Delaware | 1-15202 | 22-1867895 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
475 Steamboat Road, Greenwich, CT | 06830 | |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
99.1 | Press Release dated July 25, 2011 |
W. R. BERKLEY CORPORATION |
||||
By: | /s/ Eugene G. Ballard | |||
Name: | Eugene G. Ballard | |||
Date: July 25, 2011 | Title: | Senior Vice President-Chief Financial Officer | ||
Exhibit: | ||||
99.1 | Press Release dated July 25, 2011 |
W. R. Berkley Corporation
|
NEWS RELEASE | |
475 Steamboat Road |
||
Greenwich, Connecticut 06830 |
||
(203) 629-3000 |
FOR IMMEDIATE RELEASE
|
CONTACT: | Karen A. Horvath | ||
Vice President - External | ||||
Financial Communications | ||||
(203) 629-3000 |
Second Quarter | Six Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Gross premiums written |
$ | 1,245,276 | $ | 1,113,469 | $ | 2,515,134 | $ | 2,239,589 | ||||||||
Net premiums written |
1,057,415 | 961,354 | 2,140,718 | 1,945,304 | ||||||||||||
Net income |
83,082 | 110,207 | 199,569 | 228,817 | ||||||||||||
Net income per diluted share |
0.56 | 0.70 | 1.35 | 1.44 | ||||||||||||
Operating income (1) |
68,746 | 102,758 | 166,443 | 217,525 | ||||||||||||
Operating income per diluted share |
0.46 | 0.65 | 1.13 | 1.37 |
(1) | Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses. |
W. R. Berkley Corporation
|
Page 2 |
| Book value per share increased 4% to $27.77. | ||
| Average premium rate increases approached 2%. | ||
| Net premiums written increased 10%. | ||
| GAAP combined ratio was 101.1% including catastrophe losses and 94.9% excluding catastrophe losses. | ||
| The Company repurchased 1.1 million shares of common stock at an average cost of $31.80 per share and an aggregate cost of $36 million. |
W. R. Berkley Corporation
|
Page 3 |
W. R. Berkley Corporation
|
Page 4 |
Second Quarter | Six Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues: |
||||||||||||||||
Net premiums written |
$ | 1,057,415 | $ | 961,354 | $ | 2,140,718 | $ | 1,945,304 | ||||||||
Change in unearned premiums |
(40,171 | ) | (13,226 | ) | (140,977 | ) | (66,615 | ) | ||||||||
Net premiums earned |
1,017,244 | 948,128 | 1,999,741 | 1,878,689 | ||||||||||||
Net investment income |
149,072 | 129,731 | 295,198 | 273,292 | ||||||||||||
Insurance service fees |
25,035 | 20,390 | 47,208 | 41,875 | ||||||||||||
Net investment gains: |
||||||||||||||||
Net realized gains on
investment sales |
23,290 | 11,534 | 52,574 | 20,028 | ||||||||||||
Other-than-temporary
impairments |
(400 | ) | | (400 | ) | (2,582 | ) | |||||||||
Net investment gains |
22,890 | 11,534 | 52,174 | 17,446 | ||||||||||||
Revenues from wholly-owned
investees |
56,134 | 52,929 | 110,021 | 104,505 | ||||||||||||
Other income |
574 | 356 | 958 | 808 | ||||||||||||
Total revenues |
1,270,949 | 1,163,068 | 2,505,300 | 2,316,615 | ||||||||||||
Expenses: |
||||||||||||||||
Losses and loss expenses |
674,276 | 570,475 | 1,281,371 | 1,120,448 | ||||||||||||
Other operating costs and
expenses |
402,359 | 370,823 | 787,190 | 738,790 | ||||||||||||
Expenses from wholly-owned
investees |
55,855 | 49,934 | 109,671 | 98,908 | ||||||||||||
Interest expense |
28,132 | 26,014 | 56,249 | 52,055 | ||||||||||||
Total expenses |
1,160,622 | 1,017,246 | 2,234,481 | 2,010,201 | ||||||||||||
Income before income taxes |
110,327 | 145,822 | 270,819 | 306,414 | ||||||||||||
Income tax expense |
(27,309 | ) | (35,598 | ) | (71,309 | ) | (77,409 | ) | ||||||||
Net income before
noncontrolling interests |
83,018 | 110,224 | 199,510 | 229,005 | ||||||||||||
