Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2019 | Apr. 30, 2019 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | ALLEGHANY CORP /DE | |
Entity Central Index Key | 0000775368 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Trading Symbol | Y | |
Entity Common Stock, Shares Outstanding | 14,442,366 | |
Entity Emerging Growth Company | false | |
Entity Small Business | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Investments: | ||
Equity securities | $ 2,523,079 | $ 3,572,790 |
Debt securities | 13,279,741 | 11,823,968 |
Short-term investments | 1,272,383 | 893,776 |
Marketable Securities, Total | 17,075,203 | 16,290,534 |
Commercial mortgage loans | 676,503 | 676,532 |
Other invested assets | 563,468 | 555,972 |
Total investments | 18,315,174 | 17,523,038 |
Cash | 778,064 | 1,038,763 |
Accrued investment income | 99,491 | 91,913 |
Premium balances receivable | 946,180 | 842,642 |
Reinsurance recoverables | 1,761,611 | 1,921,278 |
Ceded unearned premiums | 231,081 | 221,232 |
Deferred acquisition costs | 488,083 | 464,546 |
Property and equipment at cost, net of accumulated depreciation and amortization | 199,045 | 195,243 |
Goodwill | 455,993 | 455,142 |
Intangible assets, net of amortization | 549,449 | 553,136 |
Current taxes receivable | 72,645 | 116,637 |
Net deferred tax assets | 10,303 | 164,890 |
Funds held under reinsurance agreements | 724,073 | 744,057 |
Other assets | 1,161,865 | 1,012,379 |
Total assets | 25,793,057 | 25,344,896 |
Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity | ||
Loss and loss adjustment expenses | 11,855,124 | 12,250,294 |
Unearned premiums | 2,368,894 | 2,267,078 |
Senior Notes and other debt | 1,676,421 | 1,669,039 |
Reinsurance payable | 174,434 | 168,667 |
Other liabilities | 1,305,976 | 1,127,346 |
Total liabilities | 17,380,849 | 17,482,424 |
Redeemable noncontrolling interests | 175,721 | 169,762 |
Common stock | 17,460 | 17,460 |
Contributed capital | 3,608,654 | 3,612,830 |
Accumulated other comprehensive (loss) | (14,157) | (202,003) |
Treasury stock | (1,393,059) | (1,312,939) |
Retained earnings | 6,017,589 | 5,577,362 |
Total stockholders' equity attributable to Alleghany stockholders | 8,236,487 | 7,692,710 |
Total liabilities, redeemable noncontrolling interests and stockholders' equity | $ 25,793,057 | $ 25,344,896 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 |
Equity securities, cost | $ 1,789,148 | $ 2,904,496 |
Debt securities, amortized cost | $ 13,113,522 | $ 11,895,850 |
Common stock, Shares authorized | 22,000,000 | 22,000,000 |
Common stock, Shares issued | 17,459,961 | 17,459,961 |
Treasury stock, shares | 3,012,224 | 2,883,452 |
Consolidated Statements of Earn
Consolidated Statements of Earnings and Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Revenues | ||
Net premiums earned | $ 1,297,309 | $ 1,207,856 |
Net investment income | 123,049 | 124,126 |
Change in the fair value of equity securities | 392,353 | (42,649) |
Net realized capital gains | 4,442 | 44,505 |
Other than temporary impairment losses | (10,020) | (511) |
Noninsurance revenue | 514,123 | 251,627 |
Total revenues | 2,321,256 | 1,584,954 |
Costs and Expenses | ||
Net loss and loss adjustment expenses | 792,498 | 670,578 |
Commissions, brokerage and other underwriting expenses | 420,126 | 406,295 |
Other operating expenses | 502,418 | 264,897 |
Corporate administration | 19,369 | 7,785 |
Amortization of intangible assets | 6,900 | 5,264 |
Interest expense | 23,531 | 21,531 |
Total costs and expenses | 1,764,842 | 1,376,350 |
Earnings before income taxes | 556,414 | 208,604 |
Income taxes | 108,512 | 37,422 |
Net earnings | 447,902 | 171,182 |
Net earnings attributable to noncontrolling interest | 7,675 | (393) |
Net earnings attributable to Alleghany stockholders | 440,227 | 171,575 |
Net earnings | 447,902 | 171,182 |
Other comprehensive income (loss): | ||
Change in unrealized gains (losses), net of deferred taxes | 183,387 | (146,358) |
Less: reclassification for net realized capital gains and other than temporary impairments, net of taxes | 4,407 | 1,379 |
Change in unrealized currency translation adjustment, net of deferred taxes | (885) | 5,100 |
Retirement plans | 937 | (1,322) |
Comprehensive income | 635,748 | 29,981 |
Comprehensive income attributable to noncontrolling interests | 7,675 | (393) |
Comprehensive income attributable to Alleghany stockholders | $ 628,073 | $ 30,374 |
Basic earnings per share attributable to Alleghany stockholders | $ 30.40 | $ 11.15 |
