W. R .   BERKLEY   CORPORATION   |   A N A LY S I S   |   2003   ANNUAL   REPORT
A N A LY S I S
                          Look at W. R. Berkley Corporation
                          carefully. Analyze ou...
W. R . B E R K L E Y C O R P O R AT I O N AT A G L A N C E




 CORPORATE PROFILE. W. R. Berkley Corporation, founded in 1...
FINANCIAL HIGHLIGHTS
          (Dollars in thousands, except per share data)




Years ended December 31,                 ...
FIVE BUSINESS SEGMENTS




W. R. Berkley Corporation’s business segments had an excellent year, each producing
strong earn...
W. R. Berkley Corporation had a record year in 2003. Return on

                  stockholders’ equity, earnings, net prem...
William R. Berkley
                                                          Chairman of the Board and
                   ...
of the factors behind those earnings. It requires a    Company obtained price increases of 20% or
    well-thought-out str...
W. R. Berkley Corporation’s strategy, which has consis-

                          tently produced some of the industry’s ...
In recent years, we have taken a series of actions to

              capitalize on opportunities while dealing with challe...
in managing state workers’ compensation residual      other financial products in Hong Kong. It is
market mechanisms. In re...
Company’s risk management capabilities and               Favorable conditions in the Company’s
    bring further depth to ...
INSPECTION
We keep the insurance market
under the microscope. In each
of our businesses, we constantly
search for opportun...
INVESTMENTS




                                                                                                      Euge...
Paul J. Hancock
                                                                  Senior Vice President
      Robert W. Go...
825.000             40
     721.875             35
     618.750
                         S E G M E N T O V E RV I E W
    ...
S T R AT E G Y
W. R. Berkley Corporation’s long-
term strategy of decentralized
operations helps drive results.
Each of ou...
S P E C I A LT Y S E G M E N T




 James S. Carey                              Thomas M. Kuzma
                     Willi...
2003          2002                                            Gross Written Premiums by Line
Segment Data          Dollars...
REGIONAL SEGMENT




                                          Kevin W. Nattrass
     Bill Thornton                       ...
2003              2002                                       Gross Written Premiums by Unit
Segment Data          Dollars ...
A LT E R N AT I V E M A R K E T S S E G M E N T




     Mark C. Tansey                                                   ...
2003     2002
Segment Data          Dollars in Millions

                                                $1,505   $1,198
T...
REINSURANCE SEGMENT




                                            Tom N. Kellogg                                        ...
2003             2002
Segment Data          Dollars in Millions

                                                         ...
I N T E R N AT I O N A L S E G M E N T




                                       Alan M. Rafe
     Eduardo I. Llobet     ...
CONTENTS
Is the beaker half full or half    supported by substantial financial
empty? Will insurance markets      resources...
T O D AY & T O M O R R O W
     We at W. R. Berkley Corporation
     apply long-term, enterprise-wide
     management to o...
W. R .   BERKLEY   CORPORATION   |   2003   FINANCIAL   DATA




                                                         ...
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
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W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
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W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
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W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
W. R. berkley annual reports 2003
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W. R. berkley annual reports 2003

