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<SEC-DOCUMENT>0000950130-01-000768.txt : 20010213
<SEC-HEADER>0000950130-01-000768.hdr.sgml : 20010213
ACCESSION NUMBER:		0000950130-01-000768
CONFORMED SUBMISSION TYPE:	424B5
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20010212

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			BERKLEY W R CORP
		CENTRAL INDEX KEY:			0000011544
		STANDARD INDUSTRIAL CLASSIFICATION:	FIRE, MARINE & CASUALTY INSURANCE [6331]
		IRS NUMBER:				221867895
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B5
		SEC ACT:		
		SEC FILE NUMBER:	033-95552
		FILM NUMBER:		1534871

	BUSINESS ADDRESS:	
		STREET 1:		165 MASON ST
		STREET 2:		P O BOX 2518
		CITY:			GREENWICH
		STATE:			CT
		ZIP:			06836-2518
		BUSINESS PHONE:		2036293000

	MAIL ADDRESS:	
		STREET 1:		165 MASON ST
		STREET 2:		PO BOX 2518
		CITY:			GREENWICH
		STATE:			CT
		ZIP:			06836-2518
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B5
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>PRELIMINARY PROSPECTUS SUPPLEMENT
<TEXT>

<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+This prospectus supplement relates to an effective registration statement     +
+under the Securities Act of 1933, but is not complete and may be changed.     +
+This prospectus is not an offer to sell these securities and it is not        +
+soliciting an offer to buy these securities in any state where the offer or   +
+sale is not permitted.                                                        +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

                                                FILED PURSUANT TO RULE 424(b)(5)
                                                       REGISTRATION NO. 33-95552


                  SUBJECT TO COMPLETION, DATED FEBRUARY 9, 2001
     PRELIMINARY PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 28, 1995

                                2,700,000 Shares

                             [W. R. BERKLEY LOGO]

                           W. R. Berkley Corporation

                                  Common Stock

                                   --------

  Our common stock is quoted on The Nasdaq Stock Market's National Market under
the symbol "BKLY". The last reported sale price on February 8, 2001 was $39.00
per share.

  The underwriters have an option to purchase a maximum of 405,000 additional
shares to cover over-allotments of shares.

  Investing in our common stock involves risks. See "Risk Factors" on page S-
11.

<TABLE>
<S>                                         <C>      <C>           <C>
                                                     Underwriting   Proceeds to
                                            Price to Discounts and W. R. Berkley
                                             Public   Commissions   Corporation
                                            -------- ------------- -------------
Per Share..................................    $           $             $
Total......................................   $           $             $
</TABLE>

  Delivery of the shares of common stock will be made on or about March   ,
2001.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the prospectus to which it relates is truthful or
complete. Any representation to the contrary is a criminal offense.

Credit Suisse First Boston

                              Merrill Lynch & Co.

                                                      Morgan Stanley Dean Witter

           The date of this prospectus supplement is February  , 2001
<PAGE>

                                 ------------

                               TABLE OF CONTENTS

                             Prospectus Supplement
<TABLE>
<CAPTION>
                                      Page
                                      ----
<S>                                   <C>
Forward-looking Statements...........  S-3
Summary..............................  S-4
Risk Factors......................... S-11
Use of Proceeds...................... S-17
Price Range of Common Stock and
 Dividend Policy..................... S-17
Capitalization....................... S-18
Business............................. S-19
Underwriting......................... S-34
Notices to Canadian Residents........ S-37
Legal Matters........................ S-38
</TABLE>
<TABLE>
<CAPTION>
                                       Page
                                       ----
<S>                                    <C>
Experts..............................  S-38
Where You Can Find More Information..  S-38
Incorporation of Certain Documents by
 Reference...........................  S-39
Index to Consolidated Financial
 Statements..........................   F-1
</TABLE>
                                   Prospectus
<TABLE>
<S>                                    <C>
Incorporation of Certain Documents by
 Reference...........................    2
Available Information................    3
The Corporation......................    4
Ratio of Earnings to Combined Fixed
 Charges and Preferred Stock
 Dividends...........................    4
Application of Proceeds..............    5
Description of Debt Securities.......    5
Description of Debt Warrants.........   17
Description of Preferred Stock.......   19
Description of Depositary Shares.....   24
Description of Preferred Stock
 Warrants............................   27
</TABLE>
<TABLE>
<S>                                     <C>
Description of Common Stock...........   29
Description of Common Stock Warrants..   29
Description of Stock Purchase
 Contracts and Stock Purchase Units...   31
Description of the Corporation's
 Outstanding Capital Stock............   32
Plan of Distribution..................   33
Global Clearance, Settlement and
 Tax Documentation Procedures.........   34
Legal Opinions........................   38
Experts...............................   39
</TABLE>


                                 ------------

   You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.

                                 ------------

   Unless otherwise indicated, all references in this prospectus supplement and
the accompanying prospectus to "W. R. Berkley", "we", "us", "our" or similar
terms refer to W. R. Berkley Corporation together with its subsidiaries.


                                      S-2
<PAGE>

                           FORWARD-LOOKING STATEMENTS

   This prospectus supplement and the accompanying prospectus contain or
incorporate by reference certain 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 or incorporated by reference in this
prospectus supplement and the accompanying prospectus, including statements
related to our performance for the year 2000 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, the underwriters or any other person that the future
plans, estimates or expectations contemplated by us will be achieved. Such
forward-looking statements 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 reinsurance
    business;

  . the impact of competition;

  . product demand and pricing;

  . claims development and the process of estimating reserves;

  . the level of our retention;

  . catastrophe and storm losses;

  . legislative and regulatory developments;

  . changes in the ratings assigned to us by ratings agencies;

  . investment results;

  . availability of reinsurance;

  . the effects of our recent restructuring;

  . availability of dividends from our insurance company subsidiaries;

  . our successful integration of acquired companies;

  . investing substantial amounts in our information systems and technology;

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

  . exchange rate and political risks.

   We describe these risks and uncertainties in greater detail below under the
caption "Risk Factors." These risks could cause our actual results for the year
2000 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 prospectus supplement.
Forward-looking statements speak only as of the date on which they are made,
and we undertake no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future developments or
otherwise. For a discussion of factors that could cause actual results to
differ, see "Risk Factors" below and the information contained in our publicly
available filings with the Securities and Exchange Commission, or SEC. These
filings are described below under the captions "Where You Can Find More
Information" and "Incorporation of Certain Documents by Reference."

                                      S-3
<PAGE>

                                    SUMMARY

   This summary highlights information about W. R. Berkley Corporation and this
offering. Because this is a summary, it may not contain all the information you
should consider before investing in our common stock. You should carefully read
this entire prospectus supplement and the prospectus to which it relates
together with our reports filed with the SEC that are incorporated by
reference. You should be aware that the ratings of our domestic insurance
subsidiaries by A.M. Best Company, Inc., or A.M. Best, contained in this
prospectus supplement are based upon factors of concern to policyholders,
insurance agents and brokers and are not directed toward the protection of
investors.

                           W. R. Berkley Corporation

Introduction

   We are a holding company which, through our subsidiaries, operates in five
segments of the property casualty insurance business: specialty lines of
insurance (including excess and surplus lines and commercial transportation);
alternative markets (including the management of alternative insurance market
mechanisms); reinsurance; regional property casualty insurance; and
international. All of our domestic insurance subsidiaries have an A.M. Best
rating of "A (Excellent)", other than Admiral Insurance Company, which has a
rating of "A+ (Superior)".

   We conduct our specialty insurance, alternative markets and reinsurance
operations nationwide. We conduct our regional insurance operations primarily
in the Midwest, New England, Southern and Mid Atlantic regions of the United
States. We currently conduct our international operations in Argentina and the
Philippines.

Strategy

   Our strategy is to build value for our shareholders over the long term by
focusing on segments of the property casualty insurance business that we
believe offer opportunities for excellent returns. We operate a group of
autonomous insurance entities that can compete effectively in selected markets
within the property casualty industry. We seek to deploy our capital and to
position our companies to capitalize on our most profitable opportunities by
concentrating on market segments where our flexibility, responsiveness,
expertise and strong relationships provide us with a competitive advantage. The
following are the basic tenets of our strategy:

  . Autonomous Structure. We operate through subsidiaries that have the
    flexibility to respond to local or specific market conditions. This
    structure allows us to be closer to our customers to better understand
    their individual needs and risk characteristics. We believe that this
    structure enhances our position within the distribution channels for our
    products. At the same time, our holding company structure allows us to
    capitalize on the benefits of economies of scale through centralized
    capital, investment and reinsurance management, technology strategy and
    additional actuarial, financial and legal staff support.

  . Specialization. Our decentralized structure allows our operating
    companies to target specialized markets and products based on local
    market conditions, underwriting risk and expertise in the business
    covered. We have developed the expertise that allows us to pursue
    specialty business niches which we believe present the opportunity for
    superior underwriting results and higher margins.

  . Disciplined Financial Approach. We manage our businesses with a focus on
    profitability rather than market share and adjust our premium growth
    plans and capital allocations accordingly. We invest our assets in a
    conservative manner and monitor our loss reserves closely.



                                      S-4
<PAGE>

Strategic Positioning

   We believe that our company has developed a reputation for underwriting
expertise and discipline. Our aggregate underwriting results, as measured by
statutory combined ratio, were superior to those of the property casualty
industry for each of the 13 years preceding, and including, 1998. For the past
several years, there has been intense competition in the industry, as there has
been an excess of capital seeking premium dollars. In 1999, rather than waiting
for the market environment to improve, we began to undertake certain
initiatives that we believe will enable us to deliver improved results. As a
result of poor industry-wide underwriting results and lower reserve margins,
insurers and reinsurers have begun to raise rates. We believe that we have
already positioned our operating segments to capitalize on the emerging market
opportunities as a result of the following:

  . Specialty. Specialty lines of insurance are, by their nature, customized
    to provide the client with a risk management solution tailored to its
    unique needs, as opposed to standard insurance, which is priced more like
    a commodity. We expect the specialty segment to become even more
    important to our overall business as we continue to focus increasingly on
    high-margin, less commodity-like businesses across the organization. We
    are beginning to see signs of substantial rate increases and tightening
    of terms for certain specialty lines, which, if these trends continue, we
    believe will provide us with substantial growth for the segment. We
    believe that, due to our underwriting expertise, loss control
    capabilities and claims handling skills, we are well-positioned to take
    advantage of opportunities in this segment.

  . Alternative Markets. As the primary markets charge higher premiums for
    the same level of coverage, we expect additional insurance buyers to
    explore alternative markets insurance mechanisms. In addition, since the
    fee-based revenues associated with alternative markets services are
    typically charged as a percentage of premium dollars, higher premiums
    (resulting from market price increases) should result in increased fee
    revenues. As an insurer in this market as well as an alternative markets
    service provider, we believe that we are well-positioned to participate
    in this growth.

  . Reinsurance. In 2000, we began to focus on reinsurance lines of business
    which are more specialty-focused and where knowledge and expertise in a
    specific area are valued over the capital scale of the reinsurance
    provider. It is in those situations where we feel we can best utilize our
    intellectual capital to drive the underwriting process. In the first
    quarter of 2000, we also began redirecting our reinsurance business away
    from the property sub-segments, which expose us to weather-related and
    other natural catastrophes, and decided to withdraw altogether from
    certain markets where we do not view ourselves as having a competitive
    advantage or where the product base is too commoditized. In addition,
    within the treaty sub-segment, we are shifting our focus toward excess of
    loss treaties, which we believe present more profitable opportunities. We
    anticipate that these changes will allow us to have more significant
    participations and greater influence over the terms and conditions of
    coverage. However, due to the shift in our focus, we are expecting a
    significant reduction in reinsurance premiums.

  . Regional. We have been repositioning this segment to better focus on the
    more profitable commercial business lines and to de-emphasize our
    personal lines. As part of this repositioning, we consolidated this
    segment's operations into four operating regions, which we estimate has
    resulted in annual after-tax savings of approximately $12 million. By
    maintaining underwriting functions at the regional company level, we
    believe that we enjoy a significant competitive advantage over those
    national insurance companies in the property casualty business with
    centralized underwriting functions. Although the market remains
    competitive, we have recently been able to raise our rates and, depending
    on market conditions, we anticipate that we will be able to continue to
    do so.

  . International. We began our international operations in 1995 and
    identified foreign markets that presented opportunities for attractive
    returns. Our international businesses first achieved profitability in
    1999 and are ranked highly in their respective countries. We expect to
    continue to grow these businesses organically through increased writings
    in Argentina and the Philippines, where we currently operate, and to seek
    opportunities in other regions as they develop.


                                      S-5
<PAGE>

   We also are taking the following strategic initiatives at the corporate
level:

  . Capital Management. One critical underpinning to our strategy remains
    constant: the discipline of maintaining a solid balance sheet. We expect
    to increase the capital of our operating companies as necessary to take
    advantage of the change in pricing conditions that began in 2000. During
    the nine months ended September 30, 2000, we estimate that we achieved
    average price increases of approximately 10%, with certain specialty
    lines achieving substantially higher increases. We plan to increase our
    retention levels by purchasing less reinsurance in order to take
    advantage of improving market conditions.

  . Recent Organizational Changes. In the fourth quarter of 2000, we
    instituted a series of internal changes designed to focus our reinsurance
    business on segments that provide the highest return and to enhance the
    delivery of expertise to clients and brokers. Under this plan, Signet
    Star Reinsurance Company was renamed Berkley Insurance Company and became
    our lead insurance operating company. We then contributed our regional
    insurance businesses to Berkley Insurance Company, thereby increasing its
    statutory policyholders' surplus from $363 million at September 30, 2000
    to approximately $600 million as of December 31, 2000. We believe this
    enhances our competitive stance and acceptability in the marketplace.
    These changes were also designed to promote the "Berkley" brand so that
    our business units can benefit from our group's well-regarded reputation
    and professional expertise.

  . Possible Acquisitions. As part of our present strategy, we continue to
    evaluate possible acquisition transactions on an ongoing basis, and at
    any given time, we may be engaged in discussions with respect to possible
    acquisitions. Although we have not completed a significant acquisition
    since 1995, we consider the acquisition of complementary businesses to be
    a means of obtaining a further competitive advantage in our business,
    should we identify suitable acquisition candidates.

Growth Opportunities and Outlook for 2001/1/

   Based on improving market conditions and our analysis of and experience with
prior industry cycles, we expect to achieve overall growth in our net premiums
written and management fees in excess of 10% in 2001. In particular, based on
current market trends, we expect accelerated growth in the specialty segment,
our facultative reinsurance operations and portions of our alternative markets
segment, accompanied by improvements in terms and conditions. In the regional
segment, we expect modest growth as a result of recently achieved and
anticipated price increases. As a result of our strategic repositioning, we
expect to experience significant reductions in net premiums written in our
reinsurance segment and the reinsurance portion of our alternative markets
segment. Growth in our specialty and regional segments would be affected, as
well, by our expected increase in retention levels.

Industry Segments

   Our net premiums written during the nine month period ended September 30,
2000 were approximately $1.1 billion, divided among our five segments as
follows:

<TABLE>
<CAPTION>
                                               Percentage of
                                                    Net
                                              Premiums Written
                                              ----------------
            <S>                               <C>
            Specialty........................       18.7%
            Alternative Markets..............       12.2
            Reinsurance......................       18.1
            Regional.........................       43.6
            International....................        7.4
                                                   -----
              Total..........................      100.0%
                                                   =====
</TABLE>
- --------------------
/1/The following paragraph contains forward-looking statements within the
  meaning of the Private Securities Litigation Reform Act. These statements are
  based, among other things, on our analysis of current market trends and are
  subject to various risks and uncertainties. See "Forward-Looking Statements"
  and "Risk Factors."

                                      S-6
<PAGE>

  . Specialty. Our specialty units underwrite complex and sophisticated
    third-party liability risks, principally within the excess and surplus
    (E&S) lines, professional liability, surety and commercial transportation
    markets. Our customers range from those having mid-to-large-sized
    commercial risks with unique needs to those having products and
    professional liability exposures. These customers benefit from our
    specialty unit's ability to evaluate and manage special risks and tailor
    insurance products for them. Our specialty insurance segment had net
    premiums written of $207.9 million for the nine months ended September
    30, 2000 and $260.4 million for the year ended December 31, 1999. Net
    premiums of our specialty insurance operations grew at a compound annual
    rate of 11.0% from 1995 to 1999.

  . Alternative Markets. Our alternative markets property casualty
    subsidiaries specialize in developing, insuring and administering self-
    insurance programs and various alternative risk transfer mechanisms. To
    best serve our clients, we also offer alternative markets reinsurance
    products, which we coordinate with our other alternative markets products
    and services. Our clients include employers, employer groups, reinsurers,
    alternative markets funds and other insurers 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 alternative markets segment had net premiums written of $135.9
    million for the nine months ended September 30, 2000 and $122.1 million
    for the year ended December 31, 1999. Management fees for our insurance
    service operations were $47.3 million for the nine months ended September
    30, 2000 and $65.8 million for the year ended December 31, 1999. Total
    revenues for our alternative markets operations grew at a compound annual
    rate of 21.0% from 1995 to 1999, which includes our acquisition of
    Midwest Employers Casualty Company in 1995.

  . Reinsurance. Our reinsurance operations underwrite both traditional and
    specialized risks, mostly through brokers. Our three operating units are:
    property casualty treaty, facultative, and fidelity and surety.
    Increasingly, we are focusing our reinsurance operations on less-
    commoditized, niche markets where we can add the most value through
    leveraging our knowledge and experience. Our reinsurance segment had net
    premiums written of $200.6 million for the nine months ended September
    30, 2000 and $309.2 million for the year ended December 31, 1999. Net
    premiums of our reinsurance operations grew at a compound annual rate of
    12.0% from 1995 to 1999.

  . Regional. Our regional subsidiaries principally provide commercial
    property casualty insurance products to customers in 37 states. Key
    clients of this segment are small-to-mid-sized businesses and
    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 W. R. Berkley group. Our
    regional insurance segment had net premiums written of $484.9 million for
    the nine months ended September 30, 2000 and $649.8 million for the year
    ended December 31, 1999. Net premiums of our regional insurance
    operations grew at a compound annual rate of 9.0% from 1995 to 1999.

  . International. Our international operations are conducted through a
    limited liability company which is owned 65% by us and 35% by a wholly
    owned subsidiary of The Northwestern Mutual Life Insurance Company. Our
    international operations provide both property casualty and life
    insurance to customers in Argentina and savings and life products to
    customers in the Philippines. We focus internationally on specific value-
    added products in markets which we find attractive. Our international
    operations segment had net premiums written of $82.6 million for the nine
    months ended September 30, 2000 and $86.2 million for the year ended
    December 31, 1999. Net premiums of our international operations grew at a
    compound annual rate of 95.7% from 1995 to 1999.

                                      S-7
<PAGE>


Recent Developments

   The following discussion is an excerpt of our earnings release dated
February 5, 2001 and should be read in conjunction with our unaudited
supplemental financial information included elsewhere in this prospectus
supplement and the other financial information presented and incorporated by
reference herein, including, in particular, our current report on Form 8-K
which contains the complete text of the earnings release.

   Revenues for the fourth quarter of 2000 increased 14.0% to $480 million from
$422 million for the same period in 1999. Revenues for the year increased 6.0%
to $1,781 million from $1,674 million in 1999.

   Operating income for the fourth quarter was $14 million, or $.53 per diluted
share, compared with an operating loss of $38 million, or $1.50 per diluted
share, for the fourth quarter of 1999. Operating income for the year was $32
million, or $1.23 per diluted share, compared with an operating loss of $23
million, or $.91 per diluted share, for 1999. In the 1999 fourth quarter, we
established additional loss reserves for the regional insurance group of
approximately $55 million (before tax). There was no comparable reserve
adjustment in 2000. Operating income (loss) is defined as net income (loss)
before realized investment gains and losses, changes in accounting principles,
extraordinary items and, for purposes of this paragraph, restructuring charges.

   Net income for the fourth quarter was $18 million, or $.68 per diluted
share, compared with a net loss of $41 million, or $1.59 per diluted share, for
the 1999 period. Net income for the year was $36 million, or $1.39 per diluted
share, compared with a net loss of $37 million, or $1.43 per diluted share, for
1999.

Corporate Information

   We were organized as a New Jersey corporation in 1967 and reincorporated in
Delaware in 1970. Our headquarters are located at 165 Mason Street, Greenwich,
Connecticut 06836, and our telephone number is (203) 629-3000.

                                  The Offering

Common stock offered........  2,700,000 shares

Common stock to be
outstanding after this
offering....................  28,356,362 shares

Use of proceeds.............  To provide additional capital for our insurance
                              subsidiaries, for the possible reduction of our
                              indebtedness and for general corporate purposes.

Nasdaq National Market
symbol......................  "BKLY"

   Unless otherwise noted, we assume in this prospectus supplement that the
underwriters will not exercise their over-allotment option to purchase an
additional 405,000 shares.

   The number of shares of common stock shown above to be outstanding after
this offering is based on the number of shares outstanding on December 31,
2000, and excludes unissued shares reserved under various employee compensation
plans--namely, 3,986,079 shares issuable upon exercise of stock options granted
under our stock option plan, at a weighted average exercise price of $31.57 per
share; and 2,647,916 shares reserved for issuance pursuant to stock options not
yet granted under our current stock option plan. It also excludes 1,978,300
shares held by certain of our subsidiaries.

                                      S-8
<PAGE>


                      Summary Consolidated Financial Data

   The summary consolidated financial data shown below (in thousands, except
per share data) is derived from and should be read in conjunction with, the
financial statements and other financial information which are included in or
incorporated by reference into this prospectus supplement. The statutory
information shown below is derived from the information reported to state
regulatory authorities in accordance with statutory accounting practices, or
SAP.

<TABLE>
<CAPTION>
                            Nine Months Ended
                              September 30,                     Year Ended December 31,
                          ---------------------  ----------------------------------------------------------
                             2000       1999        1999        1998        1997        1996        1995
                          ---------- ----------  ----------  ----------  ----------  ----------  ----------
<S>                       <C>        <C>         <C>         <C>         <C>         <C>         <C>
Consolidated GAAP
 Statement of Operations
 Data:
Net premiums written....  $1,111,926 $1,085,652  $1,427,719  $1,346,254  $1,177,641  $1,052,511  $  860,421
Net premiums earned.....   1,091,683  1,051,892   1,414,384   1,278,399   1,111,747     981,221     803,336
Net investment income...     153,025    145,265     190,316     202,420     199,588     164,490     137,332
Management fees and
 commissions............      51,535     55,347      72,344      70,727      71,456      69,246      68,457
Realized investment
 gains (losses).........       1,885     (2,404)     (6,064)     25,400      13,186       7,437      10,357
Total revenues..........   1,301,214  1,251,786   1,673,668   1,582,517   1,400,310   1,225,166   1,021,943
Interest expense........      35,954     38,068      50,801      48,819      48,869      31,963      28,209
Income (loss) before
 Federal and foreign
 income taxes...........      15,408    (10,853)    (79,248)     62,781     129,241     115,049      82,747
Federal and foreign
 income tax (expense)
 benefit................       4,085     17,768      45,766      (5,465)    (30,668)    (25,102)    (17,554)
Income (loss) before
 minority interest......      19,493      6,915     (33,482)     57,316      98,573      89,947      65,193
Net income (loss) before
 preferred dividends....      18,074      6,740     (34,048)     58,760      99,047      90,263      60,882
Preferred dividends.....         --        (497)       (497)     (7,548)     (7,828)    (13,909)    (11,062)
Cumulative effect of
 change in accounting
 principle (net of
 taxes) (1).............         --      (3,250)     (3,250)        --          --          --          --
Extraordinary gain
 (loss) (net of taxes)..         --         735         735      (5,017)        --          --          --
Net income (loss)
 attributable to common
 stockholders...........      18,074      3,728     (37,060)     46,195      91,219      76,354      49,820
Operating income (loss)
 (2)(3).................      16,850      7,806     (30,603)     34,702      82,648      71,520      43,503
Data per common share:
 Basic:
   Net income (loss)
    before change in
    accounting and
    extraordinary item..         .71        .23       (1.35)       1.82        3.09        2.56        1.91
   Net income (loss)....         .71        .14       (1.44)       1.64        3.09        2.56        1.91
   Operating income
    (loss) (2)(3).......         .66        .30       (1.19)       1.23        2.80        2.40        1.67
 Diluted:
   Net income (loss)
    before change in
    accounting and
    extraordinary
    income..............         .70        .23       (1.34)       1.76        3.02        2.53        1.90
   Net income (loss)....         .70        .14       (1.43)       1.59        3.02        2.53        1.90
   Operating income
    (loss) (2)(3).......         .65        .29       (1.19)       1.19        2.74        2.38        1.66
Weighted average shares
 outstanding:
 Basic..................      25,571     25,999      25,823      28,194      29,503      29,792      26,121
 Diluted................      25,769     26,133      25,927      29,115      30,185      30,130      26,262
</TABLE>

                                      S-9
<PAGE>


<TABLE>
<CAPTION>
                                                            December 31,
                         September 30, ------------------------------------------------------
                             2000         1999       1998       1997       1996       1995
                         ------------- ---------- ---------- ---------- ---------- ----------
<S>                      <C>           <C>        <C>        <C>        <C>        <C>
Consolidated GAAP
 Balance Sheet Data:
Investments (4).........  $3,030,270   $2,975,929 $3,233,458 $3,106,900 $2,991,606 $2,588,346
Total assets............   4,884,904    4,784,791  4,983,431  4,544,318  4,136,973  3,618,684
Reserves for losses and
 loss expenses..........   2,462,114    2,361,238  2,126,566  1,909,688  1,782,703  1,660,020
Long-term debt..........     370,068      394,792    394,444    390,415    390,104    319,287
Company-obligated
 mandatorily redeemable
 capital securities of a
 subsidiary trust
 holding solely 8.197%
 junior subordinated
 debentures.............     198,158      198,126    207,988    207,944    207,901        --
Stockholders' equity....     620,783      591,778    861,281    947,292    879,732    929,815
Book value per share....       24.43        23.10      28.80      28.72      25.13      23.59
</TABLE>

<TABLE>
<CAPTION>
                         Nine Months Ended
                           September 30,        Year Ended December 31,
                         ------------------  ---------------------------------
                           2000      1999    1999   1998   1997   1996   1995
                         --------  --------  -----  -----  -----  -----  -----
<S>                      <C>       <C>       <C>    <C>    <C>    <C>    <C>
Selected SAP Operating
 Ratios:
Loss ratio..............     73.5%     72.4%  76.5%  71.2%  66.4%  68.7%  70.7%
Expense ratio...........     34.2      34.9   35.4   34.9   34.4   33.1   31.3
Policyholders' dividend
 ratio..................       .3        .4     .3     .5     .4     .4     .5
                         --------  --------  -----  -----  -----  -----  -----
Combined ratio (5)......    108.0%    107.7% 112.2% 106.6% 101.2% 102.2% 102.5%
                         ========  ========  =====  =====  =====  =====  =====
</TABLE>
- --------------------
(1) As of January 1, 1999, we adopted the American Institute of Certified
    Public Accountants (AICPA) Statement of Position ("SOP") 97-3, "Accounting
    by Insurance and Other Enterprises for Insurance Related Assessments."
(2) Operating income (loss) is defined as net income (loss) before realized
    investment gains and losses, changes in accounting principle and
    extraordinary gains and losses on early extinguishments of long-term debt.
    Operating income (loss) includes one-time after-tax restructuring charges
    of $1,203 for the nine months ended September 30, 2000, $7,294 for the nine
    months ended September 30, 1999 and $7,294 for the year ended December 31,
    1999. Excluding these restructuring charges, operating income (loss) would
    have been $18,053, $15,100 and $(23,309), respectively, for such periods.
(3) Includes amortization of goodwill of $2,933 and $2,955 for the nine months
    ended September 30, 2000 and 1999, respectively, and $3,866, $3,178 and
    $2,950 for the years ended December 31, 1999, 1998 and 1997, respectively.
(4) Includes trading account receivable from brokers and clearing organizations
    and trading securities sold but not yet purchased.
(5) The combined ratio represents a measure of underwriting profitability,
    excluding investment income. A number in excess of 100 generally indicates
    an underwriting loss; a number below 100 generally indicates an
    underwriting gain.

                                      S-10
<PAGE>

                                  RISK FACTORS

   Our business faces significant risks. The risks described below may not be
the only risks we face. Additional risks that we do not yet know of or that we
currently think are immaterial may also impair our business operations. If any
of the events or circumstances described as risks below actually occurs, our
business, results of operations or financial condition could be materially and
adversely affected. In such case, the trading price of our common stock could
decline and you may lose part or all of your investment. You should carefully
consider and evaluate all of the information included or incorporated in this
prospectus supplement and the accompanying prospectus, including the risk
factors listed below, before deciding whether to invest in our common stock.

Insurance Industry Related Risks

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 industry's profitability can be affected significantly by

  . rising levels of actual costs that are not known by companies at the time
    they price their products;

  . volatile and unpredictable developments (including weather-related and
    other natural catastrophes);

  . changes in reserves resulting from the general claims and legal
    environments as different types of claims arise and judicial
    interpretations relating to the scope of insurers' liability develop;

  . fluctuations in interest rates, inflationary pressures and other changes
    in the investment environment, which affect returns on invested capital
    and may impact the ultimate payout of loss amounts; and

  . the long-tail and volatile nature of the reinsurance business, which may
    impact our operating results and limit opportunities for adequate
    returns.

   The demand for property casualty insurance can also vary significantly,
rising as the overall level of economic activity increases and falling as such
activity decreases. The property casualty insurance industry historically has a
cyclical nature. Recently, the property casualty insurance industry and
especially the commercial lines business have been very competitive. These
fluctuations in demand and competition could produce underwriting results that
would have a negative impact on our results of operations and financial
condition.

We face significant competitive pressures in our businesses.

   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 our competitors, particularly in the
reinsurance business, have greater financial and marketing resources than we
do.

   A number of new, proposed or potential legislative or industry developments
could further increase competition in our industry. These developments include:

  . the enactment of the Gramm-Leach-Bliley Act of 1999, which could result
    in increased competition from new entrants to our markets;

  . the implementation of commercial lines deregulation in several states,
    which could increase competition from standard carriers for our excess
    and surplus lines of insurance business;

  . programs in which state-sponsored entities provide property insurance in
    catastrophe prone areas or other alternative markets types of coverage;
    and

  . changing practices caused by the Internet, which have led to greater
    competition in the insurance business.

                                      S-11
<PAGE>

   New competition from these developments could cause the supply and/or demand
for insurance or reinsurance to change, which could adversely affect our
results of operations and financial condition.

   In addition to competition in the operation of our businesses, we face
competition from a variety of sources in attracting and retaining qualified
employees. We cannot assure you that we will maintain our current competitive
position in the markets in which we operate, or that we will be able to expand
our operations into new markets. If we fail to do so, our businesses could be
materially adversely affected.

Our actual claims losses may exceed our reserves for claims.

   We maintain loss reserves to cover our estimated liability for unpaid losses
and loss adjustment expenses, including legal and other fees as well as a
portion of our general expenses, for reported and unreported claims incurred as
of the end of each accounting period. Reserves do not represent an exact
calculation of liability. Rather, reserves represent an estimate of what we
expect the ultimate settlement and administration of claims will cost. These
estimates, which generally involve actuarial projections, are based on our
assessment of facts and circumstances then known, as well as estimates of
future trends in claims severity, frequency, judicial theories of liability and
other factors. In some cases, long-tail lines of business such as excess
workers' compensation and the workers' compensation portion of our reinsurance
business are reserved on a discounted basis. The variables described above are
affected by both internal and external events, such as changes in claims
handling procedures, inflation, judicial and litigation trends and legislative
changes. The risk of the occurrence of such events is especially present in our
specialty lines and reinsurance businesses. Many of these items are not
directly quantifiable in advance. In some areas of our business, the level of
reserves we establish is dependent in part upon the actions of third parties
that are beyond our control. In our reinsurance and excess workers'
compensation businesses, we may not establish sufficient reserves if third
parties do not give us advance notice or provide us with appropriate
information regarding certain matters. Additionally, there may be a significant
delay between the occurrence of the insured event and the time it is reported
to us.

   The inherent uncertainties of estimating reserves are greater for certain
types of liabilities, where the various considerations affecting these types of
claims are subject to change and long periods of time may elapse before a
definitive determination of liability is made. 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 you that our current
reserves will prove adequate in light of subsequent events.

We anticipate increasing our level of retention in our business.

   We anticipate increasing our retention levels in 2001 for our operations
generally due to changes in market conditions and the pricing environment. We
expect to 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 could have a material adverse effect upon our results of operations
and financial condition. A significant change in our retention levels could
also cause our historical financial results, including compound annual growth
rates, to be inaccurate indicators of our future performance on a segment or
consolidated basis.

As a property casualty insurer, we face losses from 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. Catastrophes can be caused by various events, including
hurricanes, windstorms, earthquakes, hailstorms, explosions, severe winter
weather and fires. The incidence and severity of catastrophes are inherently
unpredictable. 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. Most catastrophes are restricted

                                      S-12
<PAGE>

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 casualty lines, and most of our past
catastrophe-related claims have resulted from severe storms. Seasonal weather
variations 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 multiple catastrophic
events could have a material adverse effect upon our results of operations and
financial condition.

We are subject to extensive governmental regulation.

   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;

  . requiring reserves for unearned premium, losses and other purposes; 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. Recently adopted federal financial services modernization
legislation is expected to lead to additional federal regulation of the
insurance industry in the coming years. Also, foreign governments regulate our
international operations.

   We cannot assure you that we have or can maintain all required licenses and
approvals or that our business fully complies 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. That type of action could have a material adverse
effect on our business. 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, could have
a material adverse effect on our business.

We are rated by A.M. Best and Standard & Poor's, and a decline in these ratings
could adversely affect our operations.

   Ratings have become an increasingly important factor in establishing the
competitive position of insurance companies. Our insurance company subsidiaries
are rated by A.M. Best and certain of our insurance company subsidiaries are
rated for their claims-paying ability by Standard & Poor's Corporation, or
Standard & Poor's. A.M. Best and Standard & Poor's ratings reflect their
opinions of an insurance company's financial strength, operating performance,
strategic position and ability to meet its obligations to policyholders, are
not evaluations directed to investors and are not recommendations to buy, sell
or hold our securities. Our ratings are subject to periodic review by A.M. Best
and Standard & Poor's and the continued retention of those ratings cannot be
assured. The Standard & Poor's 2001 outlook for the U.S. property casualty
insurance industry and the Standard & Poor's mid-year 2000 outlook for the U.S.
reinsurance industry were negative. Since March 2000, Standard & Poor's has
given us a negative rating outlook. While Standard & Poor's recently affirmed
our rating of "A+", as long as we remain on negative rating outlook, a
downgrade in our rating is possible. If our ratings are reduced from their
current levels by A.M. Best and/or Standard & Poor's, our results of operations
could be adversely affected.

                                      S-13
<PAGE>

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

   Our investment portfolio consists substantially of fixed income securities.
The fair market value of these assets and the investment income from these
assets fluctuate depending on general economic and market conditions. With
respect to our investments in fixed income securities, the fair market value of
these investments generally increases or decreases in an inverse relationship
with fluctuations in interest rates, while net investment income realized by us
from future investments in fixed income securities will generally increase or
decrease with interest rates. In addition, actual net investment income and/or
cash flows from investments that carry prepayment risk (such as mortgage-backed
and other asset-backed securities) may differ from those anticipated at the
time of investment as a result of interest rate fluctuations. Because
substantially all of our fixed income securities are classified as available
for sale, changes in the market value of our securities are reflected in our
balance sheet. Similar treatment is not available for liabilities. Therefore,
interest rate fluctuations could adversely affect our results of operations and
financial condition.

We invest some of our assets in merger arbitrage, which is subject to certain
risks.

   We invest a portion of our investment portfolio in merger arbitrage. As of
September 30, 2000, our investment in merger arbitrage securities represented
approximately 15% of our total investment portfolio. Merger arbitrage is the
business of investing in the securities of publicly held companies which 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). While our merger arbitrage positions are
generally hedged against market declines, these equity investments are exposed
primarily to the risk associated with the completion of announced deals, which
are subject to regulatory as well as political and other risks.

Our premium writings and profitability are affected by the availability of
reinsurance.

   We purchase reinsurance for significant amounts of risk underwritten by our
insurance company subsidiaries, especially catastrophe risks. We also purchase
reinsurance on risks underwritten by others which we reinsure (a retrocession).
Market conditions beyond our control determine the availability and cost of the
reinsurance protection we purchase, which may affect the level of our business
and profitability. Our reinsurance facilities are generally subject to annual
renewal. We cannot assure you that we can maintain our current reinsurance
facilities or that we can obtain other reinsurance facilities in adequate
amounts and at favorable rates. If we are unable to renew our expiring
facilities or to obtain new reinsurance facilities, 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. Either of these potential developments could have a
material adverse effect on our business.

We do not yet know all the effects of the recent restructuring of certain of
our subsidiaries.

   In 2000, we implemented a restructuring plan, pursuant to which we refocused
our domestic reinsurance operations. While this restructuring is substantially
complete, all of its operating effects are not yet known, and any difficulties
caused by such restructuring could adversely affect our results of operations
and financial condition.

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

   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

                                      S-14
<PAGE>

surplus and future earnings of these subsidiaries, as well as the regulatory
restrictions. As a result, 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 may not find suitable acquisition candidates and even if we do, we may not
successfully integrate any such acquired companies.

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

If we do not invest substantial amounts in our information systems and
technology, our business may be harmed.

   Integrated management information and processing systems are vital to our
ability to monitor costs, collect receivables and achieve operating
efficiencies. As we continue our growth, the need for sophisticated information
systems and technology will increase significantly. The cost of implementing
such systems has been, and is expected to continue to be, substantial. The
failure of our information or processing systems, or our failure to upgrade
systems as necessary, could have a material adverse effect on our results of
operations and financial condition.

