ALLEGHANY CORPORATION ALLEGHANY CORPORATION
1411 Broadway, 34th Floor
New York, NY 10018
ALLEGHANY CORPORATION REPORTS 2022 SECOND QUARTER RESULTS
NEW YORK, NY, August 4, 2022 - Alleghany Corporation (NYSE-Y) announced its financial results for the second quarter of 2022. Book value per share was $587.62 at June 30, 2022, a decrease of 8.0% and 13.0% from March 31, 2022 and December 31, 2021, respectively. Excluding the change in accumulated other comprehensive income, book value per share decreased 2.1% and 0.9% during the same periods, respectively.
Highlights for the quarter are summarized below1:
- Net premiums written of $1,830 million decreased 2.6%, with reinsurance down 9.1% and insurance up 17.2%.
- Underwriting profit2 was $165 million (combined ratio of 90.4%), compared with an underwriting profit of $174 million (combined ratio of 90.2%).
- Net investment income decreased 16.9% to $106 million from $127 million.
- Alleghany Capital revenue3 increased 59.9% to $1,262 million from $789 million.
- Alleghany Capital earnings before income taxes and adjusted earnings2 before income taxes were $112 million and $119 million, respectively, compared with $50 million and $61 million, respectively.
- Net losses attributable to Alleghany stockholders were $172 million or $12.75 per diluted share, compared with net earnings attributable to Alleghany stockholders of $404 million or $29.00 per diluted share.
- Adjusted earnings were $233 million or $17.28 per diluted share, compared with $242 million or $17.39 per diluted share.
Highlights for the first six months are summarized below1:
- Net premiums written of $3,623 million decreased 0.3%, with reinsurance down 5.9% and insurance up 18.8%.
- Underwriting profit was $352 million (combined ratio of 89.5%), compared with an underwriting profit of $190 million (combined ratio of 94.4%).
- Net investment income decreased 21.9% to $219 million from $280 million.
- Alleghany Capital revenue increased 53.9% to $2,384 million from $1,548 million.
- Alleghany Capital earnings before income taxes and adjusted earnings before income taxes were $207 million and $221 million, respectively, compared with $86 million and $108 million, respectively.
- Net losses attributable to Alleghany stockholders were $46 million or $3.41 per diluted share, compared with net earnings attributable to Alleghany stockholders of $634 million or $45.41 per diluted share.
- Adjusted earnings were $487 million or $36.13 per diluted share, compared with $380 million or $27.25 per diluted share.
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- All comparisons are to the same period of the prior year, unless otherwise stated.
- Underwriting profit and adjusted earnings are non-GAAP financial measures as defined in SEC Regulation G. Refer to "Non-GAAP Financial Measures" below.
- Relates to Alleghany Capital product and service revenues.
1
Joe Brandon, President and Chief Executive Officer, commented "Alleghany produced good underwriting and operating results in the second quarter and first half of the year, generating adjusted earnings of $233 million and $487 million, respectively. However, consistent with overall financial markets in the first six months of this year, these operating results were overtaken by (mostly unrealized) losses on our bond and stock portfolios. Consequently, book value per share decreased by 13% from the start of the year to $587.62.
"During the second quarter, our re/insurance businesses generated an underwriting profit of $165 million and a combined ratio of 90.4%, reflecting continued rate increases and attractive new business opportunities. RSUI grew net premiums written by 21.5% in the second quarter, reflecting strong rate growth and new business opportunities, and generated an underwriting profit of $82 million and a combined ratio of 77.4%. Excluding a large quota share treaty TransRe elected not to renew at the end of 2021, TransRe's casualty and specialty net premiums written grew by 14.6%, while its property business declined by 17.2% as it continued to reshape its property catastrophe portfolio. Despite continued global catastrophe losses, TransRe produced $88 million of underwriting profit and a 92.9% combined ratio in the second quarter.
"Alleghany Capital delivered 60% revenue growth and adjusted earnings before income taxes of $119 million in the quarter. Growth was driven predominantly by Jazwares and IPS. Alleghany Capital's operating companies are experiencing strong order flow and are positioned to continue to grow.
"We are pleased with the operating performance of our businesses in the first half of 2022 and look forward to becoming part of Berkshire Hathaway later this year, subject to satisfaction of customary closing conditions."
