10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to          .

Commission file number 1-15202

W. R. BERKLEY CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation or organization)
475 Steamboat Road, Greenwich, CT
(Address of principal executive offices) 22-1867895
(I.R.S. Employer
Identification Number)
06830
(Zip Code)

Registrant’s telephone number, including area code: (203) 629-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, par value $.20 per share	New York Stock Exchange
6.75% Trust Originated Preferred Securities	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes þ     No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report on Form 10-K or any amendment to this Annual Report on Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

The aggregate market value of the voting and non-voting common stock held by non-affiliates (computed by reference to the price at which the common stock was last sold) as of the last business day of the Registrant’s most recently completed second fiscal quarter was $2,900,441,493.

Number of shares of common stock, $.20 par value, outstanding as of February 19, 2010: 152,811,920

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s 2009 Annual Report to Stockholders for the year ended December 31, 2009 are incorporated herein by reference in Part II, and portions of the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, are incorporated herein by reference in Part III.

W. R. BERKLEY CORPORATION

ANNUAL REPORT ON FORM 10-K

December 31, 2009

			Page
		SAFE HARBOR STATEMENT
PART I
	ITEM 1.	BUSINESS		4
	ITEM 1A.	RISK FACTORS		22
	ITEM 1B.	UNRESOLVED STAFF COMMENTS		29
	ITEM 2.	PROPERTIES		29
	ITEM 3.	LEGAL PROCEEDINGS		29
	ITEM 4.	RESERVED		29
PART II
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES		30
	ITEM 6.	SELECTED FINANCIAL DATA		31
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		32
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		32
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		32
	ITEM 9A.	CONTROLS AND PROCEDURES		32
	ITEM 9B.	OTHER INFORMATION		32
PART III
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		33
	ITEM 11.	EXECUTIVE COMPENSATION		33
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		33
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		33
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		33
PART IV
	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		34
EX-4.7
EX-13
EX-23
EX-31.1
EX-31.2
EX-32.1

2

SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. This document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “potential,” “continued,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of those words or other comparable words. Any forward-looking statements contained herein including statements related to our outlook for the industry and for our performance for the year 2010 and beyond, are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to:

•  the cyclical nature of the property casualty industry;

•  the long-tail and potentially volatile nature of the insurance and reinsurance business;

•  product demand and pricing;

•  claims development and the process of estimating reserves;

•  investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, merger arbitrage and private equity investments;

•  the impact of significant competition;

•  the potential impact of the economic downturn, and any legislative, regulatory, accounting or other initiatives taken in response to it, on our results and financial condition.

•  the uncertain nature of damage theories and loss amounts;

•  natural and man-made catastrophic losses, including as a result of terrorist activities;

•  the success of our new ventures or acquisitions and the availability of other opportunities;

•  the availability of reinsurance;

•  our retention under the Terrorism Risk Insurance Programs Reauthorization Act of 2007;

•  the ability of our reinsurers to pay reinsurance recoverables owed to us;

•  foreign currency and political risks relating to our international operations;

•  other legislative and regulatory developments, including those related to business practices in the insurance industry;

•  changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies;

•  the availability of dividends from our insurance company subsidiaries;

•  our ability to attract and retain qualified employees; and

•  other risks detailed in this Form 10-K and from time to time in our other filings with the Securities and Exchange Commission (“SEC”).

We describe these risks and uncertainties in greater detail in Item 1A, Risk Factors. These risks and uncertainties could cause our actual results for the year 2010 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our net premiums written and management fees would not necessarily result in commensurate levels of underwriting and operating profits. Our future financial performance is dependent upon factors discussed elsewhere in this Form 10-K and our other SEC filings. Forward-looking statements speak only as of the date on which they are made.

3

PART I

ITEM 1.   BUSINESS

W. R. Berkley Corporation, a Delaware corporation, is an insurance holding company that is among the largest commercial lines writers in the United States and operates in five segments of the property casualty insurance business:

•  Specialty lines of insurance, including excess and surplus lines, premises operations, professional liability and commercial automobile

•  Regional commercial property casualty insurance

•  Alternative markets, including workers’ compensation and the management of self-insurance programs

•  Reinsurance, including treaty, facultative and Lloyd’s business

•  International

Our holding company structure provides us with the flexibility to respond to local or specific market conditions and to pursue specialty business niches. It also allows us to be closer to our customers in order to better understand their individual needs and risk characteristics. Our structure allows us to capitalize on the benefits of economies of scale through centralized capital, investment and reinsurance management, and actuarial, financial and corporate legal staff support. Since 2006, we have formed 18 new operating units to capitalize on various business opportunities.

Unless otherwise indicated, all references in this Form 10-K to “W. R. Berkley,” “we,” “us,” “our,” the “Company” or similar terms refer to W. R. Berkley Corporation together with its subsidiaries.

Our specialty insurance and reinsurance operations are conducted throughout the United States, and, on a limited basis, outside the United States. Regional insurance operations are conducted primarily in the Midwest, Northeast, Southern (excluding Florida and Louisiana), Mid Atlantic, and North Pacific regions of the United States. Alternative markets operations are conducted throughout the United States. Our international operations are conducted primarily in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia and Canada.

4

Net premiums written, as reported based on United States generally accepted accounting principles (“GAAP”), for each of the past five years were as follows:

	Year Ended December 31,
	2009			2008			2007			2006			2005
	(Amounts in thousands)
Net premiums written:
Specialty	$	1,260,451		$	1,453,778		$	1,704,880		$	1,814,479		$	1,827,865
Regional		1,081,100			1,211,096			1,267,451			1,235,302			1,196,487
Alternative markets		589,637			622,185			656,369			651,255			669,774
Reinsurance		423,425			435,108			682,241			892,769			719,540
International		375,482			311,732			265,048			225,188			190,908
Total	$	3,730,095		$	4,033,899		$	4,575,989		$	4,818,993		$	4,604,574
Percentage of net premiums written:
Specialty		33.7	%		36.1	%		37.3	%		37.7	%		39.8	%
Regional		29.0	%		30.0	%		27.7	%		25.6	%		26.0	%
Alternative markets		15.8	%		15.4	%		14.3	%		13.5	%		14.5	%
Reinsurance		11.4	%		10.8	%		14.9	%		18.5	%		15.6	%
International		10.1	%		7.7	%		5.8	%		4.7	%		4.1	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following sections describe our insurance segments and their operating units. These operating units underwrite on behalf of one or more affiliated insurance companies within the group pursuant to underwriting management agreements. Certain operating units are identified by us for descriptive purposes only and are not legal entities.

Twenty-four of our twenty-five insurance company subsidiaries rated by A.M. Best Company, Inc. (“A.M. Best”) have ratings of A+ (Superior) (the second highest rating our of 15 possible ratings) and one is rated A (Excellent) (the third highest rating). A.M. Best’s ratings are based upon factors of concern to policyholders, insurance agents and brokers and are not directed toward the protection of investors. A.M. Best states: “The Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts and do not address any other risk.” A.M. Best reviews its ratings on a periodic basis, and its ratings of the Company’s subsidiaries are therefore subject to change.

All of our twenty-three insurance company subsidiaries rated by Standard & Poor’s (“S&P”) have financial strength ratings of A+ (the seventh highest rating out of twenty-seven possible ratings).

Our Moody’s ratings are A2 for Berkley Insurance Company, Berkley Regional Insurance Company and Admiral Insurance Company (the sixth highest rating out of twenty-one possible ratings).

SPECIALTY

Our specialty segment underwrites complex and sophisticated third-party liability risks, within excess and surplus lines and on an admitted basis. Excess and surplus lines differ from standard market lines in that excess and surplus lines are generally free of rate and form regulation and provide coverage for more complex and hard-to-place risks. The specialty lines of business include premises operations, commercial automobile, property, products liability and professional liability lines. The specialty business is conducted through 18 operating units. The specialty units deliver their products through a variety of distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

5

Admiral Insurance Company (“Admiral”) provides excess and surplus lines coverage that generally involves a moderate to high degree of hazard due to the nature of the class of coverage or type of business insured. Admiral concentrates on general liability, professional liability, property, and excess and umbrella liability lines of business. Admiral’s products are distributed by wholesale brokers. Admiral writes relatively larger risks, with average annual premiums in excess of $18,500 per policy.

Nautilus Insurance Company (“Nautilus”) insures excess and surplus risks for small to medium-sized commercial risks with low to moderate susceptibility to loss. Admitted business is also written through an affiliate, Great Divide Insurance Company. A substantial portion of Nautilus’ business is written on a binding authority basis, subject to certain contractual limitations. Nautilus writes relatively smaller risks, with average annual premiums less than $2,500 per policy.

Monitor Liability Managers, Inc. (“Monitor”) specializes in professional liability insurance, including directors’ and officers’ liability, employment practices liability, lawyers’ professional liability, management liability, non-profit directors’ and officers’ liability and accountants’ professional liability.

Carolina Casualty Insurance Company (“Carolina”) provides commercial insurance products and services to the transportation industry with an emphasis on intermediate and long-haul trucking and various classes of business and public auto. Carolina operates as an admitted carrier in all 50 states and the District of Columbia.

Berkley Specialty Underwriting Managers LLC (“Berkley Specialty”) has three underwriting divisions. The specialty casualty division underwrites excess and surplus lines general liability coverage with an emphasis on products liability. The entertainment and sports division underwrites property casualty insurance products, both on an admitted and non-admitted basis, for the entertainment industry and sports-related organizations. The environmental division underwrites specialty insurance products to environmental customers such as contractors, consultants and owners of sites and facilities.

Berkley Underwriting Partners, LLC (“Berkley Underwriting Partners”) underwrites specialty insurance products through program administrators and managing general underwriters. Berkley Underwriting Partners underwrites business nationwide on an admitted and non-admitted basis.

Berkley Select, LLC (“Select”), which began operations in 2007, specializes in underwriting professional liability insurance with a particular emphasis on lawyers, accountants, medical facilities and miscellaneous E&O exposures. Select’s products are distributed through a limited number of brokers.

Vela Insurance Services, Inc. (“Vela”) underwrites excess and surplus lines casualty business with a primary focus on contractors along with a portfolio of miscellaneous professional liability. Vela underwrites a variety of classes nationwide through a network of appointed excess and surplus lines brokers. Vela also underwrites wrap-up policies for large residential projects, primarily in California, through a managing general agency. Vela writes relatively larger risks, with average annual premiums in excess of $18,800 per policy.

Clermont Specialty Managers, Ltd. (“Clermont”) underwrites package insurance programs, including workers’ compensation, for luxury condominium, cooperative and rental apartment buildings and restaurants in the New York City and Chicago metropolitan areas.

Berkley Aviation, LLC (“Aviation”) underwrites general and specialty aviation insurance. It underwrites coverage for airlines, helicopters, miscellaneous general aviation operations, non-owned aircraft, fixed-base operations, control towers, airports and related businesses.

Berkley Offshore Underwriting Managers, LLC (“BOUM”), which began operations in 2008, underwrites property insurance for oil and gas exploration and production operations worldwide.

American Mining Insurance Company, Inc. (“American Mining”), which was acquired in 2007, specializes in writing workers’ compensation insurance for the mining industry and administers state and workers’ compensation funds.

Berkley Professional Liability, LLC (“Berkley Pro”), which began operations in 2008, underwrites professional liability products including directors’ and officers’ liability insurance.

6

Berkley Life Sciences, LLC (“Berkley Life Science”), which began operations in 2007, underwrites casualty products to the life science marketplace, including medical devices, biotechnology and pharmaceutical companies.

Gemini Transportation Underwriters (“Gemini”), which began operations in February 2009, underwrites excess liability insurance for the railroad and commercial trucking industries.

Berkley Asset Protection Underwriters, LLC (“Berkley Asset”), which began operations in 2008, underwrites coverage for fine arts, jewelers block, fidelity, crime and related risks.

FinSecure, LLC (“FinSecure”), which began operations in 2008, underwrites property and liability insurance coverages for financial institutions and financial services firms, including mortgage impairment property coverage.

Berkley Oil & Gas Speciality Services, LLC (“Berkley Oil & Gas”), which was formed in September 2009, underwrites a multi-line insurance product offering and provides risk control services in the domestic energy sector.

The following table sets forth the percentage of gross premiums written by each specialty unit:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Admiral		20.4	%		24.0	%		28.2	%		28.5	%		27.8	%
Nautilus		16.8	%		17.5	%		18.2	%		17.3	%		17.1	%
Monitor		10.4	%		8.6	%		7.4	%		7.1	%		8.0	%
Carolina		9.3	%		14.8	%		14.9	%		14.3	%		13.6	%
Berkley Specialty		8.5	%		9.6	%		9.2	%		9.0	%		8.6	%
Berkley Underwriting Partners		6.2	%		6.8	%		6.3	%		6.2	%		7.9	%
Select		5.3	%		2.9	%		0.8	%		—			—
Vela		4.4	%		5.6	%		7.9	%		11.9	%		14.1	%
Clermont		4.0	%		3.7	%		3.4	%		3.0	%		2.8	%
Aviation		3.6	%		3.3	%		3.3	%		2.7	%		0.1	%
BOUM		2.7	%		—			—			—			—
American Mining		2.2	%		2.1	%		0.4	%		—			—
Berkley Pro		2.1	%		0.1	%		—			—			—
Berkley Life Science		1.2	%		0.7	%		—			—			—
Gemini		1.2	%		—			—			—			—
Berkley Asset		1.1	%		0.3	%		—			—			—
FinSecure		0.6	%		—			—			—			—
Berkley Oil & Gas		—			—			—			—			—
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth the percentages of gross premiums written, by line, by our specialty insurance operations:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Premises operations		29.5	%		32.8	%		38.0	%		42.2	%		43.7	%
Property		19.0	%		15.1	%		14.4	%		12.2	%		9.1	%
Professional liability		18.1	%		12.9	%		9.9	%		8.9	%		9.9	%
Other		15.5	%		13.0	%		9.9	%		8.6	%		8.5	%
Commercial automobile		10.4	%		16.0	%		15.8	%		15.0	%		15.0	%
Products liability		7.5	%		10.2	%		12.0	%		13.1	%		13.8	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

7

REGIONAL

Our regional companies provide commercial insurance products to customers primarily in 45 states and the District of Columbia. Key clients of this segment are small-to-mid-sized businesses and state and local governmental entities. The regional business is sold through a network of non-exclusive independent agents who are compensated on a commission basis. The regional companies are organized geographically in order to provide them with the flexibility to adapt quickly to local market conditions.

Continental Western Group (“Continental Western Group”) is based in Des Moines, Iowa and operates in 18 states in the Midwest and Pacific Northwest.

Acadia Insurance Company (“Acadia”) is based in Westbrook, Maine and operates in 8 states in the Northeast.

Union Standard Insurance Group (“Union Standard”) is based in Irving, Texas and operates in 9 southern states other than Florida and Louisiana.

Berkley Mid Atlantic Group (“BMAG”) is based in Glen Allen, Virginia and operates in 7 states in the Mid Atlantic region and the District of Columbia.

Berkley Surety Group, Inc. (“Berkley Surety”) offers surety bonds on a nationwide basis through a network of thirteen regional and branch offices.

Berkley North Pacific Group, LLC (“Berkley North Pacific”), formerly a branch of Continental Western Group, became a separate operating unit in August 2009. Berkley North Pacific is based in Seattle, Washington, has an office in Boise Idaho, and operates primarily in the Pacific Northwest region.

Berkley Regional Specialty Insurance Company (“BRSIC”) offers the availability of excess and surplus lines products to independent agents in our regional territories.

Regional Excess Underwriters, LLC (“REU”) is a full service excess and surplus lines brokerage offering commercial coverages through contracted agents throughout the continental United States.

The following table sets forth the percentage of gross premiums written by each region:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Continental Western Group		26.3	%		27.2	%		27.0	%		27.5	%		28.8	%
Acadia		25.1	%		23.8	%		24.3	%		25.1	%		25.7	%
Union Standard		18.5	%		17.7	%		17.0	%		16.6	%		15.2	%
BMAG		16.9	%		15.6	%		15.6	%		15.5	%		14.6	%
Berkley Surety		3.6	%		2.9	%		2.7	%		2.0	%		2.0	%
Berkley North Pacific		3.0	%		5.3	%		6.2	%		5.6	%		5.5	%
BRSIC		1.2	%		1.2	%		1.1	%		0.5	%		—
Assigned risk plans(1)		5.4	%		6.3	%		6.1	%		7.2	%		8.2	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1) Assigned risk premiums are written on behalf of assigned risk plans managed by the Company and 100% reinsured by the respective state-sponsored assigned risk pools.

8

The following table sets forth the percentages of gross premiums written, by line, by our regional insurance operations:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Commercial multi-peril		34.7	%		34.3	%		34.8	%		35.5	%		35.8	%
Automobile		25.3	%		25.5	%		25.8	%		25.3	%		25.4	%
Workers’ compensation		18.1	%		18.2	%		17.8	%		17.9	%		17.6	%
Assigned risk plans		5.4	%		6.3	%		6.1	%		7.2	%		8.2	%
Other		16.5	%		15.7	%		15.5	%		14.1	%		13.0	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

The following table sets forth the percentages of direct premiums written by our regional insurance operations by state:

	Year Ended December 31,
	2009			2008			2007			2006			2005
State
Texas		7.1	%		6.7	%		6.4	%		6.2	%		6.0	%
Massachusetts		6.8	%		6.8	%		7.1	%		7.0	%		7.5	%
Pennsylvania		6.3	%		5.7	%		5.8	%		5.6	%		5.5	%
Kansas		5.3	%		5.8	%		6.1	%		6.8	%		6.7	%
Maine		5.3	%		4.7	%		4.9	%		5.1	%		5.3	%
New Hampshire		5.0	%		4.9	%		5.1	%		5.3	%		5.4	%
Iowa		4.0	%		4.2	%		4.2	%		4.6	%		4.8	%
Nebraska		3.9	%		3.8	%		3.8	%		4.0	%		4.0	%
North Carolina		3.6	%		3.3	%		3.4	%		3.2	%		3.1	%
Mississippi		3.5	%		3.2	%		2.8	%		2.4	%		2.0	%
Colorado		3.2	%		3.7	%		3.7	%		3.3	%		3.1	%
Vermont		3.1	%		3.0	%		3.3	%		3.5	%		3.6	%
Connecticut		3.1	%		3.0	%		2.9	%		2.9	%		2.9	%
Minnesota		3.0	%		3.2	%		3.2	%		3.4	%		3.9	%
New York		2.8	%		2.3	%		2.1	%		1.8	%		1.9	%
Missouri		2.6	%		2.8	%		3.0	%		3.3	%		3.4	%
Virginia		2.6	%		2.4	%		2.4	%		2.6	%		2.8	%
Illinois		2.5	%		2.7	%		1.7	%		2.0	%		1.8	%
Wisconsin		2.4	%		2.5	%		2.5	%		2.7	%		2.9	%
South Dakota		2.4	%		2.3	%		2.2	%		2.6	%		3.0	%
Maryland		2.4	%		2.1	%		2.1	%		2.1	%		1.7	%
Arkansas		2.3	%		2.3	%		2.5	%		2.8	%		2.6	%
Washington		1.8	%		2.8	%		3.1	%		2.3	%		2.0	%
Oklahoma		1.7	%		1.5	%		1.6	%		1.6	%		1.6	%
Tennessee		1.4	%		1.5	%		1.6	%		1.7	%		1.7	%
South Carolina		1.3	%		1.3	%		1.2	%		1.1	%		0.9	%
New Mexico		1.2	%		1.2	%		1.2	%		1.0	%		1.0	%
Other		9.4	%		10.3	%		10.1	%		9.1	%		8.9	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

9

ALTERNATIVE MARKETS

Our alternative markets operations specialize in insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include commercial and governmental entity employers, employer groups, insurers, and other groups or entities seeking alternative ways to manage their exposure to risks. Often, alternative methods of risk management result in our customers choosing to retain more of this risk than they might otherwise retain in the traditional insurance market. In addition to providing insurance products, the alternative markets segment also provides a wide variety of fee-based services, including claims, administrative and consulting services.

Midwest Employers Casualty Company (“MECC”) provides excess workers’ compensation coverage and risk management services to self-insured employers and groups as well as to insurance companies in the workers’ compensation business. Excess workers’ compensation is coverage above an amount retained, or self-insured, by the employer or group and includes large deductible and reinsurance programs.

Key Risk Insurance Company (“Key Risk”) offers primary workers’ compensation insurance principally in the southeastern United States. Key Risk focuses on middle-market accounts in specialty niches and on larger self-insured entities, with a special emphasis on managed care services. An affiliate, Key Risk Management Services, Inc., provides third party administration of self-insured workers’ compensation programs.

Berkley Net Underwriters, LLC (“Berkley Net”) uses a web-based system to allow producers to quote, bind and service insurance policies. Its initial focus is on the workers’ compensation market.

Riverport Insurance Company(“Riverport”) provides property and casualty insurance products and services for human services organizations, governmental and other specialty entities, self-insured companies, associations and purchasing groups.

Preferred Employers Insurance Company (“Preferred Employers”) offers workers’ compensation insurance in California with an emphasis on owner-managed small employers.

Berkley Accident and Health, LLC (“Berkley A&H”) underwrites accident and health insurance and reinsurance products through four primary business segments: medical stop loss, managed care, special risk and group captive.

Berkley Medical Excess Underwriters, LLC (“Medical Excess”) underwrites medical malpractice excess insurance and reinsurance coverage and provides services to hospitals and hospital associations.

Berkley Risk Administrators Company, LLC (“BRAC”) services include third-party claims administration, underwriting risk management, accounting services, loss control and safety consulting, management information systems, regulatory compliance and alternative markets program management.

The following table sets forth the percentages of gross premiums written by each alternative markets unit:

	Year Ended December 31,
	2009			2008			2007			2006			2005
MECC		38.3	%		42.1	%		45.1	%		44.6	%		41.6	%
Key Risk		17.7	%		18.8	%		17.6	%		16.8	%		15.4	%
Berkley Net		10.6	%		6.7	%		3.1	%		0.8	%		—
Riverport		10.2	%		9.3	%		7.7	%		7.0	%		7.6	%
Preferred Employers		8.2	%		8.3	%		11.3	%		16.0	%		20.9	%
Berkley A&H		6.1	%		4.6	%		2.6	%		0.4	%		—
Medical Excess		5.2	%		4.4	%		4.6	%		5.4	%		6.2	%
Assigned risk plans(1)		3.7	%		5.8	%		8.0	%		9.0	%		8.3	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1) Assigned risk premiums are written on behalf of assigned risk plans managed by the Company and 100% reinsured by the respective state-sponsored assigned risk pools.

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The following table sets forth service fees for insurance services business conducted by BRAC and Key Risk Management Services, Inc. (amounts in thousands):

	Year Ended December 31,
	2009		2008		2007		2006		2005
Insurance service fees	$	87,032	$	99,090	$	97,292	$	104,812	$	110,697

REINSURANCE

Our reinsurance operations consist of five operating units, which specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis on behalf of Berkley Insurance Company. Treaty reinsurance is the reinsurance of all or a specified portion or category of risks underwritten by the ceding company during the term of the agreement. Facultative reinsurance is the reinsurance of individual risks whereby a reinsurer generally has the opportunity to analyze and separately underwrite a risk prior to agreeing to be bound.

Signet Star Re, LLC (“Signet Star”) focuses on underwriting specialty lines of business, including professional liability, umbrella, workers’ compensation, commercial automobile and trucking. Signet Star emphasizes casualty excess of loss treaties and seeks significant participations in order to have greater influence over the terms and conditions of coverage. Our treaty business is produced through reinsurance brokers or intermediaries.

Facultative ReSources, Inc. (“Fac Re”) specializes in underwriting individual certificate and program facultative business developed through reinsurance brokers or intermediaries. Its experienced underwriters seek to offset the underwriting and pricing cycles in the underlying insurance business by working closely with ceding company clients to develop appropriate underwriting criteria and through superior risk selection.

Lloyd’s Reinsurance (“Lloyd’s reinsurance”) represents a broad range of mainly short-tail classes of business, which are written through Lloyd’s of London.

B F Re Underwriters, LLC (“BF Re”) is a facultative casualty reinsurance underwriting manager that serves clients through a nationwide network of regional offices. Its business is written directly with ceding companies. BF Re’s primary lines of business are professional liability, excess and surplus, umbrella and medical malpractice.

Berkley Risk Solutions, Inc. (“Berkley Risk Solutions”) underwrites insurance and reinsurance-based financial coverages for insurance companies and self-insured entities.

The following table sets forth the percentages of gross premiums written by each reinsurance unit:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Signet Star		58.9	%		52.2	%		39.6	%		36.1	%		42.2	%
Fac Re		19.4	%		22.1	%		21.2	%		18.9	%		23.1	%
Lloyd’s reinsurance		18.8	%		14.7	%		22.6	%		18.7	%		21.6	%
BF Re		9.4	%		12.2	%		11.2	%		9.6	%		12.3	%
Berkley Risk Solutions		(6.5	)%		(1.2	)%		4.6	%		16.6	%		0.8	%
Hong Kong(1)		—			—			0.8	%		0.1	%		—
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1) Hong Kong has been included in Berkley Re Australia’s reported results in the international segment effective January 1, 2008.

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The following table sets forth the percentages of gross premiums written, by property versus casualty business, by our reinsurance operations:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Casualty		70.2	%		82.8	%		76.2	%		83.2	%		81.2	%
Property		29.8	%		17.2	%		23.8	%		16.8	%		18.8	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

INTERNATIONAL

Our international segment has operations in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia, and Canada. We apply the same long-term strategies that that we use in our domestic operations — decentralized structures with products and services tailored to the local environments.

Berkley International Latinoamérica S.A. (“BILSA”) provides commercial and personal property casualty insurance primarily in Argentina, Brazil and Uruguay.

W. R. Berkley Insurance (Europe), Limited (“Berkley Europe”) is a London-based specialty casualty insurer that writes professional indemnity, directors’ and officers’ liability, medical malpractice, general liability, construction risks and personal accident and travel business principally in the United Kingdom and through its branch offices in Spain, Ireland, Norway and Australia.

Berkley Re Australia (“Australia”), which began operations in 2007, provides property and casualty reinsurance on a treaty and facultative basis in Australia and through its division in Hong Kong.

W. R. Berkley Syndicate Limited(“Syndicate 1967”), which began operations in 2009, underwrites property and accident classes of business through Lloyd’s of London on a worldwide basis.

Berkley Underwriting Managers Canada, Ltd. (“Berkley Canada”), which began operations in 2008, underwrites specialty casualty commercial insurance products, including general liability, products liability and other commercial lines in the Canadian provinces.

The following table sets forth the percentages of gross premiums written for our international operations:

	Year Ended December 31,
	2009			2008			2007			2006			2005
BILSA		41.0	%		51.8	%		46.8	%		42.5	%		39.5	%
Berkley Europe		33.2	%		40.1	%		52.6	%		53.1	%		56.5	%
Australia		17.8	%		8.1	%		—			—			—
Syndicate 1967		5.9	%		—			—			—			—
Berkley Canada		2.1	%		—			—			—			—
Philippines(1)		—			—			0.6	%		4.4	%		4.0	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

(1) The Philippines operation was sold in March 2007.

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Results by Industry Segment

Summary financial information about our operating segments is presented on a GAAP basis in the following table:

	Year Ended December 31,
	2009			2008			2007			2006			2005
	(Amounts in thousands)
Specialty
Revenue	$	1,483,266		$	1,810,813		$	2,006,027		$	1,952,928		$	1,816,483
Income before income taxes	$	220,906		$	375,429		$	516,931		$	479,105		$	345,896
Regional
Revenue	$	1,177,126		$	1,317,796		$	1,347,800		$	1,289,869		$	1,230,793
Income before income taxes	$	106,078		$	108,719		$	215,228		$	201,417		$	216,495
Alternative Markets
Revenue	$	768,683		$	831,622		$	874,899		$	878,531		$	856,792
Income before income taxes	$	162,875		$	201,879		$	248,080		$	291,416		$	238,462
Reinsurance
Revenue	$	487,016		$	635,763		$	893,855		$	993,120		$	849,207
Income before income taxes	$	86,358		$	117,946		$	178,302		$	135,424		$	63,606
International
Revenue	$	351,947		$	322,016		$	284,558		$	248,894		$	208,836
Income before income taxes	$	22,719		$	52,943		$	44,457		$	34,447		$	20,890
Other(1)
Revenue	$	163,140		$	(209,202	)	$	181,258		$	31,489		$	34,728
Loss before income taxes	$	(216,706	)	$	(530,594	)	$	(110,606	)	$	(153,164	)	$	(114,812	)
Total
Revenue	$	4,431,178		$	4,708,808		$	5,588,397		$	5,394,831		$	4,996,839
Income before income taxes	$	382,230		$	326,322		$	1,092,392		$	988,645		$	770,537

(1) Represents corporate revenues, corporate expenses, net investment gains and losses, and revenues and expenses from investments in wholly-owned, non-insurance subsidiaries that are consolidated for financial reporting purposes.

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The table below represents summary underwriting ratios on a GAAP basis for our insurance segments. The combined ratio represents a measure of underwriting profitability, excluding investment income. A number in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Specialty
Loss ratio		61.9	%		60.1	%		57.3	%		59.1	%		62.4	%
Expense ratio		31.1	%		28.4	%		26.7	%		25.0	%		25.1	%
Combined ratio		93.0	%		88.5	%		84.0	%		84.1	%		87.5	%
Regional
Loss ratio		61.4	%		65.4	%		59.1	%		59.7	%		55.8	%
Expense ratio		34.2	%		32.3	%		31.4	%		30.6	%		30.6	%
Combined ratio		95.6	%		97.7	%		90.5	%		90.3	%		86.4	%
Alternative Markets
Loss ratio		63.4	%		62.7	%		59.2	%		53.5	%		59.4	%
Expense ratio		25.8	%		24.2	%		23.1	%		22.1	%		20.1	%
Combined ratio		89.2	%		86.9	%		82.3	%		75.6	%		79.5	%
Reinsurance
Loss ratio		57.9	%		64.7	%		65.3	%		72.0	%		74.1	%
Expense ratio		39.1	%		34.7	%		31.3	%		27.8	%		30.1	%
Combined ratio		97.0	%		99.4	%		96.6	%		99.8	%		104.2	%
International
Loss ratio		59.9	%		61.7	%		62.6	%		64.2	%		66.5	%
Expense ratio		40.2	%		38.9	%		32.4	%		32.0	%		29.6	%
Combined ratio		100.1	%		100.6	%		95.0	%		96.2	%		96.1	%
Total
Loss ratio		61.4	%		62.7	%		59.6	%		61.0	%		62.4	%
Expense ratio		32.8	%		30.4	%		28.5	%		27.0	%		26.9	%
Combined ratio		94.2	%		93.1	%		88.1	%		88.0	%		89.3	%

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Investments

Investment results, before income taxes, were as follows:

	Year Ended December 31,
	2009			2008			2007			2006			2005
	(Dollars in thousands)
Average investments, at cost(1)	$	12,510,160		$	12,429,269		$	12,146,241		$	10,729,483		$	8,999,782
Net investment income(1)	$	552,561		$	537,033		$	634,386		$	549,030		$	385,417
Percent earned on average investments(1)		4.4	%		4.3	%		5.2	%		5.1	%		4.3	%
Net investment gains (losses)(2)	$	(38,408	)	$	(356,931	)	$	49,696		$	9,648		$	17,209
Change in unrealized investment gains (losses)(3)	$	558,626		$	(302,211	)	$	(94,957	)	$	113,539		$	(118,934	)

(1)	Includes investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.
(2)	Represents realized gains and losses on investments not classified as trading securities and investment funds.
(3)	Represents the change in unrealized investment gains (losses) for available for sale securities and investment funds.

For comparison, the following are the coupon returns for selected bond indices and the dividend returns for the S&P 500^® Index:

	Year Ended December 31,
	2009			2008			2007			2006			2005
Barclays U.S. Aggregate Bond Index(a)		4.9	%		5.4	%		5.5	%		5.3	%		4.9	%
Barclays Municipal Bond Index(a)		5.3	%		4.6	%		4.7	%		4.8	%		4.7	%
S&P 500® Index		3.0	%		1.5	%		2.0	%		2.2	%		1.8	%

(a) Formerly Lehman Brothers index.

The percentages of the fixed maturity portfolio categorized by contractual maturity, based on fair value, on the dates indicated, are set forth below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay certain obligations.

	Year Ended December 31,
	2009			2008			2007			2006			2005
1 year or less		5.3	%		3.2	%		7.4	%		11.2	%		10.6	%
Over 1 year through 5 years		27.2	%		22.9	%		19.4	%		17.5	%		13.1	%
Over 5 years through 10 years		27.2	%		29.9	%		30.2	%		26.3	%		26.6	%
Over 10 years		26.0	%		26.6	%		25.1	%		22.8	%		32.1	%
Mortgage-backed securities		14.3	%		17.4	%		17.9	%		22.2	%		17.6	%
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Loss and Loss Adjustment Expense Reserves

To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant

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periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

In examining reserve adequacy, several factors are considered in addition to the economic value of losses. These factors include historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are necessarily based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

The risk and complexity of estimating loss reserves have increased under the current financial market conditions. It is especially difficult to estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Whereas a slowing economy would generally lead to lower inflation or even deflation, increased government spending would generally lead to higher inflation. A change in our assumptions regarding inflation would result in reserve increases or decreases that would be reflected in our earnings in periods in which such assumptions are changed.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing the reserves are well tested over time, some of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties, which are beyond the Company’s control. These variables are affected by external and internal events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events.

