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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 22, 1999
W.R. BERKLEY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-7849 22-1867895
(State or Other Jurisdiction of (Commission File No.) (IRS Employer
Incorporation) Identification Number)
165 Mason Street, P.O. Box 2518, Greenwich, CT 06836-2518
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (203) 629-3000
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Reference is made to the press release of Registrant, issued on October
22, 1999, which is incorporated herein by this reference. A copy of the press
release is attached to this Form 8-K as Exhibit 99.1
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SIGNATURES
Pursuant to the requirements of the Securities and 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
------------------------------------------
(Registrant)
October 26, 1999 By: /s/ Eugene G. Ballard
- ---------------- -----------------------------------
Eugene G. Ballard
Senior Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
Exhibits:
99.1 Press Release dated October 22, 1999
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W. R. BERKLEY CORPORATION NEWS
165 MASON STREET, P.O. BOX 2518 RELEASE
GREENWICH, CONNECTICUT 06836-2518
(203) 629-3000
FOR IMMEDIATE RELEASE CONTACT: Eugene G. Ballard
Senior Vice President,
Chief Financial Officer
and Treasurer
203-629-3000
W. R. BERKLEY CORPORATION ANNOUNCES
RESULTS OF OPERATIONS FOR THE THIRD QUARTER OF 1999
Greenwich, CT, October 22, 1999 -- W.R. Berkley Corporation (NASDAQ:
BKLY), a property casualty insurance holding company, today announced results of
operations for the third quarter and nine months ended September 30, 1999.
Third quarter 1999 operating income was $865,000, or 3 cents per
diluted share, compared with $8.5 million, or 30 cents per diluted share, for
the third quarter of 1998. For the first nine months of 1999, operating income
was $15.1 million, or 57 cents per diluted share, compared with $46.3 million,
or $1.55 per diluted share, for the same period a year ago.
Third quarter catastrophe losses were $12.3 million, or 48 cents per
diluted share, compared with $11.2 million, or 39 cents per diluted share, for
the same period last year. Catastrophe losses for the first nine months were
$35.6 million, or $1.36 cents per diluted share, compared with last year's $31.6
million, or $1.06 per diluted share. Hurricane Floyd generated after-tax losses
of approximately $2.6 million, or 10 cents per diluted share, in the third
quarter.
Net premiums written in the third quarter decreased 2 percent to $359.9
million, while total third-quarter revenues rose 8 percent to $427.8 million, up
from $394.4 million for the same quarter a year ago. For the first nine months
of 1999, net premiums
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W. R. Berkley Corporation 2
written and total revenues rose 4 percent and 7 percent, respectively, compared
with the first nine months of 1998.
Third quarter net loss attributable to common stockholders was
$621,000, or 2 cents per diluted share, compared with net income of $10.4
million, or 36 cents per diluted share, for the same period a year ago. For the
first nine months of 1999, net income attributable to common stockholders was
$3.7 million, or 14 cents per diluted share, versus $50.0 million, or $1.68 per
diluted share, for the same period last year.
Results for the first nine months include an after-tax restructuring
charge in the first quarter of $7.3 million, or 28 cents per diluted share,
related to the Company's previously announced restructuring of certain of its
operating units. Under generally accepted accounting principles, the
restructuring charge does not include costs related to systems changes,
financial incentives and other activities, although they are directly related to
the restructuring plan. Through the first nine months of 1999, the Company has
incurred approximately $2.8 million of such additional costs on an after-tax
basis. The restructuring is expected to result in annual after-tax savings of
approximately $12.4 million. Management estimates that as of September 30, 1999,
the Company has achieved approximately two-thirds of such savings, on an
annualized basis.
As previously disclosed, in the first quarter of 1999 the Company
adopted AICPA Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments. A non-cash, after-tax charge of
$3.3 million, or 12 cents per diluted share, was recorded during the first
quarter and is reflected in the financial statements as a cumulative effect of a
change in accounting principle.
Third quarter 1999 net income includes capital losses, net of taxes, of
$2.2 million, or 8 cents per diluted share, compared with capital gains of $1.9
million, or 6 cents per diluted share, for the same period a year ago. For the
first nine months of 1999, capital losses totaled $1.6 million, or 6 cents per
diluted share, versus capital gains a year earlier of $8.7 million, or 30 cents
per diluted share.
-more-
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W. R. Berkley Corporation 3
The repurchase and retirement of $10.0 million of capital trust
securities and $34.7 million of long-term debt for the nine months ended 1999
and 1998, respectively, produced an extraordinary gain of $735,000 for the first
nine months of 1999 and an extraordinary loss of $5.0 million for the first nine
months of 1998. Thus far in 1999, the Company has repurchased 905,000 shares of
its common stock, leaving a balance of 1,095,000 shares available for repurchase
under its current share repurchase authorization.
Commenting on third-quarter results, William R. Berkley, chairman and
chief executive officer, said, "The competitive marketplace combined with high
catastrophe losses produced unsatisfactory underwriting results for our regional
insurance businesses. Our reinsurance businesses, while still quite profitable,
were also impacted by adverse market conditions and catastrophe losses. However,
our core specialty and alternative markets businesses reported strong results
again this quarter. While they are not immune to price competition, we continue
to be bullish about the long-term prospects for these knowledge-driven
businesses.
