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 RESULTS
NET OPERATING INCOME UP 25% TO $117 MILLION
GREENWICH, CT, OCTOBER 24, 2005 -- W. R. BERKLEY CORPORATION (NYSE: BER)
today reported net income for the third quarter of 2005 of $123 million, or 92
cents per share, a 26% increase from $97 million, or 73 cents per share, a year
ago. Net operating income for the third quarter of 2005 increased 25% to $117
million, or 88 cents per share, compared with $94 million, or 71 cents per
share, for the third quarter of 2004. Net operating income is a non-GAAP
financial measure defined by the Company as net income excluding realized
investment gains and losses and the effect of a change in accounting principle
in 2004. All per share amounts in this release reflect the 3-for-2 common stock
split effected on April 8, 2005.
Summary Financial Data
(Amounts in thousands, except per share data)
<Table>
<Caption>
Third Quarter Nine Months
------------- -----------
2005 2004 2005 2004
---- ---- ---- ----
Gross premiums written $ 1,239,114 $ 1,173,715 $ 3,832,016 $ 3,521,135
Net premiums written 1,131,128 1,058,580 3,454,307 3,161,459
Net income 122,518 97,072 377,468 321,984
Net income per diluted share 0.92 0.73 2.84 2.43
Net operating income 117,321 93,925 368,595 293,816
Net operating income per diluted share $ 0.88 $ 0.71 $ 2.77 $ 2.22
</Table>
Third quarter highlights included:
- GAAP combined ratio was 92.1% compared to 91.9% in the prior year
period. Excluding the impact of hurricanes in the comparable
periods, the GAAP combined ratio improved by 1.0 percentage points
to 87.8%.
- Hurricane losses were $50 million pre-tax, up 56% from the prior
year period.
- Cash flow from operations increased 32% to $613 million compared to
$465 million in the year-earlier period.
- Net investment income increased 50% to $108 million.
- The paid loss ratio continued to be favorable at 34.2%.
Commenting on the Company's performance, William R. Berkley, chairman
and chief executive officer, said: "The quarter reflects the outstanding results
of our operating units. We are pleased that in spite of the weather-related
losses our returns are still within our forecasted range.
"We continue to seek all the business available at our targeted
underwriting margins. Prior to the recent hurricanes, we had anticipated that
our underwriting discipline would result in modest growth. We now anticipate
that these recent events will bring about greater industry focus on
profitability and concomitant underwriting discipline in most lines. We are
therefore more positive about growth in many of our existing businesses and see
opportunities in several new areas.
"Our expectation of achieving returns over twenty percent next year
continues, and we believe we will be able to grow our top line. We anticipate
that our company will deliver returns in excess of our fifteen percent target
for the next several years," Mr. Berkley concluded.
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.
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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 2005 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 increased level of our retention, natural and man-made catastrophic
losses, including Hurricanes Katrina and Rita and as a result of terrorist
activities, the impact of competition, the availability of reinsurance, exposure
as to coverage for terrorist acts, our retention under The Terrorism Risk
Insurance Act of 2002 ("TRIA") and the scheduled expiration of TRIA on December
31, 2005, 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 merger arbitrage
investments, exchange rate and political risks relating to our international
operations, legislative and regulatory developments, including these related to
alleged anti-competitive or other improper business practices in the insurance
industry, 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 2005 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.
