Exhibit 99.2

Alleghany

ALLEGHANY CORPORATION AND SUBSIDIARIES

FINANCIAL SUPPLEMENT

Three Months Ended

March 31, 2014

(Unaudited)

 

Investor Contact:				This report is for informational purposes only. It should be read in conjunction with documents filed by Alleghany Corporation with the U.S. Securities and Exchange Commission, including the company’s Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q.
Kerry Jacobs
Phone:		(212)508-8141

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Definitions

References in this financial supplement for the quarter ended March 31, 2014 (the “Financial Supplement”) to the “Company,” “Alleghany,” “we,” “us,” and “our” refer to Alleghany Corporation and its consolidated subsidiaries unless the context otherwise requires. In addition, unless the context otherwise requires, references to

 

•

“TransRe” are to Alleghany’s reinsurance holding company subsidiary Transatlantic Holdings, Inc. and its subsidiaries,

 

•

“AIHL” are to Alleghany’s insurance holding company subsidiary Alleghany Insurance Holdings LLC,

 

•

“RSUI” are to Alleghany’s subsidiary RSUI Group, Inc. and its subsidiaries,

 

•

“Capitol” are to Alleghany’s subsidiary Capitol Transamerica Corporation and its subsidiaries, and

 

•

“PCC” are to Alleghany’s subsidiary Pacific Compensation Corporation and its subsidiaries.

Forward-Looking Statements

This Financial Supplement may contain disclosures which are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as “may,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “potential,” “should,” “continue” or the negative versions of those words or other comparable words. These forward-looking statements are based upon Alleghany’s current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and Alleghany’s future financial condition and results. These statements are not guarantees of future performance, and Alleghany has no specific intention to update these statements. The uncertainties and risks include, but are not limited to,

 

•

significant weather-related or other natural or man-made catastrophes and disasters;

 

•

the cyclical nature of the property and casualty reinsurance and insurance industries;

 

•

changes in market prices of Alleghany’s significant equity investments and changes in value of Alleghany’s debt securities portfolio;

 

•

adverse loss development for events insured by Alleghany’s reinsurance and insurance subsidiaries in either the current year or prior years;

 

•

the long-tail and potentially volatile nature of certain casualty lines of business written by Alleghany’s reinsurance and insurance subsidiaries;

 

•

the cost and availability of reinsurance;

 

•

the reliance by Alleghany’s reinsurance operating subsidiaries on a limited number of brokers;

 

•

increases in the levels of risk retention by Alleghany’s reinsurance and insurance subsidiaries;

 

•

exposure to terrorist acts and acts of war;

 

•

the willingness and ability of Alleghany’s reinsurance and insurance subsidiaries’ reinsurers to pay reinsurance recoverables owed to Alleghany’s reinsurance and insurance subsidiaries;

 

•

changes in the ratings assigned to Alleghany’s reinsurance and insurance subsidiaries;

 

•

claims development and the process of estimating reserves;

 

•

legal, political, judicial and regulatory changes, including the federal financial regulatory reform of the insurance industry by the Dodd-Frank Wall Street Reform and Consumer Protection Act;

 

•

the uncertain nature of damage theories and loss amounts;

 

•

the loss of key personnel of Alleghany’s reinsurance or insurance operating subsidiaries;

 

•

fluctuation in foreign currency exchange rates;

 

•

the failure to comply with the restrictive covenants contained in the agreements governing Alleghany’s indebtedness;

 

•

the ability to make payments on, or repay or refinance, Alleghany’s debt;

 

•

risks inherent in international operations; and

 

•

difficult and volatile conditions in the global market.

Additional risks and uncertainties include general economic and political conditions, including the effects of a prolonged U.S. or global economic downturn or recession; changes in costs; variations in political, economic or other factors; risks relating to conducting operations in a competitive environment; effects of acquisition and disposition activities, inflation rates, or recessionary or expansive trends; changes in interest rates; extended labor disruptions, civil unrest, or other external factors over which Alleghany has no control; and changes in Alleghany’s plans, strategies, objectives, expectations, or intentions, which may happen at any time at its discretion. As a consequence, current plans, anticipated actions, and future financial condition and results may differ from those expressed in any forward-looking statements made by Alleghany or on its behalf.

 

PAGE 2

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ALLEGHANY CORPORATION AND SUBSIDIARIES

FINANCIAL SUPPLEMENT TABLE OF CONTENTS

 

				Page
I.		Financial Summary
		10 Year Financial Summary			5
		Consolidated Financial Highlights			6
II.		Consolidated Results
		Consolidated Statements of Earnings - Consecutive Quarters			7
		Premiums Written			8
III.		Segment Results
		Consolidated Underwriting Results - Current Quarter			9
		Consolidated Underwriting Results - Prior Year Quarter			10
IV.		Balance Sheet Details
		Condensed Consolidated Balance Sheets			11
		Consolidated Total Investment Portfolio			12
		Debt Securities Portfolio Credit Quality			13
		Net Investment Income			14
		Financial Statement Portfolio Return			15
		Annualized Investment Book Yield			16
		Loss and Loss Adjustment Expenses (LAE)			17
		Capital Structure and Leverage Ratios			18
V.		Other
		Share Repurchase Detail			19
		Basic and Diluted Earnings per Share Information - Consecutive Quarters			20
		Return on Average Stockholders’ Equity - Consecutive Quarters			21
		Book Value per Share			22
		Catastrophe Exposure			23
		Non-GAAP Financial Measures			24
		Operating Income Reconciliation			25

 

PAGE 3

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ALLEGHANY CORPORATION AND SUBSIDIARIES

BASIS OF PRESENTATION

Presentation

All financial information contained herein is unaudited. Certain amounts may not reconcile exactly due to rounding differences. Unless otherwise noted, all data is in millions of U.S. dollars, except for share, per share, percentage and ratio information.

 

PAGE 4

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ALLEGHANY CORPORATION AND SUBSIDIARIES

10 YEAR FINANCIAL SUMMARY*

(in millions, except per share data)

 