2
The following table summarizes results for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30, | Percent | Six Months Ended June 30, | Percent | ||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||
(in millions, except share and per share data) | |||||||||||||||||||
Revenues: | |||||||||||||||||||
Total revenues | $ | 2,596.9 | $ | 2,928.7 | (11.3%) | $ | 5,315.6 | $ | 5,582.5 | (4.8%) | |||||||||
Net premiums written | 1,830.0 | 1,878.2 | (2.6%) | 3,622.8 | 3,633.0 | (0.3%) | |||||||||||||
Alleghany Capital product and service | |||||||||||||||||||
revenues | 1,262.3 | 789.2 | 59.9% | 2,383.6 | 1,548.4 | 53.9% | |||||||||||||
Net investment income | 105.5 | 126.9 | (16.9%) | 218.9 | 280.4 | (21.9%) | |||||||||||||
Change in the fair value of equity securities | (500.2) | 203.9 | n/m | (639.0) | 316.6 | n/m | |||||||||||||
Earnings: | |||||||||||||||||||
(Losses) earnings before income taxes | $ | (163.9) | $ | 521.9 | n/m | $ | 50.1 | $ | 818.8 | (93.9%) | |||||||||
Underwriting profit | 165.2 | 173.7 | (4.9%) | 351.6 | 190.3 | 84.8% | |||||||||||||
Net (losses) earnings attributable to | |||||||||||||||||||
Alleghany stockholders | (171.6) | 403.7 | n/m | (45.9) | 633.7 | n/m | |||||||||||||
Adjusted earnings | 232.6 | 242.1 | (3.9%) | 487.4 | 380.3 | 28.1% | |||||||||||||
Share and per share data: | |||||||||||||||||||
(Losses) earnings per diluted share | $ | (12.75) | $ | 29.00 | n/m | $ | (3.41) | $ | 45.41 | n/m | |||||||||
Adjusted earnings per diluted share | 17.28 | 17.39 | (0.6%) | 36.13 | 27.25 | 32.6% | |||||||||||||
Weighted average diluted shares | |||||||||||||||||||
outstanding | 13,455,198 | 13,919,489 | (3.3%) | 13,488,993 | 13,954,449 | (3.3%) |
SEGMENT RESULTS
The following table summarizes the reinsurance and insurance segment results for the three and six months ended June 30, 2022 and 2021:
Three Months Ended June 30, | Percent | Six Months Ended June 30, | Percent | |||||||||||||||||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||||
Net premiums written: | ||||||||||||||||||||||||||
Reinsurance segment | $ | 1,280.3 | $ | 1,409.1 | (9.1%) | $ | 2,638.3 | $ | 2,804.0 | (5.9%) | ||||||||||||||||
Insurance segment | 549.7 | 469.1 | 17.2% | 984.5 | 829.0 | 18.8% | ||||||||||||||||||||
$ | 1,830.0 | $ | 1,878.2 | (2.6%) | $ | 3,622.8 | $ | 3,633.0 | (0.3%) | |||||||||||||||||
Underwriting profit: | ||||||||||||||||||||||||||
Reinsurance segment | $ | 88.4 | $ | 124.2 | (28.8%) | $ | 159.9 | $ | 129.1 | 23.9% | ||||||||||||||||
Insurance segment | 76.8 | 49.5 | 55.2% | 191.7 | 61.2 | 213.2% | ||||||||||||||||||||
$ | 165.2 | $ | 173.7 | (4.9%) | $ | 351.6 | $ | 190.3 | 84.8% | |||||||||||||||||
Combined ratio: | ||||||||||||||||||||||||||
Reinsurance segment | 92.9% | 91.1% | 1.8% | 93.4% | 95.0% | (1.6%) | ||||||||||||||||||||
Insurance segment | 83.1% | 87.3% | (4.2%) | 78.7% | 92.0% | (13.3%) | ||||||||||||||||||||
Consolidated | 90.4% | 90.2% | 0.2% | 89.5% | 94.4% | (4.9%) | ||||||||||||||||||||
Underwriting profit excluding | catastrophe | losses: | ||||||||||||||||||||||||
Reinsurance segment | $ | 115.3 | $ | 151.0 | (23.6%) | $ | 234.7 | $ | 255.6 | (8.2%) | ||||||||||||||||
Insurance segment | 93.7 | 93.9 | (0.2%) | 210.7 | 186.9 | 12.7% | ||||||||||||||||||||
$ | 209.0 | $ | 244.9 | (14.7%) | $ | 445.4 | $ | 442.5 | 0.7% | |||||||||||||||||
Combined ratio excluding catastrophe losses: | ||||||||||||||||||||||||||
Reinsurance segment | 90.8% | 89.2% | 1.6% | 90.3% | 90.2% | 0.1% | ||||||||||||||||||||
Insurance segment | 79.4% | 76.0% | 3.4% | 76.6% | 75.6% | 1.0% | ||||||||||||||||||||
Consolidated | 87.8% | 86.2% | 1.6% | 86.7% | 86.9% | (0.2%) |
3
Reinsurance
TransRe's results in the first six months of 2022 and at July 1, 2022 saw growth across the casualty and specialty lines driven by new and existing business, and a contraction in the property catastrophe business.
