Alleghany — Morgan Stanley Financials Conference 2014
27 slides from Alleghany's conference presentation, Jun 10, 2014
Slide 1: Alleghany Morgan Stanley Financials Conference June 10, 2014
Alleghany Morgan Stanley Financials Conference June 10, 2014
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts but instead represent only Alleghany’s belief regarding future events, many of whic
Slide 3: Weston Hicks, President and Chief Executive Officer
Weston Hicks President and chief executive officer
Slide 4: A History of Investing in Successful Companies
A History of Investing in Successful Companies Chicago Title (spun off in 1998/1999) New York Central Railroad (merged into Penn Central in 1968) Jones Motor Company Alleghany Asset Management (sold to ABN Amro in 2001) Nickel Plate, Chesapeake & Ohio, Erie and Pere Marquette Railroads (merged into
Slide 5: Strong Track Record of Creating Long Term Stockholder Value
Strong Track Record of Creating Long Term Stockholder Value Focus on book value per share growth Long-term conservative orientation Track record of stable returns leads to outperformance Indexed Performance 2003 - 2008 2008 - 2013 2003 – 2013 Alleghany BVPS +50% +55% +132% Alleghany Price +40% +51%
Slide 6: Alleghany Today
Alleghany Today ~85 years as a public company (NYSE: Y) $7.1 billion in book value Baa2 senior debt rating from Moody’s $7.0 billion equity market capitalization BBB senior debt rating from Standard & Poor’s $19.5 billion in total cash & investments bbb+ senior debt rating from A.M. Best(1) Reinsura
Slide 7: TransRe – Leading Specialty Professional Reinsurer
TransRe – Leading Specialty Professional Reinsurer Investment Overview Acquired in March of 2012 for $3.5 billion in cash and stock Highly diversified business with just under 50% of premiums from outside the U.S. Long-lasting client relationships Prudent reserves with significant IBNR remaining 201
Slide 8: TransRe – Flexibility from Financial Strength
TransRe – Flexibility from Financial Strength Highlights Profitable book (consolidated combined ratio of 90% since acquisition) Disciplined underwriting and financial strength provide flexibility to shift book and capitalize on opportunities across products, lines and geographies Prudent casualty re
Slide 9: RSUI – Leading and Profitable Specialty Insurer
RSUI – Leading and Profitable Specialty Insurer Investment Overview Acquired in July of 2003 from Royal & Sun Alliance; initial investment of $626 million Average annual ROE since acquisition of ~11%(1) 2013 ROE of 10.9% Diversified Business Mix(2) Binding Alternative Authority Structures 11% 3% Pro
Slide 10: RSUI – Disciplined, Consistent and Opportunistic
RSUI – Disciplined, Consistent and Opportunistic Highlights $1.2 billion net underwriting income since 2003(1) Combined ratio of 82.2% since 2003(1) Since acquisition, RSUI’s stockholders’ equity has grown at a compound annual growth rate of 11.6% RSUI has produced an underwriting profit in 9 out of
Slide 11: CapSpecialty – Specialty Insurance Company for Small Businesses
CapSpecialty – Specialty Insurance Company for Small Businesses Investment Overview Acquired in January of 2002 for $242 million (including Platte River) Appointed industry veteran Stephen Sills CEO in 2013 and renamed CapSpecialty(1) in 2014 Strong commercial surety business with excellent long-ter
Slide 12: CapSpecialty – Opportunity to Strengthen Performance
CapSpecialty – Opportunity to Strengthen Performance Highlights Underwriting losses in each period presented Surety business continues to perform well Prior year results negatively impacted by discontinued program business and high expense ratio Q1 ‘14 Recent premium growth reflects expansion of P&C
Slide 13: PacificComp – Refocusing Under New Leadership
PacificComp – Refocusing Under New Leadership Investment Overview California workers’ compensation writer acquired in July of 2007 2008-2011 – Inadequate pricing in the marketplace and adverse loss development at PacificComp. PacificComp leaves the market in 2009 and reemerges as broker company in 2
Slide 14: PacificComp – Improving Underwriting and Financial Performance
