<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period. . . . . . . . September 30, 1998
or
[ ] 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 0-7849
W. R. BERKLEY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-1867895
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 Mason Street, Greenwich, Connecticut 06836-2518
(Address of principal executive offices) (Zip Code)
(203) 629-3000
(Registrant's telephone number, including area code)
None
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) 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 and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Number of shares of common stock, $.20 par value, outstanding as of
November 1, 1998: 26,486,829.
<PAGE> 2
W. R. Berkley Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
Assets (Unaudited)
Investments:
<S> <C> <C>
Invested cash $ 436,149 $ 417,967
Fixed maturity securities:
Held to maturity, at cost (fair value
$186,458 and $194,919) 171,940 182,172
Available for sale at fair value (cost $2,240,924
and $2,240,901) 2,359,557 2,322,971
Equity securities, at fair value:
Available for sale (cost $76,484 and $76,134) 80,355 86,243
Trading account (cost $300,856 and $301,136) 291,394 311,969
Cash 19,680 21,669
Premiums and fees receivable 391,003 331,774
Due from reinsurers 502,279 432,516
Accrued investment income 35,738 36,930
Prepaid reinsurance premiums 84,127 72,148
Deferred policy acquisition costs 170,352 145,737
Real estate, furniture & equipment at cost, less accumulated depreciation 137,817 126,831
Excess of cost over net assets acquired 72,579 73,142
Other assets 40,391 37,215
----------- -----------
$ 4,793,361 $ 4,599,284
=========== ===========
Liabilities, Reserves, Debt and
Stockholders' Equity
Liabilities and reserves:
Reserves for losses and loss expenses $ 2,065,112 $ 1,909,688
Unearned premiums 689,477 589,384
Due to reinsurers 122,029 95,140
Deferred Federal income taxes 24,365 32,887
Trading securities sold but not yet purchased at fair value
(proceeds $203,250 and $162,360) 208,193 159,456
Other liabilities 138,763 242,721
----------- -----------
3,247,939 3,029,276
----------- -----------
Long-term debt 386,362 390,415
Company-obligated manditorily redeemable capital securities of a
subsidiary trust holding solely 8.197% junior subordinated debentures
of the Corporation due December 15, 2045 207,977 207,944
Minority interest 24,512 24,357
----------- -----------
Stockholders' equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares:
7 3/8% Series A Cumulative Redeemable Preferred
Stock 653,952 shares issued and outstanding 65 65
Common stock, par value $.20 per share:
Authorized 80,000,000 shares, issued and
outstanding, net of treasury shares,
27,753,325 and 29,568,335 shares 7,281 7,281
Additional paid-in capital 429,340 428,760
Retained earnings 608,891 569,160
Accumulated other comprehensive income 76,867 58,206
Treasury stock, at cost, 8,650,742 and
6,835,510 shares (195,873) (116,180)
----------- -----------
926,571 947,292
----------- -----------
$ 4,793,361 $ 4,599,284
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 3
W. R. Berkley Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Net premiums written $ 366,625 $ 302,106 $ 1,040,283 $ 886,875
Increase in net unearned premiums (36,073) (18,183) (88,110) (73,752)
----------- ----------- ----------- -----------
Premiums earned 330,552 283,923 952,173 813,123
Net investment income 42,727 48,257 151,505 140,675
Management fees and commission income 17,330 17,413 53,693 52,833
Realized gains on investments 2,879 5,127 13,386 12,321
Other income 937 930 3,853 2,446
----------- ----------- ----------- -----------
Total revenues 394,425 355,650 1,174,610 1,021,398
Operating costs and expenses:
Losses and loss expenses (229,526) (189,569) (652,306) (540,429)
Other operating costs and expenses (141,561) (120,503) (413,784) (347,014)
Interest expense (11,960) (12,197) (36,291) (36,652)
----------- ----------- ----------- -----------
Income before income taxes and
minority interest 11,378 33,381 72,229 97,303
Federal income tax (expense) benefit 482 (7,932) (13,218) (23,291)
----------- ----------- ----------- -----------
Income before minority interest 11,860 25,449 59,011 74,012
Minority interest 401 124 1,666 738
----------- ----------- ----------- -----------
Net income before preferred dividends 12,261 25,573 60,677 74,750
