10-Q

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 Ended September 30, 2004

or

o 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 1-15202

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.)

475 Steamboat Road, Greenwich, Connecticut		06830
(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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
Yes x No o

Number of shares of common stock, $.20 par value, outstanding as of November 1, 2004: 84,144,023

TABLE OF CONTENTS

Part I - FINANCIAL INFORMATION
	ITEM 1. Financial Statements
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Stockholders’ Equity
		Consolidated Statements of Cash Flows
		Notes to Unaudited Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosure About Market Risk
	Item 4. Controls and Procedures
PART II – OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 5. Other Information
	Item 6. Exhibits
SIGNATURES
EX-10.1 SUPPLEMENTAL BENEFITS AGREEMENT
EX-31.1 CERTIFICATION
EX-31.2 CERTIFICATION
EX-32.1 CERTIFICATION

Part I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

W. R. Berkley Corporation and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands)

	September 30,			December 31,
	2004			2003
	(Unaudited)
Assets
Investments:
Fixed maturity securities	$	5,774,451		$	4,293,302
Equity securities available for sale		429,749			316,629
Equity securities trading account		400,736			331,967
Investments in affiliates		223,051			126,772
Total investments		6,827,987			5,068,670
Cash and cash equivalents		1,049,126			1,431,466
Premiums and fees receivable		1,008,335			950,551
Due from reinsurers		873,935			804,962
Accrued investment income		64,153			54,313
Prepaid reinsurance premiums		203,008			193,693
Deferred policy acquisition costs		441,276			405,324
Real estate, furniture & equipment at cost, less accumulated depreciation		156,876			143,792
Deferred income taxes		84,076			35,813
Goodwill		59,021			59,021
Trading account receivable from brokers and clearing organizations		162,936			102,257
Other assets		128,916			84,823
Total assets	$	11,059,645		$	9,334,685
Liabilities and Stockholders’ Equity
Liabilities:
Reserves for losses and loss expenses	$	5,163,129		$	4,192,091
Unearned premiums		2,038,886			1,857,895
Due to reinsurers		122,667			123,226
Trading securities sold but not yet purchased		171,522			119,100
Policyholders’ account balances		62,199			53,405
Other liabilities		469,418			415,714
Junior subordinated debentures		208,274			193,336
Senior notes and other debt		807,896			659,208
Total liabilities		9,043,991			7,613,975
Minority interest		39,584			38,148
Stockholders’ equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares; issued and outstanding – none		—			—
Common stock, par value $.20 per share:
Authorized 300,000,000 shares, issued and outstanding, net of treasury shares, 84,128,636 and 83,537,740 shares		20,901			20,901
Additional paid-in capital		824,670			820,388
Retained earnings		1,244,265			939,911
Accumulated other comprehensive income		97,251			119,977
Treasury stock, at cost, 20,373,624 and 20,964,520 shares		(211,017	)		(218,615	)
Total stockholders’ equity		1,976,070			1,682,562
Total liabilities and stockholders’ equity	$	11,059,645		$	9,334,685

See accompanying notes to consolidated financial statements.

1

W. R. Berkley Corporation and Subsidiaries

Consolidated Statements of Operations
(Unaudited)
(dollars in thousands, except per share data)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	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	)
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
Earnings per share:
Basic:
Income before change in accounting principle	$	1.15		$	.92		$	3.85		$	2.94
Cumulative effect of change in accounting principle, net of taxes		—			—			(.01	)		—
Net income	$	1.15		$	.92		$	3.84		$	2.94
Diluted:
Income before change in accounting principle	$	1.10		$	.87		$	3.65		$	2.79
Cumulative effect of change in accounting principle, net of taxes		—			—			(.01	)		—
Net income	$	1.10		$	.87		$	3.64		$	2.79

See accompanying notes to consolidated financial statements.

2

W. R. Berkley Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity
(dollars in thousands, except per share data)

	Nine Months Ended			Year Ended
	September 30,			December 31,
	2004			2003
	(Unaudited)
Common Stock:
Beginning and end of period	$	20,901		$	20,901
Additional paid in capital:
Beginning of period	$	820,388		$	816,223
Stock options exercised		917			2,015
Restricted stock units earned		3,189			1,927
Other		176			223
End of period	$	824,670		$	820,388
Retained earnings:
Beginning of period	$	939,911		$	623,651
Net income		321,984			337,220
Elimination of international reporting lag		—			1,776
Dividends to stockholders		(17,630	)		(22,736	)
End of period	$	1,244,265		$	939,911
Accumulated other comprehensive income:
Unrealized investment gains:
Beginning of period	$	120,807		$	114,664
Net change in period		(13,207	)		6,143
End of period		107,600			120,807
Currency translation adjustments:
Beginning of period	$	(830	)	$	(10,061	)
Net change in period		(9,519	)		9,231
End of period		(10,349	)		(830	)
Total accumulated other comprehensive income	$	97,251		$	119,977
Treasury Stock:
Beginning of period	$	(218,615	)	$	(230,179	)
Stock issued under stock incentive plan		7,912			11,386
Stock repurchased		(337	)		—
Other		23			178
End of period	$	(211,017	)	$	(218,615	)

See accompanying notes to consolidated financial statements.

3

W. R. Berkley Corporation and Subsidiaries

Consolidated Statements of Cash Flows
(Unaudited)
(dollars in thousands)

	For the Nine Months
	Ended September 30,
	2004			2003
Cash flows provided by operating activities:
Net income before change in accounting principle	$	322,711		$	244,012
Adjustments to reconcile net income to net cash flows provided by operating activities:
Realized investment gains		(44,559	)		(60,506	)
Depreciation and amortization		35,136			13,681
Minority interest		1,952			2,049
Equity in undistributed earnings of affiliates		(14,361	)		(4,597	)
Stock incentive plans		3,388			—
Change in:
Equity securities trading account		(68,769	)		(65,201	)
Premiums and fees receivable		(57,784	)		(164,619	)
Due from reinsurers		(68,973	)		(40,156	)
Accrued investment income		(9,840	)		(2,624	)
Prepaid reinsurance premiums		(9,315	)		(92,843	)
Deferred policy acquisition cost		(35,952	)		(88,111	)
Deferred income taxes		(36,973	)		(21,790	)
Trading account receivable from brokers and clearing organizations		(60,679	)		13,582
Other assets		(44,543	)		(22,083	)
Reserves for losses and loss expenses		971,038			695,227
Unearned premiums		180,991			458,572
Due to reinsurers		(559	)		(6,353	)
Trading account securities sold but not yet purchased		52,422			43,913
Policyholders’ account balances		(1,532	)		(5,588	)
Other liabilities		19,374			73,487
Net cash flows provided by operating activities		1,133,173			970,052
Cash flows used in investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities		1,213,020			746,213
Equity securities		76,098			45,039
Maturities and prepayments of fixed maturities securities		398,125			565,158
Investment in affiliates		8,234			—
Cost of purchases, excluding trading account:
Fixed maturity securities		(3,074,129	)		(1,841,372	)
Equity securities		(189,575	)		(144,325	)
Investment in affiliates		(90,761	)		(50,752	)
Change in balances due to/from security brokers		27,266			(4,110	)
Net additions to real estate, furniture and equipment		(29,225	)		(18,368	)
Other		1,112			430
Net cash flows used in investing activities		(1,659,835	)		(702,087	)
Cash flows provided by financing activities:
Net proceeds from issuance of debt		147,817			356,182
Return of policyholders’ account balances		(180	)		(262	)
Receipts credited to policyholders’ account balances		10,506			13,691
Bank deposits received		25,312			11,535
Advances from (repayments to) federal home loan bank		(16,710	)		10,175
Repayment of debt		—			(65,750	)
Net proceeds from stock options exercised		8,829			7,709
Cash dividends		(17,630	)		(21,836	)
Stock repurchases		(337	)		—
Proceeds from minority shareholders		—			15,337
Other, net		(13,285	)		7,286
Net cash flows provided by financing activities		144,322			334,067
Net increase (decrease) in cash and invested cash		(382,340	)		602,032
Cash and invested cash at beginning of year	$	1,431,466		$	594,183
Cash and invested cash at end of period	$	1,049,126		$	1,196,215
Supplemental disclosure of cash flow information:
Interest paid	$	46,994		$	33,493
Federal income taxes paid, net	$	198,507		$	99,932

See accompanying notes to consolidated financial statements.

4

W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
September 30, 2004

1. GENERAL

     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, 2003. Reclassifications have been made in the 2003 financial statements as originally reported to conform them to the presentation of the 2004 financial statements.

     The 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.

     Basic earnings per share data are based upon the weighted average number of shares outstanding during the period. Diluted earnings per share data reflect the potential dilution that would occur if options granted under employee stock-based compensation plans were exercised.

     In the opinion of management, the financial information reflects all adjustments that are necessary for a fair presentation of financial position and results of operations for the interim periods. Seasonal weather variations and natural and man-made catastrophes can have a significant impact on the results of any one or more reporting periods.

2. RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which was replaced in December 2003 by FIN 46R. FIN 46R addresses consolidation issues surrounding special purpose entities and certain other entities, collectively termed variable interest entities (“VIE”). A VIE is an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46R requires VIEs to be consolidated by their primary beneficiaries. The Company adopted FIN 46R in 2003, except for the consolidation provisions which were adopted on January 1, 2004.

     As a result of adopting the consolidation provisions of FIN 46R, the Company deconsolidated the W. R. Berkley Capital Trust (the “Trust”). The Company owns preferred securities of the Trust that were previously accounted for at the date of purchase as an extinguishment of debt and eliminated in consolidation. The impact of de-consolidating the Trust was to increase fixed maturity securities by $13,787,000 and to increase junior subordinated debentures by $14,906,000, as of January 1, 2004. The difference between these two amounts, which was $727,000 after income taxes, was reported on the Company’s consolidated statement of operations as a cumulative effect of change in accounting principle.

5

W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements (Continued)
September 30, 2004

3. COMPREHENSIVE INCOME

     The following is a reconciliation of comprehensive income (dollars in thousands):

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2004			2003			2004			2003
Net income	$	97,072		$	76,469		$	321,984		$	244,012
Other comprehensive income:
Change in unrealized foreign exchange gains (losses)		26			4,032			(9,519	)		(2,721	)
Unrealized holding gains (losses) on investment securities arising during the period, net of taxes		71,183			(22,008	)		15,688			49,020
Reclassification adjustment for realized gains included in net income, net of taxes		(3,147	)		(2,432	)		(28,895	)		(39,586	)
Other comprehensive income (loss)		68,062			(20,408	)		(22,726	)		6,713
Comprehensive income	$	165,134		$	56,061		$	299,258		$	250,725

4. STOCK-BASED COMPENSATION

     The Company adopted FASB Statement No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123”, effective as of January 1, 2003. Under the prospective method of adoption selected by the Company, the fair value recognition provisions of FASB 148 are applied to all employee awards granted, modified or settled after January 1, 2003. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period (dollars in thousands, except per share data).

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2004			2003			2004			2003
Net income, as reported	$	97,072		$	76,469		$	321,984		$	244,012
Add: Stock-based compensation expense included in reported net income, net of tax		27			7			80			19
Deduct: Total stock-based employee compensation expense under fair value based method for all awards, net of tax		(986	)		(1,171	)		(2,972	)		(3,561	)
Pro forma net income	$	96,113		$	75,305		$	319,092		$	240,470
Earnings per share:
Basic – as reported	$	1.15		$	.92		$	3.84		$	2.94
Basic – pro forma	$	1.14		$	.91		$	3.80		$	2.90
Diluted – as reported	$	1.10		$	.87		$	3.64		$	2.79
Diluted – pro forma	$	1.09		$	.86		$	3.61		$	2.75

6

W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements (Continued)
September 30, 2004

5. INVESTMENTS

     The cost, fair value and carrying value of fixed maturity securities and equity securities are as follows (dollars in thousands):

	September 30, 2004									December 31, 2003
	Amortized			Fair			Carrying			Amortized			Fair			Carrying
	Cost			Value			Value			Cost			Value			Value
Fixed maturity:
Held to maturity	$	194,340		$	212,075		$	194,340		$	203,891		$	222,692		$	203,891
Available for sale		5,452,592			5,580,111			5,580,111			3,923,156			4,089,411			4,089,411
Total	$	5,646,932		$	5,792,186		$	5,774,451		$	4,127,047		$	4,312,103		$	4,293,302
Equity securities available for sale	$	394,136		$	429,749		$	429,749		$	280,661		$	316,629		$	316,629
Trading Account:
Equity securities	$	390,708		$	400,736		$	400,736		$	321,687		$	331,967		$	331,967
Receivable from broker		162,936			162,936			162,936			102,257			102,257			102,257
Securities sold but not yet purchased		(164,688	)		(171,522	)		(171,522	)		(110,782	)		(119,100	)		(119,100	)
Total trading account	$	388,956		$	392,150		$	392,150		$	313,162		$	315,124		$	315,124

6. REINSURANCE CEDED

     The Company reinsures a portion of its exposures principally to reduce its net liability on individual risks and to protect against catastrophic losses. Estimated amounts recoverable from reinsurers are reported net of reserves for uncollectible reinsurance ($2.5 million as of September 30, 2004). The following amounts arising under reinsurance ceded contracts have been deducted in arriving at the amounts reflected in the statement of operations (dollars in thousands):

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2004		2003		2004		2003
Ceded premiums earned	$	116,783	$	144,873	$	351,172	$	396,402
Ceded losses incurred	$	78,099	$	112,371	$	243,544	$	280,455

7. RETIREMENT BENEFITS

     Effective August 19, 2004, the Company entered into an agreement to provide retirement benefits to the Company’s chief executive officer and chairman of the board. Retirement benefits are reported in accordance with FASB Statement No. 87, “Employers’ Accounting for Pensions”. As of August 19, 2004, the projected benefit obligation of $17,277,000 was recorded as a liability with a corresponding deferred asset that will be amortized as a prior service cost over the estimated remaining service period. For the three months ended September 30, 2004, the retirement benefit expense was $283,000. The key actuarial assumptions used to derive the projected benefit obligation and related expense are a discount rate of 6.0%, a rate of compensation increase of 5.0% per year and a retirement age of 72.

7

W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements (Continued)
September 30, 2004

8. INDUSTRY SEGMENTS

     The Company’s operations are presently conducted in five segments of the insurance business: specialty lines of insurance, regional property casualty insurance, alternative markets, reinsurance, and international.

     Our specialty segment underwrites complex and sophisticated third-party liability risks, principally within the excess and surplus lines, professional liability, and commercial transportation markets. The specialty business is conducted through nine operating units. The companies within the segment are divided along the different customer bases and product lines that they serve. The specialty units deliver their products through a variety of distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

     Our regional subsidiaries provide commercial insurance products to customers primarily in 32 states. Key clients of this segment are small-to-mid-sized businesses and governmental entities. The regional subsidiaries are organized geographically, which provides them with the flexibility to adapt to local market conditions, while enjoying the superior administrative capabilities and financial strength of the Company. The regional operations are conducted through four geographic regions based on markets served: Midwest, New England, Southern (excluding Florida) and Mid Atlantic.

     Our alternative markets operations specialize in developing, insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include employers, employer groups, insurers, and alternative market funds seeking less costly, more efficient ways to manage exposure to risks. In addition to providing primary and excess workers’ compensation insurance, the alternative markets segment also provides a wide variety of fee-based third-party administrative services.

     Our reinsurance operations specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis. The principal reinsurance units are facultative reinsurance, which writes individual certificates and program facultative business, treaty reinsurance, which functions as a traditional reinsurer in specialty and standard reinsurance lines, and Lloyd’s reinsurance, which writes quota share reinsurance with certain Lloyd’s syndicates.

     Our international segment includes our operations in Argentina and the Philippines. In Argentina, we currently offer commercial and personal property casualty insurance. In the Philippines, we provide savings and life products to customers, including endowment policies to pre-fund education costs and retirement income. Our operations in the U.K. are reported in our specialty segment.

8

W. R. Berkley Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements (Continued)
September 30, 2004

8. INDUSTRY SEGMENTS (continued)

     Summary financial information about the Company’s operating segments is presented in the following table. Income (loss) before income taxes by segment consists of revenues less expenses related to the respective segment’s operations, including allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.

	Revenues
	Earned		Investment								Pre-Tax			Net
(dollars in thousands)	Premiums		Income			Other		Total			Income			Income
For the three months ended September 30, 2004:
Specialty	$	377,046	$	25,578		$	—	$	402,624		$	74,123		$	50,610
Regional		274,520		10,926			—		285,446			41,581			28,067
Alternative Markets		149,166		14,476			28,020		191,662			31,447			21,816
Reinsurance		215,728		18,826			—		234,554			13,458			10,536
International		17,620		2,145			42		19,807			1,994			809
Corporate and eliminations		—		(229	)		880		651			(28,492	)		(17,913	)
Realized gains		—		—			4,792		4,792			4,792			3,147
Consolidated	$	1,034,080	$	71,722		$	33,734	$	1,139,536		$	138,903		$	97,072
For the three months ended September 30, 2003:
Specialty	$	297,574	$	18,237		$	—	$	315,811		$	47,595		$	31,277
Regional		222,389		10,788			—		233,177			40,905			27,377
Alternative Markets		101,660		9,675			25,475		136,810			18,689			12,364
Reinsurance		198,145		12,678			—		210,823			17,199			11,825
International		15,812		1,711			—		17,523			1,887			1,917
Corporate and eliminations		—		(1,411	)		226		(1,185	)		(21,623	)		(10,723	)
Realized gains		—		—			3,423		3,423			3,423			2,432
Consolidated	$	835,580	$	51,678		$	29,124	$	916,382		$	108,075		$	76,469

