ALLEGHANY CORP /DE - Quarter Report: 2008 June (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR QUARTERLY PERIOD ENDED JUNE 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE TRANSITION PERIOD FROM                      TO

ALLEGHANY CORPORATION

EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER

DELAWARE

51-0283071

7 TIMES SQUARE TOWER, 17TH FLOOR, NY, NY 10036

212-752-1356

NOT APPLICABLE

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 þ NO o

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED FILER, AN ACCELERATED FILER, A NON-ACCELERATED FILER, OR A SMALLER REPORTING COMPANY. SEE THE DEFINITIONS OF “LARGE ACCELERATED FILER,” “ACCELERATED FILER” AND “SMALLER REPORTING COMPANY” IN RULE 12B-2 OF THE EXCHANGE ACT. (CHECK ONE):

LARGE ACCELERATED FILER þ		ACCELERATED FILER o		NON-ACCELERATED FILER o		SMALLER REPORTING COMPANY o
			(DO NOT CHECK IF A SMALLER REPORTING COMPANY)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). 12b-2 OF THE EXCHANGE ACT). YES o NO þ

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.

 

 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
JUNE 30, 2008 AND 2007
(dollars in thousands, except share and per share amounts)
(unaudited)

		2008				2007
Revenues
Net premiums earned		$	240,238			$	235,219
Net investment income			34,768				38,694
Realized capital (losses) gains			(21,783	)			5,697
Other income			122				2,350
Total revenues			253,345				281,960
Costs and expenses
Loss and loss adjustment expenses			139,455				119,709
Commissions, brokerage and other underwriting expenses			72,542				60,506
Other operating expenses			12,302				12,840
Corporate administration			8,466				9,119
Interest expense			179				251
Total costs and expenses			232,944				202,425
Earnings from continuing operations, before income taxes			20,401				79,535
Income taxes			7,380				20,801
Earnings from continuing operations			13,021				58,734
Discontinued operations
Earnings from discontinued operations			10,662				6,134
Income taxes			3,248				1,928
Earnings from discontinued operations, net			7,414				4,206
Net earnings		$	20,435			$	62,940
Changes in other comprehensive income
Change in unrealized gains, net of deferred taxes		$	22,370				30,461
Less: reclassification for gains realized in net earnings, net of taxes			14,159				(3,714	)
Other			(3	)			102
Comprehensive income		$	56,961			$	89,789
Net earnings		$	20,435			$	62,940
Preferred dividends			4,305				4,305
Net earnings available to common stockholders		$	16,130			$	58,635
Basic earnings per share of common stock *
Continuing operations		$	1.04			$	6.55
Discontinued operations			0.89				0.50
		$	1.93			$	7.05
Diluted earnings per share of common stock *
Continuing operations		$	1.04			$	6.30
Discontinued operations			0.89				0.45
		$	1.93			$	6.75
Dividends per share of common stock			*				*
Average number of outstanding shares of common stock **			8,340,901				8,312,967

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED
JUNE 30, 2008 AND 2007
(dollars in thousands, except share and per share amounts)
(unaudited)

		2008				2007
Revenues
Net premiums earned		$	485,719			$	466,793
Net investment income			70,040				78,624
Net realized capital gains			52,929				55,838
Other income			185				11,075
Total revenues			608,873				612,330
Costs and expenses
Loss and loss adjustment expenses			274,686				216,843
Commissions, brokerage and other underwriting expenses			142,951				120,119
Other operating expenses			24,033				25,429
Corporate administration			18,414				17,123
Interest expense			336				974
Total costs and expenses			460,420				380,488
Earnings from continuing operations, before income taxes			148,453				231,842
Income taxes			44,885				69,553
Earnings from continuing operations			103,568				162,289
Discontinued operations
Earnings from discontinued operations			22,196				10,264
Income taxes			6,608				3,195
Earnings from discontinued operations, net			15,588				7,069
Net earnings		$	119,156			$	169,358
Changes in other comprehensive income
Change in unrealized gains, net of deferred taxes			23,431				57,734
Less: reclassification for gains realized in net earnings (net of taxes)			(34,404	)			(36,306	)
Other			(8	)			115
Comprehensive income		$	108,175			$	190,901
Net earnings		$	119,156			$	169,358
Preferred dividends			8,610				8,611
Net earnings available to common stockholders		$	110,546			$	160,747
Basic earnings per share of common stock *
Continuing operations		$	11.39			$	18.52
Discontinued operations			1.87				0.85
		$	13.26			$	19.37
Diluted earnings per share of common stock *
Continuing operations		$	11.09			$	17.43
Discontinued operations			1.67				0.76
		$	12.76			$	18.19
Dividends per share of common stock			*				*
Average number of outstanding shares of common stock **			8,335,426				8,299,807

See accompanying Notes to Unaudited Consolidated Financial Statements.

