BERKLEY W R CORP - FORM 8-K - EX-99.1 - July 30, 2014

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Exhibit 99.1

Unaudited financial information relating to the Company

Consolidated Financial Summary

(Amounts in thousands, except per share data)

 

     Second Quarter     Six Months  
     2014     2013     2014     2013  

Revenues:

         

Net premiums written

    $ 1,489,776     $ 1,341,898     $ 3,015,656     $ 2,718,864  

Change in unearned premiums

      (72,131 )     (59,383 )     (234,399 )     (204,230 )
  

 

 

    

 

 

    

 

 

    

 

 

  

Net premiums earned

      1,417,645       1,282,515       2,781,257       2,514,634  

Investment income

      138,729       143,737       307,440       279,666  

Insurance service fees

      26,922       27,652       55,625       54,388  

Net investment gains

      109,168       33,058       161,922       53,027  

Revenues from wholly-owned investees

      104,285       83,775       197,125       175,510  

Other income

      240       225       526       506  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

      1,796,989       1,570,962       3,503,895       3,077,731  
  

 

 

    

 

 

    

 

 

    

 

 

  

Expenses:

         

Losses and loss expenses

      867,778       805,470       1,689,873       1,550,149  

Other operating costs and expenses

      534,150       494,286       1,049,316       975,890  

Expenses from wholly-owned investees

      101,296       81,293       193,026       170,445  

Interest expense

      30,311       31,207       60,641       62,318  
  

 

 

    

 

 

    

 

 

    

 

 

  

Total expenses

      1,533,535       1,412,256       2,992,856       2,758,802  
  

 

 

    

 

 

    

 

 

    

 

 

  

Income before income taxes

      263,454       158,706       511,039       318,929  

Income tax expense

      (83,277 )     (43,579 )     (161,178 )     (87,204 )
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income before noncontrolling interests

      180,177        115,127        349,861        231,725   

Noncontrolling interests

      (216 )     830       (227 )     847  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income to common stockholders

    $ 179,961     $ 115,957     $ 349,634     $ 232,572  
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income per share:

         

Basic

    $ 1.41     $ 0.85     $ 2.72     $ 1.71  

Diluted

    $ 1.35     $ 0.82     $ 2.60     $ 1.65  

Average shares outstanding:

         

Basic

      127,668       135,894       128,765       135,959  

Diluted

      133,304       141,274       134,323       141,257  

Business Segment Operating Results

(Amounts in thousands, except ratios) (1)

 

     Second Quarter     Six Months  
     2014     2013     2014     2013  

Insurance-Domestic:

         

Gross premiums written

    $ 1,351,624     $ 1,186,186     $ 2,694,566     $ 2,365,908   

Net premiums written

      1,123,843       967,784       2,250,224       1,953,964   

Premiums earned

      1,041,745       925,997       2,045,252       1,810,375   

Pre-tax income

      176,855       152,334       379,040       293,684   

Loss ratio

      60.9 %     62.9 %     60.4 %     62.7 % 

Expense ratio

      32.3 %     32.5 %     32.4 %     32.8 % 

GAAP combined ratio

      93.2 %     95.4 %     92.8 %     95.5 % 

Insurance-International:

         

Gross premiums written

    $ 265,200     $ 241,738     $ 542,386     $ 493,313   

Net premiums written

      222,622       201,445       448,443       406,580   

Premiums earned

      201,868       180,192       387,192       351,311   

Pre-tax income

      11,510       12,583       29,257       34,965   

Loss ratio

      60.7 %     61.0 %     60.0 %     58.5 % 

Expense ratio

      38.8 %     38.9 %     39.4 %     38.4 % 

GAAP combined ratio

      99.5 %     99.9 %     99.4 %     96.9 % 

Reinsurance-Global:

         

Gross premiums written

    $ 155,577     $ 190,012     $ 340,716     $ 390,336   

Net premiums written

      143,311       172,669       316,989       358,320   

Premiums earned

      174,032       176,326       348,813       352,948   

Pre-tax income

      25,866       24,752       57,940       62,693   

Loss ratio

      63.4 %     63.9 %     64.0 %     59.4 % 

Expense ratio

      31.9 %     35.1 %     32.4 %     35.7 % 

GAAP combined ratio

      95.3 %     99.0 %     96.4 %     95.1 % 

Corporate and Eliminations:

