Delaware | 1-9371 | 51-0283071 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
7 Times Square Tower, 17th Floor, New York, New York | 10036 | |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition | ||||||||
Item 9.01 Financial Statements and Exhibits | ||||||||
SIGNATURES | ||||||||
Index to Exhibits | ||||||||
EX-99.1 |
99.1 | 2011 First Quarter Earnings Release, dated April 28, 2011 |
2
ALLEGHANY CORPORATION | ||||
Date: April 28, 2011
|
By: | /s/ Roger B. Gorham | ||
Name: Roger B. Gorham | ||||
Title: Senior Vice President and
chief financial officer |
3
Three months ended March 31 | ||||||||||||||||
Amount | Per Share | |||||||||||||||
(in millions, except per share amounts) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Net catastrophe (losses) after tax* |
$ | (1.9 | ) | $ | 0.3 | $ | (0.21 | ) | $ | 0.03 | ||||||
Net realized capital gains after tax |
$ | 22.6 | $ | 17.2 | $ | 2.53 | $ | 1.87 | ||||||||
Other than temporary impairment (losses) after tax |
$ | | $ | (0.7 | ) | $ | | $ | (0.08 | ) |
* | The first three months of 2010 reflect reserve releases by RSUI in the 2010 first quarter which more than offset total catastrophe losses in such period. |
2
Three months ended | ||||||||||||
March 31 | ||||||||||||
(in millions) | 2011 | 2010 | Change | |||||||||
AIHL insurance group (1): |
||||||||||||
Underwriting profit (loss) (2) |
||||||||||||
RSUI |
$ | 49.0 | $ | 36.8 | $ | 12.2 | ||||||
CATA |
0.7 | 0.3 | 0.4 | |||||||||
PCC |
(6.3 | ) | (5.4 | ) | (0.9 | ) | ||||||
43.4 | 31.7 | 11.7 | ||||||||||
Net investment income |
30.2 | 33.4 | (3.2 | ) | ||||||||
Net realized capital gains |
34.7 | 22.7 | 12.0 | |||||||||
Other than temporary impairment losses (3) |
| (1.1 | ) | 1.1 | ||||||||
Other income, less other expenses |
(9.7 | ) | (8.4 | ) | (1.3 | ) | ||||||
Total AIHL insurance group |
$ | 98.6 | $ | 78.3 | $ | 20.3 | ||||||
Corporate activities (4) |
||||||||||||
Net investment income |
1.4 | (1.9 | ) | 3.3 | ||||||||
Net realized capital gains |
| 3.8 | (3.8 | ) | ||||||||
Other than temporary impairment losses (3) |
| | | |||||||||
Other income |
0.7 | | 0.7 | |||||||||
Corporate administration and other expenses |
6.8 | 5.7 | (1.1 | ) | ||||||||
Interest expense |
4.4 | 0.1 | (4.3 | ) | ||||||||
Total Corporate activities |
(9.1 | ) | (3.9 | ) | (5.2 | ) | ||||||
Total |
$ | 89.5 | $ | 74.4 | $ | 15.1 | ||||||
Income taxes |
18.2 | 16.2 | (2.0 | ) | ||||||||
Net earnings |
$ | 71.3 | $ | 58.2 | $ | 13.1 | ||||||
(1) | Alleghany Insurance Holdings LLC (AIHL), the holding company for Alleghanys property and casualty and surety insurance operating units consisting of RSUI Group, Inc. (RSUI), Capitol Transamerica Corporation and Platte River Insurance Company (collectively, CATA) and Pacific Compensation Corporation (PCC), as well as AIHL Re LLC. | |
(2) | Represents net premiums earned less loss and loss adjustment expenses and commission, brokerage and other underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income, net realized capital gains, other-than-temporary impairment losses, other income or other expenses. Please refer to Comment on Regulation G elsewhere herein. | |
(3) | Reflects impairment charges for unrealized losses related to the investment portfolio that are required to be charged against earnings as realized losses. | |
(4) | Corporate activities consist of Alleghany Properties Holdings LLC, Alleghanys investments in Homesite Group Incorporated (Homesite) and ORX Exploration, Inc. (ORX), and corporate activities at the parent level. |
3
4
5
| significant weather-related or other natural or human-made catastrophes and disasters; | ||
| the cyclical nature of the property and casualty insurance industry; | ||
| adverse loss development for events insured by Alleghanys insurance operating units in either the current year or prior years; | ||
| changes in market prices of Alleghanys significant equity investments and changes in value of Alleghanys debt securities portfolio; | ||
| the long-tail and potentially volatile nature of certain casualty lines of business written by AIHLs insurance operating units; | ||
| the cost and availability of reinsurance; | ||
