Segments of Business

9 Months Ended

Sep. 30, 2011

Segments of Business

5. Segments 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 PCC. In addition, AIHL Re is a wholly-owned subsidiary of AIHL that has in the past provided 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 and other-than-temporary impairment losses are not considered relevant in evaluating investment performance on an annual basis. Segment accounting policies are described in Note 1 to the Notes to the Consolidated Financial Statements set forth in Item 8 of the 2010 10-K.

The primary components of “Corporate activities” are Alleghany Properties, Alleghany’s investments in Homesite and ORX and strategic investments and other activities at the parent level.

	Three months ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
	(in millions)
Revenues:
AIHL insurance group:
Net premiums earned
RSUI	$	152.2		$	148.5		$	438.2		$	445.1
CATA		36.7			42.0			113.9			124.1
PCC		1.3			0.1			3.0			4.9
		190.2			190.6			555.1			574.1
Net investment income		29.7			30.5			90.9			96.9
Net realized capital gains		22.1			27.2			63.3			82.6
Other than temporary impairment losses (1)		(2.8	)		(2.5	)		(2.8	)		(9.2	)
Other income		0.3			0.2			0.6			0.4
Total insurance group		239.5			246.0			707.1			744.8
Corporate activities:
Net investment income (2)		(7.6	)		(1.1	)		(8.7	)		(3.3	)
Net realized capital gains		0.6			0.1			0.6			4.4
Other than temporary impairment losses		—			—			—			—
Other income		—			5.2			0.9			6.5
Total	$	232.5		$	250.2		$	699.9		$	752.4
Earnings before income taxes:
AIHL insurance group:
Underwriting profit (loss) (3)
RSUI	$	7.1		$	26.6		$	75.6		$	107.2
CATA		0.1			(0.2	)		(0.9	)		2.8
PCC		(7.0	)		(6.4	)		(33.9	)		(17.3	)
		0.2			20.0			40.8			92.7
Net investment income		29.7			30.5			90.9			96.9
Net realized capital gains		22.1			27.2			63.3			82.6
Other than temporary impairment losses (1)		(2.8	)		(2.5	)		(2.8	)		(9.2	)
Other income, less other expenses		(1.2	)		(9.1	)		(18.1	)		(25.1	)
Total insurance group		48.0			66.1			174.1			237.9
Corporate activities:
Net investment income (2)		(7.6	)		(1.1	)		(8.7	)		(3.3	)
Net realized capital gains		0.6			0.1			0.6			4.4
Other than temporary impairment losses		—			—			—			—
Other income		—			5.2			0.9			6.5
Corporate administration and other expenses		3.8			9.3			17.0			21.9
Interest expense		4.3			0.6			13.0			0.7
Total	$	32.9		$	60.4		$	136.9		$	222.9

(1) Reflects impairment charges for unrealized losses related to AIHL’s investment portfolio that were deemed to be other than temporary. See Note 7(c).

(2) Includes $16.7 million and $5.2 million of Alleghany’s equity share of losses in Homesite for the nine months ended September 30, 2011 and 2010, respectively, and $3.4 million and $0.5 million of Alleghany’s equity share of losses in ORX for the nine months ended September 30, 2011 and 2010, respectively.

(3) Represents net premiums earned less loss and loss adjustment expenses and commissions, brokerage and other underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income, net realized capital gains, other-than-temporary impairment losses, other income or other expenses. Commissions, brokerage and other underwriting expenses represent commission and brokerage expenses and that portion of salaries, administration and other operating expenses attributable primarily to underwriting activities, whereas the remainder constitutes other expenses.