We cannot guarantee that our reinsurers will pay in a timely fashion, if at
all.

   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 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 or, in cases where we are a reinsurer, to our reinsureds.
Accordingly, we bear credit risk with respect to our reinsurers. We cannot
assure you that our reinsurers will pay the reinsurance recoverables owed to us
or that they will pay such recoverables on a timely basis.

Our international operations expose us to risks.

   Certain assets held by our foreign subsidiaries are subject to foreign
currency risk. Our principal area of exposure relates to fluctuations in
exchange rates between each of the Argentinean and Philippine peso and the U.S.
dollar. Consequently, a change in the exchange rate between the U.S. dollar and
either the Argentinean or Philippine peso could have an adverse effect on our
results of operations and financial condition. We are additionally subject to
political and economic risks in these countries.

Investment Related Risks

Our charter documents, Delaware law and stockholders rights plan, as well as
state insurance statutes, will make it more difficult to acquire us and may
discourage takeover attempts and thus depress the market price of our common
stock.

   Certain provisions of Delaware law, our certificate of incorporation and our
by-laws have the effect of making more difficult or discouraging unsolicited
takeover bids from third parties. While these provisions have the effect of
encouraging persons seeking to acquire control of us to negotiate with our
board of directors, they could also limit our stockholders' opportunity to
dispose of their shares at the premium prices typically associated with such
takeover attempts.

                                      S-15
<PAGE>

   For example, our certificate of incorporation and by-laws provide for a
board of directors divided into three classes, with one class being elected
each year to serve for a three-year term. As a result, at least two annual
meetings of stockholders may be required for stockholders to change a majority
of our board of directors. Pursuant to our share purchase rights plan, holders
of our common stock will receive rights to purchase shares of preferred stock
that have the same dividend, liquidation and voting rights as shares of our
common stock upon the occurrence of certain events that could lead to a person
or group acquiring 15% or more of our outstanding common stock. In addition to
being subject to Section 203 of the Delaware General Corporation Law, which
generally prohibits a publicly held Delaware corporation from engaging in
business combinations with certain stockholders, our certificate of
incorporation requires the affirmative vote of 80% of our stockholders to
approve mergers and other similar transactions between us and certain
stockholders.

   We are subject to state statutes governing insurance holding company systems
which would commonly require that any person or entity desiring to purchase
more than 10% of our outstanding voting securities must obtain regulatory
approval of the purchase. Under Florida law, which is applicable to us due to
our ownership of Carolina Casualty Insurance Company, a Florida domiciled
insurer, the acquisition of more than 5% of our capital stock must receive
state regulatory approval. Applicable state insurance company laws and
regulations could delay or impede a change of control of W. R. Berkley.

Certain of our institutional stockholders and management may influence actions
requiring stockholder approval.

   Based on public filings as of September 30, 2000, Franklin Resources, Inc.
and Neuberger & Berman Pension Management (with their respective affiliates)
held 4,533,940 and 1,521,542 shares of common stock, respectively, representing
approximately 17.7% and 5.9%, respectively, of our outstanding common stock as
of December 31, 2000. In addition, as of December 31, 2000, William R. Berkley,
our founder, chairman and president, held 4,038,569 shares of common stock
(including currently exercisable options), representing approximately 15.7% of
our outstanding common stock as of such date. As a result, these stockholders,
acting alone or together, may be able to influence matters requiring approval
by our stockholders.

Our management will have broad discretion to use the proceeds of this offering
and some uses may not yield a favorable return.

   The net proceeds of this offering have not been allocated for specific uses.
Our management will have broad discretion to spend the proceeds from this
offering in ways with which stockholders may not agree. The failure of our
management to use these funds effectively could result in unfavorable returns.
This could have significant adverse effects on our financial condition and
could cause the price of our common stock to decline.

                                      S-16
<PAGE>

                                USE OF PROCEEDS

   We estimate that we will receive approximately $99 million in net proceeds
from this offering, based upon an assumed public offering price of $39.00 per
share (the last reported sale price of our common stock on The Nasdaq Stock
Market's National Market on February 8, 2001), after deducting approximately $6
million in underwriting discounts and commissions and our estimated expenses
for this offering.

   We intend to use the net proceeds from this offering for additional capital
for our insurance subsidiaries and for general corporate purposes. We may also
use the proceeds of this offering to reduce some of our indebtedness, depending
on market conditions. As of December 31, 2000, the weighted average interest
rate for our long-term indebtedness was 7.7% with maturities from March 4, 2003
to January 1, 2022. Until we use the net proceeds of this offering, we intend
to invest the net proceeds in U.S. Treasury and government agency obligations
and high grade corporate debt securities and commercial paper.

   This use of proceeds does not reflect the underwriters' exercise of their
over-allotment option. If the underwriters exercise their over-allotment option
in full, we will receive additional net proceeds of approximately $15 million.

                PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

   Our common stock is traded on The Nasdaq Stock Market's National Market
under the symbol "BKLY." The following table sets forth the high and low sale
prices for the indicated periods, all as reported on The Nasdaq Stock Market's
National Market.

<TABLE>
<CAPTION>
                                                                     Common
                                                                 Dividends Paid
                                                    High   Low    (Per Share)
                                                   ------ ------ --------------
   <S>                                             <C>    <C>    <C>
   2001
   First Quarter (through February 8, 2001)....... $47.31 $34.94      $.13


   2000
   Fourth Quarter................................. $47.63 $30.75      $.13
   Third Quarter.................................. $35.23 $18.38      $.13
   Second Quarter................................. $23.13 $18.13      $.13
   First Quarter.................................. $23.48 $14.00      $.13


   1999
   Fourth Quarter................................. $23.75 $19.81      $.13
   Third Quarter.................................. $27.94 $21.63      $.13
   Second Quarter................................. $29.13 $24.38      $.13
   First Quarter.................................. $36.25 $23.75      $.12
</TABLE>

   The closing price of our common stock on February 8, 2001, as reported on
The Nasdaq Stock Market's National Market was $39.00 per share.

   Our ability to pay dividends is dependent upon, among other things, the
availability of dividends from our insurance company subsidiaries. Our
insurance company subsidiaries are restricted by law as to the amount of
dividends they may pay without the approval of regulatory authorities.

                                      S-17
<PAGE>

                                 CAPITALIZATION

   The following table shows our capitalization at December 31, 2000, and as
adjusted to give effect to the sale of the common stock offered by this
prospectus supplement based upon an assumed public offering price of $39.00 per
share (the last reported sale price of our common stock on The Nasdaq Stock
Market's National Market on February 8, 2001) and assuming underwriting
discounts and commissions and offering expenses of approximately $6 million.
The table further assumes that none of the proceeds of the offering are used to
pay indebtedness.

<TABLE>
<CAPTION>
                                                           Actual    As Adjusted
                                                         ----------  -----------
                                                         (in thousands, except
                                                            per share data)
<S>                                                      <C>         <C>
Long-term debt.........................................  $  370,158  $  370,158
Company-obligated mandatorily redeemable capital
 securities of a subsidiary trust holding solely 8.197%
 junior subordinated debentures of the Company due
 December 15, 2045.....................................     198,169     198,169
Minority interest......................................      31,877      31,877
Stockholders' equity:
  Preferred stock, par value $.10 per share:
    Authorized 5,000,000 shares; no shares issued......         --          --
  Common stock, par value $.20 per share:
    Authorized 80,000,000 shares, issued and
     outstanding, net of treasury shares, 25,656,362
     and 28,356,362 shares.............................       7,281       7,821
Additional paid-in capital.............................     334,061     432,993
Retained earnings......................................     574,345     574,345
Accumulated other comprehensive income.................      19,371      19,371
Treasury stock, at cost, 10,990,448 shares.............    (254,162)   (254,162)
                                                         ----------  ----------
  Total stockholders' equity...........................     680,896     780,368
                                                         ----------  ----------
    Total capitalization...............................  $1,281,100  $1,380,572
                                                         ==========  ==========
Ratios:
 Long-term debt to total capitalization................        28.9%       26.8%
 Long-term debt and company-obligated mandatorily
  redeemable capital securities to total
  capitalization.......................................        44.4%       41.2%
 Book value per share..................................      $26.54      $27.52
</TABLE>


                                      S-18
<PAGE>

                                    BUSINESS

General

   We are a holding company which, through our subsidiaries, operates in five
segments of the property casualty insurance business: specialty lines of
insurance (including excess and surplus lines and commercial transportation);
alternative markets (including the management of alternative insurance market
mechanisms); reinsurance; regional property casualty insurance; and
international. All of our domestic insurance subsidiaries have an A.M. Best
rating of "A (Excellent)", other than Admiral Insurance Company, which has a
rating of "A+ (Superior)". 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: "Best's Ratings reflect
[its] opinion as to the relative financial strength and performance of each
insurer in comparison with others, based on [its] analysis of the information
provided to [it]. These ratings are not a warranty of an insurer's current or
future ability to meet its contractual obligations." A.M. Best reviews its
ratings on a periodic basis, and ratings of our subsidiaries are therefore
subject to change.

   We conduct our specialty insurance, alternative markets and reinsurance
operations nationwide. We conduct our regional insurance operations primarily
in the Midwest, New England, Southern and Mid Atlantic regions of the United
States. We currently conduct our international operations in Argentina and the
Philippines.

   Our net premiums written grew at a compound annual rate of 13.5% from 1995
to 1999. Our net premiums written were divided among our five segments as
follows:

<TABLE>
<CAPTION>

                           Nine Months
                              Ended                   Year Ended December 31,
                          September 30, --------------------------------------------------------
                              2000         1999        1998        1997        1996       1995
                          ------------- ----------  ----------  ----------  ----------  --------
                                                (Amounts in thousands)
<S>                       <C>           <C>         <C>         <C>         <C>         <C>
Net premiums written:
  Specialty insurance
   operations...........   $  207,930   $  260,380  $  254,003  $  219,272  $  214,738  $171,520
  Alternative markets
   operations...........      135,936      122,137     106,195      90,870      76,876    25,998
  Reinsurance
   operations...........      200,605      309,181     269,634     206,652     218,200   196,299
  Regional insurance
   operations...........      484,898      649,849     641,316     618,768     517,515   460,732
  International
   operations...........       82,557       86,172      75,106      42,079      25,182     5,872
                           ----------   ----------  ----------  ----------  ----------  --------
   Total................   $1,111,926   $1,427,719  $1,346,254  $1,177,641  $1,052,511  $860,421
                           ==========   ==========  ==========  ==========  ==========  ========
Percentage of net
 premiums written:
  Specialty insurance
   operations...........         18.7%        18.2%       18.9%       18.6%       20.4%     19.9%
  Alternative markets
   operations...........         12.2          8.6         7.9         7.7         7.3       3.0
  Reinsurance
   operations...........         18.1         21.7        20.0        17.5        20.7      22.8
  Regional insurance
   operations...........         43.6         45.5        47.6        52.6        49.2      53.6
  International
   operations...........          7.4          6.0         5.6         3.6         2.4        .7
                           ----------   ----------  ----------  ----------  ----------  --------
   Total................        100.0%       100.0%      100.0%      100.0%      100.0%    100.0%
                           ==========   ==========  ==========  ==========  ==========  ========
</TABLE>



                                      S-19
<PAGE>

Strategy

   Our strategy is to build value for our shareholders over the long term by
focusing on segments of the property casualty insurance business that we
believe offer opportunities for excellent returns. We operate a group of
autonomous insurance entities that can compete effectively in selected markets
within the property casualty industry. We seek to deploy our capital and to
position our companies to capitalize on our most profitable opportunities by
concentrating on market segments where our flexibility, responsiveness,
expertise and strong relationships provide us with a competitive advantage. The
following are the basic tenets of our strategy:

  . Autonomous Structure. We operate through subsidiaries that have the
    flexibility to respond to local or specific market conditions. This
    structure allows us to be closer to our customers to better understand
    their individual needs and risk characteristics. We believe this
    structure enhances our position within the distribution channels for our
    products. At the same time, our holding company structure allows us to
    capitalize on the benefits of economies of scale through centralized
    capital, investment and reinsurance management, technology strategy and
    additional actuarial, financial and legal staff support.

  . Specialization. Our decentralized structure allows our operating
    companies to target specialized markets and products based on local
    market conditions, underwriting risk and expertise in the business
    covered. We have developed the expertise that allows us to pursue
    specialty business niches which we believe present the opportunity for
    superior underwriting results and higher margins.

  . Disciplined Financial Approach. We manage our businesses with a focus on
    profitability rather than market share and adjust our premium growth
    plans and capital allocations accordingly. We invest our assets in a
    conservative manner and monitor our loss reserves closely.

Strategic Positioning

   We believe that our company has developed a reputation for underwriting
expertise and discipline. Our aggregate underwriting results, as measured by
statutory combined ratio, were superior to those of the property casualty
industry for each of the 13 years preceding, and including, 1998. For the past
several years, there has been intense competition in the industry, as there has
been an excess of capital seeking premium dollars. In 1999, rather than waiting
for the market environment to improve, we began to undertake certain
initiatives that we believe will enable us to deliver improved results. As a
result of poor industry-wide underwriting results and lower reserve margins,
insurers and reinsurers have begun to raise rates. We believe that we have
already positioned our operating segments to capitalize on the emerging market
opportunities as a result of the strategic initiatives described in the
respective business segment sections that follow. We are also taking the
following strategic initiatives at the corporate level:

  . Capital Management. One critical underpinning to our strategy remains
    constant: the discipline of maintaining a solid balance sheet. We expect
    to increase the capital of our operating companies as necessary to take
    advantage of the change in pricing conditions that began in 2000. During
    the nine months ended September 30, 2000, we estimate that we achieved
    average price increases of approximately 10%, with certain specialty
    lines achieving substantially higher increases. We plan to increase our
    retention levels by purchasing less reinsurance in order to take
    advantage of improving market conditions.

  . Recent Organizational Changes. In the fourth quarter of 2000, we
    instituted a series of internal changes designed to focus our reinsurance
    business on segments that provide the highest return and to enhance the
    delivery of expertise to clients and brokers. Under this plan, Signet
    Star Reinsurance Company was renamed Berkley Insurance Company and became
    our lead insurance operating company. We then contributed our regional
    insurance businesses to Berkley Insurance Company, thereby increasing its
    statutory policyholders' surplus from $363 million at September 30, 2000
    to approximately $600 million as of December 31, 2000. We believe this
    enhances our competitive stance and acceptability in the marketplace.
    These changes were also designed to promote the "Berkley" brand

                                      S-20
<PAGE>

   so that our business units can benefit from our group's well-regarded
   reputation and professional expertise.

  . Possible Acquisitions. As part of our present strategy, we continue to
    evaluate possible acquisition transactions on an ongoing basis, and at
    any given time, we may be engaged in discussions with respect to possible
    acquisitions. Although we have not completed a significant acquisition
    since 1995, we consider the acquisition of complementary businesses to be
    a means of obtaining a further competitive advantage in our business,
    should we identify suitable acquisition candidates.

Recent Developments

   The following discussion is an excerpt of our earnings release dated
February 5, 2001 and should be read in conjunction with our unaudited
supplemental financial information included elsewhere in this prospectus
supplement and the other financial information presented and incorporated by
reference herein, including, in particular, our current report on Form 8-K
which contains the complete text of the earnings release.

   Revenues for the fourth quarter of 2000 increased 14.0% to $480 million from
$422 million for the same period in 1999. Revenues for the year increased 6.0%
to $1,781 million from $1,674 million in 1999.

   Operating income for the fourth quarter was $14 million, or $.53 per diluted
share, compared with an operating loss of $38 million, or $1.50 per diluted
share, for the fourth quarter of 1999. Operating income for the year was $32
million, or $1.23 per diluted share, compared with an operating loss of $23
million, or $.91 per diluted share, for 1999. In the 1999 fourth quarter, we
established additional loss reserves for the regional insurance group of
approximately $55 million (before tax). There was no comparable reserve
adjustment in 2000. Operating income (loss) is defined as net income (loss)
before realized investment gains and losses, changes in accounting principles,
extraordinary items and, for purposes of this paragraph, restructuring charges.

   Net income for the fourth quarter was $18 million, or $.68 per diluted
share, compared with a net loss of $41 million, or $1.59 per diluted share, for
the 1999 period. Net income for the year was $36 million, or $1.39 per diluted
share, compared with a net loss of $37 million, or $1.43 per diluted share, for
1999.

Growth Opportunities and Outlook for 2001/1/

   Based on improving market conditions and our analysis of and experience with
prior industry cycles, we expect to achieve overall growth in our net premiums
written and management fees in excess of 10% in 2001. In particular, based on
current market trends, we expect accelerated growth in the specialty segment,
our facultative reinsurance operations and portions of our alternative markets
segment, accompanied by improvements in terms and conditions. In the regional
segment, we expect modest growth as a result of recently achieved and
anticipated price increases. As a result of our strategic repositioning, we
expect to experience significant reductions in net premiums written in our
reinsurance segment and the reinsurance portion of our alternative markets
segment. Growth in our specialty and regional segments would be affected, as
well, by our expected increase in retention levels.

Industry Segments

 Specialty

   Our specialty units underwrite complex and sophisticated third-party
liability risks, principally within the excess and surplus (E&S) lines,
professional liability, surety and commercial transportation markets. Our
- ---------------------
/1/The following paragraph contains forward-looking statements within the
  meaning of the Private Securities Litigation Reform Act. These statements are
  based, among other things, on our analysis of current market trends and are
  subject to various risks and uncertainties. See "Forward-Looking Statements"
  and "Risk Factors."

                                      S-21
<PAGE>

customers range from those having mid-to-large-sized commercial risks with
unique needs to those having products and professional liability exposures.
These customers benefit from our specialty unit's ability to evaluate and
manage special risks and tailor insurance products for them. Our specialty
insurance segment had net premiums written of $207.9 million for the nine
months ended September 30, 2000 and $260.4 million for the year ended
December 31, 1999. Net premiums of our specialty insurance operations grew at a
compound annual rate of 11.0% from 1995 to 1999.

   Our specialty segment is organized into a number of companies to meet the
needs of our customers most effectively. We divide the different companies
within the segment along the different customer bases and product lines which
they serve. The specialty units deliver their products nationwide through a
variety of distribution channels depending on the customer base and particular
risks insured.

   Our specialty subsidiaries write E&S lines on a non-admitted basis
exclusively through wholesale agents and managing general agents. These E&S
lines include general liability insurance, such as products liability and
professional liability, surety and commercial transportation. Professional
liability insurance mostly consists of directors' and officers' coverages and
coverages for various professional services, including errors and omissions
policies (typically known as E&O), professional associations and other similar
coverages. Surety insurance involves the underwriting of contract and
commercial classes of surety bonds, which are posted by construction
contractors against the completion of a project. The companies within our
specialty segment cater to a range of customers with unique needs. During 2000,
in response to the competitive market environment, we substantially reduced our
writings of commercial transportation business and ceased issuing policies for
nursing homes and assisted care facilities. However, in 2001, we expect to
increase our writings of commercial transportation business.

   The customers of the specialty segment are highly diverse. Larger commercial
customers seek specialized E&S policies such as products liability, where we
have developed a reputation for our expertise. We are also active in
underwriting small-to-medium-sized E&S risks. Our other customers include long-
haul trucking providers (who utilize our commercial transportation insurance),
New York City area condominium, cooperative and rental apartment buildings (who
utilize our various package insurance programs), executive officers and
directors of corporations (who utilize our directors' and officers' insurance)
and building contractors (who utilize our surety bond insurance).

   The following table sets forth the percentages of gross premiums written for
each line of business of our specialty segment operations:

<TABLE>
<CAPTION>
                               Nine Months
                                  Ended        Year Ended December 31,
                              September 30, ---------------------------------
                                  2000      1999   1998   1997   1996   1995
                              ------------- -----  -----  -----  -----  -----
<S>                           <C>           <C>    <C>    <C>    <C>    <C>
General Liability............      40.5%     30.5%  28.2%  34.1%  35.3%  37.6%
Automobile Liability.........      11.0      18.3   19.0   17.7   20.9   27.5
Professional Liability.......      14.6      16.5   16.9   14.7   12.1    7.0
Directors and Officers
 Liability...................       6.8       6.6    7.7    8.1   10.0    9.0
Fire and Allied Lines........       9.4       7.7    7.1    7.5    7.1    4.9
Automobile Physical Damage...       4.4       6.4    6.1    4.9    5.3    6.8
Medical Malpractice..........       3.7       6.0    6.1    4.0    3.3    2.3
Inland Marine................       1.6       1.9    1.8    1.5    1.6    2.1
Commercial Multi-Peril.......       3.8       3.3    3.1    3.0    1.0    0.7
Surety.......................       2.7       2.1    2.0    1.9    1.3    0.8
Workers' Compensation........       0.8       0.6    1.9    2.5    1.7    0.7
Other........................       0.7       0.1    0.1    0.1    0.4    0.6
                                  -----     -----  -----  -----  -----  -----
  Total......................     100.0%    100.0% 100.0% 100.0% 100.0% 100.0%
                                  =====     =====  =====  =====  =====  =====
</TABLE>

                                      S-22
<PAGE>

   Strategy and Outlook. Specialty lines of insurance are, by their nature,
customized to provide the client with a risk management solution tailored to
its unique needs, as opposed to standard insurance, which is priced more like a
commodity. These insurance solutions require skilled and creative underwriters,
which we believe we possess. As in all of our business lines, the specialty
segment is most attractive when we can effectively deploy our expertise and
leverage our customer relationships. For example, we place the decision-making
authority for these specialized policies at the operational level, where our
insurance market specialists--whom we believe are the best equipped to evaluate
and underwrite the risks--are located. This contrasts with the practices of
companies that concentrate decision-making authority in the hands of a
centralized underwriting structure.

   Similar to our other business lines, we focus within the specialty segment
on businesses that we believe offer the most profitable or advantageous
opportunities, rather than on market share. This disciplined approach has
resulted in the specialty segment being consistently profitable over time. We
expect the specialty segment to become even more important to our overall
business as we continue to focus increasingly on high-margin, less commodity-
like businesses across the organization. We are beginning to see signs of
substantial rate increases and tightening of terms for certain specialty lines,
which, if these trends continue, we believe will provide us with substantial
growth for the segment. We believe that, due to our underwriting expertise,
loss control capabilities and claim handling skills, we are well-positioned to
take advantage of opportunities in this segment.

 Alternative Markets

   Our alternative markets property casualty subsidiaries specialize in
developing, insuring and administering self-insurance programs and various
alternative risk transfer mechanisms. To best serve our clients, we also offer
alternative markets reinsurance products, which we coordinate with our other
alternative markets products and services. Our clients include employers,
employer groups, reinsurers, alternative markets funds and other insurers
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 alternative markets segment had net premiums written of $135.9
million for the nine months ended September 30, 2000 and $122.1 million for the
year ended December 31, 1999. Management fees for our insurance service
operations were $47.3 million for the nine months ended September 30, 2000 and
$65.8 million for the year ended December 31, 1999. Total revenues for our
alternative markets operations grew at a compound annual rate of 21.0% from
1995 to 1999, which includes our acquisition of Midwest Employers Casualty
Company in 1995.

   Our decentralized structure is particularly important for our alternative
markets subsidiaries because it allows them the freedom to be responsive to
both the needs of our clients and the dynamics of this rapidly changing and
highly complex market. Each of our alternative markets divisions is involved in
risk management and is organized according to one of the following product
areas: marketing excess workers' compensation, or EWC, and related risk
management services, including a full range of consulting services; insuring
primary workers' compensation risks for small employers' associations and
employer groups in North Carolina and California; offering reinsurance products
to alternative markets clients; and providing non-risk bearing administrative
services nationwide.

   EWC insurance provides coverage to a self-insured employer once the
employer's losses exceed the employer's retention amount. Our agents market EWC
insurance primarily to employers and employer groups that have elected and
qualified for or have been approved by state regulatory authorities to self-
insure their workers compensation claims. Our subsidiaries offer a full range
of alternative solutions customized to meet risk financing needs for various
structures, such as alternative markets plans, captive insurance companies,
retention pools, risk retention groups, self-funded plans and specialty
insurance company programs.

   Our subsidiaries also specialize in providing custom designed reinsurance
products and services through brokers to alternative markets clients, such as
captive insurance companies, risk retention groups, public entity insurance
trusts and governmental pools. These clients are generally self-insured
vehicles which provide

                                      S-23
<PAGE>

insurance buyers with a mechanism for assuming part of their own risk, managing
their exposures, modifying their loss costs and, ultimately, participating in
the underwriting results. Our alternative markets operation is expanding its
efforts to service single-parent captives by leveraging its resources and its
relationships with affiliates and establishing strategic alliances with
nonaffiliated captive managers.

   We view our interaction with clients through consulting and other advisory
services as central to our marketing efforts in the alternative markets.
Program management services that our subsidiaries provide include property
casualty and workers' compensation third-party administration, claims
adjustment and management, employee benefit consulting, employee benefit third-
party administration, financial accounting, insurance and reinsurance risk
transfer, loss control and safety consulting, management information systems,
regulatory compliance and relations, risk management consulting, alternative
markets plan management, statistical analysis, underwriting and rating and
policy issuance.

   The following table sets forth the percentages of revenues (including
premiums, investment income and management fees) for our alternative markets
divisions:

<TABLE>
<CAPTION>
                                     Nine Months
                                        Ended       Year Ended December 31,
                                    September 30, ----------------------------
                                        2000      1999  1998  1997  1996  1995
                                    ------------- ----  ----  ----  ----  ----
<S>                                 <C>           <C>   <C>   <C>   <C>   <C>
Excess workers' compensation.......       29%      32%   38%   46%   49%   15%
Primary workers' compensation......       20       18    11    --    --    --
Administrative services............       24       27    29    36    37    63
Reinsurance........................       27       23    22    18    14    22
                                         ---      ---   ---   ---   ---   ---
  Total............................      100%     100%  100%  100%  100%  100%
                                         ===      ===   ===   ===   ===   ===
</TABLE>

   Strategy and Outlook. We believe that there has been a reduction of
underwriting capacity in this market. This market dynamic, coupled with price
increases in conventional markets, presents an opportunity for those providers
still serving alternative markets. As the primary markets charge higher
premiums for the same level of coverage, we expect additional insurance buyers
to explore alternative markets insurance mechanisms. To help our customers
adapt to this new environment, we expect to provide insurance products or
services through alternative markets packages. In addition, since the fee-based
revenues associated with alternative markets services are typically charged as
a percentage of premium dollars, higher premiums (resulting from market price
increases) should result in increased fee revenues. As an insurer in this
market as well as an alternative markets service provider, we believe that we
are well-positioned to participate in this growth.

 Reinsurance

   Our reinsurance operations underwrite both traditional and specialized
risks. Our three operating units are: property casualty treaty, facultative,
and fidelity and surety. Increasingly, we are focusing our reinsurance
operations on less-commoditized, niche markets where we can add the most value
through leveraging our knowledge and experience. Our reinsurance segment had
net premiums written of $200.6 million for the nine months ended September 30,
2000 and $309.2 million for the year ended December 31, 1999. Net premiums of
our reinsurance operations grew at a compound annual rate of 12.0% from 1995 to
1999.

   We principally operate as a broker market reinsurer, and our reinsurance
operations are conducted nationwide primarily through three operating units:

  . Property Casualty Treaty. Our Property Casualty Treaty Division is our
    largest business unit in terms of personnel and premiums written and is
    committed exclusively to the broker market segment of the treaty
    reinsurance industry. It operates in specialty and standard reinsurance
    lines. For this unit, we are de-emphasizing more traditional property
    casualty coverage lines of business, which have experienced intense
    competition brought on, in part, by excess capacity. Instead, we are
    focusing on more profitable businesses such as excess of loss treaties
    and specialty reinsurance coverage, where we expect opportunities for
    better margins.

                                      S-24
<PAGE>

  . Facultative. Our Facultative Division specializes in individual
    certificate and program facultative business. Its experienced
    underwriters seek to offset the underwriting and pricing cycles in the
    underlying insurance business by developing risk management solutions and
    through superior risk selection. We have recently experienced increased
    submissions and firming of pricing in our facultative business.

  . Fidelity and Surety. Our Fidelity and Surety Division operates as a lead
    reinsurer in this niche market of the property casualty industry where
    its specialized knowledge and expertise are essential to meet the needs
    of fidelity and surety primary writers. Business is marketed principally
    through brokers as well as directly to clients not served by
    intermediaries.

   The following table sets forth the percentages of gross premiums written for
each line of business of our reinsurance operations:

<TABLE>
<CAPTION>
                                Nine Months
                                   Ended        Year Ended December 31,
                               September 30, ---------------------------------
                                   2000      1999   1998   1997   1996   1995
                               ------------- -----  -----  -----  -----  -----
<S>                            <C>           <C>    <C>    <C>    <C>    <C>
  Treaty:
    Casualty and other........      51.4%     46.0%  39.7%  38.7%  45.1%  46.6%
    Property and related
     lines....................      11.6      15.1   19.1   16.1   23.3   26.8
    Professional and
     specialty................       8.4      10.1    8.4    5.5    4.7    4.8
                                   -----     -----  -----  -----  -----  -----
      Subtotal................      71.4      71.2   67.2   60.3   73.1   78.2
  Facultative.................      18.7      14.9   14.8   15.4   11.7   14.2
  Fidelity and Surety.........       7.3       7.7    6.8   10.5    9.5    7.6
  Latin American and
   Caribbean..................       2.6       6.2   11.2   13.8    5.7    --
                                   -----     -----  -----  -----  -----  -----
    Total.....................     100.0%    100.0% 100.0% 100.0% 100.0% 100.0%
                                   =====     =====  =====  =====  =====  =====
</TABLE>

   Strategy and Outlook. In 2000, we began to focus on reinsurance lines of
business which are more specialty-focused and where knowledge and expertise in
a specific area is valued over the capital scale of the reinsurance provider.
It is in those situations where we can best utilize our intellectual capital to
drive the underwriting process. In the first quarter of 2000, we also began
redirecting our reinsurance business away from the property sub-segments, which
expose us to weather-related and other natural catastrophes, and decided to
withdraw altogether from certain markets where we do not view ourselves as
having a competitive advantage or where the product base is too commoditized.
In addition, within the treaty sub-segment, we are shifting our focus toward
excess of loss treaties, which we believe present more profitable
opportunities. We anticipate that these changes will allow us to have more
significant participations and greater influence over the terms and conditions
of coverage. However, due to the shift in our focus, we are expecting a
significant reduction in reinsurance premiums. This reduction, as well as the
long-tail and volatile nature of the reinsurance business, may impact our
ability to generate adequate returns.

 Regional

   Our regional subsidiaries principally provide commercial property casualty
insurance products to customers in 37 states. Key clients of this segment are
small-to-mid-sized businesses and governmental entities. Our regional insurance
segment had net premiums written of $484.9 million for the nine months ended
September 30, 2000 and $649.8 million for the year ended December 31, 1999. Net
premiums of our regional insurance operations grew at a compound annual rate of
9.0% from 1995 to 1999.

   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
W. R. Berkley group.

                                      S-25
<PAGE>

   Our regional operation was reorganized in 1999 from ten operating regions to
four. As part of that reorganization, we streamlined our workforce by
approximately 20% and we estimate that the consolidation resulted in annual
after-tax savings of approximately $12 million, which improved our expense
ratio for the nine months ended September 30, 1999. These and related measures,
which included pricing improvements, helped us improve our statutory combined
ratio for the segment from 113% for the nine months ended September 30, 1999 to
110% for the nine months ended September 30, 2000.

   Our regional insurance companies primarily sell our insurance products
through a network of non-exclusive independent agents who are compensated on a
commission basis. We are a leading property casualty regional insurance
business in our target agency market.

   Our regional companies underwrite all major commercial and personal lines,
as detailed below as a percentage of direct premiums written:

<TABLE>
<CAPTION>
                                 Nine Months
                                    Ended        Year Ended December 31,
                                September 30, ---------------------------------
                                    2000      1999   1998   1997   1996   1995
                                ------------- -----  -----  -----  -----  -----
<S>                             <C>           <C>    <C>    <C>    <C>    <C>
Commercial Multi-Peril.........      22.9%     21.9%  20.7%  20.5%  20.8%  21.5%
Workers' Compensation..........      18.0      17.8   18.6   19.3   20.1   20.8
Automobile:
  Personal.....................      13.0      14.3   14.8   15.2   16.4   17.4
  Commercial...................      22.0      21.7   20.8   19.6   17.4   15.6
General Liability..............       7.2       7.0    6.9    6.8    6.5    6.1
Homeowners.....................       6.7       5.8    6.3    7.1    7.9    8.7
Fire and Allied Lines..........       4.0       4.5    4.7    5.0    4.7    4.6
Inland Marine..................       3.5       3.6    3.4    2.0    2.8    2.6
Other..........................       2.7       3.4    3.8    4.5    3.4    2.7
                                    -----     -----  -----  -----  -----  -----
    Total......................     100.0%    100.0% 100.0% 100.0% 100.0% 100.0%
                                    =====     =====  =====  =====  =====  =====
</TABLE>

   Strategy and Outlook. We have been repositioning this segment to better
focus on the more profitable commercial business lines and to de-emphasize our
personal lines. By maintaining underwriting functions at the regional company
level, we believe that we enjoy a significant competitive advantage over those
national insurance companies in the property casualty business with centralized
underwriting functions. Our structure and the strength of this segment also
allow us to compete more effectively with regional carriers. Although the
market remains competitive, we have recently been able to raise our rates and,
depending on market conditions, we anticipate that we will be able to continue
to do so.

 International

   We began our international operations in 1995 and identified foreign markets
that presented opportunities for attractive returns. We focus internationally
on specific value-added products in markets which we find attractive. Our
international operations segment had net premiums written of $82.6 million for
the nine months ended September 30, 2000 and $86.2 million for the year ended
December 31, 1999. Net premiums of our international operations grew at a
compound annual rate of 95.7% from 1995 to 1999.

   Our international operations are conducted through a limited liability
company which is owned 65% by us and 35% by a wholly owned subsidiary of The
Northwestern Mutual Life Insurance Company. Applying the same approach that we
take to our domestic businesses, we believe that decentralized control is key
to the success of our international effort. For example, we hire local
insurance executives who have specialized knowledge of their customers, markets
and products and we link their compensation to meeting performance objectives.

   In Argentina, we offer customers commercial and personal property casualty
insurance in addition to life insurance and workers' compensation lines. In the
Philippines, we provide savings and life products to customers, including
endowment policies to pre-fund education costs and retirement income.

                                      S-26
<PAGE>

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

<TABLE>
<CAPTION>
                                 Nine Months
                                    Ended        Year Ended December 31,
                                September 30, ---------------------------------
                                    2000      1999   1998   1997   1996   1995
                                ------------- -----  -----  -----  -----  -----
<S>                             <C>           <C>    <C>    <C>    <C>    <C>
Argentina:
  Property Casualty............      72.3%     72.3%  85.5%  96.3% 100.0% 100.0%
  Life.........................      14.7      16.5   10.9    3.7    --     --
                                    -----     -----  -----  -----  -----  -----
    Subtotal...................      87.0      88.8   96.4  100.0  100.0  100.0
Philippines....................      13.0      11.2    3.6    --     --     --
                                    -----     -----  -----  -----  -----  -----
    Total......................     100.0%    100.0% 100.0% 100.0% 100.0% 100.0%
                                    =====     =====  =====  =====  =====  =====
</TABLE>

   Strategy and Outlook. In Argentina, we market and sell our products using
local agents. In the Philippines, we have employed a different model using an
innovative direct marketing approach that combines a local sales force with our
marketing and organizational expertise. Our international businesses first
achieved profitability in 1999 and are ranked highly in their respective
countries. We expect to continue to grow these businesses organically through
increased writings in their current markets and to seek opportunities in other
regions as they develop.


                                      S-27
<PAGE>

Underwriting Results

   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. The
table below presents summary underwriting ratios, on a statutory accounting
basis, for our insurance companies and the insurance industry:

<TABLE>
<CAPTION>
                            Nine Months
                               Ended
                           September 30,                      Year Ended December 31,
                         ------------------      -------------------------------------------------
                          2000        1999       1999       1998       1997       1996       1995
                         ------      ------      -----      -----      -----      -----      -----
<S>                      <C>         <C>         <C>        <C>        <C>        <C>        <C>
Specialty Insurance
 Operations:
  Loss ratio............   74.5%       66.9%      66.0%      61.8%      61.9%      68.4%      77.9%
  Expense ratio.........   33.4        32.2       32.9       31.7       33.3       30.9       28.2
  Policyholders'
   dividend ratio.......     .1          .2         .2         .3         .5         .3         .3
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........  108.0%       99.3%      99.1%      93.8%      95.7%      99.6%     106.4%
                         ======      ======      =====      =====      =====      =====      =====
Alternative Markets
 Operations:
  Loss ratio............   71.8%       65.9%      67.4%      63.7%      73.1%      74.8%      72.3%
  Expense ratio.........   35.6        35.3       37.3       36.0       35.8       34.9       31.9
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........  107.4%      101.2%     104.7%      99.7%     108.9%     109.7%     104.2%
                         ======      ======      =====      =====      =====      =====      =====
Reinsurance Operations:
  Loss ratio............   72.8%       75.5%      76.0%      74.3%      69.2%      73.3%      78.1%
  Expense ratio.........   33.3        32.6       33.2       31.5       32.1       30.1       26.4
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........  106.1%      108.1%     109.2%     105.8%     101.3%     103.4%     104.5%
                         ======      ======      =====      =====      =====      =====      =====
Regional Insurance
 Operations:
  Loss ratio............   75.3%       76.4%      84.7%      76.0%      66.6%      66.8%      65.1%
  Expense ratio.........   34.0        35.9       36.1       35.8       34.0       34.1       34.1
  Policyholders'
   dividend ratio.......     .6          .8         .7         .9         .5         .6         .9
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........  109.9%      113.1%     121.5%     112.7%     101.1%     101.5%     100.1%
                         ======      ======      =====      =====      =====      =====      =====
International
 Operations:
  Loss ratio............   60.2%       52.2%      53.3%      59.7%      59.8%      49.7%      50.0%
  Expense ratio.........   38.8        48.2       46.4       48.5       54.6       49.9       58.3
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........   99.0%      100.4%      99.7%     108.2%     114.4%      99.6%     108.3%
                         ======      ======      =====      =====      =====      =====      =====
Combined Insurance
 Operations:
  Loss ratio............   73.5%       72.4%      76.5%      71.2%      66.4%      68.7%      70.7%
  Expense ratio.........   34.2        34.9       35.4       34.9       34.4       33.1       31.3
  Policyholders'
   dividend ratio.......     .3          .4         .3         .5         .4         .4         .5
                         ------      ------      -----      -----      -----      -----      -----
  Combined ratio........  108.0%      107.7%     112.2%     106.6%     101.2%     102.2%     102.5%
                         ======      ======      =====      =====      =====      =====      =====
Combined Insurance
 Operations:
  Premiums to surplus
   ratio (1)............    1.6         1.3        1.6        1.4        1.2        1.2        1.0
                         ======      ======      =====      =====      =====      =====      =====
Industry Ratios:
  Combined ratio........  108.9%(2)   106.2%(2)  107.1%(3)  104.9%(3)  101.5%(3)  106.3%(3)  106.7%(4)
  Premiums to surplus
   ratio................    0.9 (2)     0.9 (2)    0.9 (4)    0.8 (4)    0.9 (4)    1.0 (4)    1.2 (4)
</TABLE>
- ---------------------
(1)Based on our consolidated net premiums written to statutory surplus.
(2)Estimated by A.M. Best.
(3)Source: A.M. Best Aggregates & Averages, for stock companies.
(4)Source: A.M. Best Aggregates & Averages, for total industry.


