EXHIBIT 99.1
NEW YORK, NY, August 3, 2004 -- Net earnings of Alleghany Corporation
(NYSE-Y) in the second quarter of 2004 were $48.7 million, or approximately
$6.33 diluted earnings per share of common stock, compared with net earnings of
$6.0 million, or approximately $0.79 diluted earnings per share of common stock,
in the second quarter of 2003, John J. Burns, Jr., President and chief executive
officer of Alleghany, announced today. Net gains on investment transactions
after taxes in the second quarter of 2004 totalled $2.8 million, or $0.37 per
share, compared with $1.0 million, or $0.14 per share, in the corresponding 2003
period. In the first six months of 2004, Alleghany's net earnings were $110.8
million, or approximately $14.40 diluted earnings per share, compared with net
earnings of $13.7 million, or $1.80 diluted earnings per share, in the first six
months of 2003. The 2004 six-month results include net gains on investment
transactions after taxes of $24.4 million, or approximately $3.18 per share,
compared with $3.1 million, or approximately $0.42 per share, in the
corresponding 2003 period. Alleghany common stockholders' equity per share at
June 30, 2004 was $218.32 per share, an increase from common stockholders'
equity per share of $210.33 as of March 31, 2004 (both as adjusted for the stock
dividend declared in March 2004).
Highlights are as follows (in millions, except for per share and share
amounts):
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2004 2003 2004 2003
---- ---- ---- ----
Revenues $ 334.1 $ 144.4 $ 678.1 $ 283.0
Earnings before income taxes $ 74.5 $ 8.7 $ 170.2 $ 20.3
Net earnings $ 48.7 $ 6.0 $ 110.8 $ 13.7
Basic earnings per share of common stock * $ 6.35 $ 0.79 $ 14.46 $ 1.81
Diluted earnings per share of common stock* $ 6.33 $ 0.79 $ 14.40 $ 1.80
Average number of outstanding shares of common stock* 7,670,297 7,582,105 7,661,002 7,571,762
* Adjusted to reflect the dividend of common stock declared in March 2004.
The comparative contributions to earnings before taxes made by Alleghany's
operating units Alleghany Insurance Holdings LLC ("AIHL," a holding company for
Alleghany's property and casualty insurance businesses, consisting of RSUI
Group, Inc. ("RSUI"), Capitol Transamerica Corporation ("CATA") and Darwin
Professional Underwriters, Inc. ("Darwin")),
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 Six Months Ended
June 30, June 30,
-------- --------
2004 2003 2004 2003
---- ---- ---- ----
AIHL $75.2 $2.7 $165.9 $ 7.6
World Minerals 5.6 6.5 10.8 11.4
Corporate activities (6.4) (0.5) (6.5) 1.3
----- ---- ------ -----
Total $74.4 $8.7 $170.2 $20.3
===== ==== ====== =====
On a diluted per-share, after-tax basis, the foregoing earnings
contributions may be broken down as follows:
THREE MONTHS ENDED JUNE 30,
World Corporate
AIHL Minerals activities Total
---- -------- ---------- -----
2004
Operating income (loss)* $ 6.09 $ 0.40 $ (0.53) $ 5.96
Net gain on investment transactions 0.37 - - 0.37
-------- -------- -------- --------
Net earnings (loss) per share $ 6.46 $ 0.40 $ (0.53) $ 6.33
======== ======== ======== ========
2003
Operating income (loss)* $ 0.35 $ 0.45 $ (0.15) $ 0.65
Net gain on investment transactions - - 0.14 0.14
-------- -------- -------- --------
Net earnings (loss) per share $ 0.35 $ 0.45 $ (0.01) $ 0.79
======== ======== ======== ========
SIX MONTHS ENDED JUNE 30,
World Corporate
AIHL Minerals activities Total
---- -------- ---------- -----
2004
Operating income (loss)* $ 11.14 $ 0.76 $ (0.68) $ 11.22
Net gain on investment transactions 3.03 -- 0.15 3.18
-------- -------- -------- --------
Net earnings (loss) per share $ 14.17 $ 0.76 $ (0.53) $ 14.40
======== ======== ======== ========
2003
Operating income (loss)* $ 0.79 $ 0.75 $ (0.16) $ 1.38
Net gain on investment transactions 0.08 -- 0.34 0.42
-------- -------- -------- --------
Net earnings per share $ 0.87 $ 0.75 $ 0.18 $ 1.80
======== ======== ======== ========
*Operating income (loss) represents net earnings (loss) per share on a GAAP
(generally accepted accounting principles) basis less the net gain or loss on
investment transactions taxed at the federal income tax rate.
