FORM 10-Q

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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 March 31, 2009


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the Transition Period from to .

Commission File Number 1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		22-1867895

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

475 Steamboat Road, Greenwich, Connecticut		06830

(Address of principal executive offices)		(Zip Code)

(203) 629-3000

(Registrant’s telephone number, including area code)

None

Former name, former address and former fiscal year, if changed since last report.

Indicate by check mark whether the registrant (1) 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 has submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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


Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

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 May 1, 2009: 159,978,585.

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
EX-31.2
EX-32.1

Part I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

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


	March 31,			December 31,
	2009			2008
	(Unaudited)
Assets
Investments:
Fixed maturity securities	$	10,107,220		$	9,689,896
Equity securities available for sale		327,263			383,750
Arbitrage trading account		216,170			119,485
Investment in arbitrage funds		80,040			73,435
Investment funds		388,160			495,533
Loans receivable		385,650			381,182

Total Investments		11,504,503			11,143,281

Cash and cash equivalents		826,067			1,134,835
Premiums and fees receivable		1,127,620			1,056,096
Due from reinsurers		958,503			931,115
Accrued investment income		114,413			122,461
Prepaid reinsurance premiums		191,228			181,462
Deferred policy acquisition costs		395,756			394,807
Real estate, furniture and equipment		253,366			260,522
Deferred Federal and foreign income taxes		348,342			329,417
Goodwill		106,292			107,564
Trading account receivable from brokers and clearing organizations		124,977			128,883
Due from broker		71,764			138,411
Current federal and foreign income taxes		53,059			76,491
Other assets		117,418			115,813

Total Assets	$	16,193,308		$	16,121,158


Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses	$	9,041,703		$	8,999,596
Unearned premiums		2,015,057			1,966,150
Due to reinsurers		115,477			114,974
Trading account securities sold but not yet purchased		44,078			23,050
Other liabilities		625,418			694,255
Junior subordinated debentures		249,640			249,584
Senior notes and other debt		1,021,978			1,021,869

Total liabilities		13,113,351			13,069,478


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, 159,968,092 and 161,467,131 shares		47,024			47,024
Additional paid-in capital		924,915			920,241
Retained earnings		3,484,587			3,514,531
Accumulated other comprehensive loss		(146,148	)		(228,959	)
Treasury stock, at cost, 75,149,826 and 73,650,787 shares		(1,235,773	)		(1,206,518	)

Total common stockholders’ equity		3,074,605			3,046,319
Noncontrolling interest		5,352			5,361

Total equity		3,079,957			3,051,680

Total liabilities and equity	$	16,193,308		$	16,121,158

See accompanying notes to interim consolidated financial statements.

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


	For the Three Months Ended March 31,
	2009			2008

Revenues:
Net premiums written	$	1,023,472		$	1,157,565
Change in net unearned premiums		(44,264	)		(33,256	)

Net premiums earned		979,208			1,124,309
Net investment income		138,216			138,771
Income (loss) from investment funds		(115,074	)		5,726
Insurance service fees		26,583			27,112
Realized investment gains (losses)		(96,808	)		54,026
Revenues from wholly-owned investees		30,903			24,888
Other income		593			372

Total revenues		963,621			1,375,204


Operating costs and expenses:
Losses and loss expenses		610,445			683,041
Other operating costs and expenses		357,347			380,173
Expenses from wholly-owned investees		29,954			24,935
Interest expense		20,224			22,744

Total expenses		1,017,970			1,110,893


Income (loss) before income taxes		(54,349	)		264,311
Income tax (expense) benefit		34,065			(75,706	)

Net income (loss) before noncontrolling interests		(20,284	)		188,605
Noncontrolling interests		(62	)		(167	)

Net income (loss) attributable to common shareholders	$	(20,346	)	$	188,438


Net income (loss) per share:
Basic	$	(0.13	)	$	1.07

Diluted	$	(0.13	)	$	1.03

See accompanying notes to interim consolidated financial statements.

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


	For The Three Months
	Ended March 31,
	2009			2008

Common stock:
Beginning and end of period	$	47,024		$	47,024


Additional paid in capital:
Beginning of period	$	920,241		$	907,016
Stock options exercised, including tax benefits		(1,446	)		(3,153	)
Restricted stock units expensed		6,117			5,477
Stock options expensed		3			53

End of period	$	924,915		$	909,393


Retained earnings:
Beginning of period	$	3,514,531		$	3,248,762
Net income (loss)		(20,346	)		188,438
Dividends		(9,598	)		(8,598	)

End of period	$	3,484,587		$	3,428,602


Accumulated other comprehensive income (loss), net of tax:
Unrealized investment gains (losses):
Beginning of period	$	(142,216	)	$	52,497
Net change in period		90,192			(17,421	)

End of period		(52,024	)		35,076


Currency translation adjustments:
Beginning of period	$	(72,475	)	$	18,060
Net change in period		(7,872	)		(952	)

End of period		(80,347	)		17,108


Net pension asset:
Beginning of period	$	(14,268	)	$	(17,356	)
Net change in period		491			493

End of period		(13,777	)		(16,863	)


Total accumulated other comprehensive income (loss):	$	(146,148	)	$	35,321


Treasury stock:
Beginning of period	$	(1,206,518	)	$	(686,228	)
Stock repurchased		(31,842	)		(294,915	)
Stock options exercised		2,587			9,543

End of period	$	(1,235,773	)	$	(971,600	)


Noncontrolling interest
Beginning of period	$	5,361		$	35,496
Purchase of subsidiary shares from noncontrolling interest		—			(30,444	)
Net income		62			167
Other comprehensive loss, net of tax		(71	)		(49	)

End of period	$	5,352		$	5,170

See accompanying notes to interim consolidated financial statements.