                                      S-28
<PAGE>

Investments

   Our investment portfolio is managed primarily to support the liabilities of
our insurance operations and generate current investment returns. As of
September 30, 2000, the value of our investment portfolio was approximately
$3,030 million.

 Investment Strategy

   Our overall strategy, which continues to evolve in response to changes in
the financial markets and the opportunities available to us, is aimed at
maximizing investment returns without compromising liquidity and risk control.

   In our investment strategy, we established a level of cash and highly liquid
short-term and intermediate-term securities which, combined with expected cash
flow, we believe is adequate to meet foreseeable payment obligations. As part
of this strategy, we attempt to maintain an appropriate relationship between
the average duration of the investment portfolio and the approximate duration
of our liabilities, i.e., policy claims and debt obligations.

   Our investment policy with respect to fixed maturity securities is generally
to purchase instruments with the expectation of holding them to their maturity.
However, we consider it necessary to actively manage our portfolio to maintain
an approximate matching of assets and liabilities as well as to adjust the
portfolio as changes in financial market conditions alter the assumptions
underlying the purchase of certain securities.

   Our investments are currently comprised of fixed income and equity
securities. In 2000, in response to certain tax planning issues, we shifted a
significant portion of our investment portfolio away from municipal securities
and toward taxable fixed income securities, including U.S. Government,
corporate and mortgage-backed securities.

   The following table summarizes the types of investments we held on the
indicated dates, given as a percent of the total investments we held on such
dates:

<TABLE>
<CAPTION>
                                                             December 31,
                                         September 30, ----------------------------
                                             2000      1999  1998  1997  1996  1995
                                         ------------- ----  ----  ----  ----  ----
<S>                                      <C>           <C>   <C>   <C>   <C>   <C>
Fixed income investments:
  U.S. Government, government agencies
   and authorities......................       15%      11%    9%   14%   16%   17%
  States, municipalities and political
   subdivisions.........................       19       35    38    35    30    32
  Corporate.............................       20       15    14    15    14    16
  Mortgage-backed securities............       19       15    16    17    19    19
                                              ---      ---   ---   ---   ---   ---
    Subtotal fixed income...............       73       76    77    81    79    84
Equity securities available for sale....        3        3     2     3     3     4
Trading account (1).....................       15       11    10     8     4     4
Invested cash...........................        9       10    11     8    14     8
                                              ---      ---   ---   ---   ---   ---
    Total...............................      100%     100%  100%  100%  100%  100%
                                              ===      ===   ===   ===   ===   ===
</TABLE>
- ---------------------
(1) Includes trading account receivable from brokers and clearing organizations
    and trading securities sold but not yet purchased.

   We view the investment portfolio in two broad categories: assets that are
matched to liabilities, and other assets representing stockholders' equity.

   We invest our reserve-related assets in high-quality fixed income securities
to ensure our ability to meet our responsibilities to policyholders. We manage
the duration of these assets taking into account our mix of

                                      S-29
<PAGE>

insurance business and the resulting anticipated claims payout patterns.
Another critical goal is to maintain adequate liquidity, so that we can satisfy
insurance claims and other obligations without having to sell investments at an
inappropriate time, while controlling portfolio risk and maximizing returns.

   Assets related to stockholder funds may be invested with a somewhat
different approach that still emphasizes liquidity and risk limitations but
also provides diversification and more favorable return characteristics. A
primary goal for these investments is to achieve strong returns with modest
volatility. Since stockholders' equity is a key factor in the amount of premium
we can write, its preservation is vital to our ability to take advantage of
opportunities on the insurance side. We invest a significant portion of our
equity-related assets in merger arbitrage accounts that have produced solid
returns for us over the past decade and have demonstrated low correlation to
both the equity and fixed income markets. Merger arbitrage is the business of
investing in the securities of publicly held companies that are the targets in
announced tender offers and mergers. A portion of our assets related to
stockholder funds is invested in publicly traded real estate investment trusts
through a third-party managed account and the balance is invested in fixed
income securities.

 Fixed Income Investments

   The duration of the fixed income portfolio was approximately five years as
of September 30, 2000, essentially matching the duration of our liabilities,
which include policy claims and debt obligations.

 Trading Account

   The trading account represents our investment in merger arbitrage
securities. Our investment in merger arbitrage provided a 10.5% return for the
nine months ended September 30, 2000. This account, which is managed with a
goal of capital preservation, represented approximately 15% of our total
investment portfolio as of September 30, 2000.

 Investment Results

   Investment results before income tax effects were as follows:

<TABLE>
<CAPTION>
                          Nine Months
                             Ended                    Year Ended December 31,
                         September 30, ----------------------------------------------------------
                             2000         1999        1998        1997        1996        1995
                         ------------- ----------  ----------  ----------  ----------  ----------
                                                       (Amounts in thousands)
<S>                      <C>           <C>         <C>         <C>         <C>         <C>
Average investments, at
 cost...................  $3,024,819   $3,045,391  $2,996,707  $2,873,730  $2,538,806  $2,081,547
                          ==========   ==========  ==========  ==========  ==========  ==========
Investment income,
 before expenses........  $  159,996   $  198,556  $  206,065  $  205,812  $  171,047  $  143,527
                          ==========   ==========  ==========  ==========  ==========  ==========
Percent earned on
 average investments....         7.1%         6.5%        6.9%        7.2%        6.7%        6.9%
                          ==========   ==========  ==========  ==========  ==========  ==========
Realized gains
 (losses)...............  $    1,885   $   (6,064) $   25,400  $   13,186  $    7,437  $   10,357
                          ==========   ==========  ==========  ==========  ==========  ==========
Change in unrealized
 investment gains
 (losses) (1)...........  $   44,986   $ (173,084) $   22,147  $   66,306  $  (22,409) $  142,475
                          ==========   ==========  ==========  ==========  ==========  ==========
</TABLE>
- ---------------------
(1) The change in unrealized investment gains (losses) represents the
    difference between fair value and cost of investments at the beginning and
    end of the period including investments carried at cost.

                                      S-30
<PAGE>

   The following table summarizes our fixed maturity portfolio, excluding
short-term investments, by rating as of September 30, 2000.

                       Fixed Maturity Portfolio by Rating
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                            September 30, 2000
                                                           ---------------------
                                                                      Percent of
                                                            Carrying   Carrying
                                                             Value      Value
                                                           ---------- ----------
   <S>                                                     <C>        <C>
   U.S. Government and government agencies................ $  766,544    34.5%
   Aaa/AAA (1)............................................    656,222    29.5
   AA.....................................................    325,319    14.6
   A......................................................    233,616    10.5
   Below A................................................    242,276    10.9
                                                           ----------   -----
     Total................................................ $2,223,977   100.0%
                                                           ==========   =====
</TABLE>
- ---------------------
(1) Ratings as assigned by Moody's and S&P, respectively. Such ratings are
    generally assigned upon the issuance of the securities, subject to revision
    on the basis of ongoing evaluations. Bonds rated Aaa by Moody's or AAA by
    S&P are judged to be of the best quality and are considered to carry the
    smallest degree of investment risk.

   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 have the right to call or prepay obligations.

<TABLE>
<CAPTION>
                                                     December 31,
                               September 30, ---------------------------------
                                   2000      1999   1998   1997   1996   1995
                               ------------- -----  -----  -----  -----  -----
<S>                            <C>           <C>    <C>    <C>    <C>    <C>
1 year or less...............        3.5%      3.0%   1.7%   4.4%   3.1%   4.2%
Over 1 year through 5 years..       21.7      16.4   16.0   26.4   20.7   17.9
Over 5 years through 10
 years.......................       21.9      26.0   24.4   19.1   25.0   29.4
Over 10 years................       27.1      34.6   37.2   29.2   27.1   26.2
Mortgage-backed securities...       25.8      20.0   20.7   20.9   24.1   22.3
                                   -----     -----  -----  -----  -----  -----
  Total......................      100.0%    100.0% 100.0% 100.0% 100.0% 100.0%
                                   =====     =====  =====  =====  =====  =====
</TABLE>

Loss and Loss Adjustment Expense Reserves

   In the property casualty industry, it is not unusual for significant periods
of time to elapse between the occurrence of an insured loss, the report of the
loss to the insurer and the insurer's payment of that loss. To recognize
liabilities for unpaid losses, 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. Our loss
reserves reflect current estimates of the ultimate cost of closing outstanding
claims; other than our excess workers' compensation business, and the workers'
compensation portion of our reinsurance business, as discussed below, we do not
discount our reserves to estimated present value for financial reporting
purposes.

   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 which provide for losses incurred but not yet reported to
the insurer, potential inadequacy of case reserves, the estimated expenses of
settling claims, including legal and other fees and general expenses of
administering the claims adjustment process, and a provision for potentially
uncollectible reinsurance. Each insurance subsidiary's net retention for each
line of insurance is taken into consideration in computation of ultimate
losses.

                                      S-31
<PAGE>

   In examining reserve adequacy, several factors are considered, including
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 events. Reserve amounts are necessarily based on
management's informed estimates and judgments using data currently available.
As additional experience and other data become available and are reviewed,
these estimates and judgments are revised. This may result in increases or
decreases to reserves for insured events of prior years. The reserving process
implicitly recognizes the impact of inflation and other factors affecting loss
costs by taking into account changes in historical claim patterns and perceived
trends. There is no precise method to evaluate the impact of any specific
factor on the adequacy of reserves, because the ultimate cost of closing claims
is influenced by numerous factors.

   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 fluctuation. In particular, high levels of jury verdicts against
insurers, as well as judicial decisions which "re-formulate" policies to expand
coverage to include previously unforeseen theories of liability, e.g., those
regarding pollution and other environmental exposures, have produced
unanticipated claims and increased the difficulty of estimating the loss and
loss adjustment expense reserves we provide.

   To date, known pollution and environmental claims at our insurance company
subsidiaries have not had a material impact on our operations. Environmental
claims have not materially impacted us because these subsidiaries generally did
not insure the larger industrial companies which are subject to significant
environmental exposures. As a result, accounting for environmental losses
represents a small portion of our reserves. As of the last date we reported
these reserves, our net reserves for losses and loss adjustment expenses
relating to pollution and environmental claims were $30,944 and $33,391 at
December 31, 1999 and 1998, 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 ending reserve balances, on a net and gross of
reinsurance basis (dollars in thousands) (1)(2):

<TABLE>
<CAPTION>
                           Nine Months
                              Ended                    Year Ended December 31,
                          September 30, ------------------------------------------------------
                              2000         1999       1998       1997       1996       1995
                          ------------- ---------- ---------- ---------- ---------- ----------
<S>                       <C>           <C>        <C>        <C>        <C>        <C>
Net reserves at end of
 period.................   $1,810,761   $1,723,865 $1,583,304 $1,433,011 $1,333,122 $1,209,250
Ceded reserves at end of
 period.................      651,353      617,025    537,219    476,677    449,581    450,770
                           ----------   ---------- ---------- ---------- ---------- ----------
Gross reserves at end of
 period.................   $2,462,114   $2,340,890 $2,120,523 $1,909,688 $1,782,703 $1,660,020
                           ==========   ========== ========== ========== ========== ==========
</TABLE>
- ---------------------
(1) Our balance sheet includes $35,228, $20,348 and $6,043 as of September 30,
    2000 and December 31, 1999 and 1998, respectively, relating to reserves for
    life insurance which are not included in the table above, and our statement
    of operations includes $16,364, $14,913 and $3,693 for the nine months
    ended September 30, 2000 and year ended December 31, 1999 and 1998,
    respectively, relating to policyholder benefits incurred on life insurance
    which are not included in the above table.
(2) The aggregate net discount after reflecting the effects of ceded
    reinsurance is $213,739 at September 30, 2000 and $186,981, $186,964,
    $189,600 and $172,415 at December 31, 1999, 1998, 1997 and 1996,
    respectively.

                                      S-32
<PAGE>

Reinsurance

   We follow the customary industry practice of reinsuring a portion of our
exposures, 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 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 $250 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 $150 million in policyholder surplus.

                                      S-33
<PAGE>

                                  UNDERWRITING

   Under the terms and subject to the conditions contained in an underwriting
agreement dated February   , 2001, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated are
acting as representatives, the following respective numbers of shares of common
stock.

<TABLE>
<CAPTION>
                                                                        Number
        Underwriter                                                    of Shares
        -----------                                                    ---------
   <S>                                                                 <C>
   Credit Suisse First Boston Corporation.............................
   Merrill Lynch, Pierce, Fenner & Smith
            Incorporated..............................................
   Morgan Stanley & Co. Incorporated..................................








        Total......................................................... 2,700,000
                                                                       =========
</TABLE>

   The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering may be terminated.

   We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 405,000 additional shares at the public offering price less
the underwriting discounts and commissions. The option may be exercised only to
cover any over-allotments of common stock.

   The underwriters propose to offer shares of the common stock initially at
the public offering price on the cover page of this prospectus supplement and
to selling group members at that price less a selling concession of $    per
share. The underwriters and selling group members may allow a discount of $
per share on sales to other broker/dealers. After the initial public offering
the representatives may change the offering price and concession and discount
to broker/dealers.

   The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
                                    Per Share                       Total
                          ----------------------------- -----------------------------
                             Without          With         Without          With
                          Over-allotment Over-allotment Over-allotment Over-allotment
                          -------------- -------------- -------------- --------------
<S>                       <C>            <C>            <C>            <C>
Underwriting Discounts
 and
 Commissions paid
 by us..................       $             $              $              $
Expenses payable by us..       $             $              $              $
</TABLE>

   We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the SEC a
registration statement under the Securities Act of 1933 relating to, any shares
of our common stock or any securities convertible into, or exchangeable or
exercisable for, any shares of our common stock, or publicly disclose the
intention to make any such offer, sale, pledge, disposition or filing, without
the prior written consent of Credit Suisse First Boston Corporation, for a
period of 90 days after the date of this prospectus supplement, except
issuances of shares of common stock or grants of options to purchase shares of
common stock under any employee stock option plan, directors' stock option
plan, deferred

                                      S-34
<PAGE>

compensation plan, employee stock purchase plan or dividend reinvestment plan
in effect on the date of this prospectus supplement.

   William R. Berkley (and members of his immediate family) as well as our
other directors have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our
common stock, whether any of these transactions are to be settled by delivery
of common stock or other securities, in cash or otherwise, or publicly disclose
the intention to make any offer, sale, pledge or disposition, or to enter into
any transaction, swap, hedge or other arrangement, without, in each case, the
prior written consent of Credit Suisse First Boston Corporation, for a period
of 90 days after the date of this prospectus supplement.

   Some of the underwriters have engaged in transactions with and performed
various investment banking and other services for us in the past and may do so
from time to time in the future.

   We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments that the underwriters may be required
to make in that respect.

   In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions,
penalty bids, and passive market making in accordance with Regulation M under
the Securities Exchange Act of 1934.

  . Stabilizing transactions permit bids to purchase the underlying security
    so long as the stabilizing bids do not exceed a specified maximum.

  . Over-allotment involves sales by the underwriters of shares in excess of
    the number of shares the underwriters are obligated to purchase, which
    creates a syndicate short position. The short position may be either a
    covered short position or a naked short position. In a covered short
    position, the number of shares over-allotted by the underwriters is not
    greater than the number of shares that they may purchase in the over-
    allotment option. In a naked short position, the number of shares
    involved is greater than the number of shares in the over-allotment
    option. The underwriters may close out any short position by either
    exercising their over-allotment option and/or purchasing shares in the
    open market.

  . Syndicate covering transactions involve purchases of the common stock in
    the open market after the distribution has been completed in order to
    cover syndicate short positions. In determining the source of shares to
    close out the short position, the underwriters will consider, among other
    things, the price of shares available for purchase in the open market as
    compared to the price at which they may purchase shares through the over-
    allotment option. If the underwriters sell more shares than could be
    covered by the over-allotment option--a naked short position--the
    position can only be closed out by buying shares in the open market. A
    naked short position is more likely to be created if the underwriters are
    covered that there could be downward pressure on the price of the shares
    in the open market after pricing that could adversely affect investors
    who purchase in the offering.

  . Penalty bids permit the representatives to reclaim a selling concession
    from a syndicate member when the common stock originally sold by the
    syndicate member is purchased in a stabilizing or syndicate covering
    transaction to cover syndicate short positions.

  . In passive market making, market makers in the common stock who are
    underwriters or prospective underwriters may, subject to limitations,
    make bids for or purchases of our common stock until the time, if any, at
    which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of the
common stock. As a result the price of our common stock may be higher than the
price that might

                                      S-35
<PAGE>

otherwise exist in the open market. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.

   A prospectus supplement in electronic format may be made available on the
web sites maintained by one or more of the underwriters participating in this
offering. The representatives may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders. Internet
distributions will be allocated by the underwriters that will make internet
distributions on the same basis as other allocations. Credit Suisse First
Boston Corporation may effect an on-line distribution through its affiliate,
CSFBdirect Inc., an on-line broker/dealer, as a selling group member.

                                      S-36
<PAGE>

                         NOTICES TO CANADIAN RESIDENTS

Resale Restrictions

   The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are made. Any resale of the common stock in Canada must
be made under applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made under available
statutory exemptions or under a discretionary exemption granted by the
applicable Canadian securities regulatory authority. Purchasers are advised to
seek legal advice prior to any resale of the common stock.

Representations of Purchasers

   By purchasing common stock in Canada and accepting a purchase confirmation a
purchaser is representing to us and the dealer from whom the purchase
confirmation is received that:

  . the purchaser is entitled under applicable provincial securities laws to
    purchase the common stock without the benefit of a prospectus qualified
    under those securities laws;

  . where required by law, that the purchaser is purchasing as principal and
    not as agent; and

  . the purchaser has reviewed the text above under Resale Restrictions.

Rights of Action (Ontario Purchasers)

   The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

Enforcement of Legal Rights

   All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.

Notice to British Columbia Residents

   A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by the purchaser in this offering. The report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
or common stock acquired on the same date and under the same prospectus
exemption.

Taxation and Eligibility for Investment

   Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.


                                      S-37
<PAGE>

                                 LEGAL MATTERS

   Willkie Farr & Gallagher, New York, New York, will provide us with an
opinion as to legal matters in connection with the common stock offered by this
prospectus. LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York, will pass
upon certain legal matters for the underwriters. As of January 5, 2001,
attorneys of Willkie Farr & Gallagher beneficially own an aggregate of 45,158
shares of our common stock, of which 30,746 are beneficially owned by Robert B.
Hodes and 14,412 are beneficially owned by Jack H. Nusbaum (which amount
includes 3,000 shares held in trusts as to which Mr. Nusbaum is co-trustee).
Mr. Hodes and Mr. Nusbaum are also members of our board of directors.

                                    EXPERTS

   The consolidated financial statements of W. R. Berkley Corporation and
subsidiaries as of December 31, 1999 and 1998 and for each of the years in the
three-year period ended December 31, 1999, have been included in this
prospectus supplement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere in this prospectus supplement
and upon the authority of said firm as experts in accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

   We are subject to the informational requirements of the Exchange Act.
Accordingly, we file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can read and copy any document that we
file with the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549. Copies of such material can also be obtained
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

   Our filings with the SEC are also available from the SEC's web site at
http://www.sec.gov. Please call the SEC's toll-free telephone number at 1-800-
SEC-0330 if you need further information about the operation of the SEC's
public reference rooms. Information about us is also available on our web site
at http://www.wrberkley.com. Such information on our web site is not a part of
this prospectus supplement.

                                      S-38
<PAGE>

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
to those documents. The information incorporated by reference is an important
part of this prospectus supplement. Any statement contained in a document which
is incorporated by reference in this prospectus supplement is automatically
updated and superseded if information contained in this prospectus supplement,
or information that we later file with the SEC, modifies or replaces this
information. All documents we subsequently file pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of this
offering shall be deemed to be incorporated by reference into this prospectus
supplement. We incorporate by reference the following documents:

     1. Our Annual Report on Form 10-K for the year ended December 31, 1999;

     2. Our Quarterly Reports on Form 10-Q for the quarters ended September
  30, 2000, June 30, 2000 and March 31, 2000;

     3. Our Current Reports on Form 8-K, dated January 24, 2000, February 11,
  2000, February 24, 2000, April 26, 2000, August 1, 2000, September 26,
  2000, October 30, 2000, December 8, 2000 and February 5, 2001;

     4. The portions of our Proxy Statement dated March 29, 2000 for our 2000
  Annual Meeting of Stockholders that have been incorporated by reference
  into our Annual Report on Form 10-K; and

     5. The descriptions of our common stock and rights to purchase Series A
  Junior Participating Preferred Stock set forth in our registration
  statements on Form 8-A dated July 25, 1974 and May 11, 1999, including any
  amendments or reports for the purposes of updating such descriptions.

   To receive a free copy of any of the documents incorporated by reference in
this prospectus supplement (other than any exhibits, unless the exhibits are
specifically incorporated by reference into this prospectus supplement) call or
write us at the following address: W. R. Berkley Corporation, Attn: Ira S.
Lederman, Assistant Secretary, 165 Mason Street, P.O. Box 2518, Greenwich,
Connecticut 06836-2518, (203) 629-3000.

                                      S-39
<PAGE>




                      [THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                           W. R. BERKLEY CORPORATION

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Supplemental Financial Information:
Consolidated Statements of Operations for the Three Months Ended December
 31, 2000 and 1999 and for the Years Ended December 31, 2000 and 1999....   F-2

Supplemental Financial Information for the Three Months Ended December
 31, 2000 and 1999 and for the Years Ended December 31, 2000 and 1999....   F-3

Unaudited Interim Financial Statements:
Consolidated Statements of Operations for the Nine Months Ended September
 30, 2000 and 1999.......................................................   F-5

Consolidated Balance Sheets as of September 30, 2000 and December 31,
 1999....................................................................   F-6

Consolidated Statements of Cash Flows for the Nine Months Ended September
 30, 2000 and 1999.......................................................   F-7

Notes to Consolidated Financial Statements...............................   F-8

Audited Financial Statements:
Independent Auditors' Report.............................................  F-11

Consolidated Statements of Operations for the Years Ended December 31,
 1999, 1998 and 1997.....................................................  F-12

Consolidated Balance Sheets as of December 31, 1999 and 1998.............  F-13

Consolidated Statements of Stockholders' Equity for the Years Ended
 December 31, 1999, 1998 and 1997........................................  F-14

Consolidated Statements of Comprehensive Income for 1999, 1998 and 1997..  F-15

Consolidated Statements of Cash Flows for the Years Ended December 31,
 1999, 1998 and 1997.....................................................  F-16

Notes to Consolidated Financial Statements...............................  F-17
</TABLE>

                                      F-1
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Amounts in thousands except per share data)

<TABLE>
<CAPTION>
                                     For the Three
                                     Months Ended          For Year Ended
                                     December 31,           December 31,
                                   ------------------  -----------------------
                                     2000      1999       2000         1999
                                   --------  --------  -----------  ----------
                                      (unaudited)      (unaudited)
<S>                                <C>       <C>       <C>          <C>
Revenues:
 Net Premiums written............  $394,318  $342,067  $1,506,244   $1,427,719
 Change in unearned premiums.....     5,013    20,425     (15,230)     (13,335)
                                   --------  --------  ----------   ----------
  Premiums earned................   399,331   362,492   1,491,014    1,414,384
 Net investment income...........    57,423    45,051     210,448      190,316
 Management fees and
  commissions....................    16,514    16,997      68,049       72,344
 Realized gains (losses) on
  investments....................     6,479    (3,660)      8,364       (6,064)
 Other income....................       326     1,002       3,412        2,688
                                   --------  --------  ----------   ----------
  Total revenues.................   480,073   421,882   1,781,287    1,673,668
Operating costs and expenses:
 Losses and loss expenses........   290,815   320,910   1,094,411    1,085,826
 Other operating costs and
  expenses.......................   152,173   156,634     596,579      604,784
 Interest expense................    11,642    12,733      47,596       50,801
 Restructuring charge............       --        --        1,850       11,505
                                   --------  --------  ----------   ----------
  Income (loss) before income
   taxes and minority interest...    25,443   (68,395)     40,851      (79,248)
Federal income tax (expense)
 benefit.........................    (6,536)   27,998      (2,451)      45,766
                                   --------  --------  ----------   ----------
  Income (loss) before minority
   interest......................    18,907   (40,397)     38,400      (33,482)
  Minority interest..............      (743)     (391)     (2,162)        (566)
                                   --------  --------  ----------   ----------
 Net income (loss) before
  preferred dividends............    18,164   (40,788)     36,238      (34,048)
Preferred dividends..............       --        --          --          (497)
                                   --------  --------  ----------   ----------
 Net income (loss) attributable
  to common
  stockholders before change in
  accounting and extraordinary
  loss...........................    18,164   (40,788)     36,238      (34,545)
Cumulative effect of change in
 accounting principle
 (net of taxes)..................       --        --          --        (3,250)
Extraordinary gain on early
 extinguishment of long-term debt
 (net of taxes) .................       --        --          --           735
                                   --------  --------  ----------   ----------
 Net income (loss) attributable
  to common
  stockholders...................  $ 18,164  $(40,788) $   36,238   $  (37,060)
                                   ========  ========  ==========   ==========
Earnings (loss) per share;
  Basic..........................  $   0.71  $  (1.59) $     1.41   $    (1.44)
                                   ========  ========  ==========   ==========
  Diluted........................  $   0.68  $  (1.59) $     1.39   $    (1.43)
                                   ========  ========  ==========   ==========
Average shares outstanding:
  Basic..........................    25,536    25,616      25,632       25,823
                                   ========  ========  ==========   ==========
  Diluted........................    26,539    25,689      25,991       25,927
                                   ========  ========  ==========   ==========
</TABLE>

                                      F-2
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                       SUPPLEMENTAL FINANCIAL INFORMATION
                             (Amounts in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>


                                   For the Three Months  For the Year Ended
                                    Ended December 31,      December 31,
                                   -------------------- ----------------------
                                      2000      1999       2000        1999
                                    --------  --------  ----------  ----------
<S>                                 <C>       <C>       <C>         <C>
Regional Insurance:
  Net premiums written............. $155,945  $157,500  $  640,843  $  649,849
  Total revenues...................  183,212   182,149     718,489     702,129
  Pre-tax operating income (loss)
   (1).............................    1,949   (62,879)     (2,031)    (89,431)
  Loss ratio.......................     74.5%    108.2%       75.1%       84.7%
  Expense ratio....................     32.0%     36.6%       33.5%       36.1%
  Policyholders' dividend ratio....      1.2%       .4%         .8%         .7%
  Combined ratio (2)...............    107.7%    145.2%      109.4%      121.5%
Reinsurance:
  Net premiums written............. $ 76,035  $ 77,224  $  276,640  $  309,181
  Total revenues...................   96,767    84,720     349,164     341,940
  Pre-tax operating income (1).....    9,489     1,530      28,987      17,116
  Loss ratio.......................     74.1%     77.5%       73.2%       76.0%
  Expense ratio....................     30.3%     34.8%       32.5%       33.2%
  Combined ratio (2)...............    104.4%    112.3%      105.7%      109.2%
Specialty Insurance:
  Net premiums written............. $ 77,595  $ 60,474  $  285,525  $  260,380
  Total revenues...................   86,788    74,761     324,859     309,068
  Pre-tax operating income (1).....   13,302     6,046      30,993      42,677
  Loss ratio.......................     69.2%     63.1%       73.1%       66.0%
  Expense ratio....................     28.1%     35.5%       32.0%       32.9%
  Policyholders' dividend ratio....       .1%       .1%         .1%         .2%
  Combined ratio (2)...............     97.4%     98.7%      105.2%       99.1%
Alternative Markets:
  Net premiums written............. $ 48,319  $ 21,061  $  184,255  $  122,137
  Total revenues...................   78,597    53,966     269,025     222,276
  Pre-tax operating income (1).....    7,986     5,940      31,221      30,133
  Loss ratio.......................     69.8%     72.1%       71.2%       67.4%
  Expense ratio....................     37.8%     46.6%       36.2%       37.3%
  Combined ratio (2)...............    107.6%    118.7%      107.4%      104.7%
International (3):
  Net premiums written............. $ 36,424  $ 25,808  $  118,981  $   86,172
  Total revenues...................   33,915    25,322     118,234      93,878
  Pre-tax operating income (1).....    3,083     1,947       6,591       4,200
  Loss ratio.......................     61.1%     52.6%       60.5%       53.3%
  Expense ratio....................     32.1%     42.3%       36.6%       46.4%
  Combined ratio (2)...............     93.2%     94.9%       97.1%       99.7%
Combined:
  Net premiums written............. $394,318  $342,067  $1,506,244  $1,427,719
  Total revenues...................  479,279   420,918   1,779,771   1,669,291
  Pre-tax operating income (loss)
   (1).............................   35,809   (47,416)     95,761       4,695
  Loss ratio.......................     72.1%     88.2%       73.1%       76.5%
  Expense ratio....................     31.6%     36.9%       33.5%       35.4%
  Policyholders' dividend ratio....       .5%       .2%         .4%         .3%
  Combined ratio (2)...............    104.2%    125.3%      107.0%      112.2%
</TABLE>
- ---------------------
(1)  Pre-tax operating income (loss) represents earnings before the effects of
     realized investment gains and losses, restructuring charges, extraordinary
     items and changes in accounting principles.
(2)  Ratios are based on statutory accounting practices.
(3)  International includes life insurance premiums of $33.2 million and $24.5
     million for the years ended December 31, 2000 and 1999, respectively. Life
     insurance results are not included in the statutory ratios.

                                      F-3
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                SUPPLEMENTAL FINANCIAL INFORMATION--(Continued)
                  (Amounts in thousands except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                            For the Three
                                            Months Ended      For Year Ended
                                            December 31,       December 31,
                                          -----------------  -----------------
                                            2000     1999     2000      1999
                                          -------- --------  -------  --------
<S>                                       <C>      <C>       <C>      <C>
After-tax earnings amounts:
 Operating income (loss) (1)............. $ 13,953 $(38,409) $32,005  $(23,309)
 Restructuring charge (net of minority
  interest)..............................      --       --    (1,203)   (7,294)
                                          -------- --------  -------  --------
 Operating income (loss) after
  restructuring charge...................   13,953  (38,409)  30,802   (30,603)
 Extraordinary gain......................      --       --       --        735
 Cumulative effect of change in
  accounting principle ..................      --       --       --     (3,250)
 Realized investment gains (losses)......    4,211   (2,379)   5,436   (3,942)
                                          -------- --------  -------  --------
  Net income (loss)...................... $ 18,164 $(40,788) $36,238  $(37,060)
                                          ======== ========  =======  ========
After-tax diluted earnings per share:
 Operating income (loss) (1)............. $   0.53 $  (1.50) $  1.23  $   (.91)
 Restructuring charge (net of minority
  interest)..............................      --       --     (0.05)     (.28)
                                          -------- --------  -------  --------
 Operating income (loss) after
  restructuring charge...................     0.53    (1.50)    1.18     (1.19)
 Extraordinary gain......................      --       --       --        .03
 Cumulative effect of change in
  accounting principle...................      --       --       --       (.12)
 Realized investment gains (losses)......     0.15     (.09)    0.21      (.15)
                                          -------- --------  -------  --------
  Net income (loss)...................... $   0.68 $  (1.59) $  1.39  $  (1.43)
                                          ======== ========  =======  ========
 Cash flow (used in) from operations
  before increases in trading account
  securities............................. $(3,095) $ 27,571  $76,334  $ 82,047
                                          ======== ========  =======  ========
</TABLE>

<TABLE>
<CAPTION>
                                                       December 31, December 31,
                                                           2000         1999
                                                       ------------ ------------
<S>                                                    <C>          <C>
Balance sheet information:
 Total investments (2)................................  $3,111,602   $2,975,929
 Total assets.........................................   5,022,070    4,784,791
 Reserves for losses and loss expenses................   2,533,917    2,361,238
 Long-term debt.......................................     370,158      394,792
 Capital Trust Securities.............................     198,169      198,126
 Common stockholders' equity..........................     680,896      591,778
 Common shares outstanding............................      25,656       25,617
 Common stockholders' equity per share (3)............       26.54        23.10
</TABLE>

(1) Operating income includes after-tax catastrophe losses of $3.6 million, or
    $.13 per diluted share, for the fourth quarter of 2000 compared with $3.5
    million, or $.14 per diluted share, for the fourth quarter of 1999 and
    $31.9 million, or $1.23 per diluted share, for 2000 compared with $39.1
    million, or $1.50 per diluted share, for 1999.
(2) Investments include trading account receivable from broker and clearing
    organizations and trading securities sold but not yet purchased.
(3) The calculation of common stockholders' equity per share includes after-tax
    unrealized investment gains of $19.4 million as of December 31, 2000 and
    unrealized investment losses of $44.5 million as of December 31, 1999.

