EXHIBIT 99.1
NEW YORK, NY, August 6, 2003 -- Net earnings of Alleghany Corporation
(NYSE-Y) in the second quarter of 2003 were $6.0 million, or approximately $0.81
per share of common stock, compared with net earnings of $8.9 million, or
approximately $1.19 per share of common stock, in the second quarter of 2002,
John J. Burns, Jr., President and chief executive officer of Alleghany,
announced today. Net earnings include net gains on investment transactions after
taxes in the second quarter of 2003 of $1.0 million, or $0.14 per share,
compared with $2.8 million, or $0.38 per share, in the corresponding 2002
period. In the first six months of 2003, Alleghany's net earnings were $13.7
million, or approximately $1.85 per share, compared with net earnings of $34.7
million, or $4.64 per share, in the first six months of 2002. The 2003 six-month
results include net gains on investment transactions after taxes of $3.1
million, or approximately $0.42 per share, compared with $25.3 million, or
approximately $3.39 per share, in the corresponding 2002 period.
Alleghany common stockholders' equity per share at June 30, 2003 was
$193.07 per share, an increase from common stockholders' equity per share of
$185.85 as of March 31, 2003 (both as adjusted for the stock dividend declared
in March 2003).
Alleghany Insurance Holdings, a holding company for Alleghany's insurance
operations, consisting principally of Capitol Transamerica Corporation, recorded
pre-tax earnings of $2.7 million on revenues of $38.3 million in the second
quarter of 2003, compared with a pre-tax loss of $2.1 million on revenues of
$33.2 million in the 2002 second quarter. Alleghany Insurance Holdings recorded
pre-tax investment income of $4.8 million and realized pre-tax net losses on
investment transactions of $0.03 million in the 2003 second quarter, compared
with pre-tax investment income of $3.6 million and realized pre-tax net losses
on investment transactions of $1.0 million in the corresponding 2002 period.
Alleghany Insurance Holdings' 2003 pre-tax investment income reflects a larger
invested asset base, principally due to capital contributions by Alleghany. On
July 1, 2003, Alleghany Insurance Holdings completed the acquisition of Royal
Specialty Underwriting, Inc., as discussed below.
World Minerals recorded pre-tax earnings of $6.5 million in the 2003
second quarter, compared with pre-tax earnings of $7.7 million in the 2002
second quarter, primarily reflecting lower margins due to competitive pricing
pressures and increased labor and benefit costs. Revenues in the 2003 second
quarter were $69.0 million, compared with $66.9 million in the second quarter of
2002, reflecting the favorable impact of the strengthening of the Euro and the
pound sterling against the U.S. dollar.
Heads & Threads recorded a pre-tax loss of $1.8 million in the 2003 second
quarter, compared with pre-tax earnings of $0.6 million in the corresponding
2002 period, primarily reflecting a $1.1 million charge in connection with
changes in senior management and the relocation of Heads & Threads' corporate
offices from New Jersey to Chicago, competitive pricing pressures and higher
material costs due to increases in the cost of steel from China. Revenues in the
2003 second quarter were $27.3 million, compared with $29.0 million in the 2002
second quarter, primarily reflecting reduced demand in the U.S. economy.
Highlights are as follows (in millions, except for shares and per share
amounts):
Three Months Ended Six Months Ended
June 30 June 30
--------------------------------- ---------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
Revenues $ 144.4 $ 141.8 $ 283.0 $ 299.8
Earnings before income taxes $ 8.7 $ 13.4 $ 20.3 $ 52.7
Net earnings $ 6.0 $ 8.9 $ 13.7 $ 34.7
Basic earnings per
share of common stock * $ 0.81 $ 1.19 $ 1.85 $ 4.64
Diluted earnings per
share of common stock* $ 0.80 $ 1.09 $ 1.84 $ 4.53
Average number of outstanding
shares of common stock* 7,433,436 7,479,050 7,423,296 7,484,571
* Adjusted to reflect the dividend of common stock declared in March 2003.
