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Alleghany Investor Presentation February 2020 I. Alleghany - PowerPoint PPT Presentation

Dec 05, 2023 •214 likes •505 views

Alleghany Investor Presentation February 2020 I. Alleghany Overview Our Management Approach Strategy Philosophy 1 Own high-quality underwriting franchises Conservatism dominates our Underwrite for profit management

  1. Alleghany Investor Presentation February 2020

  2. I. Alleghany Overview

  3. Our Management Approach Strategy Philosophy 1  Own high-quality underwriting franchises “ Conservatism dominates our ― Underwrite for profit management philosophy. We ― Grow premiums only when market allows for profitable growth shun investment fads and ― Consistently maintain appropriately conservative loss reserves fashions in favor of acquiring 2  Invest for total return when risk/reward is attractive relatively few interests in 3 Acquire quality businesses at reasonable prices  basic financial, industrial and ― Provide resources, support and oversight to help them grow revenues, profits and other enterprises that offer the returns 4 potential to deliver long-term  Maintain a conservative financial and operating risk profile value to our investors ” 5  Hold significant unrestricted liquidity for potential opportunities (and downturns) 3

  4. A History of Investing in Successful Companies • Alleghany holding company formed • Nickel Plate, Chesapeake & Ohio, Erie and Pere Chicago Alleghany Asset Marquette Railroads Title Management World Minerals (merged into Penn Jones Motor (spun off in (sold to ABN (sold in 2005) Central in 1968) 1998/1999) Amro in 2001) Company 1929 1946 1949 1968 1974 1985 1986 1991 1993 1995 MSL Shelby New York Investors Underwriters Central Diversified Industries Insurance (sold Reinsurance Railroad Services (“IDS”) in 1991) Company (sold to (merged into (sold to Swiss Re in 2000) Penn Central in American Roundwood 1968) Express in 1984) (formerly Alleghany Capital Partners) PacificComp (sold to CopperPoint in 2017) 2002 2003 2007 2008 2012 2013 2014 2015 2017 2018 2019 Alleghany Capital Corporation Darwin Underwriters established (IPO in 2006 and sold in 2008) Legacy Alleghany / Logo Current Alleghany 4

  5. Attractive And Consistent Return 600 555.9 CAGR Continued 509.2 2019 Since '14 Since '09 Since '99 Focus on 500 Y BVPS 15.8% 6.0% 7.8% 8.5% BVPS Growth Y Share Price 28.3% 11.9% 11.8% 9.0% S&P 500 (Total Return) 31.5% 11.7% 13.5% 6.1% 400 Indexed Total Return 324.0 Long-term 300 Conservative Orientation 200 100 Quasi- Target Annual Growth in BVPS: autonomous 7% - 10% Subsidiary 0 Operating 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Model Y BVPS Y Share Price S&P 500 (Total Return) Note: As of December 31, 2019. Compound annual growth rates (“CAGR”) for BVPS and Stock Price include the impact of $10 speci al dividend paid in 2018. 5

  6. Modest Financial Leverage and Conservative Risk Profile Holding Company Liquidity Debt to Capital Other Debt (ACC) (millions) $1,383 Senior Notes $1,283 19.4% $1,122 17.5% 13.9% $1,047 $1,032 16.3% 15.8% 15.6% excl. 14.7% $821 2020 notes (1) 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Risk Assets / Shareholders’ Equity (3) Peak Zone PML / Shareholder Equity (2) 0.62x 10% 0.58x 9% 0.52x 0.53x 0.51x 8% 8% 8% 7% 0.39x 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 (1) Alleghany 2020 Senior Notes were redeemed on January 15, 2020. (2) Reflects net occurrence PML (after-tax) in a 1-in-250 year event (having a likelihood of being exceeded in any single year of 0.4 percent) for largest single zone peril (e.g. Northeast U.S. Wind for 2019). (3) Risk assets are defined as high yield bonds, below investment grade collateralized loan obligations and bank loans, publicly traded equity securities, private equity and partnership interests. 6

  7. Alleghany Today 90 years as a public company (NYSE: Y)  $8.8 billion in book value  Baa1 senior debt rating from Moody’s  $11.9 billion equity market capitalization  BBB+ senior debt rating from Standard & Poor’s  $20.1 billion in total cash & investments  a- senior debt rating from A.M. Best Alleghany Capital Reinsurance Insurance Investments Corporation 46% (1) 29% (1) 25% (1) Subsidiaries & Asset Management TransRe RSUI CapSpecialty Investments  GAAP equity of $5.2  GAAP equity of $1.9  GAAP equity of $0.4  $15.8 billion fixed billion billion billion income  Gross premiums  Gross premiums written  Gross premiums written  $2.5 billion equity written of $4.5 of $1.4 billion of $0.4 billion portfolio billion  10 th largest U.S. excess &  Focuses on niche  $0.6 billion other  Top 15 global surplus lines group (3) specialty commercial invested assets reinsurer (2) lines Notes: Financial data as of December 31, 2019 unless otherwise indicated. Market data as of February 14, 2020. (1) Contribution to 2019 adjusted earnings before interest and taxes, excluding corporate items. Best’s Review March 2019 – Top 50 Global Reinsurers; ranking based on unaffiliated gross premiums written in 2018. (2) A.M. Best U.S. Surplus Lines – Segment Review, September 2019. (3) 7