		As of and for the Year Ended December 31,																																								As of and for the three months ended
		2004				2005				2006				2007				2008				2009				2010				2011				2012				2013				March 31, 2014
Cash and invested assets		$	2,415.4			$	2,867.6			$	3,699.4			$	4,308.9			$	4,294.3			$	4,447.2			$	4,881.9			$	4,911.6			$	18,976.4			$	19,490.5			$	19,467.7
Net loss & LAE reserves			639.0				952.9				1,127.5				1,412.9				1,570.3				1,573.3				1,481.3				1,481.2				10,933.9				10,650.4				10,569.3
Preferred stock and debt			80.0				80.0				379.5				299.5				299.4				—				298.9				299.0				1,811.5				1,794.4				1,790.0
Common Stockholders’ Equity (“CSE”) attributable to Alleghany stockholders			1,799.5				1,894.4				2,146.4				2,484.8				2,347.3				2,717.5				2,908.9				2,925.7				6,403.8				6,923.8				7,128.1
Common shares outstanding			8.82				8.90				8.79				8.83				8.78				9.22				8.94				8.55				16.89				16.77				16.54
Net invested assets per share		$	264.86			$	313.14			$	377.79			$	453.98			$	455.05			$	482.43			$	512.53			$	539.38			$	1,016.24			$	1,055.46			$	1,069.07
% increase (decrease)			29.8	%			18.2	%			20.6	%			20.2	%			0.2	%			6.0	%			6.2	%			5.2	%			88.4	%			3.9	%			1.3	%
Book value per common share		$	204.08			$	212.80			$	244.25			$	281.36			$	267.37			$	294.79			$	325.31			$	342.12			$	379.13			$	412.96			$	431.07
% increase (decrease)			12.0	%			4.3	%			14.8	%			15.2	%			(5.0	%)			10.3	%			10.4	%			5.2	%			10.8	%			8.9	%			4.4	%
Net premiums written		$	786.7			$	802.7			$	916.2			$	962.5			$	898.2			$	830.8			$	736.2			$	774.7			$	3,723.9			$	4,287.4			$	1,134.0
Change in unearned premiums			(27.4	)			16.8				(38.4	)			11.8				50.5				14.2				31.9				(27.1	)			9.1				(48.2	)			(80.0	)
Net premiums earned		$	759.3			$	819.5			$	877.8			$	974.3			$	948.7			$	845.0			$	768.1			$	747.6			$	3,733.0			$	4,239.2			$	1,054.0
Underwriting profit (loss)		$	74.3			$	(117.4	)		$	252.0			$	268.1			$	92.1			$	129.2			$	130.9			$	49.5			$	220.3			$	420.7			$	118.6
Net investment income			62.3				78.1				127.9				146.1				130.2				101.9				125.0				108.9				313.0				465.7				110.6
Net realized capital gains, net of OTTI			86.9				148.6				28.2				92.8				(92.2	)			234.5				85.0				123.5				155.0				188.1				91.6
Total investment results		$	149.2			$	226.7			$	156.1			$	238.9			$	38.0			$	336.4			$	210.0			$	232.4			$	468.0			$	653.8			$	202.2
Net earnings attributable to Alleghany stockholders			117.7				52.3				238.9				281.8				130.8				264.8				198.5				143.3				702.2				628.4				204.9
Other changes in CSE			82.1				42.6				13.2				56.6				(268.4	)			105.5				(7.2	)			(126.5	)			2,775.9				(108.4	)			(0.6	)
Increase (decrease) in CSE		$	199.8			$	94.9			$	252.1			$	338.4			$	(137.6	)		$	370.3			$	191.3			$	16.8			$	3,478.1			$	520.0			$	204.3
Combined Ratio			90.2	%			114.3	%			71.3	%			72.5	%			90.3	%			84.7	%			83.0	%			93.4	%			94.1	%			90.1	%			88.8	%

 

*	Amounts have been adjusted for subsequent common stock dividends. The historical results of all subsidiaries that have been sold are reclassified as discontinued operations.

 

PAGE 5

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ALLEGHANY CORPORATION & SUBSIDIARIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except share and per share data)

 

				As of				As of
				March 31, 2014				December 31, 2013				Change
HIGHLIGHTS		Total investments and cash		$	19,467.7			$	19,490.5				(0.1	%)
		Total assets			23,494.3				23,361.1				0.6	%
		Total stockholders’ equity attributable to Alleghany stockholders			7,128.1				6,923.8				3.0	%
		Book value per share		$	431.07			$	412.96				4.4	%
				Three Months Ended March 31,
				2014				2013				Change
		Gross premiums written		$	1,301.1			$	1,237.5				5.1	%
		Net premiums written			1,134.0				1,093.9				3.7	%
		Net premiums earned			1,054.0				1,075.0				(2.0	%)
		Net investment income			110.6				118.8				(6.9	%)
		Net earnings attributable to Alleghany stockholders			204.9				196.3				4.4	%
		Operating income			145.4				184.2				(21.1	%)
PER SHARE AND SHARE DATA		Weighted average common shares outstanding:
		Basic			16,683,864				16,822,056				(0.8	%)
		Diluted			16,683,864				16,822,056				(0.8	%)
		Earnings per share attributable to Alleghany stockholders:
		Basic		$	12.28			$	11.67				5.2	%
		Diluted		$	12.28			$	11.67				5.2	%
		Operating earnings per share data:
		Basic		$	8.71			$	10.95				(20.4	%)
		Diluted		$	8.71			$	10.95				(20.4	%)
FINANCIAL RATIOS		Annualized return on average stockholders’ equity			11.7	%			12.1	%
		Loss and loss expense ratio			58.0	%			52.8	%			5.2
		Expense ratio			30.8	%			30.3	%			0.5
		Combined ratio			88.8	%			83.1	%			5.7

 

PAGE 6

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ALLEGHANY CORPORATION & SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS - CONSECUTIVE QUARTERS

(in millions, except per share data)

 

		Three Months Ended
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Revenues
Net premiums earned		$	1,054.0			$	1,056.0			$	1,039.9			$	1,068.3			$	1,075.0			$	1,110.1			$	1,092.8			$	1,095.9			$	434.2
Net investment income			110.6				131.2				115.3				100.4				118.8				78.4				90.5				90.9				53.2
Net realized investment gains			96.8				136.5				17.8				27.0				50.9				38.0				12.4				39.4				68.0
Other than temporary impairment losses			(5.2	)			(2.1	)			(0.7	)			(8.9	)			(32.3	)			—				—				(1.1	)			(1.8	)
Other income			30.4				40.9				17.2				9.4				11.2				13.9				33.8				9.3				0.3
Total revenues			1,286.6				1,362.5				1,189.5				1,196.2				1,223.6				1,240.4				1,229.5				1,234.4				1,048.8
Costs and Expenses
Net loss and loss expenses incurred			611.2				616.9				644.5				650.5				567.4				1,042.4				673.0				680.9				233.9
Commissions, brokerage and other underwriting expenses			324.2				340.4				333.6				339.0				326.2				289.7				253.8				239.1				99.9
Other operating expenses			53.3				67.8				39.0				27.2				30.8				25.8				47.4				34.8				15.7
Corporate administration			9.6				10.1				3.7				9.9				12.4				8.1				9.3				11.1				47.3
Amortization of intangible assets			(1.8	)			(1.4	)			(0.8	)			0.8				11.6				39.9				73.3				108.1				31.9
Interest expense			21.8				21.8				21.5				21.8				21.8				21.8				21.8				15.8				9.1
Total costs and expenses			1,018.3				1,055.6				1,041.5				1,049.2				970.2				1,427.7				1,078.6				1,089.8				437.8
Earnings (losses) before income taxes			268.3				306.9				148.0				147.0				253.4				(187.3	)			150.9				144.6				611.0
Income taxes			63.7				100.9				34.6				33.3				57.1				(94.7	)			25.5				35.3				50.9
Net earnings (losses)			204.6				206.0				113.4				113.7				196.3				(92.6	)			125.4				109.3				560.1
Net earnings attributable to noncontrolling interest			(0.3	)			0.7				0.2				—				—				—				—				—				—
Net earnings (losses) attributable to Alleghany stockholders		$	204.9			$	205.3			$	113.2			$	113.7			$	196.3			$	(92.6	)		$	125.4			$	109.3			$	560.1
Basic earnings per share attributable to Alleghany stockholders		$	12.28			$	12.24			$	6.75			$	6.78			$	11.67			$	(5.47	)		$	7.41			$	6.46			$	51.17
Diluted earnings per share attributable to Alleghany stockholders			12.28				12.24				6.75				6.78				11.67				(5.47	)			7.41				6.45				51.06
Basic operating earnings per share		$	8.71			$	7.03			$	6.09			$	6.07			$	10.95			$	(6.93	)		$	6.93			$	4.99			$	47.24
Diluted operating earnings per share			8.71				7.03				6.09				6.07				10.95				(6.93	)			6.93				4.98				47.13
SUPPLEMENTAL INFORMATION:
Premiums written:
Gross premiums written		$	1,301.1			$	1,134.2			$	1,174.1			$	1,340.5			$	1,237.5			$	1,144.1			$	1,176.4			$	1,369.0			$	533.4
Net premiums written			1,134.0				1,001.5				1,033.4				1,158.5				1,093.9				1,023.6				1,042.5				1,223.7				434.2
Net loss and loss expenses incurred:
Current year			662.8				638.6				692.3				713.2				638.3				1,047.9				679.1				666.2				249.3
Prior years			(51.6	)			(21.7	)			(47.8	)			(62.7	)			(70.9	)			(5.5	)			(6.1	)			14.7				(15.4	)
		$	611.2			$	616.9			$	644.5			$	650.5			$	567.4			$	1,042.4			$	673.0			$	680.9			$	233.9
Loss and loss expense ratio			58.0	%			58.4	%			62.0	%			60.9	%			52.8	%			93.9	%			61.6	%			62.1	%			53.9	%
Expense ratio			30.8	%			32.2	%			32.1	%			31.7	%			30.3	%			26.1	%			23.2	%			21.8	%			23.0	%
Combined ratio			88.8	%			90.6	%			94.1	%			92.6	%			83.1	%			120.0	%			84.8	%			83.9	%			76.9	%

