Segments of Business (Tables)

6 Months Ended

Jun. 30, 2020

Results for Reportable Segments and Corporate Activities

The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three and six months ended June 30, 2020 and 2019:

		Reinsurance Segment								Insurance Segment
Three Months Ended June 30, 2020		Property			Casualty & other ⁽¹⁾		Total			RSUI			Cap Specialty			Total			Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	413.3		$	740.6	$	1,153.9		$	474.7		$	101.2		$	575.9		$	1,729.8		$	—	$	1,729.8		$	(8.6	)	$	1,721.2
Net premiums written			355.8			730.7		1,086.5			300.0			91.5			391.5			1,478.0			—		1,478.0			—			1,478.0
Net premiums earned			328.7			742.3		1,071.0			241.5			82.4			323.9			1,394.9			—		1,394.9			—			1,394.9
Net loss and LAE			273.4			504.8		778.2			196.0			50.2			246.2			1,024.4			—		1,024.4			—			1,024.4
Commissions, brokerage and other underwriting expenses			96.8			226.3		323.1			52.7			34.2			86.9			410.0			—		410.0			—			410.0
Underwriting (loss) profit⁽²⁾		$	(41.5	)	$	11.2	$	(30.3	)	$	(7.2	)	$	(2.0	)	$	(9.2	)		(39.5	)		—		(39.5	)		—			(39.5	)
Net investment income																				115.4			—		115.4			3.3			118.7
Change in the fair value of equity securities																				242.2			—		242.2			—			242.2
Net realized capital gains																				(10.1	)		16.4		6.3			(44.4	)		(38.1	)
Change in allowance for credit losses on available for sale securities																				16.6			—		16.6			0.4			17.0
Noninsurance revenue																				8.3			483.2		491.5			1.2			492.7
Other operating expenses																				33.3			473.6		506.9			3.4			510.3
Corporate administration																				0.5			—		0.5			18.1			18.6
Amortization of intangible assets																				0.2			11.9		12.1			—			12.1
Interest expense																				6.8			4.3		11.1			11.1			22.2
Earnings (losses) before income taxes																			$	292.1		$	9.8	$	301.9		$	(72.1	)	$	229.8

		Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2019		Property		Casualty & other ⁽¹⁾		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital		Total Segments		Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	381.6	$	829.1	$	1,210.7	$	372.4	$	93.8	$	466.2	$	1,676.9	$	—	$	1,676.9	$	(6.1	)	$	1,670.8
Net premiums written			305.9		807.0		1,112.9		246.9		86.7		333.6		1,446.5		—		1,446.5		—			1,446.5
Net premiums earned			303.2		771.7		1,074.9		202.4		78.7		281.1		1,356.0		—		1,356.0		—			1,356.0
Net loss and LAE			136.2		508.9		645.1		105.6		46.1		151.7		796.8		—		796.8		—			796.8
Commissions, brokerage and other underwriting expenses			103.8		250.1		353.9		57.9		32.5		90.4		444.3		—		444.3		—			444.3
Underwriting profit⁽²⁾		$	63.2	$	12.7	$	75.9	$	38.9	$	0.1	$	39.0		114.9		—		114.9		—			114.9
Net investment income															138.3		0.9		139.2		3.5			142.7
Change in the fair value of equity securities															143.3		—		143.3		0.4			143.7
Net realized capital gains															12.2		0.2		12.4		—			12.4
Change in allowance for credit losses on available for sale securities															—		—		—		—			—
Noninsurance revenue															6.6		593.7		600.3		3.6			603.9
Other operating expenses															26.2		548.3		574.5		7.0			581.5
Corporate administration															1.8		—		1.8		24.2			26.0
Amortization of intangible assets															0.4		8.4		8.8		—			8.8
Interest expense															6.8		4.7		11.5		13.6			25.1
Earnings (losses) before income taxes														$	380.1	$	33.4	$	413.5	$	(37.3	)	$	376.2

