Alleghany Corporation Reports 2006 First Quarter Results - Common Stockholders' Equity Per Share Increases 5.4%.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 -- 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 of Alleghany Corporation (NYSE NYSE See: New York Stock Exchange :Y) at March 31, 2006 was $244.33, an increase of 5.4% from common stockholders' equity per share of $231.72 at December December: see month. 31, 2005 (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 February February: see month. 2006), 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, announced today. Alleghany's net 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 in the first quarter of 2006 were $59.2 million, or $7.35 per share (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 throughout), compared with $61.2 million, or $7.61 per share, in the first quarter of 2005. Net earnings from continuing operations in the 2006 first quarter include a tax benefit of $10.8 million resulting from the release of a valuation allowance Alleghany held with respect to a portion of its deferred tax assets relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc unused foreign tax credits. As a result of this release, Alleghany's effective tax rate for the first quarter of 2006 was reduced from 29.5% to 13.6%. 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. $3.30 billion at March 31, 2006, an increase of 3.8% from approximately $3.18 billion at December 31, 2005. 2006 first quarter net earnings were $59.2 million, or $7.35 per share, compared with net earnings of $60.9 million, or $7.56 per share, in the corresponding 2005 period. The 2005 first quarter amounts reflect discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , which consist of the operations of World Minerals, Inc. 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 July July: see month. 2005. Highlights of Alleghany's results for the three months ended March 31, 2006 and 2005 are as follows:
Per Share(1)
---------------------
(in millions, except for per
share and share amounts) 2006 2005 2006 2005
---- ---- ---- ----
Earnings from continuing
operations before income tax $68.5 $92.3 $8.50 $11.45
====== ====== ========== ==========
Net earnings from continuing
operations
Adjustments: 59.2 61.2 7.35 7.61
Add: Net catastrophe losses
after tax 0.6 5.4 0.07 0.68
Deduct: Realized capital gains (4.5) (30.7) (0.56) (3.81)
------ ------ ---------- ----------
Net earnings from continuing
operations, as adjusted (2) $55.3 $35.9 $6.86 $4.48
====== ====== ========== ==========
Average number of outstanding
shares of common stock (3) 8,060,810 8,054,236
(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
realized capital gains.
(3) Adjusted to reflect the dividend of common stock declared in
February 2006.
The comparative contributions to earnings from continuing operations before taxes made by Alleghany Insurance Holdings LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control ("AIHL AIHL Australian Ice Hockey League ," a holding company for Alleghany's property and casualty insurance businesses consisting of RSUI RSUI Rescue Swimmer Under Instruction (USMC) 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
March 31,
2006 2005
---- ----
AIHL $70.8 $77.1
Corporate activities (2.3) 15.2
------ ------
Total $68.5 $92.3
====== ======
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 March 31,
----------------------------
RSUI CATA Darwin AIHL
------- ------ ------ -------
2006
----
Gross premiums written $295.5 $44.3 $59.9 $399.7
Net premiums written 162.7 42.2 36.8 241.7
Net premiums earned (1) $162.1 $41.2 $27.3 $230.6
Loss and loss adjustment expenses 83.7 19.6 19.2 122.5
Underwriting expenses (2) 31.8 18.3 7.3 57.4
------- ------ ------ -------
Underwriting profit (3) 46.6 3.3 0.8 50.7
======= ====== ======
Net investment income (1) 24.9
Realized capital gains (1) 4.6
Other income (1) 0.8
Other expenses (2) 10.2
-------
Earnings before income taxes $70.8
=======
Loss ratio (4) 51.7% 47.5% 70.6% 53.1%
Expense ratio (5) 19.6% 44.5% 26.5% 24.9%
Combined ratio (6) 71.3% 92.0% 97.1% 78.0%
2005
----
Gross premiums written $270.9 $43.2 $33.9 $348.0
Net premiums written 141.6 41.1 20.5 203.2
Net premiums earned (1) $155.5 $39.3 $18.7 $213.5
Loss and loss adjustment expenses 82.4 20.0 12.9 115.3
Underwriting expenses (2) 30.0 17.7 5.3 53.0
------- ------ ------ -------
Underwriting profit (3) 43.1 1.6 0.5 45.2
======= ====== ======
Net investment income (1) 13.3
Realized capital gains (1) 25.2
Other income (1) 0.8
Other expenses (2) 7.4
-------
Earnings before income taxes $77.1
=======
Loss ratio (4) 53.0% 50.9% 68.9% 54.0%
Expense ratio (5) 19.2% 45.1% 28.5% 24.8%
Combined ratio (6) 72.2% 96.0% 97.4% 78.8%
(1) Represent components of total revenues.