                                      F-4
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Amounts in thousands except per share data)

<TABLE>
<CAPTION>
                                                         For the Nine Months
                                                         Ended September 30,
                                                        ----------------------
                                                           2000        1999
                                                        ----------  ----------
                                                             (unaudited)
<S>                                                     <C>         <C>
Revenues:
 Net premiums written.................................. $1,111,926  $1,085,652
 Change in net unearned premiums.......................    (20,243)    (33,760)
                                                        ----------  ----------
  Premiums earned......................................  1,091,683   1,051,892
 Net investment income.................................    153,025     145,265
 Management fees and commission income.................     51,535      55,347
 Realized gains (losses) on investments................      1,885      (2,404)
 Other income..........................................      3,086       1,686
                                                        ----------  ----------
  Total revenues.......................................  1,301,214   1,251,786
Operating costs and expenses:
 Losses and loss expenses..............................    803,596     764,916
 Other operating costs and expenses....................    444,406     448,150
 Interest expense......................................     35,954      38,068
 Restructuring charge..................................      1,850      11,505
                                                        ----------  ----------
  Income (loss) before income taxes....................     15,408     (10,853)
Federal income tax benefit.............................      4,085      17,768
                                                        ----------  ----------
  Net Income (loss) before minority interest and
   preferred dividends ................................     19,493       6,915
Minority interest......................................     (1,419)       (175)
Preferred dividends....................................        --         (497)
                                                        ----------  ----------
  Net income (loss) before change in accounting
   principle and extraordinary gain....................     18,074       6,243
  Cumulative effect of change in accounting principle
   (net of taxes of $1,750)............................        --       (3,250)
  Extraordinary gain on early extinguishment of long-
   term debt (net of taxes of $396)....................        --          735
                                                        ----------  ----------
  Net income (loss) attributable to common
   stockholders........................................ $   18,074  $    3,728
                                                        ==========  ==========
Earning per share:
 Basic:
  Net income (loss) before change in accounting
   principle and extraordinary gain.................... $      .71  $      .23
  Cumulative effect of change in accounting principle..        --         (.12)
  Extraordinary gain on early extinguishment of long-
   term debt...........................................        --          .03
                                                        ----------  ----------
  Net income (loss) attributable to common
   stockholders........................................ $      .71  $      .14
                                                        ==========  ==========
 Diluted:
  Net income (loss) before change in accounting
   principle and extraordinary gain.................... $      .70  $      .23
  Cumulative effect of change in accounting principle..        --         (.12)
  Extraordinary gain on early extinguishment of long-
   term debt...........................................        --          .03
                                                        ----------  ----------
  Net income (loss) attributable to common
   stockholders........................................ $      .70  $      .14
                                                        ==========  ==========
Average shares outstanding:
 Basic.................................................     25,571      25,999
                                                        ==========  ==========
 Diluted...............................................     25,769      26,133
                                                        ==========  ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                      September 30, December 31,
                                                          2000          1999
                                                      ------------- ------------
                                                       (unaudited)
<S>                                                   <C>           <C>
                       ASSETS
INVESTMENTS:
Invested cash.......................................   $  271,258    $  295,423
Fixed maturity securities:
  Held to maturity, at cost (fair value $157,878 and
   $150,465)........................................      155,514       152,657
  Available for sale, at fair value (cost $2,099,323
   and $2,180,509)..................................    2,068,463     2,110,411
Equity securities, at fair value:
  Available for sale (cost $85,894 and $54,437).....       94,028        61,380
  Trading account (cost $385,348 and $236,453)......      385,015       253,430
Cash................................................       16,006        20,051
Premiums and fees receivable........................      410,481       380,887
Due from reinsurers.................................      653,732       620,446
Accrued investment income...........................       30,003        36,925
Prepaid reinsurance premiums........................      102,599        91,005
Deferred policy acquisition costs...................      195,377       182,348
Real estate, furniture & equipment at cost, less
 accumulated depreciation...........................      123,537       128,735
Excess of cost over net assets acquired.............       72,709        76,523
Trading account receivable from brokers and clearing
 organizations......................................      193,208       258,454
Deferred Federal income taxes.......................       80,535        81,976
Other assets........................................       32,439        34,140
                                                       ----------    ----------
                                                       $4,884,904    $4,784,791
                                                       ==========    ==========

LIABILITIES, RESERVES, DEBT AND STOCKHOLDERS' EQUITY
LIABILITIES AND RESERVES:
Reserves for losses and loss expenses...............   $2,462,114    $2,361,238
Unearned premiums...................................      721,724       689,826
Due to reinsurers...................................      137,119       144,712
Short-term debt.....................................       10,000        35,000
Trading securities sold but not yet purchased, at
 fair value (proceeds $139,571 and $137,801)........      137,216       155,826
Other liabilities...................................      196,113       183,218
                                                       ----------    ----------
                                                        3,664,286     3,569,820
                                                       ----------    ----------
Long-term debt......................................      370,068       394,792
Company-obligated manditorily redeemable capital
 securities of a Subsidiary trust holding solely
 8.197% junior subordinated Debentures of the
 Corporation due December 15, 2045..................      198,158       198,126
Minority interest...................................       31,609        30,275
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.10 per share:
  Authorized 5,000,000 shares; no shares issued.....          --            --
Common stock, par value $.20 per share:
  Authorized 80,000,000 shares, issued and
   outstanding, Net of treasury shares, 25,413,619
   and 25,616,578 shares............................        7,281         7,281
Additional paid-in capital..........................      331,620       331,640
Retained earnings...................................      559,513       551,401
Accumulated other comprehensive income..............      (18,250)      (44,500)
Treasury stock, at cost, 10,990,448 and 10,787,489
 shares.............................................     (259,381)     (254,044)
                                                       ----------    ----------
                                                          620,783       591,778
                                                       ----------    ----------
                                                       $4,884,904    $4,784,791
                                                       ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                              For the Nine
                                                              Months Ended
                                                              September 30,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
                                                               (unaudited)
<S>                                                         <C>       <C>
Cash flows from (used in) operating activities:
Net income before preferred dividends and extraordinary
 items..................................................... $ 18,074  $  3,490
Adjustments to reconcile net income to cash flows from
 operating activities:
  Minority interest........................................    1,419       175
  Increase in reserves for losses and loss expenses, net of
   due to/from reinsurers..................................   61,872    62,118
  Depreciation and amortization............................   15,594    17,344
  Change in unearned premiums and prepaid reinsurance
   premiums................................................   20,304    33,825
  Increase in premiums and fees receivable.................  (29,594)  (27,376)
  Change in Federal income taxes...........................    5,338    (5,875)
  Change in deferred acquisition cost......................  (13,029)  (16,365)
  Realized gains on investments............................   (1,885)    2,404
  Other, net...............................................  (26,643)  (42,675)
                                                            --------  --------
  Net cash flows from operating activities before trading
   account.................................................   51,450    27,065
Net trading account sales (purchases), net.................  (55,034)      950
                                                            --------  --------
Net cash flows from (used in) operating activities.........   (3,584)   28,015
                                                            --------  --------
Cash flows from (used in) investing activities:
Proceeds from sales, excluding trading account:
  Fixed maturity securities available for sale.............  616,430   432,791
  Equity securities........................................   19,847     9,533
Proceeds from maturities and prepayments of fixed maturity
 securities................................................  117,320   117,726
Cost of purchases, excluding trading account:
  Fixed maturity securities available for sale............. (649,662) (574,047)
  Fixed maturity securities held to maturity...............                --
  Equity securities........................................  (59,212)   (5,457)
Change in balances due to/from security brokers............     (636)    6,609
Proceeds from the sale of a subsidiary.....................    2,532       --
Other, net.................................................   (6,514)    2,006
                                                            --------  --------
Net cash flows from (used in) investing activities.........   40,105   (10,839)
                                                            --------  --------
Cash flows used in financing activities:
Repurchase of preferred stock..............................      --    (98,092)
Proceeds from (repayment of) short-term debt...............  (25,000)  (20,500)
Purchase of treasury shares................................   (7,020)  (22,119)
Retirement of long-term debt and Capital Securities........  (25,000)   (9,171)
Cash dividends to common stockholders......................   (9,399)   (9,968)
Cash dividends to preferred stockholders...................      --     (2,001)
Other, net.................................................    1,688     8,585
                                                            --------  --------
Net cash flows used in financing activities................  (64,731) (153,266)
                                                            --------  --------
Net decrease in cash and invested cash.....................  (28,210) (136,090)
Cash and invested cash at beginning of year................  315,474   386,278
                                                            --------  --------
Cash and invested cash at end of period.................... $287,264  $250,188
                                                            ========  ========
Supplemental disclosure of cash flow information:
Interest paid.............................................. $ 31,351  $ 33,247
                                                            --------  --------
Federal income taxes received, net......................... $ (9,806) $(13,544)
                                                            ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000
                                  (Unaudited)

   The accompanying consolidated financial statements should be read in
conjunction with the following notes and with the Notes to Consolidated
Financial Statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.

1. Federal Income Taxes

   The Federal income tax provision has been computed based on the Company's
estimated annual effective tax rate, which differs from the Federal income tax
rate of 35% principally because of tax-exempt investment income.

2. Reinsurance Ceded

   The amounts of ceded reinsurance included in the statements of operations
are as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                                For the Nine
                                        For the Three Months    Months Ended
                                         Ended September 30,    September 30,
                                        --------------------- -----------------
                                           2000       1999      2000     1999
                                        ---------- ---------- -------- --------
   <S>                                  <C>        <C>        <C>      <C>
   Ceded premiums written.............. $   77,606 $   77,575 $238,432 $234,480
                                        ========== ========== ======== ========
   Ceded premiums earned............... $   79,618 $   72,416 $225,962 $223,440
                                        ========== ========== ======== ========
   Ceded losses and loss expenses...... $   76,458 $   73,474 $178,253 $198,735
                                        ========== ========== ======== ========
</TABLE>

3. Comprehensive Income

   The differences between comprehensive income (loss) and net income (loss)
are unrealized foreign exchange gains (losses) as well as unrealized gains
(losses) on securities. The following is a reconciliation of comprehensive
income (amounts in thousands):

<TABLE>
<CAPTION>
                                            For the Three       For the Nine
                                             Months Ended       Months Ended
                                            September 30,      September 30,
                                           -----------------  -----------------
                                            2000      1999     2000      1999
                                           -------  --------  -------  --------
   <S>                                     <C>      <C>       <C>      <C>
   Net income (loss) attributable to
    common stockholders..................  $ 7,092  $   (621) $18,074  $  3,728
   Other comprehensive income:
     Unrealized holding gains (losses) on
      investment securities arising
      during the period, net of tax......   17,526   (12,527)  25,426   (76,635)
     Less: Reclassification adjustment
      for gains (losses) included in net
      income (loss), net of tax..........      709    (2,221)   1,224    (1,563)
                                           -------  --------  -------  --------
     Net change in unrealized gains
      (losses) during the period.........   18,235   (14,748)  26,650   (78,198)
     Change in unrealized foreign
      exchange gains (losses)............     (357)      124     (400)      835
                                           -------  --------  -------  --------
   Comprehensive income (loss)...........  $24,970  $(15,245) $44,324  $(73,635)
                                           =======  ========  =======  ========
</TABLE>

                                      F-8
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                               September 30, 2000
                                  (Unaudited)


4. Industry Segments

   The Company's operations are presently conducted through five basic
segments: regional property casualty insurance; reinsurance; specialty lines of
insurance; alternative markets operations and international. The regional
property casualty insurance segment writes standard commercial and personal
lines insurance for such risks as automobiles, homes and businesses. The
Company's reinsurance segment specializes in underwriting property, casualty
and surety reinsurance on both a treaty and facultative basis. The specialty
lines of insurance consist primarily of excess and surplus lines, commercial
transportation, professional liability, directors and officers liability and
surety. The Company's alternative markets segment specializes in insuring,
reinsuring, and administering self-insurance programs and other alternative
risk transfer mechanisms for public entities, private employers and
associations. Finally, the international operations represent the Company's
joint venture (65% owned by the Company) with Northwestern Mutual Life
International, Inc., which writes property and casualty insurance, as well as
life insurance, internationally. For the nine months ended September 30, 2000
and 1999, the joint venture revenues include life insurance premiums of $24.7
million and $16.7 million, respectively.

   The accounting policies of the segments are the same as those described in
the summary of significant accounting policies; see the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 for a complete description.
Income tax expense (benefits) were calculated in accordance with the Company's
tax sharing agreements, which provide for the recognition of tax loss carry-
forwards only to the extent of taxes previously paid. Summary financial
information about the Company's operating segments is presented in the
following table. Income before income taxes by segment consists of revenues
less expenses related to the respective segment's operations. These amounts
include realized gains (losses) where applicable. Intersegment revenues consist
primarily of dividends, interest on inter-company debt and fees paid by
subsidiaries for portfolio management and other services to the Company.
Identifiable assets by segment are those assets used in the operation of each
segment.

<TABLE>
<CAPTION>
                                                                         Income
                                                 Revenues                (Loss)     Income
                                     ---------------------------------   Before       Tax
                          Investment Unaffiliated  Inter-                Income    (Expense)
                            Income    Customers   Segment     Total       Taxes    Benefits
                          ---------- ------------ --------  ----------  ---------  ---------
                                              (dollars in thousands)
<S>                       <C>        <C>          <C>       <C>         <C>        <C>
For the nine months
 ended September 30,
 2000:
 Regional...............   $ 43,859   $  534,262  $  1,015  $  535,277  $  (2,972)  $ 2,257
 Reinsurance............     36,643      251,371     1,026     252,397     17,253    (4,312)
 Specialty..............     35,844      236,347     1,724     238,071     16,860    (4,656)
 Alternative Markets....     31,555      190,257       171     190,428     24,488    (5,982)
 International..........      6,882       84,319       --       84,319      3,707      (396)
 Corporate and other....        755        4,658    41,170      45,828    (14,389)    4,482
 Adjustments and
  eliminations..........     (2,513)         --    (45,106)    (45,106)   (29,539)   12,692
                           --------   ----------  --------  ----------  ---------   -------
 Consolidated...........   $153,025   $1,301,214       --   $1,301,214  $  15,408   $ 4,085
                           ========   ==========  ========  ==========  =========   =======
For the nine months
 ended September 30,
 1999:
 Regional...............   $ 39,167   $  518,714  $  1,266  $  519,980  $ (32,210)  $ 9,169
 Reinsurance............     36,608      256,700       520     257,220     13,596    (2,737)
 Specialty..............     38,918      235,194      (887)    234,307     34,713    (8,252)
 Alternative Markets....     27,564      167,959       351     168,310     19,628    (3,553)
 International..........      4,935       68,556       --       68,556      1,569      (956)
 Corporate and other....        846        4,663    45,851      50,514    (15,409)   18,725
 Adjustments and
  eliminations..........     (2,773)         --    (47,101)    (47,101)   (32,740)    5,372
                           --------   ----------  --------  ----------  ---------   -------
 Consolidated...........   $145,265   $1,251,786  $    --   $1,251,786  $ (10,853)  $17,768
                           ========   ==========  ========  ==========  =========   =======
</TABLE>

   Interest expense for reinsurance, alternative markets and corporate was
$1,745,000, $441,000 and $33,768,000, respectively, for the nine months ended
September 30, 2000 and $1,745,000, $445,000 and $35,878,000, respectively, for
the corresponding period in 1999.

                                      F-9
<PAGE>

                   W. R. BERKLEY CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
                               September 30, 2000
                                  (Unaudited)


   Identifiable assets by segment are as follows:

<TABLE>
<CAPTION>
                                                     September 30, December 31,
                                                         2000          1999
                                                     ------------- ------------
   <S>                                               <C>           <C>
   Regional.........................................  $ 1,472,927  $ 1,436,575
   Reinsurance......................................    1,221,814    1,022,776
   Specialty........................................    1,374,216    1,370,837
   Alternative Markets..............................      930,111      878,125
   International....................................      211,334      177,675
   Corporate and other..............................    1,334,149    1,362,345
   Elimination......................................   (1,659,647)  (1,463,542)
                                                      -----------  -----------
   Consolidated.....................................  $ 4,884,904  $ 4,784,791
                                                      ===========  ===========
</TABLE>

5. Sale of Assets

   In the second quarter of 2000, the Company reported realized gains of $3.2
million in connection with the sale of the assets of All American Agency
Facilities, Inc. ("All American"), a managing general agency. All American's
revenues and operating profits (losses) were $1.8 million and ($0.7) million,
respectively, for the first nine months of 2000 and $7.5 million and $0.4
million, respectively, for the year ended December 31, 1999.

6. Restructuring Charge

   In the first quarter of 2000, the Company implemented a restructuring plan
for our reinsurance operations. Under the plan, the reinsurance segment has
withdrawn from the Latin American and Caribbean market, and the domestic
reinsurance operations are focusing on specialty reinsurance lines while de-
emphasizing certain commodity-type lines. The Company reduced its permanent
workforce by approximately 37 employees in connection with the plan. The
Company recognized $1,850,000 in expense in its statement of operations to
reflect charges related to the plan. These charges consisted mainly of
severance payments and contractual lease payments related to abandoned
facilities. The activities under the plan have been substantially completed.

7. Recent Accounting Pronouncements

   During 1999, the FASB issued FAS 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB 133, and
Amendment of FASB 133" which extended the effective date of FASB 133 to January
1, 2001. FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments. This statement will not have a material impact on the Company's
results of operations or financial condition.

8. Other Matters

   Reclassifications have been made in the 1999 financial statements as
originally reported to conform them to the presentation of the 2000 financial
statements.

   In the opinion of management, the summarized financial information reflects
all adjustments which are necessary for a fair presentation of financial
position and results of operations for the interim periods. Seasonal weather
variations affect the severity and frequency of losses sustained by the
insurance and reinsurance subsidiaries. Although the effect on the Company's
business of such natural catastrophes as tornadoes, hurricanes, hailstorms and
earthquakes is mitigated by reinsurance, they nevertheless can have a
significant impact on the results of any one or more reporting periods.

                                      F-10
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
W. R. Berkley Corporation

   We have audited the consolidated balance sheets of W. R. Berkley Corporation
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, comprehensive income and cash
flows for each of the years in the three-year period ended December 31, 1999.
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 generally accepted auditing
standards. 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 W. R.
Berkley Corporation and subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.

   As discussed in Note 1 to the consolidated financial statements, the Company
has changed its method of accounting for insurance-related assessments in 1999.

                                          KPMG LLP

New York, New York
February 24, 2000

                                      F-11
<PAGE>

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

<TABLE>
<CAPTION>
                                                Years ended December 31,
                                            ----------------------------------
                                               1999        1998        1997
                                            ----------  ----------  ----------
<S>                                         <C>         <C>         <C>
Revenues:
 Net premiums written...................... $1,427,719  $1,346,254  $1,177,641
 Change in net unearned premiums...........    (13,335)    (67,855)    (65,894)
                                            ----------  ----------  ----------
  Premiums earned..........................  1,414,384   1,278,399   1,111,747
 Net investment income.....................    190,316     202,420     199,588
 Management fees and commissions...........     72,344      70,727      71,456
 Realized investment gains (losses)........     (6,064)     25,400      13,186
 Other income..............................      2,688       5,571       4,333
                                            ----------  ----------  ----------
  Total revenues...........................  1,673,668   1,582,517   1,400,310
Operating costs and expenses:
 Losses and loss expenses..................  1,085,826     914,762     734,424
 Other operating costs and expenses........    604,784     556,155     487,776
 Interest expense..........................     50,801      48,819      48,869
 Restructuring charge......................     11,505         --          --
                                            ----------  ----------  ----------
  Income (loss) before income taxes and
   minority interest.......................    (79,248)     62,781     129,241
Federal and foreign income tax benefit
 (expense).................................     45,766      (5,465)    (30,668)
                                            ----------  ----------  ----------
  Income (loss) before minority interest...    (33,482)     57,316      98,573
Minority interest..........................       (566)      1,444         474
                                            ----------  ----------  ----------
  Net income (loss) before preferred
   dividends...............................    (34,048)     58,760      99,047
Preferred dividends........................       (497)     (7,548)     (7,828)
                                            ----------  ----------  ----------
  Net income (loss) before change in
   accounting and extraordinary gain
   (loss)..................................    (34,545)     51,212      91,219
  Cumulative effect of change in accounting
   principle (net of taxes)................     (3,250)        --          --
  Extraordinary gain (loss) on early
   extinguishment of long-term debt (net of
   taxes)..................................        735      (5,017)        --
                                            ----------  ----------  ----------
  Net income (loss) attributable to common
   stockholders............................ $  (37,060) $   46,195  $   91,219
                                            ==========  ==========  ==========
Earnings (loss) per share:
 Basic
  Net income (loss) before change in
   accounting and extraordinary gain
   (loss).................................. $    (1.35) $     1.82  $     3.09
  Cumulative effect of change in accounting
   principle (net of taxes)................       (.12)        --          --
  Extraordinary gain (loss) on early
   extinguishment of long-term debt........        .03        (.18)        --
                                            ----------  ----------  ----------
  Net income (loss) attributable to common
   stockholders............................ $    (1.44) $     1.64  $     3.09
                                            ==========  ==========  ==========
 Diluted
  Net income (loss) before change in
   accounting and extraordinary gain
   (loss).................................. $    (1.34) $     1.76  $     3.02
  Cumulative effect of change in accounting
   principle (net of taxes)................       (.12)        --          --
  Extraordinary gain (loss) on early
   extinguishment of long-term debt........        .03        (.17)        --
                                            ----------  ----------  ----------
  Net income (loss) attributable to common
   stockholders............................ $    (1.43) $     1.59  $     3.02
                                            ==========  ==========  ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-12
<PAGE>

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

<TABLE>
<CAPTION>
                                                            December 31,
                                                        ----------------------
                                                           1999        1998
                                                        ----------  ----------
<S>                                                     <C>         <C>
                        ASSETS
INVESTMENTS:
Invested cash.........................................  $  295,423  $  370,155
Fixed maturity securities:
 Held to maturity, at cost (fair value $150,465 and
  $183,469)...........................................     152,657     170,150
 Available for sale, at fair value (cost $2,180,509
  and $2,224,244).....................................   2,110,411   2,306,619
Equity securities, at fair value:
 Available for sale (cost $54,437 and $59,890)........      61,380      65,869
 Trading account (cost $236,453 and $373,164).........     253,430     389,310
Cash..................................................      20,051      16,123
Premiums and fees receivable..........................     380,887     377,501
Due from reinsurers...................................     620,446     513,297
Accrued investment income.............................      36,925      37,842
Prepaid reinsurance premiums..........................      91,005      79,530
Deferred policy acquisition costs.....................     182,348     168,894
Real estate, furniture and equipment at cost, less
 accumulated depreciation.............................     128,735     136,884
Deferred Federal and foreign income taxes.............      81,976         --
Excess of cost over net assets acquired...............      76,523      76,645
Trading account receivable from brokers and clearing
 organizations........................................     258,454     229,520
Other assets..........................................      34,140      45,092
                                                        ----------  ----------
                                                        $4,784,791  $4,983,431
                                                        ==========  ==========
 LIABILITIES, RESERVES, DEBT AND STOCKHOLDERS' EQUITY
LIABILITIES AND RESERVES:
Reserves for losses and loss expenses.................  $2,361,238  $2,126,566
Unearned premiums.....................................     689,826     664,861
Due to reinsurers.....................................     144,712     130,517
Deferred Federal and foreign income taxes.............         --        6,877
Trading securities sold but not yet purchased, at fair
 value (proceeds $137,801 and $283,310)...............     155,826     298,165
Short-term debt.......................................      35,000      55,500
Other liabilities.....................................     183,218     213,453
                                                        ----------  ----------
                                                         3,569,820   3,495,939
                                                        ----------  ----------
Long-term debt........................................     394,792     394,444
                                                        ----------  ----------
Company-obligated mandatorily redeemable capital
 securities of a subsidiary trust holding solely
 8.197% junior subordinated debentures of the
 corporation due December 15, 2045....................     198,126     207,988
Minority interest.....................................      30,275      23,779
                                                        ----------  ----------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.10 per share:
 Authorized 5,000,000 shares:
 7 3/8% Series A Cumulative Redeemable Preferred Stock
  653,952 shares issued and outstanding...............         --           65
Common stock, par value $.20 per share:
 Authorized 80,000,000 shares, issued and outstanding,
  net of treasury shares, 25,616,578 and
  26,504,404 shares...................................       7,281       7,281
Additional paid-in capital............................     331,640     429,611
Retained earnings.....................................     551,401     601,908
Accumulated other comprehensive income (loss).........     (44,500)     54,672
Treasury stock, at cost, 10,787,489 and 9,899,663
 shares...............................................    (254,044)   (232,256)
                                                        ----------  ----------
                                                           591,778     861,281
                                                        ----------  ----------
                                                        $4,784,791  $4,983,431
                                                        ==========  ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-13
<PAGE>

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 (Dollars in thousands, except per share data)

                  Years ended December 31, 1999, 1998 and 1997

<TABLE>
<CAPTION>
                                       Preferred
                                       and common
                                       stock and             Accumulated
                             Total     additional               other
                         stockholders'  paid-in   Retained  comprehensive Treasury
                            equity      capital   earnings  income (loss)   stock
                         ------------- ---------- --------  ------------- ---------
<S>                      <C>           <C>        <C>       <C>           <C>
Balance, December 31,
 1996...................   $ 879,732    $476,439  $490,338    $ 31,075    $(118,120)
  Net income
   attributable to
   common stockholders..      91,219         --     91,219         --           --
  Change in other
   comprehensive
   income...............      27,131         --        --       27,131          --
  Issuance of common
   shares...............       3,130       1,190       --          --         1,940
  Repurchase of
   preferred stock......     (41,523)    (41,523)      --          --           --
  Dividends to common
   stockholders ($.42
   per share)...........     (12,397)        --    (12,397)        --           --
                           ---------    --------  --------    --------    ---------
Balance, December 31,
 1997...................     947,292     436,106   569,160      58,206     (116,180)
  Net income
   attributable to
   common stockholders..      46,195         --     46,195         --           --
  Change in other
   comprehensive income
   (loss)...............      (3,534)        --        --       (3,534)         --
  Issuance of common
   shares...............       2,719         851       --          --         1,868
  Purchase of treasury
   stock................    (117,944)        --        --          --      (117,944)
  Dividends to common
   stockholders ($.48
   per share)...........     (13,447)        --    (13,447)        --           --
                           ---------    --------  --------    --------    ---------
Balance, December 31,
 1998...................     861,281     436,957   601,908      54,672     (232,256)
  Net (loss)
   attributable to
   common stockholders..     (37,060)        --    (37,060)        --           --
  Change in other
   comprehensive income
   (loss)...............     (99,172)        --        --      (99,172)         --
  Issuance of common
   shares...............         387          56       --          --           331
  Purchase of treasury
   stock................     (22,119)        --        --          --       (22,119)
  Repurchase of
   preferred stock......     (98,092)    (98,092)      --          --           --
  Dividends to common
   stockholders ($.52
   per share)...........     (13,447)        --    (13,447)        --           --
                           ---------    --------  --------    --------    ---------
Balance, December 31,
 1999...................   $ 591,778    $338,921  $551,401    $(44,500)   $(254,044)
                           =========    ========  ========    ========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-14
<PAGE>

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                   1999       1998      1997
                                                 ---------  --------  --------
<S>                                              <C>        <C>       <C>
Net income (loss) attributable to common
 stockholders................................... $ (37,060) $ 46,195  $ 91,219
                                                 ---------  --------  --------
Other comprehensive income (loss)
  Unrealized holding gain (losses) on investment
   securities arising during the period (net of
   taxes of ($51,246), ($9,941) and $10,915)....   (95,171)  (18,462)   20,271
  Less: Reclassification adjustment for net
   change in unrealized gains (losses) during
   the period (net of taxes of ($2,122), $8,890
   and $4,615)..................................    (3,942)   16,510     8,571
                                                 ---------  --------  --------
Net unrealized gain (loss)......................   (99,113)   (1,952)   28,842
  Change in unrealized foreign exchange
   (losses).....................................       (59)   (1,582)   (1,711)
                                                 ---------  --------  --------
  Other comprehensive income (loss).............   (99,172)   (3,534)   27,131
                                                 ---------  --------  --------
  Comprehensive income (loss)................... $(136,232) $ 42,661  $118,350
                                                 =========  ========  ========
</TABLE>



          See accompanying notes to consolidated financial statements.

                                      F-15
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                Years ended December 31,
                                             ---------------------------------
                                               1999        1998        1997
                                             ---------  -----------  ---------
<S>                                          <C>        <C>          <C>
Cash flows from operating activities:
Net income (loss) before minority interest,
 preferred dividends and extraordinary
 items.....................................  $ (36,732) $    57,316  $  98,573
Adjustments to reconcile net income to net
 cash flows provided by operating
 activities:
 Increase in reserves for losses and loss
  expenses, net of due to/from reinsurers..    141,718      169,285    137,312
 Depreciation and amortization.............     23,598       22,658     11,852
 Change in unearned premiums and prepaid
  reinsurance premiums.....................     13,490       68,095     67,023
 Change in premiums and fees receivable....     (3,386)     (45,727)   (64,858)
 Change in Federal income taxes............    (34,289)     (26,923)    (1,408)
 Change in deferred policy acquisition
  costs....................................    (12,457)     (22,057)   (24,465)
 Realized investment (gains) losses........      6,064      (25,400)   (13,186)
 Other, net................................    (49,491)      27,023     18,601
                                             ---------  -----------  ---------
Net cash provided by operating activities
 before trading account sales (purchases)..     48,515      224,270    229,444
Trading account sales (purchases), net.....        554       (4,567)   (89,245)
                                             ---------  -----------  ---------
Net cash provided by operating activities..     49,069      219,703    140,199
                                             ---------  -----------  ---------
Cash flows provided by (used in) investing
 activities:
Proceeds from sales, excluding trading
 account:
 Fixed maturity securities available for
  sale.....................................    594,993      715,459    718,789
 Equity securities.........................     17,200       52,727     43,204
Proceeds from maturities and prepayments of
 fixed maturity securities.................    147,668      297,303    120,944
Cost of purchases, excluding trading
 account:
 Fixed maturity securities available for
  sale.....................................   (695,928)  (1,033,190)  (984,961)
 Fixed maturity securities held to
  maturity.................................        --        (3,034)       --
 Equity securities.........................    (14,397)     (33,217)   (28,028)
Cost of acquired companies, net of acquired
 cash and invested cash....................     (1,533)      (3,304)       585
Net additions to real estate, furniture and
 equipment.................................     (8,127)     (27,167)   (17,898)
Other, net.................................       (435)       3,956     (9,904)
                                             ---------  -----------  ---------
Net cash provided by (used in) investing
 activities................................     39,441      (30,467)  (157,269)
                                             ---------  -----------  ---------
Cash flows from financing activities:
Repurchase of preferred stock..............    (98,092)         --     (41,523)
Purchase of common treasury shares.........    (22,119)    (117,944)       --
Net change in short-term debt..............    (20,500)      55,500        --
Repurchase of Company-obligated mandatorily
 redeemable capital securities of a
 subsidiary trust holding solely 8.197%
 junior subordinated debentures............     (8,774)         --         --
Cash dividends to common stockholders......    (13,888)     (13,518)   (11,695)
Cash dividends to preferred stockholders...     (2,001)      (7,356)    (8,717)
Other, net.................................      6,060          735     13,367
Net proceeds from issuance of long-term
 debt......................................        --        47,882        --
Repurchase of long-term debt...............        --       (49,104)       --
                                             ---------  -----------  ---------
Net cash provided by (used in) financing
 activities................................   (159,314)     (83,805)   (48,568)
                                             ---------  -----------  ---------
Net increase (decrease) in cash and
 invested cash.............................    (70,804)     105,431    (65,638)
Cash and invested cash at beginning of
 year......................................    386,278      280,847    346,485
                                             ---------  -----------  ---------
Cash and invested cash at end of year......  $ 315,474  $   386,278  $ 280,847
                                             =========  ===========  =========
Supplemental disclosure of cash flow
 information:
 Interest paid on debt.....................  $  50,801  $    48,976  $  45,950
                                             =========  ===========  =========
 Federal income taxes (received) paid......  $ (12,973) $    32,090  $  32,258
                                             =========  ===========  =========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-16
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              For the years ended December 31, 1999, 1998 and 1997

(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 generally accepted accounting principles ("GAAP"). All significant
intercompany transactions and balances have been eliminated. Reclassifications
have been made in the 1998 and 1997 financial statements to conform them to the
presentation of the 1999 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.
Actual results could differ from those estimates.

 (B) Revenue recognition

   Insurance premiums written are recognized as earned generally on a pro-rata
basis over the contract period. Management fees on insurance service contracts
are recorded as earned primarily on a pro-rata basis over the policy period.
Commission income is recognized as earned on the effective date of the
applicable insurance policies.

 (C) Investments

   The Company has classified its investments into three categories. 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. Securities
which the Company purchased with the intent to sell in the near-term are
classified as "trading" and are reported at estimated fair value, with
unrealized gains and losses reflected in the statement of operations. The
remaining securities are classified as "available for sale" and carried at
estimated fair value, with unrealized gains and losses, net of applicable
income taxes, excluded from earnings and reported as comprehensive income
(loss) and a separate component of stockholders' equity. Fair value is
generally determined using published market values.

   Realized gains or losses represent the difference between the cost of
securities sold and the proceeds realized upon sale. The cost of securities is
adjusted where appropriate to include a provision for significant decline in
value which is considered to be other than temporary. 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. Realized
gains or losses, including any provision for decline in value, are included in
the statement of operations.

 (D) Trading account

   The long portfolio positions are presented in the balance sheet as trading
account assets. The short sales and short call options used in trading account
activities are presented as trading securities sold but not yet purchased. The
trading account receivable from brokers and clearing organizations is comprised
of unsettled trades within the trading account and the net margin balances held
by the clearing broker.

 (E) Per share data

   Basic per share data is based upon the weighted average number of shares
outstanding during the year. Diluted per share data reflects the potential
dilution that would occur if employee stock-based compensation plans were
exercised. Shares issued in connection with loans to shareholders are not
considered to be outstanding for the purposes of calculating basic per share
amounts and have been excluded from stockholders' equity.

                                      F-17
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


 (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. Deferred policy acquisition costs are
limited to the amounts estimated to be recoverable from the applicable unearned
premiums and the related anticipated investment income by 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; 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 results
of operations in the period in which they are determined.

   The Company discounts its liabilities for excess workers' compensation
("EWC") losses and loss expenses using a "risk-free" rate. EWC liabilities are
discounted because of the long period of time over which it pays losses. The
Company believes that utilizing a "risk-free" rate to discount these reserves
more closely reflects the economics associated with the EWC line of business
(see Note 15 of notes to consolidated financial statements).

 (H) Reinsurance ceded

   Ceded unearned premiums are reported as prepaid reinsurance premiums and
estimated amounts of reinsurance recoverable on unpaid losses are included in
due from reinsurers. To the extent any reinsurer does not meet its obligations
under reinsurance agreements, the Company must discharge the liability. Amounts
due from reinsurers are reflected net of funds held where the right of offset
is present. The Company has provided reserves for uncollectible reinsurance.

 (I) Excess of cost over net assets acquired

   Costs in excess of the net assets of subsidiaries acquired are being
amortized on a straight-line basis over 25 to 40 years. The Company continually
evaluates the amortization period of its intangible assets. Estimates of useful
lives are revised when circumstances or events indicate that the original
estimate is no longer appropriate. Amortization (including adjustments) of the
excess of cost over net assets acquired was $3,866,000, $3,178,000 and
$2,950,000 for 1999, 1998 and 1997, respectively.

 (J) Federal and foreign income taxes

   The Company files a consolidated income tax return in the U.S. and foreign
tax returns in the countries of its overseas operations.

   The Company's method of accounting for income taxes is the asset and
liability method. Under the asset and liability 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.

 (K) Stock options

   The Company accounts for its stock options in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 123, "Accounting for Stock-
Based Compensation" (FAS 123), which provides that stock-based compensation may
be disclosed in the footnotes to financial statements.

                                      F-18
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


 (L) Foreign currency

   Revenues and expenses in foreign currencies 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 close of the period. Unrealized gains or
losses (losses of $3,352,000 and $3,293,000 as of December 31, 1999 and 1998,
respectively) resulting from translating foreign currency financial statements
are reported as a component of common stockholders' equity. Gains or losses
(losses of $381,000 for 1999 and gains of $1,543,000 and $1,408,000 for 1998
and 1997, respectively) resulting from foreign currency transactions
(transactions denominated in a currency other than the entity's functional
currency) are included in other income (gains) or other operating costs and
expenses (losses) in the statement of operations.

 (M) 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 $16,291,000, $17,114,000 and
$12,799,000 for 1999, 1998 and 1997, respectively.

 (N) Other comprehensive income (loss)

   Comprehensive income (loss) encompasses all changes in stockholder's equity
(except those arising from transactions with shareholders) and includes net
income, net unrealized capital gains or losses on available-for-sale securities
and unrealized foreign currency translation adjustments.

 (O) Insurance related assessments

   As of January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants (AICPA) Statement of Position ("SOP") 97-3,
"Accounting by Insurance and Other Enterprises for Insurance Related
Assessments." This statement provides guidance for determining when an entity
should recognize liabilities for guarantee fund and other insurance related
assessments, how to measure those liabilities and when an asset may be
recognized for the recovery of such assessments through premium tax offsets or
policy surcharges. The adoption of this statement resulted in an after tax
charge of $3,250,000 for the year ended December 31, 1999, which is reflected
as a cumulative effect of a change in accounting principle.

 (P) Recent accounting pronouncements

   During 1999, the FASB issued FAS 137, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB 133, and
Amendment of FASB 133" which extended the effective date of FAS 133 to January
1, 2001. FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments. This statement will not have a material impact on the Company's
results of operations or financial condition.

(2) ACQUISITIONS

   During 1999, 1998 and 1997, several international and other acquisitions
were completed for an aggregate consideration of approximately $1,533,000,
$13,389,000 and $7,238,000, respectively. The acquisitions were accounted for
as purchases and, accordingly, the results of operations of the companies have
been included from the respective dates of acquisition. Pro forma results of
operations have been omitted as such effects are not significant.


                                      F-19
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997

   Net assets of the acquired companies for 1999, 1998 and 1997 were as
follows: Investments in fixed maturity and equity securities of $0, $1,786,000
and $2,192,000; cash and invested cash of $0, $10,085,000 and $7,823,000;
excess of cost over net assets acquired of $3,744,000, $6,847,000 and
$2,688,000; and other liabilities, net of other assets of $5,277,000,
$5,329,000 and $5,465,000.

(3) COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES

   Neither the Company nor any of its subsidiaries is engaged in any litigation
known to the Company which management believes will have a material adverse
effect upon the Company's business. As is common with other insurance
companies, the Company's subsidiaries are regularly engaged in the defense of
claims arising out of the conduct of the insurance business.

(4) LEASE OBLIGATIONS

   The Company and several of its subsidiaries use office space and equipment
under leases expiring at various dates through September 1, 2004. 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 approximately: $16,109,000, $14,095,000 and $12,564,000 for 1999,
1998 and 1997, respectively. Future minimum lease payments (without provision
for sublease income) are $13,059,000 in 2000; $9,887,000 in 2001; $7,611,000 in
2002; $5,653,000 in 2003; and $4,368,000 thereafter.

(5) RESTRUCTURING PLAN

   In the first quarter of 1999, the Company implemented a plan to restructure
certain of its operating units. Under the plan, the Company consolidated ten of
its regional units into four; merged two of its alternative market units; and
combined two of its international units. In connection with the restructuring
plan, the Company expects to reduce its workforce by approximately 386
employees. The Company reported a restructuring charge of $11,505,000 in the
first quarter of 1999 to reflect the estimated costs of the plan. These charges
consist mainly of severance payments of $7,562,000, contractual lease payments
related to abandoned facilities and abandoned equipment and property owned. The
activities under the plan were substantially completed in 1999. The Company has
paid $6,916,000 related to the restructuring charge of which $4,221,000 relates
to severance payments. The remaining restructuring accrual is $4,589,000 at
December 31, 1999.

(6) DEBT

   Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                     Carrying
Description                   Rate      Maturity       Face Value     Value
- -----------                  ------ ----------------- ------------ ------------
<S>                          <C>    <C>               <C>          <C>
Senior Notes................ 6.31%  March 6, 2000     $ 25,000,000 $ 24,995,000
Senior Notes................ 6.71%  March 4, 2003       25,000,000   24,939,000
Note Payable................  (1)   December 30, 2003    8,000,000    8,000,000
Senior Subordinated Notes... 6.50%  July 1, 2003        35,793,000   35,793,000
Senior Notes................ 6.375% April 15, 2005      40,000,000   39,825,000
Senior Notes................ 6.25%  January 15, 2006   100,000,000   99,215,000
Senior Notes................ 9.875% May 15, 2008        88,800,000   86,368,000
Senior Debenture............ 8.70%  January 1, 2022     76,503,000   75,657,000
                                                      ------------ ------------
                                                      $399,096,000 $394,792,000
                                                      ============ ============
</TABLE>
- ---------------------
(1) Floating rate equal to Libor plus 50 basis points.

                                      F-20
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


   The difference between the face value of long-term debt and the carrying
value is unamortized discount. All outstanding long-term debt is not redeemable
until maturity and ranks on a parity with all other outstanding indebtedness of
the Company.

   The Company has on file a "shelf" registration statement with the Securities
and Exchange Commission with a remaining balance of $150,000,000 in additional
equity and/or debt securities. The securities may be offered from time to time
as determined by funding requirements and market conditions.