Preferred dividends (1,887) (1,852) (5,661) (5,977)
----------- ----------- ----------- -----------
Net income before extraordinary loss 10,374 23,721 55,016 68,773
Extraordinary loss on early extinguishment of
long-term debt (net of taxes of $2,701) -- -- (5,017) --
----------- ----------- ----------- -----------
Net income attributable to common stockholders $ 10,374 $ 23,721 $ 49,999 $ 68,773
=========== =========== =========== ===========
Earning per share:
Basic:
Net income before extraordinary loss $ .37 $ .80 $ 1.91 $ 2.34
Extraordinary loss on early extinguishment of
long-term debt -- -- (.17) --
----------- ----------- ----------- -----------
Net income attributable to common stockholders $ .37 $ .80 $ 1.74 $ 2.34
=========== =========== =========== ===========
Diluted:
Net income before extraordinary loss $ .36 $ .78 $ 1.85 $ 2.29
Extraordinary loss on early extinguishment of
long-term debt -- -- (.17) --
----------- ----------- ----------- -----------
Net income attributable to common stockholders $ .36 $ .78 $ 1.68 $ 2.29
=========== =========== =========== ===========
Average shares outstanding:
Basic 28,024 29,517 28,687 29,379
=========== =========== =========== ===========
Diluted 28,672 30,319 29,805 30,011
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
W. R. Berkley Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1998 1997
--------- ---------
Cash flows from operating activities:
<S> <C> <C>
Net income before preferred dividends and extraordinary items $ 60,677 $ 74,750
Adjustments to reconcile net income to cash
flows from operating activities:
Minority interest (1,666) (738)
Increase in reserves for losses
and loss expenses, net of due to/from reinsurers 112,978 90,193
Depreciation and amortization 16,383 4,775
Change in unearned premiums and
prepaid reinsurance premiums 88,110 73,752
Increase in premiums and fees receivable (59,229) (77,383)
Change in Federal income taxes (15,241) (246)
Change in deferred acquisition cost (24,615) (25,379)
Realized gains on investments (13,386) (12,321)
Other, net (52,213) 20,196
--------- ---------
Net cash flows from operating activities
before trading account sales 111,798 147,599
Trading account purchase (sales), net 5,113 (16,365)
--------- ---------
Net cash flows operating activities 116,911 131,234
--------- ---------
Cash flows (used in) investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities available for sale 484,020 422,566
Equity securities 34,363 25,306
Proceeds from maturities and prepayments of
fixed maturity securities 143,556 99,117
Cost of purchases, excluding trading account:
Fixed maturity securities available for sale (649,159) (654,260)
Fixed maturity securities held to maturity (3,034) --
Equity securities (31,642) (19,136)
Change in balances due to/from security brokers 16,971 40,207
Cost of acquired companies, net of acquired
cash and invested cash (3,520) (1,439)
Other, net (23,914) (23,463)
--------- ---------
Net cash flows (used in) investing activities (32,359) (111,102)
--------- ---------
Cash flows used in financing activities:
Net proceeds from issuance of long-term debt 39,858 --
Net proceeds from issuance of short-term debt 17,500 --
Purchase of treasury shares (81,213) (41,523)
Retirement of long-term debt (49,104) --
Cash dividends to common stockholders (10,189) (8,451)
Cash dividends to preferred stockholders (5,507) (6,992)
Other, net 296 16,907
--------- ---------
Net cash flows used in financing activities (88,359) (40,059)
--------- ---------
Net (decrease) in cash and invested cash (3,807) (19,927)
Cash and invested cash at beginning of year 459,636 346,485
--------- ---------
Cash and invested cash at end of period $ 455,829 $ 326,558
========= =========
Supplemental disclosure of cash flow information:
Interest paid $ 30,470 $ 30,330
========= =========
Federal income taxes paid, net $ 28,425 $ 23,508
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
W. R. Berkley Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
The accompanying consolidated financial statements should be read in
conjunction with the following notes and with the Notes to Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
A. FEDERAL INCOME TAXES
The Federal income tax provision has been computed based on the
Company's estimated annual effective tax rate, which differs from the Federal
income tax rate of 35% principally because of tax-exempt investment income.
