10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2006

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 incorporation or organization)	(I.R.S. Employer 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) has 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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one)

Large accelerated filer þ      Accelerated filer o      Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock, $.20 par value, outstanding as of November 1, 2006: 191,620,869.

TABLE OF CONTENTS

Part I — FINANCIAL INFORMATION
	ITEM 1. 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 1A. Risk Factors
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
	Item 6. Exhibits
SIGNATURES
EX-31.1: CERTIFICATION
EX-31.2:CERTIFICATION
EX-32.1: CERTIFICATIONS

Part I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

W. R. Berkley Corporation and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)

	September 30,			December 31,
	2006			2005
	(Unaudited)
Assets
Investments:
Fixed maturity securities	$	9,188,110		$	8,485,104
Equity securities available for sale		650,349			435,699
Equity securities trading account		787,460			567,760
Investments in partnerships and affiliates		401,784			321,662
Total investments		11,027,703			9,810,225
Cash and cash equivalents		658,910			672,941
Premiums and fees receivable		1,231,934			1,106,677
Due from reinsurers		941,598			954,066
Accrued investment income		115,302			101,751
Prepaid reinsurance premiums		180,215			178,621
Deferred policy acquisition costs		494,233			459,773
Real estate, furniture and equipment		180,614			169,472
Deferred Federal and foreign income taxes		145,357			132,059
Goodwill		65,759			65,759
Trading account receivable from brokers and clearing organizations		206,505			98,229
Other assets		196,108			146,714
Total assets	$	15,444,238		$	13,896,287
Liabilities and Stockholders’ Equity
Liabilities:
Reserves for losses and loss expenses	$	7,574,891		$	6,711,760
Unearned premiums		2,373,103			2,189,001
Due to reinsurers		92,766			87,652
Trading account securities sold but not yet purchased		236,891			198,426
Policyholders’ account balances		100,028			83,893
Other liabilities		621,083			618,712
Junior subordinated debentures		451,659			450,634
Senior notes and other debt		868,848			967,818
Total liabilities		12,319,269			11,307,896
Minority interest		27,382			21,314
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 500,000,000 shares, issued and outstanding, net of treasury shares, 191,571,222 and 191,264,346 shares		47,024			47,024
Additional paid-in capital		843,588			821,050
Retained earnings		2,352,358			1,873,953
Accumulated other comprehensive income		89,018			24,903
Treasury stock, at cost, 43,546,696 and 43,858,056 shares		(234,401	)		(199,853	)
Total stockholders’ equity		3,097,587			2,567,077
Total liabilities and stockholders’ equity	$	15,444,238		$	13,896,287

See accompanying notes to interim consolidated financial statements.

1

W. R. Berkley Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(dollars in thousands, except per share data)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2006			2005			2006			2005
Revenues:
Net premiums written	$	1,208,906		$	1,131,128		$	3,705,422		$	3,454,307
Change in unearned premiums		(15,049	)		44			(178,508	)		(191,287	)
Premiums earned		1,193,857			1,131,172			3,526,914			3,263,020
Net investment income		145,784			107,502			422,348			290,682
Service fees		26,622			25,064			80,182			84,025
Realized investment gains		1,734			8,120			3,736			13,885
Other income		511			319			1,208			1,337
Total revenues		1,368,508			1,272,177			4,034,388			3,652,949
Expenses:
Losses and loss expenses		731,941			742,242			2,175,249			2,058,714
Other operating expenses		368,311			338,962			1,082,891			1,000,367
Interest expense		23,293			23,632			70,034			60,974
Total expenses		1,123,545			1,104,836			3,328,174			3,120,055
Income before income taxes and minority interest		244,963			167,341			706,214			532,894
Income tax expense		(70,445	)		(44,540	)		(203,251	)		(153,364	)
Minority interest		(210	)		(283	)		(1,501	)		(2,062	)
Net income	$	174,308		$	122,518		$	501,462		$	377,468
Earnings per share:
Basic	$	.91		$	.64		$	2.62		$	1.99
Diluted	$	.87		$	.61		$	2.49		$	1.89

See accompanying notes to interim consolidated financial statements.

2

W. R. Berkley Corporation and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(dollars in thousands)

	For The Nine Months
	Ended September 30,
	2006			_2005__
Common Stock:
Beginning and end of period	$	47,024		$	47,024
Additional paid in capital:
Beginning of period	$	821,050		$	805,240
Stock options exercised, including tax benefits		9,696			5,932
Restricted stock units expensed		10,834			5,955
Stock options expensed		1,316			101
Stock issued to directors		692			225
End of period	$	843,588		$	817,453
Retained earnings:
Beginning of period	$	1,873,953		$	1,354,489
Net income		501,462			377,468
Dividends		(23,057	)		(19,054	)
End of period	$	2,352,358		$	1,712,903
Accumulated other comprehensive income:
Unrealized investment gains (losses):
Beginning of period	$	40,746		$	109,699
Net change in period		52,253			(50,133	)
End of period		92,999			59,566
Currency translation adjustments:
Beginning of period	$	(15,843	)	$	2,356
Net change in period		11,862			(13,871	)
End of period		(3,981	)		(11,515	)
Total accumulated other comprehensive income:	$	89,018		$	48,051
Treasury Stock:
Beginning of period	$	(199,853	)	$	(209,106	)
Stock options exercised		10,422			9,049
Stock issued to directors		89			80
Purchase of common stock		(45,059	)		(636	)
End of period	$	(234,401	)	$	(200,613	)

See accompanying notes to interim 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,
	2006			2005
Cash flows provided by operating activities:
Net income	$	501,462		$	377,468
Adjustments to reconcile net income to net cash flows provided by operating activities:
Realized investment gains		(3,736	)		(13,885	)
Depreciation and amortization		51,009			40,248
Minority interest		1,501			2,062
Equity in undistributed earnings of affiliates		(21,081	)		(20,707	)
Stock incentive plans		12,931			6,361
Change in:
Equity securities trading account		(200,128	)		(213,413	)
Premiums and fees receivable		(125,055	)		(38,776	)
Due from reinsurers		12,468			(91,545	)
Accrued investment income		(13,551	)		(16,772	)
Prepaid reinsurance premiums		(1,594	)		(3,264	)
Deferred policy acquisition cost		(34,460	)		(27,230	)
Deferred income taxes		(39,359	)		(20,610	)
Trading account receivable from brokers and clearing Organizations		(108,276	)		15,809
Other assets		(8,186	)		(3,557	)
Reserves for losses and loss expenses		863,131			1,024,219
Unearned premiums		184,102			190,798
Due to reinsurers		5,114			(1,517	)
Trading account securities sold but not yet purchased		38,465			117,422
Policyholders’ account balances		3,002			(315	)
Other liabilities		12,081			32,279
Net cash flows provided by operating activities		1,129,840			1,355,075
Cash flows used in investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities		818,311			1,120,906
Equity securities		149,920			175,734
Maturities and prepayments of fixed maturities securities		651,489			1,036,143
Investment in affiliates		48,545			11,799
Cost of purchases, excluding trading account:
Fixed maturity securities		(2,197,449	)		(3,878,128	)
Equity securities		(312,842	)		(216,929	)
Investment in affiliates		(102,013	)		(50,618	)
Change in balances due to/from security brokers		(44,199	)		140,581
Net additions to real estate, furniture and equipment		(33,250	)		(27,996	)
Acquisitions (including minority interest purchased)		(2,450	)		(33,400	)
Proceeds from sale of subsidiary		2,816			—
Other		618			—
Net cash flows used in investing activities		(1,020,504	)		(1,721,908	)
Cash flows (used in) provided by financing activities:
Net proceeds from issuance of junior subordinated debentures		—			241,665
Net proceeds from issuance of senior notes		—			198,141
Receipts credited to policyholders’ account balances		13,424			10,934
Return of policyholders’ account balances		(291	)		(684	)
Bank deposits received		10,462			9,175
Advances from (repayments to) federal home loan bank		(7,875	)		4,775
Net proceeds from stock options exercised		11,239			10,250
Repayment of senior notes		(100,000	)		(40,000	)
Cash dividends		(21,769	)		(12,687	)
Stock repurchases		(45,059	)		(636	)
Other, net		16,502			(6,907	)
Net cash flows (used in) provided by financing activities		(123,367	)		414,026
Net (decrease) increase in cash and cash equivalents		(14,031	)		47,193
Cash and cash equivalents at beginning of year	$	672,941		$	932,079
Cash and cash equivalents at end of period	$	658,910		$	979,272
Supplemental disclosure of cash flow information:
Interest paid	$	65,847		$	55,179
Federal income taxes paid	$	218,616		$	150,285

