UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Date of Report (Date of earliest event reported): April 24, 2018


     W. R. BERKLEY CORPORATION     
(Exact name of registrant as specified in its charter)

Delaware
 
1-15202
 
 22-1867895   
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation or organization)
 
File Number)
 
Identification No.)

475 Steamboat Road, Greenwich, CT
 
06830
(Address of principal executive offices)
 
(Zip Code)
 
 
 
Registrant's telephone number, including area code:
 
(203) 629-3000

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02 Results of Operations and Financial Condition.
Reference is made to the press release of W. R. Berkley Corporation (the “Company”) relating to the announcement of the Company’s results of operations for the first quarter of 2018. The press release was issued on April 24, 2018. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
The information contained herein shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit 99.1 Press Release dated April 24, 2018







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

W. R. BERKLEY CORPORATION


By:
 /s/ Richard M. Baio
 
Name:
Richard M. Baio
 
Title:
Senior Vice President -
 
 
Chief Financial Officer and
 
 
Treasurer




        


Date: April 24, 2018



EXHIBIT INDEX


Exhibit:
99.1
Press Release dated April 24, 2018





 
 
 
 
NEWS
RELEASE
 
W. R. Berkley Corporation
475 Steamboat Road
Greenwich, Connecticut 06830
(203) 629-3000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FOR IMMEDIATE RELEASE
 
 
CONTACT: 
 
Karen A. Horvath
 
 
 
 
 
 
Vice President - External
 
 
 
 
 
 
Financial Communications
 
 
 
 
 
 
(203) 629-3000
             

W. R. BERKLEY CORPORATION REPORTS FIRST QUARTER RESULTS
Net Income Increased 35% to $166 Million; Return on Equity of 12.3%

Greenwich, CT, April 24, 2018 -- W. R. Berkley Corporation (NYSE: WRB)
today reported net income for the first quarter of 2018 of $166 million, or $1.30 per share.

Summary Financial Data
(Amounts in thousands, except per share data)
 
 
First Quarter
 
 
2018
 
2017
 
 
 
 
 
Gross premiums written
 
$
1,979,421

 
$
1,936,207

Net premiums written
 
1,665,338

 
1,646,838

 
 
 
 
 
Net income to common stockholders
 
166,396

 
123,447

Net income per diluted share
 
1.30

 
0.96

 
 
 
 
 
Return on equity (1)
 
12.3
%
 
9.8
%

(1)
Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity.





W. R. Berkley Corporation     Page 2


First quarter highlights included:
We reported annualized pre-tax return on equity of 15.5%, which adjusted for accounting changes for equity securities effective January 1, 2018 would have been 22.5%.
The combined ratio was 94.6%, inclusive of 0.5 loss ratio points from catastrophes and an additional 0.7 loss ratio points from non-catastrophe weather.
Total catastrophe losses were $7 million.
Investment income increased 17.2%. Investment income attributable to the core investment portfolio increased 11.3%(1).
Net realized pre-tax gains and net unrealized pre-tax gains on equity securities of $44 million, net of performance-based compensatory costs(2).
The Company commented:
Our performance in the first quarter of 2018 was strong, resulting from our ongoing strategy to minimize volatility in our underwriting results, combined with robust investment income. Our 12.3% annualized ROE is a reflection of our focus on delivering superior risk-adjusted returns to our shareholders.
Net premiums written in the Insurance segment grew by 3.3% in the quarter, with steady price improvement in each month. This growth was partially offset by a decline of 20% in net premiums written in the Reinsurance segment, where the pricing environment remained exceptionally competitive. Similar to others, we experienced a higher level of non-catastrophe weather-related property losses in the quarter. However, the net impact of catastrophe losses was relatively modest, and our accident year loss ratio excluding catastrophe losses was stable. We remain optimistic that slow but steady improvements in pricing, along with growth in the economy benefiting from recent tax reform, will enable our underwriting results to improve.
Net investment income was particularly strong this quarter as investment funds performed notably well. Investment funds have wide variations in income from quarter to quarter, but they continue to provide us with an enhanced overall long-term return. Recurring income from the core portfolio grew primarily due to an increase in invested assets. We realized gains on sales of investments of $142 million, before consideration of the change in accounting for unrealized gains on equity securities.
Our first quarter results have provided a solid start to the year. The market is slowly moving in the right direction, and we anticipate that these trends, and consequently our results, will improve further during the remainder of the year. Changes in the tax code and accounting rules have made it more challenging to compare our current results with prior periods. We remain focused on creating shareholder value over the long-term.
(1) Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.

(2) Net realized pre-tax gains and net unrealized pre-tax gains on equity securities before performance-based compensatory costs were $48 million.






W. R. Berkley Corporation     Page 3

Webcast Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on April 24, 2018, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at http://www.wrberkley.com/investor-relations/events-and-presentations.aspx. Please log on at least ten minutes early to register and download and install any necessary software. A replay of the webcast will be available on the Company's website approximately two hours after the end of the conference call.
About W. R. Berkley Corporation
Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property casualty business: Insurance and Reinsurance.