AIHL recorded pre-tax earnings of $75.2 million on revenues of $217.0
million in the 2004 second quarter, compared with pre-tax earnings of $2.7
million on revenues of $38.3 million in the second quarter of 2003, and pre-tax
earnings of $165.9 million on revenues of $448.3 million in the first six months
of 2004, compared with pre-tax earnings of $7.6 million on revenues of $77.0
million in the first six months of 2003. AIHL's 2004 second quarter net earnings
include after-tax investment income of $6.5 million and a realized after-tax net
gain on investment transactions of $2.8 million, compared with after-tax
investment income of $3.3 million and no realized after-tax net gain on
investment transactions in the corresponding 2003 period. AIHL's 2004 second
quarter after-tax investment income reflects a larger invested asset base,
principally due to capital contributions by Alleghany and the acquisition of
RSUI in July 2003.
The comparative pre-tax contributions to AIHL's results made by its
operating units RSUI, CATA and Darwin were as follows (in thousands, except
ratios):
Three Months Ended June 30,
--------------------------------------------------
RSUI(1) CATA(2) Darwin(3) Total
------- ------- --------- -----
2004
Gross premiums written $ 308.1 $ 46.7 $ 20.2 $ 375.0
Net premiums written 171.8 42.2 14.6 228.6
Net premiums earned $ 154.0 $ 39.5 $ 9.7 $ 203.2
Loss and loss adjustment expenses 63.4 22.6 6.1 92.1
Underwriting expenses 23.5 15.6 3.7 42.8
------- ------- ------- -------
Underwriting profit (loss) (4) $ 67.1 $ 1.3 $ (0.1) $ 68.3
======= ======= ======= =======
Loss ratio (5) 41.2% 57.2% 62.9% 45.3%
Expense ratio (6) 15.3% 39.5% 38.1% 21.1%
Combined ratio (7) 56.5% 96.7% 101.0% 66.4%
2003
Gross premiums written - $ 44.1 $ 2.1 $ 46.2
Net premiums written - 39.4 2.0 41.4
Net premiums earned - $ 33.4 $ 0.1 $ 33.5
Loss and loss adjustment expenses - 19.8 0.1 19.9
Underwriting expenses - 13.6 1.4 15.0
------- ------- -------
Underwriting profit (loss) (4) - $ 0.0 $ (1.4) $ (1.4)
======= ======= =======
Loss ratio (5) - 59.3% - 59.3%
Expense ratio (6) - 40.7% - 44.9%
Combined ratio (7) - 100.0% - 104.2%
Six Months Ended June 30,
--------------------------------------------------
RSUI(1) CATA(2) Darwin(3) Total
------- ------- --------- -----
2004
Gross premiums written $ 602.5 $ 88.4 $ 40.8 $ 731.7
Net premiums written 309.5 79.0 28.6 417.1
Net premiums earned $ 302.3 $ 74.0 $ 16.6 $ 392.9
Loss and loss adjustment expenses 133.4 41.4 10.4 185.2
Underwriting expenses 47.0 30.8 6.6 84.4
------- ------- ------- -------
Underwriting profit (loss) (4) $ 121.9 $ 1.8 $ (0.4) $ 123.3
======= ======= ======= =======
Loss ratio (5) 44.1% 56.0% 62.7% 47.1%
Expense ratio (6) 15.5% 41.6% 39.8% 21.5%
Combined ratio (7) 59.6% 97.6% 102.5% 68.6%
2003
Gross premiums written - $ 80.5 $ 2.1 $ 82.6
Net premiums written - 71.7 2.0 73.7
Net premiums earned - $ 66.8 $ 0.1 $ 66.9
Loss and loss adjustment expenses - 39.6 0.1 39.7
Underwriting expenses - 26.8 1.4 28.2
------- ------- -------
Underwriting profit (loss) (4) - $ 0.4 $ (1.4) $ (1.0)
======= ======= =======
Loss ratio (5) - 59.3% - 59.3%
Expense ratio (6) - 40.2% - 42.2%
Combined ratio (7) - 99.5% - 101.5%
(1) Since July 1, 2003.