 

PAGE 7

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ALLEGHANY CORPORATION AND SUBSIDIARIES

PREMIUMS WRITTEN

(in millions)

 

		Three Months Ended March 31,
		Gross Premiums Written																Net Premiums Written
		2014				2013				Change				% Change				2014				2013				Change				% Change
Reinsurance segment:
Property		$	298.6			$	270.1			$	28.5				10.6	%		$	250.6			$	236.7			$	13.9				5.9	%
Casualty and Other			642.7				637.6				5.1				0.8	%			629.2				629.3				(0.1	)			0.0	%
			941.3				907.7				33.6				3.7	%			879.8				866.0				13.8				1.6	%
Insurance segment:
RSUI			302.3				285.8				16.5				5.8	%			195.4				181.2				14.2				7.8	%
Capitol			49.1				40.2				8.9				22.1	%			43.3				37.8				5.5				14.6	%
PCC			15.8				9.1				6.7				73.6	%			15.5				8.9				6.6				74.2	%
			367.2				335.1				32.1				9.6	%			254.2				227.9				26.3				11.5	%
Intercompany elimination			(7.4	)			(5.3	)			(2.1	)			39.6	%			—				—				—				—
Total		$	1,301.1			$	1,237.5			$	63.6				5.1	%		$	1,134.0			$	1,093.9			$	40.1				3.7	%

 

PAGE 8

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ALLEGHANY CORPORATION AND SUBSIDIARIES

CONSOLIDATED UNDERWRITING RESULTS - CURRENT QUARTER

For the Three Months Ended March 31, 2014

(dollars in millions)

 

		Reinsurance Segment												Insurance Segment
		Property				Casualty & Other				Total				RSUI				Capitol				PCC				Total				Total Segments				Corporate Activities				Consolidated
Premiums written:
Gross		$	298.6			$	642.7			$	941.3			$	302.3			$	49.1			$	15.8			$	367.2			$	1,308.5			$	(7.4	)		$	1,301.1
Net			250.6				629.2				879.8				195.4				43.3				15.5				254.2				1,134.0				—				1,134.0
Net premiums earned		$	234.5			$	558.8			$	793.3			$	204.0			$	42.3			$	14.4			$	260.7			$	1,054.0			$	—			$	1,054.0
Net loss and LAE:
Current year (ex-catastrophes)			100.6				408.6				509.2				108.7				25.0				10.3				144.0				653.2				—				653.2
Current year catastrophe losses			—				—				—				9.6				—				—				9.6				9.6				—				9.6
Prior years			(39.3	)			(6.0	)			(45.3	)			(5.9	)			(1.0	)			0.6				(6.3	)			(51.6	)			—				(51.6	)
			61.3				402.6				463.9				112.4				24.0				10.9				147.3				611.2				—				611.2
Commissions, brokerage and other underwriting expenses			65.3				174.1				239.4				54.8				22.0				8.0				84.8				324.2				—				324.2
Underwriting profit (loss)		$	107.9			$	(17.9	)		$	90.0			$	36.8			$	(3.7	)		$	(4.5	)		$	28.6				118.6				—				118.6
Net investment income																															109.2				1.4				110.6
Net realized capital gains																															75.1				21.7				96.8
OTTI losses																															(5.2	)			—				(5.2	)
Other income																															3.4				27.0				30.4
Other operating expenses																															21.3				32.0				53.3
Corporate administration																															—				9.6				9.6
Amortization of intangible assets																															(1.9	)			0.1				(1.8	)
Interest expense																															12.3				9.5				21.8
Earnings before income taxes																														$	269.4			$	(1.1	)		$	268.3
Ratios:
Net loss and LAE
Current year (ex-catastrophes)			42.9	%			73.1	%			64.2	%			53.3	%			59.0	%			71.5	%			55.2	%			62.0	%
Current year catastrophe losses			0.0	%			0.0	%			0.0	%			4.7	%			0.0	%			0.0	%			3.7	%			0.9	%
Prior years			–16.8	%			–1.1	%			–5.7	%			–2.9	%			–2.4	%			4.2	%			–2.4	%			–4.9	%
			26.1	%			72.0	%			58.5	%			55.1	%			56.6	%			75.7	%			56.5	%			58.0	%
Expense			27.8	%			31.2	%			30.2	%			26.8	%			52.0	%			55.5	%			32.5	%			30.8	%
Combined			53.9	%			103.2	%			88.7	%			81.9	%			108.6	%			131.2	%			89.0	%			88.8	%

 

PAGE 9

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ALLEGHANY CORPORATION AND SUBSIDIARIES

CONSOLIDATED UNDERWRITING RESULTS - PRIOR YEAR QUARTER

For the Three Months Ended March 31, 2013

(dollars in millions)

 

		Reinsurance Segment												Insurance Segment
		Property				Casualty & Other				Total				RSUI				Capitol				PCC				Total				Total Segments				Corporate Activities				Consolidated
Premiums written:
Gross		$	270.1			$	637.6			$	907.7			$	285.8			$	40.2			$	9.1			$	335.1			$	1,242.8			$	(5.3	)		$	1,237.5
Net			236.7				629.3				866.0				181.2				37.8				8.9				227.9				1,093.9				—				1,093.9
Net premiums earned		$	250.1			$	603.8			$	853.9			$	175.7			$	37.3			$	8.1			$	221.1			$	1,075.0			$	—			$	1,075.0
Net loss and LAE:
Current year (ex-catastrophes)			92.8				437.7				530.5				83.3				17.1				6.8				107.2				637.7				—				637.7
Current year catastrophe losses			—				—				—				0.6				—				—				0.6				0.6				—				0.6
Prior years			(36.6	)			(22.7	)			(59.3	)			(13.5	)			1.0				0.9				(11.6	)			(70.9	)			—				(70.9	)
			56.2				415.0				471.2				70.4				18.1				7.7				96.2				567.4				—				567.4
Commissions, brokerage and other underwriting expenses			62.4				188.9				251.3				48.4				19.5				7.0				74.9				326.2				—				326.2
Underwriting profit (loss)		$	131.5			$	(0.1	)		$	131.4			$	56.9			$	(0.3	)		$	(6.6	)		$	50.0				181.4				—				181.4
Net investment income																															93.3				25.5				118.8
Net realized capital gains																															49.3				1.6				50.9
OTTI losses																															(32.3	)			—				(32.3	)
Other income																															0.7				10.5				11.2
Other operating expenses																															20.4				10.4				30.8
Corporate administration																															—				12.4				12.4
Amortization of intangible assets																															11.6				—				11.6
Interest expense																															12.4				9.4				21.8
Earnings before income taxes																														$	248.0			$	5.4			$	253.4
Ratios:
Net loss and LAE
Current year (ex-catastrophes)			37.1	%			72.5	%			62.1	%			47.5	%			45.8	%			83.5	%			48.5	%			59.3	%
Current year catastrophe losses			0.0	%			0.0	%			0.0	%			0.3	%			0.0	%			0.0	%			0.3	%			0.1	%
Prior years			–14.6	%			–3.8	%			–6.9	%			–7.7	%			2.7	%			11.1	%			–5.3	%			–6.6	%
			22.5	%			68.7	%			55.2	%			40.1	%			48.5	%			94.6	%			43.5	%			52.8	%
Expense			25.0	%			31.3	%			29.4	%			27.5	%			52.4	%			86.7	%			33.9	%			30.3	%
Combined			47.5	%			100.0	%			84.6	%			67.6	%			100.9	%			181.3	%			77.4	%			83.1	%

