W.R. Berkley Corp. Closes Public Offering, Subsidiaries Receive A.M. Best Rating

November 25, 2002

W. R. Berkley Corporation has closed its previously announced public offering of 4,715,000 shares of common stock.

The number of shares sold includes 615,000 shares sold pursuant to the exercise of the underwriters’ over-allotment option. The Company received total net proceeds from the offering of $167 million, which will be used primarily to provide additional capital for the Company’s insurance subsidiaries.

Merrill Lynch & Co. was the sole bookrunner on the transaction, with Morgan Stanley as a joint lead manager and Salomon Smith Barney as a co-manager.

Also, A.M. Best Co. has affirmed the financial strength ratings of the subsidiaries of W.R. Berkley Corp.

These affirmations include the financial strength ratings of A (Excellent) of Berkley Insurance Group (Wilmington, Del.), Berkley Regional Group (Greenwich, Conn.), Nautilus Insurance Group (Scottsdale, Ariz.) and Carolina Casualty Insurance Co. (Jacksonville, Fla.). Additionally, the financial strength rating of A+ (Superior) of Admiral Insurance Group (Wilmington, Del.) is also affirmed. Carolina Casualty’s rating outlook is negative. The remaining rating outlooks are stable.

Further, A.M. Best has affirmed the “bbb” rating of senior debt securities issued by W.R. Berkley Corp., the “bbb-” rating of trust preferred securities issued by the W.R. Berkley Capital Trust and the ratings of securities under the company’s shelf registration, which include “bbb” of senior debt, “bbb-” of subordinated debt, “bbb-” of trust preferred and “bb+” of preferred stock. The outlooks for these ratings are stable.

Reflected in these ratings is the level of capitalization at the insurance companies, which has been supported by capital contributions from the parent, favorable performance by the companies’ bond portfolios and positive earnings momentum, particularly in the excess/ surplus lines, as well as the reinsurance and regional operations. In 2001 and 2002 the capital contributions were facilitated by multiple equity offerings of W.R. Berkley stock, where the majority of the proceeds were contributed to the insurance operations and the remainder was held at the holding company for general corporate purposes including debt service. These equity offerings underscore W.R. Berkley’s ability to access the capital markets.

The ratings are further supported by W.R. Berkley’s refocused reinsurance and regional operations and re-underwriting initiatives, which included price increases, as well as the elimination of personal lines and alternative market reinsurance, both of which contributed to volatility in earnings.

The ratings also consider W.R. Berkley’s overall business model that seeks to capitalize on its expertise in specialized businesses, prudent risk management strategy, a somewhat conservative investment portfolio and diversified operations within many segments of the property/casualty industry. Such factors highlight the strategic role each company plays in the Berkley group.

Conversely, in recent years, these strengths have been partially offset by W.R. Berkley’s modest operating returns and capital generation. Over the past few years, operating earnings have been negatively impacted by intense competition, a rather high expense structure, weather-related losses (particularly in personal lines) and adverse loss reserve development. In 2001, the latter was highlighted when the company experienced significant loss reserve increases from alternative markets reinsurance and, to a lesser extent, the events of Sept. 11, the Enron bankruptcy and a nursing home book of business.

The stable outlooks for Berkley Insurance, Berkley Regional and Admiral and Nautilus recognize their stabilization in capital, earnings momentum, the favorable impact of management’s initiatives and improving market conditions. The negative outlook for Carolina Casualty recognizes the inherent risk associated with considerable policy count growth and its history of adverse loss reserve development and mediocre operating performance.

While W.R. Berkley Corp.’s financial leverage has been historically high and fixed coverage relatively low for its ratings, the recent equity offerings and the aforementioned positive earnings momentum have had a favorable impact on both of these measures.

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