-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D8UWofsj9t2wuj3GD0SMaTy8rhvuTZrfJpAx6/DfyBtPEUlkHqJvnQsnhKbpE4ev /9bxhG97wEXatFwxj8Rucg== 0000950123-99-010058.txt : 19991115 0000950123-99-010058.hdr.sgml : 19991115 ACCESSION NUMBER: 0000950123-99-010058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEGHANY CORP /DE CENTRAL INDEX KEY: 0000775368 STANDARD INDUSTRIAL CLASSIFICATION: TITLE INSURANCE [6361] IRS NUMBER: 510283071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09371 FILM NUMBER: 99746901 BUSINESS ADDRESS: STREET 1: 375 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10152 BUSINESS PHONE: 2127521356 MAIL ADDRESS: STREET 1: 375 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10055 FORMER COMPANY: FORMER CONFORMED NAME: ALLEGHANY FINANCIAL CORP DATE OF NAME CHANGE: 19870115 10-Q 1 ALLEGHANY CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED SEPTEMBER 30, 1999 COMMISSION FILE NUMBER 1-9371 ALLEGHANY CORPORATION EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER DELAWARE STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION 51-0283071 INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER 375 PARK AVENUE, NEW YORK, NEW YORK 10152 ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE 212 / 752-1356 REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE NOT APPLICABLE FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE YES X NO INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASS OF COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT: 7,300,912 (AS OF SEPTEMBER 30, 1999) 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
1999 1998 -------------------------- REVENUES Investment management fees $41,721 $35,049 Net property and casualty premiums earned 185,743 112,632 Interest, dividend and other income 55,875 40,505 Net mineral and filtration sales 53,300 51,553 Net gain on investment transactions 70,609 4,874 -------------------------- Total revenues 407,248 244,613 -------------------------- COSTS AND EXPENSES Commissions and brokerage expenses 47,183 30,554 Salaries, administrative and other operating expenses 77,673 58,427 Property and casualty losses and loss adjustment expenses 142,412 77,884 Cost of mineral and filtration sales 35,619 33,826 Interest expense 8,074 8,262 Corporate administration 3,320 7,694 -------------------------- Total costs and expenses 314,281 216,647 -------------------------- Earnings from continuing operations, before income taxes 92,967 27,966 Income taxes 36,298 8,132 Earnings from continuing operations 56,669 19,834 Earnings from discontinued operations, net of tax 0 0 -------------------------- Net earnings $56,669 $19,834 ========================== Basic earnings per share of common stock:** Continuing operations $7.73 $2.70 Discontinued operations 0.00 0.00 -------------------------- Basic earnings per share $7.73 $2.70 ========================== Diluted earnings per share of common stock:** Continuing operations $7.62 $2.66 Discontinued operations 0.00 0.00 -------------------------- Diluted earnings per share $7.62 $2.66 ========================== Dividends per share of common stock * * ========================== Average number of outstanding shares of common stock** 7,321,288 7,332,888 ==========================
* In March 1999, Alleghany declared a dividend consisting of one share of Alleghany common stock for every fifty shares outstanding. ** Adjusted to reflect the common stock dividend declared in March 1999. 3 ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (dollars in thousands, except share and per share amounts) (unaudited)
1999 1998 ------------------------- REVENUES Investment management fees $ 121,673 $ 90,842 Net property and casualty premiums earned 516,116 310,736 Interest, dividend and other income 146,143 124,415 Net mineral and filtration sales 155,606 150,220 Net gain on investment transactions 83,082 7,360 ------------------------- Total revenues 1,022,620 683,573 ------------------------- COSTS AND EXPENSES Commissions and brokerage expenses 124,379 80,769 Salaries, administrative and other operating expenses 224,417 167,516 Property and casualty losses and loss adjustment expenses 379,066 215,941 Cost of mineral and filtration sales 104,065 100,202 Interest expense 24,865 23,697 Corporate administration 12,266 23,947 ------------------------- Total costs and expenses 869,058 612,072 ------------------------- Earnings from continuing operations, before income taxes 153,562 71,501 Income taxes 60,052 21,480 ------------------------- Earnings from continuing operations 93,510 50,021 Earnings from discontinued operations, net of tax 0 32,725 ------------------------- Net earnings $ 93,510 $ 82,746 ========================= Basic earnings per share of common stock: ** Continuing operations $ 12.74 $ 6.75 Discontinued operations 0.00 4.42 ------------------------- Basic net earnings per share $ 12.74 $ 11.17 ========================= Diluted earnings per share of common stock: ** Continuing operations $ 12.54 $ 6.64 Discontinued operations 0.00 4.34 ------------------------- Diluted earnings per share of common stock $ 12.54 $ 10.98 ========================= Dividends per share of common stock * * ========================= Average number of outstanding shares of common stock ** 7,338,342 7,405,799 =========================
* In March 1999, Alleghany declared a dividend consisting of one share of Alleghany common stock for every fifty shares outstanding. ** Adjusted to reflect the common stock dividend declared in March 1999. 4 ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 (dollars in thousands, except share and per share amounts)
