UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Registrant’s telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 | Results of Operations and Financial Condition. |
On August 5, 2021, Alleghany Corporation issued a press release on the subject of its financial results for the quarter ended June 30, 2021. A copy of such release is furnished herewith as Exhibit 99.1. The information hereunder shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
99.1 | Press release of Alleghany Corporation, dated August 5, 2021 | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ALLEGHANY CORPORATION | ||
Date: August 5, 2021 | By: /s/ Kerry J. Jacobs | |
Name: Kerry J. Jacobs | ||
Title: Executive Vice President and Chief Financial Officer |
3
Exhibit 99.1
ALLEGHANY CORPORATION
1411 Broadway, 34th Floor
New York, NY 10018
ALLEGHANY CORPORATION REPORTS 2021 SECOND QUARTER RESULTS
NEW YORK, NY, August 5, 2021 Alleghany Corporation (NYSE-Y) announced its financial results for the second quarter of 2021. Book value per share was $658.23, an increase of 5.5% and 5.6% from March 31, 2021 and December 31, 2020, respectively. Excluding accumulated other comprehensive income, book value per share increased 4.7% and 7.6% during the same periods, respectively.
Highlights for the quarter are summarized below1:
● | Net premiums written increased 27.1%, with reinsurance up 29.7% and insurance up 19.8%. |
● | Underwriting profit was $174 million (combined ratio of 90.2%) compared with an underwriting loss of $40 million (combined ratio of 102.8%); excluding catastrophe and Pandemic2 losses, underwriting profit was $244 million (combined ratio of 86.2%) compared with $125 million (combined ratio of 91.0%). |
● | Net investment income increased 6.9% to $127 million from $119 million. |
● | Alleghany Capital revenue3 increased 63.3% to $789 million from $483 million; Alleghany Capital adjusted earnings before income taxes were $61 million compared with $5 million. |
● | Earnings per diluted share were $29.00, compared with $12.39. |
● | Adjusted earnings per diluted share were $17.39, compared with $0.86. |
Highlights for the first six months are summarized below1:
● | Net premiums written increased 20.6%, with reinsurance up 22.0% and insurance up 16.1%. |
● | Underwriting profit was $190 million (combined ratio of 94.4%) compared with an underwriting loss of $64 million (combined ratio of 102.3%); excluding catastrophe and Pandemic2 losses, underwriting profit was $460 million (combined ratio of 86.4%) compared with $282 million (combined ratio of 90.1%). |
● | Net investment income increased 21.5% to $280 million from $231 million. |
● | Alleghany Capital revenue3 increased 64.6% to $1,548 million from $941 million; Alleghany Capital adjusted earnings before income taxes were $108 million compared with $10 million. |
● | Earnings (losses) per diluted share were $45.41, compared with ($13.38). |
● | Adjusted earnings per diluted share were $27.25, compared with $5.48. |
Weston Hicks, Chief Executive Officer, commented, Alleghany had an excellent quarter producing over $400 million in net earnings, or $29 per diluted share, and growing meaningfully across all segments. Favorable re/insurance market conditions, an improving economic environment, good investment results and excellent execution at our operating companies drove the strong result.
1 | All comparisons are to the same period of the prior year, unless otherwise stated. |
2 | The COVID-19 global pandemic is referred to herein as the Pandemic. |
3 | Relates to Alleghany Capital noninsurance revenue. |
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Joe Brandon, President, added, Continued rate increases and attractive new business opportunities at each of our re/insurance companies produced 27% growth in net premiums written, consolidated underwriting profit of $174 million and a combined ratio of 90.2%. Leading indicators continue to be strong across all three businesses.
Alleghany Capital recorded revenue growth of 63% and pre-tax adjusted earnings of $61 million in the quarter driven primarily by Jazwares, W&W|AFCO Steel and IPS. On a trailing twelve month basis, Alleghany Capitals adjusted earnings before taxes continued to grow and now exceed $250 million.
We are pleased with the results in the first half of 2021 and even more so with the underlying performance and momentum in our businesses, positioning us to deliver attractive returns for stockholders.