See accompanying notes to interim consolidated financial statements.

4

W. R. Berkley Corporation and Subsidiaries
Notes to Interim Consolidated Financial Statements (unaudited)

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, 2005. Reclassifications have been made in the 2005 financial statements as originally reported to conform them to the presentation of the 2006 financial statements.

     The income tax provision has been computed based on the Company’s effective tax rate, which differs from the federal income tax rate of 35% principally because of tax-exempt investment income.

     The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by weighted average number of common shares outstanding during the period. Diluted EPS is based upon the weighted average number of common and common equivalent shares outstanding during the period and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation. Per share amounts have been adjusted to reflect the 3-for-2 common stock split effected April 4, 2006.

     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 February 2006, the Financial Accounting Standards Board (“FASB”) issued FAS No. 155 “Accounting for Certain Hybrid Financial Instruments, an amendment of FAS No. 133 and 140,” which addresses the application of FAS 133 to beneficial interests in securitized financial assets. FAS 155 will become effective in 2007. FAS 155 requires beneficial interests in securitized financial assets be analyzed to determine whether they are freestanding derivatives or hybrid instruments containing embedded derivatives that would require bifurcation. The FASB has proposed to amend FAS 155 that, if approved, would exempt securitized interest that only contain embedded derivatives linked to prepayment risk of the underlying assets and where the investor does not control acceleration of settlement. If the proposed amendment is approved the adoption of FAS 155 will not have a material impact on the Company’s financial condition, results of operations or liquidity.

     In June 2006, the FASB issued interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes” which establishes a new accounting model for income tax reserves and contingencies. FIN 48 will become effective in 2007. The Company does not expect the adoption of FIN 48 to have a material impact on the Company’s financial condition or results of operations.

     In September 2006, the FASB issued FAS 157 “Fair Value Measurements.” FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 will become effective in 2008. The adoption of FAS 157 will not have a material impact on the Company’s financial condition or results of operations.

5

     In September 2006, the FASB issued statement No. FAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” which requires an employer to recognize the over-funded or under-funded status of defined benefit and other post-retirement plans as an asset or liability on its consolidated balance sheet. FAS 158 will become effective for years ending after December 15, 2006. The Company expects the adoption of FAS 158 to result in a decrease of approximately $14 million in its stockholders’ equity as of December 31, 2006 and a corresponding decrease in other comprehensive income for the three months ended December 31, 2006. The adoption of FAS 158 will not have an impact on the Company’s results of operations.

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,
	2006			2005			2006			2005
Net income	$	174,308		$	122,518		$	501,462		$	377,468
Other comprehensive income (loss):
Change in unrealized foreign exchange gains (losses)		5,150			(3,600	)		11,862			(13,871	)
Unrealized holding gains (losses) on investment securities arising during the period, net of taxes		118,400			(52,654	)		54,977			(41,260	)
Reclassification adjustment for realized (gains) losses included in net income, net of taxes		(1,505	)		(5,197	)		(2,724	)		(8,873	)
Other comprehensive income (loss)		122,045			(61,451	)		64,115			(64,004	)
Comprehensive income	$	296,353		$	61,067		$	565,577		$	313,464

4. STOCK-BASED COMPENSATION

     Effective January 1, 2003, the Company adopted the fair value recognition provisions of FAS 123, “Accounting for Stock-Based Compensation.” The fair value provisions of FAS 123 were applied prospectively to all employee awards granted, modified, or settled on or after January 1, 2003. In December 2004, the FASB issued FAS 123R, “Share-Based Payment,” which the Company adopted on January 1, 2006. Under FAS 123R, the cost resulting from all share-based payment transactions with employees, including those awarded prior to January 1, 2003, are recognized in the financial statements using a fair-value-based measurement method. The adoption of FAS 123R resulted in an increase in pre-tax stock based compensation expense of $1.2 million for the nine months ended September 30, 2006.

     The following table illustrates the pro forma effect on net income and earnings per share as if FAS 123R had been adopted on January 1, 2005 (dollars in thousands, except per share data).

	For the Three Months			For the Nine Months
	Ended September 30,			Ended September 30,
	2005			2005
Net income, as reported	$	122,518		$	377,468
Add: Stock-based compensation expense included in reported net income, net of tax		1,330			3,936
Deduct: Total stock-based compensation expense under fair value based method for all options, net of tax		(1,808	)		(5,370	)

	For the Three Months		For the Nine Months
	Ended September 30,		Ended September 30,
	2005		2005
Pro forma net income	$	122,040	$	376,034
Earnings per share:
Basic — as reported	$	.64	$	1.99
Basic — pro forma		.64		1.98
Diluted — as reported		.61		1.89
Diluted — pro forma		.61		1.89

6

5. INVESTMENTS

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

	Amortized			Fair			Carrying
	Cost			Value			Value
September 30, 2006
Fixed maturity securities:
Held to maturity	$	232,274		$	246,748		$	232,274
Available for sale		8,902,545			8,955,836			8,955,836
Total	$	9,134,819		$	9,202,584		$	9,188,110
Equity securities available for sale	$	571,649		$	650,349		$	650,349
Trading Account:
Equity securities	$	768,690		$	787,460		$	787,460
Receivable from broker		206,505			206,505			206,505
Securities sold but not yet purchased		(221,845	)		(236,891	)		(236,891	)
Total trading account	$	753,350		$	757,074		$	757,074
December 31, 2005
Fixed maturity securities:
Held to maturity	$	248,322		$	264,801		$	248,322
Available for sale		8,203,039			8,236,782			8,236,782
Total	$	8,451,361		$	8,501,583		$	8,485,104
Equity securities available for sale	$	409,991		$	435,699		$	435,699
Trading Account:
Equity securities	$	560,397		$	567,760		$	567,760
Receivable from broker		98,229			98,229			98,229
Securities sold but not yet purchased		(194,765	)		(198,426	)		(198,426	)
Total trading account	$	463,861		$	467,563		$	467,563

