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 FIRST
QUARTER NET INCOME DOUBLES TO $71.7 MILLION
Greenwich, CT, April 25, 2003 -- W. R. Berkley Corporation (NYSE: BER)
today reported first quarter net income of $72 million, or $1.25 per share, up
from $34 million, or 66 cents per share, a year ago. Net operating income for
the first quarter of 2003 was $63 million, or $1.10 per share, compared with $31
million, or 60 cents per share, for the first quarter of 2002. Net operating
income is a non-GAAP financial measure defined by the Company as net income
excluding gains and losses on investments, foreign currencies and discontinued
business.
Summary Financial Data First Quarter
(Amounts in thousands, except per share data) 2003 2002
---- ----
Gross premiums written $1,066,473 $776,208
Net premiums written 892,059 633,993
Net income 71,703 34,396
Net income per share (diluted) 1.25 0.66
Net operating income 62,836 31,205
Net operating income per share (diluted) $ 1.10 $ 0.60
W. R. Berkley Corporation Page 2
First quarter highlights include:
o Net operating return on equity was 18.8% annualized, or 4.7% for the
quarter
o Net premiums written grew 41% to $892 million
o Net premiums written for specialty insurance and facultative
reinsurance grew by 49% and 118%, respectively
o GAAP combined ratio improved by 4.3 percentage points to 91.8%
o Cash flow from operations increased to $276 million
o The paid loss ratio decreased to 39% in the first quarter from 59% in
the prior year quarter
Commenting on the Company's performance, William R. Berkley, chairman and
chief executive officer, said: "The results for the first quarter continue the
positive trends we've seen the past twelve months. All units of the property
casualty business generated underwriting profits except for treaty reinsurance,
where we are still seeing loss development from prior years. Our cash flow from
operations was over $275 million for the quarter. Investment income also
increased substantially, reflecting increased cash flow and greater invested
assets. The Company's portfolio duration declined slightly during the period.
"Our accident year results continue to be exceptional. Prices are still
moving up, although the pace of those increases has moderated somewhat.
Increases this year were over 12% for regional business, more than 25% for
specialty business and in excess of 30% for reinsurance business. We expect
continued improvement in underwriting profitability.
"Our expectation for ongoing growth and improved profitability has not
changed. We remain confident and enthusiastic about our opportunities for
increased profits and growth for the next several years," 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 2003 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 legal and 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, our
exposure 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 2003 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
(Amounts in thousands, except per share data)
For the Quarter
Ended March 31,
--------------------------
2003 2002
--------- ---------
Revenues:
Net premiums written $ 892,059 $ 633,993
Change in unearned premiums (191,933) (155,527)
Premiums earned 700,126 478,466
Net investment income 51,760 44,152
Service fees 25,469 20,193
Realized investment gains 14,604 4,959
Foreign currency gains (losses) (1,238) 4
Other income 692 112
Total revenues 791,413 547,886
Expenses:
Losses and loss expenses 443,886 310,601
Other operating expenses 230,853 175,443
Interest expense 12,095 11,135
Total expenses 686,834 497,179
Income before income taxes
and minority interest 104,579 50,707
Income tax expense (32,986) (16,222)
Minority interest 110 (89)
Net income $ 71,703 $ 34,396
Net income per share:
Basic $ 1.30 $ 0.69
Diluted $ 1.25 $ 0.66
Average shares outstanding:
Basic 55,249 49,914
Diluted 57,328 51,977
W. R. Berkley Corporation Page 5
Operating Results by Segment
(Amounts in thousands, except ratios (1))
For the Quarter
Ended March 31,
--------------------------------
2003 2002
-------- ---------
Specialty Insurance (2):
Gross premiums written $321,306 $217,936
Net premiums written 286,701 192,429
Premiums earned 241,627 150,422
Pre-tax income 48,541 20,379
Loss ratio 61.7% 66.2%
Expense ratio 24.9% 28.3%
GAAP combined ratio 86.6% 94.5%