(2) Includes the results of Platte River Insurance Company, which was acquired
contemporaneously with CATA in January 2002 and operates in conjunction
with CATA.
(3) Although Darwin is an underwriting manager for Platte River and certain
subsidiaries of CATA, the results of business generated by Darwin have
been separated from CATA's results for purposes of this table. Since
Darwin commenced operations in May 2003, it generated minimal business
during the second quarter and first six months of 2003. Therefore, ratios
for such periods are not separately presented.
(4) Represents net premiums earned less loss and loss adjustment expenses and
underwriting expenses, all as determined in accordance with generally
accepted accounting principles in the United States of America ("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.
(5) Loss and loss adjustment expenses divided by net premiums earned, all as
determined in accordance with GAAP.
(6) Underwriting expenses divided by net premiums earned, all as determined in
accordance with GAAP.
(7) 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 favorable underwriting results in the first six months of 2004,
particularly with respect to its commercial property line, reflect the absence
of any significant catastrophe losses and lower than expected commercial
property non-catastrophe losses during the 2004 second quarter. RSUI's
commercial property business is exposed to catastrophe losses which have
historically occurred more frequently during the second and third quarters.
The increase in CATA's gross premiums written in the second quarter and
first six months of 2004 compared with the corresponding 2003 periods primarily
reflects premiums generated from an expansion of its business into the excess
and surplus markets. CATA's 2004 second quarter underwriting results reflect
better underwriting margins on the current accident year, offset by a resulting
increase in profit commissions and a $2.9 million pre-tax charge related to loss
reserve development on contract surety and commercial multi-peril liability
business written by CATA in the 2003 and prior accident years.
Darwin's results in the second quarter and first six months of 2004
continue to reflect start-up expenses incurred to support expected future
premium levels, as well as increased competition across all of its lines of
business.
World Minerals recorded pre-tax earnings of $5.6 million on revenues of
$71.3 million in the second quarter of 2004, compared with pre-tax earnings of
$6.5 million on revenues of $69.0 million in the corresponding period in 2003,
and pre-tax earnings of $10.8 million on revenues of $138.3 million in the first
six months of 2004, compared with pre-tax earnings of $11.4 million on revenues
of $131.1 million in the first six months of 2003. The 2004 first half results
reflect lower margins due to competitive pricing pressures and increased energy,
labor and benefit costs, partially offset by the continuing favorable impact of
the strong euro versus the U.S. dollar and an increase in net shipments.
Corporate activities recorded a pre-tax loss of $6.4 million on revenues
of $45.8 million in the second quarter of 2004, compared with a pre-tax loss of
$0.5 million on revenues of $37.1 million in the corresponding period in 2003,
and a pre-tax loss of $6.5 million on revenues of $91.5 million in the first six
months of 2004, compared with pre-tax earnings of $1.3 million on revenues of
$74.9 million in the corresponding 2003 period. Corporate activities includes
parent company results and the results of miscellaneous subsidiaries, including
Heads & Threads International LLC and Alleghany Properties, Inc. The 2004
results for corporate activities reflect increased expense for stock-based
incentive compensation due to a significant increase in the market price of
Alleghany common stock from June 30, 2003 to June 30, 2004.
