W. R. Berkley Corporation Reports First Quarter Results

  W. R. Berkley Corporation Reports First Quarter Results

        Earnings per Share of 83 Cents, Net Premiums Written up 14.4%

Business Wire

GREENWICH, Conn. -- April 23, 2013

W. R. Berkley Corporation (NYSE: WRB) today reported net income for the first
quarter of 2013 of $117 million, or 83 cents per share, compared with $135
million, or 94 cents per share, for the first quarter of 2012.

Summary Financial Data

(Amounts in thousands, except per share data)

                                    First Quarter
                                     2013           2012
                                                     
Gross premiums written               $ 1,631,621     $ 1,401,526
Net premiums written                 1,376,966       1,203,526
                                                     
Net income                           116,615         135,318
Net income per diluted share         0.83            0.94
                                                     
Operating income (1)                 103,635         104,236
Operating income per diluted share   0.74            0.73
                                                     
Return on equity (2)                 10.8        %   13.7        %

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

(2) Return on equity represents net income expressed on an annualized basis as
a percentage of beginning of year stockholders’ equity.

First quarter highlights included:

  *Average rates on renewed policies increased 7.3%.
  *Net premiums written increased 14.4%.
  *GAAP combined ratio was 94.7%.
  *Return on equity of 10.8%.

Commenting on the Company's performance, William R. Berkley, chairman and
chief executive officer, said: "We had a good quarter, setting the foundation
for an excellent year. Our business is showing continued signs of improvement,
and we are well positioned to take advantage of the positive rate environment.

"The benefits of our improved pricing are slowly being reflected in our
financial results. We see new opportunities created by the current
underwriting environment as prices continue to increase faster than loss
costs. Our management team recognizes that to achieve adequate returns in the
current low interest rate environment, increased underwriting margins are
required. We believe this is attainable.

"The core fixed income investment portfolio continues to perform well, with
investment yields that remain above current market rates. Short-term fears of
inflation seem to have abated, making us less eager to further reduce the
duration of our portfolio. We continue to search the range of investment
offerings for yield as well as capital gains, but we will not sacrifice
quality nor do we intend to extend duration.

"We are optimistic that our business will continue to improve, and 2013 will
be an excellent year," 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 Wednesday, April
24, 2013 at 8:30 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.

Commencing with the first quarter of 2013, the Company will report its results
in three segments – Insurance-Domestic (formerly, Specialty, Regional and
Alternative Markets), Insurance-International and Reinsurance-Global.
Reclassifications have been made to the Company’s 2012 financial information
to conform with this presentation. Please see the Company’s website at
www.wrberkley.com for supplementary investor information regarding these
changes to its business segments.

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 three segments of the property casualty business:
insurance-domestic, insurance-international and reinsurance-global.

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; foreign currency and political
risks relating to our international operations; our ability to attract and
retain key personnel and qualified employees; 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; 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; 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)
                                               
                                                 First Quarter
                                                 2013           2012
Revenues:
Net premiums written                             $ 1,376,966     $ 1,203,526
Change in unearned premiums                      (144,847    )   (103,875    )
Net premiums earned                              1,232,119       1,099,651
Investment income                                135,929         157,619
Insurance service fees                           26,736          23,877
Net investment gains                             19,969          43,477
Change in investment valuation allowance, net    —               4,014
of other than temporary impairments
Revenues from wholly-owned investees             91,735          49,675
Other income                                     281            392         
Total revenues                                   1,506,769      1,378,705   
Expenses:
Losses and loss expenses                         744,679         679,472
Other operating costs and expenses               481,604         431,779
Expenses from wholly-owned investees             89,152          51,330
Interest expense                                 31,111         28,821      
Total expenses                                   1,346,546      1,191,402   
Income before income taxes                       160,223         187,303
Income tax expense                               (43,625     )   (52,071     )
Net income before noncontrolling interests       116,598         135,232
Noncontrolling interests                         17             86          
Net income to common stockholders                $ 116,615      $ 135,318   
                                                                 
