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 THIRD QUARTER EARNINGS
GREENWICH, CT, OCTOBER 26, 2004 -- W. R. BERKLEY CORPORATION (NYSE:
BER) today reported net income for the third quarter of 2004 of $97 million, or
$1.10 per share, a 27% increase from $76 million, or $0.87 per share, a year
ago. Third quarter 2004 net operating income increased 27% to $94 million, or
$1.06 per share, compared with $74 million, or $0.84 per share, for the third
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)
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Gross premiums written $ 1,173,715 $ 1,106,280 $ 3,521,135 $ 3,180,248
Net premiums written 1,058,580 939,677 3,161,459 2,707,193
Net income 97,072 76,469 321,984 244,012
Net income per diluted share 1.10 0.87 3.64 2.79
Net operating income 93,925 74,037 293,816 204,426
Net operating income per diluted share $ 1.06 $ 0.84 $ 3.33 $ 2.34
W. R. Berkley Corporation Page 2
Third quarter highlights included:
- Net premiums written rose to $1.059 billion, an increase of 13% from the
comparable quarter of 2003.
- Pre-tax losses attributable to Hurricanes Charley, Frances, Ivan and
Jeanne were $32 million.
- The GAAP combined ratio was 91.9% compared with 91.7% in the prior year
period.
- The paid loss ratio decreased to 30.0% from 36.2% in the prior year
quarter.
- Investment income increased 39% to $72 million.
- Cash flow from operations increased 8% to $465 million compared with
$429 million in the year-earlier period.
Commenting on the Company's performance, William R. Berkley, chairman and
chief executive officer, said: "The Company achieved record third quarter
operating results in spite of the unusually high level of storms and resulting
decline in the industry's profitability. Prices are generally increasing at a
level above loss cost inflation, and in most areas of the business our returns
continue to be comfortably above our targets.
"Our paid loss ratio declined to 30% in the third quarter, the seventh
consecutive quarterly reduction, and our cash flow was at an all-time high.
Although our ability to increase prices is becoming a greater challenge, we
expect to continue to deliver outstanding returns for the foreseeable future,"
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 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 Page 4
Consolidated Financial Summary
(Amounts in thousands, except per share data)
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
Net premiums written $ 1,058,580 $ 939,677 $ 3,161,459 $ 2,707,193
Change in unearned premiums (24,500) (104,097) (171,464) (365,019)
---------- --------- ---------- ----------
Premiums earned 1,034,080 835,580 2,989,995 2,342,174
Net investment income 71,722 51,678 209,009 153,859
Service fees 28,020 25,475 83,966 76,854
Realized investment gains 4,792 3,423 44,559 60,506
Other income 922 226 1,466 1,359
--------- -------- --------- ---------
Total revenues 1,139,536 916,382 3,328,995 2,634,752
--------- -------- --------- ---------
Expenses:
Losses and loss expenses 674,534 533,201 1,901,617 1,491,244
Other operating expenses 309,392 261,281 911,646 750,294
Interest expense 16,707 13,825 48,232 39,193
--------- -------- --------- ---------
Total expenses 1,000,633 808,307 2,861,495 2,280,731
--------- -------- --------- ---------
Income before income taxes
and minority interest 138,903 108,075 467,500 354,021
Income tax expense (40,645) (30,744) (142,837) (107,960)
Minority interest (1,186) (862) (1,952) (2,049)
---------- --------- ---------- ----------
Net income before change in accounting
principle 97,072 76,469 322,711 244,012
Cumulative effect of change in accounting
principle, net of taxes - - (727) -
--------- -------- --------- ---------
Net income $ 97,072 $ 76,469 $ 321,984 $ 244,012
========= ======== ========= =========
Net income per share:
Basic $ 1.15 $ 0.92 $ 3.84 $ 2.94
Diluted $ 1.10 $ 0.87 $ 3.64 $ 2.79
Average shares outstanding:
Basic 84,079 83,183 83,883 83,025
Diluted 88,174 87,923 88,373 87,468
W. R. Berkley Corporation Page 5
Operating Results by Segment
(Amounts in thousands, except ratios (1))
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Specialty (2):
Gross premiums written $ 416,458 $ 386,785 $ 1,194,122 $ 1,057,027
