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GREENWICH, Conn., Feb 09, 2009 (BUSINESS WIRE) -- W. R. Berkley Corporation (NYSE: WRB) today reported net income for 2008 of $1.62 per share, or $281 million, compared to $3.90 per share, or $766 million, for 2007. Net operating income for 2008 was $2.96 per share, or $513 million, compared with $3.73 per share, or $734 million, for 2007. During 2008, the Company changed its method of accounting for certain cash distributions received from investees. This change, which was applied retrospectively, increased net income for 2007 by $23 million, or 12 cents per share. 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) | ||||||||||||
Fourth Quarter | Full Year | |||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||
| Gross premiums written | $ | 1,000,009 | $ | 1,160,080 | $ | 4,520,126 | $ | 5,053,230 | ||||
| Net premiums written | 888,452 | 1,051,964 | 4,033,899 | 4,575,989 | ||||||||
| Net income | 40,326 | 184,124 | 281,141 | 766,239 | ||||||||
| Net income per diluted share | 0.24 | 0.97 | 1.62 | 3.90 | ||||||||
| Net operating income | 103,363 | 183,213 | 513,099 | 734,005 | ||||||||
| Net operating income per diluted share | 0.62 | 0.97 | 2.96 | 3.73 | ||||||||
Full year 2008 highlights included:
Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "Our operating results for the quarter were satisfactory. The combined ratio and underwriting profitability continued to be good, particularly given the current economic conditions. The Company's balance sheet and liquidity remain strong.
"During the year, 20 million shares of our common stock were repurchased. This is part of our on-going focus to maintain the appropriate balance between capital adequacy and return on equity. Our book value per share was up for the year when adjusted for share repurchases and dividends.
"The tumultuous financial markets in 2008 had an adverse impact on a small portion of our approximately $13 billion investment portfolio. Over 10% of the portfolio is maintained in cash and short-term assets as we believe exceptional liquidity is prudent at this time, in spite of the concomitant loss of investment income.
"While price competition continues, we are beginning to see selective rate increases in some lines of business. We anticipate consequential improvement in the pricing environment by the end of this year. 2009 will still have substantial underwriting profitability, and we are optimistic that our operating returns will be in line with our targeted annual 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 Monday, February 9, 2009 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 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 uncertain nature of damage theories and loss amounts, the potential impact of the current conditions in the financial markets 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, 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 Program Reauthorization Act of 2007, 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 investments in financial institutions, merger arbitrage and private equity investments, the impact of current conditions in the financial markets 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 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 2009 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) | ||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenues: | ||||||||||||||||
| Net premiums written | $ | 888,452 | $ | 1,051,964 | $ | 4,033,899 | $ | 4,575,989 | ||||||||
| Change in unearned premiums | 146,867 | 109,600 | 255,681 | 87,712 | ||||||||||||
| Premiums earned | 1,035,319 | 1,161,564 | 4,289,580 | 4,663,701 | ||||||||||||
| Net investment income | 113,584 | 165,634 | 537,033 | 634,386 | ||||||||||||
Income (loss) from investment funds | (31,942 | ) | 6,872 | (3,553 | ) | 38,274 | ||||||||||
