-----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, NCapWtarTh1TDorbOppz0RNkskPclqHoa1be/EMPTBo44iq9K/T/Z0aHC31J+0m9 rVfQEIeAHCZnRbekAduwig== 0000950123-04-012492.txt : 20041027 0000950123-04-012492.hdr.sgml : 20041027 20041026211117 ACCESSION NUMBER: 0000950123-04-012492 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20041027 DATE AS OF CHANGE: 20041026 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15202 FILM NUMBER: 041097910 BUSINESS ADDRESS: STREET 1: 475 STEAMBOAT ROAD STREET 2: . CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036293000 MAIL ADDRESS: STREET 1: 475 STEAMBOAT ROAD STREET 2: . CITY: GREENWICH STATE: CT ZIP: 06830 8-K 1 y67987e8vk.txt FORM 8-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 2004 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): October 26, 2004 W. R. BERKLEY CORPORATION ------------------------- (Exact name of registrant as specified in its charter)
DELAWARE 1-15202 22-1867895 - -------------- ------------------- ------------------ (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.)
475 STEAMBOAT ROAD, GREENWICH, CT 06830 ------------------------------ -------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 629-3000 -------------- NOT APPLICABLE (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02. RESULTS OF OPERATION AND FINANCIAL CONDITION Reference is made to the press release of W. R. Berkley Corporation (the "Company") relating to the announcement of the Company's results of operations for the third quarter of 2004. The press release was issued on October 26, 2004. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference. The information contained herein shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits 99.1 Press Release, dated October 26, 2004 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 hereunto duly authorized. W. R. BERKLEY CORPORATION By: /s/ Eugene G. Ballard ----------------------- Name: Eugene G. Ballard Title: Senior Vice President, Chief Financial Officer and Treasurer Date: October 26, 2004 EXHIBIT INDEX Exhibit: - -------- 99.1 Press Release dated October 26, 2004 EX-99.1 2 y67987exv99w1.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 THIRD QUARTER EARNINGS GREENWICH, CT, OCTOBER 26, 2004 -- W. R. BERKLEY CORPORATION (NYSE: BER) today reported net income for the third quarter of 2004 of $97 million, or $1.10 per share, a 27% increase from $76 million, or $0.87 per share, a year ago. Third quarter 2004 net operating income increased 27% to $94 million, or $1.06 per share, compared with $74 million, or $0.84 per share, for the third quarter of 2003. Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and the effects of changes in accounting principles. Summary Financial Data (Amounts in thousands, except per share data)
Third Quarter Nine Months ------------- ----------- 2004 2003 2004 2003 ---- ---- ---- ---- Gross premiums written $ 1,173,715 $ 1,106,280 $ 3,521,135 $ 3,180,248 Net premiums written 1,058,580 939,677 3,161,459 2,707,193 Net income 97,072 76,469 321,984 244,012 Net income per diluted share 1.10 0.87 3.64 2.79 Net operating income 93,925 74,037 293,816 204,426 Net operating income per diluted share $ 1.06 $ 0.84 $ 3.33 $ 2.34
W. R. Berkley Corporation Page 2 Third quarter highlights included: - Net premiums written rose to $1.059 billion, an increase of 13% from the comparable quarter of 2003. - Pre-tax losses attributable to Hurricanes Charley, Frances, Ivan and Jeanne were $32 million. - The GAAP combined ratio was 91.9% compared with 91.7% in the prior year period. - The paid loss ratio decreased to 30.0% from 36.2% in the prior year quarter. - Investment income increased 39% to $72 million. - Cash flow from operations increased 8% to $465 million compared with $429 million in the year-earlier period. Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "The Company achieved record third quarter operating results in spite of the unusually high level of storms and resulting decline in the industry's profitability. Prices are generally increasing at a level above loss cost inflation, and in most areas of the business our returns continue to be comfortably above our targets. "Our paid loss ratio declined to 30% in the third quarter, the seventh consecutive quarterly reduction, and our cash flow was at an all-time high. Although our ability to increase prices is becoming a greater challenge, we expect to continue to deliver outstanding returns for the foreseeable future," Mr. Berkley concluded. W. R. Berkley Corporation Page 3 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, regional property casualty insurance, alternative markets, reinsurance 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 2004 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, increases in the 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 risks, including those relating to fixed income securities, merger arbitrage investments, and other equity securities, exchange rate and political risks relating to our international operations, legislative and regulatory developments, changes in the ratings assigned to us by ratings agencies, the availability of dividends from our insurance company subsidiaries, our ability to successfully acquire and integrate companies and invest 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 2004 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Any projections of growth in the Company's net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. 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 4 Consolidated Financial Summary (Amounts in thousands, except per share data)
Third Quarter Nine Months ------------- ----------- 2004 2003 2004 2003 ---- ---- ---- ---- Revenues: Net premiums written $ 1,058,580 $ 939,677 $ 3,161,459 $ 2,707,193 Change in unearned premiums (24,500) (104,097) (171,464) (365,019) ---------- --------- ---------- ---------- Premiums earned 1,034,080 835,580 2,989,995 2,342,174 Net investment income 71,722 51,678 209,009 153,859 Service fees 28,020 25,475 83,966 76,854 Realized investment gains 4,792 3,423 44,559 60,506 Other income 922 226 1,466 1,359 --------- -------- --------- --------- Total revenues 1,139,536 916,382 3,328,995 2,634,752 --------- -------- --------- --------- Expenses: Losses and loss expenses 674,534 533,201 1,901,617 1,491,244 Other operating expenses 309,392 261,281 911,646 750,294 Interest expense 16,707 13,825 48,232 39,193 --------- -------- --------- --------- Total expenses 1,000,633 808,307 2,861,495 2,280,731 --------- -------- --------- --------- Income before income taxes and minority interest 138,903 108,075 467,500 354,021 Income tax expense (40,645) (30,744) (142,837) (107,960) Minority interest (1,186) (862) (1,952) (2,049) ---------- --------- ---------- ---------- Net income before change in accounting principle 97,072 76,469 322,711 244,012 Cumulative effect of change in accounting principle, net of taxes - - (727) - --------- -------- --------- --------- Net income $ 97,072 $ 76,469 $ 321,984 $ 244,012 ========= ======== ========= ========= Net income per share: Basic $ 1.15 $ 0.92 $ 3.84 $ 2.94 Diluted $ 1.10 $ 0.87 $ 3.64 $ 2.79 Average shares outstanding: Basic 84,079 83,183 83,883 83,025 Diluted 88,174 87,923 88,373 87,468
W. R. Berkley Corporation Page 5 Operating Results by Segment (Amounts in thousands, except ratios (1))
Third Quarter Nine Months ------------- ----------- 2004 2003 2004 2003 ---- ---- ---- ---- Specialty (2): Gross premiums written $ 416,458 $ 386,785 $ 1,194,122 $ 1,057,027 Net premiums written 389,997 350,278 1,124,666 958,062 Premiums earned 377,046 297,574 1,077,335 810,534 Pre-tax income 74,123 47,595 214,075 150,892 Loss ratio 62.2% 65.8% 61.9% 63.1% Expense ratio 24.9% 24.4% 25.2% 24.5% GAAP combined ratio 87.1% 90.2% 87.1% 87.6% Regional (2): Gross premiums written $ 320,640 $ 282,133 $ 988,657 $ 871,962 Net premiums written 276,488 231,951 855,032 707,930 Premiums earned 274,520 222,389 786,487 634,683 Pre-tax income 41,581 40,905 124,780 107,171 Loss ratio 57.8% 54.2% 57.2% 56.7% Expense ratio 31.1% 32.3% 31.0% 31.6% GAAP combined ratio 88.9% 86.5% 88.2% 88.3% Alternative Markets (2): Gross premiums written $ 177,691 $ 157,400 $ 557,431 $ 429,077 Net premiums written 159,886 127,688 484,853 355,593 Premiums earned 149,166 101,660 424,941 290,916 Pre-tax income 31,447 18,689 95,956 63,053 Loss ratio 71.6% 70.5% 70.4% 68.7% Expense ratio 22.0% 25.4% 21.4% 24.8% GAAP combined ratio 93.6% 95.9% 91.8% 93.5% Reinsurance (2): Gross premiums written $ 239,237 $ 262,411 $ 721,058 $ 768,165 Net premiums written 214,005 213,189 642,388 635,065 Premiums earned 215,728 198,145 648,243 557,254 Pre-tax income 13,458 17,154 64,895 37,328 Loss ratio 76.3% 69.2% 70.6% 70.8% Expense ratio 26.2% 28.5% 28.0% 29.5% GAAP combined ratio 102.5% 97.7% 98.6% 100.3% International: Gross premiums written $ 19,689 $ 17,551 $ 59,867 $ 54,017 Net premiums written 18,204 16,571 54,520 50,543 Premiums earned 17,620 15,812 52,989 48,787 Pre-tax income 1,994 1,887 4,251 4,889 Loss ratio 56.5% 51.6% 53.1% 52.2% Expense ratio 41.7% 39.2% 40.8% 42.1% GAAP combined ratio 98.2% 90.8% 93.9% 94.3%
