Alleghany Announces Third Quarter Earnings.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 23, 2000 Net earnings of Alleghany Corporation (NYSE-Y) were $16.6 million, or $2.29 per share of common stock, in the third quarter of 2000 compared with $56.7 million, or $7.58 per share, in the third quarter of 1999, John J. Burns, Jr., President and chief executive officer of Alleghany, announced today. In the first nine months of 2000, Alleghany's net earnings were $102.6 million, or $13.93 per share, compared with $93.5 million, or $12.49 per share, in the first nine months of 1999. Net earnings in the third quarter of 2000 include an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. contribution of $8.3 million from Alleghany Asset Management, Inc. compared to an after-tax contribution of $8.2 million in the third quarter of 1999, and an after-tax contribution of $25.0 million in the first nine months of 2000 compared to an after-tax contribution of $24.6 million in the first nine months of 1999. The results of Alleghany Asset Management reflect an increase in assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. , offset by increased expenses, including expenses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the expansion of its business. On October October: see month. 18, 2000, Alleghany announced that it had signed a definitive merger agreement pursuant to which Alleghany Asset Management will become a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of ABN AMRO ABN AMRO Algemene Bank Nederland-Amsterdam Roterdam Bank (Dutch bank) North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. Holding Company. In light of such merger, Alleghany Asset Management has been classified as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. . In the third quarter of 2000, World Minerals Inc. recorded higher pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings and similar revenues as compared to the third quarter of 1999, notwithstanding continued high energy costs, the weak Euro relative to the U.S. dollar affecting results in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and a decrease
in volume shipped due to various continued competitive pressures.
Alleghany Underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. Holdings Ltd. recorded higher revenues but lower pre-tax earnings in the third quarter of 2000 compared to the third quarter of 1999, reflecting continued difficult market conditions. Heads & Threads International LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control recorded higher revenues and pre-tax earnings in the third quarter of 2000 compared with the third quarter of 1999, largely reflecting its recent acquisition of Reynolds Fasteners fasteners In construction, connectors between structural members. Bolted connections are used when it is necessary to fasten two elements tightly together, especially to resist shear and bending, as in column and beam connections. , Inc., which resulted in increased sales without a commensurate com·men·su·rate adj. 1. Of the same size, extent, or duration as another. 2. Corresponding in size or degree; proportionate: a salary commensurate with my performance. 3. increase in operating costs operating costs npl → gastos mpl operacionales . The 1999 third quarter results include (i) net gains on investment transactions before taxes of $70.6 million (compared with a loss of $268 thousand in the 2000 third quarter) resulting principally from the sale by Alleghany in the 1999 period of a portion of its holdings in Burlington Burlington, town, Canada Burlington, town (1991 pop. 129,575), SE Ont., Canada, on Lake Ontario. First settled (1798) by Mohawk Loyalist Joseph Brandt, Burlington's economy was built on the shipment of wheat, lumber, and quarried rock by waterway. Northern Santa Fe Santa Fe, city, Argentina Santa Fe, city (1991 pop. 341,000), capital of Santa Fe prov., NE Argentina, a river port near the Paraná, with which it is connected by canal. Corporation, and (ii) the results of operations for the quarter of Underwriters Re Group, Inc., which was sold by Alleghany on May 10, 2000. As previously announced, Alleghany results in the first nine months of 2000 reflect several non-recurring items, including (i) a $143.8 million after-tax gain on the sale of Underwriters Re Group, Inc., (ii) a $44.6 million pre-tax loss on the operations of Underwriters Re Group (excluding Alleghany Underwriting) through the close of the sale, principally due to costs relating to the sale, (iii) a $44.0 million pre-tax charge for the strengthening of loss reserves, primarily for past years, at Alleghany Underwriting, and (iv) $20.2 million of pre-tax charges at World Minerals for the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of certain joint venture investments and assets no longer used in production, and expenses relating to changes in World Minerals' senior management. Highlights are as follows (in millions, except for shares and per share amounts):
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues from
continuing
operations $178.6 $364.7 $772.0 $899.0
====== ====== ====== ======
Earnings from
continuing operations,
before taxes $12.9 $79.6 $54.9 $111.8
===== ===== ===== ======
Earnings from
continuing
operations, net $ 8.3 $48.5 $77.6 $68.9
Earnings from
discontinued
operations, net
(Alleghany Asset
Management) 8.3 8.2 25.0 24.6
--- ---- ---- ----
Net earnings $16.6 $56.7 $102.6 $93.5
===== ===== ====== =====
Basic earnings per share
of common stock from
continuing operations(a) $1.14 $6.49 $10.53 $ 9.21
Basic earnings per share
of common stock from
discontinued operations
(Alleghany Asset
Management)(a) 1.15 1.09 3.40 3.28
---- ---- ---- ----
Basic earnings
per share of
common stock(a) $2.29 $7.58 $13.93 $12.49
===== ===== ====== ======
Diluted earnings
per share of
common stock from
continuing operations(a) $1.13 $6.36 $10.44 $9.06
Diluted earnings per share
of common stock from
discontinued operations
(Alleghany Asset
Management)(a) 1.14 1.07 3.36 3.23
---- ---- ---- ----
Diluted earnings per
share of
common stock(a) $2.27 $7.43 $13.80 $12.29
===== ===== ====== ======
Average number
of outstanding
shares of
common stock(a) 7,258,118 7,467,714 7,362,148 7,485,109
(a) Adjusted to reflect the dividend of common stock declared in March
2000.