Diluted earnings per share attributable to Alleghany stockholders | $ 30.39 | $ 11.04 |
Consolidated Statements of Ea_2
Consolidated Statements of Earnings and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Change in unrealized gains (losses), deferred taxes | $ 48,749 | $ (38,905) |
Reclassification for net realized capital gains and other than temporary impairments,taxes | 1,171 | 366 |
Change in unrealized currency translation adjustment, deferred taxes | $ (235) | $ 1,356 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock | Contributed Capital | Accumulated Other Comprehensive Income (loss) | Treasury Stock | Retained Earnings | |
Other comprehensive income (loss), net of tax: | |||||||
Cumulative effect of adoption of new accounting pronouncements | $ (600,508) | [1] | $ 600,508 | ||||
Beginning Balance at Dec. 31, 2017 | $ 8,514,063 | $ 17,460 | $ 3,612,109 | 618,118 | $ (824,906) | 5,091,282 | |
Net earnings | 171,575 | 171,575 | |||||
Other comprehensive income (loss), net of tax: | |||||||
Retirement plans | (1,322) | (1,322) | |||||
Change in unrealized appreciation of investments, net | (144,979) | (144,979) | |||||
Change in unrealized currency translation adjustment, net | 5,100 | 5,100 | |||||
Comprehensive income attributable to Alleghany stockholders | 30,374 | (141,201) | 171,575 | ||||
Dividends paid | (153,967) | (153,967) | |||||
Treasury stock repurchase | (21,268) | (21,268) | |||||
Other, net | 4,198 | 1,521 | (29) | 2,677 | 29 | ||
Ending Balance at Mar. 31, 2018 | 8,373,400 | 17,460 | 3,613,630 | (123,620) | (843,497) | 5,709,427 | |
Redeemable noncontrolling interests balance at Dec. 31, 2017 | 106,530 | ||||||
Redeemable Non-controlling Interest | |||||||
Net earnings attributable to redeemable noncontrolling interest | (393) | ||||||
Comprehensive income (loss) attributable to noncontrolling interest | (393) | ||||||
Other net changes to redeemable noncontrolling interest | 31,494 | ||||||
Redeemable noncontrolling interests balance at Mar. 31, 2018 | 137,631 | ||||||
Beginning Balance at Dec. 31, 2018 | 7,692,710 | 17,460 | 3,612,830 | (202,003) | (1,312,939) | 5,577,362 | |
Net earnings | 440,227 | 440,227 | |||||
Other comprehensive income (loss), net of tax: | |||||||
Retirement plans | 937 | 937 | |||||
Change in unrealized appreciation of investments, net | 187,794 | 187,794 | |||||
Change in unrealized currency translation adjustment, net | (885) | (885) | |||||
Comprehensive income attributable to Alleghany stockholders | 628,073 | 187,846 | 440,227 | ||||
Treasury stock repurchase | (80,486) | (80,486) | |||||
Other, net | (3,810) | (4,176) | 366 | ||||
Ending Balance at Mar. 31, 2019 | 8,236,487 | $ 17,460 | $ 3,608,654 | $ (14,157) | $ (1,393,059) | $ 6,017,589 | |
Redeemable noncontrolling interests balance at Dec. 31, 2018 | 169,762 | ||||||
Redeemable Non-controlling Interest | |||||||
Net earnings attributable to redeemable noncontrolling interest | 7,675 | ||||||
Comprehensive income (loss) attributable to noncontrolling interest | 7,675 | ||||||
Other net changes to redeemable noncontrolling interest | (1,716) | ||||||
Redeemable noncontrolling interests balance at Mar. 31, 2019 | $ 175,721 | ||||||
[1] | See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act. |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - shares | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Common stock, Shares issued | 17,459,961 | 17,459,961 | 17,459,961 | 17,459,961 |
Treasury stock, shares | 3,012,224 | 2,883,452 | 2,097,820 | 2,069,461 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Cash flows from operating activities | ||
Net earnings | $ 447,902 | $ 171,182 |
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 27,732 | 33,107 |
Change in the fair value of equity securities | (392,353) | 42,649 |
Net realized capital (gains) losses | (4,442) | (44,505) |
Other than temporary impairment losses | 10,020 | 511 |
(Increase) decrease in reinsurance recoverables, net of reinsurance payable | 165,434 | 96,582 |
(Increase) decrease in premium balances receivable | (103,538) | (58,732) |
(Increase) decrease in ceded unearned premiums | (9,849) | (14,388) |
(Increase) decrease in deferred acquisition costs | (23,537) | (14,178) |
(Increase) decrease in funds held under reinsurance agreements | 19,984 | 609 |
Increase (decrease) in unearned premiums | 101,816 | 69,299 |
Increase (decrease) in loss and loss adjustment expenses | (395,170) | (156,981) |
Change in unrealized foreign currency exchange rate losses (gains) | 1,070 | (35,143) |