		Reinsurance Segment									Insurance Segment
Six Months Ended June 30, 2020		Property			Casualty & other ⁽¹⁾			Total			RSUI		Cap Specialty			Total		Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	825.9		$	1,655.5		$	2,481.4		$	840.6	$	186.7		$	1,027.3	$	3,508.7		$	—	$	3,508.7		$	(16.9	)	$	3,491.8
Net premiums written			668.7			1,628.8			2,297.5			544.5		169.7			714.2		3,011.7			—		3,011.7			—			3,011.7
Net premiums earned			650.1			1,554.0			2,204.1			470.9		164.3			635.2		2,839.3			—		2,839.3			—			2,839.3
Net loss and LAE			521.3			1,119.1			1,640.4			311.9		99.5			411.4		2,051.8			—		2,051.8			—			2,051.8
Commissions, brokerage and other underwriting expenses			202.2			470.7			672.9			110.6		67.9			178.5		851.4			—		851.4			—			851.4
Underwriting (loss) profit⁽²⁾		$	(73.4	)	$	(35.8	)	$	(109.2	)	$	48.4	$	(3.1	)	$	45.3		(63.9	)		—		(63.9	)		—			(63.9	)
Net investment income																			225.0			1.8		226.8			3.9			230.7
Change in the fair value of equity securities																			(279.4	)		—		(279.4	)		(1.4	)		(280.8	)
Net realized capital gains																			35.1			21.4		56.5			(81.6	)		(25.1	)
Change in allowance for credit losses on available for sale securities																			(14.1	)		—		(14.1	)		(0.3	)		(14.4	)
Noninsurance revenue																			15.6			940.5		956.1			4.5			960.6
Other operating expenses																			43.1			924.3		967.4			9.6			977.0
Corporate administration																			(1.6	)		—		(1.6	)		5.8			4.2
Amortization of intangible assets																			0.5			21.2		21.7			—			21.7
Interest expense																			13.5			8.1		21.6			19.0			40.6
Earnings (losses) before income taxes																		$	(137.2	)	$	10.1	$	(127.1	)	$	(109.3	)	$	(236.4	)

		Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2019		Property		Casualty & other ⁽¹⁾		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	796.7	$	1,645.6	$	2,442.3	$	671.4	$	176.6	$	848.0	$	3,290.3		$	—	$	3,290.3		$	(12.9	)	$	3,277.4
Net premiums written			622.1		1,598.4		2,220.5		448.3		163.3		611.6		2,832.1			—		2,832.1			—			2,832.1
Net premiums earned			612.1		1,492.0		2,104.1		394.8		154.4		549.2		2,653.3			—		2,653.3			—			2,653.3
Net loss and LAE			298.8		999.5		1,298.3		199.9		91.1		291.0		1,589.3			—		1,589.3			—			1,589.3
Commissions, brokerage and other underwriting expenses			207.5		482.4		689.9		111.4		63.1		174.5		864.4			—		864.4			—			864.4
Underwriting profit⁽²⁾		$	105.8	$	10.1	$	115.9	$	83.5	$	0.2	$	83.7		199.6			—		199.6			—			199.6
Net investment income															256.3			2.2		258.5			7.3			265.8
Change in the fair value of equity securities															532.4			—		532.4			3.6			536.0
Net realized capital gains															16.2			0.6		16.8			—			16.8
Change in allowance for credit losses on available for sale securities															(10.0	)		—		(10.0	)		—			(10.0	)
Noninsurance revenue															12.0			1,098.7		1,110.7			7.3			1,118.0
Other operating expenses															55.8			1,013.8		1,069.6			14.3			1,083.9
Corporate administration															2.8			—		2.8			42.5			45.3
Amortization of intangible assets															0.6			15.1		15.7			—			15.7
Interest expense															13.6			9.0		22.6			26.1			48.7
Earnings (losses) before income taxes														$	933.7		$	63.6	$	997.3		$	(64.7	)	$	932.6

(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 and health; mortgage reinsurance; surety; and credit.

(2)

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, noninsurance revenue, 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.

Summary of 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 June 30, 2020:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	17,356.0	$	13,990.7	$	5,154.2
Insurance segment		7,072.2		5,324.3		2,572.5
Subtotal		24,428.2		19,315.0		7,726.7
Alleghany Capital		2,273.0		72.5		1,013.2
Total segments		26,701.2		19,387.5		8,739.9
Corporate activities		919.7		874.7		(283.7	)
Consolidated	$	27,620.9	$	20,262.2	$	8,456.2

Summary of Alleghany Capital Noninsurance Revenue

For Alleghany Capital’s industrial and non-industrial operations, noninsurance revenue consists of the sale of manufactured goods and services. The following table presents noninsurance revenue for the Alleghany Capital segment for the three and six months ended June 30, 2020 and 2019:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	($ in millions)
Industrial⁽¹⁾	$	280.6	$	318.3	$	523.1	$	578.4
Non-Industrial⁽²⁾		202.6		275.1		417.3		520.0
Corporate & other		—		0.3		0.1		0.3
Alleghany Capital	$	483.2	$	593.7	$	940.5	$	1,098.7

(1)	For the three and six months ended June 30, 2020 and 2019, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time.

(2)

For the three and six months ended June 30, 2020, approximately 74 percent and 78 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. For the three and six months ended June 30, 2019, 77 percent and 72 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time.