W. R. Berkley Corporation (NYSE: BER) today reported net income for
2007 of $3.78 per share, or $744 million, compared to $3.46 per
share, or $700 million, for 2006. Net operating income for 2007 was
$3.73 per share, or $734 million, compared with $3.43 per share, or
$692 million, for 2006. Net operating income is a non-GAAP
financial measure defined by the Company as net income excluding
realized investment gains and losses. Summary Financial Data
(Amounts in thousands, except per share data) � � Fourth Quarter �
Full Year 2007 � 2006 2007 � 2006 � Gross premiums written $
1,160,080 $ 1,218,542 $ 5,053,230 $ 5,276,914 Net premiums written
1,051,964 1,113,571 4,575,989 4,818,993 � Income before income
taxes 261,565 282,431 1,057,634 988,645 Net income 184,124 198,056
743,646 699,518 Net income per diluted share 0.97 0.98 3.78 3.46 �
Net operating income 183,213 193,666 734,005 692,404 Net operating
income per diluted share 0.97 0.96 3.73 3.43 Full year 2007
highlights included: Return on equity was 22.3%. GAAP combined
ratio was 88.1%. Net investment income grew 15% to $673 million.
Paid loss ratio was 42%. Repurchased 15.2 million shares of the
Company�s common stock, including 3.2 million shares in the fourth
quarter. Commenting on the Company�s performance, William R.
Berkley, chairman and chief executive officer, said: �We are
pleased with our financial results for the fourth quarter and full
year, having achieved a twenty-two percent return on equity after
tax for both periods. The Company continued to have strong
underwriting performance with a combined ratio of 88.1% and a paid
loss ratio of 42%. While we anticipate 2008 will be increasingly
competitive from an underwriting perspective, we still expect to
deliver excellent returns. �Investment income grew by fifteen
percent in 2007, without any sacrifice to the quality of the
investment portfolio. We have virtually no sub-prime exposure. It
is likely that investment returns will continue to be under
pressure due to current economic uncertainties and the shape of the
yield curve. �In the current environment, capital oversight is an
important part of management�s responsibility. We repurchased over
fifteen million shares of our common stock in 2007, representing
eight percent of our outstanding shares. �In the long-run, every
business succeeds because of its people, its relationships with its
distribution and its ultimate customers. We continue to believe
that we will be able to deliver outstanding returns to our
shareholders and exceed our minimum targeted return of fifteen
percent after tax for the foreseeable future,� Mr. Berkley
concluded. Webcast Conference Call The Company will hold its
quarterly conference call with analysts and investors to discuss
its earnings and other information on Monday, February 11, 2008 at
8:30 a.m. eastern time. The conference call will be webcast live on
the Company's website at www.wrberkley.com. A recording of the call
will be available on the Company's website approximately two hours
after the end of the conference call. About W. R. Berkley
Corporation Founded in 1967, W. R. Berkley Corporation is an
insurance holding company that is among the largest commercial
lines writers in the United States and operates in five segments of
the property casualty insurance business: specialty insurance,
regional property casualty insurance, alternative markets,
reinsurance and international. Forward Looking Information This is
a �Safe Harbor� Statement under the Private Securities Litigation
Reform Act of 1995. Any forward-looking statements contained
herein, including statements related to our outlook for the
industry and for our performance for the year 2008 and beyond, are
based upon the Company�s historical performance and on current
plans, estimates and expectations. The inclusion of this
forward-looking information should not be regarded as a
representation by us or any other person that the future plans,
estimates or expectations contemplated by us will be achieved. They
are subject to various risks and uncertainties, including but not
limited to, the cyclical nature of the property casualty industry,
the long-tail and potentially volatile nature of the insurance and
reinsurance business, product demand and pricing, claims
development and the process of estimating reserves, the uncertain
nature of damage theories and loss amounts, natural and man-made
catastrophic losses, including as a result of terrorist activities,
the impact of competition, the success of our new ventures or
acquisitions and the availability of other opportunities, the
availability of reinsurance, exposure as to coverage for terrorist
acts, our retention under the Terrorism Risk Insurance Program
Reauthorization Act of 2007 (�TRIPRA�), the ability of our
reinsurers to pay reinsurance recoverables owed to us, investment
risks, including those of our portfolio of fixed income securities
and investments in equity securities, including merger arbitrage
investments, exchange rate and political risks relating to our
international operations, legislative and regulatory developments,
including those related to alleged anti-competitive or other
improper business practices in the insurance or reinsurance
industry, changes in the ratings assigned to us by ratings
agencies, the availability of dividends from our insurance company
subsidiaries, our ability to attract and retain qualified
employees, and other risks detailed from time to time in the
Company�s filings with the Securities and Exchange Commission.
These risks could cause actual results of the industry or our
actual results for the year 2008 and beyond to differ materially
from those expressed in any forward-looking statement made by or on
behalf of the Company. Any projections of growth in the Company�s
net premiums written and management fees would not necessarily
result in commensurate levels of underwriting and operating
profits. Forward-looking statements speak only as of the date on
which they are made, and the Company undertakes no obligation to
update publicly or revise any forward-looking statement, whether as
a result of new information, future developments or otherwise.