(dollars in thousands, except share amounts)

		June 30,
		2008				December 31,
		(unaudited)				2007
Assets
Investments
Available for sale securities at fair value:
Equity securities (cost: 2008 $623,304; 2007 $691,429)		$	1,130,275			$	1,176,412
Debt securities (cost: 2008 $2,609,636; 2007 $2,541,488)			2,599,222				2,564,717
Short-term investments			474,032				316,897
			4,203,529				4,058,026
Other invested assets			198,432				193,272
Total investments			4,401,961				4,251,298
Cash			29,724				57,646
Premium balances receivable			200,220				170,080
Reinsurance recoverables			1,034,738				1,018,673
Ceded unearned premium reserves			216,830				221,203
Deferred acquisition costs			77,731				75,623
Property and equipment at cost, net of accumulated depreciation and amortization			19,725				19,735
Goodwill and other intangibles, net of amortization			203,452				207,540
Current taxes receivable			17,519				4,116
Assets of discontinued operations			891,568				812,119
Other assets			115,888				104,079
		$	7,209,356			$	6,942,112
Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses		$	2,503,098			$	2,379,701
Unearned premiums			688,649				699,409
Reinsurance payable			73,740				57,380
Net deferred tax liabilities			46,998				71,594
Liabilities of discontinued operations			720,228				653,869
Other liabilities			279,454				286,284
Total liabilities			4,312,167				4,148,237
Preferred stock (shares authorized: 2008 and 2007 - 1,132,000; issued and outstanding 2008 - 1,131,819; 2007 - 1,131,819)			299,480				299,480
Common stock (shares authorized: 2008 and 2007 - 22,000,000; issued and outstanding 2008 - 8,349,108; 2007 - 8,322,348)			8,349				8,159
Contributed capital			751,118				689,435
Accumulated other comprehensive income			317,651				328,632
Treasury stock, at cost (2008 - 5,395 shares; 2007 - none)			(1,839	)			—
Retained earnings			1,522,430				1,468,169
Total stockholders’ equity			2,897,189				2,793,875
		$	7,209,356			$	6,942,112
Shares of Common Stock Outstanding *			8,343,713				8,322,348

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2008 AND 2007
(dollars in thousands)
(unaudited)

		2008				2007
Cash flows from operating activities
Net earnings		$	119,156			$	169,358
Earnings from discontinued operations, net			15,588				7,069
Earnings from continuing operations		$	103,568			$	162,289
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:
Depreciation and amortization			11,234				6,921
Net realized capital (gains) losses			(52,929	)			(55,838	)
(Increase) decrease in other assets			(13,103	)			(11,031	)
(Increase) decrease in reinsurance receivable, net of reinsurance payable			295				94,420
(Increase) decrease in premium balances receivable			(30,140	)			(41,453	)
(Increase) decrease in ceded unearned premium reserves			4,373				29,264
(Increase) decrease in deferred acquisition costs			(2,108	)			(5,792	)
Increase (decrease) in other liabilities and current taxes			(34,528	)			(39,412	)
Increase (decrease) in unearned premiums			(10,760	)			(7,402	)
Increase (decrease) in losses and loss adjustment expenses			123,397				(12,445	)
Net adjustments			(4,269	)			(42,768	)
Net cash provided by operating activities from continuing operations			99,299				119,521
Net cash provided by operating activities from discontinued operations			65,182				54,654
Net cash provided by operating activities			164,481				174,175
Cash flows from investing activities
Purchase of investments			(621,148	)			(557,754	)
Sales of investments			441,822				399,117
Maturities of investments			220,855				139,044
Purchases of property and equipment			(2,646	)			(1,688	)
Net change in short-term investments			(158,930	)			(121,342	)
Other, net			(206	)			(3,384	)
Net cash provided by investing activities from continuing operations			(120,253	)			(146,007	)
Net cash provided by investing activities from discontinued operations			(66,211	)			(75,650	)
Net cash (used in) provided by investing activities			(186,464	)			(221,657	)
Cash flows from financing activities
Treasury stock acquisitions			(1,927	)			—
Principal payments on long-term debt			—				(80,000	)
Decrease in notes receivable			—				91,535
Convertible preferred stock dividends paid			(8,741	)			(8,755	)
Tax benefit on stock based compensation			2,330				1,062
Other, net			1,370				2,653
Net cash provided by (used in) financing activities			(6,968	)			6,495
Cash flows of discontinued operations
Operating activities			(65,182	)			(54,654	)
Investing activities			66,211				75,650
Net cash provided by (used in) discontinued operations			1,029				20,996
Net cash provided by (used in) continuing operations			(27,922	)			(19,991	)
Cash at beginning of period			57,646				41,458
Cash at end of period		$	29,724			$	21,467
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest		$	72			$	506
Income taxes paid (refunds received)		$	93,718			$	132,524

See accompanying Notes to Unaudited Consolidated Financial Statements.

Notes to Unaudited Consolidated Financial Statements
Alleghany Corporation and Subsidiaries

1. Principles of Financial Statement Presentation

This report should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2007 (the “2007 10-K”), and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, of Alleghany Corporation (“Alleghany”).

Alleghany, a Delaware corporation, is engaged in the property and casualty and surety insurance business through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”). AIHL’s insurance business is conducted through its wholly-owned subsidiaries RSUI Group, Inc. (“RSUI”), Capitol Transamerica Corporation and Platte River Insurance Company (collectively “CATA”) and AIHL’s majority-owned subsidiary Employers Direct Corporation (“EDC”), of which AIHL owns approximately 98 percent. AIHL Re LLC (“AIHL Re”), a captive reinsurance subsidiary of AIHL, is available to provide reinsurance to Alleghany operating units and affiliates. In addition, Alleghany owns approximately 32.9 percent of the outstanding shares of common stock of Homesite Group Incorporated (“Homesite”), a national, full-service, mono-line provider of homeowners insurance, and this investment is reflected in Alleghany’s financial statements in other invested assets. Alleghany also owns and manages properties in the Sacramento, California region through its subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) and conducts corporate investment and other activities at the parent level, including the holding of strategic equity investments. These strategic equity investments are available to support the internal growth of subsidiaries and for acquisitions of, and substantial investments in, operating companies.

