W. R. Berkley Corporation Reports Fourth Quarter Results

  W. R. Berkley Corporation Reports Fourth Quarter Results

                  Net Income Up 41%, Return on Equity 16.7%

Business Wire

GREENWICH, Conn. -- January 28, 2013

W. R. Berkley Corporation (NYSE: WRB) today reported net income for the fourth
quarter of 2012 of $165 million, or $1.17 per share, compared with $117
million, or 82 cents per share, for the fourth quarter of 2011.

Summary Financial Data

(Amounts in thousands, except per share data)

                     Fourth Quarter               Full Year
                      2012          2011           2012          2011
                                                                   
Gross premiums        $ 1,452,709    $ 1,255,879    $ 5,779,879    $ 5,077,313
written
Net premiums written  1,228,135      1,090,511      4,898,539      4,357,368
                                                                   
Net income            165,489        117,027        510,592        391,211
Net income per        1.17           0.82           3.56           2.69
diluted share
                                                                   
Operating income (1)  90,430         82,290         373,790        309,564
Operating income per  0.64           0.58           2.61           2.13
diluted share

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

Fourth quarter highlights included:

  *Return on equity of 16.7%.
  *Average rates on renewed policies increased 6.5%.
  *GAAP combined ratio was 98.1%.
  *Net premiums written increased 12.6%.
  *Net investment income up 30% to $152 million.
  *Special dividend of $1.00 per share of common stock paid in December 2012.

Commenting on the Company's performance, William R. Berkley, chairman and
chief executive officer, said: "We are very pleased with the Company's fourth
quarter performance. Our core underwriting results continued to improve as
prices increased on renewal business for the third successive year and loss
cost inflation continued at modest levels. The impact of Storm Sandy was
mitigated by strategic reinsurance purchases, and our fourth quarter combined
ratio was only slightly higher than the prior year.

"Our gross written premiums increased almost 16%. We continue to retain
pricing power in most areas of the business, and our renewal retention remains
satisfactory. We expect to have improved margins as higher prices are
reflected in our earned premiums.

"As we have commented in the past, our investment income benefits from
particular investment opportunities that produce better than market returns.
We realized gains from both our private equity investments and our common
stock portfolio, which contributed to our return on equity of just under 17%
for the quarter. These types of investments are part of our normal strategy,
and we expect additional realized gains to be achieved in the coming year.

"We paid a $1.00 per share special dividend in December, prior to the change
in Federal tax laws. Together with our regular dividend, we distributed almost
all of our fourth quarter earnings to our shareholders. We are increasingly
optimistic about our ability to increase prices and deliver improving
returns," Mr. Berkley concluded.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and
investors to discuss its earnings and other information on Tuesday, January
29, 2013, at 9:00 a.m. eastern time. The conference call will be webcast live
on the Company's website at www.wrberkley.com. A replay of the webcast 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 2013 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 2013 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)

                      Fourth Quarter                 Full Year
                       2012           2011            2012           2011
Revenues:
Net premiums written   $ 1,228,135     $ 1,090,511     $ 4,898,539     $ 4,357,368
Change in unearned     11,840         14,792         (225,023    )   (196,501    )
premiums
Net premiums earned    1,239,975       1,105,303       4,673,516       4,160,867
Net investment         151,875         117,090         586,763         526,351
income
Insurance service      26,012          23,356          103,133         92,843
fees
Net investment
gains:
Net realized gains     116,462         52,069          201,451         125,881
on investment sales
Change in valuation
allowance, net of      —              —              9,014          (400        )
other-than-temporary
impairments
Net investment gains   116,462        52,069         210,465        125,481     
Revenues from
wholly-owned           73,917          72,735          247,113         248,678
investees
Other income           360            400            2,564          1,764       
Total revenues         1,608,601      1,370,953      5,823,554      5,155,984   
Expenses:
Losses and loss        801,173         693,014         2,948,479       2,658,365
expenses
Other operating        467,599         429,590         1,799,623       1,626,526
costs and expenses
Expenses from
wholly-owned           74,784          71,436          247,222         245,495
investees
Interest expense       32,552         28,195         126,302        112,512     
Total expenses         1,376,108      1,222,235      5,121,626      4,642,898   
Income before income   232,493         148,718         701,928         513,086
taxes
Income tax expense     (66,994     )   (31,663     )   (191,285    )   (121,945    )
Net income before
noncontrolling         165,499         117,055         510,643         391,141
interests
Noncontrolling         (10         )   (28         )   (51         )   70          
interests
Net income to common   $ 165,489      $ 117,027      $ 510,592      $ 391,211   
stockholders
                                                                       