Other, net | 88,546 | (95,181) |
Net adjustments | (514,287) | (176,351) |
Net cash provided by (used in) operating activities | (66,385) | (5,169) |
Cash flows from investing activities | ||
Purchases of debt securities | (2,460,366) | (989,813) |
Purchases of equity securities | (69,729) | (451,519) |
Sales of debt securities | 987,132 | 1,014,024 |
Maturities and redemptions of debt securities | 235,521 | 466,457 |
Sales of equity securities | 1,510,222 | 172,819 |
Net (purchases) sales of short-term investments | (376,414) | (33,634) |
Net (purchases) sales and maturities of commercial mortgage loans | 29 | (5,569) |
(Purchases) sales of property and equipment | (12,956) | (11,057) |
Purchases of affiliates and subsidiaries, net of cash acquired | 1,157 | (105,386) |
Other, net | 73,423 | (23,951) |
Net cash provided by (used in) investing activities | (111,981) | 32,371 |
Cash flows from financing activities | ||
Treasury stock acquisitions | (80,486) | (21,268) |
Increase (decrease) in other debt | 8,178 | 9,957 |
Cash dividends paid | (153,967) | |
Other, net | (11,421) | 4,654 |
Net cash provided by (used in) financing activities | (83,729) | (160,624) |
Effect of foreign exchange rate changes on cash | 1,396 | 6,087 |
Net increase (decrease) in cash | (260,699) | (127,335) |
Cash at beginning of period | 1,038,763 | 838,375 |
Cash at end of period | 778,064 | 711,040 |
Supplemental disclosures of cash flow information | ||
Interest paid | 19,368 | 16,942 |
Income taxes paid (refund received) | $ (39,657) | $ 20,275 |
Summary of Significant Accounti
Summary of Significant Accounting Principles | 3 Months Ended |
Mar. 31, 2019 | |
Summary of Significant Accounting Principles | 1. Summary of Significant Accounting Principles (a) Principles of Financial Statement Presentation This Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) of Alleghany Corporation (“Alleghany”). Alleghany Corporation, a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006. Although Alleghany’s primary sources of revenues and earnings are its reinsurance and insurance operations and investments, Alleghany also generates revenues and expenses from a diverse portfolio of middle market businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital Corporation (“Alleghany Capital”). Alleghany Capital’s businesses include: • Bourn & Koch, Inc. (“Bourn & Koch”), a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois; • R.C. Tway Company, LLC (“Kentucky Trailer”), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets, headquartered in Louisville, Kentucky; • IPS-Integrated Project Services, LLC (“IPS”), a technical service provider focused on the global pharmaceutical and biotechnology industries, headquartered in Blue Bell, Pennsylvania; • Jazwares, LLC (together with its affiliates, “Jazwares”), a global toy, entertainment and musical instrument company, headquartered in Sunrise, Florida; • WWSC Holdings, LLC (“W&W|AFCO Steel”), a structural steel fabricator and erector, headquartered in Oklahoma City, Oklahoma; • CHECO Holdings, LLC (“Concord”), a hotel management and development company, headquartered in Raleigh, North Carolina; and • a 45 percent equity interest in Wilbert Funeral Services, Inc. (“Wilbert”), a provider of products and services for the funeral and cemetery industries and precast concrete markets, headquartered in Overland Park, Kansas. On February 7, 2018, W&W|AFCO Steel acquired Hirschfeld Holdings, LP (“Hirschfeld”). The results of Concord have been included in Alleghany’s consolidated results beginning with its acquisition by Alleghany Capital on October 1, 2018. In addition, Alleghany owns certain other holding-company investments. Alleghany’s wholly-owned subsidiary Stranded Oil Resources Corporation (“SORC”) is an exploration and production company focused on enhanced oil recovery, headquartered in Golden, Colorado. Alleghany’s wholly-owned subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) owns and manages certain properties in the Sacramento, California region. Alleghany’s public equity investments are managed primarily through Alleghany’s wholly-owned subsidiary Roundwood Asset Management LLC. Unless the context otherwise requires, references to “Alleghany” include Alleghany together with its subsidiaries. The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All material inter-company balances and transactions have been eliminated in consolidation. The portion of stockholders’ equity, net