EXHIBIT 99.1
NEW YORK, NY, November 12, 2003 -- Net earnings of Alleghany Corporation
(NYSE-Y) in the third quarter of 2003 were $74.9 million, or $10.02 basic
earnings per share of common stock, compared with net earnings of $21.7 million,
or $2.93 basic earnings per share of common stock, in the third quarter of 2002,
John J. Burns, Jr., President and chief executive officer of Alleghany,
announced today. Third quarter 2003 net earnings include the results of
operations of RSUI Group, Inc., acquired on July 1, 2003 from Royal & Sun
Alliance Group plc, and net gains on investment transactions after taxes of
$50.6 million, or $6.78 basic earnings per share, primarily reflecting the
proceeds from the disposition of approximately 4.4 million shares of common
stock of Burlington Northern Santa Fe Corporation. Such disposition generated
$119.1 million of aggregate cash proceeds, $87.7 million of which was generated
at Alleghany's insurance operating units for the purpose of diversifying their
investment portfolios.
In the first nine months of 2003, Alleghany's net earnings were $88.6
million, or $11.91 basic earnings per share, compared with net earnings of $56.4
million, or $7.56 basic earnings per share, in the first nine months of 2002.
The 2003 nine-month results include net gains on investment transactions after
taxes of $53.8 million, or $7.23 basic earnings per share, compared with $28.3
million, or $3.80 basic earnings per share, in the corresponding 2002 period.
Alleghany common stockholders' equity per share at September 30, 2003 was
$195.61, an increase from common stockholders' equity per share of $186.16 as of
December 31, 2002 (both as adjusted for the stock dividend declared in March
2003).
Highlights are as follows (in millions, except for shares and per share
amounts):
Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues $ 354.9 $ 143.4 $ 637.9 $ 443.2
Earnings before income taxes $ 107.8 $ 5.1 $ 128.1 $ 57.8
Net earnings $ 74.9 $ 21.7 $ 88.6 $ 56.4
Basic earnings per
share of common stock* $ 10.02 $ 2.93 $ 11.91 $ 7.56
Diluted earnings per
share of common stock* $ 9.99 $ 2.91 $ 11.87 $ 7.51
Average number of outstanding shares of common
stock* 7,468,549 7,409,912 7,437,907 7,459,691
* 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 (a holding company for Alleghany's
property and casualty insurance businesses, consisting principally of RSUI
Group, Inc. ("RSUI") and Capitol Transamerica Corporation ("CATA")), and World
Minerals (industrial minerals business), as well as by Alleghany's parent
company and other operations, were as follows (in millions):
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ---------------------
2003 2002 2003 2002
-------- -------- -------- -------
Alleghany Insurance Holdings $ 75.0 $ (10.4) $ 82.6 $ (11.4)
World Minerals 6.9 7.3 18.3 18.0
Corporate activities 25.9 8.2 27.2 51.2
-------- -------- -------- -------
$ 107.8 $ 5.1 $ 128.1 $ 57.8
======== ======== ======== =======
On a basic per-share, after-tax basis, the foregoing earnings
contributions may be broken down as follows:
THREE MONTHS ENDED SEPTEMBER 30
World Corporate
2003 AIHL Minerals Activities Total
- ---- -------- -------- ---------- --------
Operating income* $ 2.47 $ 0.47 $ 0.30 $ 3.24
Net gain on investment
transactions 4.03 -- 2.75 6.78
-------- -------- -------- --------
Net earnings per share $ 6.50 $ 0.47 $ 3.05 $ 10.02
======== ======== ======== ========
2002
- ----
Operating income (loss)* $ (0.49) $ 0.55 $ 2.47 $ 2.53
Net (loss) gain on
investment transactions (0.33) -- 0.73 0.40
-------- -------- -------- --------
Net (loss) earnings per share $ (0.82) $ 0.55 $ 3.20 $ 2.93
======== ======== ======== ========
NINE MONTHS ENDED SEPTEMBER 30
World Corporate
2003 AIHL Minerals Activities Total
- ---- -------- -------- ---------- --------
Operating income* $ 3.30 $ 1.24 $ 0.14 $ 4.68
Net gain on investment
transactions 4.12 -- 3.11 7.23
-------- -------- -------- --------
Net earnings per share $ 7.42 $ 1.24 $ 3.25 $ 11.91
======== ======== ======== ========
2002
- ----
Operating income (loss)* $ (0.15) $ 1.28 $ 2.64 $ 3.76
Net (loss) gain on investment
transactions (0.56) -- 4.36 3.80
-------- -------- -------- --------
Net earnings (loss) per share $ (0.72) $ 1.28 $ 7.00 $ 7.56
======== ======== ======== ========
* Operating income (loss) represents net earnings per share less the net
gain or loss on investment transactions taxed at the federal income tax
rate.