	Revenues
	Earned		Investment								Pre-Tax			Net
(dollars in thousands)	Premiums		Income			Other		Total			Income			Income
For the nine months ended September 30, 2004:
Specialty	$	1,077,335	$	74,285		$	—	$	1,151,620		$	214,075		$	146,206
Regional		786,487		32,416			—		818,903			124,780			84,187
Alternative Markets		424,941		41,752			83,966		550,659			95,956			66,338
Reinsurance		648,243		56,238			—		704,481			64,895			47,524
International		52,989		5,430			167		58,586			4,251			793
Corporate and eliminations		—		(1,112	)		1,299		187			(81,016	)		(51,232	)
Realized gains		—		—			44,559		44,559			44,559			28,895
Change in accounting		—		—			—		—			—			(727	)
Consolidated	$	2,989,995	$	209,009		$	129,991	$	3,328,995		$	467,500		$	321,984
For the nine months ended September 30, 2003:
Specialty	$	810,534	$	50,366		$	—	$	860,900		$	150,892		$	99,629
Regional		634,683		32,940			—		667,623			107,171			71,220
Alternative Markets		290,916		28,738			76,854		396,508			63,053			41,844
Reinsurance		557,254		38,896			—		596,150			37,328			25,786
International		48,787		4,792			—		53,579			4,889			3,487
Corporate and eliminations		—		(1,873	)		1,359		(514	)		(69,818	)		(37,540	)
Realized gains		—		—			60,506		60,506			60,506			39,586
Consolidated	$	2,342,174	$	153,859		$	138,719	$	2,634,752		$	354,021		$	244,012

9

     Identifiable assets by segment are as follows (dollars in thousands):

	September 30,			December 31,
	2004			2003
Specialty	$	3,701,637		$	3,127,810
Regional		2,247,728			2,008,789
Alternative Markets		1,805,889			1,504,535
Reinsurance		3,829,154			3,493,171
International		174,422			152,571
Corporate other and eliminations		(699,185	)		(952,191	)
Consolidated	$	11,059,645		$	9,334,685

     Net premiums earned by major line of business are as follows (dollars in thousands):

	Third Quarter				Nine Months
	2004		2003		2004		2003
Premises operations	$	152,372	$	126,194	$	439,183	$	329,199
Professional liability		70,390		47,201		202,016		125,403
Automobile		58,056		44,610		162,722		131,451
Products liability		43,329		28,354		120,226		78,767
Property		30,281		28,642		89,547		86,189
Other		22,618		22,573		63,641		59,525
Specialty	$	377,046	$	297,574	$	1,077,335	$	810,534
Commercial multiple peril		110,514		93,651		316,884		262,133
Automobile		79,936		68,260		228,975		192,021
Workers’ compensation		55,295		43,875		158,216		129,776
Other		28,775		16,603		82,412		50,753
Regional	$	274,520	$	222,389	$	786,487	$	634,683
Primary workers’ compensation		73,279		48,798		206,071		128,485
Excess workers’ compensation		64,737		43,022		186,137		135,777
Other		11,150		9,840		32,733		26,654
Alternative Markets	$	149,166	$	101,660	$	424,941	$	290,916
U.S.		166,432		148,896		487,177		412,972
Lloyd’s		49,296		49,249		161,066		144,282
Reinsurance	$	215,728	$	198,145	$	648,243	$	557,254
International	$	17,620	$	15,812	$	52,989	$	48,787
Total	$	1,034,080	$	835,580	$	2,989,995	$	2,342,174

9. DEBT

     In August 2004, the Company issued $150 million aggregate principal amount of 6.15% senior notes due in August 2019. The notes were issued at 99.375% of their face value amount and the net proceeds to the Company after expenses were $147,817,000.

10. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES

     The Company’s subsidiaries are regularly engaged in the defense of claims arising out of the conduct of the insurance business. The Company does not believe that such litigation, individually or in the aggregate, will have a material effect on its financial condition or results of operations.

     The New York State Attorney General and other regulators have commenced investigations, legal actions and general inquiries concerning alleged anti-competitive activities in the insurance industry. These allegations include improper sales practices as well as other non-competitive behaviors. Upon learning of this, the Company on its own initiative commenced an internal review with the assistance of outside counsel. The internal review is focused on our relationships with our distribution channels. The internal review is not yet complete.

10

SAFE HARBOR STATEMENT

     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, natural and man-made catastrophic losses, including as a result of terrorist activities, increases in the level of our retention, 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, including those related to alleged anti-competitive or other improper sales practices in the insurance industry, 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.

11

Item 2.

Management’s Discussion and Analysis of Financial
Condition and Results of Operations

Overview

     W. R. Berkley Corporation is an insurance holding company that provides, through its subsidiaries, commercial property casualty insurance products and services. The Company’s principal focus is casualty business. The Company’s primary sources of revenues and earnings are insurance and investments.

     The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time a property casualty insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic inflation on the amount of compensation due for injuries or losses. General insurance prices are also influenced by the available insurance capacity, i.e., the level of policyholders’ surplus employed in the industry and the industry’s willingness to deploy that capital.

     An insurer’s profitability is also affected by its investment income. The Company’s invested assets, which are derived from its own capital and cash flow from its insurance business, are invested principally in fixed income securities. The return on fixed income securities is affected primarily by general interest rates and the credit quality and duration of the securities. The Company also invests in equity securities, including equity securities related to merger arbitrage and convertible arbitrage strategies. Investment returns are impacted by government policies and overall economic activity.

Critical Accounting Estimates

     Management considers estimates and assumptions relating to reserves for losses and loss expenses to be critical to the portrayal of the Company’s financial condition and results since these estimates and assumptions are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

     To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Our loss reserves reflect our best estimates of the cost of settling all such claims.

     In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not yet reported to the insurer, potential inadequacy of case reserves, the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process, and a provision for potentially uncollectible reinsurance. Reserves are established based upon the then current legal interpretation of coverage provided.

     In examining reserve adequacy, several factors are considered in addition to the economic value of losses. These factors include historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future

12

outcomes. Reserve amounts are necessarily based on management’s informed estimates and judgments using data currently available. As additional experience and other data become available and are reviewed, these estimates and judgments are revised. This may result in increases or decreases to reserves for insured events of prior years. The reserving process implicitly recognizes the impact of inflation and other factors affecting loss costs by taking into account historical claim patterns and perceived trends.

     Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing the reserves are well tested over time, some of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company’s control. The variables described above are affected by both internal and external events, such as inflation, judicial and litigation trends, reinsurance coverage and legislative changes.

     The inherent uncertainties of estimating reserves are greater for certain types of liabilities, where long periods of time elapse before a definitive determination of liability is made. In periods with increased economic volatility, it becomes more difficult to accurately predict claim costs. Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled. Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events.

     Management determines the loss reserves included in the Company’s financial statements based upon an actuarially derived point estimate. The Company uses a variety of actuarial techniques and methods to derive the actuarial point estimate. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. This actuarial data is analyzed by line of business, coverage, and accident or policy year, as appropriate, for each operating unit. Industry loss experience is also used to supplement the Company’s own data in selecting “tail factors” and in areas where the Company’s own data is limited.

     The establishment of loss reserves includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions. Examples of changes in terms and conditions that can have a significant impact on reserve levels are the use of aggregate policy limits, the expansion of coverage exclusions, whether or not defense costs are within policy limits and changes in deductibles and attachment points.

     Following is a summary of the Company’s reserves for losses and loss expenses by business segment as of September 30, 2004 and December 31, 2003:

	2004		2003
Specialty	$	1,516,465	$	1,141,538
Regional		737,448		623,199
Alternative Markets		869,232		668,041
Reinsurance		1,293,722		1,045,782
International		29,071		26,735
Net reserves for losses and loss expenses		4,445,938		3,505,295
Ceded reserves for losses and loss expenses		717,191		686,796
Gross reserves for losses and loss expenses	$	5,163,129	$	4,192,091

13

     Following is a summary of the Company’s reserves for losses and loss expenses by major line of business as of September 30, 2004 and December 31, 2003:

	2004		2003
General liability		1,440,915		1,074,199
Reinsurance		1,293,722		1,045,782
Workers’ compensation		1,092,191		871,940
Automobile		376,056		322,679
Property		133,627		119,907
Other		109,427		70,788
Total	$	4,445,938	$	3,505,295

     Following is a summary of the Company’s major components of the Company’s reserves for losses and loss expenses as of September 30, 2004 and December 31, 2003:

	2004			2003
Reported case reserves	$	2,132,595		$	1,793,258
Incurred but not reported		2,783,184			2,105,191
Discount		(469,841	)		(393,154	)
Total	$	4,445,938		$	3,505,295

     For the nine months ended September 30, 2004, the Company reported losses and loss expenses of $1.9 billion, of which $200 million represented an increase in estimates for claims occurring in prior years. The increases in estimates for claims occurring in prior years by segment were $80 million for reinsurance, $62 million for specialty, $33 million for regional, $23 million for alternative markets and $2 million for international. The estimate for claims occurring in accident years prior to accident year 2003 increased by $232 million and the estimate for claims occurring in accident year 2003 decreased by $32 million. The overall increase in prior year reserves was primarily related to the reinsurance, general liability and workers’ compensation lines of business, which increased $80 million, $87 million and $31 million, respectively.