The comparative contributions to earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , before taxes made by Alleghany's operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon World Minerals (industrial minerals business), Alleghany Underwriting (Lloyd's Lloyd's, London insurance underwriting corporation of many separate syndicates; often called Lloyd's of London. Founded in the late 17th cent. by a group of merchants, shipowners, and insurance brokers at the coffeehouse of Edward Lloyd, the association is now reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. and insurance businesses), Heads & Threads (industrial fasteners business) and, until May 10, 2000, Underwriters Re Group (reinsurance and insurance businesses), as well as by Alleghany's parent company and other operations, were as follows (in millions):
Three Months Ended Nine Months Ended
September 30 September 30
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
World Minerals $ 6.2 $ 5.4 $ (4.4) $ 16.7
Alleghany Underwriting (0.4) 2.0 (56.4) 6.8
Heads & Threads 1.6 (0.8) 5.8 (2.8)
Underwriters Re Group --- 4.3 (56.1) 20.5
Parent company and other 5.5 68.7 166.0 70.6
--- ---- ----- ----
$12.9 $79.6 $54.9 $111.8
===== ===== ===== ======
On a per-share, after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. , the foregoing earnings contributions may be broken down as follows (the per-share figure by quarter may not equal the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. per-share figure due to the timing of share transactions and rounding):
Three Months Ended September 30
Alleghany Under-
2000 World Under- Heads & writers Re
---- Minerals writing Threads Group
-------- ------- ------- -----
Operations $0.49 $(0.05) $0.12 $--
Gain on sale
of Under-
writers Re Group -- -- -- --
Security
transactions -- (0.03) -- --
----- ------ -------- ----
Total $0.49 $(0.08) $0.12 $--
===== ======= ===== ===
1999
Operations $0.42 $0.19 $(0.06) $0.59
Gain on sale
of Under-
writers Re Group -- -- -- --
Security
transactions -- (0.06) -- --
----- ------ ------ ----
Total $0.42 $0.13 $(0.06) $0.59
===== ===== ======= =====
Three Months Ended September 30
Discontinued
operations
Total from (Alleghany
2000 Parent co. continuing Asset
---- and other operations Management) Total
--------- ---------- ----------- -----
Operations $0.50 $1.06 $1.15 $2.21
Gain on sale
of Under-
writers Re
Group 0.11 0.11 -- 0.11
Security
transactions -- (0.03 -- (0.03)
---- ------ ------ ------
Total $0.61 $1.14 $1.15 $2.29
===== ===== ===== =====
1999
Operations $(0.28) $0.86 $1.09 $1.95
Gain on sale
of Under-
writers Re
Group -- -- -- --
Security
transactions 5.69 5.63 -- 5.63
------ ----- ----- -----
Total $5.41 $6.49 $1.09 $7.58
===== ===== ===== =====
Nine Months Ended September 30
Alleghany Under-
2000 World Under- Heads & writers Re
---- Minerals writing Threads Group
-------- ------- ------- -----
Operations $(0.47) $(5.09) $0.45 $(4.64)
Gain on sale
of Under-
writers Re Group -- -- -- --
Security
transactions -- (0.03) -- 0.04
------- ------- ------ -------
Total $(0.47) $(5.12) $0.45 $(4.60)
======= ======= ===== =======
1999
Operations $1.35 $0.51 $(0.22) $2.28
Gain on sale
of Under-
writers Re Group -- -- -- --
Security
transactions -- (0.06) -- 0.05
------- ------- ------ -------
Total $1.35 $0.45 $(0.22) $2.33
===== ===== ======= =====
Nine Months Ended September 30
Discontinued
operations
Total from (Alleghany
2000 Parent co. continuing Asset
---- and other operations Management) Total
--------- ---------- ----------- -----
Operations $0.74 $(9.01) $3.40 $(5.61)
Gain on sale
of Under-
writers
Re Group 19.53 19.53 -- 19.53
Security
transactions -- 0.01 -- 0.01
------ ------ -------- -----