Consolidated Financial Summary (Amounts in thousands, except per
share data) � � � Fourth Quarter � Full Year 2007 � 2006 2007 �
2006 Revenues: Net premiums written $ 1,051,964 $ 1,113,571 $
4,575,989 $ 4,818,993 Change in unearned premiums � 109,600 � �
52,137 � � 87,712 � � (126,371 ) Premiums earned 1,161,564
1,165,708 4,663,701 4,692,622 Net investment income 172,506 163,827
672,660 586,175 Insurance service fees 22,663 24,630 97,689 104,812
Realized investment gains 1,456 5,912 14,938 9,648 Revenues from
wholly-owned investees 41,619 - 102,846 - Other revenues � 195 � �
366 � � 1,805 � � 1,574 � Total revenues � 1,400,003 � � 1,360,443
� � 5,553,639 � � 5,394,831 � � Expenses: Losses and loss expenses
684,388 689,249 2,779,578 2,864,498 Operating costs and expenses
391,232 366,275 1,530,987 1,449,166 Expenses from wholly-owned
investees 39,929 - 96,444 - Interest expense � 22,889 � � 22,488 �
� 88,996 � � 92,522 � Total expenses � 1,138,438 � � 1,078,012 � �
4,496,005 � � 4,406,186 � � � Income before income taxes and
minority interest 261,565 282,431 1,057,634 988,645 � Income tax
expense (76,050 ) (83,147 ) (310,905 ) (286,398 ) Minority interest
� (1,391 ) � (1,228 ) � (3,083 ) � (2,729 ) Net income $ 184,124 �
$ 198,056 � $ 743,646 � $ 699,518 � � Net income per share: Basic $
1.01 � $ 1.03 � $ 3.94 � $ 3.65 � Diluted $ 0.97 � $ 0.98 � $ 3.78
� $ 3.46 � � Average shares outstanding: Basic 181,930 191,745
188,981 191,809 Diluted 189,167 201,557 196,698 201,961 Operating
Results by Segment (Amounts in thousands, except ratios (1)) � �
Fourth Quarter � Full Year 2007 � 2006 2007 � 2006 Specialty: Gross
premiums written $ 450,323 $ 467,560 $ 1,816,727 $ 1,918,521 Net
premiums written 415,963 438,139 1,704,880 1,814,479 Premiums
earned 445,038 444,597 1,772,547 1,752,507 Pre-tax income 127,985
140,389 516,931 479,105 Loss ratio 57.6 % 56.4 % 57.3 % 59.1 %
Expense ratio 27.7 % 24.6 % 26.7 % 25.0 % GAAP combined ratio 85.3
% 81.0 % 84.0 % 84.1 % � Regional: (2) Gross premiums written $
336,646 $ 328,811 $ 1,441,077 $ 1,415,311 Net premiums written
299,305 291,597 1,267,451 1,235,302 Premiums earned 321,377 308,074
1,250,914 1,205,912 Pre-tax income 54,497 51,796 215,228 201,417
Loss ratio 59.2 % 60.3 % 59.1 % 59.7 % Expense ratio 31.7 % 30.5 %
31.4 % 30.6 % GAAP combined ratio 90.9 % 90.8 % 90.5 % 90.3 % �
Alternative Markets: Gross premiums written $ 139,631 $ 140,715 $
758,285 $ 747,680 Net premiums written 114,791 119,569 656,369
651,255 Premiums earned 164,293 167,157 651,909 658,805 Pre-tax
income 56,764 73,081 248,080 291,416 Loss ratio 62.9 % 55.7 % 59.2
% 53.5 % Expense ratio 22.5 % 21.4 % 23.1 % 22.1 % GAAP combined
ratio 85.4 % 77.1 % 82.3 % 75.6 % � Reinsurance: Gross premiums
written $ 139,800 $ 201,717 $ 732,233 $ 940,797 Net premiums
written 134,120 192,840 682,241 892,769 Premiums earned 167,616
192,834 740,439 859,411 Pre-tax income 41,109 40,137 178,302
135,424 Loss ratio 60.3 % 66.8 % 65.3 % 72.0 % Expense ratio 37.1 %
31.6 % 31.3 % 27.8 % GAAP combined ratio 97.4 % 98.4 % 96.6 % 99.8
% � International: Gross premiums written $ 93,680 $ 79,739 $
304,908 $ 254,605 Net premiums written 87,785 71,426 265,048
225,188 Premiums earned 63,240 53,046 247,892 215,987 Pre-tax
income 17,880 12,676 44,457 34,447 Loss ratio 53.3 % 57.3 % 62.6 %
64.2 % Expense ratio 34.6 % 32.3 % 32.4 % 32.0 % GAAP combined
ratio 87.9 % 89.6 % 95.0 % 96.2 % � � (Continued) Operating Results
by Segment (continued) (Amounts in thousands, except ratios (1)) �
� Fourth Quarter � Full Year 2007 � 2006 2007 � 2006 Corporate and
Eliminations: Realized investment gains $ 1,456 $ 5,912 $ 14,938 $
9,648 Interest expense (22,889 ) (22,488 ) (88,996 ) (92,522 )
Other revenues and expenses (3) (15,237 ) (19,072 ) (71,306 )
(70,290 ) Pre-tax loss (36,670 ) (35,648 ) (145,364 ) (153,164 ) �
Total: Gross premiums written $ 1,160,080 $ 1,218,542 $ 5,053,230 $
5,276,914 Net premiums written 1,051,964 1,113,571 4,575,989
4,818,993 Premiums earned 1,161,564 1,165,708 4,663,701 4,692,622
Pre-tax income 261,565 282,431 1,057,634 988,645 Loss ratio 58.9 %
59.1 % 59.6 % 61.0 % Expense ratio 29.8 % 27.4 % 28.5 % 27.0 % GAAP
combined ratio 88.7 % 86.5 % 88.1 % 88.0 % (1) � Loss ratio is