     The increase in prior year reserves for reinsurance business was primarily a result of higher than expected claims reported by ceding companies. The Company sets its initial loss estimates based principally upon information obtained during the underwriting process and adjusts these estimates as additional information becomes available. As certain reinsurance contracts have matured, the Company has adjusted its estimates of ultimate losses to reflect a higher level of known losses as well as a pattern of delayed loss reporting by some ceding companies.

     The increase in prior year reserves for general liability is generally due to higher than expected legal expenses incurred in the defense of claims in certain classes of business. Prior year ultimate loss ratios were also adjusted upwards to recognize that claim costs for certain classes of business are emerging over a longer period of time and at a higher level than expected.

     The increase in prior year reserves for workers’ compensation was generally due to higher than expected medical cost inflation. This resulted principally from increased utilization of the health care system by injured workers and more expensive and higher usage of prescription drugs.

14

Results of Operations for the First Nine Months of 2004 Compared with the First Nine Months of 2003

     Following is a summary of gross premiums written, net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the nine months ended September 30, 2004 and 2003 (dollars in thousands):

	2004			2003
Specialty
Gross premiums written	$	1,194,122		$	1,057,027
Net premiums written		1,124,666			958,062
Premiums earned		1,077,335			810,534
Loss ratio		61.9	%		63.1	%
Expense ratio		25.2	%		24.5	%
Combined ratio		87.1	%		87.6	%
Regional
Gross premiums written	$	988,657		$	871,962
Net premiums written		855,032			707,930
Premiums earned		786,487			634,683
Loss ratio		57.2	%		56.7	%
Expense ratio		31.0	%		31.6	%
Combined ratio		88.2	%		88.3	%
Alternative Markets
Gross premiums written	$	557,431		$	429,077
Net premiums written		484,853			355,593
Premiums earned		424,941			290,916
Loss ratio		70.4	%		68.7	%
Expense ratio		21.4	%		24.8	%
Combined ratio		91.8	%		93.5	%
Reinsurance
Gross premiums written	$	721,058		$	768,165
Net premiums written		642,388			635,065
Premiums earned		648,243			557,254
Loss ratio		70.6	%		70.8	%
Expense ratio		28.0	%		29.5	%
Combined ratio		98.6	%		100.3	%
International
Gross premiums written	$	59,867		$	54,017
Net premiums written		54,520			50,543
Premiums earned		52,989			48,787
Loss ratio		53.1	%		52.2	%
Expense ratio		40.8	%		42.1	%
Combined ratio		93.9	%		94.3	%
Consolidated
Gross premiums written	$	3,521,135		$	3,180,248
Net premiums written		3,161,459			2,707,193
Premiums earned		2,989,995			2,342,174
Loss ratio		63.6	%		63.7	%
Expense ratio		27.1	%		28.0	%
Combined ratio		90.7	%		91.7	%

15

Results of Operations

     The following table presents the Company’s net income and net income per share for the nine months ended September 30, 2004 and 2003 (amounts in thousands, except per share data).

	2004		2003
Net income	$	321,984	$	244,012
Weighted average diluted shares		88,373		87,468
Net income per diluted share	$	3.64	$	2.79

     The increase in net income in 2004 compared with 2003 reflects higher profits from underwriting activity as well as higher investment income. The improvement in underwriting results reflects higher insurance prices, improved terms and conditions and growth in more profitable lines of business. The improved underwriting results were partially offset by losses of $32 million attributable to Hurricanes Charley, Frances, Ivan and Jeanne.

Gross Premiums Written. Gross premiums written were $3.5 billion in 2004, up 11% from 2003. The increase in gross premiums written in 2004 was a result of higher prices as well as new business. Although prices generally increased during the first nine months of 2004, the Company is experiencing an increased level of price competition. A summary of gross premiums written in 2004 compared with 2003 by business segment follows:

• Specialty gross premiums increased by 13% to $1.2 billion in 2004, compared with $1.1 billion in 2003, due to higher prices and new business. The increases in specialty gross premiums by major business line were 7% for premises operations, 18% for professional liability, 23% for automobile and 50% for products liability. The increase in products liability included approximately $22 million related to a renewal rights transaction completed in July 2004. Specialty property lines gross premiums decreased by 1%.

• Regional gross premiums increased by 13% to $989 million in 2004, compared with $872 million in 2003. The increase generally reflects higher prices and new business. The increases in regional gross premiums by major business line were 12% for commercial multiple peril, 14% for automobile and 17% for workers’ compensation. Gross premiums from assigned risk plans decreased by 10%.

• Alternative markets gross premiums increased by 30% to $557 million in 2004, compared with $429 million in 2003, due to higher prices and new business. The increases in alternative markets gross premiums by major business line were 20% for excess workers’ compensation, 29% for primary workers’ compensation and 131% for assigned risk plans. Assigned risk premiums, which are written on behalf of state-owned assigned risk plans managed by the Company, are 100% reinsured by the respective state-owned assigned risk pools.

• Reinsurance premiums decreased by 6% to $721 million in 2004 compared with $768 million in 2003. Reinsurance written through Lloyd’s decreased 13% to $161 million due to a planned reduction in that business. Reinsurance written in the U.S. decreased 4% to $560 million. The decrease in business written in the U.S. is primarily the result of the discontinuance of all facultative business written with a particular ceding company.

• International premiums increased by 11% to $60 million in 2004 from $54 million in 2003.

Net Premiums Written. Net premiums written were $3.2 billion in 2004, up 17% from 2003. Net premiums grew more than gross premiums due to a reduction in the portion of gross premiums ceded to reinsurers. The decrease in premiums ceded to reinsurers was a result of the termination of an aggregate reinsurance agreement effective December 31, 2003 and to the planned reduction in reinsurance purchases. Premiums ceded under the aggregate reinsurance agreement were $110 million in the first nine months of 2003.

16

Premiums Earned. Premiums earned increased 28% in 2004 compared with 2003. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2004 are related to premiums written during both 2003 and 2004. The growth rate for 2004 earned premiums reflects the underlying growth in net premiums written of 35% for all of 2003 and 17% for the first nine months of 2004.

Net Investment Income. Following is a summary of net investment income for the nine months ended September 30, 2004 and 2003 (dollars in thousands):

	2004			2003
Fixed maturity securities	$	162,780		$	146,820
Equity securities available for sale		14,832			13,611
Equity securities trading account		7,671			6,972
Investment in affiliates		15,286			4,975
Cash and cash equivalents		11,092			7,101
Other		(106	)		822
Gross investment income		211,555			180,301
Interest on funds held under reinsurance treaties and investment expense		(2,546	)		(26,442	)
Total	$	209,009		$	153,859

     Net investment income increased 36% in 2004 compared with 2003. Average invested assets (including cash and cash equivalents) increased 37% to $7.0 billion in 2004 compared with $5.1 billion in 2003. The increase was a result of cash flow from operations and the proceeds from debt issued during 2004 and 2003. The average annualized gross yield on investments was 4.1% in 2004 compared with 4.7% in 2003. The lower yield in 2004 reflects the decrease in general interest rate levels, an increase in the portion of the portfolio invested in tax-exempt securities and a planned reduction in the portfolio duration. Interest on funds held under reinsurance treaties decreased by $24 million due to the termination of an aggregate reinsurance agreement effective December 31, 2003.

Realized Investment Gains and Losses. Realized investment gains and losses result from sales of securities and from provisions for other than temporary impairment in securities. Realized investment gains were $45 million in 2004 and $61 million in 2003. Realized gains in 2004 resulted primarily from the sale of common and preferred equity securities and the sale of high yield fixed income securities. Realized gains in 2003 resulted primarily from the sale of fixed income securities in order to decrease the duration of the portfolio and to increase the portion of the portfolio invested in state and municipal securities. There were no provisions for other than temporary impairment in the first nine months of 2004 or 2003.

Service Fees. The alternative markets segment offers fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverages. Service fees increased 9% in 2004 compared with 2003 primarily as a result of an increase in service fees for managing assigned risk plans.

Losses and Loss Expenses. Losses and loss expenses increased 28% in 2004 compared with 2003 primarily as a result of the increased premium volume and higher weather-related losses. Weather-related losses were $58 million compared to $35 million in the corresponding 2003 period. Weather-related losses in 2004 include losses of $32 million attributable to Hurricanes Charley, Frances, Ivan and Jeanne. The consolidated loss ratio decreased to 63.6% in 2004 from 63.7% in 2003. A summary of loss ratios in 2004 compared with 2003 by business segment follows:

• The specialty segment’s loss ratio decreased to 61.9% in 2004 from 63.1% in 2003 primarily as a result of higher prices and lower prior year reserve development ($62 million in 2004 compared with $76 million in 2003).

• The regional loss ratio was 57.2% in 2004 compared with 56.7% in 2003 as improvement in the current accident year results were offset by higher prior year reserve development ($33 million in 2004 compared with $18 million in 2003). Weather-related losses for the regional segment were $28 million and $35 million in 2004 and 2003, respectively.

17

• The alternative market loss ratio increased to 70.4% in 2004 from 68.7% in 2003. The Company discounts its liabilities for excess workers’ compensation business because of the long period of time over which losses are paid. The increase in the loss ratio in 2004 reflects a lower discount rate for current year business and an increase in prior year reserves.

