GREENWICH, Conn.--(BUSINESS WIRE)--W. R. Berkley Corporation (NYSE: WRB) today reported net income for the first quarter of 2011 of $116 million, or 79 cents per share, compared with $119 million, or 74 cents per share, for the first quarter of 2010.
| Summary Financial Data | ||||
| (Amounts in thousands, except per share data) | ||||
| First Quarter | ||||
| 2011 | 2010 | |||
| Gross premiums written | $1,269,858 | $1,126,120 | ||
| Net premiums written | 1,083,303 | 983,950 | ||
| Net income | 116,487 | 118,610 | ||
| Net income per diluted share | 0.79 | 0.74 | ||
| Operating income (1) | 97,697 | 114,767 | ||
| Operating income per diluted share | 0.66 | 0.72 | ||
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(1) Operating income is a non-GAAP financial measure defined by the |
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First quarter highlights included:
- Net premiums written increased 10%.
- GAAP combined ratio was 96.3%.
- Return on equity was 12.6%.
- Book value per share was $26.78.
Commenting on the Company’s performance, William R. Berkley, chairman and chief executive officer, said: “We are pleased with our first quarter results. Prices for the quarter were up in nearly all areas, with an average increase of almost one percent. This is the first time in seventeen quarters that we can make such a positive statement. Our growth in the quarter came mainly from our international segment and select specialty markets. Our renewal retention rate is approximately 80%, approaching our historical levels. There are increasing signs of a turn in the cycle, but as always, the change starts gradually.
“Recent events as well as revisions to catastrophe modeling tools are changing the way people view catastrophe exposures. We are beginning to see material rate increases not just limited to catastrophe business, but also in a number of other lines of business. The Company has selectively increased the non-casualty component of our business mix, although we remain cognizant of the volatility element in certain lines. We are also particularly pleased with the expansion of our non-US business.
“We continue to maintain an investment portfolio with an overwhelmingly high-quality, fixed income focus but, given the current interest rate environment, we are also searching for appropriate alternatives for new funds. We continue to refine our investment strategies and have a greater focus on total return investment opportunities that include capital gains,” 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 Tuesday, April 26, 2011 at 9:00 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 2011 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; 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, merger arbitrage and private equity investments; the impact of significant competition; the potential impact of the economic downturn, and any legislative, regulatory, accounting or other initiatives taken in response to it, on our results and financial condition; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; 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 qualified employees; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. 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. 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) | ||||||||
| First Quarter | ||||||||
| 2011 | 2010 | |||||||
| Revenues: | ||||||||
| Net premiums written | $ | 1,083,303 | $ | 983,950 | ||||
| Change in unearned premiums | (100,806 | ) | (53,389 | ) | ||||
| Net premiums earned | 982,497 | 930,561 | ||||||
| Net investment income | 131,619 | 138,843 | ||||||
| Income from investment funds | 14,507 | 4,718 | ||||||
| Insurance service fees | 22,173 | 21,485 | ||||||
| Net investment gains: | ||||||||
| Net realized gains on investment sales | 29,284 | 8,494 | ||||||
| Other-than-temporary impairments | - | (2,582 | ) | |||||
| Net investment gains | 29,284 | 5,912 | ||||||
| Revenues from wholly-owned investees | 53,887 | 51,576 | ||||||
| Other income | 384 | 452 | ||||||