W. R. Berkley Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)


	For the Three Months
	Ended March 31,
	2009			2008

Cash from operating activities:
Net income (loss)	$	(20,346	)	$	188,438
Adjustments to reconcile net income (loss) to net cash from operating activities:
Realized investment (gains) losses		96,808			(54,026	)
Depreciation and amortization		23,259			37,065
Noncontrolling interest		62			167
Equity in undistributed (earnings) losses of investment funds		115,283			(4,589	)
Stock incentive plans		6,144			5,567
Change in:
Securities trading account		(96,685	)		(4,458	)
Investment in arbitrage funds		(6,605	)		(1,695	)
Trading account receivable from brokers and clearing organizations		3,906			(17,779	)
Trading account securities sold but not yet purchased		21,028			21,092
Premiums and fees receivable		(74,900	)		(77,742	)
Due from reinsurers		(27,765	)		(8,342	)
Accrued investment income		7,845			7,248
Prepaid reinsurance premiums		(10,184	)		(20,893	)
Deferred policy acquisition costs		(1,747	)		(6,617	)
Deferred income taxes		(66,755	)		11,135
Other assets		(834	)		(11,893	)
Reserves for losses and loss expenses		49,985			156,196
Unearned premiums		52,321			55,978
Due to reinsurers		1,313			(643	)
Other liabilities		(50,573	)		(60,849	)

Net cash from operating activities		21,560			213,360

Cash used in investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities		570,940			892,344
Equity securities		15,505			8,232
Distributions from investment funds		1,686			175,278
Proceeds from maturities and prepayments of fixed maturity securities		323,879			415,456
Cost of purchases, excluding trading account:
Fixed maturity securities		(1,228,381	)		(1,463,993	)
Equity securities		(17,506	)		(30,282	)
Contributions to investment funds		(16,030	)		(56,291	)
Change in loans receivable		(3,968	)		(388	)
Change in balances due to/(from) security brokers		66,647			(36,086	)
Net additions to real estate, furniture and equipment		(4,236	)		(6,445	)
Other		(5	)		(33,980	)

Net cash used in investing activities		(291,469	)		(136,155	)

Cash used in financing activities:
Purchase of common treasury shares		(31,842	)		(294,915	)
Change in repayment of debt		(167	)		(12,397	)
Change in bank deposits		10,922			5,414
Advances from Federal Home Loan Bank		(2,785	)		500
Net proceeds from stock options exercised		971			4,515
Cash dividends to common stockholders		(9,598	)		(17,611	)
Other, net		(90	)		152

Net cash used in financing activities		(32,589	)		(314,342	)


Impact on cash due to foreign exchange rates		(6,270	)		3,347

Net decrease in cash and cash equivalents		(308,768	)		(233,790	)
Cash and cash equivalents at beginning of year		1,134,835			951,863

Cash and cash equivalents at end of period	$	826,067		$	718,073


Supplemental disclosure of cash flow information:
Interest paid	$	29,829		$	30,010

Federal and foreign income taxes paid, net	$	8,934		$	9,284

See accompanying notes to consolidated financial statements.

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, 2008. Reclassifications have been made in the 2008 financial statements as originally reported to conform them to the presentation of the 2009 financial statements.

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

The Company presents both basic and diluted earnings (loss) per share amounts. Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share 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 earnings (loss) per share and, accordingly, are excluded from the calculation.

The weighted average number of common shares used in the computation of basic and diluted earnings (loss) per share was as follows (amounts in thousands):


	For the Three Months
	Ended March 31,
	2009		2008
Basic		161,090		176,699
Diluted (1)		161,090		183,804


(1)		For the three months ended March 31, 2009, the anti-dilutive effects of 7,001 potential common shares outstanding were excluded from the outstanding diluted shares due to the first quarter net loss.

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.

The Company adopted FASB statement 160 (“FAS 160”), “Non-controlling Interests in Consolidated Financial Statements” effective January 1, 2009. FAS 160 requires that noncontrolling (minority) interests in a subsidiary be reported as equity in the consolidated financial statements. The presentation requirements of FAS 160 were applied retrospectively to the 2008 financial statements. The effect of the adoption of FAS 160 was to increase total equity as of December 31, 2008 by $5 million.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2/124-2”). FSP FAS 115-2/124-2 requires entities to separate an other-than-temporary impairment of a debt security into two components when there are credit related losses associated with the impaired debt security for which management asserts that it does not have the intent to sell the security, and it is more likely than not that it will not be required to sell the security before recovery of its cost basis. The amount of the other-than-temporary impairment related to a credit loss is recognized in operations, and the amount of the other-than-temporary impairment related to other factors is recorded in other comprehensive loss. FSP FAS 115-2/124-2 is effective for periods ending after June 15, 2009. The Company does not expect the adoption of FAS 115-2/124-2 to have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are Not Orderly” (“FSP FAS 157-4”). Under FSP FAS 157-4, if an entity determines that there has been a significant decrease in the volume and level of activity for the asset or the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), then transactions or quoted prices may not accurately reflect fair value. In addition, if there is evidence that the transaction for the asset or liability is not orderly, the entity shall place little, if any weight on that transaction price as an indicator of fair value. FSP FAS 157-4 is effective for periods ending after June 15, 2009. The Company does not expect the adoption of FAS 157-4 to have a material impact on the Company’s financial condition or results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 require disclosures about fair value of financial instruments in interim and annual financial statements. FSP FAS 107-1 and APB 28-1 is effective for periods ending after June 15, 2009. The Company does not expect the adoption of FAS 107-1 and APB 28-1 to have a material impact on the Company’s financial condition or results of operations.

2. COMPREHENSIVE INCOME

The following is a reconciliation of comprehensive income:


	For the Three Months
	Ended March 31,
(dollars in thousands)	2009			2008

Net income (loss) before noncontrolling interest	$	(20,284	)	$	188,605

Other comprehensive income (loss):
Unrealized holding gains on investment securities arising during the period, net of taxes		27,348			17,691
Reclassification adjustment for realized gains (losses) included in net income (loss), net of taxes		62,844			(35,112	)
Change in currency translation adjustment		(7,872	)		(952	)
Change in unrecognized pension obligation, net of income taxes		491			493

Other comprehensive income (loss)		82,811			(17,880	)


Comprehensive income	$	62,527		$	170,725


Comprehensive income (loss) attributable to the noncontrolling interest		(9	)		118

Comprehensive income attributable to common shareholders	$	62,518		$	170,843

3. INVESTMENTS

At March 31, 2009 and December 31, 2008, investments in fixed maturity securities and equity securities available for sale were as follows (dollars in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
March 31, 2009
Fixed maturity securities
Held to maturity	$	123,623	$	6,080	$	(829	)	$	128,874
Available for sale		9,978,519		299,388		(294,310	)		9,983,597
Equity securities
Common stocks		40,913		45,142		(19,429	)		66,626
Preferred stocks		355,788		335		(95,486	)		260,637

