<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 1-9371
ALLEGHANY CORPORATION
---------------------
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
DELAWARE
--------
STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION
51-0283071
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INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER
375 PARK AVENUE, NEW YORK, NEW YORK 10152
-----------------------------------------
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE
212/752-1356
------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
NOT APPLICABLE
--------------
FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT
THE REGISTRANT WAS REQUIRED TO FILE).
YES X NO
-------- ---------
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASS
OF COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT:
7,332,992
---------
(AS OF JUNE 30, 1999)
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED
JUNE 30, 1999 AND 1998
(dollars in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------
REVENUES
<S> <C> <C>
Investment management fees $40,579 $30,745
Net property and casualty premiums earned 186,136 104,054
Interest, dividend and other income 47,065 43,880
Net mineral and filtration sales 53,420 50,979
Net gain on investment transactions 12,110 2,510
--------------------------------------------
Total revenues 339,310 232,168
--------------------------------------------
COSTS AND EXPENSES
Commissions and brokerage expenses 40,062 25,105
Salaries, administrative and other operating expenses 77,573 63,855
Property and casualty losses and loss adjustment expenses 136,496 72,852
Cost of mineral and filtration sales 35,124 27,150
Interest expense 9,041 8,105
Corporate administration 4,288 9,414
--------------------------------------------
Total costs and expenses 302,584 206,481
--------------------------------------------
Earnings from continuing operations, before income taxes 36,726 25,687
Income taxes 15,839 8,459
Earnings from continuing operations 20,887 17,228
Earnings from discontinued operations, net of tax 0 11,484
--------------------------------------------
Net earnings $20,887 $28,712
============================================
Basic earnings per share of common stock: **
Continuing operations $2.85 $2.34
Discontinued operations 0.00 1.56
--------------------------------------------
Basic earnings per share $2.85 $3.90
============================================
Diluted earnings per share of common stock: **
Continuing operations $2.80 $2.30
Discontinued operations 0.00 1.53
--------------------------------------------
Diluted earnings per share $2.80 $3.83
============================================
Dividends per share of common stock * *
============================================
Average number of outstanding shares of common stock ** 7,331,284 7,373,312
============================================
</TABLE>
* In March 1999, Alleghany declared a dividend consisting of one share of
Alleghany common stock for every fifty shares outstanding.
** Adjusted to reflect the common stock dividend declared in March 1999.
<PAGE> 3
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(dollars in thousands, except share and per share amounts)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------------
REVENUES
<S> <C> <C>
Investment management fees $79,952 $55,793
Net property and casualty premiums earned 330,373 198,104
Interest, dividend and other income 90,268 83,910
Net mineral and filtration sales 102,306 98,667
Net gain on investment transactions 12,473 2,486
-----------------------------------------------
Total revenues 615,372 438,960
-----------------------------------------------
COSTS AND EXPENSES
Commissions and brokerage expenses 77,196 50,215
Salaries, administrative and other operating expenses 146,744 115,767
Property and casualty losses and loss adjustment expenses 236,654 138,057
Cost of mineral and filtration sales 68,446 59,698
Interest expense 16,791 15,435
Corporate administration 8,946 16,253
-----------------------------------------------
Total costs and expenses 554,777 395,425
-----------------------------------------------
Earnings from continuing operations, before income taxes 60,595 43,535
Income taxes 23,754 13,348
-----------------------------------------------
Earnings from continuing operations 36,841 30,187
Earnings from discontinued operations, net of tax 0 32,725
-----------------------------------------------
Net earnings $36,841 $62,912
===============================================
Basic earnings per share of common stock: **
Continuing operations $5.01 $4.06
Discontinued operations 0.00 4.40
-----------------------------------------------
Basic net earnings per share $5.01 $8.46
===============================================
Diluted earnings per share of common stock: **
Continuing operations $4.93 $3.99
Discontinued operations 0.00 4.32
-----------------------------------------------
Diluted earnings per share of common stock $4.93 $8.31
===============================================
Dividends per share of common stock * *
===============================================
Average number of outstanding shares of common stock ** 7,347,323 7,435,518
===============================================
</TABLE>
* In March 1999, Alleghany declared a dividend consisting of one share of
Alleghany common stock for every fifty shares outstanding.