On June 27, 2008, Darwin Professional Underwriters, Inc. (“Darwin”), of which AIHL owns approximately 55 percent, entered into a merger agreement with Allied World Assurance Company Holdings, Ltd. (“Allied World”), whereby Allied World will acquire all of the issued and outstanding shares of Darwin common stock for cash consideration of $32.00 per share. The transaction is subject to regulatory approvals and the consent of Darwin stockholders. As an inducement to Allied World to enter into the merger agreement, Alleghany entered into a voting agreement with Allied World pursuant to which Alleghany has agreed, subject to certain conditions, to vote a number of shares of its Darwin common stock equal to 40 percent of the issued and outstanding shares of common stock of Darwin in favor of the approval of the transaction. The transaction is expected to close in the fourth quarter of 2008. Upon closing of the transaction, Alleghany expects to receive aggregate proceeds of approximately $300 million in cash for AIHL’s 9,371,096 shares of Darwin common stock. Alleghany anticipates that the transaction will result in an after-tax gain of approximately $94 million, including approximately $9 million of gain deferred at the time of Darwin’s initial public offering in May 2006.

Alleghany has classified the operations of Darwin as “discontinued operations” in its consolidated financial statements for all periods presented. See Note 8 for historical financial information of these discontinued operations.

The financial statements contained in this Report on Form 10-Q are unaudited, but reflect all adjustments which, in the opinion of management, are necessary to a fair statement of results of the interim periods covered thereby. All adjustments are of a normal and recurring nature except as described herein.

The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant inter-company balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those reported results to the extent that those estimates and assumptions prove to be inaccurate.

Certain prior year amounts have been reclassified to conform to the 2008 presentation.

2. Recent Accounting Pronouncements

(a) Recently Adopted

In September 2006, FASB Statement No. 157, “Fair Value Measurements” (“SFAS 157”), was issued. SFAS 157 provides guidance for using fair value to measure assets and liabilities. SFAS 157 does not expand the use of fair value to any new circumstances. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Alleghany has adopted the provisions of SFAS 157 as of January 1, 2008, and the implementation did not have a material impact on its results of operations and financial condition. See Note 7.

(b) Future Application of Accounting Standards

In December 2007, FASB Statements No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), and No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”), were issued. SFAS 141R replaces FASB Statement No. 141, “Business Combinations.” SFAS 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose additional information regarding the nature and financial effect of the business combination. SFAS 160 requires all entities to report noncontrolling (minority) interests in subsidiaries in the same way—as equity in the consolidated financial statements. SFAS 160 also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. Alleghany will adopt SFAS 141R and SFAS 160 for all business combinations initiated after December 31, 2008.

3. Earnings Per Share of Common Stock

The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2008 and 2007 (in millions, except share amounts):

		Three months ended June 30,								Six months ended June 30,
		2008				2007				2008				2007
Earnings from continuing operations		$	13.0			$	58.7			$	103.6			$	162.3
Earnings from discontinued operations			7.4				4.2				15.6				7.1
Net earnings		$	20.4			$	62.9			$	119.2			$	169.4
Preferred dividends			4.3				4.3				8.6				8.6
Income available to
common stockholders for basic earnings per share			16.1				58.6			$	110.6				160.8
Preferred dividends			—				4.3				8.6				8.6
Effect of other dilutive securities			—				0.1				0.1				0.1
Income available to
common stockholders for diluted earnings per share		$	16.1			$	63.0			$	119.3			$	169.5
Weighted average shares
outstanding applicable to basic earnings per share			8,340,901				8,312,967				8,355,426				8,299,807
Preferred stock			—				997,998				997,969				997,998
Effect of other dilutive securities			—				24,825				20,302				20,328
Adjusted weighted average
shares outstanding applicable to diluted earnings per share			8,340,901				9,335,790				9,353,697				9,318,133

Contingently issuable shares of 48,506 and 61,355 were potentially available during 2008 and 2007, respectively, but were not included in the computations of diluted earnings per share because the impact was anti-dilutive to the earnings per share calculation.

Earnings per share by quarter may not equal the amount for the full year due to rounding.

4. Commitments and Contingencies

(a) Leases

Alleghany leases certain facilities, furniture and equipment under long-term lease agreements.

(b) Litigation

Alleghany’s subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. In the opinion of management, such provisions are adequate.

(c) Asbestos and Environmental Exposure

AIHL’s reserve for unpaid losses and loss adjustment expenses includes $20.7 million of gross reserves and $20.6 million of net reserves at June 30, 2008 and $22.9 million of gross reserves and $22.7 million of net reserves at December 31, 2007, for various liability coverages related to asbestos and environmental impairment claims that arose from reinsurance assumed by a subsidiary of CATA between 1969 and 1976. This subsidiary exited this business in 1976. Although Alleghany is unable at this time to determine whether additional reserves, which could

have a material impact upon its results of operations, may be necessary in the future, Alleghany believes that CATA’s asbestos and environmental reserves are adequate at June 30, 2008. Additional information concerning CATA’s asbestos and environmental exposure can be found in Note 13 to the Notes to the Consolidated Financial Statements set forth in Item 8 of the 2007 10-K.

(d) Indemnification Obligations

On July 14, 2005, Alleghany completed the sale of its world-wide industrial minerals business, World Minerals, Inc. (“World Minerals”), to Imerys USA, Inc. (the “Purchaser”), a wholly-owned subsidiary of Imerys, S.A., pursuant to a Stock Purchase Agreement, dated as of May 19, 2005, by and among the Purchaser, Imerys, S.A. and Alleghany (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Alleghany undertook certain indemnification obligations, including a general indemnification for breaches of representations and warranties set forth in the Stock Purchase Agreement (the “Contract Indemnification”) and a special indemnification (the “Products Liability Indemnification”) related to products liability claims arising from events that occurred during pre-closing periods, including the period of Alleghany ownership (the “Alleghany Period”).