losses and loss expenses 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 fourth quarters of 2007 and 2006,
weather-related losses were $3 million and $8 million,
respectively. For the full year of 2007 and 2006, weather-related
losses were $34 million and $39 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. Selected Balance
Sheet Information (Amounts in thousands, except per share data) � �
December 31, � December 31, 2007 2006 � Net invested assets (1) $
13,182,991 $ 12,012,298 Total assets 16,828,718 15,656,489 Reserves
for losses and loss expenses 8,678,034 7,784,269 Senior notes and
other debt 1,121,793 869,187 Junior subordinated debentures 249,375
241,953 Stockholders� equity (2) 3,566,323 3,335,159 Shares
outstanding 180,321 192,772 Stockholders� equity per share 19.78
17.30 (1) � Net invested assets include 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) Stockholders' equity
includes after-tax unrealized gains from investments and currency
translation adjustments of $67 million and $126 million as of
December 31, 2007 and December 31, 2006, respectively. Supplemental
Information (Amounts in thousands) � � Fourth Quarter � Full Year
Reconciliation of net operating income to net income: 2007 � 2006
2007 � 2006 � Net operating income (1) $ 183,213 $ 193,666 $
734,005 $ 692,404 Realized investment gains, net of taxes � 911 � �
4,390 � � 9,641 � � 7,114 � � Net income $ 184,124 � $ 198,056 � $
743,646 � $ 699,518 � Return on equity (2): � Net Income 22.1 %
30.9 % 22.3 % 27.2 % � Net operating income 22.0 % 30.2 % 22.0 %
27.0 % � Cash flow: � Cash flow from operations before cash
transfers to/from trading account (3) $ 349,718 $ 452,611 $
1,479,767 $ 1,789,014 � Trading account transfers � - � � - � � - �
� (225,000 ) � Cash flow from operations $ 349,718 � $ 452,611 � $
1,479,767 � $ 1,564,014 � (1) � Net operating income is a non-GAAP
financial measure defined by the Company as net income excluding
realized investment gains and losses. Management believes that
excluding realized investment gains and losses, which result
primarily from changes in general economic conditions, provides a
useful indicator of trends in the Company's underlying operations.
� (2) Return on equity represents net income and net operating
income expressed on an annualized basis as a percentage of
beginning of year stockholders' equity. � (3) Cash flow before
trading account transfers is a non-GAAP financial measure that
excludes cash contributions to and withdrawals from the arbitrage
trading account. Management believes that cash transfers to and
withdrawals from the arbitrage trading account are the result of
changes in investment allocations and that excluding such transfers
provides a useful measure of the Company's cash flow. Investments
(Amounts in thousands) December 31, 2007 � � With � With Insured
Underlying Municipal Fixed Income Securities Rating Rating � AAA
(1) $ 4,017,912 $ 2,001,492 AA+ 400,734 642,457 AA 343,708 747,144
AA- 237,874 620,113 A+ 60,925 480,193 A 35,863 220,487 A- 37,764
186,895 BBB+ 45,499 47,845 BBB 28,901 95,397 BBB- 26,145 37,562 B-
8,963 8,963 Not rated (2) � - � � 155,740 Total $ 5,244,288 � $
5,244,288 � Overall credit quality AA+ AA (1) � Includes $1,107,721
of escrowed to maturity and pre-refunded bonds. � (2) Represents
insured bonds for which the underlying securities are not rated.
Based on ratings for similar securities of the same issuer, the
Company considers these securities to be investment grade with an
average rating of A. In the interest of conservatism, a BBB- rating
was applied to these securities in computing the overall credit
quality of the portfolio. Residential mortgage-backed securities �
� US Government or government sponsored entity $ 1,242,274 Prime
270,711 Alt A (1) � 114,523 Total $ 1,627,508 (1) � The Company
defines Alt A securities as securities issued by dedicated Alt A
shelves and backed by loans made to borrowers with credit ratings
that fall below prime (the highest rated borrowers) but above
sub-prime. The Company's Alt A securities are backed by fixed rate
loans that were issued in 2003 and 2004 and have demonstrated good
payment history and solid credit support characteristics to date.
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