EX-99.1 4 wrb1027033.txt PRESS RELEASE 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 89% INCREASE IN THIRD QUARTER NET INCOME TO $76 MILLION Greenwich, CT, October 27, 2003 -- W. R. Berkley Corporation (NYSE: BER) today reported third quarter net income of $76 million, or 87 cents per share, up from $41 million, or 52 cents per share, a year ago. Net operating income for the third quarter of 2003 was $74 million, or 84 cents per share, compared with $42 million, or 54 cents per share, for the third quarter of 2002. Per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on August 27, 2003. Net operating income is a non-GAAP financial measure defined by the Company as net income excluding gains and losses on investments, foreign currencies and discontinued business.
Summary Financial Data (Amounts in thousands, except per share data) Third Quarter Nine Months ------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Gross premiums written $1,106,280 $ 821,612 $3,180,248 $2,326,823 Net premiums written 939,677 687,990 2,707,193 1,923,078 Net income 76,469 40,544 244,012 102,314 Net income per share (diluted) 0.87 0.52 2.79 1.30 Net operating income 74,037 41,944 204,426 107,616 Net operating income per share (diluted) $ 0.84 $ 0.54 $ 2.34 $ 1.37
Third quarter highlights include: o Net income increased 89% to $76 million compared with $41 million in the year-earlier period o Net after-tax operating return on equity for the quarter was 22.2% on an annualized basis o Net premiums written rose to $940 million, an increase of 37% from the comparable quarter of 2002 o GAAP combined ratio improved by 3.9 percentage points to 91.7% from 95.6% in the prior year period o Cash flow from operations increased 38% to $420 million compared with $303 million in the year-earlier period o The paid loss ratio decreased to 36.2% from 47.3% in the prior year quarter Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "Third quarter results were outstanding despite the continued impact of low interest rates on our investment returns as well as modest initial operating losses from several new ventures. "Cash flow from operations grew to $420 million for the quarter, while the ratio of paid losses to earned premiums declined to 36 percent. The majority of our 37 percent premium growth came from price increases, with the remainder a result of increased policy count. In subsequent quarters, we expect the growth of our existing business to be supplemented by additional revenue as our new businesses mature. "We continue to expect interest rates to increase and have positioned our portfolio to opportunistically take advantage of this situation. Our investment portfolio exceeded $6 billion at quarter-end, including approximately $1.2 billion in cash. As of September 30, we had approximately $191 million of pre-tax unrealized gains in our portfolio, and our book value was just under $19 per share. "Our after-tax operating return on equity for the quarter exceeded 22 percent on an annualized basis, and stockholders' equity per share has increased 17.6 percent year-to-date. We continue to have the ability to raise prices, and expect that this will help us to maintain and enhance the current outstanding returns for the foreseeable future," Mr. Berkley concluded. Founded in 1967, W. R. Berkley Corporation is an insurance holding company that operates in five segments of the property casualty insurance business: specialty insurance, alternative markets, reinsurance, regional property casualty insurance and international. 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 legal and 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, our exposure 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. # # #
