-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, REJk8E6sExnimnohbKtZy5S1FD/FtXe0DoVcQWWUkdr0AHRXjIva9hntMOZjtYpK bsTufEZZxl1fUGRDYRcbJA== 0000950123-07-001642.txt : 20070209 0000950123-07-001642.hdr.sgml : 20070209 20070208215612 ACCESSION NUMBER: 0000950123-07-001642 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070208 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070209 DATE AS OF CHANGE: 20070208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKLEY W R CORP CENTRAL INDEX KEY: 0000011544 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 221867895 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15202 FILM NUMBER: 07595160 BUSINESS ADDRESS: STREET 1: 475 STEAMBOAT ROAD STREET 2: . CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036293000 MAIL ADDRESS: STREET 1: 475 STEAMBOAT ROAD STREET 2: . CITY: GREENWICH STATE: CT ZIP: 06830 8-K 1 y30245e8vk.txt FORM 8-K ================================================================================ AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2007 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 8, 2007 W. R. BERKLEY CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 1-15202 22-1867895 - ----------------------------- ---------------- ------------------ (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 475 STEAMBOAT ROAD, GREENWICH, CT 06830 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 629-3000 NOT APPLICABLE ------------------------------------------------------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ================================================================================ ITEM 2.02 RESULTS OF OPERATION AND FINANCIAL CONDITION. Reference is made to the press release of W. R. Berkley Corporation (the "Company") relating to the announcement of the Company's results of operations for the fourth quarter of 2006 and the year then ended. The press release was issued on February 8, 2007. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference. The information contained herein shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 99.1 Press Release, dated February 8, 2007 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. W. R. BERKLEY CORPORATION By: /s/ Eugene G. Ballard ------------------------------ Name: Eugene G. Ballard Title: Senior Vice President, Chief Financial Officer and Treasurer Date: February 8, 2007 EXHIBIT INDEX Exhibit: - -------- 99.1 Press Release dated February 8, 2007 EX-99.1 2 y30245exv99w1.txt EX-99.1: PRESS RELEASE EXHIBIT 99.1 W. R. BERKLEY CORPORATION NEWS 475 STEAMBOAT ROAD RELEASE GREENWICH, CONNECTICUT 06830 (203) 629-3000 FOR IMMEDIATE RELEASE CONTACT: Karen A. Horvath Vice President - External Financial Communications (203)629-3000 W. R. BERKLEY CORPORATION REPORTS FOURTH QUARTER RESULTS NET INCOME UP 18% TO $198 MILLION SEVENTEENTH CONSECUTIVE QUARTER THAT RETURN ON EQUITY EXCEEDS 20% GREENWICH, CT, FEBRUARY 8, 2007 -- W. R. BERKLEY CORPORATION (NYSE: BER) today reported net income for the fourth quarter of 2006 of $198 million, or 98 cents per share, an 18% increase from $167 million, or 83 cents per share, for the fourth quarter of 2005. Net operating income for the fourth quarter of 2006 increased 17% to $194 million, or 96 cents per share, compared with $165 million, or 82 cents per share, for the corresponding quarter of 2005. Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses. All per share amounts in this release reflect the 3-for-2 common stock split effected on April 4, 2006. Summary Financial Data (Amounts in thousands, except per share data)
Fourth Quarter Full Year ------------------------- ------------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Gross premiums written (1) $1,218,542 $1,255,967 $5,276,914 $5,087,983 Net premiums written (1) 1,113,571 1,150,267 4,818,993 4,604,574 Net income 198,056 167,424 699,518 544,892 Net income per diluted share 0.98 0.83 3.46 2.72 Net operating income 193,666 165,294 692,404 533,889 Net operating income per diluted share 0.96 0.82 3.43 2.66
(1) In the fourth quarter of 2005, the Company developed sufficient information to begin reporting earned but unbilled audit premiums. Premiums written include earned but unbilled audit premiums of $3 million in the fourth quarter of 2006 compared with $57 million in the fourth quarter of 2005. W. R. Berkley Corporation Page 2 Full year 2006 highlights included: - Return on equity was 27.2%. - GAAP combined ratio was 88.0%. - Net investment income grew 45% to $586 million. - Net premiums written increased 5% to $4.8 billion. - Paid loss ratio was 38%. - Book value per share increased 28.9%. Commenting on the Company's activities, William R. Berkley, chairman and chief executive officer, said: "2006 was another excellent year. We achieved a full-year return on equity in excess of 27%, marking 17 consecutive quarters that the Company's ROE has exceeded 20%. Cash flow for 2006 was nearly $1.8 billion and our investment income grew to a record $586 million. Our paid loss ratio for the year was once again under 40%, while total loss reserves increased by over $1 billion. "While our growth has moderated somewhat, we expect the revenue contribution from our new ventures to be more significant in 2007. Although the current accident year