Total $20.27 $10.53 $3.40 $13.93
====== ====== ===== ======
1999
Operations $(1.42) $2.50 $3.28 $5.78
Gain on sale
of Under-
writers Re Group -- -- -- --
Security
transactions 6.72 6.71 -- 6.71
-------- ------- -------- -------
Total $5.30 $9.21 $3.28 $12.49
===== ===== ===== ======
As of September September: see month. 30, 2000, Alleghany beneficially owned approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 17.95 million shares, or 4.4 percent, of the outstanding common stock of Burlington Northern Santa Fe Corporation, which had an aggregate market value on that date of approximately $387.0 million, or $21.5625 per share, compared with a market value on December December: see month. 31, 1999 of $435.3 million, or $24.25 per share. The aggregate cost of such shares is approximately $201.3 million, or $11.21 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 nine months of 2000, Alleghany purchased an aggregate of 304,656 shares of its common stock for about $52.1 million, at an average cost of about $170.84 per share. As of September 30, 2000, Alleghany had 7,234,852 shares of its common stock outstanding. Alleghany common stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. per share at September 30, 2000 was $159.08 per share, a 7.1 percent increase from common stockholders' equity per share of $148.53 as of December 31, 1999 (adjusted for the March 2000 stock dividend).
ALLEGHANY CORPORATION AND SUBSIDIARIES
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 2000
------------------------------------------------------
UNDER- ALLEGHANY
WRITERS UNDER- WORLD HEADS & CORPORATE
RE GROUP WRITING MINERALS THREADS ACTIVITIES COMBINED
-------- ------- -------- ------------------ --------
Revenues
Net property &
casualty
premiums $0 $70,949 $0 $0 $0 $70,949
Interest,
dividend and
other income 0 4,165 (443) 36,373 13,649 53,744
Net mineral
and filtration
sales 0 0 54,199 0 0 54,199
Net gain (loss)
on investments 0 (351) 0 0 83 (268)
-- ----- -- -- --- -----
Total
revenues 0 74,763 53,756 36,373 13,732 178,624
-- ------- ------- ------- ------- --------
Costs and expenses
Commissions &
brokerage
expenses 0 17,632 0 0 0 17,632
Salaries,
administrative
and other
operating
expenses 0 9,386 8,881 33,870 13 52,150
Property and
casualty
losses
& LAE 0 47,551 0 0 0 47,551
Cost of mineral
and filtration
sales 0 0 37,415 0 0 37,415
Interest
expense 0 557 1,211 919 3,078 5,765
Corporate
administration 0 0 0 0 5,173 5,173
-- -- -- -- ------ ------
Total costs
and expenses 0 75,126 47,507 34,789 8,264 165,686
-- ------- ------- ------- ------ --------
Earnings from
continuing
operations,
before taxes $0 ($363) $6,249 $1,584 $5,468 12,938
=== ====== ======= ======= ======= =======
Income taxes 4,655
------
Earnings from continuing operations 8,283
Earnings from discontinued
operations, net of tax 8,321
------
Net earnings $16,604
========
THREE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------------
UNDER- ALLEGHANY
WRITERS UNDER- WORLD HEADS & CORPORATE
RE GROUP WRITING MINERALS THREADS ACTIVITIES COMBINED
-------- ------- -------- ------------------- --------
Revenues
Net property &
casualty
premiums $130,355 $55,388 $0 $0 $0 $185,743
Interest,
dividend and
other income 30,937 2,019 113 18,259 3,762 55,090
Net mineral
and filtration
sales 0 0 53,300 0 0 53,300
Net gain (loss)
on investments 8 (710) 0 0 71,311 70,609
-- ----- -- -- ------- ------
Total
revenues 161,300 56,697 53,413 18,259 75,073 364,742
-------- ------- ------ ------- ------- -------
Costs and expenses
Commissions &
brokerage
expenses 31,711 15,472 0 0 0 47,183
Salaries,
administrative
and other
operating
expenses 12,751 5,344 11,139 18,840 496 48,570
Property and
casualty
losses