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 net of reserves for uncollectible reinsurance of $2.5 million and $2.4 million as of September 30, 2006 and December 31, 2005, respectively. The following amounts arising under reinsurance ceded contracts have been deducted in arriving at the amounts reflected in the statement of income (dollars in thousands):

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2006		2005		2006		2005
Ceded premiums earned	$	117,224	$	124,978	$	353,891	$	374,195
Ceded losses incurred	$	71,558	$	149,559	$	216,645	$	307,269

7

7. 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. The main lines of business are premises operations, products liability, commercial automobile, professional liability and property lines. 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 segment provides commercial insurance products to customers primarily in 38 states. Key clients of this segment are small to mid-sized businesses and state and local 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 insurance, the alternative markets segment also provides a wide variety of fee-based services, including consulting and 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 property and casualty reinsurance through Lloyd’s.

     Our international segment offers professional indemnity and other lines in the U.K. and Spain, commercial and personal property casualty insurance in Argentina and Brazil and savings and endowment policies to pre-fund education costs in the Philippines.

     The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Income tax expense and benefits are calculated based upon the Company’s effective tax rate.

8

7. INDUSTRY SEGMENTS (continued)

     Summary financial information about the Company’s operating segments is presented in the following table. Net income 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.

									Income before
	Revenues								Taxes and
	Earned		Investment						Minority			Net
(dollars in thousands)	Premiums		Income		Other		Total		Interest			Income
For the three months ended September 30, 2006:
Specialty	$	446,453	$	50,272	$	—	$	496,725	$	119,498		$	82,758
Regional		308,263		21,117		—		329,380		51,061			35,326
Alternative Markets		166,879		28,244		26,622		221,745		76,693			52,705
Reinsurance		215,028		33,194		—		248,222		31,191			23,630
International		57,234		8,474		—		65,708		5,039			4,077
Corporate and eliminations		—		4,483		511		4,994		(40,253	)		(25,693	)
Realized investment gains		—		—		1,734		1,734		1,734			1,505
Consolidated	$	1,193,857	$	145,784	$	28,867	$	1,368,508	$	244,963		$	174,308
For the three months ended September 30, 2005:
Specialty	$	425,980	$	36,331	$	—	$	462,311	$	87,420		$	61,183
Regional		298,250		15,281		—		313,531		49,538			34,033
Alternative Markets		166,004		22,640		25,064		213,708		60,435			42,000
Reinsurance		192,396		25,506		—		217,902		(6,313	)		(1,043	)
International		48,542		3,556		—		52,098		5,014			4,461
Corporate and eliminations		—		4,188		319		4,507		(36,873	)		(23,313	)
Realized investment gains		—		—		8,120		8,120		8,120			5,197
Consolidated	$	1,131,172	$	107,502	$	33,503	$	1,272,177	$	167,341		$	122,518

9

7. INDUSTRY SEGMENTS (continued)

	Revenues
									Income Before
									Taxes and
	Earned		Investment						Minority			Net
(dollars in thousands)	Premiums		Income		Other		Total		Interest			Income
For the nine months ended September 30, 2006:
Specialty	$	1,307,910	$	144,260	$	—	$	1,452,170	$	338,716		$	235,024
Regional		897,838		60,370		—		958,208		149,621			103,472
Alternative Markets		491,648		82,675		80,182		654,505		218,335			150,433
Reinsurance		666,577		96,625		—		763,202		95,287			71,889
International		162,941		23,562		—		186,503		21,771			15,221
Corporate and eliminations		—		14,856		1,208		16,064		(121,252	)		(77,301	)
Realized investment gains		—		—		3,736		3,736		3,736			2,724
Consolidated	$	3,526,914	$	422,348	$	85,126	$	4,034,388	$	706,214		$	501,462
For the nine months ended September 30, 2005:
Specialty	$	1,204,202	$	97,141	$	—	$	1,301,343	$	247,978		$	172,843
Regional		870,586		41,875		—		912,461		157,193			107,200
Alternative Markets		482,300		60,887		84,025		627,212		157,559			109,720
Reinsurance		566,163		69,087		—		635,250		39,323			33,850
International		139,769		13,929		52		153,750		15,616			9,233
Corporate and eliminations		—		7,763		1,285		9,048		(98,660	)		(64,251	)
Realized investment gains		—		—		13,885		13,885		13,885			8,873
Consolidated	$	3,263,020	$	290,682	$	99,247	$	3,652,949	$	532,894		$	377,468

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

	September 30,			December 31,
	2006			2005
Specialty	$	5,215,484		$	4,731,062
Regional		2,782,687			2,652,556
Alternative Markets		2,684,127			2,374,967
Reinsurance		5,158,623			4,506,796
International		737,586			613,634
Corporate, other and eliminations		(1,134,269	)		(982,728	)
Consolidated	$	15,444,238		$	13,896,287

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7. INDUSTRY SEGMENTS (continued)

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

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2006		2005		2006		2005
Premises operations	$	192,563	$	174,955	$	560,502	$	491,184
Automobile		67,752		67,054		198,226		196,481
Products liability		63,787		65,853		194,550		179,561
Property		42,706		34,364		118,212		100,781
Professional liability		39,748		44,670		118,410		140,883
Other		39,897		39,084		118,010		95,312
Specialty		446,453		425,980		1,307,910		1,204,202
Commercial multiple peril		118,301		117,938		350,419		349,522
Automobile		88,769		87,053		259,350		252,714
Workers’ compensation		64,330		60,069		184,187		174,912
Other		36,863		33,190		103,882		93,438
Regional		308,263		298,250		897,838		870,586
Excess workers’ compensation		77,890		69,153		227,604		199,970
Primary workers’ compensation		67,891		79,368		204,540		231,269
Other		21,098		17,483		59,504		51,061
Alternative Markets		166,879		166,004		491,648		482,300
Casualty		185,874		154,637		592,066		466,994
Property		29,154		37,759		74,511		99,169
Reinsurance		215,028		192,396		666,577		566,163
International		57,234		48,542		162,941		139,769
Total	$	1,193,857	$	1,131,172	$	3,526,914	$	3,263,020

8. SUBSEQUENT EVENT

     On October 18, 2006, the Company announced that it will repay $210 million of 8.197% junior subordinated debentures on December 15, 2006, contemporaneously with the redemption of $210 million of 8.197% trust preferred securities by the W. R. Berkley Capital Trust.

9. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES

     The Company’s subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company’s estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations. However, adverse outcomes are possible and could negatively impact the Company’s financial condition and results of operations.

11

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 2006 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to, the cyclical nature of the property casualty industry, the long-tail and potentially volatile nature of the reinsurance business, product demand and pricing, claims development and the process of estimating reserves, the uncertain nature of damage theories and loss amounts, the increased level of our retention, natural and man-made catastrophic losses, including hurricanes and as a result of terrorist activities, the impact of competition, the success of our new ventures or acquisitions and the availability of other opportunities, the availability of reinsurance, exposure as to coverage for terrorist acts, our retention under The Terrorism Risk Insurance Act of 2002, as amended (“TRIA”), the ability of our reinsurers to pay reinsurance recoverables owed to us, investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including merger arbitrage investments, exchange rate and political risks relating to our international operations, legislative and regulatory developments, including those related to alleged anti-competitive or other improper business 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 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 2006 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.