Short-term Debt As of December 31, 1999 and 1998, the Company had $35,000,000
and $55,500,000, respectively, of outstanding short-term debt under its
unsecured line-of-credit. During 1999 and 1998, the average interest rate of
the Company's short-term debt was 5.36% and 5.59%. As of December 31, 1999, the
Company had an additional $40,000,000 of short-term debt available under its
line-of-credit.

(7) COMPANY-OBLIGATED MANDATORILY REDEEMABLE CAPITAL SECURITIES OF A SUBSIDIARY
   TRUST HOLDING SOLELY JUNIOR SUBORDINATED DEBENTURES OF THE CORPORATION DUE
   DECEMBER 15, 2045

   The Company-obligated mandatorily redeemable preferred securities of a
subsidiary trust holding solely junior subordinated debentures ("Capital Trust
Securities") were issued by the W.R. Berkley Capital Trust ("the Trust") in
1996. All of the common securities of the Trust are owned by the Company. The
sole assets of the Trust are $210,000,000 aggregate principal amount of 8.197%
Junior Subordinated Debentures due December 15, 2045, issued by the Company
(the "Junior Subordinated Debentures"). The Company's guarantee of payments of
cash distributions and payments on liquidation of the Trust and redemption of
the Capital Trust Securities, when taken together with the Company's
obligations under the Trust Agreement under which the Capital Trust Securities
were issued, the Junior Subordinated Debentures and the Indenture under which
the Junior Subordinated Debentures were issued, including its obligations to
pay costs, expenses, debts and liabilities of the Trust (other than with
respect to the Capital Trust Securities), provide a full and unconditional
guarantee of the Trust's obligations under the Capital Trust Securities. The
Company records the preferential cumulative cash dividends arising from the
payments of interest on the Junior Subordinated Debentures as interest expense
in its consolidated statement of operations.

   The Capital Trust Securities are subject to mandatory redemption in a like
amount (i) in whole but not in part, on the stated maturity date, upon
repayment of the Junior Subordinated Debentures, (ii) in whole but not in part,
at any time contemporaneously with the optional prepayment of the Junior
Subordinated Debentures by the Company upon the occurrence and continuation of
a certain event and (iii) in whole or in part, on or after December 15, 2006,
contemporaneously with the optional prepayment by the Company of Junior
Subordinated Debentures. In September 1999, a subsidiary of the Company
purchased $10 million (face amount) of the Capital Trust Securities for
$8,774,000.

                                      F-21
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


(8) REINSURANCE CEDED

   The Company follows the customary industry practice of reinsuring a portion
of its exposures principally to reduce net liability on individual risks and to
protect against catastrophic losses. The following amounts arising under
reinsurance ceded contracts have been deducted in arriving at the amounts
reflected in the statement of operations:

<TABLE>
<CAPTION>
                                                       1999     1998     1997
                                                     -------- -------- --------
                                                       (dollars in thousands)
   <S>                                               <C>      <C>      <C>
   Premiums written................................. $307,170 $292,238 $240,754
   Premiums earned..................................  294,823  286,170  239,233
   Losses and loss expenses.........................  248,767  211,389  129,405
</TABLE>

   Effective January 1, 1999, the Company purchased additional aggregate
reinsurance protection for its regional segment. Pursuant to the contract, the
reinsurer will indemnify the regional companies for losses occurring during
1999 in excess of 71% of earned premiums, up to a limit of $35,000,000.
Premiums of $21,000,000 and losses of $35,000,000 were ceded to the reinsurer
in 1999.

(9) SUPPLEMENTAL FINANCIAL STATEMENT DATA

   Other operating costs and expenses consist of the following:

<TABLE>
<CAPTION>
                                                      1999     1998     1997
                                                    -------- -------- --------
                                                      (dollars in thousands)
   <S>                                              <C>      <C>      <C>
   Amortization of deferred policy acquisition
    costs.......................................... $444,289 $394,612 $337,871
   Other operating costs and expenses of insurance
    operations.....................................   77,617   77,596   65,993
   Other costs and expenses........................   82,878   83,947   83,912
                                                    -------- -------- --------
     Total......................................... $604,784 $556,155 $487,776
                                                    ======== ======== ========
</TABLE>

(10) STOCK OPTION PLAN

   The Company has a stock option plan (the "Stock Option Plan") under which
7,125,000 shares of Common Stock were reserved for issuance. Pursuant to the
Stock Option Plan, options may be granted at prices determined by the Board of
Directors but not less than fair market value on the date of grant.

   The following table summarizes option information, including options granted
under both the 1992 and prior plans:

<TABLE>
<CAPTION>
                                    1999               1998               1997
                             ------------------ ------------------ ------------------
                                       Weighted           Weighted           Weighted
                                       Average            Average            Average
                                       Exercise           Exercise           Exercise
                              Shares    Price    Shares    Price    Shares    Price
                             --------- -------- --------- -------- --------- --------
   <S>                       <C>       <C>      <C>       <C>      <C>       <C>
   Outstanding at beginning
    of year................  3,929,333  $34.25  3,218,762  $29.52  2,491,222  $26.03
   Granted.................     68,600   25.73  1,036,975   47.08  1,154,354   34.68
   Exercised...............     14,925   21.91    106,938   23.57    280,498   20.87
   Canceled................    320,223   34.39    219,466   30.56    146,316   27.42
                             ---------  ------  ---------  ------  ---------  ------
   Outstanding at end of
    year...................  3,662,785  $34.12  3,929,333  $34.25  3,218,762  $29.52
                             ---------  ------  ---------  ------  ---------  ------
   Options exercisable at
    year end...............    998,450  $25.28    640,161  $23.72    558,210  $22.66
                             =========  ======  =========  ======  =========  ======
   Options available for
    future grant...........  3,326,102          3,073,916          3,892,439
                             =========          =========          =========
</TABLE>


                                      F-22
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997

   The fair value of the options granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions for 1999 and 1998, respectively: (a) dividend yield of 1%,
(b) expected volatility of 20%, (c) risk free interest rate of 5.61% and 5.79%
and (d) expected life of 7.5 years. The following table summarizes information
about stock options outstanding at December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                          Options Outstanding  Options Exercisable
                                          -------------------- --------------------
                                           Weighted                        Weighted
                                           Remaining  Weighted             Average
                                Number    Contractual Average    Number    Exercise
   Range of Exercise Prices   Outstanding    Life      Price   Exercisable  Price
   ------------------------   ----------- ----------- -------- ----------- --------
   <S>                        <C>         <C>         <C>      <C>         <C>
   December 31, 1999
   $14 to $27..............      736,415      3.9      $23.40    654,815    $23.14
    27 to  32..............      875,144      6.2       29.06    337,210     29.17
    32 to  48..............    2,051,226      7.8       40.13      6,425     38.29
                               ---------      ---      ------    -------    ------
     Total.................    3,662,785      6.6      $34.12    998,450    $25.28
                               =========      ===      ======    =======    ======
   December 31, 1998
   $14 to $27..............      731,983      4.4      $23.25    554,759    $22.67
    27 to  32..............    1,034,346      7.1       29.12     84,502     30.35
    32 to  48..............    2,163,004      8.8       40.43        900     47.38
                               ---------      ---      ------    -------    ------
     Total.................    3,929,333      7.6      $34.25    640,161    $23.72
                               =========      ===      ======    =======    ======
</TABLE>

   The Company applies APB Opinion 25 and related interpretations in accounting
for these plans. Accordingly, no compensation costs has been recognized for the
stock option plans. Had compensation cost for the Company's stock option plans
been determined based on the fair value at the grant dates for awards under
those plans consistent with the method of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below (000's omitted except per share data):

<TABLE>
<CAPTION>
                                                                     Diluted
                                                Basic Earnings    Earnings per
                               Net Income          per Share          Share
                            ------------------  ---------------  ---------------
                               As       Pro        As     Pro       As     Pro
                            Reported   Forma    Reported Forma   Reported Forma
                            --------  --------  -------- ------  -------- ------
   <S>                      <C>       <C>       <C>      <C>     <C>      <C>
    1999
    Before change in
     accounting and
     extraordinary item.... $(34,545) $(37,644)  $(1.35) $(1.46)  $(1.34) $(1.45)
    Attributable to Common
     Stockholders..........  (37,060)  (40,159)   (1.44)  (1.56)   (1.43)  (1.55)
                            --------  --------   ------  ------   ------  ------
    1998
    Before change in
     accounting and
     extraordinary item....   51,212    48,078     1.82    1.71     1.76    1.65
    Attributable to Common
     Stockholders..........   46,195    43,061     1.64    1.53     1.59    1.48
                            --------  --------   ------  ------   ------  ------
</TABLE>

(11) COMPENSATION PLAN

   The Company and its subsidiaries have profit sharing retirement 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 Retirement Plans
on the first day of the month following the first full three months in which
they are employed. Profit sharing expense amounted to $7,768,000, $8,524,000
and $8,402,000 for 1999, 1998 and 1997, respectively.

                                      F-23
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


   In May 1997, the Common Stockholders approved the Long-Term Incentive
Compensation Plan ("LTIP"). The LTIP provides for incentive compensation to key
executives, is based on long-term corporate performance and is based upon
criteria established by the Compensation and Stock Options Committee of the
Board of Directors (the "Committee"). Key employees are awarded participation
units ("units") as determined by the Committee. The Units vest and become
exercisable over a maximum term of five years from the date of their award. The
units are payable in cash or up to 50% in shares of Common Stock. In 1997,
226,250 units were awarded which amounted to an expense of $1,705,000. There
was no LTIP expense in 1998 or 1999.

(12) INVESTMENTS

   At December 31, 1999 and 1998, there were no investments, other than
investments in United States government securities, which exceeded 10% of
stockholders' equity. At December 31, 1999 and 1998, investments were as
follows:

<TABLE>
<CAPTION>
                                           December 31, 1999
                         ------------------------------------------------------
                                      Gross      Gross
                                    unrealized unrealized             Carrying
Type of investment        Cost (a)    gains      losses   Fair value   value
- ------------------       ---------- ---------- ---------- ---------- ----------
                                         (dollars in thousands)
<S>                      <C>        <C>        <C>        <C>        <C>
Fixed maturity
 securities held to
 maturity:
  State and municipal... $   56,172  $ 2,268    $   (951) $   57,489 $   56,172
  Corporate.............     12,839       78        (248)     12,669     12,839
  Mortgage-backed
   securities...........     83,646      135      (3,474)     80,307     83,646
                         ----------  -------    --------  ---------- ----------
    Total fixed maturity
     securities held to
     maturity...........    152,657    2,481      (4,673)    150,465    152,657
                         ----------  -------    --------  ---------- ----------
Fixed maturity
 securities available
 for sale:
  United States
   Government (b).......    334,114      473     (15,419)    319,168    319,168
  State and municipal...  1,020,716    9,905     (30,968)    999,653    999,653
  Corporate.............    437,501    1,332     (19,219)    419,614    419,614
  Mortgage-backed
   securities...........    388,178    1,657     (17,859)    371,976    371,976
                         ----------  -------    --------  ---------- ----------
    Total fixed maturity
     securities
     available for
     sale...............  2,180,509   13,367     (83,465)  2,110,411  2,110,411
                         ----------  -------    --------  ---------- ----------
Common stocks...........      8,676    7,613         (80)     16,209     16,209
Preferred stocks........     45,761      206        (796)     45,171     45,171
                         ----------  -------    --------  ---------- ----------
    Total equity
     securities
     available for
     sale...............     54,437    7,819        (876)     61,380     61,380
                         ----------  -------    --------  ---------- ----------
Trading account.........    236,453   24,241      (7,264)    253,430    253,430
                         ----------  -------    --------  ---------- ----------
Invested cash (c).......    295,423      --          --      295,423    295,423
                         ----------  -------    --------  ---------- ----------
    Total investments... $2,919,479  $47,908    $(96,278) $2,871,109 $2,873,301
                         ==========  =======    ========  ========== ==========
</TABLE>

                                      F-24
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
                                           December 31, 1998
                         ------------------------------------------------------
                                      Gross      Gross
                                    unrealized unrealized             Carrying
Type of investment        Cost (a)    gains      losses   Fair value   value
- ------------------       ---------- ---------- ---------- ---------- ----------
                                         (dollars in thousands)
<S>                      <C>        <C>        <C>        <C>        <C>
Fixed maturity
 securities held to
 maturity:
  State and municipal... $   60,492  $  6,528   $    (72) $   66,948 $   60,492
  Corporate.............     13,353       772        --       14,125     13,353
  Mortgage-backed
   securities...........     96,305     6,091        --      102,396     96,305
                         ----------  --------   --------  ---------- ----------
    Total fixed maturity
     securities held to
     maturity...........    170,150    13,391        (72)    183,469    170,150
                         ----------  --------   --------  ---------- ----------
Fixed maturity
 securities available
 for sale:
  United States
   Government (b).......    293,761     9,797       (170)    303,388    303,388
  State and municipal...  1,117,691    53,387       (959)  1,170,119  1,170,119
  Corporate.............    411,234    15,047     (6,106)    420,175    420,175
  Mortgage-backed
   securities...........    401,558    12,278       (899)    412,937    412,937
                         ----------  --------   --------  ---------- ----------
    Total fixed maturity
     securities
     available for
     sale...............  2,224,244    90,509     (8,134)  2,306,619  2,306,619
                         ----------  --------   --------  ---------- ----------
Common stocks...........      8,150     4,712       (341)     12,521     12,521
Preferred stocks........     51,740     1,750       (142)     53,348     53,348
                         ----------  --------   --------  ---------- ----------
    Total equity
     securities
     available for
     sale...............     59,890     6,462       (483)     65,869     65,869
                         ----------  --------   --------  ---------- ----------
Trading account.........    373,164    23,371     (7,225)    389,310    389,310
                         ----------  --------   --------  ---------- ----------
Invested cash (c).......    370,155       --         --      370,155    370,155
                         ----------  --------   --------  ---------- ----------
    Total investments... $3,197,603  $133,733   $(15,914) $3,315,422 $3,302,103
                         ==========  ========   ========  ========== ==========
</TABLE>
- ---------------------
(a) Adjusted as necessary for amortization of premium or discount.

(b) Includes United States government agencies and authorities.

(c) Short-term investments which mature within three months of the date of
    purchase.

   The amortized cost and fair value of fixed maturity securities at December
31, 1999, 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:

<TABLE>
<CAPTION>
                                                                  1999
                                                          ---------------------
                                                             Cost    Fair Value
                                                          ---------- ----------
                                                               (dollars in
                                                               thousands)
   <S>                                                    <C>        <C>
   Due in one year or less............................... $   68,307 $   68,329
   Due after one year through five years.................    372,376    371,743
   Due after five years through ten years................    600,055    586,027
   Due after ten years...................................    820,604    782,494
   Mortgage-backed securities............................    471,824    452,283
                                                          ---------- ----------
   Total................................................. $2,333,166 $2,260,876
                                                          ========== ==========
</TABLE>

                                      F-25
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


   Realized gains (losses) and the change in difference between fair value and
cost of investments, before applicable income taxes, are as follows:

<TABLE>
<CAPTION>
                                                     1999      1998     1997
                                                   ---------  -------  -------
                                                    (dollars in thousands)
   <S>                                             <C>        <C>      <C>
   Realized gains (losses):
     Fixed maturity securities (a)...............  $   2,792  $23,004  $(3,308)
     Equity securities...........................        (76)   3,506   16,537
     Net change in provision for decline in value
      (b):
       Fixed maturity securities.................     (8,300)     --       103
       Equity securities.........................        --       --       581
     Other.......................................       (480)  (1,110)    (727)
                                                   ---------  -------  -------
                                                      (6,064)  25,400   13,186
                                                   ---------  -------  -------
   Change in difference between fair value and
    cost of investments:
     Fixed maturity securities...................   (167,984)     877   58,476
     Equity securities...........................        964   (4,130)  (5,356)
                                                   ---------  -------  -------
                                                    (167,020)  (3,253)  53,120
                                                   ---------  -------  -------
   Total.........................................  $(173,084) $22,147  $66,306
                                                   =========  =======  =======
</TABLE>
- ---------------------

(a) During 1999, 1998 and 1997, gross gains of $15,022,000, $26,054,000, and
    $7,988,000, respectively, and gross losses of $12,230,000, $3,050,000, and
    $11,296,000, respectively, were realized.

(b) The provision for decline in value of investments is $11,100,000,
    $2,800,000, and $2,800,000 as of December 31, 1999, 1998 and 1997,
    respectively.

   Investment income consists of the following:

<TABLE>
<CAPTION>
                                                   1999      1998      1997
                                                 --------  --------  --------
                                                   (dollars in thousands)
   <S>                                           <C>       <C>       <C>
   Investment income earned on:
     Fixed maturity securities.................. $148,081  $156,961  $159,199
     Invested cash..............................   12,804     9,771    10,829
     Equity securities..........................    3,306     4,670     5,139
     Trading account (a)........................   33,532    32,997    28,831
     Other......................................      833     1,666     1,814
                                                 --------  --------  --------
       Gross investment income..................  198,556   206,065   205,812
     Interest on funds held under reinsurance
      treaties..................................   (8,240)   (3,645)   (6,224)
                                                 --------  --------  --------
     Net investment income...................... $190,316  $202,420  $199,588
                                                 ========  ========  ========
</TABLE>
- ---------------------

(a) The primary focus of the trading account is merger 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.
    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). The
    Company believes that this makes merger arbitrage investments less
    vulnerable to changes in general financial market conditions. Potential
    changes in market conditions are also mitigated by the implementation of
    hedging strategies, including short sales.

  The arbitrage positions are generally hedged against market declines by
  purchasing put options, selling call options or entering into swap
  contracts. Therefore, just as long portfolio positions may incur losses
  during

                                      F-26
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997

  market declines, hedge positions may also incur losses during market
  advances. As of December 31, 1999, the notional amount of long option
  contracts outstanding is $36,331,000 and short option contracts outstanding
  is $50,797,000.

  Investment income earned from net trading account activity includes
  unrealized trading losses of $4,897,000 for 1999 and unrealized trading
  gains of $1,291,000 and $13,737,000 for 1998 and 1997, respectively.

(13) STOCKHOLDERS' EQUITY

   Common Equity The Company has calculated per share data in accordance with
FAS 128. Treasury shares have been excluded from average outstanding shares
from the date of acquisition. The weighted average number of shares used in the
computation of basic earnings per share was 25,823,000, 28,194,000 and
29,503,000 for 1999, 1998 and 1997, respectively. The weighted average number
of shares used in the computations of diluted earnings per share was
25,927,000, 29,115,000 and 30,185,000 for 1999, 1998 and 1997, respectively.
The difference in calculating basic and diluted earnings 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:

<TABLE>
<CAPTION>
                                                           1999    1998    1997
                                                          ------  ------  ------
                                                             (in thousands)
   <S>                                                    <C>     <C>     <C>
   Balance, beginning of year............................ 26,504  29,568  29,454
   Shares issued.........................................     18     108     114
   Shares repurchased....................................   (905) (3,172)    --
                                                          ------  ------  ------
   Balance, end of year.................................. 25,617  26,504  29,568
                                                          ======  ======  ======
</TABLE>

   Preferred Equity During 1997, the Company purchased 276,855 shares of Series
A Preferred Stock for an aggregate cost of $41,523,000. On January 25, 1999,
all remaining outstanding shares of the Series A Preferred Stock were redeemed
for $98,092,000.

   On May 11, 1999, the Company declared a dividend distribution of one Right
for each outstanding share of Common Stock. Each Right entitles the holder to
purchase a unit consisting of one one-thousandth of a shares of Series A Junior
Participating Preferred Stock at a purchase price of $120 per unit (subject to
adjustment) upon the occurrence of certain events relating to potential changes
in control of the Company. The Rights expire on May 11, 2009, unless earlier
redeemed by the Company as provided in the Rights Agreement.

(14) FEDERAL AND FOREIGN INCOME TAXES

   Federal and foreign income tax expense (before the cumulative effect of
change in accounting and extraordinary items) consists of:

<TABLE>
<CAPTION>
                                                     1999     1998      1997
                                                    ------- --------  --------
                                                     (dollars in thousands)
   <S>                                              <C>     <C>       <C>
   Current (expense) benefit....................... $11,785 $(30,283) $(21,999)
   Deferred (expense) benefit......................  33,981   24,818    (8,669)
                                                    ------- --------  --------
     Total (expense) benefit....................... $45,766 $ (5,465) $(30,668)
                                                    ======= ========  ========
</TABLE>

                                      F-27
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


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

<TABLE>
<CAPTION>
                                                     1999     1998      1997
                                                    ------- --------  --------
                                                     (dollars in thousands)
   <S>                                              <C>     <C>       <C>
   Computed "expected" tax (expense) benefit....... $27,737 $(21,973) $(45,234)
   Tax-exempt investment income....................  17,853   18,412    15,432
   Other, net......................................     176   (1,904)     (866)
                                                    ------- --------  --------
     Total (expense) benefit....................... $45,766 $ (5,465) $(30,668)
                                                    ======= ========  ========
</TABLE>

   At December 31, 1999 and 1998, the tax effects of differences that give rise
to significant portions of the deferred tax asset and deferred tax liability
are as follows:

<TABLE>
<CAPTION>
                                                         1999         1998
                                                      -----------  -----------
                                                      (dollars in thousands)
   <S>                                                <C>          <C>
   DEFERRED TAX ASSET
   Loss reserve discounting.......................... $    64,946  $    62,288
   Unearned premiums.................................      40,663       39,652
   Deferred taxes on unrealized investment losses....      22,297          --
   Alternative minimum tax credit carry forward......      20,656          --
   Other.............................................      22,097       11,389
                                                      -----------  -----------
     Gross deferred tax asset........................     170,659      113,329
   Less: valuation allowance.........................      (7,000)      (7,000)
                                                      -----------  -----------
     Deferred tax asset..............................     163,659      106,329
                                                      ===========  ===========
   DEFERRED TAX LIABILITY
   Amortization of intangibles.......................       9,625       11,460
   Deferred policy acquisition costs.................      57,317       55,370
   Realized investment gains.........................         --         2,960
   Deferred taxes on unrealized investment gains.....         --        31,070
   Depreciation......................................       8,985        5,900
   Other.............................................       5,756        6,446
                                                      -----------  -----------
     Deferred tax liability..........................      81,683      113,206
                                                      -----------  -----------
     Net deferred tax asset (liability).............. $    81,976  $    (6,877)
                                                      ===========  ===========
</TABLE>

   Federal income tax expense (benefit) applicable to realized investment gains
(losses) was ($2,122,000), $8,890,000 and $4,615,000 in 1999, 1998 and 1997,
respectively. The Company had a current income tax receivable of $8,939,000 and
$10,532,000 at December 31, 1999 and 1998, respectively. The Company's tax
returns through December 31, 1994 have been examined by the Internal Revenue
Service.

   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 current operations, management
anticipates that it is more likely than not that future taxable income will be
sufficient for the realization of this net asset.

                                      F-28
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


(15) RESERVES FOR LOSSES AND LOSS EXPENSES

   The table below provides a reconciliation of the beginning and ending
reserve balances, on a gross of reinsurance basis:

<TABLE>
<CAPTION>
                                               1999       1998        1997
                                            ---------- ----------  ----------
                                                 (dollars in thousands)
   <S>                                      <C>        <C>         <C>
   Net reserves at beginning of year....... $1,583,304 $1,433,011  $1,333,122
                                            ---------- ----------  ----------
   Net reserves of companies acquired......                 2,189       4,984
   Net provision for losses and loss
    expenses:
     Claims occurring during the current
      year.................................  1,032,089    944,887     747,977
     Increase (decrease in estimates for
      claims occurring in prior years......     28,351    (42,929)    (21,313)
     Amortization of discount..............     10,473      9,111       7,760
                                            ---------- ----------  ----------
                                             1,070,913    911,069     734,424
                                            ---------- ----------  ----------
   Net payments for claims
     Current year..........................    433,942    397,787     315,370
     Prior years...........................    496,410    365,178     324,149
                                            ---------- ----------  ----------
                                               930,352    762,965     639,519
                                            ---------- ----------  ----------
   Net reserves at end of year.............  1,723,865  1,583,304   1,433,011
   Ceded reserves at end of year...........    617,025    537,219     476,677
                                            ---------- ----------  ----------
   Gross reserves at end of year........... $2,340,890 $2,120,523  $1,909,688
                                            ---------- ----------  ----------
</TABLE>

   The balance sheet includes $20,348,000 and $6,043,000 as of December 31,
1999 and 1998, respectively, relating to reserves for life insurance which are
not included in the table above, and the statement of operations includes
$14,913,000 and $3,693,000 for the years ended December 31, 1999 and 1998,
respectively, relating to the policyholder benefits incurred on life insurance
which are not included in the above table. The 1999 increase in reserves
related to prior years is due to reserve strengthening in the regional segment
partially offset by favorable reserve development in the specialty and
alternative markets segments.

   Due to the nature of Excess Workers Compensation ("EWC") business and the
long period of time over which losses are paid in this line of business, the
Company discounts the liability for losses and loss expenses established for
the EWC line of business. Discounting liabilities for losses and loss expenses
gives recognition to the time value of money. 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 and is supplemented with data compiled from insurance
companies writing workers' compensation on an excess-of-loss basis. The
expected payout pattern has a very long duration because it reflects the nature
of losses generally which penetrate self-insured retention limits contained in
EWC policies. The Company has limited the estimated payout duration to 30 years
in order to introduce an additional level of conservatism into the discounting
process. The liabilities for losses and loss expenses have been discounted
using "risk-free" discount rates determined by reference to the U.S. Treasury
yield curve weighted for the EWC premium volume to reflect the seasonality of
the anticipated duration of losses associated with such coverages. The weighted
average discount rate for accident years 1999, 1998, 1997, 1996 and 1995 and
prior is 5.90%, 5.90%, 5.98%, 5.90% and 5.80%, respectively. The aggregate net
discount, after reflecting the effects of ceded reinsurance, is $186,981,000,
$186,964,000 and $189,600,000 at December 31, 1999, 1998 and 1997,
respectively. For statutory purposes, the Company uses a discount rate of 3.0%
as permitted by the Department of Insurance of the State of Ohio.


                                      F-29
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997

   To date, known pollution and environmental claims at the insurance company
subsidiaries have not had a material impact on the Company's operations.
Environmental claims have not materially impacted the Company because its
subsidiaries generally did not insure larger industrial companies which are
subject to significant environmental exposures.

   The Company's net reserves for losses and loss adjustment expenses relating
to pollution and environmental claims were $30,944,000 and $33,391,000 at
December 31, 1999 and 1998, respectively. The Company's gross reserves for
losses and loss adjustment expenses relating to pollution and environmental
claims were $65,966,000 and $69,283,000 at December 31, 1999 and 1998,
respectively. Net incurred losses and loss expenses for reported pollution and
environmental claims were approximately $1,371,000, $2,227,000 and $79,000 in
1999, 1998 and 1997, respectively. Net paid losses and loss expenses were
approximately $3,819,000, $2,614,000 and $2,175,000 in 1999, 1998 and 1997,
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
effect 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.

                                      F-30
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


(16) INDUSTRY SEGMENTS

   The Company's operations are presently conducted through five basic
segments: specialty; alternative markets; reinsurance; regional; and
international. The specialty lines of insurance consist primarily of excess and
surplus lines, commercial transportation, professional liability, directors and
officers liability and surety. The Company's alternative markets segment
specializes in insuring, reinsuring and administering self-insurance programs
and other alternative risk transfer mechanisms for public entities, private
employers and associations. The Company's reinsurance segment specializes in
underwriting property, casualty and surety reinsurance on both a treaty and
facultative basis. The regional property casualty insurance segment writes
standard commercial and personal lines insurance for such risks as automobiles,
homes and businesses. Finally, the international operations represent the
Company's joint venture with Northwestern Mutual Life International (65% owned
by the Company), which writes property and casualty, as well as life insurance,
internationally. For the years ended December 31, 1999, 1998 and 1997, the
joint venture wrote life premiums of $24,548,000, $7,994,000 and $639,000,
respectively.

   The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Income tax expense (benefits)
were calculated in accordance with the Company's tax sharing agreements, which
provide for the recognition of tax loss carryforwards only to the extent of
taxes previously paid. Summary financial information about the company's
operating segments is presented in the following table. Income before income
taxes by segment consists of revenues less expenses related to the respective
segment's operations. These amounts include realized gains (losses) where
applicable. Intersegment revenues consist primarily of dividends, interest on
intercompany debt and fees paid by subsidiaries for portfolio management and
other services to the Company. Identifiable assets by segment are those assets
used in the operation of each segment.

<TABLE>
<CAPTION>
                                              Revenues
                            ---------------------------------------------     Income     Income Tax
                            Investment Unaffiliated  Inter-                (loss) before  Expense
                              Income    Customers    Segment     Total     Income Taxes  (Benefits)
                            ---------- ------------ ---------  ----------  ------------- ----------
                                                   (dollars in thousands)
   <S>                      <C>        <C>          <C>        <C>         <C>           <C>
   December 31, 1999:
   Regional................  $ 52,639   $  700,667  $   1,462  $  702,129    $(97,362)    $ (7,589)
   Reinsurance.............    47,288      341,201        739     341,940      14,091        1,992
   Specialty...............    50,231      310,373     (1,305)    309,068      39,261        8,692
   Alternative Markets.....    36,355      221,690        586     222,276      24,919        4,653
   International...........     6,469       93,878        --       93,878       3,535        1,443
   Corporate and other.....     1,011        5,859    114,398     120,257      32,612      (47,210)
   Adjustments and
    eliminations...........    (3,677)         --    (115,880)   (115,880)    (96,304)      (7,747)
                             --------   ----------  ---------  ----------    --------     --------
   Consolidated............  $190,316   $1,673,668  $     --   $1,673,668    $(79,248)    $(45,766)
                             ========   ==========  =========  ==========    ========     ========
   December 31, 1998:
   Regional................  $ 53,942   $  680,505  $   2,014  $  682,519    $(24,524)    $  3,323
   Reinsurance.............    47,643      296,100      1,044     297,144      33,858        6,911
   Specialty...............    59,345      309,047      2,908     311,955      85,889       24,349
   Alternative Markets.....    34,667      205,024        911     205,935      36,501        9,505
   International...........     5,469       80,287        --       80,287      (7,017)         349
   Corporate and other.....     7,927       11,554     81,983      93,537       9,288        5,465
   Adjustments and
    eliminations...........    (6,573)         --     (88,860)    (88,860)    (71,214)     (44,437)
                             --------   ----------  ---------  ----------    --------     --------
   Consolidated............  $202,420   $1,582,517  $     --   $1,582,517    $ 62,781     $  5,465
                             ========   ==========  =========  ==========    ========     ========
   December 31, 1997:
   Regional................  $ 51,920   $  634,468  $     674  $  635,142    $ 47,624     $ 14,833
   Reinsurance.............    45,520      241,204        882     242,086      42,193       10,641
   Specialty...............    60,162      281,630      2,691     284,321      68,088       18,529
   Alternative Markets.....    34,390      183,904        829     184,733      34,733       10,257
   International...........     3,623       45,360        --       45,360      (3,566)        (181)
   Corporate and other.....    10,565       13,744     48,351      62,095     (19,815)      30,849
   Adjustments and
    eliminations...........    (6,592)         --     (53,427)    (53,427)    (40,016)     (54,260)
                             --------   ----------  ---------  ----------    --------     --------
   Consolidated............  $199,588   $1,400,310  $     --   $1,400,310    $129,241     $ 30,668
                             ========   ==========  =========  ==========    ========     ========
</TABLE>

                                      F-31
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


   Interest expense for the alternative markets and reinsurance segments was
$2,870,000, $2,327,000 and $2,327,000 for the years ended December 31, 1999,
1998 and 1997, respectively. Additionally, corporate interest expense (net of
intercompany amounts) was $47,931,000, $46,492,000 and $46,542,000 for the
corresponding periods. Identifiable assets by segment are as follows:

<TABLE>
<CAPTION>
                                                     December 31,
                                          -------------------------------------
                                             1999         1998         1997
                                          -----------  -----------  -----------
   <S>                                    <C>          <C>          <C>
   Regional.............................. $ 1,436,575  $ 1,370,849  $ 1,264,962
   Reinsurance...........................   1,022,776      996,186      863,784
   Specialty.............................   1,370,837    1,502,366    1,403,068
   Alternative Markets...................     878,125      863,578      749,724
   International.........................     177,675      151,832      119,792
   Corporate and other...................   1,362,345    1,545,744    1,602,907
   Elimination...........................  (1,463,542)  (1,447,124)  (1,459,919)
                                          -----------  -----------  -----------
   Consolidated.......................... $ 4,784,791  $ 4,983,431  $ 4,544,318
                                          ===========  ===========  ===========
</TABLE>

(17) 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, 1999 and 1998:

<TABLE>
<CAPTION>
                                            1999                  1998
                                    --------------------- ---------------------
                                     Carrying              Carrying
                                      Amount   Fair Value   Amount   Fair Value
                                    ---------- ---------- ---------- ----------
                                              (dollars in thousands)
   <S>                              <C>        <C>        <C>        <C>
   Investments..................... $2,873,301 $2,871,109 $3,302,103 $3,315,422
   Long-term debt..................    394,792    383,901    394,444    435,702
   Capital Trust Securities........    198,126    172,547    207,988    206,464
                                    ---------- ---------- ---------- ----------
</TABLE>

   The estimated fair value of investments is based on quoted market prices as
of the respective reporting dates. The fair value of the long-term debt is
based on rates available for borrowings similar to the Company's outstanding
debt as of the respective reporting dates.

(18) DIVIDENDS FROM SUBSIDIARIES AND STATUTORY FINANCIAL INFORMATION

   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 2000, the maximum amount of dividends which can be paid without such
approval is approximately $77,264,000.

   Combined net income and policyholders' surplus of the Company's consolidated
insurance subsidiaries, as determined in accordance with statutory accounting
practices, are as follows:

<TABLE>
<CAPTION>
                                                      1999      1998     1997
                                                    --------  -------- --------
                                                      (dollars in thousands)
   <S>                                              <C>       <C>      <C>
    Net Income (loss).............................. $(34,598) $ 67,014 $121,300
                                                    ========  ======== ========
    Policyholders' surplus......................... $865,672  $941,853 $971,749
                                                    ========  ======== ========
</TABLE>

   The significant variances between statutory accounting practices and GAAP
are: For statutory purposes, bonds are carried at amortized cost, acquisition
costs are charged to operations as incurred, deferred federal income taxes are
not provided for temporary differences between book and tax assets and
liabilities, EWC reserves are discounted at a 3.0% rate and certain assets
designated as "non-admitted assets" are charged against surplus.

                                      F-32
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
              For the years ended December 31, 1999, 1998 and 1997


   At December 31, 1999 and 1998, bonds with a fair value of $209,485,000 and
$185,206,000 were on deposit with various state insurance departments as
required by state laws.

   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. RBC did not affect the operations of the
Company's insurance subsidiaries since all of its subsidiaries have an RBC
amount above the authorized control level RBC, as defined by the NAIC.

   The NAIC recently completed a process intended to codify statutory
accounting practices for certain insurance enterprises. As a result of this
process, the NAIC will issue a revised statutory accounting practices and
procedures manual, which will be effective January 1, 2001. The Company has not
yet determined the impact that this change will have on the statutory capital
and surplus of its insurance subsidiaries.

(19) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

   The following is a summary of quarterly financial data:

<TABLE>
<CAPTION>
                                                    Three months ended
                          --------------------------------------------------------------------------
                              March 31,          June 30,        September 30,      December 31,
                          ------------------ ----------------- ------------------ ------------------
                            1999      1998     1999     1998     1999      1998     1999      1998
                          --------  -------- -------- -------- --------  -------- --------  --------
                                       (dollars in thousands except per share data)
<S>                       <C>       <C>      <C>      <C>      <C>       <C>      <C>       <C>
Revenues................  $407,713  $383,275 $416,250 $396,910 $427,823  $394,425 $421,882  $407,907
                          ========  ======== ======== ======== ========  ======== ========  ========
Net income (loss) before
 preferred dividends....  $  2,472  $ 25,673 $  5,624 $ 22,743 $ (1,356) $ 12,261 $(40,788) $ (1,917)
                          ========  ======== ======== ======== ========  ======== ========  ========
Net income (loss) before
 change in accounting
 and extraordinary gain
 (loss).................  $  1,975  $ 23,786 $  5,624 $ 20,856 $ (1,356) $ 10,374 $(40,788) $ (3,804)
                          ========  ======== ======== ======== ========  ======== ========  ========
Net income (loss)
 attributable to common
 stockholders...........  $ (1,275) $ 21,351 $  5,624 $ 18,274 $   (621) $ 10,374 $(40,788) $ (3,804)
                          ========  ======== ======== ======== ========  ======== ========  ========
Earnings (loss) per
 share:
 Basic
 Before change in
  accounting and
  extraordinary gain
  (loss)................  $    .07  $    .81 $    .22 $    .73 $   (.06) $    .37 $  (1.59) $   (.14)
 Net income (loss)......      (.05)      .73      .22      .64     (.02)      .37    (1.59)     (.14)
 Diluted
 Before change in
  accounting and
  extraordinary gain
  (loss)................       .07       .78      .22      .70     (.05)      .36    (1.59)     (.14)
 Net income (loss)......      (.05)      .71      .22      .61     (.02)      .36    (.159)     (.14)
                          ========  ======== ======== ======== ========  ======== ========  ========
</TABLE>

                                      F-33
<PAGE>




                      [THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

PROSPECTUS

W. R. Berkley Corporation

Debt Securities and Debt Warrants
Preferred Stock, Depositary Shares and Preferred Stock Warrants
Common Stock and Common Stock Warrants
Stock Purchase Contracts and Stock Purchase Units

   W. R. Berkley Corporation (the "Corporation") may from time to time offer,
together or separately, (i) one or more series of its unsecured debt
securities which may be either senior debentures, notes, bonds and/or other
evidences of indebtedness ("Senior Securities") or subordinated debentures,
notes, bonds and/or other evidences of indebtedness ("Subordinated
Securities"), both of which may be convertible into common stock, par value
$.20 per share, of the Corporation ("Common Stock") or preferred stock, par
value $.10 per share, of the Corporation ("Preferred Stock"), (ii) warrants to
purchase Senior Securities or Subordinated Securities ("Debt Warrants"), (iii)
shares of Preferred Stock which may be convertible into shares of Common Stock
or exchangeable for Debt Securities, (iv) shares of Preferred Stock
represented by depositary shares ("Depositary Shares"), (v) warrants to
purchase shares of Preferred Stock ("Preferred Stock Warrants"), (vi) shares
of Common Stock, (vii) warrants to purchase shares of Common Stock ("Common
Stock Warrants"), (viii) Stock Purchase Contracts ("Stock Purchase Contracts")
to purchase shares of Common Stock or shares of Preferred Stock and (ix) Stock
Purchase Units ("Stock Purchase Units") representing ownership of a Stock
Purchase Contract and debt obligations of the United States of America or
agencies or instrumentalities thereof securing the holder's obligation to
purchase the shares of Common Stock or Preferred Stock under the Stock
Purchase Contract, in amounts, at prices and on terms to be determined at the
time of the offering. The Senior Securities and the Subordinated Securities
are collectively referred to herein as the "Debt Securities"; the Debt
Warrants, Preferred Stock Warrants and Common Stock Warrants are collectively
referred to herein as the "Warrants"; and the Debt Securities, Warrants,
shares of Preferred Stock, Depositary Shares, shares of Common Stock, Stock
Purchase Contracts and Stock Purchase Units are collectively referred to
herein as the "Securities."