Consolidated Financial Summary (Amounts in thousands, except per share data) Third Quarter Nine Months ------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Revenues: Net premiums written $ 939,677 $ 687,990 $ 2,707,193 $ 1,923,078 Change in unearned premiums (104,097) (119,519) (365,019) (363,453) --------- --------- ---------- ---------- Premiums earned 835,580 568,471 2,342,174 1,559,625 Net investment income 51,678 48,316 153,859 137,032 Service fees 25,475 21,650 76,854 62,767 Realized investment gains (losses) 3,383 1,612 61,660 (1,812) Foreign currency gains (losses) 40 (984) (1,154) (1,046) Other income 226 1,006 1,359 1,326 --------- --------- ---------- ---------- Total revenues 916,382 640,071 2,634,752 1,757,892 --------- --------- ---------- ---------- Expenses: Losses and loss expenses 533,201 368,763 1,491,244 1,015,879 Other operating expenses 261,281 200,182 750,294 560,508 Interest expense 13,825 11,593 39,193 34,058 --------- --------- ---------- ---------- Total expenses 808,307 580,538 2,280,731 1,610,445 --------- --------- ---------- ---------- Income before income taxes and minority interest 108,075 59,533 354,021 147,447 Income tax expense (30,744) (19,470) (107,960) (51,255) Minority interest (862) 481 (2,049) 6,122 --------- --------- ---------- ---------- Net income $ 76,469 $ 40,544 $ 244,012 $ 102,314 ========= ========= ========== ========== Net income per share: Basic $ 0.92 $ 0.54 $ 2.94 $ 1.36 Diluted $ 0.87 $ 0.52 $ 2.79 $ 1.30 Average shares outstanding: Basic 83,183 75,294 83,025 75,120 Diluted 87,923 77,985 87,468 78,492
Operating Results by Segment (Amounts in thousands, except ratios (1)) Third Quarter Nine Months ------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Specialty Insurance (2): Gross premiums written $ 386,785 $ 273,394 $ 1,057,027 $ 744,325 Net premiums written 350,278 242,558 958,062 654,751 Premiums earned 297,574 200,699 810,534 525,174 Pre-tax income 47,410 34,097 150,707 89,972 Loss ratio 65.8% 64.3% 63.1% 63.1% Expense ratio 24.4% 25.7% 24.5% 27.1% GAAP combined ratio 90.2% 90.0% 87.6% 90.2% Alternative Markets: Gross premiums written $ 157,400 $ 102,763 $ 429,077 $ 248,803 Net premiums written 127,688 89,134 355,593 215,771 Premiums earned 101,660 61,077 290,916 157,901 Pre-tax income 18,689 16,880 63,053 44,861 Loss ratio 70.5% 66.2% 68.7% 67.0% Expense ratio 25.4% 31.9% 24.8% 30.3% GAAP combined ratio 95.9% 98.1% 93.5% 97.3% Reinsurance (2): Gross premiums written $ 262,411 $ 184,025 $ 768,165 $ 526,757 Net premiums written 213,189 143,822 635,065 408,521 Premiums earned 198,145 99,167 557,254 246,005 Pre-tax income 17,154 6,729 37,283 17,555 Loss ratio 69.2% 73.0% 70.8% 72.7% Expense ratio 28.5% 30.6% 29.5% 32.3% GAAP combined ratio 97.7% 103.6% 100.3% 105.0% Regional Insurance (3): Gross premiums written $ 282,133 $ 236,212 $ 871,962 $ 711,217 Net premiums written 231,951 199,358 707,930 575,716 Premiums earned 222,389 183,424 634,683 512,067 Pre-tax income 40,905 26,736 107,171 67,736 Loss ratio 54.2% 58.8% 56.7% 61.2% Expense ratio 32.3% 33.0% 31.6% 32.0% GAAP combined ratio 86.5% 91.8% 88.3% 93.2% International: Gross premiums written $ 17,551 $ 13,045 $ 54,017 $ 73,236 Net premiums written 16,571 13,103 50,543 65,359 Premiums earned 15,812 14,967 48,787 74,357 Pre-tax income (loss) 1,887 (2,241) 4,889 (2,775) Loss ratio 51.6% 62.1% 52.2% 59.4% Expense ratio 39.2% 59.4% 42.1% 47.4% GAAP combined ratio 90.8% 121.5% 94.3% 106.8%
(Continued)
Operating Results by Segment (Amounts in thousands, except ratios (1)) Third Quarter Nine Months ------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Total Continuing Segments: Gross premiums written $ 1,106,280 $ 809,439 $ 3,180,248 $ 2,304,338 Net premiums written 939,677 687,975 2,707,193 1,920,118 Premiums earned 835,580 559,334 2,342,174 1,515,504 Pre-tax income 126,045 82,201 363,103 217,349 Loss ratio 63.8% 64.2% 63.7% 64.2% Expense ratio 27.9% 30.6% 28.0% 31.0% GAAP combined ratio 91.7% 94.8% 91.7% 95.2% Discontinued Business: Gross premiums written $ - $ 12,173 $ - $ 22,485 Net premiums written - 15 - 2,960 Premiums earned - 9,137 - 44,121 Pre-tax loss - (3,282) - (7,936) Corporate & Eliminations: Realized investment and foreign currency gains (losses) $ 3,423 $ 628 $ 60,506 $ (2,858) Interest and other, net (21,393) (20,014) (69,588) (59,108) Pre-tax loss (17,970) (19,386) (9,082) (61,966) Consolidated: Gross premiums written $ 1,106,280 $ 821,612 $ 3,180,248 $ 2,326,823 Net premiums written 939,677 687,990 2,707,193 1,923,078 Premiums earned 835,580 568,471 2,342,174 1,559,625 Pre-tax income 108,075 59,533 354,021 147,447 Loss ratio 63.8% 64.9% 63.7% 65.1% Expense ratio 27.9% 30.7% 28.0% 30.9% GAAP combined ratio 91.7% 95.6% 91.7% 96.0%
