Segments of Business

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Segments of Business

13. Segments of Business

(a) Overview

Alleghany’s segments are reported in a manner consistent with the way management evaluates the businesses. As such, Alleghany classifies its businesses into three reportable segments – reinsurance, insurance and Alleghany Capital.

Reinsurance and insurance underwriting activities are evaluated separately from investment and other activities. Segment accounting policies are described in Note 1.

The reinsurance segment consists of property and casualty reinsurance operations conducted by TransRe’s reinsurance operating subsidiaries and is further reported through two major product lines – property and casualty & specialty. TransRe provides property and casualty reinsurance to insurers and other reinsurers through brokers and on a direct basis to ceding companies. TransRe writes a modest amount of property and casualty insurance business, which is included in the reinsurance segment. A significant portion of the premiums earned by TransRe’s operations are generated by offices located in Canada, Europe, Asia, Australia, Africa and those serving Latin America and the Caribbean. Although the majority of the premiums earned by these offices typically relate to the regions where they are located, a significant portion may be derived from other regions of the world, including the U.S. In addition, although a significant portion of the assets and liabilities of these foreign offices generally relate to the countries where the ceding companies and reinsurers are located, most investments are located in the country of domicile of these offices.

The insurance segment consists of property and casualty insurance operations conducted in the U.S. by AIHL through its insurance operating subsidiaries RSUI and CapSpecialty. RSUI also writes a modest amount of assumed reinsurance business, which is included in the insurance segment.

The Alleghany Capital segment consists of industrial operations, consumer & services operations (formerly non-industrial operations) and corporate operations at the Alleghany Capital level, which include certain hotel development projects. Industrial operations are conducted through PCT, Kentucky Trailer, W&W|AFCO Steel, beginning April 1, 2020, Wilbert, and beginning May 10, 2021, Piedmont. Consumer & services operations are conducted through IPS, Jazwares and Concord.

Corporate activities are not classified as a segment. The primary components of corporate activities are Alleghany Properties, activities at the Alleghany parent company and, prior to its December 31, 2020 sale, SORC. Corporate activities also include the elimination of minor activity between segments.

In addition, corporate activities include interest expense associated with the senior notes issued by Alleghany, whereas interest expense associated with senior notes issued by TransRe is included in “Total Segments” and interest expense associated with other debt is included in Alleghany Capital. Information related to the senior notes and other debt can be found in Note 8.

(b) Results

The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for 2021, 2020 and 2019:

	Reinsurance Segment							Insurance Segment
Year Ended December 31, 2021	Property			Casualty & specialty (1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital			Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written	$	1,975.2		$	4,058.8	$	6,034.0	$	2,067.6	$	475.2	$	2,542.8	$	8,576.8		$	—		$	8,576.8		$	(38.0	)	$	8,538.8
Net premiums written		1,550.4			3,837.0		5,387.4		1,354.7		407.3		1,762.0		7,149.4			—			7,149.4			—			7,149.4
Net premiums earned		1,708.8			3,768.3		5,477.1		1,230.7		389.9		1,620.6		7,097.7			—			7,097.7			—			7,097.7
Net loss and LAE		1,444.2			2,347.4		3,791.6		805.5		237.8		1,043.3		4,834.9			—			4,834.9			—			4,834.9
Commissions, brokerage and other underwriting expenses(2)		480.1			1,176.6		1,656.7		261.1		149.7		410.8		2,067.5			—			2,067.5			—			2,067.5
Underwriting (loss) profit(3)	$	(215.5	)	$	244.3	$	28.8	$	164.1	$	2.4	$	166.5		195.3			—			195.3			—			195.3
Net investment income															509.0			(0.2	)		508.8			31.6			540.4
Change in the fair value of equity securities															457.1			—			457.1			49.7			506.8
Net realized capital gains															57.6			7.6			65.2			2.2			67.4
Change in allowance for credit losses on available for sale securities															2.0			—			2.0			0.1			2.1
Product and service revenues															39.3			3,736.4			3,775.7			14.0			3,789.7
Other operating expenses															88.9			3,387.8			3,476.7			2.9			3,479.6
Corporate administration															(0.1	)		—			(0.1	)		57.3			57.2
Amortization of intangible assets															1.8			48.1			49.9			—			49.9
Interest expense															26.9			16.2			43.1			59.2			102.3
Earnings (losses) before income taxes														$	1,142.8		$	291.7		$	1,434.5		$	(21.8	)	$	1,412.7

