net premiums written        1,132,489  1,208,906  3,524,025  3,705,422

Income before income taxes    257,703    244,963    796,069    706,214
Net income                    180,463    174,308    559,522    501,462
Net income per diluted
 share                           0.93       0.87       2.81       2.49

Net operating income          179,946    172,803    550,792    498,738
Net operating income per
 diluted share                   0.93       0.86       2.76       2.48


Third quarter highlights included:

Return on equity was 21.6% on an annualized basis. GAAP combined ratio was 88.5%. Net investment income grew 14% to $166 million. Paid loss ratio was 39.7%.

Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We were pleased with our third quarter results, which we achieved in spite of the significant turmoil in the financial markets during the period. We continue to exceed our targeted rate of return, and our operating units are maintaining the appropriate level of underwriting discipline.

"Our book value per share continues to increase, despite modest short-term dilution caused by stock repurchases at prices in excess of the then current book value. Cash flow is strong and our paid loss ratio once again dropped below forty percent. Even in today's competitive environment, opportunities continue to be available to us. We expect to be able to take advantage of them in the future as we have in the past.

"As we have previously commented, we believe that in 2007 we will be able to achieve a return on equity in excess of twenty-two percent. We expect modestly lower returns next year in part due to our increasing equity base.

"Our continued strong results reflect the outstanding performance and commitment of our people. We remain confident that we will exceed our long-term target of a fifteen percent return 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 Tuesday, October 23, 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 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 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)


                               Third Quarter          Nine Months
                           --------------------- ---------------------
                              2007       2006       2007       2006
                           ---------- ---------- ---------- ----------
Revenues:
  Net premiums written     $1,132,489 $1,208,906 $3,524,025 $3,705,422
  Change in unearned
   premiums                    43,075   (15,049)   (21,888)  (178,508)
                           ---------- ---------- ---------- ----------
    Premiums earned         1,175,564  1,193,857  3,502,137  3,526,914
  Net investment income       165,790    145,784    500,154    422,348
  Insurance service fees       23,690     26,622     75,026     80,182
  Realized investment gains       812      1,734     13,482      3,736
  Revenues from wholly-
   owned investees             41,739          -     61,227          -
  Other revenues                  437        511      1,610      1,208
                           ---------- ---------- ---------- ----------
    Total revenues          1,408,032  1,368,508  4,153,636  4,034,388
                           ---------- ---------- ---------- ----------

Expenses:
  Losses and loss expenses    706,374    731,941  2,095,190  2,175,249
  Operating costs and
   expenses                   382,530    368,311  1,139,755  1,082,891
  Expenses from wholly-
   owned investees             38,718          -     56,515          -
  Interest expense             22,707     23,293     66,107     70,034
                           ---------- ---------- ---------- ----------
Total expenses              1,150,329  1,123,545  3,357,567  3,328,174
                           ---------- ---------- ---------- ----------

    Income before income
     taxes
     and minority interest    257,703    244,963    796,069    706,214

Income tax expense           (76,344)   (70,445)  (234,855)  (203,251)
Minority interest               (896)      (210)    (1,692)    (1,501)
                           ---------- ---------- ---------- ----------
  Net income                 $180,463   $174,308   $559,522   $501,462
                           ========== ========== ========== ==========

Net income per share:
    Basic                       $0.97      $0.91      $2.93      $2.62
                           ========== ========== ========== ==========
    Diluted                     $0.93      $0.87      $2.81      $2.49
                           ========== ========== ========== ==========

Average shares outstanding:
    Basic                     186,601    191,415    190,659    191,130
    Diluted                   193,719    201,295    199,247    201,276

                     Operating Results by Segment
              (Amounts in thousands, except ratios (1))

                                 Third Quarter        Nine Months
                               ----------------- ---------------------
                                 2007     2006      2007       2006
                               -------- -------- ---------- ----------
Specialty:
  Gross premiums written       $427,878 $454,835 $1,366,404 $1,450,961
  Net premiums written          402,332  432,760  1,288,917  1,376,340
  Premiums earned               441,944  446,453  1,327,509  1,307,910
  Pre-tax income                124,391  119,498    388,946    338,716
  Loss ratio                      57.8%    59.3%      57.2%      60.0%
  Expense ratio                   26.8%    25.2%      26.4%      25.2%
  GAAP combined ratio             84.6%    84.5%      83.6%      85.2%

Regional: (2)
  Gross premiums written       $355,134 $349,353 $1,104,431 $1,086,500
  Net premiums written          312,716  309,414    968,146    943,705
  Premiums earned               315,358  308,263    929,537    897,838
  Pre-tax income                 53,507   51,061    160,731    149,621
  Loss ratio                      58.7%    59.7%      59.1%      59.5%
  Expense ratio                   31.9%    30.6%      31.3%      30.6%
  GAAP combined ratio             90.6%    90.3%      90.4%      90.1%

