10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	22-1867895
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
475 Steamboat Road, Greenwich, CT (Address of principal executive offices)	06830 (Zip Code)

Registrant’s telephone number, including area code: (203) 629-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $.20 per share	New York Stock Exchange
6.75% Trust Originated Preferred Securities	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o     No þ

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K.  þ

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 Act).  Yes o     No þ

The aggregate market value of the voting and non-voting common stock held by non-affiliates (computed by reference to the price at which the common stock was last sold) as of the last business day of the Registrant’s most recently completed second fiscal quarter was $3,265,618,080.

Number of shares of common stock, $.20 par value, outstanding as of February 14, 2011: 141,049,573

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s 2010 Annual Report to Stockholders for the year ended December 31, 2010 are incorporated herein by reference in Part II, and portions of the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, are incorporated herein by reference in Part III.

W. R. BERKLEY CORPORATION

ANNUAL REPORT ON FORM 10-K

December 31, 2010

			Page
SAFE HARBOR STATEMENT				3
PART I
	ITEM 1.	BUSINESS		4
	ITEM 1A.	RISK FACTORS		24
	ITEM 1B.	UNRESOLVED STAFF COMMENTS		31
	ITEM 2.	PROPERTIES		31
	ITEM 3.	LEGAL PROCEEDINGS		31
	ITEM 4.	RESERVED		31
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		32
	ITEM 6.	SELECTED FINANCIAL DATA		33
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		34
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		34
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		34
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		34
	ITEM 9A.	CONTROLS AND PROCEDURES		34
	ITEM 9B.	OTHER INFORMATION		34
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		35
	ITEM 11.	EXECUTIVE COMPENSATION		35
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		35
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		35
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		35
PART IV
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		36
EX-10.13
EX-13
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

2

SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

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 2011 and beyond, are based upon our 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 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;

•  investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, real estate, merger arbitrage and private equity investments;

•  the impact of significant competition;

•  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 the economic downturn, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response to it, on our results and financial condition.

•  the success of our new ventures or acquisitions and the availability of other opportunities;

•  the availability of reinsurance;

•  our retention under the Terrorism Risk Insurance Programs Reauthorization Act of 2007;

•  the ability of our reinsurers to pay reinsurance recoverables owed to us;

•  foreign currency and political risks relating to our international operations;

•  other legislative and regulatory developments, including those related to 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 key personnel and qualified employees; and

•  other risks detailed in this Form 10-K and from time to time in our other filings with the Securities and Exchange Commission (“SEC”).

We describe these risks and uncertainties in greater detail in Item 1A, Risk Factors. These risks and uncertainties could cause our actual results for the year 2011 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 elsewhere in this Form 10-K and our other SEC filings. Forward-looking statements speak only as of the date on which they are made.

3

PART I

ITEM 1.  BUSINESS

W. R. Berkley Corporation, a Delaware corporation, is an insurance holding company that is among the largest commercial lines writers in the United States and operates in five segments of the property casualty insurance business:

•  Specialty lines of insurance, including excess and surplus lines, premises operations, professional liability and commercial automobile;

•  Regional commercial property casualty insurance;

•  Alternative markets, including workers’ compensation and the management of self-insurance programs;

•  Reinsurance, including treaty, facultative and Lloyd’s business; and

•  International.

Our decentralized structure provides us with the flexibility to respond to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. Our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment and reinsurance management, and actuarial, financial and corporate legal staff support. Nineteen of the operating units described below were formed since 2006 to capitalize on various business opportunities.

Unless otherwise indicated, all references in this Form 10-K to “W. R. Berkley,” “we,” “us,” “our,” the “Company” or similar terms refer to W. R. Berkley Corporation together with its subsidiaries.

Our specialty insurance and reinsurance operations are conducted throughout the United States, and, on a limited basis, outside the United States. Regional insurance operations are conducted primarily in the Midwest, Northeast, Southern (excluding Florida and Louisiana), Mid Atlantic, and North Pacific regions of the United States. Alternative markets operations are conducted throughout the United States. Our international operations are conducted primarily in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia and Canada.

Net premiums written, as reported based on United States generally accepted accounting principles (“GAAP”), for each of the past five years were as follows:

	Year Ended December 31,
	2010		2009		2008		2007		2006
	(Amounts in thousands)
Net premiums written:
Specialty	$	1,311,831	$	1,260,451	$	1,453,778	$	1,704,880	$	1,814,479
Regional		1,044,347		1,081,100		1,211,096		1,267,451		1,235,302
Alternative markets		582,045		589,637		622,185		656,369		651,255
Reinsurance		401,239		423,425		435,108		682,241		892,769
International		511,464		375,482		311,732		265,048		225,188
Total	$	3,850,926	$	3,730,095	$	4,033,899	$	4,575,989	$	4,818,993

4

	Year Ended December 31,
	2010			2009			2008			2007			2006
	(Amounts in thousands)
Percentage of net premiums written:
Specialty		34.1	%		33.7	%		36.1	%		37.3	%		37.7	%
Regional		27.1	%		29.0	%		30.0	%		27.7	%		25.6	%
Alternative markets		15.1	%		15.8	%		15.4	%		14.3	%		13.5	%
Reinsurance		10.4	%		11.4	%		10.8	%		14.9	%		18.5	%
International		13.3	%		10.1	%		7.7	%		5.8	%		4.7	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following sections describe our insurance segments and their operating units. These operating units underwrite on behalf of one or more affiliated insurance companies within the group pursuant to underwriting management agreements. Certain operating units are identified by us for descriptive purposes only and are not legal entities.

Twenty-five of our twenty-six insurance company subsidiaries rated by A.M. Best Company, Inc. (“A.M. Best”) have ratings of A+ (Superior) (the second highest rating out of 15 possible ratings), and one is rated A (Excellent) (the third highest rating). A.M. Best’s ratings are based upon factors of concern to policyholders, insurance agents and brokers and are not directed toward the protection of investors. A.M. Best states: “The Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts and do not address any other risk.” A.M. Best reviews its ratings on a periodic basis, and its ratings of the Company’s subsidiaries are therefore subject to change.

Twenty-two of our twenty-three insurance company subsidiaries rated by Standard & Poor’s (“S&P”) have financial strength ratings of A+ (the seventh highest rating out of twenty-seven possible ratings), and one is rated A (the eighth highest rating).

Our Moody’s ratings are A2 for Berkley Insurance Company, Berkley Regional Insurance Company and Admiral Insurance Company (the sixth highest rating out of twenty-one possible ratings).

SPECIALTY

Our specialty segment underwrites complex and sophisticated third-party liability risks within excess and surplus lines and on an admitted basis. Excess and surplus lines differ from standard market lines in that excess and surplus lines are generally free of rate and form regulation and provide coverage for more complex and hard-to-place risks. The specialty lines of business include premises operations, commercial automobile, property, products liability and professional liability lines. The specialty business is conducted through 18 operating units. 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.

Admiral Insurance Company (“Admiral”) provides excess and surplus lines coverage that generally involves a moderate to high degree of hazard due to the nature of the class of coverage or type of business insured. Admiral concentrates on general liability, professional liability, property, and excess and umbrella liability lines of business. Admiral’s products are distributed by wholesale brokers. Admiral writes relatively larger risks, with average annual premiums in excess of $16,547 per policy.

Nautilus Insurance Company (“Nautilus”) insures excess and surplus risks for small to medium-sized commercial risks with low to moderate susceptibility to loss. Admitted business is also written through an affiliate, Great Divide Insurance Company. A substantial portion of Nautilus’ business is written on a binding authority basis, subject to certain contractual limitations. Nautilus writes relatively smaller risks, with average annual premiums less than $2,325 per policy.

5

Berkley Specialty Underwriting Managers LLC (“Berkley Specialty”) has three underwriting divisions. The specialty casualty division underwrites excess and surplus lines general liability coverage with an emphasis on products liability. The entertainment and sports division underwrites property casualty insurance products, both on an admitted and non-admitted basis, for the entertainment industry and sports-related organizations. The environmental division underwrites specialty insurance products to environmental customers such as contractors, consultants and owners of sites and facilities.

Monitor Liability Managers, Inc. (“Monitor”) specializes in providing professional liability insurance, including directors’ and officers’ liability, employment practices liability, lawyers’ professional liability, management liability, non-profit directors’ and officers’ liability and accountants’ professional liability to small and mid-size risks.

Berkley Underwriting Partners, LLC (“Berkley Underwriting Partners”) underwrites specialty insurance products through program administrators and managing general underwriters. Berkley Underwriting Partners underwrites business nationwide on an admitted and non-admitted basis.

Berkley Select, LLC (“Select”), which began operations in 2007, specializes in underwriting professional liability insurance with a particular emphasis on large law firms, accounting firms and medical institution facilities. Select’s products are distributed nationwide through a limited number of brokers.

Carolina Casualty Insurance Company (“Carolina”) provides commercial insurance products and services to the transportation industry with an emphasis on intermediate and long-haul trucking and various classes of business and public auto. Carolina operates as an admitted carrier in all 50 states and the District of Columbia.

Vela Insurance Services, Inc. (“Vela”) underwrites excess and surplus lines casualty business with a primary focus on contractors along with a portfolio of miscellaneous professional liability. Vela underwrites a variety of classes nationwide through a network of appointed excess and surplus lines brokers. Vela also underwrites wrap-up policies for residential and commercial projects, primarily in California. Vela writes relatively larger risks, with average annual premiums in excess of $20,786 per policy.

Clermont Specialty Managers, Ltd. (“Clermont”) underwrites package insurance programs for luxury condominium, cooperative and rental apartment buildings and restaurants in the New York City and Chicago metropolitan areas.

Berkley Aviation, LLC (“Aviation”) underwrites general and specialty aviation insurance. It underwrites coverage for airlines, helicopters, miscellaneous general aviation operations, non-owned aircraft, fixed-base operations, control towers, airports and related businesses.

Berkley Offshore Underwriting Managers, LLC (“BOUM”), which began operations in 2008, underwrites physical damage insurance on a worldwide basis for large and mid-sized oil and gas exploration and production enterprises.

Berkley Professional Liability, LLC (“Berkley Pro”), which began operations in 2008, underwrites directors’ and officers’ liability insurance for large and mid-sized corporate customers.

American Mining Insurance Company, Inc. (“American Mining”), which was acquired in 2007, specializes in writing workers’ compensation insurance for the mining industry and administers state and workers’ compensation funds.

Gemini Transportation Underwriters (“Gemini”), which began operations in February 2009, underwrites excess liability insurance for the railroad and commercial trucking industries.

Berkley Asset Protection Underwriters, LLC (“Berkley Asset”), which began operations in 2008, underwrites coverage for fine arts, jewelers block, fidelity, crime and related risks.

FinSecure, LLC (“FinSecure”), which began operations in 2008, underwrites property, liability, professional and specialty insurance coverages for financial institutions and financial services firms.

6

Berkley Life Sciences, LLC (“Berkley Life Science”), which began operations in 2007, underwrites property and casualty products to the life science marketplace, including medical devices, biotechnology and pharmaceutical companies.

Berkley Oil & Gas Specialty Services, LLC (“Berkley Oil & Gas”), which was formed in September 2009, provides multi-line insurance products, including general liability and control of well, to the domestic energy sector. Risk control services form a part of the product offerings.

Verus Underwtiting Managers, LLC (“Verus”), which began operations in 2010, provides property and casualty excess and surplus lines coverages to a select number of distribution partners.

The following table sets forth the percentage of gross premiums written by each specialty unit:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Admiral		16.7	%		20.4	%		24.0	%		28.2	%		28.5	%
Nautilus		15.9	%		16.8	%		17.5	%		18.2	%		17.3	%
Berkley Specialty		12.0	%		8.5	%		9.6	%		9.2	%		9.0	%
Monitor		10.1	%		10.4	%		8.6	%		7.4	%		7.1	%
Berkley Underwriting Partners		6.8	%		6.2	%		6.8	%		6.3	%		6.2	%
Select		5.6	%		5.3	%		2.9	%		0.8	%		—
Carolina		5.0	%		9.3	%		14.8	%		14.9	%		14.3	%
Vela		4.9	%		4.4	%		5.6	%		7.9	%		11.9	%
Clermont		4.1	%		4.0	%		3.7	%		3.4	%		3.0	%
Aviation		3.9	%		3.6	%		3.3	%		3.3	%		2.7	%
BOUM		3.7	%		2.7	%		—			—			—
Berkley Pro		2.4	%		2.1	%		0.1	%		—			—
American Mining		2.3	%		2.2	%		2.1	%		0.4	%		—
Gemini		1.9	%		1.2	%		—			—			—
Berkley Asset		1.5	%		1.1	%		0.3	%		—			—
FinSecure		1.2	%		0.6	%		—			—			—
Berkley Life Science		1.1	%		1.2	%		0.7	%		—			—
Berkley Oil & Gas		0.9	%		—			—			—			—
Verus		—			—			—			—			—
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth the percentages of gross premiums written, by line, by our specialty insurance operations:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Other liability		29.1	%		29.5	%		32.8	%		38.0	%		42.2	%
Property		20.4	%		19.0	%		15.1	%		14.4	%		12.2	%
Professional liability		18.3	%		18.1	%		12.9	%		9.9	%		8.9	%
Commercial automobile		8.2	%		10.4	%		16.0	%		15.8	%		15.0	%
Products liability		6.0	%		7.5	%		10.2	%		12.0	%		13.1	%
Other		18.0	%		15.5	%		13.0	%		9.9	%		8.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

7

REGIONAL

Our regional companies provide commercial insurance products to customers primarily in 45 states and the District of Columbia. Key clients of this segment are small-to-mid-sized businesses and state and local governmental entities. The regional business is sold through a network of non-exclusive independent agents who are compensated on a commission basis. The regional companies are organized geographically in order to provide them with the flexibility to adapt quickly to local market conditions.

Acadia Insurance Company (“Acadia”) is based in Westbrook, Maine and operates in eight states in the Northeast.

Continental Western Group (“Continental Western Group”) is based in Des Moines, Iowa and operates in tewelve states in the Midwest.

Union Standard Insurance Group (“Union Standard”) is based in Irving, Texas and operates in nine southern states other than Florida and Louisiana.

Berkley Mid Atlantic Group (“BMAG”) is based in Glen Allen, Virginia and operates in seven states principally in the Mid Atlantic region and the District of Columbia.

Berkley North Pacific Group, LLC (“Berkley North Pacific”), formerly a branch of Continental Western Group, became a separate operating unit in August 2009. Berkley North Pacific is based in Seattle, Washington, has an office in Boise Idaho, and operates in five states in the Pacific Northwest region.

In addition, the following regional companies provide the specialized services described below:

Berkley Surety Group, Inc. (“Berkley Surety”) offers surety bonds on a nationwide basis through a network of seventeen regional and branch offices.

Berkley Regional Specialty Insurance Company (“BRSIC”) offers the availability of excess and surplus lines products to our regional agents.

Regional Excess Underwriters, LLC (“REU”) is a full service excess and surplus lines brokerage offering commercial coverages through contracted agents throughout the continental United States.

The regional companies also write assigned risk premiums on behalf of assigned risk plans managed by the Company. Assigned risk premiums are 100% reinsured by the respective state-sponsored assigned risk pools. In 2010, certain assigned risk premiums were transferred from the regional segment to the alternative markets segment.

The following table sets forth the percentage of gross premiums written by each regional company:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Acadia		26.4	%		25.1	%		23.8	%		24.3	%		25.1	%
Continental Western Group		23.9	%		26.3	%		27.2	%		27.0	%		27.5	%
Union Standard		18.5	%		18.5	%		17.7	%		17.0	%		16.6	%
BMAG		17.9	%		16.9	%		15.6	%		15.6	%		15.5	%
Berkley North Pacific		4.0	%		3.0	%		5.3	%		6.2	%		5.6	%
Berkley Surety		5.0	%		3.6	%		2.9	%		2.7	%		2.0	%
BRSIC		1.2	%		1.2	%		1.2	%		1.1	%		0.5	%
Assigned risk plans		3.1	%		5.4	%		6.3	%		6.1	%		7.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

8

The following table sets forth the percentages of gross premiums written, by line, by our regional insurance operations:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Commercial multi-peril		35.8	%		34.7	%		34.3	%		34.8	%		35.5	%
Automobile		25.3	%		25.3	%		25.5	%		25.8	%		25.3	%
Workers’ compensation		18.0	%		18.1	%		18.2	%		17.8	%		17.9	%
Assigned risk plans		3.1	%		5.4	%		6.3	%		6.1	%		7.2	%
Other		17.8	%		16.5	%		15.7	%		15.5	%		14.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

9

The following table sets forth the percentages of direct premiums written by our regional insurance operations by state:

	Year Ended December 31,
	2010			2009			2008			2007			2006
State
Massachusetts		7.2	%		6.8	%		6.8	%		7.1	%		7.0	%
Texas		7.1	%		7.1	%		6.7	%		6.4	%		6.2	%
Pennsylvania		6.7	%		6.3	%		5.7	%		5.8	%		5.6	%
Maine		5.7	%		5.3	%		4.7	%		4.9	%		5.1	%
New Hampshire		5.3	%		5.0	%		4.9	%		5.1	%		5.3	%
North Carolina		4.2	%		3.6	%		3.3	%		3.4	%		3.2	%
Iowa		3.6	%		4.0	%		4.2	%		4.2	%		4.6	%
Mississippi		3.6	%		3.5	%		3.2	%		2.8	%		2.4	%
Vermont		3.4	%		3.1	%		3.0	%		3.3	%		3.5	%
Kansas		3.2	%		5.3	%		5.8	%		6.1	%		6.8	%
New York		3.1	%		2.8	%		2.3	%		2.1	%		1.8	%
Nebraska		3.0	%		3.9	%		3.8	%		3.8	%		4.0	%
Connecticut		2.9	%		3.1	%		3.0	%		2.9	%		2.9	%
Minnesota		2.8	%		3.0	%		3.2	%		3.2	%		3.4	%
Virginia		2.8	%		2.6	%		2.4	%		2.4	%		2.6	%
Wisconsin		2.8	%		2.4	%		2.5	%		2.5	%		2.7	%
Missouri		2.4	%		2.6	%		2.8	%		3.0	%		3.3	%
Washington		2.4	%		1.8	%		2.8	%		3.1	%		2.3	%
Arkansas		2.3	%		2.3	%		2.3	%		2.5	%		2.8	%
Illinois		2.3	%		2.5	%		2.7	%		1.7	%		2.0	%
Colorado		2.2	%		3.2	%		3.7	%		3.7	%		3.3	%
Maryland		2.2	%		2.4	%		2.1	%		2.1	%		2.1	%
South Dakota		1.8	%		2.4	%		2.3	%		2.2	%		2.6	%
Oklahoma		1.6	%		1.7	%		1.5	%		1.6	%		1.6	%
Tennessee		1.5	%		1.4	%		1.5	%		1.6	%		1.7	%
South Carolina		1.3	%		1.3	%		1.3	%		1.2	%		1.1	%
New Mexico		1.3	%		1.2	%		1.2	%		1.2	%		1.0	%
Alabama		1.2	%		1.2	%		1.1	%		1.0	%		0.9	%
Arizona		1.1	%		0.9	%		0.7	%		0.6	%		0.4	%
Indiana		1.1	%		0.9	%		0.9	%		1.1	%		1.0	%
North Dakota		1.1	%		1.0	%		0.9	%		0.7	%		0.7	%
Other		6.8	%		5.4	%		6.7	%		6.7	%		6.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

ALTERNATIVE MARKETS

Our alternative markets operations specialize in insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include commercial and governmental entity employers, employer groups, insurers, and other groups or entities seeking alternative ways to manage their exposure to risks. Often, alternative methods of risk management result in our customers choosing to retain more of this risk than they might otherwise retain in the traditional insurance market. In addition to providing insurance

10

products, the alternative markets segment also provides a wide variety of fee-based services, including claims, administrative and consulting services.

Midwest Employers Casualty Company (“MECC”) provides excess workers’ compensation coverage and risk management services to self-insured employers and groups as well as to insurance companies in the workers’ compensation business. Excess workers’ compensation is coverage above an amount retained, or self-insured, by the employer or group and includes large deductible and reinsurance programs.

Key Risk Insurance Company (“Key Risk”) offers primary workers’ compensation insurance principally in the southeastern United States. Key Risk focuses on middle-market accounts in specialty niches and on larger self-insured entities, with a special emphasis on managed care services. An affiliate, Key Risk Management Services, Inc., provides third party administration of self-insured workers’ compensation programs.

Berkley Accident and Health, LLC (“Berkley A&H”) underwrites accident and health insurance and reinsurance products through four primary business segments: medical stop loss, managed care, special risk and group captive.

Berkley Net Underwriters, LLC (“Berkley Net”) uses a web-based system to allow producers to quote, bind and service insurance policies. Its initial focus is on the workers’ compensation market.

Preferred Employers Insurance Company (“Preferred Employers”) offers workers’ compensation insurance in California with an emphasis on owner-managed small employers.

Riverport Insurance Company (“Riverport”) provides property and casualty insurance products and services for human services organizations, governmental and other specialty entities, self-insured companies, associations and purchasing groups.

Berkley Medical Excess Underwriters, LLC (“Medical Excess”) underwrites medical malpractice excess insurance and reinsurance coverage and provides services to hospitals and hospital associations.

Berkley Risk Administrators Company, LLC (“BRAC”) provides services including third-party claims administration, underwriting risk management, accounting services, loss control and safety consulting, management information systems, regulatory compliance and alternative markets program management.

In addition, assigned risk premiums are written on behalf of assigned risk plans managed by the Company. Assigned risk premiums are 100% reinsured by the respective state-sponsored assigned risk pools. In 2010, certain assigned risk premiums were transferred from the regional segment to the alternative markets segment.

The following table sets forth the percentages of gross premiums written by each alternative markets unit:

	Year Ended December 31,
	2010			2009			2008			2007			2006
MECC		30.7	%		38.3	%		42.1	%		45.1	%		44.6	%
Key Risk		16.1	%		17.7	%		18.8	%		17.6	%		16.8	%
Berkley A&H		10.6	%		6.1	%		4.6	%		2.6	%		0.4	%
Berkley Net		10.4	%		10.6	%		6.7	%		3.1	%		0.8	%
Preferred Employers		8.9	%		8.2	%		8.3	%		11.3	%		16.0	%
Riverport		8.2	%		10.2	%		9.3	%		7.7	%		7.0	%
Medical Excess		5.6	%		5.2	%		4.4	%		4.6	%		5.4	%
Assigned risk plans		9.5	%		3.7	%		5.8	%		8.0	%		9.0	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

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The following table sets forth service fees for insurance services business conducted by BRAC and Key Risk Management Services, Inc. (amounts in thousands):

	Year Ended December 31,
	2010		2009		2008		2007		2006
Insurance service fees	$	79,173	$	87,032	$	99,090	$	97,292	$	104,812

REINSURANCE

Our reinsurance operations consist of five operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. Treaty reinsurance is the reinsurance of all or a specified portion or category of risks underwritten by the ceding company during the term of the agreement. Facultative reinsurance is the reinsurance of individual risks whereby a reinsurer generally has the opportunity to analyze and separately underwrite a risk prior to agreeing to be bound.

Signet Star Re, LLC (“Signet Star”) focuses on underwriting specialty lines of business, including professional liability, umbrella, workers’ compensation, commercial automobile and trucking. Signet Star emphasizes casualty excess of loss treaties and seeks significant participations in order to have greater influence over the terms and conditions of coverage. Our treaty business is produced through reinsurance brokers or intermediaries.

Lloyd’s Reinsurance (“Lloyd’s Reinsurance”) represents the Company’s minority participation in a Lloyd’s syndicate that writes a broad range of mainly short-tail classes of business.

Facultative ReSources, Inc. (“Fac Re”) specializes in underwriting individual certificate and program facultative business developed through reinsurance brokers or intermediaries. Its experienced underwriters seek to offset the underwriting and pricing cycles in the underlying insurance business by working closely with ceding company clients to develop appropriate underwriting criteria and through superior risk selection.

B F Re Underwriters, LLC (“BF Re”) is a facultative casualty reinsurance underwriting manager that serves clients through a nationwide network of regional offices. Its business is written directly with ceding companies. BF Re’s primary lines of business are professional liability, excess and surplus, umbrella and medical malpractice.

Berkley Risk Solutions, Inc. (“Berkley Risk Solutions”) underwrites insurance and reinsurance-based financial coverages for insurance companies and self-insured entities.

The following table sets forth the percentages of gross premiums written by each reinsurance unit:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Signet Star		65.4	%		58.9	%		52.2	%		39.6	%		36.1	%
Lloyd’s Reinsurance		15.9	%		18.8	%		14.7	%		22.6	%		18.7	%
Fac Re		14.2	%		19.4	%		22.1	%		21.2	%		18.9	%
BF Re		9.6	%		9.4	%		12.2	%		11.2	%		9.6	%
Berkley Risk Solutions(1)		(5.1	)%		(6.5	)%		(1.2	)%		4.6	%		16.6	%
Hong Kong(2)		—			—			—			0.8	%		0.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1)	Berkley Risk Solutions reported return premiums on experience rated contracts in 2008, 2009 and 2010.
(2)	Hong Kong has been included in Berkley Re Australia’s reported results in the international segment effective January 1, 2008.

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The following table sets forth the percentages of gross premiums written, by property versus casualty business, by our reinsurance operations:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Casualty		67.8	%		70.2	%		82.8	%		76.2	%		83.2	%
Property		32.2	%		29.8	%		17.2	%		23.8	%		16.8	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

INTERNATIONAL

Our international segment has operations in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia, and Canada. We apply the same long-term strategies that that we use in our domestic operations — decentralized structures with products and services tailored to the local environments.

Berkley International Latinoamérica S.A. (“BILSA”) provides commercial and personal property casualty insurance primarily in Argentina, Brazil and Uruguay.

W.  R. Berkley Insurance (Europe), Limited (“Berkley Europe”) is a London-based specialty casualty insurer that writes professional indemnity, directors’ and officers’ liability, medical malpractice, general liability, construction risks, marine and personal accident and travel business principally in the United Kingdom and through its branch offices in Spain, Ireland, Norway, Germany and Australia.

Berkley Re Australia (“Australia”), which began operations in 2007, provides property and casualty reinsurance on a treaty and facultative basis in Australia and Southeast Asia through its divisions in Hong Kong and Singapore.

W.  R. Berkley Syndicate Limited (“Syndicate 1967”), which began operations in 2009, underwrites property and personal accident classes of business through Lloyd’s of London on a worldwide basis.

Berkley Underwriting Managers Canada, Ltd. (“Berkley Canada”), which began operations in 2008, underwrites specialty casualty commercial insurance products, including general liability, products liability and other commercial lines in the Canadian provinces.

The following table sets forth the percentages of gross premiums written for our international operations:

	Year Ended December 31,
	2010			2009			2008			2007			2006
BILSA		36.9	%		41.0	%		51.8	%		46.8	%		42.5	%
Berkley Europe		30.4	%		33.2	%		40.1	%		52.6	%		53.1	%
Australia		15.6	%		17.8	%		8.1	%		—			—
Syndicate 1967		13.8	%		5.9	%		—			—			—
Berkley Canada		3.3	%		2.1	%		—			—			—
Philippines(1)		—			—			—			0.6	%		4.4	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1) The Philippines operation was sold in March 2007.

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Results by Industry Segment

Summary financial information about our operating segments is presented on a U.S. GAAP basis in the following table:

	Year Ended December 31,
	2010			2009			2008			2007			2006
	(Amounts in thousands)
Specialty
Revenue	$	1,471,566		$	1,483,266		$	1,810,813		$	2,006,027		$	1,952,928
Income before income taxes	$	296,645		$	220,906		$	375,429		$	516,931		$	479,105
Regional
Revenue	$	1,152,447		$	1,177,126		$	1,317,796		$	1,347,800		$	1,289,869
Income before income taxes	$	117,353		$	106,078		$	108,719		$	215,228		$	201,417
Alternative Markets
Revenue	$	810,673		$	768,683		$	831,622		$	874,899		$	878,531
Income before income taxes	$	178,607		$	162,875		$	201,879		$	248,080		$	291,416
Reinsurance
Revenue	$	522,435		$	487,016		$	635,763		$	893,855		$	993,120
Income before income taxes	$	129,922		$	86,358		$	117,946		$	178,302		$	135,424
International
Revenue	$	485,534		$	351,947		$	322,016		$	284,558		$	248,894
Income before income taxes	$	21,174		$	22,719		$	52,943		$	44,457		$	34,447
Other(1)
Revenue	$	281,414		$	163,140		$	(209,202	)	$	181,258		$	31,489
Loss before income taxes	$	(140,396	)	$	(216,706	)	$	(530,594	)	$	(110,606	)	$	(153,164	)
Total
Revenue	$	4,724,069		$	4,431,178		$	4,708,808		$	5,588,397		$	5,394,831
Income before income taxes	$	603,305		$	382,230		$	326,322		$	1,092,392		$	988,645

(1) Represents corporate revenues, corporate expenses, net investment gains and losses, and revenues and expenses from investments in wholly-owned, non-insurance subsidiaries that are consolidated for financial reporting purposes.