| Insurance service fees | 25,355 | 22,663 | 102,856 | 97,689 | ||||||||||||
| Realized investment gains (losses) | (108,764 | ) | 1,456 | (356,931 | ) | 49,696 | ||||||||||
| Revenues from wholly-owned investees | 44,765 | 41,619 | 137,280 | 102,846 | ||||||||||||
| Other revenues | 518 | 195 | 2,543 | 1,805 | ||||||||||||
| Total revenues | 1,078,835 | 1,400,003 | 4,708,808 | 5,588,397 | ||||||||||||
| Expenses: | ||||||||||||||||
| Losses and loss expenses | 631,663 | 684,388 | 2,688,661 | 2,779,578 | ||||||||||||
| Operating costs and expenses | 360,163 | 391,232 | 1,475,165 | 1,530,987 | ||||||||||||
| Expenses from wholly-owned investees | 43,422 | 39,929 | 134,037 | 96,444 | ||||||||||||
| Interest expense | 20,232 | 22,889 | 84,623 | 88,996 | ||||||||||||
| Total expenses | 1,055,480 | 1,138,438 | 4,382,486 | 4,496,005 | ||||||||||||
Income before income taxes and minority interest | 23,355 | 261,565 | 326,322 | 1,092,392 | ||||||||||||
| Income tax benefit (expense) | 16,996 | (76,050 | ) | (44,919 | ) | (323,070 | ) | |||||||||
| Minority interest | (25 | ) | (1,391 | ) | (262 | ) | (3,083 | ) | ||||||||
| Net income | $ | 40,326 | $ | 184,124 | $ | 281,141 | $ | 766,239 | ||||||||
| Net income per share: | ||||||||||||||||
| Basic | $ | 0.25 | $ | 1.01 | $ | 1.68 | $ | 4.05 | ||||||||
| Diluted | $ | 0.24 | $ | 0.97 | $ | 1.62 | $ | 3.90 | ||||||||
| Average shares outstanding: | ||||||||||||||||
| Basic | 161,388 | 181,930 | 166,956 | 188,981 | ||||||||||||
| Diluted | 167,859 | 189,167 | 173,454 | 196,698 | ||||||||||||
| Operating Results by Segment | ||||||||||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
| Specialty: (2) | ||||||||||||||||
| Gross premiums written | $ | 382,535 | $ | 450,323 | $ | 1,590,335 | $ | 1,816,727 | ||||||||
| Net premiums written | 344,270 | 415,963 | 1,453,778 | 1,704,880 | ||||||||||||
| Premiums earned | 390,195 | 445,038 | 1,618,915 | 1,772,547 | ||||||||||||
| Pre-tax income | 66,767 | 127,985 | 375,429 | 516,931 | ||||||||||||
| Loss ratio | 60.8 | % | 57.6 | % | 60.1 | % | 57.3 | % | ||||||||
| Expense ratio | 29.2 | % | 27.7 | % | 28.4 | % | 26.7 | % | ||||||||
| GAAP combined ratio | 90.0 | % | 85.3 | % | 88.5 | % | 84.0 | % | ||||||||
| Regional: (2) | ||||||||||||||||
| Gross premiums written | $ | 308,147 | $ | 336,646 | $ | 1,385,791 | $ | 1,441,077 | ||||||||
| Net premiums written | 272,728 | 299,305 | 1,211,096 | 1,267,451 | ||||||||||||
| Premiums earned | 309,673 | 321,377 | 1,237,258 | 1,250,914 | ||||||||||||
| Pre-tax income | 27,747 | 54,497 | 108,720 | 215,228 | ||||||||||||
| Loss ratio | 61.2 | % | 59.2 | % | 65.4 | % | 59.1 | % | ||||||||
| Expense ratio | 33.6 | % | 31.7 | % | 32.3 | % | 31.4 | % | ||||||||
| GAAP combined ratio | 94.8 | % | 90.9 | % | 97.7 | % | 90.5 | % | ||||||||
| Alternative Markets: | ||||||||||||||||
| Gross premiums written | $ | 125,387 | $ | 139,631 | $ | 715,979 | $ | 758,285 | ||||||||
| Net premiums written | 104,738 | 114,791 | 622,185 | 656,369 | ||||||||||||
| Premiums earned | 158,615 | 164,293 | 626,858 | 651,909 | ||||||||||||
| Pre-tax income | 36,399 | 56,764 | 201,879 | 248,080 | ||||||||||||
| Loss ratio | 64.3 | % | 62.9 | % | 62.7 | % | 59.2 | % | ||||||||
| Expense ratio | 25.7 | % | 22.5 | % | 24.2 | % | 23.1 | % | ||||||||
| GAAP combined ratio | 90.0 | % | 85.4 | % | 86.9 | % | 82.3 | % | ||||||||
| Reinsurance: (2) | ||||||||||||||||
| Gross premiums written | $ | 91,113 | $ | 139,800 | $ | 458,668 | $ | 732,233 | ||||||||
| Net premiums written | 87,148 | 134,120 | 435,108 | 682,241 | ||||||||||||
| Premiums earned | 110,806 | 167,616 | 519,717 | 740,439 | ||||||||||||
| Pre-tax income | 21,473 | 41,109 | 117,946 | 178,302 | ||||||||||||
| Loss ratio | 59.9 | % | 60.3 | % | 64.7 | % | 65.3 | % | ||||||||
| Expense ratio | 36.3 | % | 37.1 | % | 34.7 | % | 31.3 | % | ||||||||
| GAAP combined ratio | 96.2 | % | 97.4 | % | 99.4 | % | 96.6 | % | ||||||||
