Alleghany Corporation Announces 2005 Third Quarter Results.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Alleghany Corporation (NYSE-Y) reported a net loss 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 in the 2005 third quarter of $105.0 million, or $13.30 per share (per share information throughout is presented on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis), compared with a net loss of $50.7 million, or $6.48 per share, in the third quarter of 2004. The 2005 third quarter results include net 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. (after-tax amounts throughout reflect tax at the federal income tax rate) catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses, including 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. reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. premiums, of $179.7 million, or $22.77 per share, and net gains on investment transactions after tax of $32.4 million, or $4.11 per share. The net effect of these two items was to reduce third quarter earnings by $147.3 million, or $18.66 per share. Third quarter 2005 earnings from continuing operations before the effect of net after-tax catastrophe losses and net gains on investment transactions after tax were $42.3 million, or $5.36 per share, compared with $49.7 million, or $6.35 per share in the third quarter of 2004. 2005 third quarter net losses were $92.5 million, or $11.72 per share, compared with net losses of $47.0 million, or $6.00 per share, in the corresponding 2004 period. Net losses for the first nine months of 2005 were $0.2 million, or $0.03 per share, compared with net earnings of $63.8 million, or $8.14 per share, in the corresponding 2004 period. Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. consist of the operations of Heads & Threads International LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control prior to its disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of in December December: see month. 2004 and the operations of World Minerals, Inc. prior to its disposition in July July: see month. 2005. Alleghany's 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 September: see month. 30, 2005 was $228.91, a decrease of 1.9% from common stockholders' equity per share of $233.29 at June June: see month. 30, 2005, but an increase of 1.1% from common stockholders' equity per share of $226.50 at year end 2004 and an increase of 8.4% from common stockholders' equity per share of $211.25 at September 30, 2004 (all as adjusted for the stock dividend declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. in March 2005). On a consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: basis, cash and invested assets were approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3.03 billion at September 30, 2005, an increase of 22.8% from approximately $2.47 billion at December 31, 2004. Weston Weston, town (1990 pop. 10,200), Middlesex co., E Mass., W of Boston; settled c.1642, set off from Watertown and inc. 1713. The town is mainly residential. Regis College, the Weston College Geophysical Observatory, and many 18th-century buildings are there. M. Hicks Hicks , Edward 1780-1849. American painter of primitive works, notably The Peaceable Kingdom, of which nearly 100 versions exist. , President and chief executive officer of Alleghany commented, "Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. caused record insurance industry
losses in the 2005 third quarter and resulted in large losses at our
RSUI RSUI Rescue Swimmer Under Instruction (USMC) subsidiary. In order to ensure that RSUI maintains unquestioned
financial strength, Alleghany has contributed $150 million of capital to
RSUI during the 2005 fourth quarter. We believe that RSUI is well
positioned to respond to a changing property insurance market. The
increased hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. frequency and intensity of the past two years
presents a number of challenges for the insurance industry, and requires
a review of many of the underwriting Underwriting1. 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. assumptions on which the property insurance market is based. RSUI is reviewing and analyzing its catastrophe exposure management approach in an attempt to manage its accumulations of risk such that its loss exposure to major catastrophic events conforms to its established risk tolerances Risk Tolerance The degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio. Notes: An investor's risk tolerance varies according to age, income requirements, financial goals, etc. and fits within its reinsurance programs." Highlights of Alleghany's results for the three months ended September 30, 2005 and 2004 are as follows:
Per Share(1)
---------------------
(in millions, except for per
