-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IYy8eD9OG83mpQGhIFBCOtZu3ykhmDMMgssWiPNiDEir/nREHO/zcu2yilKCA2Ld 36gOHu0Be8i4tKxMn9W4zA== 0000914039-98-000424.txt : 19981113 0000914039-98-000424.hdr.sgml : 19981113 ACCESSION NUMBER: 0000914039-98-000424 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKLEY W R CORP CENTRAL INDEX KEY: 0000011544 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 221867895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07849 FILM NUMBER: 98744128 BUSINESS ADDRESS: STREET 1: 165 MASON ST STREET 2: P O BOX 2518 CITY: GREENWICH STATE: CT ZIP: 06836-2518 BUSINESS PHONE: 2036293000 MAIL ADDRESS: STREET 1: 165 MASON ST STREET 2: PO BOX 2518 CITY: GREENWICH STATE: CT ZIP: 06836-2518 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period. . . . . . . . September 30, 1998 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Transition Period from ____ to ____. Commission File Number 0-7849 W. R. BERKLEY CORPORATION (Exact name of registrant as specified in its charter) Delaware 22-1867895 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 165 Mason Street, Greenwich, Connecticut 06836-2518 (Address of principal executive offices) (Zip Code) (203) 629-3000 (Registrant's telephone number, including area code) None Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No Number of shares of common stock, $.20 par value, outstanding as of November 1, 1998: 26,486,829. 2 W. R. Berkley Corporation and Subsidiaries Consolidated Balance Sheets (Dollars in thousands)
September 30, December 31, 1998 1997 ----------- ----------- Assets (Unaudited) Investments: Invested cash $ 436,149 $ 417,967 Fixed maturity securities: Held to maturity, at cost (fair value $186,458 and $194,919) 171,940 182,172 Available for sale at fair value (cost $2,240,924 and $2,240,901) 2,359,557 2,322,971 Equity securities, at fair value: Available for sale (cost $76,484 and $76,134) 80,355 86,243 Trading account (cost $300,856 and $301,136) 291,394 311,969 Cash 19,680 21,669 Premiums and fees receivable 391,003 331,774 Due from reinsurers 502,279 432,516 Accrued investment income 35,738 36,930 Prepaid reinsurance premiums 84,127 72,148 Deferred policy acquisition costs 170,352 145,737 Real estate, furniture & equipment at cost, less accumulated depreciation 137,817 126,831 Excess of cost over net assets acquired 72,579 73,142 Other assets 40,391 37,215 ----------- ----------- $ 4,793,361 $ 4,599,284 =========== =========== Liabilities, Reserves, Debt and Stockholders' Equity Liabilities and reserves: Reserves for losses and loss expenses $ 2,065,112 $ 1,909,688 Unearned premiums 689,477 589,384 Due to reinsurers 122,029 95,140 Deferred Federal income taxes 24,365 32,887 Trading securities sold but not yet purchased at fair value (proceeds $203,250 and $162,360) 208,193 159,456 Other liabilities 138,763 242,721 ----------- ----------- 3,247,939 3,029,276 ----------- ----------- Long-term debt 386,362 390,415 Company-obligated manditorily redeemable capital securities of a subsidiary trust holding solely 8.197% junior subordinated debentures of the Corporation due December 15, 2045 207,977 207,944 Minority interest 24,512 24,357 ----------- ----------- Stockholders' equity: Preferred stock, par value $.10 per share: Authorized 5,000,000 shares: 7 3/8% Series A Cumulative Redeemable Preferred Stock 653,952 shares issued and outstanding 65 65 Common stock, par value $.20 per share: Authorized 80,000,000 shares, issued and outstanding, net of treasury shares, 27,753,325 and 29,568,335 shares 7,281 7,281 Additional paid-in capital 429,340 428,760 Retained earnings 608,891 569,160 Accumulated other comprehensive income 76,867 58,206 Treasury stock, at cost, 8,650,742 and 6,835,510 shares (195,873) (116,180) ----------- ----------- 926,571 947,292 ----------- ----------- $ 4,793,361 $ 4,599,284 =========== ===========
See accompanying notes to consolidated financial statements. 1 3 W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Operations (Unaudited) (Amounts in thousands except per share data)
For the Three Months For the Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Revenues: Net premiums written $ 366,625 $ 302,106 $ 1,040,283 $ 886,875 Increase in net unearned premiums (36,073) (18,183) (88,110) (73,752) ----------- ----------- ----------- ----------- Premiums earned 330,552 283,923 952,173 813,123 Net investment income 42,727 48,257 151,505 140,675 Management fees and commission income 17,330 17,413 53,693 52,833 Realized gains on investments 2,879 5,127 13,386 12,321 Other income 937 930 3,853 2,446 ----------- ----------- ----------- ----------- Total revenues 394,425 355,650 1,174,610 1,021,398 Operating costs and expenses: Losses and loss expenses (229,526) (189,569) (652,306) (540,429) Other operating costs and expenses (141,561) (120,503) (413,784) (347,014) Interest expense (11,960) (12,197) (36,291) (36,652) ----------- ----------- ----------- ----------- Income before income taxes and minority interest 11,378 33,381 72,229 97,303 Federal income tax (expense) benefit 482 (7,932) (13,218) (23,291) ----------- ----------- ----------- ----------- Income before minority interest 11,860 25,449 59,011 74,012 Minority interest 401 124 1,666 738 ----------- ----------- ----------- ----------- Net income before preferred dividends 12,261 25,573 60,677 74,750 Preferred dividends (1,887) (1,852) (5,661) (5,977) ----------- ----------- ----------- ----------- Net income before extraordinary loss 10,374 23,721 55,016 68,773 Extraordinary loss on early extinguishment of long-term debt (net of taxes of $2,701) -- -- (5,017) -- ----------- ----------- ----------- ----------- Net income attributable to common stockholders $ 10,374 $ 23,721 $ 49,999 $ 68,773 =========== =========== =========== =========== Earning per share: Basic: Net income before extraordinary loss $ .37 $ .80 $ 1.91 $ 2.34 Extraordinary loss on early extinguishment of long-term debt -- -- (.17) -- ----------- ----------- ----------- ----------- Net income attributable to common stockholders $ .37 $ .80 $ 1.74 $ 2.34 =========== =========== =========== =========== Diluted: Net income before extraordinary loss $ .36 $ .78 $ 1.85 $ 2.29 Extraordinary loss on early extinguishment of long-term debt -- -- (.17) -- ----------- ----------- ----------- ----------- Net income attributable to common stockholders $ .36 $ .78 $ 1.68 $ 2.29 =========== =========== =========== =========== Average shares outstanding: Basic 28,024 29,517 28,687 29,379 =========== =========== =========== =========== Diluted 28,672 30,319 29,805 30,011 =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 2 4 W. R. Berkley Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (Dollars in thousands)
For the Nine Months Ended September 30, 1998 1997 --------- --------- Cash flows from operating activities: Net income before preferred dividends and extraordinary items $ 60,677 $ 74,750 Adjustments to reconcile net income to cash flows from operating activities: Minority interest (1,666) (738) Increase in reserves for losses and loss expenses, net of due to/from reinsurers 112,978 90,193 Depreciation and amortization 16,383 4,775 Change in unearned premiums and prepaid reinsurance premiums 88,110 73,752 Increase in premiums and fees receivable (59,229) (77,383) Change in Federal income taxes (15,241) (246) Change in deferred acquisition cost (24,615) (25,379) Realized gains on investments (13,386) (12,321) Other, net (52,213) 20,196 --------- --------- Net cash flows from operating activities before trading account sales 111,798 147,599 Trading account purchase (sales), net 5,113 (16,365) --------- --------- Net cash flows operating activities 116,911 131,234 --------- --------- Cash flows (used in) investing activities: Proceeds from sales, excluding trading account: Fixed maturity securities available for sale 484,020 422,566 Equity securities 34,363 25,306 Proceeds from maturities and prepayments of fixed maturity securities 143,556 99,117 Cost of purchases, excluding trading account: Fixed maturity securities available for sale (649,159) (654,260) Fixed maturity securities held to maturity (3,034) -- Equity securities (31,642) (19,136) Change in balances due to/from security brokers 16,971 40,207 Cost of acquired companies, net of acquired cash and invested cash (3,520) (1,439) Other, net (23,914) (23,463) --------- --------- Net cash flows (used in) investing activities (32,359) (111,102) --------- --------- Cash flows used in financing activities: Net proceeds from issuance of long-term debt 39,858 -- Net proceeds from issuance of short-term debt 17,500 -- Purchase of treasury shares (81,213) (41,523) Retirement of long-term debt (49,104) -- Cash dividends to common stockholders (10,189) (8,451) Cash dividends to preferred stockholders (5,507) (6,992) Other, net 296 16,907 --------- --------- Net cash flows used in financing activities (88,359) (40,059) --------- --------- Net (decrease) in cash and invested cash (3,807) (19,927) Cash and invested cash at beginning of year 459,636 346,485 --------- --------- Cash and invested cash at end of period $ 455,829 $ 326,558 ========= ========= Supplemental disclosure of cash flow information: Interest paid $ 30,470 $ 30,330 ========= ========= Federal income taxes paid, net $ 28,425 $ 23,508 ========= =========