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The table below represents summary underwriting ratios on a GAAP basis for our insurance segments. The combined ratio represents a measure of underwriting profitability, excluding investment income. A number in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Specialty
Loss ratio		58.3	%		61.9	%		60.1	%		57.3	%		59.1	%
Expense ratio		32.7	%		31.1	%		28.4	%		26.7	%		25.0	%
Combined ratio		91.0	%		93.0	%		88.5	%		84.0	%		84.1	%
Regional
Loss ratio		60.7	%		61.4	%		65.4	%		59.1	%		59.7	%
Expense ratio		35.9	%		34.2	%		32.3	%		31.4	%		30.6	%
Combined ratio		96.6	%		95.6	%		97.7	%		90.5	%		90.3	%
Alternative Markets
Loss ratio		67.6	%		63.4	%		62.7	%		59.2	%		53.5	%
Expense ratio		25.6	%		25.8	%		24.2	%		23.1	%		22.1	%
Combined ratio		93.2	%		89.2	%		86.9	%		82.3	%		75.6	%
Reinsurance
Loss ratio		52.5	%		57.9	%		64.7	%		65.3	%		72.0	%
Expense ratio		41.0	%		39.1	%		34.7	%		31.3	%		27.8	%
Combined ratio		93.5	%		97.0	%		99.4	%		96.6	%		99.8	%
International
Loss ratio		61.8	%		59.9	%		61.7	%		62.6	%		64.2	%
Expense ratio		40.4	%		40.2	%		38.9	%		32.4	%		32.0	%
Combined ratio		102.2	%		100.1	%		100.6	%		95.0	%		96.2	%
Total
Loss ratio		60.2	%		61.4	%		62.7	%		59.6	%		61.0	%
Expense ratio		34.3	%		32.8	%		30.4	%		28.5	%		27.0	%
Combined ratio		94.5	%		94.2	%		93.1	%		88.1	%		88.0	%

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Investments

Investment results, before income taxes, were as follows:

	Year Ended December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Average investments, at cost(1)	$	12,933,454		$	12,510,160		$	12,429,269		$	12,146,241		$	10,729,483
Net investment income(1)	$	538,698		$	552,561		$	537,033		$	634,386		$	549,030
Percent earned on average investments(1)		4.2	%		4.4	%		4.3	%		5.2	%		5.1	%
Net investment gains (losses)(2)	$	56,581		$	(38,408	)	$	(356,931	)	$	49,696		$	9,648
Change in unrealized investment gains (losses)(3)	$	176,588		$	557,444		$	(302,211	)	$	(94,957	)	$	113,539

(1)	Includes investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.
(2)	Represents realized gains and losses on investments not classified as trading account securities.
(3)	Represents the change in unrealized investment gains (losses) for available for sale securities.

For comparison, the following are the coupon returns for selected bond indices and the dividend returns for the S&P 500^® Index:

	Year Ended December 31,
	2010			2009			2008			2007			2006
Barclays U.S. Aggregate Bond Index(a)		4.2	%		4.9	%		5.4	%		5.5	%		5.3	%
Barclays Municipal Bond Index(a)		4.8	%		5.3	%		4.6	%		4.7	%		4.8	%
S&P 500® Index		2.3	%		3.0	%		1.5	%		2.0	%		2.2	%

(a) Formerly Lehman Brothers index.

The percentages of the fixed maturity portfolio categorized by contractual maturity, based on fair value, on the dates indicated, are set forth below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay certain obligations.

	Year Ended December 31,
	2010			2009			2008			2007			2006
1 year or less		6.7	%		5.3	%		3.2	%		7.4	%		11.2	%
Over 1 year through 5 years		27.3	%		27.2	%		22.9	%		19.4	%		17.5	%
Over 5 years through 10 years		25.9	%		27.2	%		29.9	%		30.2	%		26.3	%
Over 10 years		27.1	%		26.0	%		26.6	%		25.1	%		22.8	%
Mortgage-backed securities		13.0	%		14.3	%		17.4	%		17.9	%		22.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Loss and Loss Adjustment Expense Reserves

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

16

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 are greater when economic conditions are uncertain. 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 earnings 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. Although the loss reserves included in the Company’s financial statements represent management’s best estimates, setting reserves is inherently uncertain and the Company cannot provide assurance that its current reserves will prove adequate in light of subsequent events.

We discount our liabilities for excess workers’ compensation business and the workers’ compensation portion of our reinsurance 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. These discount rates range from 2.5% to 6.5% with a weighted average discount rate of 4.4%. 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, is $898,193,000, $877,305,000 and $846,748,000 at December 31, 2010, 2009 and 2008, respectively. The increase in the aggregate discount from 2009 to 2010 and from 2008 to 2009 resulted from the increase in workers’ compensation gross reserves.

To date, known asbestos and environmental claims at our insurance company subsidiaries have not had a material impact on our operations. These claims have not materially impacted us because these subsidiaries

17

generally did not insure the larger industrial companies which are subject to significant asbestos or environmental exposures.

Our net reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $35,543,000 and $36,525,000 at December 31, 2010 and 2009, respectively. The Company’s gross reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $51,214,000 and $53,986,000 at December 31, 2010 and 2009, respectively. Net incurred losses and loss expenses for reported asbestos and environmental claims increased (decreased) by approximately $1,755,000, $(614,000) and $440,000 in 2010, 2009 and 2008, respectively. Net paid losses and loss expenses for reported asbestos and environmental claims were approximately $2,737,000, $2,508,000 and $2,384,000 in 2010, 2009 and 2008, respectively. The estimation of these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make a reasonable actuarial estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential effect of significant unresolved legal matters, including coverage issues as well as the cost of litigating the legal issues. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

The table below provides a reconciliation of the beginning of year and end of year property casualty reserves for the indicated years (amounts in thousands):

	2010			2009			2008
Net reserves at beginning of year	$	8,147,782		$	8,122,586		$	7,822,897
Net provision for losses and loss expenses(a):
Claims occurring during the current year(b)		2,509,933			2,518,849			2,829,830
Decrease in estimates for claims occurring in prior years(c)(d)		(253,248	)		(234,008	)		(195,710	)
Decrease in discount for prior years		53,182			51,866			54,494
Total		2,309,867			2,336,707			2,688,614
Net payments for claims:
Current year		641,570			582,605			640,406
Prior years		1,811,507			1,751,026			1,662,650
Total		2,453,077			2,333,631			2,303,056
Foreign currency translation		(5,051	)		22,120			(85,869	)
Net reserves at end of year		7,999,521			8,147,782			8,122,586
Ceded reserves at end of year		1,017,028			923,889			877,010
Gross reserves at end of year	$	9,016,549		$	9,071,671		$	8,999,596

(a)	The net provision for loss and loss expenses does not include policyholder benefits incurred on life insurance of $47,000 in 2008.
(b)	Claims occurring during the current year are net of discounts of $67,763,000, $80,455,000 and $97,698,000 in 2010, 2009 and 2008, respectively.
(c)	The decrease in estimates for claims occurring in prior years is net of discounts. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $246,941,000 in 2010, $232,040,000 in 2009, and $180,154,000 in 2008.
(d)	Approximately $19 million and $44 million of the favorable reserve development in 2010 and 2009, respectively, was fully offset by a reduction in earned premiums. The favorable reserve development, net of premium offsets, was $234 million in 2010 and $190 million in 2009.

Also, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding the decrease in estimates for claims occurring in prior years.

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A reconciliation between the reserves as of December 31, 2010 as reported in the accompanying consolidated GAAP financial statements and those reported on the basis of statutory accounting principles (“SAP”) in the Company’s U.S. regulatory filings is as follows (amounts in thousands):

Net reserves reported in U.S. regulatory filings on a SAP basis	$	7,893,933
Reserves for non-U.S. companies		371,165
Loss reserve discounting(1)		(264,334	)
Ceded reserves		1,017,028
Other		(1,243	)
Gross reserves reported in the consolidated U.S. GAAP financial statements	$	9,016,549

(1) For statutory purposes, the Company discounts its workers’ compensation reinsurance reserves at 2.5% as permitted by the Department of Insurance of the State of Delaware. In its GAAP financial statements, the Company discounts excess workers’ compensation reserves at the risk-free rate and assumed workers’ compensation reserves at the statutory rate.

The following table presents the development of net reserves for 2000 through 2010. The top line of the table shows the estimated reserves for unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This represents the estimated amount of losses and loss expenses for claims arising in all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not reported to us. The upper portion of the table shows the re-estimated amount of the previously recorded reserves based on experience as of the end of each succeeding year. The estimate changes as more information becomes known about the frequency and severity of claims for individual years.

The “cumulative redundancy (deficiency)” represents the aggregate change in the estimates over all prior years. For example, the 2000 reserves have developed a $1,120 million deficiency over ten years. That amount has been reflected in income over the ten years. The impact on the results of operations of the past three years of changes in reserve estimates is shown in the reconciliation tables above. It should be noted that the table presents a “run off” of balance sheet reserves, rather than accident or policy year loss development. Therefore, each amount in the table includes the effects of changes in reserves for all prior years. For example, assume a claim that occurred in 2000 is reserved for $2,000 as of December 31, 2000. Assuming this claim estimate was changed in 2010 to $2,300, and was settled for $2,300 in 2010, the $300 deficiency would appear as a deficiency in each year from 2000 through 2010.

Year Ended December 31,	2000			2001			2002			2003			2004			2005			2006		2007		2008		2009		2010
	(Amounts in millions)
Net reserves, discounted	$	1,818		$	2,033		$	2,323		3,505$			$	4,723		$	5,867		$	6,948	$	7,823	$	8,123	$	8,148	$	8,000
Reserve discount		223			243			293			393			503			575			700		788		846		877		898
Net reserves, undiscounted	$	2,041		$	2,276		$	2,616		$	3,898		$	5,226		$	6,442		$	7,648	$	8,611	$	8,969	$	9,025	$	8,898
Net reserves re-estimated as of:
One year later	$	2,252		$	2,450		$	2,889		$	4,220		$	5,440		$	6,499		$	7,560	$	8,431	$	8,737	$	8,778
Two years later		2,397			2,671			3,242			4,552			5,588			6,578			7,494		8,239		8,560
Three years later		2,520			2,932			3,611			4,720			5,763			6,592			7,363		8,192
Four years later		2,634			3,233			3,769			4,949			5,816			6,556			7,370
Five years later		2,841			3,339			3,982			5,041			5,834			6,636
Six years later		2,889			3,534			4,069			5,082			5,929
Seven years later		3,033			3,599			4,112			5,176
Eight years later		3,110			3,624			4,187
Nine years later		3,123			3,674
Ten years later		3,161
Cumulative redundancy (deficiency), undiscounted	$	(1,120	)	$	(1,398	)	$	(1,571	)	$	(1,278	)	$	(703	)	$	(194	)	$	278		419	$	409$	$	247		—

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Year Ended December 31,	2000		2001		2002		2003		2004		2005		2006		2007		2008		2009		2010
	(Amounts in millions)
Cumulative amount of net liability paid through:
One year later	$	702	$	794	$	599	$	930	$	1,174	$	1,341	$	1,437	$	1,663	$	1,751	$	1,812
Two years later		1,255		1,191		1,216		1,750		2,106		2,363		2,636		2,935		3,106
Three years later		1,501		1,594		1,792		2,389		2,836		3,219		3,558		3,956
Four years later		1,722		1,971		2,223		2,901		3,384		3,856		4,279
Five years later		1,964		2,245		2,552		3,274		3,813		4,327
Six years later		2,138		2,467		2,814		3,582		4,131
Seven years later		2,276		2,642		3,035		3,804
Eight years later		2,401		2,808		3,189
Nine years later		2,517		2,922
Ten years later		2,592

The following table presents the development of gross reserves for 2000 through 2010.

Year Ended December 31,	2000			2001			2002			2003			2004			2005			2006		2007		2008		2009		2010
	(Amounts in millions)
Net reserves, discounted	$	1,818		$	2,033		$	2,323		$	3,505		$	4,723		$	5,867		$	6,947	$	7,823	$	8,123	$	8,148	$	8,000
Ceded reserves		658			731			845			687			727			845			837		855		877		924		1,017
Gross reserves, discounted		2,476			2,764			3,168			4,192			5,450			6,712			7,784		8,678		9,000		9,072		9,017
Reserve discount		286			324			384			462			573			654			761		867		944		944		968
Gross reserves, undiscounted	$	2,762		$	3,088		$	3,552		$	4,654		$	6,023		$	7,366		$	8,545	$	9,545	$	9,944	$	10,016	$	9,985
Gross reserves re-estimated as of:
One year later	$	2,827		$	3,153		$	3,957		$	5,030		$	6,241		$	7,406		$	8,509	$	9,396	$	9,696	$	9,810
Two years later		2,730			3,461			4,353			5,380			6,382			7,529			8,454		9,178		9,566
Three years later		2,900			3,777			4,744			5,546			6,600			7,561			8,300		9,163
Four years later		3,054			4,103			4,885			5,807			6,670			7,508			8,335
Five years later		3,267			4,192			5,132			5,915			6,680			7,617
Six years later		3,296			4,428			5,226			5,956			6,804
Seven years later		3,476			4,500			5,275			6,083
Eight years later		3,555			4,538			5,383
Nine years later		3,586			4,617
Ten Years later		3,627
Gross cumulative redundancy (deficiency)	$	(865	)	$	(1,529	)	$	(1,831	)	$	(1,429	)	$	(781	)	$	(251	)	$	210	$	382	$	378	$	206		—

Reinsurance

We follow a common industry practice of reinsuring a portion of our exposures and paying to reinsurers a part of the premiums received on the policies that we write. Reinsurance is purchased principally to reduce net liability on individual risks and to protect against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer contractually liable to the insurer to the extent of the reinsurance coverage. We monitor the financial condition of our reinsurers and attempt to place our coverages only with substantial, financially sound carriers. As a result, generally the reinsurers who reinsure our casualty insurance must have an A.M. Best rating of “A (Excellent)” or better with at least $500 million in policyholder surplus and the reinsurers who cover our property insurance must have an A.M. Best rating of “A-(Excellent)” or better with at least $250 million in policyholder surplus.

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Regulation

U.S. Regulation

Our insurance subsidiaries are subject to varying degrees of regulation and supervision in the jurisdictions in which they do business, and the Company believes that it is in compliance in all material respects with such regulations. Our insurance subsidiaries are subject to statutes which delegate regulatory, supervisory and administrative powers to state insurance commissioners. This regulation relates to such matters as the standards of solvency which must be met and maintained; the licensing of insurers and their agents; the nature of and limitations on investments; deposits of securities for the benefit of policyholders; approval of certain policy forms and premium rates; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; establishment and maintenance of reserves for unearned premiums and losses; and requirements regarding numerous other matters. Our property casualty subsidiaries, other than excess and surplus and reinsurance subsidiaries, must generally file all rates with the insurance department of each state in which they operate. Our excess and surplus and reinsurance subsidiaries generally operate free of rate and form regulation.

In addition to regulatory supervision of our insurance subsidiaries, we are subject to state statutes governing insurance holding company systems. Typically, such statutes require that we periodically file information with the appropriate state insurance commissioner, including information concerning our capital structure, ownership, financial condition and general business operations. Under the terms of applicable state statutes, any person or entity desiring to purchase more than a specified percentage (commonly 10%) of our outstanding voting securities would be required to obtain prior regulatory approval of the purchase. Under Alabama law, which is applicable to us due to our ownership of American Mining Insurance Company, Inc., an Alabama domiciled insurance company, the acquisition of more than 5% of our capital stock is subject to prior regulatory approval. Further, state insurance statutes typically place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect their solvency. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

The National Association of Insurance Commissioners (“NAIC”) utilizes a Risk Based Capital (“RBC”) formula that is designed to measure the adequacy of an insurer’s statutory surplus in relation to the risks inherent in its business. The RBC formula develops a risk adjusted target level of adjusted statutory capital by applying certain factors to various asset, premium and reserve items. The RBC Model Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under regulatory control. The RBC of each of our domestic insurance subsidiaries was above the authorized RBC control level as of December 31, 2010.

The NAIC also has developed a set of 13 financial ratios referred to as the Insurance Regulatory Information System (“IRIS”). On the basis of statutory financial statements filed with state insurance regulators, the NAIC annually calculates these IRIS ratios to assist state insurance regulators in monitoring the financial condition of insurance companies. The NAIC has established an acceptable range for each of the IRIS financial ratios.

The NAIC also has recently adopted amendments to the model holding company law, expanding upon the regulation of holding company systems. When and if adopted by the various states, these laws and regulations may have additional impact upon the Company’s operations.

Our insurance company subsidiaries are also subject to assessment by state guaranty funds when an insurer in a particular jurisdiction has been judicially declared insolvent and insufficient funds are available from the liquidated company to pay policyholders and claimants. The protection afforded under a state’s guaranty fund to policyholders of the insolvent insurer varies from state to state. Generally, all licensed property casualty insurers are considered to be members of the fund, and assessments are based upon their pro rata share of direct written premiums. The NAIC Model Post-Assessment Guaranty Fund Act, which many states have adopted, limits assessments to an insurer to 2% of its subject premium and permits recoupment of assessments through rate setting. Likewise, several states (or underwriting organizations of which our insurance subsidiaries are required to be members) have limited assessment authority with regard to deficits in certain lines of business.

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State insurance laws and regulations require us to participate in mandatory property-liability “shared market,” “pooling” or similar arrangements that provide certain types of insurance coverage to individuals or others who otherwise are unable to purchase coverage voluntarily provided by private insurers. Shared market mechanisms include assigned risk plans and fair access to insurance requirement or “FAIR” plans. In addition, some states require insurers to participate in reinsurance pools for claims that exceed specified amounts. Our participation in these mandatory shared market or pooling mechanisms generally is related to the amount of our direct writings for the type of coverage written by the specific arrangement in the applicable state.

The regulation of our U.S. subsidiaries’ excess and surplus lines insurance business differs significantly from the regulation of our admitted business. Our surplus lines subsidiaries are subject to the surplus lines regulation and reporting requirements of the jurisdictions in which they are eligible to write surplus lines insurance. Although the surplus lines business is generally less regulated than admitted business, strict regulations apply to surplus lines placements in the laws of every state and the regulation of surplus lines insurance may undergo changes in the future. Federal or state measures may be introduced to increase the oversight of surplus lines insurance in the future.

We receive funds from our insurance company subsidiaries in the form of dividends and management fees for certain management services. Annual dividends in excess of maximum amounts prescribed by state statutes may not be paid without the approval of the insurance commissioner of the state in which an insurance subsidiary is domiciled.

State insurance laws and regulations include numerous provisions governing trade practices and the marketplace activities of insurers, including provisions governing marketing and sales practices, policyholder services, claims management and complaint handling. State regulatory authorities generally enforce these provisions through periodic market conduct examinations.

The Terrorism Risk Insurance Act of 2002 became effective November 26, 2002, was amended on December 22, 2005 by the Terrorism Risk Insurance Extension Act of 2005 and further amended effective December 26, 2007 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (collectively, “TRIA”). TRIA established a Federal program that provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism. The program is effective through December 31, 2014. TRIA is applicable to almost all commercial lines of property and casualty insurance but excludes commercial auto, burglary and theft, surety, professional liability and farm owners’ multi-peril insurance. Insurers with direct commercial property and casualty insurance exposure in the United States are required to participate in the program and make available coverage for certified acts of terrorism. The most recent amendment to TRIA broadened the definition of certified acts to include domestic terrorism. Federal participation will be triggered under TRIA when the Secretary of Treasury certifies an act of terrorism. Under the program, the federal government will pay 85% of an insurer’s covered losses in excess of the insurer’s applicable deductible. The insurer’s deductible is based on 20% percent of earned premium for the prior year for covered lines of commercial property and casualty insurance. Based on our 2010 earned premiums, our deductible under TRIA during 2011 will be approximately $503 million. The federal program will not pay losses for certified acts unless such losses exceed $100 million. TRIA limits the federal government’s share of losses at $100 billion for a program year. In addition, an insurer that has satisfied its deductible is not liable for the payment of losses in excess of the $100 billion cap.

Competition

The property casualty insurance and reinsurance businesses are highly competitive, with over 2,000 insurance companies transacting business in the United States. We compete directly with a large number of these companies. Our strategy in this highly fragmented industry is to seek specialized areas or geographic regions where our insurance subsidiaries can gain a competitive advantage by responding quickly to changing market conditions. Our subsidiaries establish their own pricing practices. Such practices are based upon a Company-wide philosophy to price products with the intent of making an underwriting profit. Competition in our industry generally changes with profitability and has increased since 2004. As a result of increased competition, we have experienced both downward pressure on pricing for many of our insurance lines as well as demands by insureds and cedants for better terms and conditions.

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Competition for specialty and alternative markets business comes from other specialty insurers, regional carriers, large national multi-line companies and reinsurers. Standard carriers have increasingly competed for excess and surplus business, and as a result many of our specialty companies have reduced their writing substantially.

Competition for the reinsurance business comes from domestic and foreign reinsurers, which produce their business either on a direct basis or through the broker market. These competitors include Swiss Re, Munich Re, Berkshire Hathaway, Transatlantic Reinsurance, and Partner Re. Additionally, our reinsurance writings have reduced substantially since many ceding companies have elected to retain more business and the limited business available has become more competitive.

The regional property casualty subsidiaries compete with mutual and other regional stock companies as well as national carriers. Direct writers of property casualty insurance compete with the regional subsidiaries by writing insurance through their salaried employees, generally at a lower acquisition cost than through independent agents such as those used by the Company.

The international operations compete with native insurance operations both large and small, which may be related to government entities, as well as with branches or local subsidiaries of multinational companies.

Competition from insurers and reinsurers based in Bermuda and other tax advantaged jurisdictions has increased over the last several years, including from domestic based subsidiaries of foreign based entities especially as to excess and surplus lines business.

Employees

As of February 16, 2011, we employed 6,253 individuals. Of this number, our subsidiaries employed 6,154 persons and the remaining 99 persons were employed at the parent company.

Other Information about the Company’s Business

We maintain an interest in the acquisition and start up of complementary businesses and continue to evaluate possible acquisitions and new ventures on an ongoing basis. In addition, our insurance subsidiaries develop new coverages or lines of business to meet the needs of insureds.

Seasonal weather variations and other events affect the severity and frequency of losses sustained by the insurance and reinsurance subsidiaries. Although the effect on our business of catastrophes such as tornadoes, hurricanes, hailstorms, earthquakes and terrorist acts may be mitigated by reinsurance, they nevertheless can have a significant impact on the results of any one or more reporting periods.

We have no customer which accounts for 10 percent or more of our consolidated revenues.

Compliance by W. R. Berkley and its subsidiaries with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to protection of the environment, has not had a material effect upon our capital expenditures, earnings or competitive position.

The Company’s internet address is www.wrberkley.com. The information on our website is not incorporated by reference in this annual report on Form 10-K. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are accessible free of charge through this website as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC.

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ITEM 1A.   RISK FACTORS

Our businesses face significant risks. If any of the events or circumstances described as risks below actually occurs, our businesses, results of operations or financial condition could be materially and adversely affected.

Risks Relating to Our Industry

Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry.

The results of companies in the property casualty insurance industry historically have been subject to significant fluctuations and uncertainties. The demand for insurance is influenced primarily by general economic conditions, while the supply of insurance is often directly related to available capacity or the perceived profitability of the business. Over the past several years, we have faced increased competition in our business, including as a result of an increased flow of capital into the insurance and reinsurance industry, with both new entrants and existing insurers seeking to gain market share. This has resulted in decreased premium rates and at times less favorable contract terms and conditions. The adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural disasters, regulatory measures and court decisions that define and expand the extent of coverage and the effects of economic inflation on the amount of compensation due for injuries or losses. In addition, investment rates of return may impact rate adequacy. These factors can have a significant impact on ultimate profitability because a property casualty insurance policy is priced before its costs are known as premiums usually are determined long before claims are reported. These factors could produce results that would have a negative impact on our results of operations and financial condition.

Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves.

Our gross reserves for losses and loss expenses were approximately $9 billion as of December 31, 2010. Our loss reserves reflect our best estimates of the cost of settling claims and related expenses with respect to insured events that have occurred.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claims administration will cost for claims that have occurred, whether known or unknown. 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, inflation, judicial theories of liability, reinsurance coverage, legislative changes and other factors, including the actions of third parties, which are beyond our control.

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 and settlement is reached. In periods with increased economic volatility, such as under the current financial market conditions, it becomes more difficult to accurately predict claim costs. It is especially difficult to estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled. Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is inherently uncertain, we cannot assure that our current reserves will prove adequate in light of subsequent events. Should we need to increase our reserves, our pre-tax income for the reporting period would decrease by a corresponding amount.

We decreased our estimates for claims occurring in prior years by $253 million in 2010, $234 million in 2009, $196 million in 2008 and $106 million in 2007, and increased our estimates by $27 million in 2006. We, along with the property casualty insurance industry in general, have experienced higher than expected losses for certain types of business written from 1999 to 2002. Although our reserves reflect our best estimate of the costs of settling claims, we cannot assure you that our claim estimates will not need to be increased in the future.

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We discount our reserves 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 liabilities. The expected loss and loss expense payout pattern subject to discounting is derived from our loss payout experience. Changes in the loss and loss expense payout pattern are recorded in the period they are determined. If the actual loss payout pattern is shorter than anticipated, the discount will be reduced and pre-tax income will decrease by a corresponding amount.

As a property casualty insurer, we face losses from natural and man-made catastrophes.

Property casualty insurers are subject to claims arising out of catastrophes that may have a significant effect on their results of operations, liquidity and financial condition. Catastrophe losses have had a significant impact on our results. In addition, through our participation in certain Lloyd’s syndicates, we have additional exposure to catastrophic losses. For example, weather-related losses were $81 million in 2010, $63 million in 2009, $114 million in 2008, $34 million in 2007 and $39 million in 2006.

Catastrophes can be caused by various events, including hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter weather and fires, as well as terrorist activities. The incidence and severity of catastrophes are inherently unpredictable but have increased in recent years. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Some catastrophes are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. Catastrophes can cause losses in a variety of our property and casualty lines, and most of our past catastrophe-related claims have resulted from severe storms. Seasonal weather variations or the impact of climate change may affect the severity and frequency of our losses. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. It is therefore possible that a catastrophic event or multiple catastrophic events could produce significant losses and have a material adverse effect on our results of operations and financial condition.

We face significant competitive pressures in our businesses, which have reduced premium rates and could harm our ability to maintain or increase our profitability and premium volume.

We compete with a large number of other companies in our selected lines of business. We compete, and will continue to compete, with major U.S. and non-U.S. insurers and reinsurers, other regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies and diversified financial services companies, some of which have implicit or explicit government support. Competitiveness in our businesses is based on many factors, including premium charges, ratings assigned by independent rating agencies, commissions paid to producers, the perceived financial strength of the company, other terms and conditions offered, services provided (including ease of doing business over the internet), speed of claims payment and reputation and experience in the lines to be written.

Some of our competitors, particularly in the reinsurance business, have greater financial and marketing resources than we do. These competitors within the reinsurance segment include Swiss Re, Munich Re, Berkshire Hathaway, Transatlantic Reinsurance, and Partner Re. We expect that perceived financial strength, in particular, will become more important as customers seek high quality reinsurers. Certain of our competitors operate from Bermuda or other tax advantaged or less regulated jurisdictions that may provide them with additional competitive and pricing advantages.

Over the past several years, we have faced increased competition in our business, particularly in our reinsurance and specialty segments, as increased supply has led to reduced prices and, at times, less favorable terms and conditions. Our specialty segment increasingly encounters competition from admitted companies seeking to increase market share. We expect to continue to face strong competition in these and our other lines of business and may continue to experience reduced pricing and weaker terms and conditions.

This intense competition could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our products at attractive rates and retain existing business or write new products at adequate rates or on acceptable terms and conditions. If we are unable to retain existing business or write new business at adequate rates and on acceptable terms and conditions, our results of operations could be materially and adversely affected.

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Conditions in the financial markets and the effect of the economic downturn have had and may continue to have a negative impact on our results of operations and financial condition, particularly if such conditions continue.

The significant volatility and uncertainty experienced in financial markets around the world during the past several years and the effect of the economic downturn have continued. Although the U.S. and various foreign governments have taken various actions to try to stabilize the financial markets, the ultimate effectiveness of such actions remains unclear. Therefore, volatility and uncertainty in the financial markets and the resulting negative economic impact may continue for some time.

While we monitor conditions in the financial markets, we cannot predict future conditions or their impact on our results of operations and financial condition. Depending on conditions in the financial markets, we could incur additional realized and unrealized losses in our investment portfolio in future periods, and financial market volatility and uncertainty and an economic downturn could have a significant negative impact on third parties that we do business with, including insureds and reinsurers.

We, as a primary insurer, may have significant exposure for terrorist acts.

