Segments of Business (Tables)

9 Months Ended

Sep. 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 nine months ended September 30, 2020 and 2019:

		Reinsurance Segment								Insurance Segment
Three Months Ended September 30, 2020		Property			Casualty & other ⁽¹⁾		Total			RSUI			Cap Specialty			Total			Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	473.3		$	904.7	$	1,378.0		$	410.8		$	111.8		$	522.6		$	1,900.6		$	—	$	1,900.6		$	(9.2	)	$	1,891.4
Net premiums written			375.9			887.3		1,263.2			271.9			102.0			373.9			1,637.1			—		1,637.1			—			1,637.1
Net premiums earned			374.7			832.6		1,207.3			260.4			89.2			349.6			1,556.9			—		1,556.9			—			1,556.9
Net loss and LAE			306.1			553.2		859.3			256.6			57.8			314.4			1,173.7			—		1,173.7			—			1,173.7
Commissions, brokerage and other underwriting expenses			112.4			259.0		371.4			58.8			34.3			93.1			464.5			—		464.5			—			464.5
Underwriting (loss) profit⁽²⁾		$	(43.8	)	$	20.4	$	(23.4	)	$	(55.0	)	$	(2.9	)	$	(57.9	)		(81.3	)		—		(81.3	)		—			(81.3	)
Net investment income																				122.7			—		122.7			6.6			129.3
Change in the fair value of equity securities																				103.4			—		103.4			(10.6	)		92.8
Net realized capital gains																				1.7			13.9		15.6			1.1			16.7
Change in allowance for credit losses on available for sale securities																				3.4			—		3.4			—			3.4
Noninsurance revenue																				8.9			713.8		722.7			1.1			723.8
Other operating expenses																				23.4			643.4		666.8			2.6			669.4
Corporate administration																				0.8			—		0.8			12.1			12.9
Amortization of intangible assets																				0.2			11.0		11.2			—			11.2
Interest expense																				6.8			3.3		10.1			13.2			23.3
Earnings (losses) before income taxes																			$	127.6		$	70.0	$	197.6		$	(29.7	)	$	167.9

		Reinsurance Segment							Insurance Segment
Three Months Ended September 30, 2019		Property			Casualty & other ⁽¹⁾		Total		RSUI		Cap Specialty			Total		Subtotal			Alleghany Capital			Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	455.9		$	787.4	$	1,243.3	$	319.7	$	95.6		$	415.3	$	1,658.6		$	—		$	1,658.6		$	(7.5	)	$	1,651.1
Net premiums written			339.0			772.7		1,111.7		213.4		88.8			302.2		1,413.9			—			1,413.9			—			1,413.9
Net premiums earned			327.0			770.6		1,097.6		208.9		83.5			292.4		1,390.0			—			1,390.0			—			1,390.0
Net loss and LAE			225.1			505.6		730.7		125.9		51.1			177.0		907.7			—			907.7			—			907.7
Commissions, brokerage and other underwriting expenses			108.3			252.6		360.9		55.7		32.9			88.6		449.5			—			449.5			—			449.5
Underwriting (loss) profit⁽²⁾		$	(6.4	)	$	12.4	$	6.0	$	27.3	$	(0.5	)	$	26.8		32.8			—			32.8			—			32.8
Net investment income																	145.1			1.2			146.3			1.5			147.8
Change in the fair value of equity securities																	(16.7	)		—			(16.7	)		—			(16.7	)
Net realized capital gains																	4.1			(0.2	)		3.9			—			3.9
Change in allowance for credit losses on available for sale securities																	(3.6	)		—			(3.6	)		—			(3.6	)
Noninsurance revenue																	7.5			628.0			635.5			3.0			638.5
Other operating expenses																	32.5			578.2			610.7			6.6			617.3
Corporate administration																	1.5			—			1.5			20.8			22.3
Amortization of intangible assets																	0.4			7.7			8.1			—			8.1
Interest expense																	6.8			5.2			12.0			13.7			25.7
Earnings (losses) before income taxes																$	128.0		$	37.9		$	165.9		$	(36.6	)	$	129.3