The following table summarizes results for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30, | Percent | Six Months Ended June 30, | Percent | |||||||||||||||||||||
2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||||||||
(in millions, except share and per share data) | ||||||||||||||||||||||||
Revenues: |
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Total revenues |
$ | 2,928.7 | $ | 2,227.4 | 31.5 | % | $ | 5,582.5 | $ | 3,710.3 | 50.5 | % | ||||||||||||
Net premiums written |
1,878.2 | 1,478.0 | 27.1 | % | 3,633.0 | 3,011.7 | 20.6 | % | ||||||||||||||||
Alleghany Capital revenue1 |
789.2 | 483.2 | 63.3 | % | 1,548.4 | 940.5 | 64.6 | % | ||||||||||||||||
Net investment income |
126.9 | 118.7 | 6.9 | % | 280.4 | 230.7 | 21.5 | % | ||||||||||||||||
Change in the fair value of equity securities |
203.9 | 242.2 | (15.8 | %) | 316.6 | (280.8 | ) | n/m | ||||||||||||||||
Earnings: |
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Earnings (losses) before income taxes |
$ | 521.9 | $ | 229.8 | 127.1 | % | $ | 818.8 | $ | (236.4 | ) | n/m | ||||||||||||
Underwriting profit (loss) |
173.7 | (39.5 | ) | n/m | 190.3 | (63.9 | ) | n/m | ||||||||||||||||
Net earnings (losses) attributable to Alleghany stockholders |
403.7 | 177.4 | 127.6 | % | 633.7 | (183.8 | ) | n/m | ||||||||||||||||
Adjusted earnings |
242.1 | 12.3 | n/m | 380.3 | 86.4 | 340.2 | % | |||||||||||||||||
Share and per share data: |
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Earnings (losses) per diluted share |
$ | 29.00 | $ | 12.39 | 134.1 | % | $ | 45.41 | $ | (13.38 | ) | n/m | ||||||||||||
Adjusted earnings per diluted share |
17.39 | 0.86 | n/m | 27.25 | 5.48 | 397.3 | % | |||||||||||||||||
Weighted average diluted shares outstanding |
13,919,489 | 14,310,874 | (2.7 | %) | 13,954,449 | 14,361,569 | (2.8 | %) |
1 | Relates to Alleghany Capital noninsurance revenue. |
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SEGMENT RESULTS
The following table summarizes the reinsurance and insurance segment results for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30, | Percent | Six Months Ended June 30, | Percent | |||||||||||||||||||||
2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Net premiums written: |
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Reinsurance segment |
$ | 1,409.1 | $ | 1,086.5 | 29.7 | % | $ | 2,804.0 | $ | 2,297.5 | 22.0 | % | ||||||||||||
Insurance segment |
469.1 | 391.5 | 19.8 | % | 829.0 | 714.2 | 16.1 | % | ||||||||||||||||
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$ | 1,878.2 | $ | 1,478.0 | 27.1 | % | $ | 3,633.0 | $ | 3,011.7 | 20.6 | % | |||||||||||||
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Underwriting profit (loss): |
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Reinsurance segment |
$ | 124.2 | $ | (30.3 | ) | n/m | $ | 129.1 | $ | (109.2 | ) | n/m | ||||||||||||
Insurance segment |
49.5 | (9.2 | ) | n/m | 61.2 | 45.3 | 35.1 | % | ||||||||||||||||
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$ | 173.7 | $ | (39.5 | ) | n/m | $ | 190.3 | $ | (63.9 | ) | n/m | |||||||||||||
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Underwriting profit excluding catastrophe and Pandemic losses: |
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Reinsurance segment |
$ | 150.3 | $ | 85.5 | 75.8 | % | $ | 272.9 | $ | 178.8 | 52.6 | % | ||||||||||||
Insurance segment |
93.9 | 39.6 | 137.1 | % | 186.9 | 103.5 | 80.6 | % | ||||||||||||||||
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$ | 244.2 | $ | 125.1 | 95.2 | % | $ | 459.8 | $ | 282.3 | 62.9 | % | |||||||||||||
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Reinsurance
TransRes net premiums written increased 29.7% and 22.0% in the second quarter and first six months of 2021, respectively, from the corresponding periods of 2020, reflecting a continued rise in rates overall, with growth in U.S. professional liability, casualty, agriculture and U.S. automobile lines of business, partially offset by an increase in ceded premiums.
TransRes combined ratio for the second quarter and first six months of 2021 was 91.1% and 95.0%, respectively, compared with 102.9% and 104.9% for the corresponding periods of 2020, respectively. The decrease in the combined ratio in the second quarter and first six months of 2021 reflects an improved attritional loss ratio and lower Pandemic losses.
TransRes catastrophe losses in the second quarter and first six months of 2021 were $27 million and $127 million, respectively, related to losses from Winter Storm Uri and other storms (collectively the Winter Storms). In the second quarter and first six months of 2020, TransRe incurred $115 million and $268 million of Pandemic losses, respectively.
In total, TransRe has incurred $409 million of Pandemic losses since inception including $1 million net favorable development in the second quarter and $17 million net adverse development in the first six months of 2021. TransRes underwriting profit before catastrophe and Pandemic losses was $150 million and $273 million in the second quarter and first six months of 2021, respectively, an increase of 75.8% and 52.6% compared to the corresponding periods of 2020, respectively.
Insurance
Insurance segment net premiums written increased 19.8% and 16.1% in the second quarter and first six months of 2021, respectively, from the corresponding periods of 2020, reflecting growth at both RSUI and CapSpecialty.
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RSUIs net premiums written increased 21.2% and 16.8% in the second quarter and first six months of 2021, respectively, from the corresponding periods of 2020, reflecting growth in most lines of business due to increases in business opportunities, higher rates and improved general market conditions, particularly in the directors and officers liability, professional lines, umbrella/excess and property lines of business.
RSUIs combined ratio for the second quarter and first six months of 2021 was 83.6% and 89.6%, respectively, compared with 102.9% and 89.7% for the corresponding periods of 2020, respectively. The decrease in the combined ratio in the second quarter and first six months of 2021 primarily reflects favorable prior accident year loss reserve development compared with unfavorable prior accident year loss reserve development in the prior periods and, to a lesser extent, a lower expense ratio and a lower overall current accident year attritional loss ratio. Additionally, the second quarter of 2021 had lower catastrophe losses compared with the corresponding period of 2020, while the first six months of 2021 reflected higher catastrophe losses compared with 2020.
