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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2022 |
or
|
|
|
☐ |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
For the transition period from to |
Commission File Number 1-9371
ALLEGHANY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
|
|
|
Delaware |
|
51-0283071 |
State or Other Jurisdiction of |
|
I.R.S. Employer Identification No. |
Incorporation or Organization |
|
|
|
|
|
1411 Broadway, 34th Floor, NY, NY |
|
10018 |
Address of Principal Executive Offices |
|
Zip Code |
212-752-1356
Registrant’s Telephone Number, Including Area Code
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $1.00 par value |
Y |
New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
Large accelerated filer ☒ |
|
Accelerated filer ☐ |
|
|
|
|
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
|
|
|
|
|
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
13,454,888 Shares, par value $1.00 per share, as of April 28, 2022
ALLEGHANY CORPORATION
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(unaudited) |
|
|
|
|
|
|
($ in thousands, except share amounts) |
|
Assets |
|
|
|
|
|
|
Investments: |
|
|
|
|
|
|
Securities at fair value: |
|
|
|
|
|
|
Equity securities (cost: 2022 – $2,400,563; 2021 – $2,552,722) |
|
$ |
3,413,525 |
|
|
$ |
3,683,820 |
|
Debt securities (amortized cost: 2022 – $15,993,207; 2021 – $15,727,143; allowance for credit losses: 2022 – $1,084; 2021 – $502) |
|
|
15,558,624 |
|
|
|
16,061,560 |
|
Short-term investments |
|
|
1,305,804 |
|
|
|
1,142,258 |
|
|
|
|
20,277,953 |
|
|
|
20,887,638 |
|
Commercial mortgage loans |
|
|
462,556 |
|
|
|
475,860 |
|
Other invested assets |
|
|
561,195 |
|
|
|
557,800 |
|
Total investments |
|
|
21,301,704 |
|
|
|
21,921,298 |
|
Cash |
|
|
993,056 |
|
|
|
927,966 |
|
Accrued investment income |
|
|
93,895 |
|
|
|
87,610 |
|
Premium balances receivable |
|
|
1,528,474 |
|
|
|
1,458,679 |
|
Reinsurance recoverables |
|
|
2,164,653 |
|
|
|
2,195,975 |
|
Ceded unearned premiums |
|
|
483,088 |
|
|
|
463,412 |
|
Deferred acquisition costs |
|
|
636,654 |
|
|
|
586,753 |
|
Property and equipment at cost, net of accumulated depreciation and amortization |
|
|
303,591 |
|
|
|
304,452 |
|
Goodwill |
|
|
754,648 |
|
|
|
753,607 |
|
Intangible assets, net of amortization |
|
|
909,420 |
|
|
|
924,406 |
|
Net deferred tax assets |
|
|
104,966 |
|
|
|
— |
|
Funds held under reinsurance agreements |
|
|
506,005 |
|
|
|
634,182 |
|
Other assets |
|
|
2,114,273 |
|
|
|
2,010,335 |
|
Total assets |
|
$ |
31,894,427 |
|
|
$ |
32,268,675 |
|
|
|
|
|
|
|
|
Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity |
|
|
|
|
|
|
Loss and loss adjustment expenses |
|
$ |
14,316,367 |
|
|
$ |
14,357,635 |
|
Unearned premiums |
|
|
3,386,395 |
|
|
|
3,179,513 |
|
Senior notes and other debt |
|
|
2,822,777 |
|
|
|
2,847,199 |
|
Reinsurance payable |
|
|
360,919 |
|
|
|
322,902 |
|
Current taxes payable |
|
|
63,912 |
|
|
|
34,297 |
|
Net deferred tax liabilities |
|
|
— |
|
|
|
56,958 |
|
Other liabilities |
|
|
1,982,891 |
|
|
|
1,965,943 |
|
Total liabilities |
|
|
22,933,261 |
|
|
|
22,764,447 |
|
Redeemable noncontrolling interests |
|
|
365,793 |
|
|
|
317,346 |
|
Common stock (shares authorized: 2022 and 2021 – 22,000,000; shares issued: 2022 and 2021 – 17,459,961) |
|
|
17,460 |
|
|
|
17,460 |
|
Contributed capital |
|
|
3,593,370 |
|
|
|
3,608,905 |
|
Accumulated other comprehensive (loss) income |
|
|
(464,460 |
) |
|
|
141,822 |
|