** Adjusted to reflect the common stock dividend declared in March 1999.
<PAGE> 4
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(Unaudited) 1998
----------------------------------------
<S> <C> <C> <C>
ASSETS
Available for sale securities:
Fixed maturities:
U.S. Government, government agency and
municipal obligations (amortized cost $534,162) $532,700 $537,937
Short-term investments (amortized cost 140,549) 140,549 76,015
Bonds, notes and other (amortized cost 644,744) 641,336 687,755
Equity securities (cost 301,541) 731,887 824,326
----------------------------------------
2,046,472 2,126,033
Cash 18,279 25,441
Cash pledged to secure trust deposits 15,849 56,907
Premium trust funds 118,480 107,854
Notes receivable 91,536 91,536
Funds held, accounts and other receivables 548,636 502,721
Property and equipment - at cost, less accumulated depreciation and amortization 208,510 208,698
Reinsurance receivable 666,805 571,689
Other assets 668,330 591,565
----------------------------------------
$4,382,897 $4,282,444
========================================
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Property and casualty losses and loss adjustment expenses $1,701,546 $1,554,818
Unearned premiums 429,466 389,603
Other liabilities 490,868 443,938
Long-term debt of parent company 0 18,200
Long-term debt of subsidiaries 417,691 421,595
Net deferred tax liability 126,167 150,218
Trust deposits secured by pledged assets 19,950 56,644
----------------------------------------
Total liabilities 3,185,688 3,035,016
Common stockholders' equity 1,197,209 1,247,428
----------------------------------------
$4,382,897 $4,282,444
========================================
Shares of common stock outstanding * 7,332,992 7,375,848
========================================
Common stockholders' equity per share * $163.26 $169.12
========================================
</TABLE>
* Adjusted to reflect the common stock dividend declared in March 1999.
<PAGE> 5
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND 1998
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $36,841 $30,187
Adjustments to reconcile net earnings to cash
provided by (used in) operations:
Depreciation and amortization 10,409 12,437
Net gain on investment transactions (12,473) (2,486)
Other charges, net 15,829 1,708
Increase in funds held, accounts and other receivables (45,915) (44,358)
Increase in reinsurance receivable (95,116) (17,715)
Increase in property and casualty losses and loss adjustment expenses 146,728 68,771
Increase in unearned premium reserves 39,863 37,403
Increase in premium trust funds (10,626) 0
Increase in other assets (76,765) (12,855)
Increase in other liabilities 46,930 37,737
Decrease (increase) in cash pledged to secure trust deposits 41,058 (23,256)
(Decrease) increase in trust deposits (36,694) 21,606
-------------------------------
Net adjustments 23,228 78,992
-------------------------------
Cash provided by operations 60,069 109,179
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (437,044) (141,200)
Maturities of investments 31,302 36,338
Sales of investments 396,385 114,494
Purchases of property and equipment (15,599) (12,821)
Other, net (10,166) (114,750)
-------------------------------
Net cash used in investing activities (35,122) (117,939)
-------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (66,300) (24,500)
Proceeds of long-term debt 44,196 88,000
Treasury stock acquisitions (14,270) (71,787)
Net cash provided to discontinued operations 0 (5,097)
Other, net 4,265 7,149
-------------------------------
Net cash used in financing activities (32,109) (6,235)
-------------------------------
Net decrease in cash (7,162) (14,995)
Cash at beginning of period 25,441 45,772
-------------------------------
Cash at end of period $18,279 $30,777
===============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $16,314 $15,284
Income taxes $11,422 $38,713
</TABLE>
<PAGE> 6
Notes to the Consolidated Financial Statements
This report should be read in conjunction with the Annual Report on Form
10-K for the year ended December 31, 1998 (the "1998 Form 10-K") and the
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 of Alleghany
Corporation (the "Company").
The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary to a fair
statement of the results of the interim periods covered thereby. All adjustments
are of a normal and recurring nature except as described herein.