RSUIs catastrophe losses in the second quarter and first six months of 2021 were $44 million and $124 million, respectively, primarily related to the Winter Storms, which were $31 million and $111 million, respectively. An additional $13 million of catastrophe losses in the second quarter of 2021 related to severe weather and flooding in the Midwestern U.S. in the spring of 2021. Catastrophe losses in the second quarter and first six months of 2020 were $48 million and $57 million, respectively, including $20 million of Pandemic-related losses with the remainder primarily related to severe weather and flooding in the Southeastern U.S. RSUIs underwriting profit before catastrophe and Pandemic losses was $93 million and $185 million in the second quarter and first six months of 2021, respectively, an increase of 130.4% and 75.3% compared with the corresponding periods of 2020, respectively.
CapSpecialtys net premiums written increased 15.2% and 13.6% in the second quarter and first six months of 2021, respectively, from the corresponding periods of 2020, primarily reflecting growth in the professional liability and other specialty casualty lines of business due to increases in business opportunities and higher rates, CapSpecialtys expanded product offerings and the impact of CapSpecialtys purchases of certain renewal rights in May 2020, partially offset by curtailing certain unprofitable broker relationships.
CapSpecialtys combined ratio for the second quarter and first six months of 2021 was 99.3% and 99.4%, respectively, compared with 102.5% and 101.8% for the corresponding periods of 2020, respectively. The decrease in the combined ratio in the second quarter and first six months of 2021 reflects a lower expense ratio and reduced catastrophe losses.
4
Alleghany Capital
The following table summarizes earnings (losses) before income taxes and adjusted earnings (losses) before income taxes for the Alleghany Capital segment for the three and six months ended June 30, 2021 and 2020:
Three Months Ended June 30, | ||||||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||||||
Industrial | Non- industrial |
Corp. & other |
Total | Industrial | Non- industrial |
Corp. & other |
Total | |||||||||||||||||||||||||
($ in millions) | ($ in millions) | |||||||||||||||||||||||||||||||
Earnings (losses) before income taxes |
$ | 28.6 | $ | 26.8 | $ | (5.4 | ) | $ | 50.0 | $ | 2.7 | $ | (4.9 | ) | $ | 12.0 | $ | 9.8 | ||||||||||||||
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Less: net realized capital gains |
(0.1 | ) | (0.1 | ) | - | (0.2 | ) | (0.1 | ) | - | (16.3 | ) | (16.4 | ) | ||||||||||||||||||
Add: amortization of intangible assets |
4.4 | 7.2 | - | 11.6 | 4.0 | 7.9 | - | 11.9 | ||||||||||||||||||||||||
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Adjusted earnings (losses) before income taxes |
$ | 32.9 | $ | 33.9 | $ | (5.4 | ) | $ | 61.4 | $ | 6.6 | $ | 3.0 | $ | (4.3 | ) | $ | 5.3 | ||||||||||||||
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Six Months Ended June 30, | ||||||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||||||
Industrial | Non- industrial |
Corp. & other |
Total | Industrial | Non- industrial |
Corp. & other |
Total | |||||||||||||||||||||||||
($ in millions) | ($ in millions) | |||||||||||||||||||||||||||||||
Earnings (losses) before income taxes |
$ | 54.9 | $ | 40.8 | $ | (9.9 | ) | $ | 85.8 | $ | 9.9 | $ | (12.6 | ) | $ | 12.8 | $ | 10.1 | ||||||||||||||
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Less: net realized capital gains |
(0.3 | ) | (0.9 | ) | - | (1.2 | ) | (5.3 | ) | 0.2 | (16.3 | ) | (21.4 | ) | ||||||||||||||||||
Add: amortization of intangible assets |
8.5 | 14.4 | - | 22.9 | 7.4 | 13.8 | - | 21.2 | ||||||||||||||||||||||||
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Adjusted earnings (losses) before income taxes |
$ | 63.1 | $ | 54.3 | $ | (9.9 | ) | $ | 107.5 | $ | 12.0 | $ | 1.4 | $ | (3.5 | ) | $ | 9.9 | ||||||||||||||
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The significant increase in earnings before income taxes in the second quarter and first six months of 2021 from the corresponding periods of 2020 reflects higher earnings across all Alleghany Capital subsidiaries. The increase in non-industrial earnings before income taxes primarily reflects higher sales and margins at Jazwares, due to strong customer demand across its portfolio of licenses and brands and the acquisition of Kelly Toys Holdings LLC in April 2020, and an increase in revenue and margins at IPS. Higher industrial earnings before income taxes in 2021 primarily reflect higher sales and margins at W&W|AFCO Steel, related to strong execution on higher backlogs entering the year, and the impact of Wilberts April 1, 2020 inclusion in Alleghanys consolidated results, partially offset by lower realized capital gains.
INVESTMENTS
Alleghany reported net investment income for the second quarter and first six months of 2021 of $127 million and $280 million, respectively, representing an increase of 6.9% and 21.5%, respectively, from the corresponding periods of 2020. The second quarter increase primarily reflects higher dividend income, partially offset by lower interest income and partnership income. The increase for the first six months of 2021 primarily reflects higher partnership income and dividend income, partially offset by lower interest income.