We discount our liabilities for excess workers’ compensation business and the workers’ compensation portion of our reinsurance business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting the liabilities. The expected losses and loss expense payout pattern subject to discounting was derived from the Company’s loss payout experience. For non-proportional business, reserves for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. These discount rates range from 2.7% to 6.5% with a weighted average discount rate of 4.4%. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of Insurance of the State of Delaware of 2.7%. The aggregate net discount, after reflecting the effects of ceded reinsurance, is $877,305,000, $846,748,000 and $787,988,000 at December 31, 2009, 2008 and 2007, respectively. The increase in the aggregate discount from 2008 to 2009 and from 2007 to 2008 resulted from the increase in workers’ compensation gross reserves.

To date, known asbestos and environmental claims at our insurance company subsidiaries have not had a material impact on our operations. These claims have not materially impacted us because these subsidiaries generally did not insure the larger industrial companies which are subject to significant environmental exposures.

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Our net reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $36,525,000 and $39,646,000 at December 31, 2009 and 2008, respectively. The Company’s gross reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $53,986,000 and $56,957,000 at December 31, 2009 and 2008, respectively. Net incurred losses and loss expenses for reported asbestos and environmental claims were approximately $(614,000), $440,000 and $7,029,000 in 2009, 2008 and 2007, respectively. Net paid losses and loss expenses for reported asbestos and environmental claims were approximately $2,508,000, $2,384,000 and $2,912,000 in 2009, 2008 and 2007, respectively. The estimation of these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make a reasonable actuarial estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential affect of significant unresolved legal matters, including coverage issues as well as the cost of litigating the legal issues. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

The table below provides a reconciliation of the beginning of year and end of year property casualty reserves for the indicated years (amounts in thousands):

	2009			2008			2007
Net reserves at beginning of year	$	8,122,586		$	7,822,897		$	6,947,597
Net reserves of company acquired		—			—			68,392
Net provision for losses and loss expenses(a):
Claims occurring during the current year(b)		2,518,849			2,829,830			2,837,647
Decrease in estimates for claims occurring in prior years(c)(d)		(234,008	)		(195,710	)		(105,879	)
Decrease in discount for prior years		51,866			54,494			46,808
		2,336,707			2,688,614			2,778,576
Net payments for claims:
Current year		570,080			644,213			538,364
Prior years		1,741,431			1,744,712			1,433,304
		2,311,511			2,388,925			1,971,668
Net reserves at end of year		8,147,782			8,122,586			7,822,897
Ceded reserves at end of year		923,889			877,010			855,137
Gross reserves at end of year	$	9,071,671		$	8,999,596		$	8,678,034

(a)	Net provision for loss and loss expenses excludes $47,000 and $1,002,000 in 2008 and 2007, respectively, relating to the policyholder benefits incurred on life insurance that are included in the statements of income.
(b)	Claims occurring during the current year are net of discounts of $80,455,000, $97,698,000 and $117,177,000 in 2009, 2008 and 2007, respectively.
(c)	The decrease in estimates for claims occurring in prior years is net of discounts of $1,968,000, $15,556,000 and $17,736,000 in 2009, 2008 and 2007, respectively. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $232,040,000 in 2009, $180,154,000 in 2008 and $88,143,000 in 2007.
(d)	Approximately $44 million of the favorable reserve development in 2009 was fully offset by a reduction in earned premiums. The favorable reserve development, net of premium offsets, was $190 million.

Also, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further information regarding the decrease in estimates for claims occurring in prior years.

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A reconciliation between the reserves as of December 31, 2009 as reported in the accompanying consolidated GAAP financial statements and those reported on the basis of statutory accounting principles (“SAP”) is as follows (amounts in thousands):

Net reserves reported on a SAP basis	$	8,051,598
Additions (deductions) to statutory reserves:
International property & casualty reserves		323,207
Loss reserve discounting(1)		(224,942	)
Other		(2,081	)
Net reserves reported on a GAAP basis		8,147,782
Ceded reserves reclassified as assets		923,889
Gross reserves reported on a GAAP basis	$	9,071,671

(1) For statutory purposes, we use a discount rate of 2.7% for non-proportional business as permitted by the Department of Insurance of the State of Delaware.

The following table presents the development of net reserves for 1999 through 2009. The top line of the table shows the estimated reserves for unpaid losses and loss expenses recorded at the balance sheet date for each of the indicated years. This represents the estimated amount of losses and loss expenses for claims arising in all prior years that are unpaid at the balance sheet date, including losses that had been incurred but not reported to us. The upper portion of the table shows the re-estimated amount of the previously recorded reserves based on experience as of the end of each succeeding year. The estimate changes as more information becomes known about the frequency and severity of claims for individual years.

The “cumulative redundancy (deficiency)” represents the aggregate change in the estimates over all prior years. For example, the 1999 reserves have developed a $688 million deficiency over ten years. That amount has been reflected in income over the ten years. The impact on the results of operations of the past three years of changes in reserve estimates is shown in the reconciliation tables above. It should be noted that the table presents a “run off” of balance sheet reserves, rather than accident or policy year loss development. Therefore, each amount in the table includes the effects of changes in reserves for all prior years. For example, assume a claim that occurred in 1999 is reserved for $2,000 as of December 31, 1999. Assuming this claim estimate was changed in 2009 to $2,300, and was settled for $2,300 in 2008, the $300 deficiency would appear as a deficiency in each year from 1999 through 2009.

Year Ended December 31,	1999			2000			2001			2002			2003			2004			2005			2006		2007		2008		2009
	(Amounts in millions)
Net reserves, discounted	$	1,724		$	1,818		$	2,033		$	2,323		$	3,505		$	4,723		$	5,867		$	6,948	$	7,823	$	8,123	$	8,148
Reserve discount		196			223			243			293			393			503			575			700		788		846		877
Net reserves, undiscounted	$	1,920		$	2,041		$	2,276		$	2,616		$	3,898		$	5,226		$	6,442		$	7,648	$	8,611	$	8,969	$	9,025
Net reserves re-estimated as of:
One year later	$	1,934		$	2,252		$	2,450		$	2,889		$	4,220		$	5,440		$	6,499		$	7,560	$	8,431	$	8,737
Two years later		2,082			2,397			2,671			3,242			4,552			5,588			6,578			7,494		8,239
Three years later		2,203			2,520			2,932			3,611			4,720			5,763			6,592			7,363
Four years later		2,260			2,634			3,233			3,769			4,949			5,816			6,556
Five years later		2,330			2,841			3,339			3,982			5,041			5,834
Six years later		2,449			2,889			3,534			4,069			5,082
Seven years later		2,460			3,033			3,599			4,112
Eight years later		2,564			3,110			3,624
Nine years later		2,600			3,123
Ten years later		2,608
Cumulative redundancy (deficiency ), undiscounted	$	(688	)	$	(1,082	)	$	(1,348	)	$	(1,496	)	$	(1,184	)	$	(608	)	$	(114	)	$	285	$	372	$	232		—

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Year Ended December 31,	1999		2000		2001		2002		2003		2004		2005		2006		2007		2008		2009
	(Amounts in millions)
Cumulative amount of net liability paid through:
One year later	$	584	$	702	$	794	$	599	$	929	$	1,185	$	1,321	$	1,433	$	1,745	$	1,741
Two years later		1,011		1,255		1,191		1,216		1,749		2,107		2,342		2,640		3,010
Three years later		1,426		1,501		1,594		1,792		2,388		2,837		3,202		3,556
Four years later		1,567		1,722		1,971		2,223		2,900		3,386		3,838
Five years later		1,699		1,964		2,245		2,552		3,273		3,817
Six years later		1,831		2,138		2,467		2,814		3,585
Seven years later		1,934		2,276		2,642		3,035
Eight years later		2,021		2,401		2,808
Nine years later		2,109		2,517
Ten years later		2,164

The following table presents the development of gross reserves for 1999 through 2009.

Year Ended December 31,	1999			2000			2001			2002			2003			2004			2005			2006		2007		2008		2009
	(Amounts in millions)
Net reserves, discounted	$	1,724		$	1,818		$	2,033		$	2,323		$	3,505		$	4,723		$	5,867		$	6,947	$	7,823	$	8,123	$	8,148
Ceded reserves		617			658			731			845			687			727			845			837		855		877		924
Gross reserves, discounted		2,341			2,476			2,764			3,168			4,192			5,450			6,712			7,784		8,678		9,000		9,072
Reserve discount		250			286			324			384			462			573			654			761		867		944		944
Gross reserves, undiscounted	$	2,591		$	2,762		$	3,088		$	3,552		$	4,654		$	6,023		$	7,366		$	8,545	$	9,545	$	9,944	$	10,016
Gross reserves re-estimated as of:
One year later	$	2,653		$	2,827		$	3,153		$	3,957		$	5,030		$	6,241		$	7,406		$	8,509	$	9,396	$	9,696
Two years later		2,556			2,730			3,461			4,353			5,380			6,382			7,529			8,454		9,178
Three years later		2,385			2,900			3,777			4,744			5,546			6,600			7,561			8,300
Four years later		2,465			3,054			4,103			4,885			5,807			6,670			7,508
Five years later		2,564			3,267			4,192			5,132			5,915			6,680
Six years later		2,684			3,296			4,428			5,226			5,956
Seven years later		2,682			3,476			4,500			5,275
Eight years later		2,814			3,555			4,538
Nine years later		2,860			3,586
Ten Years later		2,885
Gross cumulative redundancy (deficiency)	$	(294	)	$	(824	)	$	(1,450	)	$	(1,723	)	$	(1,302	)	$	(657	)	$	(142	)	$	245	$	367	$	248		—

Reinsurance

We follow a common industry practice of reinsuring a portion of our exposures and paying to reinsurers a part of the premiums received on the policies that we write. Reinsurance is purchased principally to reduce net liability on individual risks and to protect against catastrophic losses. Although reinsurance does not legally discharge an insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer contractually liable to the insurer to the extent of the reinsurance coverage. We monitor the financial condition of our reinsurers and attempt to place our coverages only with substantial, financially sound carriers. As a result, generally the reinsurers who reinsure our casualty insurance must have an A.M. Best rating of “A (Excellent)” or better with at least $500 million in policyholder surplus and the reinsurers who cover our property insurance must have an A.M. Best rating of “A-(Excellent)” or better with at least $250 million in policyholder surplus.

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Regulation

Our insurance subsidiaries are subject to varying degrees of regulation and supervision in the jurisdictions in which they do business, and the Company believes that it is in compliance in all material respects with such regulations. Our insurance subsidiaries are subject to statutes which delegate regulatory, supervisory and administrative powers to state insurance commissioners. This regulation relates to such matters as the standards of solvency which must be met and maintained; the licensing of insurers and their agents; the nature of and limitations on investments; deposits of securities for the benefit of policyholders; approval of certain policy forms and premium rates; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; establishment and maintenance of reserves for unearned premiums and losses; and requirements regarding numerous other matters. Our property casualty subsidiaries, other than excess and surplus and reinsurance subsidiaries, must generally file all rates with the insurance department of each state in which they operate. Our excess and surplus and reinsurance subsidiaries generally operate free of rate and form regulation.

In addition to regulatory supervision of our insurance subsidiaries, we are subject to state statutes governing insurance holding company systems. Typically, such statutes require that we periodically file information with the appropriate state insurance commissioner, including information concerning our capital structure, ownership, financial condition and general business operations. Under the terms of applicable state statutes, any person or entity desiring to purchase more than a specified percentage (commonly 10%) of our outstanding voting securities would be required to obtain prior regulatory approval of the purchase. Under Alabama law, which is applicable to us due to our ownership of American Mining Insurance Company, Inc., an Alabama domiciled insurance company, the acquisition of more than 5% of our capital stock is subject to prior regulatory approval. Further, state insurance statutes typically place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect their solvency. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.”

Various state and federal organizations, including Congressional committees and the National Association of Insurance Commissioners (“NAIC”), have been conducting reviews into various aspects of the insurance business. The insurance industry has been the subject of scrutiny with respect to insurance broker and agent compensation arrangements and sales practices. State and federal regulators have conducted proceedings relating to compensation and bidding arrangements between producers and issuers of insurance products, and alleged unsuitable sales practices. No assurance can be given that future legislative or regulatory changes resulting from such activities will not adversely affect our insurance subsidiaries.

The NAIC utilizes a Risk Based Capital (“RBC”) formula that is designed to measure the adequacy of an insurer’s statutory surplus in relation to the risks inherent in its business. The RBC formula develops a risk adjusted target level of adjusted statutory capital by applying certain factors to various asset, premium and reserve items. The RBC Model Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to actually placing the insurer under regulatory control. The RBC of each of our domestic insurance subsidiaries was above the authorized RBC control level as of December 31, 2009.

The Gramm-Leach-Bliley Act, or Financial Services Modernization Act of 1999 (the “Act”), was enacted in 1999 and significantly affects the financial services industry, including insurance companies, banks and securities firms. The Act modifies federal law to permit the creation of financial holding companies, which, as regulated by the Act, can maintain cross-holdings in insurance companies, banks and securities firms to an extent not previously allowed. The Act also permits or facilitates certain types of combinations or affiliations for financial holding companies. The Act establishes a functional regulatory scheme under which state insurance departments will maintain primary regulation over insurance activities, subject to provisions for certain federal preemptions.

Our insurance company subsidiaries are also subject to assessment by state guaranty funds when an insurer in a particular jurisdiction has been judicially declared insolvent and insufficient funds are available from the liquidated company to pay policyholders and claimants. The protection afforded under a state’s guaranty fund to policyholders of the insolvent insurer varies from state to state. Generally, all licensed property casualty insurers are considered to be members of the fund, and assessments are based upon their pro rata share of direct written premiums. The NAIC

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Model Post-Assessment Guaranty Fund Act, which many states have adopted, limits assessments to an insurer to 2% of its subject premium and permits recoupment of assessments through rate setting. Likewise, several states (or underwriting organizations of which our insurance subsidiaries are required to be members) have limited assessment authority with regard to deficits in certain lines of business.

We receive funds from our insurance company subsidiaries in the form of dividends and management fees for certain management services. Annual dividends in excess of maximum amounts prescribed by state statutes may not be paid without the approval of the insurance commissioner of the state in which an insurance subsidiary is domiciled.

The Terrorism Risk Insurance Act of 2002 became effective November 26, 2002, was amended on December 22, 2005 by the Terrorism Risk Insurance Extension Act of 2005 and further amended effective December 26, 2007 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (collectively, “TRIA”). TRIA established a Federal program that provides for a system of shared public and private compensation for insured losses resulting from acts of terrorism. The program is effective through December 31, 2014. TRIA is applicable to almost all commercial lines of property and casualty insurance but excludes commercial auto, burglary and theft, surety, professional liability and farm owners’ multi-peril insurance. Insurers with direct commercial property and casualty insurance exposure in the United States are required to participate in the program and make available coverage for certified acts of terrorism. The most recent amendment to TRIA broadened the definition of certified acts to include domestic terrorism. Federal participation will be triggered under TRIA when the Secretary of Treasury certifies an act of terrorism. Under the program, the federal government will pay 85% of an insurer’s covered losses in excess of the insurer’s applicable deductible. The insurer’s deductible is based on 20% percent of earned premium for the prior year for covered lines of commercial property and casualty insurance. Based on our 2009 earned premiums, our deductible under TRIA during 2010 will be approximately $512 million. The federal program will not pay losses for certified acts unless such losses exceed $100 million. TRIA limits the federal government’s share of losses at $100 billion for a program year. In addition, an insurer that has satisfied its deductible is not liable for the payment of losses in excess of the $100 billion cap.

Competition

The property casualty insurance and reinsurance businesses are highly competitive, with over 2,000 insurance companies transacting business in the United States. We compete directly with a large number of these companies. Our strategy in this highly fragmented industry is to seek specialized areas or geographic regions where our insurance subsidiaries can gain a competitive advantage by responding quickly to changing market conditions. Our subsidiaries establish their own pricing practices. Such practices are based upon a Company-wide philosophy to price products with the intent of making an underwriting profit. Competition in our industry generally changes with profitability and has increased since 2004. As a result of increased competition, we have experienced both downward pressure on pricing for many of our insurance lines as well as demands by insureds and cedants for better terms and conditions.

Competition for specialty and alternative markets business comes from other specialty insurers, regional carriers, large national multi-line companies and reinsurers. Standard carriers have increasingly competed for excess and surplus business.

Competition for the reinsurance business comes from domestic and foreign reinsurers, which produce their business either on a direct basis or through the broker market. These competitors include Swiss Re, Munich Re, Berkshire Hathaway, Transatlantic Reinsurance, and Partner Re.

The regional property casualty subsidiaries compete with mutual and other regional stock companies as well as national carriers. Direct writers of property casualty insurance compete with the regional subsidiaries by writing insurance through their salaried employees, generally at a lower acquisition cost than through independent agents such as those used by the Company.

The international operations compete with native insurance operations both large and small, which may be related to government entities, as well as with branches or local subsidiaries of multinational companies.

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Competition from insurers based in Bermuda and other tax advantaged jurisdictions has increased over the last several years, including from domestic based subsidiaries of foreign based entities especially as to excess and surplus lines business.

Employees

As of February 16, 2010, we employed 6,072 individuals. Of this number, our subsidiaries employed 5,978 persons and the remaining 94 persons were employed at the parent company.

Other Information about the Company’s Business

We maintain an interest in the acquisition or start up of complementary businesses and continue to evaluate possible acquisitions and new ventures on an ongoing basis. In addition, our insurance subsidiaries develop new coverages or lines of business to meet the needs of insureds.

Seasonal weather variations and other events affect the severity and frequency of losses sustained by the insurance and reinsurance subsidiaries. Although the effect on our business of catastrophes such as tornadoes, hurricanes, hailstorms, earthquakes and terrorist acts may be mitigated by reinsurance, they nevertheless can have a significant impact on the results of any one or more reporting periods.

We have no customer which accounts for 10 percent or more of our consolidated revenues.

Compliance by W. R. Berkley and its subsidiaries with federal, state and local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to protection of the environment, has not had a material effect upon our capital expenditures, earnings or competitive position.

The Company’s internet address is www.wrberkley.com. The information on our website is not incorporated by reference in this annual report on Form 10-K. The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are accessible free of charge through this website as soon as reasonably practicable after they have been electronically filed with or furnished to the SEC.

ITEM 1A.   RISK FACTORS

Our businesses face significant risks. If any of the events or circumstances described as risks below actually occurs, our businesses, results of operations or financial condition could be materially and adversely affected.

Risks Relating to Our Industry

Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry.

The results of companies in the property casualty insurance industry historically have been subject to significant fluctuations and uncertainties. The demand for insurance is influenced primarily by general economic conditions, while the supply of insurance is directly related to available capacity. Over the past several years, we have faced increased competition in our business, including as a result of an increased flow of capital into the insurance and reinsurance industry, with both new entrants and existing insurers seeking to gain market share. This has resulted in decreased premium rates and at times less favorable contract terms and conditions. The adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural disasters, regulatory measures and court decisions that define and expand the extent of coverage and the effects of economic inflation on the amount of compensation due for injuries or losses. In addition, investment rates of return may impact rate adequacy. These factors can have a significant impact on ultimate profitability because a property casualty insurance policy is priced before its costs are known as premiums usually are determined long before claims are reported. These factors could produce results that would have a negative impact on our results of operations and financial condition.

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Our actual claims losses may exceed our reserves for claims, which may require us to establish additional reserves.

Our gross reserves for losses and loss expenses were approximately $9 billion as of December 31, 2009. Our loss reserves reflect our best estimates of the cost of settling claims and related expenses with respect to insured events that have occurred.

Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claims administration will cost for claims that have occurred, whether known or unknown. The major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, inflation, judicial theories of liability, reinsurance coverage, legislative changes and other factors, including the actions of third parties, which are beyond our control.

The inherent uncertainties of estimating reserves are greater for certain types of liabilities, where long periods of time elapse before a definitive determination of liability is made and settlement is reached. In periods with increased economic volatility, such as under the current financial market conditions, it becomes more difficult to accurately predict claim costs. It is especially difficult to estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Reserve estimates are continually refined in an ongoing process as experience develops and further claims are reported and settled. Adjustments to reserves are reflected in the results of the periods in which such estimates are changed. Because setting reserves is inherently uncertain, we cannot assure that our current reserves will prove adequate in light of subsequent events. Should we need to increase our reserves, our pre-tax income for the reporting period would decrease by a corresponding amount.

We decreased our estimates for claims occurring in prior years by $234 million in 2009, $196 million in 2008 and $106 million in 2007, and increased our estimates by $27 million in 2006 and $187 million in 2005. We, along with the property casualty insurance industry in general, have experienced higher than expected losses for certain types of business written from 1999 to 2002. Although our reserves reflect our best estimate of the costs of settling claims, we cannot assure you that our claim estimates will not need to be increased in the future.

We discount our reserves for excess and assumed workers’ compensation business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting liabilities. The expected loss and loss expense payout pattern subject to discounting is derived from our loss payout experience. Changes in the loss and loss expense payout pattern are recorded in the period they are determined. If the actual loss payout pattern is shorter than anticipated, the discount will be reduced and pre-tax income will decrease by a corresponding amount.

As a property casualty insurer, we face losses from natural and man-made catastrophes.

Property casualty insurers are subject to claims arising out of catastrophes that may have a significant effect on their results of operations, liquidity and financial condition. Catastrophe losses have had a significant impact on our results. In addition, through our participation in certain Lloyd’s syndicates, we have additional exposure to catastrophic losses. For example, weather-related losses were $63 million in 2009, $114 million in 2008, $34 million in 2007, $39 million in 2006 and $99 million in 2005.

Catastrophes can be caused by various events, including hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter weather and fires, as well as terrorist activities. The incidence and severity of catastrophes are inherently unpredictable but have increased in recent years. The extent of losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event. Some catastrophes are restricted to small geographic areas; however, hurricanes and earthquakes may produce significant damage in large, heavily populated areas. Catastrophes can cause losses in a variety of our property and casualty lines, and most of our past catastrophe-related claims have resulted from severe storms. Seasonal weather variations or physical impacts of climate change may affect the severity and frequency of our losses. Insurance companies are not permitted to reserve for a catastrophe until it has occurred. It is therefore possible that a catastrophic event or

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multiple catastrophic events could produce significant losses and have a material adverse effect on our results of operations and financial condition.

We face significant competitive pressures in our businesses, which have reduced premium rates and could harm our ability to maintain or increase our profitability and premium volume.

We compete with a large number of other companies in our selected lines of business. We compete, and will continue to compete, with major U.S. and non-U.S. insurers and reinsurers, other regional companies, as well as mutual companies, specialty insurance companies, underwriting agencies and diversified financial services companies, some of which have implicit or explicit government support. Competitiveness in our businesses is based on many factors, including premium charges, ratings assigned by independent rating agencies, commissions paid to producers, the perceived financial strength of the company, other terms and conditions offered, services provided, speed of claims payment and reputation and experience in the lines to be written.

Some of our competitors, particularly in the reinsurance business, have greater financial and marketing resources than we do. These competitors within the reinsurance segment include Swiss Re, Munich Re, Berkshire Hathaway, Transatlantic Reinsurance, and Partner Re. We expect that perceived financial strength, in particular, will become more important as customers seek high quality reinsurers. Certain of our competitors operate from Bermuda or other tax advantaged or less regulated jurisdictions that may provide them with additional competitive and pricing advantages.

Over the past several years, we have faced increased competition in our business, particularly in our reinsurance segment, as increased supply has led to reduced prices. Our specialty segment increasingly encounters competition from admitted companies seeking to increase market share. We expect to continue to face strong competition in these and our other lines of business and may continue to experience reduced pricing and weaker terms and conditions.

This intense competition could cause the supply and/or demand for insurance or reinsurance to change, which could affect our ability to price our products at attractive rates and retain existing business or write new products at adequate rates or on acceptable terms and conditions. If we are unable to retain existing business or write new business at adequate rates, our results of operations could be materially and adversely affected.

Current conditions in the financial markets and the ongoing economic downturn have had and may continue to have a negative impact on our results of operations and financial condition, particularly if such conditions continue.

The significant volatility and uncertainty experienced in financial markets around the world during the past several years and the ongoing economic downturn have continued. Although the U.S. and various foreign governments have taken various actions to try to stabilize the financial markets, it is unclear whether those actions will be effective. Therefore, volatility and uncertainty in the financial markets and the resulting negative economic impact may continue for some time.

While we monitor conditions in the financial markets, we cannot predict future conditions or their impact on our results of operations and financial condition. Depending on conditions in the financial markets, we could incur additional realized and unrealized losses in our investment portfolio in future periods, and financial market volatility and uncertainty and an economic downturn could have a significant negative impact on third parties that we do business with, including insureds and reinsurers.

We, as a primary insurer, may have significant exposure for terrorist acts.

To the extent an act of terrorism, whether a domestic or foreign act, is certified by the Secretary of Treasury, we may be covered under the Terrorism Risk Insurance Act of 2002, as amended on December 22, 2005 and further amended on December 26, 2007 (“TRIA”), for up to 85% of our losses for certain property/casualty lines of insurance. However, any such coverage would be subject to a mandatory deductible based on 20% of earned premium for the prior year for the covered lines of commercial property and casualty insurance. Based on our 2009 earned premiums, our deductible under TRIA during 2010 is approximately $512 million. TRIA is in effect through

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December 31, 2014 unless extended or replaced by a similar program. The coverage provided under TRIA does not apply to reinsurance that we write.

Our earnings could be more volatile because of our significant level of retentions.

As compared to a number of our competitors, we maintain significant retention levels in premiums written. We purchase less reinsurance, the process by which we transfer, or cede, part of the risk we have assumed to a reinsurance company, thereby retaining more risk. As a result, our earnings could be more volatile and increased severities are more likely to have a material adverse effect on our results of operations and financial condition.

We are subject to extensive governmental regulation, which increases our costs and could restrict the conduct of our business.

We are subject to extensive governmental regulation and supervision. Most insurance regulations are designed to protect the interests of policyholders rather than stockholders and other investors. This system of regulation, generally administered by a department of insurance in each state in which we do business, relates to, among other things:

•  standards of solvency, including risk-based capital measurements;

•  restrictions on the nature, quality and concentration of investments;

•  requiring certain methods of accounting;

•  rate and form regulation pertaining to certain of our insurance businesses; and

•  potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.

State insurance departments conduct periodic examinations of the affairs of insurance companies and require the filing of annual and other reports relating to the financial condition of insurance companies, holding company issues and other matters. Federal financial services modernization legislation and legislative and regulatory initiatives taken or which may be taken in response to the current conditions in the financial markets and the ongoing economic downturn may lead to additional federal regulation of the insurance industry in the coming years. We may be subject to potentially increased federal oversight as a financial institution. Also, foreign governments regulate our international operations.

The insurance industry has been the subject of scrutiny with respect to insurance broker and agent compensation arrangements and sales practices. The New York State Attorney General and other state and federal regulators have conducted investigations and other proceedings relating to compensation and bidding arrangements between producers and issuers of insurance products, and alleged unsuitable sales practices by producers on behalf of either the issuer or the purchaser. The practices included, among other things that certain brokers and insurers may have engaged in anti-competitive practices in connection with insurance premium quotes. New investigative proceedings may be commenced in the future. These investigations and proceedings could result in legal precedents and new industry-wide practices or legislation, rules or regulations that could significantly affect the insurance industry and the Company.

We may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations. Also, some regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or monetarily penalize us. Also, changes in the level of regulation of the insurance industry, whether federal, state or foreign, or changes in laws or regulations themselves or interpretations by regulatory authorities, restrict the conduct of our business.

In certain of our insurance businesses, the rates we charge our policyholders are subject to regulatory approval. Certain lines of business are subject to a greater degree of regulatory scrutiny than others. For example, the workers’

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compensation business is highly regulated. For 2009, approximately 16.1% of our net premiums written represented primary workers’ compensation business. Over the past several years, rates for primary workers’ compensation business written in the State of California have declined significantly as a result of workers’ compensation reform. Of our net premiums written during 2009, approximately 1.4% represented primary workers’ compensation business written in the State of California.

Risks Relating to Our Business

We cannot guarantee that our reinsurers will pay in a timely fashion, if at all, and, as a result, we could experience losses.

We purchase reinsurance by transferring part of the risk that we have assumed, known as ceding, to a reinsurance company in exchange for part of the premium we receive in connection with the risk. Although reinsurance makes the reinsurer contractually liable to us to the extent the risk is transferred or ceded to the reinsurer, it does not relieve us, the reinsured, of our liability to our policyholders. Our reinsurers may not pay the reinsurance recoverables that they owe to us or they may not pay such recoverables on a timely basis. Accordingly, we bear credit risk with respect to our reinsurers, and if our reinsurers fail to pay us, our financial results would be adversely affected. Underwriting results and investment returns of some of our reinsurers may affect their future ability to pay claims. As of December 31, 2009, the amount due from our reinsurers was approximately $973 million, including amounts due from state funds and industry pools. Certain of these amounts due from reinsurers are secured by letters of credit or by funds held in trust on our behalf.

We are rated by A.M. Best, Standard & Poor’s, and Moody’s, and a decline in these ratings could affect our standing in the insurance industry and cause our sales and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance companies. Certain of our insurance company subsidiaries are rated by A.M. Best, Standard & Poor’s and Moody’s Investors. Our ratings are subject to periodic review, and we cannot assure you that we will be able to retain those ratings.

If our ratings are reduced from their current levels by A.M. Best, Standard & Poor’s or Moody’s, our competitive position in the insurance industry could suffer and it would be more difficult for us to market our products. A significant downgrade could result in a substantial loss of business as policyholders move to other companies with higher claims-paying and financial strength ratings.

If market conditions cause reinsurance to be more costly or unavailable, we may be required to bear increased risks or reduce the level of our underwriting commitments.

As part of our overall risk and capacity management strategy, we purchase reinsurance for certain amounts of risk underwritten by our insurance company subsidiaries, especially catastrophe risks. We also purchase reinsurance on risks underwritten by others which we reinsure. Market conditions beyond our control determine the availability and cost of the reinsurance protection we seek to purchase, which may affect the level of our business and profitability. Our reinsurance contracts are generally subject to annual renewal. We may be unable to maintain our current reinsurance contracts or to obtain other reinsurance contracts in adequate amounts and at favorable rates. In addition, we may be unable to obtain reinsurance on terms acceptable to us relating to certain lines of business that we intend to begin writing. If we are unable to renew our expiring contracts or to obtain new reinsurance contracts, either our net exposures would increase or, if we are unwilling to bear an increase in net exposures, we would have to reduce the level of our underwriting commitments, especially catastrophe exposed risks.

Depending on conditions in the financial markets and the ongoing economic downturn, we may be unable to raise debt or equity capital if needed.

If the current conditions in the financial markets and the ongoing economic downturn continue, we may be unable to access debt or equity capital on acceptable terms if needed, which could have a negative impact on our ability to invest in our insurance company subsidiaries and/or to take advantage of opportunities to expand our business, such as possible acquisitions and new ventures.

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Our international operations expose us to investment, political and economic risks, including foreign currency and credit risk.

Our expanding international operations in the United Kingdom, Continental Europe, South America, Australia, Southeast Asia and Canada expose us to investment, political and economic risks, including foreign currency and credit risk. Changes in the value of the U.S. dollar relative to other currencies could have an adverse effect on our results of operations and financial condition.

Our investments in non-U.S.-denominated securities are subject to fluctuations in non-U.S. securities and currency markets, and those markets can be volatile. Non-U.S. currency fluctuations also affect the value of any dividends paid by our non-U.S. subsidiaries to their parent companies in the U.S.

We may not find suitable acquisition candidates or new insurance ventures and even if we do, we may not successfully integrate any such acquired companies or successfully invest in such ventures.

As part of our present strategy, we continue to evaluate possible acquisition transactions and the start-up of complementary businesses on an ongoing basis, and at any given time we may be engaged in discussions with respect to possible acquisitions and new ventures. We cannot assure you that we will be able to identify suitable acquisition transactions or insurance ventures, that such transactions will be financed and completed on acceptable terms or that our future acquisitions or start-up ventures will be successful. The process of integrating any companies we do acquire or investing in new ventures may have a material adverse effect on our results of operations and financial condition.

We may be unable to attract and retain qualified employees.

We depend on our ability to attract and retain experienced underwriting talent and other skilled employees who are knowledgeable about our business. If the quality of our underwriting team and other personnel decreases, we may be unable to maintain our current competitive position in the specialized markets in which we operate, and be unable to expand our operations into new markets.

Risks Relating to Our Investments

A significant amount of our assets is invested in fixed maturity securities and is subject to market fluctuations.

Our investment portfolio consists substantially of fixed maturity securities. As of December 31, 2009, our investment in fixed maturity securities was approximately $11.3 billion, or 87% of our total investment portfolio. As of that date, our portfolio of fixed maturity securities consisted of the following types of securities: U.S. Government securities (15%); state and municipal securities (52%); corporate securities (15%); mortgage-backed securities (14%) and foreign government bonds (4%).

