Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

2. Goodwill and Intangible Assets

On October 1, 2019, Jazwares acquired the outstanding equity of Wicked Cool Toys, LLC (“WCT”), a global toy company based in Bristol, Pennsylvania, for $159.0 million. Jazwares funded the acquisition with $135.5 million of incremental debt and the issuance of certain noncontrolling interests in Jazwares, which were valued at $23.5 million and which increased the aggregate noncontrolling interests in Jazwares from approximately 23 percent to approximately 25 percent. In connection with the acquisition, Alleghany recorded $39.1 million of goodwill, $83.9 million of finite-lived intangible assets related to license agreements and $24.9 million of other finite-lived intangible assets related primarily to customer relationships.

The acquisition-date consideration transferred and purchase price allocation to the acquired assets and assumed liabilities of WCT were based on estimated fair values that have not been finalized. As a result, the fair value recorded for these items is a provisional estimate and may be subject to further adjustment. Once completed, any adjustment resulting from the valuations may impact the individual amounts recorded for acquired assets and assumed liabilities, as well as the residual goodwill. The acquisition accounting for WCT is expected to be finalized later in 2020.

On October 1, 2018, Alleghany Capital acquired approximately 85 percent of the equity in Concord for $136.6 million, consisting of $68.6 million in cash paid upon consummation of the transaction, $38.2 million of potential contingent consideration based on future profitability and $29.8 million of incremental debt. In connection with the acquisition, Alleghany recorded $83.0 million of goodwill and $70.8 million of finite-lived intangible assets related primarily to customer relationships.

On February 7, 2018, W&W|AFCO Steel acquired the outstanding equity of Hirschfeld Holdings, LP (“Hirschfeld”), a fabricator of steel bridges and structural steel for stadiums, airports and other large commercial and industrial projects, for $109.1 million, consisting of $94.4 million in cash and $14.7 million of incremental debt. The $94.4 million paid by W&W|AFCO Steel was funded by capital contributions from Alleghany and noncontrolling interests of $75.5 million and $18.9 million, respectively. In connection with the acquisition, Alleghany completed the process of determining the fair value of acquired assets and liabilities in the fourth quarter of 2018, and recorded $3.0 million of goodwill and $9.4 million of finite-lived intangible assets related primarily to customer relationships.

On April 28, 2017, Alleghany Capital acquired approximately 80 percent of the equity in W&W|AFCO Steel for $164.5 million, consisting of $163.9 million in cash paid on May 1, 2017 and $0.6 million of estimated purchase price adjustments. In connection with the acquisition, Alleghany recorded $41.1 million, $25.3 million and $70.0 million of goodwill, indefinite-lived intangible assets and finite-lived intangible assets, respectively. Indefinite-lived intangible assets relate to trade name and finite-lived intangible assets relate to customer relationships.

In addition to W&W|AFCO Steel’s acquisition of Hirschfeld and Jazwares’ acquisition of WCT, several other subsidiaries of Alleghany Capital have made other acquisitions, including:

•

Acquisitions made by Kentucky Trailer in 2014, 2015, 2018 and 2019, including two acquisitions of controlling interests in manufacturers of aluminum feed transportation equipment. Specifically, Kentucky Trailer acquired a company based in Cedar Rapids, Iowa in December 2018 and a company based in Birmingham, Alabama in July 2019;

•

Acquisitions made by Jazwares in 2016 and 2018;

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Acquisitions made by PCT of a manufacturer of waterjet orifices and nozzles and a provider of related services in October 2016 and a provider of high-performance solid carbide end mills in June 2019; and

•

An acquisition made by IPS in May 2019.