Net income per share:
Basic                                            $ 0.86          $ 0.98
Diluted                                          $ 0.83          $ 0.94
                                                                 
Average shares outstanding:
Basic                                            136,025         137,814
Diluted                                          141,223         143,411

Business Segment Operating Results

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

                               First Quarter
                                2013           2012
Insurance-Domestic:
Gross premiums written          $ 1,179,722     $ 1,038,434
Net premiums written            986,180         882,943
Premiums earned                 884,378         810,069
Pre-tax income                  141,350         147,735
Loss ratio                      62.4        %   62.9        %
Expense ratio                   33.1        %   33.2        %
GAAP combined ratio             95.5        %   96.1        %
                                                
Insurance-International:
Gross premiums written          $ 251,575       $ 200,504
Net premiums written            205,135         167,994
Premiums earned                 171,119         143,885
Pre-tax income                  22,382          15,699
Loss ratio                      55.8        %   57.3        %
Expense ratio                   38.0        %   40.3        %
GAAP combined ratio             93.8        %   97.6        %
                                                
Reinsurance-Global:
Gross premiums written          $ 200,324       $ 162,588
Net premiums written            185,651         152,589
Premiums earned                 176,622         145,697
Pre-tax income                  37,941          31,638
Loss ratio                      55.0        %   60.2        %
Expense ratio                   36.3        %   37.6        %
GAAP combined ratio             91.3        %   97.8        %
                                                
Corporate and Eliminations:
Net realized investment gains   $ 19,969        $ 47,791
Interest expense                (31,111     )   (28,821     )
Other revenues and expenses     (30,308     )   (26,439     )
Pre-tax loss                    (41,450     )   (7,769      )
                                                
Consolidated:
Gross premiums written          $ 1,631,621     $ 1,401,526
Net premiums written            1,376,966       1,203,526
Premiums earned                 1,232,119       1,099,651
Pre-tax income                  160,223         187,303
Loss ratio                      60.4        %   61.8        %
Expense ratio                   34.3        %   34.7        %
GAAP combined ratio             94.7        %   96.5        %

(1) Commencing with the first quarter of 2013, the Company will report its
results in three segments – Insurance-Domestic (formerly, Specialty, Regional
and Alternative Markets), Insurance-International and Reinsurance-Global.
Reclassifications have been made to the Company’s 2012 financial information
to conform with this presentation.

(2) 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 the loss
ratio and the expense ratio.

Supplemental Information

(Amounts in thousands, except ratios)

                                                  First Quarter             
                                                   2013            2012
Insurance-Domestic net premiums written by
line:
Workers' compensation                              $ 298,177      $ 244,441
Other liability                                    323,556         292,059
Short-tail lines (1)                               179,799         169,129
Commercial automobile                              123,586         120,811
Professional liability                             61,062         56,503    
Total                                              $ 986,180     $ 882,943 
                                                                   
Losses from catastrophes:
Insurance-Domestic                               $ 3,660      $ 4,378
Insurance-International                           233            —
Reinsurance-Global                                1,120         28        
Total                                             $ 5,013     $ 4,406     
                                                                   
Investment income:
Core portfolio (2)                                 $ 121,212       $ 123,515
Investment funds                                   10,934          27,623
Arbitrage trading account                          3,783          6,481     
Total                                              $ 135,929      $ 157,619 
                                                                   
Other operating costs and expenses:
Underwriting expenses                              $ 422,213       $ 382,023
Service expenses                                   22,305          19,592
Net foreign currency losses (gains)                1,947           (1,434    )
Other costs and expenses                           35,139         31,598    
Total                                              $ 481,604      $ 431,779 
                                                                   
Cash flow from operations                          $ 75,070        $ 73,762
                                                                   
Reconciliation of operating income to net
income:
Operating income (3)                               $ 103,635       $ 104,236
After-tax investment gains                         12,980         31,082    
Net income                                         $ 116,615      $ 135,318 

(1) Short-tail lines includes commercial multi-peril (non-liability), inland
and ocean marine, accident and health, fidelity and surety, boiler and
machinery and other lines.

