EXHIBIT 99.1
ALLEGHANY CORPORATION REPORTS 2006 FIRST QUARTER RESULTS -- COMMON STOCKHOLDERS'
EQUITY PER SHARE INCREASES 5.4%
NEW YORK, NY, April 27, 2006 -- Common stockholders' equity per share
of Alleghany Corporation (NYSE-Y) at March 31, 2006 was $244.33, an increase of
5.4% from common stockholders' equity per share of $231.72 at December 31, 2005
(all as adjusted for the stock dividend declared in February 2006), Weston M.
Hicks, President and chief executive officer of Alleghany, announced today.
Alleghany's net earnings from continuing operations in the first quarter of 2006
were $59.2 million, or $7.35 per share (presented on a diluted basis
throughout), compared with $61.2 million, or $7.61 per share, in the first
quarter of 2005. Net earnings from continuing operations in the 2006 first
quarter include a tax benefit of $10.8 million resulting from the release of a
valuation allowance Alleghany held with respect to a portion of its deferred tax
assets relating to unused foreign tax credits. As a result of this release,
Alleghany's effective tax rate for the first quarter of 2006 was reduced from
29.5% to 13.6%. On a consolidated basis, cash and invested assets were
approximately $3.30 billion at March 31, 2006, an increase of 3.8% from
approximately $3.18 billion at December 31, 2005.
2006 first quarter net earnings were $59.2 million, or $7.35 per share,
compared with net earnings of $60.9 million, or $7.56 per share, in the
corresponding 2005 period. The 2005 first quarter amounts reflect discontinued
operations, which consist of the operations of World Minerals, Inc. prior to its
disposition in July 2005.
Highlights of Alleghany's results for the three months ended March 31,
2006 and 2005 are as follows:
Per Share(1)
-------------------------------
(in millions, except for per share and share amounts) 2006 2005 2006 2005
------------- ------------- ------------- -------------
Earnings from continuing operations before income tax $ 68.5 $ 92.3 $ 8.50 $ 11.45
============= ============= ============= =============
Net earnings from continuing operations 59.2 61.2 7.35 7.61
Adjustments:
Add: Net catastrophe losses after tax 0.6 5.4 0.07 0.68
Deduct: Realized capital gains (4.5) (30.7) (0.56) (3.81)
------------- ------------- ------------- -------------
Net earnings from continuing operations, as adjusted (2) $ 55.3 $ 35.9 $ 6.86 $ 4.48
============= ============= ============= =============
Average number of outstanding shares of common stock (3) 8,060,810 8,054,236
</Table>
(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 realized
capital gains.
(3) Adjusted to reflect the dividend of common stock declared in February
2006.
The comparative contributions to earnings from continuing operations
before taxes made by 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 corporate activities
(consisting of Alleghany Properties LLC and corporate activities at the parent
level), were as follows (in millions):
Three Months Ended
March 31,
2006 2005
------------ ------------
AIHL $ 70.8 $ 77.1
Corporate activities (2.3) 15.2
------------ ------------
Total $ 68.5 $ 92.3
============ ============
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,
<Table>
<Caption>
RSUI CATA Darwin AIHL
---------- ---------- ---------- ----------
2006
Gross premiums written $ 295.5 $ 44.3 $ 59.9 $ 399.7
Net premiums written 162.7 42.2 36.8 241.7
Net premiums earned (1) $ 162.1 $ 41.2 $ 27.3 $ 230.6
Loss and loss adjustment expenses 83.7 19.6 19.2 122.5
Underwriting expenses (2) 31.8 18.3 7.3 57.4
---------- ---------- ---------- ----------
Underwriting profit (3) 46.6 3.3 0.8 50.7
========== ========== ==========
Net investment income (1) 24.9
Realized capital gains (1) 4.6
Other income (1) 0.8
Other expenses (2) 10.2
----------
Earnings before income taxes $ 70.8
==========
Loss ratio (4) 51.7% 47.5% 70.6% 53.1%
Expense ratio (5) 19.6% 44.5% 26.5% 24.9%
Combined ratio (6) 71.3% 92.0% 97.1% 78.0%
2005
Gross premiums written $ 270.9 $ 43.2 $ 33.9 $ 348.0
Net premiums written 141.6 41.1 20.5 203.2
Net premiums earned (1) $ 155.5 $ 39.3 $ 18.7 $ 213.5
Loss and loss adjustment expenses 82.4 20.0 12.9 115.3
Underwriting expenses (2) 30.0 17.7 5.3 53.0
---------- ---------- ---------- ----------
Underwriting profit (3) 43.1 1.6 0.5 45.2
========== ========== ==========
Net investment income (1) 13.3
Realized capital gains (1) 25.2
Other income (1) 0.8
Other expenses (2) 7.4
----------
Earnings before income taxes $ 77.1
==========
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%
(1) Represent components of total revenues.
(2) Underwriting expenses represent commission and brokerage expenses and that
portion of salaries, administration and other operating expenses directly
attributable to underwriting activities, whereas the remainder constitutes
"other expenses."