(1) Underwriting ratios represent losses, loss expenses and underwriting expenses expressed as a percentage of premiums earned. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses. (2) Operating results for the prior periods have been restated to reflect two changes in the accounting presentation. First, operating results for Vela Insurance Services, Inc., an excess and surplus lines underwriting manager, were transferred from the reinsurance segment to the specialty segment as a result of a change in management responsibility for this business. Second, in the fourth quarter of 2002, the Company modified the presentation of reinsurance assumed from Lloyd's syndicates to reflect the Company's share of the reinsurance and brokerage costs paid by the syndicates. Previously, these amounts were netted against assumed premiums. (3) For the third quarter of 2003 weather-related losses for the regional segment were $14 million compared with $12 million in the year-earlier period. For the first nine months of 2003, weather-related losses for the regional segment were $35 million compared with $34 million in the year-earlier period.
Supplemental Information (Amounts in thousands, except ratios (1)) Third Quarter Nine Months ------------- ----------- 2003 2002 2003 2002 ---- ---- ---- ---- Components of net income: Underwriting income $ 69,540 $ 25,286 $ 194,751 $ 61,358 Insurance services 4,877 5,955 15,528 12,939 Net investment income 51,678 48,316 153,859 137,032 Interest and other expenses (21,443) (20,652) (70,623) (61,024) Realized investment and foreign currency gains (losses) 3,423 628 60,506 (2,858) Income taxes and minority interest (31,606) (18,989) (110,009) (45,133) ---------- ---------- ------------ ------------ Net income $ 76,469 $ 40,544 $ 244,012 $ 102,314 ========== ========== ============ ============ Reconciliation of net operating income to net income: Net operating income (1) 74,037 41,944 204,426 107,616 Realized investment and foreign currency gains (losses), after tax 2,432 733 39,586 (144) Discontinued business, after tax - (2,133) - (5,158) ---------- ---------- ------------ ------------ Net income $ 76,469 $ 40,544 $ 244,012 $ 102,314 ========== ========== ============ ============ Net operating return on equity, annualized (1) 22.2% 18.0% 20.4% 15.4% Cash flow from operations before change in trading account $ 419,700 $ 303,462 $1,016,119 $ 542,916
September 30, 2003 December 31, 2002 ------------------ ----------------- Selected balance sheet information: Total investments (2) $6,026,738 $4,663,100 Total assets 8,875,336 7,031,323 Reserves for losses and loss expenses 3,863,152 3,167,925 Senior debt 658,933 362,985 Trust preferred securities 193,325 198,251 Stockholders' equity (3) 1,578,446 1,335,199 Shares outstanding 83,255 82,835 Stockholders' equity per share 18.96 16.12 (1) Net operating income is a non-GAAP financial measure defined by the Company as net income excluding gains and losses on investments, foreign currencies and discontinued business. Management believes that excluding investment and foreign currency gains, which result primarily from changes in general economic conditions, and excluding results of businesses that have been discontinued provides a useful indicator of trends in the Company's underlying and on-going operations. Net operating return on equity represents net operating income expressed as a percentage of beginning of year stockholders' equity, adjusted for stock transactions and expressed on an annualized basis. (2) Investments include accounts receivable from brokers and clearing organizations and securities sold but not yet purchased. (3) Stockholders' equity includes after-tax unrealized gains from investments and foreign exchange of $111 million and $105 million as of September 30, 2003 and December 31, 2002, respectively.