| Total revenues | 1,234,351 | 1,153,547 | ||||||
| Expenses: | ||||||||
| Losses and loss expenses | 607,095 | 549,973 | ||||||
| Other operating costs and expenses | 384,831 | 367,967 | ||||||
| Expenses from wholly-owned investees | 53,816 | 48,974 | ||||||
| Interest expense | 28,117 | 26,041 | ||||||
| Total expenses | 1,073,859 | 992,955 | ||||||
| Income before income taxes | 160,492 | 160,592 | ||||||
| Income tax expense | (44,000 | ) | (41,811 | ) | ||||
| Net income before | ||||||||
| noncontrolling interests | 116,492 | 118,781 | ||||||
| Noncontrolling interests | (5 | ) | (171 | ) | ||||
| Net income to common stockholders | $ | 116,487 | $ | 118,610 | ||||
| Net income per share: | ||||||||
| Basic | $ | 0.83 | $ | 0.77 | ||||
| Diluted | $ | 0.79 | $ | 0.74 | ||||
| Average shares outstanding: | ||||||||
| Basic | 141,177 | 153,445 | ||||||
| Diluted | 147,425 | 159,771 | ||||||
| Operating Results by Segment | ||||||
| (Amounts in thousands, except ratios (1)) | ||||||
| First Quarter | ||||||
|
2011 |
2010 | |||||
| Specialty: | ||||||
| Gross premiums written | $ | 415,730 | $ | 342,932 | ||
| Net premiums written | 358,117 | 301,928 | ||||
| Premiums earned | 330,207 | 312,953 | ||||
| Pre-tax income | 90,369 | 75,670 | ||||
| Loss ratio | 54.2% | 57.9% | ||||
| Expense ratio | 33.6% | 33.6% | ||||
| GAAP combined ratio | 87.8% | 91.5% | ||||
| Regional:(2) | ||||||
| Gross premiums written | $ | 298,841 | $ | 302,641 | ||
| Net premiums written | 279,624 | 272,032 | ||||
| Premiums earned | 261,517 | 263,669 | ||||
| Pre-tax income | 24,898 | 41,964 | ||||
| Loss ratio | 62.4% | 57.2% | ||||
| Expense ratio | 36.1% | 35.5% | ||||
| GAAP combined ratio | 98.5% | 92.7% | ||||
| Alternative Markets: | ||||||
| Gross premiums written | $ | 254,847 | $ | 241,351 | ||
| Net premiums written | 200,554 | 210,405 | ||||
| Premiums earned | 148,337 | 154,785 | ||||
| Pre-tax income | 41,630 | 50,985 | ||||
| Loss ratio | 72.6% | 64.6% | ||||
| Expense ratio | 26.1% | 25.5% | ||||
| GAAP combined ratio | 98.7% | 90.1% | ||||
| Reinsurance:(2) | ||||||
| Gross premiums written | $ | 112,564 | $ | 106,369 | ||
| Net premiums written | 106,354 | 98,771 | ||||
| Premiums earned | 105,478 | 99,558 | ||||
| Pre-tax income | 25,362 | 34,420 | ||||
| Loss ratio | 62.6% | 50.4% | ||||
| Expense ratio | 39.2% | 43.8% | ||||
| GAAP combined ratio | 101.8% | 94.2% | ||||
| International:(2) | ||||||
| Gross premiums written | $ | 187,876 | $ | 132,827 | ||
| Net premiums written | 138,654 | 100,814 | ||||
| Premiums earned | 136,958 | 99,596 | ||||
| Pre-tax income | 2,515 | 373 | ||||
| Loss ratio | 66.5% | 67.9% | ||||
| Expense ratio | 39.1% | 43.6% | ||||
| GAAP combined ratio | 105.6% | 111.5% | ||||
| Operating Results by Segment (Continued) | ||||||||
| (Amounts in thousands, except ratios (1)) | ||||||||
| First Quarter | ||||||||
| 2011 | 2010 | |||||||
| Corporate and Eliminations: | ||||||||
| Net investment gains | $ | 29,284 | $ | 5,912 | ||||
| Interest expense | (28,117 | ) | (26,041 | ) | ||||
| Other revenues and expenses (3) | (25,449 | ) | (22,691 | ) | ||||
| Pre-tax loss | (24,282 | ) | (42,820 | ) | ||||
| Consolidated: | ||||||||
| Gross premiums written | $ | 1,269,858 | $ | 1,126,120 | ||||
| Net premiums written | 1,083,303 | 983,950 | ||||||
| Premiums earned | 982,497 | 930,561 | ||||||
| Pre-tax income | 160,492 | 160,592 | ||||||
| Loss ratio | 61.8 | % | 59.1 | % | ||||
| Expense ratio | 34.5 | % | 35.0 | % | ||||
| GAAP combined ratio | 96.3 | % | 94.1 | % | ||||
| (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 first quarter of 2011, catastrophe and weather-related losses were $24 million, including $15 million related to earthquakes in Japan and New Zealand and floods in Australia. For the first quarter of 2010, weather-related losses were $23 million. |
|
| (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) | |||||
| March 31, 2011 | December 31, 2010 | ||||
| Net invested assets (1) | $ | 13,983,378 | $ | 13,918,768 | |