September 30, 1999 December 31, (Unaudited) 1998 ------------------------------ ASSETS Available for sale securities: Fixed maturities: U.S. Government, government agency and municipal obligations (amortized cost $526,491) $ 523,935 $ 537,937 Short-term investments (amortized cost 274,792) 274,792 76,015 Bonds, notes and other (amortized cost 671,977) 663,356 687,755 Equity securities (cost 245,450) 534,730 824,326 ------------------------------ 1,996,813 2,126,033 Cash 18,095 25,441 Cash pledged to secure trust deposits 8,929 56,907 Premium trust funds 143,465 107,854 Notes receivable 91,536 91,536 Funds held, accounts and other receivables 600,001 502,721 Property and equipment - at cost, less accumulated depreciation and amortization 208,514 208,698 Reinsurance receivable 734,922 571,689 Other assets 666,539 591,565 ------------------------------ $4,468,814 $4,282,444 ============================== LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Property and casualty losses and loss adjustment expenses $1,844,571 $1,554,818 Unearned premiums 469,587 389,603 Other liabilities 492,998 443,938 Long-term debt of parent company 0 18,200 Long-term debt of subsidiaries 416,924 421,595 Net deferred tax liability 81,674 150,218 Trust deposits secured by pledged assets 13,315 56,644 ------------------------------ Total liabilities 3,319,069 3,035,016 Common stockholders' equity 1,149,745 1,247,428 ------------------------------ $4,468,814 $4,282,444 ============================== Shares of common stock outstanding * 7,300,912 7,375,848 ============================== Common stockholders' equity per share * $ 157.48 $ 169.12 ==============================
* Adjusted to reflect the common stock dividend declared in March 1999. 5 ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (dollars in thousands) (unaudited)
1999 1998 ------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 93,510 $ 50,021 Adjustments to reconcile net earnings to cash provided by (used in) operations: Depreciation and amortization 15,668 14,281 Net (gain) loss on investment transactions (83,082) 4,557 Other charges, net 23,175 (11,870) Increase in funds held, accounts and other receivables (97,280) (72,457) Increase in reinsurance receivable (163,233) (51,059) Increase in property and casualty losses and loss adjustment expenses 289,753 135,457 Increase in unearned premium reserves 79,984 20,216 Increase in premium trust funds (35,611) 0 Increase in other assets (74,974) (18,890) Increase in other liabilities 49,060 79,486 Decrease (increase) in cash pledged to secure trust deposits 47,978 (11,853) (Decrease) increase in trust deposits (43,329) 9,048 ------------------------ Net adjustments 8,109 96,916 ------------------------ Cash provided by operations 101,619 146,937 ------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (628,861) (252,745) Maturities of investments 50,766 43,113 Sales of investments 673,429 244,798 Purchases of property and equipment (20,025) (24,401) Other, net (146,122) (170,198) ------------------------ Net cash used in investing activities (70,813) (159,433) ------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (72,300) (50,500) Proceeds of long-term debt 49,429 110,000 Treasury stock acquisitions (21,609) (71,877) Net cash provided to discontinued operations 0 (5,097) Other, net 6,328 8,891 ------------------------ Net cash used in financing activities (38,152) (8,583) ------------------------ Net decrease in cash (7,346) (21,079) Cash at beginning of period 25,441 45,772 ------------------------ Cash at end of period $ 18,095 $ 24,693 ======================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 20,040 $ 20,440 Income taxes $ 14,416 $ 37,734
6 Notes to the Consolidated Financial Statements This report should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 1998 (the "1998 Form 10-K") and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999 of Alleghany Corporation (the "Company"). The information included in this report is unaudited but reflects all adjustments which, in the opinion of management, are necessary to a fair statement of the results of the interim periods covered thereby. All adjustments are of a normal and recurring nature except as described herein. Spin-off of Chicago Title Corporation - ------------------------------------- On June 17, 1998, the Company completed the spin-off of the title insurance and real estate-related services business conducted by Chicago Title and Trust Company ("CT&T"). The spin-off was effected by a distribution to the Company's stockholders of shares of a newly formed holding company for CT&T called Chicago Title Corporation ("Chicago Title"). The common stock of Chicago Title is traded on the New York Stock Exchange under the symbol "CTZ." The financial services business conducted through Alleghany Asset Management, Inc. ("Alleghany Asset Management") was not a part of the distribution and remains with the Company. The unaudited consolidated financial statements of the Company include the accounts of the Company and its subsidiaries for all periods presented. In light of the spin-off of Chicago Title, the spun-off operation is classified as a "discontinued operation" through the date of the spin-off. Comprehensive Income - -------------------- The Company's total comprehensive (loss) income for the three months and nine months ended September 30, 1999 and 1998 was $(38,978) thousand and $(82,402) thousand, and $7,977 thousand and $99,029 thousand respectively. Comprehensive (loss) income includes the Company's net earnings adjusted for changes in unrealized appreciation (depreciation) of investments, which was $(96,722) thousand and $(170,289) thousand, and $(13,370) thousand and $15,039 thousand, and cumulative translation adjustments, which was $1,075 thousand and $(5,623) thousand, and $1,513 thousand and $1,244 thousand, for the three months and nine months ended September 30, 1999 and 1998, respectively. 6 7 Segment Information Information concerning the Company's continuing operations by industry segment is summarized below:
For the three months ended For the nine months ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 1999 1998 1999 1998 ------------- ------------- ------------- ------------- Revenues Asset management $ 42,506 $ 35,606 $ 123,571 $ 92,360 Property and casualty insurance 217,997 138,307 594,354 379,216 Mining and filtration 53,413 51,294 155,516 149,565 Corporate activities 93,332 19,406 149,179 62,432 ---------- ---------- ---------- ---------- Total $ 407,248 $ 244,613 $1,022,620 $ 683,573 ---------- ---------- ---------- ---------- Earnings from continuing operations before tax Asset management $ 13,404 $ 10,705 $ 41,755 $ 27,915 Property and casualty insurance 6,299 17,452 27,263 42,486 Mining and filtration 5,380 6,411 16,736 14,867 Corporate activities 67,884 (6,602) 67,808 (13,767) ---------- ---------- ---------- ---------- Total 92,967 27,966 153,562 71,501 Income taxes 36,298 8,132 60,052 21,480 Discontinued operations 0 0 0 32,725 ---------- ---------- ---------- ---------- Net income $ 56,669 $ 19,834 $ 93,510 $ 82,746 ---------- ---------- ---------- ----------
September 30, December 31, 1999 1998 ------------- ------------ Identifiable assets Asset management $ 83,770 $ 118,458 Property and casualty insurance 3,415,687 3,064,155 Mining and filtration 340,600 331,714 Corporate activities 628,757 768,117 ---------- ---------- Total $4,468,814 $4,282,444 ========== ==========
7 8 Contingencies The Company's subsidiaries are parties to pending claims and litigation in the ordinary course of their businesses. Each such operating unit makes provisions on its books in accordance with generally accepted accounting principles for estimated losses to be incurred as a result of such claims and litigation, including related legal costs. In the opinion of management, such provisions are adequate as of September 30, 1999. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The Company reported net earnings from continuing operations of $56.7 million on revenues of $407.2 million during the third quarter of 1999, compared with net earnings from continuing operations of $19.8 million on revenues of $244.6 million during the third quarter of 1998. Net gains on investment transactions from continuing operations before taxes in the third quarter of 1999 totalled $70.6 million, compared with net gains of $4.9 million in the third quarter of 1998. The gains in 1999 principally resulted from the sale by the Company of a portion of its holdings in Burlington Northern Santa Fe Corporation. Net earnings from continuing operations contributed $93.5 million on revenues of $1,022.6 million during the first nine months of 1999, compared with net earnings from continuing operations of $50.0 million on revenues of $683.6 million during the first nine months of 1998. Net earnings, which include discontinued operations, were $82.7 million in the first nine months of 1998. No discontinued operations were recorded in the 1999 periods and the third quarter of 1998. Underwriters Re Group, Inc. ("Underwriters Re Group") contributed pre-tax earnings of $6.3 million on revenues of $218.0 million in the third quarter of 1999, compared with $17.5 million on revenues of $138.3 million in the third quarter of 1998, and $27.3 million on revenues of $594.3 million in the first nine months of 1999, compared with $42.5 million on revenues of $379.2 million in the first nine months of 1998. The 1999 third quarter and nine-month results of Underwriters Re Group include the results of its London-based Lloyd's operations (previously, Venton Holdings Ltd.) for the period April 1, 1999 through June 30, 1999, and the period following its acquisition on October 23, 1998 through June 30, 1999, respectively. The results of Underwriters Re Group's London operations are reported on a one quarter lag due to the complexity of converting Lloyd's accounting information to U.S. accounting principles. The results of Underwriters Re Group reflect, in general, the effects of the soft insurance and reinsurance markets worldwide and reserve strengthening at its primary companies in the 8 9 amount of $12.0 million (net of reinsurance). Underwriters Re Group also received a $7.0 million dividend in the third quarter of 1999 on a common stock investment which did not pay a dividend in 1998. In addition, Underwriters Re Group's 1999 third quarter results included a pre-tax loss on investments of $702 thousand incurred in connection with portfolio restructurings, compared with a pre-tax gain of $4.6 million on sales of equity investments in the third quarter of 1998. Alleghany Asset Management contributed pre-tax earnings of $13.4 million on revenues of $42.5 million in the 1999 third quarter, compared with $10.7 million on revenues of $35.6 million in the 1998 third quarter, and $41.8 million on revenues of $123.6 million in the first nine