  1. 1. W. R . BERKLEY CORPORATION | A N A LY S I S | 2003 ANNUAL REPORT
  2. 2. A N A LY S I S Look at W. R. Berkley Corporation carefully. Analyze our numbers. You will find a high-quality balance sheet, leading market positions and outstanding operating results. A N A LY S I S 2 Chairman’s Letter Table of Contents 10 Investments 12 Segment Overview 14 Specialty Segment 16 Regional Segment 18 Alternative Markets Segment 20 Reinsurance Segment 22 International Segment 25 Financial Data Cover: “Analysis” by Michael Theise
  3. 3. W. R . B E R K L E Y C O R P O R AT I O N AT A G L A N C E CORPORATE PROFILE. W. R. Berkley Corporation, founded in 1967, is one of the nation’s premier commercial lines property casualty insurance providers. Our strengths include skilled people, disciplined underwriting and a strong balance sheet. Each of the Company’s operating units participates in a product area or geographic territory where it applies its professional skills to meet customer needs. Operations are decentralized to place decision-making and accountability in the hands of people who are close to the customer. The management of the Company is focused on the long-term. We manage to optimize the risk- adjusted returns across the entire enterprise. The effective execution of our strategy has produced one of the best performance records in the insurance industry. 2.0 4.0 8 3.5 7 HOW W. R. BERKLEY CORPORATION IS DIFFERENT. The Company distinguishes itself in several ways: ACCOUNTABILITY. The business is operated with an ownership perspective and a clear sense of fiduciary 1.5 3.0 6 responsibility to shareholders. 2.5 5 PEOPLE-ORIENTED STRATEGY. New businesses are started when opportunities are identified and, most impor- 1.0 2.0 4 tantly, when the right talent is found to lead a business. Of the Company’s 27 units, 19 were developed internally and eight were acquired. 1.5 3 RESPONSIBLE FINANCIAL PRACTICES. Risk exposures are managed proactively. A strong balance sheet, including 0.5 1.0 2 a high-quality investment portfolio, ensures ample resources to grow the business1 profitably whenever there 0.5 are opportunities to do so. RISK-ADJUSTED RETURNS. Management company-wide is focused on obtaining the best potential returns with 0.0 0.0 0 a real understanding of the amount of risk being assumed. Superior risk-adjusted returns are generated over the insurance cycle. TRANSPARENCY. Consistent and objective standards are used to measure performance – and, the same standards are used regardless of the environment. FINANCIAL HIGHLIGHTS. W. R. Berkley Corporation delivered record results in 2003: • Return on stockholders’ equity rose to 25.3%, the highest in nearly three decades. • Net income reached a new high of $3.87 per share, advancing 75% over 2002. • Net premiums written increased 35% to $3.7 billion. • Cash flow from operations advanced 47% to $1.4 billion. The Company achieved these results by capitalizing on increasing insurance prices and improving terms and conditions. Stockholders’ Equity Net Premiums Written Investments dollars in billions dollars in billions market value – dollars in billions 3.7 1.7 6.5 2.7 1.3 4.7 1.9 3.6 0.9 3.1 3.0 1.5 1.4 0.7 0.6 ‘99 ‘00 ‘01 ‘02 ‘03 ‘99 ‘00 ‘01 ‘02 ‘03 ‘99 ‘00 ‘01 ‘02 ‘03
  4. 4. FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) Years ended December 31, 2003 2002 2001 2000 1999 Total revenues $ 3,630,108 $ 2,566,084 $ 1,941,797 $ 1,781,287 $ 1,673,668 Net premiums written 3,670,515 2,710,490 1,858,096 1,506,244 1,427,719 Net investment income 210,056 187,875 195,021 210,448 190,316 Service fees 101,715 86,095 75,771 68,049 72,344 Net income (loss) 337,220 175,045 (91,546) 36,238 (37,060) Net income (loss) per common share: Basic 4.06 2.29 (1.39) .63 (.64) Diluted 3.87 2.21 (1.39) .62 (.64) Return on common stockholders’ equity 25.3% 18.4% (11.2%) 6.1% (4.9%) At year end Total assets $ 9,334,685 $ 7,031,323 $ 5,633,509 $ 5,022,070 $ 4,784,791 Total investments 6,480,713 4,663,100 3,607,586 3,112,540 2,995,980 Stockholders’ equity 1,682,562 1,335,199 931,595 680,896 591,778 Common shares outstanding (in thousands) 83,538 82,835 74,792 57,726 57,639 Common stockholders’ equity per share 20.14 16.12 12.45 11.79 10.27 RELATIVE STOCK PRICE PERFORMANCE W. R. Berkley vs. S&P 500 over the past 20 years percentage change 2000% 2336% 1500% 1000% 629% W. R . B E R K L E Y C O R P O R AT I O N 500% S&P 500 0% 2/84 2/86 2/88 2/90 2/92 2/94 2/96 2/98 2/00 2/02 2/04
  5. 5. FIVE BUSINESS SEGMENTS W. R. Berkley Corporation’s business segments had an excellent year, each producing strong earnings growth. The specialty units underwrite complex and sophisticated risks, including SPECIALTY. general, professional and product liability coverages as well as commercial transporta- tion business, primarily on an excess and surplus lines basis. 2003 RESULTS: Total revenues increased 44% to $1.2 billion. Pre-tax income rose 48% to $202 million. The regional units, which are leaders in their local markets, write commer- REGIONAL. cial lines coverages for small and mid-sized business firms and governmental entities. This segment also writes surety coverages. 2003 RESULTS: Total revenues advanced 23% to $924 million. Pre-tax income increased 47% to $153 million. The alternative markets units develop and administer self- ALTERNATIVE MARKETS. insurance programs and other alternative risk transfer mechanisms, and also write specialized workers’ compensation insurance. Workers’ compensation business is the main focus of the segment. 2003 RESULTS: Total revenues advanced 53% to $551 million. Pre-tax income was $85 million, up 36%. The reinsurance units write reinsurance on both a facultative and REINSURANCE. treaty basis. In addition, the Company writes business under quota share reinsurance agreements with several Lloyd’s syndicates and participates in several specialty niches. 2003 RESULTS: Total revenues rose 84% to $813 million. Pre-tax income increased 300% to $60 million. The Company’s international joint venture operates in Argentina INTERNATIONAL. and Asia. Total revenues declined 25% to $71 million, due mainly to the impact of 2003 RESULTS: currency devaluation in Argentina. Segment pre-tax income was $3 million versus a pre-tax loss of $2 million in 2002.
  6. 6. W. R. Berkley Corporation had a record year in 2003. Return on stockholders’ equity, earnings, net premiums written and cash flow from operations all increased strongly. While the Company’s 2003 performance was excellent, we expect 2004 to be significantly better. TO OUR SHAREHOLDERS: We achieved these results by effectively executing our strategy and capitalizing on the strongest property casualty insurance market conditions in more than a decade. The Company performed well by every measure in 2003: • Return on equity increased to 25.3% from 18.4% in 2002. • Earnings per share advanced 75% to $3.87. • Net premiums written rose 35% to $3.7 billion. Approximately three-quarters of the increase came from higher prices and one-quarter from increased policy counts. • The Company’s GAAP combined ratio declined to 91.4%, well below the industry average and the Company’s lowest combined ratio in over 20 years, reflecting a higher underwriting profit. • Cash flow from operations increased 47% to $1.4 billion. Record cash flow helps drive the growth of the Company’s investable assets, 2 which ultimately will result in more future investment income.
