BERKLEY W R CORP - 10-K Annual Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004
OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		22-1867895
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

475 Steamboat Road, Greenwich, CT		06830
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (203) 629-3000

Securities registered pursuant to Section 12(b) of the Act:
Common stock, par value $.20 per share
Rights to purchase Series A Junior Participating Preferred Stock

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities and Exchange Act of 1934). Yes þ No o

The aggregate market value of the voting and non-voting common stock held by non-affiliates (computed by reference to the price at which the common stock was last sold) as of the last business day of the Registrant’s most recently completed second fiscal quarter was $3,156,900,592.

Number of shares of common stock, $.20 par value, outstanding as of March 3, 2005: 84,272,875.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s 2004 Annual Report to Stockholders for the year ended December 31, 2004 are incorporated herein by reference in Part II, and portions of the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2004, are incorporated herein by reference in Part III.

SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking words such as “believes”, “expects”, “potential”, “continued”, “may”, “will”, “should”, “seeks”, “approximately”, “predicts”, “intends”, “plans”, “estimates”, “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained herein including statements related to our outlook for the industry and for our performance for the year 2005 and beyond, are based upon our 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 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 long-tail and potentially volatile nature of the reinsurance business;

•   product demand and pricing;

•   claims development and the process of estimating reserves;

•   the uncertain nature of damage theories and loss amounts;

•   natural and man-made catastrophic losses, including as a result of terrorist activities;

•   the impact of competition;

•   the availability of reinsurance;

•   exposure as to coverage for terrorist acts, our retention under The Terrorism Risk Insurance Act of 2002 (“TRIA”) and the potential expiration of TRIA;

•   the ability of our reinsurers to pay reinsurance recoverables owed to us;

•   investment results, including those of our portfolio of fixed income securities and investments in equity securities, including merger arbitrage investments;

•   exchange rates and political risks relating to our international operations;

•   legislative and regulatory developments, including those related to alleged anti-competitive or other improper sales and practices in the insurance industry;

•   changes in the ratings assigned to us by rating agencies;

•   availability of dividends from our insurance company subsidiaries;

•   our ability to successfully acquire and integrate companies and invest in new insurance ventures;

•   our ability to attract and retain qualified employees; and

•   other risks detailed from time to time in this Form 10-K and in our filings with the Securities and Exchange Commission.

We describe these risks and uncertainties in greater detail below under the caption “Certain factors that may affect future results.” These risks and uncertainties could cause our actual results for the year 2005 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. Our future financial performance is dependent upon factors discussed elsewhere in this Form 10-K and our other SEC filings. Forward-looking statements speak only as of the date on which they are made.

PART I

ITEM 1. BUSINESS

W. R. Berkley Corporation, a Delaware corporation, is an insurance holding company which, through its subsidiaries, operates in five segments of the property casualty insurance business:

•   Specialty lines of insurance, including excess and surplus lines, professional liability and commercial transportation

•   Regional commercial property casualty insurance

•   Alternative markets, including workers’ compensation and the management of self- insurance programs

•   Reinsurance, including treaty, facultative and Lloyd’s business

•   International

Our holding company structure provides us with the flexibility to respond to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. Our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment and reinsurance management and actuarial, financial and corporate legal staff support.

Unless otherwise indicated, all references in this Form 10-K to “W. R. Berkley,” “we,” “us,” “our,” the “Company” or similar terms refer to W. R. Berkley Corporation together with its subsidiaries.

Our specialty insurance and reinsurance operations are conducted nationwide, as well as in the United Kingdom. Regional insurance operations are conducted primarily in the Midwest, New England, Southern (excluding Florida) and Mid Atlantic regions of the United States. Alternative markets operations are conducted throughout the U.S. International operations are conducted in Argentina and the Philippines.

Net premiums written, as reported based on United States generally accepted accounting principles (“GAAP”), for each of the past five years were as follows:


	Year Ended December 31,
	2004			2003			2002			2001			2000
	(Amounts in thousands)
Net premiums written:
Specialty insurance	$	1,581,180		$	1,295,570		$	939,929		$	567,714		$	300,885
Regional		1,128,800			963,988			776,577			598,149			499,526
Alternative markets		616,282			482,389			305,357			151,942			98,001
Reinsurance		865,559			861,457			601,969			196,572			261,280
International		74,540			67,111			79,313			150,090			118,981
Discontinued business (1)		—			—			7,345			193,629			227,571

Total	$	4,266,361		$	3,670,515		$	2,710,490		$	1,858,096		$	1,506,244


Percentage of net premiums written:
Specialty insurance		37.1	%		35.3	%		34.6	%		30.5	%		20.1	%
Regional		26.5			26.3			28.7			32.2			33.1
Alternative markets		14.4			13.1			11.3			8.2			6.5
Reinsurance		20.3			23.5			22.2			10.6			17.3
International		1.7			1.8			2.9			8.1			7.9
Discontinued business (1)		—			—			0.3			10.4			15.1


Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1)

Represents personal lines and certain reinsurance lines that were discontinued in 2001.

The following sections briefly describe our insurance segments. All of the domestic insurance subsidiaries except Admiral Insurance Company have an A.M. Best Company, Inc. (“A.M. Best”) rating of “A (Excellent)” which is the third highest rating out of 15 possible ratings by A. M. Best. Admiral Insurance Company has a rating of “A+ (Superior)” which is A.M. Best’s second highest rating. W. R. Berkley Insurance (Europe), Limited has a rating of “A- (Excellent)” which is A.M. Best’s fourth highest rating. A.M. Best’s ratings are based upon factors of concern to policyholders, insurance agents and brokers and are not directed toward the protection of investors. A.M. Best states: “While Best’s ratings reflect [its] opinion of a company’s financial strength and ability to meet its ongoing obligations to policyholders, they are not a warranty, nor are they a recommendation of specific policy form, contract, rate or claim practice.” A.M. Best reviews its ratings on a periodic basis, and ratings of the Company’s subsidiaries are therefore subject to change.

SPECIALTY INSURANCE

Our specialty segment underwrites complex and sophisticated third-party liability risks, principally within excess and surplus lines. Excess and surplus lines differ from standard market lines in that excess and surplus lines are generally free of rate and form regulation and provide coverage for more complex and hard-to-place risks. The primary specialty lines of business are premises operations, professional liability, commercial automobile, products liability and property lines. The specialty business is conducted through nine operating units. The companies within the segment are divided along the different customer bases and product lines that they serve. The specialty units deliver their products through a variety of distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

Admiral Insurance Company (“Admiral”) provides excess and surplus lines coverage that generally involves a moderate to high degrees of risk due to the nature of the class of coverage (e.g., products liability) or insured entity (e.g., fireworks distributors). Admiral concentrates on commercial casualty, professional liability, umbrella and commercial property lines of business produced by wholesale brokers. Admiral’s average annual premiums per policy were approximately $45,000 in 2004.

Nautilus Insurance Company (“Nautilus”) insures excess and surplus risks that are less complex and involve a lower degree of expected severity than those covered by Admiral. A substantial portion of Nautilus’ business is written on a binding authority basis, subject to certain contractual limitations. Nautilus’ average annual premiums per policy were approximately $4,000 in 2004.

Carolina Casualty Insurance Company (“Carolina”) specializes in transportation insurance for long-haul trucking and public automobile risks, operating as an admitted carrier in all states.

Monitor Liability Managers, Inc. (“Monitor”) specializes in professional liability insurance, including directors’ and officers’ liability, employment practices liability, lawyers’ professional liability, management liability and non-profit directors’ and officers’ liability.

Vela Insurance Services, LLC (“Vela”) provides excess and surplus lines coverage to small and medium size accounts with a primary focus on contractors and products liability. Vela’s average annual premiums per policy were approximately $52,000 in 2004.

W. R. Berkley Insurance (Europe), Limited (“Berkley UK”) is a United Kingdom authorized insurance company that began operations in July 2003. Berkley UK writes professional indemnity, directors & officers and general liability business.

Berkley Specialty Underwriting Managers, LLC (“Berkley Specialty”) is an underwriting company formed in 2004 to provide excess and surplus lines general liability coverage to the wholesale market. It also plans to offer commercial property and casualty insurance products to the entertainment and sports industry.

Clermont Specialty Managers, Ltd. (“Clermont”) writes package insurance programs, including workers’ compensation, for luxury condominium, cooperative and rental apartment buildings and restaurants in the New York City metropolitan area.

Berkley Medical Excess Underwriters, LLC (“Medical Excess”) provides medical malpractice excess insurance and reinsurance coverage and services to hospitals and hospital associations.

The following table sets forth the percentage of gross premiums written by specialty unit:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Admiral		30.9	%		33.0	%		36.3	%		37.9	%		38.0	%
Nautilus		18.0			18.1			17.1			16.6			23.8
Carolina		15.3			14.6			17.3			18.1			10.4
Monitor		10.7			13.0			14.8			15.2			17.1
Vela		9.2			9.9			8.6			7.1			3.9
Berkley UK		6.8			3.5			—			—			—
Berkley Specialty		3.1			—			—			—			—
Clermont		3.1			3.3			4.0			3.4			4.4
Medical Excess		2.9			3.4			0.8			—			—
Surety (1)		—			1.2			1.1			1.7			2.4


Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1)

Surety was transferred to the regional segment in 2004.

The following table sets forth the percentages of gross premiums written, by line, by our specialty insurance operations:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Premises operations		37.5	%		38.3	%		37.3	%		39.2	%		40.1	%
Professional liability		19.2			18.4			15.3			11.1	%		14.0	%
Automobile		14.2			13.8			16.3			18.5			14.4
Products liability		13.5			10.9			11.4			11.0			9.4
Property		8.3			9.8			12.3			13.3			15.7
Other		7.3			8.8			7.4			6.9			6.4


Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

REGIONAL

Our regional subsidiaries provide commercial insurance products to customers primarily in 27 states. Key clients of this segment are small-to-mid-sized businesses and state and local governmental entities. The regional subsidiaries are organized geographically, which provides them with the flexibility to adapt to local market conditions, while enjoying the superior administrative capabilities and financial strength of W. R. Berkley. The regional operations are conducted through four geographic regions based on markets served: Continental Western Insurance Group (“Continental Western Group”) in the Midwest, Acadia Insurance Company (“Acadia”) in New England, Union Standard Insurance Group (“Union Standard”) in the South (excluding Florida), and Berkley Mid Atlantic Group in the Mid Atlantic region. In addition, surety bonds are offered nationwide through a separate regional company, Monitor Surety Managers, Inc. (“Monitor Surety”).

The regional subsidiaries primarily sell insurance products through a network of non-exclusive independent agents who are compensated on a commission basis. Our regional companies underwrite all major commercial lines.

The following table sets forth the percentage of gross premiums written by each region:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Continental Western Group		35.2	%		36.3	%		36.4	%		36.6	%		41.8	%
Acadia		26.4			27.1			26.3			25.8			24.4
Union Standard		15.0			15.1			15.4			15.7			16.3
Berkley Mid Atlantic Group		13.8			12.8			13.6			15.0			16.1
Monitor Surety		2.2			—			—			—			—
Assigned risk plans (1)		7.4			8.7			8.3			6.9			1.4

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1)

Assigned risk premiums are written on behalf of assigned risk plans managed by the Company and 100% reinsured by the respective state-sponsored assigned risk pools.