  8. Capital Allocation as of December 31, 2019 amounts in millions, except book value per share Consolidated: Alleghany Capital Operating Entities: Stockholders' Equity $ 8,777 89.8% W&W|AFCO Steel $ 255 2.6% Parent Company Debt (1) 994 10.2% Jazwares 235 2.4% Total Capital $ 9,771 100.0% Concord 109 1.1% Precision Cutting Technologies 105 1.1% Wilbert (45% investment) (2) Shares outstanding (mm) 14.36 82 0.9% BVPS $ 611.00 Kentucky Trailer 81 0.8% Market Capitalization $ 11,878 IPS 67 0.7% Total Alleghany Capital $ 934 9.6% (Re)insurance: Other: Parent cash and marketable securities (3) TransRe $ 5,243 53.7% $ 1,233 12.6% RSUI 1,874 19.2% Stranded Oil 87 0.9% CapSpecialty 395 4.0% Alleghany Properties 24 0.2% Other items, net (4) AIHL Re 21 0.2% (40) (0.4%) Total (Re)insurance $ 7,533 77.1% Total Other $ 1,304 13.3% Note: All subsidiaries are majority owned unless otherwise stated. Market data as of February 14, 2020. (1) Excludes $350 million par value senior notes at TransRe that mature in 2039. Also excludes $367 million of debt at Alleghany Capital (“ACC”). (2) Alleghany Capital expected to increase its ownership to over 90% during the first half of 2020. Wilbert will then be accounted for on a fully-consolidated basis. (3) Parent cash and marketable securities exclude cash at the TransRe holding company ($50 million at 12/31/2019), which is included in TransRe capital. (4) Primarily Alleghany parent deferred compensation and taxes, as well as ACC parent. 8

  9. Current (Re)insurance Operations ($ in millions) Cumulative Results Over Holding Period Net Underwriting Subsidiary / Cash & Stockholders’ Years Premiums Profits Combined Net Acquisition Date Investments Equity Held Written (Losses) Ratio Dividends IRR $13,804 $5,243 8 $29,130 $1,017 96.4% $1,592 (1) 10.1% 2.6x March 6, 2012 3,829 1,874 17 12,026 1,776 84.6 1,149 11.6 2.0x July 1, 2003 849 395 18 3,523 (55) 101.6 130 5.5 2.2x January 1, 2002 Total $18,515 (2) 7,533 (2) (Re)insurance 2.5x Note: As of December 31, 2019. (1) Total dividends to Alleghany of $1,901 million less a $309 million capital contribution in 2014 primarily to repay senior notes. (2) Inclusive of AIHL Re. 9

  10. Consolidated Underwriting Results for Past 10 Years Combined Ratio Underwriting Profit $495 83.0% $467 $421 $401 88.8% 89.0% 90.1% $220 91.9% 93.4% 94.1% $131 95.5% $50 $33 99.4% Pre- Pre- TransRe TransRe ($162) 103.2% 106.4% ($316) '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 2010-to-Date Underwriting Profits of $1.7 B and Combined Ratio of ~95.5% Note: Underwriting profit is a non-GAAP financial measure. Refer to the appendix for further information. 10

  11. TransRe – Structural Competitive Advantages Net Premiums Written (1) Business Overview (2019)  Diversified, global reinsurer with casualty Engineering Other Specialty & specialty expertise 2% 3% Aviation Marine & 2% Long-standing client and intermediary  Energy relationships 4%  70% proportional business Specialty Personal Auto /  Leads or co-leads more than half 27% Motor Guaranty 15% of its book 8% Strong balance sheet and infrastructure   Leveraging market position with third A&H Traditional 8% Casualty party capital 16%  Generates recurring fee income Catastrophe  TransRe has returned net dividends of Property 7% $1,592 million since acquisition and Non- Professional repaid $667 million in senior notes Catastrophe Liability Casualty Property 15% 46% 2019 Highlights 20% Property  Net premiums written up 13% 27% Underwriting loss of $41mm   Profitability impacted by cat losses $3.8 billion (1) relating to Typhoons Hagibis and Faxai History of Prudently Navigating Market Conditions and Opportunities (1) Excludes Farmers quota share treaty which contributed $691 million to net premiums written. 11

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