Alternative Markets:
Gross premiums written $170,181 $ 98,173
Net premiums written 137,182 84,580
Premiums earned 82,974 45,337
Pre-tax income 21,949 14,232
Loss ratio 67.3% 66.8%
Expense ratio 24.6% 28.7%
GAAP combined ratio 91.9% 95.5%
Reinsurance (2):
Gross premiums written $262,392 $166,943
Net premiums written 214,799 129,289
Premiums earned 162,477 64,579
Pre-tax income 9,669 8,191
Loss ratio 71.9% 69.5%
Expense ratio 30.4% 32.7%
GAAP combined ratio 102.3% 102.2%
Regional Insurance:
Gross premiums written $295,858 $238,319
Net premiums written 237,754 183,703
Premiums earned 198,205 156,581
Pre-tax income 32,195 22,435
Loss ratio 57.9% 60.5%
Expense ratio 31.5% 31.6%
GAAP combined ratio 89.4% 92.1%
International:
Gross premiums written $ 16,736 $ 46,218
Net premiums written 15,623 40,550
Premiums earned 14,843 39,184
Pre-tax income 1,235 266
Loss ratio 49.2% 60.1%
Expense ratio 45.4% 41.8%
GAAP combined ratio 94.6% 101.9%
(Continued)
W. R. Berkley Corporation Page 6
Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
For the Quarter
Ended March 31,
--------------------------------
2003 2002
-------- ---------
Total Continuing Segments:
Gross premiums written $1,066,473 $767,589
Net premiums written 892,059 630,551
Premiums earned 700,126 456,103
Pre-tax income 113,589 65,503
Loss ratio 63.4% 64.2%
Expense ratio 28.4% 31.3%
GAAP combined ratio 91.8% 95.5%
Discontinued Business:
Gross premiums written $ - $ 8,619
Net premiums written - 3,442
Premiums earned - 22,363
Pre-tax loss - (54)
Corporate & Eliminations:
Realized investment and foreign
currency gains $ 13,366 $ 4,963
Interest and other, net (22,376) (19,705)
Pre-tax loss (9,010) (14,742)
Consolidated:
Gross premiums written $1,066,473 $776,208
Net premiums written 892,059 633,993
Premiums earned 700,126 478,466
Pre-tax income 104,579 50,707
Loss ratio 63.4% 64.9%
Expense ratio 28.4% 31.2%
GAAP combined ratio 91.8% 96.1%
(1) Underwriting ratios represent losses, loss expenses and underwriting
expenses expressed as a percentage of premium earned. Underwriting expenses
do not include expenses related to insurance services or unallocated
corporate expenses.
(2) Segment operating results for the prior period have been restated to
reflect two changes in the accounting presentation. First, operating
results for Vela Insurance Services, Inc., an excess and surplus lines
underwriting manager, were transferred from the reinsurance segment to the
specialty segment as a result of a change in management responsibility for
this business. Second, in the fourth quarter of 2002, the Company modified
the presentation of reinsurance assumed from Lloyd's syndicates to reflect
the Company's share of the reinsurance and brokerage costs paid by the
syndicates. Previously, these amounts were netted against assumed premiums.
Restated operating results by segment for each of the five years ended
December 31, 2002 are presented in a separate table below.
W. R. Berkley Corporation Page 7
Supplemental Information
(Amounts in thousands, except per share data)
For the Quarter
Ended March 31,
----------------------------
2003 2002
---------- -----------
Components of net income:
Underwriting income (1) $ 57,078 $ 18,641
Insurance services 5,652 3,450
Net investment income 51,760 44,152
Interest and other expenses (23,277) (20,499)
Realized investment and foreign currency gains 13,366 4,963
Income taxes and minority interest (32,876) (16,311)
Net income $ 71,703 $ 34,396
Reconciliation of net income to net operating income:
Net income 71,703 34,396
Realized investment and foreign currency gains, after tax (8,867) (3,226)
Discontinued business, after tax - 35
Net operating income (2) $ 62,836 $ 31,205
Net operating return on equity (2) 4.7% 3.3%
Cash flow from operations before
change in trading account $ 275,831 $ 94,150
March 31, December 31,
2003 2002
Selected balance sheet information:
Total investments (3) $5,062,056 $ 4,663,100
Total assets 7,872,555 7,031,323
Reserves for losses and loss expenses 3,381,172 3,167,929
Long-term debt 499,186 362,985
Trust preferred securities 198,262 198,251
Stockholders' equity (4) 1,397,307 1,335,199
Shares outstanding 55,286 55,223
Stockholders' equity per share 25.27 24.18
(1) Catastrophe losses were $7 million pre-tax, or 8 cents per share after-tax, in the
first quarter of each of 2003 and 2002.