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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 is among the largest commercial lines writers in the United States and operates in five business segments: specialty insurance, regional property casualty insurance, alternative markets, reinsurance and international. 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 available insurance capacity, i.e., the level of policyholders’ surplus employed in the industry, and the industry’s willingness to deploy that capital.

     The Company’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 maturity securities. The return on fixed maturity 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.

Critical Accounting Estimates

     The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses and assumed premiums. Management believes these policies and estimates are the most critical to its operations and require the most difficult, subjective and complex judgments.

     Reserves for Losses and Loss Expenses. 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. Estimates and assumptions relating to reserves for losses and loss expenses 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.

     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 reported (“IBNR”) to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

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     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 outcomes. Reserve amounts are necessarily based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

     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. These variables are affected by internal and external events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage and legislative changes, which make it more difficult to accurately predict claim costs. 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. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events.

     Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. For example, the paid loss and incurred loss development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred loss development methods would be less credible than other actuarial methods. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” and in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

     The establishment of the actuarially derived loss reserve point estimate also 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.

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     The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate increases, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Management believes the estimates and assumptions it makes in the reserving process provide the best estimate of the ultimate cost of settling claims and related expenses with respect to insured events which have occurred; however, different assumptions and variables could lead to significantly different reserve estimates.

     Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.

     Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less for IBNR required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, commercial multi-peril business, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is little paid or incurred loss data to consider.

     Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags. For example, as of December 31, 2005, initial loss estimates for accident years 1996 through 2004 were increased by an average of 6% for lines with short reporting lags and by an average of 37% for lines with long reporting lags. For the latest accident year ended December 31, 2005, initial loss estimates were $1.6 billion for lines with short reporting lags and $0.9 billion for lines with long reporting lags.

15

     The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect historical changes, current trends and other factors observed. For example, in 2005 loss reserves for our commercial automobile business were increased to reflect an observed trend of higher severity losses, and loss reserves for our California workers’ compensation business were decreased to reflect an observed trend of lower severity losses following the enactment of legislative reforms.

     If the actual level of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s estimate. The following table reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity on our loss estimate for claims occurring in 2005 (dollars in thousands):

	Frequency (+/-)
Severity (+/-)	1%		5%		10%
1%	$	50,866	$	153,165	$	281,014
5%		153,165		259,495		392,407
10%		281,014		392,407		531,648

     Our net reserves for losses and loss expenses of $6.7 billion as of September 30, 2006 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above.

     Approximately $1.7 billion, or 26%, of the Company’s net loss reserves relate to assumed reinsurance business. There is a higher degree of uncertainty and greater variability regarding estimates of assumed loss reserves because those estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is extended. Management considers the impact of delayed reporting in its selection of assumed loss development factors.

     Information received from ceding companies is used to set initial expected loss ratios, to establish case reserves and to estimate reserves for incurred but not reported losses. This information, which is generally provided through reinsurance intermediaries, is gathered through the underwriting process and from periodic claim reports and other correspondence with ceding companies. The Company performs underwriting and claim audits of selected ceding companies to determine the accuracy and completeness of information provided to the Company. The information received from the ceding companies is supplemented by the Company’s own loss development experience with similar lines of business as well as industry loss trends and loss development benchmarks.

     Following is a summary of the Company’s reserves for losses and loss expenses by business segment as of September 30, 2006 and December 31, 2005 (dollars in thousands):

	September 30,		December 31,
	2006		2005
Specialty	$	2,422,277	$	2,103,542
Regional		1,035,380		913,768
Alternative Markets		1,328,896		1,198,389
Reinsurance		1,732,123		1,496,455
International		221,525		155,136
Net reserves for losses and loss expenses		6,740,201		5,867,290
Ceded reserves for losses and loss expenses		834,690		844,470
Gross reserves for losses and loss expenses	$	7,574,891	$	6,711,760

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     Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of September 30, 2006 and December 31, 2005 (dollars in thousands):

	Reported Case		Incurred but
	Reserves		not Reported		Total
September 30, 2006
General liability	$	692,512	$	1,707,637	$	2,400,149
Workers’ compensation		679,318		874,281		1,553,599
Automobile		331,944		214,247		546,191
International		71,817		149,708		221,525
Other		101,523		185,091		286,614
Total primary		1,877,114		3,130,964		5,008,078
Reinsurance		662,788		1,069,335		1,732,123
Total	$	2,539,902	$	4,200,299	$	6,740,201
December 31, 2005
General liability	$	644,278	$	1,410,008	$	2,054,286
Workers’ compensation		602,855		808,207		1,411,062
Automobile		326,827		175,320		502,147
International		52,144		102,992		155,136
Other		104,803		143,401		248,204
Total primary		1,730,907		2,639,928		4,370,835
Reinsurance		686,551		809,904		1,496,455
Total	$	2,417,458	$	3,449,832	$	5,867,290

     For the nine months ended September 30, 2006, the Company reported losses and loss expenses of $2.2 billion, of which $20 million represented an increase in estimates for claims occurring in prior years. The estimates for claims occurring in prior years were increased by $46 million for assumed reinsurance and decreased by $26 million for primary business. On an accident year basis, the change in prior year reserves is comprised of an increase in estimates for claims occurring in accident years prior to 2003 that was partially offset by a decrease in estimates for claims occurring in accident years 2004 and 2005.

     Case reserves for primary business increased 8% to $1.9 billion as a result of a 5% increase in the number of outstanding claims and a 3% increase in the average case reserve per claim. Reserves for incurred but not reported losses for primary business increased 19% to $3.1 billion at September 30, 2006 from $2.6 billion at December 31, 2005. Prior year reserves decreased by $41 million for the alternative markets segment and increased by $14 million and $1 million, respectively, for the regional and specialty segments. By line of business, prior year reserves decreased by $41 million for workers’ compensation and increased by $6 million, $3 million and $6 million, respectively, for general liability, commercial automobile and property lines. The decrease in workers’ compensation prior year reserves reflects the favorable impact of workers’ compensation reforms in California on loss cost trends.

     Case reserves for reinsurance business decreased 3% to $663 million at September 30, 2006 from $687 million at December 31, 2005. Reserves for incurred but not reported losses for reinsurance business increased 32% to $1,069 million at September 30, 2006 from $810 million at December 31, 2005. Prior year reserves increased $46 million as losses reported by ceding companies for those years were higher than expected. The Company sets its initial loss estimates based principally upon information obtained during the underwriting process and adjusts these estimates as losses are reported by ceding companies and additional information becomes available.

17

     Premium Estimates. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premium, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately $148 million and $90 million at September 30, 2006 and December 31, 2005, respectively. The assumed premium estimates are based upon terms set forth in the reinsurance agreement, information received from ceding companies during the underwriting and negotiation of the agreement, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate premiums to be received under its assumed reinsurance agreements.

