01—Abstract
Summary
Summary of the 10-K filed March 12, 2004. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation reported a strong 2003 for its fiscal year ended December 31, 2003. Net premiums written rose to $3.67 billiona from $2.71 billion in 2002, and net income increased to $337.2 million ($3.87 per diluted share) from $175.0 million ($2.21 per diluted share).
Total revenues were $3.63 billionb, and the consolidated combined ratio improved to 91.4% from 95.4% in 2002, reflecting higher prices and improved terms and conditions. The company operates through five segments: specialty, alternative markets, reinsurance, regional, and international, with specialty and regional the largest contributors to pre-tax income. Reserve development was a key watch item.
The company added $273 millionc to estimates for claims occurring in prior years in 2003, up from $174 million in 2002, driven mainly by casualty reinsurance written from 1998 to 2001, excess and surplus lines, professional liability, and workers' compensation. Gross reserves for losses and loss expenses reached $4.19 billion at year-end, and the filing notes that reserves may prove inadequate and could require further increases. Capital and liquidity grew during the year.
Stockholders' equity rose to $1.68 billiond from $1.34 billion, and the company issued $200 million of 5.875% senior notes due 2013 and $150 million of 5.125% senior notes due 2010. Debt totaled $659.2 million on the balance sheet, and operating cash flow was $1.40 billion. The filing also notes that the company's regulatory dividend capacity from insurance subsidiaries in 2004 is approximately $197 million.
02—Key points
Key Highlights
- Net premiums written increased to $3.67 billion in 2003 from $2.71 billion in 2002, with the specialty segment at $1.30 billion and reinsurance at $861 million.
- Net income rose to $337.2 million, or $3.87 per diluted share, compared with $175.0 million, or $2.21 per diluted share, in 2002.
- The consolidated combined ratio improved to 91.4% from 95.4%, with the loss ratio falling to 63.4% from 65.0% and the expense ratio to 28.0% from 30.4%.
- Additions to prior-year loss reserves totaled $273 million in 2003, compared with $174 million in 2002, mainly from casualty reinsurance and excess and surplus lines.
- Stockholders' equity increased to $1.68 billion from $1.34 billion, and book value per share rose to $20.14 from $16.12.
- The company issued $350 million of senior notes in 2003, including $200 million of 5.875% notes due 2013 and $150 million of 5.125% notes due 2010.
- Operating cash flow was $1.40 billion in 2003, up from $953 million in 2002, and the company disclosed that it received no dividends from insurance subsidiaries in 2002 or 2003.
03—Questions
Frequently Asked Questions
How did W. R. Berkley's profitability change in 2003?
Net income increased to $337.2 million, or $3.87 per diluted share, from $175.0 million, or $2.21 per diluted share, in 2002. The filing attributes the improvement to higher underwriting profits, higher investment income, and realized investment gains of $82.5 million, partly offset by $273 million of additions to prior-year loss reserves.
What drove the growth in premiums?
Net premiums written rose to $3.67 billion from $2.71 billion, which the filing attributes to higher prices and new business. Specialty premiums increased 38%, alternative markets 58%, reinsurance 43%, and regional 24%, while international premiums decreased 15%.
Are there risks related to loss reserves?
Yes. The company increased its estimates for prior-year claims by $273 million in 2003, and it states that reserves are estimates that may prove inadequate, which could reduce pre-tax income. Gross reserves for losses and loss expenses were $4.19 billion at December 31, 2003.
How is the company financed, and what debt did it issue?
Debt on the balance sheet was $659.2 million at year-end, and the company issued $200 million of 5.875% senior notes due 2013 in February 2003 and $150 million of 5.125% senior notes due 2010 in September 2003. Stockholders' equity was $1.68 billion, and total capitalization was $2.54 billion.
What constraints apply to dividends from the insurance subsidiaries?
The maximum amount that insurance subsidiaries can pay as dividends in 2004 without regulatory approval is approximately $197 million. The company received $44.5 million in dividends from subsidiaries in 2000 and $7.2 million in 2001, and it elected not to take dividends from them in 2002 or 2003.
04—Continue