EX-99.1 3 y96593exv99w1.txt 2004 FIRST QUARTER EARNINGS RELEASE Exhibit 99.1 ALLEGHANY CORPORATION 375 Park Avenue New York NY 10152 Contact: R.M. Hart (212) 752-1356 FOR IMMEDIATE RELEASE ALLEGHANY CORPORATION ANNOUNCES 2004 FIRST QUARTER RESULTS NEW YORK, NY, April 22, 2004 -- Net earnings of Alleghany Corporation (NYSE-Y) in the first quarter of 2004 were $62.1 million, or $8.08 diluted earnings per share of common stock, compared with net earnings of $7.7 million, or $1.01 diluted earnings per share of common stock, in the first 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 first quarter of 2004 totalled $21.6 million, or $2.81 per share, compared with $2.1 million, or $0.28 per share, in the corresponding 2003 period. Alleghany common stockholders' equity per share at March 31, 2004 was $210.33, an increase from common stockholders' equity per share of $204.44 as of December 31, 2003 (both as adjusted for the stock dividend declared in March 2004). Highlights are as follows (in millions, except for per share and share amounts): -1-
Three Months Ended March 31 -------- 2004 2003 ---------- ---------- Revenues $ 344.2 $ 138.7 Earnings before taxes $ 95.8 $ 11.6 Net earnings $ 62.1 $ 7.7 Basic earnings per share of common stock* $ 8.11 $ 1.02 Diluted earnings per share of common stock* $ 8.08 $ 1.01 Average number of outstanding shares of common stock* 7,652,336 7,561,408
* 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): -2-
Three Months Ended March 31 -------- 2004 2003 ------- ------- AIHL $ 90.6 $ 4.9 World Minerals 5.3 4.9 Parent Company and other (0.1) 1.8 ------ ------ Total $ 95.8 $ 11.6 ======= =======
On a diluted per-share, after-tax basis, the foregoing earnings contributions may be broken down as follows: Three Months Ended March 31
Parent World Company AIHL Minerals and other Total --------- --------- --------- --------- 2004 Operating income (loss)* $ 5.06 $ 0.36 $ (0.15) $ 5.27 Net gain on investment transactions 2.66 -- 0.15 2.81 --------- --------- --------- --------- Net earnings per share $ 7.72 $ 0.36 $ -- $ 8.08 ========= ========= ========= ========= 2003 Operating income (loss)* $ 0.45 $ 0.30 $ (0.02) $ 0.73 Net gain on investment transactions 0.08 -- 0.20 0.28 --------- --------- --------- --------- Net earnings per share $ 0.53 $ 0.30 $ 0.18 $ 1.01 ========= ========= ========= =========
* Operating income (loss) represents net earnings (loss) per share less the net gain or loss on investment transactions taxed at the federal income tax rate. AIHL recorded pre-tax earnings of $90.6 million on revenues of $231.4 million in the 2004 first quarter, compared with pre-tax earnings of $4.9 million on revenues of $38.7 million in the first quarter of 2003. AIHL's 2004 first quarter net earnings include -3- after-tax investment income of $7.1 million and a realized after-tax net gain on investment transactions of $20.4 million, compared with after-tax investment income of $3.0 million and a realized after-tax net gain on investment transactions of $0.6 million in the corresponding 2003 period. AIHL's 2004 first 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 March 31
RSUI(1) CATA(2) Darwin(3) Total --------- --------- --------- --------- 2004 Gross premiums written $ 294.4 $ 41.7 $ 20.6 $ 356.7 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) (4) $ 54.9 $ 0.4 $ (0.4) $ 54.9 ========= ========= ========= ========= Loss ratio (5) 47.2% 54.6% 62.3% 49.1% Expense ratio (6) 15.8% 44.1% 43.5% 22.0% Combined ratio (7) 63.0% 98.7% 105.8% 71.1% 2003 Gross premiums written -- $ 36.4 -- $ 36.4 Net premiums earned -- $ 33.4 -- $ 33.4 Loss and loss adjustment expenses -- 19.8 -- 19.8 Underwriting expenses -- 13.2 -- 13.2 --------- --------- --------- --------- Underwriting profit (4) -- $ 0.4 -- $ 0.4 ========= ========= ========= ========= Loss ratio (5) -- 59.4% -- 59.4% Expense ratio (6) -- 39.5% -- 39.5% Combined ratio (7) -- 98.9% -- 98.9%