share and share amounts) 2005 2004 2005 2004
-------- ------- ---------- ----------
Loss from continuing operations
before income tax $ (168.3)$ (85.7)$ (21.32)$ (10.95)
======== ======= ========== ==========
Net loss from continuing
operations (105.0) (50.7) (13.30) (6.48)
Adjustments:
Add: Net catastrophe losses
after tax 179.7 104.8 22.77 13.38
Deduct: Net gains on investment
transactions after tax (32.4) (4.4) (4.11) (0.55)
-------- ------- ---------- ----------
Net earnings from continuing
operations, as adjusted (2) $ 42.3 $ 49.7 $ 5.36 $ 6.35
======== ======= ========== ==========
Average number of outstanding
shares of common stock (3) 7,892,663 7,828,819
(1) Represents diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of 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 net gains on investment transactions after tax. (3) Adjusted to reflect the dividend of common stock declared in March 2005. Highlights of Alleghany's consolidated results for the nine months ended September 30, 2005 and 2004 are as follows:
Per Share(1)
----------------------
(in millions, except for per
share and share amounts) 2005 2004 2005 2004
------- ------- ---------- ----------
(Loss) earnings from continuing
operations before income tax $ (23.5)$ 68.7 $ (2.98)$ 8.75
======= ======= ========== ==========
Net (loss) earnings from
continuing operations (6.8) 51.2 (0.87) 6.53
Adjustments:
Add: Net catastrophe losses
after tax 188.8 106.8 23.96 13.60
Deduct: Net gains on investment
transactions after tax (63.5) (28.7) (8.06) (3.66)
------- ------- ---------- ----------
Net earnings from continuing
operations, as adjusted (2) $ 118.5 $ 129.3 $ 15.03 $ 16.47
======= ======= ========== ==========
Average number of outstanding
shares of common stock (3) 7,881,121 7,849,829
(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 net gains on investment transactions after tax. (3) Adjusted to reflect the dividend of common stock declared in March 2005. The comparative contributions to earnings from continuing operations before taxes made by Alleghany Insurance Holdings LLC ("AIHL AIHL Australian Ice Hockey League ," a holding company for Alleghany's property and casualty insurance businesses consisting of RSUI Group, Inc. ("RSUI"), Capitol Capitol, seat of the U.S. Congress Capitol, seat of the U.S. government at Washington, D.C. It is the city's dominating monument, built on an elevated site that was chosen by George Washington in consultation with Major Pierre L'Enfant. Transamerica Corporation Transamerica Corporation is a holding company for various life insurance companies and investment firms doing business primarily in the United States. Transamerica began as a holding company controlled by A. P. ("CATA Cat´a 1. The Latin and English form of a Greek preposition, used as a prefix to signify
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2005 2004 2005 2004
---- ---- ---- ----
AIHL $ (206.5) $ (81.5) $ (71.3) $ 84.4
Corporate activities 38.2 (4.2) 47.8 (15.7)
--------- -------- -------- --------
Total $ (168.3) $ (85.7) $ (23.5) $ 68.7
========= ======== ======== ========
The comparative pre-tax contributions Pre-tax contribution Payment to an account made with funds from a worker's paycheck before federal income taxes are deducted. to AIHL's results made by its 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 RSUI, CATA and Darwin were as follows (in millions, except ratios):
Three Months Ended September 30,
RSUI CATA Darwin(1) AIHL
---- ---- --------- ----
2005
----
Gross premiums written (2) $ 305.9 $ 44.1 $ 43.0 $ 393.0
Net premiums written (2) 134.0 41.7 26.0 201.7
Net premiums earned $ 133.1 $ 39.4 $ 22.0 $ 194.5
Loss and loss adjustment expenses 326.8 18.3 14.9 360.0
Underwriting expenses 32.7 16.3 6.7 55.7
------- ------ ------ -------
Underwriting (loss) profit (3) $(226.4) $ 4.8 $ 0.4 (221.2)
======= ====== ======
Interest, dividend and other income 19.7
Net gain on investment transactions 4.6
Other expenses (9.6)
-------
Loss before income taxes $(206.5)
=======
Loss ratio (4) 245.5% 46.3% 68.1% 185.1%
Expense ratio (5) 24.6% 41.5% 30.3% 28.7%
Combined ratio (6) 270.1% 87.8% 98.4% 213.8%
2004
----
Gross premiums written (2) $ 305.5 $ 43.7 $ 25.3 $ 374.5
Net premiums written (2) 155.7 39.1 17.2 212.0
Net premiums earned $ 147.5 $ 37.7 $ 13.4 $ 198.6
Loss and loss adjustment expenses 212.2 21.3 8.7 242.2
Underwriting expenses 23.3 20.9 4.5 48.7
------- ------ ------ -------
Underwriting (loss) profit (3) $ (88.0) $ (4.5) $ 0.2 (92.3)
======= ====== ======
Interest, dividend and other income 11.1
Net gain on investment transactions 6.7
Other expenses (7.0)
-------
Loss before income taxes $ (81.5)
=======
Loss ratio (4) 143.9% 56.3% 65.0% 121.9%
Expense ratio (5) 15.8% 55.5% 33.8% 24.5%
Combined ratio (6) 159.7% 111.8% 98.8% 146.4%