Total	$	10,498,843	$	350,945	$	(410,054	)	$	10,439,734


December 31, 2008
Fixed maturity securities
Held to maturity	$	123,908	$	5,433	$	(3,693	)	$	125,648
Available for sale		9,717,151		232,945		(384,108	)		9,565,988
Equity securities
Common stocks		39,343		49,333		(7,833	)		80,843
Preferred stocks		399,451		95		(96,639	)		302,907

Total	$	10,279,853	$	287,806	$	(492,273	)	$	10,075,386

4. SECURITIES IN AN UNREALIZED LOSS POSITION

The following table summarizes all securities in an unrealized loss position at March 31, 2009 and December 31, 2008 by the length of time those securities have been continuously in an unrealized loss position (dollars in thousands):


	Less Than 12 Months				12 Months or Greater
			Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses

March 31, 2009
U.S. government and agency	$	39,933	$	768	$	17,225	$	1,084
State and municipal		596,388		28,348		651,675		64,099
Mortgage-backed securities		214,245		29,044		263,461		70,919
Corporate		586,888		30,506		270,244		65,635
Foreign		18,504		4,736		—		—

Fixed maturity securities		1,455,958		93,402		1,202,605		201,737
Common stocks		19,841		19,429		—		—
Preferred stocks		42,904		27,096		111,666		68,390

Total	$	1,518,703	$	139,927	$	1,314,271	$	270,127


December 31, 2008
U.S. government and agency	$	25,031	$	3,494	$	8,197	$	212
State and municipal		1,081,558		65,944		485,805		74,500
Mortgage-backed securities		327,563		57,032		211,762		46,766
Corporate		377,313		83,277		228,738		53,055
Foreign		17,519		3,521		—		—

Fixed maturity securities		1,828,984		213,268		934,502		174,533
Common Stocks		5,952		7,833		—		—
Preferred stocks		123,930		44,062		109,103		52,577

Total	$	1,958,866	$	265,163	$	1,043,605	$	227,110

Fixed Maturity Securities - In determining whether declines in fair values of fixed maturity securities are other than temporary, the Company assesses the issuer’s ability to continue to meet its contractual payment obligations as they become due and whether the Company has the ability and intent to hold the investment until it recovers or matures. The Company’s assessment of its intent to hold an investment until it recovers or matures 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. Additionally, for certain securitized financial assets with contractual cash flows (including asset-backed securities), the Company updates its best estimate of the present value of expected cash flows over the life of the security. If management determines that the fair value of the securitized financial asset and the present value of the asset’s cash flows estimated at the current financial reporting date are less than the present value of the estimated cash flows at the date of purchase, an other-than–temporary impairment is recognized and the securitized financial asset is written down to fair value.

At March 31, 2009, there were 40 fixed maturity securities for which unrealized losses were 20% or greater than amortized cost. Those securities had an aggregate unrealized loss of $164 million. The Company has evaluated these securities and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. The Company does not consider these securities to be other than temporarily impaired.

Perpetual Preferred Securities - In assessing other than temporary impairments of perpetual preferred securities, the Company applies an impairment model similar to that used for a fixed maturity security provided they are of high quality and there has been no evidence of deterioration in credit of the issuer. Otherwise, impairment tests for perpetual preferred securities are similar to those used for common stock.

At March 31, there were 44 securities for which unrealized losses were 20% or greater than amortized cost. Those securities, which had an aggregate unrealized loss of $92 million, are primarily investment grade securities issued by banks, insurers and REITs. The Company has the ability and intent to hold these securities at least until the investment impairment is recovered. The Company believes these unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors and does not consider these securities to be other than temporarily impaired.

Common Stock - In determining whether declines in fair values of common stock are other than temporary, management assesses (1) the severity and duration of the impairment, (2) the historic and implied volatility of the security, (3) recoveries or additional declines in fair value subsequent to the balance sheet date, (4) the financial condition and near-term prospects of the issuer, (5) whether the market decline was affected by macroeconomic conditions or by specific information pertaining to an individual security and (6) the length of the forecasted recovery period.

At March 31, 2009, the Company owned common stock in four companies with an aggregate fair value of $20 million and an aggregate unrealized loss of $19 million. As of March 31, 2009, these investments had been in an unrealized loss position for less than six months. The Company does not consider any of these stocks to be other than temporarily impaired. There were no other common stocks in an unrealized loss position at March 31, 2009.

Because of changing economic and market conditions affecting issuers of debt and equity securities and the performance of the underlying collateral affecting certain classes of assets, it is reasonably possible that we will recognize other-than-temporary impairments in the future.

5. FAIR VALUE MEASUREMENTS

The Company’s fixed income and equity securities available for sale and its trading account securities are carried at fair value following the guidance in Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). The statement defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” FAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available.

Because many fixed income securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities, securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial data, projections and business developments of the issuer and other relevant information.

The following table presents the assets and liabilities measured at fair value on a recurring basis as of March 31, 2009 and December 31, 2008 by level (dollars in thousands):


	Total		Level 1		Level 2		Level 3
March 31, 2009
Assets:
Fixed maturity securities available for sale	$	9,983,597	$	—	$	9,845,049	$	138,548
Equity securities available for sale		327,263		12,598		207,629		107,036
Arbitrage trading account		216,170		215,817		—		353

Total assets	$	10,527,030	$	228,415	$	10,052,678	$	245,937


Liabilities:
Securities sold but not yet purchased	$	44,078	$	44,078	$	—	$	—

December 31, 2008
Assets:
Fixed maturity securities available for sale	$	9,565,988	$	—	$	9,417,349	$	148,639
Equity securities available for sale		383,750		19,829		254,701		109,220
Arbitrage trading account		119,485		115,723		3,409		353

Total assets	$	10,069,223	$	135,552	$	9,675,459	$	258,212


Liabilities:
Securities sold but not yet purchased	$	23,050	$	23,050	$	—	$	—

The following table summarizes changes in Level 3 assets for the three months ended March 31, 2009 and 2008 (dollars in thousands):