Spin-off of Chicago Title Corporation
On June 17, 1998, the Company completed the spin-off of the title insurance
and real estate-related services business conducted by Chicago Title and Trust
Company ("CT&T"). The spin-off was effected by a distribution to the Company's
stockholders of shares of a newly formed holding company for CT&T called Chicago
Title Corporation ("Chicago Title"). The common stock of Chicago Title is traded
on the New York Stock Exchange under the symbol "CTZ." The financial services
business conducted through Alleghany Asset Management, Inc. ("Alleghany Asset
Management") was not a part of the distribution and remains with the Company.
The unaudited consolidated financial statements of the Company include the
accounts of the Company and its subsidiaries for all periods presented. In light
of the spin-off of Chicago Title, the spun-off operation is classified as a
"discontinued operation" through the date of the spin-off.
Comprehensive Income
The Company's total comprehensive (loss) income for the three months and
six months ended June 30, 1999 and 1998 was $(27,295) thousand and $(41,310)
thousand, and $18,868 thousand and $91,225 thousand respectively. Comprehensive
(loss) income includes the Company's net earnings adjusted for changes in
unrealized appreciation (depreciation) of investments, which was $(43,508)
thousand and $(71,993) thousand, and $(9,968) thousand and $28,582 thousand, and
cumulative translation adjustments, which was $(4,674) thousand and $(6,158)
thousand, and $124 thousand and $(269) thousand, for the three months and six
months ended June 30, 1999 and 1998, respectively.
6
<PAGE> 7
Segment Information
Information concerning the Company's continuing operations by industry
segment is summarized below:
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
--------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
REVENUES
- --------
Asset management $41,128 $31,295 $81,065 $56,754
Property and casualty
insurance 210,734 127,299 376,357 240,909
Mining and filtration 53,503 50,616 102,103 98,271
Corporate activities 33,945 22,958 55,847 43,026
------ ------ ------ ------
Total $339,310 $232,168 $615,372 $438,960
======== ======== ======== ========
EARNINGS FROM CONTINUING
OPERATIONS BEFORE TAX
- -----------------------
Asset management $13,923 $9,188 $28,351 $17,210
Property and casualty
insurance 9,908 15,269 20,964 25,034
Mining and filtration 7,012 4,878 11,356 8,456
Corporate activities 5,883 (3,648) (76) (7,165)
----- ------- ---- -------
Total 36,726 25,687 60,595 43,535
Income taxes 15,839 8,459 23,754 13,348
Discontinued operations 0 11,484 0 32,725
- ------ - ------
Net income $20,887 $28,712 $36,841 $62,912
======= ======= ======= =======
<CAPTION>
June 30, December 31,
1999 1998
--------------- ---------------
IDENTIFIABLE ASSETS
- -------------------
<S> <C> <C>
Asset management $99,106 $118,458
Property and casualty
insurance 3,279,581 3,064,155
Mining and filtration 334,899 331,714
Corporate activities 669,311 768,117
------- -------
Total $4,382,897 $4,282,444
========== ==========
</TABLE>
7
<PAGE> 8
Contingencies
The Company's subsidiaries are parties to pending claims and litigation in
the ordinary course of their businesses. Each such operating unit makes
provisions on its books in accordance with generally accepted accounting
principles for estimated losses to be incurred as a result of such claims and
litigation, including related legal costs. In the opinion of management, such
provisions are adequate as of June 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The Company reported net earnings from continuing operations of $20.9
million on revenues of $339.3 million during the second quarter of 1999,
compared with net earnings from continuing operations of $17.2 million on
revenues of $232.3 million during the second quarter of 1998. Net earnings from
continuing operations contributed $36.8 million on revenues of $615.4 million
during the first six months of 1999, compared with net earnings from continuing
operations of $30.2 million on revenues of $439.0 million during the first six
months of 1998.
Net earnings, which include discontinued operations, were $28.7 million in
the second quarter of 1998 and $62.9 million in the first six months of 1998. No
discontinued operations were recorded in the 1999 periods. Income taxes for the
second quarter of 1999 include a $2.5 million federal income tax payment in
closing the tax years 1993-95.
Net gains on investment transactions before taxes in the first half of 1999
totalled $12.5 million, compared with net gains of $2.5 million in the first
half of 1998. The gains in 1999 principally resulted from the sale by the
Company of its holdings in Armco, Inc.
