EXHIBIT 99.1
W. R. Berkley Corporation NEWS
475 Steamboat Road RELEASE
Greenwich, Connecticut 06830
(203) 629-3000
FOR IMMEDIATE RELEASE CONTACT: Eugene G. Ballard
Chief Financial Officer
203-629-3000
W. R. BERKLEY CORPORATION REPORTS SECOND QUARTER
2002 OPERATING INCOME OF $34 MILLION, UP 98%
Greenwich, CT, July 24, 2002 -- W. R. Berkley Corporation (NYSE: BER) today
reported second quarter operating income of $34 million, or 66 cents per share,
up 98% from $17 million, or 38 cents per share, a year ago. For the first six
months of 2002, operating income was $66 million, or $1.26 per share, up from
$28 million, or 63 cents per share, a year ago. Per share amounts have been
adjusted to reflect the 3-for-2 common stock split effected on July 2, 2002.
The following table summarizes the second quarter and year-to-date
financial performance (amounts in thousands, except per share data):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
---- ---- ---- ----
Gross premiums written $ 710,003 $ 539,163 $1,467,211 $1,054,434
Net premiums written 592,095 453,888 1,218,088 885,799
Net income 27,374 9,598 61,770 19,864
Operating income (a) 34,467 17,383 65,672 27,686
Per share amounts:
Net income $ 0.52 $ 0.21 $ 1.18 $ 0.45
Operating income (a) 0.66 0.38 1.26 0.63
(a) Operating income represents net income before discontinued businesses and
realized investment gains and losses.
W. R. Berkley Corporation Page 2
Second quarter highlights include:
o Gross premiums written for continuing business segments grew 54% to
$708 million.
o Gross premiums written for the reinsurance segment increased $98
million, including $32 million from new Lloyds' quota share business
and a 105% increase in facultative reinsurance.
o Gross premiums written for specialty insurance grew by 64% to $233
million.
o Combined ratio for continuing operations improved by over 7 points to
95.3%.
o Cash flow from operations increased to $145 million compared with $36
million in the second quarter of 2001.
Commenting on the Company's results, William R. Berkley, chairman and chief
executive officer, said: "We were very pleased with our second quarter operating
results. The growth of our domestic ongoing business was in excess of 65% both
for the quarter and the six months periods. We are pleased with the current
level of underwriting profitability. Thus far, however, this year's low interest
rate environment has kept investment returns and overall profitability below our
expectations.
"We believe that the higher pricing and improved terms and conditions will
continue to benefit performance for the balance of the year and beyond, and we
are confident that our results will continue to improve substantially. While
attempting to forecast the future is always difficult, the pricing of business
already on the books ensures us an excellent start for next year. We expect the
strong current pricing environment to continue and anticipate modest increases
in existing interest rates. We are excited about the Company's excellent
prospects for 2003 and beyond," Mr. Berkley concluded.
W. R. Berkley Corporation Page 3
Founded in 1967, W. R. Berkley Corporation is an insurance holding company
that operates in five segments of property casualty insurance business:
specialty insurance, alternative markets, reinsurance, regional property
casualty insurance and international.
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 2002 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 ultimate results of the various pending arbitration proceedings, the
increased level of our retention, natural and man-made catastrophic losses,
including as a result of terrorist activities, the impact of competition, the
availability of reinsurance, the ability of our reinsurers to pay reinsurance
recoverables owed to us, investment results and potential impairment of invested
assets, exchange rate and political risks, legislative and regulatory
developments, changes in the ratings assigned to us by ratings agencies,
uncertainty as to our reinsurance coverage for terrorist acts, the availability
of dividends from our insurance company subsidiaries, our successful integration
of acquired companies or investment 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 2002 and beyond to differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company. 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.