Net income per
share:
Basic                  $ 1.22          $ 0.85          $ 3.72          $ 2.80
Diluted                $ 1.17          $ 0.82          $ 3.56          $ 2.69
                                                                       
Average shares
outstanding:
Basic                  135,861         137,174         137,097         139,688
Diluted                141,654         143,016         143,315         145,672

Operating Results by Segment

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

                    Fourth Quarter             Full Year
                     2012         2011          2012           2011
                                                                 
Specialty:
Gross premiums       $ 544,928     $ 474,205     $ 2,071,193     $ 1,818,344
written
Net premiums         452,131       408,425       1,747,687       1,554,516
written
Premiums earned      431,054       395,181       1,646,471       1,442,748
Pre-tax income       57,283        53,324        261,856         290,937
Loss ratio           65.4      %   63.8      %   62.8        %   59.4        %
Expense ratio        32.6      %   32.0      %   32.7        %   32.6        %
GAAP combined        98.0      %   95.8      %   95.5        %   92.0        %
ratio
                                                                 
Regional:
Gross premiums       $ 292,360     $ 268,138     $ 1,218,602     $ 1,149,362
written
Net premiums         266,303       247,127       1,119,274       1,064,507
written
Premiums earned      281,145       270,552       1,090,217       1,065,975
Pre-tax income       43,000        33,299        122,211         30,529
Loss ratio           56.2      %   57.9      %   59.6        %   68.0        %
Expense ratio        36.2      %   35.6      %   36.5        %   36.1        %
GAAP combined        92.4      %   93.5      %   96.1        %   104.1       %
ratio
                                                                 
Alternative
Markets:
Gross premiums       $ 206,727     $ 171,094     $ 971,370       $ 827,156
written
Net premiums         146,855       121,980       702,922         619,097
written
Premiums earned      174,185       158,402       680,334         612,558
Pre-tax income       53,344        29,653        194,433         145,660
Loss ratio           68.5      %   73.3      %   71.4        %   72.3        %
Expense ratio        26.2      %   26.5      %   25.9        %   26.7        %
GAAP combined        94.7      %   99.8      %   97.3        %   99.0        %
ratio
                                                                 
Reinsurance:
Gross premiums       $ 134,805     $ 115,474     $ 508,717       $ 453,170
written
Net premiums         127,891       110,805       477,252         430,329
written
Premiums earned      119,487       110,788       446,939         426,008
Pre-tax income       18,526        16,368        93,268          83,150
Loss ratio           68.1      %   63.4      %   60.5        %   61.6        %
Expense ratio        38.2      %   39.7      %   40.1        %   40.5        %
GAAP combined        106.3     %   103.1     %   100.6       %   102.1       %
ratio
                                                                 
International:
Gross premiums       $ 273,889     $ 226,968     $ 1,009,997     $ 829,281
written
Net premiums         234,955       202,174       851,404         688,919
written
Premiums earned      234,104       170,380       809,555         613,578
Pre-tax income       11,376        11,613        62,061          39,033
Loss ratio           68.6      %   57.5      %   62.9        %   60.5        %
Expense ratio        34.8      %   41.1      %   37.2        %   40.2        %
GAAP combined        103.4     %   98.6      %   100.1       %   100.7       %
ratio

Operating Results by Segment (Continued)

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

                 Fourth Quarter                 Full Year
                 2012           2011            2012           2011
                                                                 
Corporate and
Eliminations:
Net investment   $ 116,462       $ 52,069        $ 210,465       $ 125,481
gains
Interest expense (32,552     )   (28,195     )   (126,302    )   (112,512    )
Other revenues   (34,946     )   (19,413     )   (116,064    )   (89,192     )
and expenses (3)
Pre-tax income   48,964          4,461           (31,901     )   (76,223     )
(loss)
                                                                 