  7. 7. William R. Berkley Chairman of the Board and Chief Executive Officer Looking ahead, we continue to focus on gen- Each of the Company’s five business segments – erating the highest risk-adjusted returns. We will specialty, regional, alternative markets, reinsurance grow the Company opportunistically and seek and international – contributed to sharply higher out new business whenever market conditions earnings in 2003. allow us to do so. We work constantly to manage Equally important was the growth of the the entire enterprise, evaluating risk and remaining Company’s investment portfolio to $6.5 billion aware of uncertainty, always seeking the maxi- at the end of 2003, up from $4.7 billion a year mum potential returns from every opportunity. earlier. Invested assets at the end of 2003 included $1.4 billion of cash and cash equivalents, reflect- The ing our belief that interest rates will rise within the W. R. BERKLEY CORPORATION’S STRATEGY. Company performed well in 2003 because man- next year due to expanding federal budget deficits agement made the right decisions to position the and a modestly improving economy. We expect business for profitable growth, and made these the portfolio to generate more income in the next decisions early. These decisions have allowed the few years as interest rates rise and as we believe Company to write more business at a time of it appropriate to invest the Company’s funds at outstanding industry profitability and, in doing more attractive longer-term rates. so, grow rapidly and generate returns better than Looking back, the past three years have those of our insurance industry peers. During been an exceptional period for W. R. Berkley 2003, to support its growth, the Company raised Corporation. As net premiums written have 3 additional capital and expanded several operating advanced from $1.5 billion in 2000 to $3.7 billion units while starting three new units. in 2003, the Company has moved up the industry Good management is not just a matter of pro- ladder to become one of the 15 largest commer- ducing higher earnings and better returns. Good cial lines property casualty insurance writers in management also requires a clear understanding the United States.
  8. 8. of the factors behind those earnings. It requires a Company obtained price increases of 20% or well-thought-out strategy and effective planning more during 2003, accompanied by significant to deal with the opportunities and challenges on improvements in terms and conditions. The busi- the horizon in order to continue to improve a ness written by the Company during the year company’s performance. In addition, it requires a not only contributed to profits in 2003, but constant understanding of, and focus on, the risks should contribute in 2004 as well. inherent in a company’s day-to-day business, while The last previous “hard” insurance market at the same time being conscious of the uncertain may offer some perspective on the industry’s out- environment that is part of contemporary society. look today. The last hard market began in 1985, The Company’s strategy, which has consis- and prices continued to increase until 1988. Even tently produced some of the industry’s best results, though prices then plateaued, returns remained at is based on a philosophy of decentralized opera- attractive levels through 1994. tions that places decision-making as close to the As of the end of 2003, in the wake of two customer as possible. Through this approach, years of sizable price increases, the market had the Company is able to respond quickly to the recovered to approximately its 1990 price levels. constant changes in its markets and take advan- With current pricing, we see the prospect of con- tage of the opportunities afforded by those tinued excellent returns at least into 2006. Given changes. We empower our managers and hold today’s market conditions, this is the time to access them accountable. and write as much good business as possible. Over the past 20 years, we have grown the W. R. Berkley Corporation’s strategic approach Company’s book value by more than 1,400%. and its high-quality balance sheet have enabled us The Company’s excellent business performance, to do just that. The Company has written more not only in 2003 but over longer periods as well, business and grown profitably even as a number is also reflected in the price of its common stock. of competitors have been constrained by unre- W. R. Berkley Corporation’s stock price has solved past problems, including the inadequate appreciated 2,336%, not including dividends, reserving of prior-year losses. According to a during the past 20 years, well ahead of the recent report by Standard & Poor’s, the property 629% price appreciation of the Standard & casualty industry is under-reserved by approxi- Poor’s 500 Index. mately $60 billion, impinging upon the ability of some insurers to write new business. WRITING PROFITABLE BUSINESS. Insurance industry Adequate reserves are key to maintaining a market conditions were robust in 2003 for the strong balance sheet, which in turn enables a second consecutive year. In many lines, the company to write more business. We address 4 reserving issues proactively and therefore believe the Company is well positioned relative to the industry. During 2003, as the Company wrote more business, we increased our reserves to cover the potential losses associated with that business.
  9. 9. W. R. Berkley Corporation’s strategy, which has consis- tently produced some of the industry’s best results, is based on a philosophy of decentralized operations that places decision-making as close to the customer as possible. By year-end, reserves were $4.2 billion, up 32% responsibilities of insurers and their insureds are from $3.2 billion at the end of 2002. During under constant revision by the courts. Inflation in that same period, the Company’s policy counts general, and medical costs in particular, continue increased by only 7%. The Company’s paid-to- to push claims costs higher. incurred-loss ratio decreased from 53% in 2002 These issues have a different impact on each to 37% in 2003, remaining well below the insurance company. Successful companies know industry average. A lower ratio indicates a posi- how to anticipate and deal with the inevitable tive loss development trend. industry challenges and continually refine their The Company has positioned itself favorably strategies to keep pace with evolving and not in other ways as well. By exercising care in the always predictable markets. They know how selection of reinsurers and insisting on adequate to choose the right business lines in which to security, we have largely avoided the problem participate. They are able to minimize the impact of uncollectible reinsurance, a major challenge of negative trends and events that are beyond for some of our competitors in 2003. In addition, their control and optimize the opportunities the Company has no material asbestos-related available to them when the market environment liabilities, nor does it use derivatives or have is positive. Successful insurance companies are, any “off-balance-sheet” financing. We strive most importantly, always looking ahead, assessing to maintain maximum transparency in our risk and conscious of uncertainty. financial statements. Since the Company’s founding, we have During 2003, the Company issued $350 focused on identifying and participating in what million of debt to support its increasing growth. we believe will be the most profitable areas of the This additional capital, in combination with the business on a risk-adjusted basis, recognizing that Company’s high-quality balance sheet, enabled doing so is critical to the Company’s success. The us to write all the business we felt appropriate Company’s operating units take part in market at attractive rates during 2003. We believe sectors that demand a high level of underwriting W. R. Berkley Corporation has the financial skill and offer excellent opportunities for profit. resources and experienced personnel to continue We generally avoid commodity-type business in to write all the good business that will be avail- which competition is more intense and margins able to us in 2004 in our market segments. are generally lower. In all its markets, W. R. Berkley Corporation CHOOSING THE BEST SECTORS. The insurance indus- is known as a high-quality insurer that has the try is long-term in nature. Companies receive commitment, infrastructure and depth of financial premiums in return for a contractual promise to resources to understand the needs of customers 5 pay future claims that are uncertain in their timing and amount. Industry challenges, such as natural disasters and periods of inadequate pricing, are endemic and are faced by all insurers. In addition, the
