BER Berkley W R Cp

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.