margins are likely to be impacted somewhat by the competitive environment, we are confident that the margins available to us will continue to be excellent. With an increasing contribution from investment income, we remain optimistic that we will achieve a return on equity in excess of 20% in 2007. "Managing an insurance enterprise means more than operational oversight. It also demands well-considered capital management, something we have always done. We will continue to use our capital and manage our leverage in ways that reflect the current and anticipated needs of the enterprise. "We have an outstanding team at W. R. Berkley and remain confident in the ability of our people to continue to deliver outstanding risk adjusted returns," Mr. Berkley concluded. W. R. Berkley Corporation Page 3 Webcast Conference Call The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Friday, February 9, 2007 at 8:30 a.m. eastern time. The conference call will be webcast live on the Company's website at www.wrberkley.com. A recording of the call will be available on the Company's website approximately two hours after the end of the conference call. About W. R. Berkley Corporation Founded in 1967, 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 segments of the property casualty insurance business: specialty insurance, regional property casualty insurance, alternative markets, reinsurance and international. Forward Looking Information 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 2007 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 income 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 2007 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. Any projections of growth in the Company's net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. # # # W. R. Berkley Corporation Page 4 Consolidated Financial Summary (Amounts in thousands, except per share data)
Fourth Quarter Full Year ---------------------------- ---------------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Revenues: Net premiums written $ 1,113,571 $ 1,150,267 $ 4,818,993 $ 4,604,574 Change in unearned premiums 52,137 47,648 (126,371) (143,639) ----------- ----------- ----------- ----------- Premiums earned 1,165,708 1,197,915 4,692,622 4,460,935 Net investment income 163,827 113,280 586,175 403,962 Service fees 24,630 26,672 104,812 110,697 Realized investment gains 5,912 3,324 9,648 17,209 Other income 366 2,699 1,574 4,036 ----------- ----------- ----------- ----------- Total revenues 1,360,443 1,343,890 5,394,831 4,996,839 ----------- ----------- ----------- ----------- Expenses: Losses and loss expenses 689,249 723,088 2,864,498 2,781,802 Other operating expenses 366,275 358,207 1,449,166 1,358,574 Interest expense 22,488 24,952 92,522 85,926 ----------- ----------- ----------- ----------- Total expenses 1,078,012 1,106,247 4,406,186 4,226,302 ----------- ----------- ----------- ----------- Income before income taxes and minority interest 282,431 237,643 988,645 770,537 Income tax expense (83,147) (69,157) (286,398) (222,521) Minority interest (1,228) (1,062) (2,729) (3,124) ----------- ----------- ----------- ----------- Net income $ 198,056 $ 167,424 $ 699,518 $ 544,892 =========== =========== =========== =========== Net income per share: (1) Basic $ 1.03 $ 0.88 $ 3.65 $ 2.86 =========== =========== =========== =========== Diluted $ 0.98 $ 0.83 $ 3.46 $ 2.72 =========== =========== =========== =========== Average shares outstanding: (1) Basic 191,745 191,183 191,809 190,533 Diluted 201,557 201,453 201,961 200,426
(1) Per share amounts reflect the 3-for-2 common stock split effected on April 4, 2006. W. R. Berkley Corporation Page 5 Operating Results by Segment (Amounts in thousands, except ratios (1))
Fourth Quarter Full Year -------------------------- -------------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Specialty: (2)(3) Gross premiums written $ 467,560 $ 515,734 $1,918,521 $1,932,821 Net premiums written 438,139 485,834 1,814,479 1,827,865 Premiums earned 444,597 477,991 1,752,507 1,682,193 Pre-tax income 140,389 97,918 479,105 345,896 Loss ratio 56.4% 62.1% 59.1% 62.4% Expense ratio 24.6% 25.2% 25.0% 25.1% GAAP combined ratio 81.0% 87.3% 84.1% 87.5% Regional: (2) Gross premiums written $ 328,811 $ 322,920 $1,415,311 $1,384,574 Net premiums written 291,597 286,318 1,235,302 1,196,487 Premiums earned 308,074 302,588 1,205,912 1,173,174 Pre-tax income 51,796 59,302 201,417 216,495 Loss ratio 60.3% 54.7% 59.7% 55.8% Expense ratio 30.5% 30.9% 30.6% 30.6% GAAP combined ratio 90.8% 85.6% 90.3% 86.4% Alternative Markets: (3) Gross premiums written $ 140,715 $ 158,157 $ 747,680 $ 781,411 Net premiums written 119,569 141,844 651,255 669,774 Premiums earned 167,157 181,178 658,805 663,478 Pre-tax income 73,081 80,903 291,416 238,462 Loss ratio 55.7% 51.4% 53.5% 59.4% Expense ratio 21.4% 18.4% 22.1% 20.1% GAAP combined ratio 77.1% 69.8% 75.6% 79.5% Reinsurance: (2) Gross premiums written $ 201,717 $ 180,559 $ 940,797 $ 770,781 Net premiums written 192,840 167,206 892,769 719,540 Premiums earned 192,834 187,934 859,411 754,097 Pre-tax income 40,137 24,283 135,424 63,606 Loss ratio 66.8% 70.9% 72.0% 74.1% Expense ratio 31.6% 30.1% 27.8% 30.1% GAAP combined ratio 98.4% 101.0% 99.8% 104.2% International: Gross premiums written $ 79,739 $ 78,597 $ 254,605 $ 218,396 Net premiums written 71,426 69,065 225,188 190,908 Premiums earned 53,046 48,224 215,987 187,993 Pre-tax income 12,676 5,274 34,447 20,890 Loss ratio 57.3% 71.6% 64.2% 66.5% Expense ratio 32.3% 28.1% 32.0% 29.6% GAAP combined ratio 89.6% 99.7% 96.2% 96.1%