(Continued) W. R. Berkley Corporation Page 6 Operating Results by Segment (continued) (Amounts in thousands, except ratios (1))
Third Quarter Nine Months ------------- ----------- 2004 2003 2004 2003 ---- ---- ---- ---- Corporate and Eliminations: Realized investment gains $ 4,792 $ 3,423 $ 44,559 $ 60,506 Interest and other, net (28,492) (21,578) (81,016) (69,818) Pre-tax loss (23,700) (18,155) (36,457) (9,312) Total (2): Gross premiums written $ 1,173,715 $ 1,106,280 $ 3,521,135 $ 3,180,248 Net premiums written 1,058,580 939,677 3,161,459 2,707,193 Premiums earned 1,034,080 835,580 2,989,995 2,342,174 Pre-tax income 138,903 108,075 467,500 354,021 Loss ratio 65.2% 63.8% 63.6% 63.7% Expense ratio 26.7% 27.9% 27.1% 28.0% GAAP combined ratio 91.9% 91.7% 90.7% 91.7%
- ---------- (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. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses. Combined ratio is the sum of loss ratio and expense ratio. (2) Weather-related losses, including losses attributable to Hurricanes Charley, Frances, Ivan and Jeanne, were $40 million in the third quarter of 2004 compared to weather-related losses of $14 million in the third quarter of 2003. For the first nine months of 2004, weather-related losses were $58 million compared to $35 million in the corresponding 2003 period. W. R. Berkley Corporation Page 7 Supplemental Information (Amounts in thousands, except per share data)
Third Quarter Nine Months ------------- ----------- Reconciliation of net operating income to net income: 2004 2003 2004 2003 ---- ---- ---- ---- Net operating income (1) $ 93,925 74,037 $ 293,816 $ 204,426 Realized investment gains, net of taxes 3,147 2,432 28,895 39,586 Cumulative effect of change in accounting principle - - (727) - -------- -------- --------- ------- Net income $ 97,072 76,469 $ 321,984 $ 244,012 ======== ======== ========= ======= Return on equity (2) 23.1% 22.9% 25.5% 24.4% Cash flow from operations $ 464,520 $ 428,613 $ 1,133,978 $ 975,640 Cash flow from operations before cash transfers to/from trading account (3) $ 487,520 $ 428,613 $ 1,206,978 $ 975,640
September 30, December 31, ------------- ------------ Selected balance sheet information 2004 2003 ---- ---- Total investments (4) $ 7,838,682 $ 6,480,713 Total assets 11,059,645 9,334,685 Reserves for losses and loss expenses 5,163,129 4,192,091 Debt 807,896 659,208 Junior subordinated debentures 208,274 193,336 Stockholders' equity (5) 1,976,070 1,682,562 Shares outstanding 84,129 83,538 Stockholders' equity per share 23.49 20.14
- ---------- (1) Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and the effects of changes in accounting principles. Management believes that excluding realized investment gains, which result primarily from changes in general economic conditions, and the effects of changes in accounting principle 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 stockholders' equity. (3) Cash flow from operations before cash transfers to/from trading account is a non-GAAP financial measure that excludes cash contributions to and withdrawals from the arbitrage trading account. Management believes that cash transfers to/from the arbitrage trading account are the result of changes in investment allocations and that excluding such transfers provides a useful measure of the Company's cash flow. (4) Investments include accounts receivable from brokers and clearing organizations and securities sold but not yet purchased. (5) Stockholders' equity includes after-tax unrealized gains from investments and foreign exchange of $97 million and $120 million as of September 30, 2004 and December 31, 2003, respectively. -----END PRIVACY-ENHANCED MESSAGE-----