EXHIBIT 99.1
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W. R. BERKLEY CORPORATION NEWS RELEASE
475 STEAMBOAT ROAD
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 EARNINGS
GREENWICH, CT, JULY 26, 2004 -- W. R. BERKLEY CORPORATION (NYSE: BER)
today reported net income for the second quarter of 2004 of $109 million, or
$1.25 per share, a 14% increase from $96 million, or $1.10 per share, a year
ago. Second quarter 2004 net operating income increased 53% to $103 million, or
$1.18 per share, compared with $68 million, or $0.78 per share, for the second
quarter of 2003. Net operating income is a non-GAAP financial measure defined by
the Company as net income excluding realized investment gains and the effects of
changes in accounting principles.
Summary Financial Data
(Amounts in thousands, except per share data)
Second Quarter Six Months
-------------- ----------
2004 2003 2004 2003
---- ---- ---- ----
Gross premiums written ....................... $1,130,696 $1,007,495 $2,347,420 $2,073,968
Net premiums written ......................... 1,016,177 875,457 2,102,879 1,767,516
Net income ................................... 109,484 95,840 224,912 167,543
Net income per diluted share (1) ............. 1.25 1.10 2.56 1.93
NET OPERATING INCOME ......................... 103,084 67,553 199,891 130,389
NET OPERATING INCOME PER DILUTED SHARE (1) ... $ 1.18 $ 0.78 $ 2.27 $ 1.50
(1) Per share amounts for 2003 have been adjusted to reflect the 3-for-2
common stock split effected on August 27, 2003.
W. R. Berkley Corporation 2
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Second quarter highlights included:
- - Net premiums written rose to $1.016 billion, an increase of 16% from the
comparable quarter of 2003.
- - GAAP combined ratio improved by 1.8 percentage points to 89.8% from 91.6%
in the prior year period.
- - The paid loss ratio decreased to 31.0% from 37.0% in the prior year
quarter.
- - Investment income increased 36% to $69 million.
- - Cash flow from operations increased 34% to $390 million compared with $291
million in the year-earlier period.
Commenting on the Company's performance, William R. Berkley, chairman and
chief executive officer, said: "We are extremely pleased with our progress both
in absolute terms and relative to the industry. We continue to adjust our
business mix, focusing strategically on areas that offer us the best opportunity
for improved pricing and more favorable terms and conditions."
He added, "Prices for casualty business, which represents more than 80%
percent of our premiums, are generally increasing at rates greater than loss
cost inflation. However, there are areas, such as director's and officer's
liability and treaty reinsurance, where pricing has become more competitive. As
a result of our disciplined underwriting, premiums for those areas decreased
slightly in the second quarter. However, net premiums written for all other
lines of business grew by 21% from a year ago.
"We continue to generate strong cash flow and an increasing level of
invested assets. We anticipate exceeding our original forecast of a 22%
after-tax operating return on equity this year, and anticipate achieving a
similar level of performance in 2005," Mr. Berkley concluded.
W. R. Berkley Corporation 3
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Founded in 1967, W. R. Berkley Corporation is an insurance holding company
that operates in five segments of the property casualty insurance business:
specialty insurance, regional property casualty insurance, alternative markets,
reinsurance 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 2004 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,
increases in the 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 risks, including those
relating to fixed income securities, merger arbitrage investments, and other
equity securities, exchange rate and political risks relating to our
international operations, legislative and regulatory developments, changes in
the ratings assigned to us by ratings agencies, the availability of dividends
from our insurance company subsidiaries, our ability to successfully acquire and
integrate companies and invest 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
2004 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.