To the extent an act of terrorism, whether a domestic or foreign act, is certified by the Secretary of Treasury, we may be covered under the Terrorism Risk Insurance Act of 2002, as amended on December 22, 2005 and further amended on December 26, 2007 (“TRIA”), for up to 85% of our losses for certain property/casualty lines of insurance. However, any such coverage would be subject to a mandatory deductible based on 20% of earned premium for the prior year for the covered lines of commercial property and casualty insurance. Based on our 2010 earned premiums, our deductible under TRIA during 2011 is approximately $503 million. TRIA is in effect through December 31, 2014 unless extended or replaced by a similar program. The coverage provided under TRIA does not apply to reinsurance that we write.

Our earnings could be more volatile because of our significant level of retentions.

As compared to a number of our competitors, we maintain significant retention levels in premiums written. We purchase less reinsurance, the process by which we transfer, or cede, part of the risk we have assumed to a reinsurance company, thereby retaining more risk. As a result, our earnings could be more volatile and increased severities are more likely to have a material adverse effect on our results of operations and financial condition.

We are subject to extensive governmental regulation, which increases our costs and could restrict the conduct of our business.

We are subject to extensive governmental regulation and supervision. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. This system of regulation, generally administered by a department of insurance in each state in which we do business, relates to, among other things:

•  standards of solvency, including risk-based capital measurements;

•  restrictions on the nature, quality and concentration of investments;

•  requiring certain methods of accounting;

•  rate and form regulation pertaining to certain of our insurance businesses; and

•  potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.

State insurance departments conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies, holding company issues and other matters. Federal financial services modernization legislation and legislative and regulatory initiatives taken or which may be taken in response to the current conditions in the financial markets and the ongoing economic downturn may lead to additional federal regulation of the insurance industry in the coming years.

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On July 21, 2010, President Obama signed into law the Dodd Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) which effects sweeping changes to financial services regulation in the United States. The Dodd-Frank Act establishes the Financial Services Oversight Council (“FSOC”) which is authorized to recommend that certain systemically significant non-bank financial companies, including insurance companies, be regulated by the Board of Governors of the Federal Reserve. The Dodd-Frank Act also establishes a Federal Insurance Office (“FIO”) and authorizes the federal preemption of certain state insurance laws. FSOC and the FIO are authorized to study, monitor and report to Congress on the U.S. insurance industry and the significance of global reinsurance to the U.S. insurance market. The potential impact of the Dodd-Frank Act on the U.S. insurance business is not clear, however, our business could be affected by changes to the U.S. system of insurance regulation or our designation or the designation of insurers or reinsurers with which we do business as systemically significant non-bank financial companies.

Although U.S. state regulation is the primary form of regulation of insurance and reinsurance, in addition to the changes brought about by the Dodd-Frank Act, Congress has considered over the past years various proposals relating to the creation of an optional federal charter, repeal of the insurance company antitrust exemption from the McCarran Ferguson Act, and tax law changes. We may be subject to potentially increased federal oversight as a financial institution. Also, foreign governments regulate our international operations.

With respect to international measures, an EU directive concerning the capital adequacy, risk management and regulatory reporting for insurers and reinsurers (“Solvency II”) which was adopted by the European Parliament in April 2009, may affect our insurance businesses. Adoption by EU member states is anticipated at the end of 2012. Implementation of Solvency II may require us to utilize a significant amount of resources to ensure compliance. In addition, Solvency II may have the effect of increasing the capital requirements of our EU domiciled insurers. Solvency II provides for the supervision of group solvency. Our capital requirements may be adversely affected if the EU Commission finds that the insurance regimes of our third-country domiciled companies are not equivalent to the requirements of Solvency II.

We may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations. Also, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us. Also, changes in the level of regulation of the insurance industry, whether federal, state or foreign, or changes in laws or regulations themselves or interpretations by regulatory authorities, restrict the conduct of our business.

In certain of our insurance businesses, the rates we charge our policyholders are subject to regulatory approval. Certain lines of business are subject to a greater degree of regulatory scrutiny than others. For example, the workers’ compensation business is highly regulated. For 2010, approximately 16.5% of our net premiums written represented primary workers’ compensation business. Over the past several years, rates for primary workers’ compensation business written in the State of California have declined significantly as a result of workers’ compensation reform. Of our net premiums written during 2010, approximately 1.6% represented primary workers’ compensation business written in the State of California.

Risks Relating to Our Business

We cannot guarantee that our reinsurers will pay in a timely fashion, if at all, and, as a result, we could experience losses.

We purchase reinsurance by transferring part of the risk that we have assumed, known as ceding, to a reinsurance company in exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer contractually liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us, the reinsured, of our liability to our policyholders. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay such recoverables on a timely basis. Accordingly, we bear credit risk with respect to our reinsurers, and if our reinsurers fail to pay us, our financial results would be adversely affected. Underwriting results and investment returns of some of our reinsurers may affect their future

27

ability to pay claims. As of December 31, 2010, the amount due from our reinsurers was approximately $1,070 million, including amounts due from state funds and industry pools where it was intended that we would bear no risk. Certain of these amounts due from reinsurers are secured by letters of credit or by funds held in trust on our behalf.

We are rated by A.M. Best, Standard & Poor’s, and Moody’s, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Certain of our insurance company subsidiaries are rated by A.M. Best, Standard & Poor’s and Moody’s Investors. Our ratings are subject to periodic review, and we cannot assure you that we will be able to retain those ratings.

If our ratings are reduced from their current levels by A.M. Best, Standard & Poor’s or Moody’s, our competitive position in the insurance industry could suffer and it would be more difficult for us to market our products. A significant downgrade could result in a substantial loss of business as policyholders move to other companies with higher claims-paying and financial strength ratings.

If market conditions cause reinsurance to be more costly or unavailable, we may be required to bear increased risks or reduce the level of our underwriting commitments.

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain amounts of risk underwritten by our insurance company subsidiaries, especially catastrophe risks. We also purchase reinsurance on risks underwritten by others which we reinsure. Market conditions beyond our control determine the availability and cost of the reinsurance protection we seek to purchase, which may affect the level of our business and profitability. Our reinsurance contracts are generally subject to annual renewal. We may be unable to maintain our current reinsurance contracts or to obtain other reinsurance contracts in adequate amounts and at favorable rates. In addition, we may be unable to obtain reinsurance on terms acceptable to us relating to certain lines of business that we intend to begin writing. If we are unable to renew our expiring contracts or to obtain new reinsurance contracts, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures, we would have to reduce the level of our underwriting commitments, especially catastrophe exposed risks.

Depending on conditions in the financial markets and the economic downturn, we may be unable to raise debt or equity capital if needed.

If the current conditions in the financial markets and the economic downturn continue, we may be unable to access debt or equity capital on acceptable terms if needed, which could have a negative impact on our ability to invest in our insurance company subsidiaries and/or to take advantage of opportunities to expand our business, such as possible acquisitions and new ventures.

Our international operations expose us to investment, political and economic risks, including foreign currency and credit risk.

Our expanding international operations in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia and Canada expose us to investment, political and economic risks, including foreign currency and credit risk. Changes in the value of the U.S. dollar relative to other currencies could have an adverse effect on our results of operations and financial condition.

Our investments in non-U.S.-denominated securities are subject to fluctuations in non-U.S. securities and currency markets, and those markets can be volatile. Non-U.S. currency fluctuations also affect the value of any dividends paid by our non-U.S. subsidiaries to their parent companies in the U.S.

28

We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate any such acquired companies or successfully invest in such ventures.

As part of our present strategy, we continue to evaluate possible acquisition transactions and the start-up of complementary businesses on an ongoing basis, and at any given time we may be engaged in discussions with respect to possible acquisitions and new ventures. We cannot assure you that we will be able to identify suitable acquisition transactions or insurance ventures, that such transactions will be financed and completed on acceptable terms or that our future acquisitions or start-up ventures will be successful. The process of integrating any companies we do acquire or investing in new ventures may have a material adverse effect on our results of operations and financial condition.

We may be unable to attract and retain key personnel and qualified employees.

We depend on our ability to attract and retain key personnel, including our Chairman and CEO, COO, senior executive officers, presidents of our operating units, experienced underwriters and other skilled employees who are knowledgeable about our business. If the quality of our underwriting team and other personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate, and be unable to expand our operations into new markets.

Risks Relating to Our Investments

A significant amount of our assets is invested in fixed maturity securities and is subject to market fluctuations.

Our investment portfolio consists substantially of fixed maturity securities. As of December 31, 2010, our investment in fixed maturity securities was approximately $11 billion, or 86% of our total investment portfolio. As of that date, our portfolio of fixed maturity securities consisted of the following types of securities: U.S. Government securities (12%); state and municipal securities (50%); corporate securities (21%); mortgage-backed securities (13%) and foreign government bonds (4%).

The fair value of these assets and the investment income from these assets fluctuate depending on general economic and market conditions. The fair value of fixed maturity securities generally decreases as interest rates rise. Conversely, if interest rates decline, investment income earned from future investments in fixed maturity securities will be lower. In addition, some fixed maturity securities, such as mortgage-backed and other asset-backed securities, carry prepayment risk as a result of interest rate fluctuations.

The value of investments in fixed maturity securities is subject to impairment as a result of deterioration in the credit worthiness of the issuer, default by the issuer (including states and municipalities) in the performance of its obligations in respect of the securities and/or increases in market interest rates. To a large degree, the credit risk we face is a function of the economy; accordingly, we face a greater risk in an economic downturn or recession. Although the historical rates of default on state and municipal securities have been relatively low, our state and municipal fixed maturity securities could be subject to a higher risk of default or impairment due to declining municipal tax bases and revenue. The economic downturn has resulted in many states and municipalities operating under deficits or projected deficits, the severity and duration of which could have an adverse impact on both the valuation of our state and municipal fixed maturity securities and the issuer’s ability to perform its obligations thereunder. Additionally, our investments are subject to losses as a result of a general decrease in commercial and economic activity for an industry sector in which we invest, as well as risks inherent in particular securities.

Although we attempt to manage these risks through the use of investment guidelines and other oversight mechanisms and by diversifying our portfolio and emphasizing preservation of principal, our efforts may not be successful. Impairments, defaults and/or rate increases could reduce our net investment income and net realized investment gains or result in investment losses. Investment returns are currently, and will likely continue to remain, under pressure due to the significant volatility experienced in the financial markets, economic uncertainty, more generally, and the shape of the yield curve. As a result, our exposure to the risks described above could materially and adversely affect our results of operations.

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We invest some of our assets in equity securities, merger arbitrage securities, investment funds, private equity and real estate related assets, which may decline in value.

We invest a portion of our investment portfolio in equity securities, merger arbitrage securities, investment funds, private equity and real estate related assets. At December 31, 2010, our investment in these assets was approximately $1.8 billion, or 14%, of our investment portfolio. We reported provisions for other than temporary impairments in the value of these assets of approximately $9 million in 2010, $63 million in 2009 and $427 million in 2008, and losses from investment funds of $8 million in 2010, $174 million in 2009 and $4 million in 2008.

Merger and arbitrage trading securities were $420 million, or 3%, of our investment portfolio at December 31, 2010. Merger arbitrage involves investing in the securities of publicly held companies that are the targets in announced tender offers and mergers. Merger arbitrage differs from other types of investments in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period, usually four months or less. Our merger arbitrage positions are exposed to the risk associated with the completion of announced deals, which are subject to regulatory as well as political and other risks.

Investments in publicly traded real estate investment trusts, real estate investment funds and limited partnerships and loans receivable were $675 million, or 5%, of our investment portfolio at December 31, 2010. The values of our real estate related investments are subject to fluctuations based on changes in the economy in general and real estate valuations in particular. These investments have been subject to significant volatility as a result of the current conditions in the financial markets. In addition, our investments in real estate related assets are less liquid than our other investments.

Risks Relating to Purchasing Our Securities

We are an insurance holding company and, therefore, may not be able to receive dividends in needed amounts.

As an insurance holding company, our principal assets are the shares of capital stock of our insurance company subsidiaries. We have to rely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations and for paying dividends to stockholders and corporate expenses. The payment of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as regulatory restrictions. During 2011, the maximum amount of dividends that can be paid without regulatory approval is approximately $490 million. As a result, in the future we may not be able to receive dividends from these subsidiaries at times and in amounts necessary to meet our obligations or pay dividends.

We are subject to certain provisions that may have the effect of hindering, delaying or preventing third party takeovers, which may prevent our stockholders from receiving premium prices for their shares in an unsolicited takeover and make it more difficult for third parties to replace our current management.

Provisions of our Restated Certificate of Incorporation and By-Laws, as well as state insurance statutes, may hinder, delay or prevent unsolicited acquisitions or changes of our control. These provisions may also have the effect of making it more difficult for third parties to cause the replacement of our current management without the concurrence of our board of directors.

These provisions include:

•  our classified board of directors and the ability of our board to increase its size and to appoint directors to fill newly created directorships;

•  the requirement that 80% of our stockholders must approve mergers and other transactions between us and the holder of 5% or more of our shares, unless the transaction was approved by our board of directors prior to such holder’s acquisition of 5% of our shares;

•  the need for advance notice in order to raise business or make nominations at stockholders’ meetings; and

30

•  state insurance statutes that restrict the acquisition of control (generally defined as 10% of the outstanding shares, though 5% in Alabama and certain other jurisdictions) of an insurance company without regulatory approval.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934.

ITEM 2.   PROPERTIES

W. R. Berkley and its subsidiaries own or lease office buildings or office space suitable to conduct their operations. At December 31, 2010, the Company had aggregate office space of 3,352,844 square feet, of which 939,991 were owned and 2,412,853 were leased.

Rental expense for the Company’s operations was approximately $29,936,000, $28,067,000 and $23,802,000 for 2010, 2009 and 2008, respectively. Future minimum lease payments (without provision for sublease income) are $31,265,000 in 2011, $27,749,000 in 2012 and $94,143,000 thereafter.

ITEM 3.   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 4.   RESERVED

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PART II

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of the Company is traded on the New York Stock Exchange under the symbol “WRB”.

	Price Range				Dividends Declared
	High		Low		per Share
2010:
Fourth Quarter	$	28.83	$	26.19	$	0.07
Third Quarter		27.66		25.63		0.07
Second Quarter		28.13		25.69		0.07
First Quarter		26.75		23.89		0.06
2009:
Fourth Quarter	$	26.15	$	23.30	$	0.06
Third Quarter		26.26		20.82		0.06
Second Quarter		25.18		21.05		0.06
First Quarter		31.07		18.59		0.06

The closing price of the common stock on February 24, 2011 as reported on the New York Stock Exchange was $29.42 per share. The approximate number of record holders of the common stock on February 14, 2011 was 459.

Set forth below is a summary of the shares repurchased by the Company during the fourth quarter of 2010 and the remaining number of shares authorized for purchase by the Company during such period.

					Total Number of		Maximum Number of
					Shares Purchased as		Shares that may yet
					Part of Publicly		be Purchased Under
	Total Number of		Average Price		Announced Plans or		the Plans or
	Shares Purchased		Paid per Share		Programs		Programs(1)
October 2010		289,697		27.51		289,697		6,393,341
November 2010		2,502,200		27.29		2,502,200		7,844,343
December 2010		2,782,020		27.13		2,002,149		5,842,194

(1) The Company’s repurchase authorization was increased to 10,000,000 shares by its Board of Directors on November 3, 2010.

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ITEM 6.   SELECTED FINANCIAL DATA

	Year Ended December 31,
	2010			2009			2008			2007			2006
	(Amounts in thousands, except per share data)
Net premiums written	$	3,850,926		$	3,730,095		$	4,033,899		$	4,575,989		$	4,818,993
Net premiums earned		3,835,582			3,805,849			4,289,580			4,663,701			4,692,622
Net investment income		538,698			552,561			537,033			634,386			549,030
Income (losses) from investment funds		(8,173	)		(173,553	)		(3,553	)		38,274			37,145
Insurance service fees		85,405			93,245			102,856			97,689			104,812
Net investment gains (losses)		56,581			(38,408	)		(356,931	)		49,696			9,648
Revenues from wholly-owned investees		214,454			189,347			137,280			102,846			—
Total revenues		4,724,069			4,431,178			4,708,808			5,588,397			5,394,831
Interest expense		106,969			87,989			84,623			88,996			92,522
Income before income taxes		603,305			382,230			326,322			1,092,392			988,645
Income tax expense		(153,739	)		(73,150	)		(44,919	)		(323,070	)		(286,398	)
Noncontrolling interests		(279	)		(23	)		(262	)		(3,083	)		(2,729	)
Net income to common stockholders		449,287			309,057			281,141			766,239			699,518
Data per common share:
Net income per basic share		3.02			1.93			1.68			4.05			3.65
Net income per diluted share		2.90			1.86			1.62			3.90			3.46
Common stockholders’ equity		26.26			22.97			18.87			19.92			17.30
Cash dividends declared		0.27			0.24			0.23			0.20			0.16
Weighted average shares outstanding:
Basic		148,752			160,357			166,956			188,981			191,809
Diluted		155,081			166,574			173,454			196,698			201,961
Investments	$	12,995,393		$	13,050,238		$	11,143,281		$	11,956,717		$	11,172,684
Total assets		17,528,547			17,328,596			16,121,158			16,820,005			15,656,489
Reserves for losses and loss expenses		9,016,549			9,071,671			8,999,596			8,678,034			7,784,269
Junior subordinated debentures		242,784			249,793			249,584			249,375			241,953
Senior notes and other debt		1,500,419			1,345,481			1,021,869			1,121,793			869,187
Common stockholders’ equity		3,702,876			3,596,067			3,046,319			3,592,368			3,335,159

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is contained in the registrant’s 2010 Annual Report to Stockholders (attached hereto as Exhibit 13), which information is incorporated herein by reference.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to the information under “Market Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is contained in the registrant’s 2010 Annual Report to Stockholders (attached hereto as Exhibit 13), which information is incorporated herein by reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the registrant which are contained in the registrant’s 2010 Annual Report to Stockholders (attached hereto as Exhibit 13) are incorporated herein by reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.   CONTROLS AND PROCEDURES

(a)   Evaluation Of Disclosure Controls And Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this annual 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 Exchange Act and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b)   Management’s Report On Internal Control Over Financial Reporting

Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. See pages 28 and 29 of Exhibit 13 of this Form 10-K for management’s report and the related report as to the effectiveness of the Company’s internal control over financial reporting by KPMG LLP, an independent registered public accounting firm.

(c)   Change In Internal Control

During the quarter ended December 31, 2010, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

None.

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PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

ITEM 11.   EXECUTIVE COMPENSATION

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)   Security ownership of certain beneficial owners

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

(b)   Security ownership of management

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

(c)   Changes in control

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2010, and which is incorporated herein by reference.

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PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Index to Financial Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s consolidated financial statements, together with the reports on the consolidated financial statements and the effectiveness of internal control over financial reporting of KPMG LLP, appear in the Company’s 2010 Annual Report to Stockholders (attached hereto as Exhibit 13) and are incorporated by reference in this Annual Report on Form 10-K. With the exception of the aforementioned information, the 2010 Annual Report to Stockholders is not deemed to be filed as part of this report. The schedules to the consolidated financial statements listed below should be read in conjunction with the consolidated financial statements in such 2010 Annual Report to Stockholders. Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or required information is shown in the financial statements or notes thereto.

Index to Financial Statement Schedules	Page
Independent Registered Public Accountants’ Report on Schedules		42
Schedule II — Condensed Financial Information of Registrant		43
Schedule III — Supplementary Insurance Information		47
Schedule IV — Reinsurance		48
Schedule V — Valuation and Qualifying Accounts		49
Schedule VI — Supplementary Information Concerning Property — Casualty Insurance Operations		50

(b)   Exhibits

The exhibits filed as part of this report are listed on pages 38-41 hereof.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

W. R. BERKLEY CORPORATION

By  /s/  William R. Berkley

William R. Berkley,

Chairman of the Board and

Chief Executive Officer

February 28, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  William R. Berkley William R. Berkley	Chairman of the Board and Chief Executive Officer Principal executive officer	February 28, 2011
/s/  W. Robert Berkley, Jr. W. Robert Berkley, Jr.	President, Chief Operating Officer and Director	February 28, 2011
/s/  Ronald E. Blaylock Ronald E. Blaylock	Director	February 28, 2011
/s/  Mark E. Brockbank Mark E. Brockbank	Director	February 28, 2011
/s/  George G. Daly George G. Daly	Director	February 28, 2011
/s/  Mary C. Farrell Mary C. Farrell	Director	February 28, 2011
/s/  Rodney A. Hawes, Jr. Rodney A. Hawes, Jr.	Director	February 28, 2011
/s/  Jack H. Nusbaum Jack H. Nusbaum	Director	February 28, 2011
/s/  Mark L. Shapiro Mark L. Shapiro	Director	February 28, 2011
/s/  Eugene G. Ballard Eugene G. Ballard	Senior Vice President and Chief Financial Officer Principal financial officer and principal accounting officer	February 28, 2011

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ITEM 15.   (b) EXHIBITS

Number
	(3	.1)	The Company’s Restated Certificate of Incorporation, as amended through May 10, 2004 (incorporated by reference to Exhibits 3.1 and 3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).
	(3	.2)	Amendment, dated May 11, 2004, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly report on Form 10-Q (File No. 1-15202) filed with the Commission on August 5, 2004).
	(3	.3)	Amendment, dated May 16, 2006, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on May 17, 2006).
	(3	.4)	Amended and Restated By-Laws (incorporated by reference to Exhibit 3(ii) of the Company’s Current Report on Form 8-K (File No. 0-7849) filed with the Commission on May 11, 1999).
	(4	.1)	Indenture, dated as of February 14, 2003, between the Company and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission of March 31, 2003).
	(4	.2)	First Supplemental Indenture, dated February 14, 2003, between the Company and The Bank of New York, a trustees, relating to $200,000,000 principal amount of the Company’s 5.875% Senior Notes due 2013, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form (File No. 1-15202) filed with the Commission of March 31, 2003).
	(4	.3)	Second Supplemental Indenture, dated as of September 12, 2003, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 5.125% Senior Notes due 2010, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on November 14, 2003).
	(4	.4)	Third Supplemental Indenture, dated as of August 24, 2004, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 6.150% Senior Notes due 2019, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 14, 2005).
	(4	.5)	Fourth Supplemental Indenture, dated as of May 9, 2005, between the Company and The Bank of New York, as Trustee, relating to $200,000,000 principal amount of the Company’s 5.60% Senior Notes due 2015, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s quarterly report on Form 10-Q (File No. 1-15200) filed with the Commission on August 2, 2005).
	(4	.6)	Fifth Supplemental Indenture, dated as of February 9, 2007, between the Company and The Bank of New York, as Trustee, relating to $250,000,000 principal amount of the Company’s 6.25% Senior Notes due 2037, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.7 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 1, 2007).
	(4	.7)	Sixth Supplemental Indenture, dated as of September 14, 2009, between the Company and The Bank of New York Mellon, as Trustee, relating to $300,000,000 principal amount of the Company’s 7.375% Senior Notes due 2019, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.7 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on February 26, 2010).
	(4	.8)	Seventh Supplemental Indenture, dated as of September 16, 2010, between the Company and The Bank of New York Mellon, as Trustee, relating to $300,000,000 principal amount of the Company’s 5.375% Senior Notes due 2020, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on September 16, 2010).
	(4	.9)	Amended and Restated Trust Agreement of W. R. Berkley Capital Trust dated as of July 26, 2003 (Incorporated by reference to Exhibit 4.3 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).

38

Number
	(4	.10)	Subordinated Indenture between W. R. Berkley Corporation and The Bank of New York, as Trustee, dated as of July 26, 2005 (incorporated by reference to Exhibit 4.4 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.11)	Supplemental Indenture No. 1 to the Subordinated Indenture between W. R. Berkley Corporation and The Bank of New York, as Trustee, dated as of July 26, 2005, relating to 6.750% Subordinated Debentures Due 2045 (incorporated by reference to Exhibit 4.6 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.12)	Preferred Securities Guarantee Agreement between W. R. Berkley Corporation, as Guarantor, and The Bank of New York, as Preferred Guarantee Trustee, dated as of July 26, 2005, relating to W. R. Berkley Capital Trust II (incorporated by reference to Exhibit 4.6 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.13)	The instruments defining the rights of holders of the other long term debt securities of the Company are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company agrees to furnish supplementally copies of these instruments to the Commission upon request.
	(10	.1)	W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s 2003 Proxy Statement (File No. 1-15202) filed with the Commission on April 14, 2003).
	(10	.2)	Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on May 3, 2005).
	(10	.3)	Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2010).
	(10	.4)	Form of Restricted Stock Unit Agreement for grant of April 4, 2003 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).
	(10	.5)	W. R. Berkley Corporation Deferred Compensation Plan for Officers as amended and restated effective December 3, 2007 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on December 19, 2007).
	(10	.6)	W. R. Berkley Corporation Deferred Compensation Plan for Directors as amended and restated effective December 3, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on December 19, 2007).
	(10	.7)	W. R. Berkley Corporation 2007 Annual Incentive Compensation Plan (incorporated by reference to Annex A of the Company’s 2006 Proxy Statement (File No. 1-15202) filed with the Commission on April 18, 2006).
	(10	.8)	W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Annex B from the Company’s 2004 Proxy Statement (File No. 1-15202) filed with the Commission on April 12, 2004).
	(10	.9)	W. R. Berkley Corporation 2009 Long-Term Incentive Plan (incorporated by reference to Annex A of the Company’s 2009 Proxy Statement (File No. 1-15202) filed with the Commission on April 17, 2009).
	(10	.10)	Form of Performance Unit Award Agreement under the W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on May 3, 2005).
	(10	.11)	Form of 2008 Performance Unit Award Agreement under the W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on March 13, 2008).
	(10	.12)	W. R. Berkley Corporation 2009 Directors Stock Plan (incorporated by reference to Annex B of the Company’s 2009 Proxy Statement (File No. 1-15202) filed with the Commission on April 17, 2009).
	(10	.13)	Supplemental Benefits Agreement between William R. Berkley and the Company as amended and restated as of December 12, 2008.
	(13)		Portions of the 2010 Annual Report to Stockholders of W. R. Berkley Corporation that are incorporated by reference in this Report on Form 10-K.

39

Number
	(14)	Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 14, 2005).
	(21)	Following is a list of the Company’s significant subsidiaries and other operating entities. Subsidiaries of subsidiaries are indented and the parent of each such corporation owns 100% of the outstanding voting securities of such corporation except as noted below.