Partnership income in the second quarter and first six months of 2021 included depreciation and appreciation, respectively, in a certain strategic partnership that has exposure to cryptocurrencies. Our partnership income in the first six months of 2020 reflected the impact of the Pandemic on lower-quality debt securities held by certain of our investment partnerships. The increase in dividend income reflects an increased allocation to higher-yielding stocks and a $16 million special dividend received from a mutual fund. Lower interest income reflects the impact of low reinvestment yields on debt securities and lower yields on short-term investment and floating-rate debt securities.
Financial statement total return4 on investments was 2.2% for the second quarter of 2021, compared with 4.8% for the corresponding period of 2020, primarily reflecting a lower appreciation in the value of Alleghanys debt and equity securities portfolio, partially offset by higher net investment income.
4 | As calculated in Alleghanys financial supplement available on Alleghanys website. See Additional Information. |
5
In the second quarter and first six months of 2020, Alleghany recorded $45 million and $74 million, respectively, of impairment charges at SORC from write-downs of SORCs oil field assets. SORC was subsequently sold on December 31, 2020.
OTHER FINANCIAL INFORMATION
As of June 30, 2021, Alleghany had 13,888,774 shares of its common stock outstanding, compared with 14,041,180 shares of its common stock outstanding as of December 31, 2020.
During the first six months of 2021, Alleghany repurchased an aggregate of 155,741 shares of its common stock in the open market for $99.1 million, at an average price per share of $636.42. As of June 30, 2021, Alleghany had $333.3 million remaining under its share repurchase authorization.
Additional Information
Concurrent with the issuance of todays earnings press release, Alleghany has posted a financial supplement to its website, www.alleghany.com, containing additional schedules that provide further detail pertaining to Alleghanys financial results.
Additional information regarding Alleghanys 2021 second quarter financial results, including managements discussion and analysis of Alleghanys financial condition and results of operations, is contained in Alleghanys Quarterly Report on Form 10-Q for the period ended June 30, 2021 (the Form 10-Q), to be filed with the U.S. Securities and Exchange Commission (the SEC) on or about the date hereof. The Form 10-Q and the financial supplement will be available on Alleghanys website at www.alleghany.com. The Form 10-Q will also be available on the SECs website at www.sec.gov. Readers are urged to review the Form 10-Q for a more complete discussion of Alleghanys financial performance.
About Alleghany Corporation
Alleghany Corporation (NYSE-Y) creates value by owning and supporting its operating subsidiaries and managing investments, anchored by a core position in property and casualty reinsurance and insurance. Alleghanys property and casualty subsidiaries include: Transatlantic Holdings, Inc. (TransRe), a leading global reinsurer; RSUI Group, Inc. (RSUI), which underwrites wholesale specialty insurance coverages including property, casualty, professional liability and directors and officers liability; and CapSpecialty, Inc. (CapSpecialty), an underwriter of commercial property, casualty and surety insurance coverages.
Alleghanys subsidiary Alleghany Capital Corporation (Alleghany Capital) owns and supports a diverse portfolio of eight non-financial businesses. Alleghany Capitals industrial businesses include: (i) Precision Cutting Technologies, Inc., which provides precision automated machine tool solutions and high-performance carbide end mills and manufactures and services waterjet orifices and nozzles; (ii) R.C. Tway Company, LLC (dba Kentucky Trailer), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets; (iii) WWSC Holdings, LLC, a structural steel fabricator and erector (W&W|AFCO Steel); (iv) Wilbert Funeral Services, Inc. (Wilbert), a provider of products and services for the funeral and cemetery industries and precast concrete markets; and (v) Piedmont Manufacturing Group, LLC (Piedmont), a provider of injection molded and thermoformed parts and multi-component assemblies for original equipment manufacturer customers in a range of end-markets. Alleghany Capitals non-industrial businesses include: (i) IPS-Integrated Project Services, LLC, a design, engineering, procurement, construction management and validation service provider focused on the global pharmaceutical and biotechnology industries (IPS); (ii) Jazwares, LLC, a global toy and musical instrument company (Jazwares); and (iii) CHECO Holdings, LLC, a hotel management and development company.
Non-GAAP Financial Measures
Throughout this press release, Alleghanys results of operations have been presented in the way that Alleghany believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use financial information in evaluating the performance of Alleghany. This presentation includes the use of underwriting profit, adjusted earnings, adjusted earnings per diluted share, adjusted earnings before income taxes and book value per share excluding accumulated other comprehensive income (AOCI), which are non-GAAP financial measures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Also, note that these measures may be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A discussion of Alleghanys calculation and use of these financial measures is provided below.
Underwriting profit represents net premiums earned less net loss and loss adjustment expenses and commissions, brokerage and other underwriting expenses, all as determined in accordance with U.S. 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, non-insurance revenue, other operating expenses, corporate administration, amortization of intangible assets and interest expense. Alleghany consistently uses underwriting profit as a supplement to earnings before income taxes, the most comparable U.S. GAAP
6
financial measure, to evaluate the performance of its reinsurance and insurance segments and believes that underwriting profit provides useful additional information to investors because it highlights net earnings attributable to a segments underwriting performance. Earnings before income taxes may show a profit despite an underlying underwriting loss; and when underwriting losses persist over extended periods, a reinsurance or an insurance companys ability to continue as an ongoing concern may be at risk.
