EX-99.1 4 w1165446.txt PRESS RELEASE 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 SHARPLY HIGHER FOURTH QUARTER EARNINGS Greenwich, CT, February 10, 2003 -- W. R. Berkley Corporation (NYSE: BER) today reported fourth quarter 2002 operating income of $53 million, or 96 cents per share, compared with an operating loss of $15 million, or 32 cents per share, a year ago. For full year 2002, operating income was $161 million, or $3.04 per share, compared with break-even operating results for 2001. The following table summarizes the fourth quarter and year-to-date financial performance (amounts in thousands, except per share data):
For the Quarter For the Year Ended December 31, Ended December 31, 2002 2001 2002 2001 ---- ---- ---- ---- Gross premiums written $ 881,404 $ 593,928 $ 3,208,227 $ 2,208,466 Net premiums written 787,412 503,070 2,710,490 1,858,096 Earnings (loss) amounts after taxes and minority interest: Operating income (loss)(a) 53,040 (15,342) 160,655 180 Realized investment gains (losses) 11,924 (10,606) 12,223 (3,207) Foreign currency gains 9,552 61 9,110 320 Discontinued business (1,785) (38,277) (6,943) (88,839) ----------- ----------- ----------- ---------- Net income (loss) $ 72,731 $ (64,164) $ 175,045 $ (91,546) =========== =========== =========== ========== Per share amounts (b): Operating income (loss) (a) $ 0.96 $ (0.32) $ 3.04 $ -- Net income (loss) $ 1.32 $ (1.36) $ 3.31 $ (2.09)
(a) Operating income (loss) represents net income (loss) before discontinued business, realized investment gains and losses and foreign currency gains. W.R. Berkley Corporation Page 2 (b) Per share amounts reflect 4,715,000 shares issued on November 22, 2002 and the 3-for-2 common stock split affected on July 2, 2002. Highlights for the 2002 fourth quarter and full year compared with the prior year periods: o Gross premiums written for continuing business grew 56% in the fourth quarter to $885 million. o GAAP combined ratio for continuing business was 93.3% in the fourth quarter compared with a combined ratio of 112.4% in the prior year quarter. o The paid loss ratio for continuing business decreased to 43.5% in the fourth quarter from 61.0% in the prior year quarter, and the paid-to-incurred loss ratio decreased to 67.8% in 2002 from 76.8% in 2001. o Cash flow from operations increased to $223 million in the fourth quarter compared with $81 million in the prior year quarter. For the full year, cash flow from operations increased to $766 million from $210 million in 2001. Commenting on the Company's results, William R. Berkley, chairman and chief executive officer, said: "Our excellent results continue to reflect strategic decisions made over the past several years to consolidate our operations and focus on our most profitable lines of business. This focus also resulted in the early recognition of past reserve deficiencies, and thus, we are able to reflect in our current results the benefits of higher prices and improved terms and conditions. W.R. Berkley Corporation Page 3 "We are continuing our cautious reserving practices to guard against the possibility of future adverse reserve development. We believe our current financial statements reflect a prudent view in an uncertain world. The earned premiums reported on our 2002 financial statements only partially reflect the increased pricing that was in effect in 2002. If in fact year-end price levels had been in effect for the full year and earned in that year, our 2002 results would have been substantially better than those reported. As a result, we expect significantly better results in 2003. "This year, even with lower investment returns, we achieved a return on beginning capital of over 18%, and a return of 17% on an operating basis. We look ahead with continued enthusiasm and believe overall industry problems will result in a continuation of