Alleghany Insurance Holdings ("AIHL") recorded pre-tax earnings of $75.0
million on revenues of $221.5 million in the third quarter of 2003, compared
with a pre-tax loss of $10.4 million on revenues of $32.5 million in the 2002
third quarter. AIHL's 2003 third quarter net earnings include pre-tax investment
income of $7.4 million and a realized pre-tax net gain on investment
transactions of $46.3 million, compared with pre-tax investment income of $3.6
million and a realized pre-tax net loss on investment transactions of $3.8
million in the corresponding 2002 period. AIHL's 2003 pre-tax investment income
reflects a larger invested asset base, principally due to capital contributions
by Alleghany and the acquisition of RSUI. AIHL's 2003 pre-tax net gain on
investment transactions primarily reflects the disposition of 3.2 million shares
of common stock of Burlington Northern Santa Fe for aggregate cash proceeds of
$87.7 million for the purpose of diversifying the investment portfolios of the
insurance operating units.
The comparative pre-tax contributions to AIHL's results made by RSUI
(since July 1, 2003) and CATA, were as follows (in thousands, except ratios):
THREE MONTHS ENDED SEPTEMBER 30
2003 RSUI CATA(1) TOTAL
- ---- --------- --------- ---------
Gross premiums written $ 489,868 $ 49,519 $ 539,387
Net premiums earned $ 135,777 $ 32,042 $ 167,819
Loss and loss adjustment expenses 81,645 18,964 100,609
Underwriting expenses 25,439 14,658 40,097
--------- --------- ---------
Underwriting profit (loss) (2) $ 28,693 $ (1,580) $ 27,113
========= ========= =========
Loss ratio (3) 60.1% 59.2% 59.9%
Expense ratio (4) 18.8% 45.7% 23.9%
Combined ratio (5) 78.9% 104.9% 83.8%
2002
- ----
Gross premiums written -- $ 37,705 $ 37,705
Net premiums earned -- $ 32,700 $ 32,700
Loss and loss adjustment expenses -- 30,192 30,192
Underwriting expenses -- 12,145 12,145
--------- --------- ---------
Underwriting loss (2) -- $ (9,637) $ (9,637)
========= ========= =========
Loss ratio (3) -- 92.3% 92.3%
Expense ratio (4) -- 37.1% 37.1%
Combined ratio (5) -- 129.4% 129.4%
NINE MONTHS ENDED SEPTEMBER 30
2003 RSUI CATA(1) TOTAL
- ---- --------- --------- ---------
Gross premiums written $ 489,868 $ 132,089 $ 621,957
Net premiums earned $ 135,777 $ 98,982 $ 234,759
Loss and loss adjustment expenses 81,645 58,632 140,277
Underwriting expenses 25,439 42,941 68,380
--------- --------- ---------
Underwriting profit (loss) (2) $ 28,693 $ (2,591) $ 26,102
========= ========= =========
Loss ratio (3) 60.1% 59.2% 59.8%
Expense ratio (4) 18.8% 43.4% 29.1%
Combined ratio (5) 78.9% 102.6% 88.9%
2002
- ----
Gross premiums written -- $ 113,188 $ 113,188
Net premiums earned -- $ 92,370 $ 92,370
Loss and loss adjustment expenses -- 73,419 73,419
Underwriting expenses -- 32,505 32,505
--------- --------- ---------
Underwriting loss (2) -- $ (13,554) $ (13,554)
========= ========= =========
Loss ratio (3) -- 79.5% 79.5%
Expense ratio (4) -- 35.2% 35.2%
Combined ratio (5) -- 114.7% 114.7%
(1) Includes the results of Platte River Insurance Company and other insurance
operations.