The comparative contributions to earnings before taxes made by Alleghany's
operating units Alleghany Insurance Holdings (insurance businesses), World
Minerals (industrial minerals business) and Heads & Threads (industrial
fasteners business), as well as by Alleghany's parent company and other
operations, were as follows (in millions):
Three Months Ended Six Months Ended
June 30 June 30
---------------------- ----------------------
2003 2002 2003 2002
------- ------- ------- -------
Alleghany Insurance Holdings $ 2.7 $ (2.1) $ 7.6 $ (0.9)
World Minerals 6.5 7.7 11.4 10.7
Heads & Threads (1.8) 0.5 (1.7) 1.1
Parent company and other 1.3 7.3 3.0 41.8
------- ------- ------- -------
$ 8.7 $ 13.4 $ 20.3 $ 52.7
======= ======= ======= =======
On a per-share, after-tax basis, the foregoing earnings contributions may
be broken down as follows:
THREE MONTHS ENDED JUNE 30
World Heads & Parent co.
2003 AIHL Minerals Threads and other Total
- ---- ---- -------- ------- --------- -----
Operating income (loss)* $ 0.36 $ 0.46 $ (0.15) $ -- $ 0.67
Net gain on investment
transactions -- -- -- 0.14 0.14
-------- -------- -------- -------- --------
Net earnings (loss) per share
$ 0.36 $ 0.46 $ (0.15) $ 0.14 $ 0.81
======== ======== ======== ======== ========
2002
Operating income (loss)* $ (0.03) $ 0.58 $ 0.05 $ 0.21 $ 0.81
Net (loss) gain on investment
transactions (0.09) -- -- 0.47 0.38
-------- -------- -------- -------- --------
Net (loss) earnings per share $ (0.12) $ 0.58 $ 0.05 $ 0.68 $ 1.19
======== ======== ======== ======== ========
SIX MONTHS ENDED JUNE 30
World Heads & Parent co.
2003 AIHL Minerals Threads and other Total
---- ---- -------- ------- --------- -----
Operating income (loss)* $ 0.82 $ 0.77 $ (0.14) $ (0.02) $ 1.43
Net gain on investment
transactions 0.08 -- -- 0.34 0.42
-------- -------- -------- -------- --------
Net earnings (loss) per share
$ 0.90 $ 0.77 $ (0.14) $ 0.32 $ 1.85
======== ======== ======== ======== ========
2002
Operating income (loss)* $ 0.33 $ 0.74 $ 0.09 $ 0.09 $ 1.25
Net (loss) gain on investment
transactions (0.23) -- -- 3.62 3.39
-------- -------- -------- -------- --------
Net earnings (loss) per share $ 0.10 $ 0.74 $ 0.09 $ 3.71 $ 4.64
======== ======== ======== ======== ========
*Operating income represents net earnings per share less the net gain or loss on
investment transactions taxed at the federal income tax rate.
As of June 30, 2003 Alleghany beneficially owned approximately 16.0
million shares, or 4.3 percent, of the outstanding common stock of Burlington
Northern Santa Fe Corporation, which had an aggregate market value on that date
of approximately $455.0 million, or $28.44 per share, compared with a market
value on March 31, 2003 of $398.4 million, or $24.90 per share. The aggregate
cost of such shares is approximately $181.8 million, or $11.36 per share.
Alleghany has previously announced that it may purchase shares of its
common stock in open market transactions from time to time. In the second
quarter of 2003, Alleghany did not purchase any shares of its common stock. As
of June 30, 2003, Alleghany had 7,458,192 shares of common stock outstanding
(which includes the stock dividend declared in March 2003).
As previously announced, on July 1, 2003, Alleghany Insurance Holdings
completed the acquisition of Royal Specialty Underwriting, Inc. ("RSUI") from
Royal & Sun Alliance Insurance Group for approximately $115.0 million. In
addition to RSUI, Alleghany Insurance Holdings acquired renewal rights to the
ongoing business underwritten by RSUI for insurance affiliates of Royal & Sun
Alliance and the related net unearned premium reserve portfolio of approximately
$320.0 million. The transaction excluded loss reserves associated with business
previously underwritten by RSUI for insurance affiliates of Royal & Sun
Alliance.
RSUI underwrites specialty insurance coverages through wholesale brokers
and producers. Premiums related to RSUI underwritten business are approximately
evenly split between the admitted and non-admitted insurance markets, with
approximately 68.0% of total premiums written for specialty property coverages.
Insurance policies underwritten by RSUI for insurance affiliates of Royal & Sun
Alliance accounted for gross written premiums of $1,205.0 million and net
written premiums of $515.0 million for the year ended December 31, 2002 and
gross written premiums of $359.8 million and net written premiums of $162.0
million for the first quarter of 2003.