Noncontrolling interests |
64 | (17 | ) | 59 | (188 | ) | ||||||||||
Net income to common
stockholders |
$ | 83,082 | $ | 110,207 | $ | 199,569 | $ | 228,817 | ||||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.59 | $ | 0.73 | $ | 1.41 | $ | 1.50 | ||||||||
Diluted |
$ | 0.56 | $ | 0.70 | $ | 1.35 | $ | 1.44 | ||||||||
Average shares outstanding: |
||||||||||||||||
Basic |
141,637 | 151,215 | 141,408 | 152,324 | ||||||||||||
Diluted |
147,677 | 157,461 | 147,614 | 158,539 |
W. R. Berkley Corporation
|
Page 5 |
Second Quarter | Six Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Specialty: |
||||||||||||||||
Gross premiums written |
$ | 473,849 | $ | 404,407 | $ | 889,579 | $ | 747,339 | ||||||||
Net premiums written |
405,433 | 342,275 | 763,550 | 644,203 | ||||||||||||
Premiums earned |
349,943 | 316,513 | 680,150 | 629,466 | ||||||||||||
Pre-tax income |
77,564 | 75,177 | 167,933 | 150,847 | ||||||||||||
Loss ratio |
60.6 | % | 57.2 | % | 57.5 | % | 57.6 | % | ||||||||
Expense ratio |
31.9 | % | 32.7 | % | 32.8 | % | 33.2 | % | ||||||||
GAAP combined ratio |
92.5 | % | 89.9 | % | 90.3 | % | 90.8 | % | ||||||||
Regional: |
||||||||||||||||
Gross premiums written |
$ | 280,841 | $ | 286,711 | $ | 579,682 | $ | 589,352 | ||||||||
Net premiums written |
260,579 | 258,543 | 540,203 | 530,575 | ||||||||||||
Premiums earned |
266,764 | 266,629 | 528,281 | 530,298 | ||||||||||||
Pre-tax income (loss) |
(15,579 | ) | 25,505 | 9,319 | 67,469 | |||||||||||
Loss ratio |
77.6 | % | 62.2 | % | 70.1 | % | 59.7 | % | ||||||||
Expense ratio |
36.3 | % | 35.5 | % | 36.2 | % | 35.5 | % | ||||||||
GAAP combined ratio |
113.9 | % | 97.7 | % | 106.3 | % | 95.2 | % | ||||||||
Alternative Markets: |
||||||||||||||||
Gross premiums written |
$ | 178,792 | $ | 146,599 | $ | 433,639 | $ | 387,950 | ||||||||
Net premiums written |
121,819 | 117,092 | 322,373 | 327,497 | ||||||||||||
Premiums earned |
148,999 | 155,227 | 297,336 | 310,012 | ||||||||||||
Pre-tax income |
41,579 | 45,571 | 83,209 | 96,556 | ||||||||||||
Loss ratio |
72.2 | % | 65.2 | % | 72.4 | % | 64.9 | % | ||||||||
Expense ratio |
27.4 | % | 26.0 | % | 26.7 | % | 25.8 | % | ||||||||
GAAP combined ratio |
99.6 | % | 91.2 | % | 99.1 | % | 90.7 | % | ||||||||
Reinsurance: |
||||||||||||||||
Gross premiums written |
$ | 106,866 | $ | 114,646 | $ | 219,430 | $ | 221,015 | ||||||||
Net premiums written |
99,550 | 107,633 | 205,904 | 206,404 | ||||||||||||
Premiums earned |
105,836 | 105,632 | 211,314 | 205,190 | ||||||||||||
Pre-tax income |
25,361 | 30,157 | 50,723 | 64,577 | ||||||||||||
Loss ratio |
58.8 | % | 55.7 | % | 60.7 | % | 53.1 | % | ||||||||
Expense ratio |
42.0 | % | 41.0 | % | 40.6 | % | 42.4 | % | ||||||||
GAAP combined ratio |
100.8 | % | 96.7 | % | 101.3 | % | 95.5 | % | ||||||||
International: |
||||||||||||||||
Gross premiums written |
$ | 204,928 | $ | 161,106 | $ | 392,804 | $ | 293,933 | ||||||||
Net premiums written |
170,034 | 135,811 | 308,688 | 236,625 | ||||||||||||
Premiums earned |
145,702 | 104,127 | 282,660 | 203,723 | ||||||||||||
Pre-tax income |
11,511 | 6,586 | 14,026 | 6,959 | ||||||||||||
Loss ratio |
58.7 | % | 61.1 | % | 62.5 | % | 64.4 | % | ||||||||
Expense ratio |
41.1 | % | 41.2 | % | 40.1 | % | 42.4 | % | ||||||||
GAAP combined ratio |
99.8 | % | 102.3 | % | 102.6 | % | 106.8 | % |
W. R. Berkley Corporation
|
Page 6 |
Second Quarter | Six Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Corporate and Eliminations: |
||||||||||||||||
Net investment gains |