A reconciliation of underwriting profit (loss) to earnings (losses) before income taxes is presented below.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Earnings (losses) before income taxes |
$ | 521.9 | $ | 229.8 | $ | 818.8 | $ | (236.4 | ) | |||||||
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Adjustments to earnings before income taxes: |
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Net investment income |
126.9 | 118.7 | 280.4 | 230.7 | ||||||||||||
Change in the fair value of equity securities |
203.9 | 242.2 | 316.6 | (280.8 | ) | |||||||||||
Net realized capital gains |
12.9 | (38.1 | ) | 25.9 | (25.1 | ) | ||||||||||
Change in allowance for credit losses on available for sale securities |
0.2 | 17.0 | 2.2 | (14.4 | ) | |||||||||||
Noninsurance revenue |
800.4 | 492.7 | 1,568.3 | 960.6 | ||||||||||||
Other operating expenses |
(739.5 | ) | (510.3 | ) | (1,463.5 | ) | (977.0 | ) | ||||||||
Corporate administration |
(20.2 | ) | (18.6 | ) | (29.7 | ) | (4.2 | ) | ||||||||
Amortization of intangible assets |
(12.4 | ) | (12.1 | ) | (23.9 | ) | (21.7 | ) | ||||||||
Interest expense |
(24.0 | ) | (22.2 | ) | (47.8 | ) | (40.6 | ) | ||||||||
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348.2 | 269.3 | 628.5 | (172.5 | ) | ||||||||||||
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Underwriting profit (loss) |
$ | 173.7 | $ | (39.5 | ) | $ | 190.3 | $ | (63.9 | ) | ||||||
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Adjusted earnings and adjusted earnings per diluted share represent net earnings attributable to Alleghany stockholders and earnings per diluted share, respectively, excluding (on an after-tax basis) change in the fair value of equity securities, net realized capital gains, change in allowance for credit losses on available for sale securities and amortization of intangible assets, all as determined in accordance with U.S. GAAP. Alleghany uses adjusted earnings and adjusted earnings per diluted share as supplements to net earnings attributable to Alleghany stockholders and earnings per diluted share, respectively, the most comparable U.S. GAAP financial measures, to provide useful additional information to investors by highlighting earnings and earnings per diluted share attributable to its performance exclusive of changes in the fair value of equity securities, realized capital gains or losses, change in allowance for credit losses on available for sale securities and amortization of intangible assets.
Reconciliations of adjusted earnings and adjusted earnings per diluted share to net earnings (losses) attributable to Alleghany stockholders and earnings (losses) per diluted share, respectively, are presented below.
7
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
($ in millions, except share and per share amounts) | ||||||||||||||||
Net earnings (losses) attributable to Alleghany stockholders(1) |
$ | 403.7 | $ | 177.4 | $ | 633.7 | $ | (183.8 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Adjustments to net earnings attributable to Alleghany stockholders: |
||||||||||||||||
Change in the fair value of equity securities |
203.9 | 242.2 | 316.6 | (280.8 | ) | |||||||||||
Net realized capital gains |
12.9 | (38.1 | ) | 25.9 | (25.1 | ) | ||||||||||
Change in allowance for credit losses on available for sale securities |
0.2 | 17.0 | 2.2 | (14.4 | ) | |||||||||||
Amortization of intangible assets |
(12.4 | ) | (12.1 | ) | (23.9 | ) | (21.7 | ) | ||||||||
Income tax effect of adjustments |
(43.0 | ) | (43.9 | ) | (67.4 | ) | 71.8 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
161.6 | 165.1 | 253.4 | (270.2 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted earnings |
$ | 242.1 | $ | 12.3 | $ | 380.3 | $ | 86.4 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares outstanding |
13,919,489 | 14,310,874 | 13,954,449 | 14,361,569 | ||||||||||||
Earnings (losses) per diluted share |
$ | 29.00 | $ | 12.39 | $ | 45.41 | $ | (13.38 | ) | |||||||
Adjusted earnings per diluted share |
$ | 17.39 | $ | 0.86 | $ | 27.25 | $ | 5.48 |
___________________ |
(1) | The numerators for calculating earnings per diluted share and adjusted earnings per diluted share may be further reduced for the effect of dilutive securities. Please refer to the Form 10-Q for additional information. |
Adjusted earnings before income taxes is a non-GAAP financial measure for Alleghanys non-insurance operating subsidiaries and investments in the Alleghany Capital segment. Adjusted earnings before income taxes represents noninsurance revenue and net investment income less other operating expenses and interest expense, and does not include: (i) amortization of intangible assets; (ii) change in the fair value of equity securities; (iii) net realized capital gains; (iv) change in allowance for credit losses on available for sale securities; and (v) income taxes. Because adjusted earnings before income taxes excludes amortization of intangible assets, change in the fair value of equity securities, net realized capital gains, change in allowance for credit losses on available for sale securities and income taxes, it provides an indication of economic performance that is not affected by levels of effective tax rates or levels of amortization resulting from acquisition accounting. Alleghany uses adjusted earnings before income taxes as a supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the performance of certain of its non-insurance operating subsidiaries and investments. A reconciliation of adjusted earnings before income taxes to earnings before income taxes is presented above in Segment Results-Alleghany Capital.