# # #
W. R. Berkley Corporation 4
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Consolidated Financial Summary
(Amounts in thousands, except per share data)
Second Quarter Six Months
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2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Net premiums written ..................... $ 1,016,177 $ 875,457 $ 2,102,879 $ 1,767,516
Change in unearned premiums .............. (11,794) (68,989) (146,964) (260,922)
----------- ----------- ----------- -----------
Premiums earned ....................... 1,004,383 806,468 1,955,915 1,506,594
Net investment income .................... 68,798 50,421 137,287 102,181
Service fees ............................. 27,707 25,910 55,946 51,379
Realized investment gains ................ 9,860 43,717 39,767 57,083
Other income ............................. 6 441 544 1,133
----------- ----------- ----------- -----------
Total revenues ........................ 1,110,754 926,957 2,189,459 1,718,370
----------- ----------- ----------- -----------
Expenses:
Losses and loss expenses ................. 626,578 514,157 1,227,083 958,043
Other operating expenses ................. 310,476 258,160 602,254 489,013
Interest expense ......................... 15,754 13,273 31,525 25,368
----------- ----------- ----------- -----------
Total expenses ........................ 952,808 785,590 1,860,862 1,472,424
----------- ----------- ----------- -----------
Income before income taxes
and minority interest .............. 157,946 141,367 328,597 245,946
Income tax expense .......................... (48,166) (44,230) (102,192) (77,216)
Minority interest ........................... (296) (1,297) (766) (1,187)
----------- ----------- ----------- -----------
Net income before change in accounting
principle ............................. 109,484 95,840 225,639 167,543
Cumulative effect of change in accounting
principle, net of taxes .................. -- -- (727) --
----------- ----------- ----------- -----------
Net income ............................... $ 109,484 $ 95,840 $ 224,912 $ 167,543
=========== =========== =========== ===========
Net income per share:
Basic ................................. $ 1.31 $ 1.15 $ 2.68 $ 2.02
Diluted ............................... $ 1.25 $ 1.10 $ 2.56 $ 1.93
Average shares outstanding:
Basic ................................. 83,895 83,015 83,785 82,944
Diluted ............................... 87,880 87,053 87,925 86,661
W. R. Berkley Corporation 5
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Operating Results by Segment
(Amounts in thousands, except ratios (1))
Second Quarter Six Months
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2004 2003 2004 2003
---- ---- ---- ----
Specialty:
Gross premiums written .......... $411,111 $348,936 $777,664 $670,242
Net premiums written ............ 389,914 321,083 734,669 607,784
Premiums earned ................. 357,184 271,333 700,289 512,960
Pre-tax income .................. 74,769 54,756 139,952 103,297
Loss ratio ...................... 60.5% 61.5% 61.7% 61.6%
Expense ratio ................... 25.4% 24.1% 25.3% 24.5%
GAAP combined ratio ............. 85.9% 85.6% 87.0% 86.1%
Regional (2):
Gross premiums written .......... $331,474 $293,971 $668,017 $589,829
Net premiums written ............ 287,906 238,225 578,544 475,979
Premiums earned ................. 263,996 214,089 511,967 412,294
Pre-tax income .................. 37,405 34,071 83,199 66,266
Loss ratio ...................... 58.7% 58.2% 56.9% 58.1%
Expense ratio ................... 31.1% 31.0% 31.0% 31.2%
GAAP combined ratio ............. 89.8% 89.2% 87.9% 89.3%
Alternative Markets:
Gross premiums written .......... $133,279 $101,496 $379,740 $271,677
Net premiums written ............ 111,816 90,723 324,967 227,905
Premiums earned ................. 143,641 106,282 275,775 189,256
Pre-tax income .................. 32,821 22,415 64,509 44,364
Loss ratio ...................... 68.4% 68.1% 69.7% 67.7%
Expense ratio ................... 22.8% 24.5% 21.1% 24.5%
GAAP combined ratio ............. 91.2% 92.6% 90.8% 92.2%
Reinsurance:
Gross premiums written .......... $235,184 $243,362 $481,821 $505,754
Net premiums written ............ 208,700 207,077 428,383 421,876
Premiums earned ................. 221,869 196,632 432,515 359,109