# # #
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Consolidated Financial Summary
(Amounts in thousands, except per share data)
<Table>
<Caption>
Third Quarter Nine Months
------------- -----------
2005 2004 2005 2004
---- ---- ---- ----
Revenues:
Net premiums written $ 1,131,128 $ 1,058,580 $ 3,454,307 $ 3,161,459
Change in unearned premiums 44 (24,500) (191,287) (171,464)
-------------- ------------ ------------ ------------
Premiums earned 1,131,172 1,034,080 3,263,020 2,989,995
Net investment income 107,502 71,722 290,682 209,009
Service fees 25,064 28,020 84,025 83,966
Realized investment gains 8,120 4,792 13,885 44,559
Other income 319 922 1,337 1,466
-------------- ------------ ------------ ------------
Total revenues 1,272,177 1,139,536 3,652,949 3,328,995
============== ============ ============ ============
Expenses:
Losses and loss expenses 742,242 674,534 2,058,714 1,901,617
Other operating expenses 338,962 309,392 1,000,367 911,646
Interest expense 23,632 16,707 60,974 48,232
-------------- ------------ ------------ ------------
Total expenses 1,104,836 1,000,633 3,120,055 2,861,495
============== ============ ============ ============
Income before income taxes
and minority interest 167,341 138,903 532,894 467,500
Income tax expense (44,540) (40,645) (153,364) (142,837)
Minority interest (283) (1,186) (2,062) (1,952)
-------------- ------------ ------------ ------------
Net income before change in accounting
principle 122,518 97,072 377,468 322,711
Cumulative effect of change in accounting
principle, net of taxes - - - (727)
-------------- ------------ ------------ ------------
Net income $ 122,518 $ 97,072 $ 377,468 $ 321,984
============== ============ ============ ============
Net income per share:
Basic (1) $ 0.96 $ 0.77 $ 2.99 $ 2.56
Diluted (1) $ 0.92 $ 0.73 $ 2.84 $ 2.43
Average shares outstanding:
Basic (1) 127,196 126,118 126,413 125,825
Diluted (1) 133,753 132,261 132,791 132,559
</Table>
(1) Per share amounts reflect the 3-for-2 common stock split effected on April
8, 2005.
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Operating Results by Segment
(Amounts in thousands, except ratios (1))
<Table>
<Caption>
Third Quarter Nine Months
------------- -----------
2005 2004 2005 2004
---- ---- ---- ----
Specialty (2):
Gross premiums written $ 469,432 $ 416,458 $ 1,409,763 $ 1,194,122
Net premiums written 444,881 389,997 1,335,737 1,124,666
Premiums earned 435,716 377,046 1,239,688 1,077,335
Pre-tax income 89,080 74,123 253,766 214,075
Loss ratio 63.4% 62.2% 62.8% 61.9%
Expense ratio 24.4% 24.9% 24.8% 25.2%
GAAP combined ratio 87.8% 87.1% 87.6% 87.1%
Regional (2):
Gross premiums written $ 337,790 $ 320,640 $ 1,061,654 $ 988,657
Net premiums written 291,339 276,488 910,169 855,032
Premiums earned 298,250 274,520 870,586 786,487
Pre-tax income 49,538 41,581 157,193 124,780
Loss ratio 57.8% 57.8% 56.2% 57.2%
Expense ratio 30.7% 31.1% 30.5% 31.0%
GAAP combined ratio 88.5% 88.9% 86.7% 88.2%
Alternative Markets (2):
Gross premiums written $ 178,280 $ 177,691 $ 586,885 $ 557,431
Net premiums written 164,015 159,886 504,740 484,853
Premiums earned 159,760 149,166 464,668 424,941
Pre-tax income 58,446 31,447 151,782 95,956
Loss ratio 58.3% 71.6% 62.2% 70.4%
Expense ratio 21.3% 22.0% 21.1% 21.4%
GAAP combined ratio 79.6% 93.6% 83.3% 91.8%
Reinsurance (2):
Gross premiums written $ 230,143 $ 239,237 $ 706,031 $ 721,058
Net premiums written 209,296 214,005 642,073 642,388
Premiums earned 215,982 215,728 627,566 648,243
Pre-tax income (loss) (4,753) 13,458 46,487 64,895
Loss ratio 87.2% 76.3% 74.4% 70.6%
Expense ratio 27.5% 26.2% 29.8% 28.0%
GAAP combined ratio 114.7% 102.5% 104.2% 98.6%
International:
Gross premiums written $ 23,469 $ 19,689 $ 67,683 $ 59,867
Net premiums written 21,597 18,204 61,588 54,520
Premiums earned 21,464 17,620 60,512 52,989
Pre-tax income 3,783 1,994 8,441 4,251
Loss ratio 57.4% 56.1% 57.9% 53.1%
Expense ratio 35.4% 35.0% 35.4% 35.5%
GAAP combined ratio 92.8% 91.1% 93.3% 88.6%
</Table>
(Continued)
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W.R. Berkley Corporation
Operating Results by Segment (continued)
(Amounts in thousands, except rations (1))
Third Quarter Nine Months
------------- -----------
2005 2004 2005 2004
---- ---- ---- ----
Corporate and Eliminations:
Realized investment gains $ 8,120 $ 4,792 $ 13,885 $ 44,559
Interest and other, net (36,873) (28,492) (98,660) (81,016)
Pre-tax loss (28,753) (23,700) (84,775) (36,457)
Total:
Gross premiums written $ 1,239,114 $ 1,173,715 $ 3,832,016 $ 3,521,135
Net premiums written 1,131,128 1,058,580 3,454,307 3,161,459
Premiums earned 1,131,172 1,034,080 3,263,020 2,989,995
Pre-tax income 167,341 138,903 532,894 467,500
Loss ratio 65.6% 65.2% 63.1% 63.6%
Expense ratio 26.5% 26.7% 27.1% 27.1%
GAAP combined ratio 92.1% 91.9% 90.2% 90.7%
(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.