Book value per share excluding AOCI is calculated by dividing: (i) stockholders equity attributable to Alleghany stockholders less AOCI, all as determined in accordance with GAAP, by (ii) shares outstanding. Alleghany uses book value per share excluding AOCI as a supplement to book value per share, the most comparable GAAP financial measure, in order to better disclose its per share performance by excluding the effects of AOCI, which includes changes in interest rates and credit spreads on its debt securities portfolio, among others. A reconciliation of book value per share to book value per share excluding AOCI is presented below.
8
June 30, 2021 |
March 31, 2021 |
December 31, 2020 |
||||||||||
($ in millions, except share and per share amounts) | ||||||||||||
Stockholders equity attributable to Alleghany stockholders |
$ | 9,142.0 | $ | 8,695.9 | $ | 8,755.7 | ||||||
Less: AOCI |
303.2 | 224.2 | 452.4 | |||||||||
|
|
|
|
|
|
|||||||
$ | 8,838.8 | $ | 8,471.7 | $ | 8,303.3 | |||||||
|
|
|
|
|
|
|||||||
Shares outstanding |
13,888,774 | 13,940,669 | 14,041,180 | |||||||||
Book value per share |
$ | 658.23 | $ | 623.78 | $ | 623.57 | ||||||
Book value per share excluding AOCI |
$ | 636.40 | $ | 607.70 | $ | 591.35 |
# # #
9
Forward-looking Statements
This release contains disclosures, which may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as may, will, expect, project, estimate, anticipate, plan, believe, potential, should or the negative versions of those words or other comparable words. Forward-looking statements do not relate solely to historical or current facts; rather, they are based on managements expectations as well as certain assumptions and estimates made by, and information available to, management at the time. These statements are not guarantees of future performance. These forward-looking statements are based upon Alleghanys current expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and Alleghanys future financial condition and results. Factors that could cause these forward-looking statements to differ, possibly materially, from that currently contemplated include:
| significant weather-related or other natural or man-made catastrophes and disasters; |
| the effects of outbreaks of pandemics or contagious diseases, including the length and severity of the current Pandemic, including its impact on Alleghanys business; |
| the cyclical nature of the property and casualty reinsurance and insurance industries; |
| changes in market prices of Alleghanys significant equity investments and changes in value of Alleghanys debt securities portfolio; |
| adverse loss development for events insured by Alleghanys reinsurance and insurance subsidiaries in either the current year or prior years; |
| the long-tail and potentially volatile nature of certain casualty lines of business written by Alleghanys reinsurance and insurance subsidiaries; |
| the cost and availability of reinsurance; |
| the reliance by Alleghanys reinsurance and insurance operating subsidiaries on a limited number of brokers; |
| legal, political, judicial and regulatory changes; |
| increases in the levels of risk retention by Alleghanys reinsurance and insurance subsidiaries; |
| changes in the ratings assigned to Alleghanys reinsurance and insurance subsidiaries; |
| claims development and the process of estimating reserves; |
| exposure to terrorist acts and acts of war; |
| the willingness and ability of Alleghanys reinsurance and insurance subsidiaries reinsurers to pay reinsurance recoverables owed to Alleghanys reinsurance and insurance subsidiaries; |
| the uncertain nature of damage theories and loss amounts; |
| the loss of key personnel of Alleghanys reinsurance or insurance operating subsidiaries; |
| fluctuation in foreign currency exchange rates; |
| the failure to comply with the restrictive covenants contained in the agreements governing Alleghanys indebtedness; |
| the ability to make payments on, or repay or refinance, Alleghanys debt; |
| risks inherent in international operations; and |
| difficult and volatile conditions in the global market. |
10
Additional risks and uncertainties include general economic and political conditions, including the effects of a prolonged U.S. or global economic downturn or recession; changes in costs; variations in political, economic or other factors; risks relating to conducting operations in a competitive environment; effects of acquisition and disposition activities, inflation rates, or recessionary or expansive trends; changes in interest rates; extended labor disruptions, civil unrest, or other external factors over which we have no control; changes in Alleghanys plans, strategies, objectives, expectations, or intentions, which may happen at any time at its discretion; and other factors discussed in Alleghanys 2020 Form 10-K. All forward-looking statements speak only as of the date they are made and are based on information available at that time. Alleghany does not undertake any obligation to update or revise any forward-looking statements to reflect subsequent circumstances or events.