(2) Net operating income is a non-GAAP financial measure defined by the Company as net
income excluding gains and losses on investments, foreign currencies and discontinued
business. Management believes that excluding investment and foreign currency gains,
which result primarily from changes in general economic conditions, and excluding
results of businesses that have been discontinued provides a useful indicator of
trends in the Company's underlying and on-going operations. Net operating return on
equity represents net operating income expressed as a percentage of beginning of year
stockholders' equity, adjusted for stock transactions.
(3) Investments include trading account receivable from brokers and clearing
organizations and trading securities sold but not yet purchased.
(4) Stockholders' equity includes after-tax unrealized gains from investments and foreign
exchange of $97 million and $105 million as of March 31, 2003 and December 31, 2002,
respectively.
W. R. Berkley Corporation Page 8
Operating Results by Segment
For the Year Ended December 31, 2002
(Amounts in thousands, except ratios (1))
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
----------- ----------- ----------- ----------- -----------
Specialty (2):
Gross premiums written $ 217,936 $ 252,995 $ 273,394 $ 283,351 $ 1,027,676
Net premiums written 192,429 219,764 242,558 285,178 939,929
Premiums earned 150,422 174,053 200,699 247,522 772,696
Pre-tax income 20,379 35,496 34,097 46,140 136,112
Loss ratio 66.2% 58.9% 64.3% 65.0% 63.7%
Expense ratio 28.3% 27.8% 25.7% 22.5% 25.7%
GAAP combined ratio 94.5% 86.7% 90.0% 87.5% 89.4%
Alternative Markets:
Gross premiums written $ 98,173 $ 47,867 $ 102,763 $ 100,151 $ 348,954
Net premiums written 84,580 42,057 89,134 89,586 305,357
Premiums earned 45,337 51,487 61,077 77,657 235,558
Pre-tax income 14,232 13,749 16,880 17,842 62,703
Loss ratio 66.8% 68.1% 66.2% 66.2% 66.7%
Expense ratio 28.7% 30.0% 31.9% 28.1% 29.6%
GAAP combined ratio 95.5% 98.1% 98.1% 94.3% 96.3%
Reinsurance (2):
Gross premiums written $ 166,943 $ 175,789 $ 184,025 $ 243,070 $ 769,827
Net premiums written 129,289 135,410 143,822 193,448 601,969
Premiums earned 64,579 82,259 99,167 152,282 398,287
Pre-tax income (loss) 8,191 2,635 6,729 (2,574) 14,981
Loss ratio 69.5% 74.9% 73.0% 78.8% 75.0%
Expense ratio 32.7% 34.0% 30.6% 30.7% 31.7%
GAAP combined ratio 102.2% 108.9% 103.6% 109.5% 106.7%
Regional:
Gross premiums written $ 238,319 $ 236,686 $ 236,212 $ 243,933 $ 955,150
Net premiums written 183,703 192,655 199,358 200,861 776,577
Premiums earned 156,581 172,062 183,424 193,318 705,385
Pre-tax income 22,435 18,565 26,736 36,349 104,085
Loss ratio 60.5% 64.3% 58.8% 53.6% 59.1%
Expense ratio 31.6% 31.4% 33.0% 33.5% 32.4%
GAAP combined ratio 92.1% 95.7% 91.8% 87.1% 91.5%
International:
Gross premiums written $ 46,218 $ 13,973 $ 13,045 $ 14,029 $ 87,265
Net premiums written 40,550 11,706 13,103 13,954 79,313
Premiums earned 39,184 20,206 14,967 14,927 89,284
Pre-tax income (loss) 266 (800) (2,241) 1,018 (1,757)
Loss ratio 60.1% 56.0% 62.1% 28.6% 54.2%