  10. 10. In recent years, we have taken a series of actions to capitalize on opportunities while dealing with challenges and deliberately refining where and how the Company does business. Those actions are paying off today. and meet its obligations to them. Our risk-bearing The Company’s regional group writes com- companies have regularly maintained “A” or mercial lines for small and mid-sized businesses better A.M. Best Co. ratings for more than 25 and governmental entities. This exclusive focus years. Long-term relationships with brokers and on commercial lines has led to significant profit agents allow the Company to compete effectively improvement, reflecting the impact of a favorable with its largest peers. Even in today’s transaction- market environment in combination with the obsessed world, successful agents and brokers group’s enhanced ability to service customers. In recognize the importance of commitment. 2003, the regional segment generated $153 mil- In managing the Company, we allocate capital lion of pre-tax income and had an 87.5% GAAP to those insurance lines and those business units combined ratio, a remarkable performance. where we see the best potential risk-adjusted We recently restructured the Company’s pri- returns. We seek to apply the Company’s flexi- mary surety business by combining four separate bility, responsiveness, expertise and strong rela- operations into one unit and placing that unit tionships to competitive advantage in each of its within the regional segment as of 2004. The market sectors. Our goal is to build value for new unit principally writes bonds for mid-sized shareholders by outperforming the Company’s contractors. Although surety pricing has been peers throughout the insurance market cycle. insufficient for the past several years, there has recently been some improvement. We seek to In recent years, we have taken capitalize on that improvement by maintaining a STRATEGIC ACTIONS. a series of actions to capitalize on opportunities strong, highly-focused surety operation with supe- while dealing with challenges and deliberately rior underwriting and distribution capabilities. refining where and how the Company does busi- The alternative markets segment continued its ness. Those actions are paying off today. excellent growth with good profitability in 2003. Since 2000, the Company has invested signifi- This segment is, in part, countercyclical to the cantly in its specialty group, enabling the group other segments. Customers often turn to self- to grow rapidly in a period which has presented insurance and other alternative markets when great opportunity. The specialty group was the primary markets charge higher premiums W. R. Berkley Corporation’s third largest segment for the same or reduced levels of coverage. The just three years ago and is now the largest as well Company’s alternative markets units provide both as the most profitable segment. The operating fee-based services and risk-bearing insurance to units in this segment write complex and sophis- meet the full range of needs of our alternative ticated coverages that are often tailored to the market customers. In addition, the Company has customer’s particular needs. In 2003, the developed one of the nation’s leading capabilities 6 Company formed a new unit, Admiral Excess Underwriters, to specialize in underwriting excess casualty coverages, one of the few areas of the specialty market in which we did not pre- viously participate.
  11. 11. in managing state workers’ compensation residual other financial products in Hong Kong. It is market mechanisms. In recent years, the Company exploring additional opportunities for profitable has also leveraged its expertise to start new expansion in Asia and Latin America. units, such as Preferred Employers Insurance Company, which specializes in providing workers’ We continue to develop new NEW VENTURES. compensation coverage for small, owner-managed businesses as platforms to support the Company’s businesses in California. Preferred has grown long-term growth. While not yet significant con- rapidly during the past two years in response to tributors to results, these businesses offer excellent the current favorable pricing environment, writing prospects for the future. Our financial results fully $163 million of net premiums in 2003. The reflect the startup expenses of these ventures. unit’s tight geographical and product focus In 2003, in addition to launching Admiral enables it to respond quickly to changes in the Excess Underwriters, the Company formed California legislative and claims environment. W. R. Berkley Insurance (Europe), Limited in In the reinsurance segment, during the past London. The new unit is owned 80% by two years we have expanded the Company’s W. R. Berkley Corporation. The unit is focused facultative business and have withdrawn from initially on writing professional indemnity what we perceive to be commodity-type lines in insurance. Late in the year, we formed Berkley the treaty operations. Results have been dramatic. Risk Solutions, Inc., which provides insurance- The facultative business, led by an extremely based as well as reinsurance-focused financial experienced and disciplined management team, solutions for insurance companies and self-insured wrote $286 million of net premiums in 2003 ver- entities in the U.S. and other markets. sus $62 million in 2001. The reinsurance group did The Company’s other newer ventures well in 2003 even though results were dampened continue to make good progress. B F Re by the need to add to reserves for prior business Underwriters, LLC, which provides casualty written in the treaty operation. Segment earnings facultative reinsurance on a direct basis, wrote are expected to continue to improve as this adverse $56 million of net premiums in 2003, its first development from prior years is eliminated. full year. Berkley Medical Excess Underwriters, The Company’s international joint venture LLC, which provides rational capacity to the is the smallest of the five segments. It returned medical malpractice insurance market, was to profitability in 2003, overcoming challenging established at the end of 2001 and wrote $49 economic conditions in Argentina. The venture million of gross premiums in 2003. also has operations in the Philippines and recently began distributing savings, life insurance and MANAGEMENT TEAM. We have an unusual breadth 7 and depth of talented people at the corporate level and throughout the Company’s operating units. During the past two years, to support the Company’s growth, we have been selectively adding to staff in order to strengthen the
  12. 12. Company’s risk management capabilities and Favorable conditions in the Company’s bring further depth to our overall management major lines are expected to continue. While the team in strategic areas. overall level of rate increases is abating, the trend Robert W. Gosselink joined the Company in remains positive as prices continue to rise more 2003 as Senior Vice President – Insurance Risk than “loss cost” inflation. As in the previous hard Management. Jeffrey E. Vosburgh joined the cycle, we anticipate at least another two years of Company as President of the newly-formed strong pricing, even if prices go up only modestly Berkley Risk Solutions unit, and Stuart Wright on an inflation-adjusted basis from where they came on board as Chief Executive Officer of the are today. The Company will continue to write newly-formed London operation, W. R. Berkley all the good business it can in this environment. Insurance (Europe). All three of these individuals W. R. Berkley Corporation’s excellent results – are talented, experienced insurance industry exec- not only in 2003, but also over longer periods – utives. We are pleased to welcome them and the speak to the dedication and skills of its people. I skilled teams they have assembled. want to personally thank the Company’s employ- Robert C. Hewitt, formerly Senior Vice ees, brokers, agents, customers and shareholders President – Risk Management, was named for their support. W. R. Berkley Corporation’s Senior Vice President – Alternative Markets, dedicated people worldwide remain committed to succeeding H. Raymond Lankford, who retired meeting the needs of customers and, by doing so, and continues as a consultant to the Company. generating superior returns for shareholders. It is Kevin W. Nattrass, formerly Senior Vice the responsibility of management to evaluate these President of Acadia Insurance Company, became returns not just in absolute dollars, but also on President and Chief Operating Officer of Berkley a risk-adjusted basis. We believe the Company’s Mid-Atlantic Group. 2003 results are even better when examined from that perspective. OUTLOOK. We are confident of another outstanding We are extremely pleased with the Company’s year in 2004. The Company’s operations are con- performance in 2003. We have never been more centrated in product lines that have experienced confident or excited about W. R. Berkley some of the insurance industry’s largest price Corporation’s prospects for the future. increases. Furthermore, W. R. Berkley Corporation primarily writes casualty insurance, an area where Sincerely, prices continue to increase. William R. Berkley Chairman of the Board and Chief Executive Officer March 30, 2004 8