		Percentage
	Jurisdiction of	owned
	Incorporation	by the Company(1)
Berkley International, LLC(2)	New York		100	%
Berkley Surety Group, Inc.	Delaware		100	%
Clermont Specialty Managers, Ltd.	New Jersey		100	%
J/I Holding Corporation:	Delaware		100	%
Admiral Insurance Company:	Delaware		100	%
Admiral Indemnity Company	Delaware		100	%
Berkley London Holdings, Inc.(3)	Delaware		100	%
W. R. Berkley London Finance, Limited	United Kingdom		100	%
W. R. Berkley London Holdings, Limited	United Kingdom		100	%
W. R. Berkley Insurance (Europe), Limited	United Kingdom		100	%
Carolina Casualty Insurance Company	Iowa		100	%
Nautilus Insurance Company:	Arizona		100	%
Great Divide Insurance Company	North Dakota		100	%
Key Risk Management Services, Inc.	North Carolina		100	%
Monitor Liability Managers, Inc.	Delaware		100	%
Signet Star Holdings, Inc.:	Delaware		100	%
Berkley Insurance Company	Delaware		100	%
Berkley Regional Insurance Company	Delaware		100	%
Acadia Insurance Company	New Hampshire		100	%
Berkley National Insurance Company	Iowa		100	%
CGH Insurance Group, Inc	Alabama		100	%
American Mining Insurance Company, Inc.	Alabama		100	%
Continental Western Insurance Company	Iowa		100	%
Firemen’s Insurance Company of Washington, D.C.	Delaware		100	%
Tri-State Insurance Company of Minnesota	Minnesota		100	%
Union Insurance Company	Iowa		100	%
Key Risk Insurance Company	North Carolina		100	%
Midwest Employers Casualty Company:	Delaware		100	%
Berkley Risk Administrators Company, LLC	Minnesota		100	%
Preferred Employers Insurance Company	California		100	%
Gemini Insurance Company	Delaware		100	%
Riverport Insurance Company	Minnesota		100	%
StarNet Insurance Company	Delaware		100	%
Facultative ReSources, Inc.	Connecticut		100	%

40

1)	W. R. Berkley Corporation is the ultimate parent. The subsidiary of a direct parent is indicated by an indentation, and its percentage ownership is as indicated in this column.
2)	Berkley International, LLC is held by W. R. Berkley Corporation and its subsidiaries as follows: W. R. Berkley Corporation (2%), Admiral Insurance Company (35%), Berkley Regional Insurance Company (14%), Nautilus Insurance Company (14%) and Berkley Insurance Company (35%).
3)	Held by Admiral Insurance Company (66.67%) and Berkley Insurance Company (33.33%)
(23)	Consent of Independent Registered Public Accounting Firm
(31.1)	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(31.2)	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(32.1)	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

41

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

W. R. Berkley Corporation:

Under date of February 28, 2011, we reported on the consolidated balance sheets of W. R. Berkley Corporation and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010, as contained in the 2010 Annual Report to Stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the December 31, 2010 Annual Report on Form 10-K for the year 2010. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

New York, New York

February 28, 2011

42

Schedule II

W. R. Berkley Corporation
Condensed Financial Information of Registrant
Balance Sheets (Parent Company)

	December 31,
	2010			2009
	(Amounts in thousands)
Assets:
Cash and cash equivalents	$	29,476		$	117,648
Fixed maturity securities available for sale at fair value (cost $244,804 and $303,203 in 2010 and 2009, respectively)		246,275			302,898
Equity securities available for sale, at fair value (cost $0 in 2010 and 2009)		109,748			97,525
Investment in subsidiaries		5,261,686			4,748,256
Deferred Federal income taxes		80,861			202,159
Current Federal income taxes		19,163			—
Real estate, furniture and equipment at cost, less accumulated depreciation		6,431			6,063
Other assets		7,969			2,769
Total assets	$	5,761,609		$	5,477,318
Liabilities and stockholders’ equity
Liabilities:
Due to subsidiaries	$	189,499		$	143,917
Other liabilities		161,666			149,275
Current Federal income taxes		—			28,707
Junior subordinated debentures		242,784			242,580
Senior notes		1,464,784			1,316,772
Total liabilities		2,058,733			1,881,251
Stockholders’ equity:
Preferred stock		—			—
Common stock		47,024			47,024
Additional paid-in capital		935,099			926,359
Retained earnings (including accumulated undistributed net income of subsidiaries of $3,305,654 and $2,936,834 in 2010 and 2009, respectively)		4,194,684			3,785,187
Accumulated other comprehensive income		276,563			163,207
Treasury stock, at cost		(1,750,494	)		(1,325,710	)
Total stockholders’ equity		3,702,876			3,596,067
Total liabilities and stockholders’ equity	$	5,761,609		$	5,477,318

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

43

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

Statements of Income (Parent Company)

	Years Ended December 31,
	2010			2009			2008
	(Amounts in thousands)
Management fees and investment income including dividends from subsidiaries of $405,917, $150,545 and $568,634 for 2010, 2009 and 2008, respectively	$	411,623		$	159,361		$	580,969
Net investment gains (losses)		(1,891	)		20,961			(601	)
Other income		158			206			382
Total revenues		409,890			180,528			580,750
Operating costs and expense		117,658			88,276			93,794
Interest expense		105,510			87,054			83,770
Income before federal income taxes		186,722			5,198			403,186
Federal income taxes:
Federal income taxes provided by subsidiaries on a separate return basis		28,377			117,133			140,108
Federal income tax expense on a consolidated return basis		(138,389	)		(58,644	)		(12,560	)
Net benefit (expense)		(110,012	)		58,489			127,548
Income before undistributed equity in net income (loss) of subsidiaries		76,710			63,687			530,734
Equity in undistributed net income (loss) of subsidiaries		372,577			245,370			(249,593	)
Net income	$	449,287		$	309,057		$	281,141

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

44

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

Statements of Cash Flows (Parent Company)

	Years Ended December 31,
	2010			2009			2008
	(Amounts in thousands)
Cash flows from operating activities:
Net income	$	449,287		$	309,057		$	281,141
Adjustments to reconcile net income to net cash from operating activities:
Net investment (gains) losses		1,891			(20,961	)		601
Depreciation and amortization		3,963			2,279			2,488
Equity in undistributed (earnings) losses of subsidiaries		(372,577	)		(245,370	)		249,593
Tax payments received from subsidiaries		106,284			103,356			273,172
Federal income taxes provided by subsidiaries on a separate return basis		(28,377	)		(117,133	)		(140,108	)
Stock incentive plans		26,318			24,078			23,991
Change in:
Federal income taxes		29,332			62,753			(149,139	)
Other assets		16,430			(381	)		(877	)
Other liabilities		11,467			11,661			(23,310	)
Accrued investment income		(2,776	)		(137	)		3,099
Other, net		—			(603	)		691
Net cash from operating activities		241,242			128,599			521,342
Cash from (used in) investing activities:
Proceeds from sales of fixed maturity securities		164,920			29,355			197,621
Proceeds from maturities and prepayments of
fixed maturity securities		85,695			47,133			43,912
Proceeds from sales of equity securities		3			17,897			—
Cost of purchases of fixed maturity securities		(195,646	)		(353,944	)		(44,589	)
Investment in funds		0			5,204			(213	)
Investments in and advances to subsidiaries, net		(18,685	)		(29,179	)		(44,771	)
Change in balance due to security broker		(8,500	)		14,483			—
Net additions to real estate, furniture & equipment		(1,212	)		(224	)		(263	)
Other, net		—			1			780
Net cash from (used in) investing activities		26,575			(269,274	)		152,477
Cash from (used in) financing activities:
Net proceeds from issuance of senior notes		296,636			297,461			—
Net proceeds from stock options exercised		17,730			5,426			14,806
Repayment of senior notes		(150,000	)		—			(88,745	)
Purchase of common treasury shares		(471,007	)		(147,144	)		(553,284	)
Cash dividends to common stockholders		(49,348	)		(28,843	)		(46,978	)
Other, net		—			—			7
Net cash from (used in) financing activities		(355,989	)		126,900			(674,194	)
Net decrease in cash and cash equivalents		(88,172	)		(13,775	)		(375	)
Cash and cash equivalents at beginning of year		117,648			131,423			131,798
Cash and cash equivalents at end of year	$	29,476		$	117,648		$	131,423

See accompanying Report of Independent Registered Public Accounting Firm and note to condensed financial statements.

45

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

December 31, 2010

Note to Condensed Financial Statements (Parent Company)

The accompanying condensed financial statements should be read in conjunction with the notes to consolidated financial statements included elsewhere herein. Reclassifications have been made in the 2009 and 2008 financial statements as originally reported to conform them to the presentation of the 2010 financial statements.

The Company files a consolidated federal tax return with the results of its domestic insurance subsidiaries included on a statutory basis. Under present Company policy, federal income taxes payable by subsidiary companies on a separate-return basis are paid to W. R. Berkley Corporation, and the Company pays the tax due on a consolidated return basis.

46

Schedule III

W. R. Berkley Corporation and Subsidiaries

Supplementary Insurance Information

December 31, 2010, 2009 and 2008

									Net
									Investment
									Income and
	Deferrred								Income (Loss)				Amortization of
	Policy		Reserve for						from				Deferred Policy		Other			Net
	Acquisition		Losses and		Unearned		Premiums		Investment		Loss and Loss		Acquisition		Operating Cost			Premiums
	Cost		Loss Expenses		Premiums		Earned		Funds		Expenses		Cost		and Expenses			Written
			(Amounts in thousands)
December 31, 2010
Specialty	$	122,440	$	3,186,769	$	693,358	$	1,288,373	$	180,063	$	750,831	$	263,279	$	160,811		$	1,311,831
Regional		139,289		1,378,936		530,672		1,066,922		82,411		647,986		293,690		93,418			1,044,347
Alternative markets		33,471		2,355,007		261,858		608,191		123,309		410,873		92,364		128,829			582,045
Reinsurance		56,834		1,591,397		203,430		419,356		103,079		220,230		129,508		42,775			401,239
International		53,908		504,440		264,403		452,740		32,794		279,947		138,376		46,037			511,464
Corporate and adjustments		—		—		—		—		8,869		—		—		314,841			—
Total	$	405,942	$	9,016,549	$	1,953,721	$	3,835,582	$	530,525	$	2,309,867	$	917,217	$	786,711		$	3,850,926
December 31, 2009
Specialty	$	116,234	$	3,210,479	$	662,972	$	1,354,355	$	125,351	$	838,894	$	297,388	$	126,078		$	1,260,451
Regional		142,249		1,440,158		554,426		1,116,871		57,530		686,093		289,973		94,982			1,081,100
Alternative markets		34,443		2,221,488		287,031		597,932		83,719		378,961		89,432		137,415			589,637
Reinsurance		60,219		1,787,006		225,209		411,511		75,505		238,075		127,446		35,137			423,425
International		38,215		412,540		198,790		325,180		26,767		194,684		98,915		35,629			375,482
Corporate and adjustments		—		—		—		—		10,136		—		—		291,857			—
Total	$	391,360	$	9,071,671	$	1,928,428	$	3,805,849	$	379,008	$	2,336,707	$	903,154	$	721,098		$	3,730,095
December 31, 2008
Specialty	$	136,845	$	3,177,194	$	731,409	$	1,618,915	$	188,120	$	972,729	$	343,354	$	119,301		$	1,453,778
Regional		144,126		1,443,136		592,153		1,237,258		80,538		809,525		313,483		86,068			1,211,096
Alternative markets		35,281		2,140,839		305,177		626,858		105,674		393,004		90,475		146,264			622,185
Reinsurance		52,663		1,924,315		210,388		519,717		116,046		336,478		150,895		30,444			435,108
International		25,892		314,112		127,023		286,832		35,184		176,925		100,332		(8,186	)		311,732
Corporate and adjustments		—		—		—		—		7,918		—		—		102,735			—
Total	$	394,807	$	8,999,596	$	1,966,150	$	4,289,580	$	533,480	$	2,688,661	$	998,539	$	476,626		$	4,033,899

See accompanying Report of Independent Registered Public Accounting Firm.

47

Schedule IV

W. R. Berkley Corporation and Subsidiaries

Reinsurance

Years ended December 31, 2010, 2009 and 2008

									Percentage
			Ceded		Assumed				of Amount
	Direct		to Other		from Other		Net		Assumed
	Amount		Companies		Companies		Amount		to Net
	(Amounts in thousands)
Year ended December 31, 2010:
Specialty	$	1,492,589	$	214,025	$	33,267	$	1,311,831		2.5	%
Regional		1,155,970		115,789		4,166		1,044,347		0.4	%
Alternative markets		619,832		120,672		82,885		582,045		14.2	%
Reinsurance		3,803		24,058		421,494		401,239		105.0	%
International		516,057		90,607		86,014		511,464		16.8	%
Total	$	3,788,251	$	565,151	$	627,826	$	3,850,926		16.3	%
Year ended December 31, 2009:
Specialty	$	1,443,728	$	203,754	$	20,477	$	1,260,451		1.6	%
Regional		1,217,365		148,686		12,421		1,081,100		1.1	%
Alternative markets		567,767		75,112		96,982		589,637		16.4	%
Reinsurance		8,638		32,543		447,330		423,425		105.6	%
International		362,338		63,249		76,393		375,482		20.3	%
Total	$	3,599,836	$	523,344	$	653,603	$	3,730,095		17.5	%
Year ended December 31, 2008:
Specialty	$	1,577,196	$	136,557	$	13,139	$	1,453,778		0.9	%
Regional		1,370,381		174,695		15,410		1,211,096		1.3	%
Alternative markets		604,970		93,794		111,009		622,185		17.8	%
Reinsurance		4,965		23,560		453,703		435,108		104.3	%
International		340,976		57,621		28,377		311,732		9.1	%
Total	$	3,898,488	$	486,227	$	621,638	$	4,033,899		15.4	%

See accompanying Report of Independent Registered Public Accounting Firm.

48

Schedule V

W. R. Berkley Corporation and Subsidiaries

Valuation and Qualifying Accounts

Years ended December 31, 2010, 2009 and 2008

			Additions-		Deduction-
	Opening		Charged to		Amounts			Ending
	Balance		Expense		Written Off			Balance
	(Amounts in thousands)
Year ended December 31, 2010:
Premiums and fees receivable	$	19,733	$	5,013	$	(5,263	)	$	19,483
Due from reinsurers		4,430		—		(1,332	)		3,098
Deferred federal and foreign income taxes		2,226		102		—			2,328
Loan loss reserves		13,847		6,235		(140	)		19,942
Total	$	40,236	$	11,350	$	(6,735	)	$	44,851
Year ended December 31, 2009:
Premiums and fees receivable	$	18,423	$	9,593	$	(8,283	)	$	19,733
Due from reinsurers		4,895		—		(465	)		4,430
Deferred federal and foreign income taxes		3,113		—		(887	)		2,226
Loan loss reserves		735		13,112		—			13,847
Total	$	27,166	$	22,705	$	(9,635	)	$	40,236
Year ended December 31, 2008:
Premiums and fees receivable	$	18,252	$	8,483	$	(8,312	)	$	18,423
Due from reinsurers		2,859		2,036		—			4,895
Deferred federal and foreign income taxes		2,018		1,095		—			3,113
Loan loss reserves		671		64		—			735
Total	$	23,800	$	11,678	$	(8,312	)	$	27,166

See accompanying Report of Independent Registered Public Accounting Firm.

49

Schedule VI

W. R. Berkley Corporation and Subsidiaries

Supplementary Information Concerning Property-Casualty Insurance Operations

Years Ended December 31, 2010, 2009 and 2008

	2010			2009			2008
	(Amounts in thousands)
Deferred policy acquisition costs	$	405,942		$	391,360		$	394,807
Reserves for losses and loss expenses		9,016,549			9,071,671			8,999,596
Unearned premium		1,953,721			1,928,428			1,966,150
Premiums earned		3,835,582			3,805,849			4,289,580
Net investment income		538,698			552,561			537,033
Losses and loss expenses incurred:
Current year		2,509,933			2,518,849			2,829,830
Prior years		(253,248	)		(234,008	)		(195,710	)
Decrease in discount for prior years		53,182			51,866			54,494
Amortization of deferred policy acquisition costs		917,217			903,154			998,539
Paid losses and loss expenses		2,453,077			2,333,631			2,303,056
Net premiums written		3,850,926			3,730,095			4,033,899

See accompanying Report of Independent Registered Public Accounting Firm.

50

EX-10.13

Exhibit 10.13

SUPPLEMENTAL BENEFITS AGREEMENT
Amended and Restated as of December 12, 2008

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

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

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

          WHEREAS, this Agreement was entered into as of August 19, 2004, at which time Executive became earned and vested in, and entitled to a legally binding right to, certain payments and benefits hereunder;

          WHEREAS, pursuant to Treasury Regulation § 1.409A-6(a)(3)(i), Section 409A of the Code does not apply with respect to amounts deferred prior to January 1, 2005; to wit, in the case of the Retirement Benefit, the Gross-Up Payment, and the continued health benefits (each a payment of a non-account balance plan under Section 409A of the Code) under this Agreement, the present value of the amount to which the Executive would have been entitled hereunder upon a voluntary termination for any reason on December 31, 2004, and in the case of the perquisites (part of a separate plan under Section 409A of the Code), the right to the in-kind benefits as of December 31, 2004;

          WHEREAS, all payments and benefits under this Agreement, other than (i) the increase in the present value of the Retirement Benefit after December 31, 2004, and (ii) the Gross-Up Payment, are grandfathered from the application of Section 409A of the Code pursuant to the operation of Treasury Regulation § 1.409A-6(a)(3)(i);

          WHEREAS, the Gross-Up Payment complies with Section 409A of the Code;

          WHEREAS, the Company and Executive amended and restated this Agreement effective as of December 17, 2007, only with respect to the Retirement Benefit, in order that the calculation, determination, and payment of such Retirement Benefit be in all respects compliant with the requirements of Section 409A of the Code;

          WHEREAS, the amendment to and restatement of this Agreement effective as of December 17, 2007, were made for the sole purpose of making the Retirement Benefit compliant with Section 409A of the Code (and therefore do not constitute a material modification of any part of this Agreement under Section 409A of the Code), and in no way amended or affected the calculation, determination, distribution, or provision of, any payments or benefits hereunder other than the Retirement Benefit; and

          WHEREAS, the Company and Executive desire to amend and restate this Agreement effective as of December 12, 2008, to change the time and form of payment of the

Retirement Benefit in a manner compliant with transition relief provided under Notice 2007-86 and other applicable guidance promulgated by the Treasury Department or Internal Revenue Service regarding compliance with Section 409A of the Code.

          NOW, THEREFORE, the parties hereto agree as follows:

          Section 1. Definitions.

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

          “Benefit Calculation Date” means the earliest to occur of (i) January 2, 2014, (ii) the date of Executive’s Qualifying Termination, and (iii) the date of a Change in Control.

          “Benefit Commencement Date” means the earliest to occur of (i) January 2, 2014, (ii) the date of Executive’s death, and (iii) the date of a Change in Control.

          “Board” means the Company’s Board of Directors.

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

          “Change in Control” means any transaction that constitutes either (i) a change in the ownership of the Company within the default meaning under Treasury Regulation Section 1.409A-3(i)(5)(v) (i.e., the acquisition by a person or group of persons of stock of the Company constituting more than 50% of the total fair market value or total voting power of the stock of the Company), (ii) a change in the effective control of the Company within the default meaning under Treasury Regulation Section 1.409A-3(i)(5)(vi) (i.e., either (x) the acquisition by a person or group of persons of stock of the Company possessing 30% or more of the total voting power of the stock of the Company or (y) the replacement during any 12-month period of a majority of the members of the Board by members whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election), or (iii) a change in the ownership of a substantial portion of the Company’s assets within the default meaning of Treasury Regulation Section 1.409A-3(i)(5)(vii) (i.e., the acquisition by a person or group of persons of assets from the Company that have a total gross fair market value equal to or greater than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition).

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

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          “Final Average Five-Year Compensation” means the average of Executive’s base salary and regular annual bonus (excluding any amounts paid under the Company’s Long-Term Incentive Plan), earned in respect of each of the five fiscal years of the Company prior to the fiscal year in which the Benefit Calculation Date occurs.

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

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

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

          “Make-up Account” means a notional account which, during the period commencing upon the date of a Qualifying Termination and ending on the Benefit Commencement Date, shall be credited on each monthly anniversary of the date of such Qualifying Termination with an amount equal to one twelfth (¹/_12th) of the Retirement Benefit plus interest on the balance in such account at the interest rate then in effect under Section 6 of the W. R. Berkley Corporation Deferred Compensation Plan for Officers, as amended and restated December 3, 2007. For purposes of clarity, in the event the Benefit Calculation Date and the Benefit Commencement Date occur on the same date, Executive shall not be entitled to a Make-up Account.

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

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

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

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

          “Retirement Benefit” means an annual benefit equal to the greater of (i) $1,000,000, or (ii) fifty percent (50%) of Highest Average Three-Year Compensation, which in the case of clause (ii) shall in no event exceed one hundred fifty percent (150%) of Final Average Five-Year Compensation.

          Section 2. Benefits.

          (a) Retirement Benefit. Within thirty (30) days following the Benefit Commencement Date, Executive shall be paid the first annual Retirement Benefit, plus a lump sum amount equal to the accrued balance in the Make-up Account, if any. Thereafter, Executive shall be paid the annual Retirement Benefit on each anniversary of the Benefit Commencement Date for the remainder of his life. Upon Executive’s death, and if Executive’s spouse has not predeceased him, Executive’s spouse shall thereafter be entitled to receive, in lieu of the full Retirement Benefit that would have been payable to the Executive absent his death, fifty percent (50%) of the annual Retirement Benefit on each anniversary of the Benefit Commencement Date for the remainder of her life (and in the event that the Benefit Commencement Date occurred as a result of Executive’s death, Executive’s spouse shall also receive within thirty (30) days following the Executive’s death a lump sum payment equal to the sum of (i) fifty percent (50%) of the annual Retirement Benefit and (ii) the accrued balance in the Make-up Account, if any). Notwithstanding the foregoing, within ten (10) business days following the Benefit Commencement Date, Executive may elect for him and his spouse to receive, in lieu of the yearly Retirement Benefit set forth in this Section 2(a), an annual lifetime annuity benefit under a joint and survivor annuity based on the lives of Executive and his spouse that is the actuarial equivalent of one hundred percent (100%) of the yearly Retirement Benefits that would have otherwise been made to Executive and his spouse had no such election occurred. Notwithstanding anything herein to the contrary, in the event the Benefit Commencement Date occurs as the result of a Change in Control, Executive shall receive within thirty (30) days of such Change in Control, in lieu of the yearly Retirement Benefits provided by this Section 2(a), a lump sum amount equal to the actuarial present value of one hundred percent (100%) of the yearly Retirement Benefits that would have otherwise been made to Executive following a Benefit Commencement Date that was not a Change in Control. The following actuarial assumptions shall be applied for purposes of the preceding two sentences:

Mortality:	Based on the mortality rates under the 1994 Uninsured Pensioner Mortality Table (UP-94)
Interest Rate:	6%

          (b) Continued Health Benefits. Following a Qualifying Termination, (i) for the remainder of Executive’s life, in the case of Executive, and for the remainder of his spouse’s life, in the case of Executive’s spouse, the Company shall provide Executive and Executive’s spouse with health insurance coverage with substantially the same level of benefits as provided to Executive and his spouse immediately prior to such Qualifying Termination; provided, that if Executive and/or his spouse become eligible to participate in any government provided health

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

          (c) Perquisites.

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

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

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

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

          Section 3. Additional Payments.

          (a) If it is determined by a nationally recognized United States public accounting firm selected by the Company and approved in writing by Executive (the “Auditors”) that any payment or benefit made or provided to Executive in connection with this Agreement or otherwise (collectively, a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (the “Parachute Tax”), then Company shall pay to the Executive, prior to the time the Parachute Tax is payable with respect to such Payment, an additional payment (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any Parachute Tax) imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Parachute Tax imposed upon the Payment. The amount of any

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Gross-Up Payment shall be determined by the Auditors, subject to adjustment, as necessary, as a result of any Internal Revenue Service position. For purposes of making the calculations required by this Agreement, the Auditors may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code, provided that the Auditors’ determinations must be made with substantial authority (within the meaning of Section 6662 of the Code).

          (b) The federal tax returns filed by Executive (and any filing made by a consolidated tax group which includes the Company) shall be prepared and filed on a basis consistent with the determination of the Auditors with respect to the Parachute Tax payable by Executive. Executive shall make proper payment of the amount of any Parachute Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and such other documents reasonably requested by the Company evidencing such payment. If, after the Company’s payment to Executive of the Gross-Up Payment, the Auditors determine in good faith that the amount of the Gross-Up Payment should be reduced or increased, or such determination is made by the Internal Revenue Service, then within ten business days of such determination, Executive shall pay to the Company the amount of any such reduction, or the Company shall pay to Executive the amount of any such increase; provided, however, that in no event shall the Executive have any such refund obligation if it is determined by the Company (with its counsel) that to do so would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time; and provided, further, that if Executive has prior thereto paid such amounts to the Internal Revenue Service, such refund shall be due only to the extent that a refund of such amount is received by Executive.

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

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

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

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

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law under, the circumstances, and the parties hereto agree that such court shall reduce the time period and/or geographic scope to permissible duration or size.

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

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

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

          Section 5. Taxes.

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

          Section 6. Legal Fees.

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

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          Section 7. No Mitigation.

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

          Section 8. Successors and Assigns.

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

          Section 9. Waiver and Amendments.

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

          Section 10. Severability.

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

          Section 11. Governing Law.

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

          Section 12. Section Headings.

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

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          Section 13. Entire Agreement.

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

          Section 14. Counterparts.

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

[Signatures to appear on the following page.]

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

W.R. BERKLEY CORPORATION
By:	/s/ Philip J. Ablove
	Name:	Philip J. Ablove
	Title:	Chairman, Compensation Committee
William R. Berkley
/s/ William R. Berkley

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EX-13

Exhibit 13

FINANCIAL DATA

	Years Ended December 31,
	2010			2009			2008			2007			2006
	(Amounts in thousands, except per share data)
Net premiums written	$	3,850,926		$	3,730,095		$	4,033,899		$	4,575,989		$	4,818,993
Net premiums earned		3,835,582			3,805,849			4,289,580			4,663,701			4,692,622
Net investment income		538,698			552,561			537,033			634,386			549,030
Income (losses) from investment funds		(8,173	)		(173,553	)		(3,553	)		38,274			37,145
Insurance service fees		85,405			93,245			102,856			97,689			104,812
Net investment gains (losses)		56,581			(38,408	)		(356,931	)		49,696			9,648
Revenues from wholly-owned investees		214,454			189,347			137,280			102,846			—
Total revenues		4,724,069			4,431,178			4,708,808			5,588,397			5,394,831
Interest expense		106,969			87,989			84,623			88,996			92,522
Income before income taxes		603,305			382,230			326,322			1,092,392			988,645
Income tax expense		(153,739	)		(73,150	)		(44,919	)		(323,070	)		(286,398	)
Noncontrolling interests		(279	)		(23	)		(262	)		(3,083	)		(2,729	)
Net income to common stockholders		449,287			309,057			281,141			766,239			699,518
Data per common share:
Net income per basic share		3.02			1.93			1.68			4.05			3.65
Net income per diluted share		2.90			1.86			1.62			3.90			3.46
Stockholders’ equity		26.26			22.97			18.87			19.92			17.30
Cash dividends declared		0.27			0.24			0.23			0.20			0.16
Weighted average shares outstanding:
Basic		148,752			160,357			166,956			188,981			191,809
Diluted		155,081			166,574			173,454			196,698			201,961
Balance sheet data as of year end:
Investments	$	12,995,393		$	13,050,238		$	11,143,281		$	11,956,717		$	11,172,684
Total assets		17,528,547			17,328,596			16,121,158			16,820,005			15,656,489
Reserves for losses and loss expenses		9,016,549			9,071,671			8,999,596			8,678,034			7,784,269
Junior subordinated debentures		242,784			249,793			249,584			249,375			241,953
Senior notes and other debt		1,500,419			1,345,481			1,021,869			1,121,793			869,187
Common stockholders’ equity		3,702,876			3,596,067			3,046,319			3,592,368			3,335,159

1

PAST PRICES OF COMMON STOCK

The common stock of the Company is traded on the New York Stock Exchange under the symbol “WRB”.

					Dividends
	Price Range				Declared
	High		Low		per Share
2010
Fourth Quarter	$	28.83	$	26.19	$	0.07
Third Quarter		27.66		25.63		0.07
Second Quarter		28.13		25.69		0.07
First Quarter		26.75		23.89		0.06
2009
Fourth Quarter	$	26.15	$	23.30	$	0.06
Third Quarter		26.26		20.82		0.06
Second Quarter		25.18		21.05		0.06
First Quarter		31.07		18.59		0.06

ITEM 7.   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, regional, alternative markets, reinsurance and international. Our decentralized structure provides us with the flexibility to respond to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. While providing our business units with certain operating autonomy, our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment and reinsurance management, and actuarial, financial and corporate legal staff support. The Company’s primary sources of revenues and earnings are its insurance operations and its investments.

Nineteen of our operating units have been formed since 2006 to capitalize on various business opportunities. These newer units are focused on important parts of the economy in the U.S., including healthcare, energy and agriculture, and on growing international markets, including Australia, Southeast Asia and South America.

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 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.

Beginning in 2005, the property casualty insurance became more competitive and insurance rates decreased across most business lines. Increased competition and the impact of the economic downturn also put pressure on policy terms and conditions. Although price levels were generally stable in 2009 and 2010, current market price levels for certain lines of business remain below the prices required for the Company to achieve its return objectives. As property casualty insurance became more competitive, insurance rates decreased across most business lines from 2005 through 2008. Although this trend began to moderate in 2009 and pricing has stabilized in most areas, current market price levels for certain lines of business remain below the prices required for the Company to achieve its return objectives. Price changes are reflected in the Company’s results over time as premiums are earned.

2

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, which are at historically low levels, as well as the credit quality and duration of the securities. The Company also invests in equity securities, merger arbitrage, private equity investments and real estate related investments.

Critical Accounting Estimates

The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and other-than-temporary impairments of 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 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

3

determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot provide assurance 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

4

automobile, primary workers’ compensation, 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.

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 2010 (dollars in thousands):

	Frequency (+/-)
Severity (+/-)	1%		5%		10%
1%		50,450		151,851		278,603
5%		151,851		257,268		389,040
10%		278,603		389,040		527,086

Our net reserves for losses and loss expenses of $8.0 billion as of December 31, 2010 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above.