The fair value of these assets and the investment income from these assets fluctuate depending on general economic and market conditions. The fair value of fixed maturity securities generally decreases as interest rates rise. Conversely, if interest rates decline, investment income earned from future investments in fixed maturity securities will be lower. In addition, some fixed maturity securities, such as mortgage-backed and other asset-backed securities, carry prepayment risk as a result of interest rate fluctuations.

The value of investments in fixed maturity securities is subject to impairment as a result of deterioration in the credit worthiness of the issuer, default by the issuer (including states and municipalities) in the performance of its obligations in respect of the securities and/or increases in market interest rates. To a large degree, the credit risk we face is a function of the economy; accordingly, we face a greater risk in an economic downturn or recession. Additionally, our investments are subject to losses as a result of a general decrease in commercial and economic activity for an industry sector in which we invest, as well as risks inherent in particular securities.

Although we attempt to manage these risks through the use of investment guidelines and other oversight mechanisms and by diversifying our portfolio and emphasizing preservation of principal, our efforts may not be successful. Impairments, defaults and/or rate increases could reduce our net investment income and net realized

27

investment gains or result in investment losses. Investment returns are currently, and will likely continue to remain, under pressure due to the significant volatility and disruption currently experienced in the financial markets, current and continuing economic uncertainty, more generally, and the shape of the yield curve. As a result, our exposure to the risks described above could materially and adversely affect our results of operations.

We invest some of our assets in equity securities, merger arbitrage securities, investment funds, private equity and real estate related assets, which may decline in value.

We invest a portion of our investment portfolio in equity securities, merger arbitrage securities, investment funds, private equity and real estate related assets. At December 31, 2009, our investment in these assets was approximately $1.8 billion, or 13%, of our investment portfolio. We reported provisions for other than temporary impairments in the value of these assets of approximately $63 million in 2009 and $427 million in 2008, and losses from investment funds of $174 million in 2009.

Merger and convertible arbitrage trading securities were $549 million, or 4%, of our investment portfolio at December 31, 2009. Merger arbitrage involves investing in the securities of publicly held companies that are the targets in announced tender offers and mergers. Merger arbitrage differs from other types of investments in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period, usually four months or less. Our merger arbitrage positions are exposed to the risk associated with the completion of announced deals, which are subject to regulatory as well as political and other risks.

Investments in publicly traded real estate investment trusts, real estate investment funds and limited partnerships and loans receivable were $701 million, or 5%, of our investment portfolio at December 31, 2009. The values of our real estate related investments are subject to fluctuations based on changes in the economy in general and real estate valuations in particular. These investments have been subject to significant volatility as a result of the current conditions in the financial markets. In addition, our investments in real estate related assets are less liquid than our other investments.

Risks Relating to Purchasing Our Securities

We are an insurance holding company and, therefore, may not be able to receive dividends in needed amounts.

As an insurance holding company, our principal assets are the shares of capital stock of our insurance company subsidiaries. We have to rely on dividends from our insurance company subsidiaries to meet our obligations for paying principal and interest on outstanding debt obligations and for paying dividends to stockholders and corporate expenses. The payment of dividends by our insurance company subsidiaries is subject to regulatory restrictions and will depend on the surplus and future earnings of these subsidiaries, as well as regulatory restrictions. During 2010, the maximum amount of dividends that can be paid without regulatory approval is approximately $384 million. As a result, in the future we may not be able to receive dividends from these subsidiaries at times and in amounts necessary to meet our obligations or pay dividends.

We are subject to certain provisions that may have the effect of hindering, delaying or preventing third party takeovers, which may prevent our stockholders from receiving premium prices for their shares in an unsolicited takeover and make it more difficult for third parties to replace our current management.

Provisions of our Restated Certificate of Incorporation and By-Laws, as well as state insurance statutes, may hinder, delay or prevent unsolicited acquisitions or changes of our control. These provisions may also have the effect of making it more difficult for third parties to cause the replacement of our current management without the concurrence of our board of directors.

These provisions include:

•  our classified board of directors and the ability of our board to increase its size and to appoint directors to fill newly created directorships;

28

•  the requirement that 80% of our stockholders must approve mergers and other transactions between us and the holder of 5% or more of our shares, unless the transaction was approved by our board of directors prior to such holder’s acquisition of 5% of our shares;

•  the need for advance notice in order to raise business or make nominations at stockholders’ meetings; and

•  state insurance statutes that restrict the acquisition of control (generally defined as 10% of the outstanding shares, though 5% in Alabama and certain other jurisdictions) of an insurance company without regulatory approval.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

There are no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Securities Exchange Act of 1934.

ITEM 2.   PROPERTIES

W. R. Berkley and its subsidiaries own or lease office buildings or office space suitable to conduct their operations. At December 31, 2009, the Company had aggregate office space of 2,503,125 square feet, of which 934,141 were owned and 1,568,984 were leased.

Rental expense was approximately $28,067,000, $23,802,000 and $21,438,000 for 2009, 2008 and 2007, respectively. Future minimum lease payments (without provision for sublease income) are $26,574,000 in 2010, $21,979,000 in 2011 and $65,349,000 thereafter.

ITEM 3.   LEGAL PROCEEDINGS

The Company’s subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company’s estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations.

ITEM 4.   RESERVED

29

PART II

ITEM 5.   MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of the Company is traded on the New York Stock Exchange under the symbol “WRB”.

	Price Range				Dividends Declared
	High		Low		per Share
2009:
Fourth Quarter	$	26.15	$	23.30	$	0.06
Third Quarter		26.26		20.82		0.06
Second Quarter		25.18		21.05		0.06
First Quarter		31.07		18.59		0.06
2008:
Fourth Quarter	$	31.21	$	16.62	$	0.06
Third Quarter		29.34		20.39		0.06
Second Quarter		29.02		24.01		0.06
First Quarter		31.26		26.39		0.05

The closing price of the common stock on February 19, 2010 as reported on the New York Stock Exchange was $25.56 per share. The approximate number of record holders of the common stock on February 19, 2010 was 484.

Set forth below is a summary of the shares repurchased by the Company during the fourth quarter of 2009 and the remaining number of shares authorized for purchase by the Company during such period.

					Total Number of		Maximum Number of
					Shares Purchased as		Shares that may yet
					Part of Publicly		be Purchased Under
	Total Number of		Average Price		Announced Plans or		the Plans or
	Shares Purchased		Paid per Share		Programs		Programs(1)
October 2009		—		—		—		10,000,000
November 2009		1,079,601		24.46		1,079,601		8,920,399
December 2009		3,666,530		24.24		3,533,417		5,386,982

(1) Remaining shares available for repurchase under the Company’s repurchase authorization of 10,000,000 shares that was approved by the Board of Directors on August 3, 2009. The Company’s repurchase authorization was increased by 10,000,000 shares by its Board of Directors on February 8, 2010.

30

ITEM 6.   SELECTED FINANCIAL DATA

	Year Ended December 31,
	2009			2008			2007			2006			2005
	(Amounts in thousands, except per share data)
Net premiums written	$	3,730,095		$	4,033,899		$	4,575,989		$	4,818,993		$	4,604,574
Net premiums earned		3,805,849			4,289,580			4,663,701			4,692,622			4,460,935
Net investment income		552,561			537,033			634,386			549,030			385,417
Income (losses) from investment funds		(173,553	)		(3,553	)		38,274			37,145			18,545
Insurance service fees		93,245			102,856			97,689			104,812			110,697
Net investment gains (losses)		(38,408	)		(356,931	)		49,696			9,648			17,209
Revenues from wholly-owned investees		189,347			137,280			102,846			—			—
Total revenues		4,431,178			4,708,808			5,588,397			5,394,831			4,996,839
Interest expense		87,989			84,623			88,996			92,522			85,926
Income before income taxes		382,230			326,322			1,092,392			988,645			770,537
Income tax expense		(73,150	)		(44,919	)		(323,070	)		(286,398	)		(222,521	)
Noncontrolling interests		(23	)		(262	)		(3,083	)		(2,729	)		(3,124	)
Net income to common stockholders		309,057			281,141			766,239			699,518			544,892
Data per common share:
Net income per basic share		1.93			1.68			4.05			3.65			2.86
Net income per diluted share		1.86			1.62			3.90			3.46			2.72
Stockholders’ equity		22.97			18.87			19.92			17.30			13.42
Cash dividends declared		0.24			0.23			0.20			0.16			0.12
Weighted average shares outstanding:
Basic		160,357			166,956			188,981			191,809			190,533
Diluted		166,574			173,454			196,698			201,961			200,426
Investments	$	13,050,238		$	11,143,281		$	11,956,717		$	11,172,684		$	9,866,389
Total assets		17,328,596			16,121,158			16,820,005			15,656,489			13,896,287
Reserves for losses
and loss expenses		9,071,671			8,999,596			8,678,034			7,784,269			6,711,760
Junior subordinated debentures					249,584			249,375			241,953			450,634
		249,793
Senior notes and other debt					1,021,869			1,121,793			869,187			967,818
		1,345,481
Common stockholders’ equity		3,596,067			3,046,319			3,592,368			3,335,159			2,567,077

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ITEM 7.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which will be contained in the registrant’s 2009 Annual Report to Stockholders (attached hereto as Exhibit 13), which information is incorporated herein by reference.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to the information under “Market Risk” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which will be contained in the registrant’s 2009 Annual Report to Stockholders (attached hereto as Exhibit 13), which information is incorporated herein by reference.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the registrant which will be contained in the registrant’s 2009 Annual Report to Stockholders (attached hereto as Exhibit 13) are incorporated herein by reference.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.   CONTROLS AND PROCEDURES

(a)   Evaluation Of Disclosure Controls And Procedures

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this annual report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company has in place effective controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act and the rules thereunder, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

(b)   Management’s Report On Internal Control Over Financial Reporting

Management has conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. See pages 27 and 28 of Exhibit 13 of this Form 10-K for management’s report and the related report as to the Company’s internal control over financial reporting by KPMG LLP, an independent registered public accounting firm.

(c)   Change In Internal Control

During the quarter ended December 31, 2009, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.   OTHER INFORMATION

None.

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PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

ITEM 11.   EXECUTIVE COMPENSATION

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

(a)   Security ownership of certain beneficial owners

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

(b)   Security ownership of management

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

(c)   Changes in control

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

TEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

ITEM 14.   PRINCIPAL ACCOUNTING FEES AND SERVICES

Reference is made to the registrant’s definitive proxy statement, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2009, and which is incorporated herein by reference.

33

PART IV

ITEM 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)   Index to Financial Statements

Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s financial statements, together with the reports on the financial statements and the effectiveness of internal control over financial reporting of KPMG LLP, appear in the Company’s 2009 Annual Report to Stockholders (attached hereto as Exhibit 13) and are incorporated by reference in this Annual Report on Form 10-K. With the exception of the aforementioned information, the 2009 Annual Report to Stockholders is not deemed to be filed as part of this report. The schedules to the financial statements listed below should be read in conjunction with the financial statements in such 2009 Annual Report to Stockholders. Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or required information is shown in the financial statements or notes thereto.

Index to Financial Statement Schedules	Page
Independent Registered Public Accountants’ Report on Schedules		40
Schedule II — Condensed Financial Information of Registrant		41
Schedule III — Supplementary Insurance Information		45
Schedule IV — Reinsurance		46
Schedule V — Valuation and Qualifying Accounts		47
Schedule VI — Supplementary Information Concerning Property — Casualty Insurance Operations		48

(b)   Exhibits

The exhibits filed as part of this report are listed on pages 36, 37, 38 and 39 hereof.

34

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

W. R. BERKLEY CORPORATION

By  /s/   William R. Berkley

William R. Berkley,

Chairman of the Board and

Chief Executive Officer

February 26, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  William R. Berkley William R. Berkley	Chairman of the Board and Chief Executive Officer Principal executive officer	February 26, 2010
/s/  W. Robert Berkley, Jr.  W. Robert Berkley, Jr.	President, Chief Operating Officer and Director	February 26, 2010
/s/  Ronald E. Blaylock Ronald E. Blaylock	Director	February 26, 2010
/s/  Mark E. Brockbank Mark E. Brockbank	Director	February 26, 2010
/s/  George G. Daly George G. Daly	Director	February 26, 2010
/s/  Mary C. Farrell Mary C. Farrell	Director	February 26, 2010
/s/  Rodney A. Hawes, Jr.  Rodney A. Hawes, Jr.	Director	February 26, 2010
/s/  Jack H. Nusbaum Jack H. Nusbaum	Director	February 26, 2010
/s/  Mark L. Shapiro Mark L. Shapiro	Director	February 26, 2010
/s/  Eugene G. Ballard Eugene G. Ballard	Senior Vice President and Chief Financial Officer Principal financial officer and principal accounting officer	February 26, 2010

35

ITEM 15.   (b) EXHIBITS

Number
	(3	.1)	The Company’s Restated Certificate of Incorporation, as amended through May 10, 2004 (incorporated by reference to Exhibits 3.1 and 3.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).
	(3	.2)	Amendment, dated May 11, 2004, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly report on Form 10-Q (File No. 1-15202) filed with the Commission on August 5, 2004).
	(3	.3)	Amendment, dated May 16, 2006, to the Company’s Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on May 17, 2006).
	(3	.4)	Amended and Restated By-Laws (incorporated by reference to Exhibit 3(ii) of the Company’s Current Report on Form 8-K (File No. 0-7849) filed with the Commission on May 11, 1999).
	(4	.1)	Indenture, dated as of February 14, 2003, between the Company and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission of March 31, 2003).
	(4	.2)	First Supplemental Indenture, dated February 14, 2003, between the Company and The Bank of New York, a trustees, relating to $200,000,000 principal amount of the Company’s 5.875% Senior Notes due 2013, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form (File No. 1-15202) filed with the Commission of March 31, 2003).
	(4	.3)	Second Supplemental Indenture, dated as of September 12, 2003, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 5.125% Senior Notes due 2010, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on November 14, 2003).
	(4	.4)	Third Supplemental Indenture, dated as of August 24, 2004, between the Company and The Bank of New York, as Trustee, relating to $150,000,000 principal amount of the Company’s 6.150% Senior Notes due 2019, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 14, 2005).
	(4	.5)	Fourth Supplemental Indenture, dated as of May 9, 2005, between the Company and The Bank of New York, as Trustee, relating to $200,000,000 principal amount of the Company’s 5.60% Senior Notes due 2015, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.2 of the Company’s quarterly report on Form 10-Q (File No. 1-15200) filed with the Commission on August 2, 2005).
	(4	.6)	Fifth Supplemental Indenture, dated as of February 9, 2007, between the Company and The Bank of New York, as Trustee, relating to $250,000,000 principal amount of the Company’s 6.25% Senior Notes due 2037, including form of the Notes as Exhibit A (incorporated by reference to Exhibit 4.7 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 1, 2007).
	(4	.7)	Sixth Supplemental Indenture, dated as of September 14, 2009, between the Company and The Bank of New York Mellon, as Trustee, relating to $300,000,000 principal amount of the Company’s 7.375% Senior Notes due 2019, including form of the Notes as Exhibit A.
	(4	.8)	Amended and Restated Trust Agreement of W. R. Berkley Capital Trust II, dated as of July 26, 2005 (incorporated by reference to Exhibit 4.3 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.9)	Subordinated Indenture between W. R. Berkley Corporation and The Bank of New York, as Trustee, dated as of July 26, 2005 (incorporated by reference to Exhibit 4.4 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.10)	Supplemental Indenture No. 1 to the Subordinated Indenture between W. R. Berkley Corporation and The Bank of New York, as Trustee, dated as of July 26, 2005, relating to 6.750% Subordinated Debentures Due 2045 (incorporated by reference to Exhibit 4.6 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).

36

Number
	(4	.11)	Preferred Securities Guarantee Agreement between W. R. Berkley Corporation, as Guarantor, and The Bank of New York, as Preferred Guarantee Trustee, dated as of July 26, 2005, relating to W. R. Berkley Capital Trust II (incorporated by reference to Exhibit 4.6 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 2, 2005).
	(4	.12)	The instruments defining the rights of holders of the other long term debt securities of the Company are omitted pursuant to Section (b)(4)(iii)(A) of Item 601 of Regulation S-K. The Company agrees to furnish supplementally copies of these instruments to the Commission upon request.
	(10	.1)	W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s 2003 Proxy Statement (File No. 1-15202) filed with the Commission on April 14, 2003).
	(10	.2)	Form of Restricted Stock Unit Agreement under the W. R. Berkley Corporation 2003 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on May 3, 2005).
	(10	.3)	Form of Restricted Stock Unit Agreement for grant of April 4, 2003 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on August 6, 2003).
	(10	.4)	W. R. Berkley Corporation Deferred Compensation Plan for Officers as amended and restated effective December 3, 2007 (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on December 19, 2007).
	(10	.5)	W. R. Berkley Corporation Deferred Compensation Plan for Directors as amended and restated effective December 3, 2007 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on December 19, 2007).
	(10	.6)	W. R. Berkley Corporation 2007 Annual Incentive Compensation Plan (incorporated by reference to Annex A of the Company’s 2006 Proxy Statement (File No. 1-15202) filed with the Commission on April 18, 2006).
	(10	.7)	W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Annex B from the Company’s 2004 Proxy Statement (File No. 1-15202) filed with the Commission on April 12, 2004).
	(10	.8)	W. R. Berkley Corporation 2009 Long-Term Incentive Plan (incorporated by reference to Annex A of the Company’s 2009 Proxy Statement (File No. 1-15202) filed with the Commission on April 17, 2009).
	(10	.9)	Form of Performance Unit Award Agreement under the W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (File No. 1-15202) filed with the Commission on May 3, 2005).
	(10	.10)	Form of 2008 Performance Unit Award Agreement under the W. R. Berkley Corporation 2004 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on March 13, 2008).
	(10	.11)	W. R. Berkley Corporation 2009 Directors Stock Plan (incorporated by reference to Annex B of the Company’s 2009 Proxy Statement (File No. 1-15202) filed with the Commission on April 17, 2009).
	(10	.12)	Supplemental Benefits Agreement between William R. Berkley and the Company as amended and restated as of December 17, 2007 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K (File No. 1-15202) filed with the Commission on December 19, 2007).
	(13)		Portions of the 2009 Annual Report to Stockholders of W. R. Berkley Corporation that are incorporated by reference in this Report on Form 10-K.
	(14)		Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14 of the Company’s Annual Report on Form 10-K (File No. 1-15202) filed with the Commission on March 14, 2005).

37

Number
	(21)	Following is a list of the Company’s significant subsidiaries and other operating entities. Subsidiaries of subsidiaries are indented and the parent of each such corporation owns 100% of the outstanding voting securities of such corporation except as noted below.

		Percentage
	Jurisdiction of	owned
	Incorporation	by the Company(1)
Berkley International, LLC(2)	New York		100	%
Berkley Surety Group, Inc.	Delaware		100	%
Clermont Specialty Managers, Ltd.	New Jersey		100	%
J/I Holding Corporation:	Delaware		100	%
Admiral Insurance Company:	Delaware		100	%
Admiral Indemnity Company	Delaware		100	%
Berkley London Holdings, Inc.(3)	Delaware		100	%
W. R. Berkley London Finance, Limited	United Kingdom		100	%
W. R. Berkley London Holdings, Limited	United Kingdom		100	%
W. R. Berkley Insurance (Europe), Limited	United Kingdom		100	%
Carolina Casualty Insurance Company	Iowa		100	%
Nautilus Insurance Company:	Arizona		100	%
Great Divide Insurance Company	North Dakota		100	%
Key Risk Management Services, Inc.	North Carolina		100	%
Monitor Liability Managers, Inc.	Delaware		100	%
Signet Star Holdings, Inc.:	Delaware		100	%
Berkley Insurance Company	Delaware		100	%
Berkley Regional Insurance Company	Delaware		100	%
Acadia Insurance Company	New Hampshire		100	%
Berkley National Insurance Company	Iowa		100	%
CGH Insurance Group, Inc	Alabama		100	%
American Mining Insurance Company, Inc.	Alabama		100	%
Continental Western Insurance Company	Iowa		100	%
Firemen’s Insurance Company of Washington, D.C.	Delaware		100	%
Tri-State Insurance Company of Minnesota	Minnesota		100	%
Union Insurance Company	Iowa		100	%
Key Risk Insurance Company	North Carolina		100	%
Midwest Employers Casualty Company:	Delaware		100	%
Berkley Risk Administrators Company, LLC	Minnesota		100	%
Preferred Employers Insurance Company	California		100	%
Gemini Insurance Company	Delaware		100	%
Riverport Insurance Company	Minnesota		100	%
StarNet Insurance Company	Delaware		100	%
Facultative ReSources, Inc.	Connecticut		100	%

1) W. R. Berkley Corporation is the ultimate parent. The subsidiary of a direct parent is indicated by an indentation, and its percentage ownership is as indicated in this column.

38

2)	Berkley International, LLC is held by W. R. Berkley Corporation and its subsidiaries as follows: W. R. Berkley Corporation (2%), Admiral Insurance Company (35%), Berkley Regional Insurance Company (14%), Nautilus Insurance Company (14%) and Berkley Insurance Company (35%).
3)	Held by Admiral Insurance Company (66.67%) and Berkley Insurance Company (33.33%)
(23)	Consent of Independent Registered Public Accounting Firm
(31.1)	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(31.2)	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a).
(32.1)	Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

39

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

W. R. Berkley Corporation:

Under date of February 26, 2010, we reported on the consolidated balance sheets of W. R. Berkley Corporation and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, as contained in the 2009 Annual Report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the December 31, 2009 Annual Report on Form 10-K for the year 2009. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

New York, New York

February 26, 2010

40

Schedule II

W. R. Berkley Corporation
Condensed Financial Information of Registrant
Balance Sheets (Parent Company)

	December 31,
	2009			2008
	(Amounts in thousands)
Cash and cash equivalents	$	117,648		$	131,423
Fixed maturity securities available for sale at fair value (cost $303,203 and $25,454 in 2009 and 2008, respectively)		302,898			26,352
Equity securities available for sale, at fair value (cost $0 in 2009 and 2008)		97,525			44,491
Investment in affiliate		—			2,089
Investments in subsidiaries		4,748,256			4,104,009
Deferred Federal income taxes		202,159			339,452
Current Federal income taxes		—			85,804
Real estate, furniture and equipment at cost, less accumulated depreciation		6,063			6,459
Other assets		2,769			2,251
Total assets	$	5,477,318		$	4,742,330
Liabilities and stockholders’ equity
Liabilities:
Due to subsidiaries	$	143,917		$	324,330
Other liabilities		149,275			111,188
Current Federal income taxes		28,707			—
Junior subordinated debentures		242,580			242,372
Senior notes		1,316,772			1,018,121
Total liabilities		1,881,251			1,696,011
Stockholders’ equity:
Preferred stock		—			—
Common stock		47,024			47,024
Additional paid-in capital		926,359			920,241
Retained earnings (including accumulated undistributed net income of subsidiaries of $2,936,834 and $2,691,464 in 2009 and 2008, respectively)		3,785,187			3,514,531
Accumulated other comprehensive income (loss)		163,207			(228,959	)
Treasury stock, at cost		(1,325,710	)		(1,206,518	)
Total stockholders’ equity		3,596,067			3,046,319
Total liabilities and stockholders’ equity	$	5,477,318		$	4,742,330

See note to condensed financial statements.

41

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

Statements of Income (Parent Company)

	December 31,
	2009			2008			2007
	(Amounts in thousands)
Management fees and investment income including dividends from subsidiaries of $150,545, $568,634 and $612,296 for 2009, 2008 and 2007, respectively	$	159,361		$	580,969		$	637,594
Net investment gains (losses)		20,961			(601	)		(220	)
Other income		206			382			180
Total revenues		180,528			580,750			637,554
Operating costs and expense		88,276			93,794			98,406
Interest expense		87,054			83,770			87,716
Income before federal income taxes		5,198			403,186			451,432
Federal income taxes:
Federal income taxes provided by subsidiaries on a separate return basis		117,133			140,108			347,018
Federal income tax expense on a consolidated return basis		(58,644	)		(12,560	)		(292,537	)
Net benefit		58,489			127,548			54,481
Income before undistributed equity in net income (loss) of subsidiaries		63,687			530,734			505,913
Equity in undistributed net income (loss) of subsidiaries		245,370			(249,593	)		260,326
Net income	$	309,057		$	281,141		$	766,239

See note to condensed financial statements.

42

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

Statements of Income (Parent Company)

	Years Ended December 31,
	2009			2008			2007
	(Amounts in thousands)
Cash flows from operating activities:
Net income	$	309,057		$	281,141		$	766,239
Adjustments to reconcile net income to net cash from operating activities:
Net investment (gains) losses		(20,961	)		601			220
Depreciation and amortization		2,279			2,488			2,324
Equity in undistributed (earnings) losses of subsidiaries		(245,370	)		249,593			(260,326	)
Tax payments received from subsidiaries		103,356			273,172			349,173
Federal income taxes provided by subsidiaries on a separate return basis		(117,133	)		(140,108	)		(347,018	)
Stock incentive plans		24,078			23,991			20,836
Change in:
Federal income taxes		62,753			(149,139	)		14,838
Other assets		(381	)		(877	)		101
Other liabilities		11,661			(23,310	)		30,884
Accrued investment income		(137	)		3,099			(3,299	)
Other, net		(603	)		691			(126	)
Net cash from operating activities		128,599			521,342			573,846
Cash from (used in) investing activities:
Proceeds from sales of fixed maturity securities		29,355			197,621			86,050
Proceeds from maturities and prepayments of fixed maturity securities		47,133			43,912			35,976
Proceeds from sales of equity securities		17,897			—			—
Cost of purchases of fixed maturity securities		(353,944	)		(44,589	)		(278,986	)
Cost of purchases of equity securities		—			—			(726	)
Investment in funds		5,204			(213	)		(68,064	)
Investments in and advances to subsidiaries, net		(29,179	)		(44,771	)		(46,051	)
Change in balance due to security broker		14,483			—			—
Net additions to real estate, furniture & equipment		(224	)		(263	)		(1,927	)
Other, net		1			780			255
Net cash from (used in) investing activities		(269,274	)		152,477			(273,473	)
Cash from (used in) financing activities:
Net proceeds from issuance of senior notes		297,461			—			246,644
Net proceeds from stock options exercised		5,426			14,806			25,676
Repayment of senior notes		—			(88,745	)		—
Purchase of common treasury shares		(147,144	)		(553,284	)		(488,794	)
Cash dividends to common stockholders		(28,843	)		(46,978	)		(36,284	)
Other, net		—			7			(5	)
Net cash from (used in) financing activities		126,900			(674,194	)		(252,763	)
Net increase (decrease) in cash and cash equivalents		(13,775	)		(375	)		47,610
Cash and cash equivalents at beginning of year		131,423			131,798			84,188
Cash and cash equivalents at end of year	$	117,648		$	131,423		$	131,798

See note to condensed financial statements.

43

Schedule II, Continued

W. R. Berkley Corporation
Condensed Financial Information of Registrant — (Continued)

December 31, 2009

Note to Condensed Financial Statements (Parent Company)

The accompanying condensed financial statements should be read in conjunction with the notes to consolidated financial statements included elsewhere herein. Reclassifications have been made in the 2008 and 2007 financial statements as originally reported to conform them to the presentation of the 2009 financial statements.

The Company files a consolidated federal tax return with the results of its domestic insurance subsidiaries included on a statutory basis. Under present Company policy, federal income taxes payable by subsidiary companies on a separate-return basis are paid to W. R. Berkley Corporation, and the Company pays the tax due on a consolidated return basis.

44

Schedule III

W. R. Berkley Corporation and Subsidiaries

Supplementary Insurance Information

December 31, 2009, 2008 and 2007

									Net
									Investment
									Income and				Amortization
	Deferrred								Income (Loss)				of
	Policy		Reserve for						from				Deferred Policy		Other			Net
	Acquisition		Losses and		Unearned		Premiums		Investment		Loss and Loss		Acquisition		Operating Cost			Premiums
	Cost		Loss Expenses		Premiums		Earned		Funds		Expenses		Cost		and Expenses			Written
			(Amounts in thousands)
December 31, 2009
Specialty	$	116,234	$	3,210,479	$	662,972	$	1,354,355	$	125,351	$	838,894	$	297,388	$	126,078		$	1,260,451
Regional		142,249		1,440,158		554,426		1,116,871		57,530		686,093		289,973		94,982			1,081,100
Alternative markets		34,443		2,221,488		287,031		597,932		83,719		378,961		89,432		137,415			589,637
Reinsurance		60,219		1,787,006		225,209		411,511		75,505		238,075		127,446		35,137			423,425
International		38,215		412,540		198,790		325,180		26,767		194,684		98,915		35,629			375,482
Corporate and adjustments		—		—		—		—		10,136		—		—		291,857			—
Total	$	391,360	$	9,071,671	$	1,928,428	$	3,805,849	$	379,008	$	2,336,707	$	903,154	$	721,098		$	3,730,095
December 31, 2008
Specialty	$	136,845	$	3,177,194	$	731,409	$	1,618,915	$	188,120	$	972,729	$	343,354	$	119,301		$	1,453,778
Regional		144,126		1,443,136		592,153		1,237,258		80,538		809,525		313,483		86,068			1,211,096
Alternative markets		35,281		2,140,839		305,177		626,858		105,674		393,004		90,475		146,264			622,185
Reinsurance		52,663		1,924,315		210,388		519,717		116,046		336,478		150,895		30,444			435,108
International		25,892		314,112		127,023		286,832		35,184		176,925		100,332		(8,186	)		311,732
Corporate and adjustments		—		—		—		—		7,918		—		—		102,735			—
Total	$	394,807	$	8,999,596	$	1,966,150	$	4,289,580	$	533,480	$	2,688,661	$	998,539	$	476,626		$	4,033,899
December 31, 2007
Specialty	$	165,608	$	3,044,134	$	886,519	$	1,772,547	$	233,080	$	1,015,176	$	361,221	$	112,699		$	1,704,880
Regional		152,063		1,337,611		621,566		1,250,914		96,886		739,667		317,653		75,252			1,267,451
Alternative markets		35,325		1,994,569		315,676		651,909		125,698		385,837		90,096		150,886			656,369
Reinsurance		78,420		1,968,923		302,442		740,439		153,416		483,757		160,522		71,274			682,241
International		23,828		332,797		114,487		247,892		36,666		155,141		72,875		12,085			265,048
Corporate and adjustments		—		—		—		—		26,914		—		—		106,424			—
Total	$	455,244	$	8,678,034	$	2,240,690	$	4,663,701	$	672,660	$	2,779,578	$	1,002,367	$	528,620		$	4,575,989

45

Schedule IV

W. R. Berkley Corporation and Subsidiaries

Reinsurance

Years ended December 31, 2009, 2008 and 2007

									Percentage
			Ceded		Assumed				of Amount
	Direct		to Other		from Other		Net		Assumed
	Amount		Companies		Companies		Amount		to Net
	(Amounts in thousands)
Year ended December 31, 2009:
Specialty	$	1,443,728	$	203,754	$	20,477	$	1,260,451		1.6	%
Regional		1,217,365		148,686		12,421		1,081,100		1.1	%
Alternative markets		567,767		75,112		96,982		589,637		16.4	%
Reinsurance		8,638		32,543		447,330		423,425		105.6	%
International		362,338		63,249		76,393		375,482		20.3	%
Total	$	3,599,836	$	523,344	$	653,603	$	3,730,095		17.5	%
Year ended December 31, 2008:
Specialty	$	1,577,196	$	136,557	$	13,139	$	1,453,778		0.9	%
Regional		1,370,381		174,695		15,410		1,211,096		1.3	%
Alternative markets		604,970		93,794		111,009		622,185		17.8	%
Reinsurance		4,965		23,560		453,703		435,108		104.3	%
International		340,976		57,621		28,377		311,732		9.1	%
Total	$	3,898,488	$	486,227	$	621,638	$	4,033,899		15.4	%
Year ended December 31, 2007:
Specialty	$	1,796,620	$	111,847	$	20,107	$	1,704,880		1.2	%
Regional		1,422,015		173,626		19,062		1,267,451		1.5	%
Alternative markets		645,680		101,916		112,605		656,369		17.2	%
Reinsurance		4,633		49,992		727,600		682,241		106.6	%
International		304,908		39,860		—		265,048		—
Total	$	4,173,856	$	477,241	$	879,374	$	4,575,989		19.2	%

46

Schedule V

W. R. Berkley Corporation and Subsidiaries

Valuation and Qualifying Accounts

Years ended December 31, 2009, 2008 and 2007

			Additions-		Deduction-
	Opening		Charged to		Amounts			Ending
	Balance		Expense		Written Off			Balance
	(Amounts in thousands)
Year ended December 31, 2009:
Premiums and fees receivable	$	18,423	$	9,593	$	(8,283	)	$	19,733
Due from reinsurers		4,895		—		(465	)		4,430
Deferred federal and foreign income taxes		3,113		—		(887	)		2,226
Loan loss reserves		735		13,112		—			13,847
Total	$	27,166	$	22,705	$	(9,635	)	$	40,236
Year ended December 31, 2008:
Premiums and fees receivable	$	18,252	$	8,483	$	(8,312	)	$	18,423
Due from reinsurers		2,859		2,036		—			4,895
Deferred federal and foreign income taxes		2,018		1,095		—			3,113
Loan loss reserves		671		64		—			735
Total	$	23,800	$	11,678	$	(8,312	)	$	27,166
Year ended December 31, 2007:
Premiums and fees receivable	$	20,458	$	6,176	$	(8,382	)	$	18,252
Due from reinsurers		2,531		328		—			2,859
Deferred federal and foreign income taxes		9,621		—		(7,603	)		2,018
Loan loss reserves		621		50		—			671
Total	$	33,231	$	6,554	$	(15,985	)	$	23,800

47

Schedule VI

W. R. Berkley Corporation and Subsidiaries

Supplementary Information Concerning Property-Casualty Insurance Operations

Years Ended December 31, 2009, 2008 and 2007

	2009			2008			2007
	(Amounts in thousands)
Deferred policy acquisition costs	$	391,360		$	394,807		$	455,244
Reserves for losses and loss expenses		9,071,671			8,999,596			8,678,034
Unearned premium		1,928,428			1,966,150			2,240,690
Premiums earned		3,805,849			4,289,580			4,663,701
Net investment income		552,561			537,033			634,386
Losses and loss expenses incurred:
Current year		2,518,836			2,829,830			2,837,647
Prior years		(234,008	)		(195,710	)		(105,879	)
Decrease in discount for prior years		51,866			54,494			46,808
Amortization of deferred policy acquisition costs		903,154			998,539			1,002,367
Paid losses and loss expenses		2,311,511			2,388,925			1,971,668
Net premiums written		3,730,095			4,033,899			4,575,989

48

EX-4.7

Exhibit 4.7

W. R. BERKLEY CORPORATION

TO

THE BANK OF NEW YORK MELLON, as Trustee

SIXTH SUPPLEMENTAL INDENTURE TO
INDENTURE DATED FEBRUARY 14, 2003
(SENIOR DEBT SECURITIES)

Dated as of September 14, 2009

7.375% Senior Notes due 2019

TABLE OF CONTENTS

	Page
ARTICLE I
Relation to Indenture; Definitions
Section 1.1. RELATION TO INDENTURE	1
Section 1.2. DEFINITIONS	1
ARTICLE II
The Series of Securities
Section 2.1. TITLE OF THE SECURITIES	2
Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT	2
Section 2.3. PRINCIPAL PAYMENT DATE	2
Section 2.4. INTEREST AND INTEREST RATES	2
Section 2.5. PLACE OF PAYMENT	3
Section 2.6. REDEMPTION	3
Section 2.7. DENOMINATION	5
Section 2.8. CURRENCY	5
Section 2.9. FORM OF NOTES	5
Section 2.10. REGISTRAR AND PAYING AGENT FOR THE NOTES	5
Section 2.11. SINKING FUND OBLIGATIONS	5
Section 2.12. DEFEASANCE AND COVENANT DEFEASANCE	5
Section 2.13. PAYMENT OF TAXES	5
Section 2.14. LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES	5
Section 2.15. LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES	6
Section 2.16. IMMEDIATELY AVAILABLE FUNDS	6
ARTICLE III
Miscellaneous Provisions
Section 3.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS	6
Section 3.2. PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL	7
Section 3.3. ADOPTION, RATIFICATION AND CONFIRMATION	7
Section 3.4. COUNTERPARTS	7
Section 3.5. GOVERNING LAW	7

W. R. BERKLEY CORPORATION

SIXTH SUPPLEMENTAL INDENTURE TO
INDENTURE DATED FEBRUARY 14, 2003
(SENIOR DEBT SECURITIES)

$300,000,000

7.375% Senior Notes due 2019

     SIXTH SUPPLEMENTAL INDENTURE, dated as of September 14, 2009, between W. R. BERKLEY CORPORATION, a Delaware corporation (the “Company”), and THE BANK OF NEW YORK MELLON, a banking corporation organized under the laws of the State of New York, as Trustee (the “Trustee”).