the current pricing environment of increasing rates at least through 2004," Mr. Berkley concluded. Founded in 1967, W. R. Berkley Corporation is an insurance holding company that operates in five segments of property casualty insurance business: specialty insurance, alternative markets, reinsurance, regional property casualty insurance and international. W.R. Berkley Corporation Page 4 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 2003 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 ultimate results of the various pending arbitration proceedings, the increased 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 results and potential impairment of invested assets, exchange rate and political risks, legislative and regulatory developments, changes in the ratings assigned to us by ratings agencies, uncertainty as to our reinsurance coverage for terrorist acts, the availability of dividends from our insurance company subsidiaries, our successful integration of acquired companies or investment 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 2003 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. 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 5 Consolidated Financial Summary (Amounts in thousands, except per share data)
For the Quarter For the Year Ended December 31, Ended December 31, ---------------------------- ---------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Revenues: Net premiums written $ 787,412 $ 503,070 $ 2,710,490 $ 1,858,096 Change in unearned premiums (94,510) (44,991) (457,963) (177,627) ----------- ----------- ----------- ----------- Premiums earned 692,902 458,079 2,252,527 1,680,469 Net investment income 50,843 47,421 187,875 195,021 Service fees 23,328 19,219 86,095 75,771 Realized investment gains (losses) 17,026 (23,420) 15,214 (12,252) Foreign currency gains 22,902 144 21,856 758 Other income 1,191 132 2,517 2,030 ----------- ----------- ----------- ----------- Total revenues 808,192 501,575 2,566,084 1,941,797 Expenses: Losses and loss expenses 448,092 420,902 1,463,971 1,380,500 Other operating expenses 236,697 170,970 797,205 663,776 Interest expense 11,417 11,287 45,475 45,719 Restructuring charge -- 3,196 -- 3,196 ----------- ----------- ----------- ----------- Total expenses 696,206 606,355 2,306,651 2,093,191 Income (loss) before income taxes and minority interest 111,986 (104,780) 259,433 (151,394) Income tax (expense) benefit (32,884) 35,102 (84,139) 56,661 Minority interest (6,371) 5,514 (249) 3,187 ----------- ----------- ----------- ----------- Net income (loss) $ 72,731 $ (64,164) $ 175,045 $ (91,546) =========== =========== =========== =========== Net income (loss) per share: Basic $ 1.37 $ (1.36) $ 3.44 $ (2.09) Diluted 1.32 $ (1.36) $ 3.31 $ (2.09) Average shares outstanding: Basic 53,273 47,276 50,885 43,708 Diluted 55,062 49,665 52,923 45,833
W.R. Berkley Corporation Page 6 Supplemental After-Tax Earnings (Amounts in thousands, except per share data)
For the Quarter For the Year Ended December 31, Ended December 31, ------------------------ ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Earnings (loss) amounts after taxes and minority interest: Operating income (loss) (1) (2) $ 53,040 $ (15,342) $ 160,655 $ 180 Realized investment gains (losses) 11,924 (10,606) 12,223 (3,207) Foreign currency gains (3) 9,552 61 9,110 320 Discontinued business (4) (1,785) (38,277) (6,943) (88,839) --------- --------- --------- --------- Net income (loss) $ 72,731 $ (64,164) $ 175,045 $ (91,546) ========= ========= ========= ========= Earnings (loss) per diluted share: Operating income (loss) (1) (2) $ 0.96 $ (0.32) $ 3.04 $ -- Realized investment gains (losses) 0.22 (0.23) 0.23 (0.07) Foreign currency gains (3) 0.17 -- 0.17 0.01 Discontinued business (4) (0.03) (0.81) (0.13) (2.03) --------- --------- --------- --------- Net income (loss) $ 1.32 $ (1.36) $ 3.31 $ (2.09) ========= ========= ========= ========= Cash flow from operations before change in trading account $ 223,108 $ 81,013 $ 766,024 $ 209,917 (1) Operating income reflects weather-related losses of $6.1 million pre-tax, or 7 cents per share after-tax, for the quarter ended December 31, 2002 compared with $5.2 million pre-tax, or 7 cents per share after-tax, in the year-earlier period. For full year 2002, operating income reflects weather-related losses of $41.2 million pre-tax, or 51 cents per share after-tax, compared with $37.1 million pre-tax, or 55 cents per share after-tax, in the year-earlier period. (2) Fourth quarter 2001 operating income reflects an increase in treaty reinsurance reserves of $32.8 million pre-tax, or 45 cents per share after-tax, and losses related to the Enron bankruptcy of $18.5 million pre-tax, or 25 cents per share after-tax. Full year 2001 operating income also reflects World Trade Center losses of $35.0 million pre-tax, or 52 cents per share after-tax. (3) Foreign currency gains represent net gains reported by the company's foreign subsidiaries and result primarily from translating into Argentine pesos, invested assets and life insurance liabilities denominated in US dollars, and of settling certain life insurance contracts for less than their stated value following the devaluation of the Argentine peso. The company also reported an unrealized foreign exchange loss of $15.2 million (net of minority interest) as a result of the translation of the net assets of its Argentine subsidiary to US dollars. Under generally accepted accounting principles, unrealized foreign exchange losses are reported directly to stockholders' equity. (4) The 2001 results for the discontinued business reflect loss reserve increases of $52.5 million pre-tax, or 72 cents per share after-tax, in the fourth quarter and $102.5 million pre-tax, or $1.52 per share after-tax, for the full year. The 2001 results for the discontinued business also include a fourth quarter restructuring charge of $2.1 million after-tax, or 4 cents per share.
W.R. Berkley Corporation Page 7 Operating Results by Segment (Amounts in thousands, except ratios)
For the Quarter For the Year Ended December 31, Ended December 31, ------------------------ ------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Specialty Insurance (1): Gross premiums written $ 255,188 $ 184,007 $ 939,324 $ 611,364 Net premiums written 256,804 160,870 861,693 527,502 Premiums earned 224,190 125,716 711,577 401,611 Pre-tax operating income (loss) 37,460 11,170 119,417 30,185 Loss ratio 66.5% 70.1% 64.0% 71.4% Expense ratio 23.3% 28.8% 26.3% 31.1% GAAP combined ratio 89.8% 98.9% 90.3% 102.5% Alternative Markets: Gross premiums written $ 100,151 $ 42,074 $ 348,954 $ 169,439 Net premiums written 89,586 38,667 305,357 151,942 Premiums earned 77,657 38,322 235,558 123,173 Pre-tax operating income 17,842 6,246 62,703 34,255 Loss ratio 66.2% 80.0% 66.7% 76.5% Expense ratio 28.1% 31.3% 29.6% 32.9% GAAP combined ratio 94.3% 111.3% 96.3% 109.4% Reinsurance (2): Gross premiums written $ 271,233 $ 98,087 $ 858,179 $ 332,382 Net premiums written 221,822 69,610 680,205 236,784 Premiums earned 175,614 69,142 459,406 236,385 Pre-tax operating income (loss) 6,106 (44,334) 31,676 (57,034) Loss ratio 75.1% 146.3% 73.0% 104.4% Expense ratio 28.5% 31.0% 29.9% 36.8% GAAP combined ratio 103.6% 177.3% 102.9% 141.2% Regional Insurance: Gross premiums written $ 243,933 $ 193,833 $ 955,150 $ 705,001 Net premiums written 200,861 165,271 776,577 598,149 Premiums earned 193,318 154,573 705,385 555,750 Pre-tax operating income 36,349 18,636 104,085 40,399 Loss ratio 53.6% 61.6% 59.1% 67.2% Expense ratio 33.5% 34.8% 32.4% 35.0% GAAP combined ratio 87.1% 96.4% 91.5% 102.2% International: Gross premiums written $ 14,029 $ 47,419 $ 87,265 $ 170,600 Net premiums written 13,954 42,554 79,313 150,090 Premiums earned 14,927 38,874 89,284 140,909 Pre-tax operating income (loss) 1,018 3,020 (1,757) 12,149 Loss ratio 28.6% 62.1% 54.2% 61.4% Expense ratio 70.6% 43.2% 51.3% 40.6% GAAP combined ratio 99.2% 105.3% 105.5% 102.0%