| International: | ||||||||||||||||
| Gross premiums written | $ | 92,827 | $ | 93,680 | $ | 369,353 | $ | 304,908 | ||||||||
| Net premiums written | 79,568 | 87,785 | 311,732 | 265,048 | ||||||||||||
| Premiums earned | 66,030 | 63,240 | 286,832 | 247,892 | ||||||||||||
| Pre-tax income | 21,580 | 17,880 | 52,945 | 44,457 | ||||||||||||
| Loss ratio | 55.3 | % | 53.3 | % | 61.7 | % | 62.6 | % | ||||||||
| Expense ratio | 42.6 | % | 34.6 | % | 38.9 | % | 32.4 | % | ||||||||
| GAAP combined ratio | 97.9 | % | 87.9 | % | 100.6 | % | 95.0 | % | ||||||||
| Operating Results by Segment (Continued) | ||||||||||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
| Corporate and Eliminations: | ||||||||||||||||
| Realized investment gains (losses) | $ | (108,764 | ) | $ | 1,456 | $ | (356,931 | ) | $ | 49,696 | ||||||
| Interest expense | (20,232 | ) | (22,889 | ) | (84,623 | ) | (88,996 | ) | ||||||||
| Other revenues and expenses (3) | (21,615 | ) | (15,237 | ) | (89,043 | ) | (71,306 | ) | ||||||||
| Pre-tax loss | (150,611 | ) | (36,670 | ) | (530,597 | ) | (110,606 | ) | ||||||||
| Total: | ||||||||||||||||
| Gross premiums written | $ | 1,000,009 | $ | 1,160,080 | $ | 4,520,126 | $ | 5,053,230 | ||||||||
| Net premiums written | 888,452 | 1,051,964 | 4,033,899 | 4,575,989 | ||||||||||||
| Premiums earned | 1,035,319 | 1,161,564 | 4,289,580 | 4,663,701 | ||||||||||||
| Pre-tax income | 23,355 | 261,565 | 326,322 | 1,092,392 | ||||||||||||
| Loss ratio | 61.0 | % | 58.9 | % | 62.7 | % | 59.6 | % | ||||||||
| Expense ratio | 31.6 | % | 29.8 | % | 30.4 | % | 28.5 | % | ||||||||
| GAAP combined ratio | 92.6 | % | 88.7 | % | 93.1 | % | 88.1 | % | ||||||||
| (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) | Weather-related losses were $6 million and $3 million for the fourth quarter of 2008 and 2007, respectively, and $114 million and $34 million for full year 2008 and 2007, respectively. The 2008 weather-related losses, which included losses from Hurricanes Ike, Gustav and Dolly, were $90 million for the regional segment, $9 million for the specialty segment and $15 million for the reinsurance segment. | |
| (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) | ||||||
| December 31, | December 31, | |||||
2008 | 2007 | |||||
| Net invested assets (1) | $ | 12,522,360 | $ | 13,251,497 | ||
| Total assets | 16,121,158 | 16,820,005 | ||||
| Reserves for losses and loss expenses | 8,999,596 | 8,678,034 | ||||
| Senior notes and other debt | 1,021,869 | 1,121,793 | ||||
| Junior subordinated debentures | 249,584 | 249,375 | ||||
| Stockholders' equity (2) (3) (4) | 3,046,319 | 3,592,368 | ||||
| Shares outstanding (3) | 161,467 | 180,321 | ||||
| Stockholders' equity per share (4) | 18.87 | 19.92 | ||||
| Stockholders' equity per share, as previously reported (4) | NA | 19.80 | ||||
| (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. Reclassifications have been made to 2007 balance sheet accounts to conform to the presentation of the 2008 financial statements. | |
| (2) | After-tax unrealized investment losses were $142 million as of December 31, 2008 compared with unrealized investment gains of $52 million as of December 31, 2007. Unrealized currency translation losses were $72 million as of December 31, 2008 compared with unrealized currency translation gains of $18 million as of December 31, 2007. | |
| (3) | During 2008, the Company repurchased 20 million shares of its common stock for $546 million. Share repurchases for the full year of 2008 resulted in a reduction of stockholders' equity per share of $0.89. | |