• The reinsurance loss ratio was 70.6% in 2004 compared with 70.8% in 2003. The decrease reflects improved results for the current accident year as a result of higher prices for both Lloyd’s and U.S. business. These improvements were partially offset by losses of $27 million attributable to Hurricanes Charley, Frances, Ivan and Jeanne and by higher prior year reserve development ($81 million in 2004 compared with $61 million in 2003).

• The international loss ratio was 53.1% in 2004 compared with 52.2% in 2003.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the nine months ended September 30, 2004 and 2003 (dollars in thousands):

	2004		2003
Underwriting expenses	$	809,606	$	656,179
Service company expenses		64,524		61,326
Other costs and expenses		37,516		32,789
Total	$	911,646	$	750,294

     Underwriting expenses increased 23% in 2004 compared with 2003 as a result of higher premium volume. The consolidated expense ratio decreased to 27.1% in 2004 from 28.0% in 2003. The decrease is due to a 28% increase in earned premiums with no significant increase in underwriting expenses other than commissions and premium taxes.

     Service company expenses represent the costs associated with the alternative market’s fee-based business. The increase in service expenses of 5% compared with 2003 was commensurate with the increase in service fee revenues of 9%.

     Other costs and expenses represent primarily general and administrative expenses for the corporate office and costs associated with our foreign operations. Other costs and expenses increased to $38 million in 2004 from $33 million in 2003 due to higher compensation costs.

Interest Expense. Interest expense increased 23% to $48 million as a result of the issuance of $200 million of 5.875% senior notes in February 2003, $150 million of 5.125% senior notes in September 2003 and $150 million of 6.15% senior notes in August 2004.

Income taxes. The effective income tax rate was 31% in 2004 and 2003. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income and state income taxes.

18

Results of Operations for the Third Quarter of 2004 Compared to the Third Quarter of 2003

     Following is a summary of gross premiums written, net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the three months ended September 30, 2004 and 2003 (dollars in thousands):

	2004			2003
Specialty
Gross premiums written	$	416,458		$	386,785
Net premiums written		389,997			350,278
Premiums earned		377,046			297,574
Loss ratio		62.2	%		65.8	%
Expense ratio		24.9	%		24.4	%
Combined ratio		87.1	%		90.2	%
Regional
Gross premiums written	$	320,640		$	282,133
Net premiums written		276,488			231,951
Premiums earned		274,520			222,389
Loss ratio		57.8	%		54.2	%
Expense ratio		31.1	%		32.3	%
Combined ratio		88.9	%		86.5	%
Alternative Markets
Gross premiums written	$	177,691		$	157,400
Net premiums written		159,886			127,688
Premiums earned		149,166			101,660
Loss ratio		71.6	%		70.5	%
Expense ratio		22.0	%		25.4	%
Combined ratio		93.6	%		95.9	%
Reinsurance
Gross premiums written	$	239,237		$	262,411
Net premiums written		214,005			213,189
Premiums earned		215,728			198,145
Loss ratio		76.3	%		69.2	%
Expense ratio		26.2	%		28.5	%
Combined ratio		102.5	%		97.7	%
International
Gross premiums written	$	19,689		$	17,551
Net premiums written		18,204			16,571
Premiums earned		17,620			15,812
Loss ratio		56.5	%		51.6	%
Expense ratio		41.7	%		39.2	%
Combined ratio		98.2	%		90.8	%
Consolidated
Gross premiums written	$	1,173,715		$	1,106,280
Net premiums written		1,058,580			939,677
Premiums earned		1,034,080			835,580
Loss ratio		65.2	%		63.8	%
Expense ratio		26.7	%		27.9	%
Combined ratio		91.9	%		91.7	%

19

Results of Operations

     The following table presents the Company’s net income and net income per share for the three months ended September 30, 2004 and 2003 (amounts in thousands, except per share data).

	2004		2003
Net income	$	97,072	$	76,469
Weighted average diluted shares		88,174		87,923
Net income per diluted share	$	1.10	$	.87

     The increase in net income in 2004 compared with 2003 reflects higher profits from underwriting activity as well as higher investment income. The improvement in underwriting results reflects higher insurance prices, improved terms and conditions and growth in more profitable lines of business.

Premiums. Gross premiums written were $1.2 billion in 2004, up 6% from 2003. The increase in gross premiums written in 2004 was a result of higher prices as well as new business. A summary of gross premiums written in 2004 compared with 2003 by business segment follows:

• Specialty gross premiums increased by 8% to $416 million in 2004, compared with $387 million in 2003, due to higher prices and new business. The increases in specialty gross premiums by major business line were 30% for automobile, 89% for products liability and 19% for other lines. The increase in products liability included approximately $22 million related to renewal rights transaction completed in July 2004. Gross premiums for premises operations, professional liability and property lines decreased by 5%, 15% and 1%, respectively, due to an increased level of competition in those lines of business.

• Regional gross premiums increased by 14% to $321 million in 2004, compared with $282 million in 2003. The increase generally reflects higher prices and new business. The increase in regional gross premiums by major business line were 4% for commercial multiple peril, 12% for automobile and 20% for workers’ compensation. Gross premiums from assigned risk plans increased by 8%.

• Alternative markets gross premiums increased by 13% to $178 million in 2004, compared with $157 million in 2003, due to higher prices and new business. The increase in alternative markets gross premiums by major business line were 10% for excess workers’ compensation, 14% for primary workers’ compensation and 49% for assigned risk plans. Assigned risk premiums, which are written on behalf of state assigned risk plans managed by the Company, are 100% reinsured by the respective state-owned assigned risk pools.

• Reinsurance premiums decreased by 9% to $239 million in 2004 compared with $262 million in 2003. Reinsurance written through Lloyd’s decreased 9% to $54 million due to a planned reduction in that business. Reinsurance written in the U.S. decreased 9% to $186 million. The decrease in business written in the U.S. is primarily the result of the discontinuance of all facultative business written with a particular ceding company.

• International premiums increased by 12% to $20 million in 2004 from $18 million in 2003.

     Net premiums written and premiums earned increased 13% and 24%, respectively, compared with the third quarter of 2003. The reasons for the quarterly change in net and earned premiums were consistent with the reasons for the year-to-date changes described above.

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Net Investment Income. Following is a summary of net investment income for the three months ended September 30, 2004 and 2003 (dollars in thousands):

	2004			2003
Fixed maturity securities	$	55,930		$	49,227
Equity securities available for sale		5,561			4,863
Equity securities trading account		1,332			1,003
Investment in affiliates		5,872			3,655
Cash and cash equivalents		4,200			2,371
Other		(2	)		205
Gross investment income		72,893			61,324
Interest on funds held under reinsurance treaties and investment expense		(1,171	)		(9,646	)
Total	$	71,722		$	51,678

     Net investment income increased 39% in 2004 compared with 2003. Average invested assets (including cash and cash equivalents) increased 35% to $7.4 billion in 2004 compared with $5.5 billion in 2003. The increase was a result of cash flow from operations and the proceeds from debt issued during 2004 and 2003. The average annualized gross yield on investments was 3.9% in 2004 compared with 4.4% in 2003. The lower yield in 2004 reflects the decrease in general interest rate levels, an increase in the portion of the portfolio invested in tax-exempt securities and a planned reduction in the portfolio duration. Interest on funds held under reinsurance treaties decreased by $8 million due to the termination of an aggregate reinsurance agreement effective December 31, 2003.

Realized Investment Gains and Losses. Realized investment gains and losses result from sales of securities and from provisions for other than temporary impairment in securities. Realized investment gains were $5 million in 2004 and $3 million in 2003. Realized gains in 2004 resulted primarily from the sale of common and preferred equity securities and the sale of high yield fixed income securities. There were no provisions for other then temporary impairment in the third quarter of 2004 or 2003.

Service Fees. The alternative markets segment offers fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverages. Service fees increased 10% in 2004 compared with 2003 primarily as a result of an increase in service fees for managing assigned risk plans.

Losses and Loss Expenses. Losses and loss expenses increased 27% in 2004 compared with 2003 primarily as a result of the increased premium volume and higher weather-related losses. The consolidated loss ratio increased to 65.2% in 2004 from 63.8% in 2003. The primary reasons for the increase in the loss ratio in 2004 were as follows:

• Weather-related losses were $40 million compared to $14 million in the corresponding 2003 period. Losses attributable to Hurricanes Charley, Frances, Ivan and Jeanne were $32 million, including $27 million relating to Lloyd’s reinsurance business.

• The Company completed global commutations of all reinsurance previously ceded to the Gerling companies and the Trenwick companies. The net cost of the commutations was approximately $16 million, including $7 million and $8 million relating to the reinsurance and specialty segments, respectively.

• The specialty segment recorded a recovery of $6 million arising from previously settled reinsurance arbitration.

     Other than as described above, the reasons for the changes in quarterly loss ratios by segment were consistent with the reasons for the changes in the year-to-date loss ratios described above.