W.R. Berkley Corporation Page 8 Operating Results by Segment (continued) (Amounts in thousands, except ratios)
For the Quarter For the Year Ended December 31, Ended December 31, ------------------------ ------------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Total Continuing Segments: Gross premiums written $ 884,534 $ 565,420 $3,188,872 $1,988,786 Net premiums written 783,027 476,972 2,703,145 1,664,467 Premiums earned 685,706 426,627 2,201,210 1,457,828 Pre-tax operating income (loss) 98,775 (5,262) 316,124 59,954 Loss ratio 64.2% 79.5% 64.2% 74.6% Expense ratio 29.1% 32.9% 30.4% 34.6% GAAP combined ratio 93.3% 112.4% 94.6% 109.2% Discontinued Business (3): Gross premiums written $ (3,130) $28,508 $ 19,355 $ 219,680 Net premiums written 4,385 26,098 7,345 193,629 Premiums earned 7,196 31,452 51,317 222,641 Pre-tax segment loss (2,746) (55,692) (10,682) (133,480) Loss ratio 110.4% 259.8% 98.7% 131.4% Expense ratio 36.7% 24.4% 30.8% 33.0% GAAP combined ratio 147.1% 284.2% 129.5% 164.4% Total Segments: Gross premiums written $ 881,404 $ 593,928 $3,208,227 $2,208,466 Net premiums written 787,412 503,070 2,710,490 1,858,096 Premiums earned 692,902 458,079 2,252,527 1,680,469 Pre-tax segment income (loss) 96,029 (60,954) 305,442 (73,526) Loss ratio 64.7% 91.9% 65.0% 82.1% Expense ratio 29.2% 32.3% 30.4% 34.4% GAAP combined ratio 93.9% 124.2% 95.4% 116.5% (1) Full year 2001 pre-tax operating income for the specialty segment reflects World Trade Center losses of $9.0 million. (2) In the fourth quarter of 2002, the company changed its presentation of reinsurance premiums assumed from Lloyd's syndicates to reflect the company's proportionate share of the syndicates' reinsurance costs as ceded premiums and its share of the syndicates' brokerage cost as underwriting expenses. Previously, this business was presented similar to the manner it is reported by the syndicates, with reinsurance and brokerage costs netted against premiums. Amounts reported in prior quarters of 2002 were reclassified to reflect this change. The change had no effect on underwriting profits or net income for the current or prior quarters. Fourth quarter 2001 pre-tax operating income for the reinsurance segment reflects an increase in reinsurance reserves of $32.8 million and losses related to the Enron W.R. Berkley Corporation Page 9 bankruptcy of $18.5 million. Full year 2001 pre-tax operating income for the reinsurance segment also reflects World Trade Center losses of $26.0 million. (3) Pre-tax results in 2001 for the discontinued business segment reflect loss reserve increases of $52.5 million in the fourth quarter and $102.5 million for full year.
Balance Sheet Information (Amounts in thousands, except per share data) December 31, December 31, 2002 2001 ---- ---- Total investments (1) $4,607,853 $3,598,053 Total assets 7,031,323 5,633,509 Reserves for losses and loss expenses 3,210,632 2,817,682 Long-term debt 362,985 370,554 Trust preferred securities 198,251 198,210 Stockholders' equity (2)(3) 1,335,199 931,595 Shares outstanding 55,223 49,862 Stockholders' equity per share 24.18 18.68 (1) Investments include trading account receivable from brokers and clearing organizations and trading securities sold but not yet purchased. (2) Stockholders' equity includes after-tax unrealized investment gains and unrealized foreign exchange losses of $105 million and $37.3 million as of December 31, 2002 and December 31, 2001, respectively. (3) Stockholders' equity reflects proceeds of $167 million from the issuance of 4,715,000 shares of common stock on November 22, 2002.