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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 10, 2000
Alleghany Corporation
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-9371 51-0283071
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(Commission File Number) (IRS Employer Identification Number)
375 Park Avenue, Suite 3201
New York, New York 10152
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 752-1356
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Item 2. Acquisition or Disposition of Assets.
On December 30, 1999, Alleghany Corporation, a Delaware corporation
("Alleghany"), and Swiss Re America Holding Corporation, a Delaware corporation
("Swiss Re"), entered into a Stock Purchase Agreement (as modified by the
Closing Agreement dated May 10, 2000, the "Stock Purchase Agreement"), pursuant
to which Alleghany agreed to sell all of the common stock, par value $.01 per
share, of its subsidiary Underwriters Re Group, Inc. ("URG"), to Swiss Re.
The sale of URG was completed on May 10, 2000. Alleghany received pre-tax
proceeds of the sale of about $650 million in cash (net of a $10 million
holdback). The final purchase price is subject to adjustment as provided by the
terms of the Stock Purchase Agreement. Alleghany retained URG's London-based
Lloyd's operations to be conducted through Alleghany Underwriting Holdings Ltd
(previously referred to as Venton Holdings Ltd). Also, in connection with the
sale, Alleghany purchased from URG 7.425 million shares of common stock of
Burlington Northern Santa Fe Corporation for cash consideration paid to URG of
approximately $188 million.
Item 7. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information is attached as
Annex A hereto:
(i) Alleghany Corporation Unaudited Pro Forma Consolidated
Balance Sheet as of March 31, 2000.
(ii) Alleghany Corporation Unaudited Pro Forma Consolidated
Statement of Earnings for the quarter ended March 31, 2000.
(iii) Alleghany Corporation Unaudited Pro Forma Consolidated
Statement of Earnings for the year ended December 31, 1999.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated balance sheet at March 31, 2000
included in Annex A attached hereto gives effect to the disposition by Alleghany
of URG as if the disposition had occurred at March 31, 2000 and the unaudited
pro forma consolidated statements of earnings for the three months ended March
31, 2000 and for the year ended December 31, 1999 included in Annex A attached
hereto give effect to such disposition as if the disposition had occurred on
January 1, 2000. The unaudited pro forma results do not reflect the gain on the
sale of URG of approximately $118 million. Unaudited pro forma financial
information does not purport to be indicative of either the results of future
operations or the results of operations that would have occurred had the
disposition been consummated on the dates indicated.
The unaudited pro forma financial statements included in Annex A
attached hereto should be read in conjunction with Alleghany's historical
consolidated financial statements and notes thereto previously filed in
Alleghany's Annual Report on Form 10-K for the year ended December 31, 1999,
and the Quarterly Report on Form 10-Q for the three months ended March 31,
2000.
(c) Exhibits. The following are filed as exhibits to this Report:
Exhibit Number Exhibit Description
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99.1 Stock Purchase Agreement, dated as of December 30,
1999, by and between Alleghany Corporation and Swiss
Re America Holding Corporation, filed as Exhibit
99.1 to Alleghany's Current Report on Form 8-K for
December 30, 1999, is incorporated herein by
reference.
99.2 Closing Agreement, dated May 10, 2000, by and
between Swiss Re America Holding Corporation and
Alleghany Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALLEGHANY CORPORATION
Date: May 25, 2000 By: /s/ Peter R. Sismondo
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Name: Peter R. Sismondo
Title: Vice President,
Controller, Treasurer
and Assistant Secretary
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ANNEX A
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet at March 31, 2000
gives effect to the disposition by Alleghany of URG as if the disposition had
occurred at March 31, 2000 and the unaudited pro forma consolidated statements
of earnings for the three months ended March 31, 2000 and for the year ended
December 31, 1999 give effect to such disposition as if the disposition had
occurred on January 1, 2000. The unaudited pro forma results do not reflect the
gain on the sale of URG of approximately $118 million. Unaudited pro forma
financial information does not purport to be indicative of either the results
of future operations or the results of operations that would have occurred had
the disposition been consummated on the dates indicated.
The unaudited pro forma financial statements should be read in conjunction with
Alleghany's historical consolidated financial statements and notes thereto
previously filed in Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1999, and the Quarterly Report on Form 10-Q for the three months
ended March 31, 2000.
ALLEGHANY CORPORATION
Pro Forma Balance Sheet
March 31, 2000
(Unaudited)
($ in 000's)
Pro Forma
URG Pro Forma Balance
3/31/2000 Adjustments Adjustments Sheet
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Assets
Available for sale securities:
Fixed maturities $ 1,182,660 ($1,152,656) $ -- $ 30,004
Equity securities 450,463 (211,037) 187,900 427,326
Short-term investments 260,961 (117,660) -- 143,301
----------- ----------- ----------- -----------
1,894,084 (1,481,353) 187,900 600,631
Cash 30,980 6,048 462,200 499,228
Cash pledged to secure trust deposits 17,469 -- -- 17,469
Premium trust funds 182,312 (8,085) -- 174,227
Notes receivable 91,535 -- -- 91,535
Funds held, accounts and other receivables 529,685 (303,262) 10,000 236,423
Property and equipment, net 204,592 (10,640) -- 193,952
Reinsurance receivable 882,236 (679,365) -- 202,871
Other assets 663,928 (171,974) -- 491,954
----------- ----------- ----------- -----------
$ 4,496,821 ($2,648,631) $ 660,100 $ 2,508,290
=========== =========== =========== ===========
Liabilities and Common Stockholders' Equity
Property and casualty losses and LAE $ 2,063,387 ($1,608,567) $ -- $ 454,820
Unearned premiums 356,811 (133,876) -- 222,935
Other liabilities 529,097 (327,971) 109,938 311,064
Parent company debt -- -- -- --
Subsidiaries' debt 399,791 (198,012) -- 201,779
Net deferred tax liability 36,746 41,214 (13,300) 64,660
Trust deposits secured by pledged assets 22,910 -- -- 22,910
----------- ----------- ----------- -----------
Total liabilities 3,408,742 (2,227,212) 96,638 1,278,168
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----------- ----------- ----------- -----------
Common stockholders' equity 1,088,079 (421,419) 563,462 1,230,122
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$ 4,496,821 ($2,648,631) $ 660,100 $ 2,508,290
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See accompanying footnotes.