TransRe's net premiums written decreased 9.1% and 5.9% in the second quarter and first six months of 2022, respectively, from the corresponding periods of 2021, primarily reflecting the impact of TransRe's decision to not renew a certain large whole account quota share treaty as of December 31, 2021. Also contributing were decreases in property lines of business, partially offset by improving rates and growth in various casualty and specialty lines of business.
TransRe's combined ratio for the second quarter of 2022 was 92.9% compared with 91.1% for the second quarter of 2021, primarily reflecting the impact of higher commission rates and less favorable prior accident year loss and LAE reserve development. TransRe's combined ratio for the first six months of 2022 was 93.4% compared with 95.0% for the first six months of 2021, primarily reflecting lower catastrophe losses, partially offset by the impact of higher commission rates.
TransRe's current year catastrophe losses in the second quarter and first six months of 2022 were $27 million and $75 million, respectively. Catastrophe losses in the second quarter and first six months included $9 million and $44 million, respectively, from the ongoing conflict between Russia and Ukraine and $18 million and $31 million, respectively, from Australian floods. In the second quarter and first six months of 2021, TransRe incurred $27 million and $127 million of losses related to Winter Storm Uri and other storms (collectively, "Winter Storms"), respectively.
Insurance
Insurance segment net premiums written increased 17.2% and 18.8% in the second quarter and first six months of 2022, respectively, from the corresponding periods of 2021, reflecting growth at both RSUI and, to a lesser extent, CapSpecialty.
RSUI's net premiums written increased 21.5% and 23.2% in the second quarter and first six months of 2022, respectively, from the corresponding periods of 2021, reflecting growth in most lines of business due to increases in business opportunities, higher rates and improved general market conditions, particularly in the property and professional liability lines of business. The increase in net premiums written in the second quarter of 2022 was partially offset by a decline in the directors' and officers' liability lines of business.
RSUI's combined ratio for the second quarter and first six months of 2022 was 77.4% and 72.2%, respectively, compared with 83.6% and 89.6% for the corresponding periods of 2021. The decrease in the combined ratio in the second quarter and first six months of 2022 primarily reflects lower catastrophe losses and the impact of lower overall current accident year loss ratios excluding catastrophe losses, partially offset by unfavorable prior accident year loss reserve development compared with favorable prior accident year loss reserve development in the second quarter and first six months of 2021.
RSUI's catastrophe losses in the second quarter and first six months of 2022 were $17 million and $19 million, respectively, related to severe weather in the U.S. Catastrophe losses in the second quarter and first six months of 2021 were $44 million and $125 million, respectively, primarily related to the Winter Storms as well as additional catastrophe losses related to severe weather and flooding in the Midwestern U.S. in the spring of 2021.
CapSpecialty's net premiums written increased 2.4% and 4.1% in the second quarter and first six months of 2022, respectively from the corresponding periods of 2021, primarily reflecting growth in certain specialty casualty and professional liability lines of business and, to a lesser extent, growth in the surety lines of business, reflecting increases in business opportunities and higher rates, partially offset by a curtailment of certain unprofitable broker relationships and declines in discontinued binding authority business.
CapSpecialty's combined ratio for the second quarter and first six months of 2022 was 105.1% and 102.4%, respectively, compared with 99.3% and 99.4% for the corresponding periods of 2021. The increase in the combined ratio in the second quarter and first six months of 2022 primarily reflects higher unfavorable prior accident year loss reserve development, partially offset by an improved expense ratio.