& LAE 108,529 33,884 0 0 0 142,413
Cost of mineral
and filtration
sales 0 0 35,619 0 0 35,619
Interest
expense 4,007 0 1,275 191 2,601 8,074
Corporate
administration 0 0 0 0 3,320 3,320
-- -- -- -- ------ -----
Total costs
and
expenses 156,998 54,700 48,033 19,031 6,417 285,179
-------- ------- ------ ------- ------ -------
Earnings from
continuing
operations,
before taxes $4,302 $1,997 $5,380 ($772) $68,656 79,563
==== ======= ====== ========
Income taxes 31,043
------
Earnings from continuing operations 48,520
Earnings from discontinued
operations, net of tax 8,149
------
Net earnings $56,669
========
ALLEGHANY CORPORATION AND SUBSIDIARIES
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2000
------------------------------------------------------
UNDER- ALLEGHANY
WRITERS UNDER- WORLD HEADS & CORPORATE
RE GROUP WRITING MINERALS THREADS ACTIVITIES COMBINED
-------- ------- -------- --------- --------- --------
Revenues
Net property &
casualty
premiums $95,965 $193,348 $0 $0 $0 $289,313
Interest,
dividend
and other
income 29,584 9,611 182 99,349 30,806 169,532
Net mineral and
filtration
sales 0 0 154,395 0 0 154,395
Net gain (loss)
on investments 440 (302) 0 0 158,604 158,742
---- ----- -- -- -------- --------
Total revenues 125,989 202,657 154,577 99,349 189,410 771,982
-------- -------- -------- ------- -------- --------
Costs and expenses
Commissions &
brokerage
expenses 29,991 58,477 0 0 0 88,468
Salaries,
administrative
and other
operating
expenses 41,082 28,942 47,607 91,465 42 209,138
Property and
casualty losses
& LAE 105,683 171,053 0 0 0 276,736
Cost of mineral
and filtration
sales 0 0 107,714 0 0 107,714
Interest expense 5,346 557 3,621 2,085 7,430 19,039
Corporate
administration 0 0 0 0 16,010 16,010
-- -- -- -- ------- -------
Total costs and
expenses 182,102 259,029 158,942 93,550 23,482 717,105
-------- -------- -------- ------- ------- --------
Earnings from
continuing
operations,
before taxes ($56,113) ($56,372) ($4,365) $5,799 $165,928 54,877
========= ========= ======== ======= ======== ========
Income taxes (22,699)
-------
Earnings from
continuing
operations 77,576
Earnings from
discontinued
operations,
net of tax 25,004
Net earnings $102,580
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------------
UNDER- ALLEGHANY
WRITERS UNDER- WORLD HEADS & CORPORATE
RE GROUP WRITING MINERALS THREADS ACTIVITIES COMBINED
Revenues -------- ------- -------- --------- --------- --------
Net property &
casualty
premiums $369,136 $146,980 $0 $0 $0 $516,116
Interest,
dividend
and other
income 69,161 9,180 (90) 56,463 9,532 144,246
Net mineral and
filtration
sales 0 0 155,606 0 0 155,606
Net gain (loss)
on investments 608 (710) 0 0 83,184 83,082
---- ----- -- -- ------- -------
Total revenues 438,905 155,450 155,516 56,463 92,716 899,050
-------- -------- -------- ------- ------- --------
Costs and expenses
Commissions &
brokerage
expenses 82,026 42,353 0 0 0 124,379
Salaries,
administrative
and other
operating
expenses 34,432 17,193 31,150 58,614 1,214 142,603
Property and
casualty losses
& LAE 289,926 89,139 0 0 0 379,065
Cost of mineral
and filtration
sales 0 0 104,065 0 0 104,065
Interest expense 12,023 0 3,565 613 8,664 24,865
Corporate
administration 0 0 0 0 12,266 12,266
-- -- -- -- ------- -------
Total costs and
expenses 418,407 148,685 138,780 59,227 22,144 787,243
-------- -------- -------- ------- ------- --------
Earnings from
continuing
operations,
before taxes $20,498 $6,765 $16,736 ($2,764) $70,572 111,807
======= ======== ======== ======== =======
Income taxes 42,906
--------
Earnings from
continuing
operations 68,901
Earnings from
discontinued
operations,
net of tax 24,609
Net earnings $93,510
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