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ALLEGHANY CORPORATION
Pro Forma Statement of Earnings
March 31, 2000
(Unaudited)
($ in 000's, except share amounts)
Pro Forma
URG Pro Forma Statement
3/31/00 Adjustments Adjustments of Earnings
----------- ----------- ----------- -----------
Revenues:
Investment management fees $ 44,039 $ -- $-- $ 44,039
Net property and casualty premiums earned 162,656 (97,673) -- 64,983
Interest, dividend and other income 53,488 (20,998) -- 32,490
Net mineral and filtration sales 49,106 -- -- 49,106
Net gain on investment transactions 475 (410) -- 65
----------- ----------- ----- -----------
Total revenues 309,764 (119,081) -- 190,683
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Costs and expenses:
Commissions and brokerage expenses 40,135 (21,713) -- 18,422
Salaries, administrative and other
operating expenses 86,832 (16,096) -- 70,736
Property and casualty losses & LAE 135,076 (88,789) -- 46,287
Cost of mineral and filtration sales 34,658 -- -- 34,658
Interest expense 7,699 (4,010) -- 3,689
Corporate administration 5,571 -- -- 5,571
----------- ----------- ----- -----------
Total costs and expenses 309,971 (130,608) -- 179,363
----------- ----------- ----- -----------
Earnings before income taxes (207) 11,527 -- 11,320
Income taxes (689) 6,306 -- 5,617
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Net earnings $ 482 $ 5,221 $-- $ 5,703
=========== =========== ===== ===========
Basic earnings per share * $ 0.07 $ 0.77
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Diluted earnings per share * $ 0.06 $ 0.76
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Average shares outstanding * 7,444,502 7,444,502
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* Adjusted to reflect the dividend of common stock in March 2000.
See accompanying footnotes.
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ALLEGHANY CORPORATION
Pro Forma Statement of Earnings
December 31, 1999
(Unaudited)
($ in 000's, except share amounts)
Pro Forma
URG Pro Forma Statement
12/31/1999 Adjustments Adjustments of Earnings
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Revenues:
Investment management fees $ 165,673 $ -- $ -- $ 165,673
Net property and casualty premiums earned 719,846 (498,662) -- 221,184
Interest, dividend and other income 200,135 (93,037) -- 107,098
Net mineral and filtration sales 208,480 -- -- 208,480
Net gain on investment transactions 82,029 (1,521) 80,508
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Total revenues 1,376,163 (593,220) -- 782,943
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Costs and expenses:
Commissions and brokerage expenses 172,527 (110,862) -- 61,665
Salaries, administrative and other
operating expenses 304,197 (43,990) -- 260,207
Property and casualty losses & LAE 548,459 (379,615) -- 168,844
Cost of mineral and filtration sales 139,107 -- -- 139,107
Interest expense 32,337 (16,031) -- 16,306
Corporate administration 17,632 -- -- 17,632
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Total costs and expenses 1,214,259 (550,498) -- 663,761
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Earnings before income taxes 161,904 (42,722) -- 119,182
Income taxes 61,799 (4,927) -- 56,872
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Net earnings $ 100,105 ($ 37,795) $ -- $ 62,310
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Basic earnings per share * $ 13.39 $ 9.62
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Diluted earnings per share * $ 13.19 $ 9.48
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Average shares outstanding * 7,477,200 7,477,200
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* Adjusted to reflect the dividend of common stock in March 2000.
See accompanying footnotes.
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FOOTNOTES
1. The sale of Underwriters Re Group, Inc. (URG) was completed on May 10,
2000. Alleghany retained URG's London-based Lloyd's operations which
will be conducted through Alleghany Underwriting Holdings Ltd.
Accordingly, the accompanying financial statements exclude the results
of URG (URG Adjustments) from the Company's results.
2. The Company received pre-tax proceeds of about $650.1 million in cash
(net of a $10 million holdback) from the sale. In connection with the
sale, the Company paid approximately $187.9 million in cash for the
purchase of 7.425 million shares of Burlington Northern Santa Fe
Corporation from URG. Other pro forma adjustments include a $10 million
holdback pending final settlement of an outstanding issue,
approximately $3.7 million pre-tax of transaction expenses, a $38
million pre-tax accrual relating to loss reserve guarantees, current
taxes of approximately $71 million and a $13.3 million net deferred tax
asset.
3. The pro forma balance sheet reflects the results of the transaction
immediately after the sale and excludes URG's results of operations for
the period April 1, 2000 through the date of the sale. Such results of
operations will include a charge of $18.8 million after tax for an
adverse development cover and special bonuses to URG employees of $11.4
million after tax.
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Index to Exhibits
Exhibit Number Description of Exhibit
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99.1 Stock Purchase Agreement, dated as of December 30,
1999 by and between Alleghany Corporation and Swiss
Re America Holding Corporation, filed as Exhibit
99.1 to Alleghany's Current Report on Form 8-K for
December 30, 1999, is incorporated herein by
reference.
99.2 Closing Agreement, dated May 10, 2000, by and
between Swiss Re America Holding Corporation and
Alleghany Corporation.