$ | 22,890 | $ | 11,534 | $ | 52,174 | $ | 17,446 | ||||||||
Interest expense |
(28,132 | ) | (26,014 | ) | (56,249 | ) | (52,055 | ) | ||||||||
Other revenues and expenses (3) |
(24,867 | ) | (22,694 | ) | (50,316 | ) | (45,385 | ) | ||||||||
Pre-tax loss |
(30,109 | ) | (37,174 | ) | (54,391 | ) | (79,994 | ) | ||||||||
Consolidated: |
||||||||||||||||
Gross premiums written |
$ | 1,245,276 | $ | 1,113,469 | $ | 2,515,134 | $ | 2,239,589 | ||||||||
Net premiums written |
1,057,415 | 961,354 | 2,140,718 | 1,945,304 | ||||||||||||
Premiums earned |
1,017,244 | 948,128 | 1,999,741 | 1,878,689 | ||||||||||||
Pre-tax income |
110,327 | 145,822 | 270,819 | 306,414 | ||||||||||||
Loss ratio |
66.3 | % | 60.2 | % | 64.1 | % | 59.6 | % | ||||||||
Expense ratio |
34.8 | % | 34.2 | % | 34.7 | % | 34.6 | % | ||||||||
GAAP combined ratio |
101.1 | % | 94.4 | % | 98.8 | % | 94.2 | % |
(1) | Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. Underwriting expenses do not include expenses related to insurance services or unallocated corporate expenses. GAAP combined ratio is the sum of the loss ratio and the expense ratio. | |
(2) | For the second quarters of 2011 and 2010, catastrophe losses were $63 million and $30 million, respectively. These amounts are net of reinsurance coverage and reinstatement premiums. Catastrophe losses in the second quarter of 2011 were primarily a result of severe weather events that occurred in the U.S. in April and May, including multiple tornados and hail storms. For the first six months of 2011 and 2010, catastrophe losses were $88 million and $53 million, respectively. | |
(3) | Other revenues and expenses include corporate investment income, expenses not allocated to the business segments and revenues and expenses from investments in wholly-owned, non-insurance subsidiaries that are consolidated for financial reporting purposes. |
W. R. Berkley Corporation
|
Page 7 |
June 30, 2011 | December 31, 2010 | |||||||
Net invested assets (1) |
$ | 14,251,620 | $ | 13,918,768 | ||||
Total assets |
18,195,124 | 17,528,547 | ||||||
Reserves for losses and loss expenses |
9,195,675 | 9,016,549 | ||||||
Senior notes and other debt |
1,501,739 | 1,500,419 | ||||||
Junior subordinated debentures |
242,893 | 242,784 | ||||||
Common stockholders equity (2)(3) |
3,912,807 | 3,702,876 | ||||||
Common stock outstanding (3) |
140,911 | 141,010 | ||||||
Common stockholders equity per share (3) |
27.77 | 26.26 |
(1) | Net invested assets include investments, cash investments and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. | |
(2) | After-tax unrealized investment gains were $388 million and $335 million as of June 30, 2011 and December 31, 2010, respectively. Unrealized currency translation losses were $33 million and $42 million as of June 30, 2011 and December 31, 2010, respectively. | |
(3) | During 2011, the Company repurchased 1.1 million shares of common stock at an average cost of $31.80 per share and an aggregate cost of $36 million. |
W. R. Berkley Corporation
|
Page 8 |
Second Quarter | Six Months | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Reconciliation of operating income
to net income: |
||||||||||||||||
Operating income (1) |
$ | 68,746 | $ | 102,758 | $ | 166,443 | $ | 217,525 | ||||||||
Investment gains, net of tax |
14,336 | 7,449 | 33,126 | 11,292 | ||||||||||||
Net income |
$ | 83,082 | $ | 110,207 | $ | 199,569 | $ | 228,817 | ||||||||
Return on equity (2) |
9.0 | % | 12.3 | % | 10.8 | % | 12.7 | % | ||||||||