Substantially all of the representations and warranties to which the Contract Indemnification applies survived until July 14, 2007, with the exception of certain representations and warranties such as those related to environmental, real estate and tax matters, which survive for longer periods and generally, except for tax and certain other matters, apply only to aggregate losses in excess of $2.5 million, up to a maximum of approximately $123.0 million. The Stock Purchase Agreement provides that Alleghany has no responsibility for products liability claims arising in respect of events occurring after the closing, and that any products liability claims involving both pre-closing and post-closing periods will be apportioned on an equitable basis. Additional information concerning the Contract Indemnification and Products Liability Indemnification can be found in Note 13 to the Notes to the Consolidated Financial Statements set forth in Item 8 of the 2007 10-K.

Based on Alleghany’s experience to date and other analyses, Alleghany established a $600 thousand reserve in connection with the Products Liability Indemnification for the Alleghany Period. Such reserve was $400 thousand at June 30, 2008.

(e) Equity Holdings Concentration

At June 30, 2008, Alleghany had a concentration of market risk in its available-for-sale equity securities portfolio of common stock of Burlington Northern Santa Fe Corporation (“Burlington Northern”), a railroad holding company, amounting to $399.6 million. During the first quarter of 2008, Alleghany sold approximately 1.0 million shares of Burlington Northern common stock, resulting in a pre-tax gain of $78.1 million.

At June 30, 2008, Alleghany also had a concentration of market risk in its available-for-sale equity securities portfolio with respect to the common stock of certain energy sector businesses amounting to $417.3 million.

5. Segment of Business

Information related to Alleghany’s reportable segment is shown in the table below. Property and casualty and surety insurance operations are conducted by AIHL through its insurance operating units RSUI, CATA and EDC. Alleghany has classified the operations of Darwin as “discontinued operations” in its consolidated financial statements for all periods presented. See Notes 1 and 8. In addition, AIHL Re is a wholly-owned subsidiary of AIHL that is available to provide reinsurance to Alleghany’s insurance operating units and affiliates.

Alleghany’s reportable segment is reported in a manner consistent with the way management evaluates the businesses. As such, insurance underwriting activities are evaluated separately from investment activities. Net realized capital gains or losses are not considered relevant in evaluating investment performance on an annual basis. Segment accounting policies are the same as those described in Note 1 to the Notes to the Consolidated Financial Statements set forth in Item 8 of the 2007 10-K.

The primary components of “corporate activities” are Alleghany Properties, AIHL’s investment in Homesite, and corporate investment and other activities at the parent level, including strategic equity investments. Such strategic equity investments are available to support the internal growth of subsidiaries and for acquisitions of, and substantial investments in, operating companies.

		Three months ended June 30,								Six months ended June 30,
(in millions)		2008				2007				2008				2007
Revenues:
AIHL insurance group:
Net premiums earned
RSUI		$	174.2			$	178.2			$	352.0			$	344.8
CATA			48.0				50.9				94.9				98.2
EDC			18.0								38.6				—
AIHL Re			—				6.1				0.2				23.8
			240.2				235.2				485.7				466.8
Net investment income			30.6				30.7				62.2				62.6
Net realized capital (losses) gains			(22.8	)(1)			5.7				(26.2	)(1)			—
Other income			0.1				0.2				0.2				0.3
Total insurance group			248.1				271.8				521.9				529.7
Corporate activities:
Net investment income (2)			4.2				8.0				7.9				16.0
Net realized capital gains			1.0				—				79.1	(3)			55.8	(3)
Other income			—				2.2				—				10.8
Total		$	253.3			$	282.0			$	608.9			$	612.3
Earnings from continuing operations, before income taxes:
AIHL insurance group:
Underwriting profit (loss)(4)
RSUI		$	54.7			$	41.5			$	93.3			$	91.7
CATA			3.5				7.4				7.7				14.4
EDC			(29.9	)(5)			—				(33.0	)(5)			—
AIHL Re			—				6.1				0.1				23.7
			28.3				55.0				68.1				129.8
Net investment income			30.6				30.7				62.2				62.6
Net realized capital (losses) gains			(22.8	)(1)			5.7				(26.2	)(1)			—
Other income, less other expenses			(11.5	)			(12.0	)			(22.5	)			(23.4	)
Total insurance group			24.6				79.4				81.6				169.0
Corporate activities:
Net investment income (2)			4.2				8.0				7.9				16.0
Net realized capital gains			1.0				—				79.1	(3)			55.8	(3)
Other income			—				2.2				—				10.8
Corporate administration and other expenses			9.2				9.8				19.8				18.8
Interest expense			0.2				0.3				0.3				1.0
Total		$	20.4			$	79.5			$	148.5			$	231.8

6. Reinsurance

As discussed in the 2007 10-K, RSUI reinsures its property lines of business through a program consisting of surplus share treaties, facultative placements, per risk and catastrophe excess of loss treaties. RSUI’s catastrophe reinsurance program (which covers catastrophe risks including, among others, windstorms and earthquakes) and per risk reinsurance program run on an annual basis from May 1 to the following April 30. RSUI has placed all of its catastrophe reinsurance program for the 2008-2009 period. Under the 2008-2009 program, RSUI’s catastrophe reinsurance program provides coverage in two layers for $400.0 million of losses in excess of a $100.0 million net retention after application of the surplus share treaties, facultative reinsurance and per risk covers. The first layer provides coverage for $100.0 million of losses, before a 33.15 percent co-participation by RSUI, in excess of the $100.0 million net retention, and the second layer provides coverage for $300.0 million of losses, before a 5 percent co-participation by RSUI, in excess of $200.0 million. In addition, RSUI’s property per risk reinsurance program for the 2008-2009 period provides RSUI with coverage for $90.0 million of losses in excess of $10.0 million net retention per risk after application of the surplus share treaties and facultative reinsurance.

