ALLEGHANY CORP /DE [Y] Filings

10-Q 1 y-20220630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2022


☐		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.

13,455,454 Shares, par value $1.00 per share, as of July 28, 2022

ALLEGHANY CORPORATION

TABLE OF CONTENTS


		Page
PART I

ITEM 1.	Financial Statements	1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	66
ITEM 4.	Controls and Procedures	68
PART II

ITEM 1.	Legal Proceedings	69
ITEM 1A.	Risk Factors	69
ITEM 6.	Exhibits	71
SIGNATURES		72

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets


	June 30,			December 31,
	2022			2021
	(unaudited)
	($ in thousands, except share amounts)
Assets
Investments:
Securities at fair value:
Equity securities (cost: 2022 – $2,352,925; 2021 – $2,552,722)	$	2,869,444		$	3,683,820
Debt securities (amortized cost: 2022 – $15,694,482; 2021 – $15,727,143; allowance for credit losses: 2022 – $8,679; 2021 – $502)		14,651,254			16,061,560
Short-term investments		1,624,444			1,142,258
		19,145,142			20,887,638
Commercial mortgage loans		451,404			475,860
Other invested assets		538,302			557,800
Total investments		20,134,848			21,921,298
Cash		941,519			927,966
Accrued investment income		94,871			87,610
Premium balances receivable		1,627,263			1,458,679
Reinsurance recoverables		2,161,436			2,195,975
Ceded unearned premiums		523,733			463,412
Deferred acquisition costs		646,646			586,753
Property and equipment at cost, net of accumulated depreciation and amortization		319,650			304,452
Goodwill		733,109			753,607
Intangible assets, net of amortization		889,605			924,406
Current taxes receivable		22,589			—
Net deferred tax assets		334,295			—
Funds held under reinsurance agreements		421,362			634,182
Other assets		2,156,939			2,010,335
Total assets	$	31,007,865		$	32,268,675

Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
Loss and loss adjustment expenses	$	14,393,680		$	14,357,635
Unearned premiums		3,525,555			3,179,513
Senior notes and other debt		2,339,598			2,847,199
Reinsurance payable		389,837			322,902
Current taxes payable		—			34,297
Net deferred tax liabilities		—			56,958
Other liabilities		2,057,076			1,965,943
Total liabilities		22,705,746			22,764,447
Redeemable noncontrolling interests		395,449			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		3,575,815			3,608,905
Accumulated other comprehensive (loss) income		(964,281	)		141,822
Treasury stock, at cost (2022 – 4,004,507 shares; 2021 – 3,861,426 shares)		(2,029,617	)		(1,934,531	)
Retained earnings		7,307,293			7,353,226
Total stockholders’ equity attributable to Alleghany stockholders		7,906,670			9,186,882
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	31,007,865		$	32,268,675

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings and Comprehensive Income

(unaudited)


	Three Months Ended June 30,
	2022			2021
	($ in thousands, except per share amounts)
Revenues
Net premiums earned	$	1,715,188		$	1,784,351
Net investment income		105,452			126,931
Change in the fair value of equity securities		(500,223	)		203,902
Net realized capital gains		11,167			12,942
Change in allowance for credit losses on available for sale securities		(7,595	)		246
Product and service revenues		1,272,902			800,425
Total revenues		2,596,891			2,928,797

Costs and Expenses
Net loss and loss adjustment expenses		1,039,127			1,087,206
Commissions, brokerage and other underwriting expenses		510,935			523,513
Other operating expenses		1,149,986			739,592
Corporate administration		17,278			20,148
Amortization of intangible assets		14,941			12,431
Interest expense		28,544			24,037
Total costs and expenses		2,760,811			2,406,927

(Losses) earnings before income taxes		(163,920	)		521,870
Income taxes		(40,033	)		102,281
Net (losses) earnings		(123,887	)		419,589
Net earnings attributable to noncontrolling interest		47,727			15,938
Net (losses) earnings attributable to Alleghany stockholders	$	(171,614	)	$	403,651