  13. 13. INSPECTION We keep the insurance market under the microscope. In each of our businesses, we constantly search for opportunities that offer superior rewards with risks that can be properly evaluated. INSPECTION 9
  14. 14. INVESTMENTS Eugene G. Ballard Senior Vice President James G. Shiel Chief Financial Officer and Treasuer Senior Vice President Investments he portfolio increased significantly in 2003, totaling T $6.5 billion at year-end, up from $4.7 billion at the end of 2002. This increase primarily reflected the investment of cash flow from operations as well as the proceeds from two financings totaling $350 million, in addition to market appreciation. In 2003, the portfolio generated $210 million of net investment income, up 12% from 2002 despite The effective management of our investment assets is the impact of low interest rates and the shortened portfolio duration. an integral part of our overall enterprise management. The portfolio is managed conservatively to support the Company’s ability to write insurance. We have three The investment portfolio, which has more than doubled main investment goals: achieve favorable risk-adjusted in size during the past four years, is an important driver returns; avoid investment exposures that might impair the Company’s ability to expand its insurance business; of future earnings. and maintain the duration of the fixed income portfolio within one year of the duration of the Company’s lia- bilities, including policy claims and debt obligations. FIXED INCOME INVESTMENTS. At year-end, the portfolio was invested 88% in fixed income securities, including cash and cash equivalents. Low interest rates have created a challenging fixed income investment 10 environment. Our current view is that interest rates will move higher within the next year due to various trends, including expanding federal budget deficits and a weak dollar. As a result, we have recently been investing new monies primarily in short-term securities
  15. 15. Paul J. Hancock Senior Vice President Robert W. Gosselink Ira S. Lederman Chief Corporate Actuary Senior Vice President Senior Vice President Insurance Risk Management General Counsel and Secretary cash equivalents), 34% in municipal securities, 17% in Fixed Income Portfolio Distribution mortgage-backed securities, 9% in corporate bonds Foreign Bonds U.S. Government and Government Agency (including a modest position in high-yield bonds) and 4% in foreign bonds. 4% 9% Corporate Bonds 11% The weighted average credit rating of the fixed income 17% portfolio was “AA” at year-end, and the duration was 4.1 Cash and Cash 25% years, approximately one year shorter than the duration Equivalents of the Company’s liabilities. 34% ALTERNATIVE INVESTMENTS. The portfolio includes vari- Mortgage-backed State and Municipal ous alternative investments which offer opportunities for Securities more favorable returns while diversifying risk. These investments, which are managed by outside professionals, represented 12% of the overall portfolio at year-end. to lessen the portfolio’s exposure to the impact of Merger arbitrage has been a mainstay of the alternative anticipated rate increases. portfolio for more than 15 years. Although we have scaled The Company had $1.4 billion of cash and cash back the portfolio’s allocation to this area for the past two equivalents at year-end. Although this cash position years because of modest merger and acquisition activity, affected the level of investment income in 2003, we we are optimistic that the recent sharp increase in merger believe the Company will be well rewarded in the long 120 activity will create renewed opportunities. run when interest rates increase and we are able to 100 During the past two years, we have increased the invest at more attractive yields. In the fall of 2003, the 80 portfolio’s investments in other income-producing areas Company invested several hundred million dollars in 60 where we see attractive returns, including high dividend intermediate-term municipal bonds when bond prices 11 40 common stocks, convertible securities arbitrage and real declined temporarily and yields suddenly became espe- 20 estate investment trusts (REITs). In 2003, the portfolio cially attractive. We remain alert to other opportunities 0 made its first direct investment of $50 million in commer- to capture higher rates. cial real estate. The total allocation to the real estate sector, At year-end, the fixed income portfolio was invested including REITs, was $254 million at year-end. 36% in U.S. Government securities (including cash and
  16. 16. 825.000 40 721.875 35 618.750 S E G M E N T O V E RV I E W 30 515.625 25 412.500 20 309.375 15 206.250 Each of our five business segments is comprised of individual operating units that serve a 10 market that is defined by geography, products or services, or types of customers. Our growth 103.125 5 is based on meeting the needs of customers, maintaining a high-quality balance sheet and 0.000 0 allocating capital to our best opportunities. 825.000 721.875 618.750 515.625 412.500 2003 Revenues versus Profits dollars in millions 309.375 206.250 202 Specialty Specialty 1,188 103.125 153 Regional Regional 924 0.000 Alternative Alternative 85 551 60 Reinsurance Reinsurance 813 71 International International 3 2003 Revenues 2003 Profits 2003 Revenues versus Profits percent 40 33 Specialty Specialty 26 30 Regional Regional 16 17 Alternative Alternative 23 12 Reinsurance Reinsurance 1 2 International International 2003 Revenues 2003 Profits 12
  17. 17. S T R AT E G Y W. R. Berkley Corporation’s long- term strategy of decentralized operations helps drive results. Each of our operating units is empowered to identify and respond quickly to customers’ needs. STRATEGY 13
  18. 18. S P E C I A LT Y S E G M E N T James S. Carey Thomas M. Kuzma William F. Murray Admiral Insurance Nautilus Insurance Company Admiral Excess Company Underwriters Division W. Robert Berkley, Jr. Senior Vice President he specialty insurance group is the Company’s OPERATING UNIT RESULTS. The segment has nine T largest and most profitable segment. Total revenues specialty units, including two that were started in increased 44% in 2003, while pre-tax income 2003, each serving a particular market. rose 48% and return on equity increased to 25%. Admiral Insurance Company, one of the leading These excellent results were driven by strong surplus lines carriers in the industry, specializes in pricing as well as improved terms and conditions. underwriting difficult-to-place, moderate-to-high- The Company’s specialty units underwrite complex risk classes that other carriers are unwilling or unable and sophisticated third-party liability risks, mainly to consider. It has been consistently successful and on an excess and surplus lines basis. These include enjoyed another outstanding year in 2003, increasing general, professional and product liability coverages its net premiums written by 29%. as well as commercial transportation business. In In 2003, Admiral formed a new division, Admiral each of its lines, the specialty group emphasizes a Excess Underwriters, to specialize in underwriting disciplined underwriting approach, expanding its excess casualty coverages, one of the few specialty business when prices and terms and conditions are lines in which W. R. Berkley Corporation did not most attractive. previously participate. In 2003, as the standard markets continued to Nautilus Insurance Company, which continued withdraw from writing what was traditionally con- to achieve significant growth, underwrites small-to- sidered non-standard lines, the specialty group wrote medium sized commercial property and casualty risks, more business and successfully capitalized on higher predominantly on an excess and surplus lines basis. prices. The specialty insurance market, where our It increased its net premiums written by 49% and skills give us a competitive advantage, represents a produced a 25% return on equity in 2003, capitaliz- strong growth opportunity for W. R. Berkley ing on price increases as well as the ongoing flow of Corporation in the current environment. Key to the business coming into the surplus lines market from 14 specialty group’s success, not only in 2003 but also the standard market. going forward, are the intellectual capital of its peo- Carolina Casualty Insurance Company was an ple, the substantial financial resources of the organi- outstanding performer, increasing its net premiums zation and the group’s strong relationships with its written by 16% and generating one of the highest distribution systems. returns on equity among W. R. Berkley Corporation’s
