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GREENWICH, Conn., Jul 27, 2009 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the second quarter of 2009 of $97 million, or 59 cents per share, compared with $80 million, or 46 cents per share, for the second quarter of 2008. Operating income for the second quarter of 2009 was $100 million, or 60 cents per share, compared with $139 million, or 80 cents per share, for the corresponding quarter of 2008. Operating income is a non-GAAP financial measure defined by the Company as net income excluding income or losses from investment funds and net investment gains or losses.
| Summary Financial Data | ||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||
Second Quarter | Six Months | |||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||
| Gross premiums written | $ | 1,054,577 | $ | 1,114,810 | $ | 2,202,819 | $ | 2,399,983 | ||||
| Net premiums written | 908,912 | 991,549 | 1,932,384 | 2,149,114 | ||||||||
| Net income | 97,387 | 80,257 | 77,041 | 268,695 | ||||||||
| Net income per diluted share | 0.59 | 0.46 | 0.46 | 1.50 | ||||||||
| Operating income | 99,930 | 139,133 | 217,226 | 288,737 | ||||||||
| Operating income per diluted share | 0.60 | 0.80 | 1.30 | 1.62 | ||||||||
Second quarter highlights included:
Commenting on the Company's activities, William R. Berkley, chairman and chief executive officer, said: "We were pleased with our quarterly results. The slightly higher combined ratio compared with the first quarter's was entirely due to increased storm activity.
"The market value of our investment portfolio improved, and liquidity remains strong. While inflation is likely to be a significant intermediate and long-term concern, we do not consider it to be a near-term issue. We have extended the portfolio duration slightly; however, it is still approximately one year shorter than the duration of our liabilities. The Company's cash flow remains strong and we continue to focus our investment portfolio on securities rated "A" or better.
"From an operating point of view, we generally believe that the insurance cycle is bottoming out and see early signs of improving conditions. Our greatest competition continues to come from national carriers that aggressively focus on large accounts and market share. In addition, new entrants in the specialty lines are behaving in an undisciplined manner in an effort to establish a market presence.
"We continue to believe that our Company will meet or exceed our risk adjusted return objectives over the cycle," 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, July 28, 2009 at 8:30 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, municipal bonds, 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) | ||||||||||||||||
Second Quarter | Six Months | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
| Revenues: | ||||||||||||||||
| Net premiums written | $ | 908,912 | $ | 991,549 | $ | 1,932,384 | $ | 2,149,114 | ||||||||
| Change in unearned premiums | 42,260 | 83,162 | (2,004 | ) | 49,906 | |||||||||||
| Net premiums earned | 951,172 | 1,074,711 | 1,930,380 | 2,199,020 | ||||||||||||
| Net investment income | 132,135 | 162,333 | 270,351 | 301,104 | ||||||||||||
| Losses from investment funds | (37,821 | ) | (8,394 | ) | (152,895 | ) | (2,668 | ) | ||||||||
| Insurance service fees | 25,257 | 24,761 | 51,840 | 51,873 | ||||||||||||
| Net investment gains (losses): | ||||||||||||||||
| Net realized gains on sales of investments | 49,224 | 161 | 62,616 | 72,866 | ||||||||||||
| Other-than-temporary investment impairments | (23,932 | ) | (82,324 | ) | (134,132 | ) | (101,003 | ) | ||||||||
| Less investment impairments recognized | ||||||||||||||||
| in other comprehensive income | 8,604 | - | 8,604 | - | ||||||||||||
| Net investment gains (losses) | 33,896 | (82,163 | ) | (62,912 | ) | (28,137 | ) | |||||||||
| Revenues from wholly-owned investees | 49,942 | 27,131 | 80,845 | 52,019 | ||||||||||||
| Other income | 517 | 760 | 1,110 | 1,132 | ||||||||||||
| Total revenues | 1,155,098 | 1,199,139 | 2,118,719 | 2,574,343 | ||||||||||||
| Expenses: | ||||||||||||||||
| Losses and loss expenses | 597,267 | 679,703 | 1,207,712 | 1,362,744 | ||||||||||||
| Other operating costs and expenses | 365,514 | 376,249 | 722,861 | 756,422 | ||||||||||||