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Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the three months ended September 30, 2004 and 2003 (dollars in thousands):

	2004		2003
Underwriting expenses	$	275,888	$	232,839
Service company expenses		20,555		20,598
Other costs and expenses		12,949		7,844
Total	$	309,392	$	261,281

     Underwriting expenses increased 18% in 2004 compared with 2003 as a result of higher premium volume. The consolidated expense ratio decreased to 26.7% in 2004 from 27.9% in 2003. The decrease is due to a 24% increase in earned premiums with no significant increase in underwriting expenses other than commissions and premium taxes.

     Service company expenses represent the costs associated with the alternative market’s fee-based business.

     Other costs and expenses represent primarily general and administrative expenses for the corporate office and costs associated with our foreign operations. Other costs and expenses increased to $13 million in 2004 from $8 million in 2003 due to higher compensation costs.

Interest Expense. Interest expense increased 21% to $17 million as a result of the issuance of $150 million of 5.125% senior notes in September 2003 and $150 million of 6.15% senior notes in August 2004.

Income taxes. The effective income tax rate was 29% in 2004 and 28% in 2003. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income and state income taxes.

Investments

     As part of its investment strategy, the Company establishes a level of cash and highly liquid short-term and intermediate-term securities that, combined with expected cash flow, is believed adequate to meet foreseeable payment obligations. The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations.

     The carrying value of the Company’s investment portfolio and investment-related assets as of September 30, 2004 and December 31, 2003 were as follows (dollars in thousands):

	September 30,			December 31,
	2004			2003
Fixed maturity securities	$	5,774,451		$	4,293,302
Equity securities available for sale		429,749			316,629
Equity securities trading account		400,736			331,967
Investments in affiliates		223,051			126,772
Total investments		6,827,987			5,068,670
Cash and cash equivalents		1,049,126			1,431,466
Trading account receivable from brokers and clearing organization		162,936			102,257
Trading account securities sold but not yet purchased		(171,522	)		(119,100	)
Other investment-related liabilities		(29,846	)		(2,580	)
Total	$	7,838,681		$	6,480,713

Fixed Maturities. The Company’s investment policy with respect to fixed maturity securities is generally to purchase instruments with the expectation of holding them to their maturity. However, active management of the available for sale portfolio is considered necessary to maintain an approximate matching of assets and liabilities as well as to adjust the portfolio as a result of changes in financial market conditions and tax considerations. At September 30, 2004 (as compared to December 31, 2003), the fixed maturities portfolio mix was as follows: U.S. Government securities were 15% (14% in 2003); state and municipal securities were 54% (46% in 2003); corporate securities were 10% (14% in 2003); mortgage-backed securities were 18% (21% in 2003); and foreign

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bonds were 3% in 2004 (5% in 2003).

     The Company’s philosophy related to holding or selling fixed maturity securities is based on an objective of maximizing total return. The Company generally attempts to match the duration of those assets held as insurance reserves with the expected payout pattern of those liabilities within a range of one year. However, based on managements’ view of expected interest rate changes and total rate of return opportunities over the foreseeable future, the Company may decide to shorten or extend the duration of the investment portfolio. In a period in which management believes that interest rates will be rising, the duration of the fixed income portfolio will generally be shortened in order to mitigate the impact of an interest rate rise on the market value of the portfolio. The sale of longer-term investments in order to shorten the duration may result in realized gains; however, there is no reason to expect these gains to continue in future periods. During 2003 and 2004, the Company shortened the duration of the investment portfolio by increasing the portion of the portfolio invested in cash and cash equivalents.

Equity Securities Available for Sale. Equity securities available for sale primarily represent investments in common and preferred stocks of publicly traded banks, utilities and real estate investment trusts.

Equity Securities Trading Account. The trading account is comprised of direct investments in arbitrage securities and investments in arbitrage-related limited partnerships that specialize in merger arbitrage and convertible arbitrage strategies. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers. Convertible arbitrage is the business of investing in convertible securities with the goal of capitalizing on price differentials between these securities and their underlying equities. The Company increased its investment in merger arbitrage securities by $73 million during the first nine months of 2004.

Investments in Affiliates. At September 30, 2004 (as compared to December 31, 2003), investments in affiliates were as follows: equity in Kiln plc was $50 million ($40 million in 2003); real estate partnerships were $109 million ($58 million in 2003); structured finance partnerships were $45 million ($18 million in 2003); and other investments were $19 million ($11 million in 2003).

Securities in an Unrealized Loss Position. The following table summarizes, for all securities in an unrealized loss position at September 30, 2004, the aggregate fair value and gross unrealized loss by length of time those securities have been continuously in an unrealized loss position (dollars in thousands):

			Gross unrealized
	Fair value		loss
Fixed maturities:
0 – 6 months	$	1,194,098	$	8,156
7 – 12 months		289,670		4,012
Over 12 months		71,848		2,353
Total	$	1,555,616	$	14,521
Equities securities available for sale:
0 – 6 months	$	33,475	$	374
7 – 12 months		45,730		2,987
Over 12 months		200		14
Total	$	79,405	$	3,375

Liquidity and Capital Resources

     As a holding company, the Company derives cash from its subsidiaries in the form of dividends, tax payments and management fees. Maximum amounts of dividends that can be paid without regulatory approval are prescribed by statute. During 2004, the maximum amount of dividends which can be paid without regulatory approval is approximately $197 million, of which $10 million was paid during the nine months ended September 30, 2004. The ability of the holding company to service its debt obligations is limited by the ability of the insurance subsidiaries to pay dividends. In the event dividends, tax payments and management fees available to the holding company were inadequate to service its debt obligations, the Company would need to raise capital, sell assets or restructure its debt obligations.

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     Cash flow provided from operating activities increased to $1.1 billion during the nine months ended September 30, 2004 from $970 million during the comparable period of 2003. The increase in operating cash flow in 2004 was primarily due to a higher level of cash flow from underwriting activities (premium collections less paid losses and underwriting expenses). Cash flow provided by operating activities in 2004 is net of $73 million transferred to the arbitrage trading account.

     Accumulated other comprehensive income, which represents after-tax unrealized gains on investments and foreign currency translation, decreased to $97 million at September 30, 2004 from $120 million at December 31, 2003. The decrease in unrealized gains on investments was primarily due to the realization of gains as a result of investment sales.

     At September 30, 2004, the Company’s outstanding debt was $817 million (face amount). The maturities of the debt are $40 million in 2005, $100 million in 2006, $89 million in 2008, $150 million in 2010, $200 million in 2013, $150 million in 2019, $76 million in 2022 and $12 million in 2023. The Company also has $210 million (face amount) of junior subordinated debentures that mature in 2045.

     At September 30, 2004, stockholders’ equity was $2.0 billion and total capitalization (stockholders’ equity and debt) was $3.0 billion. The percentage of the Company’s capital attributable to debt was 34% at September 30, 2004 compared with 34% at December 31, 2003.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

     The Company’s market risk generally represents the risk of loss that may result from the potential change in the fair value of the Company’s investment portfolio as a result of fluctuations in prices, interest rates and currency exchange rates. The Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations.

     The duration of the investment portfolio decreased from 4.1 years at December 31, 2003 to 3.4 years at September 30, 2004. The overall market risk relating to the Company’s portfolio has remained similar to the risk at December 31, 2003.

Item 4. Controls and Procedures

     The Company’s management, including its Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14 as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act and the rules there under, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

     The Company’s subsidiaries are regularly engaged in the defense of claims arising out of the conduct of the insurance business. The Company does not believe that such litigation, individually or in the aggregate, will have a material effect on its financial condition or results of operations.

     The New York State Attorney General and other regulators have commenced investigations, legal actions and general inquiries concerning alleged anti-competitive activities in the insurance industry. These allegations include improper sales practices as well as other non-competitive behaviors. Upon learning of this, the Company on its own initiative commenced an internal review with the assistance of outside counsel. The internal review is focused on our relationships with our distribution channels. The internal review is not yet complete.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     Set forth below is a summary of the shares repurchased by the Company during the quarter and the number of shares remaining authorized for purchase by the Company.

					Total number of	Maximum number of
					shares purchased as	shares that may yet
					part of publicly	be purchased under
	Total number of		Average price		announced plans	the plans or
	shares purchased		paid per share		or programs	programs (1)
July 1, 2004
July 31, 2004		—		—	None		1,788,750
August 1, 2004
August 31, 2004		—		—	None		1,788,750
September 1, 2004
September 30, 2004		—		—	None		1,788,750

(1) Remaining shares available for repurchase under the Company’s repurchase authorization that was approved by the Board of Directors on November 10, 1998.

     On August 3, 2004, the Company issued an aggregate of 500,000 Restricted Stock Units (“RSUs”) to certain of its employees. Each RSU represents the right to receive one share of common stock and is conditioned on the employee’s satisfying certain requirements outlined in the award agreement. The RSU’s vest after five years of continuous employment. The shares were not registered under the Securities Act of 1933 in reliance on the exemption provided in Section 4(2) thereof for transactions not involving a public offering.