Underwriters Re Group, Inc. ("Underwriters Re Group") contributed pre-tax
earnings of $9.9 million on revenues of $210.7 million in the second quarter of
1999, compared with $15.3 million on revenues of $127.3 million in the second
quarter of 1998, and $21.0 million on revenues of $376.4 million in the first
six months of 1999, compared with $25.0 million on revenues of $240.9 million in
the first six months of 1998.
The 1999 second quarter and six-month results of Underwriters Re Group
include the results of Venton Holdings Ltd. for the period January 1, 1999
through March 31, 1999, and the period following its acquisition on October 23,
1998 through March 31, 1999, respectively. The results of Venton Holdings Ltd.
are reported on a one quarter lag due to the complexity of converting Lloyd's
accounting information to U.S. accounting principles. The results of
Underwriters Re Group reflect lower earned premiums from its primary companies
and soft reinsurance and insurance markets worldwide. In addition,
8
<PAGE> 9
Underwriters Re Group's 1999 second quarter results include a pre-tax gain of
$232 thousand on sales of investments, compared with a pre-tax gain of $2.5
million in the second quarter of 1998.
Alleghany Asset Management contributed pre-tax earnings of $13.9 million on
revenues of $41.1 million in the 1999 second quarter, compared with $9.2 million
on revenues of $31.3 million in the 1998 second quarter, and $28.3 million on
revenues of $81.1 million in the first six months of 1999, compared with $17.2
million on revenues of $56.8 million in the first six months of 1998. The
improved results of Alleghany Asset Management are primarily due to an increase
in assets under management. As of June 30, 1999, Alleghany Asset Management
managed $43.3 billion in assets, as compared with $31.7 billion as of June 30,
1998.
World Minerals Inc. ("World Minerals") contributed pre-tax earnings of $7.0
million on revenues of $53.5 million in the 1999 second quarter, compared with
$4.9 million on revenues of $50.6 million in the 1998 second quarter, and $11.4
million on revenues of $102.1 million in the first six months of 1998, compared
with $8.5 million on revenues of $98.3 million in the first six months of 1998.
World Minerals' results improved due to increased sales worldwide,
including in China, which resulted in lower losses reported by World Minerals'
Chinese joint ventures. World Minerals results, however, continue to be
negatively affected by competitive pressure. 1998 results reflect, among other
things, the effects of severe El Nino storms and rail car shortages on World
Minerals' Lompoc, California diatomite operations.
As of June 30, 1999, the Company beneficially owned approximately 22.29
million shares, or 4.7 percent, of the outstanding common stock of Burlington
Northern Santa Fe Corporation, which had an aggregate market value on that date
of approximately $691.0 million, or $31.00 per share, compared with a market
value on December 31, 1998 of $763.4 million, or $34.25 per share. The aggregate
cost of such shares is approximately $253.7 million, or $11.38 per share.
The Company's common stockholders' equity per share at June 30, 1999
(adjusted for the March 1999 stock dividend) was $163.26 per share, a 3 percent
decrease from common stockholders' equity per share of $169.12 as of December
31, 1998, reflecting a decline in market prices of the Company's securities
holdings.
Year 2000
The Year 2000 issue arises from computer programs that use two digits
rather than four digits to define the applicable year. This could result in a
failure of information technology systems ("IT systems") and other equipment
containing imbedded technology
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<PAGE> 10
("non-IT systems") to correctly read the year 2000, which could cause
significant disruption in business operations. Each of the Company and its
subsidiaries has undertaken a four-phase program to determine the extent of Year
2000 issues within each of its significant IT systems and non-IT systems and to
take appropriate remedial action. The four phases of the program are assessment,
planning, execution and testing. The assessment and planning phases were
completed in early 1998 and execution and testing began thereafter.
Non-compliant systems were reprogrammed or replaced, and then tested. The
execution and testing phases were largely completed by year-end 1998, but some
testing is continuing in 1999. The cost of remediation (including replacement
software and hardware), testing and outside consultant fees is currently
expected to total $4.7 million, of which about $4.4 million has been incurred
through June 30, 1999.