| Total assets | 17,983,511 | 17,528,547 | |||
| Reserves for losses and loss expenses | 9,172,680 | 9,016,549 | |||
| Senior notes and other debt | 1,497,095 | 1,500,419 | |||
| Junior subordinated debentures | 242,841 | 242,784 | |||
| Common stockholders' equity (2) | 3,791,784 | 3,702,876 | |||
| Common stock outstanding | 141,599 | 141,010 | |||
| Common stockholders' equity per share | 26.78 | 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 $310 million and $335 million as of March 31, 2011 and December 31, 2010, respectively. Unrealized currency translation losses were $32 million and $42 million as of March 31, 2011 and December 31, 2010, respectively. |
| Supplemental Information | ||||||
| (Amounts in thousands) | ||||||
| First Quarter | ||||||
| 2011 | 2010 | |||||
| Reconciliation of operating income | ||||||
| to net income: | ||||||
| Operating income (1) | $ | 97,697 | $ | 114,767 | ||
| Investment gains, net of tax | 18,790 | 3,843 | ||||
| Net income | $ | 116,487 | $ | 118,610 | ||
| Return on equity (2) | 12.6% | 13.2% | ||||
| Cash flow from operations | $ | 51,771 | $ | 57,159 | ||
| Other operating costs and expenses: | ||||||
| Underwriting expenses | $ | 339,185 | $ | 325,603 | ||
| Service expenses | 17,329 | 18,544 | ||||
| Net foreign currency (gains) losses | 520 | (5,027) | ||||
| Other costs and expenses | 27,797 | 28,847 | ||||
| Total | $ | 384,831 | $ | 367,967 | ||
| (1) |
Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses. The Company modified its definition of operating income to include income and losses from investment funds, which had previously been excluded. 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 Company’s underlying operations. |
|
| (2) | Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity. |
| Investment Portfolio | ||||||||
| March 31, 2011 | ||||||||
| (Amounts in thousands) | ||||||||
| Carrying | Percent | |||||||
| Value | of Total | |||||||
| Fixed maturity securities: | ||||||||
| United States government and government agencies | $ | 1,295,559 | 9.3% | |||||
| State and municipal: | ||||||||
| Special revenue | 2,129,061 | 15.2% | ||||||
| Pre-refunded | 1,461,295 | 10.5% | ||||||
| State general obligation | 1,012,535 | 7.2% | ||||||
| Local general obligation | 427,260 | 3.1% | ||||||
| Corporate backed | 449,398 | 3.2% | ||||||
| Total state and municipal (1) | 5,479,549 | 39.2% | ||||||
| Mortgage-backed securities: | ||||||||
| Agency | 1,052,388 | 7.5% | ||||||
| Residential - Prime | 267,365 | 1.9% | ||||||
| Residential - Alt A | 54,490 | 0.4% | ||||||
| Commercial | 57,999 | 0.4% | ||||||
| Total mortgage-backed securities | 1,432,242 | 10.2% | ||||||
| Corporate: | ||||||||
| Industrial | 1,192,670 | 8.5% | ||||||
| Financial |
722,808 |
5.2% |
||||||
| Utilities | 197,053 | 1.4% | ||||||
| Asset-backed |
273,692 |
2.0% |
||||||
| Other | 122,702 | 0.9% | ||||||
| Total corporate | 2,508,925 | 18.0% | ||||||
| Foreign government and foreign government agencies | 535,343 | 3.8% | ||||||
| Total fixed maturity securities (1) | 11,251,618 | 80.5% | ||||||
| Equity securities available for sale: | ||||||||
| Common stocks | 315,297 | 2.3% | ||||||
| Preferred stocks | ||||||||
| Financial | 96,981 | 0.7% | ||||||
| Real estate | 48,604 | 0.3% | ||||||
| Utilities | 49,248 | 0.4% | ||||||
| Total equity securities available for sale | 510,130 | 3.7% | ||||||
| Cash and cash equivalents (2) | 741,012 | 5.3% | ||||||
| Arbitrage trading account | 488,202 | 3.5% | ||||||
| Investment in arbitrage funds | 62,541 | 0.4% | ||||||
| Investment funds | 548,327 | 3.9% | ||||||
| Loans receivable | 348,773 | 2.5% | ||||||
| Real estate | 32,775 | 0.2% | ||||||
| Net invested assets | $ | 13,983,378 | 100.0% | |||||
| (1) |
For state and municipal securities, the average rating was AA and the average duration was 4.0 years. For total fixed maturity securities, the average rating was AA and the average duration was 3.6 years. |
|
| (2) |
Includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. |