The following table presents the amount of goodwill and intangible assets, net of accumulated amortization expense, reported on Alleghany’s consolidated balance sheets as of December 31, 2019 and 2018:

	December 31, 2019									December 31, 2018
	Gross Carrying Value			Accumulated Amortization			Net Carrying Value⁽¹⁾			Gross Carrying Value			Accumulated Amortization			Net Carrying Value⁽¹⁾
	($ in millions)
Insurance Segment⁽²⁾ - Goodwill	$	49.0		$	—		$	49.0		$	49.0		$	—		$	49.0
Insurance Segment - Intangible assets:
Agency relationships		16.6			12.4			4.2			18.4			11.4			7.0
State insurance licenses		25.1			—			25.1			25.1			—			25.1
Trade name		35.5			—			35.5			35.5			—			35.5
Brokerage and reinsurance relationships		33.8			33.8			—			33.8			33.8			—
Renewal rights		25.1			24.5			0.6			25.1			24.1			1.0
Other		4.1			4.1			—			4.1			4.1			—
Total insurance segment intangibles		140.2			74.8			65.4			142.0			73.4			68.6
Total insurance segment goodwill and other intangibles	$	189.2		$	74.8		$	114.4		$	191.0		$	73.4		$	117.6

Reinsurance Segment⁽²⁾ - Goodwill	$	8.8		$	—		$	8.8		$	8.8		$	—		$	8.8
Reinsurance Segment - Intangible assets:
Value of business in-force		291.4			291.4			—			291.4			291.4			—
Loss and LAE reserves		(98.8	)		(85.7	)		(13.1	)		(98.8	)		(82.6	)		(16.2	)
State and foreign insurance licenses		19.0			—			19.0			19.0			—			19.0
Trade name		50.0			—			50.0			50.0			—			50.0
Renewal rights		53.0			30.7			22.3			51.5			26.0			25.5
Leases		(25.8	)		(21.6	)		(4.2	)		(28.1	)		(19.5	)		(8.6	)
Other		15.1			10.9			4.2			14.6			10.0			4.6
Total reinsurance segment intangibles		303.9			225.7			78.2			299.6			225.3			74.3
Total reinsurance segment goodwill and other intangibles	$	312.7		$	225.7		$	87.0		$	308.4		$	225.3		$	83.1

Alleghany Capital⁽²⁾⁽³⁾ - Goodwill	$	465.2		$	—		$	465.2		$	397.3		$	—		$	397.3
Alleghany Capital⁽³⁾ - Intangible assets:
Trade name		171.8			0.6			171.2			176.9			0.1			176.8
License agreements		152.1			32.6			119.5			68.2			22.6			45.6
Customer relationships		296.4			47.5			248.9			215.1			27.7			187.4
Other		25.8			23.0			2.8			21.2			20.8			0.4
Total Alleghany Capital intangibles		646.1			103.7			542.4			481.4			71.2			410.2
Total Alleghany Capital goodwill and other intangibles	$	1,111.3		$	103.7		$	1,007.6		$	878.7		$	71.2		$	807.5

Alleghany consolidated:
Goodwill	$	523.0		$	—		$	523.0		$	455.1		$	—		$	455.1
Intangible assets		1,090.2			404.2			686.0			923.0			369.9			553.1
Goodwill and other intangibles assets	$	1,613.2		$	404.2		$	1,209.0		$	1,378.1		$	369.9		$	1,008.2

(1)	Goodwill and intangible assets have been reduced by amounts written-down in prior periods, as applicable.

(2)	See Note 13 for additional information on Alleghany’s segments of business.

(3)

Represents goodwill and other intangible assets related to the acquisition of: (i) Jazwares on April 15, 2016 and its subsequent acquisitions; (ii) W&W|AFCO Steel on April 28, 2017 and its subsequent acquisition; (iii) Concord on October 1, 2018; (iv) PCT on April 26, 2012 and its subsequent acquisitions; (v) IPS on October 31, 2015 and its subsequent acquisition; and (vi) Kentucky Trailer on August 30, 2013 and its subsequent acquisitions. Balances as of December 31, 2019 also reflect the finalization of provisional estimates that existed as of December 31, 2018.

In most instances, trade names and state and foreign insurance licenses have an indefinite useful life. The economic useful lives of significant intangible assets in the reinsurance and insurance segments are as follows: agency relationships — 15 years; brokerage and reinsurance relationships — 15 years; renewal rights — between 3 and 14 years; loss and LAE reserves — 15 years;

and leases — 10 years. The economic useful life of license agreements is 8 years and of customer relationships is between 5 and 10 years.