W. R. Berkley Corporation     Page 4


Forward Looking Information

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2018 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new alternative entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response, on our results and financial condition; foreign currency and political risks (including those associated with the United Kingdom's withdrawal from the European Union, or "Brexit") relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2015; the ability of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; potential difficulties with technology and/or data security; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2018 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.


# # #




W. R. Berkley Corporation     Page 5



Consolidated Financial Summary
(Amounts in thousands, except per share data)

 
 
First Quarter
 
 
2018
 
2017
Revenues:
 
 
 
 
Net premiums written
 
$
1,665,338

 
$
1,646,838

Change in unearned premiums
 
(97,930
)
 
(76,796
)
Net premiums earned
 
1,567,408

 
1,570,042

Net investment income
 
174,518

 
148,858

Net realized and unrealized gains on investments (1)
 
48,464

 
52,348

Revenues from non-insurance businesses
 
70,171

 
65,390

Insurance service fees
 
30,675

 
33,280

Other income
 
11

 
500

Total revenues
 
1,891,247

 
1,870,418

Expenses:
 
 
 
 
Losses and loss expenses
 
963,219

 
979,603

Other operating costs and expenses
 
610,439

 
603,700

Expenses from non-insurance businesses
 
69,543

 
66,019

Interest expense
 
37,056

 
36,799

Total expenses
 
1,680,257

 
1,686,121

Income before income taxes
 
210,990

 
184,297

Income tax expense
 
(43,417
)
 
(59,623
)
Net income before noncontrolling interests
 
167,573

 
124,674

Noncontrolling interests
 
(1,177
)
 
(1,227
)
Net income to common stockholders
 
$
166,396

 
$
123,447

 
 
 
 
 
Net income per share:
 
 
 
 
Basic
 
$
1.32

 
$
1.01

Diluted
 
$
1.30

 
$
0.96

 
 
 
 
 
Average shares outstanding (2):
 
 
 
 
Basic
 
126,375

 
121,893

Diluted
 
128,125

 
128,453



(1) Includes net realized gains on investment sales of $142 million reduced by a change in unrealized gains on equity securities of $94 million. The change in unrealized gains on equity securities commenced January 1, 2018 due to our adoption of ASU 2016-01.

(2) Basic shares outstanding consist of the weighted average number of common shares outstanding during the period (including shares held in a grantor trust). Diluted shares outstanding consist of the weighted average number of basic and common equivalent shares outstanding during the period.



W. R. Berkley Corporation     Page 6


Business Segment Operating Results
(Amounts in thousands, except ratios) (1)

 
 
First Quarter
 
 
2018
 
2017
Insurance:
 
 
 
 
Gross premiums written
 
$
1,837,971

 
$
1,769,405

Net premiums written
 
1,543,052

 
1,494,135

Premiums earned
 
1,432,337

 
1,413,170

Pre-tax income
 
229,028

 
199,994

Loss ratio
 
60.6
%
 
60.9
%
Expense ratio
 
32.8
%
 
32.9
%
GAAP combined ratio
 
93.4
%
 
93.8
%
 
 
 
 
 
Reinsurance:
 
 
 
 
Gross premiums written
 
$
141,450

 
$
166,802

Net premiums written
 
122,286

 
152,703

Premiums earned
 
135,071

 
156,872

Pre-tax income
 
14,592

 
4,594

Loss ratio
 
69.9
%
 
75.9
%
Expense ratio
 
37.5
%
 
37.0
%
GAAP combined ratio
 
107.4
%
 
112.9
%
 
 
 
 
 
Corporate and Eliminations:
 
 
 
 
  Net realized and unrealized gains on investments
 
$
48,464

 
$
52,348

  Interest expense
 
(37,056
)
 
(36,799
)
  Other revenues and expenses
 
(44,038
)
 
(35,840
)
  Pre-tax loss
 
(32,630
)
 
(20,291
)
 
 
 
 
 
Consolidated:
 
 
 
 
  Gross premiums written
 
$
1,979,421

 
$
1,936,207

  Net premiums written
 
1,665,338

 
1,646,838

  Premiums earned
 
1,567,408

 
1,570,042

  Pre-tax income
 
210,990

 
184,297

  Loss ratio
 
61.4
%
 
62.4
%
  Expense ratio
 
33.2
%
 
33.3
%
  GAAP combined ratio
 
94.6
%
 
95.7
%

(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.