Alternative Markets:
  Gross premiums written       $214,320 $209,674   $618,654   $606,965
  Net premiums written          190,247  190,555    541,578    531,686
  Premiums earned               165,686  166,879    487,616    491,648
  Pre-tax income                 60,006   76,693    191,316    218,335
  Loss ratio                      60.3%    51.3%      57.9%      52.8%
  Expense ratio                   23.2%    22.6%      23.3%      22.3%
  GAAP combined ratio             83.5%    73.9%      81.2%      75.1%

Reinsurance:
  Gross premiums written       $177,198 $233,419   $592,433   $739,080
  Net premiums written          166,555  221,163    548,121    699,929
  Premiums earned               190,559  215,028    572,823    666,577
  Pre-tax income                 44,894   31,191    137,193     95,287
  Loss ratio                      65.5%    73.3%      66.8%      73.5%
  Expense ratio                   29.9%    27.7%      29.6%      26.7%
  GAAP combined ratio             95.4%   101.0%      96.4%     100.2%

International:
  Gross premiums written        $69,579  $58,909   $211,228   $174,866
  Net premiums written           60,639   55,014    177,263    153,762
  Premiums earned                62,017   57,234    184,652    162,941
  Pre-tax income                 11,306    5,039     26,577     21,771
  Loss ratio                      66.5%    71.0%      65.9%      66.5%
  Expense ratio                   30.0%    32.1%      31.6%      31.9%
  GAAP combined ratio             96.5%   103.1%      97.5%      98.4%

               Operating Results by Segment (continued)
              (Amounts in thousands, except ratios (1))

                               Third Quarter          Nine Months
                           --------------------- ---------------------
                              2007       2006       2007       2006
                           ---------- ---------- ---------- ----------
Corporate and Eliminations:
  Realized investment gains      $812     $1,734    $13,482     $3,736
  Interest expense           (22,707)   (23,293)   (66,107)   (70,034)
  Other revenues and
   expenses (3)              (14,506)   (16,960)   (56,069)   (51,218)
  Pre-tax loss               (36,401)   (38,519)  (108,694)  (117,516)

Total:
  Gross premiums written   $1,244,109 $1,306,190 $3,893,150 $4,058,372
  Net premiums written      1,132,489  1,208,906  3,524,025  3,705,422
  Premiums earned           1,175,564  1,193,857  3,502,137  3,526,914
  Pre-tax income              257,703    244,963    796,069    706,214
  Loss ratio                    60.1%      61.3%      59.8%      61.7%
  Expense ratio                 28.4%      27.2%      28.1%      26.9%
  GAAP combined ratio           88.5%      88.5%      87.9%      88.6%
(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. GAAP combined ratio is the sum of the loss ratio and the expense ratio.

(2) For the third quarters of 2007 and 2006, weather-related losses were $8 million and $7 million, respectively. For the first nine months of 2007 and 2006, weather-related losses were $30 million and $32 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)

                                          September 30,   December 31,
                                              2007           2006
                                          ------------- --------------

Net invested assets (1)                     $12,917,146    $12,012,298
Total assets                                 16,695,839     15,656,489
Reserves for losses and loss expenses         8,442,126      7,784,269
Senior notes and other debt                   1,121,678        869,187
Junior subordinated debentures                  242,107        241,953
Stockholders' equity (2)                      3,516,730      3,335,159
Shares outstanding                              183,275        192,772
Stockholders' equity per share                    19.19          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 $105 million and $126 million as of September 30, 2007 and December 31, 2006, respectively. 
                      Supplemental Information
                       (Amounts in thousands)

                                Third Quarter        Nine Months
                              ----------------- ---------------------
Reconciliation of net
 operating income to net
 income:                        2007     2006      2007       2006
                              -------- -------- ---------- ----------

  Net operating income (1)    $179,946 $172,803   $550,792   $498,738
  Realized investment gains,
   net of taxes                    517    1,505      8,730      2,724
                              -------- -------- ---------- ----------

    Net income                $180,463 $174,308   $559,522   $501,462
                              ======== ======== ========== ==========
Return on equity:

  Net Income (2)                 21.6%    27.2%      22.4%      26.0%

  Net operating income (2)       21.6%    26.9%      22.0%      25.9%
Cash flow:

  Cash flow from operations
   before cash transfers
    to/from trading account
     (3)                      $492,837 $558,873 $1,130,051 $1,336,403

  Trading account transfers          -        -          -  (225,000)
                              -------- -------- ---------- ----------

  Cash flow from operations   $492,837 $558,873 $1,130,051 $1,111,403
                              ======== ======== ========== ==========


(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. Reclassifications have been made to the 2006 cash flow amounts to conform with the presentation in 2007.

CONTACT: W. R. Berkley Corporation Karen A. Horvath Vice President - External Financial Communications 203-629-3000

SOURCE: W. R. Berkley Corporation

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