Consolidated:
Gross premiums   $ 1,452,709     $ 1,255,879     $ 5,779,879     $ 5,077,313
written
Net premiums     1,228,135       1,090,511       4,898,539       4,357,368
written
Premiums earned  1,239,975       1,105,303       4,673,516       4,160,867
Pre-tax income   232,493         148,718         701,928         513,086
Loss ratio       64.6        %   62.7        %   63.1        %   63.9        %
Expense ratio    33.5        %   34.3        %   34.1        %   34.6        %
GAAP combined    98.1        %   97.0        %   97.2        %   98.5        %
ratio

(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. GAAP combined ratio is the sum of loss ratio
and expense ratio.

(2) Losses attributable to Storm Sandy, net of reinsurance recoveries and
reinstatement premiums, were $40 million in the fourth quarter of 2012. Total
losses from catastrophes were as follows (in thousands):

                    Fourth Quarter           Full Year
                    2012        2011         2012        2011
                                                           
Specialty           $ 6,560      $ 1,702      $ 18,213     $ 17,316
Regional            624          (268     )   24,373       84,856
Alternative Markets 33           589          631          2,134
Reinsurance         19,811       6,294        20,691       23,973
International       13,786      6,232       16,290      25,086
Total               $ 40,814    $ 14,549    $ 80,198    $ 153,365

(3) Other revenues and expenses include corporate investment income, expenses
not allocated to the business segments and revenues and expenses from
investments in wholly-owned, non-insurance subsidiaries that are consolidated
for financial reporting purposes.

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

                                        December 31, 2012  December 31, 2011
                                                            
Net invested assets (1)                 $    15,681,803     $    14,559,781
Total assets                            20,155,896          18,403,873
Reserves for losses and loss expenses   9,751,086           9,337,134
Senior notes and other debt             1,871,535           1,500,503
Junior subordinated debentures          243,206             242,997
Common stockholders’ equity (2) (3) (4) 4,306,217           3,953,356
Common stock outstanding (3) (4)        136,018             137,520
Book value per share (4) (5)            31.66               28.75
Tangible book value per share (4) (5)   30.95               28.04

(1) Net invested assets include investments, cash and cash equivalents,
trading accounts receivable from brokers and clearing organizations, trading
account securities sold but not yet purchased and unsettled purchases.

(2) After-tax unrealized investment gains were $518 million and $430 million
as of December 31, 2012 and 2011, respectively. Unrealized currency
translation losses were $37 million and $61 million as of December 31, 2012
and 2011, respectively.

(3) During the fourth quarter of 2012, the Company repurchased 170,300 shares
of its common stock at an average cost of $37.00 per share. During 2012, the
Company repurchased 3.4 million shares of its common stock at an average cost
of $37.24 per share and an aggregate cost of $128 million.

(4) The Financial Accounting Standards Board has issued new guidance regarding
the treatment of costs associated with acquiring or renewing insurance
contracts. This guidance modifies the definition of the types of costs that
can be capitalized and specifies that the costs must be directly related to
the successful acquisition of a new or renewed insurance contract. We adopted
this guidance effective January 1, 2012 and retrospectively adjusted our
previously issued financial statements (including the applicable 2011
information contained herein). The effect of adopting this guidance
retrospectively was to decrease deferred acquisition costs by $84 million,
common stockholders' equity by $55 million and book value per share by 40
cents as of December 31, 2011. The guidance also resulted in minor changes to
other operating costs and expenses and expense ratios.

(5) Book value per share is total common stockholders’ equity divided by the
number of common shares outstanding. Tangible book value per share is total
common stockholders’ equity excluding the after-tax value of goodwill and
other intangible assets divided by the number of common shares outstanding.