 

PAGE 10

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ALLEGHANY CORPORATION & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31, 2014				December 31, 2013
		(in thousands)
Assets
Investments:
Available-for-sale securities at fair value:
Equity securities		$	2,637,802			$	2,229,453
Debt securities			14,802,122				14,802,890
Short-term investments			926,674				1,317,895
			18,366,598				18,350,238
Other invested assets			619,674				641,924
Total investments			18,986,272				18,992,162
Cash			481,414				498,315
Reinsurance recoverables			1,354,229				1,363,707
Goodwill and intangible assets			228,892				227,031
All other assets			2,443,529				2,279,873
Total assets		$	23,494,336			$	23,361,088
Liabilities and Stockholders’ Equity
Loss and loss adjustment expenses		$	11,864,719			$	11,952,541
Unearned premiums			1,857,948				1,765,550
Senior Notes			1,790,041				1,794,407
All other liabilities			843,549				901,069
Total liabilities			16,356,257				16,413,567
Total stockholders’ equity attributable to Alleghany stockholders			7,128,056				6,923,757
Noncontrolling interest			10,023				23,764
Total stockholders’ equity			7,138,079				6,947,521
Total liabilities and stockholders’ equity		$	23,494,336			$	23,361,088

 

PAGE 11

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ALLEGHANY CORPORATION AND SUBSIDIARIES

CONSOLIDATED TOTAL INVESTMENT PORTFOLIO

(dollars in millions)

 

		March 31, 2014								December 31, 2013								September 30, 2013								June 30, 2013								March 31, 2013								December 31, 2012								September 30, 2012								June 30, 2012								March 31, 2012
CARRYING VALUE
Equity securities		$	2,637.8				13.9	%		$	2,229.4				11.7	%		$	2,035.2				10.8	%		$	1,827.5				10.0	%		$	2,004.9				10.8	%		$	1,424.0				7.8	%		$	1,504.6				8.2	%		$	1,047.1				5.8	%		$	773.9				4.4	%
Debt securities			14,802.1				77.9	%			14,802.9				77.9	%			15,041.1				80.0	%			14,944.1				81.7	%			15,110.5				81.6	%			15,999.5				87.3	%			16,336.5				88.5	%			15,596.8				86.2	%			15,733.9				89.8	%
Short term investments			926.7				4.9	%			1,317.9				6.9	%			949.3				5.1	%			884.4				4.8	%			757.1				4.1	%			366.0				2.0	%			235.1				1.2	%			1,023.1				5.6	%			571.7				3.3	%
Other invested assets			619.6				3.3	%			641.9				3.5	%			771.7				4.1	%			645.9				3.5	%			643.1				3.5	%			537.4				2.9	%			383.7				2.1	%			433.9				2.4	%			434.9				2.5	%
Total		$	18,986.2				100.0	%		$	18,992.1				100.0	%		$	18,797.3				100.0	%		$	18,301.9				100.0	%		$	18,515.6				100.0	%		$	18,326.9				100.0	%		$	18,459.9				100.0	%		$	18,100.9				100.0	%		$	17,514.4				100.0	%
INVESTMENT ALLOCATION BY CARRYING VALUE
Equity securities:
Common stock		$	2,637.8				13.9	%		$	2,229.4				11.7	%		$	2,035.2				10.8	%		$	1,827.5				10.0	%		$	2,004.9				10.8	%		$	1,424.0				7.8	%		$	1,504.6				8.2	%		$	1,047.1				5.8	%		$	773.9				4.4	%
Preferred stock			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%			—				0.0	%
			2,637.8				13.9	%			2,229.4				11.7	%			2,035.2				10.8	%			1,827.5				10.0	%			2,004.9				10.8	%			1,424.0				7.8	%			1,504.6				8.2	%			1,047.1				5.8	%			773.9				4.4	%
Debt securities:
U.S. government obligations			826.0				4.3	%			955.0				5.0	%			1,000.5				5.3	%			441.9				2.4	%			522.1				2.8	%			522.9				2.9	%			486.2				2.6	%			528.6				2.9	%			545.8				3.1	%
Municipal bonds			5,610.9				29.6	%			5,590.1				29.4	%			5,974.9				31.8	%			6,364.2				34.8	%			6,321.8				34.1	%			6,304.1				34.4	%			6,563.9				35.6	%			6,602.3				36.5	%			6,774.2				38.7	%
Foreign government obligations			948.4				5.0	%			975.4				5.1	%			1,062.8				5.7	%			836.6				4.6	%			821.1				4.4	%			816.0				4.5	%			838.4				4.5	%			824.2				4.6	%			869.7				5.0	%
U.S. corporate bonds			2,392.2				12.6	%			2,312.9				12.2	%			2,173.5				11.6	%			2,691.1				14.7	%			2,842.5				15.4	%			3,515.7				19.2	%			3,516.8				19.1	%			3,040.9				16.8	%			2,944.5				16.8	%
Foreign corporate bonds			1,732.2				9.1	%			1,831.7				9.6	%			1,777.3				9.5	%			1,886.2				10.3	%			1,950.1				10.6	%			2,198.5				12.0	%			2,203.7				11.9	%			1,944.9				10.7	%			2,076.6				11.9	%
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)			1,352.7				7.1	%			1,547.8				8.1	%			1,591.7				8.5	%			1,458.7				8.0	%			1,611.2				8.7	%			1,662.5				9.1	%			1,975.9				10.7	%			1,978.7				10.9	%			1,823.7				10.4	%
Commercial mortgage-backed securities (“CMBS”)			981.9				5.2	%			885.6				4.7	%			858.5				4.6	%			829.8				4.5	%			627.6				3.3	%			510.1				2.8	%			493.9				2.7	%			427.8				2.4	%			394.1				2.3	%
Asset-backed securities			957.8				5.0	%			704.4				3.7	%			601.9				3.2	%			435.6				2.4	%			414.1				2.1	%			469.7				2.6	%			257.7				1.4	%			249.4				1.4	%			305.3				1.7	%
			14,802.1				77.9	%			14,802.9				77.9	%			15,041.1				80.0	%			14,944.1				81.7	%			15,110.5				81.6	%			15,999.5				87.3	%			16,336.5				88.5	%			15,596.8				86.2	%			15,733.9				89.8	%
Short term investments			926.7				4.9	%			1,317.9				6.9	%			949.3				5.1	%			884.4				4.8	%			757.1				4.1	%			366.0				2.0	%			235.1				1.2	%			1,023.1				5.6	%			571.7				3.3	%
Other invested assets:
Equity method investments			88.3				0.5	%			87.4				0.6	%			219.1				1.2	%			218.2				1.2	%			213.6				1.2	%			191.9				1.0	%			195.7				1.1	%			196.6				1.1	%			201.1				1.1	%
Partnership investments			274.3				1.4	%			282.4				1.5	%			268.7				1.4	%			288.6				1.6	%			291.4				1.6	%			311.9				1.7	%			155.5				0.8	%			206.7				1.1	%			205.8				1.2	%
Other			257.0				1.4	%			272.1				1.4	%			283.9				1.5	%			139.1				0.8	%			138.1				0.7	%			33.6				0.2	%			32.5				0.2	%			30.6				0.2	%			28.0				0.2	%
			619.6				3.3	%			641.9				3.5	%			771.7				4.1	%			645.9				3.5	%			643.1				3.5	%			537.4				2.9	%			383.7				2.1	%			433.9				2.4	%			434.9				2.5	%
Total		$	18,986.2				100.0	%		$	18,992.1				100.0	%		$	18,797.3				100.0	%		$	18,301.9				100.0	%		$	18,515.6				100.0	%		$	18,326.9				100.0	%		$	18,459.9				100.0	%		$	18,100.9				100.0	%		$	17,514.4				100.0	%
RATINGS* OF DEBT SECURITIES PORTFOLIO, BY CARRYING VALUE
AAA/Aaa		$	2,550.2				17.2	%		$	2,559.2				17.3	%		$	2,613.7				17.4	%		$	2,431.4				16.3	%		$	2,359.5				15.6	%		$	2,636.4				16.5	%		$	2,551.1				15.6	%		$	2,442.5				15.7	%		$	2,526.5				16.1	%
AA/Aa			6,905.0				46.7	%			7,295.9				49.3	%			7,801.9				51.9	%			7,327.7				49.0	%			7,542.2				49.9	%			7,606.0				47.5	%			8,077.3				49.4	%			7,942.4				50.9	%			8,123.3				51.6	%
A/A			2,914.4				19.7	%			2,984.0				20.2	%			3,247.8				21.6	%			3,508.5				23.5	%			3,660.2				24.2	%			4,031.8				25.2	%			4,042.2				24.7	%			3,948.4				25.3	%			4,044.9				25.7	%
BBB/Baa			1,839.6				12.4	%			1,633.9				11.0	%			1,253.0				8.3	%			1,387.0				9.3	%			1,285.2				8.5	%			1,456.7				9.1	%			1,430.4				8.8	%			1,108.7				7.1	%			892.5				5.7	%
BB / Ba			111.7				0.8	%			56.9				0.4	%			24.3				0.2	%			55.1				0.4	%			62.0				0.4	%			59.7				0.4	%			68.3				0.4	%			33.5				0.2	%			15.3				0.1	%
B			290.4				1.9	%			132.5				0.9	%			16.3				0.1	%			81.6				0.5	%			52.8				0.3	%			55.2				0.3	%			42.4				0.3	%			4.8				0.0	%			5.1				0.0	%
CCC			112.5				0.8	%			79.5				0.5	%			46.3				0.3	%			47.9				0.3	%			49.4				0.4	%			45.8				0.3	%			43.5				0.3	%			40.6				0.3	%			40.4				0.3	%
CC			26.0				0.2	%			26.7				0.2	%			26.7				0.2	%			27.1				0.2	%			28.3				0.2	%			27.9				0.2	%			19.3				0.1	%			17.7				0.1	%			19.4				0.1	%
Below CC			12.8				0.1	%			5.0				0.0	%			4.8				0.0	%			5.1				0.0	%			5.4				0.0	%			5.3				0.0	%			15.0				0.1	%			13.3				0.1	%			13.8				0.1	%
Not rated			39.5				0.3	%			29.3				0.2	%			6.3				0.0	%			72.7				0.5	%			65.5				0.5	%			74.7				0.5	%			47.0				0.3	%			44.9				0.3	%			52.7				0.3	%
		$	14,802.1				100.0	%		$	14,802.9				100.0	%		$	15,041.1				100.0	%		$	14,944.1				100.0	%		$	15,110.5				100.0	%		$	15,999.5				100.0	%		$	16,336.5				100.0	%		$	15,596.8				100.0	%		$	15,733.9				100.0	%
Duration of debt securities portfolio			4.2 years								4.5 years								4.3 years								4.2 years								3.8 years								3.7 years								3.7 years								3.7 years								4.0 years
Average credit quality**			AA-								AA-								AA-								AA-								AA-								AA-								AA-								AA-								AA-