| exposure to terrorist acts; | ||
| the willingness and ability of AIHLs insurance operating units reinsurers to pay reinsurance recoverables owed to such insurance operating units; | ||
| changes in the ratings assigned to AIHLs insurance operating units; | ||
| claims development and the process of estimating reserves; | ||
| legal and regulatory changes, including the new federal financial regulatory reform of the insurance industry established by the Dodd-Frank Wall Street Reform and Consumer Protection Act; | ||
| the uncertain nature of damage theories and loss amounts; and | ||
| increases in the levels of risk retention by AIHLs insurance operating units. |
6
(in millions, except ratios) | RSUI | CATA | PCC | AIHL | ||||||||||||
Three months ended March 31, 2011 |
||||||||||||||||
Gross premiums written |
$ | 212.2 | $ | 37.6 | $ | 0.4 | $ | 250.2 | ||||||||
Net premiums written |
130.8 | 35.4 | 0.4 | 166.6 | ||||||||||||
Net premiums earned (1) |
$ | 141.6 | $ | 39.3 | $ | 0.1 | $ | 181.0 | ||||||||
Loss and loss adjustment expenses |
51.2 | 19.1 | 0.7 | 71.0 | ||||||||||||
Commission, brokerage and other underwriting expenses (2) |
41.4 | 19.5 | 5.7 | 66.6 | ||||||||||||
Underwriting profit (loss) (3) |
$ | 49.0 | $ | 0.7 | $ | (6.3 | ) | $ | 43.4 | |||||||
Net investment income (1) |
||||||||||||||||
Net realized capital gains (1) |
30.2 | |||||||||||||||
Other than temporary impairment losses (1) |
34.7 | |||||||||||||||
Other income (1) |
| |||||||||||||||
Other expenses (2) |
0.1 | |||||||||||||||
Earnings before income taxes |
9.8 | |||||||||||||||
$ | 98.6 | |||||||||||||||
Loss ratio (4) |
||||||||||||||||
Expense ratio (5) |
36.2 | % | 48.5 | % | 762.5 | % | 39.2 | % | ||||||||
Combined ratio (6) |
29.2 | % | 49.7 | % | 5857.3 | % | 36.8 | % | ||||||||
65.4 | % | 98.2 | % | 6619.8 | % | 76.0 | % | |||||||||
Three months ended March 31, 2010 |
||||||||||||||||
Gross premiums written |
$ | 222.0 | $ | 40.6 | $ | 2.4 | $ | 265.0 | ||||||||
Net premiums written |
130.3 | 38.2 | 2.3 | 170.8 | ||||||||||||
Net premiums earned (1) |
$ | 150.3 | $ | 40.6 | $ | 3.8 | $ | 194.7 | ||||||||
Loss and loss adjustment expenses |
72.8 | 21.0 | 2.8 | 96.6 | ||||||||||||
Commission, brokerage and other underwriting expenses (2) |
40.7 | 19.3 | 6.4 | 66.4 | ||||||||||||
Underwriting profit (loss) (3) |
$ | 36.8 | $ | 0.3 | $ | (5.4 | ) | $ | 31.7 | |||||||
Net investment income (1) |
33.4 | |||||||||||||||
Net realized capital gains (1) |
22.7 | |||||||||||||||
Other than temporary impairment losses (1) |
(1.1 | ) | ||||||||||||||
Other income (1) |
0.1 | |||||||||||||||
Other expenses (2) |
8.5 | |||||||||||||||
Losses before income taxes |
$ | 78.3 | ||||||||||||||
Loss ratio (4) |
48.5 | % | 51.6 | % | 74.2 | % | 49.6 | % | ||||||||
Expense ratio (5) |
27.1 | % | 47.6 | % | 166.3 | % | 34.1 | % | ||||||||
Combined ratio (6) |
75.6 | % | 99.2 | % | 240.5 | % | 83.7 | % |
(1) | Represent components of total revenues. | |
(2) | Commissions, brokerage and other underwriting expenses represent commission and brokerage expenses and that portion of salaries, administration and other operating expenses attributable to underwriting activities, whereas the remainder constitutes other expenses. | |
(3) | Represents net premiums earned less loss and loss adjustment expenses and commission, brokerage and other underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income, net realized capital gains, other-than-temporary impairment losses, other income and other expenses. Underwriting profit does not replace net earnings determined in accordance with GAAP as a measure of profitability; rather, we believe that underwriting profit, which does not include net investment income, net realized capital gains, other-than-temporary impairment losses, other income and other expenses, enhances the understanding of AIHLs insurance operating units operating results by highlighting net earnings attributable to their underwriting performance. With the addition of net investment income, net realized capital gains, other-than-temporary impairment losses, other income and other expenses, reported pre-tax net earnings (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, an insurance companys ability to continue as an ongoing concern may be at risk. Therefore, we view underwriting 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) | Commissions, brokerage and other 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 commission, brokerage and other underwriting expenses. |