		Reinsurance Segment									Insurance Segment
Nine Months Ended September 30, 2020		Property			Casualty & other ⁽¹⁾			Total			RSUI			Cap Specialty			Total			Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	1,299.2		$	2,560.2		$	3,859.4		$	1,251.3		$	298.5		$	1,549.8		$	5,409.2		$	—	$	5,409.2		$	(26.1	)	$	5,383.1
Net premiums written			1,044.6			2,516.1			3,560.7			816.4			271.7			1,088.1			4,648.8			—		4,648.8			—			4,648.8
Net premiums earned			1,024.8			2,386.5			3,411.3			731.3			253.5			984.8			4,396.1			—		4,396.1			—			4,396.1
Net loss and LAE			827.4			1,672.4			2,499.8			568.5			157.2			725.7			3,225.5			—		3,225.5			—			3,225.5
Commissions, brokerage and other underwriting expenses			314.6			729.6			1,044.2			169.4			102.3			271.7			1,315.9			—		1,315.9			—			1,315.9
Underwriting (loss)⁽²⁾		$	(117.2	)	$	(15.5	)	$	(132.7	)	$	(6.6	)	$	(6.0	)	$	(12.6	)		(145.3	)		—		(145.3	)		—			(145.3	)
Net investment income																					347.8			1.8		349.6			10.3			359.9
Change in the fair value of equity securities																					(176.0	)		—		(176.0	)		(12.0	)		(188.0	)
Net realized capital gains																					36.8			35.3		72.1			(80.4	)		(8.3	)
Change in allowance for credit losses on available for sale securities																					(10.7	)		—		(10.7	)		(0.2	)		(10.9	)
Noninsurance revenue																					24.4			1,654.3		1,678.7			5.7			1,684.4
Other operating expenses																					66.5			1,567.7		1,634.2			12.2			1,646.4
Corporate administration																					(0.9	)		—		(0.9	)		18.0			17.1
Amortization of intangible assets																					0.6			32.3		32.9			—			32.9
Interest expense																					20.3			11.4		31.7			32.2			63.9
Earnings (losses) before income taxes																				$	(9.5	)	$	80.0	$	70.5		$	(139.0	)	$	(68.5	)

		Reinsurance Segment						Insurance Segment
Nine Months Ended September 30, 2019		Property		Casualty & other ⁽¹⁾		Total		RSUI		Cap Specialty			Total		Subtotal			Alleghany Capital		Total Segments			Corporate Activities			Consolidated
	($ in millions)
Gross premiums written		$	1,252.6	$	2,433.0	$	3,685.6	$	991.1	$	272.3		$	1,263.4	$	4,949.0		$	—	$	4,949.0		$	(20.5	)	$	4,928.5
Net premiums written			961.1		2,371.0		3,332.1		661.7		252.2			913.9		4,246.0			—		4,246.0			—			4,246.0
Net premiums earned			939.1		2,262.6		3,201.7		603.7		237.9			841.6		4,043.3			—		4,043.3			—			4,043.3
Net loss and LAE			523.8		1,505.1		2,028.9		325.8		142.3			468.1		2,497.0			—		2,497.0			—			2,497.0
Commissions, brokerage and other underwriting expenses			315.8		735.0		1,050.8		167.2		96.0			263.2		1,314.0			—		1,314.0			—			1,314.0
Underwriting profit (loss)⁽²⁾		$	99.5	$	22.5	$	122.0	$	110.7	$	(0.4	)	$	110.3		232.3			—		232.3			—			232.3
Net investment income																401.5			3.4		404.9			8.7			413.6
Change in the fair value of equity securities																515.7			—		515.7			3.6			519.3
Net realized capital gains																20.4			0.3		20.7			0.1			20.8
Change in allowance for credit losses on available for sale securities																(13.6	)		—		(13.6	)		—			(13.6	)
Noninsurance revenue																19.5			1,726.8		1,746.3			10.2			1,756.5
Other operating expenses																88.3			1,592.0		1,680.3			20.9			1,701.2
Corporate administration																4.4			—		4.4			63.2			67.6
Amortization of intangible assets																1.0			22.8		23.8			—			23.8
Interest expense																20.3			14.2		34.5			39.9			74.4
Earnings (losses) before income taxes															$	1,061.8		$	101.5	$	1,163.3		$	(101.4	)	$	1,061.9

(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 September 30, 2020:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	17,777.6	$	14,299.6	$	5,309.4
Insurance segment		7,367.7		5,489.3		2,571.9
Subtotal		25,145.3		19,788.9		7,881.3
Alleghany Capital		2,440.4		89.5		1,059.9
Total segments		27,585.7		19,878.4		8,941.2
Corporate activities		866.9		869.3		(344.8	)
Consolidated	$	28,452.6	$	20,747.7	$	8,596.4

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 nine months ended September 30, 2020 and 2019:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	($ in millions)
Industrial⁽¹⁾	$	324.2	$	286.8	$	847.3	$	865.2
Non-Industrial⁽²⁾		389.6		341.2		806.9		861.2
Corporate & other		—		—		0.1		0.4
Alleghany Capital	$	713.8	$	628.0	$	1,654.3	$	1,726.8

(1)	For the three and nine months ended September 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 nine months ended September 30, 2020, approximately 54 percent and 66 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 nine months ended September 30, 2019, 71 percent of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time.