							Equity
							Securities			Arbitrage
				Fixed			Available			Trading
	Total			Maturities			for Sale			Account
For the three months ended March 31, 2009
Balance as of December 31, 2008	$	258,212		$	148,639		$	109,220		$	353
Realized and unrealized gains and losses:
Included in earnings (loss)		(13	)		(13	)		—			—
Included in other comprehensive income		(13,478	)		(8,035	)		(5,443	)		—
Purchases, sales and maturities, net		1,216			(2,043	)		3,259			—


Balance as of March 31, 2009	$	245,937		$	138,548		$	107,036		$	353


For the three months ended March 31, 2008
Balance as of December 31, 2007	$	90,918		$	23,725		$	62,911		$	4,282
Realized and unrealized gains and losses:
Included in earnings		(4,000	)		(4,000	)		—			—
Included in other comprehensive income		5,266			—			5,266			—
Purchases, sales and maturities, net		13,045			—			13,045			—


Balance as of March 31, 2008	$	105,229		$	19,725		$	81,222		$	4,282

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 due from reinsurers are reported net of reserves for uncollectible reinsurance of $5.8 million and $4.9 million as of March 31, 2009 and December 31, 2008, respectively. The following amounts arising under reinsurance ceded contracts have been deducted in arriving at the amounts reflected in the statements of operations (dollars in thousands):


	For the Three Months
	Ended March 31,
	2009		2008
Ceded premiums earned	$	115,306	$	108,396
Ceded losses incurred	$	77,283	$	53,391

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 primary lines of business are premises operations, professional liability, commercial automobile, products 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 44 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 organized geographically based on markets served.

Our alternative markets segment specializes 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 segment specializes 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 personal and commercial property casualty insurance in South America and commercial insurance and reinsurance in the United Kingdom, Continental Europe, Australia and Hong Kong.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Income tax expense and benefits are calculated based upon the Company’s overall effective tax rate.

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


	Revenues
			Investment								Pre-tax			Net
	Earned		Income and								Income			Income
(dollars in thousands)	Premiums		Funds		Other			Total			(Loss)			(Loss)

For the three months ended March 31, 2009:
Specialty	$	357,928	$	3,985	$	894		$	362,807		$	27,744		$	22,131
Regional		285,616		1,737		1,081			288,434			18,365			13,723
Alternative markets		151,993		5,180		24,611			181,784			30,434			25,108
Reinsurance		105,623		2,346		—			107,969			2,999			4,362
International		78,048		8,001		—			86,049			6,168			3,579
Corporate and eliminations (1)		—		1,893		31,493			33,386			(43,251	)		(26,405	)
Realized investment losses		—		—		(96,808	)		(96,808	)		(96,808	)		(62,844	)


Consolidated	$	979,208	$	23,142	$	(38,729	)	$	963,621		$	(54,349	)	$	(20,346	)


For the three months ended March 31, 2008:
Specialty	$	429,336	$	50,993	$	1,010		$	481,339		$	112,786		$	79,175
Regional		311,269		21,563		—			332,832			37,804			27,052
Alternative markets		155,209		27,925		26,105			209,239			60,982			42,850
Reinsurance		152,434		31,297		—			183,731			33,289			25,237
International		76,061		9,411		—			85,472			10,646			6,135
Corporate and eliminations (1)		—		3,308		25,257			28,565			(45,222	)		(27,123	)
Realized investment gains		—		—		54,026			54,026			54,026			35,112


Consolidated	$	1,124,309	$	144,497	$	106,398		$	1,375,204		$	264,311		$	188,438


(1)		Corporate and eliminations represent corporate revenues and expenses and other items that are not allocated to business segments.

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


	March 31,			December 31,
	2009			2008
Specialty	$	5,652,781		$	5,594,747
Regional		2,636,543			2,652,459
Alternative markets		3,592,105			3,463,508
Reinsurance		4,232,878			4,231,514
International		897,481			879,271
Corporate and eliminations		(818,480	)		(700,341	)

Consolidated	$	16,193,308		$	16,121,158

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


	For the Three Months
	Ended March 31,
	2009		2008

Premises operations	$	125,100	$	166,380
Commercial automobile		54,392		67,123
Property		48,282		55,477
Products liability		39,081		52,179
Professional liability		40,426		38,871
Other		50,647		49,306

Specialty		357,928		429,336


Commercial multiple peril		105,176		115,852
Commercial automobile		83,336		90,957
Workers’ compensation		57,946		63,930
Other		39,158		40,530

Regional		285,616		311,269


Excess workers’ compensation		66,448		69,754
Primary workers’ compensation		60,336		62,251
Other		25,209		23,204

Alternative markets		151,993		155,209


Casualty		91,162		127,857
Property		14,461		24,577

Reinsurance		105,623		152,434


International		78,048		76,061

Total	$	979,208	$	1,124,309

8. 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.

SAFE HARBOR STATEMENT

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking words such as ‘believes,” “expects,” “potential,” “continued,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” or the negative version of those words or other comparable words. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2009 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 insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; the potential impact of the current conditions in the financial markets and the ongoing economic downturn on our results and financial condition, particularly if such conditions continue; the potential impact of current legislative, regulatory, accounting and other initiatives taken or which may be taken in response to the current conditions in the financial markets and the ongoing economic downturn; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, merger arbitrage and private equity investments; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; the impact of significant and increasing 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 Program Reauthorization Act of 2007; the ability of our reinsurers to pay reinsurance recoverables owed to us; the impact of current conditions in the financial markets and the ongoing economic downturn on our ability to raise debt or equity capital if needed; foreign currency and political risks relating to our international operations; other 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 or our insurance company subsidiaries by rating 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 (“SEC”). These risks and uncertainties could cause our actual results for the year 2009 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. Our future financial performance is dependent upon factors discussed in our Annual Report on Form 10-K, elsewhere in this Form 10-Q and our other SEC filings. Forward-looking statements speak only as of the date on which they are made.


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.

Available insurance capacity has increased in recent years, increasing competition in the industry and putting downward pressure on pricing and terms and conditions. In 2007, we saw increased competition and decreased prices across most of our business segments. This trend of increased competition and decreased prices continued in 2008. These trends moderated somewhat in the first quarter of 2009 and we expect continued improvement over the balance of the year. Price changes are reflected in our results over time as premiums are earned.