(3) Represents net premiums earned less loss and loss adjustment expenses and
underwriting expenses, all as determined in accordance with GAAP, and does not
include net investment income and other income or realized capital gains.
Underwriting profit (loss) does not replace net income (loss) determined in
accordance with GAAP as a measure of profitability; rather, we believe that
underwriting profit (loss), which does not include net investment income and
other income or realized capital gains, enhances the understanding of AIHL's
insurance operating units' operating results by highlighting net income
attributable to their underwriting performance. With the addition of net
investment income and other income and realized capital gains, reported pre-tax
net income (a GAAP measure) may show a profit despite an underlying underwriting
loss. Where underwriting losses persist over extended periods, an insurance
company's ability to continue as an ongoing concern may be at risk. Therefore,
we view 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 2006 first quarter underwriting profit increased approximately
8% from the corresponding 2005 period, primarily reflecting an increase in
underwriting profit from the casualty lines of business, which reflects lower
estimated ultimate casualty loss and loss adjustment expense ratios for the
current accident year, partially offset by a slight decline in the underwriting
profit from the property line of business due primarily to reinsurance
reinstatement premiums related to Hurricane Katrina.
CATA's 2006 first quarter underwriting profit increased approximately
106% from the corresponding 2005 period, reflecting substantially improved
underwriting profit in its commercial surety line of business attributable to
favorable loss emergence (resulting in a release in the 2006 first quarter of
$0.9 million of 2005 accident year loss reserves), and an increase in gross
premiums written in that line. CATA's underwriting profit in the 2006 first
quarter also benefited from CATA's exit from the unprofitable construction
segment of its contract surety line of business during the 2005 first quarter.
These positive factors were partially offset by lower property and casualty
underwriting profit.
Darwin's 2006 first quarter underwriting profit increased approximately
60% from the corresponding 2005 period, primarily reflecting an increase in net
premiums earned due to increased levels of gross premiums written across all
lines of business and a decrease in expenses relative to premium volume.
AIHL's 2006 first quarter net investment income increased approximately
86% from the corresponding 2005 period, primarily reflecting a larger invested
asset base attributable principally to capital contributions made by Alleghany
to RSUI and Darwin during the 2005 fourth quarter.
Highlights of results for corporate activities during the three months
ended March 31, 2006 and 2005 were as follows (in millions):
<Table>
<Caption>
2006 2005
------------ ------------
Revenues $ 7.9 $ 25.5
Interest expense 1.1 0.7
Corporate administration expense 9.1 9.6
------------ ------------
(Loss) earnings before income taxes $ (2.3) $ 15.2
============ ============
</Table>
Corporate activities recorded a pre-tax loss of $2.3 million on
revenues of $7.9 million in the 2006 first quarter, compared with pre-tax
earnings of $15.2 million on revenues of $25.5 million. The decrease in revenues
in the 2006 period is attributable to substantially lower realized capital gains
recorded in the 2006 first quarter, totaling $2.4 million, as compared with
$22.0 million of realized capital gains in the corresponding 2005 period.
As of March 31, 2006, Alleghany beneficially owned 6.0 million shares,
or approximately 1.6 percent, of the outstanding common stock of Burlington
Northern Santa Fe Corporation, which had an aggregate market value on that date
of approximately $500.0 million, or $83.33 per share. The aggregate cost of such
shares is approximately $72.4 million, or $12.07 per share.
On March 29, 2006, Alleghany purchased an aggregate of 139,000 shares
of its common stock for approximately $39.2 million, at an average cost of about
$281.91 per share (not adjusted for the subsequent stock dividend), in a
privately negotiated transaction. As of March 31, 2006, Alleghany had 7,942,600
shares of common stock outstanding (which includes the stock dividend declared
in February 2006).
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 this 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 realized capital gains, a non-GAAP financial measure, which
is intended to assist investors in analyzing the impact of such items and
represents the way management analyzes Alleghany's results. 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.
# # #
FORWARD-LOOKING STATEMENTS
This press release contains disclosures which are forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of words such as
"may," "will," "expect," "project," "estimate," "anticipate," "plan," "believe,"
"potential," "should," "continue" or the negative versions of those words or
other comparable words. These forward-looking statements are based upon
Alleghany's current plans or expectations and are subject to a number of
uncertainties and risks that could significantly affect current plans,
anticipated actions and future financial condition and results. These statements
are not guarantees of future performance, and Alleghany has no specific
intention to update these statements. The uncertainties and risks include, but
are not limited to risks relating to Alleghany's insurance operating units such
as
o significant weather-related or other natural or human-made
catastrophes and disasters;
o the cyclical nature of the property and casualty industry;
o the long-tail and potentially volatile nature of certain
casualty lines of business written by Alleghany's insurance
operating units;
o the cost and availability of reinsurance;
o exposure to terrorist acts;
o the willingness and ability of Alleghany's insurance operating
units' reinsurers to pay reinsurance recoverables owed to the
insurance operating units;
o changes in the ratings assigned to Alleghany's insurance
operating units;
o claims development and the process of estimating reserves;
o legal and regulatory changes;
o the uncertain nature of damage theories and loss amounts;
o increases in the levels of risk retention by Alleghany's
insurance operating units; and
o adverse loss development for events insured by Alleghany's
insurance operating units in either the current year or prior
year.