     The Company’s policy is to recognize earned but unbilled audit premiums when they are reliably determinable. As of September 30, 2006 and December 31, 2005, the Company reported an accrual for earned but unbilled audit premiums receivable of $64 million and $47 million, respectively.

18

Results of Operations for the Nine Months ended September 30, 2006 and 2005

Business Segment Results

     Following is a summary of gross and 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, 2006 and 2005. The combined ratio represents a measure of underwriting profitability, excluding investment income. A combined ratio in excess of 100% indicates an underwriting loss; a number below 100% indicates an underwriting profit.

	For the Nine Months
	Ended September 30,
(Dollars in thousands)	2006			2005
Specialty
Gross premiums written	$	1,450,961		$	1,417,087
Net premiums written		1,376,340			1,342,031
Premiums earned		1,307,910			1,204,202
Loss ratio		60.0	%		62.5	%
Expense ratio		25.2	%		25.0	%
Combined ratio		85.2	%		87.5	%
Regional
Gross premiums written	$	1,086,500		$	1,061,654
Net premiums written		943,705			910,169
Premiums earned		897,838			870,586
Loss ratio		59.5	%		56.2	%
Expense ratio		30.6	%		30.5	%
Combined ratio		90.1	%		86.7	%
Alternative Markets
Gross premiums written	$	606,965		$	623,254
Net premiums written		531,686			527,930
Premiums earned		491,648			482,300
Loss ratio		52.8	%		62.3	%
Expense ratio		22.3	%		20.8	%
Combined ratio		75.1	%		83.1	%
Reinsurance
Gross premiums written	$	739,080		$	590,222
Net premiums written		699,929			552,334
Premiums earned		666,577			566,163
Loss ratio		73.5	%		75.2	%
Expense ratio		26.7	%		30.1	%
Combined ratio		100.2	%		105.3	%
International
Gross premiums written	$	174,866		$	139,799
Net premiums written		153,762			121,843
Premiums earned		162,941			139,769
Loss ratio		66.5	%		64.8	%
Expense ratio		31.9	%		30.1	%
Combined ratio		98.4	%		94.9	%
Consolidated
Gross premiums written	$	4,058,372		$	3,832,016
Net premiums written		3,705,422			3,454,307
Premiums earned		3,526,914			3,263,020
Loss ratio		61.7	%		63.1	%
Expense ratio		26.9	%		27.1	%
Combined ratio		88.6	%		90.2	%

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     The following table presents the Company’s net income and net income per share for the nine months ended September 30, 2006 and 2005 (amounts in thousands, except per share data):

	2006		2005
Net income	$	501,462	$	377,468
Weighted average diluted shares		201,276		199,187
Net income per diluted share	$	2.49	$	1.89

     The increase in net income in 2006 compared with 2005 reflects higher investment income and higher profits from underwriting activity. The increase in investment income was the result of an increase in average invested assets as well as an increase in the average yield on investments. The improvement in underwriting results was primarily attributable to less prior year loss reserve development and to lower weather-related losses.

     Gross Premiums Written. Gross premiums written were $4.1 billion in 2006, up 6% from 2005. While prices increased significantly in 2002 and 2003, the Company experienced an increased level of price competition in 2004 and 2005. This trend continued in 2006 with price levels for renewal business declining approximately 2% as compared with the prior year period.

     Gross premiums include approximately $59 million of premiums written by new businesses established in the past twelve months. Gross premiums for the regional and alternative markets segments include premiums written on behalf of assigned risk plans managed by the Company. The assigned risk business is fully reinsured by the respective state-sponsored assigned risk plans.

     A summary of gross premiums written in 2006 compared with 2005 by business segment follows:

• Specialty gross premiums increased by 2% to $1.5 billion in 2006 from $1.4 billion in 2005. The number of new and renewal policies issued in 2006, net of policy cancellations, increased 2%. Average prices for renewal policies, adjusted for changes in exposure, decreased 3%. Gross premiums written increased 4% for premises operations and 23% for property lines. Gross premiums written decreased 11% for professional liability lines and 3% for commercial automobile. Gross premiums for product liability were unchanged.

• Regional gross premiums increased by 2% to $1,087 million in 2006 from $1,062 million in 2005. The number of new and renewal policies issued in 2006, net of policy cancellations, decreased 2%. Average prices for renewal policies, adjusted for changes in exposure, decreased 2%. Gross premiums written increased 6% for workers’ compensation, 2% for commercial automobile and 1% for commercial multiple peril. Gross premiums include assigned risk premiums of $84 million in 2006 and $94 million in 2005.

• Alternative markets gross premiums decreased by 3% to $607 million in 2006 from $623 million in 2005. Gross premiums included gross premiums for assigned risk plans of $49 million in 2006 and $65 million in 2005. Excluding the assigned risk plan premiums, alternative market’s gross premiums were unchanged. The number of new and renewal policies issued in 2006, net of policy cancellations was unchanged. Average prices for renewal policies, adjusted for changes in exposure, decreased 4%. Gross premiums written decreased 11% for primary workers’ compensation and increased 10% for excess workers’ compensation. The decline in premiums for primary workers’ compensation was primarily due to rate decreases in California.

• Reinsurance gross premiums increased by 25% to $739 million in 2006 from $590 million in 2005. Average prices for renewal business increased 3%. Casualty gross premiums written increased 30% to $612 million, and property gross premiums written increased 7% to $127 million. The 2006 premiums include $123 million related to two new medical malpractice reinsurance agreements. While these agreements contain limits on the potential amount of losses to be paid by the Company, they also contain limits on the potential amount of profit that may be earned by the Company.

• International gross premiums increased by 25% to $175 million in 2006 from $140 million in 2005 due to growth in Europe and Argentina.

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     Net Premiums Earned. Net premiums earned increased 8% to $3.5 billion from $3.3 billion in 2005. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2006 are related to business written during both 2006 and 2005. The 8% growth rate for 2006 earned premiums reflects the underlying growth in net premiums written in those years.

     Net Investment Income. Following is a summary of net investment income for the nine months ended September 30, 2006 and 2005 (dollars in thousands):

							Average Annualized
	Amount						Yield
	2006			2005			2006		2005
Fixed maturity securities, including cash	$	321,073		$	238,212			4.6 %		4.1 %
Arbitrage trading account		51,785			15,925			9.9 %		4.8 %
Investments in partnerships and affiliates		27,947			20,707			9.8 %		10.6 %
Equity securities available for sale		23,128			18,817			6.5 %		6.2 %
Other		—			(410	)		—		—
Gross investment income		423,933			293,251			5.2 %		4.4 %
Investment expenses and interest on funds held		(1,585	)		(2,569	)
Total	$	422,348		$	290,682

     Net investment income increased 45% to $422 million in 2006 from $291 million in 2005. Average invested assets (including cash and cash equivalents) increased 22% to $10.9 billion in 2006 from $8.9 billion in 2005 as a result of cash flow from operations. The average annualized gross yield on investments increased to 5.2% in 2006 from 4.4% in 2005 due to higher short-term interest rates and higher returns from the arbitrage trading account.