A-1
THREE MONTHS ENDED 3/31/11 | THREE MONTHS ENDED 3/31/10 | |||||||||||||||||||||||
ALLEGHANY | ALLEGHANY | |||||||||||||||||||||||
INSURANCE | CORPORATE | INSURANCE | CORPORATE | |||||||||||||||||||||
HOLDINGS | ACTIVITIES | COMBINED | HOLDINGS | ACTIVITIES | COMBINED | |||||||||||||||||||
Revenues |
||||||||||||||||||||||||
Net premiums earned |
$ | 180,980 | $ | 0 | $ | 180,980 | $ | 194,700 | $ | 0 | $ | 194,700 | ||||||||||||
Net investment income |
30,188 | 1,391 | 31,579 | 33,381 | (1,952 | ) | 31,429 | |||||||||||||||||
Net realized capital gains |
34,692 | 0 | 34,692 | 22,695 | 3,772 | 26,467 | ||||||||||||||||||
Other than temporary impairment
losses |
0 | 0 | 0 | (1,077 | ) | 0 | (1,077 | ) | ||||||||||||||||
Other income |
131 | 754 | 885 | 137 | (4 | ) | 133 | |||||||||||||||||
Total revenues |
245,991 | 2,145 | 248,136 | 249,836 | 1,816 | 251,652 | ||||||||||||||||||
Costs and expenses |
||||||||||||||||||||||||
Loss and loss adjustment expenses |
71,022 | 0 | 71,022 | 96,627 | 0 | 96,627 | ||||||||||||||||||
Commissions, brokerage and other
underwriting expenses |
66,528 | 0 | 66,528 | 66,356 | 0 | 66,356 | ||||||||||||||||||
Other operating expenses |
9,780 | 466 | 10,246 | 8,358 | 493 | 8,851 | ||||||||||||||||||
Corporate administration |
11 | 6,368 | 6,379 | 12 | 5,222 | 5,234 | ||||||||||||||||||
Interest expense |
78 | 4,374 | 4,452 | 149 | 70 | 219 | ||||||||||||||||||
Total costs and expenses |
147,419 | 11,208 | 158,627 | 171,502 | 5,785 | 177,287 | ||||||||||||||||||
Earnings (loss) before income taxes |
$ | 98,572 | ($9,063 | ) | 89,509 | $ | 78,334 | ($3,969 | ) | 74,365 | ||||||||||||||
Income taxes |
18,169 | 16,196 | ||||||||||||||||||||||
Net earnings |
$ | 71,340 | $ | 58,169 | ||||||||||||||||||||
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Investments |
||||||||
Available for sale securities at fair value: |
||||||||
Equity securities (cost: 2011 $1,284,686; 2010 $1,310,009) |
$ | 1,598,682 | $ | 1,500,686 | ||||
Debt securities (amortized cost: 2010 $2,783,146; 2010 $2,778,117) |
2,831,302 | 2,832,411 | ||||||
Short-term investments |
246,072 | 264,811 | ||||||
4,676,056 | 4,597,908 | |||||||
Other invested assets |
204,634 | 207,294 | ||||||
Total investments |
4,880,690 | 4,805,202 | ||||||
Cash |
64,881 | 76,741 | ||||||
Premium balances receivable |
144,251 | 128,075 | ||||||
Reinsurance recoverables |
867,777 | 873,295 | ||||||
Ceded unearned premium reserves |
137,684 | 144,065 | ||||||
Deferred acquisition costs |
65,814 | 67,692 | ||||||
Property and equipment at cost, net of
accumulated depreciation and amortization |
20,189 | 19,504 | ||||||
Goodwill and other intangibles, net of amortization |
141,474 | 142,312 | ||||||
Net deferred tax assets |
17,714 | 77,147 | ||||||
Other assets |
189,525 | 97,666 | ||||||
$ | 6,529,999 | $ | 6,431,699 | |||||
Liabilities and Stockholders Equity |
||||||||
Losses and loss adjustment expenses |
$ | 2,290,226 | $ | 2,328,742 | ||||
Unearned premiums |
503,105 | 523,927 | ||||||
Senior Notes |
298,952 | 298,923 | ||||||
Reinsurance payable |
44,353 | 41,500 | ||||||
Current taxes payable |
2,557 | 3,220 | ||||||
Other liabilities |
338,824 | 326,519 | ||||||
Total liabilities |
3,478,017 | 3,522,831 | ||||||
Common stock (shares authorized: 2011 and 2010 -
22,000,000; issued and outstanding: |
||||||||
2011 - 9,300,143; 2010 - 9,300,448) |
9,118 | 9,118 | ||||||
Contributed capital |
928,248 | 928,816 | ||||||
Accumulated other comprehensive income |
241,866 | 170,262 | ||||||
Treasury stock, at cost (2011 - 364,793 shares; 2010 - 351,532 shares) |
(103,926 | ) | (99,686 | ) | ||||
Retained earnings |
1,976,676 | 1,900,358 | ||||||
Total stockholders equity |
3,051,982 | 2,908,868 | ||||||
$ | 6,529,999 | $ | 6,431,699 | |||||