Exhibit 99.1
NEW YORK, NY, April 22, 2005 -- Net earnings from continuing operations of
Alleghany Corporation (NYSE-Y) in the first quarter of 2005 were $60.9 million,
or $7.72 per share (per share information throughout is presented on a diluted
basis), compared with $60.7 million, or $7.75 per share, in the first quarter of
2004, Weston M. Hicks, President and chief executive officer of Alleghany,
announced today. Alleghany common stockholders' equity per share at March 31,
2005 was $231.80, an increase of 2.3% from common stockholders' equity per share
of $226.50 as of December 31, 2004 (as adjusted for the stock dividend declared
in March 2005). On a consolidated basis, cash and invested assets were
approximately $2.6 billion at March 31, 2005, an increase of 4.8% from
approximately $2.5 billion at December 31, 2004.
Alleghany had net catastrophe losses after tax of $5.4 million, or $0.68
per share, in the 2005 first quarter, compared with $0.3 million, or $0.04 per
share in the corresponding 2004 period. In the first quarter of 2005, net gains
on investment transactions after tax were $30.7 million, or $3.89 per share,
compared with $21.6 million, or $2.75 per share, in the 2004 first quarter.
First quarter 2005 net earnings from continuing operations adjusted to exclude
net catastrophe losses after tax and net gains on investment transactions after
tax were $35.6 million, or $4.51 per share, compared with $39.4 million, or
$5.04 per share, in the corresponding 2004 period.
Three Months Ended March 31,
----------------------------
Per Share(1)
(in millions, except for per share and share ------------
amounts) 2005 2004 2005 2004
---- ---- ---- ----
Net earnings from continuing operations $60.9 $60.7 $7.72 $ 7.75
Adjustments:
Add: Net catastrophe losses after tax 5.4 0.3 0.68 0.04
Deduct: Net gains on investment transactions
after tax (30.7) (21.6) (3.89) (2.75)
------ ------ ------ -------
Net earnings from continuing operations, as
adjusted (2) $35.6 $39.4 $4.51 $5.04
Average number of outstanding shares of common
stock (3) 7,896,309 7,835,784
(1) Represents diluted earnings per share of common stock and includes the
impact on net earnings resulting from the inclusion of dilutive securities
under the "if-converted method".
(2) Adjusted to exclude net catastrophe losses after tax and net gains on
investment transactions after tax.
(3) Adjusted to reflect the dividend of common stock declared in March 2005.
2005 first quarter net earnings were $60.9 million, or $7.72 per share, compared
with $62.1 million, or $7.92 per share, in the corresponding 2004 period. 2005
first quarter pre-tax earnings from continuing operations were $93.8 million,
compared with $93.5 million in the 2004 first quarter. Discontinued operations
consist of the operations of Heads & Threads International LLC prior to its
disposition in December 2004.
The comparative contributions to earnings from continuing operations
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, Inc. (industrial minerals business), as well as by corporate
activities (consisting of Alleghany Properties LLC and corporate activities at
the parent level), were as follows (in millions):
Three Months Ended
March 31
2005 2004
---- ----
AIHL $77.2 $90.6
World Minerals 1.5 5.3
Corporate activities 15.1 (2.4)
---- -----
Total $93.8 $93.5
===== =====
AIHL recorded pre-tax earnings of $77.2 million on revenues of $253.0
million in the 2005 first quarter, compared with pre-tax earnings of $90.6
million on revenues of $231.4 million in the first quarter of 2004. AIHL's 2005
first quarter pre-tax earnings include investment income before tax of $14.2
million and net gains on investment transactions before tax of $25.2 million,
compared with $10.3 million and $31.4 million, respectively, in the
corresponding 2004 period.