earnings and comprehensive income that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets, the Consolidated Statements of Earnings and Comprehensive Income and the Consolidated Statements of Changes in Equity as noncontrolling interests. In addition, Alleghany accretes the redeemable noncontrolling interests up to its future estimated redemption value over the period from the date of issuance to the earliest redemption date. Because all noncontrolling interests have the option to sell their ownership interests to Alleghany in the future (generally through 2024), the portion of stockholders’ equity that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets and the Consolidated Statements of Changes in Equity as redeemable noncontrolling interests for all periods presented. During the first three months of 2019, the noncontrolling interests outstanding were approximately as follows: Bourn & Koch - 11 percent; Kentucky Trailer - 23 percent; IPS - 15 percent; Jazwares - 23 percent; W&W|AFCO Steel - 20 percent; and Concord - 15 percent. In the first quarter of 2019, all noncontrolling interests of Bourn & Koch have exercised their options and sold their ownership interests to Alleghany, effective April 1, 2019. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Alleghany relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from those reported results to the extent that those estimates and assumptions prove to be inaccurate. Changes in estimates are reflected in the Consolidated Statements of Earnings and Comprehensive Income in the period in which the changes are made. (b) Other Significant Accounting Principles Alleghany’s significant accounting principles can be found in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K. (c) Recent Accounting Standards Recently Adopted In February 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this new guidance in the first quarter of 2018 and has elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on Alleghany. In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. As part of its implementation, Alleghany elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by Alleghany’s lessors for certain of its leases). As of January 1, 2019, Alleghany’s adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) for further information on Alleghany’s leases. In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. Alleghany adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on Alleghany’s financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s equity securities, and Note 7(b) of this Form 10-Q for further information on accumulated other comprehensive income. In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material impact on Alleghany’s results of operations and financial condition. See Note 10 of this Form 10-Q for further information on Alleghany’s noninsurance revenue. Future Application of Accounting Standards In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an available-for-sale (“AFS”) basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020. Although Alleghany expects to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, it does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s reinsurance recoverables. In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s goodwill. In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified disclosures. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2019 | |
Fair Value of Financial Instruments | 2. Fair Value of Financial Instruments The following table presents the carrying value and estimated fair value of Alleghany’s consolidated financial instruments as of March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair Value ($ in millions) Assets Investments (excluding equity method investments and loans) (1) $ 17,075.7 $ 17,075.7 $ 16,291.3 $ 16,291.3 Liabilities Senior Notes and other debt (2) $ 1,676.4 $ 1,814.1 $ 1,669.0 $ 1,795.5 (1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments carried at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are carried at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below. (2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8 , “Financial Statements and Supplementary Data” of the 2018 Form 10 -K for additional information on the senior notes and other debt. The following tables present Alleghany’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of March 31, 2019 and December 31, 2018: Level 1 Level 2 Level 3 Total ($ in millions) As of March 31, 2019 