See accompanying notes to consolidated financial statements. 3 5 W. R. Berkley Corporation and Subsidiaries Notes to Consolidated Financial Statements September 30, 1998 (Unaudited) The accompanying consolidated financial statements should be read in conjunction with the following notes and with the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. A. FEDERAL INCOME TAXES The Federal income tax provision has been computed based on the Company's estimated annual effective tax rate, which differs from the Federal income tax rate of 35% principally because of tax-exempt investment income. B. REINSURANCE CEDED The amounts of ceded reinsurance included in the statements of operations are as follows (amounts in thousands):
For the Three Months For the Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Ceded premiums written $ 73,601 $ 59,221 $206,599 $179,741 ======== ======== ======== ======== Ceded premiums earned $ 68,909 $ 60,920 $194,799 $174,884 ======== ======== ======== ======== Ceded losses and loss expenses $ 53,989 $ 26,973 $148,814 $ 90,986 ======== ======== ======== ========
C. PER SHARE DATA Basic per share data is based upon the weighted average number of shares outstanding during the year. Diluted per share data reflects the potential dilution that would occur if employee stock based compensation plans were exercised. 4 6 D. Comprehensive Income In June 1997, the Financial Accounting Standard Board issued statement No. 130, "Reporting Comprehensive Income", which requires enterprises to disclose comprehensive income and its components. The differences between comprehensive income and net income are unrealized foreign exchange gains (losses) as well as unrealized gains (losses) on securities. The following is a reconciliation of comprehensive income (amounts in thousands):
For the Three months For the Nine months Ended September 30, Ended September 30, ------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- -------- Net income attributable to common stockholders $ 10,374 $ 23,721 $ 49,999 $ 68,773 -------- -------- -------- -------- Other comprehensive income: Unrealized holding gains on investment securities arising during the period 19,186 13,579 12,885 7,628 Less: Reclassification adjustment for gains included in net income, net of tax 1,871 3,333 8,701 8,009 -------- -------- -------- -------- Net change in unrealized gains during the period 21,057 16,912 21,586 15,637 Change in unrealized foreign exchange (losses) (448) -- (2,925) -- -------- -------- -------- -------- Other comprehensive income 20,609 16,912 18,661 15,637 -------- -------- -------- -------- Comprehensive income $ 30,983 $ 40,633 $ 68,660 $ 84,410 ======== ======== ======== ========
E. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", was issued and established standards for accounting and reporting of derivative instruments and hedging activities. The statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is currently evaluating the requirements but does not expect this statement to have a material impact on it's financial position or results of operation. F. YEAR 2000 The Company continues to address system requirements with regards to Year 2000 compliance issues, and believes that the majority of the systems have been tested and verified as being Year 2000 compliant. To date, no significant losses have arisen or come to light with respect to Year 2000 claims exposure for the Company's insurance and reinsurance subsidiaries. Additionally, certain of the Company's insurance subsidiaries may either include or exclude insurance coverage for Year 2000 exposures. However, due in part to the potential for judicial decisions which re-formulate policies to expand their coverage for previously unforeseen theories of liability which may produce unanticipated claims, and because there is no prior history of such claims at this point in time, the amount of any potential Year 2000 coverage liabilities is not determinable. 5 7 G. OTHER MATTERS Reclassifications have been made in the 1997 financial statements as originally reported to conform them to the presentation of the 1998 financial statements. In the opinion of management, the summarized financial information reflects all adjustments, which are necessary for a fair presentation of financial position and results of operations for the interim periods. The Company's results of operations are affected by seasonal weather variations. Accordingly, results reflected for any interim period are not necessarily indicative of those to be expected for the entire year. 6 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net income attributable to common stockholders ("net income") was $10.4 million, ($.36 diluted per share) for the third quarter of 1998, in comparison with $23.7 million, ($.78 diluted per share), for the 1997 period. Net income was $50.0 million, ($1.68 diluted per share) for the nine months of 1998, in comparison with $68.8 million, ($2.29 diluted per share) for the 1997 period. Operating income, which we define as net income before realized investment gains (losses) and