Expense ratio 41.8% 49.5% 59.4% 70.6% 51.3%
GAAP combined ratio 101.9% 105.5% 121.5% 99.2% 105.5%
(Continued)
W. R. Berkley Corporation Page 9
Operating Results by Segment (continued)
For the Year Ended December 31, 2002
(Amounts in thousands, except ratios (1))
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
----------- ----------- ----------- ----------- -----------
Discontinued:
Gross premiums written $ 8,619 $ 1,693 $ 12,173 $ (3,130) $ 19,355
Net premiums written 3,442 (497) 15 4,385 7,345
Premiums earned 22,363 12,621 9,137 7,196 51,317
Pre-tax loss (54) (4,600) (3,282) (2,746) (10,682)
Loss ratio 78.7% 121.3% 107.5% 110.4% 98.7%
Expense ratio 29.9% 24.2% 37.2% 36.7% 30.8%
GAAP combined ratio 108.6% 145.5% 144.7% 147.1% 129.5%
Corporate & Eliminations:
Realized gains (losses) $ 4,963 $ (8,449) $ 628 $ 39,928 $ 37,070
Interest and other (19,705) (19,389) (20,014) (23,971) (83,079)
Pre-tax income (loss) (14,742) (27,838) (19,386) 15,957 (46,009)
Consolidated:
Gross premiums written $ 776,208 $ 729,003 $ 821,612 $ 881,404 $ 3,208,227
Net premiums written 633,993 601,095 687,990 787,412 2,710,490
Premiums earned 478,466 512,688 568,471 692,902 2,252,527
Pre-tax income 50,707 37,207 59,533 111,986 259,433
Loss ratio 64.9% 65.6% 64.9% 64.7% 65.0%
Expense ratio 31.2% 31.0% 30.7% 29.2% 30.4%
GAAP combined ratio 96.1% 96.6% 95.6% 93.9% 95.4%
(1) Underwriting ratios represent losses, loss expenses and underwriting expenses expressed as a percentage
of premium earned. Underwriting expenses do not include expenses related to insurance services or
unallocated corporate expenses.
(2) Segment operating results have been restated to reflect two changes in the accounting presentation.
First, operating results for Vela Insurance Services, Inc., an excess and surplus lines underwriting
manager, were transferred from the reinsurance segment to the specialty segment as a result of a change
in management responsibility for this business. Second, in the fourth quarter of 2002, the Company
modified the presentation of reinsurance assumed from Lloyd's syndicates to reflect the Company's share
of the reinsurance and brokerage costs paid by the syndicates. Previously, these amounts were netted
against assumed premiums.
W. R. Berkley Corporation Page 10
Operating Results by Segment
For the Five Years Ended December 31, 2002
(Amounts in thousands, except ratios (1))
1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- -----------
Specialty (2):
Gross premiums written $ 379,404 $ 394,958 $ 423,907 $ 658,199 $ 1,027,676
Net premiums written 259,317 268,889 300,885 567,714 939,929
Premiums earned 240,215 262,682 282,205 428,058 772,696
Pre-tax income 75,549 43,331 32,104 34,554 136,112
Loss ratio 62.0% 68.1% 73.1% 71.0% 63.7%
Expense ratio 31.7% 35.2% 33.5% 30.7% 25.7%
GAAP combined ratio 93.7% 103.3% 106.6% 101.7% 89.4%
Alternative Markets:
Gross premiums written $ 72,527 $ 83,167 $ 108,802 $ 169,439 $ 348,954
Net premiums written 66,418 73,089 98,001 151,942 305,357
Premiums earned 63,064 75,979 88,872 123,173 235,558
Pre-tax income 28,252 25,807 34,944 34,255 62,703