For the international segment, the loss and expense ratios do not include
life insurance business. GAAP combined ratio is the sum of loss ratio and
expense ratio.
(2) Pre-tax losses attributable to hurricanes in the third quarters of 2005 and
2004 were $50 million and $32 million, respectively (net of reinsurance
recoveries and after reinstatement premiums). Total weather-related losses
in the third quarter of 2005 were $56 million, including losses of $35
million for reinsurance, $16 million for regional and $5 million for
specialty. Total weather-related losses in the third quarter of 2004 were
$40 million, including losses of $27 million for reinsurance, $9 million
for regional, $3 million for specialty and $1 million for alternative
markets. For the first nine months of 2005 and 2004, total weather-related
losses were $74 million and $58 million, respectively.
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W. R. Berkley Corporation
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
<Table>
<Caption>
September 30, December 31,
2005 2004
---- ----
Total investments (1) $10,058,292 $ 8,341,944
Total assets 13,671,523 11,451,033
Reserves for losses 6,473,830 5,449,611
Senior notes and other debt 967,449 808,264
Junior subordinated debentures 450,301 208,286
Stockholders' equity (2) 2,424,818 2,109,702
Shares outstanding 127,423 126,409
Stockholders' equity per share 19.03 16.69
</Table>
(1) Total investments include cash and cash equivalents, trading accounts
receivable from brokers and clearing organizations, trading account
securities sold but not yet purchased and unsettled purchases.
(2) Stockholders' equity includes after-tax unrealized gains from
investments and currency translation adjustments of $48 million and
$112 million as of September 30, 2005 and December 31, 2004,
respectively.
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W. R. Berkley Corporation
Supplemental Information
(Amounts in thousands)
<Table>
<Caption>
Third Quarter Nine Months
------------- -----------
Reconciliation of net operating
income to net income: 2005 2004 2005 2004
---- ---- ---- ----
Net operating income (1) $ 117,321 $ 93,925 $ 368,595 $ 293,816
Realized investment gains, net of taxes 5,197 3,147 8,873 28,895
Cumulative effect of change
in accounting principle -- -- -- (727)
---------- ---------- ---------- ----------
Net income $ 122,518 $ 97,072 $ 377,468 $ 321,984
========== ========== ========== ==========
Return on equity:
Net income (2) 23.2% 23.1% 23.9% 25.5%
Net operating income (2) 22.2% 22.3% 23.3% 23.3%
Cash flow:
Cash flow from operations $ 613,080 $ 464,520 $1,355,074 $1,133,978
Cash flow from operations before cash transfers
to/from trading account (3) $ 618,107 $ 487,520 $1,435,101 $1,206,978
</Table>
(1) Net operating income is a non-GAAP financial measure defined by the
Company as net income excluding gains and losses on investments and the
effect of a change in accounting principle in 2004. Management believes
that excluding investment gains and losses, which result primarily from
changes in general economic conditions, and the change in accounting
principle in 2004 provides a useful indicator of trends in the
Company's underlying operations.
(2) Return on equity represents net income and net operating 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 and withdrawals 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.
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