 

*	The debt securities portfolio credit quality is measured using the lower of the Standard & Poor’s Ratings Services, Moody’s Investors Services Inc. or Fitch’s Ratings rating.

**	The average debt securities portfolio credit quality is measured by weighting each individual security’s rating, which uses the lower of the Standard & Poor’s Ratings Services, Moody’s Investors Services Inc. or Fitch’s Ratings rating.

 

PAGE 12

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ALLEGHANY CORPORATION & SUBSIDIARIES

DEBT SECURITIES PORTFOLIO CREDIT QUALITY*

March 31, 2014

(in millions)

 

		AAA / Aaa				AA / Aa				A				BBB / Baa				Below BBB / Baa or Not-Rated				Total Carrying Value
U.S. Government obligations		$	—			$	826.0			$	—			$	—			$	—			$	826.0
Municipal bonds			804.9				3,731.6				990.6				83.8				—				5,610.9
Foreign government obligations			469.9				245.1				218.2				15.2				—				948.4
U.S. corporate bonds			18.0				151.5				675.5				1,147.9				399.3				2,392.2
Foreign corporate bonds			218.8				445.7				753.4				239.0				75.3				1,732.2
Mortgage and asset-backed securities:
RMBS			32.6				1,183.3				39.0				15.8				82.0				1,352.7
CMBS			398.0				299.4				160.2				98.3				26.0				981.9
Other asset-backed securities			608.0				22.4				77.5				239.6				10.3				957.8
Total debt securities		$	2,550.2			$	6,905.0			$	2,914.4			$	1,839.6			$	592.9			$	14,802.1
Percentage of debt securities			17.2	%			46.7	%			19.7	%			12.4	%			4.0	%			100.0	%

 

*	The debt securities portfolio credit quality is measured using the lowest of the Standard & Poor’s Ratings Services, Moody’s Investors Services Inc. or Fitch’s Ratings rating.

 

PAGE 13

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ALLEGHANY CORPORATION AND SUBSIDIARIES

NET INVESTMENT INCOME

(in millions)

 

		Three Months Ended
		March 31,
		2014				2013
Interest income		$	95.3			$	83.5
Dividends			13.6				15.1
Equity in results of Pillar Capital Holdings Limited and related funds			3.9				1.6
Equity in results of Ares Management LLC			0.1				—
Equity in results of Homesite Group Incorporated (1)			—				21.4
Equity in results of ORX Exploration, Inc.			0.4				0.7
Other investment results			4.3				1.5
Total investment income			117.6				123.8
Investment expenses			(7.0	)			(5.0	)
Net investment income		$	110.6			$	118.8
Net investment income - after tax (2)		$	89.9			$	96.2

 

(1)	Homesite Group Incorporated was sold on December 31, 2013.

(2)	Reflects income tax at a 35.0 percent statutory rate, except for tax-exempt interest income and dividends subject to dividend-received deductions.