-4- (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) Since May 2003. 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. (4) 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. (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 2004 first quarter results reflect favorable underwriting conditions in RSUI's lines of business and the absence of any significant catastrophe losses during such period. RSUI's commercial property business is exposed to catastrophe losses which have historically occurred more frequently during the second and third quarters. World Minerals recorded pre-tax earnings of $5.3 million on revenues of $67.0 million in first quarter 2004, compared with pre-tax earnings of $4.9 million on revenues of $62.1 million in the corresponding period in 2003. The 2004 first quarter results primarily reflect the continuing favorable impact of the strong euro versus the U.S. dollar and an increase in net sales. As of March 31, 2004, 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 $252.0 million, or $31.50 per share. The aggregate cost of such shares is -5- 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 2004, Alleghany did not purchase any shares of its common stock. As of March 31, 2004, Alleghany had 7,663,517 shares of common stock outstanding (which includes the stock dividend declared in March 2004). As previously stated, Alleghany common stockholders' equity per share at March 31, 2004 was $210.33, an increase from common stockholders' equity per share of $204.44 as of December 31, 2003 (both as adjusted for the stock dividend declared in March 2004). # # # -6- ALLEGHANY CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS (dollars in thousands) (unaudited)
THREE MONTHS ENDED MARCH 31, 2004 THREE MONTHS ENDED MARCH 31, 2003 --------------------------------- --------------------------------- ALLEGHANY ALLEGHANY INSURANCE WORLD CORPORATE INSURANCE WORLD CORPORATE HOLDINGS MINERALS ACTIVITIES COMBINED HOLDINGS MINERALS ACTIVITIES COMBINED -------- -------- ---------- -------- -------- -------- ---------- -------- REVENUES Net fastener sales $ 0 $ 0 $ 37,803 $ 37,803 $ 0 $ 0 $ 27,953 $ 27,953 Interest, dividend and other income 10,273 (92) 6,171 16,352 4,377 100 7,503 11,980 Net insurance premiums earned 189,668 0 0 189,668 33,415 0 0 33,415 Net mineral and filtration sales 0 67,081 0 67,081 0 62,048 0 62,048 Net gain (loss) on investments transactions 31,437 0 1,746 33,183 911 0 2,353 3,264 -------- -------- -------- -------- -------- -------- -------- -------- Total revenues 231,378 66,989 45,720 344,087 38,703 62,148 37,809 138,660 COSTS AND EXPENSES Underwriting expenses 41,638 0 0 41,638 13,362 0 0 13,362 Salaries, administrative and other operating expenses 5,984 9,801 8,458 24,243 603 8,947 8,056 17,606 Loss and loss adjustment expenses 93,098 0 0 93,098 19,853 0 0 19,853 Cost of goods sold - fasteners 0 0 27,906 27,906 0 0 20,759 20,759 Cost of mineral and filtration sales 0 51,378 0 51,378 0 47,920 0 47,920 Interest expense 0 556 688 1,244 0 355 923 1,278 Corporate administration 33 0 8,769 8,802 0 0 6,300 6,300 -------- -------- -------- -------- -------- -------- -------- -------- Total costs and expenses 140,753 61,735 45,821 248,309 33,818 57,222 36,038 127,078 -------- -------- -------- -------- -------- -------- -------- -------- EARNINGS BEFORE INCOME TAXES $ 90,625 $ 5,254 ($ 101) 95,778 $ 4,885 $ 4,926 $ 1,771 11,582 ======== ======== ======== ======== ======== ======== INCOME TAXES 33,714 3,858 -------- -------- NET EARNINGS $ 62,064 $ 7,724 ======== ========
ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
MARCH 31, DECEMBER 31, 2004 2003 (unaudited) (audited)* ----------- ---------- ASSETS Available for sale securities at fair value: Equity securities $ 532,520 $ 620,754 Debt securities 1,194,657 917,270 Short-term investments 149,918 135,079 ---------- ---------- 1,877,095 1,673,103 Cash 142,161 231,583 Notes receivable 91,933 92,082 Accounts receivable, net 74,271 75,154 Premium balances receivable 177,011 279,682 Reinsurance receivables 281,096 228,423 Ceded unearned premium reserves 320,537 264,038 Deferred acquisition costs 48,033 47,282 Property and equipment - at cost, net of accumulated depreciation 174,823 177,708 Inventory 85,107 84,612 Goodwill and other intangibles, net of amortization 231,111 233,739 Deferred tax assets 90,550 85,736 Other assets 74,196 94,898 ---------- ---------- $3,667,924 $3,568,040 ========== ========== LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current taxes payable $ 56,773 $ 49,605 Losses and loss adjustment expenses 573,447 454,664 Other liabilities 212,183 211,000 Reinsurance payable 130,382 255,117 Unearned premiums 732,270 676,940 Parent company debt 0 0 Subsidiaries' debt 164,667 167,050 Deferred tax liabilities 186,271 190,842 ---------- ---------- Total liabilities 2,055,993 2,005,218 Common stockholders' equity 1,611,931 1,562,822 ---------- ---------- $3,667,924 $3,568,040 ========== ========== COMMON SHARES OUTSTANDING (adjusted for dividends) 7,663,517 7,644,232 ========== ==========
* Certain amounts have been reclassified to conform to the 2004 presentation.