   The Securities offered pursuant to this Prospectus may be offered
separately or together in one or more series up to an aggregate initial public
offering price of $400,000,000 or the equivalent thereof denominated in
foreign currencies or units of two or more foreign currencies such as European
Currency Units, at individual prices and on terms to be set forth in one or
more supplements to this Prospectus (each, a "Prospectus Supplement").
Notwithstanding the foregoing, Common Stock (except Common Stock issued upon
conversion or exchange of Debt Securities or Preferred Stock), Common Stock
Warrants, Stock Purchase Contracts and Stock Purchase Units may be offered up
to an aggregate initial public offering price of $300,000,000.

   The Senior Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Corporation. The Subordinated Securities will be
subordinated to all existing and future Senior Indebtedness (as defined
herein) of the Corporation. See "Description of Debt Securities."

   The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and,
among other things, will include, where applicable, (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, currency,
denominations, maturity, rate or formula and time of payment of interest,
premium, terms for redemption at the option of the Corporation or repayment at
the option of the holder, terms for sinking fund payments, terms for
conversion or exchange into other Securities or Common Stock of the
Corporation and any initial public offering price; (ii) in the case of shares
of Preferred Stock, the specific title and stated value, any dividend,
liquidation, redemption, conversion, voting and other rights and the initial
public offering price; (iii) in the case of Warrants, the applicable type and
amount of Securities covered thereby and, where applicable, the duration,
aggregate amount, offering price, exercise price and detachability of such
Warrants, (iv) in the case of Depositary Shares, the fractional share of
Preferred Stock represented by each such Depositary Share, (v) in the case of
Common Stock, the aggregate number of shares offered, initial public offering
price and other terms thereof, (vi) in the case of Stock Purchase Contracts,
the designation and number of shares of Common Stock or Preferred Stock
issuable thereunder, the purchase price of the Common Stock or Preferred
Stock, the date or dates on which the Common Stock or Preferred Stock is
required to be purchased by the holders of the Stock Purchase Contracts, any
periodic payments required to be made by the Corporation to the holders of the
Stock Purchase Contracts or vice versa, and the terms of the offering and sale
thereof and (vii) in the case of Stock Purchase Units, the specific terms of
the Stock Purchase Contracts and any debt obligations securing the holder's
obligation to purchase the Common Stock or Preferred Stock under the Stock
Purchase Contracts, and the terms of the offering and sale thereof.

   The Prospectus Supplement will also contain information, where applicable,
about certain U.S. federal income tax, accounting and other considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.

                                  -----------
THESE SECURITIES HAVE  NOT BEEN APPROVED OR DISAPPROVED BY  THE SECURITIES AND
 EXCHANGE  COMMISSION  OR  ANY  STATE   SECURITIES  COMMISSION  NOR  HAS  THE
 SECURITIES  AND  EXCHANGE  COMMISSION  OR ANY  STATE  SECURITIES  COMMISSION
  PASSED   UPON  THE   ACCURACY  OR   ADEQUACY  OF   THIS  PROSPECTUS.   ANY
   REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                                  -----------
   The Securities may be sold directly by the Corporation, or through agents
designated from time to time, or through underwriters or dealers. If any
agents of the Corporation or any underwriters are involved in the sale of the
Securities, the names of such agents or underwriters and any applicable fees,
commissions or discounts and the net proceeds to the Corporation (if other
than as described herein) from such sale will be set forth in the applicable
Prospectus Supplement. See "Plan of Distribution."

The date of this Prospectus is September 28, 1995.
<PAGE>

                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

   The following documents heretofore filed by the Corporation with the
Securities and Exchange Commission (the "Commission") are incorporated herein
by reference:

     1. Annual Report on Form 10-K for the year ended December 31, 1994,
  filed with the Commission pursuant to Section 13 of the Securities Exchange
  Act of 1934 (the "Exchange Act");

     2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995
  and June 30, 1995, filed with the Commission pursuant to Section 13 of the
  Exchange Act;

     3. Current Reports on Form 8-K, dated July 20, 1995, September 14, 1995
  and September 14, 1995, filed with the Commission pursuant to Section 13 of
  the Exchange Act; and

     4. The descriptions of the Series A Cumulative Redeemable Preferred
  Stock and the Common Stock of the Corporation contained in the
  Corporation's Registration Statements on Form 8-A dated January 24, 1994
  and July 25, 1974, respectively, filed with respect to such securities
  pursuant to Section 12 of the Exchange Act, and all amendments or reports
  filed for purposes of updating such descriptions.

   All reports subsequently filed pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act prior to the termination of the offering of the Securities
shall be deemed to be incorporated by reference into this Prospectus. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

   The Corporation will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or
all documents incorporated herein by reference (other than exhibits to such
documents). Written requests should be directed to:

                             Robert S. Gorin, Esq.
              Senior Vice President, General Counsel and Secretary
                           W. R. Berkley Corporation
                                165 Mason Street
                                 P.O. Box 2518
                       Greenwich, Connecticut 06836-2518
              Telephone requests may be directed to (203) 629-3000

   No person is authorized to give any information or to make any
representations, other than those contained or incorporated by reference in
this Prospectus or the accompanying Prospectus Supplement, in connection with
the offering contemplated hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Corporation or any underwriter, dealer or agent. This Prospectus and the
accompanying Prospectus Supplement do not constitute an offer to sell or a
solicitation of an offer to buy any Securities other than the Securities to
which they relate and do not constitute an offer to sell or a solicitation of
an offer to buy any Securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction. Neither the
delivery of this Prospectus or the accompanying Prospectus Supplement, nor any
sale made hereunder or thereunder, shall, under any circumstances, create any
implication that there has been no change in the affairs of the Corporation
since the date hereof or thereof or that the information contained or
incorporated by reference herein or therein is correct as of any time
subsequent to such date.

                                       2
<PAGE>

                             AVAILABLE INFORMATION

   The Corporation is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's New York Regional Office, 7 World Trade
Center, New York, New York 10048, and Chicago Regional Office, Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661, and copies
of such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.

   This Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") filed
by the Corporation with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information included in the Registration Statement, certain parts of which are
omitted in accordance with applicable regulations. For further information
pertaining to the Corporation and the Securities offered hereby, reference is
made to the Registration Statement and the Exhibits thereto which may be
inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies thereof may be obtained from the
Commission upon payment of the prescribed fees.

                                       3
<PAGE>

                                THE CORPORATION

   The Corporation is an insurance holding company which does business, through
its subsidiaries, operating in four segments of the insurance business:
regional property casualty insurance; specialty lines of insurance (including
excess and surplus lines and commercial transportation); insurance services
operations (including the management of alternative insurance market
mechanisms); and reinsurance (conducted through Signet Star Holdings, Inc. and
its affiliates). The Corporation was founded on the concept that a group of
autonomous regional and specialty insurance entities could compete effectively
in selected markets within a very large industry. Decentralized control allows
each subsidiary to respond to local or specialty market conditions while
capitalizing on the effectiveness of centralized investment and reinsurance
management and actuarial, financial and legal staff support.

   The Corporation's regional property casualty subsidiaries write standard
commercial and personal lines insurance for such property and liability risks
as automobiles, homes and small businesses. They obtain their business
primarily in the smaller communities of the midwest and southwest through
independent insurance agencies.

   The Corporation's specialty lines subsidiaries write excess and surplus
lines and commercial transportation insurance. The Corporation's two excess and
surplus lines subsidiaries insure complex risks requiring specialized coverage
not available in the conventional market. Their business is received from
wholesale brokers on a nationwide basis, who are solicited by retail agents
whose clients are the insured. Another subsidiary insures risks in the
commercial trucking and bus industry.

   The Corporation's insurance services subsidiaries provide administration
services including loss control, policy issuance and claims handling for
workers' compensation programs and self-insurance pools. In addition, several
subsidiaries provide agency and brokerage services.

   Signet Star Holdings, Inc. writes both treaty reinsurance, where a contract
automatically covers all risks of a defined category, and facultative
reinsurance, which is negotiated on a policy-by-policy basis. This business is
assumed from other insurance companies throughout the United States and
primarily is referred by independent reinsurance intermediaries.

   The Corporation's executive offices are located at 165 Mason Street, P.O.
Box 2518, Greenwich, Connecticut 06836-2518, telephone number (203) 629-3000.
The Corporation was incorporated in Delaware in 1970 as the successor to a New
Jersey corporation incorporated in 1967.

           RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
                                STOCK DIVIDENDS

   The following table sets forth the historical ratios of earnings to combined
fixed charges and preferred stock dividends of the Corporation for the periods
indicated:

<TABLE>
<CAPTION>
         Six Months
           Ended
          June 30,                       Fiscal Year Ended December 31,
       -----------------          ---------------------------------------------------------------------
       1995        1994           1994           1993           1992           1991           1990
       ----        ----           ----           ----           ----           ----           ----
       <S>         <C>            <C>            <C>            <C>            <C>            <C>
       3.4         2.0            1.6            3.2            3.6            5.9            4.7
</TABLE>

   The ratios of earnings to combined fixed charges and preferred stock
dividends represent the number of times fixed charges (interest, debt expense
and preferred stock dividends and one-third of all rent and related costs,
considered to represent an appropriate interest factor, charged to income) are
covered by income before income taxes and cumulative effect of change in
accounting principle, extraordinary credits and fixed charges (other than
capitalized interest).

                                       4
<PAGE>

                            APPLICATION OF PROCEEDS

   Except as may otherwise be provided in the Prospectus Supplement, the net
proceeds from the sale of the Securities will be used for working capital,
acquisitions and other general corporate purposes. Pending ultimate
application, the net proceeds may be used to make short-term investments or
reduce short-term borrowings.

                         DESCRIPTION OF DEBT SECURITIES

   The following description of the Debt Securities sets forth certain general
terms and provisions of the Indentures under which the Debt Securities are to
be issued. The particular terms of each issue of Debt Securities, as well as
any modifications or additions to such general terms that may apply in the case
of such Debt Securities, will be described in the Prospectus Supplement
relating to such Debt Securities. Accordingly, for a description of the terms
of a particular issue of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and to the following description.

The Indentures

   Senior Securities, if issued in the future, will be issued under an
Indenture dated as of October 1, 1993 between the Corporation and Chemical Bank
("Chemical"), as Trustee (the "Senior Indenture"). Subordinated Securities, if
issued in the future, will be issued under an Indenture dated as of October 1,
1993 between the Corporation and Chemical, as Trustee (the "Subordinated
Indenture"). The Senior Indenture and the Subordinated Indenture are sometimes
referred to herein collectively as the "Indentures" and individually as an
"Indenture."

   The Indentures have been filed as exhibits to the Registration Statement of
which this Prospectus is a part. Each Indenture is available for inspection at
the corporate trust office of Chemical at 450 West 33rd Street, New York, New
York 10001. The following description of the Indentures and summaries of
certain provisions thereof do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all provisions of the
respective Indentures. All section references appearing herein are to sections
of the applicable Indenture or Indentures, and capitalized terms defined in the
Indentures are used herein as therein defined (unless otherwise defined
herein).

   There is no requirement that future issues of debt securities of the
Corporation be issued under either of the Indentures, and the Corporation is
free to employ other indentures or documentation, containing provisions
different from those included in the Indentures or applicable to one or more
issues of Debt Securities, in connection with future issues of such other debt
securities.

General Terms of Debt Securities

   Each Indenture provides that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time in or pursuant to authority
granted by a resolution of the Board of Directors of the Corporation or as
established in one or more indentures supplemental to such Indenture (Section
301 of the Indentures). Each Indenture also provides that there may be more
than one Trustee under such Indenture, each with respect to one or more series
of Debt Securities. Any Trustee under either Indenture may resign or be removed
with respect to one or more series of Debt Securities issued under such
Indenture, and a successor Trustee may be appointed to act with respect to such
series (Section 608 of the Indentures).

   In the event that two or more persons are acting as Trustee with respect to
different series of Debt Securities issued under the same Indenture, each such
Trustee shall be a Trustee of a trust under such Indenture separate and apart
from the trust administered by any other such Trustee (Section 609 of the
Indentures), and, except as otherwise indicated herein, any action described
herein to be taken by the Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Trustee under such Indenture.

                                       5
<PAGE>

   Reference is made to the Prospectus Supplement relating to the series of
Debt Securities to be offered for the following terms thereof: (1) the title of
such Debt Securities; (2) any limit on the aggregate principal amount of such
Debt Securities; (3) the purchase price of such Debt Securities (expressed as a
percentage of the principal amount); (4) the date or dates, or the method for
determining such date or dates, on which the principal (and premium, if any) of
such Debt Securities will be payable; (5) the rate or rates (which may be fixed
or variable), or the method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any; (6) the date or dates
from which any such interest will accrue, the Interest Payment Dates on which
any such interest will be payable, the Regular Record Dates for such Interest
Payment Dates and the basis upon which interest shall be calculated if other
than that of a 360 day year of twelve 30-day months; (7) the place or places
where the principal of (and premium, if any) and interest, if any, on such Debt
Securities will be payable and such Debt Securities may be surrendered for
registration of transfer or exchange; (8) the period or periods within which,
the price or prices at which and the terms and conditions upon which such Debt
Securities may be redeemed, as a whole or in part, at the option of the
Corporation, if the Corporation is to have such an option; (9) the obligation,
if any, of the Corporation to redeem or purchase such Debt Securities pursuant
to any sinking fund or analogous provision or at the option of a Holder
thereof, and the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities will be redeemed
or purchased, as a whole or in part, pursuant to such obligation; (10) if other
than U.S. dollars, the currency or currencies in which such Debt Securities are
denominated and payable, which may be a foreign currency or units of two or
more foreign currencies or a composite currency or currencies, and the terms
and conditions relating thereto; (11) whether the amount of payments of
principal of (and premium, if any) or interest, if any, on such Debt Securities
may be determined with reference to an index, formula or other method (which
index, formula or method may, but need not be, based on a currency, currencies,
currency unit or units or composite currency or currencies) and the manner in
which such amounts shall be determined; (12) any additions, modifications or
deletions in the terms of such Debt Securities with respect to the Events of
Default set forth in the respective Indentures; (13) the terms, if any, upon
which such Debt Securities may be convertible into Common Stock or Preferred
Stock of the Corporation and the terms and conditions upon which such
conversion will be effected, including the initial conversion price or rate,
the conversion period and any other provision in addition to or in lieu of
those described herein; (14) whether such Debt Securities will be issued in
certificated or book-entry form; (15) whether such Debt Securities will be in
registered or bearer form and, if in registered form, the denominations thereof
if other than $1,000 and any integral multiple thereof; (16) the applicability,
if any, of the defeasance and covenant defeasance provisions of Article XIV of
the applicable Indenture; (17) if such Debt Securities are to be issued upon
the exercise of Debt Warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered; and (18) any other terms of such
Debt Securities not inconsistent with the provisions of the respective
Indentures (Section 301 of the Indentures).

   Debt Securities may be issued under the Indentures as Original Issue
Discount Securities to be offered and sold at a substantial discount form the
principal amount thereof. Special U.S. federal income tax, accounting and other
considerations applicable thereto will be described in the applicable
Prospectus Supplement.

   Unless otherwise provided with respect to a series of Debt Securities, the
Debt Securities will be issued only in registered form without coupons in
denominations of $1,000 and integral multiples thereof (Section 302 of the
Indentures).

Certificated Securities

   Except as may be set forth in the applicable Prospectus Supplement, Debt
Securities will not be issued in certificated form. If, however, Debt
Securities are to be issued in certificated form, no service charge will be
made for any transfer or exchange of any Debt Securities, but the Corporation
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (Section 305 of the Indentures).

                                       6
<PAGE>

Book-Entry Debt Securities

   The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, a depository identified in the Prospectus
Supplement. Global Securities may be issued in either registered or bearer form
and in either temporary or permanent form. Unless otherwise provided in the
Prospectus Supplement, Debt Securities that are represented by a Global
Security will be issued in denominations of $1,000 and any integral multiple
thereof, and will be issued in registered form only, without coupons. Payments
of principal of, premium, if any, and interest on Debt Securities represented
by a Global Security will be made by the Corporation to the Trustee under the
applicable Indenture, and then forwarded to the depository.

   The Corporation anticipates that any Global Securities will be deposited
with, or on behalf of, The Depository Trust Company, New York, New York
("DTC"), that such Global Securities will be registered in the name of DTC's
nominee, and that the following provisions will apply to the depository
arrangements with respect to any such Global Securities. Additional or
differing terms of the depository arrangements will be described in the
Prospectus Supplement relating to a particular series of Debt Securities issued
in the form of Global Securities.

   So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the applicable Indenture. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities in certificated
form and will not be considered the owners or Holders thereof under the
applicable Indenture. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in certificated form;
accordingly, such laws may limit the transferability of beneficial interests in
a Global Security.

   If DTC is at any time unwilling or unable to continue as depository or if at
any time DTC ceases to be a clearing agency registered under the Exchange Act
if so required by applicable law or regulation, and, in either case, a
successor depository is not appointed by the Corporation within 90 days, the
Corporation will issue individual Debt Securities in certificated form in
exchange for the Global Securities. In addition, the Corporation may at any
time, and in its sole discretion, determine not to have any Debt Securities
represented by one or more Global Securities, and, in such event, will issue
individual Debt Securities in certificated form in exchange for the relevant
Global Securities. In any such instance, an owner of a beneficial interest in a
Global Security will be entitled to physical delivery of individual Debt
Securities in certificated form of like tenor and rank, equal in principal
amount to such beneficial interest and to have such Debt Securities in
certificated form registered in its name. Unless otherwise provided in the
Prospectus Supplement, Debt Securities so issued in certificated form will be
issued in denominations of $1,000 or any integral multiple thereof, and will be
issued in registered form only, without coupons.

   The following is based on information furnished by DTC:

     DTC will act as securities depository for the Debt Securities. The Debt
  Securities will be issued as fully registered securities registered in the
  name of Cede & Co. (DTC's partnership nominee). One fully registered Debt
  Security certificate is issued with respect to each $200 million of
  principal amount of the Debt Securities of a series, and an additional
  certificate is issued with respect to any remaining principal amount of
  such series.

     DTC is a limited-purpose trust company organized under the New York
  Banking Law, a "banking organization" within the meaning of the New York
  Banking Law, a member of the Federal Reserve System, a "clearing
  corporation" within the meaning of the New York Uniform Commercial Code,
  and a "clearing agency" registered pursuant to the provisions of Section
  17A of the Exchange Act. DTC holds securities that its participants
  ("Participants") deposit with DTC. DTC also facilitates the settlement
  among Participants of securities transactions, such as transfers and
  pledges, in deposited securities through

                                       7
<PAGE>

  electronic computerized book-entry changes in Participants' accounts,
  thereby eliminating the need for physical movement of securities
  certificates. Direct Participants include securities brokers and dealers,
  banks, trust companies, clearing corporations and certain other
  organizations ("Direct Participants"). DTC is owned by a number of its
  Direct Participants and by the New York Stock Exchange, Inc., the American
  Stock Exchange, Inc. and the National Association of Securities Dealers,
  Inc. Access to the DTC system is also available to others such as
  securities brokers and dealers, banks and trust companies that clear
  through or maintain a custodial relationship with a Direct Participant,
  either directly or indirectly ("Indirect Participants"). The rules
  applicable to DTC and its Participants are on file with the Commission.

     Purchases of Debt Securities under the DTC system must be made by or
  through Direct Participants, which will receive a credit for the Debt
  Securities on DTC's records. The ownership interest of each actual
  purchaser of each Debt Security ("Beneficial Owner") is in turn recorded on
  the Direct and Indirect Participants' records. A Beneficial Owner does not
  receive written confirmation from DTC of its purchase, but such Beneficial
  Owner is expected to receive a written confirmation providing details of
  the transaction, as well as periodic statements of its holdings, from the
  Direct or Indirect Participant through which such Beneficial Owner entered
  into the transaction. Transfers of ownership interests in Debt Securities
  are accomplished by entries made on the books of Participants acting on
  behalf of Beneficial Owners. Beneficial Owners do not receive certificates
  representing their ownership interests in Debt Securities, except in the
  event that use of the book-entry system for the Debt Securities is
  discontinued.

     To facilitate subsequent transfers, the Debt Securities are registered
  in the name of DTC's partnership nominee, Cede & Co. The deposit of the
  Debt Securities with DTC and their registration in the name of Cede & Co.
  will effect no change in beneficial ownership. DTC has no knowledge of the
  actual Beneficial Owners of the Debt Securities; DTC records reflect only
  the identity of the Direct Participants to whose accounts Debt Securities
  are credited, which may or may not be the Beneficial Owners. The
  Participants remain responsible for keeping account of their holdings on
  behalf of their customers.

     Delivery of notices and other communications by DTC to Direct
  Participants, by Direct Participants to Indirect Participants, and by
  Direct Participants and Indirect Participants to Beneficial Owners are
  governed by arrangements among them, subject to any statutory or regulatory
  requirements as may be in effect from time to time.

     Redemption notices shall be sent to Cede & Co. If less than all of the
  Debt Securities within an issue are being redeemed, DTC's practice is to
  determine by lot the amount of interest of each Direct Participant in such
  issue to be redeemed.

     Neither DTC nor Cede & Co. consents or votes with respect to the Debt
  Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus
  Proxy") to the issuer as soon as possible after the record date. The
  Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
  Direct Participants to whose accounts the Debt Securities are credited on
  the record date (identified on a list attached to the Omnibus Proxy).

     Principal, premium, if any, and interest payments on the Debt Securities
  are made to DTC. DTC's practice is to credit Direct Participants' accounts
  on the payable date in accordance with their respective holdings as shown
  on DTC's records unless DTC has reason to believe that it will not receive
  payment on the payable date. Payments by Participants to Beneficial Owners
  are governed by standing instructions and customary practices, as is the
  case with securities held for the accounts of customers in bearer form or
  registered in "street name," and are the responsibility of such Participant
  and not of DTC, the applicable Trustee or the Corporation, subject to any
  statutory or regulatory requirements as may be in effect from time to time.
  Payment of principal, premium, if any, and interest to DTC is the
  responsibility of the Corporation or the applicable Trustee, disbursement
  of such payments to Direct Participants is the responsibility of DTC, and
  disbursement of such payments to the Beneficial Owners is the
  responsibility of Direct and Indirect Participants.

     DTC may discontinue providing its services as securities depository with
  respect to the Debt Securities at any time by giving reasonable notice to
  the Corporation or the applicable Trustee. Under such

                                       8
<PAGE>

  circumstances, in the event that a successor securities depository is not
  appointed, Debt Security certificates are required to be printed and
  delivered.

     The Corporation may decide to discontinue use of the system of book-
  entry transfers through DTC (or a successor securities depository). In that
  event, Debt Security certificates will be printed and delivered.

   The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Corporation believes to
be reliable, but the Corporation takes no responsibility for the accuracy
thereof.

   Unless stated otherwise in the Prospectus Supplement, the underwriters or
agents with respect to a series of Debt Securities issued as Global Securities
will be Direct Participants in DTC.

   None of the Corporation, any underwriter or agent, the applicable Trustee or
any applicable paying agent will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Security, or for maintaining, supervising or reviewing
any records relating to such beneficial interest.

Merger

   The Corporation may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into any other
corporation, provided that (a) either the Corporation shall be the continuing
corporation, or the successor corporation (if other than the Corporation)
formed by or resulting from any such consolidation or merger or which shall
have received the transfer of such assets shall expressly assume payment of the
principal of (and premium, if any) and interest on all the Debt Securities and
the performance and observance of all the covenants and conditions of the
applicable Indenture; and (b) the Corporation or such successor corporation
shall not immediately thereafter be in default under the applicable Indenture
(Section 801 of the Indentures). See "Description of the Corporation's
Outstanding Capital Stock."

Limitations on Liens; Restrictions on Certain Dispositions

   Limitations on Liens. The Senior Indenture provides that the Corporation and
its Insurance Subsidiaries may not issue, assume, incur or guarantee any
indebtedness for borrowed money secured by a mortgage, pledge, lien or other
encumbrance, directly or indirectly, upon any shares of the Common Stock of an
Insurance Subsidiary which shares are owned by the Corporation or its Insurance
Subsidiaries, without effectively providing that the Debt Securities issued
thereunder (and if the Corporation so elects, any other indebtedness of the
Corporation ranking on a parity with the Debt Securities issued thereunder)
shall be secured equally and ratably with, or prior to, any such secured
indebtedness so long as such indebtedness remains outstanding (Section 1004 of
the Senior Indenture).

   The term "Insurance Subsidiaries" means only Acadia Compensation Insurance
Company, Acadia Insurance Company, Admiral Insurance Company, American West
Insurance Company, Carolina Casualty Insurance Company, Continental Western
Casualty Company, Continental Western Insurance Company, FICO Insurance
Company, Firemen's Insurance Company of Washington, D.C., Great Divide
Insurance Company, Great River Insurance Company, Nautilus Insurance Company,
Tri-State Insurance Company of Minnesota, Union Insurance Company, Union
Standard Insurance Company and any other subsidiary of the Corporation
(including a subsidiary of a subsidiary) that may succeed by merger or
otherwise to a major part, as determined in good faith by the Board of
Directors, of the business of one or more of the Insurance Subsidiaries, or any
other subsidiary which shall be designated by the Board of Directors of the
Corporation to be an Insurance Subsidiary. The term "Common Stock" means, with
respect to any Insurance Subsidiary, stock of any class, however designated,
except stock which is nonparticipating beyond fixed dividend and liquidation
preferences and the holders of which have either no voting rights or limited
voting rights entitling them, only in the case of

                                       9
<PAGE>

certain contingencies, to elect less than a majority of the directors of such
Insurance Subsidiary, and includes securities of any class, however designated,
which are convertible into such Common Stock (Section 101 of the Senior
Indenture).

   Restrictions on Certain Dispositions. The Senior Indenture also provides
that the Corporation will not, and will not permit any Insurance Subsidiary to,
issue, sell, assign, transfer or otherwise dispose of, directly or indirectly,
any of the Common Stock of any Insurance Subsidiary (except to the Company or
to one or more Insurance Subsidiaries or for the purpose of qualifying
directors), unless (a) 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 Corporation or of one of its Insurance Subsidiaries; or (b) the entire
Common Stock of an Insurance Subsidiary then owned by the Corporation or by its
Insurance 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 (c) after
giving effect to the issuance, sale, assignment, transfer or other disposition,
the Corporation and its Insurance Subsidiaries would own directly or indirectly
at least 80% of the issued and outstanding Common Stock of such Insurance
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 1005 of the Senior
Indenture). The term "Fair Value", when used with respect to Common Stock,
means the fair value thereof as determined in good faith by the Board of
Directors of the Corporation (Section 101 of the Senior Indenture).

   Waiver of Certain Covenants. The Corporation may omit in respect of any
series of Debt Securities issued under the Senior Indenture, in any particular
instance, to comply with any covenant or condition set forth under "Limitations
on Liens" and "Restrictions on Certain Dispositions" above, if before or after
the time for such compliance the Holders of at least a majority in principal
amount of the Debt Securities at the time outstanding of such series either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived and, until such
waiver shall become effective, the obligations of the Corporation and the
duties of the Senior Trustee in respect of any such covenant or condition shall
remain in full force and effect (Section 1008 of the Senior Indenture).

   Subordinated Indenture. The Subordinated Indenture does not contain the
limitations on liens and restrictions on certain dispositions contained in the
Senior Indenture.

Events of Default, Notice and Waiver

   Senior Indenture. The Senior Indenture provides that the following events
are Events of Default with respect to any series of Debt Securities issued
thereunder: (a) default for 30 days in the payment of any installment of
interest on any Debt Security of such series; (b) default in the payment of the
principal of (or premium, if any, on) any Debt Security of such series at its
Maturity; (c) default in making a sinking fund payment required for any Debt
Security of such series; (d) default in the performance of any other covenant
of the Corporation in the Senior Indenture (other than a covenant included in
the Senior Indenture solely for the benefit of a series of Debt Securities
issued thereunder other than such series), continued for 60 days after written
notice as provided in the Senior Indenture; (e) certain events of default
resulting in the acceleration of the maturity of the related indebtedness
aggregating in excess of $10,000,000 under any mortgages, indentures (including
the Indentures) or instruments under which the Corporation may have issued, or
by which there may have been secured or evidenced, any other indebtedness
(including Debt Securities of any other series) of the Corporation, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Corporation or
its property; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501 of the Senior Indenture).

                                       10
<PAGE>

   The Senior Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security or such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Senior Trustee consider such withholding to be in the interest of such Holders
(Section 601 of the Senior Indenture).

   If an Event of Default under the Senior Indenture with respect to Debt
Securities of any series issued thereunder at the time Outstanding occurs and
is continuing, then in every such case the Senior Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Corporation (and to the Senior Trustee if given by the Holders). However,
at any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Senior Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the Senior Trustee
prior to the Stated Maturity thereof, the Holders of a majority in principal
amount of Outstanding Debt Securities of such series (or of all Debt Securities
then Outstanding under the Senior Indenture, as the case may be) may, subject
to certain conditions, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the Senior Indenture, as the case may
be) have been cured or waived as provided in the Senior Indenture (Section 502
of the Senior Indenture). The Senior Indenture also provides that the Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series issued thereunder (or of all Debt Securities then
Outstanding under the Senior Indenture, as the case may be) may, subject to
certain limitations, waive any past default with respect to such series and its
consequences (Section 513 of the Senior Indenture). Reference is made to the
Prospectus Supplement relating to any series of Debt Securities issued under
the Senior Indenture which are Original Issue Discount Securities for the
particular provisions relating to acceleration of a portion of the principal
amount of such Original Issue Discount Securities upon the occurrence of an
Event of Default and the continuation thereof. Within 120 days after the close
of each fiscal year, the Corporation must file with the Senior Trustee a
statement, signed by specified officers, stating whether or not such officers
have knowledge of any default under the Senior Indenture and, if so, specifying
each such default and the nature and status thereof (Section 1006 of the Senior
Indenture).

   Subject to provisions of the Senior Indenture relating to its duties in case
of default, the Senior Trustee is under no obligation to exercise any of its
rights or powers under the Senior Indenture at the request or direction of any
Holders of any series of Debt Securities then Outstanding under the Senior
Indenture, unless such Holders shall have offered to the Senior Trustee
reasonable security or indemnity (Section 602 of the Senior Indenture). Subject
to such provisions for indemnification and certain limitations contained the
Senior Indenture, the Holders of not less than a majority in principal amount
of the Outstanding Debt Securities of any series issued thereunder (or of all
Debt Securities then Outstanding under the Senior Indenture, as the case may
be) shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Senior Trustee, or of exercising any
trust or power conferred upon the Senior Trustee (Section 512 of the Senior
Indenture).

   Subordinated Indenture. The Subordinated Indenture provides that the
following events are the only Events of Default with respect to any series of
Debt Securities issued thereunder: (a) default for 30 days in the payment of
any installment of interest on any Debt Security of such series; (b) default in
the payment of the principal of (or premium, if any, on) any Debt Security of
such series at its Maturity; (c) default in making a sinking fund payment
required for any Debt Security of such series; (d) default in the performance
of any other covenant of the Corporation in the Subordinated Indenture (other
than a covenant included in the Subordinated Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in the Subordinated
Indenture; (e) certain events of default resulting in the acceleration of the
maturity of the related indebtedness aggregating in excess of

                                       11
<PAGE>

$10,000,000 under any mortgages, indentures (including the Indentures) or
instruments under which the Corporation may have issued, or by which there may
have been secured or evidenced, any other indebtedness (including Debt
Securities of any other series) of the Corporation, but only if such
indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events relating to the bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of
the Corporation or its property; and (g) any other Event of Default provided
with respect to a particular series of Debt Securities (Section 501 of the
Subordinated Indenture).

   As with the Senior Indenture, the Subordinated Trustee may withhold notice
to the Holders of any series of Debt Securities issued under the Subordinated
Indenture of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if the Responsible Officers of the
Subordinated Trustee consider such withholding to be in the interest of such
Holders (Section 601 of the Subordinated Indenture).

   If an Event of Default under the Subordinated Indenture with respect to Debt
Securities of any series issued thereunder at the time outstanding occurs and
is continuing, then in every such case the Subordinated Trustee or the Holders
of not less than 25% in principal amount of the Outstanding Debt Securities of
that series may declare the principal (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Debt Securities of
that series to be due and payable immediately by written notice thereof to the
Corporation (and to the Subordinated Trustee if given by the Holders). However,
at any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
Subordinated Indenture, as the case may be) has been made, but before a
judgment or decree of payment of the money due has been obtained by the
Subordinated Trustee prior to the Stated Maturity thereof, the Holders of a
majority in principal amount of Outstanding Debt Securities of such series (or
of all Debt Securities then Outstanding under the Subordinated Indenture, as
the case may be) may, subject to certain conditions, rescind and annul such
acceleration if all Events of Default with respect to Debt Securities of such
series (or of all Debt Securities then Outstanding under the Subordinated
Indenture, as the case may be) have been cured or waived as provided in such
Indenture (Section 502 of the Subordinated Indenture). The Subordinated
Indenture also provides that the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of such series issued
thereunder (or of all Debt Securities then Outstanding under the Subordinated
Indenture, as the case may be) may, subject to certain limitations, waive any
past default with respect to such series and its consequences (Section 513 of
the Subordinated Indenture). Reference is made to the Prospectus Supplement
relating to any series of Debt Securities issued under the Subordinated
Indenture which are Original Issue Discount Securities for the particular
provisions relating to acceleration of a portion of the principal amount of
such Original Issue Discount Securities upon the occurrence of an Event of
Default and the continuation thereof. Within 120 days after the close of each
fiscal year, the Corporation must file with the Subordinated Trustee a
statement signed by specified officers, stating whether or not such officers
have knowledge of any default under the Subordinated Indenture, and, if so,
specifying each such default and the nature and status thereof (Section 1006 of
the Subordinated Indenture).

   Subject to provisions in the Subordinated Indenture relating to its duties
in case of default, the Subordinated Trustee is under no obligation to exercise
any of its rights or powers under the Subordinated Indenture at the request or
direction of any Holders of any series of Debt Securities then Outstanding
under the Subordinated Indenture, unless such Holders shall have offered to the
Subordinated Trustee reasonable security or indemnity (Section 602 of the
Subordinated Indenture). Subject to such provisions for indemnification and
certain limitations contained in the Subordinated Indenture, the Holders of not
less than a majority in principal amount of the Outstanding Debt Securities of
any series issued thereunder (or of all Debt Securities then Outstanding under
the Subordinated Indenture, as the case may be) shall have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Subordinated Trustee, or of exercising any trust or power
conferred upon the Subordinated Trustee (Section 512 of the Subordinated
Indenture).

                                       12
<PAGE>

Modification of the Indentures

   Senior Indenture. Modifications and amendments of the Senior Indenture may
be made only with the consent of the Holders of not less than a majority in
aggregate principal amount of all Outstanding Debt Securities under the Senior
Indenture which are affected by the modification or amendment; provided that no
such modification or amendment may, without the consent of the Holder of each
such Debt Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest (or premium, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the Maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
repayment of the Holder of any such Debt Security; (c) change the Place of
Payment, or the coin or currency, for payment of principal of, premium, if any,
or interest on any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt
Security; or (e) reduce the above-stated percentage of Outstanding Debt
Securities of any series necessary to modify or amend the Senior Indenture or
to waive compliance with certain provisions thereof or certain defaults and
consequences thereunder (Section 902 of the Senior Indenture).

   Subordinated Indenture. Modifications and amendments of the Subordinated
Indenture may be made only with the consent of the Holders of not less than a
majority in aggregate principal amount of all Outstanding Debt Securities under
the Subordinated Indenture which are affected by the modification or amendment;
provided that no such modification may, without the consent of the Holder of
each such Debt Security affected thereby, (a) change the Stated Maturity of the
principal of, or any installment of interest (or premium, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the Maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
the repayment of the Holder of any such Debt Security; (c) change the Place of
Payment, or the coin or currency, for payment of principal of, premium, if any,
or interest on any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt
Security;(e) reduce the above-stated percentage of Outstanding Debt Securities
of any series necessary to modify or amend the Subordinated Indenture or to
waive compliance with certain provisions thereof or certain default and
consequences thereunder; or (f) subordinate the indebtedness evidenced by any
such Debt Security to any indebtedness of the Corporation other than Senior
Indebtedness (as defined in the Subordinated Indenture) (Section 902 of the
Subordinated Indenture).