"While the current operating climate remains difficult, we continue to
believe that the ongoing restructuring of our regional business will yield
significant positive changes in our cost structure next year.
"Looking ahead to the balance of the year, we believe that inadequate
price levels on the business written in prior periods will continue to be a
serious drag on performance as operating income will reflect pricing levels in
effect during the previous twelve months. In addition, while our regional
businesses have met with some degree of success in increasing prices in certain
lines, current price levels for many products continue to be impacted by
industry-wide competitive pressures and must be further improved to generate
underwriting profits. Recognizing that the environment remains uncertain at
least in the near term, we will continue to monitor all aspects of our financial
position, including the effects of price competition on our anticipated loss
ratios, as we work to reshape our business to improve real returns."
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W. R. Berkley Corporation 4
W.R. Berkley Corporation is a holding company which, through its
subsidiaries, operates in all segments of the property casualty insurance
business. The operating units are grouped for management purposes into five
segments according to market served: Regional Property Casualty Insurance,
Reinsurance, Specialty Insurance, Alternative Markets and International.
# # #
This is a "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995. Any forward-looking statements contained herein
are based upon the Company's historical performance. They are subject to various
risks and uncertainties, including but not limited to the impact of competition,
product demand, catastrophe and storm losses, investment results and other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. These risks could cause the Company's actual results for
the 1999 fiscal year and beyond to differ materially from those expressed in any
forward-looking statement made by, or on behalf of, the Company.
(See accompanying financial tables)
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<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues: (Amounts in thousands except per share data)
<S> <C> <C> <C> <C>
Gross Premiums written $ 436,051 $ 435,403 $ 1,316,166 $ 1,239,529
----------- ----------- ----------- -----------
Net premiums written 359,881 366,625 1,085,652 1,040,283
Change in unearned premiums 3,657 (36,073) (33,760) (88,110)
----------- ----------- ----------- -----------
Premiums earned 363,538 330,552 1,051,892 952,173
Net investment income 48,090 42,727 145,265 151,505
Management fees and
Commissions 19,099 17,330 55,347 53,693
Realized gains (losses) on investments (3,417) 2,879 (2,404) 13,386
Other income 513 937 1,686 3,853
----------- ----------- ----------- -----------
Total revenues 427,823 394,425 1,251,786 1,174,610
Operating costs and expenses:
Losses and loss expenses (272,819) (229,526) (764,916) (652,306)
Other operating costs
And expenses (151,792) (141,561) (448,150) (413,784)
Interest expense (12,246) (11,960) (38,068) (36,291)
Restructuring charge -- -- (11,505) --
----------- ----------- ----------- -----------
Income (loss) before income taxes
And minority interest (9,034) 11,378 (10,853) 72,229
Federal income tax (expense) benefit 8,145 482 17,768 (13,218)
----------- ----------- ----------- -----------
Income (loss) before minority interest (889) 11,860 6,915 59,011
Minority interest (467) 401 (175) 1,666
----------- ----------- ----------- -----------
Net income (loss) before preferred
Dividends (1,356) 12,261 6,740 60,677
Preferred dividends -- (1,887) (497) (5,661)
----------- ----------- ----------- -----------
Net income (loss) attributable to common
Stockholders before change in
Accounting and extraordinary loss (1,356) 10,374 6,243 55,016
Cumulative effect of change in
Accounting principle (net of taxes) -- -- (3,250) --
Extraordinary gain (loss) on early
Extinquishment of long-term debt
(net of taxes) 735 -- 735 (5,017)
----------- ----------- ----------- -----------
Net income (loss) attributable to
Common stockholders (621) $ 10,374 $ 3,728 $ 49,999
=========== =========== =========== ===========
Earnings (loss) per share:
Basic $ (.02) $ .37 $ .14 $ 1.74
=========== =========== =========== ===========
Diluted $ (.02) $ .36 $ .14 $ 1.68
=========== =========== =========== ===========
Average shares outstanding:
Basic 25,723 28,024 25,999 28,687
=========== =========== =========== ===========
Diluted 25,822 28,672 26,133 29,805
=========== =========== =========== ===========
</TABLE>
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ADDENDUM #1 TO PRESS RELEASE DATED October 22, 1999
Operating Statistics by Insurance Industry Segment
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Regional Insurance (1):
