01—Abstract
Summary
Summary of the 10-K filed March 31, 2003. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation, a Delaware insurance holding company, reported net income of $175.0 milliona, or $3.31 per diluted share, for 2002, compared with a net loss of $91.5 million, or $2.09 per share, in 2001. Net premiums written rose to $2.71 billion from $1.86 billion, and total revenues were $2.57 billion versus $1.94 billion.
The combined ratio improved to 95.4% from 116.5% in 2001, with the loss ratio falling to 65.0% from 82.1%. Stockholders' equity increased to $1.34 billionb, or $24.18 per share, from $931.6 million, aided by a secondary stock offering that netted $167 million in November 2002. The company operates in five property casualty segments (specialty, alternative markets, reinsurance, regional and international) plus a discontinued business segment comprising personal lines and alternative markets reinsurance exited in 2001.
Specialty and reinsurance were the main drivers of growth: specialty net premiums written rose 63.4% and reinsurance rose 187.3%, while the discontinued segment's underwriting loss narrowed. Prior-year reserve increases of $173.7 millionc were recorded in 2002, principally in the reinsurance and specialty segments, and the filing states that known asbestos and environmental claims have not had a material impact on operations.
The filing also highlights risks including cyclicality, reserve adequacy, increased retention levels, catastrophe and terrorism exposure, and Argentine economic disruption, which led the company to cease writing life insurance there in 2002. In the first quarter of 2003 the company issued $200 milliond of 5.875% senior notes due 2013, repaid $61 million of maturing debt, and announced plans to form a U.K. insurance company expected to begin operations in the third quarter of 2003.
02—Key points
Key Highlights
- Net income rebounded to $175.0 million ($3.31 diluted EPS) in 2002 from a $91.5 million net loss ($2.09 loss per share) in 2001.
- Net premiums written grew 45.9% to $2.71 billion, led by reinsurance (up 187.3%) and specialty insurance (up 63.4%).
- The combined ratio improved to 95.4% from 116.5%, with the loss ratio falling to 65.0% from 82.1%.
- Stockholders' equity rose to $1.34 billion ($24.18 per share) from $931.6 million, helped by a November 2002 stock offering netting $167 million.
- Prior-year reserve increases of $173.7 million were recorded in 2002, mainly in reinsurance and specialty lines.
- Investment income before expenses was $210.9 million, with net investment income of $187.9 million, down from $195.0 million in 2001.
- In early 2003 the company issued $200 million of 5.875% senior notes due 2013 and announced plans for a U.K. insurance subsidiary.
03—Questions
Frequently Asked Questions
Why did W. R. Berkley swing from a loss in 2001 to a profit in 2002?
The filing attributes the improvement to higher prices and more favorable terms and conditions, particularly in specialty and reinsurance. The combined ratio fell to 95.4% from 116.5%, and the 2001 results had included charges for the World Trade Center, the Enron bankruptcy, and reserve strengthening in the discontinued and reinsurance segments.
What were the main risks highlighted in the filing?
The filing cites the cyclical nature of the property casualty industry, reserve adequacy, a higher level of retained risk, natural and man-made catastrophes including terrorism, reinsurer credit risk, the ratings from A.M. Best and Standard & Poor's, and economic and political problems in Argentina and the Philippines.
How did the company's capital position change in 2002?
Stockholders' equity rose to $1.34 billion from $931.6 million, primarily from net income of $175.0 million, a November 2002 secondary offering of 4.7 million shares netting $167 million, and other comprehensive income of $67.3 million. Long-term debt was $363.0 million at year-end, and the company's share of total capitalization attributable to debt fell to 19% from 25%.
What did the company disclose about legal proceedings?
The company said routine claim litigation is not expected to have a material effect. One subsidiary has a pending arbitration over two reinsurance contracts in which the reinsurer's interpretation would reduce recoverables by $4 million for paid losses and $46 million for unpaid losses. Two other pending arbitrations, where subsidiaries are assuming reinsurers, could cost up to $16 million after tax above reserves if decided adversely.
04—Continue