W. R. Berkley Corporation Reports Third Quarter Results

W. R. Berkley Corporation Reports Third Quarter Results

Net Income Up 32%, Net Premiums Written Up 13.3%

GREENWICH, Conn.--(BUSINESS WIRE)-- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the third quarter of 2012 of $101 million, or 71 cents per share, compared with $76 million, or 53 cents per share, for the third quarter of 2011.

Summary Financial Data

(Amounts in thousands, except per share data)

2012

2011

2012

2011

Gross premiums written

$

1,494,724

$

1,306,300

$

4,327,170

$

3,821,434

Net premiums written

1,275,887

1,126,139

3,670,404

3,266,857

Net income

100,947

76,410

345,103

274,184

Net income per diluted share

0.71

0.53

2.41

1.87

Operating income (1)

86,136

62,626

283,360

227,274

Operating income per diluted share

0.61

0.43

1.98

1.55


(1) Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses.

Third quarter highlights included:

  • Book value per share increased $1.13, representing a 15% increase on an annualized basis.

  • Average rates on renewed policies increased 7.0%.

  • GAAP combined ratio was 95.8%.

  • Net premiums written increased 13.3%.

  • The Company repurchased 2 million shares of its common stock at an average cost of $37.05 per share and an aggregate cost of $73 million.

Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We were very pleased with our third quarter results. Significant rate increases were a part of our substantial growth in the quarter, and we continue to see positive trends in most lines of business.

"It is clear, as we enter the second year of significant rate increases, that the cyclical change is no longer hypothetical. Rate increases continue to be available for disciplined companies that recognize the need for adequate returns. The consequence of declining fixed income yields has increased the need for meaningful improvement in underwriting margin. We anticipate continued price increases over the next twelve months.

"Although our current yields were virtually unchanged from a year ago, investment returns still represent the most serious obstacle to achieving adequate returns. With ten-year treasury yields hovering around 2%, it is a challenge to maintain our current portfolio yield. Our shift in focus toward investing more for capital gains has rewarded us as we achieved significant income in the first three quarters and anticipate gains in excess of $75 million in the fourth quarter.

"We remain confident that we will be able to grow and raise prices for the foreseeable future. We continue to believe that we will be able to deliver outstanding returns to our shareholders," Mr. Berkley concluded.

Webcast Conference Call and Supplementary Information

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Tuesday October 23, 2012 at 8:30 a.m. eastern time. The conference call will be webcast live on the Company's website at www.wrberkley.com. A recording of the call will be available on the Company's website approximately two hours after the end of the conference call.

About W. R. Berkley Corporation

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.

Forward Looking Information

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 2012 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 impact of significant competition; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, real estate, merger arbitrage and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response to it, on our results and financial condition; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Act of 2002, as amended; the ability of our reinsurers to pay reinsurance recoverables owed to us; foreign currency and political risks relating to our international operations; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; our ability to attract and retain key personnel and qualified employees; potential difficulties with technology and/or data security; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2012 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. 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.

Consolidated Financial Summary

(Amounts in thousands, except per share data)

2012

2011

2012

2011

Revenues:

Net premiums written

$

1,275,887

$

1,126,139

$

3,670,404

$

3,266,857

Change in unearned premiums

(89,354

)

(70,316

)

(236,863

)

(211,293

)

Net premiums earned

1,186,533

1,055,823

3,433,541

3,055,564

Net investment income

116,019

114,063

434,888

409,261

Insurance service fees

26,208

22,279

77,121

69,487

Net investment gains:

Net realized gains on investment sales

17,226

21,238

84,989

73,812

Change in valuation allowance, net of other-than-temporary impairments

5,000

9,014

(400

)

Net investment gains

22,226

21,238

94,003

73,412

Revenues from wholly-owned investees

68,087

65,922

173,196

175,943

Other income

1,428

406

2,204

1,364

Total revenues

1,420,501

1,279,731

4,214,953

3,785,031

Expenses:

Losses and loss expenses

736,632

683,980

2,147,306

1,965,351

Other operating costs and expenses

451,487

407,149

1,332,024

1,196,936

Expenses from wholly-owned investees

66,177

64,388

172,438

174,059

Interest expense

32,512

28,068

93,750

84,317

Total expenses

1,286,808

1,183,585

3,745,518

3,420,663

Income before income taxes

133,693

96,146

469,435

364,368

Income tax expense

(32,685

)

(19,775

)

(124,291

)

(90,282

)

Net income before noncontrolling interests

101,008

76,371

345,144

274,086

Noncontrolling interests

(61

)

39

(41

)

98

Net income to common stockholders

$

100,947

$

76,410

$

345,103

$

274,184

Net income per share:

Basic

$

0.74

$

0.55

$

2.51

$

1.95

Diluted

$

0.71

$

0.53

$

2.41

$

1.87

Average shares outstanding:

Basic

136,553

138,816

137,512

140,535

Diluted

141,637

144,538

142,941

146,553

Operating Results by Segment

(Amounts in thousands, except ratios (1) (2))

2012

2011

2012

2011

Specialty:

Gross premiums written

$

533,592

$

454,560

$

1,526,265

$

1,344,139

Net premiums written

452,000

382,541

1,295,556

1,146,091

Premiums earned

420,165

367,417

1,215,417

1,047,567

Pre-tax income

59,846

70,590

204,573

237,613

Loss ratio

62.4

%

58.3

%

61.8

%

57.8

%

Expense ratio

32.1

%

32.9

%

32.8

%

32.9

%

GAAP combined ratio

94.5

%

91.2

%

94.6

%

90.7

%

Regional:

Gross premiums written

$

321,659

$

301,542

$

926,242

$

881,224

Net premiums written

295,122

277,177

852,971

817,380

Premiums earned

276,629

267,142

809,072

795,423

Pre-tax income (loss)

33,219

(11,163

)

79,211

(2,770

)

Loss ratio

57.2

%

74.2

%

60.8

%

71.5

%

Expense ratio

35.9

%

35.9

%

36.5

%

36.2

%

GAAP combined ratio

93.1

%

110.1

%

97.3

%

107.7

%

Alternative Markets:

Gross premiums written

$

272,327

$

222,423

$

764,643

$

656,062

Net premiums written

205,210

174,744

556,067

497,117

Premiums earned

177,041

156,820

506,149

454,156

Pre-tax income

39,433

32,984

141,089

116,007

Loss ratio

72.9

%

70.9

%

72.4

%

71.9

%

Expense ratio

24.8

%

26.7

%

25.8

%

26.8

%

GAAP combined ratio

97.7

%

97.6

%

98.2

%

98.7

%

Reinsurance:

Gross premiums written

$

132,247

$

118,266

$

373,912

$

337,696

Net premiums written

123,098

113,620

349,361

319,524

Premiums earned

111,599

103,906

327,452

315,220

Pre-tax income

21,118

16,109

74,742

66,782

Loss ratio

58.1

%

61.5

%

57.8

%

60.9

%

Expense ratio

40.0

%

40.9

%

40.8

%

40.7

%

GAAP combined ratio

98.1

%

102.4

%

98.6

%

101.6

%

International:

Gross premiums written

$

234,899

$

209,509

$

736,108

$

602,313

Net premiums written

200,457

178,057

616,449

486,745

Premiums earned

201,099

160,538

575,451

443,198

Pre-tax i