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Alleghany Investor Presentation August 2020 Our Management - PowerPoint PPT Presentation

Apr 27, 2023 •169 likes •520 views

Alleghany Investor Presentation August 2020 Our Management Approach Strategy Philosophy 1 Own high-quality underwriting franchises Conservatism dominates our Underwrite for profit management philosophy. We Grow premiums

  1. Alleghany Investor Presentation August 2020

  2. 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 prudent 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) 2

  3. I. COVID-19 Update & Outlook

  4. 2020 Overview & Outlook  COVID- 19 is a ‘ Catastrophe in Progress ’. Outcome remains highly uncertain  Re/Insurance: - $288 million reserved for COVID-19 losses (TransRe: $268 million / RSUI: $20 million; primarily IBNR) - Event cancellation, property / business interruption are most significant components - Market conditions and leading indicators continue to improve at an accelerating pace  Alleghany Capital: - Alleghany Capital companies’ 2Q revenues and earnings impacted by sharp declines in economic activity and project site closures and delays, but overall impacts appear manageable - Improving momentum entering 2H 2020  Investments/Financial: - Investment portfolio defensively positioned; lower than average allocation to risk assets - Continuing pressure on net investment income given low yield environment - Ample liquidity with over $1.2 bn cash and marketable securities at holding company 4

  5. COVID-19 Pandemic: Year-to-Date Losses by Business Line  $288 million of Pandemic related losses (primarily IBNR) comprised as follows: TransRe RSUI Total Commentary ($ in millions) Estimated remaining event limits, net of provisions, of  Event Cancellation $ 111 $ 111 approximately $25 million for 1H 2020, ~$35 million for 2H 2020 and ~$70 million in 2021 TransRe : Primarily related to non-North American  property contracts / treaties  RSUI : Large majority of policies include explicit Property 68 $ 20 88 pathogen exclusions; provision follows detailed claims review and primarily relates to small number of U.S. property policies with low layer or sub-limited coverage grant as well as a provision for legal expenses  One specific cover Accident & Health 38 38 Higher overall loss ratio selections   Higher loss ratio selections for trade credit, surety and Guaranty 31 31 mortgage business  Includes specifically impacted miscellaneous treaties or Other 20 20 coverages Total $ 268 $ 20 $ 288 5

  6. II. Performance Highlights – 1 st Half 2020

  7. Summary of 1H 2020 Results ($ in millions) Commentary Income Statement Change vs.  Strong net premium written growth, driven 1H 2020 1H 2019 by both Reinsurance (+4%) and Insurance (+17%) Net Premiums Written $3,012- 6%-- Decline in net investment income due to  Net Investment Income 231- (13)% lower (re)investment yields, as well as lower Underwriting Result (64) N/M dividend and partnership income Combined Ratio 102.3% (10) pts-  Underwriting result and adjusted earnings Net Losses (1) $(184) N/M impacted by $288mm of estimated pre-tax COVID-19 losses (See slide 5) Adjusted Earnings (2) 86 (73)%  Underlying results strong; combined ratio 1H 2020 Changes in Equity ex-COVID-19 of 92.2% 1H 2020 impacted by pre-tax impairment  Q4 ‘19 Stockholders’ Equity $8,777--- charges of $74 million relating to write- Net Losses (184)-- downs of Stranded Oil oil field assets Change in AOCI (3) 121---  Book value per share adjusted for March Special Dividend (215)-- 2020 special dividend declined by 0.8% during the first half of 2020 Share Repurchases (44)-- - Excluding the impact of movements in Other (4) 2)-- AOCI and the special dividend, Q2 ‘20 Stockholders’ Equity $8,456--- declined by 2.2% during 1H 2020 (1) Attributable to Alleghany stockholders. (2) Net earnings attributable to Alleghany stockholders excluding (on an after-tax basis) change in the fair value of equity securities, net realized gains, change in allowance for credit losses on available for sale securities and amortization of intangible assets. (3) Accumulated other comprehensive income. (4) Includes cumulative effect of adoption of new accounting pronouncements and other. 7

  8. Alleghany Quarterly and Year to Date Consolidated Performance ($ in millions) Net Investment Income Combined Ratio Net Premiums Written +2% +6% -17% -13% $3,012 102.8% 102.3% $266 91.6% 92.5% $2,832 $231 $1,447 $143 $1,478 $119 Q2 '20 Q2 '19 1H '20 1H '19 Q2 '20 Q2 '19 1H '20 1H '19 Q2 '20 Q2 '19 1H '20 1H '19 Net Earnings (1) Adjusted Earnings (1) BVPS Growth (2) Ex. AOCI: -40% N/M -93% -73% 2.2% 3.6% (2.2)% 9.4% $736 $319 14.1% $179 7.6% $296 5.6% $86 $177 $12 (0.8%) $(184) 1H '20 1H '19 1H '20 1H '19 Q2 '20 Q2 '19 Q2 '20 Q2 '19 1H '20 1H '19 Q2 '20 Q2 '19 (1) Attributable to Alleghany stockholders. (2) Adjusted for $15/share dividend paid in March 2020. 8