B. REINSURANCE CEDED
The amounts of ceded reinsurance included in the statements of
operations are as follows (amounts in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Ceded premiums written $ 73,601 $ 59,221 $206,599 $179,741
======== ======== ======== ========
Ceded premiums earned $ 68,909 $ 60,920 $194,799 $174,884
======== ======== ======== ========
Ceded losses and loss expenses $ 53,989 $ 26,973 $148,814 $ 90,986
======== ======== ======== ========
</TABLE>
C. PER SHARE DATA
Basic per share data is based upon the weighted average number of
shares outstanding during the year. Diluted per share data reflects the
potential dilution that would occur if employee stock based compensation plans
were exercised.
4
<PAGE> 6
D. Comprehensive Income
In June 1997, the Financial Accounting Standard Board issued statement
No. 130, "Reporting Comprehensive Income", which requires enterprises to
disclose comprehensive income and its components. The differences between
comprehensive income and net income are unrealized foreign exchange gains
(losses) as well as unrealized gains (losses) on securities. The following is a
reconciliation of comprehensive income (amounts in thousands):
<TABLE>
<CAPTION>
For the Three months For the Nine months
Ended September 30, Ended September 30,
------------------- -------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income attributable to common stockholders $ 10,374 $ 23,721 $ 49,999 $ 68,773
-------- -------- -------- --------
Other comprehensive income:
Unrealized holding gains on investment
securities arising during the period 19,186 13,579 12,885 7,628
Less: Reclassification adjustment for gains
included in net income, net of tax 1,871 3,333 8,701 8,009
-------- -------- -------- --------
Net change in unrealized gains during the
period 21,057 16,912 21,586 15,637
Change in unrealized foreign exchange (losses) (448) -- (2,925) --
-------- -------- -------- --------
Other comprehensive income 20,609 16,912 18,661 15,637
-------- -------- -------- --------
Comprehensive income $ 30,983 $ 40,633 $ 68,660 $ 84,410
======== ======== ======== ========
</TABLE>
E. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging Activities", was issued
and established standards for accounting and reporting of derivative instruments
and hedging activities. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company is currently evaluating
the requirements but does not expect this statement to have a material impact on
it's financial position or results of operation.
F. YEAR 2000
The Company continues to address system requirements with regards to
Year 2000 compliance issues, and believes that the majority of the systems have
been tested and verified as being Year 2000 compliant. To date, no significant
losses have arisen or come to light with respect to Year 2000 claims exposure
for the Company's insurance and reinsurance subsidiaries. Additionally, certain
of the Company's insurance subsidiaries may either include or exclude insurance
coverage for Year 2000 exposures. However, due in part to the potential for
judicial decisions which re-formulate policies to expand their coverage for
previously unforeseen theories of liability which may produce unanticipated
claims, and because there is no prior history of such claims at this point in
time, the amount of any potential Year 2000 coverage liabilities is not
determinable.
5
<PAGE> 7
G. OTHER MATTERS
Reclassifications have been made in the 1997 financial statements as
originally reported to conform them to the presentation of the 1998 financial
statements.
In the opinion of management, the summarized financial information
reflects all adjustments, which are necessary for a fair presentation of
financial position and results of operations for the interim periods. The
Company's results of operations are affected by seasonal weather variations.
Accordingly, results reflected for any interim period are not necessarily
indicative of those to be expected for the entire year.
6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income attributable to common stockholders ("net income") was $10.4
million, ($.36 diluted per share) for the third quarter of 1998, in comparison
with $23.7 million, ($.78 diluted per share), for the 1997 period. Net income
was $50.0 million, ($1.68 diluted per share) for the nine months of 1998, in
comparison with $68.8 million, ($2.29 diluted per share) for the 1997 period.