	Reinsurance Segment								Insurance Segment
Year Ended December 31, 2020	Property			Casualty & specialty (1)		Total			RSUI		Cap Specialty			Total		Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written	$	1,761.7		$	3,475.6	$	5,237.3		$	1,714.4	$	411.3		$	2,125.7	$	7,363.0		$	—	$	7,363.0		$	(33.6	)	$	7,329.4
Net premiums written		1,439.6			3,405.4		4,845.0			1,124.8		374.6			1,499.4		6,344.4			—		6,344.4			—			6,344.4
Net premiums earned		1,379.7			3,265.0		4,644.7			1,008.8		346.7			1,355.5		6,000.2			—		6,000.2			—			6,000.2
Net loss and LAE		1,130.6			2,256.3		3,386.9			738.4		213.8			952.2		4,339.1			—		4,339.1			—			4,339.1
Commissions, brokerage and other underwriting expenses(2)		424.2			1,000.8		1,425.0			226.1		138.7			364.8		1,789.8			—		1,789.8			—			1,789.8
Underwriting (loss) profit(3)	$	(175.1	)	$	7.9	$	(167.2	)	$	44.3	$	(5.8	)	$	38.5		(128.7	)		—		(128.7	)		—			(128.7	)
Net investment income																	465.7			1.9		467.6			23.3			490.9
Change in the fair value of equity securities																	(55.8	)		—		(55.8	)		(54.7	)		(110.5	)
Net realized capital gains																	37.1			35.5		72.6			(69.5	)		3.1
Change in allowance for credit losses on available for sale securities																	(8.0	)		—		(8.0	)		—			(8.0	)
Product and service revenues																	34.9			2,477.5		2,512.4			8.7			2,521.1
Other operating expenses																	103.6			2,310.0		2,413.6			15.7			2,429.3
Corporate administration																	(0.3	)		—		(0.3	)		48.9			48.6
Amortization of intangible assets																	0.8			43.4		44.2			—			44.2
Interest expense																	27.0			15.5		42.5			45.7			88.2
Earnings (losses) before income taxes																$	214.1		$	146.0	$	360.1		$	(202.5	)	$	157.6

	Reinsurance Segment								Insurance Segment
Year Ended December 31, 2019	Property			Casualty & specialty (1)		Total			RSUI		Cap Specialty			Total		Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written	$	1,700.3		$	3,245.4	$	4,945.7		$	1,366.6	$	371.8		$	1,738.4	$	6,684.1		$	—	$	6,684.1		$	(27.7	)	$	6,656.4
Net premiums written		1,328.8			3,166.2		4,495.0			912.0		344.7			1,256.7		5,751.7			—		5,751.7			—			5,751.7
Net premiums earned		1,280.1			3,046.9		4,327.0			824.2		326.9			1,151.1		5,478.1			—		5,478.1			—			5,478.1
Net loss and LAE		942.6			2,018.5		2,961.1			503.7		221.6			725.3		3,686.4			—		3,686.4			—			3,686.4
Commissions, brokerage and other underwriting expenses(2)		424.2			982.6		1,406.8			219.2		132.7			351.9		1,758.7			—		1,758.7			—			1,758.7
Underwriting (loss) profit(3)	$	(86.7	)	$	45.8	$	(40.9	)	$	101.3	$	(27.4	)	$	73.9		33.0			—		33.0			—			33.0
Net investment income																	533.2			6.3		539.5			10.7			550.2
Change in the fair value of equity securities																	705.8			—		705.8			3.9			709.7
Net realized capital gains																	6.0			1.0		7.0			(13.5	)		(6.5	)
Change in allowance for credit losses on available for sale securities																	(19.7	)		—		(19.7	)		—			(19.7	)
Product and service revenues																	27.0			2,289.3		2,316.3			12.5			2,328.8
Other operating expenses																	103.1			2,132.9		2,236.0			27.3			2,263.3
Corporate administration																	4.1			—		4.1			70.7			74.8
Amortization of intangible assets																	1.3			32.5		33.8			—			33.8
Interest expense																	27.1			20.1		47.2			52.8			100.0
Earnings (losses) before income taxes																$	1,149.7		$	111.1	$	1,260.8		$	(137.2	)	$	1,123.6