Equity securities: Common stock $ 2,515.0 $ 3.5 $ - $ 2,518.5 Preferred stock - - 4.6 4.6 Total equity securities 2,515.0 3.5 4.6 2,523.1 Debt securities: U.S. Government obligations - 1,182.9 - 1,182.9 Municipal bonds - 2,469.7 - 2,469.7 Foreign government obligations - 779.7 - 779.7 U.S. corporate bonds - 2,316.3 433.7 2,750.0 Foreign corporate bonds - 1,270.3 151.4 1,421.7 Mortgage and asset-backed securities: Residential mortgage-backed securities (“RMBS”) (1) - 1,976.6 - 1,976.6 Commercial mortgage-backed securities (“CMBS”) - 588.6 0.2 588.8 Other asset-backed securities (2) - 931.3 1,179.0 2,110.3 Total debt securities - 11,515.4 1,764.3 13,279.7 Short-term investments - 1,272.4 - 1,272.4 Other invested assets (3) - - 0.5 0.5 Total investments (excluding equity method investments and loans) $ 2,515.0 $ 12,791.3 $ 1,769.4 $ 17,075.7 Senior Notes and other debt $ - $ 1,521.7 $ 292.4 $ 1,814.1 Level 1 Level 2 Level 3 Total ($ in millions) As of December 31, 2018 Equity securities: Common stock $ 3,563.9 $ 3.5 $ - $ 3,567.4 Preferred stock - - 5.4 5.4 Total equity securities 3,563.9 3.5 5.4 3,572.8 Debt securities: U.S. Government obligations - 1,022.4 - 1,022.4 Municipal bonds - 2,214.7 - 2,214.7 Foreign government obligations - 947.9 - 947.9 U.S. corporate bonds - 1,959.6 425.7 2,385.3 Foreign corporate bonds - 1,226.4 126.9 1,353.3 Mortgage and asset-backed securities: RMBS (1) - 1,387.9 - 1,387.9 CMBS - 533.3 - 533.3 Other asset-backed securities (2) - 712.3 1,266.9 1,979.2 Total debt securities - 10,004.5 1,819.5 11,824.0 Short-term investments - 893.8 - 893.8 Other invested assets (3) - - 0.7 0.7 Total investments (excluding equity method investments and loans) $ 3,563.9 $ 10,901.8 $ 1,825.6 $ 16,291.3 Senior Notes and other debt $ - $ 1,510.5 $ 285.0 $ 1,795.5 (1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS. (2) Includes $ 1,166.9 1,266.9 , respectively. (3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method. In the three months ended March 31, 2019, Alleghany transferred into Level 3 $ 14.7 In the three months ended March 31, 2019, Alleghany transferred out of Level 3 $ 1.0 There were no other material transfers between Levels 1, 2 or 3 in the three months ended March 31, 2019. As further described in Note 3(h), on March 15, 2018, most of AIHL’s limited partnership interests in certain subsidiaries of Ares Management LLC (“Ares”) were converted into Ares common units. As a result of the conversion, as of March 15, 2018, $ 208.2 million of Ares common units, classified as equity securities, was transferred into Level 1, and $ 58.7 million of Ares limited partnership interests, classified as other invested assets, was transferred into Level 3. On September 24, 2018, AIHL’s remaining $ 56.9 million of Ares limited partnership interests were converted into Ares common units and, as a result, was transferred from Level 3 other invested assets into Level 1 common stocks. In addition to the $ 58.7 million of Ares-related other invested assets transferred into Level 3, in the first three months of 2018, Alleghany transferred into Level 3 $ 4.3 million of financial instruments, principally due to a decrease in observable inputs related to the valuation of such assets, specifically, a decrease in broker quotes. Of the $ 4.3 million of transfers, $ 3.1 million related to preferred stock and $ 1.2 million related to U.S. corporate bonds. In the three months ended March 31, 2018, Alleghany transferred out of Level 3 $1.6 million of CMBS securities, principally due to an increase in observable inputs related to the valuation of such assets. Specifically, during the first three months of 2018, there was a decrease in the weight given to non-binding broker quotes, and as a result, there was a corresponding increase in quoted prices for similar assets in active markets. There were no other material transfers between Levels 1, 2 or 3 in the three months ended March 31, 2018. The following tables present reconciliations of the changes in Level 3 assets during the three months ended March 31, 2019 and 2018 measured at fair value: Debt Securities Mortgage and asset-backed Three Months Ended March 31 , 2019 Preferred Stock U.S. Bonds Foreign Bonds CMBS Other Asset- Securities Other Assets (1) Total ($ in millions) Balance as of January 1 , 2019 $ 5.4 $ 425.7 $ 126.9 $ - $ 1,266.9 $ 0.7 $ 1,825.6 Net realized/unrealized gains (losses) included in: Net earnings (2) - (9.9 ) - - - - (9.9 ) Other comprehensive income (loss) (0.8 ) 15.7 2.6 - 15.2 (0.2 ) 32.5 Purchases - 5.8 13.8 0.2 49.6 - 69.4 Sales - - (5.6 ) - (116.9 ) - (122.5 ) Issuances - - - - - - - Settlements - (2.6 ) (1.0 ) - (35.8 ) - (39.4 ) Transfers into Level 3 - - 14.7 - - - 14.7 Transfers out of Level 3 - (1.0 ) - - - - (1.0 ) Balance as of March 31 , 2019 $ 4.6 $ 433.7 $ 151.4 $ 0.2 $ 1,179.0 $ 0.5 $ 1,769.4 Debt Securities Mortgage and asset-backed Three Months Ended March 31 , 2018 Preferred Stock U.S. Bonds Foreign Bonds RMBS CMBS Other Asset- Securities Other Assets (1) Total ($ in millions) Balance as of January 1, 2018 $ 1.9 $ 260.0 $ 75.2 $ 161.8 $ 1.6 $ 1,101.3 $ 7.5 $ 1,609.3 Net realized/unrealized gains (losses) included in: Net earnings (2) - - - - - 0.4 1.2 1.6 Other comprehensive income (loss) 0.2 (5.4 ) (1.3 ) - - (3.3 ) (1.6 ) (11.4 ) Purchases - 36.2 - - - 128.2 - 164.4 Sales - (1.8 ) (0.9 ) - - (145.3 ) (5.5 ) (153.5 ) Issuances - - - - - - - - Settlements - - - - - - - - Transfers into Level 3 3.1 1.2 - - - - 58.7 63.0 Transfers out of Level 3 - - - - (1.6 ) - - (1.6 ) Balance as of March 31, 2018 $ 5.2 $ 290.2 $ 73.0 $ 161.8 $ - $ 1,081.3 $ 60.3 $ 1,671.8 (1) Includes partnership and non-marketable equity investments accounted for at fair value. (2) There were no other than temporary impairment (“ OTTI”) losses recorded in net earnings related to Level 3 assets still held as of March 31 , 2019 and 2018. Net unrealized losses related to Level 3 assets as of March 31, 2019 and December 31, 2018 were not material. The increase in Senior Notes and other debt included in Level 3 for the first three months of 2019 primarily reflects increased borrowings at . See Note 1(c) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for Alleghany’s accounting policy on fair value. |
Investments
Investments | 3 Months Ended |
Mar. 31, 2019 | |
Investments | 3. Investments (a) Unrealized Gains and Losses The following tables present the amortized cost and the fair value of AFS securities as of March 31, 2019 and December 31, 2018: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in millions) As of March 31, 2019 Debt securities: U.S. Government obligations $ 1,189.6 $ 6.3 $ (13.0 ) $ 1,182.9 Municipal bonds 2,386.4 84.4 (1.1 ) 2,469.7 Foreign government obligations 762.2 18.6 (1.1 ) 779.7 U.S. corporate bonds 2,708.7 53.5 (12.2 ) 2,750.0 Foreign corporate bonds 1,404.6 22.6 (5.5 ) 1,421.7 Mortgage and asset-backed securities: RMBS 1,958.9 25.4 (7.7 ) 1,976.6 CMBS 581.6 9.5 (2.3 ) 588.8 Other asset-backed securities (1) 2,121.5 9.4 (20.6 ) 2,110.3 Total debt securities 13,113.5 229.7 (63.5 ) 13,279.7 Short-term investments 1,272.4 - - 1,272.4 Total investments $ 14,385.9 $ 229.7 $ (63.5 ) $ 14,552.1 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in millions) As of December 31, 2018 Debt securities: U.S. Government obligations $ 1,042.4 $ 2.4 $ (22.4 ) $ 1,022.4 Municipal bonds 2,177.5 44.4 (7.2 ) 2,214.7 Foreign government obligations 939.0 12.3 (3.4 ) 947.9 U.S. corporate bonds 2,431.4 13.2 (59.3 ) 2,385.3 Foreign corporate bonds 1,363.0 9.1 (18.8 ) 1,353.3 Mortgage and asset-backed securities: RMBS 1,392.4 10.3 (14.8 ) 1,387.9 CMBS 536.9 2.8 (6.4 ) 533.3 Other asset-backed securities (1) 2,013.3 4.4 (38.5 ) 1,979.2 Total debt securities 11,895.9 98.9 (170.8 ) 11,824.0 Short-term investments 893.8 - - 893.8 Total investments $ 12,789.7 $ 98.9 $ (170.8 ) $ 12,717.8 (1) Includes $ 1,166.9 1,266.9 collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. (b) Contractual Maturity The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of March 31, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Fair Value ($ in millions) As of March 31, 2019 Short-term investments due in one year or less $ 1,272.4 $ 1,272.4 Mortgage and asset-backed securities (1) 4,662.0 4,675.7 Debt securities with maturity dates: One year or less 492.7 493.2 Over one through five years 3,141.4 3,169.6 Over five through ten years 2,710.4 2,756.9 Over ten years 2,107.0 2,184.3 Total debt securities $ 13,113.5 $ 13,279.7 (1) Mortgage and asset-backed securities by their nature do not generally have single maturity dates. (c) Net Investment Income The following table presents net investment income for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Interest income $ 119.2 $ 102.0 Dividend income 9.8 16.4 Investment expenses (7.5 ) (12.0 ) Pillar Investments (1) 1.2 - Limited partnership interests in certain subsidiaries of Ares (1) - 13.7 Other investment results 0.3 4.0 Total $ 123.0 $ 124.1 (1) See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares. As