months of 1999, compared with $27.9 million on revenues of $92.4 million in the first nine months of 1998. The improved results of Alleghany Asset Management are primarily due to an increase in assets under management. As of September 30, 1999, Alleghany Asset Management managed $42.1 billion in assets, as compared with $29.3 billion as of September 30, 1998. World Minerals Inc. ("World Minerals") contributed pre-tax earnings of $5.4 million on revenues of $53.4 million in the 1999 third quarter, compared with $6.4 million on revenues of $51.3 million in the 1998 third quarter, and $16.7 million on revenues of $155.5 million in the first nine months of 1999, compared with $14.9 million on revenues of $149.6 million in the first nine months of 1998. World Minerals' results for the first nine months of 1999 improved due to increased sales worldwide, which was offset in the third quarter of 1999 by some increased costs. 1998 results reflect, among other things, the effects of severe El Nino storms and rail car shortages on World Minerals' Lompoc, California diatomite operations, and the effects of increased competitive pressure. As of September 30, 1999, the Company beneficially owned approximately 17.95 million shares, or 3.9 percent, of the outstanding common stock of Burlington Northern Santa Fe Corporation. At September 30, 1999, such 17.95 million shares had an aggregate market value of approximately $493.6 million, or $27.50 per share, compared with a market value on December 31, 1998 of $614.8 million, or $34.25 per share. The aggregate cost of such shares is approximately $201.3 million, or $11.21 per share. The Company's common stockholders' equity per share at September 30, 1999 (adjusted for the March 1999 stock dividend) was $157.48 per share, a 6.9 percent decrease from common stockholders' equity per share of $169.12 as of December 31, 1998, reflecting a decline in market prices of the Company's securities holdings. 9 10 Year 2000 - --------- The Year 2000 issue arises from computer programs that use two digits rather than four digits to define the applicable year. This could result in a failure of information technology systems ("IT systems") and other equipment containing imbedded technology ("non-IT systems") to correctly read the year 2000, which could cause significant disruption in business operations. Each of the Company and its subsidiaries has undertaken a four-phase program to determine the extent of Year 2000 issues within each of its significant IT systems and non-IT systems and to take appropriate remedial action. The four phases of the program are assessment, planning, execution and testing. The assessment and planning phases were completed in early 1998 and execution and testing began thereafter. Non-compliant systems were reprogrammed or replaced, and then tested. The execution and testing phases were largely completed by year-end 1998, but some testing is continuing in 1999. The cost of remediation (including replacement software and hardware), testing and outside consultant fees is currently expected to total $4.7 million, of which about $4.5 million has been incurred through September 30, 1999. Management presently believes that it will be able to timely resolve the Year 2000 issues affecting the computer systems of the Company and its subsidiaries and that the cost of addressing such matters will not have a material impact on the business, operations, or financial condition of the Company and its subsidiaries. However, the extent to which third party computer systems are adversely affected could materially adversely affect the business, operations or financial condition of the Company and its subsidiaries. As previously reported, management engaged an outside consultant in early 1999 to assess the Year 2000 compliance programs of the Company and its subsidiaries. Management received the outside consultant's final report, which was presented to the Company's Board of Directors and its Audit Committee. In addition, the recommendations set forth in the report, which relate primarily to business continuation and contingency plans, were distributed to the relevant subsidiaries and are being implemented as appropriate. More detailed reports of the state of readiness of each of the Company's operating units and with respect to potential claims under insurance and reinsurance policies issued by the subsidiaries of Underwriters Re Group is incorporated in the Company's 1998 Form 10-K and included in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and June 30, 1999, which reports are updated as follows: Underwriters Re Group --------------------- Underwriters Re Group has completed all phases of its Year 2000 remediation, including inventory reconciliation, impact assessment, code conversion, testing and 10 11 implementation. Business contingency plans are in place to anticipate business interruptions caused by a Year 2000 failure and Underwriters Re Group continues to monitor business partners and outside vendors. In addition an event calendar has been established that identifies key personnel, critical areas, actions and alternatives for the period of December 31 through January 31. In addition to issues faced by all industries in assuring Year 2000 compliance in their own computer systems and third-party relationships, the insurance industry may also face claims asserted under certain insurance and reinsurance policies for damages incurred by insureds due to Year 2000 computer problems. Underwriters Re Group is evaluating