<PAGE>
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 JUNE 30, 1996
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 SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
-------- --------
<PAGE>
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:
7,183,394
---------
(AS OF JUNE 30, 1996)
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AND 1995
(dollars in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1996 1995***
--------------------
<S> <C> <C>
Revenues
Title premiums, escrow and trust fees $332,608 $257,832
Net reinsurance premiums earned 94,774 68,319
Interest, dividend and other income 45,626 43,559
Net mineral and filtration sales 51,251 45,403
Net gain on investment transactions 784 63
--------------------
Total revenues 525,043 415,176
--------------------
Costs and expenses
Agents' commissions and brokerage expenses 141,880 108,408
Salaries, administrative, selling and other expenses 209,048 170,963
Provisions for title losses and other claims 23,694 19,197
Property and casualty losses and loss adjustment
expenses 70,051 50,547
Cost of mineral and filtration sales 34,272 29,421
Interest expense 6,722 7,285
Corporate administration 5,230 4,034
--------------------
Total costs and expenses 490,897 389,855
--------------------
Earnings before income taxes 34,146 25,321
Income taxes 11,348 8,132
--------------------
Net earnings $ 22,798 $ 17,189
====================
Earnings per share of common stock $3.17 $2.39
====================
<PAGE>
Dividends per share of common stock * *
====================
Average number of outstanding shares of common stock** 7,189,374 7,192,798
====================
</TABLE>
* In March 1995 and 1996, Alleghany declared a dividend
consisting of one share of Alleghany common stock for
every fifty shares outstanding.
** Adjusted to reflect common stock dividends declared in
March 1996.
*** Restated to conform to the current year's presentation.
<PAGE>
<PAGE>
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(dollars in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1996 1995***
---------------------
<S> <C> <C>
Revenues
Title premiums, escrow and trust fees $623,730 $501,780
Net reinsurance premiums earned 177,750 137,096
Interest, dividend and other income 91,623 88,914
Net mineral and filtration sales 98,833 86,682
Net gain (loss) on investment transactions 1,200 (2,244)
---------------------
Total revenues 993,136 812,228
---------------------
Costs and expenses
Agents' commissions and brokerage expense 271,019 225,004
Salaries, administrative, selling and other expenses 409,078 345,605
Provisions for title losses and other claims 37,708 38,646
Property and casualty losses and loss adjustment
expenses 128,569 100,027
Cost of mineral and filtration sales 65,721 57,230
Interest expense 12,892 14,061
Corporate administration 9,299 6,615
---------------------
Total costs and expenses 934,286 787,188
---------------------
Earnings before income taxes 58,850 25,040
Income taxes 19,241 7,058
---------------------
Net earnings $39,609 $17,982
=====================
Earnings per share of common stock $5.50 $2.50
=====================
Dividends per share of common stock * *
=====================
<PAGE>
Average number of outstanding shares of common
stock** 7,203,883 7,188,944
=====================
</TABLE>
* In March 1995 and 1996, Alleghany declared a dividend
consisting of one share of Alleghany common stock for
every fifty shares outstanding.
** Adjusted to reflect common stock dividends declared in
March 1996.
*** Restated to conform to the current year's presentation.
<PAGE>
<PAGE>
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
----------------------------
<S> <C> <C>
Assets
Investments:
Fixed maturities - available for sale:
U.S. Government, government agency
and municipal obligations (amortized cost $1,040,091) $1,034,184 $1,037,312
Certificates of deposit and
commercial paper (amortized cost 304,028) 304,028 90,902
Bonds, notes and other (amortized cost 520,415) 513,303 571,568
Equity securities (cost 349,927) 679,845 637,956
----------------------------
2,531,360 2,337,738
Cash 239,003 178,068
Notes receivable 91,536 91,536
Funds held, accounts and other receivables 341,653 301,290
Title records and indexes 151,614 155,170
Property and equipment - at cost, less
accumulated depreciation and amortization 285,528 272,289
Reinsurance receivable 396,336 399,783
Other assets 389,805 386,640
----------------------------
$4,426,835 $4,122,514
============================
Liabilities and Common Stockholders' Equity
Title losses and other claims $524,092 $530,986
Property and casualty losses and
loss adjustment expenses 1,072,370 1,014,000
Other liabilities 571,763 538,750
Long-term debt of parent company 20,000 0
Long-term debt of subsidiaries 458,532 331,689
<PAGE>
Net deferred tax liability 22,455 21,659
Trust and escrow deposits secured by pledged assets 412,916 364,787
----------------------------
Total liabilities 3,082,128 2,801,871
Common stockholders' equity 1,344,707 1,320,643
----------------------------
$4,426,835 $4,122,514
============================
Shares of common stock outstanding 7,183,394 7,237,559*
============================
Common stockholders' equity per share $187.20 $182.47*
============================
</TABLE>
* Adjusted to reflect the common stock dividend declared in March 1996.