Defeasance and Covenant Defeasance

   The Indentures provide that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series and any related
coupons pursuant to Section 301 of either Indenture, the Corporation may elect
either (a) to defease and be discharged from any and all obligations with
respect to such Debt Securities and any related coupons (except for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange
of such Debt Securities and any related coupons, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities and any related coupons,
to maintain an office or agency in respect of such Debt Securities and any
related coupons and to hold moneys for payment in trust) ("defeasance")
(Section 1402 of the Indentures) or (b) to be released from its obligations
with respect to such Debt Securities and any related coupons under Sections
1004 and 1005 of the Senior Indenture (being the restrictions described under
"Limitation on Liens" and "Restrictions on Certain Dispositions," respectively)
or, if provided pursuant to Section 301 of either Indenture, its obligations
with respect to any other covenant, and any omission to comply with such
obligations shall not constitute a default or an Event of Default with respect
to such Debt Securities and any related coupons ("covenant defeasance")
(Section 1403 of the Indentures), in either case upon the irrevocable deposit
by the Corporation with the

                                       13
<PAGE>

relevant Trustee (or other qualifying trustee), in trust, of an amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities and any related coupons are then
specified as payable at Stated Maturity, or Government Obligations (as defined
below), or both, applicable to such Debt Securities and any related coupons
(with such applicability being determined on the basis of the currency,
currency unit or composite currency in which such Debt Securities are then
specified as payable at Stated Maturity) which through the payment of principal
and interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest, if any,
on such Debt Securities and any related coupons, and any mandatory sinking fund
or analogous payments thereon, on the scheduled due dates therefor.

   Such a trust may only be established if, among other things, the Corporation
has delivered to the relevant Trustee an Opinion of Counsel (as specified in
the Indentures) to the effect that the Holders of such Debt Securities and any
related coupons will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance under clause (a) above, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable United States federal
income tax law occurring after the date of the Indenture (Section 1404 of the
Indenture).

   "Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest on or principal of the
Government Obligation evidenced by such depository receipt (Section 101 of the
Indentures).

   Unless otherwise provided in the applicable Prospectus Supplement, if after
the Corporation has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the terms of such Debt Security to receive payment in a
currency, currency unit or composite currency other than that in which such
deposit has been made in respect of such Debt Security, or (b) the currency,
currency unit or composite currency in which such deposit has been made in
respect of any Debt Security of such series ceases to be used by its government
of issuance, the indebtedness represented by such Debt Security shall be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium, if any) and interest, if any, on such Debt
Security as they become due out of the proceeds yielded by converting the
amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such cessation of usage based on the applicable
Market Exchange Rate. (Section 1405 of the Indentures). Unless otherwise
provided in the applicable Prospectus Supplement, all payments of principal of
(and premium, if any) and interest, if any, and Additional Amounts, if any, on
any Debt Security that is payable in a foreign currency, currency unit or
composite currency that ceases to be used by its government of issuance shall
be made in U.S. dollars (Section 412 of the Indentures).

   In the event the Corporation effects covenant defeasance with respect to any
Debt Securities and any related coupons and such Debt Securities and any
related coupons are declared due and payable because of the

                                       14
<PAGE>

occurrence of any Event of Default other than the Event of Default described in
clause (d) under "Event of Default, Notice and Waiver" with respect to Sections
1004 and 1005 of the Senior Indenture (which Sections would no longer be
applicable to such Debt Securities or any related coupons) or described in
clause (d) or (g) under "Event of Default, Notice and Waiver" with respect to
any other covenant with respect to which there has been defeasance, the amount
in such currency, currency unit or composite currency in which such Debt
Securities and any related coupons are payable, and Government Obligations on
deposit with the relevant Trustee, will be sufficient to pay amounts due on
such Debt Securities and any related coupons at the time of their Stated
Maturity but may not be sufficient to pay amounts due on such Debt Securities
and any related coupons at the time of the acceleration resulting from such
Event of Default. However, the Corporation would remain liable to make payment
of such amounts due at the time of acceleration.

   The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series and any related coupons.

Senior Securities

   Senior Securities are to be issued under the Senior Indenture. Each series
of Senior Securities will constitute Senior Indebtedness and will rank equally
with each other series of Senior Securities and other Senior Indebtedness. All
subordinated debt (including, but not limited to, all Subordinated Securities
issued under the Subordinated Indenture) will be subordinated to the Senior
Securities and other Senior Indebtedness.

Subordination of Subordinated Securities

   Subordinated Indenture. The payment of the principal of (and premium, if
any) and interest on the Subordinated Securities will be subordinated as set
forth in the Subordinated Indenture to the Senior Indebtedness of the
Corporation, whether outstanding on the date of the Subordinated Indenture or
thereafter incurred (Section 1701 of the Subordinated Indenture). At June 30,
1995, the aggregate Senior Indebtedness of the Corporation was approximately
$255 million.

   Ranking. No class of Subordinated Securities is subordinated to any other
class of subordinated debt securities. See "Subordination Provisions" below.

   Subordination Provisions. In the event (a) of any distribution of assets of
the Corporation upon any dissolution, winding up, liquidation or reorganization
of the Corporation, whether in bankruptcy, insolvency, reorganization or
receivership proceedings or upon an assignment for the benefit of creditors or
any other marshalling of the assets and liabilities of the Corporation or
otherwise, except a distribution in connection with a merger or consolidation
or a conveyance or transfer of all or substantially all of the properties of
the Corporation which complies with the requirements of Article Eight of the
Subordinated Indenture, or (b) that a default shall have occurred and be
continuing with respect to the payment of principal of (or premium, if any) or
interest on any Senior Indebtedness, or (c) that the principal of the
Subordinated Securities of any series issued under the Subordinated Indenture
(or in the case of Original Issue Discount Securities, the portion of the
principal amount thereof referred to in Section 502 of the Subordinated
Indenture) shall have been declared due and payable pursuant to Section 502 of
the Subordinated Indenture, and such declaration shall not have been rescinded
and annulled as provided in said Section 502, then:

     (1) in a circumstance described in the foregoing clause (a) or (b), the
  holders of all Senior Indebtedness and in the circumstance described in the
  foregoing clause (c), the holders of all Senior Indebtedness outstanding at
  the time the principal of such Subordinated Securities issued under the
  Subordinated Indenture (or in the case of Original Issue Discount
  Securities, such portion of the principal amount) shall have been so
  declared due and payable, shall first be entitled to receive payment of the
  full amount due thereon in respect of principal, premium (if any) and
  interest, or provision shall be made for such payment in money or money's
  worth, before the Holders of any of the Subordinated Securities are

                                       15
<PAGE>

  entitled to receive any payment on account of the principal of (or premium,
  if any) or interest on the indebtedness evidenced by the Subordinated
  Securities;

     (2) if upon any payment or distribution contemplated in clause (1) after
  giving effect to the subordination provisions contemplated therein there
  shall remain any amounts of cash, property or securities of the Corporation
  available for payment or distribution in respect of Subordinated
  Securities, then the amount of such cash, property or securities shall be
  shared ratably among the Holders of all Subordinated Securities issued
  under the Subordinated Indenture and any subordinated indebtedness ranking
  on a parity therewith;

     (3) any payment by, or distribution of assets of, the Corporation of any
  kind or character, whether in cash, property or securities (other than
  certain subordinated securities of the Corporation issued in a
  reorganization or readjustment), to which the Holders of any of the
  Subordinated Securities would be entitled except for the provisions of
  Article XVII of the Subordinated Indenture shall be paid or delivered by
  the person making such payment or distribution directly to the holders of
  Senior Indebtedness (as provided in clauses (1) and (2) above), or on their
  behalf, ratably according to the aggregate amounts remaining unpaid on
  account of such Senior Indebtedness, to the extent necessary to make
  payment in full of all Senior Indebtedness (as provided in clauses (1) and
  (2) above) remaining unpaid after giving effect to any concurrent payment
  or distribution (or provision therefor) to the holders of such Senior
  Indebtedness, before any payment or distribution is made to or in respect
  of the Holders of the Subordinated Securities;

     (4) in the event that, notwithstanding the foregoing, any payment by, or
  distribution of assets of, the Corporation of any kind or character is
  received by the Holders of any of the Subordinated Securities issued under
  the Subordinated Indenture before all Senior Indebtedness is paid in full,
  such payment or distribution shall be paid over to the holders of such
  Senior Indebtedness or on their behalf, ratably as aforesaid, for
  application to the payment of all such Senior Indebtedness remaining unpaid
  until all such Senior Indebtedness shall have been paid in full, after
  giving effect to any concurrent payment or distribution (or provision
  therefor) to the holders of such Senior Indebtedness.

   By reason of such subordination in favor of the holders of Senior
Indebtedness in the event of insolvency, certain general creditors of the
Corporation, including holders of Senior Indebtedness, may recover more,
ratably, than the Holders of the Subordinated Securities.

Definition of Senior Indebtedness

   Senior Indebtedness is defined in the Subordinated Indenture to mean (i) the
principal of and premium, if any, and unpaid interest on indebtedness for money
borrowed, (ii) purchase money and similar obligations, (iii) obligations under
capital leases, (iv) guarantees, assumptions or purchase commitments relating
to, or other transactions as a result of which the Corporation is responsible
for the payment of, such indebtedness of others, (v) renewals, extensions and
refunding of any such indebtedness, (vi) interest or obligations in respect of
any such indebtedness accruing after the commencement of any insolvency or
bankruptcy proceedings; and (vii) obligations associated with derivative
products such as interest rate and currency exchange contracts, foreign
exchange contracts, commodity contracts, and similar arrangements, unless, in
each case, the instrument by which the Corporation incurred, assumed or
guaranteed the indebtedness or obligations described in clauses (i) through
(vii) hereof expressly provides that such indebtedness or obligation is
subordinate or junior in right of payment to any other indebtedness or
obligations of the Corporation.

Convertible Debt Securities

   The following provisions will apply to Debt Securities that will be
convertible into Common Stock or Preferred Stock (the "Convertible Debt
Securities") unless otherwise provided in the Prospectus Supplement for such
Convertible Debt Securities.

   Conversion. The Holder of any Convertible Debt Securities will have the
right, exercisable at any time during the time period specified in the
applicable Prospectus Supplement, unless previously redeemed by the

                                       16
<PAGE>

Corporation, to convert such Convertible Debt Securities into shares of Common
Stock or Preferred Stock at the conversion price or rate for each $1,000
principal amount of Convertible Debt Securities set forth in such Prospectus
Supplement. The Holder of a Convertible Debt Security may convert a portion
thereof which is $1,000 or any integral multiple of $1,000 (Section 301 of the
Senior Indenture and Section 1602 of the Subordinated Indenture). In the case
of Convertible Debt Securities called for redemption, conversion rights will
expire at the close of business on the date fixed for the redemption specified
in the Prospectus Supplement, except that, in the case of repayment at the
option of the applicable Holder, such right will terminate upon receipt of
written notice of the exercise of such option (Section 301 of the Senior
Indenture and Section 1602 of the Subordinated Indenture).

   In certain events, the conversion price or rate will be subject to
adjustment as contemplated in the applicable Indenture. For Debt Securities
convertible into Common Stock, such events include the issuance of shares of
Common Stock of the Corporation as a dividend; subdivisions and combinations of
Common Stock; the issuance to all holders of Common Stock of rights or warrants
entitling such holders (for a period not exceeding 45 days) to subscribe for or
purchase shares of Common Stock at a price per share less than the current
market price per share of Common Stock; and the distribution to all holders of
Common Stock of shares of capital stock of the Corporation (other than Common
Stock), evidences of indebtedness or assets of the Corporation (excluding cash
dividends or distributions paid from retained earnings of the Corporation) or
subscription rights or warrant (other than those referred to above). In any of
such cases, no adjustment of the conversion price or rate will be required
unless an adjustment would require a cumulative increase or decrease of at
least 1% in such price or rate (Section 301 of the Senior Indenture and Section
1605 of the Subordinated Indenture). Fractional shares of Common Stock will not
be issued upon conversion, but, in lieu thereof, the Corporation will pay a
cash adjustment (Section 301 of the Senior Indenture and Section 1606 of the
Subordinated Indenture). Unless otherwise specified in the applicable
Prospectus Supplement, Convertible Debt Securities convertible into Common
Stock surrendered for conversion between any record date for an interest
payment and the related interest payment date (except such Convertible Debt
Securities called for redemption on a redemption date during such period) must
be accompanied by payment of an amount equal to the interest thereon which the
Holder thereof is entitled to receive (Section 301 of the Senior Indenture and
Section 1604 of the Subordinated Indenture).

   The adjustment provisions for Debt Securities convertible into shares of
Preferred Stock will be determined at the time of an issuance of such Debt
Securities and will be set forth in the applicable Prospectus Supplement
related thereto.

   Except as set forth in the applicable Prospectus Supplement, any Convertible
Debt Securities called for redemption, unless surrendered for conversion on or
before the close of business on the redemption date, are subject to being
purchased from the Holder of such Convertible Debt Securities by one or more
investment bankers or other purchasers who may agree with the Corporation to
purchase such Convertible Debt Securities and convert them into Common Stock or
Preferred Stock, as the case may be (Section 1108 of the Indentures).

                          DESCRIPTION OF DEBT WARRANTS

   The following description of the terms of the Debt Warrants sets forth
certain general terms and provisions of the Debt Warrants to which any
Prospectus Supplement may relate. The particular terms of the Debt Warrants
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions do not apply to the Debt Warrants so offered will be
described in the Prospectus Supplement relating to such Debt Warrants.

   The Debt Warrants are to be issued under one or more Debt Warrant Agreements
to be entered into between the Corporation and a bank or trust company, as Debt
Warrant Agent, all as set forth in the Prospectus Supplement relating to the
particular issue of Debt Warrants. Debt Warrants may be issued independently or
together with other securities offered by any Prospectus Supplement and may be
attached to or separate from

                                       17
<PAGE>

such other securities. Copies of the form of Debt Warrant Agreement, including
the form of Debt Warrant Certificate representing the Debt Warrants, are filed
as exhibits to the Registration Statement of which this Prospectus is a part.
The following summaries of certain provisions of the form of Debt Warrant
Agreement and Debt Warrant Certificate do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Debt Warrant Agreement and the Debt Warrant Certificates,
respectively, including the definitions therein of certain terms.

General

   If Debt Warrants are offered, the applicable Prospectus Supplement will
describe the terms of the Debt Warrants to be offered, including, where
applicable, the following: (1) the offering price; (2) the currency in which
Debt Warrants may be purchased; (3) the rank, designation, aggregate principal
amount, currency and terms of the Debt Securities purchasable upon exercise of
such Debt Warrants and the applicable Indenture pursuant to which such Debt
Securities are to be issued; (4) the designation and terms of the Debt
Securities with which such Debt Warrants are issued and the number of Debt
Warrants issued with each such Debt Security; (5) the date, if any, on and
after which such Debt Warrants and the related Debt Securities will be
separately transferable; (6) the principal amount of Debt Securities
purchasable upon exercise of such Debt Warrants and the price at and currency
in which such principal amount of Debt Securities may be purchased upon such
exercise; (7) the date on which the right to exercise Debt Warrants shall
commence and the date on which such right shall expire (the "Expiration Date");
(8) whether the Debt Warrants represented by the Debt Warrant Certificate will
be issued in registered or bearer form and, if in registered form, where they
may be transferred and registered; (9) information with respect to book-entry
procedures, if any; and (10) any other considerations relating to, and terms
of, the Debt Warrants (which shall not be inconsistent with the provisions of
the Debt Warrant Agreements).

   Debt Warrant Certificates may be exchanged for new Debt Warrant Certificates
of different denominations, may (if in registered form) be presented for
registration of transfer, and may be exercised at the corporate trust office of
the Debt Warrant Agent or any other office indicated in the applicable
Prospectus Supplement. Prior to the exercise of their Debt Warrants, holders of
Debt Warrants will not have any of the rights of Holders of the Debt Securities
purchasable upon such exercise, including the right to receive payments of
principal of, premium, if any, or interest, if any, on the Debt Securities
purchasable upon such exercise or to enforce covenants in the applicable
Indenture.

   Prospective purchasers of Debt Warrants should be aware that special U.S.
federal income tax, accounting and other considerations may be applicable to
instruments such as Debt Warrants. The Prospectus Supplement relating to any
issue of Debt Warrants will describe such considerations but prospective
purchasers of Debt Warrants are urged to consult their own advisors with
respect thereto.

Exercise of Debt Warrants

   Each Debt Warrant will entitle the holder thereof to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or calculable from, the Prospectus Supplement relating to such Debt
Warrants. Debt Warrants may be exercised at any time prior to 5:00 p.m., New
York time, on the Expiration Date set forth in the Prospectus Supplement
relating thereto. After such time on the Expiration Date (or such later date to
which such Expiration Date may be extended by the Corporation), unexercised
Debt Warrants shall become void.

   Debt Warrants may be exercised by delivery to the Debt Warrant Agent of
payment as provided in the applicable Prospectus Supplement of the amount
required to purchase the Debt Securities purchasable upon such exercise
together with certain information set forth on the reverse side of the Debt
Warrant Certificate. Debt Warrants will be deemed to have been exercised upon
receipt of the exercise price, subject to the receipt, within five business
days, of the Debt Warrant Certificate evidencing such Debt Warrants. Upon
receipt of such payment and the Debt Warrant Certificate properly completed and
duly executed at the corporate trust office of

                                       18
<PAGE>

the Debt Warrant Agent or any other office indicated in the applicable
Prospectus Supplement, the Corporation will, as soon as practicable, issue and
deliver pursuant to the applicable Indenture the Debt Securities purchasable
upon such exercise. If fewer than all of the Debt Warrants represented by such
Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be
issued for the remaining amount of Debt Warrants.

Modifications

   The Debt Warrant Agreement and the terms of the Debt Warrants may be amended
by the Corporation and the Debt Warrant Agent, without the consent of the
holders thereof, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective provision contained therein, or in
any other manner which the Corporation and the Debt Warrant Agent may deem
necessary or desirable and which will not adversely affect the interests of
such holders.

Enforceability of Rights by Holders

   The Debt Warrant Agent will act solely as an agent of the Corporation in
connection with the issuance and exercise of Debt Warrants. The Debt Warrant
Agent shall have no duty or responsibility in case of any default by the
Corporation in the performance of its obligations under the Debt Warrant
Agreement or the Debt Warrant Certificate. Each holder of Debt Warrants may,
without the consent of the Debt Warrant Agent, enforce by appropriate legal
action, on its own behalf, its rights to exercise such Debt Warrants.

                         DESCRIPTION OF PREFERRED STOCK

   The following description of the terms of the shares of Preferred Stock that
may be offered by the Corporation sets forth certain general terms and
provisions of the Preferred Stock to which any Prospectus Supplement may
relate. Certain other terms of any series of Preferred Stock and the terms of
any related option, put or right of the Corporation to require the holder of
any other Security offered to also acquire shares of Preferred Stock will be
specified in the applicable Prospectus Supplement. If so specified in the
applicable Prospectus Supplement, the terms of any series of Preferred Stock
may differ from the terms set forth below. The description of the terms of the
Preferred Stock set forth below and in any Prospectus Supplement does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Certificate of Designation relating to the applicable series
of Preferred Stock, which Certificate of Designation will be filed as an
exhibit to or incorporated by reference in the Registration Statement of which
this Prospectus forms a part.

General

   Pursuant to the Corporation's Restated Certificate of Incorporation and the
Delaware General Corporation Law, the Board of Directors of the Corporation has
the authority, without further stockholder action, to issue from time to time
up to a maximum of 5,000,000 shares of preferred stock, par value $.10 per
share, in one or more series and for such consideration as may be fixed from
time to time by the Board of Directors of the Corporation and to fix before the
issuance of any shares of preferred stock of a particular series, the
designation of such series, the number of shares to comprise such series, the
dividend rate or rates payable with respect to the shares of such series, the
redemption price or prices, if any, and the terms and conditions of any
redemption, the voting rights, any sinking fund provisions for the redemption
or purchase of the shares of such series, the terms and conditions upon which
the shares are convertible or exchangeable, if they are convertible or
exchangeable, and any other relative rights, preferences and limitations
pertaining to such series.

   As of June 30, 1995, the Corporation had outstanding 1,000,000 shares of 7
3/8% Series A Cumulative Redeemable Preferred Stock (the "Series A Cumulative
Redeemable Preferred Stock"). The Series A Cumulative Redeemable Preferred
Stock was issued on January 15, 1994 in connection with the sale of 6,000,000
Depositary Shares, each representing a 1/6 fractional interest in a share of
Series A Cumulative Redeemable Preferred Stock. See "Description of the
Corporation's Outstanding Capital Stock."

                                       19
<PAGE>

   Reference is made to the Prospectus Supplement relating to the particular
series of Preferred Stock offered thereby for specific terms, including: (i)
the designation, stated value and liquidation preference of such Preferred
Stock and the number of shares offered; (ii) the initial public offering price
at which such shares will be issued; (iii) the dividend rate or rates (or
method of calculation), the dividend periods, the date or dates on which
dividends shall be payable and whether such dividends shall be cumulative or
noncumulative and, if cumulative, the dates from which dividends shall commence
to cumulate; (iv) any redemption or sinking fund provisions; (v) any conversion
or exchange provisions; (vi) the procedures for any auction and remarketing, if
any, of such Preferred Stock; (vii) whether interests in Preferred Stock will
be represented by Depositary Shares; and (viii) any additional dividend,
liquidation, redemption, sinking fund and other rights, preferences,
privileges, limitations and restrictions of such Preferred Stock.

   The Preferred Stock will, when issued against payment therefor, be fully
paid and nonassessable. Holders of Preferred Stock will have no preemptive
rights to subscribe for any additional securities which may be issued by the
Corporation.

   Because the Corporation is a holding company, its rights and the rights of
holders of its securities, including the holders of Preferred Stock, to
participate in the distribution of assets of any subsidiary of the Corporation
upon the latter's liquidation or recapitalization will be subject to the prior
claims of such subsidiary's creditors and preferred stockholders, except to the
extent the Corporation may itself be a creditor with recognized claims against
such subsidiary or a holder of preferred stock of such subsidiary.

Dividends

   The holders of the Preferred Stock will be entitled to receive, when and as
declared by the Board of Directors of the Corporation, out of funds legally
available therefor, dividends at such rates and on such dates as will be
specified in the applicable Prospectus Supplement. Such rates may be fixed or
variable or both. If variable, the formula used for determining the dividend
rate for each dividend period will be specified in the applicable Prospectus
Supplement. Dividends will be payable to the holders of record as they appear
on the stock books of the Corporation on such record dates as will be fixed by
the Board of Directors of the Corporation. Dividends may be paid in the form of
cash, Preferred Stock (of the same or a different series) or Common Stock of
the Corporation, in each case as specified in the applicable Prospectus
Supplement.

   Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as specified in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Corporation
fails to declare a dividend payable on a dividend payment date on any Preferred
Stock for which dividends are noncumulative ("Noncumulative Preferred Stock"),
then the holders of such Preferred Stock will have no right to receive a
dividend in respect of the dividend period relating to such dividend payment
date, and the Corporation will have no obligation to pay the dividend accrued
for such period, whether or not dividends on such Preferred Stock are declared
or paid on any future dividend payment dates.

   The Corporation shall not declare, pay or set apart for payment any
dividends on any series of its preferred stock ranking, as to dividends, on a
parity with or junior to the outstanding Preferred Stock of any series unless
(i) if such series of Preferred Stock has a cumulative dividend ("Cumulative
Preferred Stock"), full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on such Preferred Stock for all past dividend periods
and the then current dividend period, or (ii) if such series of Preferred Stock
is Noncumulative Preferred Stock, full dividends for the then current dividend
period on such Preferred Stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
such payment. When dividends are not paid in full upon Preferred Stock of any
series and any other shares of preferred stock of the Corporation ranking on a
parity as to dividends with such Preferred Stock, all dividends declared upon
such Preferred Stock and any other preferred stock of the Corporation ranking
on a parity as to dividends with such Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share on such Preferred

                                       20
<PAGE>

Stock and such other shares of preferred stock shall in all cases bear to each
other the same ratio that the accrued dividends per share on such Preferred
Stock (which shall not, if such Preferred Stock is Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods) and such other shares of preferred stock bear to each other.
No interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on Preferred Stock of such series which may
be in arrears.

   Except as set forth in the preceding sentence, unless (i) full dividends on
the outstanding Cumulative Preferred Stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and the
then current dividend period or (ii) full dividends for the then current
dividend period on the outstanding Noncumulative Preferred Stock of any series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment, no dividends
(other than in Common Stock of the Corporation or other shares of the
Corporation ranking junior to such Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment, nor shall any
other distribution be made, on the Common Stock of the Corporation or on any
other shares of the Corporation ranking junior to or on a parity with such
Preferred Stock as to dividends or upon liquidation.

   Unless (i) full dividends on the Cumulative Preferred Stock of any series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period or (ii) full dividends for the
then current dividend period on the Noncumulative Preferred Stock of any series
have been declared and paid or declared and a sum sufficient for the payment
thereof set apart for such payment, no Common Stock or any other shares of the
Corporation ranking junior to or on a parity with such Preferred Stock as to
dividends or upon liquidation shall be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid or made available for a
sinking fund for the redemption of any such shares) by the Corporation or any
subsidiary of the Corporation except by conversion into or exchange for shares
of the Corporation ranking junior to such Preferred Stock as to dividends and
upon liquidation. Any dividend payment made on shares of Cumulative Preferred
Stock of any series shall first be credited against the earliest accrued by
unpaid dividend due with respect to shares of such series which remains unpaid.

Redemption

   Preferred Stock may be redeemable, in whole or in part, at the option of the
Corporation, out of funds legally available therefor, and may be subject to
mandatory redemption pursuant to a sinking fund or otherwise, in each case upon
terms, at the times and at the redemption prices specified in the applicable
Prospectus Supplement. Preferred Stock redeemed by the Corporation will be
restored to the status of authorized but unissued shares of preferred stock.

   The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Corporation in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accrued and unpaid dividends
thereon (which shall not, if such Preferred Stock is Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Stock of any series is
payable only from the net proceeds of the issuance of capital stock of the
Corporation, the terms of such Preferred Stock may provide that, if no such
capital stock shall have been issued or to the extent the net proceeds from any
issuance are insufficient to pay in full the aggregate redemption price then
due, such Preferred Stock shall automatically and mandatorily be converted into
shares of the applicable capital stock of the Corporation pursuant to
conversion provisions specified in the applicable Prospectus Supplement.

   Notwithstanding the foregoing, unless (i) full dividends on the Cumulative
Preferred Stock of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof

                                       21
<PAGE>

set apart for payment for all past dividend periods and the then current
dividend period or (ii) full dividends for the then current dividend period on
the Noncumulative Preferred Stock of any series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment, no shares of Preferred Stock of such series shall be
redeemed unless all outstanding shares of Preferred Stock of such series are
simultaneously redeemed, and the Corporation shall not purchase or otherwise
acquire any shares of Preferred Stock of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of Preferred Stock
of such series pursuant to a purchase or exchange offer provided such offer is
made on the same terms to all holders of the Preferred Stock of such series.

   Notice of redemption shall be given by mailing the same to each record
holder of the Preferred Stock to be redeemed, not less than 30 nor more than 60
days prior to the date fixed for redemption thereof, at the address of such
holder as the same shall appear on the stock books of the Corporation. Each
notice shall state: (i) the redemption date; (ii) the number of shares and
series of the Preferred Stock to be redeemed; (iii) the redemption price; (iv)
the place or places where certificates for such Preferred Stock are to be
surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi)
the date upon which the holder's conversion or exchange rights, if any, as to
such shares shall terminate. If fewer than all the shares of Preferred Stock of
any series are to be redeemed, the notice mailed to each such holder thereof
shall also specify the number of shares of Preferred Stock to be redeemed from
each such holder.

   If fewer than all the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Board of Directors of the Corporation and such shares may be redeemed pro
rata from the holders of record of such shares in proportion to the number of
such shares held by such holders (with adjustments to avoid redemption of
fractional shares) or by lot in a manner determined by the Board of Directors
of the Corporation.

   If notice of redemption of any shares of Preferred Stock has been given and
if the funds necessary for such redemption have been set aside by the
Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of holders of any shares of Preferred Stock so called for redemption,
then from and after the redemption date for such shares dividends on such
shares shall cease to accrue and such shares shall no longer be deemed to be
outstanding, and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive the redemption price) shall cease.
Upon surrender, in accordance with such notice, of the certificates
representing any such shares (properly endorsed or assigned for transfer, if
the Board of Directors of the Corporation shall so require and the notice shall
so state), the redemption price set forth above shall be paid out of the funds
provided by the Corporation. If fewer than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares without cost to the holder thereof.

Conversion or Exchange Rights

   The Prospectus Supplement relating to a series of Preferred Stock that is
convertible or exchangeable will state the terms on which shares of such series
are convertible or exchangeable into Common Stock, another series of preferred
stock or Debt Securities. To the extent regulatory approval may be required for
shares of Preferred Stock to be convertible or exchangeable for Debt
Securities, the Corporation will seek to obtain such approval.

Rights Upon Liquidation

   In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the holders of each series of Preferred Stock
shall be entitled to receive out of the assets of the Corporation legally
available for distribution to stockholders, before any distribution of assets
is made to holders of Common Stock or any other class or series of capital
stock ranking junior to such Preferred Stock upon liquidation, liquidating
distributions in the amount of the liquidation preference of such Preferred
Stock plus all accrued and unpaid

                                       22
<PAGE>

dividends thereon (which shall not, in the case of Noncumulative Preferred
Stock, include any accumulation in respect of unpaid dividends for prior
dividend periods). If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the amounts payable with respect
to Preferred Stock of any series and any other shares of preferred stock of the
Corporation ranking as to any such distribution on a parity with such Preferred
Stock are not paid in full, the holders of such Preferred Stock and of such
other shares of preferred stock will share ratably in any such distribution of
assets of the Corporation in proportion to the full respective preferential
amounts to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of Preferred
Stock of any series will not be entitled to any further participation in any
distribution of assets by the Corporation.

Voting Rights

   Except as indicated below or in the applicable Prospectus Supplement, or
except as expressly required by applicable law, the holders of Preferred Stock
will not be entitled to vote.

   If the Corporation fails to pay dividends on any shares of Preferred Stock
for six consecutive quarterly periods, the holders of such shares of Preferred
Stock (voting separately as a class with all other series of preferred stock
upon which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional directors of the
Corporation at a special meeting called by the holders of record of at least
10% of such Preferred Stock or the next annual meeting of stockholders and at
each subsequent meeting until (i) all dividends accumulated on shares of
Cumulative Preferred Stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment or (ii) four consecutive quarterly
dividends on shares of Noncumulative Preferred Stock shall have been fully paid
or declared and a sum sufficient for the payment thereof set aside for payment.
In such case, the entire Board of Directors of the Corporation will be
increased by two directors.

   So long as any shares of Preferred Stock remain outstanding, the Corporation
shall not, without the affirmative vote of the holders of at least two-thirds
of each series of Preferred Stock outstanding at the time, given in person or
by proxy, at a meeting (voting separately as a class): (i) authorize, create or
issue, or increase the authorized or issued amount of, any class or series of
capital stock ranking prior to such series of Preferred Stock with respect to
payment of dividends or distribution of assets upon liquidation, dissolution or
winding up, or reclassify any capital stock into any such shares, or authorize,
create or issue any obligation or security convertible into, exchangeable for
or evidencing the right to purchase any such shares or (ii) amend, alter or
repeal the provisions of the Restated Certificate of Incorporation, including
the Certificate of Designation relating to such series of Preferred Stock,
whether by merger, consolidation, or to otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of Preferred Stock or the holders thereof; provided, however, that any
increase in the amount of the authorized preferred stock or any outstanding
series of preferred stock or any other capital stock of the Corporation, or the
creation and issuance of any other series of preferred stock or of any other
capital stock of the Corporation, in each case ranking on a parity with or
junior to the Preferred Stock of such series with respect to the payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.

   The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been deposited in trust to effect such redemption.

                                       23
<PAGE>

                        DESCRIPTION OF DEPOSITARY SHARES

General

   The Corporation may issue receipts ("Depositary Receipts") evidencing the
Depositary Shares, each of which will represent a fraction of a share of
Preferred Stock. Shares of Preferred Stock of each class or series represented
by Depositary Shares will be deposited under a separate Deposit Agreement (the
"Deposit Agreement") among the Corporation, the depositary (the "Preferred
Stock Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fraction of a share
of Preferred Stock represented by the Depositary Shares evidenced by such
Depository Receipt, to all the rights and preferences of the Preferred Stock
represented by such Depositary Shares (including dividend, voting, conversion,
redemption and liquidation rights).

   The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicant Deposit Agreement at the time such receipts are
issued. Immediately following the issuance and delivery of the Preferred Stock
by the Corporation to the preferred Stock Depositary, the Corporation will
cause the Preferred Stock Depositary to issue, on behalf of the Corporation,
the Depositary Receipts. Copies of the applicable form of Deposit Agreement and
Depositary Receipt may be obtained from the Corporation upon request, and the
following summary of the form thereof filed as an exhibit to the Registration
Statement of which this Prospectus is a part is qualified in its entirety by
reference thereto.

Dividends and Other Distributions

   The Preferred Stock Depositary will distribute all dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Receipts in proportion to the number of such Depositary Receipts
owned by such holders, subject to certain obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to the Preferred Stock Depositary.

   In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless the Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the
Corporation, sell such property and distribute the net proceeds from such sale
to such holders.

Withdrawal of Stock

   Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption, converted or exchanged into other
securities of the Corporation), the holders thereof will be entitled to
delivery, at such office to or upon his order, of the number of whole or
fractional shares of the Preferred Stock and any money or other property
represented by such Depositary Shares. Holders of Depositary Receipts will be
entitled to receive whole or fractional shares of the Preferred Stock on the
basis of the proportion of Preferred Stock represented by each Depositary Share
as specified in the applicable Prospectus Supplement, but holders of such
shares of Preferred Stock will not thereafter be entitled to receive Depositary
Shares therefor. If the Depositary Receipts delivered by the holder evidence a
number of Depositary Shares in excess of the number of Depositary Shares
representing the number of shares of Preferred Stock to be withdrawn, the
Preferred Stock Depositary will deliver to such holder at the same time a new
Depositary Receipt evidencing such excess number of Depositary Shares.

Redemption of Depositary Shares

   Whenever the Corporation redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of
the same redemption date the number of Depositary Shares

                                       24
<PAGE>

representing shares of the Preferred Stock so redeemed, provided the
Corporation shall have paid in full to the Preferred Stock Depositary the
redemption price of the Preferred Stock to be redeemed plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price per Depositary Share will be equal to the redemption price and
any other amounts per share payable with respect to the Preferred Stock. If
fewer than all the Depositary Shares are to be redeemed, the Depositary Shares
to be redeemed will be selected by the Preferred Stock Depositary by lot or pro
rata or other equitable method, in each case as may be determined by the
Corporation.

   From and after the date fixed for redemption, all dividends in respect of
the Depositary Shares so called for redemption will cease to accrue, such
Depositary Shares will no longer be deemed to be outstanding and all rights of
the holders of the Depositary Receipts evidencing such Depositary Shares will
cease, except the right to receive any moneys payable upon such redemption and
any money or other property to which the holders of such Depositary Receipts
were entitled upon such redemption upon surrender thereof to the Preferred
Stock Depositary.

Voting the Preferred Stock

   Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Preferred Stock Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Preferred
Stock Depositary will vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Corporation
will agree to take all reasonable action which may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting shares of
Preferred Stock to the extent it does not receive specific instructions from
the holders of Depositary Receipts evidencing the Depositary Shares
representing such Preferred Stock. The Preferred Stock Depositary shall not be
responsible for any failure to carry out any instruction to vote, or for the
manner or effect of any such vote made, as long as any such action or inaction
is in good faith and does not result from negligence or willful misconduct of
the Preferred Stock Depositary.

Exchange of Preferred Stock

   Whenever the Corporation exchanges all of the shares of Preferred Stock held
by the Preferred Stock Depositary for Debt Securities or Common Stock, the
Preferred Stock Depositary will exchange as of the same exchange date all
Depositary Shares representing all of the shares of the Preferred Stock so
exchanged for Debt Securities or Common Stock, provided the Corporation shall
have issued and deposited with the Preferred Stock Depositary Debt Securities
or Common Stock for all of the shares of the Preferred Stock to be exchanged.
The exchange rate per Depositary Share shall be equal to the exchange rate per
share of Preferred Stock multiplied by the fraction of a share of Preferred
Stock represented by one Depositary Share, plus all money and other property,
if any, represented by such Depositary Shares, including all amounts paid by
the Corporation in respect of dividends which on the exchange date have accrued
on the shares of Preferred Stock to be so exchanged and have not theretofore
been paid.

Conversion of Preferred Stock

   The Depositary Shares, as such, are not convertible or exchangeable into
Common Stock or any other securities or property of the Corporation.
Nevertheless, if so specified in the applicable Prospectus Supplement relating
to an offering of Depository Shares, the Depositary Receipts may be surrendered
by holders thereof to the Preferred Stock Depositary with written instructions
to the Preferred Stock Depositary to instruct the Corporation to cause
conversion or exchange of the Preferred Stock represented by the Depositary
Shares

                                       25
<PAGE>

evidenced by such Depositary Receipts into whole shares of Common Stock, other
shares of Preferred Stock or Debt Securities of the Corporation, and the
Corporation has agreed that upon receipt of such instructions and any amounts
payable in respect thereof, it will cause the conversion or exchange thereof
utilizing the same procedures as those provided for delivery of Preferred Stock
to effect such conversion or exchange. If the Depositary Shares evidenced by a
Depositary Receipt are to be converted or exchanged in part only, a new
Depositary Receipt or Receipts will be issued for any Depositary Shares not to
be converted or exchanged. See "Description of Preferred Stock--Conversion or
Exchange Rights."