Operating income, which we define as net income before realized
investment gains (losses) and extraordinary items, was $8.5 million, ($.30
diluted per share), in the second quarter of 1998 in comparison with $20.4
million, ($.67 diluted per share), earned in the corresponding 1997 period.
Operating income was $46.3 million, ($1.55 diluted per share), in the nine
months of 1998, in comparison with $60.8 million, ($2.02 diluted per share),
earned in the corresponding 1997 period.
Third quarter net income included capital gains, net of taxes, of $1.9
million, or $.06 per share diluted, compared with $3.3 million, or $.11 per
share diluted, for the same period last year. For the first nine months of 1998
capital gains were $8.7 million or $.30 per share diluted compared with $8.0
million or $.27 per share diluted recorded during the corresponding 1997 period.
The Company also reported an extraordinary loss of $5.0 million for the
first nine months of 1998 related to the repurchase and retirement of $34.7
million (face amount) of long-term debt. There were no comparable extraordinary
items in 1997.
Operating Results for the Nine months of 1998
As compared to the Nine months of 1997
Net premiums written during the first nine months of 1998 increased by
17% to $1,040.3 million from $886.9 million written in the comparable 1997
period. Net premiums written by the regional segment increased by $40.0 million
or 8.5%, approximately 43% of this increase was due to Continental Western; the
balance of the increase was generated by several of the other regional units.
Specialty net premiums written increased by $28.1 million or 18% due to
increases in all sectors of this business. Net premiums written by the
reinsurance operations increased by $42.5 million or 27% mainly due to an
increase in prorata treaty volume. Alternative Markets net premiums written
increased $14.1 million or 19% due to the commencement of operations of Key Risk
Insurance Company (which underwrote business previously managed on behalf of a
self-insurance association). This increase more than offset a decline in
premiums written by Midwest Employers Casualty Company. International net
premiums written increased $28.6 million to $57.5 million primarily due to 1997
acquisitions and the continued growth in our Argentine workers compensation
company.
For the nine months ended September 30, 1998, pre-tax investment income
increased by 7.7% to $151.5 million. The increase in average investable assets
due to cash flow from operations contributed to the growth in investment income.
This increase more than offset the reinvestment of funds at lower yields and a
slightly lower yield from our trading portfolio. (See "Liquidity and Capital
Resources")
Management fees and commission income ("Management fees") consist
primarily of revenues earned by the Alternative Markets segment. During the nine
months of 1998, management fees increased 2% from the comparable 1997 amount as
intense competition inhibited growth.
Realized gains increased to $13.4 million from $12.3 million earned in
the comparable 1997 period. Realized gains on fixed income securities result
primarily from the Company's strategy of maintaining an appropriate balance
between the duration of its fixed income portfolio and the duration of its
liabilities; realized gains on equity securities arise primarily as a result of
a variety of factors which influence the Company's valuation criteria. The
majority of the 1998 realized gains were attributable to the sale of fixed
maturity securities while the majority of the 1997 realized gains resulted from
the sale of equity securities.
7
<PAGE> 9
The combined ratio (on a statutory basis) of the Company's insurance
operations increased to 102.6% for the nine months ended September 30, 1998 from
100.5% in the comparable 1997 period due to increases in the consolidated loss
ratio and expense ratio. The consolidated loss ratio (losses and loss expenses
incurred expressed as a percentage of premiums earned) increased to 68.1% in
1998 from 66.8% in 1997 due to an increase in weather related losses as well as
an increase in current year claims experience due to the effects of increased
rate competition. These factors more than offset a reduction in losses incurred
from significant reserve releases due to better than expected experience on
business written in prior years.
Other operating costs and expenses, which consist of the expenses of
the Company's operating units as well as the Company's corporate and investment
expenses, increased by 19% to $413.8 million. The increase in other operating
costs and expenses is primarily due to substantial growth in premium volume
which in turn results in an increase in underwriting expenses. The consolidated
expense ratio (underwriting expenses expressed as a percentage of premiums
written) increased slightly to 34.0% from 33.5%. This increase resulted
primarily from a higher growth rate in international operations, which operate
at a higher expense ratio than domestic operations and expansion of several
regional companies.