Pre-tax income .................. 30,122 10,460 51,437 20,174
Loss ratio ...................... 66.6% 71.3% 67.8% 71.6%
Expense ratio ................... 28.3% 29.8% 29.0% 30.1%
GAAP combined ratio ............. 94.9% 101.1% 96.8% 101.7%
International:
Gross premiums written .......... $ 19,648 $ 19,730 $ 40,178 $ 36,466
Net premiums written ............ 17,841 18,349 36,316 33,972
Premiums earned ................. 17,693 18,132 35,369 32,975
Pre-tax income .................. 666 1,767 2,257 3,002
Loss ratio ...................... 53.2% 55.1% 51.4% 52.4%
Expense ratio ................... 40.7% 42.1% 40.4% 43.6%
GAAP combined ratio ............. 93.9% 97.2% 91.8% 96.0%
(Continued)
W. R. Berkley Corporation 6
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Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
Second Quarter Six Months
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2004 2003 2004 2003
---- ---- ---- ----
Corporate and Eliminations:
Realized investment gains ... $ 9,860 $ 43,717 $ 39,767 $ 57,083
Interest and other, net ..... (27,697) (25,819) (52,524) (48,240)
Pre-tax income (loss) ....... (17,837) 17,898 (12,757) 8,843
Total:
Gross premiums written ...... $ 1,130,696 $ 1,007,495 $ 2,347,420 $ 2,073,968
Net premiums written ........ 1,016,177 875,457 2,102,879 1,767,516
Premiums earned ............. 1,004,383 806,468 1,955,915 1,506,594
Pre-tax income .............. 157,946 141,367 328,597 245,946
Loss ratio .................. 62.4% 63.8% 62.7% 63.6%
Expense ratio ............... 27.4% 27.8% 27.3% 28.1%
GAAP combined ratio ......... 89.8% 91.6% 90.0% 91.7%
(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.
Combined ratio is the sum of loss ratio and expense ratio.
(2) Weather-related losses for the regional segment were $15 million in the
second quarter of 2004 compared to $16 million in the second quarter of
2003. For the first six months of 2004, weather-related losses were $19
million compared to $21 million in the corresponding 2003 period.
W. R. Berkley Corporation 7
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SUPPLEMENTAL INFORMATION
(Amounts in thousands, except per share data)
Second Quarter Six Months
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Reconciliation of net operating income to net income: 2004 2003 2004 2003
---- ---- ---- ----
Net operating income (1) ............................... $ 103,084 67,553 $ 199,891 $ 130,389
Realized investment gains, net of taxes ................ 6,400 28,287 25,748 37,154
Cumulative effect of change in accounting principle .... -- -- (727) --
--------- --------- --------- ---------
Net income ....................................... $ 109,484 95,840 $ 224,912 $ 167,543
========= ========= ========= =========
Return on equity (2) ................................... 26.0% 28.7% 26.7% 25.1%
Cash flow from operations .............................. $ 389,934 $ 291,430 $ 669,458 $ 547,027
Cash flow from operations before cash transfers
to/from trading account (3) ......................... $ 339,934 $ 291,430 $ 719,458 $ 547,027
June 30, December 31,
Selected balance sheet information 2004 2003
---- ----
Total investments (4) ................... $ 7,100,594 $ 6,480,713
Total assets ............................ 10,321,445 9,334,685
Reserves for losses and loss expenses ... 4,822,575 4,192,091
Debt .................................... 659,776 659,208
Junior subordinated debentures .......... 208,263 193,336
Stockholders' equity (5) ................ 1,813,741 1,682,562
Shares outstanding ...................... 84,044 83,538
Stockholders' equity per share .......... 21.58 20.14
(1) Net operating income is a non-GAAP financial measure defined by the
Company as net income excluding realized investment gains and the effects
of changes in accounting principles. Management believes that excluding
realized investment gains, 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 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/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.
(4) Investments include accounts receivable from brokers and clearing
organizations and securities sold but not yet purchased.
(5) Stockholders' equity includes after-tax unrealized gains from investments
and foreign exchange of $29 million and $120 million as of June 30, 2004
and December 31, 2003, respectively.