RSUI reinsures its other lines of business through quota share treaties, except for professional liability and binding authority lines where RSUI retains all of such business. RSUI’s quota share reinsurance treaty for umbrella/excess renewed on June 1, 2008 and provides coverage for policies with limits up to $30.0 million, with RSUI ceding 35 percent of the premium and loss for policies with limits up to $15.0 million and ceding 67.5 percent of the premium and loss for policies with limits in excess of $15.0 million up to $30.0 million. RSUI’s directors and officers (“D&O”) liability line quota share reinsurance treaty renewed on July 1, 2008 and provides coverage for policies with limits up to $20.0 million, with RSUI ceding 35 percent of the premium and loss for all policies with limits up to $10.0 million and ceding 60 percent of the premium and loss for policies with limits in excess of $10.0 million up to $20.0 million.

7. Investments

(a) Fair Value

The estimated carrying values and fair values of Alleghany’s financial instruments as of June 30, 2008 and December 31, 2007 are as follows (in millions):

June 30, 2008

December 31, 2007

Carrying

Fair

Carrying

Fair

Value

Value

Value

Value

Assets

Investments (excluding equity-method investments)*

$4,222.6

$4,222.6

$4,069.3

$4,069.3

As previously noted, SFAS 157 was issued in September 2006 and adopted by Alleghany as of January 1, 2008. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. In addition, SFAS 157 establishes a three-tiered hierarchy for inputs used in management’s determination of fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing a financial instrument. Unobservable inputs are inputs that reflect management’s belief about the assumptions market participants would use in pricing a financial instrument based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of inputs as follows:

	•		“Level 1” — Management’s valuations are based on unadjusted quoted prices in active markets for identical, unrestricted assets. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these assets does not involve any meaningful degree of judgment. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis. For Alleghany, assets utilizing Level 1 inputs generally include common stocks and U.S. Government debt securities where valuations are based on quoted market prices.
	•		“Level 2” — Management’s valuations are based on quoted market prices where such markets are not deemed to be sufficiently “active.” In such circumstances, additional valuation metrics will be used which involve direct or indirect observable market inputs. For Alleghany, assets utilizing Level 2 inputs generally include debt securities other than debt issued by the U.S. Government and preferred stocks. Third-party dealer quotes typically constitute a significant input in management’s determination of the fair value of these types of fixed income securities. In developing such quotes, dealers will use the terms of the security and market-based inputs. Terms of the security include coupon, maturity date, and any special provisions that may, for example, enable the investor, at his election, to redeem the security prior to its scheduled maturity date. Market-based inputs include the level of interest rates applicable to comparable securities in the market place and current credit rating(s) of the security.
	•		“Level 3” — Management’s valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Valuation under Level 3 generally involves a significant degree of judgment on the part of management. For Alleghany, assets utilizing Level 3 inputs are primarily limited to partnership investments. Quotes from the third-party general partner of the entity in which such investment was held, which will often be based on unobservable market inputs, constitute the primary input in management’s determination of the fair value.

The estimated fair values of Alleghany’s invested assets by balance sheet caption and level as of June 30, 2008 are as follows (in millions):

		Level 1				Level 2				Level 3				Total
Assets
Equity securities		$	1,084.0			$	46.3			$	—			$	1,130.3
Debt securities			149.4				2,442.1				7.7				2,599.2
Short-term investments			328.1				145.9				—				474.0
Other invested assets*			—				—				19.1				19.1
Investments (excluding equity-method investments)		$	1,561.5			$	2,634.3			$	26.8			$	4,222.6

(b) Equity Securities

Net realized capital gains of $52.9 million for the first six months of 2008 included $62.7 million of impairment charges related to unrealized losses in Alleghany’s equity portfolio that were deemed to be other than temporary and, as such, are required to be charged against earnings. The $62.7 million of impairment charges (of which $47.6 million was incurred in the second quarter of 2008) relates to equity holdings primarily in the energy (refinery) and financial services sectors. The $62.7 million charge was primarily due to the severity of the declines in fair value of such securities relative to cost as of June 30, 2008. As of June 30, 2008 and December 31, 2007, no equity security was in a continuous unrealized loss position for twelve months or more.

After adjusting the cost basis of equity securities for the recognition of $62.7 million of unrealized losses through impairment charges, the following is information regarding unrealized gain (loss), before tax, on Alleghany’s equity securities:

(in millions)		At June 30, 2008				At December 31, 2007
Gross unrealized gain		$	521.4			$	513.7
Gross unrealized (loss)			(14.4	)			(28.7	)
Net unrealized gain		$	507.0			$	485.0

8. Discontinued Operations

Alleghany has classified the operations of Darwin as “discontinued operations” in its consolidated financial statements for all periods presented. Historical balance sheet information related to these discontinued operations, as included in Alleghany’s consolidated financial statements, is set forth in the following table (in millions):

		June 30, 2008				December 31, 2007
Assets
Available for sale securities at fair value		$	572.5			$	449.4
Short term investments			47.8				107.6
Cash			6.4				7.5
Reinsurance recoverables			148.6				136.4
Ceded unearned premium reserves			44.2				43.2
Other			72.1				68.0
		$	891.6			$	812.1
Liabilities
Losses and loss adjustment expenses			426.1				387.9
Unearned premiums			144.3				141.1
Debt			5.0				5.0
Other			38.2				23.9
Minority interest (carried at the AIHL level)			106.6				95.9
			720.2				653.8
Alleghany Equity
Alleghany’s investment in Darwin			171.4				158.3
		$	891.6			$	812.1

Alleghany’s investment in Darwin excludes the portion of Darwin’s stockholders’ equity that is attributable to common stockholders other than Alleghany.