W. R. Berkley Corporation     Page 7


Supplemental Information
(Amounts in thousands)
 
 
First Quarter
 
 
2018
 
2017
Net premiums written:
 
 
 
 
  Other liability
 
$
468,840

 
$
436,446

  Workers' compensation
 
419,258

 
426,557

  Short-tail lines (1)
 
291,118

 
287,078

  Commercial automobile
 
214,645

 
204,200

  Professional liability
 
149,191

 
139,854

    Total Insurance
 
1,543,052

 
1,494,135

  Casualty reinsurance
 
82,335

 
93,541

  Property reinsurance
 
39,951

 
59,162

     Total Reinsurance
 
122,286

 
152,703

          Total
 
$
1,665,338

 
$
1,646,838

 
 
 
 
 
Losses from catastrophes:
 
 
 
 
  Insurance
 
$
7,131

 
$
14,304

  Reinsurance
 
257

 
194

    Total
 
$
7,388

 
$
14,498

 
 
 
 
 
Net investment income:
 
 
 
 
  Core portfolio (2)
 
$
128,973

 
$
115,849

  Investment funds
 
40,354

 
26,649

  Arbitrage trading account
 
5,191

 
6,360

    Total
 
$
174,518

 
$
148,858

 
 
 
 
 
Net realized and unrealized gains on investments:
 
 
 
 
  Net realized gains on investment sales
 
$
142,669

 
$
52,348

  Change in unrealized gains on equity securities (3)
 
(94,205
)
 

    Total
 
$
48,464

 
$
52,348

 
 
 
 
 
Other operating costs and expenses:
 
 
 
 
  Policy acquisition and insurance operating expenses
 
$
520,231

 
$
523,409

  Insurance service expenses
 
32,712

 
29,933

  Net foreign currency losses
 
13,484

 
5,508

  Other costs and expenses
 
44,012

 
44,850

    Total
 
$
610,439

 
$
603,700

 
 
 
 
 
Cash flow from operations
 
$
(20,035
)
 
$
75,472


(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) The change in unrealized gains on equity securities commenced January 1, 2018 due to our adoption of ASU 2016-01.


W. R. Berkley Corporation     Page 8


Selected Balance Sheet Information
(Amounts in thousands, except per share data)
 
March 31,
2018
 
December 31, 2017
 
 
 
 
Net invested assets (1)
$
18,532,423

 
$
18,508,646

Total assets
24,587,832

 
24,299,917

Reserves for losses and loss expenses
11,784,895

 
11,670,408

Senior notes and other debt
1,782,139

 
1,769,052

Subordinated debentures
897,426

 
728,218

Common stockholders’ equity (2)
5,451,776

 
5,411,344

Common stock outstanding (3)
121,544

 
121,515

Book value per share (4)
44.85

 
44.53

Tangible book value per share (4)
42.84

 
42.51

(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)
As of March 31, 2018, reflected in common stockholders' equity are after-tax unrealized investment gains of $35 million and unrealized currency translation losses of $294 million. As of December 31, 2017, after-tax unrealized investment gains were $375 million and unrealized currency translation losses were $307 million. The decrease in unrealized investment gains in the first quarter 2018 was primarily attributable to the change in accounting treatment of equity securities.
(3)
During the three months ended March 31, 2018, the Company repurchased 101,000 shares of its common stock for $6.8 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.
(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.




W. R. Berkley Corporation     Page 9


Investment Portfolio
March 31, 2018
(Amounts in thousands)
 
 
Carrying
Value
 
Percent
of Total
Fixed maturity securities:
 
 
 
 
United States government and government agencies
 
$
479,909

 
2.6
%
State and municipal:
 
 
 
 
Special revenue
 
2,676,724

 
14.4
%
Pre-refunded
 
467,758

 
2.5
%
State general obligation
 
450,878

 
2.4
%
Local general obligation
 
408,745

 
2.2
%
Corporate backed
 
373,878

 
2.1
%
Total state and municipal
 
4,377,983

 
23.6
%
Mortgage-backed securities:
 
 
 
 
Agency
 
827,309

 
4.4
%
      Commercial
 
335,284

 
1.8
%
Residential - Prime
 
218,183

 
1.2
%
Residential - Alt A
 
18,993

 
0.1
%
Total mortgage-backed securities
 
1,399,769

 
7.6
%
Asset-backed securities
 
2,101,691

 
11.3
%
Corporate:
 
 
 
 
Industrial
 
2,374,121

 
12.8
%
Financial
 
1,418,598

 
7.7
%
Utilities
 
274,532

 
1.5
%
Other
 
43,450

 
0.2
%
Total corporate
 
4,110,701

 
22.2
%
Foreign government
 
873,079

 
4.7
%
Total fixed maturity securities (1)
 
13,343,132

 
71.9
%
Equity securities available for sale:
 
 
 
 
Common stocks
 
320,435

 
1.7
%
Preferred stocks
 
175,599

 
1.0
%
Total equity securities available for sale
 
496,034

 
2.7
%
Real estate
 
1,833,337

 
9.9
%
Investment funds (2)
 
1,159,792

 
6.3
%
Cash and cash equivalents (3)
 
879,367

 
4.8
%
Arbitrage trading account
 
744,859

 
4.0
%
Loans receivable
 
75,902

 
0.4
%
Net invested assets
 
$
18,532,423

 
100.0
%
(1)
Total fixed maturity securities had an average rating of AA - and an average duration of 3.0 years, including cash and cash equivalents.
(2)
Investment funds are net of related liabilities of $1.3 million.
(3)
Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.