| (4) | In the fourth quarter of 2008, the Company changed its method of accounting for cash distributions received in excess of an investment's carrying value. Previously such distributions were reported as a deferred credit and recognized in earnings upon disposal of the investment. Under the new method, such distributions are recognized as a realized gain upon receipt. The Company received cash distributions in excess of the carrying value of an investment in 2007, and the accounting change was applied retrospectively to the 2007 financial statements. The effect of the change was to increase net income and stockholders' equity by $23 million, or $0.12 per share. | |
| Supplemental Information | ||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||
| Reconciliation of net operating income to net income: | 2008 | 2007 | 2008 | 2007 | ||||||||||||
| Net operating income (1) | $ | 103,363 | $ | 183,213 | $ | 513,099 | $ | 734,005 | ||||||||
| Realized investment gains (losses), net of taxes(2) | (70,630 | ) | 911 | (231,958 | ) | 32,234 | ||||||||||
| Effective tax rate adjustment (3) | 7,593 | - | - | - | ||||||||||||
| Net income | $ | 40,326 | $ | 184,124 | $ | 281,141 | $ | 766,239 | ||||||||
| Return on equity (4): | ||||||||||||||||
| Net income | 4.5 | % | 22.1 | % | 7.8 | % | 23.0 | % | ||||||||
| Net operating income | 11.5 | % | 22.0 | % | 14.3 | % | 22.0 | % | ||||||||
| Cash flow: | ||||||||||||||||
Cash flow from operations before cash transfers to/from trading account (5) | $ | 262,991 | $ | 354,441 | $ | 999,147 | $ | 1,449,884 | ||||||||
| Trading account transfers | 503,813 | - | 553,813 | - | ||||||||||||
| Cash flow from operations | $ | 766,804 | $ | 354,441 | $ | 1,552,960 | $ | 1,449,884 | ||||||||
| (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 $68 million and $282 million for the fourth quarter and full year 2008, respectively. | |
| (3) | Income taxes are allocated to operating income and realized gains and losses based on the actual year-to-date tax rate. For interim periods, any difference between the actual year-to-date tax rate and the previously projected full year effective tax rate is reported separately. | |
| (4) | Return on equity represents net income and net operating income expressed on an annualized basis as a percentage of beginning of year stockholders' equity. | |
| (5) | 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. Reclassifications have been made to the 2007 cash flow to conform to the presentation of the 2008 financial statements. |
| Investment Information | ||
| As of December 31, 2008 | ||
| Investment Allocation (based on carrying values): | ||
| U.S. government and agencies | 9% | |
| State and municipal | 45% | |
Mortgage-backed securities, primarily U.S. government agencies | 14% | |
| Corporate | 8% | |
| Loans receivable, primarily mortgages | 3% | |
| Foreign governments and agencies | 2% | |
Cash and cash equivalents (includes receivable from brokers and clearing organizations) | 11% | |
| Total fixed maturities | 92% | |
| Trading account equities | 1% | |
| Preferred stock | 2% | |
| Common stock | 1% | |
Investment funds (1) | 4% | |
| Total invested assets | 100% | |
| Duration | 3.1 years | |
| Average quality rating | AA | |
| Net Investment Income (amounts in thousands): | ||||||||||||||||
Fourth Quarter | Full Year | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Fixed maturities, including cash | $ | 118,700 | $ | 128,205 | $ | 497,549 | $ | 500,378 | ||||||||
| Equity securities available for sale | 6,848 | 24,408 | 38,144 | 57,502 | ||||||||||||
| Arbitrage trading account | (10,750 | ) | 14,336 | 6,032 | 80,253 | |||||||||||
| Investment expenses | (1,214 | ) | (1,315 | ) | (4,692 | ) | (3,747 | ) | ||||||||
| Total | $ | 113,584 | $ | 165,634 | $ | 537,033 | $ | 634,386 | ||||||||
| (1) | Financial results for certain investment funds are reported in the Company's financial statements on a one quarter lag to facilitate the timely completion of the consolidated financial statements. |
SOURCE: W. R. Berkley Corporation
W. R. Berkley Corporation
Karen A. Horvath, 203-629-3000
Vice President - External Financial Communications
Copyright Business Wire 2009