4
Alleghany Capital
The following table summarizes earnings before income taxes and adjusted earnings before income taxes for the Alleghany Capital segment for the three and six months ended June 30, 2022 and 2021:
2022 | Three Months Ended June 30, | 2021 | |||||||||||||||||||||||||||||
Consumer | Corp. & | Consumer | Corp. & | ||||||||||||||||||||||||||||
Industrial | & services | other | Total | Industrial | & services | other | Total | ||||||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||||||
Earnings (losses) before income taxes | $ | 21.6 | $ | 95.5 | $ | (5.1 | ) | $ | 112.0 | $ | 28.6 | $ | 26.8 | $ | (5.4 | ) | $ | 50.0 | |||||||||||||
Less: net realized capital gains | (1.1) | - | (0.1) | (0.1) | |||||||||||||||||||||||||||
(7.0) | (8.1) | - | (0.2) | ||||||||||||||||||||||||||||
Add: amortization of intangible assets | 5.8 | 8.8 | - | 14.6 | 4.4 | 7.2 | - | 11.6 | |||||||||||||||||||||||
Adjusted earnings (losses) before income | |||||||||||||||||||||||||||||||
taxes | $ | 26.3 | $ | 97.3 | $ | (5.1 | ) | $ | 118.5 | $ | 32.9 | $ | 33.9 | $ | (5.4 | ) | $ | 61.4 | |||||||||||||
2022 | Six Months | Ended June 30, | 2021 | ||||||||||||||||||||||||||||
Consumer | Corp. & | Consumer | Corp. & | ||||||||||||||||||||||||||||
Industrial | & services | other | Total | Industrial | & services | other | Total | ||||||||||||||||||||||||
($ in millions) | |||||||||||||||||||||||||||||||
Earnings (losses) before income taxes | $ | 55.8 | $ | 165.1 | $ | (14.1 | ) | $ | 206.8 | $ | 54.9 | $ | 40.8 | $ | (9.9 | ) | $ | 85.8 | |||||||||||||
Less: net realized capital gains | (2.3) | - | (0.3) | (0.9) | |||||||||||||||||||||||||||
(11.9) | (14.2) | - | (1.2) | ||||||||||||||||||||||||||||
Add: amortization of intangible assets | 10.6 | 17.7 | - | 28.3 | 8.5 | 14.4 | - | 22.9 | |||||||||||||||||||||||
Adjusted earnings (losses) before income | |||||||||||||||||||||||||||||||
taxes | $ | 64.1 | $ | 170.9 | $ | (14.1 | ) | $ | 220.9 | $ | 63.1 | $ | 54.3 | $ | (9.9 | ) | $ | 107.5 |
The increase in earnings before income taxes in the second quarter and first six months of 2022 from the corresponding periods of 2021 primarily reflects higher consumer and services earnings before income taxes driven by higher revenues and improved margins at Jazwares due to strong customer demand across its product portfolio of owned brands and licenses. Increased revenue and earnings from IPS and Concord also contributed to the improved results in the second quarter and first six months of 2022. IPS's results also reflect the addition of Linesight, acquired in October 2021.
INVESTMENTS
Alleghany reported net investment income for the second quarter and first six months of 2022 of $106 million and $219 million, respectively, representing a decrease of 16.9% and 21.9%, respectively, from the corresponding periods of 2021, primarily reflecting lower dividend income and lower partnership income. The lower dividend income is primarily due to a large special dividend in the second quarter 2021 from a mutual fund. The lower partnership income is due to lower returns in certain partnerships that invest in lower-quality debt. For the first six months of 2022, lower partnership income also reflects depreciation compared with appreciation in 2021 in certain partnerships that have exposure to cryptocurrencies.
Financial statement total return4 on investments was (4.8%) and (8.6%) for the second quarter and first six months of 2022, compared with 2.2% and 2.1% for the corresponding periods of 2021, primarily reflecting depreciation in the value of Alleghany's debt and equity securities portfolio.
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4 As calculated in Alleghany's financial supplement available on Alleghany's website. See "Additional Information".
5
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Alleghany Corporation published this content on 04 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2022 21:03:00 UTC.