extraordinary items, was $8.5 million, ($.30 diluted per share), in the second quarter of 1998 in comparison with $20.4 million, ($.67 diluted per share), earned in the corresponding 1997 period. Operating income was $46.3 million, ($1.55 diluted per share), in the nine months of 1998, in comparison with $60.8 million, ($2.02 diluted per share), earned in the corresponding 1997 period. Third quarter net income included capital gains, net of taxes, of $1.9 million, or $.06 per share diluted, compared with $3.3 million, or $.11 per share diluted, for the same period last year. For the first nine months of 1998 capital gains were $8.7 million or $.30 per share diluted compared with $8.0 million or $.27 per share diluted recorded during the corresponding 1997 period. The Company also reported an extraordinary loss of $5.0 million for the first nine months of 1998 related to the repurchase and retirement of $34.7 million (face amount) of long-term debt. There were no comparable extraordinary items in 1997. Operating Results for the Nine months of 1998 As compared to the Nine months of 1997 Net premiums written during the first nine months of 1998 increased by 17% to $1,040.3 million from $886.9 million written in the comparable 1997 period. Net premiums written by the regional segment increased by $40.0 million or 8.5%, approximately 43% of this increase was due to Continental Western; the balance of the increase was generated by several of the other regional units. Specialty net premiums written increased by $28.1 million or 18% due to increases in all sectors of this business. Net premiums written by the reinsurance operations increased by $42.5 million or 27% mainly due to an increase in prorata treaty volume. Alternative Markets net premiums written increased $14.1 million or 19% due to the commencement of operations of Key Risk Insurance Company (which underwrote business previously managed on behalf of a self-insurance association). This increase more than offset a decline in premiums written by Midwest Employers Casualty Company. International net premiums written increased $28.6 million to $57.5 million primarily due to 1997 acquisitions and the continued growth in our Argentine workers compensation company. For the nine months ended September 30, 1998, pre-tax investment income increased by 7.7% to $151.5 million. The increase in average investable assets due to cash flow from operations contributed to the growth in investment income. This increase more than offset the reinvestment of funds at lower yields and a slightly lower yield from our trading portfolio. (See "Liquidity and Capital Resources") Management fees and commission income ("Management fees") consist primarily of revenues earned by the Alternative Markets segment. During the nine months of 1998, management fees increased 2% from the comparable 1997 amount as intense competition inhibited growth. Realized gains increased to $13.4 million from $12.3 million earned in the comparable 1997 period. Realized gains on fixed income securities result primarily from the Company's strategy of maintaining an appropriate balance between the duration of its fixed income portfolio and the duration of its liabilities; realized gains on equity securities arise primarily as a result of a variety of factors which influence the Company's valuation criteria. The majority of the 1998 realized gains were attributable to the sale of fixed maturity securities while the majority of the 1997 realized gains resulted from the sale of equity securities. 7 9 The combined ratio (on a statutory basis) of the Company's insurance operations increased to 102.6% for the nine months ended September 30, 1998 from 100.5% in the comparable 1997 period due to increases in the consolidated loss ratio and expense ratio. The consolidated loss ratio (losses and loss expenses incurred expressed as a percentage of premiums earned) increased to 68.1% in 1998 from 66.8% in 1997 due to an increase in weather related losses as well as an increase in current year claims experience due to the effects of increased rate competition. These factors more than offset a reduction in losses incurred from significant reserve releases due to better than expected experience on business written in prior years. Other operating costs and expenses, which consist of the expenses of the Company's operating units as well as the Company's corporate and investment expenses, increased by 19% to $413.8 million. The increase in other operating costs and expenses is primarily due to substantial growth in premium volume which in turn results in an increase in underwriting expenses. The consolidated expense ratio (underwriting expenses expressed as a percentage of premiums written) increased slightly to 34.0% from 33.5%. This increase resulted primarily from a