  9. Underwriting Performance – 1H 2020 Reinsurance Insurance Casualty & Cap Total Property Other Total RSUI Specialty Total Re/Insurance Loss ratio 80.2% 72.0% 74.4% 66.2% 60.5% 64.8% 72.3% Expense ratio 31.1% 30.3% 30.5% 23.5% 41.3% 28.1% 30.0% Combined ratio 111.3% 102.3% 104.9% 89.7% 101.8% 92.9% 102.3% Catastrophe activity & prior year development: Current year catastrophe losses 32.1% 5.1% 13.1% 12.1% 0.8% 9.2% 12.2% Net (favorable) adverse development (9.2%) (3.2%) (4.9%) 3.2% 0.1% 2.4% (3.3%) in prior year loss reserves Combined ratio excluding catastrophe losses and prior 88.4% 100.4% 96.7% 74.4% 100.9% 81.3% 93.4% year development Strong Underlying Performance Offset by Significant Catastrophe (COVID-19) Activity 9

  10. Capital Allocation as of June 30, 2020 amounts in millions, except book value per share Consolidated: Alleghany Capital Subsidiaries: Stockholders' Equity $ 8,456 87.7% Jazwares $ 287 3.0% Parent Company Debt (1) 1,190 12.3% W&W|AFCO Steel 255 2.6% $ 9,646 100.0% Wilbert (2) Total Capital 146 1.5% Precision Cutting Technologies 127 1.3% 14.31 Shares outstanding (mm) Concord 108 1.1% BVPS $ 590.85 Kentucky Trailer 80 0.8% BVPS ex. AOCI 570.45 IPS 66 0.7% $ 7,474 Market Capitalization Total Alleghany Capital $ 1,067 11.1% Re/insurance: Other: Parent cash and marketable securities (3) TransRe $ 5,154 53.4% $ 1,197 12.4% RSUI 1,746 18.1% Stranded Oil 26 0.3% 399 4.1% CapSpecialty Alleghany Properties 24 0.2% Other items, net (4) 24 0.2% AIHL Re 9 0.1% Total Re/insurance $ 7,323 75.9% Total Other $ 1,256 13.0% Note: All subsidiaries are majority owned unless otherwise stated. Market data as of July 31, 2020. (1) Excludes $350 million par value senior notes at TransRe that mature in 2039 as well as $439 million of debt (excluding intercompany debt) at Alleghany Capital. (2) On April 1, 2020, Alleghany Capital acquired an additional approximately 55% of Wilbert it did not previously own, bringing its equity interest to approximately 100%. As of that date, Wilbert is accounted for on a fully-consolidated basis. Prior to April 1, 2020, Alleghany had a 45% equity investment accounted for using equity method. (3) Parent cash and marketable securities exclude $45 million of cash at the TransRe holding company, which is included in TransRe capital. (4) Primarily Alleghany parent deferred compensation and taxes, as well as ACC parent. 10

  11. III. Re/Insurance Operations

  12. Current (Re)insurance Operations ($ in millions) Cumulative Results Over H olding Period Ne t Underwriting Subsidiary / Cash & Stockholders’ Years Premiums Profits Combined Ne t Acquisition Date Investments Equity Held Written (Losses) Ratio Dividends IRR $13,991 $5,154 8 $31,427 $907 97.1% $1,732 8.8% 2.7x March 6, 2012 3,946 1,746 17 12,571 1,824 84.8 1,324 11.3 2.3x July 1, 2003 925 399 18 3,692 (58) 101.6 130 5.0 2.3x January 1, 2002 Total $18,894 (1) 7,323 (1) (Re)insurance 2.6x Note: As of June 30, 2020. (1) Includes AIHL Re. 12

  13. Consolidated Underwriting Results for Past 10 Years Underwriting Profit Combined Ratio ($ in millions) $495 $467 83.0% $421 $401 88.8%89.0% 90.1% $220 91.9% 93.4% $131 94.1% 95.9% $50 $33 99.4% ($64) Pre- Pre- 102.3% TransRe 103.2% TransRe ($162) 106.4% ($316) '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1H '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 1H '20 '20 Catastrophe Losses ($mm): Ex. C atastrophe C ombined Ratio (%): 31 74 470 15 1 95 62 226 818 65 8 400 346 79.0 83.5 81.5 86.5 86.6 87.5 87.4 89.9 90.0 92.1 90.1 2010-to-Date Underwriting Profits of $1.7 B and Combined Ratio of ~95.9% Note: Underwriting profit is a non-GAAP financial measure. Refer to the appendix for further information. 13

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