01—Abstract
Summary
Summary of the 10-K filed February 28, 2011. Cited figures are marked; the original filing is the authoritative source.
W.
R. Berkley Corporation is an insurance holding company and one of the largest commercial lines writers in the United States, operating in five segments: specialty, regional, alternative markets, reinsurance and international. For 2010, net premiums written were $3,850,926 thousanda ($3.85 billion), up from $3,730,095 thousand in 2009, and net premiums earned were $3,835,582 thousand.
Net income to common stockholders rose to $449,287 thousandb ($2.90 per diluted share) from $309,057 thousand ($1.86 per diluted share) in 2009. The filing attributes the increase mainly to lower losses from investment funds ($8 million in 2010 versus $174 million in 2009) and lower other-than-temporary impairments ($9 million versus $143 million in 2009 as reported in MD&A). The consolidated GAAP combined ratio was 94.5% in 2010 compared with 94.2% in 2009, with the loss ratio improving to 60.2% from 61.4% on favorable prior-year reserve development of $234 million net of premium offsets.
The international segment's combined ratio was 102.2%, and gross premiums written there rose 37% to $602 millionc. Stockholders' equity was $3,702,876 thousand at year-end, or $26.26 per share, and the company repurchased 17,017,479 shares in 2010 for $449 million.
Management's 2010 Annual Report (Exhibit 13) is incorporated by reference for the full MD&A and financial statements, and the filing notes that current pricing for certain lines remains below levels needed to achieve return objectives. Key risks highlighted include the cyclical and competitive nature of the industry, reserve adequacy (gross loss reserves of about $9 billiond), catastrophe exposure, investment market volatility (fixed maturity securities were about 86% of investments), ratings dependence, and limited dividend capacity from insurance subsidiaries, which can pay about $490 million without regulatory approval in 2011.
02—Key points
Key Highlights
- Net premiums written of $3,850,926 thousand in 2010, up from $3,730,095 thousand in 2009.
- Net income to common stockholders of $449,287 thousand, or $2.90 per diluted share, compared with $309,057 thousand, or $1.86 per diluted share, in 2009.
- Consolidated GAAP combined ratio of 94.5% in 2010 versus 94.2% in 2009; loss ratio improved to 60.2% from 61.4%.
- Favorable prior-year reserve development of $234 million net of premium offsets in 2010 versus $190 million in 2009.
- Gross premiums written rose 4% to $4,416 million; international gross premiums increased 37% to $602 million.
- Stockholders' equity of $3.7 billion, or $26.26 per share, at December 31, 2010; 17,017,479 shares repurchased in 2010 for $449 million.
- Insurance subsidiaries can pay approximately $490 million in dividends during 2011 without regulatory approval.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $4.72B$4.43B | +6.6% |
| Interest Expense | $106.97M$87.99M | +21.6% |
| Net Income | $446.40M$309.06M | +44.4% |
| EPS (Basic) | $3.00$1.93 | +55.4% |
| EPS (Diluted) | $2.88$1.86 | +54.8% |
| Shares Outstanding (Basic) | 148.75M160.36M | −7.2% |
| Shares Outstanding (Diluted) | 155.08M166.57M | −6.9% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in 2010?
The filing states net income rose to $449 million from $309 million, primarily due to lower losses from investment funds ($8 million in 2010 compared with $174 million in 2009) and lower other-than-temporary impairments ($9 million compared with $143 million in 2009).
How did underwriting profitability change?
The consolidated GAAP combined ratio was 94.5% in 2010 compared with 94.2% in 2009. The loss ratio improved to 60.2% from 61.4%, but the expense ratio rose to 34.3% from 32.8%. The international segment's combined ratio was 102.2%, above 100.
Is the company's pricing environment improving?
The filing says that price levels were generally stable in 2009 and 2010, but current market price levels for certain lines remain below the prices required for the Company to achieve its return objectives. Competition has increased since 2004, and the company has experienced downward pressure on pricing.
What are the main risks to investors?
Key risks include cyclical industry results, reserve adequacy for gross loss reserves of about $9 billion, catastrophe losses, investment market volatility (fixed maturity securities were about 86% of investments), possible ratings downgrades, and the holding company's reliance on dividends from insurance subsidiaries.
How much capital did the company return to shareholders?
The company repurchased 17,017,479 shares in 2010 at an aggregate cost of $449 million and declared cash dividends of $0.27 per share for 2010, up from $0.24 in 2009.
06—Continue