Approximately $1.5 billion, or 19%, of the Company’s net loss reserves as of December 31, 2010 relate to our reinsurance segment. 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 December 31, 2010 and 2009:

	2010		2009
	(Dollars in thousands)
Specialty	$	2,883,823	$	2,972,562
Regional		1,285,004		1,341,451
Alternative markets		1,867,470		1,771,114
Reinsurance		1,507,353		1,699,052
International		455,871		363,603
Net reserves for losses and loss expenses		7,999,521		8,147,782
Ceded reserves for losses and loss expenses		1,017,028		923,889
Gross reserves for losses and loss expenses	$	9,016,549	$	9,071,671

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Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of December 31, 2010 and 2009:

	Reported Case		Incurred But
	Reserves		Not Reported		Total
	(Dollars in thousands)
December 31, 2010
General liability	$	873,553	$	2,038,814	$	2,912,367
Workers’ compensation		1,188,117		1,022,331		2,210,448
Commercial automobile		325,686		173,247		498,933
International		195,981		259,890		455,871
Other		158,794		255,755		414,549
Total primary		2,742,131		3,750,037		6,492,168
Reinsurance		639,997		867,356		1,507,353
Total	$	3,382,128	$	4,617,393	$	7,999,521
December 31, 2009
General liability	$	845,889	$	2,159,611	$	3,005,500
Workers’ compensation		1,094,800		1,019,552		2,114,352
Commercial automobile		393,534		196,060		589,594
International		145,807		217,796		363,603
Other		143,336		232,345		375,681
Total primary		2,623,366		3,825,364		6,448,730
Reinsurance		688,593		1,010,459		1,699,052
Total	$	3,311,959	$	4,835,823	$	8,147,782

Reserves for primary and excess workers’ compensation business are net of an aggregate net discount of $898 million and $877 million as of December 31, 2010 and 2009, respectively.

The following table presents development in our estimate of claims occurring in prior years:

	For the Year
	Ended December 31,
	2010			2009
	(Dollars in thousands)
Favorable reserve development:
Specialty	$	99,447		$	75,501
Regional		83,732			52,294
Alternative markets		22,158			49,346
Reinsurance		46,816			49,040
International		1,095			7,827
Total favorable reserve development		253,248			234,008
Premium offsets(1):
Specialty		(134	)		(6,598	)
Alternative markets		1,485			(4,174	)
Reinsurance		(20,558	)		(33,036	)
Net development	$	234,041		$	190,200

(1) Represents portion of reserve development that was offset by an increase (decrease) in earned premiums.

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For the year ended December 31, 2010, estimates for claims occurring in prior years decreased by $253 million, before premium offsets, and by $234 million, net of premium offsets. The favorable reserve development in 2010 was primarily attributable to accident years 2005 through 2009, partially offset by unfavorable reserve development in earlier years. 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.

Specialty — The majority of the favorable reserve development for the specialty segment during 2010 and 2009 was associated with excess and surplus (“E&S”) business. E&S insurers are free from rate and form regulation and generally charge higher rates for business than those that are charged in the “standard” market. Beginning in 2003, the E&S business began to experience improved claim frequency (i.e., a lower number of reported claims per unit of exposure). One reason for the lower number of claims was the Company’s introduction of more restrictive policy language which included additional exclusions that eliminated claims that would have previously been covered, particularly for the Company’s building contractor business. In addition, as standard carriers tightened their underwriting criteria, the Company benefited from an influx of accounts from the standard market to the E&S market during these years. The more restrictive policy language and the influx of standard market business resulted in an improved risk profile within the E&S business and a reduction in loss costs that was not expected at the time loss reserves were initially established. We began to recognize those trends in 2007 and have continued to reduce our estimates of ultimate claim costs since then as the magnitude of the frequency trends has become more evident. The favorable reserve development in 2010 was primarily attributable to accident years 2006 through 2009. The favorable reserve development in 2009 was primarily attributable to accident years 2004 through 2007.

Regional — The favorable reserve development for the regional segment during 2010 was primarily related to commercial multi-peril, commercial automobile and workers’ compensation business. The favorable reserve development resulted mainly from lower loss emergence on known case reserves relative to historical levels. The favorable reserve development also reflects lower than anticipated claim frequency on commercial automobile business, which the Company believes is due, in part, to a reduction in miles driven by insured vehicles as a result of the economic downturn. The favorable reserve development in 2010 was primarily attributable to accident years 2007 through 2009.

Alternative Markets — The favorable reserve development for the alternative markets segment during 2010 and 2009 was primarily related to workers’ compensation business written in California and to medical excess business. From 2003 to 2005, the State of California enacted various legislative reforms whose impact on workers’ compensation costs was uncertain at the time. As actual claims data has emerged, and interpretation of the reforms through case law has evolved, it has become clear that the impact of the reforms was greater than initially expected, resulting in favorable reserve development.

The Company began its excess medical business in 2002, and its initial loss estimates were based primarily on industry data and benchmarks. As the Company’s excess medical business has matured, the Company has been able to use its own database and experience to estimate loss reserves. The Company’s database and experience indicate that losses are likely to be lower than what was expected when loss reserves were initially established. The favorable reserve development in 2010 and 2009 resulted from a continuation of those trends.

Reinsurance — Estimates for claims occurring in prior years decreased by $26 million, net of premium offsets during 2010. The majority of the favorable development for the reinsurance segment during 2010 was related to the Company’s participation in a Lloyd’s of London syndicate. The favorable development resulted from a re-evaluation of the syndicate’s loss reserves for underwriting years 2008 through 2009 in connection with its annual year-end review of loss reserves that was completed in the first quarter of 2010.

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. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of

7

Insurance of the State of Delaware of 2.5%. As of December 31, 2010, the aggregate blended discount rates ranged from 2.5% to 6.5%, with a weighted average discount rate of 4.4%. The aggregate net discount, after reflecting the effects of ceded reinsurance, was $898 million and $877 million as of December 31, 2010 and 2009, 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 $58 million at December 31, 2010 and 2009. 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 Impairments (OTTI) 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 or maturity, the Company considers whether the price of an equity security is expected to recover within a reasonable period of time.

The Company classifies its fixed maturity securities and preferred stocks by credit rating, primarily based on ratings assigned by credit rating agencies. For purposes of classifying securities with different ratings, the Company uses the lower rating if two ratings were assigned and the middle rating if three ratings were assigned, unless the Company’s own analysis indicates that the lower rating is more appropriate. Securities that are not rated by a rating agency are evaluated and classified by the Company on a case-by-case basis.

Fixed Maturity Securities — For securities that we intend to sell or, more likely than not, would be required to sell, a decline in value below amortized cost is considered to be OTTI. The amount of OTTI is equal to the difference between amortized cost and fair value at the balance sheet date. For securities that we do not intend to sell or expect to be required to sell, a decline in value below amortized cost is considered to be an OTTI if we do not expect to recover the entire amortized cost basis of a security (i.e., the present value of cash flows expected to be collected is less than the amortized cost basis of the security).

The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the decline in value not considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other comprehensive income.

Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

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The following table provides a summary of all fixed maturity securities in an unrealized loss position as of December 31, 2010:

	Number of		Aggregate		Unrealized
	Securities		Fair Value		Loss
	(Dollars in thousands)
Unrealized loss less than 20% of amortized cost		280	$	2,021,852	$	75,686
Unrealized loss of 20% or greater:
Twelve months and longer		11		51,819		19,322
Total		291	$	2,073,671	$	95,008

A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at December 31, 2010 is presented in the table below:

					Gross
	Number of		Aggregate		Unrealized
	Securities		Fair Value		Loss
	(Dollars in thousands)
Unrealized loss less than $5 million:
Mortgage-backed securities		12	$	91,747	$	7,835
Corporate		12		77,265		5,068
State and municipal		3		28,590		3,854
Unrealized loss $5 million or more Mortgage-backed security(1)		1		31,450		5,550
Total		28	$	229,052	$	22,307

(1) This investment is secured by 95 properties comprising approximately 30 million square feet of office space located primarily in Boston, Northern California and Los Angeles. The current debt maturity of February 2012 can be extended at the borrower’s option through February 2014 provided that there is no continuing default. The Company believes the amount of outstanding debt for the Company’s debt layer and all debt layers senior to the Company’s debt layer to be below the current fair values for the underlying properties. Based on the portfolio’s stable performance (e.g., occupancy rates, lease terms and debt service coverage) and on there being substantial subordinate capital, the Company does not consider the investment to be OTTI.

The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default on financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.

Preferred Stocks — At December 31, 2010, there were eight preferred stocks in an unrealized loss position, with an aggregate fair value of $104 million and a gross unrealized loss of $11 million. Three of those preferred stocks with an aggregate fair value of $15 million and a gross unrealized loss of $5 million are rated non-investment grade. The Company does not consider any of the preferred stocks to be OTTI.

Common Stocks — At December 31, 2010, there were four common stocks in an unrealized loss position with an aggregate fair value of $59 million and an aggregate unrealized loss of $1 million. The Company does not consider any of these securities to be OTTI.

Loans Receivable — The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, a valuation reserve is established with a corresponding charge to net realized capital losses. Loans receivable are reported net of a valuation reserve of $20 million and $14 million at December 31, 2010 and 2009, respectively.

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Fair Value Measurements. The Company’s fixed maturity and equity securities available for sale and its trading account securities are carried at fair value. Fair value is defined 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.” The Company utilizes 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 similar assets in active markets. 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. The fair value of the vast majority of the Company’s portfolio is based on observable data (other than quoted prices) and, accordingly, is classified as Level 2.

In classifying particular financial securities in the fair value hierarchy, the Company uses its judgment to determine whether the market for a security is active and whether significant pricing inputs are observable. The Company determines the existence of an active market by assessing whether transactions occur with sufficient frequency and volume to provide reliable pricing information. The Company determines whether inputs are observable based on the use of such information by pricing services and external investment managers, the uninterrupted availability of such inputs, the need to make significant adjustments to such inputs and the volatility of such inputs over time. If the market for a security is determined to be inactive or if significant inputs used to price a security are determined to be unobservable, the security is categorized in Level 3 of the fair value hierarchy.

Because many fixed maturity 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 summarizes pricing methods for fixed maturity securities available for sale as of December 31, 2010 (dollars in thousands):

	Carrying		Percent
	Value		of Total
Pricing source:
Independent pricing services	$	10,590,625		95.5	%
Syndicate manager		100,125		0.9	%
Directly by the Company based on:
Observable data		315,698		2.8	%
Cash flow model		86,711		0.8	%
Total	$	11,093,159		100.0	%

Independent pricing services — The vast majority of the Company’s fixed maturity securities available for sale were priced by independent pricing services (generally one U.S. pricing service plus additional pricing services with respect to a limited number of foreign securities held by the Company). The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g., broker quotes and prices observed for comparable securities). The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company reviews the prices provided by pricing services for reasonableness based upon current trading levels for similar securities. If the prices appear unusual to the Company, they are re-examined and the value is either confirmed or revised. In addition, the Company periodically performs independent price tests of a sample of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of December 31, 2010, the Company did not make any

10

adjustments to the prices provided by the pricing services. Based upon the Company’s review of the methodologies used by the independent pricing services, these securities were classified as Level 2.

Syndicate manager — The Company has a 15% participation in a Lloyd’s syndicate, and the Company’s share of the securities owned by the syndicate is priced by the syndicate’s manager. The majority of the securities are liquid, short duration fixed maturity securities. The Company reviews the syndicate manager’s pricing methodology and audited financial statements and holds discussions with the syndicate manager as necessary to confirm its understanding and agreement with security prices. Based upon the Company’s review of the methodologies used by the syndicate manager, these securities were classified as Level 2.

Observable data — If independent pricing is not available, the Company prices the securities directly. Prices are based on observable market data where available, including current trading levels for similar securities and non-binding quotations from brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes obtained from brokers. Since these securities were priced based on observable data, they were classified as Level 2.

Cash flow model — If the above methodologies are not available, the Company prices securities using a discounted cash flow model based upon assumptions as to prevailing credit spreads, interest rates and interest rate volatility, time to maturity and subordination levels. Discount rates are adjusted to reflect illiquidity where appropriate. These securities were classified as Level 3.

Results of Operations for the Years Ended December 31, 2010 and 2009

Business Segment Results

Following is a summary of gross and net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and United States Generally Accepted Accounting Principles (“GAAP”) combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended December 31, 2010 and 2009. The GAAP combined ratio represents a measure of underwriting profitability,

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excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.

	2010			2009
	(Dollars in thousands)
Specialty
Gross premiums written	$	1,525,856		$	1,464,205
Net premiums written		1,311,831			1,260,451
Premiums earned		1,288,373			1,354,355
Loss ratio		58.3	%		61.9	%
Expense ratio		32.7	%		31.1	%
GAAP combined ratio		91.0	%		93.0	%
Regional
Gross premiums written	$	1,160,136		$	1,229,786
Net premiums written		1,044,347			1,081,100
Premiums earned		1,066,922			1,116,871
Loss ratio		60.7	%		61.4	%
Expense ratio		35.9	%		34.2	%
GAAP combined ratio		96.6	%		95.6	%
Alternative Markets
Gross premiums written	$	702,717		$	664,749
Net premiums written		582,045			589,637
Premiums earned		608,191			597,932
Loss ratio		67.6	%		63.4	%
Expense ratio		25.6	%		25.8	%
GAAP combined ratio		93.2	%		89.2	%
Reinsurance
Gross premiums written	$	425,297		$	455,968
Net premiums written		401,239			423,425
Premiums earned		419,356			411,511
Loss ratio		52.5	%		57.9	%
Expense ratio		41.0	%		39.1	%
GAAP combined ratio		93.5	%		97.0	%
International
Gross premiums written	$	602,071		$	438,731
Net premiums written		511,464			375,482
Premiums earned		452,740			325,180
Loss ratio		61.8	%		59.9	%
Expense ratio		40.4	%		40.2	%
GAAP combined ratio		102.2	%		100.1	%
Consolidated
Gross premiums written	$	4,416,077		$	4,253,439
Net premiums written		3,850,926			3,730,095
Premiums earned		3,835,582			3,805,849
Loss ratio		60.2	%		61.4	%
Expense ratio		34.3	%		32.8	%
GAAP combined ratio		94.5	%		94.2	%

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Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net income per diluted share for the years ended December 31, 2010 and 2009 (amounts in thousands, except per share data):

	2010		2009
Net income to common stockholders	$	449,287	$	309,057
Weighted average diluted shares		155,081		166,574
Net income per diluted share	$	2.90	$	1.86

The Company reported net income of $449 million in 2010 compared to $309 million in 2009. The increase in net income was primarily due to lower losses from investment funds ($8 million in 2010 compared with $174 million in 2009) and lower other-than-temporary investment impairments ($9 million in 2010 compared with $143 million in 2009). The number of weighted average diluted shares decreased as a result of the Company’s repurchases of its common stock in 2010 and 2009.

Premiums. Gross premiums written were $4,416 million in 2010, an increase of 4% from $4,253 million in 2009. The increase in gross premiums written was primarily due to growth in international business as a result of expansion into new markets. Approximately 76.9% of policies expiring in 2010 were renewed, about the same as the 76.8% renewal rate for policies expiring in 2009. The average price of policies renewed in 2010 declined 0.3% from the same period in 2009.

Beginning in 2005, the property casualty insurance became more competitive and insurance rates decreased across most business lines. Although price levels were generally stable in 2009 and 2010, current market price levels for certain lines of business remain below the prices required for the Company to achieve its return objectives. Disparities between the Company’s price levels and the pricing available in the market resulted in significant declines in gross premiums written for other liability, commercial automobile, excess workers’ compensation and reinsurance during 2009 and 2010. These declines have been more than offset by increased premiums from new business units (those units that began operations since 2006) and expansion into new markets. A summary of gross premiums written in 2010 compared with 2009 by line of business within each business segment follows:

•  Specialty gross premiums increased by 4% to $1,526 million in 2010 from $1,464 million in 2009. Gross premiums written increased 12% for property lines, 6% for professional liability and 2% for other liability and decreased 18% for commercial automobile and 17% for products liability.

•  Regional gross premiums decreased by 6% to $1,160 million in 2010 from $1,230 million in 2009. Gross premiums written decreased 6% for workers’ compensation, 6% for commercial automobile and 3% for commercial multiple peril. Gross premiums include assigned risk premiums, which are fully reinsured, of $36 million in 2010 and $66 million in 2009. The decrease in assigned risk premiums was due to the transfer of certain assigned risk premiums from the regional segment to the alternative markets segment in 2010.

•  Alternative markets gross premiums increased by 6% to $703 million in 2010 from $665 million in 2009. Gross premiums written decreased 16% for excess workers’ compensation and increased by 1% for primary workers’ compensation. Gross premiums include fully reinsured assigned risk premiums of $67 million in 2010 and $24 million in 2009. The increase is primarily due to the transfer from the regional segment described above.

•  Reinsurance gross premiums decreased by 7% to $425 million in 2010 from $456 million in 2009. Gross premiums written decreased 10% to $288 million for casualty business and increased 1% to $137 million for property business.

•  International gross premiums increased by 37% to $602 million in 2010 from $439 million in 2009. The increase is primarily due to an increase in business written by our recently started operations in Canada, Norway and Brazil and our Lloyd’s syndicate. Gross premiums written increased 144% for property lines, 30% for liability lines, 24% for workers’ compensation, 20% for reinsurance assumed, 6% for auto and 1% for professional liability.

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Net premiums written were $3,851 million in 2010, an increase of 3% from $3,730 million in 2009. Ceded reinsurance premiums as a percentage of gross written premiums increased to 13% in 2010 from 12% in 2009. The increase was primarily related to recently started operating units, which have a higher ceded premium percentage than mature operating units due to differences in the limits and risk profiles of their business.

Premiums earned increased 1% to $3,836 million in 2010 from $3,806 million in 2009. Insurance premiums are primarily earned on a pro rata basis ratably over the policy term, and premiums earned in 2010 are related to business written during both 2010 and 2009.

Net Investment Income. Following is a summary of net investment income for 2010 and 2009:

							Average Annualized
	Amount						Yield
	2010			2009			2010			2009
	(Dollars in thousands)
Fixed maturity securities, including cash	$	501,750		$	495,140			4.1	%		4.2	%
Arbitrage trading account and funds		28,847			40,714			6.3	%		10.8	%
Equity securities available for sale		11,661			20,295			3.5	%		6.1	%
Gross investment income		542,258			556,149			4.2	%		4.4	%
Investment expenses		(3,560	)		(3,588	)
Total	$	538,698		$	552,561			4.1	%		4.4	%

Net investment income decreased 3% to $539 million in 2010 from $553 million in 2009. The decrease in investment income is due to a decline in the average yield, partially offset by an increase in average invested assets. Average invested assets, at cost (including cash and cash equivalents) were $12.9 billion in 2010 and $12.5 billion in 2009. The decrease in net investment income from equity securities reflects both a lower average annualized yield and a decline in the average amount invested in equity securities in 2010 compared with 2009. Investment income from merger arbitrage is a function of the number and value of announced merger transactions and the amount invested in and potential spreads available for those transactions.

Losses from Investment Funds.  Following is a summary of income (losses) from investment funds (which are reported on a one-quarter lag) for 2010 and 2009:

	2010			2009
	(Dollars in thousands)
Real estate funds	$	(4,766	)	$	(159,569	)
Energy funds		996			(13,227	)
Other funds		(4,403	)		(757	)
Total	$	(8,173	)	$	(173,553	)

Losses from investment funds decreased to $8 million in 2010 from $174 million in 2009, primarily as a result of lower losses from real estate funds. The real estate funds, which had an aggregate carrying value of $226 million at December 31, 2010, invest in commercial real estate loans and securities as well as direct property ownership. In 2009, asset values were impacted by general deterioration of real estate fundamentals coupled with the absence of a refinancing market and an increase in non-performing assets. Although these market conditions have moderated, a large number of real estate projects remain over-leveraged and face near-term refinancing pressure.

Insurance Service Fees. Insurance service fees consist of fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage. Service fees decreased to $85 million in 2010 from $93 million in 2009 due to a decline in fees received for claims administration services.

Net Realized Gains on Investment Sales. 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

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spreads, currency values and general economic conditions. Net realized gains on investment sales were $66 million in 2010 compared with $104 million in 2009.

Other-Than-Temporary Impairments. Other-than-temporary impairments were $9 million in 2010 compared with $143 million in 2009. The impairment charge in 2009 was primarily related to debt and preferred stock of major financial institutions that experienced adverse credit events and ratings downgrades during the period, including write-downs of debt issued by Thornburg Mortgage, Inc. and preferred stock issued by Citibank and Bank of America.

Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were $214 million in 2010 compared with $189 million in 2009. These revenues were derived from aviation-related businesses that were separately purchased in 2007, 2008 and 2009. 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 increase in 2010 revenues is due to the acquisition of an aviation company in June 2009, partially offset by lower aircraft sales in 2010.

Losses and Loss Expenses. Losses and loss expenses decreased to $2,310 million in 2010 from $2,337 million in 2009. The consolidated loss ratio decreased to 60.2% in 2010 from 61.4% in 2009 primarily due to an increase in favorable reserve development, principally in our specialty and regional segments. Favorable prior year reserve development, net of related premium adjustments, was $234 million in 2010 and $190 million in 2009. Weather-related losses were $81 million in 2010 (including $8 million from the earthquake in Chile) compared with $63 million in 2009. A summary of loss ratios in 2010 compared with 2009 by business segment follows:

•  Specialty’s loss ratio decreased to 58.3% in 2010 from 61.9% in 2009 due to an increase in favorable reserve development. Favorable prior year reserve development, net of related premium adjustments, was $99 million in 2010 compared with $69 million in 2009.

•  Regional’s loss ratio decreased to 60.7% in 2010 from 61.4% in 2009 due to an increase in favorable reserve development, partially offset by storm losses. Weather-related losses were $73 million in 2010 compared with $63 million in 2009. Net favorable prior year reserve development was $84 million in 2010 compared with $52 million in 2009.

•  Alternative markets’ loss ratio increased to 67.6% in 2010 from 63.4% in 2009 due to a decrease in favorable reserve development. Favorable prior year reserve development, net of related premium adjustments, was $24 million in 2010 compared with $45 million in 2009.

•  Reinsurance’s loss ratio decreased to 52.5% in 2010 from 57.9% in 2009 due to lower loss ratios for several large property treaties and to an increase in favorable reserve development. Favorable prior year reserve development, net of related premium adjustments, was $26 million in 2010 compared with $16 million in 2009.

•  International’s loss ratio increased to 61.8% in 2010 from 59.9% in 2009 due primarily to losses from the Chilean earthquake of $4 million and to a decrease in favorable reserve development. Net favorable prior year reserve development was $1 million in 2010 compared with $8 million in 2009.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for 2010 and 2009:

	2010		2009
	(Dollars in thousands)
Underwriting expenses	$	1,314,483	$	1,248,463
Service expenses		72,372		78,331
Net foreign currency losses		2,126		4,213
Other costs and expenses		107,381		109,831
Total	$	1,496,362	$	1,440,838

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Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) increased to 34.3% in 2010 from 32.8% in 2009 primarily due to higher expense ratios for certain underwriting units that experienced a significant decline in earned premiums in 2010.

Service expenses, which represent the costs associated with the fee-based businesses, decreased 8% to $72 million. The decrease was due to lower employment costs and was in line with the rate of decrease in insurance service fees.

Net foreign currency losses result from transactions denominated in a currency other than the operating unit’s functional currency. The loss in 2010 was primarily attributable to operating units in the U.K and resulted from transactions denominated in Australian and Norwegian currencies.

Other costs and expenses, which represent corporate expenses, decreased 2% to $107 million due to a decrease in general and administrative costs.

Expenses from Wholly-Owned Investees. Expenses from wholly-owned investees were $208 million in 2010 compared to $183 million in 2009. These expenses represent costs associated with aviation-related businesses that were separately purchased in 2007, 2008 and 2009. 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 increase in 2010 expenses is due to the acquisition of an aviation company in June 2009, partially offset by lower cost of aircraft sales in 2010.

Interest Expense. Interest expense increased 21.6% to $107 million primarily due to the issuance of $300 million of 7.375% senior notes in September 2009 and $300 million of 5.375% senior notes in September 2010, partially offset by the repayment of $150 million of 5.125% senior notes in September 2010.

Income Taxes. The effective income tax rate was 25% in 2010 as compared to 19% in 2009. The effective income tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income. Tax exempt investment income comprised a smaller portion of the 2010 pre-tax income and as such had a lower impact on the effective tax rate for 2010 compared with 2009.

Results of Operations for the Years Ended December 31, 2009 and 2008

Business Segment Results

Following is a summary of gross and net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and GAAP combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended December 31, 2009 and 2008. The GAAP combined ratio represents a

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measure of underwriting profitability, excluding investment income. A GAAP combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit.

	2009			2008
	(Dollars in thousands)
Specialty
Gross premiums written	$	1,464,205		$	1,590,335
Net premiums written		1,260,451			1,453,778
Premiums earned		1,354,355			1,618,915
Loss ratio		61.9	%		60.1	%
Expense ratio		31.1	%		28.4	%
GAAP combined ratio		93.0	%		88.5	%
Regional
Gross premiums written	$	1,229,786		$	1,385,791
Net premiums written		1,081,100			1,211,096
Premiums earned		1,116,871			1,237,258
Loss ratio		61.4	%		65.4	%
Expense ratio		34.2	%		32.3	%
GAAP combined ratio		95.6	%		97.7	%
Alternative Markets
Gross premiums written	$	664,749		$	715,979
Net premiums written		589,637			622,185
Premiums earned		597,932			626,858
Loss ratio		63.4	%		62.7	%
Expense ratio		25.8	%		24.2	%
GAAP combined ratio		89.2	%		86.9	%
Reinsurance
Gross premiums written	$	455,968		$	458,668
Net premiums written		423,425			435,108
Premiums earned		411,511			519,717
Loss ratio		57.9	%		64.7	%
Expense ratio		39.1	%		34.7	%
GAAP combined ratio		97.0	%		99.4	%
International
Gross premiums written	$	438,731		$	369,353
Net premiums written		375,482			311,732
Premiums earned		325,180			286,832
Loss ratio		59.9	%		61.7	%
Expense ratio		40.2	%		38.9	%
GAAP combined ratio		100.1	%		100.6	%
Consolidated
Gross premiums written	$	4,253,439		$	4,520,126
Net premiums written		3,730,095			4,033,899
Premiums earned		3,805,849			4,289,580
Loss ratio		61.4	%		62.7	%
Expense ratio		32.8	%		30.4	%
GAAP combined ratio		94.2	%		93.1	%

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Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net income per diluted share for the years ended December 31, 2009 and 2008 (amounts in thousands, except per share data):

	2009		2008
Net income to common stockholders	$	309,057	$	281,141
Weighted average diluted shares		166,574		173,454
Net income per diluted share	$	1.86	$	1.62

The Company reported net income of $309 million in 2009 compared to $281 million in 2008. The increase in net income is primarily due to a reduction in OTTI ($152 million in 2009 compared with $434 million in 2008). This was partially offset by an increase in losses from investment funds ($174 million in 2009 compared with $4 million in 2008). The number of weighted average diluted shares decreased as a result of the Company’s repurchases of its common stock in 2008 and 2009.

Premiums. Gross premiums written were $4.3 billion in 2009, down 6% from 2008. The decrease in gross premiums is the result of lower overall economic activity and less new business production, partially offset by higher premiums for recently started operating units. The Company has experienced increased competition and downward pressure on pricing since 2004, although the pressure moderated in 2009. Approximately 77% of business expiring in 2009 was renewed, and the average price of policies renewed in 2009 decreased 1%. Gross premiums for companies that began operations since 2006 were $538 million in 2009 compared to $308 million in 2008. A summary of gross premiums written in 2009 compared with 2008 by line of business within each business segment follows:

•  Specialty gross premiums decreased by 8% to $1,464 million in 2009 from $1,590 million in 2008. Gross premiums written decreased 40% for commercial automobile, 32% for products liability and 17% for other liability. Gross premiums written increased 29% for professional liability and 16% for property lines.

•  Regional gross premiums decreased by 11% to $1,230 million in 2009 from $1,386 million in 2008. Gross premiums written decreased 12% for commercial automobile, 12% for workers’ compensation and 10% for commercial multiple peril. Gross premiums include assigned risk premiums, which are fully reinsured, of $66 million in 2009 and $87 million in 2008.

•  Alternative markets gross premiums decreased by 7% to $665 million in 2009 from $716 million in 2008. Gross premiums written decreased 16% for excess workers’ compensation and were unchanged for primary workers’ compensation. Gross premiums include assigned risk premiums, which are fully reinsured, of $24 million in 2009 and $41 million in 2008.

•  Reinsurance gross premiums decreased by 1% to $456 million in 2009 from $459 million in 2008. Casualty gross premiums written decreased 16% to $320 million due to increased return premiums and non-renewed accounts. Property gross premiums written increased 72% to $136 million due to two new non-catastrophe exposed property treaties.

•  International gross premiums increased by 19% to $439 million in 2009 from $369 million in 2008. The increase is primarily due to an in increase in business written in Australia and Southeast Asia and to business written by our new operating units in Lloyd’s and Canada.

Premiums earned decreased 11% to $3,806 million in 2009 from $4,290 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 11% decrease for 2009 earned premiums reflects the underlying decline in net premiums written in 2008 and 2009.