     Service Fees. The alternative markets segment offers fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage. Service fees were $80 million in 2006, down from $84 million in 2005, primarily as a result of a decline in fees for managing assigned risk plans.

     Realized Investment Gains. Realized investment gains result primarily from sales of securities, as well as from provisions for other than temporary impairment in securities. Realized investment gains were $4 million in 2006 compared with $14 million in 2005. The Company buys and sells securities on a regular basis in order to maximize the total return on investments. Decisions to sell securities are based on management’s view of the underlying fundamentals of specific securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions.

     Losses and Loss Expenses. Losses and loss expenses increased 6% to $2.2 billion in 2006 from $2.1 billion in 2005 due to increased premium volume. The consolidated loss ratio was 61.7% in 2006 compared with 63.1% in 2005. The 2006 loss ratio reflects less prior year loss reserve development ($20 million in 2006 compared with $149 million in 2005) and lower storm losses ($32 million in 2006 compared with $74 million in 2005). The 2005 weather-related losses includes $50 million attributable to hurricanes Katrina and Rita. These were partially offset by an increase in the expected loss ratio for accident year 2006 as a result of a decline in average prices. A summary of loss ratios in 2006 compared with 2005 by business segment follows:

• Specialty’s loss ratio decreased to 60.0% in 2006 from 62.5% in 2005 principally due to lower prior year loss reserve development.

• The regional loss ratio increased to 59.5% in 2006 from 56.2% in 2005. The 2006 loss ratio reflects an increase in the expected loss ratio for accident year 2006 as a result of a decline in average prices. Weather-related losses were $32 million in 2006 compared with $30 million in 2005.

21

• Alternative market’s loss ratio decreased to 52.8% from 62.3% primarily as a result of the favorable reserve development related to workers’ compensation business in California.

• The reinsurance loss ratio decreased to 73.5% in 2006 from 75.2% in 2005. The decrease reflects the impact of lower weather-related losses (with no hurricane losses in 2006 compared with $36 million in 2005) and less prior year loss reserve development. These were partially offset by relatively higher loss ratios for the new medical malpractice reinsurance agreements referred to above.

• The international loss ratio increased to 66.5% in 2006 from 64.8% in 2005 primarily as a result of an increase in losses for business written in Argentina.

     Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the nine months ended September 30, 2006 and 2005 (dollars in thousands):

	2006		2005
Underwriting expenses	$	948,099	$	883,310
Service expenses		66,818		68,803
Other costs and expenses		67,974		48,254
Total	$	1,082,891	$	1,000,367

     Underwriting expenses increased 7% primarily as a result of higher premium volume. Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The consolidated expense ratio (underwriting expenses expressed as a percentage of premiums earned) was 26.9% in 2006 compared with 27.1% in 2005.

     Service expenses, which represent the costs associated with the alternative market’s fee-based business, decreased 3% to $67 million primarily as a result of a decrease in costs associated with the servicing of assigned risk plan business.

     Other costs and expenses, which represent general and administrative expenses for the parent company, increased 41% to $68 million primarily as a result of higher incentive compensation costs.

     Interest Expense. Interest expense increased 15% to $70 million as a result of interest expense related to $200 million of 5.6% senior notes issued in May 2005 and $250 million of 6.75% junior subordinated debentures issued in July 2005. This was partially offset by a reduction in interest expense as a result of the repayment of $100 million 6.25% senior notes in January 2006.

     Income taxes. The effective income tax rate was 29% in 2006 and 2005. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income.

22

Results of Operations for The Three Months ended September 30, 2006 and 2005

Business Segment Results

     Following is a summary of gross and 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, 2006 and 2005. The combined ratio represents a measure of underwriting profitability, excluding investment income. A combined ratio in excess of 100% indicates an underwriting loss; a number below 100% indicates an underwriting profit.

	For the Three Months
	Ended September 30,
(Dollars in thousands)	2006			2005
Specialty
Gross premiums written	$	454,835		$	460,317
Net premiums written		432,760			435,535
Premiums earned		446,453			425,980
Loss ratio		59.3	%		63.3	%
Expense ratio		25.2	%		24.7	%
Combined ratio		84.5	%		88.0	%
Regional
Gross premiums written	$	349,353		$	337,790
Net premiums written		309,414			291,339
Premiums earned		308,263			298,250
Loss ratio		59.7	%		57.8	%
Expense ratio		30.6	%		30.7	%
Combined ratio		90.3	%		88.5	%
Alternative Markets
Gross premiums written	$	209,674		$	196,290
Net premiums written		190,555			178,482
Premiums earned		166,879			166,004
Loss ratio		51.3	%		58.6	%
Expense ratio		22.6	%		21.0	%
Combined ratio		73.9	%		79.6	%
Reinsurance
Gross premiums written	$	233,419		$	195,702
Net premiums written		221,163			182,261
Premiums earned		215,028			192,396
Loss ratio		73.3	%		89.1	%
Expense ratio		27.7	%		27.5	%
Combined ratio		101.0	%		116.6	%
International
Gross premiums written	$	58,909		$	49,015
Net premiums written		55,014			43,511
Premiums earned		57,234			48,542
Loss ratio		71.0	%		65.2	%
Expense ratio		32.1	%		28.9	%
Combined ratio		103.1	%		94.1	%
Consolidated
Gross premiums written	$	1,306,190		$	1,239,114
Net premiums written		1,208,906			1,131,128
Premiums earned		1,193,857			1,131,172
Loss ratio		61.3	%		65.6	%
Expense ratio		27.2	%		26.5	%
Combined ratio		88.5	%		92.1	%

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     The following table presents the Company’s net income and net income per share for the three months ended September 30, 2006 and 2005 (amounts in thousands, except per share data):

	2006		2005
Net income	$	174,308	$	122,518
Weighted average diluted shares		201,295		200,630
Net income per diluted share	$	.87	$	.61

     The increase in net income in 2006 compared with 2005 reflects higher investment income and higher profits from underwriting activity. The increase in investment income was the result of an increase in average invested assets as well as an increase in the average yield on investments. The improvement in underwriting results was primarily attributable to less prior year loss reserve development and to lower weather-related losses.

     Gross Premiums Written. Gross premiums written were $1.3 billion in 2006, up 5% from 2005. While prices increased significantly in 2002 and 2003, the Company experienced an increased level of price competition in 2004 and 2005. This trend continued in 2006 with price levels for renewal business declining approximately 2%, as compared with the prior year period.

     Gross premiums for the regional and alternative markets segments include premiums written on behalf of assigned risk plans managed by the Company. The assigned risk business is fully reinsured by the respective state-sponsored assigned risk plans.

     A summary of gross premiums written in 2006 compared with 2005 by business segment follows:

• Specialty gross premiums decreased 1% to $455 million in 2006 from $460 million in 2005. The number of new and renewal policies issued in 2006, net of cancellations, were unchanged. Average prices for renewal policies, adjusted for changes in exposure, decreased 4%. Gross premiums written decreased 8% for premises operations, 16% for products liability and 13% for professional liability. Gross premiums written increased 36% for property lines and 20% for commercial automobile.

