W.R. Berkley Regional Units Being Revamped, Not Sold
Greenwich, CT-based W.R. Berkley has decided to restructure the management and back-office operations of its group of 10 regional insurance companies into four geographic segments based on markets served.
Today's decision marks the culmination of a process that began last Fall with the retention of Morgan Stanley & Co. to explore strategic opportunities for Berkley's regional insurance companies, which represent approximately 45% of the company's total revenues.
"Over the past few months, we have thoroughly reviewed the full range of strategic alternatives for our regional insurance group," said William R. Berkley, chairman and chief executive officer. "It is our judgment, shared by our advisors, that in the face of increasingly aggressive competition, restructuring offers the best route to improved financial returns and enhanced value for our shareholders."
The consolidation of management and administrative functions, which the company says should be completed before the end of 1999, is expected to result in annual after-tax savings of between $10 million and $15 million, based on the company's preliminary analysis of achievable cost savings and other benefits.
"The consolidation of managerial and administrative resources will give us the economies of scale and pricing flexibility to remain competitive in today's price-driven environment," Berkley said. "It will also allow us to attract and retain the kind of top managerial talent we need to grow the business. As planned, the restructuring should achieve all of these ends without altering our core philosophy of making underwriting decisions as close as possible to the customers and markets we serve. Given the annual savings expected to be realized going forward, we expect this consolidation to pay for itself very quickly."
The company will take a one-time after-tax charge of between $9 million and $13 million in the first quarter of 1999 to cover costs directly related to the consolidation.
Restructuring the managerial and back-office resources of Berkley's 10 regional insurance units will leave four regional companies to manage the consolidated businesses on a geographic basis. One regional company in each geographic segment has been designated as the primary insurance unit. It is listed first in the segment. Other companies also will write in certain segments.
- New England: Acadia Insurance Company
- MidAtlantic: Firemen's Insurance Company of Washington, DC; Berkley Insurance Company of the Carolinas; Chesapeake Bay Property & Casualty Insurance Company; and The Presque Isle Insurance Division
- Midwest: Continental Western Insurance Companies; American West Insurance Company; Tri-State Insurance Company of Minnesota; and Union Insurance Company
- Southern Tier: Union Standard Insurance Company; Great River Insurance Company