Federal income tax expense in 1998 was $13.2 million (18% effective
rate) as compared to a $23.3 million (24% effective rate) for the comparable
1997 period. The decrease in the effective tax rate in 1998 is due primarily to
an increase in the percentage of pre-tax income that is tax-exempt. (See
"Liquidity and Capital Resources").
Operating Results for the Third Quarter of
1998 as Compared to the Third Quarter of 1997
For the third quarter of 1998 as compared to the corresponding 1997
period, net premiums written increased 21% for reasons discussed above; net
investment income decreased 11%, due primarily to lower earnings in the trading
portfolio; and management fees and commission income decreased slightly.
The combined ratio (on a statutory basis) of the Company's insurance
operations increased to 102.7% for the three months ended September 30, 1998
from 101.4% in the comparable 1997 period due to an increase in the consolidated
loss ratio and a decrease in the consolidated expense ratio. The consolidated
loss ratio (losses and loss expenses incurred expressed as a percentage of
premiums earned) increased to 68.7% in 1998 from 67.0% in 1997 for the reasons
discussed above.
Other operating costs and expenses increased 17% to $141.6 million for
the three months ended September 30, 1998 and the consolidated expense ratio of
the Company's insurance operations (underwriting expenses expressed as a
percentage of premiums written) decreased slightly to 33.5% for the 1998 period
from 33.7% for the comparable 1997.
For the third quarter of 1998 the Company recorded a Federal income
tax benefit of $0.5 million as compared to an expense of $7.9 million for the
comparable 1997 period. The 1998 tax benefit is a result of the Company's
tax-exempt income exceeding its pre-tax income, whereas, in the third quarter
of 1997, tax-exempt income was approximately one-third of the Company's pre-tax
income.
Liquidity and Capital Resources
Cash flow from operating activities before trading account sales, was
$111.8 million for the first nine months of 1998 compared with $147.6 million
for the same period in 1997. The lower level of cash flow was primarily due to
higher paid losses.
The net investment portfolio, on a cost basis, increased by $8.1
million to $3,226.4 million at September 30, 1998 from $3,218.3 million at
December 31, 1997 as the purchase of treasury stock and the retirement of debt
more than offset cash flow from operations.
The composition of the Company's net investment portfolio distribution
at September 30, 1998 as compared with December 31, 1997 was: tax-exempt
securities increased to 36% from 34%; U.S. Government securities and cash
equivalents (excluding trading cash) decreased to 21% from 23%; corporate bonds
remained at 15%; mortgage-backed securities decreased to 16% from 17%; the net
trading account investments increased to 10% from 8%; and equity securities
represented the balance.
8
<PAGE> 10
In February 1998 the Company repurchased $16.3 million face value of
its 9.875% and 8.7% senior notes and debentures for $19.7 million and issued
$20.2 of short-term debt to finance these purchases. In April 1998 the Company
repurchased an additional $18.4 million of its 9.875% and 8.7% senior debentures
for $22.1 million. In April 1998 the Company issued $40 million face value
6.375% medium-term notes due April 15, 2005. The proceeds from the issuance of
the medium-term notes were used to repay the short-term debt issued in
connection with the repurchased debentures. In addition, a portion of the
proceeds from the medium-term notes was used to retire $10 million face value of
its 8.95% senior notes, which matured on May 20, 1998.
During 1998 the Company purchased 3,172,222 shares, to date, of its
Common Stock leaving a balance of 261,078 shares available for repurchase under
its current authorization.
For the first nine months of 1998, Stockholders' Equity decreased by
approximately $20.7 million. The decrease in Stockholders' Equity is
attributable to the repurchase of Common Stock, which was partially offset by an
increase in Retained Earnings. Accordingly, the Company's total capitalization
decreased to $1,520.9 million at September 30, 1998 and the percentage of the
Company's capital attributable to debt remained at 25%.
For background information concerning a further discussion of the
Company's Liquidity and Capital Resources, see the Company's Annual Report on
Form 10-K.