(2) Represents net premiums earned less loss and loss adjustment expenses and
underwriting expenses, all as determined in accordance with generally accepted
accounting principles ("GAAP"), and does not include income derived from
investments. Underwriting profit (loss) does not replace net income (loss)
determined in accordance with GAAP as a measure of profitability; rather, it
provides a basis for management to evaluate the underwriting performance of its
insurance operating units.
(3) Loss and loss adjustment expenses divided by net premiums earned, all as
determined in accordance with GAAP.
(4) Underwriting expenses divided by net premiums earned, all as determined in
accordance with GAAP.
(5) The sum of the Loss Ratio and Expense Ratio, all as determined in accordance
with GAAP, representing the percentage of each premium dollar an insurance
company has to spend on losses (including loss adjustment expenses) and
underwriting expenses.
RSUI's 2003 third quarter gross premiums written include $320.0 million of
unearned premiums which were acquired with RSUI in July 2003, as well as $169.9
million of gross premiums written since acquisition, reflecting continued strong
markets in its lines of business. In addition, RSUI's third quarter results
reflect pre-tax catastrophe losses of approximately $10.0 million due to the
East Coast blackout in August 2003 and approximately $4.8 million due to
Hurricane Isabel in September 2003.
CATA's 2003 third quarter results reflect a $3.3 million pre-tax reduction
in loss reserves due to better than expected loss emergence in the current year
following an independent actuarial
review, an increase in gross premiums written due to price increases and
increased submission activity in its property and casualty lines of business.
CATA's 2003 third quarter results also reflect the recording of additional prior
year loss reserve development of $3.4 million pre-tax ($1.4 million of which was
pursuant to an arbitration settlement) related to assumed reinsurance treaties
written prior to 1980.
World Minerals recorded pre-tax earnings of $6.9 million in the 2003 third
quarter, compared with pre-tax earnings of $7.3 million in the 2002 third
quarter, primarily reflecting lower margins due to competitive pricing pressures
and increased labor and benefit costs. Revenues in the 2003 third quarter were
$67.4 million, compared with $65.6 million in the third quarter of 2002,
reflecting the continuing favorable impact of the strengthening of the Euro and
the pound sterling against the U.S. dollar.
As of September 30, 2003 Alleghany beneficially owned approximately 11.6
million shares, or 3.1 percent, of the outstanding common stock of Burlington
Northern Santa Fe Corporation, which had an aggregate market value on that date
of approximately $335.7 million, or $28.87 per share. The aggregate cost of such
shares is approximately $138.1 million, or $11.88 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 third quarter
of 2003, Alleghany did not purchase any shares of its common stock. As of
September 30, 2003, Alleghany had 7,487,885 shares of common stock outstanding
(which includes the stock dividend declared in March 2003).
As stated previously, Alleghany common stockholders' equity per share at
September 30, 2003 was $195.61, an increase from common stockholders' equity per
share of $186.16 as of December 31, 2002 (both as adjusted for the stock
dividend declared in March 2003).