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Net Investment Income.   Following is a summary of net investment income for 2009 and 2008:

							Average Annualized
	Amount						Yield
	2009			2008			2009			2008
	Dollars in thousands
Fixed maturity securities, including cash	$	495,140		$	497,549			4.2	%		4.4	%
Arbitrage trading account and funds		40,714			6,032			10.8	%		1.5	%
Equity securities available for sale		20,295			38,144			6.1	%		5.5	%
Gross investment income		556,149			541,725			4.4	%		4.4	%
Investment expenses		(3,588	)		(4,692	)
Total	$	552,561		$	537,033			4.4	%		4.3	%

Net investment income increased 3% to $553 million in 2009 from $537 million in 2008. The increase in income from arbitrage trading was due to an increase in the amount invested in the arbitrage trading account and to an increase in merger activity and related investment opportunities. Average invested assets, at cost (including cash and cash equivalents) were $12.5 billion in 2009 and $12.4 billion in 2008.

Losses from Investment Funds. Following is a summary of income (losses) from investment funds (which are reported on a one-quarter lag) for the years ended December 31, 2009 and 2008:

	2009			2008
	Dollars in thousands
Real estate funds	$	(159,569	)	$	(43,116	)
Energy funds		(13,227	)		30,785
Other funds		(757	)		(1,919	)
Kiln Ltd		—			10,697
Total	$	(173,553	)	$	(3,553	)

Losses from investment funds were $174 million in 2009 compared to $4 million in 2008, primarily as a result of losses from real estate funds. The real estate funds, which had an aggregate carrying value of $193 million at December 31, 2009, invest in commercial real estate loans and securities as well as direct property ownership. Asset values were impacted by general deterioration of real estate fundamentals coupled with the absence of a refinancing market and an increase in non-performing assets. In addition, in an environment of falling values and stricter underwriting standards, a large number of real estate projects are over-leveraged and facing near-term refinancing pressure. The energy funds reported a loss of $13 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. Insurance service fees consists of fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage as well as brokerage services. Service fees decreased to $93 million in 2009 from $103 million in 2008 due to a decline in fees received for administering assigned risk plans as a result of a decrease in workers’ compensation premiums by those plans.

Net Realized Gains on Investment Sales. 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. Net realized gains on investment sales were $104 million in 2009 compared with $77 million in 2008. Net realized investment gains in 2008 from the sale of securities included a gain of $70 million from the sale of the Company’s interest in Kiln Ltd.

Other-Than-Temporary Impairments. Other-than-temporary impairments were $143 million in 2009 compared with $434 million in 2008. The impairment charge in 2009 was primarily related to debt and preferred stock of major financial institutions that experienced adverse credit events and ratings downgrades during the period, including write-downs of debt issued by Thornburg Mortgage, Inc. and preferred stock issued by Citibank and Bank

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of America. The impairment charge in 2008 was primarily related to financial sector equity securities, including investments in Fannie Mae, Freddie Mac and other financial institutions.

Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were $189 million in 2009 compared with $137 million in 2008. These revenues were derived from aviation-related businesses that were separately purchased in 2007, 2008 and 2009. 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 comparable since the Company acquired one of its aviation companies in 2008 and another in 2009.

Losses and Loss Expenses. Losses and loss expenses decreased to $2,337 million in 2009 from $2,689 million in 2008 due to lower earned premiums. The consolidated loss ratio was 61.4% in 2009 compared with 62.7% in 2008. Weather-related losses were $63 million in 2009 compared with $114 million in 2008. Favorable prior year reserve development, net of related premium adjustments, was $190 million in 2009 and $196 million in 2008. A summary of loss ratios in 2009 compared with 2008 by business segment follows:

•  Specialty’s loss ratio increased to 61.9% in 2009 from 60.1% in 2008 due to a decline in favorable reserve development. Favorable prior year development, net of related premium adjustments, was $69 million in 2009 compared with $108 million in 2008.

•  The regional loss ratio decreased to 61.4% in 2009 from 65.4% in 2008 due to lower storm losses and an increase in favorable reserve development. Weather-related losses were $63 million in 2009 compared with $90 million in 2008. Net favorable prior year development was $52 million in 2009 compared with $26 million in 2008.

•  Alternative markets’ loss ratio increased to 63.4% in 2009 from 62.7% in 2008 due to pricing and loss cost trends and to the use of lower discount rates used to discount excess workers’ compensation reserves. These were partially offset by an increase in favorable reserve development, net of related premium adjustments, to $45 million in 2009 from $40 million in 2008.

•  The reinsurance loss ratio decreased to 57.9% in 2009 from 64.7% in 2008 due to lower losses from property business assumed from a Lloyd’s syndicate. Net favorable prior year development, net of related premium adjustments, was $16 million in 2009 compared with $12 million in 2008.

•  The international loss ratio decreased to 59.9% in 2009 from 61.7% in 2008 due to improved underwriting results for business written in Australia and Southeast Asia. Net favorable prior year development was $8 million in 2009 compared with $10 million in 2008.

Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the years ended December 31, 2009 and 2008:

	2009		2008
	Dollars in thousands
Underwriting expenses	$	1,248,463	$	1,303,551
Service expenses		78,331		87,397
Net foreign currency (gains) losses		4,213		(23,213	)
Other costs and expenses		109,831		107,430
Total	$	1,440,838	$	1,475,165

Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) increased to 32.8% in 2009 from 30.4% in 2008 primarily due to the decline in earned premiums. Underwriting expenses includes expenses related to recently started business operations. Some of the recently started business operations have relatively higher expense ratios due to their early stage of development.

Service expenses, which represent the costs associated with the fee-based businesses, decreased 10% to $78 million due to lower employment costs.

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Net foreign currency (gains) losses result from transactions denominated in a currency other than the operating unit’s functional currency. The gain in 2008 was primarily attributable to foreign operating units holding assets denominated in U.S. dollars.

Other costs and expenses, which represent corporate expenses, increased 2% to $110 million due to an increase in incentive compensation costs.

Expenses from Wholly-Owned Investees. Expenses from wholly-owned investees were $183 million in 2009 compared to $134 million in 2008. These expenses represent costs associated with aviation-related businesses that were separately purchased in 2007, 2008 and 2009. 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 comparable since the Company acquired one of the aviation companies in 2008 and another in 2009.

Interest Expense. Interest expense increased 4% to $88 million primarily due to the issuance of $300 million of 7.375% senior notes in September 2009, slightly offset by the repayment of $89 million of 9.875% senior notes in May 2008.

Income Taxes. The effective income tax rate was 19% in 2009 as compared to 14% in 2008. The effective income tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income.

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 are adequate to meet its payment obligations. The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The

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average duration of its portfolio was 3.6 years at December 31, 2010 and 2009. The Company’s investment portfolio and investment-related assets as of December 31, 2010 were as follows (dollars in thousands):

	Carrying		Percent
	Value		Of Total
	(Dollars in thousands)
Fixed maturity securities:
U.S. government and government agencies	$	1,347,875		10	%
State and municipal:
Special revenue		2,204,898		17	%
State general obligation		1,067,012		8	%
Local general obligation		424,188		3	%
Pre-refunded(1)		1,468,700		11	%
Corporate backed		368,646		3	%
Total state and municipal		5,533,444		43	%
Mortgage-backed securities:
Agency		1,058,216		8	%
Residential-Prime		265,381		2	%
Residential-Alt A		73,581		1	%
Commercial		53,670		0	%
Total mortgage-backed securities		1,450,848		11	%
Corporate:
Industrial		1,112,855		9	%
Financial		671,298		5	%
Utilities		187,204		1	%
Asset-backed		285,117		2	%
Other		128,783		1	%
Total corporate		2,385,257		18	%
Foreign government and foreign government agencies		491,730		4	%
Total fixed maturity securities		11,209,154		86	%
Equity securities available for sale:
Preferred stocks:
Financial		101,900		1	%
Real estate		89,446		1	%
Utilities		53,651		0	%
Total preferred stocks		244,997		2	%
Common stocks		316,056		2	%
Total equity securities available for sale		561,053		4	%
Arbitrage trading account		359,192		3	%
Investment in arbitrage funds		60,660		0	%
Investment funds		451,751		3	%
Loans receivable		353,583		3	%
Total investments	$	12,995,393		100	%

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(1) Bonds that have been pre-refunded with U.S. government securities.

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.

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 fair 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 high-dividend yielding common and preferred stocks issued by large market capitalization companies.

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 arbitrage funds represents investments in limited partnerships that specialize in merger arbitrage and relative value arbitrage. 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 December 31, 2010 and 2009, the Company’s carrying value in investment funds was $452 million and $419 million, respectively, including investments in real estate funds of $226 million and $193 million, respectively, and investments in energy funds of $97 million and $106 million, respectively.

Loans Receivable. Loans receivable, which are carried at amortized cost, have an aggregate cost of $354 million and an aggregate fair value of $313 million at December 31, 2010. Amortized cost of these loans is net of a valuation allowance of $20 million as of December 31, 2010. The nine largest loans have an aggregate amortized cost of $275 million and an aggregate fair value of $229 million and are secured by commercial real estate. These loans earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) between August 2011 and June 2014. The loans are secured by office buildings (64%), hotels (23%) and senior living facilities (13%) located primarily in New York City, California, Hawaii, Boston and Philadelphia.

Market Risk. The Company’s market risk generally represents the risk of gain or loss that may result from the potential change in the fair value of the Company’s investment portfolio as a result of fluctuations in credit quality and interest rates. The Company uses various models and stress test scenarios to monitor and manage interest rate risk. In addition, the Company’s international businesses and securities are subject to currency exchange rate risk. As noted above, the Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities (i.e., policy claims and debt obligations). The average duration for the fixed maturity portfolio was 3.6 years at December 31, 2010 and 2009.

23

The following table outlines the groups of fixed maturity securities and the components of the interest rate risk at December 31, 2010:

	Effective
	Duration
	(Years)		Fair Value
	Dollars in thousands
Cash and cash equivalents		0.0	$	642,952
U. S. government securities		3.6		1,347,875
State and municipal		4.1		5,535,755
Corporate		4.0		2,385,442
Foreign		2.7		491,730
Mortgage-backed securities		3.4		1,454,515
Loans receivable		1.5		312,515
Total		3.6	$	12,170,784

Duration is a common gauge of the price sensitivity of fixed maturity securities to changes in interest rates. The Company determines the estimated change in fair value of the fixed maturity securities, assuming parallel shifts in the yield curve for treasury securities while keeping spreads between individual securities and treasury securities static. The estimated fair value at specified levels at December 31, 2010 would be as follows (dollars in thousands):

	Fixed Maturity		Estimated Change
Change in Interest Rates:	Securities		in Fair Value
300 basis point rise	$	10,860,992	$	(1,309,792	)
200 basis point rise		11,297,638		(873,146	)
100 basis point rise		11,734,284		(436,500	)
Base scenario		12,170,784		—
100 basis point decline		12,598,354		427,570
200 basis point decline		13,025,778		854,994
300 basis point decline		13,453,202		1,282,418

Approximately 36% of the Company’s state and municipal bonds are insured by bond insurers, including MBIA (13%), FGIC (8%), AGO (8%) and AMBAC (7%). At the time of purchase and in subsequent evaluations of state and municipal securities, the Company considers the rating of the underlying security without regard to credit enhancement from bond insurance.

Arbitrage investing differs from other types of investments in that its focus is on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general stock market conditions. Potential changes in market conditions are also mitigated by the implementation of hedging strategies, including short sales.

Additionally, the arbitrage positions are generally hedged against market declines by purchasing put options, selling call options or entering into swap contracts. The Company’s merger arbitrage securities are primarily exposed to the risk of completion of announced deals, which are subject to regulatory as well as transactional and other risks.

Liquidity and Capital Resources

Cash Flow. Cash flow provided from operating activities was $451 million in 2010, $316 million in 2009 and $1,553 million in 2008. The increase in cash flow from operating activities in 2010 compared with 2009 was due to lower premium collections, higher paid losses and higher tax payments in 2009, partially offset by a decrease in cash transfers to the arbitrage trading account. There were no cash transfers to the arbitrage trading account in 2010

24

compared with transfers to the arbitrage trading accounts of $383 million in 2009 and cash transfers from the arbitrage trading account of $554 million in 2008.

As a holding company, the Company derives cash from its subsidiaries in the form of dividends, tax payments and management fees. Maximum amounts of dividends that can be paid without regulatory approval are prescribed by statute. During 2011, the maximum amount of dividends which can be paid without regulatory approval is approximately $490 million. The ability of the holding company to service its debt obligations is limited by the ability of the insurance subsidiaries to pay dividends. In the event dividends, tax payments and management fees available to the holding company were inadequate to service its debt obligations, the Company would need to raise capital, sell assets or restructure its debt obligations.

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 85% invested in cash, cash equivalents and marketable fixed income securities as of December 31, 2010. 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.

Debt. In September 2010, the Company issued $300 million of 5.375% senior notes due 2020 and repaid its $150 million of 5.125% senior notes upon maturity. In September 2009, the Company issued $300 million of 7.375% senior notes due 2019. At December 31, 2010, the Company had senior notes, junior subordinated debentures and other debt outstanding with a carrying value of $1,743 million and a face amount of $1,762 million. The maturities of the outstanding debt are $14 million in 2011, $21 million in 2012, $200 million in 2013, $200 million in 2015, $450 million in 2019, $300 million in 2020, $76 million in 2022, $1 million in 2023, $250 million in 2037 and $250 million in 2045.

Equity. The Company repurchased 17,017,479 shares, 6,382,331 shares and 20,677,144 shares of its common stock in 2010, 2009 and 2008, respectively. The aggregate cost of the repurchases was $449 million in 2010, $147 million in 2009 and $553 million in 2008. At December 31, 2010, total common stockholders’ equity was $3.7 billion, common shares outstanding were 141,009,834, and stockholders’ equity per outstanding share was $26.26. Stockholders’ equity per share, including equivalent shares for unissued RSUs and unexercised stock options (using the treasury stock method) was $25.54.

Total Capital. Total capitalization (equity, senior notes and other debt and junior subordinated debentures) was $5.4 billion at December 31, 2010. The percentage of the Company’s capital attributable to senior notes, junior subordinated debentures and other debt was 32% at December 31, 2010 and 31% at December 31, 2009.

Federal and Foreign Income Taxes

The Company files a consolidated income tax return in the U.S. and foreign tax returns in each of the countries in which it has overseas operations. At December 31, 2010, the Company had a deferred gross tax asset, net of valuation allowance, of $391 million (which primarily relates to loss and loss expense reserves and unearned premium reserves), and a gross deferred tax liability of $326 million (which primarily relates to deferred policy acquisition costs and intangible assets). The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

25

Reinsurance

The Company follows customary industry practice of reinsuring a portion of its exposures, paying reinsurers a part of the premiums received on the policies it writes. Reinsurance is purchased by the Company principally to reduce its net liability on individual risks and to protect it against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the reinsurance coverage. The Company monitors the financial condition of its reinsurers and attempts to place its coverages only with substantial and financially sound carriers.

The following table presents the credit quality of amounts due from reinsurers as of December 31, 2010 (dollars in thousands). Amounts due from reinsurers are net of reserves for uncollectible reinsurance of $3 million.

Reinsurer	Rating(1)	Amount
Munich Re	AA-	$	133,679
Swiss Re	A+		72,161
Berkshire Hathaway	AA+		65,934
Transatlantic Re	A+		48,864
Partner Re	AA-		47,758
Axis Capital	A+		46,313
Lloyd’s of London	A+		44,746
Ace Group	AA-		28,227
Hannover Re Group	AA-		23,132
XL Capital	A		21,102
Other reinsurers rated A- or better			156,876
Non-rated and other(2)			58,822
Subtotal			747,632
Residual market pools(3)			322,624
Total		$	1,070,256

(1)	Rating represents S&P rating, or if not rated by S&P, A.M. Best rating.
(2)	The majority of non-rated and other consists of amounts due from government sponsored reinsurers and amounts that are secured by letters of credit or other forms of collateral.
(3)	Many states require licensed insurers that provide workers’ compensation insurance to participate in programs that provide workers’ compensation to employers that cannot procure coverage from an insurer on a voluntary basis. Insurers can fulfill this residual market obligation by participating in pools where results are shared by the participating companies. The Company acts as a servicing carrier for workers’ compensation pools in 18 states. As a servicing carrier, the Company writes residual market business directly and then cedes 100% of this business to the respective pool. As a servicing carrier, the Company receives fee income for its services. The Company does not retain underwriting risk, and credit risk is limited as ceded balances are jointly shared by all the pool members.

As of January 1, 2011, the Company’s catastrophe excess of loss reinsurance program provides protection for losses between $30 million and $145 million for primary business written by its U.S. companies. The Company has separate catastrophe excess of loss and quota share agreements for business written through Lloyd’s. The catastrophe reinsurance agreements are subject to certain limits, exclusions and reinstatement premiums.

26

Contractual Obligations

Following is a summary of the Company’s contractual obligations as of December 31, 2010 (dollars in thousands):

Estimated Payments By Periods	2011		2012		2013		2014		2015		Thereafter
Gross reserves for losses	$	2,273,518	$	1,580,430	$	1,226,031	$	898,898	$	681,064	$	3,325,128
Operating lease obligations		31,265		27,749		23,482		18,702		14,877		37,082
Purchase obligations		25,204		20,633		35,021		586		470		366
Junior subordinated debentures		0		0		0		0		0		250,000
Debt maturities		13,651		20,877		200,512		0		200,000		1,077,099
Interest payments		110,666		110,011		99,830		97,872		91,338		1,072,463
Other long-term liabilities		42,609		21,965		10,184		15,498		20,311		72,546
Total	$	2,496,913	$	1,781,665	$	1,595,060	$	1,031,556	$	1,008,060	$	5,834,684

The estimated payments for reserves for losses and loss expenses in the above table represent the projected (undiscounted) payments for gross loss and loss expense reserves related to losses incurred as of December 31, 2010. The estimated payments in the above table do not consider payments for losses to be incurred in future periods. These amounts include reserves for reported losses and reserves for incurred but not reported losses. Estimated amounts recoverable from reinsurers are not reflected. The estimated payments by year are based on historical loss payment patterns. The actual payments may differ from the estimated amounts due to changes in ultimate loss reserves and in the timing of the settlement of those reserves.

The Company utilizes letters of credit to back certain reinsurance payments and obligations. Outstanding letters of credit were $32 million as of December 31, 2010. The Company has made certain guarantees to state regulators that the statutory capital of certain subsidiaries will be maintained above certain minimum levels. In addition, the Company has commitments to invest up to $174 million in certain investment funds.

Off-Balance Sheet Arrangements

An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing, hedging or research and development arrangements with the Company. The Company has no arrangements of these types that management believes may have a material current or future effect on our financial condition, liquidity or results of operations.

27

Management’s Report on Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.

28

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

W. R. Berkley Corporation:

We have audited W. R. Berkley Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010, and our report dated February 28, 2011 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

New York, New York

February 28, 2011

29

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

W. R. Berkley Corporation:

We have audited the accompanying consolidated balance sheets of W. R. Berkley Corporation and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 28, 2011 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

New York, New York

February 28, 2011

30

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands, except per share data)
REVENUES:
Net premiums written	$	3,850,926		$	3,730,095		$	4,033,899
Change in net unearned premiums		(15,344	)		75,754			255,681
Net premiums earned		3,835,582			3,805,849			4,289,580
Net investment income		538,698			552,561			537,033
Losses from investment funds		(8,173	)		(173,553	)		(3,553	)
Insurance service fees		85,405			93,245			102,856
Net investment gains (losses):
Net realized gains on investment sales		65,786			104,453			76,619
Other-than-temporary impairments		(9,205	)		(151,727	)		(433,550	)
Portion of impairments reclassified to other comprehensive income		—			8,866			—
Net investment gains (losses)		56,581			(38,408	)		(356,931	)
Revenues from wholly-owned investees		214,454			189,347			137,280
Other income		1,522			2,137			2,543
Total revenues		4,724,069			4,431,178			4,708,808
OPERATING COSTS AND EXPENSES:
Losses and loss expenses		2,309,867			2,336,707			2,688,661
Other operating costs and expenses		1,496,362			1,440,838			1,475,165
Expenses from wholly-owned investees		207,566			183,414			134,037
Interest expense		106,969			87,989			84,623
Total operating costs and expenses		4,120,764			4,048,948			4,382,486
Income before income taxes		603,305			382,230			326,322
Income tax expense		(153,739	)		(73,150	)		(44,919	)
Net income before noncontrolling interests		449,566			309,080			281,403
Noncontrolling interests		(279	)		(23	)		(262	)
Net income to common stockholders	$	449,287		$	309,057		$	281,141
NET INCOME PER SHARE:
Basic	$	3.02		$	1.93		$	1.68
Diluted	$	2.90		$	1.86		$	1.62

See accompanying notes to consolidated financial statements.

31

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31,
	2010			2009
	(Dollars in thousands,
	except per share data)
Assets
Investments:
Fixed maturity securities	$	11,209,154		$	11,299,197
Equity securities available for sale		561,053			401,367
Arbitrage trading account		359,192			465,783
Investment in arbitrage funds		60,660			83,420
Investment funds		451,751			418,880
Loans receivable		353,583			381,591
Total investments		12,995,393			13,050,238
Cash and cash equivalents		642,952			515,430
Premiums and fees receivable		1,087,208			1,047,976
Due from reinsurers		1,070,256			972,820
Accrued investment income		138,384			130,524
Prepaid reinsurance premiums		215,816			211,054
Deferred policy acquisition costs		405,942			391,360
Real estate, furniture and equipment		254,720			246,605
Deferred federal and foreign income taxes		65,492			190,450
Goodwill		90,581			90,581
Trading account receivable from brokers and clearing organizations		339,235			310,042
Current federal and foreign income taxes		23,605			—
Other assets		198,963			171,516
Total assets	$	17,528,547		$	17,328,596
Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses	$	9,016,549		$	9,071,671
Unearned premiums		1,953,721			1,928,428
Due to reinsurers		215,723			208,045
Trading account securities sold but not yet purchased		53,494			143,885
Other liabilities		836,001			779,347
Junior subordinated debentures		242,784			249,793
Senior notes and other debt		1,500,419			1,345,481
Total liabilities		13,818,691			13,726,650
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, 141,009,834 and 156,552,355 shares		47,024			47,024
Additional paid-in capital		935,099			926,359
Retained earnings		4,194,684			3,785,187
Accumulated other comprehensive income		276,563			163,207
Treasury stock, at cost, 94,108,084 and 78,565,563 shares		(1,750,494	)		(1,325,710	)
Total common stockholders’ equity		3,702,876			3,596,067
Noncontrolling interests		6,980			5,879
Total equity		3,709,856			3,601,946
Total liabilities and equity	$	17,528,547		$	17,328,596

See accompanying notes to consolidated financial statements.

32

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)
COMMON STOCK:
Beginning and end of period	$	47,024		$	47,024		$	47,024
ADDITIONAL PAID IN CAPITAL:
Beginning of period	$	926,359		$	920,241		$	907,016
Stock options exercised and restricted units issued including tax benefit		(17,042	)		(17,665	)		(10,520	)
Restricted stock units expensed		25,584			23,649			23,239
Stock options expensed		—			12			214
Stock issued		198			122			292
End of period	$	935,099		$	926,359		$	920,241
RETAINED EARNINGS:
Beginning of period	$	3,785,187		$	3,514,531		$	3,271,355
Net income to common stockholders		449,287			309,057			281,141
Dividends		(39,790	)		(38,401	)		(37,965	)
End of period	$	4,194,684		$	3,785,187		$	3,514,531
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized investment gains (losses):
Beginning of period	$	219,394		$	(142,216	)	$	52,497
Unrealized gains (losses) on securities not other-than-temporarily impaired		114,468			365,136			(194,713	)
Unrealized gains (losses) on other-than-temporarily impaired securities		885			(3,526	)		—
End of period		334,747			219,394			(142,216	)
Currency translation adjustments:
Beginning of period		(40,371	)		(72,475	)		18,060
Net change in period		(2,117	)		32,104			(90,535	)
End of period		(42,488	)		(40,371	)		(72,475	)
Net pension asset:
Beginning of period		(15,816	)		(14,268	)		(17,356	)
Net change in period		120			(1,548	)		3,088
End of period		(15,696	)		(15,816	)		(14,268	)
Total accumulated other comprehensive income (loss)	$	276,563		$	163,207		$	(228,959	)
TREASURY STOCK:
Beginning of period	$	(1,325,710	)	$	(1,206,518	)	$	(686,228	)
Stock exercised/vested		45,687			27,322			32,195
Stock issued		536			630			799
Stock repurchased		(471,007	)		(147,144	)		(553,284	)
End of period	$	(1,750,494	)	$	(1,325,710	)	$	(1,206,518	)
NONCONTROLLING INTERESTS:
Beginning of period	$	5,879		$	5,361		$	35,496
Change in subsidiary shares from noncontrolling interest		814			474			(30,126	)
Net income		279			23			262
Other comprehensive income (loss), net of tax		8			21			(271	)
End of period	$	6,980		$	5,879		$	5,361

See accompanying notes to consolidated financial statements.

33

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)
Net income before noncontrolling interests	$	449,566		$	309,080		$	281,403
Other comprehensive income (loss):
Change in unrealized foreign exchange gains (losses)		(2,117	)		32,104			(90,535	)
Unrealized holding gains (losses) on investment securities arising during the period, net of taxes		152,235			336,757			(426,942	)
Reclassification adjustment for net investment gains (losses) included in net income, net of taxes		(36,874	)		24,874			231,958
Change in unrecognized pension obligation, net of taxes		120			(1,548	)		3,088
Other comprehensive income (loss)		113,364			392,187			(282,431	)
Comprehensive income (loss)		562,930			701,267			(1,028	)
Comprehensive income (loss) to the noncontrolling interest		(287	)		(44	)		9
Comprehensive income (loss) to common shareholders	$	562,643		$	701,223		$	(1,019	)

See accompanying notes to consolidated financial statements.

34

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2010			2009			2008
	(Dollars in thousands)
CASH FROM OPERATING ACTIVITIES:
Net income to common stockholders	$	449,287		$	309,057		$	281,141
Adjustments to reconcile net income to net cash from operating activities:
Net investment (gains) losses		(56,581	)		38,408			356,931
Depreciation and amortization		82,867			78,875			83,953
Noncontrolling interests		279			23			262
Investment funds		26,640			176,670			8,550
Stock incentive plans		27,407			24,465			24,139
Change in:
Securities trading account		106,591			(346,298	)		182,301
Investment in arbitrage funds		22,760			(9,985	)		137,305
Trading account receivable from brokers and clearing organizations		(29,193	)		(181,159	)		281,043
Trading account securities sold but not yet purchased		(90,391	)		120,835			(44,089	)
Premiums and fees receivable		(41,167	)		17,159			117,128
Due from reinsurers		(40,888	)		(36,279	)		(35,760	)
Accrued investment income		(7,913	)		(7,509	)		11,103
Prepaid reinsurance premiums		17,988			(24,167	)		(8,744	)
Deferred policy acquisition costs		(15,272	)		6,181			53,332
Deferred income taxes		63,866			(52,536	)		(57,321	)
Other assets		(30,797	)		774			36,227
Reserves for losses and loss expenses		(103,745	)		41,923			416,235
Unearned premiums		3,414			(57,261	)		(238,557	)
Due to reinsurers		7,940			86,456			21,645
Other liabilities		58,224			130,422			(73,864	)
Net cash from operating activities		451,316			316,054			1,552,960
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Proceeds from sales, excluding trading account:
Fixed maturity securities		1,554,906			2,436,258			1,006,604
Equity securities		137,990			188,646			62,254
Distributions from investment funds		47,045			18,639			184,621
Proceeds from maturities and prepayments of fixed maturity securities		1,374,378			1,214,157			997,171
Cost of purchases, excluding trading account:
Fixed maturity securities		(2,755,449	)		(4,869,368	)		(2,230,222	)
Equity securities		(193,914	)		(67,309	)		(172,306	)
Contributions to investment funds		(101,024	)		(105,650	)		(148,039	)
Change in loans receivable		23,317			(11,363	)		(48,524	)
Net additions to real estate, furniture and equipment		(49,605	)		(30,455	)		(78,947	)
Change in balances due to (from) security brokers		(297	)		144,023			(138,281	)
Payment for business purchased, net of cash acquired		—			(33,812	)		(48,895	)
Net cash from (used in) investing activities		37,347			(1,116,234	)		(614,564	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from issuance of debt		309,030			333,589			—
Bank deposits received		6,222			17,213			17,795
Advances from (repayments to) federal home loan bank		(8,800	)		4,165			6,325
Net proceeds from stock options exercised		17,730			5,426			14,806
Repayment of senior notes, other debt and junior suboridinated debentures		(162,685	)		(11,165	)		(102,123	)
Cash dividends to common stockholders		(49,348	)		(28,843	)		(46,978	)
Purchase of common treasury shares		(471,007	)		(147,144	)		(553,284	)
Other net		(217	)		144			168
Net cash from (used in) financing activities		(359,075	)		173,385			(663,291	)
Net impact on cash due to change in foreign exchange rates		(2,066	)		7,390			(92,133	)
Net increase (decrease) in cash and cash equivalents		127,522			(619,405	)		182,972
Cash and cash equivalents at beginning of year		515,430			1,134,835			951,863
Cash and cash equivalents at end of year	$	642,952		$	515,430		$	1,134,835

See accompanying notes to consolidated financial statements.