The following table sets forth the percentages of gross premiums written, by line, by our regional insurance operations:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Commercial Multi-Peril		36.6	%		36.6	%		35.2	%		29.9	%		28.9	%
Automobile		26.0			25.9			25.8			26.2			27.9
Workers’ Compensation		17.1			17.5			17.2			24.3			22.7
Assigned risk plans		7.4			8.7			8.3			6.9			1.4
Other		12.9			11.3			13.5			12.7			19.1

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth the percentages of direct premiums written, by state, by our regional insurance operations:


	Year Ended December 31,
	2004			2003			2002			2001			2000
State
Massachusetts		7.6	%		7.7	%		7.2	%		7.2	%		5.8	%
Kansas		7.5			7.9			8.3			7.9			5.0
Texas		6.1			6.4			6.2			6.3			6.0
New Hampshire		5.9			6.2			6.9			7.8			7.2
Maine		5.7			6.2			7.5			7.9			8.0
Pennsylvania		5.1			4.2			3.9			2.4			2.1
Iowa		4.7			4.7			4.6			5.5			6.5
Nebraska		4.2			4.5			4.8			5.4			5.3
Minnesota		4.0			3.8			3.5			3.7			4.1
Missouri		3.6			3.5			3.2			3.5			3.7
Vermont		3.6			3.8			4.1			3.7			3.2
South Dakota		3.3			3.6			3.6			3.4			2.9
North Carolina		3.1			3.2			4.0			4.9			5.4
Wisconsin		3.1			2.8			2.7			2.9			2.7
Colorado		3.0			3.0			3.3			3.6			4.4
Connecticut		2.8			1.7			0.9			—			—
Virginia		2.8			2.7			2.7			3.4			3.5
Arkansas		2.4			1.9			1.9			2.3			2.7
Illinois		2.0			2.0			2.2			2.3			2.7
Mississippi		2.0			2.1			2.1			2.5			3.1
Tennessee		1.8			4.1			1.8			1.6			2.0
Washington		1.8			1.7			0.9			0.5			0.4
New York		1.7			0.8			1.2			0.1			0.1
Maryland		1.5			1.2			1.0			0.8			0.6
Oklahoma		1.5			1.5			1.5			1.5			1.3
Idaho		1.2			1.5			1.5			1.3			1.2
Montana		1.2			1.2			1.1			0.9			1.0
Other		6.8			6.1			7.4			6.7			9.1

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

ALTERNATIVE MARKETS

Our alternative markets operations specialize in developing, insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include employers, employer groups, insurers, and alternative market funds seeking less costly, more efficient ways to manage exposure to risks. In addition to providing insurance, the alternative markets segment also provides a wide variety of fee-based services, including consulting and administrative services.

Each of our alternative markets operating units is involved in risk management and is organized according to one of the following product areas: insuring excess workers’ compensation risks; insuring primary workers’ compensation risks; and providing non-risk bearing services.

Midwest Employers Casualty Company (“MECC”) operates on a nationwide basis and provides excess workers’ compensation coverage and risk management services to self-insured employers and groups above their self-insured or retained limits.

Preferred Employers Insurance Company (“Preferred Employers”) offers primary workers’ compensation insurance in California. Insurance coverage is provided primarily to owner-managed small employers.

Key Risk Insurance Company (“Key Risk”) offers primary workers’ compensation insurance principally in North Carolina. Insurance services are also provided through its affiliate, Key Risk Management Services.

Berkley Risk Administrators Company, LLC (“BRAC”) implements and manages alternative risk management programs and self-insurance pools for business, governmental entities, assigned risk plans, tribal nations and non-profit entities. BRAC also provides administrative and claims services to insurance companies. BRAC’s services include third-party administration, claims adjustment and management, employee benefit consulting, accounting services, insurance and reinsurance risk transfer, loss control and safety consulting, management information systems, regulatory compliance and relations, risk management consulting, alternative markets plan management, statistical analysis, underwriting and rating, and policy issuance. BRAC also underwrites property casualty insurance for self-insured entities.

The following table sets forth the percentages of gross premiums written by each alternative markets unit:


	Year Ended December 31,
	2004			2003			2002			2001			2000
MECC		43.8	%		41.1	%		51.6	%		53.6	%		63.4	%
Preferred Employers		32.4			29.8			24.3			20.6			9.7
Key Risk		16.6			14.0			19.6			24.3			26.4
BRAC		7.2			15.1			4.5			1.5			0.5

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth services fees for insurance services business conducted by BRAC and Key Risk (amounts in thousands):


	Year Ended December 31,
	2004		2003		2002		2001		2000
Services fees	$	109,344	$	101,715	$	86,095	$	74,913	$	63,434

REINSURANCE

Our reinsurance operations consist of seven operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. Treaty reinsurance is the reinsurance of all or a specified portion or category of risks underwritten by the ceding company during the term of the agreement. Facultative reinsurance is the reinsurance of individual risks whereby a reinsurer generally has the opportunity to analyze and separately underwrite a risk prior to agreeing to be bound.

Signet Star Re, LLC (“Signet Star”) focuses on specialty lines of business, including professional liability, umbrella, workers’ compensation, commercial automobile and trucking, where knowledge and expertise in a specific area is valued over the capital scale of the reinsurance provider. Signet Star emphasizes casualty excess of loss treaties and seeks significant participations in order to have greater influence over the terms and conditions of coverage. Signet Star business is produced through reinsurance brokers or intermediaries as opposed to direct relationships with the ceding companies.

Facultative ReSources, Inc. (“Fac Re”) specializes in individual certificate and program facultative business developed through brokers. Its experienced underwriters seek to offset the underwriting and pricing cycles in the underlying insurance business by working closely with ceding company clients to develop appropriate underwriting criteria and through superior risk selection.

Lloyd’s of London Reinsurance (“Lloyd’s”) represents quota share reinsurance contracts with MAP Capital Limited and Kiln plc. Map Capital Limited and Kiln PLC underwrite a broad range of mainly short-tail classes of business on a worldwide basis.

Berkley Underwriting Partners, LLC (“Berkley Underwriting Partners”) writes specialty insurance products through program administrators and managing general underwriters.

B F Re Underwriting, LLC. (“BF Re”), which commenced operations in 2002, writes facultative reinsurance on a direct basis.

Fidelity & Surety Reinsurance Managers, LLC (“Fidelity and Surety”) offers reinsurance coverage to a limited number of regional fidelity and surety accounts.

Berkley Risk Solutions (“Berkley Risk Solutions”) was formed in 2003, and in 2004 began to provide insurance and reinsurance-based financial solutions to insurance companies and self-insured entities.

The following table sets forth the percentages of gross premiums written by each reinsurance unit:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Signet Star		34.7	%		34.0	%		35.4	%		56.3	%		76.8	%
Fac Re		24.6			28.0			24.3			26.9			15.2
Lloyd’s		22.0			23.9			27.8			—			—
Berkley Underwriting Partners		9.9			7.9			11.0			10.2			—
B F Re		8.2			5.7			—			—			—
Fidelity and Surety		0.3			0.5			1.5			6.6			8.0
Berkley Risk Solutions		0.3			—			—			—			—

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth the percentages of gross premiums written, by property versus casualty business, by our reinsurance operations:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Property		22.9	%		23.4	%		24.8	%		8.4	%		14.4	%
Casualty		77.1			76.6			75.2			91.6			85.6

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

INTERNATIONAL

The Company and Northwestern Mutual Life International, Inc. (“NML”), a wholly-owned subsidiary of The Northwestern Mutual Life Insurance Company, jointly own Berkley International, LLC (“Berkley International”).

Applying the same approach that we take for our domestic businesses, we believe that decentralized control is key to the success of our international efforts. For example, we hire local insurance executives who have specialized knowledge of their customers, markets and products, and we link their compensation to meeting performance objectives.

International operations are conducted in Argentina and the Philippines. In Argentina, we offer commercial and personal property casualty insurance. Our Argentina subsidiary ceased writing new life insurance business in 2002. In the Philippines, we provide savings and life products to customers.

The following table set forth the percentages of direct premiums for our international operations:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Property casualty		92.5	%		91.7	%		72.3	%		77.9	%		72.3	%
Life		0.2			0.6			10.0			12.4			14.7

Total Argentina		92.7			92.3			82.3			90.3			87.0

Philippines - Life		7.3			7.7			17.7			9.7			13.0


Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

DISCONTINUED BUSINESS

In 2001, the Company discontinued its domestic personal lines business, both homeowners and private passenger automobile, and the alternative markets division of its reinsurance segment, by not renewing existing policies or treaties and ceasing to write new business. Although the Company discontinued the alternative market division of its reinsurance segment, it continues to write insurance and reinsurance covering workers’ compensation for self-insured entities within the alternative markets segment .

The following table set forth the percentages of net premiums written for our discontinued business:


	Year Ended December 31,
	2004		2003		2002			2001			2000
Personal lines		—		—		68.3	%		61.8	%		61.8	%
Alternative markets reinsurance		—		—		31.7			38.2			38.2


Total		—		—		100.0	%		100.0	%		100.0	%

OTHER BUSINESS

The Company owns a majority interest in Peyton Street Independent Financial Services (“Peyton Street”), a unitary thrift holding company that owns the common stock of InsurBanc. InsurBanc provides banking services principally to independent insurance agencies and their employees.

Results by Industry Segment

Summary financial information about our operating segments is presented on a GAAP basis in the following table:


	Year Ended December 31,
	2004			2003			2002			2001			2000
	(Amounts in thousands)
Specialty Insurance

Revenues	$	1,569,893		$	1,188,013		$	826,558		$	470,107		$	336,621
Income before income taxes		290,442			201,885			136,112			34,554			32,104

Regional

Revenues		1,112,801			923,965			749,750			608,682			560,748
Income before income taxes		184,152			153,292			104,085			37,203			4,182

Alternative Markets

Revenues		750,227			551,091			359,230			234,430			189,425
Income before income taxes		128,660			85,397			62,703			34,255			34,944

Reinsurance

Revenues		946,994			813,180			442,199			250,850			335,935
Income (loss) before income taxes		87,373			59,984			14,981			(61,403	)		26,026

International

Revenues		81,512			70,931			94,609			155,913			117,971
Income (loss) before income taxes		7,437			3,347			(1,757	)		12,149			6,591

Discontinued Business

Revenues		—			—			55,774			232,403			232,392
Loss before income taxes		—			—			(10,682	)		(133,480	)		(9,936	)

Other (1)

Revenues		50,808			82,928			37,964			(10,588	)		8,195
Loss before income taxes		(59,551	)		(14,601	)		(46,009	)		(74,672	)		(53,060	)

Total

Revenues	$	4,512,235		$	3,630,108		$	2,566,084		$	1,941,797		$	1,781,287
Income (loss) before income tax		638,513			489,304			259,433			(151,394	)		40,851

(1)

Represents corporate revenues, expenses and realized investment gains and losses, which are not allocated to business segments. Also includes the operating results of Peyton Street.