(2) Underwriting expenses represent commission and brokerage
expenses and that portion of salaries, administration and
other operating expenses directly attributable to underwriting
activities, whereas the remainder constitutes "other
expenses."
(3) Represents net premiums earned less loss and loss adjustment
expenses and underwriting expenses, all as determined in
accordance with GAAP, and does not include net investment
income and other income or realized capital gains.
Underwriting profit (loss) does not replace net income (loss)
determined in accordance with GAAP as a measure of
profitability; rather, we believe that underwriting profit
(loss), which does not include net investment income and other
income or realized capital gains, enhances the understanding
of AIHL's insurance operating units' operating results by
highlighting net income attributable to their underwriting
performance. With the addition of net investment income and
other income and realized capital gains, reported pre-tax net
income (a GAAP measure) may show a profit despite an
underlying underwriting loss. Where underwriting losses
persist over extended periods, an insurance company's ability
to continue as an ongoing concern may be at risk. Therefore,
we view 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's 2006 first quarter 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. increased approximately 8% from the corresponding 2005 period, primarily reflecting an increase in underwriting profit from the casualty lines of business, which reflects lower estimated ultimate casualty loss and loss adjustment expense ratios for the current accident year, partially offset by a slight decline in the underwriting profit from the property line of business due primarily to 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 related to Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. .CATA's 2006 first quarter underwriting profit increased approximately 106% from the corresponding 2005 period, reflecting substantially improved underwriting profit in its commercial surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. line of business attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. loss emergence (resulting in a release in the 2006 first quarter of $0.9 million of 2005 accident year loss reserves), and an increase in 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. in that line. CATA's underwriting profit in the 2006 first quarter also benefited from CATA's exit from the unprofitable construction segment of its contract surety line of business during the 2005 first quarter. These positive factors were partially offset by lower property and casualty underwriting profit. Darwin's 2006 first quarter underwriting profit increased approximately 60% from the corresponding 2005 period, primarily reflecting an increase in net premiums earned due to increased levels of gross premiums written across all lines of business and a decrease in expenses relative to premium volume. AIHL's 2006 first quarter net investment income increased approximately 87% from the corresponding 2005 period, primarily reflecting a larger invested asset base attributable principally to capital contributions made by Alleghany to RSUI and Darwin during the 2005 fourth quarter. Highlights of results for corporate activities during the three months ended March 31, 2006 and 2005 were as follows (in millions):
2006 2005
---- ----
Revenues $7.9 $25.5
Interest expense 1.1 0.7
Corporate administration expense 9.1 9.6
------ ------
(Loss) earnings before income taxes $(2.3) $15.2
====== ======
Corporate activities recorded a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss of $2.3 million on revenues of $7.9 million in the 2006 first quarter, compared with pre-tax earnings of $15.2 million on revenues of $25.5 million. The decrease in revenues in the 2006 period is attributable to substantially lower realized capital gains recorded in the 2006 first quarter, totaling $2.4 million, as compared with $22.0 million of realized capital gains in the corresponding 2005 period. As of March 31, 2006, Alleghany beneficially owned 6.0 million shares, or approximately 1.6 percent, of the outstanding 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, which had an aggregate market value on that date of approximately $500.0 million, or $83.33 per share. The aggregate cost of such shares is approximately $72.4 million, or $12.07 per share. On March 29, 2006, Alleghany purchased an aggregate of 139,000 shares of its common stock for approximately $39.2 million, at an average cost of about $281.91 per share (not adjusted for the subsequent stock dividend), in a privately negotiated transaction. As of March 31, 2006, Alleghany had 7,942,600 shares of common stock outstanding (which includes the stock dividend declared in February 2006). Comment on Regulation G This press release includes certain non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). figures are included herein. Throughout this 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 Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses after tax and realized capital gains, a non-GAAP financial measure, which is intended to assist investors in analyzing the impact of such items and represents the way management analyzes Alleghany's results. 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 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 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 press 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 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 operating units such as
-- significant weather-related or other natural or human-made
catastrophes and disasters;
-- the cyclical nature of the property and casualty industry;
-- the long-tail and potentially volatile nature of certain
casualty lines of business written by Alleghany's
insurance operating units;
-- the cost and availability of reinsurance;
-- exposure to terrorist acts;
-- the willingness and ability of Alleghany's insurance
operating units' reinsurers to pay reinsurance
recoverables owed to the insurance operating units;
-- changes in the ratings assigned to Alleghany's insurance
operating units;
-- 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 Alleghany's
insurance operating units; and
-- adverse loss development for events insured by Alleghany's
insurance operating units in either the current year or
prior year.
