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Alleghany 4Q 2016 A History of Investing in Successful Com panies - PowerPoint PPT Presentation

Oct 04, 2023 •169 likes •484 views

Alleghany 4Q 2016 A History of Investing in Successful Com panies Chicago Title (spun off CapSpecialty in 19 9 8 / 19 9 9 ) RSUI Jones Motor New York Com pany Alleghany Asset PacificCom p Central Railroad Managem ent (sold to (m erged

  1. Alleghany 4Q 2016

  2. A History of Investing in Successful Com panies Chicago Title (spun off CapSpecialty in 19 9 8 / 19 9 9 ) RSUI Jones Motor New York Com pany Alleghany Asset PacificCom p Central Railroad Managem ent (sold to (m erged into ABN Am ro in 20 0 1) Penn Central in 19 6 8 ) TransRe 2016 1929 1949 1954 1968 1974 1984 1999 2007 Shelby Darwin Insurance Underwriters Nickel Plate, Chesapeake & Ohio, (IPO in (sold in Reinsurance Alleghany Erie and Pere Marquette 20 0 6 and 19 9 1) Com pany Capital Railroads (m erged into Penn sold in (sold to Swiss Corporation Central in 19 6 8 ) 20 0 8 ) MSL Re in 20 0 0 ) Industries Roundwood Investors Diversified Services (“IDS”) (sold to World Minerals (sold in Am erican Express in 19 8 4 ) 20 0 5) Legacy Alleghany Current Alleghany 2

  3. Strong Track Record of Creating Long Term Stockholder Value Indexed Perform ance 13 Years (1) 10 Years 5 Years 2003 – 2016 2006-2016 2011-2016 Focus on book value Alleghany BVPS +18 3% +111% +51% per share growth Alleghany Price +220 % +8 5% +113% +16 4 % +9 6 % +9 8 % S&P 500 Long-term (%) conservative orientation 350 300 250 Track record of 200 stable returns leads to outperform ance 150 100 50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Alleghany’s book value per share has delivered a stable return that has outpaced the S&P 50 0 over the long term Note: Alleghany price and S&P 500 calculated on a total return basis. Annual tim e periods ending Decem ber 31 of the respective year. (1) Approxim ates current CEO’s tenure w ith Alleghany. Source: Bloom berg 3

  4. Delivering Consistent BVPS Growth Over Cycles Book Value Annual Rolling Annualized Average Year Per Share * Growth in BVPS Three-Year Four-Year Five-Year Seven-Year Ten-Year 1999 $ 122.27 2000 141.03 15.3% 2001 162.36 15.1% 2002 162.75 0.2% 10.0% 2003 182.18 11.9% 8.9% 10.5% 2004 204.08 12.0% 7.9% 9.7% 10.8% 2005 212.80 4.3% 9.3% 7.0% 8.6% 2006 244.25 14.8% 10.3% 10.7% 8.5% 10.4% 2007 281.36 15.2% 11.3% 11.5% 11.6% 10.4% 2008 267.37 (5.0%) 7.9% 7.0% 8.0% 7.4% 2009 294.79 10.3% 6.5% 8.5% 7.6% 8.9% 9.2% 2010 325.31 10.4% 5.0% 7.4% 8.9% 8.6% 8.7% 2011 342.12 5.2% 8.6% 5.0% 7.0% 7.7% 7.7% 2012 379.13 10.8% 8.7% 9.1% 6.1% 8.6% 8.8% 2013 412.96 8.9% 8.3% 8.8% 9.1% 7.8% 8.5% 2014 465.51 12.7% 10.8% 9.4% 9.6% 7.5% 8.6% 2015 486.02 4.4% 8.6% 9.2% 8.4% 8.9% 8.6% 2016 515.24 6.0% 7.7% 8.0% 8.5% 8.3% 7.8% Average 9.0% 8.7% 8.7% 8.7% 8.6% 8.5% * Adjusted for subsequent stock dividends 4

  5. Alleghany Today ~87 years as a public company (NYSE: Y)  $7.9 billion in book value  Baa1 senior debt rating from Moody’s  $9.4 billion equity market capitalization  BBB+ senior debt rating from Standard & Poor’s  $18.7 billion in total cash & investments  a- senior debt rating from A.M. Best Reinsurance Insurance Investm ents Asset Alleghany Capital TransRe RSUI CapSpecialty PacificCom p Managem ent Corporation  Statutory Surplus  Statutory Surplus  Statutory Surplus  Statutory Surplus  $14.4 billion fixed  Bourn & Koch of $1.5 billion of $4.8 billion of $234 million of $112 million income  Kentucky Trailer  Gross Premiums  Gross Premiums  $3.1 billion equity  Gross Premiums  Gross Premiums Written of $1.1  SORC Written of $4.3 Written of $0.3 Written of $0.1 portfolio billion billion billion billion  $0.6 billion other  IPS  Top 10 global  11 th largest U.S.  Focuses on niche  Specializes in invested assets reinsurer (1) excess & surplus  Jazwares specialty California workers’ lines group (2) commercial lines compensation insurance Notes: Market capitalization and financial data as of December 31, 2016 unless otherwise indicated. (1) Best’s Review September 2016 – Top 50 Global Reinsurers; ranking based on non-life net premiums written. (2) A.M. Best U.S. Surplus Lines – Segment Review, September 2016. 5