# # #
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 2003 THREE MONTHS ENDED SEPTEMBER 30, 2002
------------------------------------------ -------------------------------------------
ALLEGHANY ALLEGHANY
INSURANCE WORLD CORPORATE INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- -------- -------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 30,559 $ 30,559 $ 0 $ 0 $ 28,150 $ 28,150
Interest, dividend and other income 7,359 (54) 3,791 11,096 3,589 613 8,745 12,947
Net premiums earned 167,819 0 0 167,819 32,700 0 0 32,700
Net mineral and filtration sales 0 67,502 0 67,502 0 65,017 0 65,017
Net gain (loss) on investment
transactions 46,275 0 31,599 77,874 (3,755) 0 8,372 4,617
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues 221,453 67,448 65,949 354,850 32,534 65,630 45,267 143,431
COSTS AND EXPENSES
Underwriting expenses 40,097 0 0 40,097 12,145 0 0 12,145
Salaries, administrative and other
operating expenses 5,780 9,908 7,226 22,914 639 10,256 7,764 18,659
Loss and loss adjustment expenses 100,609 0 0 100,609 30,192 0 0 30,192
Cost of goods sold - fasteners 0 0 23,614 23,614 0 0 21,084 21,084
Cost of mineral and filtration sales 0 50,174 0 50,174 0 47,467 0 47,467
Interest expense 0 451 930 1,381 0 571 1,274 1,845
Corporate administration 0 0 8,218 8,218 0 0 6,940 6,940
-------- -------- -------- -------- -------- -------- -------- --------
Total costs and expenses 146,486 60,533 39,988 247,007 42,976 58,294 37,062 138,332
-------- -------- -------- -------- -------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES $ 74,967 $ 6,915 $ 25,961 107,843 ($10,442) $ 7,336 $ 8,205 5,099
======== ======== ======== ======== ======== ========
INCOME TAXES 32,973 (16,621)
-------- --------
NET EARNINGS $74,870 $ 21,720
======= ========
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2003 NINE MONTHS ENDED SEPTEMBER 30, 2002
------------------------------------------ -------------------------------------------
ALLEGHANY ALLEGHANY
INSURANCE WORLD CORPORATE INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- -------- -------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 85,804 $ 85,804 $ 0 $ 0 $ 85,035 $ 85,035
Interest, dividend and other income 16,569 165 19,453 36,187 10,506 130 22,288 32,924
Net premiums earned 234,759 0 0 234,759 92,370 0 0 92,370
Net mineral and filtration sales 0 198,410 0 198,410 0 189,309 0 189,309
Net gain (loss) on investment
transactions 47,147 0 35,569 82,716 (6,447) 0 50,011 43,564
--------- --------- --------- --------- --------- --------- --------- ---------
Total revenues 298,475 198,575 140,826 637,876 96,429 189,439 157,334 443,202
COSTS AND EXPENSES
Underwriting expenses 68,380 0 0 68,380 32,505 0 0 32,505
Salaries, administrative and other
operating expenses 7,257 28,656 24,585 60,498 1,874 30,120 22,376 54,370
Loss and loss adjustment expenses 140,277 0 0 140,277 73,419 0 0 73,419
Cost of goods sold - fasteners 0 0 65,182 65,182 0 0 64,171 64,171
Cost of mineral and filtration sales 0 150,295 0 150,295 0 139,849 0 139,849
Interest expense 0 1,322 2,805 4,127 0 1,469 3,672 5,141
Corporate administration 0 0 21,001 21,001 0 0 15,954 15,954
--------- --------- --------- --------- --------- --------- --------- ---------
Total costs and expenses 215,914 180,273 113,573 509,760 107,798 171,438 106,173 385,409
--------- --------- --------- --------- --------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES $ 82,561 $ 18,302 $ 27,253 128,116 ($ 11,369) $ 18,001 $ 51,161 57,793
========= ========= ========= ========= ========= =========
INCOME TAXES 39,526 1,369
-------- ---------
NET EARNINGS $ 88,590 $ 56,424
======== =========
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share amounts)
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------- ------------
ASSETS
Available for sale securities:
Equity securities $ 623,667 $ 486,353
Debt securities 774,783 580,606
Short-term investments 117,693 237,698
---------- ----------
1,516,143 1,304,657
Cash 194,962 27,423
Notes receivable 92,101 92,358
Insurance and accounts receivable 186,991 85,710
Reinsurance receivables 147,622 147,479
Deferred acquisition costs 54,648 22,547
Property and equipment - at cost, net of accumulated depreciation 176,322 173,539
Inventory 86,744 81,978
Goodwill and other intangibles, net of amortization 228,663 112,858
Other assets 141,801 85,833
---------- ----------
$2,825,997 $2,134,382
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current taxes payable $ 34,086 $ 28,372
Losses and loss adjustment expenses 338,432 258,471
Other liabilities 240,820 147,411
Unearned premiums 452,046 64,115
Parent company debt 25,000 0
Subsidiaries' debt 158,947 152,507
Net deferred tax liability 111,986 104,164
---------- ----------
Total liabilities 1,361,317 755,040
Common stockholders' equity 1,464,680 1,379,342
---------- ----------
$2,825,997 $2,134,382
========== ==========
COMMON SHARES OUTSTANDING (adjusted for dividends) 7,487,885 7,409,282
========== ==========