Net premiums written 389,997 350,278 1,124,666 958,062
Premiums earned 377,046 297,574 1,077,335 810,534
Pre-tax income 74,123 47,595 214,075 150,892
Loss ratio 62.2% 65.8% 61.9% 63.1%
Expense ratio 24.9% 24.4% 25.2% 24.5%
GAAP combined ratio 87.1% 90.2% 87.1% 87.6%
Regional (2):
Gross premiums written $ 320,640 $ 282,133 $ 988,657 $ 871,962
Net premiums written 276,488 231,951 855,032 707,930
Premiums earned 274,520 222,389 786,487 634,683
Pre-tax income 41,581 40,905 124,780 107,171
Loss ratio 57.8% 54.2% 57.2% 56.7%
Expense ratio 31.1% 32.3% 31.0% 31.6%
GAAP combined ratio 88.9% 86.5% 88.2% 88.3%
Alternative Markets (2):
Gross premiums written $ 177,691 $ 157,400 $ 557,431 $ 429,077
Net premiums written 159,886 127,688 484,853 355,593
Premiums earned 149,166 101,660 424,941 290,916
Pre-tax income 31,447 18,689 95,956 63,053
Loss ratio 71.6% 70.5% 70.4% 68.7%
Expense ratio 22.0% 25.4% 21.4% 24.8%
GAAP combined ratio 93.6% 95.9% 91.8% 93.5%
Reinsurance (2):
Gross premiums written $ 239,237 $ 262,411 $ 721,058 $ 768,165
Net premiums written 214,005 213,189 642,388 635,065
Premiums earned 215,728 198,145 648,243 557,254
Pre-tax income 13,458 17,154 64,895 37,328
Loss ratio 76.3% 69.2% 70.6% 70.8%
Expense ratio 26.2% 28.5% 28.0% 29.5%
GAAP combined ratio 102.5% 97.7% 98.6% 100.3%
International:
Gross premiums written $ 19,689 $ 17,551 $ 59,867 $ 54,017
Net premiums written 18,204 16,571 54,520 50,543
Premiums earned 17,620 15,812 52,989 48,787
Pre-tax income 1,994 1,887 4,251 4,889
Loss ratio 56.5% 51.6% 53.1% 52.2%
Expense ratio 41.7% 39.2% 40.8% 42.1%
GAAP combined ratio 98.2% 90.8% 93.9% 94.3%
(Continued)
W. R. Berkley Corporation Page 6
Operating Results by Segment (continued)
(Amounts in thousands, except ratios (1))
Third Quarter Nine Months
------------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Corporate and Eliminations:
Realized investment gains $ 4,792 $ 3,423 $ 44,559 $ 60,506
Interest and other, net (28,492) (21,578) (81,016) (69,818)
Pre-tax loss (23,700) (18,155) (36,457) (9,312)
Total (2):
Gross premiums written $ 1,173,715 $ 1,106,280 $ 3,521,135 $ 3,180,248
Net premiums written 1,058,580 939,677 3,161,459 2,707,193
Premiums earned 1,034,080 835,580 2,989,995 2,342,174
Pre-tax income 138,903 108,075 467,500 354,021
Loss ratio 65.2% 63.8% 63.6% 63.7%
Expense ratio 26.7% 27.9% 27.1% 28.0%
GAAP combined ratio 91.9% 91.7% 90.7% 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, including losses attributable to Hurricanes
Charley, Frances, Ivan and Jeanne, were $40 million in the third quarter
of 2004 compared to weather-related losses of $14 million in the third
quarter of 2003. For the first nine months of 2004, weather-related losses
were $58 million compared to $35 million in the corresponding 2003 period.
W. R. Berkley Corporation Page 7
Supplemental Information
(Amounts in thousands, except per share data)
Third Quarter Nine Months
------------- -----------
Reconciliation of net operating
income to net income: 2004 2003 2004 2003
---- ---- ---- ----
Net operating income (1) $ 93,925 74,037 $ 293,816 $ 204,426
Realized investment gains, net of taxes 3,147 2,432 28,895 39,586
Cumulative effect of change
in accounting principle - - (727) -
-------- -------- --------- -------
Net income $ 97,072 76,469 $ 321,984 $ 244,012
======== ======== ========= =======
Return on equity (2) 23.1% 22.9% 25.5% 24.4%
Cash flow from operations $ 464,520 $ 428,613 $ 1,133,978 $ 975,640
Cash flow from operations before cash transfers
to/from trading account (3) $ 487,520 $ 428,613 $ 1,206,978 $ 975,640
September 30, December 31,
------------- ------------
Selected balance sheet information 2004 2003
---- ----
Total investments (4) $ 7,838,682 $ 6,480,713
Total assets 11,059,645 9,334,685
Reserves for losses and loss expenses 5,163,129 4,192,091
Debt 807,896 659,208
Junior subordinated debentures 208,274 193,336
Stockholders' equity (5) 1,976,070 1,682,562
Shares outstanding 84,129 83,538
Stockholders' equity per share 23.49 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, and the effects of changes in accounting principle
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 $97 million and $120 million as of September 30,
2004 and December 31, 2003, respectively.