Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2018

Condensed Financial Information of Registrant

Schedule II – Condensed Financial Information of Registrant

Condensed Balance Sheets

ALLEGHANY CORPORATION

December 31, 2018 and 2017

	2018		2017
	($ in thousands)
Assets
Equity securities (cost: 2018 – $47,546; 2017 – $397,906)	$	64,121	$	438,355
Debt securities (amortized cost: 2018 – $90; 2017 – $26,236)		90		26,572
Short-term investments		287,573		91,590
Other invested assets		79,266		76,953
Cash		331		21,280
Property and equipment at cost, net of accumulated depreciation and amortization		4,588		5,101
Other assets		8,303		5,518
Net deferred tax assets		13,956		14,454
Investment in subsidiaries		8,491,404		9,119,885
Total assets	$	8,949,632	$	9,799,708
Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
Senior notes	$	993,286	$	992,331
Other liabilities		87,489		119,852
Current taxes payable		6,385		66,932
Total liabilities		1,087,160		1,179,115
Redeemable noncontrolling interests		169,762		106,530
Stockholders’ equity attributable to Alleghany stockholders		7,692,710		8,514,063
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	8,949,632	$	9,799,708

See accompanying Notes to Condensed Financial Statements

Condensed Statements of Earnings

ALLEGHANY CORPORATION

Year ended December 31,

	2018			2017			2016
	($ in thousands)
Revenues
Net investment income	$	16,548		$	13,659		$	7,688
Change in the fair value of equity securities		(44,780	)		-			-
Net realized capital gains		(265	)		3,326			(10,674	)
Other than temporary impairment losses		-			-			-
Noninsurance revenue		64			683			159
Total revenues		(28,433	)		17,668			(2,827	)
Costs and Expenses
Interest expense		53,121			52,103			52,470
Corporate administration		17,565			45,308			42,035
Total costs and expenses		70,686			97,411			94,505
Operating (losses)		(99,119	)		(79,743	)		(97,332	)
Equity in earnings of consolidated subsidiaries		138,711			116,433			745,137
Earnings before income taxes		39,592			36,690			647,805
Income taxes		(15,062	)		(63,802	)		187,141
Net earnings		54,654			100,492			460,664
Net earnings attributable to noncontrolling interest		15,115			10,359			3,743
Net earnings attributable to Alleghany stockholders	$	39,539		$	90,133		$	456,921

See accompanying Notes to Condensed Financial Statements

Condensed Statements of Cash Flows

ALLEGHANY CORPORATION

Year ended December 31,

	2018			2017			2016
	($ in thousands)
Cash flows from operating activities
Net earnings	$	54,654		$	100,492		$	460,664
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Equity in undistributed net (earnings) losses of consolidated subsidiaries		(130,050	)		(154,577	)		(524,201	)
Depreciation and amortization		1,750			1,916			2,035
Change in the fair value of equity securities		44,780			-			-
Net realized capital (gains) losses		265			(3,326	)		10,674
Other than temporary impairment losses		-			-			-
Increase (decrease) in other liabilities and taxes payable		(84,803	)		25,040			14,677
Net adjustments		(168,058	)		(130,947	)		(496,815	)
Net cash (used in) provided by operating activities		(113,404	)		(30,455	)		(36,151	)
Cash flows from investing activities
Purchases of equity securities		(31,125	)		(1,427,194	)		(132,129	)
Purchases of debt securities		(3,418	)		-			-
Sales of debt securities		29,189			4,909			-
Maturities and redemptions of debt securities		53			73			73
Sales of equity securities		360,579			1,213,974			166,634
Net (purchase) sale of short-term investments		(195,983	)		143,920			(152,375	)
Purchases of property and equipment		-			(76	)		(5,779	)
Other, net		(4,926	)		(35,182	)		(37,600	)
Net cash (used in) provided by investing activities		154,369			(99,576	)		(161,176	)
Treasury stock acquisitions		(491,633	)		(16,048	)		(68,320	)
Cash dividends paid		(153,967	)		-			-
Capital contributions to consolidated subsidiaries		(175,653	)		(245,000	)		(163,732	)
Distributions from consolidated subsidiaries		751,471			405,000			434,900
Other, net		7,868			1,220			(1,859	)
Net cash provided by (used in) financing activities		(61,914	)		145,172			200,989
Net (decrease) increase in cash		(20,949	)		15,141			3,662
Cash at beginning of period		21,280			6,139			2,477
Cash at end of period	$	331		$	21,280		$	6,139
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest paid	$	51,375		$	51,375		$	51,375
Income taxes paid (refunds received)		(8,338	)		8,140			37,220

See accompanying Notes to Condensed Financial Statements

Notes to Condensed Financial Statements

ALLEGHANY CORPORATION

1.    Investment in Consolidated Subsidiaries. Reference is made to Note 1 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

2.    Adoption of New Accounting Guidance. Reference is made to Note 1 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

3.    Income Taxes. Reference is made to Note 9 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

4.    Commitments and Contingencies. Reference is made to Note 12 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

5.    Stockholders’ Equity. Reference is made to Note 10 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K with respect to stockholders’ equity and surplus available for dividend payments to Alleghany from its subsidiaries.

6.    Senior Notes. Reference is made to Note 8 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

7.    Credit Agreement. Reference is made to Note 7 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

8.    Long-Term Compensation Plans. Reference is made to Note 14 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

9.    Employee Retirement Benefit Plans. Reference is made to Note 15 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.