Supplemental Information

(Amounts in thousands)

                     Fourth Quarter             Full Year
                     2012         2011          2012           2011
                                                                 
Reconciliation of
operating income to
net income:
Operating income (1) $ 90,430      $ 82,290      $ 373,790       $ 309,564
Investment gains,    75,059       34,737       136,802        81,647      
net of tax
Net income           $ 165,489    $ 117,027    $ 510,592      $ 391,211   
                                                                 
Return on equity (2) 16.7      %   12.8      %   12.9        %   10.7        %
                                                                 
Cash flow from       $ 222,108     $ 185,036     $ 675,457       $ 670,279
operations
                                                                 
Other operating
costs and expenses:
Underwriting         $ 415,126     $ 378,644     $ 1,592,746     $ 1,438,129
expenses
Service expenses     20,990        19,467        84,986          75,231
Net foreign currency (3,219    )   287           (6,092      )   (1,884      )
(gains) losses
Other costs and      34,702       31,192       127,983        115,050     
expenses
Total                $ 467,599    $ 429,590    $ 1,799,623    $ 1,626,526 

(1) Operating income is a non-GAAP financial measure defined by the Company as
net income excluding net investment gains and losses. Management believes that
excluding net investment gains and losses, which are often discretionary and
frequently relate to economic factors, 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 common stockholders’ equity.

Investment Portfolio

December 31, 2012

(Amounts in thousands)

                                                   Carrying         Percent
                                                                 
                                                   Value            of Total
                                                                    
Fixed maturity securities:
United States government and government agencies   $ 898,463        5.7    %
State and municipal:
Special revenue                                    2,243,455        14.3   %
Pre-refunded                                       917,207          5.8    %
State general obligation                           888,498          5.7    %
Local general obligation                           399,783          2.5    %
Corporate backed                                   384,766         2.5    %
Total state and municipal                          4,833,709       30.8   %
Mortgage-backed securities:
Agency                                             1,110,385        7.1    %
Commercial                                         273,568          1.7    %
Residential - Prime                                236,372          1.5    %
Residential - Alt A                                128,136         0.8    %
Total mortgage-backed securities                   1,748,461       11.1   %
Corporate:
Industrial                                         1,590,816        10.2   %
Financial                                          799,602          5.1    %
Asset-backed                                       596,428          3.8    %
Utilities                                          235,409          1.5    %
Other                                              129,461         0.8    %
Total corporate                                    3,351,716       21.4   %
Foreign                                            1,111,607       7.1    %
Total fixed maturity securities (1)                11,943,956      76.1   %
                                                                    
Equity securities available for sale:
Common stocks                                      282,066          1.8    %
Preferred stocks                                   93,956          0.6    %
Total equity securities available for sale         376,022         2.4    %
                                                                    
Cash and cash equivalents (2)                      1,245,505        7.9    %
Investment funds (2)                               778,547          5.0    %
Real estate                                        606,735          3.9    %
Loans receivable                                   401,961          2.6    %
Arbitrage trading account                          329,077         2.1    %
Net invested assets                                $ 15,681,803    100.0  %

(1) Total fixed maturity securities had an average rating of AA- and an
average duration of 3.4 years.

(2) Cash and cash equivalents includes trading accounts receivable from
brokers and clearing organizations, trading account securities sold but not
yet purchased and unsettled purchases. Investment funds are net of related
liabilities of $31 million.

Foreign Fixed Maturity Securities

December 31, 2012

(Amounts in thousands)

                   Government   Corporate    Total
Australia           $ 230,308     $ 114,000     $ 344,308
Canada              129,822       50,681        180,503
United Kingdom      142,036       33,668        175,704
Argentina           125,396       30,750        156,146
Germany             90,748        —             90,748
Brazil              51,752        —             51,752
Norway              38,625        —             38,625
Supranational (1)   37,013        —             37,013
Netherlands         —             14,427        14,427
Switzerland         —             11,403        11,403
Singapore           6,985         —             6,985
Uruguay             3,576         —             3,576
New Zealand         417          —            417
Total               $ 856,678    $ 254,929    $ 1,111,607

(1) Supranational represents investments in the North American Development
Bank, European Investment Bank and Inter-American Development Bank.

Contact:

W. R. Berkley Corporation
Karen A. Horvath
Vice President - External
Financial Communications
203-629-3000
 
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