PacificComp – Improving Underwriting and Financial Performance Highlights After ceasing new business writings entirely in 2009, PacificComp began writing a very modest amount of new business in 2011 and has increased growth as conditions have improved New business focus on San Diego, Central and Nor
Slide 15: Jack Sennott, Senior Vice President and Chief Financial Officer
Jack Sennott Senior Vice President and chief financial officer
Slide 16: Alleghany Investment Strategy
Alleghany Investment Strategy Property & Casualty Insurance Cycle –> Drives operational cash flow Our Catastrophe Losses –> Drive near term cash flow demands Environment Long-Term Casualty Loss Reserves –> Subject to loss cost inflation risk Mandatory Fixed Income Holdings –> Subject to inflation ri
Slide 17: How We Think about Investment Risk
How We Think about Investment Risk Investments are a significant part of our earnings power Total Cash & Investments $19.5 billion = = 2.73x investment leverage Total Equity $7.1 billion The economy remains vulnerable to Portfolio structured to withstand deflationary shocks or recessionary trends ma
Slide 18: Fixed Income: Preserving Capital and Maximizing After-Tax Return
Fixed Income: Preserving Capital and Maximizing After-Tax Return Sector Allocation Credit Quality(1) ($ in billions) U.S. AAA/Aaa $2.6 Government Short Foreign 5% Term Government 6% 6% AA/Aa $6.9 Municipals 36% A/A $2.9 Foreign Corporate 11% BBB/Baa $1.8 U.S. Corporate 15% MBS and Below BBB/Baa $0.6
Slide 19: Equity Investments: Fundamental Research, Concentrated Positions, Long-Term Focused
Equity Investments: Fundamental Research, Concentrated Positions, Long-Term Focused Alleghany equity securities: $2.6 billion(1) Invest in strong businesses at reasonable prices based on proprietary fundamental research Expect 10-15% turnover annually Currently hold 26 positions above $5 million Lar
Slide 20: Alleghany Capital Corporation: Goal and Strategy
Alleghany Capital Corporation: Goal and Strategy Goal is to generate above-market returns over the long-term, investing primarily in equity securities of private companies Strategy is to leverage its competitive advantages of permanent and scalable capital to generate proprietary deal flow and then
Slide 21: Alleghany Capital Corporation Selected Investments
Alleghany Capital Corporation Selected Investments Company Description Sector Founded Kentucky Trailer is a leading manufacturer of custom trailers and truck bodies for the moving and storage Manufacturing 1879 industry and other niche markets Headquartered in Louisville, KY of precision machine too
Slide 22: Alleghany Consolidated Performance
Alleghany Consolidated Performance Net Premiums Written Combined Ratio ($in millions) (%) $4,287 $3,724 90.3 93.4 94.1 90.1 84.7 88.8 83.0 83.1 72.5 $963 $1,134 $898 $831 $736 $775 $1,093 2007 2008 2009 2010 2011 2012 2013 Q1’13 Q1’14 2007 2008 2009 2010 2011 2012 2013 Q1’13 Q1’14 Consolidated Net I
Slide 23: Alleghany Summary Balance Sheet
Alleghany Summary Balance Sheet March 31, 2014 December 31, 2013 ($ 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 inves
Slide 24: Alleghany Summary Income Statement
Alleghany Summary Income Statement $ in millions, except per share data Three Months Ended March 31, 2014 December 31,2013 September 30, 2013 June 30, 2013 March 31, 2013 Revenues Net premiums earned $ 1,054.0 $ 1,056.0 $ 1,039.9 $ 1,068.3 $ 1,075.0 Net investment income 110.6 131.2 115.3 100.4 118.
Slide 25: Demonstrated Financial Results – Year Summary
Demonstrated Financial Results – 10 Year Summary $ in millions, except per share data As of and for the Year Ended December 31, 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CAGR Net invested assets per share $204.04 $264.86 $313.14 $377.79 $453.98 $455.05 $482.43 $512.53 $539.38 $1,016.24
Slide 26: Weston Hicks, Summary and Outlook
Weston Hicks Summary and Outlook
Slide 27: Key Alleghany Takeaways
Key Alleghany Takeaways Long-term focus with track record of book value growth TransRe and RSUI are “true franchises” Significant investment capability Non-financial businesses likely to be a larger contributor in the future Holding company maintains significant optionality through excess liquidity
Alleghany — Morgan Stanley Financials Conference 2014 on 6ix