The table below represents summary underwriting ratios, on a GAAP accounting basis for our insurance segments. The combined ratio represents a measure of underwriting profitability, excluding investment income. A number in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit:


	Year Ended December 31,
	2004			2003			2002			2001			2000
Specialty Insurance
Loss ratio		62.0	%		63.3	%		63.7	%		71.0	%		73.1	%
Expense ratio		25.2			24.9			25.7			30.7			33.5

Combined ratio		87.2	%		88.2	%		89.4	%		101.7	%		106.6	%


Regional
Loss ratio		55.7	%		56.3	%		59.1	%		67.2	%		75.5	%
Expense ratio		31.2			31.2			32.4			35.0			35.1

Combined ratio		86.9	%		87.5	%		91.5	%		102.2	%		110.6	%


Alternative Markets
Loss ratio		70.5	%		68.6	%		66.7	%		76.5	%		70.2	%
Expense ratio		21.5			24.6			29.6			32.9			38.7

Combined ratio		92.0	%		93.2	%		96.3	%		109.4	%		108.9	%


Reinsurance
Loss ratio		69.4	%		69.6	%		75.0	%		109.3	%		73.3	%
Expense ratio		29.3			29.5			31.7			38.3			33.3

Combined ratio		98.7	%		99.1	%		106.7	%		147.6	%		106.6	%


International
Loss ratio		55.2	%		54.4	%		54.2	%		61.4	%		62.1	%
Expense ratio		42.0			42.3			51.3			40.6			41.7

Combined ratio		97.2	%		96.7	%		105.5	%		102.0	%		103.8	%


Discontinued Business
Loss ratio		—			—			98.7	%		131.4	%		75.9	%
Expense ratio		—			—			30.8			33.0			32.8

Combined ratio		—			—			129.5	%		164.4	%		108.7	%


Total
Loss ratio		63.0	%		63.4	%		65.0	%		82.1	%		73.4	%
Expense ratio		27.4			28.0			30.4			34.4			34.8

Combined ratio		90.4	%		91.4	%		95.4	%		116.5	%		108.2	%

Investments

Investment results before income tax effects were as follows:


	Year Ended December 31,
	2004			2003			2002			2001			2000
	(Amounts in thousands)
Average investments, at cost	$	7,180,721		$	5,326,621		$	3,881,121		$	3,279,830		$	3,046,364

Investment income, before expenses	$	293,866		$	244,347		$	210,900		$	206,656		$	219,955

Percent earned on average investments		4.1	%		4.6	%		5.4	%		6.3	%		7.2	%


Realized investment and foreign currency gains (losses)	$	48,268		$	81,692		$	37,070		$	(11,494	)	$	8,364


Change in unrealized investment gains (losses) (1)	$	(20,386	)	$	24,566		$	113,529		$	28,344		$	98,919

(1)		The change in unrealized investment gains (losses) represents the difference between fair value and cost of available for sale securities and investment in affiliates at the beginning and end of the calendar year.

		For comparison, following are the coupon returns for selected bond indices and the dividend returns for the S&P 500 Index.


	Year Ended December 31,
	2004			2003			2002			2001			2000
Lehman Brothers U.S. Aggregate Bond Index		5.0	%		5.3	%		6.0	%		6.5	%		6.9	%

Lehman Brothers Municipal Bond Index		4.8	%		4.8	%		5.1	%		5.2	%		5.5	%

S&P500 Index		1.9	%		2.3	%		1.3	%		1.1	%		1.0	%

The percentages of the fixed maturity portfolio categorized by contractual maturity, based on fair value, on the dates indicated, are set forth below. Actual maturities may differ from contractual maturities because certain issuers have the right to call or prepay obligations.


	2004			2003			2002			2001			2000
1 year or less		10.8	%		1.6	%		3.1	%		3.2	%		3.5	%
Over 1 year through 5 years		15.8			21.1			16.9			20.5			22.1
Over 5 years through 10 years		19.0			19.0			25.4			23.2			21.8
Over 10 years		36.4			36.8			27.8			26.2			27.7
Mortgage-backed securities		18.0			21.5			26.8			26.9			24.9

Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Loss and Loss Adjustment Expense Reserves

To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not yet reported to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

In examining reserve adequacy, several factors are considered in addition to the economic value of losses. These factors include historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are necessarily based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing the reserves are well tested over time, some of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company’s control. These variables are affected by internal and external events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage and legislative changes, which make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events.

We discount our liabilities for excess workers’ compensation business and the workers’ compensation portion of our reinsurance business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting the liabilities. The expected losses and loss expense payout pattern subject to discounting was derived from the Company’s loss payout experience and is supplemented with data compiled from insurance companies writing similar business. The liabilities for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve for non-proportional business, and at the statutory rate for proportional business. The discount rates range from 3.5% to 6.5% with a weighted average rate of 4.8%. The aggregate net discount, after reflecting the effects of ceded reinsurance, is $502,874,000, $393,152,000 and $292,697,000 at December 31, 2004, 2003 and 2002, respectively. The increase in the aggregate discount from 2003 to 2004 and from 2002 to 2003 resulted from the increase in workers’ compensation reserves.

To date, known asbestos and environmental claims at our insurance company subsidiaries have not had a material impact on our operations. Environmental claims have not materially impacted us because these subsidiaries generally did not insure the larger industrial companies which are subject to significant environmental exposures.

Our net reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $38,258,000 and $31,866,000 at December 31, 2004 and 2003, respectively. The Company’s gross reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $54,971,000 and $49,283,000 at December 31, 2004 and 2003, respectively. Net incurred losses and loss expenses for reported asbestos and environmental claims were approximately $9,194,000, $4,749,000 and $6,652,000 in 2004, 2003 and 2002, respectively. Net paid losses and loss expenses for reported asbestos and environmental claims were approximately $2,802,000, $1,391,000 and $2,938,000 in 2004, 2003 and 2002, respectively. The estimation of these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make a reasonable actuarial estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential affect of significant unresolved legal matters, including coverage issues as well as the cost of litigating the legal issues. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

The table below provides a reconciliation of the beginning and ending property casualty reserves (amounts in thousands):


	2004		2003		2002
Net reserves at beginning of year	$	3,505,295	$	2,323,241	$	2,033,293

Net provision for losses and loss expenses (a):
Claims occurring during the current year (b)		2,236,860		1,780,905		1,288,071
Increase in estimates for claims occurring in prior years (c)		294,931		244,636		156,184
Decrease in discount for prior years		24,220		24,115		12,999

		2,556,011		2,049,656		1,457,254


Net payments for claims (d):
Current year		409,776		268,170		373,541
Prior years		928,688		599,432		793,765

		1,338,464		867,602		1,167,306

Net reserves at end of year		4,722,842		3,505,295		2,323,241
Ceded reserves at end of year		726,769		686,796		844,684

Gross reserves at end of year	$	5,449,611	$	4,192,091	$	3,167,925

(a)		Net provision for loss and loss expenses excludes $3,299, $521 and $6,717 in 2004, 2003 and 2002, respectively, relating to the policyholder benefits incurred on life insurance that are included in the statement of income.

(b)		Claims occurring during the current year are net of discount of $107,282, $96,365 and $38,939 in 2004, 2003 and 2002, respectively.

(c)		The increase in estimates for claims occurring in prior years is net of discount of $26,658, $28,214 and $23,626 in 2004, 2003 and 2002, respectively. The increase in estimates for claims occurring in prior years before discount is $321,589, $272,850 and $179,810 in 2004, 2003 and 2002, respectively.

(d)		Net payments in 2003 are net of $331,000 of cash received upon the commutation of the aggregate reinsurance agreement (see Note 9 of Notes to Consolidated Financial Statements).

Also, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding the increase in estimates for claims occurring in prior years.

A reconciliation between the reserves as of December 31, 2004 as reported in the accompanying consolidated GAAP financial statements and those reported on the basis of statutory accounting principles (“SAP”) is as follows (amounts in thousands):


Net reserves reported on a SAP basis	$	4,746,923
Additions (deductions) to statutory reserves:
International property & casualty reserves		30,121
Loss reserve discounting (1)		(53,983	)
Other		(219	)

Net reserves reported on a GAAP basis		4,722,842
Ceded reserves reclassified as assets		726,769

Gross reserves reported on a GAAP basis	$	5,449,611

(1)

For statutory purposes, we use a discount rate of 3.5% for non-proportional business as permitted by the Department of Insurance of the State of Delaware.

The following table presents the development of net reserves for 1994 through 2004. The top line of the table shows the estimated reserves for unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This represents the estimated amount of losses and loss expenses for claims arising in all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not yet reported to us. The upper portion of the table shows the re-estimated amount of the previously recorded reserves based on experience as of the end of each succeeding year. The estimate changes as more information becomes known about the frequency and severity of claims for individual years.

The “cumulative redundancy (deficiency)” represents the aggregate change in the estimates over all prior years. For example, the 1994 reserves have developed a $170 million redundancy over ten years. That amount has been reflected in income over the ten years. The impact on the results of operations of the past three years of changes in reserve estimates is shown in the reconciliation tables above. It should be noted that the table presents a “run off” of balance sheet reserves, rather than accident or policy year loss development. Therefore, each amount in the table includes the effects of changes in reserves for all prior years. For example, assume a claim that occurred in 1994 is reserved for $2,000 as of December 31, 1994. Assuming this claim estimate was changed in 2004 to $2,300, and was settled for $2,300 in 2004, the $300 deficiency would appear as a deficiency in each year from 1994 through 2003.


	(Amounts in millions)
Year Ended December 31,	1994		1995		1996		1997		1998			1999			2000			2001			2002			2003			2004
Net reserves, discounted	$	895	$	1,209	$	1,333	$	1,433	$	1,583		$	1,724		$	1,818		$	2,033		$	2,323		$	3,505		$	4,723
Reserve discount		—		152		172		190		187			196			223			243			293			393			503

Net reserve, undiscounted		895		1,361		1,505		1,623		1,770			1,920			2,041			2,276			2,616			3,898			5,226

Net Re-estimated as of:
One year later		885		1,346		1,481		1,580		1,798			1,934			2,252			2,450			2,889			4,220
Two years later		872		1,305		1,406		1,566		1,735			2,082			2,397			2,671			3,242
Three years later		833		1,236		1,356		1,446		1,805			2,203			2,520			2,932
Four years later		789		1,195		1,239		1,463		1,856			2,260			2,634
Five years later		764		1,112		1,248		1,494		1,859			2,330
Six years later		706		1,118		1,271		1,488		1,886
Seven years later		712		1,135		1,265		1,495
Eight years later		723		1,132		1,266
Nine years later		725		1,134
Ten years later		725

Cumulative redundancy	$	170	$	227	$	239	$	128	$	(116	)	$	(410	)	$	(593	)	$	(656	)	$	(626	)	$	(322	)

(deficiency), undiscounted

Cumulative amount of net liability paid through:
One year later	$	221	$	265	$	332	$	365	$	496		$	584		$	702		$	794		$	599		$	929
Two years later		355		434		523		574		795			1,011			1,255			1,191			1,216
Three years later		445		550		635		737		1,032			1,426			1,501			1,594
Four years later		501		616		714		852		1,306			1,567			1,722
Five years later		528		655		782		1,033		1,387			1,699
Six years later		543		701		903		1,068		1,448
Seven years later		577		785		935		1,112
Eight years later		634		809		966
Nine years later		654		835
Ten years later		675

The following table presents the development of gross reserves for 1994 through 2004.


