Greenwich, Conn.-based insurer W.R. Berkley reported 2007 fourth-quarter net income decreased 7 percent as pressure to drop prices helped drive down performance.

Fourth-quarter net income dropped to $184 million, off by $14 million. At 97 cents a share results were off 1 cent from the same period in 2006. Revenues grew 3 percent, or $40 million, to $1.4 billion.

For the year, net income increased 6 percent, or $44 million, to $744 million, or $3.78 a share, up 32 cents a share from the comparative period. Revenues were up 3 percent, or $159 million, to $5.55 billion.

Gross written premium for the quarter was down 5 percent, or $58 million, to $1.16 billion, and down 4 percent, or $224 million, to $5.05 billion for the year.

The company's combined ratio increased 2.2 points to 88.7 for the quarter and 0.1 point to 88.1 for the year.

William R. Berkley, chairman and chief executive officer, said he was pleased with the company's performance in the quarter, noting the company achieved a 22 percent return on equity.

However, during an analyst's conference call, he said the firm would be challenged in 2008 to hit that same mark, but was hopeful the company would hit a 20 percent ROE next year.

He noted that specialty and reinsurance were the two hardest hit areas of the business because of competition and loosening of terms and conditions that Berkley did not feel were acceptable and competitive, especially on the reinsurance side.

Competition is moving lines from the nonstandard to standard lines market at prices he did not believe were acceptable or would prove profitable. He said he expected these lines that have been written at half to a quarter below where they should be written would return to the excess and surplus lines market in a few years as losses mount for these underwriters.

He said that "no one is being a lunatic" when it comes to soft market underwriting, but he added that no one has been able to figure out the correct formula for dropping prices to a level where the underwriting remains profitable. He said average price drops have been around 5-to-8 percent. Reinsurance premium rates, however, were seeing much steeper declines at 30 percent.

The company has little to no subprime mortgage-related exposure either in its investments or underwriting, but Mr. Berkley said that all carriers would be hit by some kind of loss as unhappy investors seek "the deepest pockets" they can find to recover some of their losses.

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