Nine Months Ended September 30,
RSUI CATA Darwin(1) AIHL
---- ---- --------- ----
2005
----
Gross premiums written (2) $ 902.2 $ 133.0 $ 113.5 $1,148.7
Net premiums written (2) 443.8 126.5 67.3 637.6
Net premiums earned $ 446.8 $ 119.2 $ 60.7 $ 626.7
Loss and loss adjustment expenses 492.2 56.1 41.4 589.7
Underwriting expenses 94.1 51.9 18.2 164.1
------- ------- ------- --------
Underwriting (loss) profit (3) $(139.4) $ 11.2 $ 1.1 (127.1)
======= ======= =======
Interest, dividend and other
income 48.6
Net gain on investment
transactions 30.4
Other expenses (23.2)
--------
Loss before income taxes $ (71.3)
========
Loss ratio (4) 110.2% 47.1% 68.2% 94.1%
Expense ratio (5) 21.1% 43.5% 29.9% 26.2%
Combined ratio (6) 131.2% 90.6% 98.1% 120.3%
2004
----
Gross premiums written (2) $ 907.9 $ 132.1 $ 66.1 $1,106.1
Net premiums written (2) 465.3 118.1 45.8 629.2
Net premiums earned $ 449.8 $ 111.7 $ 30.0 $ 591.5
Loss and loss adjustment expenses 345.6 62.6 19.1 427.3
Underwriting expenses 70.2 51.7 11.2 133.1
------- ------- ------- --------
Underwriting profit (loss) (3) $ 34.0 $ (2.6) $ (0.3) 31.1
======= ======= =======
Interest, dividend and other
income 30.8
Net gain on investment
transactions 42.5
Other expenses (20.0)
--------
Earnings before income taxes $ 84.4
========
Loss ratio (4) 76.8% 56.1% 63.6% 72.2%
Expense ratio (5) 15.6% 46.3% 37.2% 22.5%
Combined ratio (6) 92.4% 102.4% 100.8% 94.7%
(1) Although Darwin is an underwriting manager for Platte River Platte River River, central Nebraska, U.S. Formed by the confluence of the North Platte and South Platte rivers, it is 310 mi (500 km) long. It flows southeast into a big bend at Kearney, Neb., then empties into the Missouri River at Plattsmouth, south of Omaha. and certain subsidiaries of CATA, Darwin is managed on an operating unit basis and therefore, the results of business generated by Darwin have been separated from CATA's results for purposes of this table. (2) Amounts do not reflect the impact of an inter-company pooling agreement. (3) Represents net premiums earned less loss and loss adjustment expenses and underwriting expenses, all as determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), and does not include interest, dividend and other income or net gains on investment transactions. Underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. (loss) does not replace net earnings (loss) determined in accordance with GAAP as a measure of profitability; rather, Alleghany believes that underwriting profit (loss), which does not include interest, dividend and other income or net gains on investment transactions, enhances the understanding of AIHL's insurance operating units' operating results by highlighting net earnings attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to their underwriting performance. With the addition of interest, dividend and other income and net gains on investment transactions, reported pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta net earnings (a GAAP measure) may show a profit despite an underlying underwriting loss. Where such underwriting losses persist over extended periods, an insurance company's ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views 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 recorded an underwriting loss of $226.4 million in the 2005 third quarter, reflecting $276.0 million of pre-tax catastrophe losses, net of reinsurance and reinsurance reinstatement premiums, primarily reflecting the impact of Hurricanes Katrina KATRINA Keeping All the Resources in New Orleans Alive KATRINA Krewe Aiding Trash Removal In the New Orleans Area , Rita and Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the , compared with an underwriting loss of $88.0 million in the 2004 third quarter, reflecting $158.5 million of pre-tax catastrophe losses, net of reinsurance and reinsurance reinstatement premiums, primarily reflecting the impact of the four 2004 third quarter Florida hurricanes The List of Florida hurricanes encompasses 470 tropical or subtropical cyclones that affected the state of Florida. More storms hit Florida than any other U.S. state, and since 1851 only eighteen hurricane seasons passed without a storm impacting the state. . For the nine months ended September 30, 2005, RSUI recorded an underwriting loss of $139.4 million, reflecting losses from the 2005 third quarter hurricanes, compared with an underwriting profit of $34.0 million for the first nine months of 2004, primarily reflecting strong property results in the first half of 2004, partially offset by the 2004 third quarter hurricane losses. RSUI currently estimates that its losses relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Hurricane Katrina are approximately $150.5 million, after-tax, which reflects pre-tax gross loss and loss