W.R. Berkley 4Q Net Income Off 7%; But Rates Firming For 2012

Update: 4:31 p.m.

NU Online News Service, Feb. 1, 12:39 p.m. EST

Greenwich, Conn.-based insurer W.R. Berkley says 2011 fourth-quarter net income was down 7 percent, but its chief executive says rate increases are taking hold and 2012 should be a better year.

“Our confidence in the cyclical turn is becoming greater as time passes,” says William R. Berkley, chairman and chief executive officer in a statement. “We continue to see recognition by the industry of the need for further rate increases and greater underwriting discipline. We anticipate 2012 will be a better year, although it will primarily be recognized in the second half when the benefits of price increases will be realized. We are excited about the opportunities currently before us.”

Berkley says fourth-quarter net income dropped $9 million, compared to the same period in 2010, to $118 million, primarily on increases in looses and loss expenses and operating costs and expenses.

The quarter’s combined ratio rose 2.7 points to 96.8.

For the year, net income dropped 12 percent, or $54 million, to $395 million compared to the previous year. Revenues increased 9 percent or $432 million to $5.2 billion.

The combined ratio for the year increased 3.8 points to 98.3.

Fourth-quarter catastrophe losses stood at $15 million, an increase of $9 million for 2010. Full year, catastrophe losses rose $72 million to $153 million. The amounts are net of reinsurance coverage and reinstatement premiums.

Berkley says the company was pleased with the results, but even more importantly, the company is pleased with its position for the coming year. Core business premiums are growing, he says, and average renewal rates rose more than 4 percent in the fourth quarter.

“Our operating units’ priority is to remain focused on price,” he says.

During a conference call with financial analysts, Berkley says many insurers have underpriced risk during the accident years 2008 and 2009 and have yet to begin feeling the pain from those decisions. That underpricing will increase the pressure on the industry to ramp-up rates, he says.

He was especially critical of standard line carriers that he says misclassified risk that should have remained in the specialty market place where it was properly priced.

Eugene G. Ballard, chief financial officer, says he believes the flow from the standard line market to the higher priced specialty will accelerate in the coming year.

W. Robert Berkley Jr., president and chief operating officer, says the carrier is getting rate increases on renewal, but difficulty remains getting new business.

This story was updated at 4:31 p.m. with comments from the financial analysts' conference call.











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