Historical information related to the results of operations of the discontinued operations, as included in Alleghany’s consolidated financial statements, is set forth in the following table (in millions):

		Six months ended
		June 30, 2008				June 30, 2007
Revenues
Net premiums earned		$	106.9			$	86.4
Net investment income			12.0				10.7
Net realized capital gains			(0.6	)			—
Other income			(0.1	)			—
			118.2				97.1
Costs and expenses
Losses and loss adjustment expenses			40.6				50.7
Commission, brokerage and other underwriting expenses			30.4				24.8
Other operating expenses			6.9				2.8
			77.9				78.3
Earnings before income taxes and minority interest			40.3				18.8
Income taxes			12.0				5.8
Earnings before minority interest			28.3				13.0
Minority interest (carried at the AIHL-level)			12.7				5.9
Net earnings		$	15.6			$	7.1

Net earnings during the 2008 period include a $23.2 million release of prior accident year loss reserves ($15.1 million after tax and before minority interest), reflecting favorable loss emergence.

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     References to the “Company,” “Alleghany,” “we,” “us,” and “our” in Items 2, 3 and 4 of Part I, as well as in Part II, of this Form 10-Q refer to Alleghany Corporation and its consolidated subsidiaries unless the context otherwise requires. “AIHL” refers to our insurance holding company subsidiary Alleghany Insurance Holdings LLC. “RSUI” refers to our subsidiary RSUI Group, Inc. and its subsidiaries. “AIHL Re” refers to our subsidiary AIHL Re LLC. “CATA” refers to our subsidiary Capitol Transamerica Corporation and its subsidiaries and also includes the results and operations of Platte River Insurance Company unless the context otherwise requires. “EDC” refers to our subsidiary Employers Direct Corporation and its subsidiaries. Unless the context otherwise requires, references to AIHL include the operations of RSUI, CATA, EDC and AIHL Re. “Alleghany Properties” refers to our subsidiary Alleghany Properties Holdings LLC and its subsidiaries.

Cautionary Statement Regarding Forward-Looking Information

     “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 as defined in the Private Securities Litigation Reform Act 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 our current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and our future financial condition and results. These statements are not guarantees of future performance, and we have no specific intention to update these statements. The uncertainties and risks include, but are not limited to, risks relating to our 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;
	•		changes in market prices of our significant equity investments and changes in value of our fixed income portfolio;
	•		the long-tail and potentially volatile nature of certain casualty lines of business written by our insurance operating units;
	•		the cost and availability of reinsurance;
	•		exposure to terrorist acts;
	•		the willingness and ability of our insurance operating units’ reinsurers to pay reinsurance recoverables owed to our insurance operating units;
	•		changes in the ratings assigned to our 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 our insurance operating units; and
	•		adverse loss development for events insured by our 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 U.S. or global economic downturn 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 interest rates; extended labor disruptions, civil unrest or other external factors over which we have no control; and changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at our discretion. 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 us or on our behalf.

Critical Accounting Estimates

     The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, or “GAAP,” requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period covered by the financial statements. Critical accounting estimates are defined as those estimates that are important to the presentation of our financial condition and results of operations and require us to exercise significant judgment.

     We review our critical accounting estimates and assumptions quarterly. These reviews include evaluating the adequacy of reserves for unpaid losses and loss adjustment expenses and the reinsurance allowance for doubtful accounts, analyzing the recoverability of deferred tax assets, assessing goodwill for impairment and evaluating the investment portfolio for other-than-temporary declines in estimated fair value. Actual results may differ from the estimates used in preparing the consolidated financial statements.

     Readers are encouraged to review our Report on Form 10-K for the year ended December 31, 2007, or the “2007 10-K,” for a more complete description of our critical accounting estimates.

Business Overview

     We are engaged, through AIHL and its subsidiaries, primarily in the property and casualty and surety insurance business. In addition, AIHL Re, a captive reinsurance subsidiary of AIHL, is available to provide reinsurance to our insurance operating units and affiliates. We also own and manage properties in the Sacramento, California region through our subsidiary Alleghany Properties and conduct corporate investment and other activities at the parent level, including the holding of strategic equity investments. Our primary sources of revenues and earnings are our insurance operations and investments.

     The profitability of our insurance operating units, and as a result, our profitability, is primarily impacted by the adequacy of premium rates, as well as the cost of reinsurance, level of catastrophe losses, intensity of competition and investment returns. The ultimate adequacy of premium rates is not known with certainty at the time property casualty insurance policies are issued because premiums are determined before claims are reported. The adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural disasters, regulatory measures and court decisions that define and expand the extent of coverage and the effects of economic inflation on the amount of compensation due for injuries or losses.

     With respect to reinsurance, as part of their overall risk and capacity management strategy, our insurance operating units purchase reinsurance for certain amounts of risk underwritten by them, especially catastrophe risks. The reinsurance programs purchased by our insurance operating units are generally subject to annual renewal. Market conditions beyond their control determine the availability and cost of the reinsurance protection they purchase, which may affect the level of businesses written and thus their profitability.