of March 31, 2019, non-income producing invested assets were immaterial. (d) Change in the Fair Value of Equity Securities The following table presents changes in the fair value of equity securities for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Change in the fair value of equity securities sold during the period $ 62.1 $ 11.6 Change in the fair value of equity securities held at the end of the period 330.3 (54.2 ) Change in the fair value of equity securities $ 392.4 $ (42.6 ) (e) Realized Gains and Losses The proceeds from sales of debt and equity securities were $2.5 billion and $1.2 billion for the three months ended March 31, 2019 and 2018, respectively. Realized capital gains and losses for the three months ended March 31, 2019 primarily reflect capital gains and losses from the sale of debt securities. Realized capital gains and losses for the three months ended March 31, 2018 primarily reflect a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information on this conversion. The following table presents amounts of gross realized capital gains and gross realized capital losses for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Gross realized capital gains $ 12.1 $ 60.3 Gross realized capital losses (7.7 ) (15.8 ) Net realized capital gains $ 4.4 $ 44.5 Gross realized capital losses exclude OTTI losses, as discussed below. (f) OTTI losses Alleghany holds its debt securities as AFS and, as such, these securities are recorded at fair value. Alleghany continually monitors the difference between amortized cost and the estimated fair value of its debt investments, which involves uncertainty as to whether declines in value are temporary in nature. The analysis of a security’s decline in value is performed in its functional currency. If the decline is deemed temporary, Alleghany records the decline as an unrealized loss in stockholders’ equity. If the decline is deemed to be other than temporary, Alleghany writes its amortized cost-basis down to the fair value of the security and records an OTTI loss on its statement of earnings. In addition, any portion of such decline related to a debt security that is believed to arise from factors other than credit is recorded as a component of other comprehensive income rather than charged against earnings. Debt securities in an unrealized loss position are evaluated for OTTI if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost for an extended period of time (nine consecutive months or more); (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis. If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records an OTTI loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the OTTI loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income. In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities. OTTI losses in the first three months of 2019 reflect $10.0 million of unrealized losses on debt securities, primarily related to the energy sector, that were deemed to be other than temporary and, as such, were required to be charged against earnings. The determination that unrealized losses on debt securities were other than temporary was primarily due to the deterioration of creditworthiness of the issuer. OTTI losses in the first three months of 2018 reflect $0.5 million of unrealized losses on debt securities that were deemed to be other than temporary and, as such, were required to be charged against earnings. Upon the ultimate disposition of the securities for which OTTI losses have been recorded, a portion of the loss may be recoverable depending on market conditions at the time of disposition. After adjusting the amortized cost basis of securities for the recognition of OTTI losses, the remaining gross unrealized investment losses for debt securities as of March 31, 2019 were deemed to be temporary, based on, among other factors: (i) the duration of time and the relative magnitude to which the fair value of these investments had been below cost were not indicative of an OTTI loss; (ii) the absence of compelling evidence that would cause Alleghany to call into question the financial condition or near-term business prospects of the issuer of the security; and (iii) Alleghany’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery. Alleghany may ultimately record a realized loss after having originally concluded that the decline in value was temporary. Risks and uncertainties are inherent in the methodology. Alleghany’s methodology for assessing other than