(1)Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident & health; mortgage reinsurance; surety; and credit.

(2)Includes amortization associated with deferred acquisition costs of $1,693.1 million, $1,457.0 million and $1,392.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

(3)Underwriting profit represents net premiums earned less net loss and LAE and commissions, brokerage and other underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income, change in the fair value of equity securities, net realized capital gains, change in allowance for credit losses on available for sale securities, product and service revenues, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance.

(c) Foreign operations

Information associated with Alleghany’s foreign operations in its reinsurance segment (representing the vast majority of Alleghany’s foreign operations), is as follows:

•Foreign gross premiums written were approximately $1.7 billion in each of 2021, 2020 and 2019.

•Foreign net premiums earned in 2021, 2020 and 2019 were approximately $1.6 billion, $1.6 billion and $1.5 billion, respectively. The foreign country in which Alleghany generates the largest amount of premium revenues is the U.K. Net premiums earned by operations in the U.K. in 2021, 2020 and 2019 were $756.6 million, $699.6 million and $615.6 million, respectively.

•Certain of Alleghany Capital’s subsidiaries earned revenues outside of the U.S., however, substantially all of Alleghany Capital’s consolidated revenues were earned in the U.S.

(d) Identifiable assets and equity

The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets, and equity attributable to Alleghany, for Alleghany’s reportable segments and for corporate activities as of December 31, 2021:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	19,048.2	$	15,208.8	$	5,398.4
Insurance segment		8,402.7		6,080.2		2,759.1
Subtotal		27,450.9		21,289.0		8,157.5
Alleghany Capital		3,368.0		165.9		1,337.9
Total segments		30,818.9		21,454.9		9,495.4
Corporate activities		1,449.7		1,394.5		(308.5	)
Consolidated	$	32,268.6	$	22,849.4	$	9,186.9

(e) Alleghany Capital Product and Service Revenues

For Alleghany Capital’s industrial and consumer & services operations, product and service revenues consists of the sale of manufactured goods and services. The following table presents product and service revenues for the Alleghany Capital segment for 2021, 2020 and 2019:

	Year Ended December 31,
	2021		2020		2019
	($ in millions)
Industrial(1)	$	1,662.3	$	1,220.9	$	1,105.6
Consumer & services(2)		2,074.1		1,256.5		1,183.7
Corporate & other		—		0.1		—
Alleghany Capital	$	3,736.4	$	2,477.5	$	2,289.3

(1)For 2021, 2020 and 2019, the vast majority of industrial product and service revenues were recognized as goods and services transferred to customers over time.

(2)For 2021, 2020 and 2019, approximately 50 percent, 59 percent and 70 percent, respectively, of consumer & services product and service revenues were recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time.

(f) Concentration

Significant portions of the reinsurance segment’s gross premiums written are produced by a limited number of brokers. Gross premiums written produced by the reinsurance segment’s three largest brokers were approximately: 30 percent, 23 percent and 10 percent in 2021; 27 percent, 19 percent and 14 percent in 2020; and 26 percent, 17 percent and 16 percent in 2019.

A large whole account quota share treaty accounted for approximately 8 percent in 2021, 13 percent in 2020 and 14 percent in 2019 of gross premiums written in the reinsurance segment. The lower percentage in 2021 reflects TransRe's decision to not renew the large whole account quota share treaty as of December 31, 2021.