 

PAGE 14

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ALLEGHANY CORPORATION AND SUBSIDIARIES

FINANCIAL STATEMENT PORTFOLIO RETURN

(dollars in millions)

 

		Three Months Ended
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Investment income and realized gains*:
Net investment income		$	110.6			$	131.2			$	115.3			$	100.4			$	118.8			$	78.4			$	90.5			$	90.9			$	53.2
Net realized investment gains			96.8				136.5				17.8				27.0				50.9				38.0				12.4				39.5				68.0
Other than temporary impairment losses			(5.2	)			(2.1	)			(0.7	)			(8.9	)			(32.3	)			—				—				(1.1	)			(1.8	)
			202.2				265.6				132.4				118.5				137.4				116.4				102.9				129.3				119.4
Opening net unrealized gains on investment securities*:
Net unrealized gains on debt securities portfolio		$	(72.9	)		$	23.0			$	1.6			$	354.7			$	406.2			$	427.6			$	224.6			$	108.9			$	140.6
Net unrealized gains on equity securities portfolio			424.8				292.2				166.0				152.3				(12.5	)			46.8				0.8				114.7				95.3
			351.9				315.2				167.6				507.0				393.7				474.4				225.4				223.6				235.9
Closing net unrealized gains on investment securities*:
Net unrealized gains on debt securities portfolio		$	119.4			$	(72.9	)		$	23.0			$	1.6			$	354.7			$	406.2			$	427.6			$	224.6			$	108.9
Net unrealized gains on equity securities portfolio			372.8				424.8				292.2				166.0				152.3				(12.5	)			46.8				0.8				114.7
			492.2				351.9				315.2				167.6				507.0				393.7				474.4				225.4				223.6
Increase (decrease) in net unrealized gains on investment securities*:
Increase (decrease) on debt securities portfolio		$	192.3			$	(95.9	)		$	21.4			$	(353.1	)		$	(51.5	)		$	(21.4	)		$	203.0			$	115.7			$	(31.7	)
Increase (decrease) on equity securities portfolio			(52.0	)			132.6				126.2				13.7				164.8				(59.3	)			46.0				(113.9	)			19.4
			140.3				36.7				147.6				(339.4	)			113.3				(80.7	)			249.0				1.8				(12.3	)
Net investment income, realized gains and unrealized gains*		$	342.5			$	302.3			$	280.0			$	(220.9	)		$	250.7			$	35.7			$	351.9			$	131.1			$	107.1
Opening aggregate invested assets, at fair value		$	18,992.1			$	18,797.3			$	18,301.9			$	18,515.6			$	18,326.9			$	18,459.9			$	18,100.9			$	17,514.4			$	4,826.8
Closing aggregate invested assets, at fair value			18,986.2				18,992.1				18,797.3				18,301.9				18,515.6				18,326.9				18,459.9				18,100.9				17,514.4
Average invested assets		$	18,989.2			$	18,894.7			$	18,549.6			$	18,408.8			$	18,421.3			$	18,393.4			$	18,280.4			$	17,807.7			$	11,170.6
Financial statement portfolio return*			1.8	%			1.6	%			1.5	%			-1.2	%			1.4	%			0.2	%			1.9	%			0.7	%			1.0	%

 

*	Before income tax.

 

PAGE 15

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ALLEGHANY CORPORATION AND SUBSIDIARIES

ANNUALIZED INVESTMENT BOOK YIELD

(dollars in millions)

 

		Three Months Ended
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Net investment income		$	110.6			$	131.2			$	115.3			$	100.4			$	118.8			$	78.4			$	90.5			$	90.9			$	53.2
Opening invested assets:
Debt securities portfolio, at amortized cost		$	14,875.8			$	15,018.1			$	14,942.5			$	14,755.8			$	15,593.3			$	15,908.9			$	15,372.2			$	15,625.0			$	2,538.9
Equity securities portfolio, at cost			1,804.7				1,743.0				1,661.5				1,852.6				1,436.5				1,457.8				1,046.3				659.2				775.7
Short term investments, at fair value (1)			1,317.9				949.3				884.4				757.1				366.0				235.1				1,023.1				571.7				1,096.5
Other invested assets, at carrying value (2)			641.9				771.7				645.9				643.1				537.4				383.7				433.9				434.9				179.8
			18,640.3				18,482.1				18,134.3				18,008.6				17,933.2				17,985.5				17,875.5				17,290.8				4,590.9
Ending invested assets:
Debt securities portfolio, at amortized cost		$	14,682.7			$	14,875.8			$	15,018.1			$	14,942.5			$	14,755.8			$	15,593.3			$	15,908.9			$	15,372.2			$	15,625.0
Equity securities portfolio, at cost			2,265.0				1,804.7				1,743.0				1,661.5				1,852.6				1,436.5				1,457.8				1,046.3				659.2
Short term investments, at fair value (1)			926.7				1,317.9				949.3				884.4				757.1				366.0				235.1				1,023.1				571.7
Other invested assets, at carrying value (2)			619.6				641.9				771.7				645.9				643.1				537.4				383.7				433.9				434.9
			18,494.0				18,640.3				18,482.1				18,134.3				18,008.6				17,933.2				17,985.5				17,875.5				17,290.8
Average invested assets		$	18,567.1			$	18,561.2			$	18,308.2			$	18,071.5			$	17,970.9			$	17,959.4			$	17,930.5			$	17,583.2			$	10,940.9
Investment book yield			0.6	%			0.7	%			0.6	%			0.6	%			0.7	%			0.4	%			0.5	%			0.5	%			0.5	%
Annualized investment book yield			2.4	%			2.8	%			2.5	%			2.2	%			2.6	%			1.7	%			2.0	%			2.1	%			1.9	%

 

(1)	Fair value approximates amortized cost.

(2)	Carrying value primarily reflects the equity method of accounting for certain private equity and partnerships, and to a lesser extent, fair value or cost for certain other investments.

 

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ALLEGHANY CORPORATION AND SUBSIDIARIES

LOSS AND LOSS ADJUSTMENT EXPENSES (LAE)

(in millions)

 

		Three Months Ended March 31,
		2014				2013
Reserves, beginning of period		$	11,952.5			$	12,239.8
Less: reinsurance recoverables(1)			1,302.1				1,305.9
Net reserves, beginning of period			10,650.4				10,933.9
Incurred loss, net of reinsurance, related to:
Current year			662.8				638.3
Prior years			(51.6	)			(70.9	)
Total incurred loss and LAE, net of reinsurance			611.2				567.4
Paid loss, net of reinsurance, related to:
Current year			32.7				24.8
Prior years			672.7				623.5
Total paid loss and LAE, net of reinsurance			705.4				648.3
Foreign exchange effect			13.1				(71.3	)
Net reserves, end of period			10,569.3				10,781.7
Plus: reinsurance recoverables(1)			1,295.4				1,269.8
Reserves, end of period		$	11,864.7			$	12,051.5

 

(1)	Reinsurance recoverables in this table include only ceded loss and LAE reserves.