  19. 19. 2003 2002 Gross Written Premiums by Line Segment Data Dollars in Millions $3,128 $2,271 Total assets Other 1,188 827 Total revenues 19% 202 136 Pre-tax income Directors & 6% 52% General Liability 88% 89% GAAP combined ratio Officers 11% 25% 21% Return on equity 12% Excludes realized investment gains and loses. Commercial Transportation Professional Liability Richard P. Shemitis Alfred Schonberger Stuart Wright Armin W. Blumberg Douglas J. Powers J. Michael Foley Vela Insurance Clermont Specialty W. R. Berkley Insurance Carolina Casualty Monitor Liability Berkley Medical Excess Services, Inc. Managers, Ltd. (Europe), Limited Insurance Company Managers, Inc. Underwriters, LLC 27 operating units. Carolina specializes in commercial Berkley Medical Excess Underwriters, LLC writes transportation insurance, primarily involving long- medical malpractice excess insurance and reinsurance haul trucking and public automobile risks. The for hospitals. The unit had a strong year, increasing its company continues to work with its agents and gross premiums written to $49 million in 2003, its brokers to position itself as a preferred commercial first full year of operation, and continues to establish transportation market. its position as a market leader. Vela Insurance Services, Inc. writes excess and In July 2003, W. R. Berkley Corporation surplus lines with a primary focus on contractor and expanded its specialty operations to the United product liability coverages. Vela increased its net Kingdom by forming W. R. Berkley Insurance premiums written by 44% in 2003 and generated (Europe), Limited, which is owned 80% by a 40% return on equity. W. R. Berkley Corporation and 20% by Kiln plc. Monitor Liability Managers, Inc. writes directors The new company is initially writing professional and officers, lawyers professional and employment indemnity insurance, with additional lines to be practices lines. It continued to perform well in 2003, added. Net premiums written were $43 million in delivering a 35% return on equity despite the con- the unit’s partial first year. stantly evolving complexities of its line of business. While most of the units in the specialty group SPECIALTY SEGMENT OUTLOOK. Specialty insurance serve customers nationwide, Clermont Specialty markets have remained strong in the opening months Managers, Ltd. has a specific geographic focus. of 2004, and we believe these favorable market Clermont writes package insurance programs for conditions will continue. As a leader in specialty residential condominium and co-op associations as insurance, we have the people, the capital and the well as for upscale restaurants in the metropolitan distribution relationships to establish an even more New York City area, where it has well-established significant presence in the market segments in which 15 relationships with its distributors. Clermont increased we participate. its net premiums written by 28% in 2003 and contin- ued to increase its profits.
  20. 20. REGIONAL SEGMENT Kevin W. Nattrass Bill Thornton Berkley Mid-Atlantic Group Acadia Insurance Company Robert P. Cole Senior Vice President T he regional segment had an outstanding year, commercial lines units, withdrawing from personal achieving a record 28% return on equity. The lines insurance, re-underwriting all our business to segment has grown rapidly and has delivered improve pricing and tighten terms, and combining excellent profitability since we took a series of actions, the Company’s various primary surety operations beginning in 1999, to restructure the business and into a single unit. Because we restructured proactively, focus on the best opportunities. the regional segment has been well positioned to These actions, coupled with the segment’s ongoing capitalize on market opportunities. We have, at the efforts to deliver superior service to customers and same time, been able to provide agents with the excellent financial results to shareholders, enabled steady source of capacity they need even in a period W. R. Berkley Corporation to become one of the best of mergers and withdrawals by many other regional performers in the entire regional property casualty commercial lines carriers. industry in 2003. The segment’s revenue increased 23% in 2003, reflecting higher prices in a strong OPERATING UNIT RESULTS. The four commercial lines market as well as a modest increase in policy count. units – Acadia Insurance Company, Berkley Mid- Pre-tax operating income advanced 47%. Atlantic Group, Continental Western Group and The segment consists of four commercial lines Union Standard Insurance Group – serve small and units as well as the Company’s primary surety unit. mid-sized business and governmental entities primarily Operations are decentralized, placing decision-mak- in 32 states. Each is a multi-line company, offering ing in the hands of people who are close to the cus- an array of commercial lines insurance products and tomer. We believe the growing success of the loss control services through a select group of agents. regional group reflects not only the skills of our peo- Acadia writes commercial business in Maine, ple, but also the group’s focus on smaller and mid- New Hampshire, Vermont, Massachusetts, sized commercial lines customers, its strong local Connecticut, and central and northern New York. In 16 presence in each of its markets, and the ability of addition to writing a full line of standard commercial the operating units to identify and respond rapidly property casualty products, it writes specialty prod- to customers’ needs. ucts for companies in the region, including lumber Since 1999, we have realigned the segment by mills, timber haulers, and marine business. Acadia had combining 10 regional units into the current four another standout year, achieving strong profitability,
  21. 21. 2003 2002 Gross Written Premiums by Unit Segment Data Dollars in Millions $1,993 $1,591 Total assets Union Standard 924 750 Total revenues 17% 153 104 Pre-tax income 29% Acadia 88% 92% GAAP combined ratio 28% 20% Return on equity 40% 14% Excludes personal lines business and realized investment gains and loses. Continental Western Berkley Mid-Atlantic Craig W. Sparks Bradley S. Kuster Paul J. Fleming Union Standard Continental Western Group Monitor Surety Managers, Inc. Insurance Group joined the ranks of superior performers in the regional 36% growth in net premiums written and an 87% GAAP combined ratio. Continuing its expansion, group. Union Standard registered strong revenue and Acadia recently opened new branch offices in earnings improvement, and its combined ratio of 87% Connecticut and upstate New York, firmly establishing was the best in the unit’s 28-year history. Union itself as one of the premier commercial lines carriers Standard is streamlining the way it does business in the Northeast. through investments in imaging technology and Berkley Mid-Atlantic Group’s marketing territory improved workflow processes. These technologies spans the Atlantic coast from Pennsylvania to South and processes will over time be adopted by the other Carolina, including the District of Columbia. The regional units as appropriate. unit reported solid results in 2003, increasing its net Contract bonds and court and commercial bonds premiums written by 13%. With the recent strength- are written through Monitor Surety Managers, Inc., ening of its management