Cash flow from operations |
$ | 160,949 | $ | 129,511 | $ | 216,392 | $ | 186,670 | ||||||||
Other operating costs and expenses: |
||||||||||||||||
Underwriting expenses |
$ | 353,814 | $ | 324,599 | $ | 692,999 | $ | 650,202 | ||||||||
Service expenses |
19,562 | 18,411 | 36,891 | 36,955 | ||||||||||||
Net foreign currency
(gains) losses |
9 | 1,316 | 529 | (3,711 | ) | |||||||||||
Other costs and expenses |
28,974 | 26,497 | 56,771 | 55,344 | ||||||||||||
Total |
$ | 402,359 | $ | 370,823 | $ | 787,190 | $ | 738,790 | ||||||||
(1) | Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses. Management believes that excluding net investment gains and losses, which are often discretionary and frequently relate to economic factors, provides a useful indicator of trends in the Companys underlying operations. | |
In 2011, the Company modified its definition of operating income to include income and losses from investment funds, which had previously been excluded. Operating income for prior periods has been modified to conform to this definition. For the second quarters of 2011 and 2010, income from investment funds was $17.0 million and $1.5 million, respectively. For the first six months of 2011 and 2010, income from investment funds was $31.5 million and $6.3 million, respectively. | ||
(2) | Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders equity. |
W. R. Berkley Corporation
|
Page 9 |
Carrying | Percent | |||||||
Value | of Total | |||||||
Fixed maturity securities: |
||||||||
United States government and government agencies |
$ | 1,177,289 | 8.3 | % | ||||
State and municipal: |
||||||||
Special revenue |
2,129,715 | 14.9 | % | |||||
Pre-refunded |
1,419,472 | 10.0 | % | |||||
State general obligation |
996,628 | 7.0 | % | |||||
Local general obligation |
415,706 | 2.9 | % | |||||
Corporate backed |
499,179 | 3.5 | % | |||||
Total state and municipal (1) |
5,460,700 | 38.3 | % | |||||
Mortgage-backed securities: |
||||||||
Agency |
1,104,024 | 7.7 | % | |||||
Residential Prime |
266,080 | 1.9 | % | |||||
Residential Alt A |
50,536 | 0.4 | % | |||||
Commercial |
56,098 | 0.4 | % | |||||
Total mortgage-backed securities |
1,476,738 | 10.4 | % | |||||
Corporate: |
||||||||
Industrial |
1,211,591 | 8.5 | % | |||||
Financial |
775,776 | 5.4 | % | |||||
Utilities |
205,924 | 1.4 | % | |||||
Asset-backed |
308,666 | 2.2 | % | |||||
Other |
112,323 | 0.8 | % | |||||
Total corporate |
2,614,280 | 18.3 | % | |||||
Foreign government and foreign government agencies |
550,502 | 3.8 | % | |||||
Total fixed maturity securities (1) |
11,279,509 | 79.1 | % | |||||
Equity securities available for sale: |
||||||||
Common stocks |
348,259 | 2.5 | % | |||||
Preferred stocks |
||||||||
Financial |
92,582 | 0.7 | % | |||||
Real estate |
26,199 | 0.2 | % | |||||
Utilities |
44,012 | 0.3 | % | |||||
Total equity securities available for
sale |
511,052 | 3.7 | % | |||||
Cash and cash equivalents (2) |
951,214 | 6.7 | % | |||||
Arbitrage trading account |
474,787 | 3.3 | % | |||||
Investment in arbitrage funds |
59,728 | 0.4 | % | |||||
Investment funds |
545,794 | 3.8 | % | |||||
Loans receivable |
311,663 | 2.2 | % | |||||
Real estate |
117,873 | 0.8 | % | |||||
Net invested assets |
$ | 14,251,620 | 100.0 | % | ||||
(1) | For state and municipal securities, the average rating was AA and the average duration was 3.8 years. For total fixed maturity securities, the average rating was AA and the average duration was 3.5 years. | |
(2) | Includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. |