# # #
W. R. Berkley Corporation Page 4
Consolidated Financial Summary
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
2002 2001 2002 2001
---- ---- ---- ----
(Amounts in thousands, except per share data)
Revenues:
Net premiums written $ 592,095 $ 453,888 $ 1,218,088 $ 885,799
Change in unearned premiums (82,407) (35,828) (230,934) (88,804)
----------- ----------- ----------- -----------
Premiums earned 509,688 418,060 987,154 796,995
Net investment income 44,564 50,368 88,716 100,798
Service fees 20,924 19,111 41,117 36,703
Realized investment gains (losses) (8,449) 2,561 (3,486) 4,397
Other income 208 897 320 1,257
----------- ----------- ----------- -----------
Total revenues 566,935 490,997 1,113,821 940,150
Expenses:
Losses and loss expenses 336,515 296,653 647,116 568,121
Other operating expenses 181,883 169,319 356,326 321,942
Interest expense 11,330 11,412 22,465 22,862
----------- ----------- ----------- -----------
Total expenses 529,728 477,384 1,025,907 912,925
Income before income taxes
and minority interest 37,207 13,613 87,914 27,225
Income tax expense (15,563) (3,074) (31,785) (5,558)
Minority interest 5,730 (941) 5,641 (1,803)
----------- ----------- ----------- -----------
Net income $ 27,374 $ 9,598 $ 61,770 $ 19,864
=========== =========== =========== ===========
Net income per share:
Basic $ 0.55 $ 0.22 $ 1.23 $ 0.47
Diluted 0.52 0.21 1.18 0.45
Average shares outstanding:
Basic 50,125 43,485 50,020 41,963
Diluted 52,399 45,077 52,304 43,865
Supplemental Information:
Operating income (1) $ 34,467 $ 17,383 $ 65,672 $ 27,686
Operating income per share (1) 0.66 0.38 1.26 0.63
(1) Operating income represents net income before discontinued businesses and realized investment gains
and losses.
W. R. Berkley Corporation Page 5
Supplemental After-Tax Earnings
(Amounts in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------- -------------------
2002 2001 2002 2001
---- ---- ---- ----
After-tax earnings amounts:
- ---------------------------
Operating income (1)(2) $ 34,467 $ 17,383 $ 65,672 $ 27,686
Discontinued businesses (3) (2,990) (9,450) (3,025) (10,680)
Realized investment gains (losses) (4) (4,103) 1,665 (877) 2,858
--------- --------- --------- ---------
Net income $ 27,374 $ 9,598 $ 61,770 $ 19,864
========= ========= ========= =========
Earnings (loss) per diluted share:
- ----------------------------------
Operating income (1)(2) $ 0.66 $ 0.38 $ 1.26 $ 0.63
Discontinued businesses (3) (0.06) (0.21) (0.06) (0.24)
Realized investment gains (losses) (4) (0.08) 0.04 (0.02) 0.06
--------- --------- --------- ---------
Net income $ 0.52 $ 0.21 $ 1.18 $ 0.45
========= ========= ========= =========
Cash flow from operations before
change in trading account $ 145,304 $ 36,047 $ 239,454 $ 43,148
(1) Operating income represents net income before discontinued businesses and realized investment
gains and losses.
(2) For the second quarter of 2002, catastrophe losses for the continuing business segments were $18
million pre-tax, or 22 cents per share after-tax, compared with $16 million pre-tax, or 23 cents
per share after-tax, in the year-earlier period. For the first six months of 2002, catastrophe
losses for the continuing business segments were $23 million pre-tax, or 29 cents per share
after-tax, compared with $22 million pre-tax, or 33 cents per share after-tax, in the year-earlier
period.
(3) For the second quarter of 2002, catastrophe losses for the discontinued business segment were $3
million pre-tax, or 4 cents per share after-tax, compared with $15 million pre-tax, or 22 cents
per share after-tax, in the year-earlier period. For the first six months of 2002, catastrophe
losses for the discontinued business segment were $4 million pre-tax, or 6 cents per share
after-tax, compared with $18 million pre-tax, or 26 cents per share after-tax, in the year-earlier
period.
(4) Realized investment gains (losses) in the second quarter of 2002 include a reduction in the
carrying value of Argentine bonds of $6 million (net of minority interest).