Net premiums written $ 159,893 $ 173,134 $ 492,349 $ 500,989
Total revenues 173,505 173,453 519,980 518,362
Pre-tax operating income (loss) (2) (17,343) (135) (26,552) 5,221
Loss ratio 81.5% 70.6% 76.4% 71.1%
Expense ratio 35.4% 35.2% 35.9% 34.7%
Policyholders' dividend ratio .7% .8% .8% .8%
Combined ratio (3) 117.6% 106.6% 113.1% 106.6%
Reinsurance:
Net premiums written $ 78,079 $ 73,300 $ 231,957 $ 199,788
Total revenues 91,251 70,470 257,220 213,081
Pre-tax operating income (2) 5,822 2,866 15,586 24,532
Loss ratio 75.4% 78.8% 75.5% 73.2%
Expense ratio 30.4% 31.0% 32.6% 31.3%
Combined ratio (3) 105.8% 109.8% 108.1% 104.5%
Specialty Insurance (4):
Net premiums written $ 64,776 $ 64,237 $ 202,707 $ 193,416
Total revenues 82,522 77,193 237,077 228,619
Pre-tax operating income (2) 12,808 13,560 36,138 54,808
Loss ratio 64.9% 61.9% 67.1% 60.0%
Expense ratio 34.8% 33.1% 32.5% 32.1%
Policyholders' dividend ratio .4% 0.7% .2% .4%
Combined ratio (3) 100.1% 95.7% 99.8% 92.5%
Alternative Markets:
Net premiums written $ 34,866 $ 34,459 $ 98,275 $ 88,590
Total revenues 55,290 51,969 165,540 152,405
Pre-tax operating income (2) 7,700 8,054 24,686 26,427
Loss ratio 63.1% 57.0% 65.5% 61.7%
Expense ratio 39.3% 32.3% 34.6% 33.6%
Combined ratio (3) 102.4% 89.3% 100.1% 95.3%
International:
Net premiums written $ 22,267 $ 21,495 $ 60,364 $ 57,500
Total revenues 24,522 20,450 68,556 58,921
Pre-tax operating income (loss)(2)(4) 1,022 (1,010) 2,253 (4,765)
Loss ratio 52.2% 60.1% 52.2% 59.8%
Expense ratio 46.3% 37.4% 48.2% 44.7%
Combined ratio (3) 98.5% 97.5% 100.4% 104.5%
Combined:
Net premiums written $ 359,881 $ 366,625 $ 1,085,652 $ 1,040,283
Total revenues 427,090 393,535 1,248,373 1,171,388
Pre-tax operating income (2) 10,009 23,335 52,111 106,223
Loss ratio 74.0% 68.7% 72.4% 68.1%
Expense ratio 35.0% 33.5% 34.9% 34.0%
Policyholders' dividend ratio .4% 0.5% .4% .5%
Combined ratio (3) 109.4% 102.7% 107.7% 102.6%
</TABLE>
(1) The regional results were impacted by the purchase of additional
reinsurance which resulted in a reduction in net premiums written of
$8.1 million and $20.9 million, and an increase in reinsurance
recoveries of $12.8 million and $35.0 million, for the third quarter
and first nine months of 1999, respectively. The expense ratio for the
regional group was impacted by the additional reinsurance premiums and
by certain costs directly attributable to the restructuring. After
adjusting for these items, the expense ratio would have been 32.5
percent for the third quarter and 33.6 percent for the first nine
months of 1999.
(2) Pre-tax operating income (loss) represents earnings before the effects
of realized investment gains (losses).
(3) Based on statutory accounting practices.
(4) Represents results before minority interest.
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W. R. BERKLEY CORPORATION
ADDENDUM #2 TO PRESS RELEASE DATED October 22, 1999
Supplementary Information
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
After-tax earnings amounts:
Operating income (1) $ 865 $ 8,503 $ 15,100 $ 46,315
Restructuring charge (net of
minority interest) -- -- (7,294) --
Extraordinary gain (loss) 735 -- 735 (5,017)
Cumulative effect of change in
Accounting principle -- -- (3,250) --
Realized investment gains (losses) (2,221) 1,871 (1,563) 8,701
--------- --------- --------- ---------
Net income (loss) $ (621) $ 10,374 $ 3,728 $ 49,999
========= ========= ========= =========
After-tax diluted earnings per share:
Operating income (1) $ .03 $ .30 $ .57 1.55
Restructuring charge (net of
minority interest) -- -- (.28) --
Extraordinary gain (loss) .03 -- .03 (.17)
Cumulative effect of change in
Accounting principle -- -- (.12) --
Realized investment gains (losses) (.08) .06 (.06) .30
--------- --------- --------- ---------
Net income (loss) $ (.02) $ .36 $ .14 $ 1.68
========= ========= ========= =========
Cash flow from operations 21,149 55,979 27,065 111,798
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Balance sheet information:
Total investments (2) $3,000,427 $3,233,458
Total assets 4,818,110 4,983,431
Reserves for losses and loss expenses 2,236,514 2,126,566
Long-term debt 394,705 394,444
Capital Trust Securities 198,114 207,988
Preferred equity -- 98,093
Common stockholders' equity 657,699 763,188
Common shares outstanding 25,616 26,504
Common stockholders' equity per share (3) 25.68 28.80
</TABLE>
(1) Operating income represents net income or loss before realized investment
gains or losses, restructuring charges, the change in accounting principle and
extraordinary items.
(2) Including trading account receivable from broker and clearing organizations
and trading securities sold but not yet purchased.
(3) Included in the calculation of common stockholders' equity per share are
after-tax unrealized investment losses of $22.7 million and unrealized
investment gains of $54.7 million as of September 30, 1999 and December 31,
1998, respectively.