YEAR 2000
The Company continues to address system requirements with regards to
Year 2000 compliance issues, and believes that the majority of the systems have
been tested and verified as being Year 2000 compliant. The project of Year 2000
readiness is broken down into the following phases: (1) inventorying Year 2000
items, (2) prioritizing the identified items, (3) evaluating Year 2000
compliance and alternative solutions, for items determined to be material to the
Company, (4) replacing or repairing material items that are determined not to be
Year 2000 compliant and (5) testing and changing items which are material. The
project, which began in 1996, is substantially complete, and it is expected that
all critical primary systems will be tested and functional by March 1999. This
includes both operational and financial systems upon which the Company is
dependent. As to embedded chips, the Company expects to be compliant by March
1999 with respect to those chips which are integral to its operating systems.
Compliance with respect to the remainder of the Company's embedded chips is
expected to be achieved by the third quarter of 1999. Additionally, the Company
is communicating with third parties with whom it has a material relationship,
e.g. independent insurance agents, and financial institutions, to identify any
Year 2000 issues with respect to those third parties. As a result of these
communications, the Company reasonably believes that those third parties are
either in general compliance with Year 2000 readiness or the Company is
following up for alternative resolution.
It is the Company's practice in the normal course of business to
upgrade technology including hardware and software as appropriate. As a result
of this practice, much of its Year 2000 readiness has been accomplished in the
ordinary course. To date, the Company has incurred approximately $6 million of
costs which have been expensed as incurred, and estimates an additional $2
million to be incurred to complete Year 2000 compliance. The total cost
associated with Year 2000 compliance is not expected to be material to the
Company's financial position.
Notwithstanding the above, a failure by the Company or a third party to
correct a material Year 2000 problem could result in an interruption in, or a
failure of, certain normal business activities or operations. Such failures
could materially and adversely affect the Company's results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the Year 2000 problem, including the uncertainty of the Year 2000 readiness of
third parties with whom the Company deals, providers and vendors, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial condition.
To date, no significant losses have arisen or come to light with
respect to Year 2000 claims exposure for the Company's insurance and reinsurance
subsidiaries. Additionally, certain of the Company's insurance subsidiaries may
either include or exclude insurance coverage for Year 2000 exposures. However,
due in part to the potential for judicial decisions which re-formulate policies
to expand their coverage for previously unforeseen theories of liability which
may produce unanticipated claims, and because there is no prior history of such
claims at this point in time, the amount of any potential Year 2000 coverage
liabilities is not determinable.
9
<PAGE> 11
The Company has not implemented a formal contingency plan with respect
to Year 2000 compliance issues, however, the Company and its various operating
units are presently analyzing contingency alternatives for implementation.
Except for historical information, the matters discussed in this
quarterly report on form 10-Q are forward-looking statements that are subject to
certain risks and uncertainties that could cause the actual results to differ
materially from those projected, including pricing competition and other
initiatives by competitors, legislative and regulatory developments, interest
rate levels and other conditions in the financial and securities markets,
unforeseen technological issues associated with Year 2000 compliance efforts
and the extent to which vendors, public utilities, governmental entities and
other third parties that interface with the company may fail to achieve Year
2000 compliance, and other risks detailed from time to time in the Company's SEC
reports. The Company assumes no obligation to update the information in this
quarterly report.
10
<PAGE> 12
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
On July 10, 1998 the Company filed a current report on Form
8-K announcing expectation of lower second-quarter earnings.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements 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
WILLIAM R. BERKLEY
William R. Berkley
Chairman of the Board and
Chief Executive Officer
ANTHONY J. DEL TUFO
Anthony J. Del Tufo
Senior Vice President,
Chief Financial Officer
and Treasurer
12
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 2,359,557
<DEBT-CARRYING-VALUE> 171,940
<DEBT-MARKET-VALUE> 186,458
<EQUITIES> 371,749
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,903,246
<CASH> 455,829
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 170,352
<TOTAL-ASSETS> 4,793,361
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0
65
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952,173
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</TABLE>