• Regional gross premiums increased by 3% to $349 million in 2006 from $338 million in 2005. The number of new and renewal policies issued in 2006, net of cancellations, was unchanged. Average prices for renewal policies, adjusted for changes in exposure, decreased 3%. Gross premiums written increased 8% for workers’ compensation, 3% for commercial multiple peril and 4% for commercial automobile. Gross premiums include assigned risk premiums of $20 million in 2006 and $27 million in 2005.

• Alternative markets gross premiums increased by 7% to $210 million in 2006 from $196 million in 2005. Gross premiums included gross premiums for assigned risk plans of $10 million in 2006 and $8 million in 2005. Excluding the assigned risk plan premiums, alternative market’s gross premiums increased by 6%. The number of new and renewal policies issued in 2006, net of cancellations, increased 3%. Average prices for renewal policies, adjusted for changes in exposure, decreased 4%. Gross premiums written were unchanged for primary workers’ compensation and increased 13% for excess workers’ compensation.

• Reinsurance gross premiums increased 19% to $233 million in 2006 from $196 million in 2005. Average prices for renewal business increased 3%. Casualty gross premiums written increased 24% to $193 million, and property gross premiums written increased 1% to $40 million. The 2006 premiums include $32 million related to the new medical malpractice reinsurance agreements referred to above.

• International gross premiums increased by 20% to $59 million in 2006 from $49 million in 2005 due to growth in Europe and Argentina.

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     Net Premiums Earned. Net premiums earned increased 6% to $1.2 billion from $1.1 billion in 2005. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2006 are related to business written during both 2006 and 2005. The 6% growth rate for 2006 earned premiums reflects the underlying growth in net premiums written in those years.

     Net Investment Income. Following is a summary of net investment income for the three months ended September 30, 2006 and 2005 (dollars in thousands):

							Average Annualized
	Amount						Yield
	2006			2005			2006		2005
Fixed maturity securities, including cash	$	112,434		$	87,807			4.7 %		4.2 %
Arbitrage trading account		14,510			7,883			7.7 %		6.6 %
Investments in partnerships and affiliates		10,982			6,926			11.3 %		9.9 %
Equity securities available for sale		8,682			5,522			6.5 %		5.7 %
Other		—			(308	)
Gross investment income		146,608			107,830			5.2 %		4.5 %
Investment expenses and interest on funds held		(824	)		(328	)
Total	$	145,784		$	107,502

     Net investment income increased 36% to $146 million in 2006 from $108 million in 2005. Average invested assets (including cash and cash equivalents) increased 18% to $11.3 billion in 2006 from $9.5 billion in 2005 as a result of cash flow from operations. The average annualized gross yield on investments increased to 5.2% in 2006 from 4.5% in 2005 due primarily to higher short-term interest rates.

     Service Fees. The alternative markets segment offers fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage. Service fees increased to $27 million in 2006 from $25 million in 2005 primarily as a result of an increase in fees for managing assigned risk plans.

     Realized Investment Gains. Realized investment gains result primarily from sales of securities, as well as from provisions for other than temporary impairment in securities. Realized investment gains were $2 million in 2006 compared with $8 million in 2005. The Company buys and sells securities on a regular basis in order to maximize the total return on investments. Decisions to sell securities are based on management’s view of the underlying fundamentals of specific securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions.

     Losses and Loss Expenses. Losses and loss expenses decreased 1% to $732 million in 2006 from $742 million in 2005. The consolidated loss ratio decreased to 61.3% in 2006 from 65.6% in 2005. The 2006 loss ratio reflects less prior year loss reserve development ($6 million in 2006 compared with $79 million in 2005) and lower storm losses ($7 million in 2006 compared with $56 million in 2005). The 2005 weather-related losses include $50 million attributable to hurricanes Katrina and Rita. These were partially offset by an increase in the expected loss ratio for accident year 2006 as a result of a decline in average prices. A summary of loss ratios in 2006 compared with 2005 by business segment follows:

• Specialty’s loss ratio decreased to 59.3% in 2006 from 63.3% in 2005 principally due to lower prior year adverse reserve development.

• The regional loss ratio increased to 59.7% in 2006 from 57.8% in 2005. The 2006 loss ratio reflects an increase in the expected loss ratio for accident year 2006 as a result of a decline in average prices. Weather-related losses were $7 million in 2006 compared with $16 million in 2005.

• Alternative market’s loss ratio decreased to 51.3% from 58.6% primarily as a result of favorable reserve development related to workers’ compensation business in California.

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• The reinsurance loss ratio decreased to 73.3% in 2006 from 89.1% in 2005. The decrease reflects the impact of lower weather-related losses (with no hurricane losses in 2006 compared with $35 million in 2005) and less prior year loss reserve development. These were partially offset by relatively higher loss ratios for the new medical malpractice reinsurance agreements referred to above.

• The international loss ratio increased to 71.0% in 2006 from 65.2% in 2005 primarily as a result of higher losses for business written in Argentina.

     Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the three months ended September 30, 2006 and 2005 (dollars in thousands):

	2006		2005
Underwriting expenses	$	324,166	$	300,021
Service expenses		21,816		21,049
Other costs and expenses		22,329		17,892
Total	$	368,311	$	338,962

     Underwriting expenses increased 8% in 2006 compared with 2005 primarily as a result of higher premium volume. Underwriting expenses are primarily comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The consolidated expense ratio (underwriting expenses expressed as a percentage of premiums earned) increased to 27.2% in 2006 from 26.5% in 2005. The increase reflects changes in the mix of business as well as expenses related by new businesses established in the past twelve months.

     Service expenses, which represent the costs associated with the alternative market’s fee-based business, increased 4% to $22 million primarily as a result of an increase in costs associated with the servicing of assigned risk plan business.

     Other costs and expenses, which represent general and administrative expenses for the parent company, increased 25% to $22 million primarily as a result of higher incentive compensation costs.

     Interest Expense. Interest expense decreased 1% to $23 million as a result of the repayment of $100 million 6.25% senior notes in January 2006, partially offset by $250 million of 6.75% junior subordinated debentures issued in July 2005.

     Income taxes. The effective income tax rate was 29% in 2006 and 27% in 2005. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income.

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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, it believes adequate to meet 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, 2006 and December 31, 2005 were as follows (dollars in thousands):

	September 30,			December 31,
	2006			2005
Fixed maturity securities	$	9,188,110		$	8,485,104
Equity securities available for sale		650,349			435,699
Equity securities trading account		787,460			567,760
Investments in partnerships and affiliates		401,784			321,662
Total investments		11,027,703			9,810,225
Cash and cash equivalents		658,910			672,941
Trading account receivable from brokers and clearing organization		206,505			98,229
Trading account securities sold but not yet purchased		(236,891	)		(198,426	)
Unsettled sales (purchases)		39,482			(4,719	)
Total	$	11,695,709		$	10,378,250

     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, 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, 2006 (as compared to December 31, 2005), the fixed maturities portfolio mix was as follows: U.S. Government securities were 18% (15% in 2005); state and municipal securities were 52% (55% in 2005); corporate securities were 8% (9% in 2005); mortgage-backed securities were 18% (18% in 2005); and foreign bonds were 4%(3% in 2005).

     The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in order to mitigate the impact of an interest rate rise on the market value of the portfolio. Similarly, in a period in which management expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason to expect these gains to continue in future periods.