Amendment and Termination of the Deposit Agreement

   The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Corporation and the Preferred Stock Depositary. However, any
amendment that materially and adversely alters the rights of the holders of
Depositary Receipts or that would be materially and adversely inconsistent with
the rights granted to the holders of the related Preferred Stock will not be
effective unless such amendment has been approved by the holders of at least
two thirds of the Depositary Shares then outstanding.

   The Deposit Agreement may be terminated by the Corporation upon not less
than 60 days' notice if a majority of the Depositary Shares then outstanding
consents thereto, whereupon the Preferred Stock Depositary shall deliver or
make available to each holder of Depositary Receipts, upon surrender of the
Depositary Receipts held by such holder, such number of whole or fractional
shares of Preferred Stock represented by the Depositary Shares evidenced by
such Depositary Receipts. In addition, the Deposit Agreement will automatically
terminate if (i) all outstanding Depositary Shares shall have been redeemed,
converted or exchanged or (ii) there shall have been a final distribution in
respect of the related Preferred Stock in connection with any liquidation,
dissolution or winding up of the Corporation and such distribution shall have
been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares representing such Preferred Stock.

Charges of Preferred Stock Depositary

   The Corporation will pay all transfer and other taxes and governmental
charges arising solely from the existence of the Deposit Agreement. In
addition, the Corporation will pay the fees and expenses of the Preferred Stock
Depositary in connection with the performance of its duties under the Deposit
Agreement. Holders of Depositary Receipts will pay transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
Deposit Agreement.

Resignation and Removal of Depositary

   The Preferred Stock Depositary may resign at any time by delivering to the
Corporation notice of its election to do so, and the Corporation may at any
time remove the Preferred Stock Depositary, any such resignation or removal to
take effect upon the appointment of a successor Preferred Stock Depositary,
which successor Preferred Stock Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.

Miscellaneous

   The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Corporation which are received
by the Preferred Stock Depositary with respect to the related Preferred Stock.

   Neither the Preferred Stock Depositary nor the Corporation will be liable if
it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement.

                                       26
<PAGE>

The obligations of the Corporation and the Preferred Stock Depositary under the
Deposit Agreement will be limited to performing their duties thereunder in good
faith and without negligence or willful misconduct, and the Corporation and the
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of Preferred
Stock unless satisfactory indemnity is furnished. The Corporation and the
Preferred Stock Depositary may rely on written advice of counsel or
accountants, or information provided by persons presenting shares of Preferred
Stock for deposit, holders of Depositary Receipts or other persons believed in
good faith to be competent and authorized to give such information and on
documents believed in good faith to be genuine.

   In the event the Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on
the one hand, and the Corporation, on the other hand, the Preferred Stock
Depositary shall be entitled to act on such claims, requests or instructions
received from the Corporation.

                    DESCRIPTION OF PREFERRED STOCK WARRANTS

   The Corporation may issue Preferred Stock Warrants for the purchase of
Preferred Stock. Preferred Stock Warrants may be issued independently or
together with other Securities offered by any Prospectus Supplement and may be
attached to or separate from such other Securities. Each series of Preferred
Stock Warrants will be issued under one or more warrant agreements (each, a
"Preferred Stock Warrant Agreement") to be entered into between the Corporation
and a bank or trust company, as Preferred Stock Warrant Agent, all as set forth
in the Prospectus Supplement relating to the particular issue of offered
Preferred Stock Warrants. The Preferred Stock Warrant Agent will act solely as
an agent of the Corporation in connection with the Preferred Stock Warrant
Certificates and will not assume any obligation or relationship of agency or
trust for or with any holders of Preferred Stock Warrant Certificates or
beneficial owners of Preferred Stock Warrants. Copies of the form of Preferred
Stock Warrant Agreement, including the form of Preferred Stock Warrant
Certificates representing the Preferred Stock Warrants, are filed as exhibits
to the Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the form of Preferred Stock Warrant
Agreement and Preferred Stock Warrant Certificate do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
the provisions of the Preferred Stock Warrant Agreement and the Preferred Stock
Warrant Certificates.

General

   If Preferred Stock Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Preferred Stock Warrants, including
the following, where applicable: (1) the offering price; (2) the designation,
aggregate number and terms of the series of Preferred Stock purchasable upon
exercise of such Preferred Stock Warrants and minimum number of Preferred Stock
Warrants that are exercisable; (3) the designation and terms of the series of
Preferred Stock with which such Preferred Stock Warrants are being offered and
the number of such Preferred Stock Warrants being offered with each such
Preferred Stock; (4) the date on and after which such Preferred Stock Warrants
and the related series of Preferred Stock will be transferable separately; (5)
the number and stated value of the series of Preferred Stock purchasable upon
exercise of each such Preferred Stock Warrant and the price at which such
number of shares of Preferred Stock of such series may be purchased upon such
exercise; (6) the date on which the right to exercise such Preferred Stock
Warrants shall commence and the date on which such right shall expire (the
"Preferred Stock Warrant Expiration Date"); (7) whether the Preferred Stock
Warrants represented by the Preferred Stock Warrant Certificates will be issued
in registered or bearer form; (8) information with respect to book-entry
procedures, if any; and (9) any other terms of such Preferred Stock Warrants
for the purchase of shares of Preferred Stock which shall not be inconsistent
with the provisions of the Preferred Stock Warrant Agreement.

   Preferred Stock Warrant Certificates may be exchanged for the new Preferred
Stock Warrant Certificates of different denominations, may (if in registered
form) be presented for registration of transfer, and may be exercised at the
corporate trust office of the Preferred Stock Warrant Agent or any other office
indicated in the

                                       27
<PAGE>

applicable Prospectus Supplement. Prior to the exercise of any Preferred Stock
Warrant, a holder thereof shall have no rights of a holder of shares of the
Preferred Stock purchasable upon such exercise, including the right to receive
payment of dividends, if any, on the underlying Preferred Stock or the right to
vote such underlying Preferred Stock.

   Prospective purchasers of Preferred Stock Warrants should be aware that
special U.S. federal income tax, accounting and other considerations may be
applicable to instruments such as Preferred Stock Warrants. The Prospectus
Supplement relating to any issue of Preferred Stock Warrants will describe such
considerations but prospective purchasers are urged to consult their own
advisors with respect thereto.

Exercise of Preferred Stock Warrants

   Each Preferred Stock Warrant will entitle the holder thereof to purchase
such number of shares of Preferred Stock at such exercise price as shall be set
forth in, or calculable from, the Prospectus Supplement relating to the offered
Preferred Stock Warrants. Preferred Stock Warrants may be exercised at any time
prior to 5:00 p.m., New York time, on the Preferred Stock Warrant Expiration
Date set forth in the Prospectus Supplement relating thereto. After such time
on the Preferred Stock Warrant Expiration Date (or such later date to which
such Preferred Stock Warrant Expiration Date may be extended by the
Corporation), unexercised Preferred Stock Warrants shall become void.

   Preferred Stock Warrants may be exercised by delivery to the Preferred Stock
Warrant Agent of payment as provided in the applicable Prospectus Supplement of
the amount required to purchase the shares of Preferred Stock purchasable upon
such exercise together with certain information set forth on the reverse side
of the Preferred Stock Warrant Certificate. Preferred Stock Warrants will be
deemed to have been exercised upon receipt of the exercise price, subject to
the receipt, within five business days, of the Preferred Stock Warrant
Certificate evidencing such Preferred Stock Warrants. Upon receipt of such
payment and the Preferred Stock Warrant Certificate properly completed and duly
executed at the corporate trust office of the Preferred Stock Warrant Agent or
any other office indicated in the applicable Prospectus Supplement, the
Corporation will, as soon as practicable, issue and deliver the shares of
Preferred Stock purchasable upon such exercise. If fewer than all of the
Preferred Stock Warrants represented by such Preferred Stock Warrant
Certificate are exercised, a new Preferred Stock Warrant Certificate will be
issued for the remaining number of Preferred Stock Warrants.

Modifications

   The Preferred Stock Warrant Agreement and the terms of the Preferred Stock
Warrants may be amended by the Corporation and the Preferred Stock Warrant
Agent, without the consent of the holders thereof, for the purpose of curing
any ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained therein, or in any other manner which the
Corporation may deem necessary or desirable and which will not materially and
adversely affect the interests of such holders.

   The Corporation and the Preferred Stock Warrant Agent also may modify or
amend the Preferred Stock Warrant Agreement and the terms of the Preferred
Stock Warrants, with the consent of the holders of not less than a majority in
number of the then outstanding unexercised Preferred Stock Warrants affected,
provided that no such modification or amendment that shortens the period of
time during which the Preferred Stock Warrants may be exercised or otherwise
materially and adversely affects the exercise rights of the holders of the
Preferred Stock Warrants or reduces the number of outstanding Preferred Stock
Warrants the consent of whose holders is required for modification or amendment
of the Preferred Stock Warrant Agreement or the terms of the Preferred Stock
Warrants may be made without the consent of the holders affected thereby.

Merger, Consolidation, Sale or Other Dispositions

   If at any time there shall be a merger, consolidation, sale, transfer,
conveyance or other disposition of substantially all of the assets of the
Corporation, then the successor or assuming corporation shall succeed to

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<PAGE>

and be substituted for the Corporation in, and the Corporation will be relieved
of any further obligation under, the Preferred Stock Warrant Agreement or the
Preferred Stock Warrants.

Enforceability of Rights by Holders

   The Preferred Stock Warrant Agent will act solely as an agent of the
Corporation in connection with the issuance and exercise of Preferred Stock
Warrants. The Preferred Stock Warrant Agent shall have no duty or
responsibility in case of any default by the Corporation in the performance of
its obligations under the Preferred Stock Warrant Agreement or the Preferred
Stock Warrant Certificates. Each holder of Preferred Stock Warrants may,
without the consent of the Preferred Stock Warrant Agent, enforce by
appropriate legal action, on its own behalf, its right to exercise such
Preferred Stock Warrants.

                          DESCRIPTION OF COMMON STOCK

   The Corporation may issue (either separately or together with other
Securities) shares of its Common Stock. Under the Restated Certificate of
Incorporation, the Corporation is authorized to issue up to 40,000,000 shares
of its Common Stock. Reference is made to the Prospectus Supplement relating to
Common Stock offered thereby, or other Securities convertible or exchangeable
for, or exercisable into, Common Stock, for the terms relevant thereto,
including the number of shares offered, any initial offering price, and market
price and dividend information, as well as, if applicable, information on such
other Securities. See "Description of the Corporation's Outstanding Capital
Stock" below.

                      DESCRIPTION OF COMMON STOCK WARRANTS

   The Corporation may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with other
Securities offered by any Prospectus Supplement and may be attached to or
separate from such other Securities. Each series of Common Stock Warrants will
be issued under one or more warrant agreements (each, a "Common Stock Warrant
Agreement") to be entered into between the Corporation and a bank or trust
company, as Common Stock Warrant Agent, all as set forth in the Prospectus
Supplement relating to the particular issue of offered Common Stock Warrants.
The Common Stock Warrant Agent will act solely as an agent of the Corporation
in connection with the Common Stock Warrant Certificates and will not assume
any obligation or relationship of agency or trust for or with any holders of
Common Stock Warrant Certificates or beneficial owners of Common Stock
Warrants. Copies of the form of Common Stock Warrant Agreement, including the
form of Common Stock Warrant Certificates representing the Common Stock
Warrants, are filed as exhibits to the Registration Statement of which this
Prospectus is a part. The following summaries of certain provisions of the form
of Common Stock Warrant Agreement and Common Stock Warrant Certificate do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Common Stock Warrant Agreement and
the Common Stock Warrant Certificates.

General

   If Common Stock Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Common Stock Warrants, including the following,
where applicable: (1) the offering price; (2) the aggregate number of shares of
Common Stock purchasable upon exercise of such Common Stock Warrants and
minimum number of Common Stock Warrants that are exercisable; (3) the
designation and terms of any other Securities with which such Common Stock
Warrants are being offered and the number of such Common Stock Warrants being
offered with such Securities; (4) the date on and after which such Common Stock
Warrants and such other Securities will be transferable separately; (5) the
number of shares of Common Stock purchasable upon exercise of each such Common
Stock Warrant and the price at which such number of shares of Common Stock may
be purchased upon such exercise; (6) the date on which the right to exercise
such Common Stock

                                       29
<PAGE>

Warrants shall commence and the date on which such right shall expire (the
"Common Stock Warrant Expiration Date"; (7) whether the Common Stock Warrants
represented by the Common Stock Warrant Certificates will be issued in
registered or bearer form; (8) information with respect to book-entry
procedures, if any; and (9) any other terms of such Common Stock Warrants for
the purchase of shares of Common Stock which shall not be inconsistent with the
provisions of the Common Stock Warrant Agreement.

   Common Stock Warrant Certificates may be exchanged for new Common Stock
Warrant Certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Common Stock Warrant Agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Common Stock
Warrant, a holder thereof shall have no rights of a holder of shares of the
Common Stock purchasable upon such exercise, including the right to receive
payment of dividends, if any, on the underlying Common Stock or the right to
vote such underlying Common Stock.

   Prospective purchasers of Common Stock Warrants should be aware that special
U.S. federal income tax, accounting and other considerations may be applicable
to instruments such as Common Stock Warrants. The Prospectus Supplement
relating to any issue of Common Stock Warrants will describe such
considerations but prospective purchasers are urged to consult their own
advisors with respect thereto.

Exercise of Common Stock Warrants

   Each Common Stock Warrant will entitle the holder thereof to purchase such
number of shares of Common Stock at such exercise price as shall be set forth
in, or calculable from, the Prospectus Supplement relating to the offered
Common Stock Warrants. Common Stock Warrants may be exercised at any time prior
to 5:00 p.m., New York time, on the Common Stock Warrant Expiration Date set
forth in the Prospectus Supplement relating thereto. After such time on the
Common Stock Warrant Expiration Date (or such later date to which such Common
Stock Warrant Expiration Date may be extended by the Corporation), unexercised
Common Stock Warrants shall become void.

   Common Stock Warrants may be exercised by delivery to the Common Stock
Warrant Agent of payment as provided in the applicable Prospectus Supplement of
the amount required to purchase the shares of Common Stock purchasable upon
such exercise together with certain information set forth on the reverse side
of the Common Stock Warrant Certificate. Common Stock Warrants will be deemed
to have been exercised upon receipt of the exercise price, subject to the
receipt, within five business days, of the Common Stock Warrant Certificate
evidencing such Common Stock Warrants. Upon receipt of such payment and the
Common Stock Warrant Certificate properly completed and duly executed at the
corporate trust office of the Common Stock Warrant Agent or any other office
indicated in the applicable Prospectus Supplement, the Corporation will, as
soon as practicable, issue and deliver the shares of Common Stock purchasable
upon such exercise. If fewer than all of the Common Stock Warrants represented
by such Common Stock Warrant Certificate are exercised, a new Common Stock
Warrant Certificate will be issued for the remaining number of Common Stock
Warrants.

Modifications

   The Common Stock Warrant Agreement and the terms of the Common Stock
Warrants may be amended by the Corporation and the Common Stock Warrant Agent,
without the consent of the holders thereof, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained therein, or in any other manner which the
Corporation may deem necessary or desirable and which will not materially and
adversely affect the interests of such holders.

   The Corporation and the Common Stock Warrant Agent also may modify or amend
the Common Stock Agreement and the terms of the Common Stock Warrants, with the
consent of the holders of not less than a majority in number of the then
outstanding unexercised Common Stock Warrants affected, provided that no such
modification or amendment that shortens the period of time during which the
Common Stock Warrants

                                       30
<PAGE>

may be exercised or otherwise materially and adversely affects the exercise
rights of the holders of the Common Stock Warrants or reduces the number of
outstanding Common Stock Warrants the consent of whose holders is required for
modification or amendment of the Common Stock Warrant Agreement or the terms of
the Common Stock Warrants may be made without the consent of the holders
affected thereby.

Merger, Consolidation, Sale or Other Dispositions

   If at any time there shall be a merger, consolidation, sale, transfer,
conveyance or other disposition of substantially all of the assets of the
Corporation, then the successor or assuming corporation shall succeed to and be
substituted for the Corporation in, and the Corporation will be relieved of any
further obligation under, the Common Stock Warrant Agreement or the Common
Stock Warrants.

Enforceability of Rights of Holders

   The Common Stock Warrant Agent will act solely as an agent of the
Corporation in connection with the issuance and exercise of Common Stock
Warrants. The Common Stock Warrant Agent shall have no duty or responsibility
in case of any default by the Corporation in the performance of its obligations
under the Common Stock Warrant Agreement or the Common Stock Warrant
Certificates. Each holder of Common Stock Warrants, may, without the consent of
the Common Stock Warrant Agent, enforce by appropriate legal action, on its own
behalf, its right to exercise such Common Stock Warrants.

                    DESCRIPTION OF STOCK PURCHASE CONTRACTS
                            AND STOCK PURCHASE UNITS

   The Corporation may issue Stock Purchase Contracts, including contracts
obligating holders to purchase from the Corporation, and the Corporation to
sell to the holders, a specified number of shares of Common Stock or Preferred
Stock at a future date or dates specified in the Stock Purchase Contracts. The
price per share and the number of shares of Common Stock or Preferred Stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. Any such formula may include anti-dilution provisions to adjust the
number of shares issuable pursuant to the Stock Purchase Contracts upon certain
events.

   The Stock Purchase Contracts may be issued separately or as a part of Stock
Purchase Units, each consisting of a Stock Purchase Contract and debt
obligations of the United States of America or agencies or instrumentalities
thereof. Such debt obligations would be pledged with a collateral agent to
secure the holders' obligations to purchase the Common Stock or the Preferred
Stock under the Stock Purchase Contracts. Any such debt obligations will be
obligations of the United States Government and not of the Corporation. Unless
a holder of Stock Purchase Units settles its Stock Purchase Contracts early
through the delivery of consideration to the Corporation or its agent in the
manner described below, the principal of such debt obligations, when paid at
maturity, will automatically be applied to satisfy in full the holder's
obligation to purchase Common Stock or Preferred Stock under the Stock Purchase
Contracts. The Stock Purchase Contracts may require the Corporation to make
periodic payments to the holders of the Stock Purchase Units or vice versa, and
such payments may be unsecured or prefunded on some basis.

   Holders of Stock Purchase Units may be entitled to settle the underlying
Stock Purchase Contracts prior to the stated settlement date by surrendering
the certificate evidencing the Stock Purchase Units, accompanied by the payment
due, in such form and calculated pursuant to such formula as may be prescribed
in the Stock Purchase Contracts and described in the applicable Prospectus
Supplement. Upon settlement, the holder would receive the number of shares of
Common Stock or Preferred Stock deliverable under such Stock Purchase
Contracts, subject to adjustment in certain cases. In such event, the debt
obligations that were pledged as security for the obligation of the holder to
perform under the Stock Purchase Contracts would be transferred to the holder
free and clear of the Corporation's security interest therein.

                                       31
<PAGE>

   The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its
entirety by reference to the Stock Purchase Contracts, and, if applicable,
collateral arrangements and depositary arrangements, relating to such Stock
Purchase Contracts or Stock Purchase Units.

           DESCRIPTION OF THE CORPORATION'S OUTSTANDING CAPITAL STOCK

   The aggregate number of shares of capital stock of all classes which the
Corporation has authority to issue is forty-five million (45,000,000) shares,
of which forty million (40,000,000) shares are Common Stock of the par value of
twenty cents ($.20) each, and five million (5,000,000) shares are Preferred
Stock of the par value of ten cents ($.10) each. As of June 30, 1995, there
were 16,664,867 shares of Common Stock and 1,000,000 shares of Preferred Stock
outstanding.

Common Stock

   Subject to the senior rights of Preferred Stock which may from time to time
be outstanding, holders of Common Stock are entitled to receive such dividends
as may be declared by the Board of Directors outs of funds legally available
therefor. Upon dissolution and liquidation, holders of Common Stock are
entitled to a ratable shares of the net assets of the Company remaining after
payment to the holders of the Preferred Stock of the full preferential amounts
to which they are entitled. All outstanding shares of Common Stock are fully
paid and nonassessable.

   The holders of Common Stock are entitled to one vote per share for the
election of Directors and on all other matters submitted to a vote of
stockholders. Holders of Common Stock are not entitled to cumulative voting for
the election of Directors. They are not entitled to preemptive rights.

   The transfer agent and registrar for the Common Stock is Chemical Bank.

Preferred Stock

   The Preferred Stock has priority over the Common Stock with respect to
dividends and to other distributions, including the distribution of assets upon
liquidation. The Board of Directors is authorized to fix and determine the
terms, limitations and relative rights and preferences of the Preferred Stock,
to establish series of Preferred Stock and to fix and determine the variations
as among series. The Board of Directors without stockholder approval could
issue Preferred Stock with voting and conversion rights which could adversely
affect the voting power of the holders of Common Stock.

   The Corporation's outstanding Preferred Stock consists of 1,000,000 shares
of Series A Cumulative Redeemable Preferred Stock, which was issued on January
14, 1994 in connection with the sale of 6,000,000 Depositary Shares, each
representing a 1/6 fractional interest in a share of Series A Cumulative
Redeemable Preferred Stock. The liquidation preference of each share of Series
A Cumulative Redeemable Preferred Stock is $150.00 (equivalent to $25.00 per
Depositary Share). Dividends on the Series A Cumulative Redeemable Preferred
Stock and the Depositary Shares representing such Series A Cumulative
Redeemable Preferred Stock are cumulative from the date of original issue and
are payable quarterly in arrears at the rate of 7 3/8% of the liquidation
preference per annum (equivalent to $1.84375 per annum per Depositary Share).
The Series A Cumulative Redeemable Preferred Stock and the Depositary Shares
representing such Series A Cumulative Redeemable Preferred Stock may be
redeemed for cash at the option of the Corporation, in whole or in part, at a
redemption price of $150.00 per share (equivalent to $25.00 per Depositary
Share), plus accrued and unpaid dividends, if any, thereon. The Series A
Cumulative Redeemable Preferred Stock and the Depositary Shares representing
such Series A Cumulative Redeemable Preferred Stock have no stated maturity and
are not subject to any sinking fund or mandatory redemption or convertible into
or exchangeable for any other property or securities of the Corporation.

                                       32
<PAGE>

Anti-Takeover Provisions

   The Corporation currently has provisions in its Restated Certificate of
Incorporation and By-Laws which could have an "anti-takeover" effect. The Board
of Directors is divided into three classes, each class having a term of three
years. Each year the term of one class expires. In addition, the affirmative
vote or consent of the holders of four-fifths (80%) of the stock of the
Corporation entitled to vote in elections of Directors is required to authorize
any of the following transactions:

     (a) merger or consolidation of the Corporation into any other
  corporation; or

     (b) sale, lease, exchange, mortgage or other disposition of all or any
  substantial part of the assets of the Corporation to any other corporation,
  person or other entity; or

     (c) sale or lease by any other corporation, person or entity to the
  Corporation or any subsidiary thereof of any securities or assets (except
  assets having an aggregate fair market value of less than $4,000,000) in
  exchange for voting securities (securities convertible into voting
  securities or options, warrants or rights to purchase voting securities) of
  the Corporation or any subsidiary thereof

if such corporation, person or entity is, or has been at any time within the
preceding two years, the beneficial owner of 5% or more of the outstanding
shares of stock of the Corporation entitled to vote in elections of Directors.

                              PLAN OF DISTRIBUTION

   The Corporation may sell the Securities: (i) through underwriters; (ii) to
dealers; (iii) through agents; or (iv) directly to a limited number of
institutional purchasers or to a single purchaser. The Prospectus Supplement
with respect to the Securities will set forth the name or names of the
underwriters, if any, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price and any discounts
or concessions allowed or reallowed or paid to dealers.

   If underwriters are used in a sale of any Securities, such Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The Securities may be offered to the public through underwriters or
through a group of underwriters. Unless otherwise set forth in the Prospectus
Supplement, the obligations of the underwriters to purchase the Securities will
be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Securities if any are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.

   If a dealer is utilized in the sale of any Securities, the Corporation will
sell such Securities to the dealer, as principal. The dealer may then resell
such Securities to the public at varying prices to be determined by such dealer
at the time of resale. The name of the dealer and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.

   The Securities may be sold by the Corporation through agents designated by
the Corporation from time to time. Any such agent involved in the offer or sale
of any Securities will be named, and any fees or commissions payable by the
Corporation to such agent will be set forth, in the Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.

   The Securities may be sold directly by the Corporation to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating thereto.

                                       33
<PAGE>

   If so indicated in the Prospectus Supplement, the Corporation will authorize
underwriters, dealers and agents to solicit offers by certain specified
institutions to purchase the Securities from the Corporation at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.

   Underwriters, dealers and agents may be entitled, under agreements entered
into with the Corporation, to indemnification by the Corporation against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments which such underwriters, dealers or
agents may be required to make in respect thereof. Any such underwriters,
dealers and agents may be customers of, engage in transactions with or perform
services for, the Corporation in the ordinary course of business.

   The place and time of delivery of the Securities will be set forth in the
Prospectus Supplement.

         GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES

   When so provided in the Prospectus Supplement, investors in the Global
Securities representing any of the Securities issued hereunder may hold a
beneficial interest in such Global Securities through the Depository, CEDEL or
Euroclear (as defined below) or through participants. The Global Securities may
be traded as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle as set forth
in the applicable Prospectus Supplement.

   Cedel S.A. ("CEDEL") is incorporated under the laws of Luxembourg as a
professional depository. CEDEL holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between CEDEL participants through electronic book-entry changes
in accounts of CEDEL participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its
participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations and may include the underwriters. Indirect access to CEDEL is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
participant, either directly or indirectly.

   The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries generally similar to the arrangements for cross-market
transfers with the Depository. The Euroclear System is operated by Morgan
Guaranty Trust Company of New York, Brussels, Belgium office (the "Euroclear
Operator" or "Euroclear"), under contract with Euroclear Clearance System S.C.,
a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for the Euroclear
System on behalf of Euroclear participants. Euroclear participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include the underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.

                                       34
<PAGE>

   The Euroclear Operator is the Belgian branch of Morgan Guaranty Trust
Company of New York ("Morgan") which is a member of the Federal Reserve System.
As such, it is regulated and examined by the Federal Reserve Board and the New
York State Banking Department, as well as the Belgian Banking Commission.

   Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear participants,
and has no record of or relationship with persons holding through Euroclear
participants.

   Principal, premium, if any, and interest payments with respect to Securities
held through CEDEL or Euroclear will be credited to the cash accounts of CEDEL
participants or Euroclear participants in accordance with the relevant system's
rules and procedures, to the extent received by its depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations as described below. The CEDEL or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a holder under the relevant Indenture on behalf of a CEDEL
participant or Euroclear participant only in accordance with its relevant rules
and procedures and subject to its depositary's ability to effect such actions
on its behalf through the Depository.

Initial Settlement

   All Global Securities will be registered in the name of Cede & Co. as
nominee of the Depository. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect participants in the Depository. As a result, CEDEL and Euroclear
will hold positions on behalf of their participants through their respective
depositaries, Citibank and Morgan, which in turn will hold such positions in
accounts as participants of the Depository.

   Global Securities held through the Depository will follow the settlement
practices described above. Investor securities custody account will be credited
with their holdings against payment on the settlement date. Global Securities
held through CEDEL or Euroclear accounts will follow the settlement procedures
applicable to conventional eurobonds, except that there will be no temporary
global security and no "lock-up" or restricted period. Global Securities will
be credited to the securities custody accounts on the settlement date against
payment.

Secondary Market Trading

   Since the purchase determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.

   Trading between Depository Participants. Secondary market trading between
Depository participants will be settled using the procedures described above.

   Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL participants and/or Euroclear participants will be
settled using the procedures applicable to conventional eurobonds.

   Trading between Depository Seller and CEDEL or Euroclear Purchaser. When
beneficial interests in the Global Securities are to be transferred from the
account of a Depository participant to the account of a CEDEL

                                       35
<PAGE>

participant or a Euroclear participant, the purchaser will send instructions to
CEDEL or Euroclear through a participant at least one business day prior to
settlement. CEDEL or Euroclear will instruct Citibank or Morgan, respectively,
as the case may be, to receive a beneficial interest in the Global Securities
against payment. Unless otherwise set forth in the Prospectus Supplement,
payment will include interest accrued on the beneficial interest in the Global
Securities so transferred from and including the last coupon payment date to
and excluding the settlement date, on the basis on which interest is calculated
on the Debt Securities. For transactions settling on the 31st of the month,
payment will include interest accrued to and excluding the first day of the
following month. Payment will then be made by Citibank or Morgan to the
Depository participant's account against delivery of the beneficial interest in
the Global Securities. After settlement has been completed, the beneficial
interest in the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the CEDEL or Euroclear participant's account. The securities credit will appear
the next day (European time) and the cash debit will be back-valued to, and the
interest on the beneficial interests in Global Securities will accrue from, the
value date (which would be the preceding day when settlement occurred in New
York). If settlement is not completed on the intended value date (i.e., the
trade fails), the CEDEL or Euroclear cash debit will be valued instead as of
the actual settlement date.

   CEDEL participants and Euroclear participants will need to make available to
the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.

   As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, CEDEL
participants or Euroclear participants purchasing beneficial interest in Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the beneficial interests in the Global Securities were credited
to their accounts. However, interest on the beneficial interests in the Global
Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period
may substantially reduce or offset the amount of such overdraft charges,
although this result will depend on each participant's particular cost of
funds.

   Since the settlement is taking place during New York business hours,
Depository participants can employ their usual procedures for sending a
beneficial interest in Global Securities to Citibank or Morgan for the benefit
of CEDEL participants or Euroclear participants. The sale proceeds will be
available to the Depository seller on the settlement date. Thus, to the
Depository participant a cross-market transaction will settle no differently
than a trade between two Depository participants.

   Trading between CEDEL or Euroclear Seller and Depository Purchaser. Due to
time zone differences in their favor, CEDEL and Euroclear participants may
employ their customary procedures for transactions in which the beneficial
interest in the Global Securities is to be transferred by the respective
clearing system, through Citibank or Morgan, to a Depository participant. The
seller will send instructions to CEDEL or Euroclear through a participant at
least one business day prior to settlement. In these cases, CEDEL or Euroclear
will instruct Citibank or Morgan, as appropriate, to deliver the beneficial
interest in the Global Securities to the Depository participant's account
against payment. Payment will include interest accrued on the beneficial
interests in the Global Securities from and including the last coupon payment
date to and excluding the settlement date on the basis on which interest is
calculated on the Global Securities. For transactions settling on the 31st of
the month, payment will include interest accrued to and excluding the first day
of the following month. The payment will then be reflected in the account of
the CEDEL or Euroclear participant the following day, and receipt of the cash
proceeds in the CEDEL or Euroclear participant's account would be back-valued
to the value date (which would be the preceding day, when settlement occurred
in New York). Should the CEDEL or Euroclear participant have a line of credit
with its respective clearing system and elect to be in debit in anticipation of
receipt of the sale proceeds in its account, the back-valuation will extinguish
any

                                       36
<PAGE>

overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the CEDEL or Euroclear participant's account would instead be
valued as of the actual settlement date.

   Finally, day traders that used CEDEL or Euroclear and that purchase
beneficial interests in Global Securities from Depository participants for
credit to CEDEL participants or Euroclear participants should note that these
trades would automatically fail on the sale side unless affirmative action were
taken. At least three techniques should be readily available to eliminate this
potential problem:

     (1) borrowing through CEDEL or Euroclear for one day (until the purchase
  side of the day trade is reflected in their CEDEL or Euroclear accounts) in
  accordance with the clearing system's customary procedures;

     (2) borrowing beneficial interests in the Global Securities in the U.S.
  from a Depository participant no later than one day prior to settlement,
  which would give beneficial interests in the Global Securities sufficient
  time to be reflected in the appropriate CEDEL or Euroclear account in order
  to settle the sale side of the trade; or

     (3) staggering the value dates for the buy and sell sides of the trade
  so that the value date for the purchase from the Depository participant is
  at least one day prior to the value date for the sale to the CEDEL
  participant or Euroclear participant.

   Although the Depository, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of beneficial interests in Global
Securities among participants of the Depository, CEDEL and Euroclear, they are
under no obligation to perform or continue to perform such procedures and such
procedures may be discontinued at any time.

Certain U.S. Federal Income Tax Documentation Requirements

   A beneficial owner of Global Securities holding securities, directly or
indirectly, through CEDEL or Euroclear (or through the Depository if the holder
has an address outside the U.S.) will be subject to the 30% U.S. withholding
tax that generally applies to payments of interest (including original issue
discount) on registered debt issued by U.S. persons, unless (i) each clearing
system, bank or other financial institution that holds customers' securities in
the ordinary course of its trade or business in the chain of intermediaries
between such beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements, and (ii) such beneficial
owner takes one of the following steps to obtain an exemption or reduced tax
rate:

     Exemption for non-U.S. persons (Form W-8). Non-U.S. persons that are
  beneficial owners (other than a beneficial owner that owns actually or
  constructively 10% or more of the total combined voting power of all
  classes of stock of the Corporation entitled to vote or a controlled
  foreign corporation that is related to the Corporation through stock
  ownership) can obtain a complete exemption from the withholding tax by
  filing a properly completed Form W-8 (Certificate of Foreign Status).

     Exemption for non-U.S. persons with effectively connected income (Form
  4224). A non-U.S. person, including a non-U.S. corporation or bank with a
  U.S. branch, that is a beneficial owner and for which the interest income
  is effectively connected with its conduct of a trade or business in the
  United States, can obtain an exemption from the withholding tax by filing a
  properly completed Form 4224 (Exemption from Withholding of Tax on Income
  Effectively Connected with the Conduct of a Trade or Business in the United
  States).

     Exemption or reduced rate for non-U.S. persons resident in treaty
  countries (Form 1001). Non-U.S. persons that are beneficial owners that are
  entitled to the benefits of an income tax treaty with the United States can
  obtain an exemption or reduced tax rate (depending on the treaty terms) by
  filing a properly completed Form 1001 (Ownership, Exemption or Reduced Rate
  Certificate). If the treaty provides only for

                                       37
<PAGE>

  a reduced rate, withholding tax will be imposed at that rate unless the
  filer alternatively files Form W-8. Form 1001 may be filed by the
  beneficial owner or the beneficial owner's agent.

     Exemption for U.S. persons (Form W-9). U.S. persons can obtain a
  complete exemption from the withholding tax by filing a properly completed
  Form W-9 (Request for Taxpayer Identification Number and Certification).

U.S. Federal Income Tax Reporting Procedure

   The beneficial owner of the Global Security or, in the case of a Form 1001
or a Form 4224 filer, his agent, files by submitting the appropriate form to
the entity through whom it directly holds the Global Security. For example, if
the beneficial owner is listed directly on the books of Euroclear or CEDEL as
the holder of the Debt Security, the IRS Form must be provided to Euroclear or
CEDEL, as the case may be. Each person through which a Debt Security is held
must submit, on behalf of the beneficial owner, the IRS Form (or in certain
cases a copy thereof) under applicable procedures to the person through which
it holds the Debt Security, until the IRS Form is received by the U.S. person
who would otherwise be required to withhold U.S. federal income tax from
interest on the Debt Security. For example, in the case of Debt Securities held
through Euroclear or CEDEL, the IRS Form (or a copy thereof) must be received
by the U.S. depositary of such clearing agency. Applicable procedures include,
if a beneficial owner of the Debt Security provides an IRS Form W-8 to a
securities clearing organization, bank or other financial institution (a
"financial institution") that holds the Debt Security in the ordinary course of
its trade or business on the owner's behalf, that such financial institution
certify to the person otherwise required to withhold U.S. federal income tax
from such interest, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a financial institution between
it and the beneficial owner and that it furnish the payor with a copy thereof.

   As used in this section on tax documentation requirements, the term "U.S.
person" means (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States
or any State thereof or (iii) an estate or trust the income of which is
includable in gross income for U.S. tax purposes, regardless of its source.

   This summary does not deal with all aspects of U.S. income tax and
withholding that may be relevant to foreign beneficial owners of the Global
Securities, including special categories of foreign investors who may not be
eligible for exemptions from U.S. withholding tax. Investors are advised to
consult their own tax advisors for specific tax advice concerning their holding
and disposing of beneficial interests in the Global Securities. Any additional
requirements, if applicable, will be set forth in the Prospectus Supplement.

                                 LEGAL OPINIONS

   The legality of the Securities offered hereby will be passed upon for the
Corporation by Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York
10019, and, if underwriters, dealers or agents are utilized, by Brown & Wood,
One World Trade Center, New York, New York 10048. Attorneys of Willkie Farr &
Gallagher who have participated in this offering beneficially own an aggregate
of 49,761 shares of Common Stock, of which 20,000 are beneficially owned by
Robert B. Hodes and 29,761 are beneficially owned by Jack H. Nusbaum (which
amount includes 22,750 shares held in trusts as to which Mr. Nusbaum is a
co-trustee). Mr. Hodes and Mr. Nusbaum are also Directors of the Corporation.

                                       38
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                                    EXPERTS

   The financial statements and schedules of W.R. Berkley Corporation and
subsidiaries as of December 31, 1994 and 1993 and for each of the years in the
three year period ended December 31, 1994, incorporated by reference herein and
elsewhere in the Registration Statement have been audited and reported upon by
KPMG Peat Marwick LLP, independent certified public accountants. The financial
information for the five years ended December 31, 1994, in the table under
"Selected Financial Data" incorporated by reference herein and in the
Registration Statement has been derived from financial statements audited and
reported upon by KPMG Peat Marwick LLP. Such financial statements, schedules
and selected financial data have been incorporated by reference herein and in
the Registration Statement in reliance upon the reports of KPMG Peat Marwick
LLP, incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.

   The reports of KPMG Peat Marwick LLP on the financial statements and
schedules as of December 31, 1994 and 1993 and for each of the years in the
three year period ended December 31, 1994 refer to the Corporation's adoption
of the provisions of the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" in 1992
and No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
on December 31, 1993.

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