RECITALS

     The Company has heretofore executed and delivered to the Trustee an indenture for senior debt securities, dated as of February 14, 2003 (the “Indenture”), providing for the issuance from time to time of series of the Company’s Securities.

     Section 3.1 of the Indenture provides for various matters with respect to any series of Securities issued under the Indenture to be established in an indenture supplemental to the Indenture.

     Section 9.1(4) of the Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Indenture to establish the form or terms of Securities of any series as provided by Sections 2.1 and 3.1 of the Indenture.

     NOW, THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH:

     For and in consideration of the premises and the issuance of the series of Securities provided for herein, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities of such series, as follows:

ARTICLE I

RELATION TO INDENTURE; DEFINITIONS

     Section 1.1. RELATION TO INDENTURE. This Sixth Supplemental Indenture constitutes an integral part of the Indenture.

     Section 1.2. DEFINITIONS. For all purposes of this Sixth Supplemental Indenture:

1

     (a) Capitalized terms used herein without definition shall have the meanings specified in the Indenture;

     (b) All references herein to Articles and Sections, unless otherwise specified, refer to the corresponding Articles and Sections of this Sixth Supplemental Indenture; and

     (c) The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Sixth Supplemental Indenture.

     (d) “Fair Value,” when used with respect to Common Stock, means the fair value thereof as determined in good faith by the Board of Directors.

ARTICLE II

THE SERIES OF SECURITIES

     Section 2.1. TITLE OF THE SECURITIES. There shall be a series of Securities designated the “7.375% Senior Notes due 2019” (the “Notes”).

     Section 2.2. LIMITATION ON AGGREGATE PRINCIPAL AMOUNT. The aggregate principal amount of the Notes shall initially be limited to $300,000,000. The Company may, without the consent of the Holders of the Notes, issue additional Securities having the same interest rate, maturity date and other terms as described in the related prospectus supplement and prospectus. Any additional Securities, together with the Notes offered by the related prospectus supplement, will constitute a single series of Securities under the Indenture. No additional Securities may be issued if an Event of Default under the Indenture has occurred and is continuing with respect to the Securities.

     Section 2.3. PRINCIPAL PAYMENT DATE. The principal amount of the Notes outstanding (together with any accrued and unpaid interest) shall be payable in a single installment on September 15, 2019, which date shall be the Stated Maturity of the Notes Outstanding.

     Section 2.4. INTEREST AND INTEREST RATES. The rate of interest on each Note shall be 7.375% per annum, accruing from September 14, 2009, or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, payable semiannually in arrears on March 15 and September 15 of each year commencing March 15, 2010 until the principal thereof shall have become due and payable, and until the principal thereof is paid or duly provided for or made available for payment. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any partial period shall be computed on the basis of the actual number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on any Note is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay). The interest installment so payable in respect of any Note, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to

2

the person in whose name such Note (or one or more Predecessor Securities) is registered at the close of business on March 1 or September 1 prior to such Interest Payment Date. Any such interest installment not punctually paid or duly provided for in respect of any Note shall forthwith cease to be payable to the registered Holder on such Regular Record Date and may either be paid to the Person in whose name such Note (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed by the Company and the Trustee for the payment of such Defaulted Interest, notice whereof shall be given to the Holders of the Notes not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

     Section 2.5. PLACE OF PAYMENT. The Place of Payment where the Notes may be presented or surrendered for payment, where the Notes may be surrendered for registration of transfer or exchange and where notices and demand to or upon the Company in respect of the Notes and the Indenture may be served shall be the Corporate Trust Office of the Trustee.

     Section 2.6. REDEMPTION.

     (a) The Company may redeem the Notes at its option, in whole or in part, at any time and from time to time at a Redemption Price equal to the greater of (i) 100% of the principal amount of such Securities to be redeemed or (ii) an amount, as determined by an Independent Investment Banker, equal to the sum of the present values of the remaining scheduled payments of principal of and interest on the securities to be redeemed (not including any portion of such payments of interest accrued as of the date of redemption) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points, plus, in either of the above cases, accrued and unpaid interest thereon to, but not including, the Redemption Date.

     (b) For the purposes of this Section 2.6,

     “Adjusted Treasury Rate” means, with respect to any Redemption Date:

– the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” published by the Board of Governors of the Federal Reserve System (or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity) under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue. If no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or

3

extrapolated from such yields on a straight line basis, rounding to the nearest month; or

– if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

     The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date.

     “Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such securities (“Remaining Life”).

     “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such quotations.

     “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

     “Reference Treasury Dealer” means:

– each of Credit Suisse Securities (USA) LLC and Banc of America Securities LLC and their respective successors; provided that, if any of the foregoing ceases to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer; and

– any other Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City Time, on the third Business Day preceding such Redemption Date.

     The Company will mail a notice of redemption at least 30 days but not more than 60 days before the Redemption Date to each holder of the notes to be redeemed. If less than all

4

of the notes are to be redeemed, the trustee will select, by such method as it will deem fair and appropriate, including pro rata or by lot, the notes to be redeemed in whole or in part.

     Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the notes or portions thereof called for redemption.

     Section 2.7. DENOMINATION. The Notes shall be issuable only in registered form without coupons and in denominations of $1,000 and integral multiples thereof.

     Section 2.8. CURRENCY. Principal and interest on the Notes shall be payable in such coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts.

     Section 2.9. FORM OF NOTES. The Notes shall be substantially in the form attached as EXHIBIT A hereto.

     Section 2.10. REGISTRAR AND PAYING AGENT FOR THE NOTES. The Trustee shall serve initially as Registrar and Paying Agent for the Notes.

     Section 2.11. SINKING FUND OBLIGATIONS. The Company has no obligation to redeem or purchase any Notes pursuant to any sinking fund or analogous requirement or upon the happening of a specified event or at the option of a Holder thereof.

     Section 2.12. DEFEASANCE AND COVENANT DEFEASANCE. The Company has elected to have both Section 4.2(2) of the Indenture (relating to defeasance) and Section 4.2(3) (relating to covenant defeasance) applied to the Notes.

     Section 2.13. PAYMENT OF TAXES. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all taxes, assessments and governmental charges levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary, and lawful claims for labor, materials and supplies, which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment or governmental charge whose amount, applicability or validity is being contested in good faith by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

     Section 2.14. LIMITATION ON LIENS ON STOCK OF PRINCIPAL SUBSIDIARIES. The Company will not, and it will not permit any Subsidiary of the Company to, at any time directly or indirectly create, assume, incur or permit to exist any Indebtedness secured by a pledge, lien or other encumbrance (any pledge, lien or other encumbrance being hereinafter in this Section referred to as a “lien”) on the voting securities of Principal Subsidiaries, or the voting securities of a Subsidiary that owns, directly or indirectly, the voting securities of any of the Principal Subsidiaries without making effective provision whereby the Notes then Outstanding (and, if the Company so elects, any other Indebtedness of the Company

5

that is not subordinate to the Notes and with respect to which the governing instruments require, or pursuant to which the Company is otherwise obligated or required, to provide such security) shall be equally and ratably secured with such secured Indebtedness so long as such other Indebtedness shall be secured. For purposes of this Section 2.14 only, “Indebtedness”, in addition to those items specified in Section 1.1 of the Indenture, shall include any obligation of, or any such obligation guaranteed by, any Person for the payment of amounts due under a swap agreement or other similar instrument or agreement or foreign currency hedge exchange or similar instrument or agreement.

     If the Company shall hereafter be required to secure the Notes equally and ratably with any other Indebtedness pursuant to this Section, (i) the Company will promptly deliver to the Trustee an Officer’s Certificate stating that the foregoing covenant has been complied with, and an Opinion of Counsel stating that in the opinion of such counsel the foregoing covenant has been complied with and that any instruments executed by the Company or any Subsidiary of the Company in the performance of the foregoing covenant comply with the requirements of the foregoing covenant and (ii) the Trustee is hereby authorized to enter into an indenture or agreement supplemental hereto and to take such action, if any, as it may deem advisable to enable it to enforce the rights of the holders of the Notes so secured.

     Section 2.15. LIMITATIONS ON ISSUE OR DISPOSITION OF COMMON STOCK OF PRINCIPAL SUBSIDIARIES. As long as any of the Notes remain outstanding, the Company will not, and will not permit any Subsidiary to, issue, sell, assign, transfer or otherwise dispose of, directly or indirectly, any of the Common Stock of any Principal Subsidiary (except to the Company or to one or more Subsidiaries or for the purpose of qualifying directors); provided, however, that this covenant shall not apply if (i) the issuance, sale, assignment, transfer or other disposition is required to comply with the order of a court or regulatory authority of competent jurisdiction, other than an order issued at the request of the Company or of one of its Subsidiaries; (ii) the entire Common Stock of a Principal Subsidiary then owned by the Company or by its Subsidiaries is disposed of in a single transaction or in a series of related transactions, for consideration consisting of cash or other property which is at least equal to the Fair Value of such Common Stock; or (iii) after giving effect to the issuance, sale, assignment, transfer or other disposition, the Company and its Subsidiaries would own directly or indirectly at least 80% of the issued and outstanding Common Stock of such Principal Subsidiary and such issuance, sale, assignment, transfer or other disposition is made for consideration consisting of cash or other property which is at least equal to the Fair Value of such Common Stock.

     Section 2.16. IMMEDIATELY AVAILABLE FUNDS. All payments of principal and interest shall be made in immediately available funds.

ARTICLE III

MISCELLANEOUS PROVISIONS

     Section 3.1. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals herein contained are made by the Company and not by the Trustee, and the Trustee assumes no

6

responsibility for the correctness thereof. The Trustee makes no representation as to the validity or sufficiency of this Sixth Supplemental Indenture.

     Section 3.2. PAYMENT OF EXPENSES UPON RESIGNATION OR REMOVAL. Upon termination of this Sixth Supplemental Indenture or the Indenture or the removal or resignation of the Trustee, unless otherwise stated, the Company shall pay to the Trustee all amounts accrued to the date of such termination, removal or resignation.

     Section 3.3. ADOPTION, RATIFICATION AND CONFIRMATION. The Indenture, as supplemented and amended by this Sixth Supplemental Indenture, is in all respects hereby adopted, ratified and confirmed.

     Section 3.4. COUNTERPARTS. This Sixth Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

     Section 3.5. GOVERNING LAW. THIS SIXTH SUPPLEMENTAL INDENTURE AND EACH NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

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     IN WITNESS WHEREOF, the parties hereto have caused this Sixth Supplemental Indenture to be duly executed on the day and year first above written.

W. R. BERKLEY CORPORATION
By:	/s/ Eugene G. Ballard
	Name:	Eugene G. Ballard
	Title:	Senior Vice President and Chief Financial Officer
THE BANK OF NEW YORK MELLON, as Trustee
By:	/s/ Timothy W. Casey
	Name:	Timothy W. Casey
	Title:	Senior Associate

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EXHIBIT A

(FORM OF FACE OF NOTE)

     This Note is a global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depository or a nominee of a Depository. This Note is exchangeable for Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Indenture, and no transfer of this Note (other than a transfer of this Note as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances.

     Unless this Note is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.

Certificate No. [ • ]
Dated: September 14, 2009 $300,000,000
CUSIP No. 084423 AQ5
ISIN No. US084423 AQ52

W. R. BERKLEY CORPORATION

7.375% Senior Notes due 2019

     W. R. BERKLEY CORPORATION, a Delaware corporation (the “Company,” which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the principal sum of THREE HUNDRED MILLION DOLLARS AND NO CENTS ($300,000,000) on September 15, 2019. The Company further promises to pay interest on said principal sum outstanding from September 14, 2009, or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, semiannually (subject to deferral as set forth herein) in arrears on March 15 and September 15 of each year commencing March 15, 2010 at the rate of 7.375% per annum, until the principal hereof shall have become due and payable and, until the principal hereof is paid or duly provided for or made available for payment. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of interest payable for any partial period shall be computed on the basis of the number of actual days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Note is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay). A “Business Day,” with respect to any Place of Payment or other location, shall

A-1

mean any day other than a Saturday, Sunday or other day on which banking institutions in such Place of Payment or other location are authorized or obligated by law, regulation or executive order to close. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on March 1 or September 1 prior to such Interest Payment Date. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such Defaulted Interest, notice whereof shall be given to the Holder of this Note not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which this Note may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture.

     The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company maintained for that purpose in the United States in such coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered Holder at such address as shall appear in the Security Register. Notwithstanding the foregoing, so long as the Holder of this Note is Cede & Co., the payment of the principal of (and premium, if any) and interest on this Note will be made at such place and to such account as may be designated by Cede & Co. All payments of principal and interest hereunder shall be made in immediately available funds.

     Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid for any purpose.

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     IN WITNESS WHEREOF, the Company has caused this instrument to be executed.

W. R. BERKLEY CORPORATION
By:
	Name:
	Title:

CERTIFICATE OF AUTHENTICATION

     This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.

Dated: September 14, 2009

THE BANK OF NEW YORK MELLON, as Trustee
By:
	Authorized Signatory

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(FORM OF REVERSE OF NOTE)

     This Note is one of a duly authorized issue of securities of the Company, designated as its 7.375% Senior Notes due 2019 (herein referred to as the “Securities”), issued under and pursuant to an Indenture, dated as of February 14, 2003 between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture), as supplemented by the Sixth Supplemental Indenture dated as of September 14, 2009, between the Company and the Trustee (the Indenture as so supplemented, the “Indenture”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered.

     All terms used in this Note that are defined in the Indenture shall have the meanings assigned to them in the Indenture.

     The Company may redeem the Securities at the Company’s option , in whole or in part, at any time and from time to time at a Redemption Price equal to the greater of (i) 100% of the principal amount of such Securities to be redeemed or (ii) an amount, as determined by an Independent Investment Banker, the sum of the present values of the remaining scheduled payments of principal of and interest thereon on the Securities to be redeemed (not including any portion of such payments of interest accrued to the date of redemption) discounted to the Redemption Date on a semiannual basis assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus 50 basis points, plus, in either of the above cases, accrued and unpaid interest thereon to the Redemption Date.

     “Adjusted Treasury Rate” means, with respect to any Redemption Date:

– the yield, under the heading which represents the average for the immediately preceding week, appearing in the most recently published statistical release designated “H.15(519)” published by the Board of Governors of the Federal Reserve System (or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity) under the caption “Treasury Constant Maturities,” for the maturity corresponding to the Comparable Treasury Issue. If no maturity is within three months before or after the Remaining Life, yields for the two published maturities most closely corresponding to the Comparable Treasury Issue shall be determined and the Adjusted Treasury Rate shall be interpolated or extrapolated from such yields on a straight line basis, rounding to the nearest month; or

– if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per

A-4

annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

     The Adjusted Treasury Rate shall be calculated on the third Business Day preceding the Redemption Date.

     “Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be used, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities (“Remaining Life”).

     “Comparable Treasury Price” means (i) the average of three Reference Treasury Dealer Quotations for such Redemption Date, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (ii) if the Independent Investment Banker obtains fewer than three such Reference Treasury Dealer Quotations, the average of all such quotations.

     “Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

     “Reference Treasury Dealer” means:

– each of Credit Suisse Securities (USA) LLC and Banc of America Securities LLC and their respective successors; provided, however, that if any of the foregoing shall cease to be a primary U.S. Government securities dealer in the United States (a “Primary Treasury Dealer”), the Company shall substitute therefor another Primary Treasury Dealer; and

– any other Primary Treasury Dealer selected by the Company.

     “Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker at 5:00 p.m., New York City Time, on the third Business Day preceding such Redemption Date.

     The Company will mail a notice of redemption at least 30 days but not more than 60 days before the Redemption Date to each holder of the Securities to be redeemed. If less than all of the Securities are to be redeemed, the Trustee will select, by such method as it will deem fair and appropriate, including pro rata or by lot, the Securities to be redeemed in whole or in part.

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     Unless we default in payment of the Redemption Price, on and after the Redemption Date, interest will cease to accrue on the Securities or portions thereof called for redemption.

     If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

     The Indenture contains provisions for satisfaction, discharge and defeasance at any time of the entire indebtedness of this Note upon compliance by the Company with certain conditions set forth in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities of each series at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture (other than Section 4.2 of the Indenture) shall alter or impair the obligation of the Company to pay the principal and interest on the Note at the times, place and rate, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the Security Register, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer, in form satisfactory to the Company and the Security Registrar, duly executed by the Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

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     This global Note is exchangeable for Securities in definitive form only under certain limited circumstances set forth in the Indenture. Securities of this series so issued are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations herein and therein set forth, Securities of this series so issued are exchangeable for a like aggregate principal amount of Securities of this series of a different authorized denomination, as requested by the Holder surrendering the same.

     The Company and, by its acceptance of this Note or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Note agree that for United States federal, state and local tax purposes it is intended that this Note constitute indebtedness.

     THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE SECURITIES WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF.

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EX-13

Exhibit 13

FINANCIAL DATA

(Amounts in thousands, except per share data)

Years ended December 31,	2009			2008			2007			2006			2005
Net premiums written	$	3,730,095		$	4,033,899		$	4,575,989		$	4,818,993		$	4,604,574
Net premiums earned		3,805,849			4,289,580			4,663,701			4,692,622			4,460,935
Net investment income		552,561			537,033			634,386			549,030			385,417
Income (losses) from investment funds		(173,553	)		(3,553	)		38,274			37,145			18,545
Insurance service fees		93,245			102,856			97,689			104,812			110,697
Net investment gains (losses)		(38,408	)		(356,931	)		49,696			9,648			17,209
Revenues from wholly-owned investees		189,347			137,280			102,846			—			—
Total revenues		4,431,178			4,708,808			5,588,397			5,394,831			4,996,839
Interest expense		87,989			84,623			88,996			92,522			85,926
Income before income taxes		382,230			326,322			1,092,392			988,645			770,537
Income tax expense		(73,150	)		(44,919	)		(323,070	)		(286,398	)		(222,521	)
Noncontrolling interests		(23	)		(262	)		(3,083	)		(2,729	)		(3,124	)
Net income to common stockholders		309,057			281,141			766,239			699,518			544,892
Data per common share:
Net income per basic share		1.93			1.68			4.05			3.65			2.86
Net income per diluted share		1.86			1.62			3.90			3.46			2.72
Stockholders’ equity		22.97			18.87			19.92			17.30			13.42
Cash dividends declared		0.24			0.23			0.20			0.16			0.12
Weighted average shares outstanding:
Basic		160,357			166,956			188,981			191,809			190,533
Diluted		166,574			173,454			196,698			201,961			200,426
Balance sheet data as of year end:
Investments	$	13,050,238		$	11,143,281		$	11,956,717		$	11,172,684		$	9,866,389
Total assets		17,328,596			16,121,158			16,820,005			15,656,489			13,896,287
Reserves for losses and loss expenses		9,071,671			8,999,596			8,678,034			7,784,269			6,711,760
Junior subordinated debentures		249,793			249,584			249,375			241,953			450,634
Senior notes and other debt		1,345,481			1,021,869			1,121,793			869,187			967,818
Common stockholders’ equity		3,596,067			3,046,319			3,592,368			3,335,159			2,567,077

PAST PRICES OF COMMON STOCK

The common stock of the Company is traded on the New York Stock Exchange under the symbol “WRB”.

	Price Range				Dividends
					Declared
	High		Low		Per Share
2009
Fourth Quarter	$	26.15	$	23.30	$	0.06
Third Quarter		26.26		20.82		0.06
Second Quarter		25.18		21.05		0.06
First Quarter		31.07		18.59		0.06
2008
Fourth Quarter	$	31.21	$	16.62	$	0.06
Third Quarter		29.34		20.39		0.06
Second Quarter		29.02		24.01		0.06
First Quarter		31.26		26.39		0.05

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates in five business segments: specialty insurance, regional property casualty insurance, alternative markets, reinsurance and international. The Company’s primary sources of revenues and earnings are its insurance operations and its investments.

     The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time a property casualty insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic inflation on the amount of compensation for injuries or losses. General insurance prices are also influenced by available insurance capacity, i.e., the level of policyholders’ surplus employed in the industry, and the industry’s willingness to deploy that capital.

     Available insurance capacity has increased in recent years, increasing competition in the industry and putting downward pressure on pricing and terms and conditions. In 2007, we saw increased competition and decreased prices across most of our business segments. This trend of increased competition and decreased prices continued in 2008. These trends moderated in 2009, and we expect continued improvement in 2010. Price changes are reflected in our results over time as premiums are earned.

     The Company’s profitability is also affected by its investment income. The Company’s invested assets, which are derived from its own capital and cash flow from its insurance business, are invested principally in fixed maturity securities. The return on fixed maturity securities is affected primarily by general interest rates and the credit quality and duration of the securities. The Company also invests in equity securities, including those of financial institutions, merger arbitrage, private equity investments and real estate related investments.

Critical Accounting Estimates

     The following presents a discussion of accounting policies and estimates relating to reserves for losses and loss expenses, assumed premiums and investments. Management believes these policies and estimates are the most critical to its operations and require the most difficult, subjective and complex judgments.

     Reserves for Losses and Loss Expenses. To recognize liabilities for unpaid losses, either known or unknown, insurers establish reserves, which is a balance sheet account representing estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred. Estimates and assumptions relating to reserves for losses and loss expenses are based on complex and subjective judgments, often including the interplay of specific uncertainties with related accounting and actuarial measurements. Such estimates are also susceptible to change as significant periods of time may elapse between the occurrence of an insured loss, the report of the loss to the insurer, the ultimate determination of the cost of the loss and the insurer’s payment of that loss.

     In general, when a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. The estimate represents an informed judgment based on general reserving practices and reflects the experience and knowledge of the claims personnel regarding the nature and value of the specific type of claim. Reserves are also established on an aggregate basis to provide for losses incurred but not reported (“IBNR”) to the insurer, potential inadequacy of case reserves and the estimated expenses of settling claims, including legal and other fees and general expenses of administrating the claims adjustment process. Reserves are established based upon the then current legal interpretation of coverage provided.

     In examining reserve adequacy, several factors are considered in addition to the economic value of losses. These factors include historical data, legal developments, changes in social attitudes and economic conditions, including the effects of inflation. The actuarial process relies on the basic assumption that past experience, adjusted judgmentally for the effects of current developments and anticipated trends, is an appropriate basis for predicting future outcomes. Reserve amounts are

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necessarily based on management’s informed estimates and judgments using currently available data. As additional experience and other data become available and are reviewed, these estimates and judgments may be revised. This may result in reserve increases or decreases that would be reflected in our results in periods in which such estimates and assumptions are changed.

     The risk and complexity of estimating loss reserves have increased under the current financial market conditions. It is especially difficult to estimate the impact of inflation on loss reserves given the current economic environment and related government actions. Whereas a slowing economy would generally lead to lower inflation or even deflation, increased government spending would generally lead to higher inflation. A change in our assumptions regarding inflation would result in reserve increases or decreases that would be reflected in our operations in periods in which such assumptions are changed.

     Reserves do not represent an exact calculation of liability. Rather, reserves represent an estimate of what management expects the ultimate settlement and claim administration will cost. While the methods for establishing reserves are well tested over time, some of the major assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation. These estimates, which generally involve actuarial projections, are based on management’s assessment of facts and circumstances then known, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors, including the actions of third parties which are beyond the Company’s control. These variables are affected by external and internal events, such as inflation and economic volatility, judicial and litigation trends, reinsurance coverage, legislative changes and claim handling and reserving practices, which make it more difficult to accurately predict claim costs. The inherent uncertainties of estimating reserves are greater for certain types of liabilities where long periods of time elapse before a definitive determination of liability is made. Because setting reserves is inherently uncertain, the Company cannot assure that its current reserves will prove adequate in light of subsequent events.

     Loss reserves included in the Company’s financial statements represent management’s best estimates based upon an actuarially derived point estimate and other considerations. The Company uses a variety of actuarial techniques and methods to derive an actuarial point estimate for each operating unit. These methods include paid loss development, incurred loss development, paid and incurred Bornhuetter-Ferguson methods and frequency and severity methods. In circumstances where one actuarial method is considered more credible than the others, that method is used to set the point estimate. For example, the paid loss and incurred loss development methods rely on historical paid and incurred loss data. For new lines of business, where there is insufficient history of paid and incurred claims data, or in circumstances where there have been significant changes in claim practices, the paid and incurred loss development methods would be less credible than other actuarial methods. The actuarial point estimate may also be based on a judgmental weighting of estimates produced from each of the methods considered. Industry loss experience is used to supplement the Company’s own data in selecting “tail factors” and in areas where the Company’s own data is limited. The actuarial data is analyzed by line of business, coverage and accident or policy year, as appropriate, for each operating unit.

     The establishment of the actuarially derived loss reserve point estimate also includes consideration of qualitative factors that may affect the ultimate losses. These qualitative considerations include, among others, the impact of re-underwriting initiatives, changes in the mix of business, changes in distribution sources and changes in policy terms and conditions. Examples of changes in terms and conditions that can have a significant impact on reserve levels are the use of aggregate policy limits, the expansion of coverage exclusions, whether or not defense costs are within policy limits, and changes in deductibles and attachment points.

     The key assumptions used to arrive at the best estimate of loss reserves are the expected loss ratios, rate of loss cost inflation, and reported and paid loss emergence patterns. Expected loss ratios represent management’s expectation of losses at the time the business is written, before any actual claims experience has emerged. This expectation is a significant determinant of the estimate of loss reserves for recently written business where there is little paid or incurred loss data to consider. Expected loss ratios are generally derived from historical loss ratios adjusted for the impact of rate changes, loss cost trends and known changes in the type of risks underwritten. Expected loss ratios are estimated for each key line of business within each operating unit. Expected loss cost inflation is particularly important for the long-tail lines, such as excess casualty, and claims with a high medical component, such as workers’ compensation. Reported and paid loss emergence patterns are used to project current reported or paid loss amounts to their ultimate settlement value. Loss development factors are based on the historical emergence patterns of paid and incurred losses, and are derived from the Company’s own experience and industry data. The paid loss emergence pattern is also significant to excess and assumed workers’ compensation reserves because those reserves are discounted to their estimated present value based upon such estimated payout patterns. Management believes the estimates and assumptions it makes in the reserving process provide the best

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estimate of the ultimate cost of settling claims and related expenses with respect to insured events which have occurred; however, different assumptions and variables could lead to significantly different reserve estimates.

     Loss frequency and severity are measures of loss activity that are considered in determining the key assumptions described in our discussion of loss and loss expense reserves, including expected loss ratios, rate of loss cost inflation and reported and paid loss emergence patterns. Loss frequency is a measure of the number of claims per unit of insured exposure, and loss severity is a measure of the average size of claims. Factors affecting loss frequency include the effectiveness of loss controls and safety programs and changes in economic activity or weather patterns. Factors affecting loss severity include changes in policy limits, retentions, rate of inflation and judicial interpretations.

     Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of businesses with short reporting lags than for lines of business with long reporting lags.

     The key assumptions used in calculating the most recent estimate of the loss reserves are reviewed each quarter and adjusted, to the extent necessary, to reflect historical changes, current trends and other factors observed. If the actual level of loss frequency and severity are higher or lower than expected, the ultimate losses will be different than management’s estimate. The following table reflects the impact of changes (which could be favorable or unfavorable) in frequency and severity on our loss estimate for claims occurring in 2009 (dollars in thousands):

	Frequency (+/-)
Severity (+/-)		1%		5%		10%
1%			50,629		152,390		279,592
5%			152,390		258,182		390,422
10%			279,592		390,422		528,958

     Our net reserves for losses and loss expenses of $8.1 billion as of December 31, 2009 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above.

     Approximately $1.7 billion, or 21%, of the Company’s net loss reserves as of December 31, 2009 relate to assumed reinsurance business. There is a higher degree of uncertainty and greater variability regarding estimates of assumed loss reserves because those estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is extended. Management considers the impact of delayed reporting in its selection of assumed loss development factors.

     Information received from ceding companies is used to set initial expected loss ratios, to establish case reserves and to estimate reserves for incurred but not reported losses on assumed reinsurance business. This information, which is generally provided through reinsurance intermediaries, is gathered through the underwriting process and from periodic claim reports and other correspondence with ceding companies. The Company performs underwriting and claim audits of selected ceding companies to determine the accuracy and completeness of information provided to the Company. The information received from the ceding companies is supplemented by the Company’s own loss development experience with similar lines of business as well as industry loss trends and loss development benchmarks.