 

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ALLEGHANY CORPORATION AND SUBSIDIARIES

CAPITAL STRUCTURE AND LEVERAGE RATIOS

(in millions)

 

		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Capital Structure
Senior Notes		$	1,790.0			$	1,794.4			$	1,798.7			$	1,803.0			$	1,807.3			$	1,811.5			$	1,815.7			$	1,819.8			$	1,423.9
Total stockholders’ equity attributable to Alleghany stockholders			7,128.1				6,923.8				6,716.5				6,498.4				6,625.3				6,403.8				6,581.1				6,280.1				6,183.1
Total capitalization		$	8,918.1			$	8,718.2			$	8,515.2			$	8,301.4			$	8,432.6			$	8,215.3			$	8,396.8			$	8,099.9			$	7,607.0
Leverage ratios
Debt to total capitalization			20.1	%			20.6	%			21.1	%			21.7	%			21.4	%			22.1	%			21.6	%			22.5	%			18.7	%
Closing stockholders’ equity attributable to Alleghany stockholders		$	7,128.1			$	6,923.8			$	6,716.5			$	6,498.4			$	6,625.3			$	6,403.8			$	6,581.1			$	6,280.1			$	6,183.1
Net premiums written (trailing 12 months)		$	4,327.4			$	4,287.4			$	4,309.4			$	4,318.5			$	4,383.7			$	3,723.9			$	2,874.0			$	2,021.4			$	1,042.3
Net premiums written (trailing 12 months) to stockholders’ equity			0.61				0.62				0.64				0.66				0.66				0.58				0.44				0.32				0.17
Total investments and cash		$	19,467.7			$	19,490.5			$	19,212.0			$	18,783.1			$	19,090.5			$	18,976.4			$	19,031.2			$	18,505.5			$	18,034.7
Total investments and cash to stockholders’ equity			2.73				2.82				2.86				2.89				2.88				2.96				2.89				2.95				2.92
Reserve for losses and loss expenses		$	11,864.7			$	11,952.5			$	12,030.3			$	12,029.8			$	12,051.5			$	12,239.8			$	11,830.8			$	11,720.9			$	11,870.3
Deduct: reinsurance recoverable on ceded losses			(1,295.4	)			(1,302.1	)			(1,310.5	)			(1,271.0	)			(1,269.8	)			(1,305.9	)			(1,232.3	)			(1,237.7	)			(1,256.4	)
Net reserve for losses and loss expenses			10,569.3				10,650.4				10,719.8				10,758.8				10,781.7				10,933.9				10,598.5				10,483.2				10,613.9
Net reserve for losses and loss expenses to stockholders’ equity			1.48				1.54				1.60				1.66				1.63				1.71				1.61				1.67				1.72

 

PAGE 18

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ALLEGHANY CORPORATION AND SUBSIDIARIES

SHARE REPURCHASE DETAIL

 

Period		Total Number of Shares Repurchased				Average Price Paid per Share				Total Number of Shares Repurchased as Part of Publicly Announced Plans or Programs*				Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in millions)*
January 1 to January 31, 2014			18,592			$	376.43				18,592			$	234.9
February 1 to February 28, 2014			61,527				373.79				61,527				211.9
March 1 to March 31, 2014			162,489				397.84				162,489				147.3
Total			242,608				390.10				242,608
Quarter ended March 31, 2013			89,751			$	351.82				89,751			$	250.7
Quarter ended June 30, 2013			23,409				376.49				23,409				241.9
Quarter ended September 30, 2013			—				—				—				241.9
Quarter ended December 31, 2013			—				—				—				241.9
Total			113,160				356.92				113,160				241.9

 

*	In October 2012, Alleghany’s Board of Directors authorized the repurchase of shares of our common stock, at such times and at prices as management determines advisable, up to an aggregate of $300.0 million.

 

PAGE 19

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ALLEGHANY CORPORATION AND SUBSIDIARIES

BASIC AND DILUTED EARNINGS PER SHARE INFORMATION - CONSECUTIVE QUARTERS

(in millions, except share and per share data)

 

		Three Months Ended
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Net earnings attributable to Alleghany stockholders		$	204.9			$	205.3			$	113.2			$	113.7			$	196.3			$	(92.6	)		$	125.4			$	109.3			$	560.1
Effect of dilutive securities			—				—				—				—				—				—				—				0.1				0.2
Income available to common stockholders for diluted earnings per share		$	204.9			$	205.3			$	113.2			$	113.7			$	196.3			$	(92.6	)		$	125.4			$	109.4			$	560.3
Weighted average common shares outstanding applicable to basic earnings per share			16,683,864				16,766,192				16,766,192				16,781,461				16,822,056				16,925,994				16,931,811				16,930,548				10,945,269
Effect of dilutive securities			—				—				—				—				—				—				—				19,789				28,160
Adjusted weighted average common shares outstanding applicable to diluted earnings per share			16,683,864				16,766,192				16,766,192				16,781,461				16,822,056				16,925,994				16,931,811				16,950,337				10,973,429
Basic earnings per share attributable to Alleghany stockholders		$	12.28			$	12.24			$	6.75			$	6.78			$	11.67			$	(5.47	)		$	7.41			$	6.46			$	51.17
Diluted earnings per share attributable to Alleghany stockholders			12.28				12.24				6.75				6.78				11.67				(5.47	)			7.41				6.45				51.06

 

PAGE 20

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ALLEGHANY CORPORATION AND SUBSIDIARIES

RETURN ON AVERAGE STOCKHOLDERS’ EQUITY - CONSECUTIVE QUARTERS

(in millions)

 

		Three Months Ended
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Opening stockholders’ equity attributable to Alleghany stockholders		$	6,923.8			$	6,716.5			$	6,498.4			$	6,625.3			$	6,403.8			$	6,581.1			$	6,280.1			$	6,183.1			$	2,925.7
Closing stockholders’ equity attributable to Alleghany stockholders			7,128.1				6,923.8				6,716.5				6,498.4				6,625.3				6,403.8				6,581.1				6,280.1				6,183.1
Average stockholders’ equity		$	7,025.9			$	6,820.1			$	6,607.5			$	6,561.9			$	6,514.6			$	6,492.5			$	6,430.6			$	6,231.6			$	4,554.4
Net earnings attributable to Alleghany stockholders		$	204.9			$	205.3			$	113.2			$	113.7			$	196.3			$	(92.6	)		$	125.4			$	109.3			$	560.1
Return on average stockholders’ equity			2.9	%			3.0	%			1.7	%			1.7	%			3.0	%			–1.4	%			2.0	%			1.8	%			12.3	%
Annualized return on average stockholders’ equity			11.7	%			12.0	%			6.9	%			6.9	%			12.1	%			–5.7	%			7.8	%			7.0	%			49.2	%

 

PAGE 21

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ALLEGHANY CORPORATION AND SUBSIDIARIES

BOOK VALUE PER SHARE

(in millions, except share and per share data)

 

		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Total stockholders’ equity attributable to Alleghany stockholders		$	7,128.1			$	6,923.8			$	6,716.5			$	6,498.4			$	6,625.3			$	6,403.8			$	6,581.1			$	6,280.1			$	6,183.1
Shares outstanding			16,535,591				16,766,192				16,766,192				16,766,192				16,785,308				16,890,623				16,932,328				16,930,793				16,928,664
Book value per share		$	431.07			$	412.96			$	400.60			$	387.59			$	394.71			$	379.13			$	388.67			$	370.93			$	365.24
Quarter-over-Quarter growth			4.4	%			3.1	%			3.4	%			–1.8	%			4.1	%			–2.5	%			4.8	%			1.6	%			6.8	%

 

PAGE 22

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ALLEGHANY CORPORATION AND SUBSIDIARIES

CATASTROPHE EXPOSURE

The business of our reinsurance and insurance subsidiaries exposes them to losses from various catastrophe events. In a catastrophe event, losses from many insureds across multiple lines of business may result directly or indirectly from such single occurrence. Our reinsurance and insurance subsidiaries take certain measures to mitigate the impact of catastrophe events through various means including considering catastrophe risks in their underwriting and pricing decisions, purchasing reinsurance, monitoring and modeling accumulated exposures, and managing exposure in key geographic zones and product lines that are prone to catastrophic events.

Natural disasters such as hurricanes, other windstorms, earthquakes and other catastrophes have the potential to materially and adversely affect our operating results. Other risks, such as an outbreak of a pandemic disease, a major terrorist event, the bankruptcy of a major company or a marine and/or aviation disaster, could also have a material adverse effect on our business and operating results.