35

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2010, 2009 and 2008

(1)   Summary of Significant Accounting Policies

(A)   Principles of consolidation and basis of presentation

The consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”), have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions and balances have been eliminated. Reclassifications have been made in the 2009 and 2008 financial statements to conform to the presentation of the 2010 financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. The most significant items on our balance sheet that involve a greater degree of accounting estimates that are subject to change in the future are the valuation of investments, other than temporary impairments, loss and loss adjustment expense reserves and premium estimates. Actual results could differ from those estimates.

(B)   Revenue recognition

Insurance premiums are recognized as written at the inception of the policy. Reinsurance premiums are estimated based upon information received from ceding companies, and subsequent differences from such estimates are recorded in the period they are determined. Insurance and reinsurance premiums are primarily earned on a pro rata basis over the policy term. Fees for services are earned over the period that the services are provided.

Audit premiums are recognized when they are reliably determinable. The accrual for earned but unbilled audit premiums decreased net premiums written and premiums earned by $7 million, $23 million and $28 million in 2010, 2009 and 2008, respectively.

Revenues from wholly-owned investees are derived from services provided to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. Revenue is recognized upon delivery of aircraft, delivery of fuel, shipment of parts and upon completion of services.

(C)   Cash and cash equivalents

Cash equivalents consist of funds invested in money market accounts and investments with an effective maturity of three months or less when purchased.

(D)   Investments

Fixed maturity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of stockholders’ equity. Fixed maturity securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Investment income from fixed maturity securities is recognized based on the constant effective yield method. Premiums and discounts on mortgage-backed securities are adjusted for the effects of actual and anticipated prepayments on a retrospective basis.

Equity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of stockholders’ equity.

36

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

Equity securities that the Company purchased with the intent to sell in the near-term are classified as trading account securities and are reported at estimated fair value. Realized and unrealized gains and losses from trading activity are reported as net investment income. The trading account includes direct investments in arbitrage securities and investments in arbitrage-related funds. Short sales and short call options are presented as trading securities sold but not yet purchased. Unsettled trades and the net margin balances held by the clearing broker are presented as a trading account receivable from brokers and clearing organizations.

Investment funds are carried under the equity method of accounting. The Company reports its share of the income or loss from such investments as income (losses) from investment funds. The Company’s share of the earnings or losses of investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company’s consolidated financial statements.

Loans receivable represent commercial real estate mortgage loans and bank loans and are carried at amortized cost. The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, a valuation allowance equal to the difference between the carrying value of the loan and the estimated fair value of the underlying collateral is established, with a corresponding charge to earnings.

Fair value is generally determined based on quoted market prices. 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.

Realized gains or losses represent the difference between the cost of securities sold and the proceeds realized upon sale. The Company uses primarily the first-in, first-out method to determine the cost of securities sold.

The cost of securities is adjusted where appropriate to include a provision for a 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 to recover the cost basis of the investment prior to the time of sale or maturity. Since equity securities do not have a contractual cash flow or a maturity, the Company considers whether the price of an equity security is expected to recover within a reasonable period of time.

For fixed maturity securities that the Company intends to sell or, more likely than not, would be required to sell, a decline in value below amortized cost is considered to be an other-than-temporary impairment (“OTTI”). The amount of OTTI is equal to the difference between amortized cost and fair value at the balance sheet date. For fixed maturity securities that the Company does not intend to sell or believes that it is more likely than not it would not be required to sell, a decline in value below amortized cost is considered to be an OTTI if the Company does not expect to recover the entire amortized cost basis of a security (i.e., the present value of cash flows expected to be collected is less than the amortized cost basis of the security). The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the decline in value not considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other comprehensive income.

Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, if any, the ability of the issuer to make scheduled payments, historical

37

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

(E)   Per share data

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

(F)   Deferred policy acquisition costs

Acquisition costs (primarily commissions and premium taxes) incurred in writing insurance and reinsurance business are deferred and amortized ratably over the terms of the related contracts. Ceding commissions received on reinsurance contracts are netted against acquisition costs and are recognized ratably over the life of the contract. Deferred policy acquisition costs are presented net of unearned ceding commissions and are limited to the amounts estimated to be recoverable from the applicable unearned premiums and the related anticipated investment income after giving effect to anticipated losses, loss adjustment expenses and expenses necessary to maintain the contracts in force.

(G)   Reserves for losses and loss expenses

Reserves for losses and loss expenses are an accumulation of amounts determined on the basis of (1) evaluation of claims for business written directly by the Company; (2) estimates received from other companies for reinsurance assumed by the Company; and (3) estimates for losses incurred but not reported (based on Company and industry experience). These estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the statements of income in the period in which they are determined. The Company discounts its reserves for excess and assumed workers’ compensation claims using a risk-free or statutory rate. (See Note 12 of Notes to Consolidated Financial Statements.)

(H)   Reinsurance ceded

The unearned portion of premiums ceded to reinsurers is reported as prepaid reinsurance premiums and earned ratably over the policy term. The estimated amounts of reinsurance recoverable on unpaid losses are reported as due from reinsurers. To the extent any reinsurer does not meet its obligations under reinsurance agreements, the Company must discharge its liability. Amounts due from reinsurers are reflected net of funds held where the right of offset is present. The Company has provided reserves for estimated uncollectible reinsurance.

(I)   Deposit accounting

Contracts that do not meet the risk transfer requirements of GAAP are accounted for using the deposit accounting method. Under this method, an asset or liability is recognized at the inception of the contract based on consideration paid or received. The amount of the deposit asset or liability is adjusted at subsequent reporting dates using the interest method with a corresponding credit or charge to interest income or expense. Deposit liabilities for assumed reinsurance contracts were $95 million and $27 million at December 31, 2010 and 2009, respectively.

38

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(J)   Federal and foreign income taxes

The Company files a consolidated income tax return in the U.S. and foreign tax returns in each of the countries in which it has its overseas operations. The Company’s method of accounting for income taxes is the asset and liability method. Under this method, deferred tax assets and liabilities are measured using tax rates currently in effect or expected to apply in the years in which those temporary differences are expected to reverse. Interest and penalties, if any, are reported as income tax expense. The Company believes there are no tax positions that would require disclosure under GAAP. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.

(K)   Foreign currency

Gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) are reported on the statements of income as other operating costs and expenses. Unrealized gains or losses resulting from translating the results of non-U.S. dollar denominated operations are reported in accumulated other comprehensive income. Revenues and expenses denominated in currencies other than U.S. dollars are translated at the weighted average exchange rate during the year. Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date.

(L)   Real estate, furniture and equipment

Real estate, furniture and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the estimated useful lives of the respective assets. Depreciation expense was $41 million, $46 million and $38 million for 2010, 2009 and 2008, respectively.

(M)   Comprehensive income (loss)

Comprehensive income (loss) encompasses all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income, net unrealized holding gains or losses on available for sale securities, unrealized foreign currency translation adjustments and changes in unrecognized pension obligations.

(N)   Goodwill and other intangible assets

Goodwill and other intangibles assets are tested for impairment on an annual basis and at interim periods where circumstances require. The Company’s impairment test as of December 31, 2010 indicated that there were no impairment losses related to goodwill and other intangible assets. Intangible assets of $31 million are included in other assets as of December 31, 2010 and 2009.

(O)   Stock options

The costs resulting from all share-based payment transactions with employees are recognized in the consolidated financial statements using a fair-value-based measurement method.

(P)   Statements of cash flows

Interest payments were $103 million, $80 million and $84 million in 2010, 2009 and 2008, respectively. Income taxes paid were $123 million, $16 million and $182 million in 2010, 2009 and 2008, respectively. Other non-cash items include acquisitions and dispositions, unrealized investment gains and losses and pension expense. (See Note 2, Note 9 and Note 24 of Notes to Consolidated Financial Statements.)

39

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(Q)   Recent accounting pronouncements

In December 2009, the Financial Accounting Standards Board (“FASB”) issued guidance that: (i) eliminates the concept of qualifying “special-purpose entity” (“SPE”); (ii) alters the requirement for transferring assets off of the reporting company’s balance sheet; (iii) requires additional disclosure about a transferor’s involvement in transferred assets; and (iv) eliminates special treatment of guaranteed mortgage securitizations. This guidance was effective as of January 1, 2010. The adoption of this guidance did not have a material impact on our financial condition or results of operations.

In December 2009, the FASB issued guidance requiring the reporting entity to perform a qualitative analysis that results in a variable interest entity (“VIE”) being consolidated if the reporting entity: (i) has the power to direct activities of the VIE that significantly impact the VIE’s financial performance; and (ii) has an obligation to absorb losses or receive benefits that may be significant to the VIE. This guidance further requires enhanced disclosures, including disclosure of significant judgments and assumptions as to whether a VIE must be consolidated, and how involvement with a VIE affects the company’s financial statements. This guidance was effective as of January 1, 2010. The adoption of this guidance did not have a material impact on our financial condition or results of operations.

In January 2010, the FASB issued guidance that requires additional disclosures regarding fair value measurements. The guidance requires entities to disclose the amounts and reasons for significant transfers between Level 1 and Level 2 of the fair value hierarchy, the reasons for any transfers in or out of Level 3 and separate information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements. Portions of the guidance are effective for interim and annual reporting periods beginning after December 15, 2009, which we adopted effective January 1, 2010, and the remaining guidance is effective for interim and annual reporting periods beginning after December 15, 2010. The adoption of this remaining guidance will expand the disclosures related to fair value measurements in the notes to the Company’s consolidated financial statements.

In July 2010, the FASB issued guidance that requires additional disclosures regarding allowances for credit losses and the credit quality of financing receivables. Portions of the guidance are effective and were adopted by us on December 31, 2010, and the remaining guidance is effective in 2011. The adoption of this remaining guidance is not expected to have a material impact on our financial condition or results of operations.

In October 2010, the FASB issued guidance regarding the treatment of costs associated with acquiring or renewing insurance contracts. This guidance modifies the definition of the types of costs that can be capitalized and specifies that the costs must be based on successful efforts that is acquiring a new contract or renewing a contract. This guidance is effective for periods beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on our financial condition or results of operations.

(2)   Acquisitions

In 2009, the Company acquired a company in the aviation business for $35 million. In 2008, the Company acquired another company in the aviation business and the remaining 20% minority interest in W. R. Berkley Insurance (Europe), Limited for a total cost of $55 million.

40

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The following table summarizes the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition.

	2009			2008
	(Dollars in thousands)
Cash and cash equivalents	$	1,773		$	6,112
Real estate, furniture and equipment		1,777			16,541
Deferred federal income taxes		—			(4,815	)
Intangible assets		—			3,658
Goodwill		—			6,229
Other assets		40,382			3,696
Total assets acquired		43,932			31,421
Reserve for losses and loss expenses		—			(1,570	)
Other liabilities		8,355			8,428
Total liabilities assumed		8,355			6,858
Noncontrolling interests		(8	)		(30,444	)
Net assets acquired	$	35,585		$	55,007

The weighted average useful life of the intangible assets acquired in 2008 was 10 years. This 2008 goodwill is not deductible for tax purposes.

(3)  Investments in Fixed Maturity Securities

At December 31, 2010 and 2009, investments in fixed maturity securities were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Carrying
	Cost		Gains		Losses			Value		Value
	(Dollars in thousands)
December 31, 2010
Held to maturity:
State and municipal	$	71,998	$	3,440	$	(1,129	)	$	74,309	$	71,998
Residential mortgage-backed securities		39,002		3,667		—			42,669		39,002
Corporate		4,995		185		—			5,180		4,995
Total held to maturity		115,995		7,292		(1,129	)		122,158		115,995
Available for sale:
U.S. government and government agency		1,289,669		58,658		(452	)		1,347,875		1,347,875
State and municipal		5,302,513		203,221		(44,288	)		5,461,446		5,461,446
Mortgage-backed securities:
Residential(1)		1,319,289		52,165		(13,278	)		1,358,176		1,358,176
Commercial		57,057		2,207		(5,594	)		53,670		53,670
Corporate		2,307,987		102,306		(30,031	)		2,380,262		2,380,262
Foreign		460,683		31,283		(236	)		491,730		491,730
Total available for sale		10,737,198		449,840		(93,879	)		11,093,159		11,093,159
Total investment in fixed maturity securities	$	10,853,193	$	457,132	$	(95,008	)	$	11,215,317	$	11,209,154

41

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Carrying
	Cost		Gains		Losses			Value		Value
	(Dollars in thousands)
December 31, 2009
Held to maturity:
State and municipal	$	70,847	$	6,778	$	(739	)	$	76,886	$	70,847
Residential mortgage-backed securities		44,318		2,984		—			47,302		44,318
Corporate		4,994		—		(13	)		4,981		4,994
Total held to maturity		120,159		9,762		(752	)		129,169		120,159
Available for sale:
U.S. government and government agency		1,677,579		40,358		(3,784	)		1,714,153		1,714,153
State and municipal(2)		5,551,632		238,271		(41,048	)		5,748,855		5,748,855
Mortgage-backed securities:
Residential(1)		1,537,331		38,229		(44,343	)		1,531,217		1,531,217
Commercial		47,292		—		(12,069	)		35,223		35,223
Corporate		1,719,874		59,082		(35,574	)		1,743,382		1,743,382
Foreign		394,711		12,323		(826	)		406,208		406,208
Total available for sale		10,928,419		388,263		(137,644	)		11,179,038		11,179,038
Total investment in fixed maturity securities	$	11,048,578	$	398,025	$	(138,396	)	$	11,308,207	$	11,299,197

(1)	Gross unrealized losses for mortgage-backed securities include $4,064,000 and $5,085,000, as of December 31, 2010 and 2009, respectively, related to the non-credit portion of OTTI recognized in other comprehensive income.
(2)	Gross unrealized losses for state and municipal securities includes $340,000, as of December 31, 2009, related to the non-credit portion of OTTI recognized in other comprehensive income.

The amortized cost and fair value of fixed maturity securities at December 31, 2010, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations:

	Amortized
	Cost		Fair Value
	(Dollars in thousands)
Due in one year or less	$	738,832	$	750,274
Due after one year through five years		2,926,911		3,066,783
Due after five years through ten years		2,758,716		2,904,361
Due after ten years		3,013,386		3,039,384
Mortgage-backed securities		1,415,348		1,454,515
Total	$	10,853,193	$	11,215,317

At December 31, 2010 and 2009, there were no investments, other than investments in United States government and government agency securities, which exceeded 10% of common stockholders’ equity. At December 31, 2010, investments with a carrying value of $803 million were on deposit in custodial or trust accounts, of which $598 million was on deposit with state insurance departments, $103 million was on deposit in support of the Company’s underwriting activities at Lloyd’s, $70 million was on deposit as security for reinsurance

42

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

clients and $32 million was on deposit as security for letters of credit issued in support of the Company’s reinsurance operations.

(4)   Investments in Equity Securities Available for Sale

At December 31, 2010 and 2009, investments in equity securities available for sale were as follows:

			Gross		Gross
			Unrealized		Unrealized			Fair		Carrying
	Cost		Gains		Losses			Value		Value
	(Dollars in thousands)
December 31, 2010
Common stocks	$	188,949	$	128,096	$	(989	)	$	316,056	$	316,056
Preferred stocks		215,286		40,386		(10,675	)		244,997		244,997
Total	$	404,235	$	168,482	$	(11,664	)	$	561,053	$	561,053
December 31, 2009
Common stocks	$	27,237	$	97,554	$	(5,731	)	$	119,060	$	119,060
Preferred stocks		285,490		9,745		(12,928	)		282,307		282,307
Total	$	312,727	$	107,299	$	(18,659	)	$	401,367	$	401,367

(5)  Arbitrage Trading Account and Arbitrage Funds

At December 31, 2010 and 2009, the fair value and carrying value of the arbitrage trading account and investment in arbitrage funds and related assets and liabilities were as follows:

	2010			2009
	(Dollars in thousands)
Arbitrage trading account	$	359,192		$	465,783
Investment in arbitrage funds		60,660			83,420
Related assets and liabilities:
Trading account receivables from brokers and clearing organizations		339,235			310,042
Securities sold but not yet purchased		(53,494	)		(143,885	)

The primary focus of the trading account is merger arbitrage and relative value arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. 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. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general financial market conditions.

The Company uses put options, call options and swap contracts in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options and contracts are reported at fair value. As of December 31, 2010, the fair value of long option contracts outstanding was $6 million (notional amount of $118 million) and the fair value of short option contracts outstanding was $0.5 million (notional amount of $126 million). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.

43

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(6)   Investment Funds

Investment funds include the following:

	Carrying Value				Income (Losses)
	as of December 31,				from Investment Funds
	2010		2009		2010			2009			2008
	(Dollars in thousands)
Real estate	$	226,183	$	193,178	$	(4,766	)	$	(159,569	)	$	(43,116	)
Kiln Ltd		—		—		—			—			10,697
Energy		96,511		106,213		996			(13,227	)		30,785
Other		129,057		119,489		(4,403	)		(757	)		(1,919	)
Total	$	451,751	$	418,880	$	(8,173	)	$	(173,553	)	$	(3,553	)

In 2008, the Company sold its 20.1% interest in Kiln Ltd for $174 million and reported a realized gain of $70 million.

(7)   Net Investment Income

Net investment income consists of the following:

	2010			2009			2008
	(Dollars in thousands)
Investment income earned on:
Fixed maturity securities and cash	$	501,750		$	495,140		$	497,549
Equity securities available for sale		11,661			20,295			38,144
Arbritage trading account(a)		28,847			40,714			6,032
Gross investment income		542,258			556,149			541,725
Investment expense		(3,560	)		(3,588	)		(4,692	)
Net investment income	$	538,698		$	552,561		$	537,033

(a) Investment income earned from net trading account activity includes unrealized trading losses of $2,447,000 and $334,000 in 2010 and 2008, respectively, and unrealized trading gains of $2,061,000 in 2009.

(8)  Loans Receivable

The amortized cost of loans receivable was $354 million and $382 million at December 31, 2010 and 2009, respectively. Amortized cost is net of a valuation allowance of $20 million and $14 million at December 31, 2010 and 2009, respectively. The nine largest loans have an aggregate amortized cost of $275 million and an aggregate fair value of $229 million and are secured by commercial real estate. These loans earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) between August 2011 and June 2014. The loans are secured by office buildings (64%), hotels (23%) and senior living facilities (13%) with properties located primarily in New York City, California, Hawaii, Boston and Philadelphia.

The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. A risk rating is assigned to each loan receivable based upon the Company’s assessment of loan to value, cash flow stability, financial and operating performance, loan structure and market conditions. Loans receivable with a potential for default are further assessed using discounted cash flow analysis and comparable cost and sales methodologies, if appropriate. For loans where the Company determines it is probable that the contractual terms will not be met, a valuation reserve is established with a corresponding charge

44

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

to earnings. Loans receivable are reported net of a valuation reserve of $20 million and $14 million at December 31, 2010 and 2009, respectively.

(9)   Realized and Unrealized Investment Gains and Losses

Realized and unrealized investment gains and losses are as follows:

	2010			2009			2008
	(Dollars in thousands)
Realized investment gains and losses:
Fixed maturity securities:
Gains	$	38,204		$	50,500		$	20,444
Lossses		(8,990	)		(3,632	)		(6,458	)
Equity securities available for sale		34,477			52,680			(9,377	)
Sale of investment funds		1,871			4,905			72,010
Provision for other than temporary impairments(1)		(9,205	)		(151,727	)		(433,550	)
Less investment impairments recognized in other comprehensive income		—			8,866			—
Other gains		224			—			—
Total net investment gains (losses)		56,581			(38,408	)		(356,931	)
Income tax (expense) benefit		(19,707	)		13,534			124,973
	$	36,874		$	(24,874	)	$	(231,958	)
Change in unrealized gains and losses of available for sales securities:
Fixed maturity securities	$	102,454		$	406,025		$	(258,359	)
Less investment impairments recognized in other comprehensive income		1,362			(5,425	)		—
Equity securities available for sale		68,178			143,684			(10,333	)
Investment funds		4,560			13,235			(33,595	)
Cash and cash equivalents		34			(75	)		76
Total change in unrealized gains and losses		176,588			557,444			(302,211	)
Income tax (expense) benefit		(61,227	)		(195,813	)		107,291
Noncontrolling interests		(8	)		(21	)		207
	$	115,353		$	361,610		$	(194,713	)

(1) Includes change in valuation allowance for loans receivable of $6,082,000 and $12,418,000 for the years ended December 31, 2010 and 2009, respectively, there was no change in the valuation allowance for 2008.

45

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(10)  Securities in an Unrealized Loss Position

The following table summarizes all securities in an unrealized loss position at December 31, 2010 and 2009 by the length of time those securities have been continuously in an unrealized loss position.

	Less Than 12 Months				12 Months or Greater				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(Dollars in thousands)
December 31, 2010
U.S. government and government agency	$	60,228	$	420	$	6,973	$	32	$	67,201	$	452
State and municipal		951,119		26,577		156,617		18,840		1,107,736		45,417
Mortgage-backed securities		116,194		2,809		174,163		16,063		290,357		18,872
Corporate		409,604		7,233		155,259		22,798		564,863		30,031
Foreign		43,514		236		—		—		43,514		236
Fixed maturity securities		1,580,659		37,275		493,012		57,733		2,073,671		95,008
Common stocks		58,979		989		—		—		58,979		989
Preferred stocks		27,010		2,368		76,890		8,307		103,900		10,675
Equity securities available for sale		85,989		3,357		76,890		8,307		162,879		11,664
Total	$	1,666,648	$	40,632	$	569,902	$	66,040	$	2,236,550	$	106,672
December 31, 2009
U.S. government and government agency	$	389,745	$	3,653	$	7,361	$	131	$	397,106	$	3,784
State and municipal		376,914		12,971		443,666		28,816		820,580		41,787
Mortgage-backed securities		306,840		12,719		260,519		43,693		567,359		56,412
Corporate		194,690		13,958		172,656		21,629		367,346		35,587
Foreign		81,368		826		—		—		81,368		826
Fixed maturity securities		1,349,557		44,127		884,202		94,269		2,233,759		138,396
Common stocks		19,948		5,731		—		—		19,948		5,731
Preferred stocks		9,951		76		163,985		12,852		173,936		12,928
Equity securities available for sale		29,899		5,807		163,985		12,852		193,884		18,659
Total	$	1,379,456	$	49,934	$	1,048,187	$	107,121	$	2,427,643	$	157,055

46

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

Fixed Maturity Securities — A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at December 31, 2010 is presented in the table below:

					Gross
	Number of		Aggregate		Unrealized
	Securities		Fair Value		Loss
	(Dollars in thousands)
Unrealized loss less than $5 million:
Mortgage-backed securities		12	$	91,747	$	7,835
Corporate		12		77,265		5,068
State and municipal		3		28,590		3,854
Unrealized loss $5 million or more
Mortgage-backed security(1)		1		31,450		5,550
Total		28	$	229,052	$	22,307

(1) This investment is secured by 95 properties comprising approximately 30 million square feet of office space located primarily in Boston, Northern California and Los Angeles. The current debt maturity of February 2012 can be extended at the borrower’s option through February 2014 provided that there is no continuing default. The Company believes the amount of outstanding debt for the Company’s debt layer and all debt layers senior to the Company’s debt layer to be below the current fair values for the underlying properties. Based on the portfolio’s stable performance (e.g., occupancy rates, lease terms and debt service coverage) and on there being substantial subordinate capital, the Company does not consider the investment to be OTTI.

For OTTI of fixed maturity securities that management does not intend to sell or believes that it is more likely than not it would not be required to sell, the portion of the decline in value considered to be due to credit factors is recognized in earnings and the portion of the decline in value considered to be due to non-credit factors is recognized in other comprehensive income. The table below provides a roll-forward of the portion of impairments recognized in earnings for those securities that have been impaired due to both credit factors and non-credit factors.

	For the Year Ended
	December 31,
	2010			2009
	(Dollars in thousands)
Beginning balance of amounts related to credit losses	$	5,661		$	—
Additions for amounts related to credit losses		—			5,661
Deductions for amounts related to credit loss sales		(1,400	)		—
Ending balance of amounts related to credit losses	$	4,261		$	5,661

The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default on financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.

Preferred Stocks – At December 31, 2010, there were eight preferred stocks in an unrealized loss position, with an aggregate fair value of $104 million and a gross unrealized loss of $11 million. Three of those preferred stocks with an aggregate fair value of $15 million and a gross unrealized loss of $5 million are rated non-investment grade. The Company does not consider any of the preferred stocks to be OTTI.

47

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

Common Stocks – At December 31, 2010, there were four common stocks in an unrealized loss position with an aggregate fair value of $59 million and an aggregate unrealized loss of $1 million. The Company does not consider any of these securities to be OTTI.

(11)  Fair Value Measurements

The Company’s fixed maturity and equity securities available for sale and its trading account securities are carried at fair value. Fair value is defined 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.” The Company utilizes 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 similar assets in active markets. 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 maturity 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 projections, credit quality and business developments of the issuer and other relevant information.

48

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The following tables present the assets and liabilities measured at fair value on a recurring basis as of December 31, 2010 and 2009 by level:

	Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
December 31, 2010
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	1,347,875	$	—	$	1,347,875	$	—
State and municipal		5,461,446		—		5,461,446		—
Mortgage-backed securities		1,411,846		—		1,411,846		—
Corporate		2,380,262		—		2,292,199		88,063
Foreign		491,730		—		491,730		—
Total fixed maturity securities available for sale		11,093,159		—		11,005,096		88,063
Equity securities available for sale:
Common stocks		316,056		204,749		109,748		1,559
Preferred stocks		244,997		—		155,551		89,446
Total equity securities available for sale		561,053		204,749		265,299		91,005
Arbitrage trading account		359,192		162,292		193,713		3,187
Total	$	12,013,404	$	367,041	$	11,464,108	$	182,255
Liabilities:
Securities sold but not yet purchased	$	53,494	$	51,672	$	1,822	$	—
December 31, 2009
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	1,714,153	$	—	$	1,714,153	$	—
State and municipal		5,748,855		—		5,748,855		—
Mortgage-backed securities		1,566,440		—		1,540,540		25,900
Corporate		1,743,382		—		1,653,222		90,160
Foreign		406,208		—		406,208		—
Total fixed maturity securities available for sale		11,179,038		—		11,062,978		116,060
Equity securities available for sale:
Common stocks		119,060		11,295		106,206		1,559
Preferred stocks		282,307		—		227,594		54,713
Total equity securities available for sale		401,367		11,295		333,800		56,272
Arbitrage trading account		465,783		465,430		—		353
Total	$	12,046,188	$	476,725	$	11,396,778	$	172,685
Liabilities:
Securities sold but not yet purchased	$	143,885	$	143,885	$	—	$	—

There were no transfers between Levels 1 and 2 for the year ended December 31, 2010.

49

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The following tables summarize changes in Level 3 assets for the years ended December 31, 2010 and 2009:

	Gains (Losses) Included in:
						Other
	Beginning					Comprehensive							Paydowns/			Transfers					Ending
	Balance		Earnings			Income		Purchases		Sales			Maturities			In		Out			Balance
	(Dollars in thousands)
Year ended December 31, 2010
Fixed maturity securities available for sale:
Mortgage-backed securities	$	25,900	$	—		$	—	$	—	$	—		$	—		$	—	$	(25,900	)	$	—
Corporate		90,160		(850	)		1,558		19,632		(5,324	)		(17,113	)				—			88,063
Total		116,060		(850	)		1,558		19,632		(5,324	)		(17,113	)		—		(25,900	)		88,063
Equity securities available for sale:
Common stocks		1,559		—			—							—					—			1,559
Preferred stocks		54,713		23,535			31,633		19,542		(39,977	)		—					—			89,446
Total		56,272		23,535			31,633		19,542		(39,977	)		—			—		—			91,005
Arbitrage trading account		353		(353	)		—		3,187		—			—			—		—			3,187
Total	$	172,685	$	22,332		$	33,191	$	42,361	$	(45,301	)	$	(17,113	)	$	—	$	(25,900	)	$	182,255
Year ended December 31, 2009
Fixed maturity securities available for sale:
State and municipal	$	41,672	$	—		$	—	$	—	$	—		$	—		$	—	$	(41,672	)	$	—
Mortgage-backed securities		22,462		—			3,438		—		—			—			—		—			25,900
Corporate		84,505		391			12,004		1,833		(800	)		(19,429	)		39,994		(28,338	)		90,160
Total		148,639		391			15,442		1,833		(800	)		(19,429	)		39,994		(70,010	)		116,060
Equity securities available for sale:
Common stocks		58,734		—			712		—		—			—			—		(57,887	)		1,559
Preferred stocks		50,486		—			968		3,259		—			—			—		—			54,713
Total		109,220		0			1,680		3,259		0			0			0		(57,887	)		56,272
Arbitrage trading account		353		—			—							—					—			353
Total	$	258,212	$	391		$	17,122	$	5,092	$	(800	)	$	(19,429	)	$	39,994	$	(127,897	)	$	172,685

The transfers in (out) of Level 3 for state and municipal, mortgage-backed and corporate securities in 2010 and 2009 were based upon the availability of broker dealer quotations. In certain circumstances the Company was able to obtain quotations from third party broker dealers. The common stock transfers out of Level 3 in 2009 were attributable to securities for which observable data became available due to public and private equity offerings.