  6. Alleghany Business Model – Incom e Generation Through Insurance, Private Capital and Equity Capital Markets Investing Underwriting Investment Returns Returns Private Capital Build-Out Alleghany TransRe RSUI CapSpecialty PacificComp Capital Corporation Dividends Dividends Alleghany Investm ents Corporation Strategic Public Share Repay Acquisitions Dividends Investments Securities Repurchases Debt Investm ents M&A Capital Managem ent 6

  7. Capital Allocation as of Decem ber 31, 20 16 $ in m illions Consolidated: Alleghany Capital: $ 7,940 Stockholders' Equity Stranded Oil $ 149 1.7% Parent Company Debt 991 Bourn & Koch 65 0.7% Total Capital $ 8 ,931 Kentucky Trailer 58 0.6% IPS 94 1.1% 237 2.7% Jazwares Corporate and other (12) (0.1%) Total Alleghany Capital $ 591 6.7% (Re)insurance: TransRe $ 5,203 58.3% Other: TransRe ownership of (78) (0.9%) Cash and marketable securities (1) $ 965 10.8% CapSpecialty RSUI 1,602 17.9% Investment in Ares 224 2.5% CapSpecialty 320 3.6% Alleghany Properties 34 0.4% 1.3% (0.5%) PacificComp 119 Other items, net (49) Total (Re)insurance $ 7,166 Total Other $ 1,174 8 0 .2% 13.1% (1) Cash and public investments excludes cash at the TransRe holding company ($82.8 million at 12/ 31/ 2016), which is included in TransRe capital. 7

  8. TransRe – Leading Specialty Professional Reinsurer Investm ent Overview Diversified Business Mix (1) Engineering  Acquired in March of 2012 for $3.5 2% Aviation billion in cash and stock Property 2% Catastrophe Marine and Non- 13% energy Catastrophe  Highly diversified business by both line 5% Property Guaranty 22% and geography with approximately 35% 6% Medical of premiums from outside the U.S. malpractice Auto / motor 4% 7%  Long-lasting client relationships A&H General 4% Liability 23%  Prudent reserves with significant IBNR E&O / D&O 12%  TransRe has returned net dividends of GPW: $4 .3 billion $766 million since acquisition and Continued Underwriting Profitability repaid $667 million in senior notes ($ in m illions) Cumulative underwriting  No legacy AIG liabilities (2) profits of $1.5 billion under Underwriting profit Alleghany ownership  Formed exclusive broker market Combined ratio 400 95.0% $345 $334 $327 93.3% underwriting relationship with Gen Re 93.0% $267 300 $261 in July 2016 91.0% 200 90.9% 89.0% 89.9% 89.9% 89.6% 100 87.0% 0 85.0% 2012 2013 2014 2015 2016 8 (1) Based on gross premiums written in the twelve month period ended December 31, 2016. (2) 100% of 1986 and prior AIG exposure commuted.

  9. TransRe – Flexibility from Financial Strength Highlights Sum m ary Financials  Profitable book (consolidated combined ratio of ($ in m illions) FY20 14 FY20 15 FY20 16 90.7% since acquisition) Gross premiums written $3,600 $3,662 $4,330 Net premiums written 3,410 3,387 3,969  Disciplined underwriting and financial strength Net premiums earned 3,331 3,116 3,845 provide flexibility to shift book and capitalize Net losses and loss expenses on opportunities across products, lines and Current year attritional 2,045 1,895 2,440 Current year catastrophe 32 47 139 geographies Prior year (182) (208) (294) 2,285 1,719 1,909  Efficient business model 1,299 Underwriting expenses 1,077 1,070 Underwriting Profit $34 5 $327 $26 1 FY 20 16 Consolidated GAAP Ratios Loss and loss expense  2016 underwriting results lower largely due to Current attritional 61.4% 60.9% 63.5% higher catastrophe losses related to Alberta Current catastrophe 1.4% 1.0% 3.6% fires, earthquakes in Japan, Ecuador and New Prior (5.5%) (6.7%) (7.6%) 57.3% 55.2% 59.5% Zealand, typhoon and flooding in China and Expense 32.3% 34.3% 33.8% Hurricane Matthew, partially offset by higher Com bined Ratio 8 9 .6 % 8 9 .5% 9 3.3% favorable prior year development GAAP Equity $5,130 $5,210 $5,203  Premiums written and earned for the year up significantly primarily due to the large whole Pre-tax ROE (annualized) 14.9% 12.1% 11.1% account quota share entered into in 4Q ’15, partially offset by changes in foreign exchange 9

  10. RSUI – Leading and Profitable Specialty Insurer Investm ent Overview Diversified Business Mix (1) Alternative Structures  Acquired in July of 2003 5%  Since Acquisition: D&O Binding Authority 15% 14%  RSUI’s equity has compounded at ~11% a Professional Liability 13% year  Cumulative combined ratio of 81.7% General Liability Property 3%  RSUI has returned net $874 million 34% Umbrella / Excess 16% dividends to Alleghany GPW: $1.1 billion Underwriting Profitability ($ in m illions) Cumulative underwriting profits of $1.7 billion under Alleghany ownership $220 122% $197 $190 $180 $160 $158 $151 $138 $138 99% $108 $92 $83 80% 80% 80% 78% 73% 71% 70% 69% 69% 82% $5 82% 86% Underwriting profit Combined ratio ($133) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (1) Based on gross premiums written by department as for the twelve months ended December 31, 2016 (modest amount of property premium written through binding authority department). 10

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