(Continued) W. R. Berkley Corporation Page 6 Operating Results by Segment (continued) (Amounts in thousands, except ratios (1))
Fourth Quarter Full Year ----------------------------- ----------------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Corporate and Eliminations: Realized investment gains $ 5,912 $ 3,324 $ 9,648 $ 17,209 Interest and other, net (41,560) (33,361) (162,812) (132,021) Pre-tax loss (35,648) (30,037) (153,164) (114,812) Total: Gross premiums written $ 1,218,542 $ 1,255,967 $ 5,276,914 $ 5,087,983 Net premiums written 1,113,571 1,150,267 4,818,993 4,604,574 Premiums earned 1,165,708 1,197,915 4,692,622 4,460,935 Pre-tax income 282,431 237,643 988,645 770,537 Loss ratio 59.1% 60.4% 61.0% 62.4% Expense ratio 27.4% 26.6% 27.0% 26.9% GAAP combined ratio 86.5% 87.0% 88.0% 89.3%
(1) Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses. For the international segment, the loss and expense ratios do not include life insurance business. GAAP combined ratio is the sum of the loss ratio and the expense ratio. (2) Fourth quarter weather-related losses were $8 million in 2006 (all in the regional segment) compared with $26 million in 2005 ($5 million for regional, $8 million for specialty and $13 million for reinsurance). Full year weather-related losses were $39 million in 2006 (all in the regional segment) compared with $99 million in 2005 ($35 million for regional, $16 million for specialty and $48 million for reinsurance). (3) In 2005, the Company developed sufficient information to begin reporting earned but unbilled audit premiums. For specialty, net premiums written included estimated earned but unbilled audit premiums of $1 million and $18 million in the fourth quarter and full year of 2006, respectively, compared with $45 million in the fourth quarter and full year of 2005. For alternative markets, net premiums written included estimated earned but unbilled audit premiums of $2 million and $4 million in the fourth quarter and full year of 2006, respectively, compared with $12 million in the fourth quarter and full year of 2005. W. R. Berkley Corporation Page 7 Selected Balance Sheet Information (Amounts in thousands, except per share data)
December 31, December 31, 2006 2005 ----------- ----------- Total investments (1) $12,012,298 $10,378,250 Total assets 15,656,489 13,896,287 Reserves for losses and loss expenses 7,784,269 6,711,760 Senior notes and other debt 869,187 967,818 Junior subordinated debentures 241,953 450,634 Stockholders' equity (2) 3,335,159 2,567,077 Shares outstanding 192,772 191,265 Stockholders' equity per share 17.30 13.42
(1) Total investments include cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. (2) Stockholders' equity includes after-tax unrealized gains from investments and currency translation adjustments of $126 million and $25 million as of December 31, 2006 and December 31, 2005, respectively. W. R. Berkley Corporation Page 8 Supplemental Information (Amounts in thousands)
Fourth Quarter Full Year ---------------------------- ----------------------------- Reconciliation of net operating income to net income: 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Net operating income (1) $ 193,666 $ 165,294 $ 692,404 $ 533,889 Realized investment gains, net of taxes 4,390 2,130 7,114 11,003 ----------- ----------- ----------- ----------- Net income $ 198,056 $ 167,424 $ 699,518 $ 544,892 =========== =========== =========== =========== Return on equity: Net Income (2) 30.9% 31.7% 27.2% 25.8% Net operating income (2) 30.2% 31.3% 27.0% 25.3% Cash flow: Cash flow from operations before cash transfers to/from trading account (3) $ 452,610 $ 369,400 $ 1,789,013 $ 1,814,386 Trading account transfers -- -- (225,000) (80,027) ----------- ----------- ----------- ----------- Cash flow from operations $ 452,610 $ 369,400 $ 1,564,013 $ 1,734,359 =========== =========== =========== ===========
(1) Net operating income is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses. Management believes that excluding realized investment gains and losses, which result primarily from changes in general economic conditions, provides a useful indicator of trends in the Company's underlying operations. (2) Return on equity represents net income and net operating income expressed on an annualized basis as a percentage of beginning of year stockholders' equity. (3) Cash flow before trading account transfers is a non-GAAP financial measure that excludes cash contributions to and withdrawals from the arbitrage trading account. Management believes that cash transfers to and withdrawals from the arbitrage trading account are the result of changes in investment allocations and that excluding such transfers provides a useful measure of the Company's cash flow. Reclassifications have been made to the cash flow information for the fourth quarter and full year of 2005 to conform to the presentation of the 2006 information. -----END PRIVACY-ENHANCED MESSAGE-----