Management presently believes that it will be able to timely resolve the
Year 2000 issues affecting the computer systems of the Company and its
subsidiaries and that the cost of addressing such matters will not have a
material impact on the business, operations, or financial condition of the
Company and its subsidiaries. However, the extent to which third party computer
systems are adversely affected could materially adversely affect the business,
operations or financial condition of the Company and its subsidiaries.
As previously reported, management engaged an outside consultant in early
1999 to assess the Year 2000 compliance programs of the Company and its
subsidiaries. Management recently received the outside consultant's final
report, which has been presented to the Company's Board of Directors and its
Audit Committee. In addition, the recommendations set forth in the report, which
relate primarily to business continuation and contingency plans, have been
distributed to the relevant subsidiaries and are being implemented as
appropriate.
More detailed reports of the state of readiness of each of the Company's
operating units and with respect to potential claims under insurance and
reinsurance policies issued by the subsidiaries of Underwriters ReGroup is
incorporated in the Company's 1998 Form 10-K and included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999, which
reports are updated as follows:
Underwriters Re Group
Venton replaced its non-compliant IT systems with a new system. The new
system attained Lloyd's markets Year 2000 certification, has been put in
operation and is being tested for final acceptance. On an interim basis, a
portion of the old system has been integrated into the new system, which portion
also has been made Year 2000 compliant.
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<PAGE> 11
Underwriters Re Group is finalizing various contingency plans, aspects of
which will be tested during the balance of the year.
In addition to issues faced by all industries in assuring Year 2000
compliance in their own computer systems and third-party relationships, the
insurance industry may also face claims asserted under certain insurance and
reinsurance policies for damages incurred by insureds due to Year 2000 computer
problems. Underwriters Re Group is evaluating the potential insurance exposures
arising from Year 2000 problems. A quantification of the insurance industry's or
Underwriters Re Group's potential exposure to Year 2000 losses is not yet
possible, as policy wordings vary and legal interpretations of possible
insurance coverage for losses are likely to differ from jurisdiction to
jurisdiction.
Underwriters Re Group, through the use of questionnaires and other methods
of determining a client's exposure to Year 2000 losses, has adjusted its current
underwriting practices to address potential insurance exposures for Year 2000
losses. Upon evaluation of the responses to these questionnaires and/or other
information, Underwriters Re Group may in some instances exclude Year 2000
losses or decline to issue or renew a policy. If the responses are considered
appropriate, contracts may be written without express Year 2000 language.
Alleghany Asset Management
Alleghany Asset Management utilizes four third-party service providers for
critical business services, including custody, security receipt and delivery,
and income collection services. In addition to each such third party's own
contingency plans relating to the services provided to Alleghany Asset
Management, Alleghany Asset Management has prepared backup contingency plans,
pursuant to which Alleghany Asset Management will retrieve customer account data
at multiple dates prior to January 1, 2000 and, in the event of a complete third
party failure, will maintain on an interim basis ongoing account activity on
internally maintained systems that have been tested as Year 2000 compliant.
Alleghany Asset Management has begun testing its third party and backup
contingency plans, which will continue through the fourth quarter of 1999. Such
testing will include on-site involvement of Alleghany Asset Management's most
significant third-party vendor.
World Minerals
World Minerals believes that, for all internal IT and non-IT systems, it
has completed all four phases of its Year 2000 project.
World Minerals is developing detailed contingency plans to address its
mission critical applications worldwide. To date, World Minerals has developed
contingency plans for its Lompoc operations. Such plans were sent to World
Minerals' other sites around the
11
<PAGE> 12
world to be used as a guide to develop site-specific contingency plans. The
site-specific plans are being reviewed by World Minerals management.
Heads and Threads
With the exception of the system supporting its mill business, which is
scheduled to be replaced in the third quarter of 1999, Heads and Threads has
assessed, planned, executed and tested its internal IT systems. Based on the
recommendations of the Company's outside consultant, Heads and Threads plans to
perform additional testing of its internal IT systems using a more expansive
base of dates and date ranges.
The Company's results in the first half of 1999 are not indicative of
operating results in future periods. The Company and its subsidiaries have
adequate internally generated funds and unused credit facilities to provide for
the currently foreseeable needs of its and their businesses.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss from adverse changes in market prices and
rates, such as interest rates, foreign currency exchange rates and commodity
prices. The primary market risk related to the Company's non-trading financial
instruments is the risk of loss associated with adverse changes in interest
rates.