The comparative pre-tax contributions to AIHL's results made by its
operating units RSUI, CATA and Darwin were as follows (in millions, except
ratios):
Three Months Ended March 31,
----------------------------
RSUI CATA Darwin(1) AIHL
---- ---- --------- ----
2005
Gross premiums written (2) $270.9 $43.2 $33.9 $348.0
Net premiums written (2) 141.6 41.1 20.5 203.2
Net premiums earned $155.5 $39.3 $18.7 $213.5
Loss and loss adjustment expenses 82.4 20.0 12.9 115.3
Underwriting expenses 30.0 17.7 5.3 53.0
---- ---- --- ----
Underwriting profit (loss) (3) 43.1 1.6 0.5 45.2
==== === ===
Interest, dividend and other income 14.2
Net gains on investment transactions 25.2
Other expenses 7.4
---
Earnings before income taxes $77.2
=====
Loss ratio (4) 53.0% 50.9% 68.9% 54.0%
Expense ratio (5) 19.2% 45.1% 28.5% 24.8%
Combined ratio (6) 72.2% 96.0% 97.4% 78.8%
2004
Gross premiums written (2) $294.4 $41.7 $20.6 $356.7
Net premiums written (2) 137.7 36.8 14.0 188.5
Net premiums earned $148.4 $34.4 $6.9 $189.7
Loss and loss adjustment expenses 70.0 18.8 4.3 93.1
Underwriting expenses 23.5 15.2 3.0 41.7
---- ---- --- ----
Underwriting profit (loss) (3) $54.9 $0.4 $(0.4) 54.9
===== ==== ======
Interest, dividend and other income 10.3
Net gains on investment transactions 31.4
Other expenses 6.0
---
Earnings before income taxes $90.6
=====
Loss ratio (4) 47.2% 54.6% 62.3% 49.1%
Expense ratio (5) 15.8% 44.1% 43.5% 22.0%
Combined ratio (6) 63.0% 98.7% 105.8% 71.1%
(1) Although Darwin is an underwriting manager for Platte River and certain
subsidiaries of CATA, Darwin is managed on an operating unit basis and
therefore, the results of business generated by Darwin have been separated
from CATA's results for purposes of this table.
(2) Amounts do not reflect the impact of an inter-company pooling agreement.
(3) Represents net premiums earned less loss and loss adjustment expenses and
underwriting expenses, all as determined in accordance with U.S. generally
accepted accounting principles ("GAAP"), and does not include interest,
dividend and other income or net gains on investment transactions.
Underwriting profit (loss) does not replace net earnings (loss) determined
in accordance with GAAP
as a measure of profitability; rather, Alleghany believes that
underwriting profit (loss), which does not include interest, dividend and
other income or net gains on investment transactions, enhances the
understanding of AIHL's insurance operating units' operating results by
highlighting net earnings attributable to their underwriting performance.
With the addition of interest, dividend and other income and net gains on
investment transactions, reported pre-tax net earnings (a GAAP measure)
may show a profit despite an underlying underwriting loss. Where such
underwriting losses persist over extended periods, an insurance company's
ability to continue as an ongoing concern may be at risk. Therefore,
Alleghany views underwriting (loss) profit as an important measure in the
overall evaluation of performance.
(4) Loss and loss adjustment expenses divided by net premiums earned, all as
determined in accordance with GAAP.
(5) Underwriting expenses divided by net premiums earned, all as determined in
accordance with GAAP.
(6) 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 2005 first quarter underwriting profit was approximately $43.1
million, compared with approximately $54.9 million in the corresponding 2004
period, primarily reflecting an increase in loss and loss adjustment expenses in
certain property lines of business and higher underwriting expenses primarily
reflecting the absence of profit sharing payments received under certain
property reinsurance treaties due to 2004 catastrophe losses. CATA reported an
underwriting profit of $1.6 million in the 2005 first quarter, compared with
$0.4 million in the first quarter of 2004, primarily reflecting improved loss
experience in its property and casualty lines of business and a decrease in
reinsurance costs. Darwin reported an underwriting profit of $0.5 million in the
2005 first quarter, compared with an underwriting loss of $0.4 million in the
2004 first quarter, primarily reflecting a significant increase in net premiums
earned due to increased levels of gross premiums written across all lines of
business, partially offset by increased loss and loss adjustment and
underwriting expenses primarily attributable to such premium growth.
World Minerals recorded pre-tax earnings of $1.5 million on revenues of
$69.6 million in first quarter 2005, compared with pre-tax earnings of $5.3
million on revenues of $67.0 million in the corresponding period in 2004. The
2005 first quarter results primarily reflect higher operating, production and
transportation costs, primarily at World Minerals' Lompoc, California plant,
which were exacerbated by unusually heavy rainfall in California during the
quarter, and competitive pricing pressures, partially offset by a modest
increase in net sales.
Corporate activities recorded pre-tax earnings of $15.1 million on
revenues of $25.5 million in the 2005 first quarter, compared with a pre-tax
loss of $2.4 million on revenues of $7.9 million in the corresponding period in
2004. Corporate activities' 2005 first quarter results include $22.0 million of
net gains on investment transactions before tax, compared with $1.7 million in
the corresponding 2004 period.
As of March 31, 2005, Alleghany beneficially owned 8.0 million shares, or
approximately 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 $431.4 million, or $53.93 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 first quarter
of 2005, Alleghany did not make any such purchases of shares of its common
stock. As of March 31, 2005, Alleghany had
7,885,205 shares of common stock outstanding (which includes the stock dividend
declared in March 2005).