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     Following is a summary of the Company’s reserves for losses and loss expenses by business segment as of December 31, 2009 and 2008 (dollars in thousands):

	2009		2008
Specialty	$	2,972,562	$	2,973,824
Regional		1,341,451		1,329,697
Alternative markets		1,771,114		1,691,678
Reinsurance		1,699,052		1,842,848
International		363,603		284,539
Net reserves for losses and loss expenses		8,147,782		8,122,586
Ceded reserves for losses and loss expenses		923,889		877,010
Gross reserves for losses and loss expenses	$	9,071,671	$	8,999,596

     Following is a summary of the Company’s net reserves for losses and loss expenses by major line of business as of December 31, 2009 and 2008 (dollars in thousands):

	Reported Case		Incurred But
	Reserves		Not Reported		Total
December 31, 2009
General liability	$	845,889	$	2,159,611	$	3,005,500
Workers’ compensation		1,094,800		1,019,552		2,114,352
Commercial automobile		393,534		196,060		589,594
International		145,807		217,796		363,603
Other		143,336		232,345		375,681
Total primary		2,623,366		3,825,364		6,448,730
Reinsurance		688,593		1,010,459		1,699,052
Total	$	3,311,959	$	4,835,823	$	8,147,782
December 31, 2008
General liability	$	800,059	$	2,227,257	$	3,027,316
Workers’ compensation		988,714		1,014,524		2,003,238
Commercial automobile		393,035		210,562		603,597
International		129,351		155,188		284,539
Other		145,010		216,038		361,048
Total primary		2,456,169		3,823,569		6,279,738
Reinsurance		770,247		1,072,601		1,842,848
Total	$	3,226,416	$	4,896,170	$	8,122,586

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     The following table presents favorable development in our estimate of claims occurring in prior years for the years ended December 31 (dollars in thousands):

	2009			2008
Specialty	$	75,501		$	108,497
Regional		52,294			25,530
Alternative markets		49,346			39,674
Reinsurance		49,040			12,440
International		7,827			9,569
Total development		234,008			195,710
Premium offsets (1)
Specialty		(6,598	)		—
Alternative markets		(4,174	)		—
Reinsurance		(33,036	)		—
Net development	$	190,200		$	195,710

(1) Represents portion of favorable reserve development that was offset by a reduction in earned premiums.

     For the year ended December 31, 2009, estimates for claims occurring in prior years decreased by $234 million before premium offsets and by $190 million net of premium offsets. On an accident year basis, the change in prior year reserves for 2009 is comprised of an increase in estimates for claims occurring in accident years 2002 and prior of $44 million and a decrease in estimates for claims occurring in accident years 2003 through 2008 of $278 million. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.

     Specialty — The majority of the favorable reserve development for the specialty segment during calendar years 2009 and 2008 was associated with excess and surplus (“E&S”) business. E&S insurers are free from rate and form regulation and generally charge higher rates for business than those that are charged in the “standard” market. The favorable development for the E&S business was primarily caused by lower claim frequency trends between 2003 and 2006. Claim frequency (i.e., the number of reported claims per unit of exposure) declined 7.6% in 2003, 10.4% in 2004, 4.6% in 2005 and 5.7% in 2006. These trends were lower than the trends that had been assumed in the reserve estimates made as of December 31, 2007 and 2008. This resulted in favorable reserve development in 2008 and 2009 as those assumptions were revised. One reason for the lower than expected number of claims was the Company’s introduction of more restrictive policy language which included additional exclusions that eliminated claims that would have previously been covered, particularly for the Company’s building contractor business. In addition, as standard carriers tightened their underwriting criteria, the Company benefited from an influx of accounts from the standard market to the E&S market during these years. The more restrictive policy language and the influx of standard market business resulted in an improved risk profile within the E&S business and a reduction in loss costs that was greater than expected. The favorable E&S development was partially offset by adverse development in commercial transportation.

     For 2009, specialty reserve development (before premium offsets) includes favorable reserve development of $2 million, $9 million, $23 million, $35 million and $28 million for accident years 2003 through 2007, respectively, and unfavorable reserve development of $21 million in years prior to 2003. For 2008, specialty reserve development (before premium offsets) includes favorable reserve development of $11 million, $21 million, $8 million, $42 million and $46 million for accident years 2003 through 2007, respectively, partially offset by unfavorable reserve development of $20 million in years prior to 2003.

     Alternative Markets — The favorable reserve development for the alternative markets segment during 2009 and 2008 was primarily related to workers’ compensation business written in California and to medical excess business. From 2003 to 2005, the State of California enacted various legislative reforms whose impact on workers’ compensation costs was uncertain at the time. As actual claims data have emerged, and interpretation of the reforms through case law has evolved, it has become clear that the impact of the reforms was greater than initially expected, resulting in favorable reserve development.

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     The Company began its excess medical business in 2002, and its initial loss estimates were based primarily on industry data and benchmarks. As the Company’s excess medical business has matured, the Company has been able to use its own database and experience to estimate loss reserves. The Company’s database and experience indicate that losses are likely to be lower than was expected when loss reserves were initially established. The favorable reserve development in 2009 resulted from a continuation of those trends.

     Regional — The favorable reserve development for the regional segment during 2009 was driven primarily by the other liability and commercial automobile lines of business. The favorable reserve development for other liability was primarily related to umbrella business (excess liability coverage above their primary policy limits). Following a comprehensive review of its own umbrella experience in 2009, the Company modified its claims development pattern to reflect its own experience rather than industry data. This shortened the claim development pattern resulting in favorable reserve development. The favorable reserve development for commercial automobile business during 2009 resulted from a reduction in claim frequency. The Company believes the lower claim frequency was related in part to a reduction in miles driven by insured vehicles as a result of the economic downturn.

     Loss Reserve Discount — The Company discounts its liabilities for excess and assumed workers’ compensation business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting the liabilities. The expected losses and loss expense payout pattern subject to discounting was derived from the Company’s loss payout experience. For non-proportional business, reserves for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. As of December 31, 2009, these discount rates ranged from 2.7% to 6.5%, with a weighted average discount rate of 4.4%. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of Insurance of the State of Delaware of 2.7%. The aggregate net discount, after reflecting the effects of ceded reinsurance, was $877 million and $847 million as of December 31, 2009 and 2008, respectively.

     Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premium, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately $53 million and $49 million at December 31, 2009 and 2008, respectively. The assumed premium estimates are based upon terms set forth in the reinsurance agreement, information received from ceding companies during the underwriting and negotiation of the agreement, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.

     Other-Than-Temporary Impairments (OTTI) of Investments. The cost of securities is adjusted where appropriate to include a provision for decline in value which is considered to be other-than-temporary. An other-than- temporary decline is considered to occur in investments where there has been a sustained reduction in market value and where the Company does not expect the fair value to recover prior to the time of sale or maturity. Since equity securities do not have a contractual cash flow at maturity, the Company considers whether the price of an equity security is expected to recover within a reasonable period of time.

     The Company classifies its fixed maturity securities and preferred stocks by credit rating, primarily based on ratings assigned by credit rating agencies. For purposes of classifying securities with different ratings, the Company uses the lower rating if two ratings were assigned and the middle rating if three ratings were assigned, unless the Company’s own analysis indicates that the lower rating is more appropriate. Securities that are not rated by a rating agency are evaluated and classified by the Company on a case-by-case basis. Unrated securities with an aggregate fair value of $10 million were classified as investment grade at December 31, 2009.

     Fixed Maturity Securities – For securities that we intend to sell or, more likely than not, would be required to sell, a decline in value below amortized cost is considered to be OTTI. The amount of OTTI is equal to the difference between amortized cost and fair value at the balance sheet date. For securities that we do not intend to sell or expect to be required to sell, a decline in value below amortized cost is considered to be an OTTI if we do not expect to recover the entire amortized cost basis of a security (i.e., the present value of cash flows expected to be collected is less than the amortized cost basis of the security). The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the

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decline in value not considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other comprehensive income.

     Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, the ability of the issuer to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.

     The following table provides a summary of all fixed maturity securities as of December 31, 2009 by the length of time those securities have been continuously in an unrealized loss position (dollars in thousands):

					Gross
	Number of		Aggregate		Unrealized
	Securities		Fair Value		Loss
Unrealized loss less than 20% of amortized cost		234	$	2,079,664	$	84,211
Unrealized loss of 20% or greater:
Less than six months		4		36,275		9,556
Six months to less than nine		—		—		—
Nine months to less than twelve		—		—		—
Twelve months		11		117,820		44,629
Total		249	$	2,233,759	$	138,396

     A summary of the Company’s non-investment grade fixed maturity securities that were in an unrealized loss position at December 31, 2009 is presented in the table below (dollars in thousands):

					Gross
	Number of		Aggregate		Unrealized
	Securities		Fair Value		Loss
Mortgage-backed securities		15	$	92,298	$	24,457
Corporate		9		40,804		5,804
State and municipal		5		36,848		4,586
Foreign bonds		1		485		38
Total		30	$	170,435	$	34,885

     One of the securities in the above table has an unrealized loss position greater than $5 million. That investment is a commercial mortgage-backed security with a fair value of $26 million and an unrealized loss of $11 million. The investment is secured by 99 properties comprising approximately 30 million square feet of office space located primarily in Boston, Northern California and Los Angeles. The current debt maturity of February 2011 can be extended at the borrower’s option through February 2012 provided that there is no continuing default and that the borrower provides interest protection for LIBOR above 6¹/2%. The Company believes the amount of outstanding debt for the Company’s debt layer and all debt layers senior to the Company’s debt layer to be below the current market values for the underlying properties. Based on the portfolio’s stable performance (e.g., occupancy rates, lease terms and debt service coverage) and on there being substantial subordinate capital, the Company does not consider the investment to be OTTI.

     The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default on financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.

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     Preferred Stocks – At December 31, 2009, there were 36 preferred stocks in an unrealized loss position, with an aggregate fair value of $174 million and a gross unrealized loss of $13 million. None of the securities had an unrealized loss of greater than 20% at December 31, 2009. One preferred stock with an aggregate fair value of $3 million and an aggregate unrealized loss of $186,000 is rated non-investment grade. The Company does not consider this investment to be OTTI.

     Common Stocks - At December 31, 2009, the Company owned three common stocks in an unrealized loss position with an aggregate fair value of $20 million and an aggregate unrealized loss of $6 million. The Company does not consider any of these investments to be OTTI.

     Loans Receivable - The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, an impairment is recognized and a valuation allowance is established with a charge to net realized capital losses. Loans receivable are reported net of a valuation reserve of $14 million and $1 million at December 31, 2009 and 2008, respectively.

     Fair Value Measurements. The Company’s fixed maturity and equity securities available for sale and its trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available. The fair value of the vast majority of the Company’s portfolio is based on observable data (other than quoted prices) and, accordingly, is classified as Level 2.

     In classifying particular financial securities in the fair value hierarchy, the Company uses its judgment to determine whether the market for a security is active and whether significant pricing inputs are observable. The Company determines the existence of an active market by assessing whether transactions occur with sufficient frequency and volume to provide reliable pricing information. The Company determines whether inputs are observable based on the use of such information by pricing services and external investment managers, the uninterrupted availability of such inputs, the need to make significant adjustments to such inputs and the volatility of such inputs over time. If the market for a security is determined to be inactive or if significant inputs used to price a security are determined to be unobservable, the security is categorized in Level 3 of the fair value hierarchy.

     Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities, securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial data, projections and business developments of the issuer and other relevant information.

     The following table summarizes pricing methods for fixed maturity securities available for sale as of December 31, 2009 (dollars in thousands):

	Carrying		Percent
	Value		of Total
Pricing source:
Independent pricing services	$	10,676,367		95.5	%
Syndicate manager		121,728		1.1	%
Directly by the Company based on:
Observable data		292,205		2.6	%
Par value		1,425		—
Cash flow model		87,313		0.8	%
Total	$	11,179,038		100.0	%

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Independent pricing services — The vast majority of the Company’s fixed maturity securities available for sale were priced by independent pricing services (generally one U.S. pricing service plus additional pricing services with respect to a limited number of foreign securities held by the Company). The prices provided by the independent pricing services are generally based on observable market data in active markets (e.g., broker quotes and prices observed for comparable securities). The determination of whether markets are active or inactive is based upon the volume and level of activity for a particular asset class. The Company conducts interviews with the pricing services to gain an understanding of how different types of securities are priced. The Company reviews the prices provided by pricing services for reasonableness based upon current trading levels for similar securities. If the prices appear unusual to the Company, they are re-examined and the value is either confirmed or revised. In addition, the Company periodically performs independent price tests of a sample of securities to ensure proper valuation and to verify our understanding of how securities are priced. As of December 31, 2009, the Company did not make any adjustments to the prices provided by the pricing services. Based upon the Company’s review of the methodologies used by the independent pricing services, these securities were classified as Level 2.

     Syndicate manager – The Company has a 15% participation in a Lloyd’s syndicate, and the Company’s share of the securities owned by the syndicate is priced by the syndicate’s manager. The majority of the securities are liquid, short duration fixed maturity securities. The Company reviews the syndicate manager’s pricing methodology and audited financial statements and holds discussions with the syndicate manager as necessary to confirm its understanding and agreement with security prices. Based upon the Company’s review of the methodologies used by the syndicate manager, these securities were classified as Level 2.

     Observable data – If independent pricing is not available, the Company prices the securities directly. Prices are based on observable market data where available, including current trading levels for similar securities and non-binding quotations from brokers. The Company generally requests two or more quotes. If more than one quote is received, the Company sets a price within the range of quotes received based on its assessment of the credibility of the quote and its own evaluation of the security. The Company generally does not adjust quotes obtained from brokers. Since these securities were priced based on observable data, they were classified as Level 2.

     Par value – Bonds that can be put to the issuer at par in the near-term are priced at par provided there are no significant concerns with the issuer’s ability to repay. These securities were classified as Level 2.

     Cash flow model – If the above methodologies are not available, the Company prices securities using a discounted cash flow model based upon assumptions as to prevailing credit spreads, interest rates and interest rate volatility, time to maturity and subordination levels. Discount rates are adjusted to reflect illiquidity where appropriate. These securities were classified as Level 3.

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Results of Operations for the Years Ended December 31, 2009 and 2008

Business Segment Results

     Following is a summary of gross and net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and combined GAAP ratios (sum of loss ratio and expense ratio) for each of our business segments for years ended December 31, 2009 and 2008. The combined ratio represents a measure of underwriting profitability, excluding investment income. A combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit (dollars in thousands).

	2009			2008
Specialty
Gross premiums written	$	1,464,205		$	1,590,335
Net premiums written		1,260,451			1,453,778
Premiums earned		1,354,355			1,618,915
Loss ratio		61.9	%		60.1	%
Expense ratio		31.1	%		28.4	%
GAAP combined ratio		93.0	%		88.5	%
Regional
Gross premiums written	$	1,229,786		$	1,385,791
Net premiums written		1,081,100			1,211,096
Premiums earned		1,116,871			1,237,258
Loss ratio		61.4	%		65.4	%
Expense ratio		34.2	%		32.3	%
GAAP combined ratio		95.6	%		97.7	%
Alternative Markets
Gross premiums written	$	664,749		$	715,979
Net premiums written		589,637			622,185
Premiums earned		597,932			626,858
Loss ratio		63.4	%		62.7	%
Expense ratio		25.8	%		24.2	%
GAAP combined ratio		89.2	%		86.9	%
Reinsurance
Gross premiums written	$	455,968		$	458,668
Net premiums written		423,425			435,108
Premiums earned		411,511			519,717
Loss ratio		57.9	%		64.7	%
Expense ratio		39.1	%		34.7	%
GAAP combined ratio		97.0	%		99.4	%
International
Gross premiums written	$	438,731		$	369,353
Net premiums written		375,482			311,732
Premiums earned		325,180			286,832
Loss ratio		59.9	%		61.7	%
Expense ratio		40.2	%		38.9	%
GAAP combined ratio		100.1	%		100.6	%
Consolidated
Gross premiums written	$	4,253,439		$	4,520,126
Net premiums written		3,730,095			4,033,899
Premiums earned		3,805,849			4,289,580
Loss ratio		61.4	%		62.7	%
Expense ratio		32.8	%		30.4	%
GAAP combined ratio		94.2	%		93.1	%

11

     Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net income per diluted share for the years ended December 31, 2009 and 2008 (amounts in thousands, except per share data):

	2009		2008
Net income to common stockholders	$	309,057	$	281,141
Weighted average diluted shares		166,574		173,454
Net income per diluted share	$	1.86	$	1.62

     The Company reported net income of $309 million in 2009 compared to $281 million in 2008. The increase in net income is primarily due to a reduction in OTTI ($152 million in 2009 compared with $434 million in 2008). This was partially offset by an increase in losses from investment funds ($174 million in 2009 compared with $4 million in 2008). The number of weighted average diluted shares decreased as a result of the Company’s repurchases of its common stock in 2008 and 2009.

     Gross Premiums Written. Gross premiums written were $4.3 billion in 2009, down 6% from 2008. The decrease in gross premiums is the result of lower overall economic activity and less new business production, partially offset by higher premiums for recently started operating units. The Company has experienced increased competition and downward pressure on pricing since 2004, although the pressure moderated in 2009. Approximately 77% of business expiring in 2009 was renewed, and the average price of policies renewed in 2009 decreased 1%. Gross premiums for companies that began operations since 2006 were $538 million in 2009 compared to $308 million in 2008. A summary of gross premiums written in 2009 compared with 2008 by line of business within each business segment follows:

• Specialty gross premiums decreased by 8% to $1,464 million in 2009 from $1,590 million in 2008. Gross premiums written decreased 40% for commercial automobile, 32% for products liability and 17% for premises operations. Gross premiums written increased 29% for professional liability and 16% for property lines.

• Regional gross premiums decreased by 11% to $1,230 million in 2009 from $1,386 million in 2008. Gross premiums written decreased 12% for commercial automobile, 12% for workers’ compensation and 10% for commercial multiple perils. Gross premiums include assigned risk premiums, which are fully reinsured, of $66 million in 2009 and $87 million in 2008.

• Alternative markets gross premiums decreased by 7% to $665 million in 2009 from $716 million in 2008. Gross premiums written decreased 16% for excess workers’ compensation and were unchanged for primary workers’ compensation. Gross premiums include assigned risk premiums, which are fully reinsured, of $24 million in 2009 and $41 million in 2008.

• Reinsurance gross premiums decreased by 1% to $456 million in 2009 from $459 million in 2008. Casualty gross premiums written decreased 16% to $320 million due to increased return premiums and non-renewed accounts. Property gross premiums written increased 72% to $136 million due to two new non-catastrophe exposed property treaties.

• International gross premiums increased by 19% to $439 million in 2009 from $369 million in 2008. The increase is primarily due to an in increase in business written in Australia and Southeast Asia and to business written by our new operating units in Lloyd’s and Canada.

     Net Premiums Earned. Premiums earned decreased 11% to $3,806 million in 2009 from $4,290 million in 2008. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2009 are related to business written during both 2009 and 2008. The 11% decrease for 2009 earned premiums reflects the underlying decline in net premiums written in 2008 and 2009.

12

     Net Investment Income. Following is a summary of net investment income for the years ended December 31, 2009 and 2008 (dollars in thousands):

							Average Annualized
	Amount						Yield
	2009			2008			2009			2008
Fixed maturity securities, including cash	$	495,140		$	497,549			4.3	%		4.5	%
Arbitrage trading account and funds		40,714			6,032			7.4	%		0.8	%
Equity securities available for sale		20,295			38,144			6.1	%		5.5	%
Gross investment income		556,149			541,725			4.4	%		4.4	%
Investment expenses		(3,588	)		(4,692	)
Total	$	552,561		$	537,033			4.4	%		4.3	%

     Net investment income increased 3% to $553 million in 2009 from $537 million in 2008. The increase in income from arbitrage trading was due to an increase in the amount invested in the arbitrage trading account and to an increase in merger activity and related investment opportunities. Average invested assets, at cost (including cash and cash equivalents) were $12.5 billion in 2009 and $12.4 billion in 2008.

     Income (Losses) from Investment Funds. Following is a summary of losses from investment funds (which are recorded on a one-quarter lag) for the year ended December 31, 2009 and 2008 (dollars in thousands):

	2009			2008
Real estate funds	$	(159,569	)	$	(43,116	)
Energy funds		(13,227	)		30,785
Other funds		(757	)		(1,919	)
Kiln Ltd		—			10,697
Total	$	(173,553	)	$	(3,553	)

     Losses from investment funds were $174 million in 2009 compared to $4 million in 2008, primarily as a result of losses from real estate funds. The real estate funds, which had an aggregate carrying value of $193 million at December 31, 2009, invest in commercial loans and securities as well as direct property ownership. Asset values were impacted by general deterioration of real estate fundamentals coupled with the absence of a refinancing market and an increase in non-performing assets. In addition, in an environment of falling values and stricter underwriting standards, a large number of real estate projects are over-leveraged and facing near-term refinancing pressure. The energy funds reported a loss of $13 million in 2009 due to a decrease in the fair value of energy related investments held by the funds. The Company sold its interest in Kiln Ltd in March 2008.

     Insurance Service Fees. Insurance service fees consists of fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage as well as brokerage services. Service fees decreased to $93 million in 2009 from $103 million in 2008 due to a decline in fees received for administering assigned risk plans as a result of a decrease in workers’ compensation premiums by those plans.

     Net Realized Gains on Investment Sales. The Company buys and sells securities on a regular basis in order to maximize its total return on investments. Decisions to sell securities are based on management’s view of the underlying fundamentals of specific securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net realized gains on investment sales were $104 million in 2009 compared with $77 million in 2008. Net realized investment gains in 2008 from the sale of securities included a gain of $70 million from the sale of the Company’s interest in Kiln Ltd.

     Other-Than-Temporary Impairments. Other-than-temporary impairments were $143 million in 2009 compared with $434 million in 2008. The impairment charge in 2009 was primarily related to debt and preferred stock of major financial institutions that experienced adverse credit events and ratings downgrades during the period, including write-downs of debt issued by Thornburg Mortgage, Inc. and preferred stock issued by Citibank and Bank of America. The impairment charge in 2008 was primarily related to financial sector equity securities, including investments in Fannie Mae, Freddie Mac and other financial institutions.

13

     Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were $189 million in 2009 compared with $137 million in 2008. These revenues were derived from aviation-related businesses that were separately purchased in 2007, 2008 and 2009. These companies provide services to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. The 2009 and 2008 revenues are not comparable since the Company acquired one of its aviation companies in 2008 and another of its aviation companies in 2009.

     Losses and Loss Expenses. Losses and loss expenses decreased to $2,337 million in 2009 from $2,689 million in 2008 due to lower earned premiums. The consolidated loss ratio was 61.4% in 2009 compared with 62.7% in 2008. Weather-related losses were $63 million in 2009 compared with $114 million in 2008. Favorable prior year reserve development, net of related premium adjustments, was $190 million in 2009 and $196 million in 2008. A summary of loss ratios in 2009 compared with 2008 by business segment follows:

• Specialty’s loss ratio increased to 61.9% in 2009 from 60.1% in 2008 due to a decline in favorable reserve development. Net favorable prior year development, net of related premium adjustments, was $69 million in 2009 compared with $108 million in 2008.

• The regional loss ratio decreased to 61.4% in 2009 from 65.4% in 2008 due to lower storm losses and an increase in favorable reserve development. Weather-related losses were $63 million in 2009 compared with $90 million in 2008. Net favorable prior year development was $52 million in 2009 compared with $26 million in 2008.

• Alternative markets’ loss ratio increased to 63.4% in 2009 from 62.7% in 2008 due to pricing and loss cost trends and to the use of lower discount rates used to discount excess workers’ compensation reserves. These were partially offset by an increase in favorable reserve development, net of related premium adjustments, to $45 million in 2009 from $40 million in 2008.

• The reinsurance loss ratio decreased to 57.9% in 2009 from 64.7% in 2008 due to lower losses from property business assumed from a Lloyd’s syndicate. Net favorable prior year development, net of related premium adjustments, was $16 million in 2009 compared with $12 million in 2008.

• The international loss ratio decreased to 59.9% in 2009 from 61.7% in 2008 due to improved underwriting results for business written in Australia and Southeast Asia. Net favorable prior year development was $8 million in 2009 compared with $10 million in 2008.

     Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the years ended December 31, 2009 and 2008 (dollars in thousands):

	2009		2008
Underwriting expenses	$	1,248,463	$	1,303,551
Service expenses		78,331		87,397
Net foreign currency (gains) losses		4,213		(23,213	)
Other costs and expenses		109,831		107,430
Total	$	1,440,838	$	1,475,165

     Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The expense ratio (underwriting expenses expressed as a percentage of premiums earned) increased to 32.8% in 2009 from 30.4% in 2008 primarily due to the decline in earned premiums. Underwriting expenses includes expenses related to recently started business operations. Some of the recently started business operations have a relatively higher expenses ratio due to their early stage of development.

     Service expenses, which represent the costs associated with the fee-based businesses, decreased 10% to $78 million due to lower employment costs.

     Net foreign currency (gains) losses result from transactions denominated in a currency other than the operating unit’s functional currency. The gain in 2008 was primarily attributable to foreign operating units holding assets denominated in U.S. dollars.

14

     Other costs and expenses, which represent corporate expenses, increased 2% to $110 million due to an increase in incentive compensation costs.

     Expenses from Wholly-Owned Investees. Expenses from wholly-owned investees were $183 million in 2009 compared to $134 million in 2008. These expenses represent costs associated with aviation-related businesses that were separately purchased in 2007, 2008 and 2009. These include cost of goods sold related to aircraft and other sales, labor and equipment costs related to repairs and other services and general and administrative expenses. The 2009 and 2008 expenses are not comparable since the companies were not all owned for the year ended December 31, 2008.

     Interest Expense. Interest expense increased 4% to $88 million primarily due to the issuance of $300 million of 7.375% senior notes in September 2009, slightly offset by the repayment of $89 million of 9.875% senior notes in May 2008.

     Income Taxes. The effective income tax rate was 19% in 2009 as compared to 14% in 2008. The effective income tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income.

15

Results of Operations for the Years Ended December 31, 2008 and 2007

Business Segment Results

     The following is a summary of gross and net premiums written, premiums earned, loss ratios (losses and loss expenses incurred expressed as a percentage of premiums earned), expense ratios (underwriting expenses expressed as a percentage of premiums earned) and combined ratios (sum of loss ratio and expense ratio) for each of our business segments for the years ended December 31, 2008 and 2007. The combined ratio represents a measure of underwriting profitability, excluding investment income. A combined ratio in excess of 100 indicates an underwriting loss; a number below 100 indicates an underwriting profit (dollars in thousands).

	2008			2007
Specialty
Gross premiums written	$	1,590,335		$	1,816,727
Net premiums written		1,453,778			1,704,880
Premiums earned		1,618,915			1,772,547
Loss ratio		60.1	%		57.3	%
Expense ratio		28.4	%		26.7	%
Combined ratio		88.5	%		84.0	%
Regional
Gross premiums written	$	1,385,791		$	1,441,077
Net premiums written		1,211,096			1,267,451
Premiums earned		1,237,258			1,250,914
Loss ratio		65.4	%		59.1	%
Expense ratio		32.3	%		31.4	%
Combined ratio		97.7	%		90.5	%
Alternative Markets
Gross premiums written	$	715,979		$	758,285
Net premiums written		622,185			656,369
Premiums earned		626,858			651,909
Loss ratio		62.7	%		59.2	%
Expense ratio		24.2	%		23.1	%
Combined ratio		86.9	%		82.3	%
Reinsurance
Gross premiums written	$	458,668		$	732,233
Net premiums written		435,108			682,241
Premiums earned		519,717			740,439
Loss ratio		64.7	%		65.3	%
Expense ratio		34.7	%		31.3	%
Combined ratio		99.4	%		96.6	%
International
Gross premiums written	$	369,353		$	304,908
Net premiums written		311,732			265,048
Premiums earned		286,832			247,892
Loss ratio		61.7	%		62.6	%
Expense ratio		38.9	%		32.4	%
Combined ratio		100.6	%		95.0	%
Consolidated
Gross premiums written	$	4,520,126		$	5,053,230
Net premiums written		4,033,899			4,575,989
Premiums earned		4,289,580			4,663,701
Loss ratio		62.7	%		59.6	%
Expense ratio		30.4	%		28.5	%
Combined ratio		93.1	%		88.1	%

16

     Net Income to Common Stockholders. The following table presents the Company’s net income to common stockholders and net income per diluted share for the years ended December 31, 2008 and 2007 (amounts in thousands, except per share data):

	2008		2007
Net income to common stockholders	$	281,141	$	766,239
Weighted average diluted shares		173,454		196,698
Net income per diluted share	$	1.62	$	3.90

     Net income decreased to $281 million in 2008 from $766 million in 2007 primarily due to realized investment losses, net of tax of $232 million in 2008 as compared to realized investment gains, net of tax of $32 million in 2007. In addition, underwriting profits and investment income were lower in 2008. The decrease in weighted average diluted shares resulted from the Company’s repurchases of its common stock in 2007 and 2008.

     Gross Premiums Written. Gross premiums written were $4.5 billion in 2008, down 11% from 2007. The Company has experienced increased competition and downward pressure on pricing since 2004. This trend continued in 2008, with overall price levels for renewal business declining approximately 5% as compared with the prior year period. New business volume was also lower in 2008. Gross premiums written for businesses that were started or acquired since 2006 were $308 million in 2008 and $161 million in 2007.

     A summary of gross premiums written in 2008 compared with 2007 by business segment follows:

• Specialty gross premiums decreased by 12% to $1,590 million in 2008 from $1,817 million in 2007 due to lower premiums and less new business. Gross premiums written decreased 26% for products liability, 24% for premises operations, 11% for commercial automobile and 8% for property lines. Gross premiums written increased 14% for professional liability.

• Regional gross premiums decreased by 4% to $1,386 million in 2008 from $1,441 million in 2007 due primarily to lower prices. Gross premiums written decreased 5% for commercial automobile, 5% for commercial multiple peril and 2% for workers’ compensation. Gross premiums include assigned risk premiums, which are fully reinsured, of $87 million in 2008 and $88 million in 2007.

• Alternative markets gross premiums decreased by 6% to $716 million in 2008 from $758 million in 2007 due primarily to lower prices. Gross premiums written decreased 12% for excess workers’ compensation and 1% for primary workers’ compensation. Gross premiums include assigned risk premiums, which are fully reinsured, of $41 million in 2008 and $61 million in 2007.

• Reinsurance gross premiums decreased by 37% to $459 million in 2008 from $732 million in 2007. The decline was due to non-renewals and lower new business volume as a result of business lost to competitors or retained by ceding companies. Casualty gross premiums written decreased 32% to $380 million, and property gross premiums written decreased 55% to $79 million.

• International gross premiums increased by 21% to $369 million in 2008 from $305 million in 2007. Gross premiums in the U.K. and Continental Europe decreased 8% primarily as a result of the strengthening of the U.S. dollar against foreign currencies. Gross premiums in South America increased 34% as a result of higher price levels and new business. Gross premiums for the Australian branch, which began operating in 2008, were $25 million.

     Net Premiums Earned. Premiums earned decreased 8% to $4,290 million in 2008 from $4,664 million in 2007. Insurance premiums are earned ratably over the policy term, and therefore premiums earned in 2008 are related to business written during both 2008 and 2007. The 8% decrease for 2008 earned premiums reflects the underlying decline in net premiums written in 2007 and 2008.

17

     Net Investment Income. Following is a summary of net investment income for the years ended December 31, 2008 and 2007 (dollars in thousands):

				Average Annualized
	Amount			Yeild
	2008			2007			2008			2007
Fixed maturity securities, including cash	$	497,549		$	500,378			4.5	%		4.7	%
Arbitrage trading account and funds		6,032			80,253			0.8	%		9.8	%
Equity securities available for sale		38,144			57,502			5.5	%		7.0	%
Gross investment income		541,725			638,133			4.4	%		5.3	%
Investment expenses		(4,692	)		(3,747	)
Total	$	537,033		$	634,386			4.3	%		5.2	%

     Net investment income decreased 15% to $537 million in 2008 from $634 million in 2007 primarily as a result of lower income from the arbitrage trading account, which includes merger arbitrage and convertible arbitrage. Investment income from merger arbitrage investments decreased to $19 million from $65 million due primarily to a significant reduction in merger activity and related investment opportunities. Convertible arbitrage reported a loss of $13 million in 2008 compared with income of $16 million in 2007, as many of the financial institutions that were severely impacted by the credit crisis in 2008 were both issuers and holders of convertible preferred shares. Investment income from equity securities available for sale declined to $38 million from $58 million due to the deferral of dividends for Fannie Mae and Freddie Mac and to lower dividends for floating rate securities. Average invested assets, at cost (including cash and cash equivalents) increased 3% to $12.4 billion in 2008 from $12.1 billion in 2007 primarily as a result of cash flow from operations which was partially offset by cash used for repurchases of the Company’s common stock.

     Income (Losses) from Investment Funds. Following is a summary of income (losses) from investment funds for the years ended December 31, 2008 and 2007 (dollars in thousands):

	2008			2007
Real estate funds	$	(43,116	)	$	25,007
Energy		30,785			1,323
Other		(1,919	)		(4,108	)
Kiln Ltd		10,697			16,052
Total	$	(3,553	)	$	38,274

     Losses from investment funds were $4 million in 2008 compared to income of $38 million in 2007, primarily as a result of losses from real estate funds. The real estate funds invest primarily in commercial loans and securities that are marked to market and were marked down as credit spreads widened significantly following the bankruptcy of Lehman Brothers, government intervention, heightened concern over the U.S. and global economies, deleveraging of capital markets, increased market illiquidity and a worsening credit outlook. Income from energy funds increased to $31 million from $1 million due to an increase in the fair value of energy related investments held by the funds. The decrease in income from Kiln Ltd is due to the sale of the Company’s interest in Kiln Ltd in March 2008.

     The Company’s share of the earnings or losses of investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company’s financial statements. Subsequent to December 31, 2008, the Company received 2008 financial statements for certain real estate and energy funds. The Company’s share of net losses reported by these funds for their 2008 fourth quarter was $111 million pre-tax, or $72 million after-tax. The Company reported this loss, together with the results for investment funds for which 2008 financial statements had not yet been received, in its income statement for the first quarter of 2009.

