W. R. Berkley Corporation reported that operating income, excluding losses related to the Sept. 11 event, was $11 million, or 36 cents per diluted share, for the third quarter ended Sept. 30, compared with $9 million, or 34 cents per diluted share, for the same period in 2000.
For the first nine months, operating income, excluding losses related to the Sept. 11 event, was $38 million, or $1.35 per diluted share, in 2001, compared with operating income of $25 million, or 96 cents per diluted share, in 2000. Operating income represents net income excluding discontinued businesses, realized investment gains and restructuring charges.
After-tax losses related to the Sept. 11 event were $23 million, or 78 cents per diluted share. Pretax losses from the Sept. 11 event are estimated to be $35 million, net of reinsurance recoveries. This represents the company’s maximum retention for property and business interruption coverages and its estimated policy limits on risks exposed to casualty losses.
The company also noted plans to discontinue two lines of business that are not likely to achieve a satisfactory return on capital. The company is withdrawing from the personal lines business, both homeowners and private passenger automobile. The company will stop writing new personal lines policies immediately and will not renew existing policies, subject to all regulatory requirements. Also, the company is doing away with the alternative market division of its reinsurance business. The after-tax loss related to the discontinued businesses was $40 million, or $1.37 per diluted share, in the third quarter of 2001.
The net loss for the third quarter of 2001 was $47 million, or $1.63 per diluted share, compared with net income of $7 million, or 27 cents per diluted share, for the third quarter of 2000. The company indicated a net decline of $27 million, or 97 cents per diluted share, for the first nine months of 2001, compared with net income of $18 million, or 70 cents per diluted share, in the first nine months of 2000.
Net premiums written for on-going business jumped 31 percent to $418 million for the third quarter of 2001 from $319 million for the year-earlier period. The premium growth was headed by the company’s specialty business, which indicated a 92 percent increase in net premiums written for the quarter. Net premiums written for on-going business jumped 25 percent in the first nine months of 2001 to $1,187 million.
Due to lower returns available for the merger arbitrage business as well as lower returns on investment of new cash flow, net investment income decreased by $10 million to $47 million in the third quarter of 2001. For the first nine months net investment income was $148 million in 2001 compared with $153 million in the year-earlier period.
William R. Berkley, chairman and CEO commented that the company continues to examine each area of its business as it seeks to achieve a 15 percent rate of return on capital.
As part of this strategy, the company has decided to eliminate its personal lines business and the alternative markets division of its reinsurance business. Berkley added as a result, the company expects its regional and reinsurance segments to be in a better position to achieve their targeted returns as well as to substantially reduce its weather-related volatility.
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