         

Net realized investment gains

    $ 109,168     $ 33,058     $ 161,922     $ 53,027   

Interest expense

      (30,311 )     (31,207 )     (60,641 )     (62,318 ) 

Other revenues and expenses

      (29,634 )     (32,814 )     (56,479 )     (63,122 ) 

Pre-tax gain (loss)

      49,223       (30,963 )     44,802       (72,413 ) 

Consolidated:

         

Gross premiums written

    $ 1,772,401     $ 1,617,936     $ 3,577,668     $ 3,249,557   

Net premiums written

      1,489,776       1,341,898       3,015,656       2,718,864   

Premiums earned

      1,417,645       1,282,515       2,781,257       2,514,634   

Pre-tax income

      263,454       158,706       511,039       318,929   

Loss ratio

      61.2 %     62.8 %     60.8 %     61.6 % 

Expense ratio

      33.2 %     33.8 %     33.4 %     34.0 % 

GAAP combined ratio

      94.4 %     96.6 %     94.2 %     95.6 % 

 

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

 

- 2 -

Supplemental Information

(Amounts in thousands)

 

     Second Quarter     Six Months  
     2014      2013     2014      2013  

Insurance-Domestic net premiums written:

           

Other liability

    $ 400,289      $ 348,110     $ 771,720      $ 671,666   

Workers’ compensation

      283,995        225,888       630,865        524,065   

Short-tail lines (1)

      235,972        206,357       443,081        386,156   

Commercial automobile

      129,282        121,063       263,808        244,649   

Professional liability

      74,305        66,366       140,750        127,428   
  

 

 

     

 

 

    

 

 

     

 

 

  

Total

    $ 1,123,843      $ 967,784     $ 2,250,224      $ 1,953,964   
  

 

 

     

 

 

    

 

 

     

 

 

  

Losses from catastrophes:

           

Insurance-Domestic

    $ 38,370      $ 26,696     $ 51,111      $ 30,356   

Insurance-International

      272        3,171       1,403        3,404   

Reinsurance-Global

      1,148        4,293       1,246        5,413   
  

 

 

     

 

 

    

 

 

     

 

 

  

Total

    $ 39,790      $ 34,160     $ 53,760       $ 39,173   
  

 

 

     

 

 

    

 

 

     

 

 

  

Investment income:

           

Core portfolio (2)

    $ 109,431      $ 116,171     $ 218,824      $ 237,383   

Investment funds

      22,356        22,576       76,155        33,510   

Arbitrage trading account

      6,942        4,990       12,461        8,773   
  

 

 

     

 

 

    

 

 

     

 

 

  

Total

    $ 138,729      $ 143,737     $ 307,440      $ 279,666   
  

 

 

     

 

 

    

 

 

     

 

 

  

Other operating costs and expenses:

           

Underwriting expenses

    $ 470,296      $ 433,271     $ 928,434      $ 855,484   

Service expenses

      23,607        23,136       45,864        45,441   

Debt extinguishment costs

      —          6,709       —          6,709   

Net foreign currency (gain) loss

      1,993        (6,718 )     1,659        (4,771 ) 

Other costs and expenses

      38,254        37,888       73,359        73,027   
  

 

 

     

 

 

    

 

 

     

 

 

  

Total

    $ 534,150      $ 494,286     $ 1,049,316      $ 975,890   
  

 

 

     

 

 

    

 

 

     

 

 

  

Cash flow from operations

    $ 111,459      $ 198,820     $ 254,623      $ 313,932   

Reconciliation of operating and net income:

           

Operating income (3)

    $ 109,002      $ 98,830     $ 244,385      $ 202,465   

After-tax investment gains

      70,959        21,488       105,249        34,468   

After-tax debt extinguishment costs

      —          (4,361 )     —          (4,361 ) 
  

 

 

     

 

 

    

 

 

     

 

 

  

Net income

    $ 179,961      $ 115,957     $ 349,634      $ 232,572   
  

 

 

     

 

 

    

 

 

     

 

 

  

 

 

(1) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.
(2) Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.
(3) Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains and after-tax debt extinguishment costs. Management believes that excluding net investment gains and after-tax debt extinguishment costs provides a useful indicator of trends in the Company’s underlying operations.