<PAGE>
<PAGE>
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
--------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $39,609 $17,982
Adjustments to reconcile net earnings
to cash provided by (used in) operations:
Depreciation and amortization 24,151 21,271
Net gain on investment transactions (1,200) 2,244
Other charges, net 3,219 (2,812)
Increase in funds held, accounts and other
receivables (40,363) (69,514)
Decrease (increase) in reinsurance receivable 3,477 4,314
Decrease in title losses and other claims (6,894) (9,079)
Increase in property and casualty loss and
loss adjustment expenses 58,370 49,580
Decrease (increase) in other assets (10,816) (14,274)
Decrease in other liabilities 36,129 7,833
Increase (decrease) in trust and escrow deposits 48,129 74,215
--------------------
Net adjustments 114,202 63,778
--------------------
Cash provided by (used in) operations 153,811 81,534
--------------------
Cash flows from investing activities:
Purchase of investments (433,635) (306,925)
Maturities of investments 115,939 140,781
Sales of investments 117,264 177,243
Purchases of property and equipment (29,091) (15,312)
Disposition of property and equipment 1,257 4,052
Net sales (purchases) of title records and indexes 0 (158)
--------------------
Net cash provided by investing activities (228,266) (319)
--------------------
<PAGE>
Cash flows from financing activities:
Principal payments on long-term debt (135,836) (17,591)
Proceeds of long-term debt 285,400 63,000
Purchase of treasury shares (15,068) (1,274)
Common stock distributions 924 2,103
--------------------
Net cash provided by financing activities 135,420 46,238
--------------------
Net increase in cash 60,965 127,679
Cash at beginning of period 178,068 107,942
--------------------
Cash at end of period $239,033 $235,621
====================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $12,877 $14,426
Income taxes $31,100 $17,493
</TABLE>
<PAGE>
<PAGE>
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,
1995 (the "1995 Form 10-K Report"), and the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996 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.
Contingencies
-------------
The Company's subsidiaries and division 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 June 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATION.
----------------------------------
The Company reported net earnings of $22.8 million
in the second quarter of 1996 compared with $17.2 million in
the second quarter of 1995, and $39.6 million in the first
six months of 1996 compared with $18.0 million in the first
six months of 1995.
Net gains on investment transactions after taxes in
the first half of 1996 totalled $1.2 million, compared with
net losses of $2.2 million in the first half of 1995.
<PAGE>
Chicago Title and Trust Company ("CT&T")
contributed pre-tax earnings of $24.4 million on revenues of
$348.4 million in the 1996 second quarter, compared with
$12.5 million on revenues of $271.2 million in the second
quarter of 1995. In the first six months of 1996, CT&T
contributed pre-tax earnings of $39.2 million on revenues of
$654.9 million, compared with $0.5 million on revenues of
$529.4 million in the first six months of 1995.
CT&T's results in the second quarter of 1996
reflect continued active real estate markets and the benefits
of expense reduction efforts undertaken in 1995. Home
mortgage refinancing activity declined significantly during
the second quarter of 1996 from first quarter levels, but
such decline was offset by an increase in residential resale
and commercial transactions. CT&T's results in the second
quarter of 1995 reflected improved conditions in real estate
markets over depressed conditions prevailing in the first
quarter of 1995, the results of its continuing efforts to
reduce expenses and a $3.0 million pre-tax payment received
by CT&T in settlement of litigation with a competitor.
CT&T's results also reflect the contribution of
CT&T's Financial Services Group. The Financial Services
Group contributed pre-tax operating income to CT&T of about
$3.3 million in the 1996 second quarter, an increase of 50
percent over the 1995 second quarter contribution of $2.2
million, and $6.1 million in the first six months of 1996, an
increase of 39 percent over the contribution in the first six
months of 1995 of $4.4 million (1995 figures are adjusted to
reflect CT&T's corporate overhead allocation). The improved
results of CT&T's Financial Services Group are primarily due
to an increase in assets under management. As of June 30,
1996, the Financial Services Group managed $12.2 billion in
assets, compared with $8.1 billion as of June 30, 1995.
URC Holdings Corp. on a consolidated basis,
including Underwriters Reinsurance Company, ("Underwriters")
contributed pre-tax earnings of $8.1 million on revenues of
$109.1 million in the second quarter of 1996, compared with
$7.6 million on revenues of $79.4 million in the second
quarter of 1995, and $15.0 million on revenues of $205.8
million in the first six months of 1996 as compared with
$14.2 million on revenues of $157.1 million in the first six
months of 1995. Underwriters' results for the second quarter
<PAGE>
of 1996 reflect increased business, an absence of significant
catastrophe losses and an absence of adverse reserve
activity.
Net earned premiums for the second quarter of 1996
were $94.8 million compared with $68.3 million in the prior
year second quarter, and $177.8 million for the first six
months of 1996 compared with $137.1 million in the prior year
first six months, reflecting increased business. Commissions
and brokerage expenses also increased in the first six months
of 1996 primarily because of the increase in business written
and a change in the mix of treaty business having higher
ceding commissions paid but lower assumed levels of risk.