Treasury stock, at cost (2022 – 4,005,073 shares; 2021 – 3,861,426 shares) |
|
|
(2,029,904 |
) |
|
|
(1,934,531 |
) |
Retained earnings |
|
|
7,478,907 |
|
|
|
7,353,226 |
|
Total stockholders’ equity attributable to Alleghany stockholders |
|
|
8,595,373 |
|
|
|
9,186,882 |
|
Total liabilities, redeemable noncontrolling interests and stockholders’ equity |
|
$ |
31,894,427 |
|
|
$ |
32,268,675 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
1
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings and Comprehensive Income
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
($ in thousands, except per share amounts) |
|
Revenues |
|
|
|
|
|
|
Net premiums earned |
|
$ |
1,605,458 |
|
|
$ |
1,604,763 |
|
Net investment income |
|
|
113,476 |
|
|
|
153,484 |
|
Change in the fair value of equity securities |
|
|
(138,777 |
) |
|
|
112,728 |
|
Net realized capital gains |
|
|
(10,003 |
) |
|
|
12,931 |
|
Change in allowance for credit losses on available for sale securities |
|
|
(582 |
) |
|
|
1,972 |
|
Product and service revenues |
|
|
1,149,162 |
|
|
|
767,835 |
|
Total revenues |
|
|
2,718,734 |
|
|
|
2,653,713 |
|
|
|
|
|
|
|
|
Costs and Expenses |
|
|
|
|
|
|
Net loss and loss adjustment expenses |
|
|
941,787 |
|
|
|
1,112,070 |
|
Commissions, brokerage and other underwriting expenses |
|
|
477,165 |
|
|
|
476,036 |
|
Other operating expenses |
|
|
1,028,892 |
|
|
|
723,889 |
|
Corporate administration |
|
|
10,723 |
|
|
|
9,558 |
|
Amortization of intangible assets |
|
|
14,082 |
|
|
|
11,478 |
|
Interest expense |
|
|
32,110 |
|
|
|
23,752 |
|
Total costs and expenses |
|
|
2,504,759 |
|
|
|
2,356,783 |
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
213,975 |
|
|
|
296,930 |
|
Income taxes |
|
|
45,082 |
|
|
|
58,867 |
|
Net earnings |
|
|
168,893 |
|
|
|
238,063 |
|
Net earnings attributable to noncontrolling interest |
|
|
43,212 |
|
|
|
8,022 |
|
Net earnings attributable to Alleghany stockholders |
|
$ |
125,681 |
|
|
$ |
230,041 |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
168,893 |
|
|
$ |
238,063 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
Change in unrealized gains, net of deferred taxes of ($163,282) and ($57,932) in 2022 and 2021, respectively |
|
|
(614,251 |
) |
|
|
(217,935 |
) |
Less: reclassification for net realized capital gains and change in allowance for credit losses on available for sale securities, net of taxes of $2,223 and ($3,130) for 2022 and 2021, respectively |
|
|
8,362 |
|
|
|
(11,773 |
) |
Change in unrealized currency translation adjustment, net of deferred taxes of ($139) and $654 for 2022 and 2021, respectively |
|
|
(523 |
) |
|
|
2,461 |
|
Retirement plans |
|
|
130 |
|
|
|
(965 |
) |
Comprehensive (loss) income |
|
|
(437,389 |
) |
|
|
9,851 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
43,212 |
|
|
|
8,022 |
|
Comprehensive (loss) income attributable to Alleghany stockholders |
|
$ |
(480,601 |
) |
|
$ |
1,829 |
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Alleghany stockholders |
|
$ |
9.29 |
|
|
$ |
16.44 |
|
Diluted earnings per share attributable to Alleghany stockholders |
|
|
9.29 |
|
|
|
16.37 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
2
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
|
|
Common Stock |
|
|
Contributed Capital |
|
|
Accumulated Other Comprehensive Income (loss) |
|
|
Treasury Stock |
|
|
Retained Earnings |
|
|
Total Stockholders' Equity Attributable to Alleghany Shareholders |
|
|
Redeemable Non- controlling Interest |