	(Amounts in millions)
Year Ended December 31,		1994		1995		1996		1997		1998		1999		2000			2001			2002			2003			2004
Net reserves, discounted		895		1,209		1,333		1,433		1,583		1,724		1,818			2,033			2,323			3,505			4,723
Ceded Reserves		1,176		451		450		477		538		617		658			731			845			687			727

Gross reserves, discounted		2,071		1,660		1,783		1,910		2,121		2,341		2,476			2,764			3,168			4,192			5,450
Reserve discount		—		192		216		241		248		250		286			324			384			462			573

Gross reserve-undiscounted	$	2,071	$	1,852	$	1,999	$	2,151	$	2,369	$	2,591	$	2,762		$	3,088		$	3,552		$	4,654		$	6,023


Gross Re-estimated as of:
One year later	$	2,043	$	1,827	$	1,965	$	2,132	$	2,390	$	2,653	$	2,827		$	3,153		$	3,957		$	5,030
Two years later		2,026		1,789		1,959		2,096		2,389		2,556		2,730			3,461			4,353
Three years later		1,983		1,754		1,909		2,010		2,218		2,385		2,900			3,777
Four years later		1,951		1,733		1,823		1,871		2,079		2,465		3,054
Five years later		1,928		1,681		1,739		1,787		2,102		2,564
Six years later		1,899		1,630		1,688		1,795		2,139
Seven years later		1,858		1,589		1,692		1,805
Eight years later		1,827		1,593		1,692
Nine years later		1,834		1,589
Ten Years later		1,829

Gross cumulative redundancy (deficiency)	$	242	$	263	$	307	$	346	$	230	$	27	$	(292	)	$	(689	)	$	(801	)	$	(376	)

Reinsurance

We follow the customary industry practice of reinsuring a portion of our exposures and paying to reinsurers a part of the premiums received on the policies that we write. Reinsurance is purchased principally to reduce net liability on individual risks and to protect against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the reinsurance coverage. We monitor the financial condition of our reinsurers and attempt to place our coverages only with substantial, financially sound carriers. As a result, generally the reinsurers who reinsure our casualty insurance must have an A.M. Best rating of “A (Excellent)” or better with $500 million in policyholder surplus and the reinsurers who cover our property insurance must have an A.M. Best rating of “A-(Excellent)” or better with $250 million in policyholder surplus. As a result of the attacks of September 11, 2001, many reinsurers have significantly changed their underwriting guidelines, and limit or no longer provide terrorism coverage. See “Management’s Discussion and Analysis of Financial Condition and Result of Operations” and Note 9 of “Notes to Consolidated Financial Statements.”

Regulation

Our insurance subsidiaries are subject to varying degrees of regulation and supervision in the jurisdictions in which they do business, and the Company believes that it is in compliance in all material respects with such regulations. They are subject to statutes which delegate regulatory, supervisory and administrative powers to state insurance commissioners. This regulation relates to such matters as the standards of solvency which must be met and maintained; the licensing of insurers and their agents; the nature of and limitations on investments; deposits of securities for the benefit of policyholders; approval of policy forms and premium rates; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; establishment and maintenance of reserves for unearned premiums and losses; and requirements regarding numerous other matters. Our property casualty subsidiaries, other than excess and surplus and reinsurance subsidiaries, must generally file all rates with the insurance department of each state in which they operate. Our excess and surplus and reinsurance subsidiaries generally operate free of rate and form regulation.

In addition to regulatory supervision of our insurance subsidiaries, we are subject to state statutes governing insurance holding company systems. Typically, such statutes require that we periodically file information with the state insurance commissioner, including information concerning our capital structure, ownership, financial condition and general business operations. Under the terms of applicable state statutes, any person or entity desiring to purchase more than a specified percentage (commonly 10%) of our outstanding voting securities would be required to obtain regulatory approval of the purchase. Under Florida law, which is applicable to us due to

our ownership of Carolina Casualty Insurance Company, a Florida domiciled insurer, the acquisition of more than 5% of our capital stock must receive regulatory approval. Further, state insurance statutes typically place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect their solvency. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

Various state and federal organizations, including Congressional committees and the National Association of Insurance Commissioners (“NAIC”), have been conducting reviews into various aspects of the insurance business. No assurance can be given that future legislative or regulatory changes resulting from such activity will not adversely affect our insurance subsidiaries.

The NAIC utilizes a Risk Based Capital (RBC) formula that is designed to measure the adequacy of an insurer’s statutory surplus in relation to the risks inherent in its business. The RBC formula develops a risk adjusted target level of adjusted statutory capital by applying certain factors to various asset, premium and reserve items. The RBC Model Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under regulatory control. The RBC of each of our domestic insurance subsidiaries was above the authorized RBC control level as of December 31, 2004.

The Gramm-Leach-Bliley Act, or Financial Services Modernization Act of 1999 (the “Act”), was enacted in 1999 and significantly affects the financial services industry, including insurance companies, banks and securities firms. The Act modifies federal law to permit the creation of financial holding companies, which, as regulated by the Act, can maintain cross-holdings in insurance companies, banks and securities firms to an extent not previously allowed. The Act also permits or facilitates certain types of combinations or affiliations for financial holding companies. The Act establishes a functional regulatory scheme under which state insurance departments will maintain primary regulation over insurance activities, subject to provisions for certain federal preemptions.

Our insurance subsidiaries are also subject to assessment by state guaranty funds when an insurer in that jurisdiction has been judicially declared insolvent and insufficient funds are available from the liquidated company to pay policyholders and claimants. The protection afforded under a state’s guaranty fund to policyholders of the insolvent insurer varies from state to state. Generally, all licensed property casualty insurers are considered to be members of the fund, and assessments are based upon their pro rata share of direct written premiums. The NAIC Model Post-Assessment Guaranty Fund Act, which many states have adopted, limits assessments to an insurer to 2% of its subject premium and permits recoupment of assessments through rate setting. Likewise, several states (or underwriting organizations of which our insurance subsidiaries are required to be members) have limited assessment authority with regard to deficits in certain lines of business.

We receive funds from our insurance subsidiaries in the form of dividends and management fees for certain management services. Annual dividends in excess of maximum amounts prescribed by state statutes may not be paid without the approval of the insurance commissioner of the state in which an insurance subsidiary is domiciled.

The Terrorism Risk Insurance Act of 2002 (“TRIA”) became effective November 26, 2002. TRIA establishes a temporary Federal program that provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism. The program is scheduled to terminate on December 31, 2005. TRIA is applicable to almost all commercial lines of property and casualty insurance. Insurers with direct commercial property and casualty insurance exposure in the United States are required to participate in the program and make available coverage for certified acts of terrorism. Federal participation will be triggered under TRIA when the Secretary of Treasury certifies an act of terrorism. Under the program the federal government will pay 90% of an insurer’s losses in excess of the insurer’s applicable deductible. The insurer’s deductible is based on a percent of earned premium for covered lines of commercial property and casualty insurance: for 2004 it was 10% of 2003 premium and for 2005 it is 15% of 2004 premium. Based on our 2004 earned premiums, our deductible under TRIA during 2005 will increase to approximately $517 million. TRIA limits the federal governments share of losses at $100 billion for a program year. In addition, an insurer that has satisfied its deductible is not liable for the payment of losses in excess of the $100 billion cap. After December 31, 2005, there will not be a Federal program available for terrorism losses, unless TRIA is extended or replaced. At such time, the Company will have the option to exclude terrorism losses from coverage, except for any lines of insurance or jurisdictions where exclusions were not permitted before TRIA was enacted.

The insurance industry recently has become the subject of increasing scrutiny with respect to insurance broker and agent compensation arrangements and sales practices. The New York State Attorney General and other state and federal regulators have commenced investigations and other proceedings relating to compensation and bidding arrangements between producers and issuers of insurance products, and unsuitable sales practices by producers on behalf of either the issuer or the purchaser. The practices currently under investigation include, among other things, allegations that so-called contingent commission arrangements may conflict with a broker’s duties to its customers and that certain brokers and insurers may have engaged in anti-competitive practices in connection with insurance premium quotes. The New York State Attorney General has recently entered into settlement agreements with two large insurance brokers against whom civil complaints had been filed. These investigations and proceedings are expected to continue, and new investigative proceedings may be commenced, in the future. These investigations and proceedings could result in legal precedents and new industry-wide practices or legislation, rules or regulations that could significantly affect the insurance industry.

Competition

The property casualty insurance and reinsurance businesses are competitive, with over 2,000 insurance companies transacting business in the United States. We compete directly with a large number of these companies. Our strategy in this highly fragmented industry is to seek specialized areas or geographic regions where our insurance subsidiaries can gain a competitive advantage by responding quickly to changing market conditions. Our subsidiaries establish their own pricing practices. Such practices are based upon a Company-wide philosophy to price products with the general intent of making an underwriting profit. Competition in the industry generally changes with profitability.

Competition for specialty and alternative markets business comes from other specialty insurers, regional carriers, large national multi-line companies and reinsurers. Under certain market conditions, standard carriers also compete for excess and surplus business.

Competition for the reinsurance business comes from domestic and foreign reinsurers, which produce their business either on a direct basis or through the broker market. These competitors include Berkshire Hathaway, GE Insurance Solutions, Transatlantic Reinsurance and Everest Reinsurance, which collectively comprise a majority of the property casualty reinsurance market in the United States.

The regional property casualty subsidiaries compete with mutual and other regional stock companies as well as national carriers. Direct writers of property casualty insurance compete with the regional subsidiaries by writing insurance through their salaried employees, generally at a lower cost than through independent agents such as those used by the Company.

The international operations compete with native insurance operations both large and small, which may be related to government entities, as well as with branch or local subsidiaries of multinational companies.

Employees

As of February 28, 2005, we employed 4,736 persons. Of this number, our subsidiaries employed 4,671 persons, of whom 2,709 were executive and administrative personnel and 1,962 were clerical personnel. We employed the remaining 65 persons at the parent company and in investment operations, of whom 49 were executive and administrative personnel and 16 were clerical personnel.

Other Information about the Company’s business

We maintain an interest in the acquisition or start up of complementary businesses and continue to evaluate possible acquisitions and new ventures on an ongoing basis. In addition, the insurance subsidiaries develop new coverages or lines of business to meet the needs of insureds.

Seasonal weather variations and other events affect the severity and frequency of losses sustained by the insurance and reinsurance subsidiaries. Although the effect on our business of such catastrophes as tornadoes, hurricanes, hailstorms, earthquakes and terrorist acts may be mitigated by reinsurance, they nevertheless can have a significant impact on the results of any one or more reporting periods.

We have no customer which accounts for 10 percent or more of our consolidated revenues.

Compliance by W. R. Berkley and its subsidiaries with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to protection of the environment has not had a material effect upon our capital expenditures, earnings or competitive position.

The Company’s internet address is www.wrberkley.com. The information on our website is not incorporated by reference in this annual report on Form 10-K. The Corporation’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are accessible free of charge through this website as soon as reasonably practicable after they have been electronically filed with or furnished to the Securities and Exchange Commission.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

Our business faces significant risks. If any of the events or circumstances described as risks below actually occurs, our business, results of operations or financial condition could be materially and adversely affected.

Risks Relating to Our Industry

Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry.

The results of companies in the property casualty insurance industry historically have been subject to significant fluctuations and uncertainties. The demand for insurance is influenced primarily by general economic conditions, while the supply of insurance is directly related to available capacity. The adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural disasters, regulatory measures and court decisions that define and expand the extent of coverage and the effects of economic inflation on the amount of compensation due for injuries or losses. In addition, investment rates of return may impact policy rates. These factors can have a significant impact on ultimate profitability because a property casualty insurance policy is priced before its costs are known, as premiums usually are determined long before claims are reported. These factors could produce results that would have a negative impact on our results of operations and financial condition.

Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves.

Our gross reserves for losses and loss expenses were approximately $5.4 billion as of December 31, 2004. Our loss reserves reflect our best estimates of the cost of settling all claims and related expenses with respect to insured events that have occurred.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claims administration will cost for claims that have occurred, whether known or unknown. The major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, inflation, judicial theories of liability, reinsurance coverage, legislative changes and other factors, including the actions of third parties which are beyond our control.

The inherent uncertainties of estimating reserves are greater for certain types of liabilities, where long periods of time elapse before a definitive determination of liability is made and settlement is reached. In periods with increased economic volatility, it becomes more difficult to accurately predict claim costs. Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled. Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is inherently uncertain, we cannot assure you that our current reserves will prove adequate in light of subsequent events. Should we need to increase our reserves, our pre-tax income for the period would decrease by a corresponding amount.

We increased our estimates for claims occurring in prior years by $295 million in 2004, $245 million in 2003 and $156 million in 2002. We, along with the property casualty insurance industry in general, have experienced higher than expected losses for certain types of business written from 1998 to 2001. Although our reserves reflect our best estimate of the costs of settling claims, we cannot assure you that our claim estimates will not need to be increased in the future.

We discount our reserves for excess and assumed workers’ compensation business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting liabilities. The expected loss and loss expense payout pattern subject to discounting is derived from our loss payout experience and is supplemented with data compiled from insurance companies writing similar business. Changes in the loss and loss expense payout pattern are recorded in the period they are determined. If the actual loss payout pattern is shorter than anticipated, the discount will be reduced and pre-tax income will decrease by a corresponding amount.

As a property casualty insurer, we face losses from natural and man-made catastrophes.

Property casualty insurers are subject to claims arising out of catastrophes that may have a significant effect on their results of operations, liquidity and financial condition. Catastrophe losses have had a significant impact on our results. In addition, through our recent quota share arrangements with certain Lloyd’s syndicates, we have additional exposure to catastrophic losses. For example, weather-related losses were $29 million in 2002, $38 million in 2003 and $60 million in 2004.

Catastrophes can be caused by various events, including hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter weather and fires, as well as terrorist activities. The incidence and severity of catastrophes are inherently unpredictable. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Some catastrophes are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. Catastrophes can cause losses in a variety of our property casualty lines, and most of our past catastrophe-related claims have resulted from severe storms. Seasonal weather variations may affect the severity and frequency of our losses. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. It is therefore possible that a catastrophic event or multiple catastrophic events could produce significant losses and have a material adverse effect on our results of operations and financial condition.

We face significant competitive pressures in our businesses, which may reduce premium rates and prevent us from pricing our products at attractive rates.

We compete with a large number of other companies in our selected lines of business. We compete, and will continue to compete, with major U.S. and non-U.S. insurers and reinsurers, other regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies and diversified financial services companies. Competition in our businesses is based on many factors, including the perceived financial strength of the company, premium charges, other terms and conditions offered, services provided, commissions paid to producers, ratings assigned by independent rating agencies, speed of claims payment and reputation and experience in the lines to be written.

Some of our competitors, particularly in the reinsurance business, have greater financial and marketing resources than we do. These competitors within the reinsurance segment include Berkshire Hathaway, GE Insurance Solutions, Transatlantic Reinsurance and Everest Reinsurance Company, which collectively comprise a majority of the U.S. property casualty reinsurance market. We expect that perceived financial strength, in particular, will become more important as customers seek high quality reinsurers. Certain of our competitors operate from tax advantaged jurisdictions and have the ability to offer lower rates due to such tax advantages.

New competition could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our products at attractive rates.

We, as a primary insurer, may have significant exposure for terrorist acts.

To the extent that reinsurers have excluded coverage for terrorist acts or have priced such coverage at rates that we believe are not practical, we, in our capacity as a primary insurer, do not have reinsurance protection and are exposed for potential losses as a result of any terrorist acts. For example, our losses from the World Trade Center attack in 2001 were $35 million. We have particular exposure to terrorist acts as a provider of insurance for habitational risks in the New York metropolitan area and as a workers’ compensation insurer.

To the extent an act of terrorism is certified by the Secretary of Treasury, we may be covered under The Terrorism Risk Insurance Act of 2002 (“TRIA”) for up to 90% of our losses. However, any such coverage would be subject to a mandatory deductible based on a percent of earned premium for the covered lines of commercial property and casualty insurance. Based on our 2004 earned premiums, our deductible under TRIA during 2005 will increase to approximately $517 million. If TRIA is not extended beyond its stated termination date of December 31, 2005 or replaced by a similar program, our liability for terrorist acts could be a material amount. In addition, even this coverage provided under TRIA does not apply to reinsurance that we write.

We are subject to extensive governmental regulation, which increases our costs and could restrict the conduct of our business.

We are subject to extensive governmental regulation and supervision. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. This system of regulation, generally administered by a department of insurance in each state in which we do business, relates to, among other things:

•   standards of solvency, including risk-based capital measurements;

•   restrictions on the nature, quality and concentration of investments;

•   requiring certain methods of accounting;

•   rate and form regulation pertaining to certain of our insurance businesses; and

•   potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.

State insurance departments conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies, holding company issues and other matters. Recently adopted federal financial services modernization legislation may lead to additional federal regulation of the insurance industry in the coming years. Also, foreign governments regulate our international operations.

We may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations. Also, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us. Also, changes in the level of regulation of the insurance industry, whether federal, state or foreign, or changes in laws or regulations themselves or interpretations by regulatory authorities, restrict the conduct of our business.

In certain of our insurance businesses, the rates we charge our policyholders are subject to regulatory approval. Certain lines of business are subject to a greater degree of regulatory scrutiny then others. For example, the workers’ compensation business is highly regulated. During 2004, approximately 13% of our net premiums written represented primary workers’ compensation business. Of our net premiums written, approximately 5% represented primary workers’ compensation business written in the State of California, which is undergoing workers’ compensation reform that may adversely affect our ability to adjust rates.

Risks Relating to Our Business

We cannot guarantee that our reinsurers will pay in a timely fashion, if at all, and, as a result, we could experience losses.

We purchase reinsurance by transferring part of the risk that we have assumed, known as ceding, to a reinsurance company in exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us, the reinsured, of our liability to

our policyholders. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay such recoverables on a timely basis. Accordingly, we bear credit risk with respect to our reinsurers, and if our reinsurers fail to pay us, our financial results would be adversely affected. Underwriting results and investment returns of some of our reinsurers may affect their future ability to pay claims. As of December 31, 2004, the amount due from our reinsurers was $851 million, including amounts due from state funds and industry pools. Certain of these amounts due from reinsurers are secured by letters of credit or held in trust on our behalf.

We are rated by A.M. Best and Standard & Poor’s, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Certain of our insurance company subsidiaries are rated by A.M. Best, Standard & Poor’s and Moody’s Investors Services. A.M. Best, Standard & Poor’s and Moody’s ratings reflect their opinions of an insurance company’s financial strength, operating performance, strategic position and ability to meet its obligations to policyholders, are not evaluations directed to investors and are not recommendations to buy, sell or hold our securities. Our ratings are subject to periodic review, and we cannot assure you that we will be able to retain those ratings. All of the domestic insurance subsidiaries except Admiral Insurance Company have an A.M. Best Company, Inc. (“A.M. Best”) rating of “A (Excellent)” which is the third highest rating out of 15 possible ratings by A. M. Best. Admiral Insurance Company has a rating of “A+ (Superior)” which is A.M. Best’s second highest rating. W. R. Berkley Insurance (Europe), Limited has a rating of “A- (Excellent)” which is A.M. Best’s fourth highest rating. The Standard & Poor’s financial strength rating for our insurance subsidiaries is A+/negative (the seventh highest rating out of twenty-seven possible ratings). Our Moody’s rating is A2 for Berkley Insurance Company (the sixth highest rating out of twenty-one possible ratings).

If our ratings are reduced from their current levels by A.M. Best, Standard & Poor’s or Moody’s, our competitive position in the insurance industry could suffer and it would be more difficult for us to market our products. A significant downgrade could result in a substantial loss of business as policyholders move to other companies with higher claims-paying and financial strength ratings.

If market conditions cause reinsurance to be more costly or unavailable, we may be required to bear increased risks or reduce the level of our underwriting commitments.

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain amounts of risk underwritten by our insurance company subsidiaries, especially catastrophe risks. We also purchase reinsurance on risks underwritten by others which we reinsure. Market conditions beyond our control determine the availability and cost of the reinsurance protection we purchase, which may affect the level of our business and profitability. Our reinsurance facilities are generally subject to annual renewal. We may be unable to maintain our current reinsurance facilities or to obtain other reinsurance facilities in adequate amounts and at favorable rates. If we are unable to renew our expiring facilities or to obtain new reinsurance facilities, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures, we would have to reduce the level of our underwriting commitments, especially catastrophe exposed risks.

Our international operations expose us to investment, political and economic risks.

Our international operations, including our recent UK-based operations, expose us to investment, political and economic risks, including foreign currency and credit risk. Changes in the value of the U.S. dollar relative to other currencies could have an adverse effect on our results of operations and financial condition. For example, Argentina has recently experienced substantial political and economic problems, including debt restructuring and the devaluation of the Argentinean peso. As a result, we recorded a charge of $18 million in 2001 and $10 million in 2002 to recognize other than temporary impairment of our investment in Argentine bonds.

We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate any such acquired companies or successfully invest in such ventures.

As part of our present strategy, we continue to evaluate possible acquisition transactions and the start-up of complementary businesses on an ongoing basis, and at any given time, we may be engaged in discussions with respect to possible acquisitions and new ventures. We cannot assure you that we will be able to identify suitable acquisition transactions or insurance ventures, that such transactions will be financed and completed on acceptable terms or that our

future acquisitions or ventures will be successful. The process of integrating any companies we do acquire or investing in new ventures may have a material adverse effect on our results of operations and financial condition.

We may be unable to attract and retain qualified employees.

We depend on our ability to attract and retain experienced underwriting talent and other skilled employees who are knowledgeable about our business. If the quality of our underwriting team and other personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate, and be unable to expand our operations into new markets.

Risks Relating to Our Investments

A significant amount of our assets is invested in fixed income securities and is subject to market fluctuations.

Our investment portfolio consists substantially of fixed income securities. As of December 31, 2004, our investment in fixed income securities was approximately $6.4 billion, or 76% of our total investment portfolio.

The fair market value of these assets and the investment income from these assets fluctuate depending on general economic and market conditions. The fair market value of fixed income securities generally decreases as interest rates rise. Conversely, if interest rates decline, investment income earned from future investments in fixed income securities will be lower. In addition, some fixed income securities, such as mortgage-backed and other asset-backed securities, carry prepayment risk as a result of interest rate fluctuations. Based upon the composition and duration of our investment portfolio at December 31, 2004, a 100 basis point increase in interest rates would result in a decrease in the fair value of our investments of approximately $258 million.