     Insurance Service Fees. The alternative markets and specialty segments offer fee-based services to help clients develop and administer self-insurance programs, primarily for workers’ compensation coverage. Service fees increased to $103 million in 2008 from $98 million in 2007 primarily as a result of the acquisition of American Mining Insurance Company in October 2007.

     Net Realized Gains on Investment Sales. The Company buys and sells securities on a regular basis in order to maximize its total return on investments. Decisions to sell securities are based on management’s view of the underlying

18

fundamentals of specific securities as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net realized gains on investment sales were $77 million in 2008 compared with $52 million in 2007. Net realized investment gains from the sale of securities included a gain of $70 million from the sale of the Company’s interest in Kiln Ltd in 2008.

     Other-Than-Temporary Impairments. Other-than-temporary impairments were $434 million in 2008 compared with $3 million in 2007. The impairment charge in 2008 included $263 million from the write down of preferred stocks issued by Fannie Mae and Freddie Mac, $90 million for a REIT common stock, $64 million for preferred stocks issued by banks, insurers and REITs and $16 million for private equity investments.

     Revenues from Wholly-Owned Investees. Revenues from wholly-owned investees were $137 million in 2008 compared with $103 million in 2007. These revenues were derived from aviation-related businesses that were separately purchased in 2007 and 2008. These companies provide services to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. The 2008 and 2007 revenues are not comparable since the companies are not included for the same periods.

     Losses and Loss Expenses. Losses and loss expenses decreased to $2,689 million in 2008 from $2,780 million in 2007. The consolidated loss ratio was 62.7% in 2008 compared with 59.6% in 2007. Estimated loss ratios for accident year 2008 were higher due to higher weather-related losses, a decline in price levels and the impact of anticipated loss cost trends and inflation. Weather-related losses (including reinstatement premiums) were $114 million in 2008 compared with $34 million in 2007. The 2008 weather-related losses included losses from Hurricanes Ike, Gustav and Dolly. The increase in the accident year 2008 loss ratio was partially offset by favorable prior year reserve development, which was $196 million in 2008 compared with $106 million in 2007. The favorable loss reserve development in 2008 and 2007 was primarily related to the specialty segment. A summary of loss ratios in 2008 compared with 2007 by business segment follows:

• Specialty’s loss ratio increased to 60.1% in 2008 from 57.3% in 2007. Estimated loss ratios for accident year 2008 were higher due to a decline in price levels and a more competitive market environment. The increase in the accident year 2008 loss ratio was partially offset by favorable reserve development. Net favorable prior year development was $108 million in 2008 compared with $97 million in 2007.

• The regional loss ratio increased to 65.4% in 2008 from 59.1% in 2007. Estimated loss ratios for accident year 2008 were higher due to higher weather-related losses and to a decline in price levels. Weather-related losses were $90 million in 2008 compared with $34 million in 2007. Net favorable prior year development was $26 million in 2008 compared with $22 million in 2007.

• Alternative markets’ loss ratio increased to 62.7% from 59.2% in 2007. Estimated loss ratios for accident year 2008 were higher due to a decline in price levels, a more competitive market environment and the impact of lower discount rates used to discount excess workers’ compensation reserves. Net favorable prior year development was $40 million in 2008 compared with $24 million in 2007.

• The reinsurance loss ratio decreased to 64.7% in 2008 from 65.3% in 2007 due primarily to favorable reserve development. Favorable prior year development was $12 million in 2008 compared with unfavorable prior year development of $44 million in 2007.

• The international loss ratio decreased to 61.7% in 2008 from 62.6% in 2007 due to favorable reserve development and a change in the mix of business. Favorable prior year development was $10 million in 2008 compared with $7 million in 2007.

     Other Operating Costs and Expenses. Following is a summary of other operating costs and expenses for the years ended December 31, 2008 and 2007 (dollars in thousands):

	2008			2007
Underwriting expenses	$	1,303,551		$	1,330,519
Service expenses		87,397			90,561
Net foreign currency (gains)		(23,213	)		(2,731	)
Other costs and expenses		107,430			112,638
Total	$	1,475,165		$	1,530,987

19

     Underwriting expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. The consolidated expense ratio (underwriting expenses expressed as a percentage of premiums earned) increased to 30.4% in 2008 from 28.5% in 2007 primarily due to the decline in earned premiums.

     Service expenses, which represent the costs associated with the alternative markets and specialty segments’ fee-based businesses, decreased 3% to $87 million due to lower employment costs.

     Other costs and expenses, which represent corporate expenses, decreased 5% to $107 million. The decrease was due to lower incentive compensation costs.

     Expenses from Wholly-Owned Investees. Expenses from wholly-owned investees were $134 million in 2008 compared to $96 million in 2007. These expenses represent costs associated with aviation-related businesses that were separately purchased in 2007 and 2008. These include cost of goods sold related to aircraft and other sales, labor and equipment costs related to repairs and other services and general and administrative expenses. The 2008 and 2007 expenses are not comparable since the companies are not included for the same periods.

     Interest Expense. Interest expense decreased 5% to $85 million primarily due to the repayment of $89 million of 9.875% senior notes in May 2008.

     Income Taxes. The effective income tax rate was 14% in 2008 and 29% in 2007. The effective tax rate differs from the federal income tax rate of 35% primarily because of tax-exempt investment income, which represented a greater portion of pre-tax income in 2008.

20

Investments

     As part of its investment strategy, the Company establishes a level of cash and highly liquid short-term and intermediate-term securities that, combined with expected cash flow, it believes adequate to meet payment obligations. The Company also attempts to maintain an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations. In 2009, the Company increased the average duration of its portfolio from 3.1 years to 3.6 years to more closely match the duration of its liabilities.

     The Company’s investment portfolio and investment-related assets as of December 31, 2009 were as follows (dollars in thousands):

	Cost		Carrying Value
Fixed maturity securities:
U.S. government and government agencies	$	1,677,579	$	1,714,153
State and municipal		5,622,479		5,819,702
Mortgage-backed securities:
Agency		1,097,881		1,125,837
Residential-Prime		407,282		379,320
Residential-Alt A		76,486		70,378
Commercial		47,292		35,223
Total mortgage-backed securities		1,628,941		1,610,758
Corporate:
Industrial		782,254		814,120
Financial		478,713		482,293
Utilities		183,160		188,827
Asset-backed		174,632		155,694
Other		98,043		99,251
Government agency		8,066		8,191
Total corporate		1,724,868		1,748,376
Foreign government and foreign government agencies		394,711		406,208
Total fixed maturity securities		11,048,578		11,299,197
Equity securities available for sale:
Preferred stocks:
Financial		109,994		107,124
Real estate		119,834		121,524
Utilities		55,662		53,659
Total preferred stocks		285,490		282,307
Common stocks		27,237		119,060
Total equity securities available for sale		312,727		401,367
Arbitrage trading account		465,783		465,783
Investment in arbitrage funds		83,420		83,420
Investment funds		420,040		418,880
Loans receivable		381,591		381,591
Total investments	$	12,712,139	$	13,050,238

     Fixed Maturity Securities. The Company’s investment policy with respect to fixed maturity securities is generally to purchase instruments with the expectation of holding them to their maturity. However, management of the available for sale portfolio is considered necessary to maintain an approximate matching of assets and liabilities as well as to adjust the portfolio as a result of changes in financial market conditions and tax considerations. At December 31, 2009 (as compared to December 31, 2008), the fixed maturity securities portfolio mix was as follows: U.S. government securities were 15% (12% in 2008); state and municipal securities were 52% (58% in 2008); corporate securities were 15% (10% in 2008); mortgage-backed securities were 14% (17% in 2008); and foreign government bonds were 4% (3% in 2008).

21

     The Company’s philosophy related to holding or selling fixed maturity securities is based on its objective of maximizing total return. The key factors that management considers in its investment decisions as to whether to hold or sell fixed maturity securities are its view of the underlying fundamentals of specific securities as well as its expectations regarding interest rates, credit spreads and currency values. In a period in which management expects interest rates to rise, the Company may sell longer duration securities in order to mitigate the impact of an interest rate rise on the fair value of the portfolio. Similarly, in a period in which management expects credit spreads to widen, the Company may sell lower quality securities, and in a period in which management expects certain foreign currencies to decline in value, the Company may sell securities denominated in those foreign currencies. The sale of fixed maturity securities in order to achieve the objective of maximizing total return may result in realized gains; however, there is no reason to expect these gains to continue in future periods.

     Equity Securities Available for Sale. Equity securities available for sale primarily represent investments in common and preferred stocks of publicly traded REITs, financial companies and utilities.

     Arbitrage Trading Account. The arbitrage trading account is comprised of direct investments in arbitrage securities. Merger arbitrage is the business of investing in the securities of publicly held companies that are the targets in announced tender offers and mergers.

     Investment in Arbitrage Funds. Investment in arbitrage funds represents investments in limited partnerships that specialize in merger arbitrage, convertible arbitrage and relative value arbitrage. Convertible arbitrage is the business of investing in convertible securities with the goal of capitalizing on price differentials between these securities and their underlying equities. Relative value arbitrage is the business of investing primarily in equity securities with the goal of capitalizing on perceived differences in fundamental values between pairs of companies in similar industries.

     Investment Funds. At December 31, 2009 and December 31, 2008, the Company’s carrying value in investment funds was $419 million and $496 million, respectively, and included investments in real estate funds of $193 million and $302 million, respectively.

     Loans Receivable. Loans receivable, which are carried at amortized cost, have an aggregate cost of $382 million and an aggregate fair value of $285 million at December 31, 2009. Amortized cost of these loans is net of a valuation allowance of $14 million and $1 million as of December 31, 2009 and 2008, respectively. The ten largest have an aggregate amortized cost of $298 million and an aggregate fair value of $199 million and are secured by commercial real estate. These loans earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) between August 2011 and January 2013. The loans are secured by office buildings (60%), hotels (27%) and senior living facilities (13%) located primarily in New York City, California, Hawaii, Boston and Philadelphia.

     Market Risk. The Company’s market risk generally represents the risk of gain or loss that may result from the potential change in the fair value of the Company’s investment portfolio as a result of fluctuations in credit quality and interest rates. The Company uses various models and stress test scenarios to monitor and manage interest rate risk. In addition, the Company’s international businesses and securities are subject to currency exchange rate risk. As discussed above, the Company attempts to manage its interest rate risk by maintaining an appropriate relationship between the average duration of the investment portfolio and the approximate duration of its liabilities, i.e., policy claims and debt obligations. The average duration for the fixed income portfolio was 3.6 years and 3.1 years at December 31, 2009 and 2008, respectively.

22

     The following table outlines the groups of fixed maturity securities and the components of the interest rate risk at December 31, 2009 (dollars in thousands):

	Effective
	Duration
	(Years)		Fair Value
Cash and cash equivalents		0.0	$	515,430
U. S. government securities		3.4		1,714,153
State and municipal		4.2		5,825,741
Corporate		4.2		1,748,363
Foreign		2.7		406,208
Mortgage-backed securities		3.0		1,613,742
Loans receivable		2.2		285,122
Total		3.6	$	12,108,759

     Duration is a common gauge of the price sensitivity of a fixed income portfolio to a change in interest rates. The Company determines the estimated change in fair value of the fixed maturity securities, assuming immediate parallel shifts in the treasury yield curve while keeping spreads between individual securities and treasury securities static. The fair value at specified levels at December 31, 2009 would be as follows (dollars in thousands):

			Estimated Change in
	Fixed Maturity Securities		Fair Value
Change in interest rates:
300 basis point rise	$	10,786,286	$	(1,322,473	)
200 basis point rise		11,227,109		(881,650	)
100 basis point rise		11,667,933		(440,826	)
Base scenario		12,108,759		—
100 basis point decline		12,540,304		431,545
200 basis point decline		12,971,853		863,094
300 basis point decline		13,403,401		1,294,642

     Approximately 39% of the Company’s state and municipal bonds are insured by bond insurers. The carrying value of insured bonds by bond insurer at December 31, 2009 was: MBIA - $844 million, FGIC — $532 million, FSA — $439 million and AMBAC — $450 million. In addition, at December 31, 2009, the Company owned common stock of MBIA with a carrying value of $6.4 million.

     The following table presents the credit quality of insured state and municipal bonds with and without credit for insurance enhancement (dollars in thousands):

	Credit-Enhanced		Underlying
Rating	Rating (2)		Rating
AAA	$	686,151	$	267,450
AA		827,386		1,040,296
A		740,691		835,474
BBB		11,016		63,305
Below BBB		—		—
Unrated (1)		253		58,972
Total	$	2,265,497	$	2,265,497

(1)	Includes $19 million of municipal bonds that have been pre-refunded to maturity with escrowed funds. For the majority of the remaining unrated securities, similar securities for the same issuer were rated investment grade.
(2)	For purposes of this table, the ratings assigned to bond insurers are FSA–AAA, MBIA–A, AMBAC–C, and FGIC–not rated.

23

     Arbitrage investing differs from other types of investments in that its focus is on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general stock market conditions. Potential changes in market conditions are also mitigated by the implementation of hedging strategies, including short sales.

     Additionally, the arbitrage positions are generally hedged against market declines by purchasing put options, selling call options or entering into swap contracts. The Company’s merger arbitrage securities are primarily exposed to the risk of completion of announced deals, which are subject to regulatory as well as transactional and other risks.

Liquidity and Capital Resources

     Cash Flow. Cash flow provided from operating activities was $316 million in 2009, $1,553 million in 2008 and $1,450 million in 2007. The decrease in cash flow from operating activities in 2009 was primarily due to cash transfer to and from the arbitrage trading accounts, which are included in cash flow from operations under U. S. generally accepted accounting principles. Cash transfers to the arbitrage trading account were $383 million in 2009, compared with cash flow from the arbitrage trading account of $554 million in 2008.

     As a holding company, the Company derives cash from its subsidiaries in the form of dividends, tax payments and management fees. Maximum amounts of dividends that can be paid without regulatory approval are prescribed by statute. During 2010, the maximum amount of dividends which can be paid without regulatory approval is approximately $384 million. The ability of the holding company to service its debt obligations is limited by the ability of the insurance subsidiaries to pay dividends. In the event dividends, tax payments and management fees available to the holding company were inadequate to service its debt obligations, the Company would need to raise capital, sell assets or restructure its debt obligations.

     The Company’s insurance subsidiaries’ principal sources of cash are premiums, investment income, service fees and proceeds from sales and maturities of portfolio investments. The principal uses of cash are payments for claims, taxes, operating expenses and dividends. The Company expects its insurance subsidiaries to fund the payment of losses with cash received from premiums, investment income and fees. The Company targets an average duration for its investment portfolio that is within one year of the average duration of its liabilities so that portions of its investment portfolio mature throughout the claim cycle and are available for the payment of claims if necessary. In the event operating cash flow and proceeds from maturities and prepayments of fixed income securities are not sufficient to fund claim payments and other cash requirements, the remainder of the Company’s cash and investments is available to pay claims and other obligations as they become due. The Company’s investment portfolio is highly liquid, with approximately 86% invested in cash, cash equivalents and marketable fixed income securities as of December 31, 2009. If the sale of fixed income securities were to become necessary, a realized gain or loss equal to the difference between the cost and sales price of securities sold would be recognized.

     Financing Activity. During 2009, the Company repurchased 6,382,331 shares (including 133,113 shares purchased in connection with the Company’s stock option program) of its common stock for $147 million. In July 2009, a subsidiary of the Company entered into a $28 million line of credit, of which $19 million was outstanding as of December 31, 2009. In September 2009, the Company issued $300 million of 7.375% Senior Notes due 2019.

     During 2008, the Company repurchased 20,677,144 shares of its common stock for $553 million. The Company repaid $12 million of subsidiary debt in January 2008 and $89 million of 9.875% senior notes in May 2008.

     In February 2007, the Company issued $250 million of 6.25% senior notes due on February 15, 2037. During 2007, the Company repurchased 16,130,773 shares (including 963,773 shares purchased in connection with the Company’s stock option program) of its common stock for $489 million.

     At December 31, 2009, the Company had senior notes, junior subordinated debentures and other debt outstanding with a carrying value of $1,595 million and a face amount of $1,612 million. The maturities of the outstanding debt are $150 million in 2010, $2 million in 2011, $26 million in 2012, $200 million in 2013, $200 million in 2015, $450 million in 2019, $76 million in 2022, $1 million in 2023, $7 million in 2035 (expected to be called in 2010), $250 million in 2037 and $250 million in 2045 (prepayable in 2010).

24

     At December 31, 2009, equity was $3.6 billion and total capitalization (equity, senior notes and other debt and junior subordinated debentures) was $5.2 billion. The percentage of the Company’s capital attributable to senior notes, junior subordinated debentures and other debt was 31% at December 31, 2009 and 29% at December 31, 2008.

Federal and Foreign Income Taxes

     The Company files a consolidated income tax return in the U.S. and foreign tax returns in each of the countries in which it has overseas operations. At December 31, 2009, the Company had a deferred gross tax asset, net of valuation allowance, of $452 million (which primarily relates to loss and loss expense reserves and unearned premium reserves), and a gross deferred tax liability of $261 million (which primarily relates to deferred policy acquisition costs and intangible assets). The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

Reinsurance

     The Company follows customary industry practice of reinsuring a portion of its exposures, paying reinsurers a part of the premiums received on the policies it writes. Reinsurance is purchased by the Company principally to reduce its net liability on individual risks and to protect it against catastrophic losses. Although reinsurance does not legally discharge in insurer from its primary liability for the full amount of the policies, it does make the assuming reinsurer liable to the insurer to the extent of the reinsurance coverage. The Company monitors the financial condition of its reinsurers and attempts to place its coverages only with substantial and financially sound carriers.

     The following table presents the credit quality of amounts due from reinsurers as of December 31, 2009 (dollars in thousands). Amounts due from reinsurers are net of reserves for uncollectible reinsurance of $4 million.

Reinsurer	Rating (1)	Amount
Munich Re	AA-	$	130,947
Swiss Re	AA-		67,332
Berkshire Hathaway	AAA		66,510
Partner Re	AA-		35,877
Transatlantic	A+		35,028
Axis Capital	A		31,958
XL Capital	A+		29,386
Ace	A+		24,992
Allied World	A-		23,597
Other reinsurers rated A- or better			174,870
Non-rated and other (2)			42,110
Subtotal			662,607
Residual market pools (3)			310,213
Total		$	972,820

(1)	Rating represents S&P rating, or if not rated by S&P, A.M. Best rating.
(2)	The majority of non-rated and other consists of amounts due from government sponsored reinsurers, and amounts that are secured by letters of credit or other forms of collateral.
(3)	Many states require licensed insurers that provide workers’ compensation insurance to participate in programs that provide workers’ compensation to employers that cannot procure coverage from an insurer on a voluntary basis. Insurers can fulfill this residual market obligation by participating in pools where results are shared by the participating companies. The Company acts as a servicing carrier for workers’ compensation pools in 18 states. As a servicing carrier, the Company writes residual market business directly and then cedes 100% of this business to the respective pool. As a servicing carrier, the Company receives fee income for its services. The Company does not retain underwriting risk, and credit risk is limited as ceded balances are jointly shared by all the pool members.

25

     For 2010, the Company’s property catastrophe reinsurance provides protection for 92.4% of the net loss between $10 million and $125 million, and its casualty contingency agreement provides protection for 94.5% of the net loss between $2 million and $33 million. The catastrophe and casualty contingency reinsurance agreements are subject to certain limits, exclusions and reinstatement premiums. For business written through Lloyd’s, the Company has separate catastrophe excess of loss and quota share agreements secured through its Lloyd’s general agents.

Contractual Obligations

     Following is a summary of the Company’s contractual obligations as of December 31, 2009 (amounts in thousands):

Estimated Payments By Periods	2010		2011		2012		2013		2014		Thereafter
Gross reserves for losses	$	2,280,587	$	1,619,977	$	1,233,021	$	931,854	$	674,708	$	3,275,701
Operating lease obligations		26,574		31,979		17,075		13,792		9,873		24,609
Purchase obligations		15,298		8,069		17,532		33,927		2,454		2,483
Junior subordinated debentures		7,217		—		—		—		—		250,000
Debt maturities		150,422		2,142		25,519		200,000		—		977,128
Interest payments		99,965		94,646		94,117		83,707		81,749		1,073,088
Other long-term liabilities		54,939		24,108		14,276		2,349		8,698		42,521
Total	$	2,635,002	$	1,780,921	$	1,401,540	$	1,265,629	$	777,482	$	5,645,530

     The estimated payments for reserves for losses and loss expenses in the above table represent the projected (undiscounted) payments for gross loss and loss expense reserves related to losses incurred as of December 31, 2009. The estimated payments in the above table do not consider payments for losses to be incurred in future periods. These amounts include reserves for reported losses and reserves for incurred but not reported losses. Estimated amounts recoverable from reinsurers are not reflected. The estimated payments by year are based on historical loss payment patterns. The actual payments may differ from the estimated amounts due to changes in ultimate loss reserves and in the timing of the settlement of those reserves.

     The Company utilizes letters of credit to back certain reinsurance payments and obligations. Outstanding letters of credit were $36 million as of December 31, 2009. The Company has made certain guarantees to state regulators that the statutory capital of certain subsidiaries will be maintained above certain minimum levels. In addition, the Company has commitments to invest up to $212 million in certain investment funds.

Off-Balance Sheet Arrangements

     An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the Company, or that engages in leasing, hedging or research and development arrangements with the Company. The Company has no arrangements of these types that management believes may have a material current or future effect on our financial condition, liquidity or results of operations.

26

Management’s Report on Internal Control Over Financial Reporting

     A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2009.

27

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
W. R. Berkley Corporation:

We have audited W. R. Berkley Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009, and our report dated February 26, 2010 expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

New York, New York
February 26, 2010

28

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
W. R. Berkley Corporation:

We have audited the accompanying consolidated balance sheets of W. R. Berkley Corporation and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss), and cash flows for each of the years in the three-year period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2010 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

New York, New York
February 26, 2010

29

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)

Years Ended December 31,	2009			2008			2007
REVENUES:
Net premiums written	$	3,730,095		$	4,033,899		$	4,575,989
Change in net unearned premiums		75,754			255,681			87,712
Net premiums earned		3,805,849			4,289,580			4,663,701
Net investment income		552,561			537,033			634,386
Income (losses) from investment funds		(173,553	)		(3,553	)		38,274
Insurance service fees		93,245			102,856			97,689
Net investment gains (losses):
Net realized gains on investment sales		104,453			76,619			52,376
Other-than-temporary impairments		(151,727	)		(433,550	)		(2,680	)
Portion of impairments reclassified to other comprehensive income		8,866			—			—
Net investment gains (losses)		(38,408	)		(356,931	)		49,696
Revenues from wholly-owned investees		189,347			137,280			102,846
Other income		2,137			2,543			1,805
Total revenues		4,431,178			4,708,808			5,588,397
OPERATING COSTS AND EXPENSES:
Losses and loss expenses		2,336,707			2,688,661			2,779,578
Other operating costs and expenses		1,440,838			1,475,165			1,530,987
Expenses from wholly-owned investees		183,414			134,037			96,444
Interest expense		87,989			84,623			88,996
Total operating costs and expenses		4,048,948			4,382,486			4,496,005
Income before income taxes		382,230			326,322			1,092,392
Income tax expense		(73,150	)		(44,919	)		(323,070	)
Net income before noncontrolling interests		309,080			281,403			769,322
Noncontrolling interests		(23	)		(262	)		(3,083	)
Net income to common stockholders	$	309,057		$	281,141		$	766,239
NET INCOME PER SHARE:
Basic	$	1.93		$	1.68		$	4.05
Diluted	$	1.86		$	1.62		$	3.90

See accompanying notes to consolidated financial statements.

30

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

December 31,	2009			2008
Assets
Investments:
Fixed maturity securities	$	11,299,197		$	9,689,896
Equity securities available for sale		401,367			383,750
Arbitrage trading account		465,783			119,485
Investment in arbitrage funds		83,420			73,435
Investment funds		418,880			495,533
Loans receivable		381,591			381,182
Total investments		13,050,238			11,143,281
Cash and cash equivalents		515,430			1,134,835
Premiums and fees receivable		1,047,976			1,056,096
Due from reinsurers		972,820			931,115
Accrued investment income		130,524			122,461
Prepaid reinsurance premiums		211,054			181,462
Deferred policy acquisition costs		391,360			394,807
Real estate, furniture and equipment		246,605			260,522
Deferred federal and foreign income taxes		190,450			329,417
Goodwill		107,131			107,564
Trading account receivable from brokers and clearing organizations		310,042			128,883
Due from broker		—			138,411
Current, federal and foreign income taxes		—			76,491
Other assets		154,966			115,813
Total assets	$	17,328,596		$	16,121,158
Liabilities and Equity
Liabilities:
Reserves for losses and loss expenses	$	9,071,671		$	8,999,596
Unearned premiums		1,928,428			1,966,150
Due to reinsurers		208,045			114,974
Trading account securities sold but not yet purchased		143,885			23,050
Other liabilities		779,347			694,255
Junior subordinated debentures		249,793			249,584
Senior notes and other debt		1,345,481			1,021,869
Total liabilities		13,726,650			13,069,478
Equity:
Preferred stock, par value $.10 per share:
Authorized 5,000,000 shares; issued and outstanding — none		—			—
Common stock, par value $.20 per share:
Authorized 500,000,000 shares, issued and outstanding, net of treasury shares, 156,552,355 and 161,467,131 shares		47,024			47,024
Additional paid-in capital		926,359			920,241
Retained earnings		3,785,187			3,514,531
Accumulated other comprehensive income (loss)		163,207			(228,959	)
Treasury stock, at cost, 78,565,563 and 73,650,787 shares		(1,325,710	)		(1,206,518	)
Total common stockholders’ equity		3,596,067			3,046,319
Noncontrolling interests		5,879			5,361
Total equity		3,601,946			3,051,680
Total liabilities and equity	$	17,328,596		$	16,121,158

See accompanying notes to consolidated financial statements.

31

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)

Years Ended December 31,	2009			2008			2007
COMMON STOCK:
Beginning and end of period	$	47,024		$	47,024		$	47,024
Stock issued		—			—			—
End of period	$	47,024		$	47,024		$	47,024
ADDITIONAL PAID IN CAPITAL:
Beginning of period	$	920,241		$	907,016		$	859,787
Stock options exercised and restricted units issued including tax benefit		(17,665	)		(10,520	)		26,510
Restricted stock units expensed		23,649			23,239			19,541
Stock options expensed		12			214			794
Stock issued		122			292			384
End of period	$	926,359		$	920,241		$	907,016
RETAINED EARNINGS:
Beginning of period	$	3,514,531		$	3,271,355		$	2,542,744
Net income to common stockholders		309,057			281,141			766,239
Dividends		(38,401	)		(37,965	)		(37,628	)
End of period	$	3,785,187		$	3,514,531		$	3,271,355
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized investment gains (losses):
Beginning of period	$	(142,216	)	$	52,497		$	121,961
Unrealized gain (losses) on securities not other-than-temporarily impaired		367,035			(194,713	)		(69,464	)
Unrealized losses on other-than-temporarily impaired securities		(5,425	)		—			—
End of period		219,394			(142,216	)		52,497
Currency translation adjustments:
Beginning of period		(72,475	)		18,060			3,748
Net change in period		32,104			(90,535	)		14,312
End of period		(40,371	)		(72,475	)		18,060
Net pension asset:
Beginning of period		(14,268	)		(17,356	)		(14,096	)
Net change in period		(1,548	)		3,088			(3,260	)
End of period		(15,816	)		(14,268	)		(17,356	)
Total accumulated other comprehensive income (loss)	$	163,207		$	(228,959	)	$	53,201
TREASURY STOCK:
Beginning of period	$	(1,206,518	)	$	(686,228	)	$	(226,009	)
Stock exercised/vested		27,322			32,195			28,455
Stock issued		630			799			117
Stock repurchased		(147,144	)		(553,284	)		(488,791	)
End of period	$	(1,325,710	)	$	(1,206,518	)	$	(686,228	)
NONCONTROLLING INTERESTS:
Beginning of period	$	5,361		$	35,496		$	30,615
Change in subsidiary shares from noncontrolling interest		525			(30,126	)		256
Net income		23			262			3,083
Other comprehensive income (loss), net of tax		(30	)		(271	)		1,542
End of period	$	5,879		$	5,361		$	35,496

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)

Years Ended December 31,	2009			2008			2007
Net income before noncontrolling interests	$	309,080		$	281,403		$	769,322
Other comprehensive income (loss):
Change in unrealized foreign exchange gains (losses)		32,104			(90,535	)		14,312
Unrealized holding gains (losses) on investment securities arising during the period, net of taxes		336,706			(426,942	)		(35,688	)
Reclassification adjustment for net investment gains (losses) included in net income (losses), net of taxes		24,874			231,958			(32,234	)
Change in unrecognized pension obligation, net of taxes		(1,548	)		3,088			(3,260	)
Other comprehensive income (loss)		392,136			(282,431	)		(56,870	)
Comprehensive income (loss)		701,216			(1,028	)		712,452
Comprehensive income (loss) to the noncontrolling interest		7			9			(4,625	)
Comprehensive income (loss) to common shareholders	$	701,223		$	(1,019	)	$	707,827

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Years Ended December 31,	2009			2008			2007
CASH FROM OPERATING ACTIVITIES:
Net income to common stockholders	$	309,057		$	281,141		$	766,239
Adjustments to reconcile net income to net cash from operating activities:
Net investment (gains) losses		38,408			356,931			(49,696	)
Depreciation and amortization		78,875			83,953			73,697
Noncontrolling interests		23			262			3,083
Equity in undistributed losses (income) of investment funds		176,670			8,550			(25,202	)
Stock incentive plans		24,465			24,139			21,105
Change in:
Securities trading account		(346,298	)		182,301			152,188
Investment in arbitrage funds		(9,985	)		137,305			(21,888	)
Trading account receivable from brokers and clearing organizations		(181,159	)		281,043			(97,706	)
Trading account securities sold but not yet purchased		120,835			(44,089	)		(102,936	)
Premiums and fees receivable		17,159			117,128			50,925
Due from reinsurers		(36,279	)		(35,760	)		45,995
Accrued investment income		(7,509	)		11,103			(18,066	)
Prepaid reinsurance premiums		(24,167	)		(8,744	)		(10,242	)
Deferred policy acquisition costs		6,181			53,332			7,834
Deferred income taxes		(52,536	)		(57,321	)		(5,060	)
Other assets		774			36,227			(48,383	)
Reserves for losses and loss expenses		41,923			416,235			798,725
Unearned premiums		(57,261	)		(238,557	)		(75,044	)
Due to reinsurers		86,456			21,645			(42,212	)
Other liabilities		130,422			(73,864	)		26,528
Net cash from operating activities		316,054			1,552,960			1,449,884
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sales, excluding trading account:
Fixed maturity securities		2,436,258			1,006,604			2,065,004
Equity securities		188,646			62,254			480,867
Distributions from investment funds		18,639			184,621			132,268
Proceeds from maturities and prepayments of fixed maturity securities		1,214,157			997,171			984,504
Cost of purchases, excluding trading account:
Fixed maturity securities		(4,869,368	)		(2,230,222	)		(3,716,828	)
Equity securities		(67,309	)		(172,306	)		(551,253	)
Contributions to investment funds		(105,650	)		(148,039	)		(127,134	)
Change in loans receivable		(11,363	)		(48,524	)		(208,148	)
Net additions to real estate, furniture and equipment		(30,455	)		(78,947	)		(31,108	)
Change in balances due to (from) security brokers		144,023			(138,281	)		1,412
Payment for business purchased, net of cash acquired		(33,812	)		(48,895	)		(50,162	)
Proceeds from sale of business, net of cash divested		—			—			2,939
Net cash used in investing activities		(1,116,234	)		(614,564	)		(1,017,639	)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Net proceeds from issuance of debt		333,589			—			246,644
Bank deposits received		17,213			17,795			7,572
Advances from federal home loan bank		4,165			6,325			(655	)
Net proceeds from stock options exercised		5,426			14,806			25,676
Repayment of senior notes		(11,165	)		(102,123	)		(2,019	)
Cash dividends to common stockholders		(28,843	)		(46,978	)		(36,284	)
Purchase of common treasury shares		(147,144	)		(553,284	)		(488,794	)
Other net		144			168			3,702
Net cash from (used in) financing activities		173,385			(663,291	)		(244,158	)
Net impact on cash due to change in foreign exchange rates		7,390			(92,133	)		9,529
Net (decrease) increase in cash and cash equivalents		(619,405	)		182,972			197,616
Cash and cash equivalents at beginning of year		1,134,835			951,863			754,247
Cash and cash equivalents at end of year	$	515,430		$	1,134,835		$	951,863

See accompanying notes to consolidated financial statements.