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Item 5. Other Information

Supplemental Benefits Agreement

     On August 19, 2004, the Company entered into a Supplemental Benefits Agreement with William R. Berkley, the Company’s Chairman and Chief Executive Officer. Under the agreement, upon the earliest to occur of: (a) Mr. Berkley’s resignation from employment as Chief Executive Officer for any reason; (b) any termination of his employment by the Company other than for “cause”; or (c) termination of his employment by reason of his death, Mr. Berkley will be entitled to an annual retirement benefit equal to the greater of (1) $1,000,000, or (2) fifty percent (50%) of his highest average three-year compensation over the prior ten fiscal years, but not exceeding one hundred fifty percent (150%) of his average five-year compensation over the prior five fiscal years. If such termination occurs following Mr. Berkley’s 72nd birthday, he will be entitled to an enhanced retirement benefit, actuarially increased to reflect the passage of time from the date Mr. Berkley attained age 72 until the date of such termination. The retirement benefit will be paid annually for the remainder of Mr. Berkley’s life, and if he predeceases his spouse, fifty percent (50%) of such benefit will be paid annually to his spouse for the remainder of her life. Mr. Berkley may elect to have his spouse receive one hundred percent (100%) of the retirement benefit following his death, provided, that, in such event, the retirement benefit will be reduced by an amount such that the payments made to Mr. Berkley and his spouse following such election will be the actuarial equivalent to the payments that would otherwise been made had no such election occurred.

     Under the agreement, Mr. Berkley and his spouse will also be entitled to receive continued health insurance coverage for the remainder of their respective lives. During the two-year period following his termination or, if longer, the period that Mr. Berkley performs consulting services to Company or remains Chairman of the Board, he will be entitled to continue to receive certain perquisites, including continued use of the Company plane and a car and driver, in a manner consistent with his prior use of such perquisites. Additionally, for so long as Mr. Berkley requests, following such termination, the Company is required to provide him with office accommodations and support, including secretarial support, in a manner consistent with that provided prior to such termination. To the extent that any benefits under the agreement or otherwise result in the imposition of an excise tax under Section 4999 of the Internal Revenue Code, Mr. Berkley will receive an additional payment to hold him harmless against such excise tax.

     The agreement prohibits Mr. Berkley from competing against the Company for two years following his resignation of employment other than for “good reason,” during which time, Mr. Berkley has agreed to be available to provide consulting services to the Company.

     The above summary is qualified in its entirety by reference to the Supplemental Benefits Agreement, which is incorporated by reference in its entirety and filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

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Item 6. Exhibits

     Number

(3.1)	The Company’s Restated Certificate of Incorporation, as amended through May 10, 2004 (incorporated by reference to Exhibits 3.1 and 3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).
(3.2)	Amendment, dated May 11, 2004, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly report on Form 10-Q (File No. 1-15-202) filed with the Commission on August 5, 2004)
(10.1)	Supplemental Benefits Agreement between William R. Berkley and the Company dated August 19, 2004
(31.1)	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(31.2)	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(32.1)	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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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
Date: November 8, 2004	/s/ William R. Berkley
	William R. Berkley
	Chairman of the Board and
	Chief Executive Officer
Date: November 8, 2004	/s/ Eugene G. Ballard
	Eugene G. Ballard
	Senior Vice President,
	Chief Financial Officer
	and Treasurer

EX-10.1

Exhibit 10.1

SUPPLEMENTAL BENEFITS AGREEMENT

          This SUPPLEMENTAL BENEFITS AGREEMENT is dated as of August 19, 2004, and is entered into by and between W. R. Berkley Corporation, a Delaware corporation (the “Company”), and William R. Berkley (“Executive”).

          WHEREAS, Executive currently serves as the Company’s Chief Executive Officer and as the Chairman of the Board; and

          WHEREAS, each of Executive and the Company wish to enter into an agreement (this “Agreement”) providing for certain benefits upon Executive’s retirement as the Company’s Chief Executive Officer, subject to the terms and conditions contained herein.

          NOW, THEREFORE, the parties hereto agree as follows:

     Section 1. Definitions.

          (a) “Auditors” shall have the meaning set forth in Section 3 hereof.

          (b) “Board” means the Company’s Board of Directors.

          (c) “Cause” means (i) Executive is convicted of, or pleads guilty or no contest to any felony; or (ii) Executive engages in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out his duties to the Company, resulting, in either case, in material economic harm to the Company. For purposes of clause (ii) above, no act or failure to act by Executive shall be considered “willful” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Enhanced Retirement Benefit” means the Retirement Benefit calculated on the date Executive attains age 72, actuarially increased to reflect the passage of time from the date Executive attained age 72 until the date of such Qualifying Termination, where such actuarial increase is determined on the following basis:

          Mortality: Based on the mortality rates under the 1994 Uninsured Pensioner Mortality Table (UP-94)

          Interest Rate: 6%

          (f) “Final Average Five-Year Compensation” means the average of Executive’s base salary and regular annual bonus (excluding any amounts paid under the

Company’s Long-Term Incentive Plan), earned in respect of each of the five fiscal years of the Company prior to the fiscal year in which a Qualifying Termination occurs.

          (g) “Good Reason” means, in each case without Executive’s consent, (i) any change in Executive’s title (including his position as Chairman of the Board) or any diminution in Executive’s authority or responsibility; (ii) the assignment of duties or responsibilities that are inconsistent in any material respect with Executive’s position or status as Chief Executive Officer of the Company; (iii) a reduction by the Company in Executive’s rate of annual base salary or a material reduction in the value of Executive’s annual bonus opportunity, each as in effect on the date hereof or as the same may be increased from time to time thereafter; (iv) any requirement of the Company that Executive be based anywhere more than twenty (20) miles from the office where Executive is located as of the date hereof; or (v) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor, as contemplated in Section 8 hereof.

          (h) “Gross-Up Payment” shall have the meaning set forth in Section 3 hereof.

          (i) “Highest Average Three-Year Compensation” means the greatest three fiscal year average of Executive’s base salary and regular annual bonus earned in respect of each such fiscal year (excluding any amounts paid under the Company’s Long-Term Incentive Plan), determined by using any three consecutive fiscal years over the ten fiscal year period prior to the year in which a Qualifying Termination occurs.

          (j) “Parachute Tax” shall have the meaning set forth in Section 3 hereof.

          (k) “Payment” shall have the meaning set forth in Section 3 hereof.

          (l) “Qualifying Termination” means the earliest to occur of (i) Executive’s resignation from employment as Chief Executive Officer of the Company for any reason; (ii) any termination of Executive’s employment by the Company other than for Cause; provided, however, that, in each case, Executive shall not be required to resign from his position as Chairman of the Board following any termination of employment in order for a Qualifying Termination to occur; or (iii) termination of Executive’s employment by reason of his death.

          (m) “Restricted Period” means the period commencing on the date of Executive’s resignation from employment as Chief Executive Officer without Good Reason and ending on the second anniversary thereof.

          (n) “Retirement Benefit” means an annual benefit equal to the greater of (i) $1,000,000, or (ii) fifty percent (50%) of Highest Average Three-Year Compensation, which in the case of clause (ii) shall in no event exceed one hundred fifty percent (150%) of Final Average Five-Year Compensation; provided, however, than in the event a Qualifying Termination occurs following the date upon which Executive attains age 72, the Retirement Benefit shall equal the greater of the Retirement Benefit or the Enhanced Retirement Benefit.

     Section 2. Benefits upon a Qualifying Termination.

          (a) Retirement Benefit. As soon as practicable following a Qualifying Termination, but in no event more than thirty (30) days following such Qualifying Termination, Executive shall be paid the first annual Retirement Benefit. Thereafter, Executive shall be paid the Retirement Benefit on each anniversary of the date of such Qualifying Termination for the remainder of his life. In the event that Executive’s Qualifying Termination occurs as a result of Executive’s death, or Executive’s death occurs following a Qualifying Termination, and if Executive’s spouse has not predeceased him, Executive’s spouse shall thereafter be entitled to receive fifty percent (50%) of the Retirement Benefit on each anniversary of such Qualifying Termination for the remainder of her life (and upon such Qualifying Termination, if it occurred as a result of Executive’s death). Notwithstanding the foregoing, within ten (10) business days following any Qualifying Termination, Executive may elect to have his spouse receive one hundred percent (100%) of the Retirement Benefit; provided, that, in such event, the Retirement Benefit shall be reduced by an amount such that the payments made to Executive and his spouse following such election will be the actuarial equivalent to the payments that would otherwise been made to Executive and his spouse had no such election occurred. The following actuarial assumptions shall be applied for purposes of determining the reduction described in the preceding sentence:

          Mortality: Based on the mortality rates under the 1994 Uninsured Pensioner Mortality Table (UP-94)

          Interest Rate: 6%

          (b) Continued Health Benefits. Following a Qualifying Termination, (i) for the remainder of Executive’s life, in the case of Executive, and for the remainder of his spouse’s life, in the case of Executive’s spouse, the Company shall provide Executive and Executive’s spouse with health insurance coverage with substantially the same level of benefits as provided to Executive and his spouse immediately prior to such Qualifying Termination; provided, that if Executive and/or his spouse become eligible to participate in any government provided health care coverage, Executive and/or his spouse shall participate in such coverage to the extent reasonably practicable, and, in such case, the level of benefits provided under this subsection (b) shall be reduced to avoid duplication of benefits. Notwithstanding the foregoing, following the date Executive and/or his spouse participate in such government provided coverage, Executive and/or his spouse shall have the right to elect not to use such government provided coverage with respect to any procedure if Executive and/or his spouse reasonably believe, in the Executive’s and/or the spouse’s discretion, that the same quality of care can not be provided through use of such coverage as the quality of care available through the Company provided coverage. Benefits provided to Executive and his spouse under this subsection (b) shall be paid by the Company; provided, however, that with respect to Executive’s spouse, until such time that Executive’s spouse participates in the government health care coverage described above, Executive and/or his spouse shall be responsible for payment to the Company of an amount equal to any “co-pay” applicable to spouses of other employees of the Company receiving the same level of benefits.