As of June 30, 2004 Alleghany beneficially owned approximately 8.0 million
shares, or 2.1 percent, of the outstanding common stock of Burlington Northern
Santa Fe Corporation, which had an aggregate market value on that date of
approximately $280.6 million, or $35.07 per
share, compared with a market value on June 30, 2003 of $227.5 million, or
$28.44 per share. The aggregate cost of such shares is approximately $96.6
million, or $12.07 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 2004, Alleghany did not purchase any shares of its common stock. As
of June 30, 2004, Alleghany had 7,675,313 shares of common stock outstanding
(which includes the stock dividend declared in March 2004).
Additional information regarding the 2004 second quarter results of
Alleghany and its operating units is contained in Alleghany's Report on Form
10-Q for the quarter ended June 30, 2004, which was filed with the U.S.
Securities and Exchange Commission on August 3, 2004.
# # #
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED JUNE 30, 2004
----------------------------------------------------
ALLEGHANY
INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 43,577 $ 43,577
Interest, dividend and other income 9,387 19 2,261 11,667
Net premiums earned 203,215 0 0 203,215
Net mineral and filtration sales 0 71,246 0 71,246
Net gain (loss) on investment transactions 4,363 0 (11) 4,352
-------- -------- -------- --------
Total revenues 216,965 71,265 45,827 334,057
COSTS AND EXPENSES
Underwriting expenses 42,750 0 0 42,750
Salaries, administrative and other
operating expenses 6,842 10,063 9,025 25,930
Loss and loss adjustment expenses 92,016 0 0 92,016
Cost of goods sold - fasteners 0 0 32,435 32,435
Cost of mineral and filtration sales 0 55,065 0 55,065
Interest expense 0 573 742 1,315
Corporate administration 106 0 9,986 10,092
-------- -------- -------- --------
Total costs and expenses 141,714 65,701 52,188 259,603
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES $ 75,251 $ 5,564 ($ 6,361) 74,454
======== ======== ========
INCOME TAXES 25,731
--------
NET EARNINGS $ 48,723
========
THREE MONTHS ENDED JUNE 30, 2003
----------------------------------------------------
ALLEGHANY
INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 27,292 $ 27,292
Interest, dividend and other income 4,833 119 8,159 13,111
Net premiums earned 33,525 0 0 33,525
Net mineral and filtration sales 0 68,860 0 68,860
Net gain (loss) on investment transactions (39) 0 1,617 1,578
-------- -------- -------- --------
Total revenues 38,319 68,979 37,068 144,366
COSTS AND EXPENSES
Underwriting expenses 14,921 0 0 14,921
Salaries, administrative and other
operating expenses 874 9,801 9,303 19,978
Loss and loss adjustment expenses 19,815 0 0 19,815
Cost of goods sold - fasteners 0 0 20,809 20,809
Cost of mineral and filtration sales 0 52,201 0 52,201
Interest expense 0 516 952 1,468
Corporate administration 0 0 6,483 6,483
-------- -------- -------- --------
Total costs and expenses 35,610 62,518 37,547 135,675
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES $ 2,709 $ 6,461 ($ 479) 8,691
======== ======== ========
INCOME TAXES 2,695
NET EARNINGS $ 5,996
========
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
SIX MONTHS ENDED JUNE 30, 2004
--------------------------------------------------------
ALLEGHANY
INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 81,380 $ 81,380
Interest, dividend and other income 19,660 (73) 8,432 28,019
Net premiums earned 392,883 0 0 392,883
Net mineral and filtration sales 0 138,327 0 138,327