adjustment expenses of $1.06 billion, anticipated reinsurance recoveries of $855.8 million and $26.1 million of reinsurance reinstatement premiums. The reinsurance recoveries anticipate the full utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of RSUI's catastrophe reinsurance treaty Reinsurance Treaty (June 18, 1887) Secret agreement between Germany and Russia. Arranged by Otto von Bismarck after the collapse of the Three Emperors' League, it provided that each party would remain neutral if either became involved in a war with a third nation, and that and significant utilization of the occurrence limits of its surplus share and per risk reinsurance treaties. Approximately 97.7% of RSUI's reinsurance recoverables balance at September 30, 2005 was due from reinsurance companies having financial strength ratings of A or higher (as of September 30, 2005) by A.M. Best Company, Inc. RSUI's current estimate of its losses from Hurricane Katrina was developed after consideration of reported claims, the insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. values of properties in the affected areas, modeled losses and application of RSUI's reinsurance coverages. Because of the unprecedented scale of Hurricane Katrina, such estimate involves significant judgment due in part to the limited ability to access portions of the affected area, legal and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. uncertainties, determination of loss causation causation Relation that holds between two temporally simultaneous or successive events when the first event (the cause) brings about the other (the effect). According to David Hume, when we say of two types of object or event that “X causes Y” (e.g. and the preliminary nature of the information available. Accordingly, there can be no assurance that RSUI's ultimate cost for Hurricane Katrina will not exceed its current estimate. RSUI's 2005 third quarter earnings were also adversely impacted by losses from Hurricane Rita Hurricane Rita was the fourth-most intense Atlantic hurricane ever recorded and the most intense tropical cyclone ever observed in the Gulf of Mexico. Rita caused $11.3 billion in damage on the U.S. Gulf Coast in September 2005. , which, net of reinsurance, are estimated to total $26.3 million after-tax and Hurricane Dennis This article is about the Atlantic hurricane of 2005. For other storms of the same name, see Hurricane Dennis (disambiguation). Hurricane Dennis was an early-forming major hurricane in the Caribbean and Gulf of Mexico during the 2005 Atlantic hurricane season. , which, net of reinsurance, are estimated to total $2.4 million after-tax. In October October: see month. 2005, Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth made landfall land·fall n. 1. The act or an instance of sighting or reaching land after a voyage or flight. 2. The land sighted or reached after a voyage or flight. in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. and Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and . RSUI has exposure to Wilma in Florida, but currently does not have sufficient information to estimate its losses. The increase in CATA's underwriting profit in the third quarter and first nine months of 2005 compared with the corresponding 2004 periods primarily reflects $2.9 million of pre-tax reductions in prior year loss reserves in the first nine months of 2005 (compared with a $1.4 million increase in prior year loss reserves in the first nine months of 2004) due to lower actual loss emergence than assumed for purposes of setting reserves and a decrease in reinsurance costs. Darwin reported an increase in underwriting profits in the third quarter and first nine months of 2005 from the corresponding 2004 periods, primarily reflecting a significant increase in net premiums earned due to increased levels of gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. across all lines of business, partially offset by increased loss and loss adjustment expenses and underwriting expenses primarily attributable to such premium growth. Highlights of results for corporate activities during the three and nine month period ended September 30, 2005 were as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
------- ------- ------- -------
Revenues $ 50.9 $ 7.4 $ 83.3 $ 17.6
Interest expense 0.9 0.6 2.5 1.7
Corporate administration expense 11.8 11.0 33.0 31.6
------- ------- ------- -------
Earnings (loss) before income
taxes $ 38.2 $ (4.2) $ 47.8 $ (15.7)
======= ======= ======= =======