Comment on Regulation G
This press release includes certain non-GAAP financial measures. The
reconciliations of such measures to the most comparable GAAP figures are
included herein. Throughout the press release Alleghany presents its operations
in the way it believes will be most meaningful and useful to the investing
public and others who use such information in evaluating Alleghany's results.
In addition to the GAAP presentations of net earnings (loss), Alleghany
also shows net earnings (loss) as adjusted to exclude both net catastrophe
losses after tax and net gains on investment transactions after tax, a non-GAAP
financial measure, which is intended to assist investors in analyzing the impact
of such items. Catastrophe losses and gains on investment transactions can
fluctuate significantly from period to period, which could distort the analysis
of trends and comparability of reported periods.
Investors should consider these non-GAAP measures in addition to, and not
as a substitute for, measures of financial performance prepared in accordance
with GAAP.
# # #
ALLEGHANY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED MARCH 31, 2005 THREE MONTHS ENDED MARCH 31, 2004
------------------------------------------ ------------------------------------------
ALLEGHANY ALLEGHANY
INSURANCE WORLD CORPORATE INSURANCE WORLD CORPORATE
HOLDINGS MINERALS ACTIVITIES COMBINED HOLDINGS MINERALS ACTIVITIES COMBINED
------------------------------------------ ------------------------------------------
REVENUES
Net premiums earned $213,552 $0 $0 $213,552 $189,668 $0 $0 $189,668
Net mineral and filtration sales 0 69,738 0 69,738 0 67,081 0 67,081
Interest, dividend and other income 14,248 (162) 3,476 17,562 10,273 (92) 6,171 16,352
Net gain (loss) on investments transactions 25,192 0 22,035 47,227 31,437 0 1,746 33,183
------- ------ ------- -------- -------- ------ ------- --------
Total revenues 252,992 69,576 25,511 348,079 231,378 66,989 7,917 306,284
COSTS AND EXPENSES
Loss and loss adjustment expenses 115,277 0 0 115,277 93,098 0 0 93,098
Commissions and brokerage 53,044 0 0 53,044 41,638 0 0 41,638
Cost of mineral and filtration sales 0 56,954 0 56,954 0 51,378 0 51,378
Salaries, administrative and other
operating expenses 7,354 10,410 799 18,563 5,984 9,801 1,004 16,789
Corporate administration 102 0 8,979 9,081 33 0 8,769 8,802
Interest expense 0 687 665 1,352 0 556 532 1,088
------- ------ ------- -------- -------- ------ ------- --------
Total costs and expenses 175,777 68,051 10,443 254,271 140,753 61,735 10,305 212,793
------- ------ ------- -------- -------- ------ ------- --------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES $77,215 $1,525 $15,068 93,808 $90,625 $5,254 ($2,388) 93,491
======== ======= ======== ======== ======= ========
INCOME TAXES 32,937 32,795
------- ------
EARNINGS FROM CONTINUING OPERATIONS 60,871 60,696
DISCONTINUED OPERATIONS
Operations 0 2,287
Income taxes 0 919
-- -----
EARNINGS FROM DISCONTINUED OPERATIONS, NET 0 1,368
-- -----
NET EARNINGS $60,871 $62,064
======== =======
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
MARCH 31, DECEMBER 31,
2005 2004*
(unaudited) (audited)
--------------- --------------
ASSETS
Available for sale securities at fair value:
Equity securities $637,291 $645,184
Debt securities 1,466,558 1,179,210
Short-term investments 265,733 378,452
--------------- --------------
2,369,582 2,202,846
Cash 240,729 288,436
Notes receivable 91,665 91,665
Accounts receivable, net 63,008 70,547
Premium balances receivable 181,466 203,141
Reinsurance recoverables 648,922 623,325
Ceded unearned premium reserves 275,131 286,451
Deferred acquisition costs 55,514 56,165
Property and equipment - at cost, net of accumulated depreciation 164,976 168,316
Inventory 39,950 41,521
Goodwill and other intangibles, net of amortization 221,339 223,706
Deferred tax assets 110,738 104,563
Other assets 121,131 67,043
--------------- --------------
$4,584,151 $4,427,725
=============== ==============
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses $1,266,411 $1,232,337
Unearned premiums 729,517 751,131
Reinsurance payable 121,794 112,479
Deferred tax liabilities 225,384 224,847
Subsidiaries' debt 138,860 138,258
Current taxes payable 46,008 17,433
Other liabilities 228,389 177,824
--------------- --------------
Total liabilities 2,756,363 2,654,309
Common stockholders' equity 1,827,788 1,773,416
--------------- --------------
$4,584,151 $4,427,725
=============== ==============
COMMON SHARES OUTSTANDING (adjusted for stock dividends) 7,885,205 7,829,721
=============== ==============
* Certain amounts have been reclassified to conform to the 2005 presentation.