Additional risks and uncertainties include general economic and political
conditions, including the effects of a prolonged U.S. or global economic
downturn or recession; changes in costs; variations in political, economic or
other factors; risks relating to conducting operations in a competitive
environment; effects of acquisition and disposition activities, inflation rates
or recessionary or expansive trends; changes in market prices of Alleghany's
significant equity investments; extended labor disruptions, civil unrest or
other external factors over which Alleghany has no control; and changes in
Alleghany's plans, strategies, objectives, expectations or intentions, which may
happen at any time at its discretion. As a consequence, current plans,
anticipated actions and future financial condition and results may differ from
those expressed in any forward-looking statements made by or on behalf of
Alleghany.
# # #
ALLEGHANY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED 3/31/06 THREE MONTHS ENDED 3/31/05
------------------------------------------- ------------------------------------------
ALLEGHANY ALLEGHANY
INSURANCE CORPORATE INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED HOLDINGS ACTIVITIES COMBINED
------------ ------------ ------------ ------------ ------------ ------------
REVENUES
Net premiums earned $ 230,582 $ 0 $ 230,582 $ 213,552 $ 0 $ 213,552
Net investment income 24,896 4,417 29,313 13,390 1,812 15,202
Realized capital gains 4,574 2,409 6,983 25,192 22,035 47,227
Other income 836 1,101 1,937 759 1,640 2,399
------------ ------------ ------------ ------------ ------------ ------------
Total revenues 260,888 7,927 268,815 252,893 25,487 278,380
COSTS AND EXPENSES
Loss and loss adjustment expenses 122,530 0 122,530 115,277 0 115,277
Commissions and brokerage 57,385 0 57,385 53,044 0 53,044
Salaries, administrative and other
operating expenses 10,114 715 10,829 7,354 799 8,153
Corporate administration 0 8,423 8,423 102 8,856 8,958
Interest expense 0 1,101 1,101 0 665 665
------------ ------------ ------------ ------------ ------------ ------------
Total costs and expenses 190,029 10,239 200,268 175,777 10,320 186,097
------------ ------------ ------------ ------------ ------------ ------------
EARNINGS (LOSS) FROM CONTINUING
OPERATIONS, BEFORE INCOME TAXES $ 70,859 $ (2,312) 68,547 $ 77,116 $ 15,167 92,283
============ ============ ============ ============
INCOME TAXES 9,341 31,060
------------ ------------
EARNINGS FROM CONTINUING OPERATIONS 59,206 61,223
DISCONTINUED OPERATIONS
Operations 0 1,525
Income taxes 0 1,877
------------ ------------
(LOSS) FROM DISCONTINUED OPERATIONS, NET 0 (352)
------------ ------------
NET EARNINGS $ 59,206 $ 60,871
============ ============
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
MARCH 31,
2006 DECEMBER 31,
(unaudited) 2005*
------------ ------------
ASSETS
Investments
Available for sale securities at fair value:
Equity securities $ 810,360 $ 796,192
Debt securities 1,821,941 1,589,371
Short-term investments 629,368 738,846
------------ ------------
3,261,669 3,124,409
Other invested assets 11,432 10,876
------------ ------------
Total investments 3,273,101 3,135,285
------------ ------------
Cash 29,472 47,457
Notes receivable 91,535 91,535
Premium balances receivable 207,277 223,378
Reinsurance recoverables 1,510,909 1,642,199
Ceded unearned premium reserves 298,281 314,472
Deferred acquisition costs 66,544 62,161
Property and equipment - at cost, net of accumulated
depreciation and amortization 19,006 19,708
Goodwill and other intangibles, net of amortization 165,483 167,506
Deferred tax assets 143,160 117,524
Current taxes receivable 0 18,310
Other assets 77,444 74,196
------------ ------------
$ 5,882,212 $ 5,913,731
============ ============
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses $ 2,481,925 $ 2,581,041
Unearned premiums 807,872 812,982
Reinsurance payable 130,143 181,693
Deferred tax liabilities 240,979 213,512
Subsidiaries' debt 80,000 80,000
Current taxes payable 48,175 0
Other liabilities 152,461 176,176
------------ ------------
Total liabilities 3,941,555 4,045,404
Common stockholders' equity 1,940,657 1,868,327
------------ ------------
$ 5,882,212 $ 5,913,731
============ ============
COMMON SHARES OUTSTANDING (adjusted for stock dividends) 7,942,600 8,062,977
* Certain amounts have been reclassified to conform to the 2006 presentation.