     (c) Perquisites.

     (i) For the period commencing on a Qualifying Termination and ending on the latest to occur of (A) two (2) years following the date of such Qualifying Termination, (B) the date on which Executive ceases to serve as Chairman of the Board, or (C) the date upon which Executive ceases to provide consulting services to the Company, the Company shall provide Executive with:

               (1) continued use of the Company airplane, in a manner consistent with Executive’s historical use of such airplane prior to such Qualifying Termination; and

               (2) a car and driver at a level consistent with that provided to Executive prior to such Qualifying Termination.

     (ii) Following a Qualifying Termination, for so long as Executive requests, the Company shall provide Executive with office accommodations and support, which shall include computer and telecommunication office equipment (e.g., fax machine, copy machine, telephones, etc.), reasonable office supplies and full-time secretarial support in a manner consistent with the office accommodations and support provided to him prior to such Qualifying Termination.

     Section 3. Additional Payments.

          (a) If it is determined by a nationally recognized United States public accounting firm selected by the Company and approved in writing by Executive (the “Auditors”) that any payment or benefit made or provided to Executive in connection with this Agreement or otherwise (collectively, a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (the “Parachute Tax”), then Company shall pay to the Executive, prior to the time the Parachute Tax is payable with respect to such Payment, an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any Parachute Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Parachute Tax imposed upon the Payment. The amount of any Gross-Up Payment shall be determined by the Auditors, subject to adjustment, as necessary, as a result of any Internal Revenue Service position. For purposes of making the calculations required by this Agreement, the Auditors may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code, provided that the Auditors’ determinations must be made with substantial authority (within the meaning of Section 6662 of the Code).

          (b) The federal tax returns filed by Executive (and any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a basis consistent with the determination of the Auditors with respect to the Parachute Tax payable by Executive. Executive shall make proper payment of the amount of any Parachute Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and such other

documents reasonably requested by the Company evidencing such payment. If, after the Company’s payment to Executive of the Gross-Up Payment, the Auditors determine in good faith that the amount of the Gross-Up Payment should be reduced or increased, or such determination is made by the Internal Revenue Service, then within ten business days of such determination, Executive shall pay to the Company the amount of any such reduction, or the Company shall pay to Executive the amount of any such increase; provided, however, that in no event shall the Executive have any such refund obligation if it is determined by the Company (with its counsel) that to do so would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time; and provided, further, that if Executive has prior thereto paid such amounts to the Internal Revenue Service, such refund shall be due only to the extent that a refund of such amount is received by Executive.

          (c) The fees and expenses of the Auditors (and any other legal and accounting fees) incurred for services rendered in connection with the Auditors’ determination of the Parachute Tax or any challenge by the Internal Revenue Service or other taxing authority relating to such determination shall be paid by the Company.

     Section 4. Non-Competition; Consulting during the Restricted Period.

          (a) Non-Competition. In the event that Executive resigns from employment without Good Reason, Executive covenants and agrees that during the Restricted Period, with respect to any State of the United States of America or any other jurisdiction in which the Company engages in business at the time of such termination, Executive shall not, directly or indirectly, individually or jointly, own any interest in, operate, join, control or participate as a partner, director, principal, officer, or agent of, enter into the employment of, act as a consultant to, or perform any services for any entity that engages in activities that are materially competitive with the Company or its subsidiaries.

          (b) Blue Pencil. If any court of competent jurisdiction shall at any time deem the duration or the geographic scope of the provisions of subsection (a) above unenforceable, the other provisions of this Agreement shall nevertheless stand, and the duration and/or geographic scope set forth herein shall be deemed to be the longest period and/or greatest size permissible by law under the circumstances, and the parties hereto agree that such court shall reduce the time period and/or geographic scope to permissible duration or size.

          (c) Injunctive Relief. Without intending to limit the remedies available to the Company, but subject to subsection (e) below, Executive acknowledges that a breach of any of the covenants contained in subsection (a) above may result in material irreparable injury to the Company or its subsidiaries for which there is no adequate remedy at law; that it will not be possible to measure damages for such injuries precisely; and that, in the event of such a breach or threat thereof, the Company shall be entitled to obtain a temporary restraining order and/or a preliminary or permanent injunction, without the necessity of proving irreparable harm or injury as a result of such actual or threatened breach of subsection (a) above, restraining Executive from engaging in activities prohibited by subsection (a) above or such other relief as may be required specifically to enforce any of the covenants in hereof.

          (d) Consulting Arrangement. During the Restricted Period, Executive agrees to be reasonably available to provide consulting services, at the request of the Board, for not more than twenty (20) hours per month. In connection with any request for Executive’s services hereunder, the Board shall give reasonable notice to Executive prior to time such services are to be performed and shall accommodate the Employee’s other professional or personal commitments to the extent reasonably possible. Executive shall not be entitled to additional compensation or fees as a result of providing such services.

          (e) No Set-Off. A breach by Executive of subsections (a) or (d) above shall not affect the right of Executive or his spouse to receive and continue to receive the Retirement Benefit and the other benefits and perquisites described in Section 2 hereof, and the Company shall have no right of set-off against any such amounts.

     Section 5. Taxes.

          The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment and social insurance taxes, as shall be required by law.

     Section 6. Legal Fees.

          If any legal action or proceeding is commenced to enforce or interpret the provisions of this Agreement, or any plan, agreement or arrangement referenced in this Agreement, or to recover damages for breach thereof, all reasonable legal fees, disbursements, costs and expenses paid or incurred by Executive in connection with any such action or proceeding shall be paid or reimbursed by the Company, irrespective of the outcome thereof, provided that if such action or proceeding is initiated by Executive or in his name, Executive shall not be entitled to such payment or reimbursement if it is finally determined by a court of competent jurisdiction that such action or proceeding was frivolous and brought by Executive (or in his name) in bad faith.

     Section 7. No Mitigation.

          Executive shall not be required to mitigate the amount of any payment provided for pursuant to this Agreement by seeking other employment or otherwise and the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.

     Section 8. Successors and Assigns.

          (a) This Agreement shall inure to the benefit of and be enforceable by, and may be assigned by the Company to, any purchaser of all or substantially all of the Company’s business or assets, any successor to the Company or any assignee thereof (whether direct or indirect, by purchase, merger, consolidation or otherwise). The Company will require any such purchaser, successor or assignee to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such purchase, succession or assignment had taken place.

     Section 9. Waiver and Amendments.

          Any waiver, alteration, amendment or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by the parties hereto; provided, however, that any such waiver, alteration, amendment or modification is consented to on the Company’s behalf by the Board. No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

     Section 10. Severability.

          In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

     Section 11. Governing Law.

          THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF) APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

     Section 12. Section Headings.

          The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof, affect the meaning or interpretation of this Agreement or of any term or provision hereof.

     Section 13. Entire Agreement.

          This Agreement constitutes the entire understanding and agreement of the parties hereto regarding the subject matter of this Agreement and supersedes all prior negotiations, discussions, correspondence, communications, understandings and agreements between the parties relating thereto.

     Section 14. Counterparts.

          This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. The execution of this Agreement may be by actual or facsimile signature.

* * *

[Signatures to appear on the following page.]

          IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written.

W. R. BERKLEY CORPORATION
By:	/S/ Richard G. Merrill
	Name: Richard G. Merrill
	Title: Chairman, Compensation Committee
William R. Berkley
	/S/ William R. Berkley

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, William R. Berkley, Chairman of the Board and Chief Executive Officer of W. R. Berkley Corporation (the “registrant”), certify that:

1.	I have reviewed this quarterly report on Form 10-Q of the registrant;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2004

/s/ William R. Berkley

William R. Berkley

Chairman of the Board and

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Eugene G. Ballard, Senior Vice President, Chief Financial Officer and Treasurer of W. R. Berkley Corporation (the “registrant”), certify that:

1.	I have reviewed this quarterly report on Form 10-Q of the registrant;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2004

/s/ Eugene G. Ballard

Eugene G. Ballard

Senior Vice President,

Chief Financial Officer and

Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of W. R. Berkley Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, William R. Berkley, Chairman of the Board and Chief Executive Officer of the Company, and Eugene G. Ballard, Senior Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William R. Berkley

William R. Berkley

Chairman of the Board and Chief Executive Officer

/s/ Eugene G. Ballard

Eugene G. Ballard

Senior Vice President – Chief Financial Officer and Treasurer

November 8, 2004

A signed original of this written statement required by Section 906 has been provided to W. R. Berkley Corporation (the “Company”) and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.