Net (losses) earnings	$	(123,887	)	$	419,589
Other comprehensive income (loss):
Change in unrealized gains, net of deferred taxes of ($125,309) and $24,339 in 2022 and 2021, respectively		(471,401	)		91,560
Less: reclassification for net realized capital gains and change in allowance for credit losses on available for sale securities, net of taxes of ($750) and ($2,769) for 2022 and 2021, respectively		(2,822	)		(10,419	)
Change in unrealized currency translation adjustment, net of deferred taxes of ($6,834) and ($598) for 2022 and 2021, respectively		(25,707	)		(2,249	)
Retirement plans		109			113
Comprehensive (loss) income		(623,708	)		498,594
Comprehensive income attributable to noncontrolling interests		47,727			15,938
Comprehensive (loss) income attributable to Alleghany stockholders	$	(671,435	)	$	482,656

Basic (losses) earnings per share attributable to Alleghany stockholders	$	(12.75	)	$	29.00
Diluted (losses) earnings per share attributable to Alleghany stockholders		(12.75	)		29.00

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings and Comprehensive Income

(unaudited)


	Six Months Ended June 30,
	2022			2021
	($ in thousands, except per share amounts)
Revenues
Net premiums earned	$	3,320,646		$	3,389,114
Net investment income		218,928			280,415
Change in the fair value of equity securities		(639,000	)		316,630
Net realized capital gains		1,164			25,873
Change in allowance for credit losses on available for sale securities		(8,177	)		2,218
Product and service revenues		2,422,064			1,568,260
Total revenues		5,315,625			5,582,510

Costs and Expenses
Net loss and loss adjustment expenses		1,980,914			2,199,276
Commissions, brokerage and other underwriting expenses		988,100			999,549
Other operating expenses		2,178,878			1,463,481
Corporate administration		28,001			29,706
Amortization of intangible assets		29,023			23,909
Interest expense		60,654			47,789
Total costs and expenses		5,265,570			4,763,710

Earnings before income taxes		50,055			818,800
Income taxes		5,049			161,148
Net earnings		45,006			657,652
Net earnings attributable to noncontrolling interest		90,939			23,960
Net (losses) earnings attributable to Alleghany stockholders	$	(45,933	)	$	633,692

Net earnings	$	45,006		$	657,652
Other comprehensive income (loss):
Change in unrealized gains, net of deferred taxes of ($288,591) and ($33,593) in 2022 and 2021, respectively		(1,085,652	)		(126,375	)
Less: reclassification for net realized capital gains and change in allowance for credit losses on available for sale securities, net of taxes of $1,473 and ($5,899) for 2022 and 2021, respectively		5,540			(22,192	)
Change in unrealized currency translation adjustment, net of deferred taxes of ($6,973) and $57 for 2022 and 2021, respectively		(26,230	)		213
Retirement plans		239			(852	)
Comprehensive (loss) income		(1,061,097	)		508,446
Comprehensive income attributable to noncontrolling interests		90,939			23,960
Comprehensive (loss) income attributable to Alleghany stockholders	$	(1,152,036	)	$	484,486

Basic (losses) earnings per share attributable to Alleghany stockholders	$	(3.41	)	$	45.41
Diluted (losses) earnings per share attributable to Alleghany stockholders		(3.41	)		45.41

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)


	Six Months Ended June 30, 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	)

ALLEGHANY CORP /DE [Y] Filings
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-02-23]
10-Q	[2021-11-04]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-02-23]
10-Q	[2020-11-03]
10-Q	[2020-08-04]
10-Q	[2020-05-05]
10-K	[2020-02-19]
10-Q	[2019-11-05]
10-Q	[2019-08-06]
10-Q	[2019-05-07]
10-K	[2019-02-20]
10-Q	[2018-11-01]
10-Q	[2018-08-02]
10-Q	[2018-05-03]
10-K	[2018-02-21]
10-Q	[2017-11-02]
10-Q	[2017-08-03]
10-Q	[2017-05-04]
10-K	[2017-02-22]
10-Q	[2016-11-01]
10-Q	[2016-08-02]
10-Q	[2016-05-05]
10-K	[2016-02-23]
10-Q	[2015-11-03]
10-Q	[2015-08-04]
10-Q	[2015-05-05]
10-K	[2015-02-24]
10-Q	[2014-11-03]
10-Q	[2014-08-04]
10-Q	[2014-05-05]
10-K	[2014-02-25]
10-Q	[2013-11-04]
10-Q	[2013-08-05]
10-Q	[2013-05-06]
10-K	[2013-02-21]
10-Q	[2012-11-06]
10-Q	[2012-08-06]
10-Q	[2012-05-07]
10-K	[2012-02-24]