Net gain (loss) on investment transactions 35,800 0 1,735 37,535
--------- --------- --------- ---------
Total revenues 448,343 138,254 91,547 678,144
COSTS AND EXPENSES
Underwriting expenses 84,388 0 0 84,388
Salaries, administrative and other
operating expenses 12,826 19,864 17,483 50,173
Loss and loss adjustment expenses 185,114 0 0 185,114
Cost of goods sold - fasteners 0 0 60,341 60,341
Cost of mineral and filtration sales 0 106,443 0 106,443
Interest expense 0 1,129 1,430 2,559
Corporate administration 139 0 18,755 18,894
--------- --------- --------- ---------
Total costs and expenses 282,467 127,436 98,009 507,912
--------- --------- --------- ---------
EARNINGS BEFORE INCOME TAXES $ 165,876 $ 10,818 ($ 6,462) 170,232
========= ========= =========
INCOME TAXES 59,445
---------
NET EARNINGS $ 110,787
=========
SIX MONTHS ENDED JUNE 30, 2003
--------------------------------------------------
ALLEGHANY
INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED
-------- -------- ---------- --------
REVENUES
Net fastener sales $ 0 $ 0 $ 55,245 $ 55,245
Interest, dividend and other income 9,210 219 15,662 25,091
Net premiums earned 66,940 0 0 66,940
Net mineral and filtration sales 0 130,908 0 130,908
Net gain (loss) on investment transactions 872 0 3,970 4,842
-------- -------- -------- --------
Total revenues 77,022 131,127 74,877 283,026
COSTS AND EXPENSES
Underwriting expenses 28,283 0 0 28,283
Salaries, administrative and other
operating expenses 1,477 18,748 17,359 37,584
Loss and loss adjustment expenses 39,668 0 0 39,668
Cost of goods sold - fasteners 0 0 41,568 41,568
Cost of mineral and filtration sales 0 100,121 0 100,121
Interest expense 0 871 1,875 2,746
Corporate administration 0 0 12,783 12,783
-------- -------- -------- --------
Total costs and expenses 69,428 119,740 73,585 262,753
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES $ 7,594 $ 11,387 $ 1,292 20,273
======== ======== ========
INCOME TAXES 6,553
--------
NET EARNINGS $ 13,720
========
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
JUNE 30, DECEMBER 31,
2004 2003
(unaudited) (audited)*
----------- ----------
ASSETS
Available for sale securities at fair value:
Equity securities $ 594,206 $ 620,754
Debt securities 1,219,710 917,270
Short-term investments 168,102 135,079
---------- ----------
1,982,018 1,673,103
Cash 166,098 231,583
Notes receivable 91,804 92,082
Accounts receivable, net 74,369 75,154
Premium balances receivable 192,486 279,682
Reinsurance receivables 323,856 228,423
Ceded unearned premium reserves 336,188 264,038
Deferred acquisition costs 56,271 47,282
Property and equipment - at cost, net of accumulated depreciation 171,615 177,708
Inventory 88,239 84,612
Goodwill and other intangibles, net of amortization 232,423 233,739
Deferred tax assets 104,822 85,736
Other assets 77,780 94,898
---------- ----------
$3,897,969 $3,568,040
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current taxes payable $ 29,077 $ 49,605
Losses and loss adjustment expenses 684,429 454,664
Other liabilities 242,316 211,000
Reinsurance payable 127,286 255,117
Unearned premiums 773,340 676,940
Subsidiaries' debt 162,585 167,050
Deferred tax liabilities 203,237 190,842
---------- ----------
Total liabilities 2,222,270 2,005,218
Common stockholders' equity 1,675,699 1,562,822
---------- ----------
$3,897,969 $3,568,040
========== ==========
COMMON SHARES OUTSTANDING (adjusted for stock dividends) 7,675,313 7,644,232
========== ==========
* Certain amounts have been reclassified to conform to the 2004 presentation.