As a result of the current conditions in the financial markets, certain of the largest U.S. insurers have been significantly impacted by, among other things, investment losses, lower credit ratings and reduced policyholders’ surplus. This may lead to an increased emphasis on stability and credit ratings of insurers, reduced insurance capacity and less competition in the industry, putting upward pressure on pricing and terms and conditions.

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 those of financial institutions, merger arbitrage, private equity investments and real estate securities.

Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and investments. 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.

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.

The risk and complexity of estimating loss reserves have increased under the current financial market conditions. It is especially difficult to estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Whereas a slowing economy would generally lead to lower inflation or even deflation, increased government spending would generally lead to higher inflation. A change in our assumptions regarding inflation would result in reserve increases or decreases that would be reflected in our operations in periods in which such 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 external and internal events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, 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.

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 changes, 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 IBNR is 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 often 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, 2008, initial loss estimates for accident years 1999 through 2007 were decreased by an average of 3% for lines with short reporting lags and by an average of 12% for lines with long reporting lags. For the latest accident year ended December 31, 2008, initial loss estimates were $1.7 billion for lines with short reporting lags and $1.1 billion for lines with long reporting lags.

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. 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 2008 (dollars in thousands):


			Frequency (+/-)
Severity (+/-)			1%		5%		10%

	1	%		56,881		171,208		314,116
	5	%		171,208		290,062		438,631
	10	%		314,116		438,631		594,274

Our net reserves for losses and loss expenses of $8 billion as of March 31, 2009 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 $2 billion, or 22%, of the Company’s net loss reserves as of March 31, 2009 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 on assumed reinsurance business. 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 March 31, 2009 and December 31, 2008 (dollars in thousands):


	March 31,		December 31,
	2009		2008

Specialty	$	3,003,494	$	2,973,824
Regional		1,336,971		1,329,697
Alternative Markets		1,709,008		1,691,678
Reinsurance		1,803,578		1,842,848
International		298,400		284,539

Net reserves for losses and loss expenses		8,151,451		8,122,586
Ceded reserves for losses and loss expenses		890,252		877,010

Gross reserves for losses and loss expenses	$	9,041,703	$	8,999,596

Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of March 31, 2009 and December 31, 2008 (dollars in thousands):


	Reported Case		Incurred But Not
	Reserves		Reported		Total

March 31, 2009
General liability	$	820,425	$	2,235,846	$	3,056,271
Workers’ compensation		1,003,222		1,022,092		2,025,314
Commercial automobile		381,810		222,417		604,227
International		128,614		169,786		298,400
Other		143,541		220,121		363,661

Total primary		2,477,612		3,870,262		6,347,873
Reinsurance		751,282		1,052,296		1,803,578

Total	$	3,228,894	$	4,922,558	$	8,151,451


December 31, 2008
General liability	$	800,059	$	2,227,257	$	3,027,316
Workers’ compensation		988,714		1,014,524		2,003,238
Commercial automobile		393,035		210,562		603,597
International		129,351		155,188		284,539
Other		145,010		216,038		361,048

Total primary		2,456,169		3,823,569		6,279,738
Reinsurance		770,247		1,072,601		1,842,848

Total	$	3,226,416	$	4,896,170	$	8,122,586

For the three months ended March 31, 2009, the Company reported losses and loss expenses of $610 million. Estimates for claims occurring in prior years decreased by $54 million. On an accident year basis, the change in prior year reserves is comprised of an increase in estimates for claims occurring in accident years 2002 and prior of $16 million and a decrease in estimates for claims occurring in accident years 2003 through 2008 of $70 million. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.

By segment, prior year reserves decreased by $17 million for specialty, $16 million for alternative markets, $10 million for regional, $7 million for reinsurance and $4 million for international. For primary business lines, prior year reserves decreased by $29 million for general liability, $13 million for workers’ compensation and $5 million for property. The decrease in prior year reserves for general liability reflects the favorable loss reserve trends for excess and surplus lines for accident years 2003 through 2008.

Loss Reserve Discount. The Company discounts its liabilities for excess and assumed workers’ compensation business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting the liabilities. The expected losses and loss expense payout pattern subject to discounting was derived from the Company’s loss payout experience. For non-proportional business, reserves for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. As of December 31, 2008, these discount rates ranged from 3.1% to 6.5%, with a weighted average discount rate of 4.6%. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of Insurance of the State of Delaware of 2.5%. The aggregate net discount, after reflecting the effects of ceded reinsurance, was $852 million and $847 million as of March 31, 2009 and December 31, 2008, respectively.

Assumed Reinsurance Premiums. 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 $48 million and $49 million at March 31, 2009 and December 31, 2008, 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 amount of premiums to be received under its assumed reinsurance agreements.

Other Than Temporary Declines in the Value of Investments. The cost of securities is adjusted where appropriate to include a provision for decline in value which is considered to be other than temporary. An other than temporary decline is considered to occur in investments where there has been a sustained reduction in fair value and where the Company does not expect the fair value to recover prior to the time of sale or maturity. Since equity securities do not have a contractual cash flow at maturity, the Company considers whether the price of an equity security is expected to recover within a reasonable period of time. Management regularly reviews securities that have a fair value less than cost to determine whether an other than temporary impairment has occurred. If a decline in value is considered other than temporary, the Company reports a realized loss on its statement of operations.

Write downs for other than temporary impairments were $110 million and $19 million for the first three months of 2009 and 2008, respectively. These impairments charges were primarily related to debt and preferred stock of three major financial institutions that experienced adverse credit events and ratings downgrades in the quarter.

Fixed Maturity Securities Unrealized Losses - The following table provides a summary of all fixed maturity securities March 31, 2009 by the length of time those securities have been continuously in an unrealized loss position (dollars in thousands):


					Gross
	Number of		Aggregate		Unrealized Losses
	Securities		Fair Value		(1)

Unrealized loss less than 20% of cost		260	$	2,361,486	$	131,623

Unrealized loss 20% or greater than cost:
Less than six months		3		14,442		6,200
Six months to less than nine months		8		75,198		21,329
Nine months to less than twelve months		3		19,179		15,639
Twelve months or greater		26		188,258		120,348

Total		300	$	2,658,563	$	295,139



(1)		Fixed maturity securities classified as available for sale are carried at estimated fair value and unrealized losses, net of income taxes, are reported as a component of equity.