We evaluate catastrophic events and assess the probability of occurrence and magnitude through the use of industry recognized models and other techniques. We supplement these models by judgmentally interpreting and adjusting when appropriate the modeled output and by periodically monitoring the exposure risks of our operations. There is no single standard methodology to project possible losses from catastrophe exposures. Further, there are no industry standard assumptions used in projecting these losses, and the form and quality of the data obtained, including data obtained from insureds and ceding companies, and used in these models are not uniformly compatible with the data requirements of all models. Therefore, the use of different methodologies and assumptions could materially change the projected losses. Finally, these modeled losses may not be comparable with estimates made by other companies.

Although the analytical tools used to estimate catastrophe exposure are useful in both pricing and monitoring catastrophe risk, the estimates derived by use of these techniques are inherently uncertain and do not reflect our maximum exposures to these events. Although the models are frequently updated, these projections are nevertheless inherently imprecise. It is highly likely that our losses will vary, perhaps materially, from these estimates.

Projections of potential catastrophe losses are typically expressed in terms of the probable maximum loss, or “PML.” We define PML as our anticipated maximum loss (taking into account contract limits) caused by a single catastrophic event at a specified estimated return period affecting a broad contiguous area. These modeled losses are estimated based upon contracts in force at January 1, 2014 for TransRe and December 1, 2013 for RSUI.

The following is an overview of such modeled PMLs from property, engineering, marine and energy exposures and the associated natural perils that we deem most significant. The estimated amount of these modeled losses are presented for both a 100 year return period (having a likelihood of being exceeded in any single year of 1.0 percent), and a 250 year return period (having a likelihood of being exceeded in any single year of 0.4 percent), and are presented in two ways: (i) gross catastrophe losses; and (ii) after-tax net catastrophe costs such as gross losses, net of reinsurance, net reinstatement premiums and taxes. The reduction for reinsurance assumes that all reinsurers fulfill their obligations in accordance with contract terms.

 

		100 Year Return Period								250 Year Return Period
		Gross Loss				Net Loss				Gross Loss				Net Loss
		(before tax)				(after tax)				(before tax)				(after tax)
		(in billions)
Florida, Wind		$	1.2			$	0.5			$	1.8			$	0.8
California, Earthquake			1.0				0.4				1.6				0.6
Northeast U.S., Wind			0.7				0.4				1.5				0.7
Gulf Coast, Wind			0.9				0.3				1.5				0.6
Europe, Wind			0.6				0.3				0.8				0.4
Japan, Earthquake			0.5				0.2				0.7				0.3
Japan, Wind			0.5				0.2				0.5				0.2

“Florida, Wind” has the highest modeled after-tax net catastrophe costs for both a 100 year and 250 year return periods. These costs would represent approximately 7 percent and 11 percent, respectively, of stockholders’ equity as of March 31, 2014. If multiple severe catastrophic events occur in any one year, or a single catastrophic event affects more than one geographic area, the potential economic cost to us could be materially higher than any one of the amounts shown above.

There is much uncertainty and imprecision in the compilation of these estimates at many stages in the process. Moreover, the makeup of our in-force business is constantly changing as new business is added and existing contracts terminate or expire, including contracts for reinsurance coverage purchased by us. In addition, these estimates take into account what we believe to be the most likely accumulation of territories, but there can be no assurance that we have captured every possible scenario in our analysis. As a result of these factors, among others, there can be no assurance that we will not experience after-tax net catastrophe costs from individual events that will exceed these estimates by a material amount. There also can be no assurance that we will not experience catastrophe events more frequently than the modeled probabilities would suggest. In any given year, catastrophe events could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.

 

PAGE 23

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ALLEGHANY CORPORATION AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

Throughout this Financial Supplement, Alleghany’s results of operations are presented in the way that Alleghany believes will be the most meaningful and useful to investors, analysts, rating agencies and others who use financial information in evaluating Alleghany’s performance. This Financial Supplement includes various “non-GAAP financial measures” under U.S. Securities and Exchange Commission rules and regulations. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for measures of operating performance prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). When such measures are disclosed, reconciliations to the most comparable GAAP measure are provided.

UNDERWRITING PROFIT

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, net realized capital gains, OTTI losses, other income, other operating expenses, amortization of intangible assets or interest expense. Alleghany consistently uses underwriting profit as a supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the performance of its segments and believes that underwriting profit provides useful additional information to investors because it highlights net earnings attributable to a segment’s underwriting performance. Earnings before income taxes may show a profit despite an underlying underwriting loss, and when underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. A reconciliation of underwriting profit to earnings before income taxes is presented within “Consolidated Underwriting Results” on pages 9 to 10 of the Financial Supplement.

OPERATING INCOME (AND OPERATING INCOME PER SHARE)

Operating income and operating income per share exclude on an after-tax basis: net realized capital gains; and other than temporary impairment losses, all as determined in accordance with GAAP. Alleghany uses operating income and operating income per share as a supplement to net earnings attributable to Alleghany stockholders and earnings per share, respectively, the most comparable GAAP financial measures, to provide useful additional information to investors by highlighting net earnings and earnings per share attributable to its performance exclusive of realized investment gains or losses and impairments. A reconciliation of operating income and operating income per share to net earnings attributable to Alleghany stockholders and earnings per share, respectively, is presented within “Operating Income Reconciliation” on page 25 of the Financial Supplement.

ANNUALIZED INVESTMENT BOOK YIELD

Annualized investment book yield is calculated by dividing net investment income by average aggregate invested assets at book value. In calculating annualized investment book yield, net investment income for the period, determined in accordance with GAAP, is multiplied by the number of such periods in a calendar year in order to arrive at annualized net investment income. Alleghany utilizes and presents annualized investment book yield in order to better disclose the performance of its investments.

 

PAGE 24

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ALLEGHANY CORPORATION AND SUBSIDIARIES

OPERATING INCOME RECONCILIATION

(in millions, except share and per share amounts)

 

		Three Months Ended March 31,
		March 31, 2014				December 31, 2013				September 30, 2013				June 30, 2013				March 31, 2013				December 31, 2012				September 30, 2012				June 30, 2012				March 31, 2012
Net earnings attributable to Alleghany stockholders		$	204.9			$	205.3			$	113.2			$	113.7			$	196.3			$	(92.6	)		$	125.4			$	109.3			$	560.1
Adjustments to net earnings (after tax):
Net realized investment gains			62.9				88.7				11.6				17.6				33.1				24.7				8.1				25.6				44.2
Other than temporary impairment charges			(3.4	)			(1.3	)			(0.5	)			(5.8	)			(21.0	)			—				—				(0.7	)			(1.2	)
			59.5				87.4				11.1				11.8				12.1				24.7				8.1				24.9				43.0
Operating income		$	145.4			$	117.9			$	102.1			$	101.9			$	184.2			$	(117.3	)		$	117.3			$	84.4			$	517.1
Weighted average common shares outstanding:
Basic			16,683,864				16,766,192				16,766,192				16,781,461				16,822,056				16,925,994				16,931,811				16,930,548				10,945,269
Diluted			16,683,864				16,766,192				16,766,192				16,781,461				16,822,056				16,925,994				16,931,811				16,950,337				10,973,429
Earnings per share attributable to Alleghany stockholders:
Basic		$	12.28			$	12.24			$	6.75			$	6.78			$	11.67			$	(5.47	)		$	7.41			$	6.46			$	51.17
Diluted			12.28				12.24				6.75				6.78				11.67				(5.47	)			7.41				6.45				51.06
Operating earnings per share data:
Basic		$	8.71			$	7.03			$	6.09			$	6.07			$	10.95			$	(6.93	)		$	6.93			$	4.99			$	47.24
Diluted			8.71				7.03				6.09				6.07				10.95				(6.93	)			6.93				4.98				47.13

 

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