higher growth rate in international operations, which operate at a higher expense ratio than domestic operations and expansion of several regional companies. Federal income tax expense in 1998 was $13.2 million (18% effective rate) as compared to a $23.3 million (24% effective rate) for the comparable 1997 period. The decrease in the effective tax rate in 1998 is due primarily to an increase in the percentage of pre-tax income that is tax-exempt. (See "Liquidity and Capital Resources"). Operating Results for the Third Quarter of 1998 as Compared to the Third Quarter of 1997 For the third quarter of 1998 as compared to the corresponding 1997 period, net premiums written increased 21% for reasons discussed above; net investment income decreased 11%, due primarily to lower earnings in the trading portfolio; and management fees and commission income decreased slightly. The combined ratio (on a statutory basis) of the Company's insurance operations increased to 102.7% for the three months ended September 30, 1998 from 101.4% in the comparable 1997 period due to an increase in the consolidated loss ratio and a decrease in the consolidated expense ratio. The consolidated loss ratio (losses and loss expenses incurred expressed as a percentage of premiums earned) increased to 68.7% in 1998 from 67.0% in 1997 for the reasons discussed above. Other operating costs and expenses increased 17% to $141.6 million for the three months ended September 30, 1998 and the consolidated expense ratio of the Company's insurance operations (underwriting expenses expressed as a percentage of premiums written) decreased slightly to 33.5% for the 1998 period from 33.7% for the comparable 1997. For the third quarter of 1998 the Company recorded a Federal income tax benefit of $0.5 million as compared to an expense of $7.9 million for the comparable 1997 period. The 1998 tax benefit is a result of the Company's tax-exempt income exceeding its pre-tax income, whereas, in the third quarter of 1997, tax-exempt income was approximately one-third of the Company's pre-tax income. Liquidity and Capital Resources Cash flow from operating activities before trading account sales, was $111.8 million for the first nine months of 1998 compared with $147.6 million for the same period in 1997. The lower level of cash flow was primarily due to higher paid losses. The net investment portfolio, on a cost basis, increased by $8.1 million to $3,226.4 million at September 30, 1998 from $3,218.3 million at December 31, 1997 as the purchase of treasury stock and the retirement of debt more than offset cash flow from operations. The composition of the Company's net investment portfolio distribution at September 30, 1998 as compared with December 31, 1997 was: tax-exempt securities increased to 36% from 34%; U.S. Government securities and cash equivalents (excluding trading cash) decreased to 21% from 23%; corporate bonds remained at 15%; mortgage-backed securities decreased to 16% from 17%; the net trading account investments increased to 10% from 8%; and equity securities represented the balance. 8 10 In February 1998 the Company repurchased $16.3 million face value of its 9.875% and 8.7% senior notes and debentures for $19.7 million and issued $20.2 of short-term debt to finance these purchases. In April 1998 the Company repurchased an additional $18.4 million of its 9.875% and 8.7% senior debentures for $22.1 million. In April 1998 the Company issued $40 million face value 6.375% medium-term notes due April 15, 2005. The proceeds from the issuance of the medium-term notes were used to repay the short-term debt issued in connection with the repurchased debentures. In addition, a portion of the proceeds from the medium-term notes was used to retire $10 million face value of its 8.95% senior notes, which matured on May 20, 1998. During 1998 the Company purchased 3,172,222 shares, to date, of its Common Stock leaving a balance of 261,078 shares available for repurchase under its current authorization. For the first nine months of 1998, Stockholders' Equity decreased by approximately $20.7 million. The decrease in Stockholders' Equity is attributable to the repurchase of Common Stock, which was partially offset by an increase in Retained Earnings. Accordingly, the Company's total capitalization decreased to $1,520.9 million at September 30, 1998 and the percentage of the Company's capital attributable to debt remained at 25%. For background information concerning a further discussion of the Company's Liquidity and Capital Resources, see the Company's Annual Report on Form 10-K. YEAR 2000 The Company continues to address system requirements with regards to Year 2000 compliance issues, and believes that the majority of the systems have been tested and verified as being Year 2000 compliant. The project