01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation, a Delaware insurance holding company, reported net income to common stockholders of $309.1 milliona for 2009, compared with $281.1 million in 2008, and diluted EPS of $1.86 versus $1.62. The company describes itself as among the largest commercial lines writers in the United States, operating five segments: specialty, regional, alternative markets, reinsurance and international.
Net premiums written declined to $3.73 billionb in 2009 from $4.03 billion in 2008, and net premiums earned fell to $3.81 billion from $4.29 billion. The consolidated GAAP combined ratio was 94.2% in 2009 versus 93.1% in 2008, with the loss ratio improving to 61.4% from 62.7%. Results were helped by lower other-than-temporary impairments of $152 million, compared with $434 million in 2008, but were offset by $174 million of losses from investment funds, primarily real estate funds.
Total investments were $13.05 billionc at year-end 2009, with fixed maturity securities of $11.3 billion, about 87% of the investment portfolio. Stockholders' equity rose to $3.60 billion from $3.05 billion, and book value per share was $22.97 versus $18.87. The company repurchased 6,382,331 shares for $147 million in 2009, and the Board increased the repurchase authorization by 10,000,000 shares on February 8, 2010.
Gross reserves for losses and loss expenses were $9.07 billiond, and the company recorded favorable prior-year reserve development of $234 million before premium offsets ($190 million net). The filing notes that the company expects continued improvement in pricing in 2010, after competition and downward pricing pressure that began in 2004 and persisted through 2008.
Management also cautions about catastrophe exposure, reliance on reinsurers for about $973 million of recoverables, ratings sensitivity, and the ongoing economic downturn's effect on investment values. Dividends from insurance subsidiaries are limited to approximately $384 million without regulatory approval in 2010.
02—Key points
Key Highlights
- Net income to common stockholders was $309.1 million in 2009, up from $281.1 million in 2008; diluted EPS was $1.86 versus $1.62.
- Net premiums written fell to $3.73 billion from $4.03 billion, and net premiums earned declined to $3.81 billion from $4.29 billion.
- Consolidated GAAP combined ratio was 94.2% in 2009 versus 93.1% in 2008; the loss ratio improved to 61.4% from 62.7%.
- Other-than-temporary impairments dropped to $152 million from $434 million, while losses from investment funds rose to $174 million, mainly from real estate funds.
- Stockholders' equity increased to $3.60 billion from $3.05 billion, with book value per share of $22.97 versus $18.87.
- The company repurchased 6,382,331 shares for $147 million in 2009, and the Board raised the repurchase authorization by 10,000,000 shares in February 2010.
- Fixed maturity securities were $11.3 billion, about 87% of total investments of $13.05 billion; the 2010 dividend capacity from insurance subsidiaries is about $384 million without regulatory approval.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $4.43B$4.71B | −5.9% |
| Interest Expense | $87.99M$84.62M | +4.0% |
| Net Income | $309.06M$281.14M | +9.9% |
| EPS (Basic) | $1.93$1.68 | +14.9% |
| EPS (Diluted) | $1.86$1.62 | +14.8% |
| Shares Outstanding (Basic) | 160.36M— | — |
| Shares Outstanding (Diluted) | 166.57M— | — |
05—Questions
Frequently Asked Questions
How did W. R. Berkley perform in 2009 compared with 2008?
Net income to common stockholders rose to $309.1 million from $281.1 million, and diluted EPS increased to $1.86 from $1.62. The improvement came mainly from lower other-than-temporary impairments, partly offset by investment fund losses. Premium volume declined, with net premiums written of $3.73 billion versus $4.03 billion.
What are the company's main business segments?
The company operates five segments: specialty lines (excess and surplus lines, premises operations, professional liability, commercial automobile), regional commercial property casualty, alternative markets (including workers' compensation and self-insurance program management), reinsurance, and international. Specialty was the largest, with net premiums written of $1.26 billion in 2009.
How strong is the company's loss reserve position?
Net reserves for losses and loss adjustment expenses were $8.15 billion and gross reserves were $9.07 billion at December 31, 2009. The company recorded favorable development of $234 million on prior-year claims before premium offsets, or $190 million net. The filing also states that reserves are estimates and may prove inadequate.
What risks does the filing highlight for investors?
Key risks include the cyclical nature of the insurance industry, catastrophe losses (weather-related losses were $63 million in 2009), competitive pricing pressure, reliance on reinsurers owing about $973 million, dependence on insurance subsidiary dividends, possible ratings downgrades, and investment exposure to fixed income and real estate-related assets during the economic downturn.
06—Continue