To support future business to be underwritten by RSUI, Alleghany Insurance
Holdings acquired Underwriters Reinsurance Company ("URC"), an insurance company
admitted in 50 states and capitalized it at approximately $500.0 million. In
connection with the acquisition, the seller contractually retained all of the
liabilities of URC that existed at the time of the sale. The name of URC will be
changed to RSUI Indemnity Company and the name of RSUI will be changed to
Resurgens Specialty Underwriting, Inc. A.M. Best Co. has assigned a financial
strength rating of A (Excellent) to URC.
URC expects to acquire Landmark American Insurance Company ("Landmark"), a
surplus lines insurance company, from Royal & Sun Alliance during the third
quarter to write non-admitted or surplus business underwritten by RSUI. Pending
satisfaction of regulatory rate and form filings by URC and the acquisition of
Landmark, RSUI is continuing to underwrite on policies issued by insurance
affiliates of Royal & Sun Alliance. All such policies are fully reinsured by
URC.
This press release contains forward-looking statements with respect to the
anticipated effects of the RSUI transaction. Actual results of the transaction
could be significantly different. Factors that could affect results include
those set forth in filings made by the Company with the Securities and Exchange
Commission. Although forward-looking statements help to provide complete
information about future prospects, readers should keep in mind that
forward-looking statements are much less reliable than historical information.
# # #
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share and share amounts)
JUNE 30, DECEMBER 31,
2003 2002
---- ----
ASSETS
Available for sale securities:
Equity securities $ 707,066 $ 486,353
Debt securities 392,935 580,606
Short-term investments 201,487 237,698
---------- ----------
1,301,488 1,304,657
Cash 114,641 27,423
Notes receivable 92,575 92,358
Accounts receivables 101,350 85,710
Reinsurance receivables 155,157 147,479
Deferred acquisition costs 24,840 22,547
Property and equipment - at cost, less accumulated depreciation 171,471 173,539
Inventory 90,468 81,978
Goodwill and other intangibles, net of amortization 106,391 112,858
Other assets 105,693 85,833
---------- ----------
$2,264,074 $2,134,382
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current taxes payable $ 25,987 $ 28,372
Losses and loss adjustment expenses 270,857 258,471
Other liabilities 144,946 147,411
Unearned premiums 84,431 64,115
Subsidiaries' debt 171,046 152,507
Net deferred tax liability 126,887 104,164
---------- ----------
Total liabilities 824,154 755,040
Common stockholders' equity 1,439,920 1,379,342
---------- ----------
$2,264,074 $2,134,382
========== ==========
COMMON STOCKHOLDERS' EQUITY PER SHARE $ 193.07 $ 186.16
========== ==========
COMMON SHARES OUTSTANDING (adjusted for dividends) 7,458,192 7,409,282
========== ==========
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED JUNE 30, 2003
--------------------------------------------------------------------
ALLEGHANY
INSURANCE WORLD HEADS & CORPORATE
HOLDINGS MINERALS THREADS ACTIVITIES COMBINED
-------- -------- ------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 27,292 $ 0 $ 27,292
Interest, dividend and other income 4,833 119 0 8,159 13,111
Net insurance premiums earned 33,525 0 0 0 33,525
Net mineral and filtration sales 0 68,860 0 0 68,860
Net gain (loss) on investment transactions (39) 0 0 1,617 1,578
-------- ------- -------- ------ --------
Total revenues 38,319 68,979 27,292 9,776 144,366
COSTS AND EXPENSES
Commissions and brokerage expenses 9,370 0 0 0 9,370
Salaries, administrative and other
operating expenses 6,425 9,801 8,039 1,264 25,529
Loss and loss adjustment expenses 19,815 0 0 0 19,815
Cost of goods sold - fasteners 0 0 20,809 0 20,809
Cost of mineral and filtration sales 0 52,201 0 0 52,201
Interest expense 0 516 243 709 1,468
Corporate administration 0 0 0 6,483 6,483
-------- ------- -------- ------ --------
Total costs and expenses 35,610 62,518 29,091 8,456 135,675
-------- ------- -------- ------ --------