     Catastrophe losses, or the absence thereof, have also had a significant impact on our results. For example, pre-tax catastrophe losses, net of reinsurance and reinsurance reinstatement premiums, at our insurance operating units were $48.9 million in 2007, $18.0 million in 2006 and $330.8 million in 2005. Pre-tax catastrophe losses, net of reinsurance and reinsurance reinstatement premiums, at our insurance operating units were $20.0 million for the first six months of 2008, compared with $33.0 million for the first six months of 2007. The incidence and severity of catastrophes in any short period of time are inherently unpredictable. Catastrophes can cause losses in a variety of our property and casualty lines, and most of our past catastrophe-related claims have resulted from severe storms. Although we experienced minimal catastrophe losses in 2006, 2007 and 2008 to date, it is possible that a catastrophic event or multiple catastrophic events could produce significant losses and have a material adverse effect on our financial condition and results of operations in the future.

     The profitability of our insurance operating units is also impacted by price competition. Historically, the financial performance of the property and casualty insurance industry has tended to fluctuate in cyclical periods of price competition and excess underwriting capacity, followed by periods of high premium rates and shortages of underwriting capacity. Although an individual insurance company’s financial performance is dependent on its own specific business characteristics, the profitability of most property and casualty insurance companies tends to follow this cyclical market pattern. As discussed in more detail below, our insurance operating units experienced increased price competition in certain of their lines of business during 2006. This competitive environment continued and increased during 2007 and continued to increase during the first six months of 2008, resulting in a decrease in pricing over that time. The impact of this price competition cannot be fully quantified in advance, but it is possible that this price competition, to the extent the loss costs of our insurance operating units exceed premiums, could have a material adverse effect on the results of our insurance operating units in the future.

     Finally, profitability is also affected by our investment income. Our invested assets, which are derived primarily from our own capital and cash flow from our insurance operating units, are invested principally in fixed income securities, although we also invest in equity securities. The return on fixed income securities is primarily impacted by general interest rates and the credit quality and duration of the securities.

     The following discussion and analysis presents a review of our results for the three and six months ended June 30, 2008 and 2007. You should read this review in conjunction with the consolidated financial statements and other data presented in this Form 10-Q as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Risk Factors” contained in our 2007 10-K and our Report on Form 10-Q for the quarter ended March 31, 2008. Our results for the first six months of 2008 are not indicative of operating results in future periods.

Consolidated Results of Operations

     The following table summarizes our consolidated revenues, costs and expenses and earnings for the three and six months ended June 30, 2008 and 2007.

		Three months ended June 30,								Six months ended June 30,
(in millions)		2008				2007				2008				2007
Revenues
Net premiums earned		$	240.2			$	235.2			$	485.7			$	466.8
Net investment income			34.8				38.7				70.1				78.6
Net realized capital (losses) gains			(21.8	)			5.7				52.9				55.8
Other income			0.1				2.4				0.2				11.1
Total revenues		$	253.3			$	282.0			$	608.9			$	612.3
Costs and expenses
Loss and loss adjustment expenses		$	139.4			$	119.7			$	274.7			$	216.9
Commissions, brokerage and other underwriting expenses			72.5				60.5				143.0				120.1
Other operating expenses			12.3				12.9				24.0				25.4
Corporate administration			8.5				9.1				18.4				17.1
Interest expense			0.2				0.3				0.3				1.0
Total costs and expenses			232.9				202.5				460.4				380.5
Earnings from continuing operations, before income taxes			20.4				79.5				148.5				231.8
Income taxes			7.4				20.8				44.9				69.5
Earnings from continuing operations			13.0				58.7				103.6				162.3
Discontinued operations
Operations			10.7				6.1				22.2				10.3
Income taxes			3.3				1.9				6.6				3.2
Earnings from discontinued operations, net of tax			7.4				4.2				15.6				7.1
Net earnings		$	20.4			$	62.9			$	119.2			$	169.4
Revenues:
AIHL		$	248.1			$	271.8			$	521.9			$	529.7
Corporate activities*			5.2				10.1				87.0				82.6
Earnings (loss) from continuing operations, before income taxes:
AIHL		$	24.6			$	79.4			$	81.6				169.0
Corporate activities*			(4.2	)			0.1				66.9				62.8

     Our earnings from continuing operations before income taxes in the second quarter and first six months of 2008 decreased from the corresponding 2007 periods, primarily reflecting increases in loss and loss adjustment expenses and commissions, brokerage and other underwriting expenses as well as a decrease in other income and net investment income, partially offset by an increase in net premiums earned. Discontinued operations consist of the operations of Darwin Professional Underwriters, Inc., or “Darwin.” Additional information regarding the results of discontinued operations can be found in “Financial Condition” as well as Note 8 to the Consolidated Financial Statements included in this report on Form 10-Q.

     The increase in loss and loss adjustment expenses and commissions, brokerage and other underwriting expenses primarily reflects the inclusion of EDC’s results in the first six months of 2008, which include a $24.7 million reserve increase in the second quarter of 2008 for the current and prior accident years. In addition, RSUI’s results included a net $16.7 million release of prior accident year loss reserves in the second quarter of 2008. Additional information regarding these

reserving actions and other items can be found in the discussion of AIHL’s operating unit results from continuing operations on pages 17 through 22 herein. The decrease in other income for the first six months of 2008 from the corresponding 2007 period primarily reflects a pre-tax gain of approximately $7.2 million realized in the 2007 first quarter on sales of real property by Alleghany Properties, compared with immaterial sales activity during the first six months of 2008. The decrease in net investment income for the second quarter and first six months of 2008 from the corresponding 2007 period was principally due to lower average investment yields on our fixed income portfolio during the second quarter and first six months of 2008. The increase in net premiums earned primarily reflects the inclusion of EDC’s results in the first six months of 2008.