34

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	For the years ended December 31, 2009, 2008 and 2007
(1)	Summary of Significant Accounting Policies
(A)	Principles of consolidation and basis of presentation
	The consolidated financial statements, which include the accounts of W. R. Berkley Corporation and its subsidiaries (the “Company”), have been prepared on the basis of U. S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions and balances have been eliminated. Reclassifications have been made in the 2008 and 2007 financial statements to conform them to the presentation of the 2009 financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the revenues and expenses reflected during the reporting period. The most significant items on our balance sheet that involve a greater degree of accounting estimates that are subject to change in the future are the valuation of investments, other than temporary impairments, loss and loss adjustment expense reserves and premium estimates. Actual results could differ from those estimates.
(B)	Revenue recognition
	Premiums written are recorded at the inception of the policy. Reinsurance premiums written are estimated based upon information received from ceding companies and subsequent differences arising on such estimates are recorded in the period they are determined. Insurance premiums are earned ratably over the policy term. Fees for services are earned over the period that services are provided.
	Audit premiums are recognized when they are reliably determinable. The accrual for earned but unbilled audit premiums decreased net premiums written and premiums earned by $23 million and $28 million in 2009 and 2008, respectively, and increased net premiums written and premiums earned by $10 million in 2007.
	Revenues from wholly-owned investees are derived from services provided to the general aviation market, including fuel and line service, aircraft sales and maintenance, avionics and engineering services and parts fabrication. Revenue is recognized upon delivery of aircraft, delivery of fuel, shipment of parts and or upon completion of services.
(C)	Cash and cash equivalents
	Cash equivalents consist of funds invested in money market accounts and investments with an effective maturity of three months or less when purchased.
(D)	Investments
	Fixed maturity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of stockholders’ equity. Fixed maturity securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. Investment income from fixed maturity securities is recognized based on the constant effective yield method. Premiums and discounts on mortgage-backed securities are adjusted for the effects of actual and anticipated prepayments on a retrospective basis.
	Equity securities classified as available for sale are carried at estimated fair value, with unrealized gains and losses, net of applicable income taxes, excluded from earnings and reported as a component of comprehensive income and a separate component of stockholders’ equity.
	Equity securities that the Company purchased with the intent to sell in the near-term are classified as trading account securities and are reported at estimated fair value. Realized and unrealized gains and losses from trading activity are reported as net investment income. The trading account includes direct investments in arbitrage securities and investments in arbitrage-related funds. Short sales and short call options are presented as trading securities sold but not yet purchased. Unsettled trades and the net margin balances held by the clearing broker are presented as trading account receivable from brokers and clearing organizations.

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	Investment funds are carried under the “equity method of accounting”, whereby the Company reports its share of the income or loss from such investments as net investment income. The Company’s share of the earnings of investment funds is generally reported on a one-quarter lag in order to facilitate the timely completion of the Company’s consolidated financial statements.
	Loans receivable represent commercial real estate mortgage loans and bank loans and are carried at amortized cost.
	Fair value is generally determined based on quoted market prices. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial data, projections and business developments of the issuer and other relevant information.
	Realized gains or losses represent the difference between the cost of securities sold and the proceeds realized upon trade date of sale. The Company uses the specific identification method where possible, and the first-in, first-out method in other instances, to determine the cost of securities sold.
	The cost of securities is adjusted where appropriate to include a provision for a decline in value which is considered to be other than temporary. An other than temporary decline is considered to occur in investments where there has been a sustained reduction in fair value and where the Company does not expect the fair value to recover prior to the time of sale or maturity. Since equity securities do not have a contractual cash flow at maturity, the Company considers whether the price of an equity security is expected to recover within a reasonable period of time.
	For fixed maturity securities that the Company intends to sell or, more likely than not, would be required to sell, a decline in value below amortized cost is considered to be an other-than-temporary impairment (“OTTI”). The amount of OTTI is equal to the difference between amortized cost and fair value at the balance sheet date. For fixed maturity securities that the Company does not intend to sell or would be required to sell, a decline in value below amortized cost is considered to be an OTTI if the Company does not expect to recover the entire amortized cost basis of a security (i.e., the present value of cash flows expected to be collected is less than the amortized cost basis of the security). The portion of the decline in value considered to be a credit loss (i.e., the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security) is recognized in earnings. The portion of the decline in value not considered to be a credit loss (i.e., the difference in the present value of cash flows expected to be collected and the fair value of the security) is recognized in other comprehensive income.
	Impairment assessments for structured securities, including mortgage-backed securities and asset-backed securities, collateralized debt obligations and corporate debt, are generally evaluated based on the performance of the underlying collateral under various economic and default scenarios that may involve subjective judgments and estimates by management. Modeling these securities involves various factors, such as projected default rates, the nature and realizable value of the collateral, the ability of the security to make scheduled payments, historical performance and other relevant economic and performance factors. If an OTTI determination is made, a discounted cash flow analysis is used to ascertain the amount of the credit impairment.
	The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, a valuation allowance equal to the difference between the carrying value of the loan and the estimated fair value of the underlying collateral is established, with a charge to net realized capital losses.
(E)	Per share data
	The Company presents both basic and diluted net income per share (“EPS”) amounts. Basic EPS is calculated by dividing net income by weighted average number of common shares outstanding during the year. Diluted EPS is based upon the weighted average number of common and common equivalent shares outstanding during the year and is calculated using the treasury stock method for stock incentive plans. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. Stock options for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on EPS and, accordingly, are excluded from the calculation.

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F)	Deferred policy acquisition costs
	Acquisition costs (primarily commissions and premium taxes) incurred in writing insurance and reinsurance business are deferred and amortized ratably over the terms of the related contracts. Ceding commissions received on reinsurance contracts are netted against acquisition costs and are recognized ratably over the life of the contract. Deferred policy acquisition costs are presented net of unearned ceding commissions and are limited to the amounts estimated to be recoverable from the applicable unearned premiums and the related anticipated investment income after giving effect to anticipated losses, loss adjustment expenses and expenses necessary to maintain the contracts in force.
(G)	Reserves for losses and loss expenses
	Reserves for losses and loss expenses are an accumulation of amounts determined on the basis of (1) evaluation of claims for business written directly by the Company; (2) estimates received from other companies for reinsurance assumed by the Company; and (3) estimates for losses incurred but not reported (based on Company and industry experience). These estimates are periodically reviewed and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments are reflected in the statements of income in the period in which they are determined. The Company discounts its reserves for excess and assumed workers’ compensation claims using a risk-free or statutory rate. (See Note 12 of Notes to Consolidated Financial Statements.)
(H)	Reinsurance ceded
	The unearned portion of premiums ceded to reinsurers is reported as prepaid reinsurance premiums and earned ratably over the policy term . The estimated amounts of reinsurance recoverable on unpaid losses are reported as due from reinsurers. To the extent any reinsurer does not meet its obligations under reinsurance agreements, the Company must discharge its liability. Amounts due from reinsurers are reflected net of funds held where the right of offset is present. The Company has provided reserves for estimated uncollectible reinsurance.
(I)	Deposit accounting
	Contracts that do not meet the risk transfer requirements of GAAP are accounted for using the deposit accounting method. Under this method, an asset or liability is recognized at the inception of the contract based on consideration paid or received. The amount of the deposit asset or liability is adjusted at subsequent reporting dates using the interest method with a corresponding credit or charge to interest income or expense. Deposit liabilities for assumed reinsurance contracts were $27 million and $45 million at December 31, 2009 and 2008, respectively.
(J)	Federal and foreign income taxes
	The Company files a consolidated income tax return in the U.S. and foreign tax returns in each of the countries in which it has its overseas operations. The Company’s method of accounting for income taxes is the asset and liability method. Under this method, deferred tax assets and liabilities are measured using tax rates currently in effect or expected to apply in the years in which those temporary differences are expected to reverse. Interest and penalties, if any, are reported as income tax expense. The Company believes there are no tax positions that would require disclosure under GAAP. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that all or some portion of the deferred tax assets will not be realized.
(K)	Foreign currency
	Gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity’s functional currency) are reported on the statements of income as other operating costs and expenses. Unrealized gains or losses resulting from translating the results of non-U.S. dollar denominated operations are reported as accumulated other comprehensive income. Revenues and expenses denominated in currencies other than U.S. dollars are translated at the weighted average exchange rate during the year. Assets and liabilities are translated at the rate of exchange in effect at the balance sheet date.

37

(L)	Real estate, furniture and equipment
	Real estate, furniture and equipment are carried at cost less accumulated depreciation. Depreciation is calculated using the estimated useful lives of the respective assets. Depreciation expense was $45,801,000, $37,843,000 and $32,766,000 for 2009, 2008 and 2007, respectively.
(M)	Comprehensive income (loss)
	Comprehensive income (loss) encompasses all changes in stockholders’ equity (except those arising from transactions with stockholders) and includes net income, net unrealized holding gains or losses on available for sale securities, unrealized foreign currency translation adjustments and changes in unrecognized pension obligations.
(N)	Goodwill and other intangible assets
	Goodwill and other intangibles assets are tested for impairment on an annual basis. The Company’s impairment test as of December 31, 2009 indicated that there were no impairment losses related to goodwill and other intangible assets.
(O)	Stock options
	The costs resulting from all share-based payment transactions with employees are recognized in the consolidated financial statements using a fair-value-based measurement method.
(P)	Statements of cash flows
	Interest payments were $80,080,000, $84,284,000 and $81,291,000 in 2009, 2008 and 2007, respectively. Income taxes paid were $15,864,000, $181,948,000 and $288,763,000 in 2009, 2008 and 2007, respectively. Other non-cash items include acquisitions and dispositions, unrealized investment gains and losses and pension expense. (See Note 2, Note 9 and Note 24 of Notes to Consolidated Financial Statements.)
(Q)	Change in accounting
	During 2008, the Company changed its method of accounting for cash distributions received in excess of the carrying value of an equity method investment provided that the Company is not liable for the obligations of the investee nor otherwise committed to provide financial support. Previously such distributions were reported as a deferred credit and recognized in earnings upon disposal of the Company’s interest in the investee. Under the new method, such distributions are recognized as a realized gain upon receipt.
	Adjustments made to the 2007 income statement during 2008 as a result of the accounting change were as follows:

	2007 As
	originally		2007 As
(Dollars in thousands, except per share amounts)	reported		restated
Net investment gains	$	14,938	$	49,696
Total revenues		5,553,639		5,588,397
Income before income taxes and minority interest		1,057,634		1,092,392
Income tax expense		310,905		323,070
Net income		743,646		766,239
Net income per share:
Basic		3.94		4.05
Diluted		3.78		3.90

(R)

Recent accounting pronouncements

In June 2009, the FASB issued guidance that establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative GAAP for nongovernmental entities. The Codification supersedes all existing non-SEC accounting and reporting standards. Rules and interpretive releases of the SEC under authority of federal securities laws will remain authoritative GAAP for SEC registrants. This guidance is effective for financial statements issued for interim

38

and annual periods ending after September 15, 2009. As the Codification did not change existing GAAP, the adoption of this guidance did not have an impact on our financial condition or results of operations.

On January 1, 2009, the Company adopted guidance regarding business combinations that requires an acquirer to recognize the assets, liabilities and any non-controlling interest at fair value as of the acquisition date. Contingent consideration is required to be recognized and measured at fair value on the date of acquisition rather than at a later date when the amount of that consideration may be determinable beyond a reasonable doubt. This fair value approach replaces the cost-allocation process previously required under GAAP. The new guidance also requires acquirers to expense acquisition-related costs as incurred rather than allocating such costs to the assets acquired and liabilities assumed. The adoption of this guidance did not have an impact on the Company’s results of operations or financial condition.

On January 1, 2009, the Company adopted guidance that requires that non-controlling (minority) interests in a subsidiary be reported as equity in the consolidated financial statements. The presentation requirements of this guidance were applied retrospectively. The effect of the adoption of this guidance was to increase total equity by $5 million, $35 million and $31 million as of December 31, 2008, 2007 and 2006, respectively.

On April 1, 2009, the Company adopted guidance that amends existing GAAP to require disclosures about the fair value of financial instruments in interim financial statements. The adoption of this guidance expanded the disclosures relating to fair value of financial instruments in the notes to the Company’s consolidated financial statements.

On April 1, 2009, the Company adopted guidance that requires that an entity evaluate whether it intends to sell an impaired security or whether it is more likely than not that it will be required to sell a security before recovery of the amortized cost basis. If either of this criteria are met, an impairment equal to the difference between the security’s amortized cost and its fair value is recognized in earnings. For fixed income securities that do not meet these criteria, the credit loss component of the impairment (i.e., the difference between the security’s amortized cost and its projected net present value) is recognized in earnings and the remaining portion of the impairment is recognized as a component of other comprehensive income. The effect of adopting this guidance was to increase net income for the year ended December 31, 2009 by $5 million, or 3 cents per share.

On April 1, 2009, the Company adopted guidance that reaffirms the need for management to use judgment in determining the weight if any, to be placed on a transaction price as an indicator of fair value if an entity determines that there has been a significant decrease in the volume and level of activity for the asset or the liability in relation to the normal market activity for the asset or liability (or similar assets or liabilities), or if there is evidence that the transaction for the asset or liability is not orderly. The adoption of this guidance did not have an impact on the Company’s results of operations or financial condition.

On June 30, 2009, the Company adopted guidance concerning the accounting and disclosure of subsequent events. This guidance is not significantly different from those contained in previously existing auditing standards and, as a result, our adoption of this guidance did not have a material impact on our financial condition or results of operations. Under this guidance, we analyzed subsequent events through the date on which these financial statements were issued.

In June 2009, the FASB issued guidance that requires the reporting entity to perform a qualitative analysis that results in a variable interest entity (“VIE”) being consolidated if the reporting entity: (i) has the power to direct activities of the VIE that significantly impact the VIE’s financial performance; and (ii) has an obligation to absorb losses or receive benefits that may be significant to the VIE. This guidance further requires enhanced disclosures, including disclosure of significant judgments and assumptions as to whether a VIE must be consolidated, and how involvement with a VIE affects the Company’s financial statements. This guidance is effective for fiscal years beginning after November 15, 2009. The adoption of this guidance did not impact the Company’s results of operations or financial condition.

In January 2010, the FASB issued guidance that requires additional disclosures regarding fair value measurements. The guidance requires entities to disclose the amounts and reasons for significant transfers between Level 1 and Level 2 of the fair value hierarchy, reasons for any transfers in or out of Level 3 and to separately disclose information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuances and settlements. Portions of the guidance are effective for interim and annual reporting periods beginning after December 15, 2009 and the remaining guidance is effective for interim and annual reporting periods beginning after December 15, 2010.

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(2)	Acquisitions
	In 2009, the Company acquired an aviation company for $35 million. In 2008, the Company acquired an aviation company and the remaining 20% minority interest in W. R. Berkley Insurance (Europe), Limited for a total cost of $55 million. In 2007, the Company acquired two aviation companies and two insurance companies for a total cost of $98 million.
	The following table summarizes the estimated fair value of net assets acquired and liabilities assumed at the date of acquisition. The Company has not completed the purchase price allocation for the 2009 acquisition; as such, the amounts presented below are subject to adjustment.

(Dollars in thousands)	2009			2008			2007
Investments	$	—		$	—		$	66,358
Cash and cash equivalents		1,773			6,112			48,114
Receivables and other assets		—			—			27,018
Real estate, furniture and equipment		1,777			16,541			23,387
Deferred policy acquisition costs		—			—			345
Deferred federal income taxes		—			(4,815	)		677
Intangible assets		—			3,658			11,068
Goodwill		—			6,229			34,395
Other assets		40,382			3,696			20,918
Total assets acquired		43,932			31,421			232,280
Reserve for losses and loss expenses		—			(1,570	)		89,906
Unearned premiums		—			—			1,977
Other liabilities		8,355			8,428			28,426
Debt		—			—			13,695
Total liabilities assumed		8,355			6,858			134,004
Noncontrolling interests		(8	)		(30,444	)		—
Net assets acquired	$	35,585		$	55,007		$	98,276

The weighted average useful life of the intangible assets acquired was 10 years in 2008 and 4 years in 2007. None of the 2008 goodwill is deductible for tax purposes, and $27 million of the 2007 goodwill is deductible for tax purposes.

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(3) Investments in Fixed Maturity Securities

At December 31, 2009 and 2008, investments in fixed maturity securities were as follows:

	Amortized		Gross Unrealized					Fair		Carrying
(Dollars in thousands)	Cost		Gains		Losses			Value		Value
December 31, 2009
Held to maturity:
State and municipal	$	70,847	$	6,778	$	(739	)	$	76,886	$	70,847
Residential mortgage-backed		44,318		2,984		—			47,302		44,318
Corporate		4,994		—		(13	)		4,981		4,994
Total held to maturity		120,159		9,762		(752	)		129,169		120,159
Available for sale:
U.S. government and government agency		1,677,579		40,358		(3,784	)		1,714,153		1,714,153
State and municipal (1)		5,551,632		238,271		(41,048	)		5,748,855		5,748,855
Mortgage-backed securities:
Residential (2)		1,537,331		38,229		(44,343	)		1,531,217		1,531,217
Commercial		47,292		—		(12,069	)		35,223		35,223
Corporate		1,719,874		59,082		(35,574	)		1,743,382		1,743,382
Foreign		394,711		12,323		(826	)		406,208		406,208
Total available for sale		10,928,419		388,263		(137,644	)		11,179,038		11,179,038
Total investment in fixed income securities	$	11,048,578	$	398,025	$	(138,396	)	$	11,308,207	$	11,299,197
December 31, 2008
Held to maturity:
State and municipal	$	68,876	$	742	$	(3,693	)	$	65,925	$	68,876
Residential mortgage-backed		50,039		4,390		—			54,429		50,039
Corporate		4,993		301		—			5,294		4,993
Total held to maturity		123,908		5,433		(3,693	)		125,648		123,908
Available for sale:
U.S. government and government agency		1,083,677		46,713		(3,706	)		1,126,684		1,126,684
State and municipal		5,591,712		136,804		(136,751	)		5,591,765		5,591,765
Mortgage-backed securities:
Residential		1,632,954		27,747		(81,142	)		1,579,559		1,579,559
Commercial		74,517		—		(22,656	)		51,861		51,861
Corporate		1,095,414		9,398		(136,332	)		968,480		968,480
Foreign		238,877		12,283		(3,521	)		247,639		247,639
Total available for sale		9,717,151		232,945		(384,108	)		9,565,988		9,565,988
Total investment in fixed income securities	$	9,841,059	$	238,378	$	(387,801	)	$	9,691,636	$	9,689,896

(1)	Gross unrealized losses for state and municipal securities include $340,000 related to the non-credit portion of OTTI recognized in other comprehensive income.
(2)	Gross unrealized losses for residential mortgage-backed securities include $5,085,000 related to the non-credit portion of OTTI recognized in other comprehensive income.

41

The amortized cost and fair value of fixed maturity securities at December 31, 2009, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because certain issuers may have the right to call or prepay obligations:

	Amortized
(Dollars in thousands)	Cost		Fair Value
Due in one year or less	$	592,655	$	598,890
Due after one year through five years		2,953,507		3,070,329
Due after five years through ten years		2,950,157		3,081,511
Due after ten years		2,923,318		2,943,735
Mortgage-backed securities		1,628,941		1,613,742
Total	$	11,048,578	$	11,308,207

At December 31, 2009 and 2008, there were no investments, other than investments in United States government and government agency securities, which exceeded 10% of common stockholders’ equity. At December 31, 2009, investments with a carrying value of $84 million were on deposit in trust accounts established as security for reinsurance clients, investments with a carrying value of $132 million were on deposit with Lloyd’s in support of the Company’s underwriting activities at Lloyd’s, investments with a carrying value of $638 million were on deposit with state insurance departments and investments with a carrying value of $36 million were held on deposit in trust accounts as security for letters of credit issued in support of the Company’s reinsurance operations.

(4) Investments in Equity Securities Available for Sale

At December 31, 2009 and 2008, investments in equity securities available for sale were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Carrying
(Dollars in thousands)		Cost	Gains			Losses		Value		Value
December 31, 2009
Common stocks	$	27,237	$	97,554	$	(5,731	)	$	119,060	$	119,060
Preferred stocks		285,490		9,745		(12,928	)		282,307		282,307
Total	$	312,727	$	107,299	$	(18,659	)	$	401,367	$	401,367
December 31, 2008
Common stocks	$	39,343	$	49,333	$	(7,833	)	$	80,843	$	80,843
Preferred stocks		399,451		95		(96,639	)		302,907		302,907
Total	$	438,794	$	49,428	$	(104,472	)	$	383,750	$	383,750

(5) Arbitrage Trading Account and Arbitrage Funds

At December 31, 2009 and 2008, the fair value and carrying value of the arbitrage trading account and arbitrage funds and related assets and liabilities were as follows:

(Dollars in thousands)	2009			2008
Arbitrage trading account	$	465,783		$	119,485
Investment in arbitrage funds		83,420			73,435
Related assets and liabilities:
Receivables from brokers		310,042			128,883
Securities sold but not yet purchased		(143,885	)		(23,050	)

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The primary focus of the trading account is merger arbitrage, convertible arbitrage and relative value arbitrage. Merger arbitrage is the business of investing in the securities of publicly held companies which are the targets in announced tender offers and mergers. Convertible arbitrage is the business of investing in convertible securities with the goal of capitalizing on price differentials between these securities and their underlying equities. Relative value arbitrage is the business of investing primarily in equity securities with the goal of capitalizing on perceived differences in fundamental values between pairs of companies in similar industries. Arbitrage investing differs from other types of investing in its focus on transactions and events believed likely to bring about a change in value over a relatively short time period (usually four months or less). The Company believes that this makes arbitrage investments less vulnerable to changes in general financial market conditions.

The Company uses put options, call options and swap contracts in order to mitigate the impact of potential changes in market conditions on the merger arbitrage trading account. These options and contracts are reported at fair value. As of December 31, 2009, the fair value of long option contracts outstanding was $3,520,000 (notional amount of $40,207,000) and the fair value of short option contracts outstanding was $1,698,000 (notional amount of $22,578,000). Other than with respect to the use of these trading account securities, the Company does not make use of derivatives.

(6)	Investment Funds
	Investment funds include the following:

	Carrying Value				Income (Losses)
	as of December 31,				from Investment Funds
(Dollars in thousands)	2009		2008		2009			2008			2007
Real estate	$	193,178	$	301,581	$	(159,569	)	$	(43,116	)	$	25,007
Kiln Ltd		—		—		—			10,697			16,052
Energy		106,213		94,736		(13,227	)		30,785			1,323
Other		119,489		99,216		(757	)		(1,919	)		(4,108	)
Total	$	418,880	$	495,533	$	(173,553	)	$	(3,553	)	$	38,274

	In 2008, the Company sold its 20.1% interest in Kiln Ltd for $174 million and reported a realized gain of $70 million.
(7)	Net Investment Income
	Net investment income consists of the following:

(Dollars in thousands)	2009			2008			2007
Investment income earned on:
Fixed maturity securities, including cash	$	495,140		$	497,549		$	500,378
Equity securities available for sale		20,295			38,144			57,502
Arbritage trading account (a)		40,714			6,032			80,253
Gross investment income		556,149			541,725			638,133
Investment expense		(3,588	)		(4,692	)		(3,747	)
Net investment income	$	552,561		$	537,033		$	634,386

(a) Investment income earned from net trading account activity includes unrealized trading gains of $2,061,000 and $2,450,000 in 2009 and 2007, respectively, and unrealized trading losses of $334,000 in 2008.

(8)

Loans Receivable

The amortized cost of loans receivable was $382 million and $381 million at December 31, 2009 and 2008, respectively. Amortized cost is net of a valuation allowance of $14 million and $1 million, respectively. The ten largest loans have an aggregate amortized cost of $298 million and an aggregate fair value of $199 million and are secured by commercial real estate. These loans earn interest at floating LIBOR-based interest rates and have maturities (inclusive of extension options) between August 2011 and January 2013. The loans are secured by office buildings (60%), hotels (27%) and senior living facilities (13%) with properties located primarily in New York City, California, Hawaii, Boston and Philadelphia.

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(9)	Realized and Unrealized Investment Gains and Losses
	Realized and unrealized investment gains and losses are as follows:

(Dollars in thousands)	2009			2008			2007
Realized investment gains and losses:
Fixed maturity securities:
Gains	$	50,500		$	20,444		$	4,255
Lossses		(3,632	)		(6,458	)		(5,467	)
Equity securities available for sale		52,680			(9,377	)		16,519
Sale of investment funds		4,905			72,010			34,758
Sale of subsidiary		—			—			2,302
Provision for other than temporary impairments (1)		(151,727	)		(433,550	)		(2,680	)
Less investment impairments recognized in other comprehensive income		8,866			—			—
Other gains		—			—			9
Total net investment gains (losses)		(38,408	)		(356,931	)		49,696
Income taxes		13,534			124,973			(17,462	)
	$	(24,874	)	$	(231,958	)	$	32,234
Change in unrealized gains and losses of available for sales securities:
Fixed maturity securities	$	407,207		$	(258,359	)	$	66,237
Less investment impairments recognized in other comprehensive income		(5,425	)		—			—
Equity securities available for sale		143,684			(10,333	)		(167,133	)
Investment funds		13,235			(33,595	)		5,940
Cash and cash equivalents		(75	)		76			(1	)
Total change in unrealized gains and losses		558,626			(302,211	)		(94,957	)
Income taxes		(195,813	)		107,291			26,155
Noncontrolling interests		(1,203	)		207			(662	)
	$	361,610		$	(194,713	)	$	(69,464	)

(1) Includes change in valuation allowance for loans receivable of $12 million for the year ended December 31, 2009.

For OTTI of fixed maturity securities that management does not intend to sell or, more likely than not, would not be required to sell, the portion of the decline in value considered to be due to credit factors is recognized in earnings and the portion of the decline in value considered to be due to non-credit factors is recognized in other comprehensive income. The table below provides a roll-forward of the portion of impairments recognized in earnings for those securities that have been impaired due to both credit factors and non-credit factors.

	For the Year Ended
(Dollars in thousands)	December 31, 2009
Beginning balance of amounts related to credit losses	$	—
Additions for amounts related to credit losses		5,661
Ending balance of amounts related to credit losses	$	5,661

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(10)	Securities in an Unrealized Loss Position
	The following table summarizes all securities in an unrealized loss position December 31, 2009 and 2008 by the length of time those securities have been continuously in an unrealized loss position.

	Less Than 12 Months				12 Months or Greater				Total
			Gross				Gross				Gross
			Unrealized				Unrealized				Unrealized
(Dollars in thousands)	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
December 31, 2009
U.S. government and agency	$	389,745	$	3,653	$	7,361	$	131	$	397,106	$	3,784
State and municipal		376,914		12,971		443,666		28,816		820,580		41,787
Mortgage-backed securities		306,840		12,719		260,519		43,693		567,359		56,412
Corporate		194,690		13,958		172,656		21,629		367,346		35,587
Foreign		81,368		826		—		—		81,368		826
Fixed maturity securities		1,349,557		44,127		884,202		94,269		2,233,759		138,396
Common stocks		19,948		5,731		—		—		19,948		5,731
Preferred stocks		9,951		76		163,985		12,852		173,936		12,928
Equity securities available for sale		29,899		5,807		163,985		12,852		193,884		18,659
Total	$	1,379,456	$	49,934	$	1,048,187	$	107,121	$	2,427,643	$	157,055
December 31, 2008
U.S. government and agency	$	25,031	$	3,494	$	8,197	$	212	$	33,228	$	3,706
State and municipal		1,081,558		65,944		485,805		74,500		1,567,363		140,444
Mortgage-backed securities		327,563		57,032		211,762		46,766		539,325		103,798
Corporate		377,313		83,277		228,738		53,055		606,051		136,332
Foreign		17,519		3,521		—		—		17,519		3,521
Fixed maturity securities		1,828,984		213,268		934,502		174,533		2,763,486		387,801
Common stocks		5,952		7,833		—		—		5,952		7,833
Preferred stocks		123,930		44,062		109,103		52,577		233,033		96,639
Equity securities available for sale		129,882		51,895		109,103		52,577		238,985		104,472
Total	$	1,958,866	$	265,163	$	1,043,605	$	227,110	$	3,002,471	$	492,273

Non-Investment Grade Fixed Maturity Securities — The following table summarizes the Company’s non-investment grade fixed maturity securities at December 31, 2009.

(Dollars in thousands)	Number Of Securities		Aggregate Fair Value		Unrealized Loss
Mortgage-backed securities		15	$	92,298	$	24,457
Corporate		9		40,804		5,804
State and municipal		5		36,848		4,586
Foreign		1		485		38
Total		30	$	170,435	$	34,885

One of the securities in the above table has an unrealized loss position greater than $5 million. That investment is a commercial mortgage-backed security with a fair value of $26 million and an unrealized loss of $11 million. The investment is secured by 99 properties comprising approximately 30 million square feet of office space located primarily in Boston, Northern California and Los Angeles. The current debt maturity of February 2011can be extended at the borrower’s option through February 2012 provided that there is no continuing default and that the borrower provides interest protection for LIBOR above 6¹/2%. The Company believes the amount of outstanding debt for the Company’s debt layer and all debt layers senior to the Company’s debt layer to be below the current market values for the underlying properties. Based on the portfolio’s stable performance (e.g., occupancy rates, lease terms and debt service coverage) and on there being substantial subordinate capital, the Company does not consider the investment to be OTTI.

45

	The Company has evaluated its fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default on financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due and does not consider any of these securities to be OTTI.
	Non-Investment Grade Preferred Stocks — At December 31, 2009, the Company owned one non-investment grade preferred stock in an unrealized loss position. This investment had an aggregate fair value of $3 million and an aggregate unrealized loss of $186,000. The Company does not consider this investment to be OTTI.
	Common Stocks - At December 31, 2009, the Company owned three common stocks in an unrealized loss position. These investments had an aggregate fair value of $20 million and an aggregate unrealized loss of $6 million. The Company does not consider any of these investments to be OTTI.
	Loans Receivable — At December 31, 2009, loans receivable had an amortized cost of $382 million and a fair value of $285 million. The Company monitors the performance of its loans receivable, including current market conditions for each loan and the ability to collect principal and interest. For loans where the Company determines it is probable that the contractual terms will not be met, a valuation allowance is established with a charge to net realized capital losses. For the year ended December 31, 2009, the amortized cost of loans receivable is reported net of a valuation allowance of $14 million.
(11)	Fair Value Measurements
	The Company’s fixed maturity and equity securities available for sale and its trading account securities are carried at fair value. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available.
	Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities, securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial projections, credit quality and business developments of the issuer and other relevant information.

46

The following tables present the assets and liabilities measured at fair value on a recurring basis as of December 31, 2009 and 2008 by level:

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
December 31, 2009
Assets:
Fixed maturity securities available for sale:
U.S. government and agency	$	1,714,153	$	—	$	1,714,153	$	—
State and municipal		5,748,855		—		5,748,855		—
Mortgage-backed securities		1,566,440		—		1,540,540		25,900
Corporate		1,743,382		—		1,653,222		90,160
Foreign		406,208		—		406,208		—
Total fixed maturity securities available for sale		11,179,038		—		11,062,978		116,060
Equity securities available for sale:
Common stocks		119,060		11,295		106,206		1,559
Preferred stocks		282,307		—		227,594		54,713
Total equity securities available for sale		401,367		11,295		333,800		56,272
Arbitrage trading account		465,783		465,430		—		353
Total	$	12,046,188	$	476,725	$	11,396,778	$	172,685
Liabilities:
Securities sold but not yet purchased	$	143,885	$	143,885	$	—	$	—
December 31, 2008
Assets:
Fixed maturity securities available for sale:
U.S. government and agency	$	1,126,684	$	—	$	1,126,684	$	—
State and municipal		5,591,765		—		5,550,093		41,672
Mortgage-backed securities		1,631,420		—		1,608,958		22,462
Corporate		968,480		—		883,975		84,505
Foreign		247,639		—		247,639		—
Total fixed maturity securities available for sale		9,565,988		—		9,417,349		148,639
Equity securities available for sale:
Common stocks		80,843		19,829		2,280		58,734
Preferred stocks		302,907		—		252,421		50,486
Total equity securities available for sale		383,750		19,829		254,701		109,220
Arbitrage trading account		119,485		115,723		3,409		353
Total	$	10,069,223	$	135,552	$	9,675,459	$	258,212
Liabilities:
Securities sold but not yet purchased	$	23,050	$	23,050	$	—	$	—

47

The following tables summarize changes in Level 3 assets for years ended December 31, 2009 and 2008:

	Gains (Losses) Included in:
						Other
	Beginning					Comprehensive			Purchases			Transfers			Ending
(Dollars in thousands)	Balance		Earnings			Income			(Sales) Maturities			In/(Out)			Balance
Year ended December 31, 2009
Fixed maturity securities available for sale:
State and municipal	$	41,672	$	—		$	—		$	—		$	(41,672	)	$	—
Mortgage-backed securities		22,462		—			3,438			—			—			25,900
Corporate		84,505		391			12,004			(18,396	)		11,656			90,160
Total		148,639		391			15,442			(18,396	)		(30,016	)		116,060
Equity securities available
for sale:
Common stocks		58,734		—			712			—			(57,887	)		1,559
Preferred stocks		50,486		—			968			3,259			—			54,713
Total		109,220		—			1,680			3,259			(57,887	)		56,272
Arbitrage trading account		353		—			—			—			—			353
Total	$	258,212	$	391		$	17,122		$	(15,137	)	$	(87,903	)	$	172,685
Year ended December 31, 2008
Fixed maturity securities available for sale:
State and municipal	$	—	$	—		$	—		$	—		$	41,672		$	41,672
Mortgage-backed securities		—		—			—			—			22,462			22,462
Corporate		23,725		(5,975	)		(5,753	)		5,894			66,614			84,505
Total		23,725		(5,975	)		(5,753	)		5,894			130,748			148,639
Equity securities available available for sale:
Common stocks		51,469		—			6,645			620			—			58,734
Preferred stocks		11,442		(1,227	)		—			40,271			—			50,486
Total		62,911		(1,227	)		6,645			40,891			0			109,220
Arbitrage trading account		4,282		—			—			(4,282	)		353			353
Total	$	90,918	$	(7,202	)	$	892		$	42,503		$	131,101		$	258,212

The transfers in (out) of Level 3 for state and municipal and corporate securities in 2009 and 2008 were based upon the availability of broker dealer quotations. In certain circumstances the Company was able to obtain quotations from third party broker dealers. The common stock transfers out of Level 3 in 2009 were attributable to securities in which observable data became available due to public and private equity offerings.