In determining whether declines in fair values of fixed maturity securities are other than temporary, the Company assesses the issuer’s ability to continue to meet its contractual payment obligations as they become due and whether the Company has the ability and intent to hold the investment until it recovers or matures. The Company’s assessment of its intent to hold an investment until it recovers or matures 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. Additionally, for certain securitized financial assets with contractual cash flows (including asset-backed securities), the Company updates its best estimate of the present value of expected cash flows over the life of the security on a quarterly basis. If management determines that the fair value of the securitized financial asset and the present value of the asset’s cash flows estimated at the current financial reporting date are less than the present value of the estimated cash flows at the date of purchase, an other-than–temporary impairment is recognized and the securitized financial asset is written down to fair value.

Perpetual Preferred Securities Unrealized Losses - The following table provides a summary of all perpetual preferred securities at March 31, 2009 by the length of time those securities have been continuously in an unrealized loss position (dollars in thousands):


					Gross
	Number of		Aggregate		Unrealized Losses
	Securities		Fair Value		(1)

Unrealized loss less than 20% of cost		12	$	35,615	$	3,490
Unrealized loss 20% or greater than cost:
Less than six months		4		4,534		6,919
Six months to less than nine months		2		17,034		16,263
Nine months to less than twelve months		3		4,278		2,791
Twelve months or greater		35		93,109		66,023

Total		56	$	154,570	$	95,486



(1)		Perpetual preferred securities classified as available for sale are carried at estimated fair value and unrealized losses, net of income taxes, are reported as a component of equity.

In assessing other than temporary impairments of perpetual preferred securities, the Company applies an impairment model similar to those used for a fixed maturity security provided they are of high quality and there has been no evidence of deterioration in credit of the issuer. Otherwise, impairment tests for perpetual preferred securities are similar to that used for common stock.

At March 31, 2009, there were 44 securities for which unrealized losses were 20% or greater than amortized cost. Those securities, which had an aggregate unrealized loss of $92 million, are primarily investment grade securities issued by banks, insurers and REITs. The Company has the ability and intent to hold these securities at least until the investment impairment is recovered. The Company believes these unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors and does not consider these securities to be other than temporarily impaired.

Common Stock Unrealized Losses - In determining whether declines in fair values of common stock are other than temporary, management assesses (1) the severity and duration of the impairment, (2) the historic and implied volatility of the security, (3) recoveries or additional declines in fair value subsequent to the balance sheet date, (4) the financial condition and near-term prospects of the issuer, (5) whether the market decline was affected by macroeconomic conditions or by specific information pertaining to an individual security and (6) the length of the forecasted recovery period.

Fair Value Measurements

Results of Operations for the Three Months Ended March 31, 2009 and 2008

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 March 31, 2009 and 2008. 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 March 31,
(dollars in thousands)	2009			2008

Specialty
Gross premiums written	$	364,894		$	428,142
Net premiums written		322,557			397,787
Premiums earned		357,928			429,336
Loss ratio		62.8	%		58.1	%
Expense ratio		30.7	%		27.6	%
Combined ratio		93.5	%		85.7	%

Regional
Gross premiums written	$	322,801		$	372,995
Net premiums written		282,035			323,576
Premiums earned		285,616			311,269
Loss ratio		61.0	%		63.6	%
Expense ratio		33.1	%		31.1	%
Combined ratio		94.1	%		94.7	%

Alternative Markets
Gross premiums written	$	248,874		$	268,084
Net premiums written		225,715			238,037
Premiums earned		151,993			155,209
Loss ratio		62.2	%		57.5	%
Expense ratio		24.1	%		23.8	%
Combined ratio		86.3	%		81.3	%

Reinsurance
Gross premiums written	$	107,856		$	136,465
Net premiums written		100,833			129,646
Premiums earned		105,623			152,434
Loss ratio		63.4	%		64.0	%
Expense ratio		35.6	%		34.6	%
Combined ratio		99.0	%		98.6	%

International
Gross premiums written	$	103,817		$	79,487
Net premiums written		92,332			68,519
Premiums earned		78,048			76,061
Loss ratio		64.1	%		64.0	%
Expense ratio		37.6	%		36.5	%
Combined ratio		101.7	%		100.5	%

Consolidated
Gross premiums written	$	1,148,242		$	1,285,173
Net premiums written		1,023,472			1,157,565
Premiums earned		979,208			1,124,309
Loss ratio		62.3	%		60.8	%
Expense ratio		31.4	%		29.6	%
Combined ratio		93.7	%		90.4	%

Net Income (Loss) Attributable to Common Shareholders. The following table presents the Company’s net income (loss) attributable to common shareholders and net income (loss) per diluted share for the three months ended March 31, 2009 and 2008 (amounts in thousands, except per share data):


	2009			2008

Net income (loss) attributable to common shareholders	$	(20,346	)	$	188,438
Weighted average diluted shares		161,090			183,804
Net income (loss) per diluted share	$	(0.13	)	$	1.03

The Company reported a net loss of $20 million in 2009 compared to net income of $188 million in 2008. The net loss in 2009 was attributable to realized investment losses, including other than temporary impairments, of $97 million and losses from investment funds of $115 million. The number of weighted average diluted shares decreased as a result of the Company’s repurchases of its common stock in 2008 and 2009. In addition, the anti-dilutive effects of 7,001 potential common shares outstanding were excluded from the outstanding diluted shares in 2009 due to the net loss in 2009.

Gross Premiums Written. Gross premiums written were $1.148 billion in 2009, down 11% from 2008. The decrease in gross premiums is the result of lower economic activity and less new business production. The average price of policies renewed in 2009 decreased 1.5%. The Company has experienced increased competition and downward pressure on pricing since 2004, although the pressure has recently moderated somewhat.

A summary of gross premiums written in 2009 compared with 2008 by business segment follows:

	•		Specialty gross premiums decreased by 15% to $365 million in 2009 from $428 million. Gross premiums written decreased 48% for commercial automobile, 30% for products liability and 23% for premises operations. Gross premiums written increased 27% for professional liability and 10% for property lines. The number of new and renewal policies issued in 2009 increased 1%.