| Expenses from wholly-owned investees | 46,791 | 26,343 | 76,745 | 51,278 | ||||||||||||
| Interest expense | 20,213 | 21,396 | 40,437 | 44,140 | ||||||||||||
| Total expenses | 1,029,785 | 1,103,691 | 2,047,755 | 2,214,584 | ||||||||||||
| Income before income taxes | 125,313 | 95,448 | 70,964 | 359,759 | ||||||||||||
| Income tax (expense) benefit | (27,881 | ) | (15,173 | ) | 6,184 | (90,879 | ) | |||||||||
| Net income before noncontrolling interests | 97,432 | 80,275 | 77,148 | 268,880 | ||||||||||||
| Noncontrolling interests | (45 | ) | (18 | ) | (107 | ) | (185 | ) | ||||||||
| Net income to common shareholders | $ | 97,387 | $ | 80,257 | $ | 77,041 | $ | 268,695 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.61 | $ | 0.48 | $ | 0.48 | $ | 1.56 | ||||||||
| Diluted | $ | 0.59 | $ | 0.46 | $ | 0.46 | $ | 1.50 | ||||||||
| Average shares outstanding: | ||||||||||||||||
| Basic | 160,008 | 167,172 | 160,546 | 171,935 | ||||||||||||
| Diluted | 166,226 | 173,684 | 166,716 | 178,723 | ||||||||||||
| Operating Results by Segment | ||||||||||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||||||||||
Second Quarter | Six Months | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
| Specialty: | ||||||||||||||||
| Gross premiums written | $ | 394,889 | $ | 406,580 | $ | 759,783 | $ | 834,722 | ||||||||
| Net premiums written | 338,683 | 375,939 | 661,240 | 773,726 | ||||||||||||
| Premiums earned | 346,052 | 409,417 | 703,980 | 838,753 | ||||||||||||
| Pre-tax income | 65,920 | 108,729 | 93,664 | 221,515 | ||||||||||||
| Loss ratio | 60.0 | % | 58.8 | % | 61.4 | % | 58.4 | % | ||||||||
| Expense ratio | 29.8 | % | 28.3 | % | 30.3 | % | 27.9 | % | ||||||||
| GAAP combined ratio | 89.8 | % | 87.1 | % | 91.7 | % | 86.3 | % | ||||||||
| Regional (2): | ||||||||||||||||
| Gross premiums written | $ | 317,445 | $ | 361,633 | $ | 640,246 | $ | 734,628 | ||||||||
| Net premiums written | 277,730 | 315,288 | 559,765 | 638,864 | ||||||||||||
| Premiums earned | 281,903 | 309,424 | 567,519 | 620,693 | ||||||||||||
| Pre-tax income | 11,677 | 25,275 | 30,042 | 63,079 | ||||||||||||
| Loss ratio | 66.6 | % | 67.6 | % | 63.8 | % | 65.6 | % | ||||||||
| Expense ratio | 34.2 | % | 31.9 | % | 33.6 | % | 31.5 | % | ||||||||
| GAAP combined ratio | 100.8 | % | 99.5 | % | 97.4 | % | 97.1 | % | ||||||||
| Alternative Markets: | ||||||||||||||||
| Gross premiums written | $ | 113,960 | $ | 121,161 | $ | 362,834 | $ | 389,245 | ||||||||
| Net premiums written | 99,486 | 100,776 | 325,201 | 338,813 | ||||||||||||
| Premiums earned | 151,309 | 155,885 | 303,302 | 311,094 | ||||||||||||
| Pre-tax income | 36,961 | 52,698 | 67,395 | 113,680 | ||||||||||||
| Loss ratio | 66.4 | % | 64.1 | % | 64.3 | % | 60.8 | % | ||||||||
| Expense ratio | 25.7 | % | 23.3 | % | 24.9 | % | 23.5 | % | ||||||||
| GAAP combined ratio | 92.1 | % | 87.4 | % | 89.2 | % | 84.3 | % | ||||||||
| Reinsurance: | ||||||||||||||||
| Gross premiums written | $ | 116,217 | $ | 126,583 | $ | 224,073 | $ | 263,048 | ||||||||
| Net premiums written | 107,055 | 118,946 | 207,888 | 248,592 | ||||||||||||
| Premiums earned | 94,257 | 131,767 | 199,880 | 284,201 | ||||||||||||
| Pre-tax income | 21,228 | 33,644 | 24,227 | 66,933 | ||||||||||||
| Loss ratio | 56.4 | % | 65.7 | % | 60.1 | % | 64.8 | % | ||||||||
| Expense ratio | 42.9 | % | 34.5 | % | 39.1 | % | 34.6 | % | ||||||||
| GAAP combined ratio | 99.3 | % | 100.2 | % | 99.2 | % | 99.4 | % | ||||||||
| International: | ||||||||||||||||
| Gross premiums written | $ | 112,066 | $ | 98,853 | $ | 215,883 | $ | 178,340 | ||||||||
| Net premiums written | 85,958 | 80,600 | 178,290 | 149,119 | ||||||||||||
| Premiums earned | 77,651 | 68,218 | 155,699 | 144,279 | ||||||||||||
| Pre-tax income | 720 | 7,279 | 6,888 | 17,925 | ||||||||||||
| Loss ratio | 61.9 | % | 63.5 | % | 63.0 | % | 63.8 | % | ||||||||
| Expense ratio | 38.8 | % | 40.3 | % | 38.2 | % | 38.3 | % | ||||||||
| GAAP combined ratio | 100.7 | % | 103.8 | % | 101.2 | % | 102.1 | % | ||||||||
| Operating Results by Segment (continued) | ||||||||||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||||||||||
Second Quarter | Six Months | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