team, we believe the unit is which has offices in the East, Midwest and South poised for excellent results in 2004. and maintains a primary focus on providing surety Continental Western, the largest of the regional bonds to mid-sized contractors. The unit wrote $13 companies, serves the insurance needs of business and million of net premiums in 2003, a sizable increase farm owners and governmental entities throughout over 2002, and had a profitable year. the Midwest and Pacific Northwest. It enjoyed another outstanding year, achieving an 84% combined ratio REGIONAL SEGMENT OUTLOOK. The regional group has together with strong profit and revenue growth. delivered excellent results each of the past two years Continental Western offers a number of specialty and, in the process, has become one of the nation’s products, including property casualty insurance pack- premier regional commercial lines carriers. During ages for fire departments throughout the Midwest this period, the group has focused on improving its and products covering farm equipment dealers, market position while remaining disciplined in its 17 grain elevators, municipalities and collector cars. It underwriting standards. We anticipate another year attained good growth in each of these areas in 2003. of profitable growth in 2004 and remain dedicated In the South, Union Standard writes business in to building an organization that can succeed in all eight states from Alabama to New Mexico. The year market conditions. was one of significant improvement for the unit, as it
  22. 22. A LT E R N AT I V E M A R K E T S S E G M E N T Mark C. Tansey Melodee J. Saunders Kenneth R. Hopkins Linda R. Smith Berkley Risk Administrators Midwest Employers Berkley Risk Administrators Preferred Employers Company, LLC Casualty Company Company, LLC Insurance Company T he alternative markets segment continued to build operations, the segment participated in the favorable on its unique expertise in workers’ compensation pricing environment for traditional insurance products. insurance, delivering its third consecutive year of excellent results. Total revenues increased by 53% OPERATING UNIT RESULTS. Each alternative markets over 2002 while pre-tax income advanced 36%. unit has a particular business focus, and each achieved Return on equity reached 25%. superior returns in 2003. We have built the alternative markets segment Berkley Risk Administrators Company, LLC opportunistically over the past two decades, adding (BRAC) – a third-party administrator and program new units when we have identified promising markets manager that designs, implements and manages alter- in which we can hire talented people and apply our native risk financing programs and self-insurance skills to competitive advantage. The segment currently pools – had an outstanding year, increasing its service provides workers’ compensation insurance products fee revenues by 12% in 2003 and further improving and fee-based insurance services through four major its net income. areas of business: BRAC continued to expand its business of admin- • Providing workers’ compensation insurance on an istering state workers’ compensation assigned risk excess basis for group and individual self-insureds plans, a growth area, by successfully being awarded and on a primary basis in selected states; contracts in three additional states in 2003. Equally • Managing state workers’ compensation residual important, BRAC provides businesses, governments, market mechanisms; educational institutions, tribal nations and non-profit • Providing bundled and unbundled fee-based entities with various alternative market services. Over services to help corporate, government, non-profit the last few years, BRAC has steadily expanded the and other entities develop and administer self- geographic reach of its services and now has clients insurance programs and utilize other alternative on the East and West coasts and in the Southwest 18 means of financing or transferring risk; and as well as in the Midwest, its traditional base. In • Writing workers’ compensation insurance for small, 2002, the Company formed a risk-bearing company, owner-managed businesses in California. Nonprofits Insurance Company, which gives BRAC In 2003, the segment continued to capitalize further flexibility to provide insurance products and on opportunities to grow its fee-based business by related fee-based services. providing alternative mechanisms to help clients Midwest Employers Casualty Company (MECC) control costs. In addition, through its risk-bearing increased its net premiums written by 42%, with
  23. 23. 2003 2002 Segment Data Dollars in Millions $1,505 $1,198 Total assets 551 359 Total revenues 85 63 Pre-tax income 93% 96% GAAP combined ratio 25% 21% Return on equity Excludes realized investment gains and loses. Joe W. Sykes Key Risk Insurance Company Robert C. Hewitt Senior Vice President strong earnings. A national provider of excess workers’ Revenues by Unit compensation coverage to individual employers and Preferred Employers groups above their self-insured or retained coverages, 23% 15% Key Risk MECC has a unique ability to identify desirable workers’ compensation risks. Through its under- writing and pricing process, the company gains an 23% Berkley Risk 39% understanding of each risk’s historical and prospective Midwest Employers frequency and severity performance against its peers, and then applies that knowledge to identify preferred risks with the least propensity to cause loss. This sophisticated information provides MECC with a competitive advantage in that few if any competitors Georgia. Both units did well in 2003, increasing their have similar capabilities. In 2004, MECC plans to net income and generating excellent returns on equity. enter the large deductible area to complement its KRIC underwrites workers’ compensation products other businesses. and recently created a healthcare division to capitalize Preferred Employers Insurance Company has been on the favorable market conditions in this industry very successful in providing workers’ compensation sector. KRMS is a fee-based service organization, coverage for small business owners in the state of developing and administering workers’ compensation California, writing $163 million of net premiums in programs for self-insureds and insurance carriers. 2003. Preferred commenced operations in 1998 on a modest scale and has grown significantly during ALTERNATIVE MARKETS SEGMENT OUTLOOK. Based on the past two years, generating superior returns in a current trends and market conditions, the alternative favorable pricing environment. The unit continues to markets segment is well positioned for another year of 19 work with a select group of brokers who understand profitable growth in 2004. Our alternative markets the firm’s philosophy and business objectives. units have not only grown their fee-for-service rev- In the Southeast, Key Risk Insurance Company enues in the current hard market, but have also lever- (KRIC) and its affiliate, Key Risk Management aged the current pricing environment to achieve solid Services, Inc. (KRMS), provide workers’ compensa- returns in their risk-bearing operations. We anticipate tion insurance products and services for employers continued growth in both areas in 2004, driving in North Carolina, South Carolina, Virginia and another year of outstanding overall performance.