	•		Regional gross premiums decreased by 14% to $323 million in 2009 from $373 million in 2008. Gross premiums written decreased 15% for workers’ compensation, 14% for commercial automobile and 11% for commercial multiple peril. Gross premiums include assigned risk premiums, which are fully reinsured, of $21 million in 2009 and $27 million in 2008. The number of new and renewal policies issued in 2009 decreased 11%.

	•		Alternative markets gross premiums decreased by 7% to $249 million in 2009 from $268 million in 2008. Gross premiums written decreased 10% for excess workers’ compensation and increased 3% for primary workers’ compensation. Gross premiums include assigned risk premiums, which are fully reinsured, of $6 million in 2009 and $14 million in 2008. The number of new and renewal policies issued in 2009 decreased 11%.

	•		Reinsurance gross premiums decreased by 21% to $108 million in 2009 from $136 million in 2008. The decline was due to non-renewals and lower new business volume as a result of business lost to competitors or retained by ceding companies. Casualty gross premiums written decreased 22% to $87 million, and property gross premiums written decreased 18% to $21 million.

	•		International gross premiums increased by 31% to $104 million in 2009 from $79 million in 2008. Gross premiums in the U.K. and Continental Europe decreased 7% primarily as a result of the strengthening of the U.S. dollar against foreign currencies. Gross premiums in South America increased 4% as a result of higher price levels and new business. Gross premiums for Asia and Australia were $29 million in 2009 as compared to $4 million in 2008 due to the issuance of new large quota share contract.

Premiums Earned. Premiums earned decreased 13% to $979 million in 2009 from $1,124 million in 2008. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2009 are related to business written during both 2009 and 2008. The 13% decrease for 2009 earned premiums reflects the underlying decline in net premiums written in 2008 and 2009.

Net Investment Income. Following is a summary of net investment income for the three months ended March 31, 2009 and 2008 (dollars in thousands):


							Average Annualized
	Amount						Yield

	2009			2008			2009			2008

Fixed maturity securities, including cash	$	122,387		$	122,768			4.3	%		4.5	%
Arbitrage trading account and funds		10,661			4,015			12.6	%		1.9	%
Equity securities available for sale		6,064			12,725			6.3	%		6.2	%

Gross investment income		139,112			139,508			4.6	%		4.4	%
Investment expenses		(896	)		(737	)

Total	$	138,216		$	138,771			4.5	%		4.4	%

Net investment income in 2009 was nearly unchanged from 2008 as an increase in investment income from arbitrage trading was offset by lower investment income for equity securities. Average invested assets, at cost (including cash and cash equivalents) decreased to $12.2 billion in 2009 from $12.6 billion in 2008 as a result other than temporary impairments in 2008 and 2009.

Income (Loss) from Investment Funds. Following is a summary of income (loss) from investment funds for the three months ended March 31, 2009 and 2008 (dollars in thousands):


	2009			2008

Real estate funds		(98,508	)		(5,497	)
Energy funds		(14,691	)		1,045
Other funds		(1,875	)		(519	)
Kiln Ltd		—			10,697

Total		(115,074	)		5,726

Losses from investment funds were $115 million in 2009 compared to income of $6 million in 2008, primarily as a result of losses from real estate funds. The real estate funds invest primarily in commercial loans and securities that are marked to market. Asset values were marked down in 2009 as a result of the worsening U.S. economy and the decline in commercial real estate values. The energy funds reported a loss of $15 million in 2009 due to a decrease in the fair value of energy related investments held by the funds. The Company sold its interest in Kiln Ltd in March 2008.

Insurance Service Fees. The alternative markets and specialty segments offer fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage. Service fees were $27 million in both 2009 and 2008.

Realized Investment Gains (Losses). Realized investment gains (losses) result primarily from sales of securities, as well as from provisions for other than temporary impairment in securities. The Company buys and sells securities on a regular basis in order to maximize its 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.

Realized investment losses were $97 million in 2009 and were the result of write-downs for other-than-temporary impairments of $110 million, partially offset by realized gains from the sale of securities of $13 million. The other than temporary impairments were primarily related to debt and preferred stock of three major financial institutions that experienced adverse credit events and ratings downgrades in the quarter.

Realized investment gains were $54 million in 2008 and were the result of net realized gains from the sale of securities of $73 million, partially offset by write-downs for other-than-temporary impairments of $19 million. Net realized investment gains from the sale of securities included a gain of $70 million from the sale of the Company’s interest in Kiln Ltd.

Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were $31 million in 2009 compared with $25 million in 2008. These revenues were derived from three fixed base operators that were separately purchased in 2007 and 2008. These companies provide services to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. The 2009 and 2008 revenues are not comparative since the companies were not all owned for the three months ended March 31, 2008.

Losses and Loss Expenses. Losses and loss expenses decreased to $610 million in 2009 from $683 million in 2008 due to lower earned premium. The consolidated loss ratio was 62.3% in 2009 compared with 60.8% in 2008. Estimated loss ratios for accident year 2009 were higher due to a decline in price levels, the impact of anticipated loss cost trends, including inflation, and a more competitive market environment. Weather-related losses were $9 million in 2009 compared with $14 million in 2008. Favorable prior year reserve development was $54 million in both 2009 and 2008, primarily related to the specialty and alternative markets segments. A summary of loss ratios in 2009 compared with 2008 by business segment follows:

	•		Specialty’s loss ratio increased to 62.8% in 2009 from 58.1% in 2008. Net favorable prior year development was $17 million in 2009 compared with $24 million in 2008.

	•		The regional loss ratio decreased to 61.0% in 2009 from 63.6% in 2008. Weather-related losses were $9 million in 2009 compared with $14 million in 2008. Net favorable prior year development was $10 million in 2009 compared with $7 million in 2008.

	•		Alternative markets’ loss ratio increased to 62.2% in 2009 from 57.5% in 2008. In addition to pricing and loss cost trends, the 2009 loss ratio was impacted by the use of lower discount rates used to discount excess workers’ compensation reserves. Net favorable prior year development was $16 million in 2009 compared with $19 million in 2008.

	•		The reinsurance loss ratio decreased to 63.4% in 2009 from 64.0% in 2008. Net favorable prior year development was $7 million in 2009 compared with net unfavorable prior year development of $1 million in 2008.