|
|
|
($ in thousands, except share amounts) |
|
Balance as of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,459,961 shares of common stock issued; 3,861,426 in treasury) |
|
$ |
17,460 |
|
|
$ |
3,608,905 |
|
|
$ |
141,822 |
|
|
$ |
(1,934,531 |
) |
|
$ |
7,353,226 |
|
|
$ |
9,186,882 |
|
|
$ |
317,346 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
125,681 |
|
|
|
125,681 |
|
|
|
43,212 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plans |
|
|
— |
|
|
|
— |
|
|
|
130 |
|
|
|
— |
|
|
|
— |
|
|
|
130 |
|
|
|
— |
|
Change in unrealized appreciation of investments, net |
|
|
— |
|
|
|
— |
|
|
|
(605,889 |
) |
|
|
— |
|
|
|
— |
|
|
|
(605,889 |
) |
|
|
— |
|
Change in unrealized currency translation adjustment, net |
|
|
— |
|
|
|
— |
|
|
|
(523 |
) |
|
|
— |
|
|
|
— |
|
|
|
(523 |
) |
|
|
— |
|
Comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
(606,282 |
) |
|
|
— |
|
|
|
125,681 |
|
|
|
(480,601 |
) |
|
|
43,212 |
|
Treasury stock repurchase |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(95,987 |
) |
|
|
— |
|
|
|
(95,987 |
) |
|
|
— |
|
Other, net |
|
|
— |
|
|
|
(15,535 |
) |
|
|
— |
|
|
|
614 |
|
|
|
— |
|
|
|
(14,921 |
) |
|
|
5,235 |
|
Balance as of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,459,961 shares of common stock issued; 4,005,073 in treasury) |
|
$ |
17,460 |
|
|
$ |
3,593,370 |
|
|
$ |
(464,460 |
) |
|
$ |
(2,029,904 |
) |
|
$ |
7,478,907 |
|
|
$ |
8,595,373 |
|
|
$ |
365,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021 |
|
|
|
Common Stock |
|
|
Contributed Capital |
|
|
Accumulated Other Comprehensive Income (loss) |
|
|
Treasury Stock |
|
|
Retained Earnings |
|
|
Total Stockholders' Equity Attributable to Alleghany Shareholders |
|
|
Redeemable Non- controlling Interest |
|
|
|
($ in thousands, except share amounts) |
|
Balance as of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,459,961 shares of common stock issued; 3,418,781 in treasury) |
|
$ |
17,460 |
|
|
$ |
3,613,454 |
|
|
$ |
452,402 |
|
|
$ |
(1,645,930 |
) |
|
$ |
6,318,334 |
|
|
$ |
8,755,720 |
|
|
$ |
233,809 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
230,041 |
|
|
|
230,041 |
|
|
|
8,022 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement plans |
|
|
— |
|
|
|
— |
|
|
|
(965 |
) |
|
|
— |
|
|
|
— |
|
|
|
(965 |
) |
|
|
— |
|
Change in unrealized appreciation of investments, net |
|
|
— |
|
|
|
— |
|
|
|
(229,708 |
) |
|
|
— |
|
|
|
— |
|
|
|
(229,708 |
) |
|
|
— |
|
Change in unrealized currency translation adjustment, net |
|
|
— |
|
|
|
— |
|
|
|
2,461 |
|
|
|
— |
|
|
|
— |
|
|
|
2,461 |
|
|
|
— |
|
Comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
(228,212 |
) |
|
|
— |
|
|
|
230,041 |
|
|
|
1,829 |
|
|
|
8,022 |
|
Treasury stock repurchase |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(63,192 |
) |
|
|
— |
|
|
|
(63,192 |
) |
|
|
— |
|
Other, net |
|
|
— |
|
|
|
310 |
|
|
|
— |
|
|
|
1,214 |
|
|
|
— |
|
|
|
1,524 |
|
|
|
(8,268 |
) |
Balance as of March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,459,961 shares of common stock issued; 3,519,292 in treasury) |
|
$ |
17,460 |
|
|
$ |
3,613,764 |
|
|
$ |
224,190 |
|
|
$ |
(1,707,908 |
) |
|
$ |
6,548,375 |
|
|
$ |
8,695,881 |
|
|
$ |
233,563 |
|
See accompanying Notes to Unaudited Consolidated Financial Statements.
3
ALLEGHANY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
($ in thousands) |
|
Cash flows from operating activities |
|
|
|
|
|
|
Net earnings |
|
$ |
168,893 |
|
|
$ |
|