W. R. Berkley Corporation Page 6
Operating Results by Segment
(Amounts in thousands, except ratios)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----
Specialty Insurance:
Gross premiums written $ 232,705 $ 142,279 $ 435,038 $ 273,664
Net premiums written 203,098 125,708 382,825 231,731
Premiums earned 161,554 92,096 302,198 167,233
Pre-tax operating income 32,891 12,298 51,271 20,166
Loss ratio 58.4% 66.3% 62.1% 67.3%
Expense ratio 28.3% 31.8% 28.5% 33.3%
GAAP combined ratio 86.7% 98.1% 90.6% 100.6%
Alternative Markets:
Gross premiums written $ 47,867 $ 26,486 $ 146,040 $ 78,914
Net premiums written 42,057 23,842 126,637 70,398
Premiums earned 51,487 27,752 96,824 53,370
Pre-tax operating income 13,749 11,109 27,981 19,914
Loss ratio 68.1% 68.1% 67.5% 72.5%
Expense ratio 30.0% 32.2% 29.4% 33.3%
GAAP combined ratio 98.1% 100.3% 96.9% 105.8%
Reinsurance (1):
Gross premiums written $ 177,079 $ 78,651 $ 340,625 $ 151,703
Net premiums written 143,076 50,231 277,067 111,055
Premiums earned 91,758 49,347 165,115 113,902
Pre-tax operating income 5,240 3,236 15,430 7,527
Loss ratio 76.0% 69.2% 73.2% 72.6%
Expense ratio 30.1% 45.8% 30.2% 39.7%
GAAP combined ratio 106.1% 115.0% 103.4% 112.3%
Regional Insurance (1):
Gross premiums written $ 236,686 $ 170,375 $ 475,005 $ 337,697
Net premiums written 192,655 146,243 376,358 285,708
Premiums earned 172,062 138,541 328,643 263,368
Pre-tax operating income 18,565 10,446 41,000 15,964
Loss ratio 64.3% 68.5% 62.5% 69.5%
Expense ratio 31.4% 33.9% 31.5% 34.7%
GAAP combined ratio 95.7% 102.4% 94.0% 104.2%
International:
Gross premiums written $ 13,973 $ 42,071 $ 60,191 $ 80,697
Net premiums written 11,706 36,917 52,256 70,641
Premiums earned 20,206 33,973 59,390 65,750
Pre-tax operating income (loss) (800) 4,218 (534) 6,306
Loss ratio 56.0% 62.5% 58.7% 62.3%
Expense ratio 49.5% 36.0% 44.4% 38.8%
GAAP combined ratio 105.5% 98.5% 103.1% 101.1%
Total Continuing Segments (1):
Gross premiums written $ 708,310 $ 459,862 $ 1,456,899 $ 922,675
Net premiums written 592,592 382,941 1,215,143 769,533
Premiums earned 497,067 341,709 952,170 663,623
Pre-tax operating income 69,645 41,307 135,148 69,877
Loss ratio 64.6% 67.4% 64.5% 69.0%
Expense ratio 30.7% 35.1% 30.9% 35.5%
GAAP combined ratio 95.3% 102.5% 95.4% 104.5%
(1) Segment information for 2001 has been restated to reflect the discontinuance of the personal lines
and alternative markets reinsurance businesses.
W. R. Berkley Corporation Page 7
Operating Results by Segment (Continued)
(Amounts in thousands)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
2002 2001 2002 2001
---- ---- ---- ----
Discontinued business:
Gross premiums written $ 1,693 $ 79,301 $ 10,312 $ 131,759
Net premiums written (497) 70,947 2,945 116,266
Premiums earned 12,621 76,351 34,984 133,372
Pre-tax operating loss (4,600) (14,539) (4,654) (16,430)
Loss ratio 121.3% 87.0% 94.1% 82.7%
Expense ratio 24.2% 35.3% 27.9% 33.5%
GAAP combined ratio 145.5% 122.3% 122.0% 116.2%
Total
Gross premiums written $ 710,003 $ 539,163 $ 1,467,211 $ 1,054,434
Net premiums written 592,095 453,888 1,218,088 885,799
Premiums earned 509,688 418,060 987,154 796,995
Pre-tax operating income 65,045 26,768 130,494 53,447
Loss ratio 66.0% 71.0% 65.6% 71.3%
Expense ratio 30.6% 35.1% 30.8% 35.2%
GAAP combined ratio 96.6% 106.1% 96.4% 106.5%
Balance Sheet Information
(Amounts in thousands, except per share data)
June 30, December 31,
2002 2001
---------- -----------
Total investments (1) $3,889,762 $3,598,053
Total assets 6,077,382 5,633,509
Reserves for losses and loss expenses 2,895,078 2,817,682
Long-term debt 362,769 370,554
Trust preferred securities 198,231 198,210
Stockholders' equity (2) 1,012,621 931,595
Shares outstanding 50,181 49,862
Stockholders' equity per share 20.18 18.68
(1) Investments include trading account receivable from brokers and clearing
organizations and trading securities sold but not yet purchased.
(2) Stockholders' equity includes after-tax unrealized gains from investments
and foreign exchange of $59 million and $37 million as of June 30, 2002 and
December 31, 2001, respectively.