	•		The international loss ratio increased to 64.1% in 2009 from 64.0% in 2008. Net favorable prior year development was $4 million in both 2009 and 2008.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the three months ended March 31, 2009 and 2008 (dollars in thousands):


	2009		2008

Underwriting expenses	$	307,956	$	330,868
Service expenses		22,057		22,865
Other costs and expenses		27,334		26,440

Total	$	357,347	$	380,173

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) increased to 31.4% in 2009 from 29.6% in 2008 primarily due to the decline in earned premiums.

Service expenses, which represent the costs associated with the fee-based businesses, decreased 4% to $22 million due to lower employment costs.

Other costs and expenses, which represent corporate expenses and foreign currency transaction gains and losses, increased 3% to $27 million.

Expenses from Wholly-Owned Investees. Expenses from wholly-owned investees were $30 million in 2009 compared to $25 million in 2008. These expenses represent costs associated with three fixed base operators that were separately purchased in 2007 and 2008. These include cost of goods sold related to aircraft and other sales, labor and equipment costs related to repairs and other services and general and administrative expenses. The 2009 and 2008 expenses are not comparative since the companies were not all owned for the three months ended March 31, 2008.

Interest Expense. Interest expense decreased 11% to $20 million primarily due to the repayment of $89 million of 9.875% senior notes in May 2008.

Income Taxes. The effective income tax rate was a benefit of 63% in 2009 as compared to an expense rate of 29% in 2008. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income, which increased the benefit against the pre-tax loss in 2009 and decreased the tax expense against the pre-tax income in 2008. The tax exempt investment income is a greater portion of the 2009 pre-tax loss and as such had a larger impact to the effective tax rate for 2009.

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. Over the balance of the year, we expect to increase the average duration of our portfolio to more closely match the duration of our liabilities.

The Company’s investment portfolio and investment-related assets as of March 31, 2009 were as follows (dollars in thousands):


			Carrying
	Cost		Value
Fixed maturity securities
United States government and government agencies	$	1,130,344	$	1,183,343
State and municipal		5,619,031		5,718,535
Mortgage-backed securities
Agency		997,920		1,027,624
Residential-Prime		384,719		322,079
Residential-Alt A		104,323		94,195
Commercial		72,942		46,290

Total mortgage-backed securities		1,559,904		1,490,188


Corporate
Financial		800,444		769,213
Industrial		379,784		364,702
Asset-backed		188,176		154,581
Utilities		126,048		125,341
Other		94,175		90,647

Total corporate		1,588,627		1,504,484


Foreign government and foreign government agencies		204,236		210,670

Total fixed maturity securities		10,102,142		10,107,220


Equity securities available for sale
Preferred stock
Financial		161,186		94,755
Real estate		138,190		118,589
Utilities		56,412		47,293

Total preferred stock		355,788		260,637


Common stock		40,913		66,626

Total equity securities available for sale		396,701		327,263


Arbitrage trading account		216,170		216,170
Investment in arbitrage funds		80,040		80,040
Investment funds		404,726		388,160
Loans receivable		385,650		385,650

Total investments	$	11,585,429	$	11,504,503

Fixed Maturity Securities. 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 March 31, 2009 (as compared to December 31, 2008), the fixed maturity securities portfolio mix was as follows: U.S. government securities were 12% (12% in 2008); state and municipal securities were 56% (58% in 2008); corporate securities were 15% (10% in 2008); mortgage-backed securities were 15% (17% in 2008); and foreign government bonds were 2% (3% in 2008).

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 REITs, financial companies and utilities.

Arbitrage Trading Account. The arbitrage trading account is comprised of direct investments in arbitrage securities. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers.

Investment in Arbitrage Funds. Investment in merger arbitrage funds represents investments in limited partnerships that specialize in merger arbitrage, convertible arbitrage and relative value arbitrage. 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. Relative value arbitrage is the business of investing primarily in equity securities with the goal of capitalizing on perceived differences in fundamental values between pairs of companies in similar industries.

Investment Funds. At March 31, 2009 and December 31, 2008, the Company’s investment in investment funds was $388 million and $496 million, respectively, and included investments in real estate funds of $206 million and $292 million, respectively.

Loans Receivable. Loans receivable represent commercial real estate mortgage loans and bank loans with maturities of five years or less and floating, LIBOR-based interest rates.

Liquidity and Capital Resources

Cash Flow. Cash flow provided from operating activities decreased to $22 million in 2009 from $213 million in 2008. The decline is due to lower premium collections, higher paid losses and transfers of $70 million to the arbitrage trading account.

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 88% invested in cash, cash equivalents and marketable fixed maturity securities as of March 31, 2009. If the sale of fixed maturity 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

During the first quarter of 2009, the Company repurchased 1,636,200 shares of its common stock for $32 million.

At March 31, 2009, the Company had senior notes, junior subordinated debentures and other debt outstanding with a carrying value of $1,272 million and a face amount of $1,287 million. The maturities of the outstanding debt are $1 million in 2009, $150 million in 2010, $2 million in 2012, $200 million in 2013, $200 million in 2015, $150 million in 2019, $77 million in 2022, $7 million in 2035 (prepayable in 2010), $250 million in 2037 and $250 million in 2045 (prepayable in 2010).

At March 31, 2009, equity was $3.1 billion and total capitalization (equity, senior notes and other debt and junior subordinated debentures) was $4.3 billion. The percentage of the Company’s capital attributable to senior notes, junior subordinated debentures and other debt was 29% at March 31, 2009 and at December 31, 2008.

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 was 3.1 years at March 31, 2009 and December 31, 2008. The overall market risk relating to the Company’s portfolio has remained similar to the risk at December 31, 2008.

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 thereunder, 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 March 31, 2009, 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.

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, 2008.

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 or
	purchased		share		or programs		programs (1)
January 2009		—		—		—		8,109,900
February 2009		—		—		—		8,109,900
March 2009		1,636,200	$	19.46		1,636,200		6,473,700


(1)		Remaining shares available for repurchase under the Company’s repurchase authorization of 10,000,000 shares approved by the Board of Directors on July 29, 2008.


		W. R. BERKLEY CORPORATION

Date: May 8, 2009		/s/ William R. Berkley William R. Berkley
		Chairman of the Board and
		Chief Executive Officer

Date: May 8, 2009		/s/ Eugene G. Ballard Eugene G. Ballard
		Senior Vice President -
		Chief Financial Officer

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

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.