50

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(12)   Reserves for Losses and Loss Expenses

The table below provides a reconciliation of the beginning and ending reserve balances:

	2010			2009			2008
	(Dollars in thousands)
Net reserves at beginning of year	$	8,147,782		$	8,122,586		$	7,822,897
Net provision for losses and loss expenses(a):
Claim occuring during the current year(b)		2,509,933			2,518,849			2,829,830
Decrease in estimates for claims occurring in prior years(c)(d)		(253,248	)		(234,008	)		(195,710	)
Loss reserve discount accretion		53,182			51,866			54,494
Total		2,309,867			2,336,707			2,688,614
Net payments for claims:
Current year		641,570			582,605			640,406
Prior year		1,811,507			1,751,026			1,662,650
Total		2,453,077			2,333,631			2,303,056
Foreign currency translation		(5,051	)		22,120			(85,869	)
Net reserves at end of year		7,999,521			8,147,782			8,122,586
Ceded reserve at end of year		1,017,028			923,889			877,010
Gross reserves at end of year	$	9,016,549		$	9,071,671		$	8,999,596

(a)	The net provision for loss and loss expenses does not include policyholder benefits incurred on life insurance of $47,000 in 2008.
(b)	Claims occurring during the current year are net of loss reserve discounts of $67,763,000, $80,455,000 and $97,698,000 in 2010, 2009 and 2008, respectively.
(c)	The decrease in estimates for claims occurring in prior years is net of loss reserve discount. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $246,941,000, $232,040,000 and $180,154,000 in 2010, 2009 and 2008, respectively.
(d)	Approximately $19 million and $44 million of the favorable reserve development in 2010 and 2009, respectively, was fully offset by a reduction in earned premiums primarily for retrospectively rated policies. The favorable reserve development, net of premium offsets, was $234 million and $190 million in 2010 and 2009, respectively.

For the year ended December 31, 2010, estimates for claims occurring in prior years decreased by $234 million net of premium offsets. The favorable reserve development in 2010 was primarily attributable to accident years 2005 through 2009. 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.

Environmental and Asbestos — To date, known environmental and asbestos claims have not had a material impact on the Company’s operations. These claims have not materially impacted the Company because its subsidiaries generally did not insure large industrial companies that are subject to significant environmental or asbestos exposures.

51

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The Company’s net reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $36 million and $37 million at December 31, 2010 and 2009, respectively. The Company’s gross reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $51 million and $54 million at December 31, 2010 and 2009, respectively. Increases (decreases) in net incurred losses and loss expenses for reported asbestos and environmental claims were approximately $2 million, $(0.6) million and $0.4 million in 2010, 2009 and 2008, respectively. Net paid losses and loss expenses for asbestos and environmental claims were approximately $3 million in 2010 and 2009 and $2 million in 2008. The estimation of these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make an actuarial estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential effect of significant unresolved legal matters, including coverage issues, as well as the cost of litigating the legal issues. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

Discounting — 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. These discount rates range from 2.5% to 6.5% with a weighted average discount rate of 4.4%. 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, is $898 million, $877 million and $847 million at December 31, 2010, 2009 and 2008, respectively. The increase in the aggregate discount from 2009 to 2010 and from 2008 to 2009 resulted from an increase in excess and assumed workers’ compensation gross reserves.

(13)   Reinsurance

The following is a summary of reinsurance financial information:

	Year Ended December 31,
	2010			2009			2008
	(Dollars in thousands)
Written premiums:
Direct	$	3,788,251		$	3,599,836		$	3,898,488
Assumed		627,826			653,603			621,638
Ceded		(565,151	)		(523,344	)		(486,227	)
Total net written premiums	$	3,850,926		$	3,730,095		$	4,033,899
Earned premiums:
Direct	$	3,744,150		$	3,690,493		$	4,075,360
Assumed		652,485			617,143			704,555
Ceded		(561,053	)		(501,787	)		(490,335	)
Total net earned premiums	$	3,835,582		$	3,805,849		$	4,289,580
Ceded losses incurred	$	379,153		$	252,299		$	295,179

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 $3,098,000, $4,430,000 and $4,895,000 as of December 31, 2010, 2009 and 2008,

52

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

respectively. The following table presents the amounts due from reinsurers as of December 31, 2010 (dollars in thousands):

Reinsurer	Amount
Munich Re	$	133,697
Swiss Re		72,161
Berkshire Hathaway		65,934
Transatlantic Re		48,864
Partner Re		47,758
Axis Capital		46,313
Lloyd’s of London		44,746
Ace Group		28,227
Hannover Re Group		23,132
XL Capital Group		21,102
Other reinsurers less then $20,000		215,698
Subtotal		747,632
Residual market pools		322,624
Total	$	1,070,256

(14)   Senior Notes and Other Debt

Senior notes and other debt consist of the following (the difference between the face value and the carrying value is unamortized discount):

		2010		2010		2009
Maturity	Rate	Face Value		Carrying Value		Carrying Value
	(Dollars in thousands)
Senior notes:
September 30, 2010	5.125%	$	—	$	—	$	149,772
February 15, 2013	5.875%		200,000		199,295		198,963
May 15, 2015	5.60%		200,000		199,187		199,001
August 15, 2019	6.15%		150,000		148,772		148,630
September 15, 2019	7.375%		300,000		297,784		297,530
September 13, 2020	5.375%		300,000		296,729		—
January 1, 2022	8.70%		76,503		75,890		75,858
February 15, 2037	6.25%		250,000		247,126		247,017
Subsidiary debt:
2010	Various		—		—		422
2011	Various		13,651		13,651		2,143
2012	Various		20,877		20,877		25,520
2013	Various		512		512		—
July 3, 2023	6.88%		596		596		625
Total debt		$	1,512,139	$	1,500,419	$	1,345,481

53

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(15)   Junior Subordinated Debentures

In 2005, the Company issued $250,000,000 aggregate principal amount of 6.75% Junior Subordinated Debentures due July 26, 2045 (the “Debentures”) to W. R. Berkley Capital Trust II (the “Trust”). At December 31, 2010, the carrying value of the Debentures, net of unamortized discount, was $242,784,000. The Trust simultaneously issued an equal amount of 6.75% mandatorily redeemable preferred securities (the “Trust Preferred Securities”), which are fully and unconditionally guaranteed by the Company to the extent the Trust has funds available for payment of distributions. The Trust Preferred Securities are subject to mandatory redemption in a like amount (i) in whole but not in part upon repayment of the Debentures at maturity, (ii) in whole but not in part, at any time contemporaneously with the optional prepayment of the Debentures by the Company upon the occurrence and continuation of certain events and (iii) in whole or in part, on or after July 26, 2010, contemporaneously with the optional prepayment by the Company of the Debentures.

(16)   Income Taxes

Income tax expense consists of:

			Deferred
	Current		Expense
	Expense		(Benefit)			Total
	(Dollars in thousands)
December 31, 2010:
Domestic	$	79,143	$	66,287		$	145,430
Foreign		10,584		(2,275	)		8,309
Total expense	$	89,727	$	64,012		$	153,739
December 31, 2009:
Domestic	$	116,777	$	(56,325	)	$	60,452
Foreign		9,140		3,558			12,698
Total expense (benefit)	$	125,917	$	(52,767	)	$	73,150
December 31, 2008:
Domestic	$	77,650	$	(63,630	)	$	14,020
Foreign		24,493		6,406			30,899
Total expense (benefit)	$	102,143	$	(57,224	)	$	44,919

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of 35% to pre-tax income are as follows:

	2010			2009			2008
	(Dollars in thousands)
Computed “expected” tax expense	$	211,157		$	133,781		$	114,213
Tax-exempt investment income		(62,628	)		(64,886	)		(71,614	)
Change in valuation allowance		102			(887	)		1,095
Impact of lower foreign tax rates		(253	)		(551	)		(4,319	)
State and local taxes		2,298			1,175			2,349
Other, net		3,063			4,518			3,195
Total expense	$	153,739		$	73,150		$	44,919

54

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

At December 31, 2010 and 2009, the tax effects of differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

	2010			2009
	(Dollars in thousands)
Deferred tax asset:
Loss reserve discounting	$	152,189		$	180,481
Unearned premiums		106,162			109,099
Net operating loss carry forwards		699			1,076
Other-than-temporary impairments		69,057			73,818
Restricted stock units		39,514			30,526
Other		26,114			58,824
Gross deferred tax asset		393,735			453,824
Less valuation allowance		(2,328	)		(2,226	)
Deferred tax asset		391,407			451,598
Deferred tax liability:
Amortization of intangibles		11,780			11,381
Deferred policy acquisition costs		124,141			122,116
Unrealized investment gains		169,106			111,692
Other		20,888			15,959
Deferred tax liability		325,915			261,148
Net deferred tax asset	$	65,492		$	190,450

The Company had a current tax receivable of $23,605,000 at December 31, 2010 and a current tax payable of $27,187,000 at December 31, 2009. At December 31, 2010, the Company had foreign net operating loss carry forwards of $1,998,000, which expire beginning in 2011. In addition, the Company has a net foreign tax credit carry forward for U.S. income tax purposes in the amount of $2,226,000, which expires beginning in 2012. The Company has provided a full valuation allowance against this amount. The net change in the valuation relates primarily to these items. The statute of limitations has closed for the Company’s tax returns through December 31, 2004. The 2005 calendar year statute of limitations remains open as a result of the carry back of capital losses from the 2008 tax year, and the 2006 calendar year statue of limitations remains open as a result of the carry back of capital losses from the 2008 and 2009 tax years.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

(17)   Dividends from Subsidiaries and Statutory Financial Information (Unaudited)

The Company’s insurance subsidiaries are restricted by law as to the amount of dividends they may pay without the approval of regulatory authorities. During 2011, the maximum amount of dividends which can be paid without such approval is approximately $490 million. Combined net income and policyholders’ surplus of the

55

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

Company’s consolidated insurance subsidiaries, as determined in accordance with statutory accounting practices, are as follows:

	2010	2009		2008
	(Dollars in thousands)
Net income	$574,181	$	407,449	$	377,347
Policyholders’ surplus	$4,154,654	$	3,859,086	$	3,322,389

The significant variances between statutory accounting practices and GAAP are that for statutory purposes bonds are carried at amortized cost, acquisition costs are charged to income as incurred, deferred Federal income taxes are subject to limitations, excess and assumed workers’ compensation reserves are discounted at different discount rates and certain assets designated as “non-admitted assets” are charged against surplus.

The National Association of Insurance Commissioners (“NAIC”) has risk-based capital (“RBC”) requirements that require insurance companies to calculate and report information under a risk-based formula which measures statutory capital and surplus needs based on a regulatory definition of risk in a company’s mix of products and its balance sheet. As of December 31, 2010, all of the Company’s insurance subsidiaries had an RBC amount above the authorized control level RBC, as defined by the NAIC. The Company has guaranteed that the RBC levels of certain subsidiaries will remain above their authorized control levels.

(18)   Common Stockholders’ Equity

The weighted average number of shares used in the computation of net income per share was as follows:

	2010		2009		2008
	(Amounts in thousands)
Basic		148,752		160,357		166,956
Diluted		155,081		166,574		173,454

Treasury shares have been excluded from average outstanding shares from the date of acquisition. The difference in calculating basic and diluted net income per share is attributable entirely to the dilutive effect of stock-based compensation plans.

Changes in shares of common stock outstanding, net of treasury shares, are presented below. Shares of common stock issued and outstanding do not include shares related to unissued restricted stock units and unexercised stock options.

	2010			2009			2008
	(Amounts in thousands)
Balance, beginning of year		156,552			161,467			180,321
Shares issued		2,272			1,467			1,823
Shares repurchased		(17,814	)		(6,382	)		(20,677	)
Balance, end of year		141,010			156,552			161,467

56

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(19)   Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2010 and 2009:

	2010				2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(Dollars in thousands)
Assets:
Fixed maturity securities	$	11,209,154	$	11,215,317	$	11,299,197	$	11,308,207
Equity securities available for sale		561,053		561,053		401,367		401,367
Arbitrage trading account		359,192		359,192		465,783		465,783
Investment in arbitrage funds		60,660		60,660		83,420		83,420
Loans receivable		353,583		312,515		381,591		285,122
Cash and cash equivalents		642,952		642,952		515,430		515,430
Trading accounts receivable from brokers and clearing organizations		339,235		339,235		310,042		310,042
Liabilities:
Trading account securities sold but not yet purchased		53,494		53,494		143,885		143,885
Due to broker		5,318		5,318		5,612		5,612
Junior subordinated debentures		242,784		249,900		249,793		242,217
Senior notes and other debt		1,500,419		1,570,057		1,345,481		1,386,802

The estimated fair values of the Company’s fixed maturity securities, equity securities available for sale and arbitrage trading account securities are based on various valuation techniques. 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 similar assets in active markets. 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. The fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics. The fair value of the senior notes and other debt and the junior subordinated debentures is determined based on spreads for similar securities.

(20)   Lease Obligations

The Company and its subsidiaries use office space and equipment under leases expiring at various dates. These leases are considered operating leases for financial reporting purposes. Some of these leases have options to extend the length of the leases and contain clauses for cost of living, operating expense and real estate tax adjustments. Rental expense was $29,936,000, $28,067,000 and $23,802,000 for 2010, 2009 and 2008, respectively. Future minimum lease payments (without provision for sublease income) are: $31,265,000 in 2011; $27,749,000 in 2012; $23,482,000 in 2013; $18,702,000 in 2014 and $51,959,000 thereafter.

(21)   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

57

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

operations. However, adverse outcomes are possible and could negatively impact the Company’s financial condition and results of operations.

At December 31, 2010, the Company had commitments to invest up to $174 million in certain investment funds.

(22)   Stock Incentive Plan

The Company has a stock incentive plan under which 36,070,313 shares of common stock were reserved for issuance. Pursuant to the stock incentive plan, stock options may be granted at prices determined by the Board of Directors but not less than fair market value on the date of grant. Stock options vest according to a graded schedule of 25%, 50%, 75% and 100% on the third, fourth, fifth and sixth year anniversary of grant date. Stock options expire on the tenth year anniversary of the grant date. The Company has not issued any stock options since 2004.

The following table summarizes stock option information:

	2010				2009				2008
	Shares		Price(a)		Shares		Price(a)		Shares		Price(a)
Outstanding at beginning of year		5,700,552	$	9.53		6,566,377	$	9.06		8,384,422	$	8.84
Exercised		2,191,260		8.11		860,074		5.93		1,780,705		8.00
Cancelled		5,908		10.07		5,751		10.85		37,340		9.40
Outstanding at year end		3,503,384		10.42		5,700,552		9.53		6,566,377		9.06
Options exercisable at year end		3,503,384		—		5,699,708		9.53		6,537,403		9.04
Stock available for future grant(b)		1,785,875				3,929,067				3,953,053

(a)	Weighted average exercise price.
(b)	Includes restricted stock units.

The following table summarizes information about stock options outstanding at December 31, 2010:

	Options Outstanding and Exercisable
			Weighted
Range of			Remaining		Weighted
Exercise	Number		Contractual		Average
Prices	Outstanding		Life (in years)		Price
$0 to $10.00		1,305,300		0.20	$	9.33
$10.01 to $17.62		2,198,084		1.38		11.06
Total		3,503,384		0.94	$	10.42

Pursuant to the stock incentive plan, the Company may also issue restricted stock units (RSUs) to officers of the Company and its subsidiaries. The RSUs generally vest five years from the award date and are subject to other

58

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

vesting and forfeiture provisions contained in the award agreement. The following table summarizes RSU information for the three years ended December 31, 2010:

	2010		2009		2008
	(Dollars in Thousands)
RSUs granted:
Units		2,310,650		119,500		1,369,500
Fair value at grant date	$	58,462	$	2,783	$	33,847
RSUs vested:
Units		916,750		1,287,943		1,008,198
RSUs cancelled:
Units		161,550		89,763		128,727
Fair value at grant date	$	3,540	$	732	$	2,213
RSUs granted and unvested at end of period:
Units		4,945,375		3,713,025		4,971,231
Fair value at grant date	$	199,072	$	144,150	$	142,099

Upon vesting, shares of the Company’s common stock equal to the number of vested RSUs are issued or deferred to a later date, depending on the terms of the specific award agreement. As of December 31, 2010, 2,575,478 shares related to vested RSUs had been deferred.

The fair value of RSUs at the date of grant are recorded as unearned compensation, a component of stockholders’ equity, and expensed over the vesting period. Following is a summary of changes in unearned compensation for the three years ended December 31, 2010:

	2010			2009			2008
	(Dollars in thousands)
Unearned compensation at beginning of year	$	46,801		$	68,503		$	60,108
RSUs granted, net of cancellations		54,922			1,947			31,634
RSUs expensed		(25,584	)		(23,649	)		(23,239	)
Unearned compensation at end of year	$	76,139		$	46,801		$	68,503

(23)   Compensation Plans

The Company and its subsidiaries have profit sharing plans in which substantially all employees participate. The plans provide for minimum annual contributions of 5% of eligible compensation; contributions above the minimum are discretionary and vary with each participating subsidiary’s profitability. Employees become eligible to participate in the profit sharing plans on the first day of the month following the first full three months in which they are employed. The plans provide that 40% of the contributions vest immediately and that the remaining 60% vest at varying percentages based upon years of service. The Company’s foreign subsidiaries provide pension benefits in accordance with local regulations. The following table summarizes the profit sharing and foreign pension benefit expense for the three years ended December 31, 2010:

	2010		2009		2008
	(Dollars in thousands)
Profit sharing expense	$	29,604	$	25,785	$	25,847
Foreign pension expense		3,465		2,547		1,474
Total	$	33,069	$	28,332	$	27,321

59

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The Company has a Long-Term Incentive Compensation Plan (“LTIP”) that provides for incentive compensation to key executives based on the growth in the Company’s book value per share over a five year period. There are 124,000 units outstanding from the 2006 grant with a maximum value of $31.0 million, of which $30.7 million was earned over the five years ended December 31, 2010. There are 158,500 units outstanding from the 2008 grant with a maximum value of $39.6 million, of which $12.5 million was earned over the three years ended December 31, 2010.

The following table summarizes the LTIP expense for the three years ended December 31, 2010:

	2010		2009		2008
	(Dollars in thousands)
2006 grant	$	5,119	$	3,816	$	3,554
2008 grant		5,070		3,747		3,644
Total	$	10,189	$	7,563	$	7,198

(24)   Retirement Benefits

The Company has an unfunded noncontributory defined benefit plan that covers its chief executive officer and chairman of the board. The plan was amended on December 17, 2007 to provide that the benefits payments shall commence on the earliest of (i) January 2, 2014, (ii) the date of death or (iii) a change in control of the Company. The discount rate used to derive the projected benefit obligation and related retirement expense was 5.24% in 2010 and 5.83% in 2009. The discount rate assumption used to determine the benefit obligation for 2010 was based on a yield curve approach. Under this approach, a weighted average yield is determined from a hypothetical portfolio of AA-rated bonds. Following is a summary of the projected benefit obligation as of December 31, 2010 and 2009:

	2010		2009
	(Dollars in thousands)
Projected benefit obligation:
Beginning of year	$	45,889	$	37,851
Interest cost		2,675		2,631
Actuarial loss		3,264		5,407
End of year	$	51,828	$	45,889

Following is a summary of the amounts recognized in accumulated other comprehensive income (loss) as of December 31, 2010 and 2009:

	2010		2009
	(Dollars in thousands)
Net actuarial loss	$	9,093	$	6,254
Prior service cost		15,059		18,082
Net pension asset	$	24,152	$	24,336

60

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

The components of net periodic pension benefit cost are as follows:

	2010		2009		2008
	(Dollars in thousands)
Components of net periodic benefit cost:
Interest cost	$	2,675	$	2,631	$	2,416
Amortization of unrecognized:
Prior service costs		3,023		3,023		3,023
Net actuarial loss		424		—		—
Net periodic pension cost	$	6,122	$	5,654	$	5,439

The changes in plan assets and projected benefit obligation recognized in other comprehensive income (loss) are as follows:

	2010			2009
	(Dollars in thousands)
Changes in plan assets and projected benefit obligation:
Net actuarial loss	$	3,264		$	5,407
Amortization of:
Net actuarial loss		(424	)		—
Prior service costs		(3,023	)		(3,023	)
Total recognized in other comprehensive income (loss)	$	(183	)	$	2,384

The estimated prior service cost and net actuarial loss that will be amortized from accumulated other comprehensive income (loss) into periodic benefit cost during 2011 are $3,023,000 and $1,330,000, respectively.

(25)   Supplemental Financial Statement Data

Other operating costs and expenses consist of the following:

	2010		2009		2008
	(Dollars in thousands)
Amortization of deferred policy acquisition costs	$	917,217	$	903,154	$	998,539
Other underwriting expenses		397,266		345,309		305,012
Service company expenses		72,372		78,331		87,397
Net foreign currency (gains) losses		2,126		4,213		(23,213	)
Other costs and expenses		107,381		109,831		107,430
Total	$	1,496,362	$	1,440,838	$	1,475,165

(26)   Industry Segments

The Company’s operations are presently conducted in five segments of the insurance business: specialty, regional, 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

61

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

Our regional segments provide commercial insurance products to customers primarily in 45 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 operations specialize in developing, insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include employers, employer groups, insurers, and alternative market funds seeking less costly, more efficient ways to manage exposure to risks. In addition to providing insurance, the alternative markets segment also provides a wide variety of fee-based services, including consulting and administrative services.

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

Our international segment offers personal and commercial property casualty insurance in South America commercial property casualty insurance in the United Kingdom and Continental Europe and reinsurance in Australia, Southeast Asia and Canada.

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. Income (loss) before income taxes by segment consists of revenues less expenses related to the respective segment’s operations, including allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.

	Revenues
			Investment						Pre-Tax			Net
	Earned		Income and						Income			Income
	Premiums		Funds		Other		Total		(Loss)			(Loss)
	(Dollars in thousands)
December 31, 2010:
Specialty	$	1,288,373	$	180,063	$	3,130	$	1,471,566	$	296,645		$	214,769
Regional		1,066,922		82,411		3,114		1,152,447		117,353			86,325
Alternative markets		608,191		123,309		79,173		810,673		178,607			131,126
Reinsurance		419,356		103,079		—		522,435		129,922			97,015
International		452,740		32,794		—		485,534		21,174			14,838
Corporate, other and eliminations(1)		—		8,869		215,964		224,833		(196,977	)		(131,660	)
Net investment gains		—		—		56,581		56,581		56,581			36,874
Consolidated	$	3,835,582	$	530,525	$	357,962	$	4,724,069	$	603,305		$	449,287

62

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

	Revenues
			Investment								Pre-Tax			Net
	Earned		Income and								Income			Income
	Premiums		Funds		Other			Total			(Loss)			(Loss)
	(Dollars in thousands)
December 31, 2009:
Specialty	$	1,354,355	$	125,351	$	3,560		$	1,483,266		$	220,906		$	167,732
Regional		1,116,871		57,530		2,725			1,177,126			106,078			80,031
Alternative markets		597,932		83,719		87,032			768,683			162,875			121,993
Reinsurance		411,511		75,505		—			487,016			86,358			70,675
International		325,180		26,767		—			351,947			22,719			14,676
Corporate, other and eliminations(1)		—		10,136		191,412			201,548			(178,298	)		(121,176	)
Net investment losses		—		—		(38,408	)		(38,408	)		(38,408	)		(24,874	)
Consolidated	$	3,805,849	$	379,008	$	246,321		$	4,431,178		$	382,230		$	309,057
December 31, 2008:
Specialty	$	1,618,915	$	188,120	$	3,778		$	1,810,813		$	375,429		$	271,156
Regional		1,237,258		80,538		—			1,317,796			108,719			82,281
Alternative markets		626,858		105,674		99,090			831,622			201,879			146,460
Reinsurance		519,717		116,046		—			635,763			117,946			93,399
International		286,832		35,184		—			322,016			52,943			36,162
Corporate, other and eliminations(1)		—		7,918		139,811			147,729			(173,663	)		(116,359	)
Net investment losses		—		—		(356,931	)		(356,931	)		(356,931	)		(231,958	)
Consolidated	$	4,289,580	$	533,480	$	(114,252	)	$	4,708,808		$	326,322		$	281,141

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

December 31,	2010		2009
Specialty	$	5,854,256	$	5,589,666
Regional		2,616,238		2,741,269
Alternative markets		3,801,597		3,643,214
Reinsurance		2,972,988		3,142,017
International		1,391,604		1,118,994
Corporate, other and eliminations(1)		891,864		1,093,436
Consolidated	$	17,528,547	$	17,328,596

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

63

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

Net premiums earned by major line of business are as follows:

	2010		2009		2008
	(Dollars in thousands)
Specialty
Other liability	$	384,799	$	449,120	$	596,314
Property		212,164		199,746		208,534
Professional liability		200,219		173,201		155,967
Commercial automobile		129,505		189,501		268,438
Products liability		112,072		131,713		183,786
Other		249,614		211,074		205,876
Total specialty		1,288,373		1,354,355		1,618,915
Regional
Commercial multi peril		389,997		405,552		455,366
Commercial automobile		301,290		322,445		361,793
Workers’ compensation		214,857		229,066		250,770
Other		160,778		159,808		169,329
Total regional		1,066,922		1,116,871		1,237,258
Alternative Markets
Primary workers’ compensation		260,508		242,259		243,571
Excess workers’ compensation		216,647		252,196		289,764
Other		131,036		103,477		93,523
Total alternative markets		608,191		597,932		626,858
Reinsurance
Casualty		307,474		323,479		444,606
Property		111,882		88,032		75,111
Total reinsurance		419,356		411,511		519,717
International
Professional liability		88,997		84,101		100,908
Property		80,105		26,119		17,434
Reinsurance		74,047		56,454		9,938
Automobile		69,875		64,969		63,729
Workers’ compensation		57,802		46,698		47,149
Other liability		38,344		25,736		31,287
Other		43,570		21,103		16,387
Total international		452,740		325,180		286,832
Total	$	3,835,582	$	3,805,849	$	4,289,580

64

W. R. BERKLEY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the years ended December 31, 2010, 2009 and 2008

(27)   Quarterly Financial Information (Unaudited)

The following is a summary of quarterly financial data (in thousands except per share data):

	2010
Three Months Ended	March 31		June 30		September 30		December 31
Revenues	$	1,153,547	$	1,163,068	$	1,176,112	$	1,231,342
Net income		118,610		110,207		93,619		126,851
Net income per share(a)
Basic		0.77		0.73		0.64		0.88
Diluted		0.74		0.70		0.61		0.85

	2009
Three Months Ended	March 31			June 30		September 30		December 31
Revenues	$	963,621		$	1,155,098	$	1,136,309	$	1,176,150
Net income (loss)		(20,346	)		97,387		97,722		134,294
Net income (loss) per share(a)
Basic		(0.13	)(b)		0.61		0.61		0.84
Diluted		(0.13	)(b)		0.59		0.59		0.81

(a)	Net income (loss) per share (“EPS”) in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters EPS does not necessarily equal the full-year EPS.
(b)	For the three months ended March 31, 2009, the anti-dilutive effects of 7,001,000 potential common shares outstanding were excluded from the outstanding diluted shares due to the first quarter loss.

65

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors

W. R. Berkley Corporation:

We consent to the incorporation by reference in the registration statements (No. 333-155724) on Form S-3 and (No. 333-33935), (No. 33-88640), (No. 33-55726) and (No. 333-127598) on Form S-8 of W. R. Berkley Corporation of our reports dated February 28, 2011 with respect to the consolidated balance sheets of W. R. Berkley Corporation as of December 31, 2010 and 2009, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2010, and all related financial statement schedules and the effectiveness of internal control over financial reporting as of December 31, 2010, which reports appear or are incorporated by reference in the December 31, 2010 Annual Report on Form 10-K of W. R. Berkley Corporation.

KPMG LLP

New York, New York

February 28, 2011

EX-31.1

Exhibit 31.1

CERTIFICATIONS

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

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2011

/s/  William R. Berkley

William R. Berkley

Chairman of the Board and

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

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

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 28, 2011

/s/  Eugene G. Ballard

Eugene G. Ballard

Senior Vice President and

Chief Financial Officer

EX-32.1

Exhibit 32.1

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

In connection with the Annual Report of W. R. Berkley Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, William R. Berkley, Chairman of the Board and Chief Executive Officer of the Company, and Eugene G. Ballard, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  William R. Berkley

William R. Berkley

Chairman of the Board and Chief Executive Officer

/s/  Eugene G. Ballard

Eugene G. Ballard

Senior Vice President and Chief Financial Officer

February 28, 2011

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