01—Abstract
Summary
Summary of the 10-K filed March 27, 2000. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation reported a net loss attributable to common stockholders of $37 milliona, or $1.43 per diluted share, for 1999, compared with net income of $46 million, or $1.59 per diluted share, in 1998. The operating loss, defined as net loss before realized gains and losses, changes in accounting principle and extraordinary items, was $31 million in 1999, or $1.19 per diluted share, versus operating income of $35 million in 1998.
Management attributed the deterioration primarily to higher loss reserves and the effects of competition on rate adequacy. The regional segment was the main drag: its combined ratio rose to 121.5% from 112.7%, driven by a $55 millionb fourth-quarter loss reserve adjustment and a $11.5 million restructuring charge taken in the first quarter. Top-line growth continued.
Net premiums written rose 6% to $1.43 billionc, led by reinsurance (up 15% to $309 million) and alternative markets (up 15% to $122 million), while regional premiums grew only 1%. Net investment income fell 6% to $190 million, reflecting a smaller invested asset base after share and preferred repurchases and a lower portfolio yield of approximately 6.5%. Consolidated stockholders' equity declined to $591.8 million from $861.3 million, mainly due to repurchases of common and preferred stock (about $120 million), a $99 million after-tax decline in unrealized investment gains, and the 1999 net loss.
The company also disclosed a Year 2000 readiness effort that cost approximately $7 milliond through December 31, 1999 with no significant disruption, and a $150 million shelf registration with $35 million of short-term debt outstanding under a credit facility that must be extended by December 8, 2000. The filing notes that $25 million of senior notes mature on March 6, 2000, which management expects to fund through insurance subsidiary distributions and credit facility borrowings.
02—Key points
Key Highlights
- Net loss attributable to common stockholders of $37 million ($1.43 per diluted share) in 1999, versus net income of $46 million ($1.59 per diluted share) in 1998.
- Operating loss of $31 million ($1.19 per diluted share) in 1999, compared with operating income of $35 million in 1998; adjusted for the restructuring charge, the operating loss was $23 million ($0.91 per diluted share).
- Regional insurance combined ratio rose to 121.5% from 112.7%, with the loss ratio up to 84.7% from 76.0%, including a $55 million fourth-quarter loss reserve adjustment.
- Net premiums written grew 6% to $1.43 billion, led by reinsurance (up 15% to $309 million) and alternative markets (up 15% to $122 million).
- Net investment income decreased 6% to $190 million, and the portfolio yield fell to approximately 6.5% from 6.9%.
- Stockholders' equity fell to $591.8 million from $861.3 million, reflecting about $120 million of share repurchases, a $99 million after-tax decline in unrealized gains, and the 1999 net loss.
- A $11.5 million pre-tax restructuring charge consolidated ten regional units into four; management expects roughly $12 million in annual after-tax savings.
03—Questions
Frequently Asked Questions
Why did W. R. Berkley swing from profit to a loss in 1999?
Management said the deterioration was primarily due to an increase in loss reserves and the effects of competition on rate adequacy. The regional segment's loss ratio rose to 84.7% from 76.0%, including a $55 million fourth-quarter loss reserve adjustment, and the commercial transportation unit also saw higher claim frequency and severity.
How did premium growth and investment income trend in 1999?
Net premiums written rose 6% to $1.43 billion, with reinsurance and alternative markets each up 15%, while regional premiums grew only 1%. Net investment income fell 6% to $190 million because invested assets shrank after share and preferred repurchases and portfolio yield declined to about 6.5%.
What happened to the company's capital position?
Stockholders' equity fell to $591.8 million at December 31, 1999 from $861.3 million a year earlier. The decline came from roughly $120 million of common and preferred stock repurchases, a $99 million after-tax decline in unrealized investment gains, and the $37 million net loss. Total capitalization was $1,185 million, and long-term debt rose to 33% of capital from 27%.
What near-term financing obligations does the company face?
The company must repay $25 million of senior notes maturing March 6, 2000 and contribute about $28 million to an insurance subsidiary in the first quarter of 2000. It expects to fund these through additional subsidiary distributions and borrowings under its credit facility, which had $35 million outstanding and $40 million available at year-end 1999 and must be extended by December 8, 2000.
Were there any Year 2000 disruptions?
No. The company reported that it did not experience any significant disruption or adverse impact at January 1, 2000 or thereafter. It incurred approximately $7 million of Year 2000 compliance costs through December 31, 1999, and no significant Year 2000 claims had arisen as of that date.
04—Continue