 

- 3 -

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

 

     June 30, 2014      December 31, 2013  

Net invested assets (1)

    $ 16,017,443      $ 15,540,488   

Total assets

      21,167,194        20,551,796   

Reserves for losses and loss expenses

      10,256,219        10,080,941   

Senior notes and other debt

      1,697,037        1,692,442   

Junior subordinated debentures

      339,930        339,800   

Common stockholders’ equity (2)

      4,619,713        4,336,035   

Common stock outstanding (3)

      127,613        132,233   

Book value per share (4)

      36.20        32.79   

Tangible book value per share (4)

      35.18        31.74   

 

(1) Net invested assets include investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases, net of related liabilities.
(2) After-tax unrealized investment gains were $378 million and $257 million as of June 30, 2014 and December 31, 2013, respectively. Unrealized currency translation losses were $40 million and $61 million as of June 30, 2014 and December 31, 2013, respectively.
(3) During the second quarter of 2014, the Company repurchased 100,514 shares of its common stock for $4.6 million. During the first six months of 2014, the Company repurchased 4,908,701 shares of its common stock for $198 million.
(4) Book value per share is total common stockholders’ equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders’ equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding.

 

- 4 -

Investment Portfolio

June 30, 2014

(Amounts in thousands)

     Carrying
Value		      Percent
of Total		  

Fixed maturity securities:

      

United States government and government agencies

    $ 867,127         5.4 % 

State and municipal:

      

Special revenue

      2,219,350         13.9 % 

State general obligation

      715,219         4.5 % 

Pre-refunded

      604,868         3.8 % 

Corporate backed

      443,660         2.8 % 

Local general obligation

      308,599         1.9 % 
  

 

 

     

 

 

  

Total state and municipal

      4,291,696         26.9 % 
  

 

 

     

 

 

  

Mortgage-backed securities:

      

Agency

      1,005,318         6.3 % 

Residential - Prime

      163,031         1.0 % 

Residential — Alt A

      82,798         0.5 % 

Commercial

      80,387         0.5 % 
  

 

 

     

 

 

  

Total mortgage-backed securities

      1,331,534         8.3 % 
  

 

 

     

 

 

  

Corporate:

      

Asset-backed

      1,608,080         10.0 % 

Industrial

      1,564,582         9.8 % 

Financial

      1,164,931         7.3 % 

Utilities

      194,196         1.2 % 

Other

      97,533         0.6 % 
  

 

 

     

 

 

  

Total corporate

      4,629,322         28.9 % 
  

 

 

     

 

 

  

Foreign government

      968,376         6.0 % 
  

 

 

     

 

 

  

Total fixed maturity securities (1)

      12,088,055         75.5 % 
  

 

 

     

 

 

  

Equity securities available for sale:

      

Preferred stocks

      153,532         1.0 % 

Common stocks

      103,527         0.6 % 
  

 

 

     

 

 

  

Total equity securities available for sale

      257,059         1.6 % 
  

 

 

     

 

 

  

Investment funds (3)

      979,450         6.1 % 

Arbitrage trading account

      732,279         4.6 % 

Real estate

      530,239         3.3 % 

Cash and cash equivalents (2)

      774,670         4.8 % 

Loans receivable

      655,691         4.1 % 
  

 

 

     

 

 

  

Net invested assets

    $ 16,017,443         100.0 % 
  

 

 

     

 

 

  

 

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 3.1 years.
(2) Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.
(3) Investment funds are net of related liabilities of $5 million.

Foreign Government Fixed Maturity Securities

June 30, 2014

(Amounts in thousands)

 

     Carrying Value  

Australia

    $ 258,187   

United Kingdom

      188,303   

Canada

      171,353   

Argentina

      114,038   

Brazil

      68,431   

Germany

      66,485   

Norway

      52,320   

Supranational (1)

      39,105   

Singapore

      6,768   

Uruguay

      3,386   
  

 

 

  

Total

    $ 968,376   
  

 

 

  

 

(1) Supranational represents investments in the North American Development Bank, European Investment Bank and International Bank for Reconstruction & Development.

BERKLEY W R CORP Reports