The value of investments in fixed income securities, and particularly our investments in high-yield securities, is subject to impairment as a result of deterioration in the credit worthiness of the issuer. Although we attempt to manage this risk by diversifying our portfolio and emphasizing preservation of principal, our investments are subject to losses as a result of a general decrease in commercial and economic activity for an industry sector in which we invest, as well as risks inherent in particular securities. For example, we reported provisions for other than temporary impairments in the value of our fixed income investments of $16 million in 2002 and $430,000 in 2003.

We invest some of our assets in equity securities, including merger arbitrage investments and real estate securities, which may decline in value.

We invest a portion of our investment portfolio in equity securities, including merger arbitrage investments and investments in affiliates. At December 31, 2004, our investments in equity securities were approximately $934 million, or 11% of our investment portfolio. Although we did not report any provisions for “other than temporary impairments” in the value of our equity securities in 2003, we reported such provisions in the amounts of $2.7 million in 2002 and $2.8 million in 2004.

Merger and convertible arbitrage trading represented 38% of our equity securities at December 31, 2004. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers. Merger arbitrage differs from other types of investments in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period, usually four months or less. Our merger arbitrage positions are exposed to the risk associated with the completion of announced deals, which are subject to regulatory as well as political and other risks. As a result of the reduced activity in the merger and acquisitions area, we may not be able achieve the returns that we have enjoyed in the past.

Included in our equity security portfolio are investments in publicly traded real estate investment trusts (“REITs”) and private real estate investment funds, real estate limited partnerships and venture capital investments. At December 31, 2004, our investments in these securities were approximately $311 million, or 30% of our equity portfolio. The values of our real estate investments are subject to fluctuations based on changes in the economy in general and real estate valuations in particular. In addition, the real estate investment funds, limited partnerships, and venture capital investments in which we invest are less liquid than our other investments.

Risks Relating to Purchasing Our Securities

We are an insurance holding company and may not be able to receive dividends in needed amounts.

As an insurance holding company, our principal assets are the shares of capital stock of our insurance company subsidiaries. We have to rely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations and for paying dividends to stockholders and corporate expenses. The payment of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as the regulatory restrictions. During 2005, the maximum amount of dividends that can be paid without regulatory approval is approximately $270 million. As a result, in the future we may not be able to receive dividends from these subsidiaries at times and in amounts necessary to meet our obligations or pay dividends.

We are subject to certain provisions that may have the effect of hindering, delaying or preventing third party takeovers, which may prevent our shareholders from receiving premium prices for their shares in an unsolicited takeover and make it more difficult for third parties to replace our current management.

Provisions of our certificate of incorporation and by-laws, as well as our rights agreement and state insurance statutes, may hinder, delay or prevent unsolicited acquisitions or changes of our control. These provisions may also have the effect of making it more difficult for third parties to cause the replacement of our current management without the concurrence of our board of directors.

These provisions include:

•   our classified board of directors and the ability of our board to increase its size and to appoint directors to fill newly created directorships;

•   the requirement that 80% of our stockholders must approve mergers and other transactions between us and the holder of 5% or more of our shares, unless the transaction was approved by our board of directors prior to such holder’s acquisition of 5% of our shares;

•   the need for advance notice in order to raise business or make nominations at stockholders’ meetings;

•   our rights agreement which subject persons (other than William R. Berkley) who acquire beneficial ownership of 15% or more of our common stock without board approval to substantial dilution; and

•   state insurance statutes that restrict the acquisition of control (generally defined as 5 — 10% of the outstanding shares) of an insurance company without regulatory approval.

ITEM 2. PROPERTIES

W. R. Berkley and its subsidiaries own or lease office buildings or office space suitable to conduct their operations. At December 31, 2004, the Company had aggregate office space of 1,450,722 square feet, of which 549,638 were owned and 901,084 were leased.

Rental expense was approximately $16,783,000, $18,773,000 and $17,586,000 for 2004, 2003 and 2002, respectively. Future minimum lease payments (without provision for sublease income) are $15,889,000 in 2005; $13,747,000 in 2006; and $41,783,000 thereafter.

ITEM 3. LEGAL PROCEEDINGS

The Company’s subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company’s estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations.

The New York State Attorney General and other regulators have commenced investigations, legal actions and general inquiries concerning producer compensation and alleged anti-competitive activities in the insurance industry. Certain allegations include improper sales practices by insurance producers as well as other non-competitive behaviors. The Company and certain of its operating units, like many others in the insurance industry, have received information requests from various state insurance regulators and other state authorities. These requests, for the most part, relate to inquiries into inappropriate solicitation activities, producer compensation practices and the underwriting of legal malpractice insurance. The Company is responding to each of these inquiries and is cooperating with the applicable regulatory authorities. In this regard, the Company commenced an internal review with the assistance of outside counsel. The internal review, which is substantially complete, focused on the Company’s relationships with its distribution channels. As a result of the investigation, a single insurance operating unit reported certain limited instances of conduct that could be characterized as involving inappropriate solicitation practices. To address these limited instances, the Company has implemented certain additional internal procedures and is taking other corrective action.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted during the fourth quarter of 2004 to a vote of holders of the Company’s Common Stock.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


					Common
	Price Range				Dividends Paid
	High		Low		Per Share
2004:
Fourth Quarter	$	47.40	$	38.90	$ .07
Third Quarter		44.15		38.90	.07
Second Quarter		43.80		38.25	.07
First Quarter		42.89		34.95	.07

2003:
Fourth Quarter	$	36.93	$	31.55	$ .07
Third Quarter		36.01		31.27	.07
Second Quarter		35.73		27.83	.07
First Quarter		28.80		24.39	.07

The closing price of the Common Stock on March 3, 2005, as reported on the New York Stock Exchange, was $51.67 per share. The approximate number of record holders of the Common Stock on March 3, 2005 was 561.

Set forth below is a summary of the shares repurchased by the Company during the fourth quarter of 2004 and the remaining number of shares authorized for purchase by the Company.

Maximum number of

Total number of shares

shares that may

Total number

purchased as part of

yet be purchased

of shares

Average price

publicly announced plans

under the plans

purchased

paid per share

or programs

or programs (1)

October 2004

—

None

1,788,750

November 2004

—

None

1,788,750

December 2004

—

None

1,788,750

(1)

Remaining shares available for repurchase under the Company’s repurchase authorization that was approved by the Board of Directors on November 10, 1998.

ITEM 6. SELECTED FINANCIAL DATA


	Year Ended December 31,
	2004			2003			2002			2001			2000
	(Amounts in thousands, except per share data)
Premiums written	$	4,266,361		$	3,670,515		$	2,710,490		$	1,858,096		$	1,506,244
Net premiums earned		4,061,092			3,234,610			2,252,527			1,680,469			1,491,014
Net investment income		291,295			210,056			187,875			195,021			210,448
Service fees		109,344			101,715			86,095			75,771			68,049
Realized investment and foreign currency gains (losses)		48,268			81,692			37,070			(11,494	)		8,364
Total revenues		4,512,235			3,630,108			2,566,084			1,941,797			1,781,287
Interest expense		66,423			54,733			45,475			45,719			47,596
Income (loss) before income taxes		638,513			489,304			259,433			(151,394	)		40,851
Income tax (expense) benefit		(196,235	)		(150,626	)		(84,139	)		56,661			(2,451	)
Minority interest		(3,446	)		(1,458	)		(249	)		3,187			(2,162	)
Income (loss) before change in accounting		438,832			337,220			175,045			(91,546	)		36,238
Cumulative effect of change in accounting		(727	)		—			—			—			—
Net income (loss)		438,105			337,220			175,045			(91,546	)		36,238
Data per common share:
Income (loss) per basic share		5.22			4.06			2.29			(1.39	)		.63
Income (loss) per diluted share		4.97			3.87			2.21			(1.39	)		.62
Stockholders’ equity		25.03			20.14			16.12			12.45			11.79
Cash dividends declared		.28			.28			.24			.24			.24
Weighted average shares outstanding:
Basic		83,961			83,124			76,328			65,562			57,672
Diluted		88,181			87,063			79,385			68,750			58,481
Investments (1)	$	8,341,944		$	6,480,713		$	4,663,100		$	3,607,586		$	3,112,540
Total assets		11,451,033			9,334,685			7,031,323			5,633,509			5,022,070
Reserves for losses and loss expenses		5,449,611			4,192,091			3,167,925			2,763,850			2,475,805
Junior subordinated debentures		208,286			193,336			198,251			198,210			198,169
Senior notes and other debt		808,264			659,208			362,985			370,554			370,158
Stockholders’ equity		2,109,702			1,682,562			1,335,199			931,595			680,896

(1)

Including cash and equivalents, trading account receivable from brokers and clearing organizations and trading account securities sold but not yet purchased and unsettled purchases.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the registrant’s 2004 Annual Report to Stockholders, which information is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to the information under “Market Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the registrant’s 2004 Annual Report to Stockholders, which information is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the registrant are contained in the registrant’s 2004 Annual Report to Stockholders and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a)   Evaluation Of Disclosure Controls And Procedures

    The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period covered by this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b)   Management’s Report On Internal Control Over Financial Reporting

    Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. See pages 15-16 of the registrant’s 2004 annual report to stockholders, which information is incorporated herein by reference, for management’s report and the related attestation by KPMG LLP, an independent registered public accounting firm.

(c)   Change In Internal Control

    There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2004, and which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a) Security ownership of certain beneficial owners

(b) Security ownership of management

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Index to Financial Statements

The Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s financial statements, together with the reports on the financial statements, and management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the effectiveness of internal control over financial reporting of KPMG LLP, appear in the Company’s 2004 Annual Report to Stockholders and are incorporated by reference in this Annual Report on Form 10-K. With the exception of the aforementioned information, the 2004 Annual Report to Stockholders is not deemed to be filed as part of this report. The schedules to the financial statements listed below should be read in conjunction with the financial statements in such 2004 Annual Report to Stockholders. Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or required information is shown in the financial statements or notes thereto.


Index to Financial Statement Schedules			Page

Independent Registered Public Accountants’ Report on Schedules and Consent			38

Schedule II — Condensed Financial Information of Registrant			40

Schedule III — Supplementary Insurance Information			43

Schedule IV — Reinsurance			44

Schedule V — Valuation and Qualifying Accounts			45

Schedule VI — Supplementary Information concerning Property — Casualty Insurance Operations			46

(b) Exhibits

The exhibits filed as part of this report are listed on pages 35, 36 and 37 hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date
/s/ William R. Berkley	Chairman of the Board and
	Chief Executive Officer	March 11, 2005
William R. Berkley
Principal executive officer

/s/ William R. Berkley, Jr.	Director	March 11, 2005

William R. Berkley, Jr.

/s/ Philip J. Ablove	Director	March 11, 2005

Philip J. Ablove

/s/ Ronald E. Blaylock	Director	March 11, 2005

Ronald E. Blaylock

/s/ Mark E. Brockbank	Director	March 11, 2005

Mark E. Brockbank

/s/ George G. Daly	Director	March 11, 2005

George G. Daly

/s/ Rodney A. Hawes, Jr.	Director	March 11, 2005

Rodney A. Hawes, Jr.