  24. 24. REINSURANCE SEGMENT Tom N. Kellogg Roger J. Bassi Daniel L. Avery Craig N. Johnson Signet Star Re, LLC Fidelity & Surety Reinsurance B F Re Underwriters, LLC Signet Star Re, LLC Managers, LLC T he reinsurance segment quadrupled its pre-tax and conditions improved. Facultative ReSources, income in 2003 with strong revenue growth in which writes business through intermediaries, took both its facultative and treaty businesses. advantage of better pricing and improved terms and Facultative net premiums written more than doubled conditions in workers’ compensation reinsurance to over 2002. substantially increase its book of business in that area. In reinsurance, as in the other segments, we suc- B F Re Underwriters, which we formed in late 2002 cessfully implemented our strategy of writing as much to write business primarily on a direct basis, generated good business as possible in the current positive mar- $56 million of net premiums written in 2003, its first ket environment. The reinsurance segment’s operating full year. units not only capitalized on price increases and Overall, the segment’s facultative reinsurance net improved terms and conditions in 2003, but also grew premiums written increased to $286 million in 2003 their certificate counts during the year. from $140 million in 2002. In more than doubling The segment’s facultative operations performed their premiums, the facultative units capitalized on a especially well, generating gross premiums that, for very strong market, as some competitors were forced the first time, equaled those in the treaty business. to withdraw due to company-specific problems. While We believe the Company’s Facultative ReSources, Inc. growing dramatically during the past two years, the unit was the largest broker facultative reinsurance Company’s facultative units are prepared to cut back market in the U.S. in 2003. as necessary when the market softens and fewer opportunities are available. OPERATING UNIT RESULTS. The segment utilizes The segment’s treaty reinsurance business is the risk-bearing capabilities of Berkley Insurance managed by Signet Star Re, LLC, which also enjoyed Company (BIC), which carries an A.M. Best Co. strong growth, increasing its net premiums written rating of “A (Excellent)” and a Standard & Poor’s to $324 million in 2003 from $227 million in 2002. 20 rating of “A+ (Superior).” Business is written on During the past three years, we have re-engineered behalf of BIC by various affiliated underwriting Signet Star Re by re-staffing the unit and developing management units, which have a depth of under- a strong underwriting culture. These efforts are now writing expertise and excellent distribution. paying off with significant improvement in results. In the facultative area, Facultative ReSources, Inc. Most treaty reinsurers remained disciplined in and B F Re Underwriters, LLC both had very good their underwriting during 2003 even though there years, writing more business as prices and terms was ample industry capacity for well-priced business.
  25. 25. 2003 2002 Segment Data Dollars in Millions $3,415 $2,431 Total assets 813 442 Total revenues 60 15 Pre-tax income 99% 107% GAAP combined ratio 10% 4% Return on equity Excludes alternative markets reinsurance and realized investment gains and loses. Jeffrey E. Vosburgh John S. Diem Berkley Risk Solutions, Inc. Berkley Underwriting Partners, LLC James W. McCleary Senior Vice President and President and CEO of Facultative ReSources, Inc. As a result of this market discipline, Signet Star Re was Gross Written Premiums by Unit Lloyd’s able to identify and capitalize on many opportuni- ties. The unit’s business is focused primarily on 24% excess of loss casualty coverages, where we see the 34% Signet Star Re best profit potential. 8% Berkley As its name implies, Fidelity & Surety Reinsurance Underwriting Partners 6% Managers, LLC writes fidelity and surety coverage, 28% although it is currently writing only limited amounts B F Re Facultative ReSources of business until weakness in the surety reinsurance market is resolved. Another of the reinsurance units, Berkley Underwriting Partners, LLC (BUP), utilizes program REINSURANCE SEGMENT OUTLOOK. We anticipate administrators to write specialty insurance products. another year of profitable growth in the reinsurance It emphasizes small-to-medium sized opportunities segment even though the Company plans to write where the administrator has unique product expertise less business through its quota share reinsurance and BUP provides the centralized operating platform. agreements with Lloyd’s syndicates. Not only does the This structure allows programs to thrive at levels reinsurance business written in 2003 have significant which could not otherwise sustain the costs associated future profit embedded in it, but we also believe that with being a standalone business entity. BUP’s busi- reinsurance prices will remain attractive. We foresee ness model is exemplified by its equine underwriting many opportunities ahead and remain focused on division, started in late 2003, which specializes in writing as much profitable business as possible in livestock mortality. BUP provides the operating plat- the current strong market. form for the new division and specialists provide the 21 program and product knowledge. Berkley Risk Solutions, Inc., the newest unit in the reinsurance group, was formed in late 2003. It provides insurance-based and reinsurance-based financial solutions to insurance companies and self- insured entities not only in the United States but also in other markets.
  26. 26. I N T E R N AT I O N A L S E G M E N T Alan M. Rafe Eduardo I. Llobet BI China, Limited Berkley International Seguros S.A. Fernando Correa Urquiza President of Berkley International, LLC he international segment returned to profitability ASIA. Our business in the Philippines specializes in T in 2003, following a difficult year in 2002, and endowment policies to pre-fund educational expenses increased its pre-tax income by $5 million. We and retirement income, as well as in traditional life anticipate further profit improvement in 2004. insurance products. The business increased its assets We conduct our international business through under management by 20% in 2003, outperforming Berkley International, LLC, a joint venture with a competitors, and reduced its expenses, although earn- subsidiary of The Northwestern Mutual Life ings were lower than in 2002. Through consistent Insurance Company. W. R. Berkley Corporation growth since 1997, when the operation was started, owns 65% of the venture and holds management we now hold approximately a 14% share of new responsibility. Berkley International has operations business in the Philippines’ endowment pre-funding in Argentina and Asia. market. Late in the year, we formed an insurance agency ARGENTINA. In Argentina, we positioned the business in Hong Kong to distribute life insurance products in to perform well in 2003 by identifying and responding a manner similar to that used in the Philippines. to critical issues early. The Argentine operation returned to sound levels of profitability in 2003 even INTERNATIONAL SEGMENT OUTLOOK. We anticipate though revenues declined due primarily to the impact profitable growth in both Argentina and the of currency devaluation and the discontinuance of Philippines in 2004. Over time, we will seek new the life insurance operations. opportunities in the property casualty insurance mar- Berkley International’s property casualty opera- kets of selected countries in Latin America and Asia tions in Argentina encompass both personal and that fit Berkley International’s approach and strategy. commercial lines and benefited in 2003 from improve- ment in the automobile insurance market. We shifted 2003 2002 Segment Data Dollars in Millions 22 the market focus of our workers’ compensation $153 $127 Total assets business from larger to mid-sized companies, where 71 95 Total revenues profit opportunities are greater at this time. 3 (2) Pre-tax income (loss) Through these and other actions, we again have 97% 106% GAAP combined ratio a healthy business in Argentina with good prospects 11% N/A Return on equity for profitable growth for 2004. Excludes realized investment and foreign currency gains and loses.
  27. 27. CONTENTS Is the beaker half full or half supported by substantial financial empty? Will insurance markets resources – have consistently continue to strengthen or are delivered returns that are among they nearing their peak? While the highest in the property casu- market trends are important, it alty insurance industry. is vital to analyze the contents of the beaker. W. R. Berkley Corporation’s contents – our well-managed operating units, CONTENTS 23
  28. 28. T O D AY & T O M O R R O W We at W. R. Berkley Corporation apply long-term, enterprise-wide management to optimize risk-adjusted returns. We have the expertise and resources to maximize our strengths in the present environment – and the flexibility to anticipate, innovate and 24 respond to whatever opportunities and challenges the future may hold.
  29. 29. W. R . BERKLEY CORPORATION | 2003 FINANCIAL DATA 25

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