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

27

     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.

     Investments in Partnerships and Affiliates. At September 30, 2006 (as compared to December 31, 2005), investments in partnerships and affiliates were as follows: equity in Kiln plc was $88 million ($74 million in 2005); real estate funds were $256 million ($160 million in 2005); and other investments were $58 million ($88 million in 2005).

     Securities in an Unrealized Loss Position. The following table summarizes all securities in an unrealized loss position at September 30, 2006 and December 31, 2005 by the length of time those securities have been continuously in an unrealized loss position:

					Gross
	Number of		Aggregate		Unrealized
(Dollars in thousands)	Securities		Fair Value		Loss
September 30, 2006
Fixed maturities:
0 – 6 months		40	$	211,384	$	846
7 – 12 months		86		939,849		6,846
Over 12 months		251		2,809,770		43,527
Total		377	$	3,961,003	$	51,219
Equity securities available for sale:
0 – 6 months		6	$	30,358	$	356
7 – 12 months		13		36,154		487
Over 12 months		15		107,651		2,981
Total		34	$	174,163	$	3,824
December 31, 2005
Fixed maturities:
0 – 6 months		237	$	2,921,830	$	29,928
7 – 12 months		65		878,549		12,124
Over 12 months		96		847,400		17,410
Total		398	$	4,647,779	$	59,462
Equity securities available for sale:
0 – 6 months		38	$	45,443	$	1,221
7 – 12 months		15		106,979		2,571
Over 12 months		4		11,364		609
Total		57	$	163,786	$	4,401

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     At September 30, 2006, gross unrealized gains were $211 million, or 2% of total investments, and gross unrealized losses were $55 million, or 0.5% of total investments. There were 365 securities that have been continuously in an unrealized loss position for more than six months. Those securities had an aggregate fair value of $3.9 billion and an aggregate unrealized loss of $54 million. The decline in market value for these securities is primarily due to an increase in market interest rates.

     Management regularly reviews all securities that have a fair value less than cost to determine whether an other than temporary impairment has occurred. In determining whether a decline in fair value is other than temporary, management assesses whether the fair value is expected to recover and whether the Company has the intent to hold the investment until it recovers. The Company’s assessment of its intent to hold an investment until it recovers is based on conditions at the time the assessment is made, including general market conditions, the Company’s overall investment strategy and management’s view of the underlying value of an investment relative to its current price. If a decline in value is considered other than temporary, the Company reduces the carrying value of the security and reports a realized loss on its statement of income.

Liquidity and Capital Resources

     Cash Flow. Cash flow provided from operating activities was $1.1 billion during the nine months ended September 30, 2006 and $1.4 billion in the comparable period of 2005. The decrease is primarily a result of higher cash transfers to the arbitrage trading account ($225 million in 2006 compared with $80 million in 2005) and higher income tax payments.

     The Company’s insurance subsidiaries’ principal sources of cash are premiums, investment income, service fees and proceeds from sales and maturities of portfolio investments. The principal uses of cash are payments for claims, taxes, operating expenses and dividends. The Company expects its insurance subsidiaries to fund the payment of losses with cash received from premiums, investment income and fees. The Company targets an average duration for its investment portfolio that is within one year of the average duration of its liabilities so that portions of its investment portfolio mature throughout the claim cycle and are available for the payment of claims if necessary. In the event operating cash flow and proceeds from maturities and prepayments of fixed income securities are not sufficient to fund claim payments and other cash requirements, the remainder of the Company’s cash and investments is available to pay claims and other obligations as they become due. The Company’s investment portfolio is highly liquid, with approximately 84% invested in cash, cash equivalents and marketable fixed income securities as of September 30, 2006. If the sale of fixed income securities were to become necessary, a realized gain or loss equal to the difference between the cost and sales price of securities sold would be recognized.

     Financing Activity. In June 2006, the Company repurchased 1.4 million shares of its common stock for $44.4 million. On November 1, 2006 the Board of Directors increased the Company’s repurchase authorization to permit the Company to repurchase up to 22.6 million shares.

     At September 30, 2006, the Company had senior notes, junior subordinated debentures and other debt outstanding with a carrying value of $1,321 million and a face amount of $1,337 million. The maturities of the outstanding debt are $89 million in 2008, $150 million in 2010, $200 million in 2013, $200 million in 2015, $150 million in 2019, $76 million in 2022, $12 million in 2023 and $460 million in 2045 (of which $210 million has been called and will be prepaid on December 15, 2006 and $250 million is prepayable in 2010). The Company repaid $100 million of 6.25% senior notes at their maturity in January 2006.

     As of September 30, 2006, the Company had repurchased preferred securities of the W. R. Berkley Capital Trust with an aggregate principal amount of $84 million and a carrying value of $83 million. The preferred securities, which are secured by the Company’s junior subordinated debentures, are reported as investments in fixed income securities on the accompanying balance sheet and have not been deducted from the outstanding debt amounts referred to in the preceding paragraph.

29

     On October 18, 2006 the Company announced that it will repay $210 million of junior subordinated debentures on December 15, 2006, contemporaneously with the redemption of $210 million of 8.197% trust preferred securities by the W. R. Berkley Capital Trust. This amount includes preferred securities already repurchased by the Company.

     At September 30, 2006, stockholders’ equity was $3.1 billion and total capitalization (stockholders’ equity, senior notes, junior subordinated debentures and other debt) was $4.4 billion. The percentage of the Company’s capital attributable to senior notes and other debt and junior subordinated debentures was 30% at September 30, 2006, compared with 36% at December 31, 2005.

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 its investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations.

     The duration of the investment portfolio decreased to 3.7 years at September 30, 2006 from 3.8 years at December 31, 2005. The overall market risk relating to the Company’s portfolio has remained similar to the risk at December 31, 2005.

Item 4. Controls and Procedures

     Disclosure 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.

     Changes in Internal Control over Financial Reporting. During the quarter ended September 30, 2006, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     The Company’s subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company’s estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations. However, adverse outcomes are possible and could negatively impact the Company’s financial condition and results of operations.

Item 1A. Risk Factors

     There have been no material changes from the risk factors previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2005.

30

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.

						Maximum number of
	Total				Total number of shares	shares that may
	number of		Average price		purchased as part of	yet be purchased
	shares		paid per		publicly announced plans	under the plans
	purchased		share		or programs	or programs (1)
July 2006		—		—	None		2,624,688
August 2006		—		—	None		2,624,688
September 2006		—		—	None		2,624,688

(1) Remaining shares available for repurchase under the Company’s repurchase authorization of 10,125,000 shares that was approved by the Board of Directors on November 10, 1998. In addition, on November 1, 2006 the Board of Directors increased the Company’s repurchase authorization to permit the Company to repurchase up to 22.6 million shares.

31

Item 6. Exhibits

     Number

(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.

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 3, 2006	/s/ William R. Berkley
	William R. Berkley
	Chairman of the Board and Chief Executive Officer
Date: November 3, 2006	/s/ Eugene G. Ballard
	Eugene G. Ballard
	Senior Vice President, Chief Financial Officer and Treasurer

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 3, 2006

/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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 3, 2006

/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, 2006 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 3, 2006

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.