the potential insurance exposures arising from Year 2000 problems. A quantification of the insurance industry's or Underwriters Re Group's potential exposure to Year 2000 losses is not possible, as policy wordings vary and legal interpretations of possible insurance coverage for losses are likely to differ from jurisdiction to jurisdiction. Underwriters Re Group, through the use of questionnaires and other methods of determining a client's exposure to Year 2000 losses, has adjusted its current underwriting practices to address potential insurance exposures for Year 2000 losses. Upon evaluation of the responses to these questionnaires and/or other information, Underwriters Re Group may in some instances exclude Year 2000 losses or decline to issue or renew a policy. If the responses are considered appropriate, contracts may be written without express Year 2000 language. Alleghany Asset Management -------------------------- Alleghany Asset Management has conducted a business risk assessment at each of its subsidiaries to consider business and financial risks posed by Year 2000 and has developed continuity plans to address critical risks and business processes. In addition, Alleghany Asset Management has a disaster management program, which provides for the defined processes to be carried out by designated members of the disaster management team in the event of any disaster, including one related to Year 2000. World Minerals -------------- World Minerals has established a Crisis Management Team which will be responsible for developing procedures and insuring that adequate staff and facilities are available should it need to respond to any Year 2000 issues when the new millennium begins. This team comprises members from all mission-critical areas of World Minerals and is empowered to make quick, informed decisions to deal with the entire range of potential Year 2000 failures. 11 12 Heads and Threads ----------------- Heads and Threads has assessed, planned, executed and tested its internal IT and non-IT systems. A remaining potential risk involves the system supporting its mill business. Contingency plans have been developed to mitigate business interruptions caused by any Year 2000-related failure of this system. Heads and Threads has conducted a business risk assessment at each of its locations to consider safety and financial risks posed by Year 2000 and has developed a business continuity plan to address critical risks and business processes. Heads and Threads has also developed crisis management procedures and teams. These teams will be responsible for making quick, informed decisions in an effort to avoid serious financial, legal and safety repercussions. Heads and Threads continues to monitor all business activities for Year 2000-related risks. The Company's results in the first nine months of 1999 are not indicative of operating results in future periods. The Company and its subsidiaries have adequate internally generated funds and unused credit facilities to provide for the currently foreseeable needs of its and their businesses. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Market risk is the risk of loss from adverse changes in market prices and rates, such as interest rates, foreign currency exchange rates and commodity prices. The primary market risk related to the Company's non-trading financial instruments is the risk of loss associated with adverse changes in interest rates. The Company's 1998 Form 10-K provides a more detailed discussion of the market risks affecting its operations. Based on the Company's estimates as of September 30, 1999, no material change has occurred in its market risks, as compared to amounts disclosed in its 1998 Form 10-K. Forward-Looking Statements The "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" contain disclosures which are forward-looking statements. 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" or "continue." These forward-looking statements are based upon the Company's current plans or expectations and are subject to a number of 12 13 uncertainties and risks that could significantly affect current plans and anticipated actions and the Company's future financial condition and results. The uncertainties and risks include, but are not limited to, those relating to conducting operations in a competitive environment; acquisition activities; the complexity of integrated computer systems; the success and expense of the remediation efforts of the Company, its subsidiaries and third parties in achieving Year 2000 compliance, development of claims arising from Year 2000 problems and general economic conditions. 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 the Company. 13 14 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. Exhibit Number Description 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the third quarter of 1999. 14 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALLEGHANY CORPORATION --------------------- Registrant Date: November 12, 1999 /s/ David B. Cuming ------------------------------------- David B. Cuming Senior Vice President (and principal financial officer) 15 EX-27 2 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1999 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,462,083 0 0 534,730 0 0 1,996,813 27,024 734,922 0 4,468,814 1,844,571 469,587 0 0 416,924 0 0 0 1,149,745 4,468,814 516,116 89,680 83,082 333,742 379,066 0 0 153,562 60,052 93,510 0 0 0 93,510 12.74 12.54 0 0 0 0 0 0 0
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