Corporate activities' 2005 third quarter results include $45.3 million of net gains on investment transactions before tax as a result of the disposition of 1.0 million shares of common stock of 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, compared with no such gains in the corresponding 2004 period, and corporate activities' results in the first nine months of 2005 include $67.3 million of net gains on investment transactions before tax, compared with $1.7 million in the first nine months of 2004. As of September 30, 2005, Alleghany beneficially owned 7.0 million shares, or approximately 1.9 percent, of the outstanding common stock of Burlington Northern Santa Fe Corporation, which had an aggregate market value on that date of approximately $418.6 million, or $59.80 per share. The aggregate cost of such shares is approximately $84.5 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 third quarter of 2005, Alleghany did not make any such purchases of shares of its common stock. As of September 30, 2005, Alleghany had 7,895,189 shares of common stock outstanding (which includes the stock dividend declared in March 2005). Additional information regarding the 2005 third quarter results of Alleghany and its operating units is contained in Alleghany's Report on Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 2005, which will be filed with the U.S. Securities and Exchange Commission on or before November November: see month. 9, 2005. 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 the 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 net gains on investment transactions after tax, a non-GAAP financial measure, which is intended to assist investors in analyzing the impact of such items. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release contains disclosures which are forward-looking statements as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 Alleghany's 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 subsidiaries such as --significant weather-related or other natural or human-made catastrophes and disasters; --the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the property casualty industry; --the long-tail and potentially volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. nature of certain casualty lines of business written by such subsidiaries; --the availability of reinsurance; --exposure to terrorist acts; --the willingness and ability of such subsidiaries' reinsurers to pay reinsurance recoverables owed to such subsidiaries; --changes in the ratings assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. to such subsidiaries; --claims development and the process of estimating reserves; --legal and regulatory changes; --the uncertain nature of damage theories and loss amounts; --increases in the levels of risk retention by such subsidiaries; and --adverse loss development for events insured by such subsidiaries in either the current year or prior years. Additional risks and uncertainties include general economic and political conditions, including the effects of a prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. U.S. or global economic downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. or recession, changes in costs, including changes in labor costs, energy costs and raw material prices, 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, tax, extended labor disruptions, civil unrest Unrest is a sociological phenomenon, for instance:
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED 9/30/05
---------------------------------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
---------------------------------
Revenues
Net premiums earned $ 194,489 $ 0 $ 194,489
Interest, dividend and other income 19,658 5,642 25,300
Net gain on investments
transactions 4,595 45,311 49,906
---------- --------- ---------
Total revenues 218,742 50,953 269,695
Costs and expenses
Loss and loss adjustment expenses 360,038 0 360,038
Commissions and brokerage 55,738 0 55,738
Salaries, administrative and other
operating expenses 9,383 577 9,960
Corporate administration 107 11,255 11,362
Interest expense 0 877 877
---------- --------- ---------
Total costs and expenses 425,266 12,709 437,975
---------- --------- ---------
(Loss) earnings from continuing
operations, before income taxes ($206,524) $ 38,244 (168,280)
========== =========
Income tax benefit (63,320)
---------
Loss from continuing operations (104,960)
Discontinued operations
Operations (including gain on
disposal of 13,714 in 2005) 13,659
Income taxes 1,188
---------
Earnings from discontinued
operations, net 12,471
---------
Net loss ($92,489)
=========
THREE MONTHS ENDED 9/30/04
--------------------------------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
--------------------------------
Revenues
Net premiums earned $ 198,606 $ 0 $ 198,606
Interest, dividend and other income 11,094 7,418 18,512
Net gain on investments transactions 6,688 0 6,688
--------- --------- ---------
Total revenues 216,388 7,418 223,806
Costs and expenses
Loss and loss adjustment expenses 242,166 0 242,166