For more information, please contact:
Dale James
Alleghany Corporation
212-508-8116
11
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, | December 31, | |||||||
2021 | 2020 | |||||||
(unaudited) | ||||||||
($ in thousands, except share amounts) | ||||||||
Assets |
||||||||
Investments: |
||||||||
Securities at fair value: |
||||||||
Equity securities (cost: 2021 $2,671,604; 2020 $2,051,996) |
$ | 3,580,228 | $ | 2,718,902 | ||||
Debt securities (amortized cost: 2021 $15,331,053; 2020 $14,898,522; allowance for credit losses: 2021 $361; 2020 $2,579) |
15,864,867 | 15,618,470 | ||||||
Short-term investments |
379,009 | 714,208 | ||||||
|
|
|
|
|||||
19,824,104 | 19,051,580 | |||||||
Commercial mortgage loans |
543,106 | 670,239 | ||||||
Other invested assets |
538,857 | 465,153 | ||||||
|
|
|
|
|||||
Total investments |
20,906,067 | 20,186,972 | ||||||
Cash |
871,459 | 791,442 | ||||||
Accrued investment income |
86,249 | 88,760 | ||||||
Premium balances receivable |
1,438,476 | 1,145,341 | ||||||
Reinsurance recoverables |
1,873,447 | 1,781,096 | ||||||
Ceded unearned premiums |
398,282 | 311,898 | ||||||
Deferred acquisition costs |
651,832 | 595,117 | ||||||
Property and equipment at cost, net of accumulated depreciation and amortization |
302,848 | 267,872 | ||||||
Goodwill |
627,612 | 614,163 | ||||||
Intangible assets, net of amortization |
801,666 | 787,462 | ||||||
Current taxes receivable |
- | 3,189 | ||||||
Funds held under reinsurance agreements |
822,820 | 794,453 | ||||||
Other assets |
1,710,903 | 1,559,245 | ||||||
|
|
|
|
|||||
Total assets |
$ | 30,491,661 | $ | 28,927,010 | ||||
|
|
|
|
|||||
Liabilities, Redeemable Noncontrolling Interests and Stockholders Equity |
||||||||
Loss and loss adjustment expenses |
$ | 13,504,471 | $ | 12,970,626 | ||||
Unearned premiums |
3,329,083 | 2,984,060 | ||||||
Senior notes and other debt |
2,063,652 | 2,135,946 | ||||||
Reinsurance payable |
294,229 | 208,384 | ||||||
Current taxes payable |
6,166 | - | ||||||
Net deferred tax liabilities |
88,329 | 43,547 | ||||||
Other liabilities |
1,822,978 | 1,594,918 | ||||||
|
|
|
|
|||||
Total liabilities |
21,108,908 | 19,937,481 | ||||||
|
|
|
|
|||||
Redeemable noncontrolling interests |
240,722 | 233,809 | ||||||
Common stock (shares authorized: 2021 and 2020 22,000,000; shares issued: 2021 and 2020 17,459,961) |
17,460 | 17,460 | ||||||
Contributed capital |
3,612,783 | 3,613,454 | ||||||
Accumulated other comprehensive income |
303,196 | 452,402 | ||||||
Treasury stock, at cost (2021 3,571,187 shares; 2020 3,418,781 shares) |
(1,743,434 | ) | (1,645,930 | ) | ||||
Retained earnings |
6,952,026 | 6,318,334 | ||||||
|
|
|
|
|||||
Total stockholders equity attributable to Alleghany stockholders |
9,142,031 | 8,755,720 | ||||||
|
|
|
|
|||||
Total liabilities, redeemable noncontrolling interests and stockholders equity |
$ | 30,491,661 | $ | 28,927,010 | ||||
|
|
|
|
12
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
Three Months Ended June 30, |
||||||||
2021 | 2020 | |||||||
($ in thousands, except per share amounts) | ||||||||
Revenues |
||||||||
Net premiums earned |
$ | 1,784,351 | $ | 1,394,868 | ||||
Net investment income |
126,931 | 118,691 | ||||||
Change in the fair value of equity securities |
203,902 | 242,186 | ||||||
Net realized capital gains |
12,942 | (38,100 | ) | |||||
Change in allowance for credit losses on available for sale securities |
246 | 17,021 | ||||||
Noninsurance revenue |
800,425 | 492,701 | ||||||
|
|
|
|
|||||
Total revenues |
2,928,797 | 2,227,367 | ||||||
|
|
|
|
|||||
Costs and Expenses |
||||||||
Net loss and loss adjustment expenses |
1,087,206 | 1,024,362 | ||||||
Commissions, brokerage and other underwriting expenses |
523,513 | 410,017 | ||||||
Other operating expenses |
739,592 | 510,306 | ||||||
Corporate administration |
20,148 | 18,579 | ||||||
Amortization of intangible assets |
12,431 | 12,093 | ||||||
Interest expense |
24,037 | 22,194 | ||||||
|
|
|
|
|||||
Total costs and expenses |
2,406,927 | 1,997,551 | ||||||
|
|
|
|
|||||
Earnings before income taxes |
521,870 | 229,816 | ||||||
Income taxes |
102,281 | 53,356 | ||||||
|
|
|
|
|||||
Net earnings |
419,589 | 176,460 | ||||||
Net earnings (losses) attributable to noncontrolling interest |
15,938 | (918 | ) | |||||
|
|
|
|
|||||
Net earnings attributable to Alleghany stockholders |
$ | 403,651 | $ | 177,378 | ||||
|
|
|
|
|||||
Net earnings |
$ | 419,589 | $ | 176,460 | ||||
Other comprehensive income: |
||||||||
Change in unrealized gains, net of deferred taxes of $24,339 and $109,432 in 2021 and 2020, respectively |
91,560 | 411,673 | ||||||