EARNINGS BEFORE INCOME TAXES $ 2,709 $ 6,461 ($ 1,799) $1,320 8,691
======== ======= ======== ======
Income taxes 2,695
-----
NET EARNINGS $5,996
------
THREE MONTHS ENDED JUNE 30, 2002
-------------------------------------------------------------------
ALLEGHANY
INSURANCE WORLD HEADS & CORPORATE
HOLDINGS MINERALS THREADS ACTIVITIES COMBINED
-------- -------- ------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $28,953 $ 0 $ 28,953
Interest, dividend and other income 3,617 57 0 7,316 10,990
Net insurance premiums earned 30,647 0 0 0 30,647
Net mineral and filtration sales 0 66,829 0 0 66,829
Net gain (loss) on investment transactions (1,043) 0 0 5,397 4,354
-------- ------- ------- ------- --------
Total revenues 33,221 66,886 28,953 12,713 141,773
COSTS AND EXPENSES
Commissions and brokerage expenses 6,063 0 0 0 6,063
Salaries, administrative and other
operating expenses 4,962 10,561 6,203 1,203 22,929
Loss and loss adjustment expenses 24,340 0 0 0 24,340
Cost of goods sold - fasteners 0 0 22,002 0 22,002
Cost of mineral and filtration sales 0 48,122 0 0 48,122
Interest expense 0 467 170 986 1,623
Corporate administration 0 0 0 3,251 3,251
-------- ------- ------- ------- --------
Total costs and expenses 35,365 59,150 28,375 5,440 128,330
-------- ------- ------- ------- --------
EARNINGS BEFORE INCOME TAXES ($ 2,144) $ 7,736 $ 578 $ 7,273 13,443
======== ======= ======= =======
Income taxes 4,547
-----
NET EARNINGS $8,896
------
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
SIX MONTHS ENDED JUNE 30, 2003
--------------------------------------------------------------------
ALLEGHANY
INSURANCE WORLD HEADS & CORPORATE
HOLDINGS MINERALS THREADS ACTIVITIES COMBINED
-------- -------- ------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 55,245 $ 0 $ 55,245
Interest, dividend and other income 9,210 219 0 15,662 25,091
Net insurance premiums earned 66,940 0 0 0 66,940
Net mineral and filtration sales 0 130,908 0 0 130,908
Net gain (loss) on investment transactions 872 0 0 3,970 4,842
------- -------- -------- ------- --------
Total revenues 77,022 131,127 55,245 19,632 283,026
COSTS AND EXPENSES
Commissions and brokerage expenses 16,425 0 0 0 16,425
Salaries, administrative and other
operating expenses 13,335 18,748 14,910 2,449 49,442
Loss and loss adjustment expenses 39,668 0 0 0 39,668
Cost of goods sold - fasteners 0 0 41,568 0 41,568
Cost of mineral and filtration sales 0 100,121 0 0 100,121
Interest expense 0 871 446 1,429 2,746
Corporate administration 0 0 0 12,783 12,783
------- -------- -------- ------- --------
Total costs and expenses 69,428 119,740 56,924 16,661 262,753
------- -------- -------- ------- --------
EARNINGS BEFORE INCOME TAXES $ 7,594 $ 11,387 ($ 1,679) $ 2,971 20,273
======= ======== ======== =======
Income taxes 6,553
-----
NET EARNINGS $13,720
=======
SIX MONTHS ENDED JUNE 30, 2002
------------------------------------------------------------------------
ALLEGHANY
INSURANCE WORLD HEADS & CORPORATE
HOLDINGS MINERALS THREADS ACTIVITIES COMBINED
-------- -------- ------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $56,885 $ 0 $ 56,885
Interest, dividend and other income 6,917 (483) 0 13,543 19,977
Net insurance premiums earned 59,670 0 0 0 59,670
Net mineral and filtration sales 0 124,292 0 0 124,292
Net gain (loss) on investment transactions (2,692) 0 0 41,639 38,947
-------- --------- ------- ------- --------
Total revenues 63,895 123,809 56,885 55,182 299,771
COSTS AND EXPENSES
Commissions and brokerage expenses 11,556 0 0 0 11,556
Salaries, administrative and other
operating expenses 10,039 19,864 12,285 2,327 44,515
Loss and loss adjustment expenses 43,227 0 0 0 43,227
Cost of goods sold - fasteners 0 0 43,087 0 43,087
Cost of mineral and filtration sales 0 92,382 0 0 92,382
Interest expense 0 898 433 1,965 3,296
Corporate administration 0 0 0 9,014 9,014
-------- --------- ------- ------- --------
Total costs and expenses 64,822 113,144 55,805 13,306 247,077
-------- --------- ------- ------- --------
EARNINGS BEFORE INCOME TAXES ($ 927) $ 10,665 $ 1,080 $41,876 52,694
======== ========= ======= =======
Income taxes 17,990
------
NET EARNINGS $ 34,704
========