of Year 2000 readiness is broken down into the following phases: (1) inventorying Year 2000 items, (2) prioritizing the identified items, (3) evaluating Year 2000 compliance and alternative solutions, for items determined to be material to the Company, (4) replacing or repairing material items that are determined not to be Year 2000 compliant and (5) testing and changing items which are material. The project, which began in 1996, is substantially complete, and it is expected that all critical primary systems will be tested and functional by March 1999. This includes both operational and financial systems upon which the Company is dependent. As to embedded chips, the Company expects to be compliant by March 1999 with respect to those chips which are integral to its operating systems. Compliance with respect to the remainder of the Company's embedded chips is expected to be achieved by the third quarter of 1999. Additionally, the Company is communicating with third parties with whom it has a material relationship, e.g. independent insurance agents, and financial institutions, to identify any Year 2000 issues with respect to those third parties. As a result of these communications, the Company reasonably believes that those third parties are either in general compliance with Year 2000 readiness or the Company is following up for alternative resolution. It is the Company's practice in the normal course of business to upgrade technology including hardware and software as appropriate. As a result of this practice, much of its Year 2000 readiness has been accomplished in the ordinary course. To date, the Company has incurred approximately $6 million of costs which have been expensed as incurred, and estimates an additional $2 million to be incurred to complete Year 2000 compliance. The total cost associated with Year 2000 compliance is not expected to be material to the Company's financial position. Notwithstanding the above, a failure by the Company or a third party to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, including the uncertainty of the Year 2000 readiness of third parties with whom the Company deals, providers and vendors, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. To date, no significant losses have arisen or come to light with respect to Year 2000 claims exposure for the Company's insurance and reinsurance subsidiaries. Additionally, certain of the Company's insurance subsidiaries may either include or exclude insurance coverage for Year 2000 exposures. However, due in part to the potential for judicial decisions which re-formulate policies to expand their coverage for previously unforeseen theories of liability which may produce unanticipated claims, and because there is no prior history of such claims at this point in time, the amount of any potential Year 2000 coverage liabilities is not determinable. 9 11 The Company has not implemented a formal contingency plan with respect to Year 2000 compliance issues, however, the Company and its various operating units are presently analyzing contingency alternatives for implementation. Except for historical information, the matters discussed in this quarterly report on form 10-Q are forward-looking statements that are subject to certain risks and uncertainties that could cause the actual results to differ materially from those projected, including pricing competition and other initiatives by competitors, legislative and regulatory developments, interest rate levels and other conditions in the financial and securities markets, unforeseen technological issues associated with Year 2000 compliance efforts and the extent to which vendors, public utilities, governmental entities and other third parties that interface with the company may fail to achieve Year 2000 compliance, and other risks detailed from time to time in the Company's SEC reports. The Company assumes no obligation to update the information in this quarterly report. 10 12 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits None (b) Reports on Form 8-K On July 10, 1998 the Company filed a current report on Form 8-K announcing expectation of lower second-quarter earnings. 11 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. W. R. BERKLEY CORPORATION WILLIAM R. BERKLEY William R. Berkley Chairman of the Board and Chief Executive Officer ANTHONY J. DEL TUFO Anthony J. Del Tufo Senior Vice President, Chief Financial Officer and Treasurer 12 EX-27 2 EXHIBIT 27
7 1,000 U.S. DOLLARS 9-MOS DEC-31-1998 JAN-1-1998 SEP-30-1998 1 2,359,557 171,940 186,458 371,749 0 0 2,903,246 455,829 0 170,352 4,793,361 2,065,112 689,477 0 0 594,339 0 65 7,281 919,225 4,793,361 952,173 151,505 13,386 3,853 652,306 0 0 72,229 13,218 55,016 0 (5,017) 0 49,999 1.74 1.68 0 0 0 0 0 0 0
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