Soft Market Not Affecting W.R. Berkley, Yet

Soft Market Not Affecting W.R. Berkley, Yet

By Mark E. Ruquet

NU Online News Service, July 27, 4:14 p.m. EDT?W.R. Berkley Corp.'s chief executive said he expects the softening insurance market would not affect the company's underwriting profitability for at least another year, but other insurers are feeling the downturn already.[@@]

Berkley reported second-quarter net income of close to $109.5 million, or $1.25 a share, compared to $95.8 million, or $1.10 a share, for the same period of 2003, a 14 percent.

"Most of my competitors are feeling [the downturn in the market] worse than we are," William R. Berkley, chairman and chief executive officer of the Greenwich, Conn.-based carrier, said during the company's 2004 second-quarter financial report.

He said the insurance market is "not falling apart," but the question out there is how profitable a company would continue to be from its underwriting margin. He said Berkley would be profitable in the next quarter, and expects to be profitable in the fourth. This profitable performance from underwriting, he explained, would extend into next year.

He said the company believes its peak level of underwriting profitability is between 6-to-12 months away.

"I think we are doing better than the industry; we are still seeing improving margins," he said.

Revenues in the quarter rose 20 percent, or less than $184 million, going from $927 million to $1.1 billion. This was fueled by a $141 million, or 16 percent, increase in net premiums written, going from less than $876 million to $1.02 billion.

For the six months, net income has gone up more than 34 percent, or $57.4 million, going from $168 million, or $1.93 a share, to $225 million, or $2.56 a share. Revenues have increased more than 27 percent, or $471 million, going from $1.7 billion to less than $2.2 billion. This was on increased net premiums written of 19 percent, or $335.4 million, going from less than $1.8 billion to more than $2.1 billion.

The company's second-quarter combined ratio stood at 89.8 percent, compared to 91.6 in 2003. For the six months, the combined ratio stood at 90 percent, compared to 91.7 percent last year.

Mr. Berkley said the specialty markets are still seeing increases, while other areas are seeing flat and decreasing growth, but he anticipated the company would continue to grow annually at 15-to-20 percent.

He was critical of some underwriting currently going on in some areas of the market, commenting, "There are some people out there doing stupid things."

His criticism centered mainly on carriers entering workers' compensation, commenting that some Bermuda companies have entered the arena who "don't have a clue" to what they are doing.

Berkley spent years building a huge actuarial database in this area, which accounts for $350 million in annualized revenue to the carrier, he noted, adding, "We don't know how people get into the business who don't do that."

"We don't think they have any idea what they are doing," he observed. "It can easily bankrupt the most brilliant of underwriters. So we don't think people understand what they are doing. It is a deadly line of business."