     Net realized capital gains in the first six months of 2008 and 2007 primarily reflects sales by parent of common stock of Burlington Northern Santa Fe Corporation, or “Burlington Northern,” during the 2008 first quarter and 2007 first quarter. Net realized capital gains in the first six months of 2008 were partially offset by $62.7 million of unrealized losses recognized as impairment charges in the 2008 second quarter that are primarily related to energy (refinery) and financial service sector equity holdings of AIHL that were deemed to be other than temporary and, as such, are required to be charged against earnings, partially offset by $36.5 million of net realized capital gains on the sale of securities by AIHL. Additional information regarding our investments can be found in on pages 28 and 29 herein.

     The effective tax rate on earnings from continuing operations before income taxes was 30.2 percent for the first six months of 2008, compared with 30.0 percent for the corresponding 2007 period.

AIHL Operating Unit Pre-Tax Results from Continuing Operations

(in millions, except ratios)		RSUI				AIHL Re				CATA				EDC (1)				AIHL
Three months ended June 30, 2008
Gross premiums written		$	314.4				—			$	56.9			$	19.7			$	391.0
Net premiums written			192.1				—				49.2				18.9				260.2
Net premiums earned (2)		$	174.2				—			$	48.0			$	18.0			$	240.2
Loss and loss adjustment expenses			76.1				—				23.9				39.4				139.4
Commission, brokerage and other underwriting expenses (3)			43.4				—				20.6				8.5				72.5
Underwriting profit (loss) (4)		$	54.7				—			$	3.5			$	(29.9	)		$	28.3
Net investment income (2)																			30.6
Net realized capital losses (2)																			(22.8	)
Other income (2)																			0.1
Other expenses (3)																			(11.6	)
Earnings from continuing operations before income taxes																		$	24.6
Loss ratio (5)			43.7	%			—				49.8	%			218.2	%			58.0	%
Expense ratio (6)			24.9	%			—				43.0	%			47.3	%			30.2	%
Combined ratio (7)			68.6	%			—				92.8	%			265.5	%			88.2	%
Three months ended June 30, 2007
Gross premiums written		$	371.0			$	0.4			$	71.2				—			$	442.6
Net premiums written			224.0				1.4				56.3				—				281.7
Net premiums earned (2)		$	178.2			$	6.1			$	50.9				—			$	235.2
Loss and loss adjustment expenses			97.3				—				22.4				—				119.7
Commission, brokerage and other underwriting expenses (3)			39.4				—				21.1				—				60.5
Underwriting profit (4)		$	41.5			$	6.1			$	7.4				—			$	55.0
Net investment income (2)																			30.7
Net realized capital gains (2)																			5.7
Other income (2)																			0.2
Other expenses (3)																			(12.2	)
Earnings from continuing operations before income taxes																		$	79.4
Loss ratio (5)			54.6	%			—				44.0	%			—				50.9	%
Expense ratio (6)			22.1	%			0.8	%			41.4	%			—				25.7	%
Combined ratio (7)			76.7	%			0.8	%			85.4	%			—				76.6	%

AIHL Operating Unit Pre-Tax Results from Continuing Operations

(in millions, except ratios)		RSUI				AIHL Re				CATA				EDC (1)				AIHL
Six months ended June 30, 2008
Gross premiums written		$	569.5			$	0.2			$	112.1			$	43.0			$	724.8
Net premiums written			344.5				0.2				95.2				40.0				479.9
Net premiums earned (2)		$	352.0			$	0.2			$	94.9			$	38.6			$	485.7
Loss and loss adjustment expenses			170.6				—				47.4				56.6				274.6
Commission, brokerage and other underwriting expenses (3)			88.1				0.1				39.8				15.0				143.0
Underwriting profit (loss) (4)		$	93.3			$	0.1			$	7.7			$	(33.0	)		$	68.1
Net investment income (2)																			62.2
Net realized capital losses (2)																			(26.2	)
Other income (2)																			0.2
Other expenses (3)																			(22.7	)
Earnings from continuing operations before income taxes																		$	81.6
Loss ratio (5)			48.5	%			—				50.0	%			146.6	%			56.6	%
Expense ratio (6)			25.0	%			28.4	%			41.9	%			38.8	%			29.4	%
Combined ratio (7)			73.5	%			28.4	%			91.9	%			185.4	%			86.0	%
Six months ended June 30, 2007
Gross premiums written		$	659.9			$	0.4			$	135.2				—			$	795.5
Net premiums written			380.4				1.4				106.8				—				488.6
Net premiums earned (2)		$	344.8			$	23.8			$	98.2				—			$	466.8
Loss and loss adjustment expenses			173.8				—				43.1				—				216.9
Commission, brokerage and other underwriting expenses (3)			79.3				0.1				40.7				—				120.1
Underwriting profit (4)		$	91.7			$	23.7			$	14.4				—			$	129.8
Net investment income (2)																			62.6
Net realized capital losses (2)																			—
Other income (2)																			0.3
Other expenses (3)																			(23.7	)
Earnings from continuing operations before income taxes																		$	169.0
Loss ratio (5)			50.4	%			—				43.9	%			—				46.5	%
Expense ratio (6)			23.0	%			0.4	%			41.4	%			—				25.7	%
Combined ratio (7)			73.4	%			0.4	%			85.3	%			—				72.2	%