/s/ Richard G. Merrill	Director	March 11, 2005

Richard G. Merrill

/s/ Jack H. Nusbaum	Director	March 11, 2005

Jack H. Nusbaum

/s/ Mark L. Shapiro	Director	March 11, 2005

Mark L. Shapiro

/s/ Eugene G. Ballard	Senior Vice President,	March 11, 2005
	Chief Financial Officer and
Eugene G. Ballard	Treasurer
Principal accounting officer

/s/ Clement P. Patafio	Vice President,	March 11, 2005
	Corporate Controller
Clement P. Patafio

ITEM 15. (b) EXHIBITS


Number
(2.1)		Agreement and Plan of Merger between the Company, Berkley Newco Corp. and MECC, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K (File No. 0-7849) filed with the Commission on September 28, 1995.)

(2.2)		Agreement and Plan of Restructuring, dated July 20, 1995, by and among the Company, Signet Star Holdings, Inc., Signet Star Reinsurance Company, Signet Reinsurance Company and General Re Corporation (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K (File No. 0-7849) filed with the Commission on September 28, 1995).

(3.1)		The Company’s Restated Certificate of Incorporation, as amended through May 10, 2004 (incorporated by reference to Exhibits 3.1 and 3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).

(3.2)		Amendment, dated May 11, 2004, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly report on Form 10-Q (File No. 1-15-202) filed with the Commission on August 5, 2004).

(3.3)		Amended and Restated By-Laws (incorporated by reference to Exhibit 3(ii) of the Company’s Current Report on Form 8-K (File No. 0-7849) filed with the Commission on May 11, 1999).

(4.1)		Indenture, dated as of February 14, 2003, between the Company and The Bank of New York, as trustee, relating to $200,000,000 principal amount of the Company’s 5.875% Senior Notes due 2013 (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission of March 31, 2003).

(4.2)		First Supplemental Indenture, dated February 14, 2003, between the Company and The Bank of New York, as trustees, relating to $200,000,000 principal amount of the Company’s 5.875% Senior Notes due 2013, including form of the Notes as Exhibit A (incorporated by reference to Exhibt 4.1 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission of March 31, 2003).

(4.3)		Second Supplemental Indenture, dated as of September 12, 2003, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 5.125% Senior Notes due 2010, including form of the Notes as Exhibit A. (incorporated by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on November 14, 2003).

(4.4)		Third Supplemental Indenture, dated as of August 24, 2004, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 6.150% Senior Notes due 2019, including form of the Notes as Exhibit A.

(4.5)		The instruments defining the rights of holders of the other long term debt securities of the Company are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company agrees to furnish supplementally copies of these instruments to the Commission upon request.

(10.1)		W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s 2003 Proxy Statement (File No. 1-15202) filed with the Commission on April 14, 2003).

(10.2)		Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).

(10.3)		W. R. Berkley Corporation Deferred Compensation Plan for Officers as amended January 1, 1991 (incorporated by reference to Exhibit 10.4 of the Company’s Annual Report on Form 10-K (File No. 0-7849) filed with the Commission on March 26, 1996).


Number
(10.4)		W. R. Berkley Corporation Deferred Compensation Plan for Directors as adopted March 7, 1996 (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K (File No. 0-7849) filed with the Commission on March 26, 1996).

(10.5)		W. R. Berkley Corporation Annual Incentive Compensation Plan (incorporated by reference to Annex A of the Company’s 2002 Proxy Statement (File No. 1-15202) filed with the Commission on April 5, 2002).

(10.6)		W. R. Berkley 2004 Long-Term Incentive Plan (incorporated by reference to Annex B from the Company’s 2004 Proxy Statement (File No. 1-15202) filed with the Commission on April 12, 2004).

(10.7)		1997 Directors Stock Plan, as Amended and Restated as of May 11, 1999 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 0-7849) filed with the Commission on August 11, 1999).

(10.8)		Supplemental Benefits Agreement between William R. Berkley and the Company dated August 19, 2004 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly report on Form 10-Q (File No. 1-15-202) filed with the Commission on November 8, 2004).

(13)		Portions of the 2004 Annual Report to Stockholders of W. R. Berkley Corporation that are incorporated by reference in this Report on Form 10-K.

(14)		Code of Ethics for Senior Financial Officers.

(21) Following is a list of the Company’s significant subsidiaries and other operating entities. Subsidiaries of subsidiaries are indented and the parent of each such corporation owns 100% of the outstanding voting securities of such corporation except as noted below.


		Percentage
	Jurisdiction of	owned
	Incorporation	by the Company¹
Berkley International, LLC²	New York		65	%
Carolina Casualty Insurance Company	Florida		100	%
Clermont Specialty Managers, Ltd.	New Jersey		100	%
J/I Holding Corporation:	Delaware		100	%
Admiral Insurance Company:	Delaware		100	%
Admiral Indemnity Company	Delaware		100	%
Berkley London Holdings, Inc.³	Delaware		100	%
W. R. Berkley London Finance, Limited	United Kingdom		80	%
W. R. Berkley London Holdings, Limited	United Kingdom		80	%
W. R. Berkley Insurance (Europe), Limited	United Kingdom		80	%
Berkley Risk Administrators Company, LLC	Minnesota		100	%
Nautilus Insurance Company:	Arizona		100	%
Great Divide Insurance Company	North Dakota		100	%
Key Risk Management Services, Inc.	North Carolina		100	%
Monitor Liability Managers, Inc.	Delaware		100	%
Monitor Surety Managers, Inc.	Delaware		100	%
Signet Star Holdings, Inc.:	Delaware		100	%
Berkley Insurance Company	Delaware		100	%
Berkley Regional Insurance Company	Delaware		100	%
Acadia Insurance Company	Maine		100	%
Chesapeake Bay Property and Casualty Insurance Company	Maine		100	%
Berkley Insurance Company of the Carolinas	North Carolina		100	%
Continental Western Insurance Company	Iowa		100	%
Firemen’s Insurance Company of Washington, D.C.	Delaware		100	%
Great River Insurance Company	Mississippi		100	%
Tri-State Insurance Company of Minnesota	Minnesota		100	%
Union Insurance Company	Nebraska		100	%
Union Standard Insurance Company	Oklahoma		100	%
Key Risk Insurance Company	North Carolina		100	%
Midwest Employers Casualty Company:	Delaware		100	%
Preferred Employers Insurance Company	California		100	%
Facultative ReSources, Inc.	Connecticut		100	%
Gemini Insurance Company	Delaware		100	%
Riverport Insurance Company	Minnesota		100	%
StarNet Insurance Company	Delaware		100	%

	1)		W. R. Berkley Corporation is the ultimate parent. The subsidiary of a direct parent in indicated by an indentation, and its percentage ownership is as indicated in this column.
	2)		The 65% majority interest is held by W. R. Berkley Corporation and its subsidiaries as follows: W. R. Berkley Corporation (1%), Admiral Insurance Company (25%), Berkley Regional Insurance Company (10%), Nautilus Insurance Company (5%) and Berkley Insurance Company (24%).
	3)		Held by Admiral Insurance Company (66.67%) and Berkley Insurance Company (33.33%)

(23)   Independent Registered Public Accountants’ Report on Schedules and Consent

(31.1)   Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(31.2)   Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(32.1)   Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Report of Independent Registered Public Accounting Firm on Schedules

The Board of Directors and Stockholders
W. R. Berkley Corporation:

Under date of March 11, 2005, we reported on the consolidated balance sheets of W.R. Berkley Corporation and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, stockholders’ equity, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, as contained in the 2004 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 2004. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

New York, New York
March 11, 2005

Schedule II

W. R. Berkley Corporation
Condensed Financial Information of Registrant
Balance Sheets (Parent Company)
(Amounts in thousands)


	December 31,
	2004			2003
Assets
Cash and cash equivalents	$	44,108		$	69,864
Fixed maturity securities:
Available for sale at fair value (cost $68,061 and $64)		68,061			64
Equity securities, at fair value:
Available for sale (cost $310 and $493)		310			513
Trading account (cost $952 and $920)		952			920
Investments in subsidiaries		2,947,009			2,420,911
Due from subsidiaries		—			43,203
Deferred Federal income taxes		99,265			39,278
Real estate, furniture & equipment at cost, less accumulated depreciation		6,830			8,466
Other assets		26,578			2,586

	$	3,193,113		$	2,585,805


Liabilities, Debt and Stockholders’ Equity

Liabilities:
Due to Subsidiaries	$	20,056		$	—
Other liabilities		58,552			62,446
Junior subordinated debentures		208,286			193,336
Senior notes		796,517			647,461


		1,083,411			903,243


Stockholders’ equity:
Preferred stock		—			—
Common stock		20,901			20,901
Additional paid-in capital		831,363			820,388
Retained earnings (including accumulated undistributed net income of subsidiaries of $1,422,160 and $968,965 in 2004 and 2003, respectively)		1,354,489			939,911
Accumulated other comprehensive income		112,055			119,977
Treasury stock, at cost		(209,106	)		(218,615	)

		2,109,702			1,682,562

	$	3,193,113		$	2,585,805

See note to condensed financial statements.

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant, Continued
Statements of Income (Parent Company)
(Amounts in thousands)


	Years ended December 31,
	2004			2003			2002
Management fees and investment income including dividends from insurance affiliates of $20,000, for 2004	$	36,236		$	5,885		$	5,470
Realized investment gains (losses)		(185	)		1,540			(867	)
Other income		2,079			2,359			2,924

Total revenues		38,130			9,784			7,527

Expenses, other than interest expense		49,548			44,476			39,349
Interest expense		65,638			56,009			44,546


Loss before Federal income taxes		(77,056	)		(90,701	)		(76,368	)


Federal income taxes:
Federal income taxes provided by subsidiaries on a separate return basis		229,356			185,342			106,145

Federal income tax expense on a consolidated return basis		(186,663	)		(151,669	)		(77,438	)


Net benefit		42,693			33,673			28,707


Loss before undistributed equity in net income of subsidiaries		(34,363	)		(57,028	)		(47,661	)

Equity in undistributed net income of subsidiaries		473,195			394,248			222,706

Net income before change in accounting principle		438,832			337,220			175,045


Cumulative effect of change in accounting principle, net of taxes		(727	)		—			—


Net income attributable to common stockholders	$	438,105		$	337,220		$	175,045

See note to condensed financial statements.

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant, Continued
Statements of Cash Flows (Parent Company)
(Amounts in thousands)


	Years ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income before change in accounting principle	$	438,832		$	337,220		$	175,045
Adjustments to reconcile net income to net cash flows provided by operating activities:
Equity in undistributed net income of subsidiaries		(473,195	)		(394,248	)		(222,706	)
Tax payments received from subsidiaries		303,462			204,768			33,085
Federal income taxes provided by subsidiaries on a separate return basis		(229,356	)		(185,341	)		(106,145	)
Change in Federal income taxes		(62,837	)		(15,709	)		59,082
Realized investment losses (gains)		185			(1,540	)		867
Employee stock benefit plan		5,342			2,328			—
Other, net		(5,295	)		20,391			28,415
Increase in trading account securities		(32	)		(11	)		(6	)

Net cash used in operating activities		(22,894	)		(32,142	)		(32,363	)

Cash flow provided by (used in) investing activities:
Proceeds from sales, excluding trading account:
Fixed maturity securities available for sale		38,865			26,246			32,695
Equity securities		—			198			—
Proceeds from maturities and prepayments of fixed maturity securities		—			—			3,473
Cost of purchases, excluding trading account:
Fixed maturity securities		(108,169	)		(544	)		(28,811	)
Equity securities		—			—			(621	)
Cost of companies acquired		—			—			(3,730	)
Investments in and advances to subsidiaries, net		78,559			(251,255	)		(206,277	)
Net additions to real estate, furniture & equipment		435			(1,446	)		(6,597	)
Other, net		183			—			628

Net cash provided by (used in) investing activities		9,873			(226,801	)		(209,240	)

Cash flows provided by (used in) financing activities:
Net proceeds from stock offering		—			—			166,960
Purchase of treasury shares		(337	)		—			(72	)
Cash dividends to common stockholders		(23,527	)		(27,681	)		(17,872	)
Net proceeds from issuance of long-term debt		—			344,435			—
Retirement of senior notes		—			(29,957	)		—
Net proceeds from stock options exercised		11,129			13,401			12,986
Other, net		—			(1,740	)		—

Net cash provided by (used in) financing activities		(12,735	)		298,458			162,002

Net increase (decrease) in cash and cash equivalents		(25,756	)		39,515			(79,601	)
Cash and cash equivalents at beginning of year		69,864			30,349			109,950

Cash and cash equivalents at end of year	$	44,108		$	69,864		$	30,349

See note to condensed financial statements.