The Company's 1998 Form 10-K provides a more detailed discussion of the
market risks affecting its operations. Based on the Company's estimates as of
June 30, 1999, no material change has occurred in its market risks, as compared
to amounts disclosed in its 1998 Form 10-K.
Forward-Looking Statements
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Quantitative and Qualitative Disclosures About
Market Risk" contain disclosures which are forward-looking statements.
Forward-looking statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of words such as
"may," "will," "expect," "project," "estimate," "anticipate," "plan" or
"continue." These forward-looking statements are based upon the Company's
current plans or expectations and are subject to a number of uncertainties and
risks that could significantly affect current plans and anticipated actions and
the Company's future financial condition and results. The uncertainties and
risks include, but are not limited to, those relating to conducting operations
in a competitive environment; acquisition activities; the complexity of
integrated computer
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<PAGE> 13
systems; the success and expense of the remediation efforts of the Company, its
subsidiaries and third parties in achieving Year 2000 compliance and general
economic conditions. As a consequence, current plans, anticipated actions and
future financial condition and results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company.
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<PAGE> 14
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(c) Recent Sales of Unregistered Securities.
On April 23, 1999, the Company issued 1,960 shares of common stock to Allan
P. Kirby, Jr. upon the exercise of an option to purchase 1,000 shares of the
Company's common stock, subject to adjustment for stock dividends and the
spin-off of Chicago Title, at an exercise price of $44.3726 per share, or
$87,000 in the aggregate, granted to Mr. Kirby on May 1, 1989, pursuant to the
Alleghany Corporation Amended and Restated Directors' Stock Option Plan. The
sale of the common stock was exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof, as
a transaction not involving a public offering.
On May 4, 1999, Alleghany issued an aggregate of 497 shares of Alleghany
common stock to seven non-employee directors of Alleghany pursuant to the
Alleghany Corporation Directors' Equity Compensation Plan representing one-half
of the value of each director's retainer for the following twelve months'
service as a director, exclusive of any per meeting fees, committee fees or
expense reimbursements. The sale of common stock was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof, as a transaction not
involving a public offering.
The above does not include unregistered issuances of the Company's common
stock that did not involve a sale, consisting of issuances of common stock and
other securities pursuant to employee incentive plans.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's 1999 Annual Meeting of Stockholders was held on April 23,
1999. 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:
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
Three-Year Term:
---------------
<S> <C> <C>
F.M. Kirby 5,509,665 517,348
Roger Noall 6,015,005 12,008
Rex D. Adams 6,012,731 14,282
</TABLE>
At the Annual Meeting, the selection of KPMG LLP as auditors for the
Company for the year 1999 was ratified by a vote of 6,023,376 shares in favor
and 1,415 shares opposed. A total of 2,222 shares abstained from voting.
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<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) Exhibits.
--------
Exhibit Number Description
-------------- -----------
<S> <C>
27 Financial Data Schedule
(b) Reports on Form 8-K.
</TABLE>
No reports on Form 8-K were filed during the second quarter of 1999.
15
<PAGE> 16
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 5, 1999 /s/ David B. Cuming
-------------------
David B. Cuming
Senior Vice President
(and principal financial officer)
16
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
ALLEGHANY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AT JUNE 30,
1999 AND THE CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTHS THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 1,314,585
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 731,887
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 2,046,472
<CASH> 34,128
<RECOVER-REINSURE> 666,805
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 4,382,897
<POLICY-LOSSES> 1,701,546
<UNEARNED-PREMIUMS> 429,466
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 417,691
0
0
<COMMON> 0
<OTHER-SE> 1,197,209
<TOTAL-LIABILITY-AND-EQUITY> 4,382,897
330,373
<INVESTMENT-INCOME> 90,268
<INVESTMENT-GAINS> 12,473
<OTHER-INCOME> 102,306
<BENEFITS> 236,654
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 0
<INCOME-PRETAX> 60,595
<INCOME-TAX> 23,754
<INCOME-CONTINUING> 36,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,841
<EPS-BASIC> 5.01
<EPS-DILUTED> 4.93
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