| Corporate and Eliminations: | ||||||||||||||||
| Net investment gains (losses) | $ | 33,896 | $ | (82,163 | ) | $ | (62,912 | ) | $ | (28,137 | ) | |||||
| Interest expense | (20,213 | ) | (21,396 | ) | (40,437 | ) | (44,140 | ) | ||||||||
| Other revenues and expenses (3) | (24,876 | ) | (28,618 | ) | (47,903 | ) | (51,096 | ) | ||||||||
| Pre-tax loss | (11,193 | ) | (132,177 | ) | (151,252 | ) | (123,373 | ) | ||||||||
| Total: | ||||||||||||||||
| Gross premiums written | $ | 1,054,577 | $ | 1,114,810 | $ | 2,202,819 | $ | 2,399,983 | ||||||||
| Net premiums written | 908,912 | 991,549 | 1,932,384 | 2,149,114 | ||||||||||||
| Premiums earned | 951,172 | 1,074,711 | 1,930,380 | 2,199,020 | ||||||||||||
| Pre-tax income | 125,313 | 95,448 | 70,964 | 359,759 | ||||||||||||
| Loss ratio | 62.8 | % | 63.2 | % | 62.6 | % | 62.0 | % | ||||||||
| Expense ratio | 32.5 | % | 30.1 | % | 32.0 | % | 29.9 | % | ||||||||
| GAAP combined ratio | 95.3 | % | 93.3 | % | 94.6 | % | 91.9 | % | ||||||||
| (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 second quarters of 2009 and 2008, weather-related losses for the regional segment were $28 million and $31 million, respectively. For the first six months of 2009 and 2008, weather-related losses for the regional segment were $36 million and $45 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) | ||||||
| June 30, | December 31, | |||||
2009 | 2008 | |||||
| Net invested assets (1) | $ | 12,824,421 | $ | 12,522,360 | ||
| Total assets | 16,656,495 | 16,121,158 | ||||
| Reserves for losses and loss expenses | 9,084,003 | 8,999,596 | ||||
| Senior notes and other debt | 1,022,732 | 1,021,869 | ||||
| Junior subordinated debentures | 249,691 | 249,584 | ||||
| Total equity (2) (3) | 3,295,699 | 3,051,680 | ||||
| Common stockholder's equity (4) | 3,290,272 | 3,046,319 | ||||
| Common shares outstanding (4) | 160,037 | 161,467 | ||||
| Common stockholders' equity per share | 20.56 | 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 gains were $31 million at June 30, 2009, compared with unrealized investment losses of $142 million at December 31, 2008. Unrealized currency translation losses were $43 million and $72 million as of June 30, 2009 and December 31, 2008, respectively. | |
| (4) | During the first six months of 2009, the Company repurchased 1.6 million shares of its common stock for $32 million. | |
| Supplemental Information | ||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||
Second Quarter | Six Months | |||||||||||||||
| Reconciliation of operating income to net income: | 2009 | 2008 | 2009 | 2008 | ||||||||||||
| Operating income (1) | $ | 99,930 | $ | 139,133 | $ | 217,226 | $ | 288,737 | ||||||||
| Net after-tax investment gains (losses) | 22,041 | (53,420 | ) | (40,803 | ) | (18,308 | ) | |||||||||
| Net after-tax losses from investment funds | (24,584 | ) | (5,456 | ) | (99,382 | ) | (1,734 | ) | ||||||||
| Net income | $ | 97,387 | $ | 80,257 | $ | 77,041 | $ | 268,695 | ||||||||
| Return on equity: | ||||||||||||||||
| Net income (2) | 12.8 | % | 8.9 | % | 5.1 | % | 15.0 | % | ||||||||
| Operating income (2) | 13.1 | % | 15.5 | % | 14.3 | % | 16.1 | % | ||||||||
| Cash flow: | ||||||||||||||||
| Cash flow from operations before cash | ||||||||||||||||
| transfers to/from trading account (3) | $ | 189,208 | $ | 144,491 | $ | 280,768 | $ | 357,851 | ||||||||
| Trading account transfers | (220,000 | ) | 50,000 | (290,000 | ) | 50,000 | ||||||||||
| Cash flow (used in) from operations | $ | (30,792 | ) | $ | 194,491 | $ | (9,232 | ) | $ | 407,851 | ||||||
| (1) | Operating income is a non-GAAP financial measure defined by the Company as net income excluding income or losses from investment funds and net investment gains or losses. The Company refined its definition of operating income beginning with the second quarter of 2009. Management believes that excluding income or losses from investment funds and net investment gains or 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 from operations before cash transfers to/from trading account 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. | |
SOURCE: W. R. Berkley Corporation
W. R. Berkley Corporation
Karen A. Horvath, 203-629-3000
Vice President - External Financial Communications
Copyright Business Wire 2009