1995 six-month results included a pre-tax benefit from IBNR
(incurred but not reported) reserve reductions of about $3.4
million, and a pre-tax loss on investments of about $2.4
million incurred in connection with restructurings of
Underwriters' investment portfolio.
On June 25, 1996, URC Holdings Corp. issued $200
million principal amount of 7-7/8% Senior Notes due 2006. Of
the net proceeds of the offering, $120.0 million was
contributed to the capital of Underwriters Reinsurance
Company, $50.0 million was used to repay indebtedness under
the credit agreement of URC Holdings Corp., and the remainder
is being used for general corporate purposes.
World Minerals Inc. ("World Minerals") contributed
pre-tax earnings of $5.5 million on revenues of $51.3 million
in the 1996 second quarter, compared with $6.7 million on
revenues of $45.5 million in the second quarter of 1995. In
the first six months of 1996, World Minerals contributed
pre-tax earnings of $10.1 million on revenues of $98.9
million, compared with $11.8 million on revenues of $87.4
million in the first six months of 1995.
The increase in revenues primarily reflects results
of strategic acquisitions since the 1995 second quarter.
Pre-tax earnings declined in the 1996 second quarter and
first six months from the prior year periods due to increased
debt and related interest expense associated with strategic
acquisitions and joint ventures, start-up costs related to
World Minerals' Chinese joint ventures and lower foreign
exchange gains in the 1996 periods.
As of June 30, 1996, the Company beneficially owned
approximately 7.43 million shares, or 5.2 percent, of the
outstanding common stock of Burlington Northern Santa Fe
<PAGE>
Corporation ("BNSF") which had an aggregate market value on
that date of approximately $601.0 million, or $80.875 per
BNSF share. The aggregate cost of such shares is
approximately $253.7 million, or $34.15 per BNSF share.
The Company's results in the first half of 1996 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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
-----------------
A. In April 1990, a class action seeking treble
damages was filed in the United States District Court for the
District of Arizona against six of the nation's largest title
insurance companies, including the three principal title
insurance companies now owned by CT&T, alleging that the
title insurers violated Section 1 of the Sherman Act in
connection with their participation in rating bureaus in
Arizona and Wisconsin. On April 21, 1994, a separate class
action suit seeking treble damages was filed in the United
States District Court for the Eastern District of Wisconsin,
asserting federal antitrust claims against the same six
defendants and a number of additional title insurers arising
from Wisconsin rating bureau activity. On October 11, 1994,
the Wisconsin suit was transferred to and consolidated with
the suit in the United States District Court in Arizona. The
status of such proceedings was last reported in Item 3 of
Part I of the 1995 Form 10-K Report.
In May 1995, counsel for the plaintiffs and the
defendants filed with the District Court in Arizona a
definitive written agreement embodying terms for a proposed
class action settlement of the asserted claims, which would
become effective upon final approval of the Court. Following
notice to the settlement class and a hearing, the Court gave
final approval to the proposed settlement by order dated May
30, 1996. This order has become final without appeal and
implementation of settlement begins on August 15, 1996.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
-------------------------------------------
HOLDERS.
-------
The Company's 1996 Annual Meeting of Stockholders
was held on April 26, 1996. At the Annual Meeting, three
directors were elected to serve for three-year terms on the
Company's Board of Directors, by the following votes:
FOR WITHHELD
--- --------
F.M. Kirby 5,539,762 182,166
Roger Noall 5,573,644 148,284
Paul F. Woodberry 5,575,950 145,978
At the Annual Meeting, the selection of KPMG Peat
Marwick LLP as auditors for the Company for the year 1996 was
ratified by a vote of 5,586,034 shares in favor and 971
shares opposed. A total of 134,923 shares abstained from
voting.
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 second
quarter of 1996.
<PAGE>
<PAGE>
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: August 13, 1996 /s/ David B. Cuming
-------------------------------
David B. Cuming
Senior Vice President
(and principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALLEGHANY
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND
THE CONSOLIDATED INCOME STATEMENT OF EARNINGS FOR THE SIX MONTHS THEN ENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 1,851,515
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 679,845
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,531,360
<CASH> 239,003
<RECOVER-REINSURE> 396,336
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 4,426,835
<POLICY-LOSSES> 1,596,462
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 478,532
0
0
<COMMON> 0
<OTHER-SE> 1,344,707
<TOTAL-LIABILITY-AND-EQUITY> 4,426,835
801,480
<INVESTMENT-INCOME> 91,623
<INVESTMENT-GAINS> 1,200
<OTHER-INCOME> 98,833
<BENEFITS> 166,277
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 58,850
<INCOME-TAX> 19,241
<INCOME-CONTINUING> 39,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,609
<EPS-PRIMARY> 5.50
<EPS-DILUTED> 5.50
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