Commissions and brokerage 48,700 0 48,700
Salaries, administrative and other
operating expenses 6,830 940 7,770
Corporate administration 152 10,147 10,299
Interest expense 0 585 585
--------- --------- ---------
Total costs and expenses 297,848 11,672 309,520
--------- --------- ---------
(Loss) earnings from continuing
operations, before income taxes ($81,460) ($4,254) (85,714)
========= =========
Income tax benefit (34,995)
---------
Loss from continuing operations (50,719)
Discontinued operations
Operations (including gain on
disposal of 13,714 in 2005) 6,220
Income taxes 2,505
---------
Earnings from discontinued operations,
net 3,715
---------
Net loss ($47,004)
=========
ALLEGHANY CORPORATION
COMBINING STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
NINE MONTHS ENDED 9/30/05
-------------------------------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
--------------------------------
Revenues
Net premiums earned $ 626,695 $ 0 $ 626,695
Interest, dividend and other income 48,644 15,954 64,598
Net gain on investments transactions 30,407 67,343 97,750
--------- --------- ---------
Total revenues 705,746 83,297 789,043
Costs and expenses
Loss and loss adjustment expenses 589,620 0 589,620
Commissions and brokerage 164,160 0 164,160
Salaries, administrative and other
operating expenses 22,966 2,197 25,163
Corporate administration 308 30,766 31,074
Interest expense 0 2,542 2,542
--------- --------- ---------
Total costs and expenses 777,054 35,505 812,559
--------- --------- ---------
(Loss) earnings from continuing
operations, before income taxes ($71,308) $ 47,792 (23,516)
========= =========
Income tax (benefit) provision (16,706)
---------
(Loss) earnings from continuing
operations (6,810)
Discontinued operations
Operations (including gain on
disposal of $12,548 in 2005) 13,006
Income taxes 6,412
----------
Earnings from discontinued operations,
net 6,594
----------
Net loss ($ 216)
==========
NINE MONTHS ENDED 9/30/04
--------------------------------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
--------------------------------
Revenues
Net premiums earned $ 591,489 $ 0 $ 591,489
Interest, dividend and other income 30,754 15,850 46,604
Net gain on investments transactions 42,488 1,735 44,223
--------- --------- ---------
Total revenues 664,731 17,585 682,316
Costs and expenses
Loss and loss adjustment expenses 427,280 0 427,280
Commissions and brokerage 133,088 0 133,088
Salaries, administrative and other
operating expenses 19,656 2,696 22,352
Corporate administration 291 28,902 29,193
Interest expense 0 1,708 1,708
--------- --------- ---------
Total costs and expenses 580,315 33,306 613,621
--------- --------- ---------
(Loss) earnings from continuing
operations, before income taxes $ 84,416 ($15,721) 68,695
========= =========
Income tax (benefit) provision 17,457
---------
(Loss) earnings from continuing
operations 51,238
Discontinued operations
Operations (including gain on
disposal of $12,548 in 2005) 22,043
Income taxes 9,498
----------
Earnings from discontinued operations,
net 12,545
----------
Net earnings $ 63,783
==========
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
SEPTEMBER 30,
2005 DECEMBER 31,
(unaudited) 2004*
------------- ------------
ASSETS
Available for sale securities at fair
value:
Equity securities $ 773,518 $ 645,184
Debt securities 1,654,036 1,179,210
Short-term investments 531,178 374,391
------------ ------------
2,958,732 2,198,785
Cash 74,788 267,760
Notes receivable 91,535 91,665
Accounts receivable, net 17,802 16,776
Premium balances receivable 179,958 203,141
Reinsurance recoverables 1,621,503 623,325
Ceded unearned premium reserves 294,275 286,451
Deferred acquisition costs 60,313 56,165
Property and equipment - at cost, net of
accumulated depreciation and amortization 18,246 15,691
Goodwill and other intangibles, net of
amortization 169,627 172,707
Deferred tax assets 112,702 98,753
Assets of discontinued operations 0 336,584
Current taxes receivable 54,992 0
Other assets 59,803 59,922
------------ ------------
$ 5,714,276 $ 4,427,725
============ ============
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses $ 2,557,249 $ 1,232,337
Unearned premiums 769,878 751,131
Reinsurance payable 135,541 112,479
Deferred tax liabilities 211,403 206,250
Subsidiaries' debt 80,000 80,000
Current taxes payable 0 15,713
Liabilities of discontinued operations 0 136,397
Other liabilities 152,920 120,002
------------ ------------
Total liabilities 3,906,991 2,654,309
Common stockholders' equity 1,807,285 1,773,416
------------ ------------
$ 5,714,276 $ 4,427,725
============ ============
COMMON SHARES OUTSTANDING (adjusted for
stock dividends) 7,895,189 7,829,721
* Certain amounts have been reclassified to conform to
the 2005 presentation.
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