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(12) Reserves for Losses and Loss Expenses

The table below provides a reconciliation of the beginning and ending reserve balances:

(Dollars in thousands)	2009			2008			2007
Net reserves at beginning of year	$	8,122,586		$	7,822,897		$	6,947,597
Net reserves of company acquired		—			—			68,392
Net provision for losses and loss expenses (a):
Claim occuring during the current year (b):		2,518,849			2,829,830			2,837,647
Decrease in estimates for claims occurring in prior years (c) (d)		(234,008	)		(195,710	)		(105,879	)
Loss reserve discount accretion		51,866			54,494			46,808
		2,336,707			2,688,614			2,778,576
Net payments for claims:
Current year		570,080			644,213			538,364
Prior year		1,741,431			1,744,712			1,433,304
		2,311,511			2,388,925			1,971,668
Net reserves at end of year		8,147,782			8,122,586			7,822,897
Ceded reserve at end of year		923,889			877,010			855,137
Gross reserves at end of year	$	9,071,671		$	8,999,596		$	8,678,034

(a)	Net provision for loss and loss expenses excludes $47,000 and $1,002,000 in 2008 and 2007, respectively, relating to the policyholder benefits incurred on life insurance that are included in the statement of income.
(b)	Claims occurring during the current year are net of loss reserve discounts of $80,455,000, $97,698,000 and $117,177,000 in 2009, 2008 and 2007, respectively.
(c)	The decrease in estimates for claims occurring in prior years is net of loss reserve discounts of $1,968,000, $15,556,000 and $17,736,000 in 2009, 2008 and 2007, respectively. On an undiscounted basis, the estimates for claims occurring in prior years decreased by $232,040,000, $180,154,000 and $88,143,000 in 2009, 2008 and 2007, respectively.
(d)	Approximately $44 million of the favorable reserve development in 2009 was fully offset by a reduction in earned premiums. The favorable reserve development, net of premium offsets, was $190 million.

For the year ended December 31, 2009, estimates for claims occurring in prior years decreased by $234 million net of premium offsets. On an accident year basis, the change in prior year reserves in 2009 is comprised of an increase in estimates for claims occurring in accident years 2002 and prior of $44 million and a decrease in estimates for claims occurring in accident years 2003 through 2008 of $278 million. The changes in prior year loss reserve estimates are generally the result of ongoing analysis of recent loss development trends. Original estimates are increased or decreased as additional information becomes known regarding individual claims and aggregate claim trends.

Environmental and asbestos — To date, known environmental and asbestos claims have not had a material impact on the Company’s operations. These claims have not materially impacted the Company because its subsidiaries generally did not insure large industrial companies that are subject to significant environmental and asbestos exposures.

The Company’s net reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $36,525,000 and $39,646,000 at December 31, 2009 and 2008, respectively. The Company’s gross reserves for losses and loss adjustment expenses relating to asbestos and environmental claims were $53,986,000 and $56,957,000 at December 31, 2009 and 2008, respectively. Net incurred losses and loss expenses for reported asbestos and environmental claims were approximately $(614,000), $440,000 and $7,029,000 in 2009, 2008 and 2007, respectively. Net paid losses and loss expenses for asbestos and environmental claims were approximately $2,508,000, $2,384,000 and $2,912,000 in 2009, 2008 and 2007, respectively. The estimation of these liabilities is subject to significantly greater than normal variation and uncertainty because it is difficult to make an actuarial estimate of these liabilities due to the absence of a generally accepted actuarial methodology for these exposures and the potential effect of significant unresolved legal matters, including coverage issues as

49

well as the cost of litigating the legal issues. Additionally, the determination of ultimate damages and the final allocation of such damages to financially responsible parties are highly uncertain.

Discounting — The Company discounts its liabilities for excess and assumed workers’ compensation business because of the long period of time over which losses are paid. Discounting is intended to appropriately match losses and loss expenses to income earned on investment securities supporting the liabilities. The expected losses and loss expense payout pattern subject to discounting was derived from the Company’s loss payout experience. For non-proportional business, reserves for losses and loss expenses have been discounted using risk-free discount rates determined by reference to the U.S. Treasury yield curve. These discount rates range from 2.7% to 6.5% with a weighted average discount rate of 4.4%. For proportional business, reserves for losses and loss expenses have been discounted at the statutory rate permitted by the Department of Insurance of the State of Delaware of 2.7%. The aggregate net discount, after reflecting the effects of ceded reinsurance, is $877,305,000, $846,748,000 and $787,988,000 at December 31, 2009, 2008 and 2007, respectively. The increase in the aggregate discount from 2008 to 2009 and from 2007 to 2008 resulted from the increase in excess and assumed workers’ compensation gross reserves.

(13) Reinsurance

The following is a summary of reinsurance financial information:

	Year Ended December 31,
(Dollars in thousands)	2009			2008			2007
Written premiums:
Direct	$	3,599,836		$	3,898,488		$	4,173,856
Assumed		653,603			621,638			879,374
Ceded		(523,344	)		(486,227	)		(477,241	)
Total net written premiums	$	3,730,095		$	4,033,899		$	4,575,989
Earned premiums:
Direct	$	3,690,493		$	4,075,360		$	4,202,673
Assumed		617,143			704,555			933,169
Ceded		(501,787	)		(490,335	)		(472,141	)
Total net earned premiums	$	3,805,849		$	4,289,580		$	4,663,701
Ceded losses incurred	$	252,299		$	295,179		$	263,072

The Company reinsures a portion of its exposures principally to reduce its net liability on individual risks and to protect against catastrophic losses. Estimated amounts due from reinsurers are reported net of reserves for uncollectible reinsurance of $4,430,000, $4,895,000 and $2,859,000 as of December 31, 2009, 2008 and 2007, respectively.

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(14) Senior Notes and Other Debt

Senior notes and other debt consist of the following (the difference between the face value and the carrying value is unamortized discount):

(Dollars in thousands)					2009		2009		2008
Description	Rate			Maturity	Face Value		Carrying Value		Carrying Value
Subsidiary debt	Various			2010 through 2012	$	28,085	$	28,085	$	3,749
Senior notes		5.125	%	September 30, 2010		150,000		149,772		149,451
Senior notes		5.875	%	February 15, 2013		200,000		198,963		198,632
Senior notes		5.60	%	May 15, 2015		200,000		199,001		198,815
Senior notes		6.15	%	August 15, 2019		150,000		148,630		148,487
Senior notes		7.375	%	September 15, 2019		300,000		297,530		—
Senior notes		8.70	%	January 1, 2022		76,503		75,858		75,829
Subsidiary debt		6.88	%	July 3, 2023		625		625		—
Senior notes		6.25	%	February 15, 2037		250,000		247,017		246,906
Total debt					$	1,355,213	$	1,345,481	$	1,021,869

(15) Junior Subordinated Debentures

Junior subordinated debentures consist of the following (the difference between the face value and the carrying value is unamortized discount):

(Dollars in thousands)					2009		2009		2008
Description	Rate			Maturity	Face Value		Carrying Value		Carrying Value
Company		6.75	%	July 26, 2045	$	250,000	$	242,576	$	242,367
Subsidiary	LIBOR + 3.75%			March 1, 2035		7,217		7,217		7,217
Total					$	257,217	$	249,793	$	249,584

In 2005, the Company issued $250,000,000 aggregate principal amount of 6.75% Junior Subordinated Debentures due July 26, 2045 (the “6.75% Junior Subordinated Debentures”) to W. R. Berkley Capital Trust II (the “Trust”). The Trust simultaneously issued an equal amount of 6.75% mandatorily redeemable preferred securities (the “6.75% Trust Preferred Securities”), which are fully and unconditionally guaranteed by the Company to the extent the Trust has funds available for repayment of distributions. The 6.75% Trust Preferred Securities are subject to mandatory redemption in a like amount (i) in whole but not in part upon repayment of the 6.75% Junior Subordinated Debentures at maturity, (ii) in whole but not in part, at any time contemporaneously with the optional prepayment of the 6.75% Junior Subordinated Debentures by the Company upon the occurrence and continuation of certain events and (iii) in whole or in part, on or after July 26, 2010, contemporaneously with the optional prepayment by the Company of the 6.75% Junior Subordinated Debentures.

A subsidiary of the Company has $7,217,000 of outstanding subordinated debentures that mature in 2035 and that the Company expects to call for payment in March 2010.

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(16) Income Taxes

Income tax expense consists of:

(Dollars in thousands)	Current Expense		Deferred Expense (Benefit)			Total
December 31, 2009:
Domestic	$	116,777	$	(56,325	)	$	60,452
Foreign		9,140		3,558			12,698
Total expense	$	125,917	$	(52,767	)	$	73,150
December 31, 2008:
Domestic	$	77,650	$	(63,630	)	$	14,020
Foreign		24,493		6,406			30,899
Total expense	$	102,143	$	(57,224	)	$	44,919
December 31, 2007:
Domestic	$	313,803	$	(8,227	)	$	305,576
Foreign	$	15,018	$	2,476			17,494
Total expense	$	328,821	$	(5,751	)	$	323,070

A reconciliation of the income tax expense and the amounts computed by applying the Federal and foreign income tax rate of 35% to pre-tax income are as follows:

(Dollars in thousands)	2009			2008			2007
Computed “expected” tax expense	$	133,781		$	114,213		$	382,337
Tax-exempt investment income		(64,886	)		(71,614	)		(67,128	)
Change in valuation allowance		(887	)		1,095			(7,604	)
Impact of lower foreign tax rates		(551	)		(4,319	)		(1,074	)
State and local taxes		1,175			2,349			2,904
Other, net		4,518			3,195			13,635
Total expense	$	73,150		$	44,919		$	323,070

At December 31, 2009 and 2008, the tax effects of differences that give rise to significant portions of the deferred tax asset and deferred tax liability are as follows:

(Dollars in thousands)	2009			2008
Deferred tax asset
Loss reserve discounting	$	180,481		$	178,788
Unrealized investments losses		—			83,324
Unearned premiums		109,099			118,691
Net operating loss carry forwards		1,076			2,395
Other-than-temporary impairments		73,818			80,963
Restricted stock units		30,526			25,797
Other		58,824			54,740
Gross deferred tax asset		453,824			544,698
Less valuation allowance		(2,226	)		(3,113	)
Deferred tax asset		451,598			541,585
Deferred tax liability
Amortization of intangibles		11,381			10,592
Deferred policy acquisition costs		122,116			129,475
Unrealized investment gains		111,692			—
Other		15,959			72,101
Deferred tax liability		261,148			212,168
Net deferred tax asset	$	190,450		$	329,417

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The Company had a current tax payable of $27,187,000 at December 31, 2009 and a current income tax receivable of $76,491,000 at December 31, 2008. At December 31, 2009, the Company had foreign net operating loss carry forwards of $3,074,000, which expire beginning in 2010. In addition, the Company has a net foreign tax credit carry forward for U.S. income tax purposes in the amount of $2,225,000, which expires beginning in 2012. The Company has provided a full valuation allowance against this amount. The net change in the valuation relates primarily to these items. The statute of limitations has closed for the Company’s tax returns through December 31, 2004. The 2005 calendar year statute of limitations remains open as a result of the carry back of capital losses from the 2008 tax year.

The realization of the deferred tax asset is dependent upon the Company’s ability to generate sufficient taxable income in future periods. Based on historical results and the prospects for future current operations, management anticipates that it is more likely than not that future taxable income will be sufficient for the realization of this asset.

(17) Dividends from Subsidiaries and Statutory Financial Information (unaudited)

The Company’s insurance subsidiaries are restricted by law as to the amount of dividends they may pay without the approval of regulatory authorities. During 2010, the maximum amount of dividends which can be paid without such approval is approximately $384 million. Combined net income and policyholders’ surplus of the Company’s consolidated insurance subsidiaries, as determined in accordance with statutory accounting practices, are as follows:

(Dollars in thousands)	2009		2008		2007
Net income	$	407,449	$	377,347	$	767,021
Policyholders’ surplus	$	3,859,086	$	3,322,389	$	3,695,106

The significant variances between statutory accounting practices and GAAP are that for statutory purposes bonds are carried at amortized cost, acquisition costs are charged to income as incurred, deferred Federal income taxes are subject to limitations, excess and assumed workers’ compensation reserves are discounted at different discount rates and certain assets designated as “non-admitted assets” are charged against surplus.

The National Association of Insurance Commissioners (“NAIC”) has risk-based capital (“RBC”) requirements that require insurance companies to calculate and report information under a risk-based formula which measures statutory capital and surplus needs based on a regulatory definition of risk in a company’s mix of products and its balance sheet. As of December 31, 2009, all of the Company’s insurance subsidiaries have an RBC amount above the authorized control level RBC, as defined by the NAIC. The Company has certain guarantees that provide that RBC levels of certain subsidiaries will remain above their authorized control levels.

(18) Common Stockholders’ Equity

The weighted average number of shares used in the computation of basic net income per share was 160,357,000, 166,956,000 and 188,981,000 for 2009, 2008 and 2007, respectively. The weighted average number of shares used in the computations of diluted net income per share was 166,574,000, 173,454,000 and 196,698,000 for 2009, 2008 and 2007, respectively. Treasury shares have been excluded from average outstanding shares from the date of acquisition. The difference in calculating basic and diluted net income per share is attributable entirely to the dilutive effect of stock-based compensation plans.

Changes in shares of common stock outstanding, net of treasury shares, are as follows:

(Amounts in thousands)	2009			2008			2007
Balance, beginning of year		161,467			180,321			192,772
Shares issued		1,467			1,823			3,680
Shares repurchased		(6,382	)		(20,677	)		(16,131	)
Balance, end of year		156,552			161,467			180,321

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(19) Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2009 and 2008:

	2009				2008
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	11,299,197	$	13,308,207	$	9,689,896	$	9,691,636
Equity securities available for sale		401,367		401,367		383,750		383,750
Arbitrage trading account		465,783		465,783		119,485		119,485
Investment in arbitrage funds		83,420		83,420		73,435		73,435
Loans receivable		381,591		285,122		381,182		328,868
Cash and cash equivalents		515,430		515,430		1,134,835		1,134,835
Trading accounts receivable from brokers and clearing organizations		310,042		310,042		128,883		128,883
Due from broker		—		—		138,411		138,411
Liabilities:
Trading account securities sold but not yet purchased		143,885		143,885		23,050		23,050
Due to broker		5,612		5,612		—		—
Junior subordinated debentures		249,793		242,217		249,584		188,717
Senior notes and other debt		1,345,481		1,386,802		1,021,869		836,914

The estimated fair values of the Company’s fixed maturity securities, equity securities available for sale and arbitrage trading account securities are based on various valuation techniques. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available. The fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics. The fair value of the senior notes and other debt and the junior subordinated debentures is based on spreads for similar securities.

(20) Lease Obligations

The Company and its subsidiaries use office space and equipment under leases expiring at various dates. These leases are considered operating leases for financial reporting purposes. Some of these leases have options to extend the length of the leases and contain clauses for cost of living, operating expense and real estate tax adjustments. Rental expense was $28,067,000, $23,802,000 and $21,438,000 for 2009, 2008 and 2007, respectively. Future minimum lease payments (without provision for sublease income) are: $26,574,000 in 2010; $21,979,000 in 2011; $17,075,000 in 2012; $13,792,000 in 2013 and $34,482,000 thereafter.

(21) Commitments, Litigation and Contingent Liabilities

The Company’s subsidiaries are subject to disputes, including litigation and arbitration, arising in the ordinary course of their insurance and reinsurance businesses. The Company’s estimates of the costs of settling such matters are reflected in its aggregate reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations. However, adverse outcomes are possible and could negatively impact the Company’s financial condition and results of operations.

At December 31, 2009, the Company had commitments to invest up to $212 million in certain investment funds and a subsidiary of the Company had commitments to extend credit under future loan agreements and unused lines of credit up to $3 million.

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(22) Stock Incentive Plan

The Company has a stock incentive plan under which 36,070,313 shares of common stock were reserved for issuance. Pursuant to the stock incentive plan, stock options may be granted at prices determined by the Board of Directors but not less than fair market value on the date of grant. Stock options vest according to a graded schedule of 25%, 50%, 75% and 100% on the third, fourth, fifth and sixth year anniversary of grant date. Stock options expire on the tenth year anniversary of the grant date. The Company has not issued any stock options since 2004.

The following table summarizes stock option information:

	2009				2008				2007
	Shares		Price (a)		Shares		Price (a)		Shares		Price (a)
Outstanding at beginning of year		6,566,377	$	9.06		8,384,422	$	8.84	$	12,088,263	$	8.29
Exercised		860,074		5.93		1,780,705		8.00		3,664,659		7.01
Cancelled		5,751		10.85		37,340		9.40		39,182		11.49
Outstanding at year end		5,700,552		9.53		6,566,377		9.06		8,384,422		8.84
Options exercisable at year end		5,699,708		9.53		6,537,403		9.04		7,431,072		8.55
Stock available for future grant (b)		3,929,067				3,953,053				5,156,486

(a)	Weighted average exercise price.
(b)	Includes restricted stock units.

The following table summarizes information about stock options outstanding at December 31, 2009:

	Options Outstanding						Options Exercisable
			Weighted						Weighted
Range of			Remaining		Weighted				Average
Exercise	Number		Contractual		Average		Number		Exercise
Prices	Outstanding		Life (in years)		Price		Exercisable		Price
$0 to $5.00		562,362		0.27	$	3.59		562,362	$	3.59
$5.01 to $9.39		2,560,395		1.20		9.33		2,560,395		9.33
$9.40 to $17.62		2,577,795		2.40		11.03		2,576,951		11.02
Total		5,700,552		1.65	$	9.53		5,699,708	$	9.53

Pursuant to the stock incentive plan, the Company may also issue restricted stock units (RSUs) to officers of the Company and its subsidiaries. The RSUs generally vest five years from the award date and are subject to other vesting and forfeiture provisions contained in the award agreement. The following table summarizes RSU information for the three years ended December 31, 2009:

(Dollars in Thousands)	2009		2008		2007
RSUs granted:
Units		119,500		1,369,500		727,250
Fair value at grant date	$	2,783	$	33,847	$	21,856
RSUs vested:
Units		1,287,943		1,008,198		—
RSUs cancelled:
Units		89,763		128,727		66,014
Fair value at grant date	$	732	$	2,213	$	1,973
RSUs outstanding at end of period:
Units		3,713,025		4,971,231		4,738,656
Fair value at grant date	$	144,150	$	142,099	$	110,465

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The fair value of RSUs at the date of grant are recorded as unearned compensation, a component of stockholders’ equity, and expensed over the vesting period. Following is a summary of changes in unearned compensation for the three years ended December 31, 2009:

(Dollars in thousands)	2009			2008			2007
Unearned compensation at beginning of year	$	68,503		$	60,108		$	59,555
RSUs granted, net of cancellations		1,947			31,634			19,883
RSUs expensed		(23,649	)		(23,239	)		(19,330	)
Unearned compensation at end of year	$	46,801		$	68,503		$	60,108

(23) Compensation Plans

The Company and its subsidiaries have profit sharing plans in which substantially all employees participate. The plans provide for minimum annual contributions of 5% of eligible compensation; contributions above the minimum are discretionary and vary with each participating subsidiary’s profitability. Employees become eligible to participate in the profit sharing plans on the first day of the month following the first full three months in which they are employed. The plans provide that 40% of the contributions vest immediately and that the remaining 60% vest at varying percentages based upon years of service. Profit sharing expense amounted to $25,785,000, $25,847,000 and $27,241,000 for 2009, 2008 and 2007, respectively. The Company’s foreign subsidiaries provide pension benefits in accordance with local regulations. The pension expense for these foreign subsidiaries amounted to $2,547,000, $1,474,000 and $796,000 for 2009, 2008 and 2007, respectively.

The Company has a Long-Term Incentive Compensation Plan (“LTIP”) that provides for incentive compensation to key executives based on the growth in the Company’s book value per share over a five year period. In 2004, the Company awarded 100,000 participants units (“Units”) that achieved their maximum value of $250 per Unit in 2007. Compensation expense related to the 2004 grant (net of forfeitures) was $4,495,000 in 2007. In 2006, the Company awarded 129,000 Units with a maximum value of $250 per Unit. Compensation expense related to the 2006 grant was $3,816,000, $3,554,000 and $10,282,000 in 2009, 2008 and 2007, respectively. In 2008, the Company awarded 164,500 units with a maximum value of $250 per unit. Compensation expense related to the 2008 grant was $3,747,000 and $3,644,000 in 2009 and 2008, respectively.

(24) Retirement Benefits

The Company has an unfunded noncontributory defined benefit plan that covers its chief executive officer and chairman of the board. The plan was amended on December 17, 2007 to provide that the benefits payments shall commence on the earliest of (i) January 2, 2014, (ii) the date of death or (iii) a change in control of the Company. The discount rate used to derive the projected benefit obligation and related retirement expense was 5.83% in 2009 and 6.95% in 2008. The discount rate assumption used to determine the benefit obligation for 2009 was based on a yield curve approach. Under this approach, a weighted average yield is determined from a hypothetical portfolio of AA bonds. Following is a summary of the projected benefit obligation as of December 31, 2009 and 2008:

(Dollars in thousands)	2009		2008
Projected benefit obligation:
Beginning of year	$	37,851	$	37,165
Interest cost		2,631		2,416
Actuarial gain (loss)		5,407		(1,730	)
End of year	$	45,889	$	37,851

Following is a summary of the amounts recognized in accumulated other comprehensive income (loss) as of December 31, 2009 and 2008:

(Dollars in thousands)	2009		2008
Net actuarial loss	$	6,254	$	846
Prior service cost		18,082		21,106
Net pension asset	$	24,336	$	21,952

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The components of net periodic pension benefit cost are as follows:

(Dollars in thousands)	2009		2008		2007
Components of net periodic benefit cost:
Interest cost	$	2,631	$	2,416	$	1,753
Amortization of unrecognized:
Prior service costs		3,023		3,023		1,267
Net actuarial loss		—		—		352
Net periodic pension cost	$	5,654	$	5,439	$	3,372

The changes in plan assets and projected benefit obligation recognized in other comprehensive income (loss) are as follows:

(Dollars in thousands)	2009			2008
Changes in plan assets and projected benefit obligation:
Net actuarial gain	$	5,407		$	(1,730	)
Amortization of:
Prior service costs		(3,023	)		(3,023	)
Total recognized in other comprehensive income (loss)	$	2,384		$	(4,753	)

The estimated prior service cost that will be amortized from accumulated other comprehensive income (loss) into periodic benefit cost during 2010 is $3,010,000.

(25) Supplemental Financial Statement Data

Other operating costs and expenses consist of the following:

(Dollars in thousands)	2009		2008			2007
Amortization of deferred policy acquisition costs	$	903,154	$	998,539		$	1,002,367
Other underwriting expenses		345,309		305,012			328,152
Service company expenses		78,331		87,397			90,561
Net foreign currency (gains) losses		4,213		(23,213	)		(2,731	)
Other costs and expenses		109,831		107,430			112,638
Total	$	1,440,838	$	1,475,165		$	1,530,987

(26) Industry Segments

The Company’s operations are presently conducted in five segments of the insurance business: specialty, regional, alternative markets, reinsurance and international.

Our specialty segment underwrites complex and sophisticated third-party liability risks, principally within the excess and surplus lines. The primary lines of business are premises operations, professional liability, commercial automobile, products liability and property lines. The companies within the segment are divided along the different customer bases and product lines that they serve. The specialty units deliver their products through a variety of distribution channels depending on the customer base and particular risks insured. The customers in this segment are highly diverse.

Our regional segments provide commercial insurance products to customers primarily in 45 states. Key clients of this segment are small-to-mid-sized businesses and state and local governmental entities. The regional subsidiaries are organized geographically, which provides them with the flexibility to adapt to local market conditions, while enjoying the superior administrative capabilities and financial strength of the Company. The regional operations are organized geographically based on markets served.

Our alternative markets operations specialize in developing, insuring, reinsuring and administering self-insurance programs and other alternative risk transfer mechanisms. Our clients include employers, employer groups, insurers, and alternative market funds seeking less costly, more efficient ways to manage exposure to risks. In addition to providing insurance, the alternative markets segment also provides a wide variety of fee-based services, including consulting and administrative services.

Our reinsurance operations specialize in underwriting property casualty reinsurance on both a treaty and a facultative basis. The principal reinsurance units are facultative reinsurance, which writes individual certificates and program facultative

57

business, treaty reinsurance, which functions as a traditional reinsurer in specialty and standard reinsurance lines, and Lloyd’s reinsurance, which writes property and casualty reinsurance through Lloyd’s.

Our international segment offers personal and commercial property casualty insurance in, South America and commercial insurance in the United Kingdom, Continental Europe and reinsurance in Australia, Southeast Asia and Canada.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Income tax expense and benefits are calculated based upon the Company’s overall effective tax rate.

58

Summary financial information about the Company’s operating segments is presented in the following table. Income (loss) before income taxes by segment consists of revenues less expenses related to the respective segment’s operations, including allocated investment income. Identifiable assets by segment are those assets used in or allocated to the operation of each segment.

	Revenues
			Investment								Pre-tax			Net
	Earned		Income and								Income			Income
(Dollars in thousands)	Premiums		Funds		Other			Total			(Loss)			(Loss)
December 31, 2009:
Specialty	$	1,354,355	$	125,351	$	3,560		$	1,483,266		$	220,906		$	167,732
Regional		1,116,871		57,530		2,725			1,177,126			106,078			80,031
Alternative markets		597,932		83,719		87,032			768,683			162,875			121,993
Reinsurance		411,511		75,505		—			487,016			86,358			70,675
International		325,180		26,767		—			351,947			22,719			14,676
Corporate, other and eliminations (1)				10,136		191,412			201,548			(178,298	)		(121,176	)
Net investment losses				—		(38,408	)		(38,408	)		(38,408	)		(24,874	)
Consolidated	$	3,805,849	$	379,008	$	246,321		$	4,431,178		$	382,230		$	309,057
December 31, 2008:
Specialty	$	1,618,915	$	188,120	$	3,778		$	1,810,813		$	375,429		$	271,156
Regional		1,237,258		80,538		—			1,317,796			108,719			82,281
Alternative markets		626,858		105,674		99,090			831,622			201,879			146,460
Reinsurance		519,717		116,046		—			635,763			117,946			93,399
International		286,832		35,184		—			322,016			52,943			36,162
Corporate, other and eliminations (1)		—		7,918		139,811			147,729			(173,663	)		(116,359	)
Net investment losses		—		—		(356,931	)		(356,931	)		(356,931	)		(231,958	)
Consolidated	$	4,289,580	$	533,480	$	(114,252	)	$	4,708,808		$	326,322		$	281,141
December 31, 2007:
Specialty	$	1,772,547	$	233,080	$	400		$	2,006,027		$	516,931		$	359,313
Regional		1,250,914		96,886		—			1,347,800			215,228			149,587
Alternative markets		651,909		125,698		97,292			874,899			248,080			173,822
Reinsurance		740,439		153,416		—			893,855			178,302			131,238
International		247,892		36,666		—			284,558			44,457			29,386
Corporate, other and eliminations (1)		—		26,914		104,648			131,562			(160,302	)		(109,341	)
Net investment gains		—		—		49,696			49,696			49,696			32,234
Consolidated	$	4,663,701	$	672,660	$	252,036		$	5,588,397		$	1,092,392		$	766,239

Identifiable assets by segment are as follows (dollars in thousands):

December 31,	2009		2008
Specialty	$	5,589,666	$	5,391,602
Regional		2,741,269		2,615,674
Alternative markets		3,643,214		3,464,953
Reinsurance		3,142,017		2,849,119
International		1,118,994		879,271
Corporate, other and eliminations (1)		1,093,436		920,539
Consolidated	$	17,328,596	$	16,121,158

(1) Corporate, other and eliminations represent corporate revenues and expenses, net investment gains and losses and other items that are not allocated to business segments.

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Net premiums earned by major line of business are as follows:

(Dollars in thousands)	2009		2008		2007
Specialty
Premises operations	$	449,120	$	596,314	$	730,874
Commercial automobile		189,501		268,438		277,170
Products liability		131,713		183,786		228,749
Property		199,746		208,534		210,791
Professional liability		173,201		155,967		155,171
Other		211,074		205,876		169,792
Total specialty		1,354,355		1,618,915		1,772,547
Regional
Commercial multiple peril		405,552		455,366		474,574
Commercial automobile		322,445		361,793		364,467
Workers’ compensation		229,066		250,770		251,774
Other		159,808		169,329		160,099
Total regional		1,116,871		1,237,258		1,250,914
Alternative Markets
Excess workers’ compensation		252,196		289,764		311,786
Primary workers’ compensation		242,259		243,571		250,628
Other		103,477		93,523		89,495
Total alternative markets		597,932		626,858		651,909
Reinsurance
Casualty		323,479		444,606		609,398
Property		88,032		75,111		131,041
Total reinsurance		411,511		519,717		740,439
International		325,180		286,832		247,892
Total	$	3,805,849	$	4,289,580	$	4,663,701

(27) Quarterly Financial Information (unaudited)

The following is a summary of quarterly financial data (in thousands except per share data):

	2009
Three months ended	March 31			June 30		September 30		December 31
Revenues	$	963,621		$	1,155,098	$	1,136,309	$	1,176,150
Net income (loss)		(20,346	)		97,387		97,722		134,294
Net income (loss) per share (a)
Basic		(0.13	) (b)		0.61		0.61		0.84
Diluted
		(0.13	) (b)		0.59		0.59		0.81

	2008
Three months ended	March 31		June 30		September 30			December 31
Revenues	$	1,375,204	$	1,199,139	$	1,055,630		$	1,078,835
Net income (loss)		188,438		80,257		(27,880	)		40,326
Net income (loss) per share (a)
Basic		1.07		0.48		(.17	) (c)		0.25
Diluted		1.03		0.46		(.17	) (c)		0.24

(a)	Net income (loss) per share (“EPS”) in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Thus, the sum of the four quarters EPS does not necessarily equal the full-year EPS.
(b)	For the three months ended March 31, 2009, the anti-dilutive effects of 7,001,000 potential common shares outstanding were excluded from the outstanding diluted shares due to the first quarter loss.
(c)	For the three months ended September 30, 2008, the anti-dilutive effects of 6,086,000 potential common shares outstanding were excluded from the outstanding diluted shares due to the third quarter loss.

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EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

Board of Directors
W. R. Berkley Corporation:

We consent to the incorporation by reference in the registration statements (No. 333-155724) on Form S-3 and (No. 333-33935), (No. 33-88640), (No. 33-55726) and (No. 333-127598) on Form S-8 of W. R. Berkley Corporation of our reports dated February 26, 2010 with respect to the consolidated balance sheets of W. R. Berkley Corporation as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity, comprehensive income (loss) and cash flows for each of the years in the three-year period ended December 31, 2009, and all related financial statement schedules and the effectiveness of internal control over financial reporting as of December 31, 2009, which reports appear or are incorporated by reference in the December 31, 2009 Annual Report on Form 10-K of W. R. Berkley Corporation.

KPMG LLP

New York, New York

February 26, 2010

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, William R. Berkley, Chairman of the Board and Chief Executive Officer of W. R. Berkley Corporation (the “registrant”), certify that:

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2010

/s/  William R. Berkley

William R. Berkley

Chairman of the Board and
Chief Executive Officer

50

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Eugene G. Ballard, Senior Vice President and Chief Financial Officer of W. R. Berkley Corporation (the “registrant”), certify that:

1. I have reviewed this annual report on Form 10-K of the registrant;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 26, 2010

/s/  Eugene G. Ballard

Eugene G. Ballard

Senior Vice President and
Chief Financial Officer

51

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of W. R. Berkley Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, William R. Berkley, Chairman of the Board and Chief Executive Officer of the Company, and Eugene G. Ballard, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  William R. Berkley

William R. Berkley

Chairman of the Board and Chief Executive Officer

/s/  Eugene G. Ballard

Eugene G. Ballard

Senior Vice President and Chief Financial Officer

February 26, 2010

A signed original of this written statement required by Section 906 has been provided to W. R. Berkley Corporation (the “Company”) and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

52