(2) Core portfolio includes fixed maturity securities, equity securities, cash
and cash equivalents, real estate and loans receivable.

(3) Operating income is a non-GAAP financial measure defined by the Company as
net income excluding after-tax net realized investment gains (losses).
Management believes that excluding net realized investment gains (losses),
which are often discretionary and frequently relate to economic factors,
provides a useful indicator of trends in the Company’s underlying operations.

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

                                       March 31, 2013  December 31, 2012
                                                         
Net invested assets (1)                 $  15,438,868    $    15,681,803
Total assets                            20,120,634       20,155,896
Reserves for losses and loss expenses   9,809,843        9,751,086
Senior notes and other debt             1,693,279        1,871,535
Junior subordinated debentures          243,258          243,206
Common stockholders’ equity (2)         4,378,541        4,306,217
Common stock outstanding                136,028          136,018
Book value per share (3)                32.19            31.66
Tangible book value per share (3)       31.18            30.95

(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, net of
related liabilities.

(2) After-tax unrealized investment gains were $525 million and $518 million
as of March 31, 2013 and December 31, 2012, respectively. Unrealized currency
translation losses were $83 million and $37 million as of March 31, 2013 and
December 31, 2012, respectively.

(3) 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.

Investment Portfolio

March 31, 2013

(Amounts in thousands)
                                                                
                                                   Carrying         Percent
                                                                
                                                   Value            of Total
                                                                
Fixed maturity securities:
United States government and government agencies   $ 875,712        5.7    %
State and municipal:
Special revenue                                    2,018,194        13.1   %
State general obligation                           859,481          5.6    %
Pre-refunded                                       853,418          5.5    %
Local general obligation                           374,158          2.4    %
Corporate backed                                   370,490         2.4    %
Total state and municipal                          4,475,741       29.0   %
Mortgage-backed securities:
Agency                                             1,057,039        6.8    %
Residential — Prime                                209,938          1.4    %
Commercial                                         209,366          1.4    %
Residential — Alt A                                99,751          0.6    %
Total mortgage-backed securities                   1,576,094       10.2   %
Corporate:
Industrial                                         1,548,214        10.0   %
Financial                                          859,566          5.6    %
Asset-backed                                       822,825          5.3    %
Utilities                                          219,618          1.4    %
Other                                              125,853         0.8    %
Total corporate                                    3,576,076       23.1   %
Foreign                                            1,161,494       7.5    %
Total fixed maturity securities (1)                11,665,117      75.5   %
Equity securities available for sale:
Common stocks                                      295,031          1.9    %
Preferred stocks                                   104,355         0.7    %
Total equity securities available for sale         399,386         2.6    %
Cash and cash equivalents (2)                      862,129          5.6    %
Investment funds (3)                               765,703          5.0    %
Arbitrage trading account                          701,223          4.5    %
Real estate                                        588,777          3.8    %
Loans receivable                                   456,533         3.0    %
Net invested assets                                $ 15,438,868    100.0  %

(1) Total fixed maturity securities had an average rating of AA- and an
average duration of 3.3 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.

(3) Investment funds are net of related liabilities of $28 million.

Foreign Fixed Maturity Securities

March 31, 2013

(Amounts in thousands)

                   Government   Corporate    Total
Australia           $ 243,737     $ 139,062     $ 382,799
Canada              136,247       49,419        185,666
United Kingdom      111,644       58,200        169,844
Argentina           133,466       29,511        162,977
Germany             72,055        —             72,055
Norway              64,936        —             64,936
Brazil              49,550        —             49,550
Supranational (1)   38,672        —             38,672
Netherlands         —             13,057        13,057
Switzerland         —             11,279        11,279
Singapore           6,840         —             6,840
Uruguay             3,400         —             3,400
New Zealand         419          —            419
Total               $ 860,966    $ 300,528    $ 1,161,494

(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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