Schedule II, Continued

W. R. Berkley Corporation

Condensed Financial Information of Registrant, Continued

December 31, 2004

Note to Condensed Financial Statements (Parent Company)

The accompanying condensed financial statements should be read in conjunction with the notes to consolidated financial statements included elsewhere herein. Reclassifications have been made in the 2003 and 2002 financial statements as originally reported to conform them to the presentation of the 2004 financial statements.

The Company files a consolidated federal tax return with the results of its domestic insurance subsidiaries included on a statutory basis. Under present Company policy, Federal income taxes payable by subsidiary companies on a separate-return basis are paid to W. R. Berkley Corporation, and the Company pays the tax due on a consolidated return basis.

Schedule III

W. R. Berkley Corporation and Subsidiaries
Supplementary Insurance Information
December 31, 2004, 2003 and 2002
(Amounts in thousands)


	Deferred		Reserve for											Amortization of
	policy		losses and						Net			Loss and		deferred policy		Other
	acquisition		loss		Unearned		Premiums		investment			Loss		acquisition		operating cost		Net premiums
	cost		expenses		premiums		earned		income			expenses		costs		and expenses		written
December 31, 2004
Specialty	$	155,450	$	1,816,432	$	785,073	$	1,466,840	$	103,053		$	909,244	$	320,617	$	49,590	$	1,581,180
Regional		138,289		952,833		588,479		1,068,552		44,249			594,811		282,653		51,185		1,128,800
Alternative markets		35,855		1,133,069		262,036		583,693		57,190			411,742		90,759		119,066		616,282
Reinsurance		86,877		1,512,736		417,360		870,827		76,167			604,252		198,576		56,793		865,559
International		26,013		34,541		11,571		71,180		10,125			39,261		16,807		18,007		74,540
Corporate and adjustments		—		—		—		—		511			—		—		43,936		—

Total	$	442,484	$	5,449,611	$	2,064,519	$	4,061,092	$	291,295		$	2,559,310	$	909,412	$	338,577	$	4,266,361


December 31, 2003
Specialty	$	141,442	$	1,372,110	$	667,106	$	1,117,781	$	70,232		$	707,711	$	236,654	$	41,763	$	1,295,570
Regional		119,961		791,295		517,451		880,597		43,368			496,156		233,339		41,177		963,988
Alternative markets		31,843		808,886		225,051		410,926		38,450			281,967		90,815		92,912		482,389
Reinsurance		87,602		1,190,256		440,759		760,558		52,622			529,092		201,694		22,410		861,457
International		24,476		29,544		7,528		64,748		6,173			35,251		24,665		7,668		67,111
Corporate and adjustments		—		—		—		—		(789	)		—		—		42,797		—

Total	$	405,324	$	4,192,091	$	1,857,895	$	3,234,610	$	210,056		$	2,050,177	$	787,167	$	248,727	$	3,670,515


December 31, 2002
Specialty	$	104,676	$	988,761	$	486,363	$	772,696	$	53,862		$	492,160	$	156,441	$	41,845	$	939,929
Regional		100,422		610,329		401,703		705,385		44,365			416,815		201,382		27,469		776,577
Alternative markets		24,720		634,620		184,800		235,558		37,641			157,186		57,668		81,737		305,357
Reinsurance		63,470		766,740		312,764		398,287		43,912			298,719		125,549		623		601,969
International		14,912		21,907		4,359		89,284		5,325			48,419		41,220		6,727		79,313
Discontinued		—		145,568		257		51,317		4,457			50,672		7,733		8,051		7,345
Corporate and adjustments		—		—		—		—		(1,687	)		—		—		40,760		—

Total	$	308,200	$	3,167,925	$	1,390,246	$	2,252,527	$	187,875		$	1,463,971	$	589,993	$	207,212	$	2,710,490

Schedule IV

W. R. Berkley Corporation and Subsidiaries
Reinsurance
Years ended December 31, 2004, 2003 and 2002
(Amounts in thousands)


					Assumed				Percentage
			Ceded		from				of amount
	Direct		to other		other		Net		assumed to
	amount		companies		companies		amount		net
Premiums written:
Year ended December 31, 2004:
Specialty	$	1,635,264	$	94,140	$	40,056	$	1,581,180		2.5	%
Regional		1,268,384		166,857		27,273		1,128,800		2.4
Alternative markets		656,055		91,598		51,825		616,282		8.4
Reinsurance		95,144		97,576		867,991		865,559		100.3
International		82,136		7,596		—		74,540		—


Total	$	3,736,983	$	457,767	$	987,145	$	4,266,361		23.1	%


Year ended December 31, 2003:
Specialty	$	1,396,825	$	132,647	$	31,392	$	1,295,570		2.4	%
Regional		1,122,630		190,785		32,143		963,988		3.3
Alternative markets		517,095		74,649		39,943		482,389		8.3
Reinsurance		86,629		169,697		944,525		861,457		109.6
International		72,232		5,121		—		67,111		—


Total	$	3,195,411	$	572,899	$	1,048,003	$	3,670,515		28.6	%


Year ended December 31, 2002:
Specialty	$	1,003,739	$	87,747	$	23,937	$	939,929		2.5
Regional		939,927		178,573		15,223		776,577		2.0
Alternative markets		309,437		43,597		39,517		305,357		12.9
Reinsurance		97,040		167,859		672,788		601,969		111.8
International		87,265		7,952		—		79,313		—
Discontinued		13,229		12,010		6,126		7,345		83.4


Total	$	2,450,637	$	497,738	$	757,591	$	2,710,490		28.0	%


			Additions		Deduction
	Opening		changed		amounts			Ending
	Balance		to expense		written off			Balance

Year ended December 31, 2004:
Premiums and fees receivable	$	9,620	$	10,970	$	(5,278	)	$	15,312
Due from reinsurers		1,920		800		(263	)		2,457

Total	$	11,540	$	11,770	$	(5,541	)	$	17,769

Year ended December 31, 2003:
Premiums	$	7,252	$	6,951	$	(4,583	)	$	9,620
Due from reinsurers		1,357		580		(17	)		1,920

Total	$	8,609	$	7,531	$	(4,600	)	$	11,540

Year ended December 31, 2002:
Premiums	$	6,540	$	4,168	$	(3,456	)	$	7,252
Due from reinsurers		1,357		—		—			1,357

Total	$	7,897	$	4,168	$	(3,456	)	$	8,609


	Page
SAFE HARBOR STATEMENT		3

PART I

ITEM 1. BUSINESS		4

ITEM 2. PROPERTIES		26

ITEM 3. LEGAL PROCEEDINGS		26

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		27

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		28

ITEM 6. SELECTED FINANCIAL DATA		29

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		30

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		30

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		30

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		30

ITEM 9A. CONTROLS AND PROCEDURES		30

ITEM 9B. OTHER INFORMATION		30

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		31

ITEM 11. EXECUTIVE COMPENSATION		31

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		31

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		31

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES		31

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		32
EX-4.4 THIRD SUPPLEMENTAL INDENTURE
EX-13 PORTIONS OF THE 2004 ANNUAL REPORT
EX-14: CODE OF ETHICS
EX-23: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
EX-31.1: CERTIFICATIONS
EX-31.2: CERTIFICATIONS
EX-32.1: CERTIFICATIONS

	•	the cyclical nature of the property casualty industry;

	•	the long-tail and potentially volatile nature of the reinsurance business;

	•	product demand and pricing;

	•	claims development and the process of estimating reserves;

	•	the uncertain nature of damage theories and loss amounts;

	•	natural and man-made catastrophic losses, including as a result of terrorist activities;

	•	the impact of competition;

	•	the availability of reinsurance;

	•	exposure as to coverage for terrorist acts, our retention under The Terrorism Risk Insurance Act of 2002 (“TRIA”) and the potential expiration of TRIA;

	•	the ability of our reinsurers to pay reinsurance recoverables owed to us;

	•	investment results, including those of our portfolio of fixed income securities and investments in equity securities, including merger arbitrage investments;

	•	exchange rates and political risks relating to our international operations;

	•	legislative and regulatory developments, including those related to alleged anti-competitive or other improper sales and practices in the insurance industry;

	•	changes in the ratings assigned to us by rating agencies;

	•	availability of dividends from our insurance company subsidiaries;

	•	our ability to successfully acquire and integrate companies and invest in new insurance ventures;

	•	our ability to attract and retain qualified employees; and

	•	other risks detailed from time to time in this Form 10-K and in our filings with the Securities and Exchange Commission.

	•	Specialty lines of insurance, including excess and surplus lines, professional liability and commercial transportation

	•	Regional commercial property casualty insurance

	•	Alternative markets, including workers’ compensation and the management of self- insurance programs

	•	Reinsurance, including treaty, facultative and Lloyd’s business

	•	International

	•	standards of solvency, including risk-based capital measurements;

	•	restrictions on the nature, quality and concentration of investments;

	•	requiring certain methods of accounting;

	•	rate and form regulation pertaining to certain of our insurance businesses; and

	•	potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.

	•	our classified board of directors and the ability of our board to increase its size and to appoint directors to fill newly created directorships;

	•	the requirement that 80% of our stockholders must approve mergers and other transactions between us and the holder of 5% or more of our shares, unless the transaction was approved by our board of directors prior to such holder’s acquisition of 5% of our shares;

	•	the need for advance notice in order to raise business or make nominations at stockholders’ meetings;

	•	our rights agreement which subject persons (other than William R. Berkley) who acquire beneficial ownership of 15% or more of our common stock without board approval to substantial dilution; and

	•	state insurance statutes that restrict the acquisition of control (generally defined as 5 — 10% of the outstanding shares) of an insurance company without regulatory approval.

	(a)	Evaluation Of Disclosure Controls And Procedures

		The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period covered by this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

	(b)	Management’s Report On Internal Control Over Financial Reporting

		Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2004. See pages 15-16 of the registrant’s 2004 annual report to stockholders, which information is incorporated herein by reference, for management’s report and the related attestation by KPMG LLP, an independent registered public accounting firm.

	(c)	Change In Internal Control

		There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.


		W. R. BERKLEY CORPORATION

		By		/s/ William R. Berkley

				William R. Berkley, Chairman of the Board and Chief Executive Officer

(23)	Independent Registered Public Accountants’ Report on Schedules and Consent

(31.1)	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(31.2)	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).

(32.1)	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.