Less: reclassification for net realized capital gains and change in allowance for credit losses on available for sale securities, net of taxes of ($2,769) and ($1,481) for 2021 and 2020, respectively |
(10,419 | ) | (5,570 | ) | ||||
Change in unrealized currency translation adjustment, net of deferred taxes of ($598) and $3,938 for 2021 and 2020, respectively |
(2,249 | ) | 14,814 | |||||
Retirement plans |
113 | 419 | ||||||
|
|
|
|
|||||
Comprehensive income |
498,594 | 597,796 | ||||||
Comprehensive income (loss) attributable to noncontrolling interests |
15,938 | (918 | ) | |||||
|
|
|
|
|||||
Comprehensive income attributable to Alleghany stockholders |
$ | 482,656 | $ | 598,714 | ||||
|
|
|
|
|||||
Basic earnings per share attributable to Alleghany stockholders |
$ | 29.00 | $ | 12.39 | ||||
Diluted earnings per share attributable to Alleghany stockholders |
29.00 | 12.39 |
13
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
Six Months Ended June 30, |
||||||||
2021 | 2020 | |||||||
($ in thousands, except per share amounts) | ||||||||
Revenues |
||||||||
Net premiums earned |
$ | 3,389,114 | $ | 2,839,288 | ||||
Net investment income |
280,415 | 230,673 | ||||||
Change in the fair value of equity securities |
316,630 | (280,790 | ) | |||||
Net realized capital gains |
25,873 | (25,074 | ) | |||||
Change in allowance for credit losses on available for sale securities |
2,218 | (14,354 | ) | |||||
Noninsurance revenue |
1,568,260 | 960,550 | ||||||
|
|
|
|
|||||
Total revenues |
5,582,510 | 3,710,293 | ||||||
|
|
|
|
|||||
Costs and Expenses |
||||||||
Net loss and loss adjustment expenses |
2,199,276 | 2,051,806 | ||||||
Commissions, brokerage and other underwriting expenses |
999,549 | 851,413 | ||||||
Other operating expenses |
1,463,481 | 976,967 | ||||||
Corporate administration |
29,706 | 4,272 | ||||||
Amortization of intangible assets |
23,909 | 21,661 | ||||||
Interest expense |
47,789 | 40,550 | ||||||
|
|
|
|
|||||
Total costs and expenses |
4,763,710 | 3,946,669 | ||||||
|
|
|
|
|||||
Earnings (losses) before income taxes |
818,800 | (236,376 | ) | |||||
Income taxes |
161,148 | (51,364 | ) | |||||
|
|
|
|
|||||
Net earnings (losses) |
657,652 | (185,012 | ) | |||||
Net earnings (losses) attributable to noncontrolling interest |
23,960 | (1,172 | ) | |||||
|
|
|
|
|||||
Net earnings (losses) attributable to Alleghany stockholders |
$ | 633,692 | $ | (183,840 | ) | |||
|
|
|
|
|||||
Net earnings (losses) |
$ | 657,652 | $ | (185,012 | ) | |||
Other comprehensive income (loss): |
||||||||
Change in unrealized gains, net of deferred taxes of ($33,593) and $35,898 in 2021 and 2020, respectively |
(126,375 | ) | 135,043 | |||||
Less: reclassification for net realized capital gains and change in allowance for credit losses on available for sale securities, net of taxes of ($5,899) and ($4,364) for 2021 and 2020, respectively |
(22,192 | ) | (16,416 | ) | ||||
Change in unrealized currency translation adjustment, net of deferred taxes of $57 and $287 for 2021 and 2020, respectively |
213 | 1,081 | ||||||
Retirement plans |
(852 | ) | 936 | |||||
|
|
|
|
|||||
Comprehensive income (loss) |
508,446 | (64,368 | ) | |||||
Comprehensive income (loss) attributable to noncontrolling interests |
23,960 | (1,172 | ) | |||||
|
|
|
|
|||||
Comprehensive income (loss) attributable to Alleghany stockholders |
$ | 484,486 | $ | (63,196 | ) | |||
|
|
|
|
|||||
Basic earnings (losses) per share attributable to Alleghany stockholders |
$ | 45.41 | $ | (12.83 | ) | |||
Diluted earnings (losses) per share attributable to Alleghany stockholders |
45.41 | (13.38 | ) |
14
Document and Entity Information |
Aug. 05, 2021 |
---|---|
Cover [Abstract] | |
Entity Registrant Name | ALLEGHANY CORP /DE |
Amendment Flag | false |
Entity Central Index Key | 0000775368 |
Document Type | 8-K |
Document Period End Date | Aug. 05, 2021 |
Entity Incorporation State Country Code | DE |
Entity File Number | 1-9371 |
Entity Tax Identification Number | 51-0283071 |
Entity Address, Address Line One | 1411 Broadway |
Entity Address, Address Line Two | 34th Floor |
Entity Address, City or Town | New York |
Entity Address, State or Province | NY |
Entity Address, Postal Zip Code | 10018 |
City Area Code | (212) |
Local Phone Number | 752-1356 |
Written Communications | false |
Soliciting Material | false |
Pre Commencement Tender Offer | false |
Pre Commencement Issuer Tender Offer | false |
Security 12b Title | Common Stock, $1.00 par value |
Trading Symbol | Y |
Security Exchange Name | NYSE |
Entity Emerging Growth Company | false |
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