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; 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; extended labor disruptions, civil unrest Unrest is a sociological phenomenon, for instance:
ALLEGHANY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in thousands)
(unaudited)
THREE MONTHS ENDED 3/31/06
--------------------- ---------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
--------- ----------- ---------
Revenues
Net premiums earned $230,582 $0 $230,582
Net investment income 24,896 4,417 29,313
Realized capital gains 4,574 2,409 6,983
Other income 836 1,101 1,937
--------- ----------- ---------
Total revenues 260,888 7,927 268,815
Costs and expenses
Loss and loss adjustment expenses 122,530 0 122,530
Commissions and brokerage 57,385 0 57,385
Salaries, administrative and other
operating expenses 10,114 715 10,829
Corporate administration 0 8,423 8,423
Interest expense 0 1,101 1,101
--------- ----------- ---------
Total costs and expenses 190,029 10,239 200,268
--------- ----------- ---------
Earnings (loss) from continuing
operations, before income taxes $70,859 ($2,312) 68,547
========= ===========
Income taxes 9,341
---------
Earnings from continuing operations 59,206
Discontinued operations
Operations 0
Income taxes 0
---------
(Loss) from discontinued operations,
net 0
---------
Net earnings $59,206
=========
THREE MONTHS ENDED 3/31/05
--------------------- ---------
ALLEGHANY
INSURANCE CORPORATE
HOLDINGS ACTIVITIES COMBINED
--------- ----------- ---------
Revenues
Net premiums earned $213,552 $0 $213,552
Net investment income 13,390 1,812 15,202
Realized capital gains 25,192 22,035 47,227
Other income 759 1,640 2,399
--------- ----------- ---------
Total revenues 252,893 25,487 278,380
Costs and expenses
Loss and loss adjustment expenses 115,277 0 115,277
Commissions and brokerage 53,044 0 53,044
Salaries, administrative and other
operating expenses 7,354 799 8,153
Corporate administration 102 8,856 8,958
Interest expense 0 665 665
--------- ----------- ---------
Total costs and expenses 175,777 10,320 186,097
--------- ----------- ---------
Earnings (loss) from continuing
operations, before income taxes $77,116 $15,167 92,283
========= ===========
Income taxes 31,060
---------
Earnings from continuing operations 61,223
Discontinued operations
Operations 1,525
Income taxes 1,877
---------
(Loss) from discontinued operations,
net (352)
---------
Net earnings $60,871
=========
ALLEGHANY CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
MARCH 31, DECEMBER 31,
2006 2005*
ASSETS (unaudited)
----------- -----------
Investments
Available for sale securities at fair
value:
Equity securities $810,360 $796,192
Debt securities 1,821,941 1,589,371
Short-term investments 629,368 738,846
----------- -----------
3,261,669 3,124,409
Other invested assets 11,432 10,876
----------- -----------
Total investments 3,273,101 3,135,285
----------- -----------
Cash 29,472 47,457
Notes receivable 91,535 91,535
Premium balances receivable 207,277 223,378
Reinsurance recoverables 1,510,909 1,642,199
Ceded unearned premium reserves 298,281 314,472
Deferred acquisition costs 66,544 62,161
Property and equipment - at cost, net of
accumulated depreciation and amortization 19,006 19,708
Goodwill and other intangibles, net of
amortization 165,483 167,506
Deferred tax assets 143,160 117,524
Current taxes receivable 0 18,310
Other assets 77,444 74,196
----------- -----------
$5,882,212 $5,913,731
=========== ===========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses $2,481,925 $2,581,041
Unearned premiums 807,872 812,982
Reinsurance payable 130,143 181,693
Deferred tax liabilities 240,979 213,512
Subsidiaries' debt 80,000 80,000
Current taxes payable 48,175 0
Other liabilities 152,461 176,176
----------- -----------
Total liabilities 3,941,555 4,045,404
Common stockholders' equity 1,940,657 1,868,327
----------- -----------
$5,882,212 $5,913,731
=========== ===========
COMMON SHARES OUTSTANDING (adjusted for stock
dividends) 7,942,600 8,062,977
* Certain amounts have been reclassified to conform to
the 2006 presentation.
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