W. R. Berkley Corporation Reports Fourth Quarter Results

W. R. Berkley Corporation (NYSE: WRB) today reported net income for the fourth quarter of 2012 of $165 million, or $1.17 per share, compared with $117 million, or 82 cents per share, for the fourth quarter of 2011.

(1) Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses.

Fourth quarter highlights included:

• Return on equity of 16.7%.
• Average rates on renewed policies increased 6.5%.
• GAAP combined ratio was 98.1%.
• Net premiums written increased 12.6%.
• Net investment income up 30% to $152 million.
• Special dividend of $1.00 per share of common stock paid in December 2012.

Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We are very pleased with the Company's fourth quarter performance. Our core underwriting results continued to improve as prices increased on renewal business for the third successive year and loss cost inflation continued at modest levels. The impact of Storm Sandy was mitigated by strategic reinsurance purchases, and our fourth quarter combined ratio was only slightly higher than the prior year.

"Our gross written premiums increased almost 16%. We continue to retain pricing power in most areas of the business, and our renewal retention remains satisfactory. We expect to have improved margins as higher prices are reflected in our earned premiums.

"As we have commented in the past, our investment income benefits from particular investment opportunities that produce better than market returns. We realized gains from both our private equity investments and our common stock portfolio, which contributed to our return on equity of just under 17% for the quarter. These types of investments are part of our normal strategy, and we expect additional realized gains to be achieved in the coming year.

"We paid a $1.00 per share special dividend in December, prior to the change in Federal tax laws. Together with our regular dividend, we distributed almost all of our fourth quarter earnings to our shareholders. We are increasingly optimistic about our ability to increase prices and deliver improving returns," Mr. Berkley concluded.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Tuesday, January 29, 2013, at 9:00 a.m. eastern time. The conference call will be webcast live on the Company's website at www.wrberkley.com. A replay of the webcast will be available on the Company's website approximately two hours after the end of the conference call.

About W. R. Berkley Corporation

Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates in five segments of the property casualty insurance business: specialty insurance, regional property casualty insurance, alternative markets, reinsurance and international.

Forward Looking Information

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2013 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, real estate, merger arbitrage and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response to it, on our results and financial condition; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Act of 2002, as amended; the ability of our reinsurers to pay reinsurance recoverables owed to us; foreign currency and political risks relating to our international operations; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; our ability to attract and retain key personnel and qualified employees; potential difficulties with technology and/or data security; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2013 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

(1) Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. GAAP combined ratio is the sum of loss ratio and expense ratio.

(2) Losses attributable to Storm Sandy, net of reinsurance recoveries and reinstatement premiums, were $40 million in the fourth quarter of 2012. Total losses from catastrophes were as follows (in thousands):

(3) Other revenues and expenses include corporate investment income, expenses not allocated to the business segments and revenues and expenses from investments in wholly-owned, non-insurance subsidiaries that are consolidated for financial reporting purposes.

(1) Net invested assets include investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.

(2) After-tax unrealized investment gains were $518 million and $430 million as of December 31, 2012 and 2011, respectively. Unrealized currency translation losses were $37 million and $61 million as of December 31, 2012 and 2011, respectively.

(3) During the fourth quarter of 2012, the Company repurchased 170,300 shares of its common stock at an average cost of $37.00 per share. During 2012, the Company repurchased 3.4 million shares of its common stock at an average cost of $37.24 per share and an aggregate cost of $128 million.

(4) The Financial Accounting Standards Board has issued new guidance regarding the treatment of costs associated with acquiring or renewing insurance contracts. This guidance modifies the definition of the types of costs that can be capitalized and specifies that the costs must be directly related to the successful acquisition of a new or renewed insurance contract. We adopted this guidance effective January 1, 2012 and retrospectively adjusted our previously issued financial statements (including the applicable 2011 information contained herein). The effect of adopting this guidance retrospectively was to decrease deferred acquisition costs by $84 million, common stockholders' equity by $55 million and book value per share by 40 cents as of December 31, 2011. The guidance also resulted in minor changes to other operating costs and expenses and expense ratios.

(5) Book value per share is total common stockholders’ equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders’ equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding.

(1) Operating income is a non-GAAP financial measure defined by the Company as net income excluding net investment gains and losses. Management believes that excluding net investment gains and losses, which are often discretionary and frequently relate to economic factors, provides a useful indicator of trends in the Company’s underlying operations.

(2) Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year common stockholders’ equity.

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 3.4 years.

(2) Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases. Investment funds are net of related liabilities of $31 million.

(1) Supranational represents investments in the North American Development Bank, European Investment Bank and Inter-American Development Bank.