Loss ratio 61.4% 65.8% 70.2% 76.5% 66.7%
Expense ratio 43.4% 41.5% 38.7% 32.9% 29.6%
GAAP combined ratio 104.8% 107.3% 108.9% 109.4% 96.3%
Reinsurance (2):
Gross premiums written $ 291,334 $ 332,772 $ 307,484 $ 285,547 $ 769,827
Net premiums written 263,790 300,671 261,280 196,572 601,969
Premiums earned 240,804 291,122 286,793 209,938 398,287
Pre-tax income (loss) 30,211 16,461 27,876 (61,403) 14,981
Loss ratio 74.4% 76.1% 73.3% 109.3% 75.0%
Expense ratio 31.5% 33.3% 33.3% 38.3% 31.7%
GAAP combined ratio 105.9% 109.4% 106.6% 147.6% 106.7%
Regional:
Gross premiums written $ 578,231 $ 595,396 $ 579,890 $ 705,001 $ 955,150
Net premiums written 486,213 497,041 499,526 598,149 776,577
Premiums earned 468,794 492,304 503,029 555,750 705,385
Pre-tax income (loss) (9,408) (70,964) 4,182 40,399 104,085
Loss ratio 76.4% 87.1% 75.5% 67.2% 59.1%
Expense ratio 36.7% 37.5% 35.1% 35.0% 32.4%
GAAP combined ratio 113.1% 124.6% 110.6% 102.2% 91.5%
International:
Gross premiums written $ 95,870 $ 107,254 $ 143,523 $ 170,600 $ 87,265
Net premiums written 75,106 86,172 118,981 150,090 79,313
Premiums earned 73,032 86,943 107,285 140,909 89,284
Pre-tax income (loss) (6,745) 4,200 6,591 12,149 (1,757)
Loss ratio 59.7% 55.4% 62.1% 61.4% 54.2%
Expense ratio 59.9% 47.5% 41.7% 40.6% 51.3%
GAAP combined ratio 119.6% 102.9% 103.8% 102.0% 105.5%
(Continued)
W. R. Berkley Corporation Page 11
Operating Results by Segment
For the Five Years Ended December 31, 2002
(Amounts in thousands, except ratios (1))
1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- -----------
Discontinued:
Gross premiums written $ 221,126 $ 221,342 $ 253,149 $ 219,680 $ 19,355
Net premiums written 195,410 201,857 227,571 193,629 7,345
Premiums earned 192,490 205,354 222,830 222,641 51,317
Pre-tax loss (18,528) (14,141) (9,936) (133,480) (10,682)
Loss ratio 76.0% 77.0% 75.9% 131.4% 98.7%
Expense ratio 37.4% 34.0% 32.8% 33.0% 30.8%
GAAP combined ratio 113.4% 111.0% 108.7% 164.4% 129.5%
Corporate & Eliminations:
Realized gains (losses) $ 25,400 $ (6,064) $ 8,364 $ (11,494) $ 37,070
Restructuring charge -- (11,505) (1,850) (3,196) --
Interest and other (61,950) (66,373) (61,424) (63,178) (83,079)
Pre-tax loss (36,550) (83,942) (54,910) (77,868) (46,009)
Consolidated:
Gross premiums written $ 1,638,492 $ 1,734,889 $ 1,816,755 $ 2,208,466 $ 3,208,227
Net premiums written 1,346,254 1,427,719 1,506,244 1,858,096 2,710,490
Premiums earned 1,278,399 1,414,384 1,491,014 1,680,469 2,252,527
Pre-tax income (loss) 62,781 (79,248) 40,851 (151,394) 259,433
Loss ratio 71.6% 76.8% 73.4% 82.1% 65.0%
Expense ratio 36.5% 36.5% 34.8% 34.4% 30.4%
GAAP combined ratio 108.1% 113.3% 108.2% 116.5% 95.4%
(1) Underwriting ratios represent losses, loss expenses and underwriting expenses expressed as a percentage
of premium earned. Underwriting expenses do not include expenses related to insurance services or
unallocated corporate expenses.
(2) Segment operating results have been restated to reflect the transfer of operating results for Vela
Insurance Services, Inc. from the reinsurance segment to the specialty segment.