temporary declines in value contains inherent risks and uncertainties which could include, but are not limited to, incorrect assumptions about financial condition, liquidity or future prospects, inadequacy of any underlying collateral and unfavorable changes in economic conditions or social trends, interest rates or credit ratings. (g) Aging of Gross Unrealized Losses The following tables present gross unrealized losses and related fair values for Alleghany’s AFS securities, grouped by duration of time in a continuous unrealized loss position, as of March 31, 2019 and December 31, 2018: Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in millions) As of March 31, 2019 Debt securities: U.S. Government obligations $ 19.3 $ - $ 665.4 $ 13.0 $ 684.7 $ 13.0 Municipal bonds 1.8 0.1 125.2 1.0 127.0 1.1 Foreign government obligations 14.2 - 111.2 1.1 125.4 1.1 U.S. corporate bonds 197.5 4.2 483.9 8.0 681.4 12.2 Foreign corporate bonds 75.6 0.8 314.9 4.7 390.5 5.5 Mortgage and asset-backed securities: RMBS 98.1 0.5 399.0 7.2 497.1 7.7 CMBS 88.3 0.1 91.4 2.2 179.7 2.3 Other asset-backed securities 1,084.5 16.9 229.9 3.7 1,314.4 20.6 Total temporarily impaired securities $ 1,579.3 $ 22.6 $ 2,420.9 $ 40.9 $ 4,000.2 $ 63.5 Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in millions) As of December 31, 2018 Debt securities: U.S. Government obligations $ 78.5 $ 0.9 $ 690.5 $ 21.5 $ 769.0 $ 22.4 Municipal bonds 312.4 2.5 202.5 4.7 514.9 7.2 Foreign government obligations 60.7 0.1 186.7 3.3 247.4 3.4 U.S. corporate bonds 1,187.9 39.4 379.7 19.9 1,567.6 59.3 Foreign corporate bonds 501.5 9.7 349.1 9.1 850.6 18.8 Mortgage and asset-backed securities: RMBS 397.7 6.4 225.9 8.4 623.6 14.8 CMBS 199.1 1.3 109.5 5.1 308.6 6.4 Other asset-backed securities 1,442.8 36.7 121.6 1.8 1,564.4 38.5 Total temporarily impaired securities $ 4,180.6 $ 97.0 $ 2,265.5 $ 73.8 $ 6,446.1 $ 170.8 As of March 31, 2019, Alleghany held a total of 1,352 debt securities that were in an unrealized loss position, of which 894 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these debt securities consisted of losses related primarily to other asset-backed securities, U.S. Government obligations, U.S. corporate bonds and RMBS. As of March 31, 2019, the vast majority of Alleghany’s debt securities were rated investment grade, with 3.6 percent of debt securities having issuer credit ratings that were below investment grade or not rated, compared with 4.4 percent as of December 31, 2018. (h) Investments in Certain Other Invested Assets In December 2012, TransRe obtained an ownership interest in Pillar Capital Holdings Limited (“Pillar Holdings”), a Bermuda- based insurance asset manager focused on collateralized reinsurance and catastrophe insurance-linked securities. Additionally, TransRe invested $175.0 million and AIHL invested $25.0 million in limited partnership funds managed by Pillar Holdings (the “Funds”). The objective of the Funds is to create portfolios with attractive risk-reward characteristics and low correlation with other asset classes, using the extensive reinsurance and capital market experience of the principals of Pillar Holdings. Alleghany has concluded that both Pillar Holdings and the Funds (collectively, the “Pillar Investments”) represent variable interest entities and that Alleghany is not the primary beneficiary, as it does not have the ability to direct the activities that most significantly impact each entity’s economic performance. Therefore, the Pillar Investments are not consolidated and are accounted for under the equity method of accounting. Alleghany’s potential maximum loss in the Pillar Investments is limited to its cumulative net investment. As of March 31, 2019, Alleghany’s carrying value in the Pillar Investments, as determined under the equity method of accounting, was $194.7 million, which is net of returns of capital received from the Pillar Investments. In July 2013, AIHL invested $250.0 million in Ares, an asset manager, in exchange for a 6.25 percent equity stake in Ares, with an agreement to engage Ares to manage up to $1.0 billion in certain investment strategies. In May 2014, Ares completed an initial public offering of its common units. Upon completion of the initial public offering, Alleghany’s equity investment in Ares converted into limited partnership interests in certain Ares subsidiaries that were convertible into Ares common units. On March 15, 2018, most of AIHL’s limited partnership interests were converted into Ares common units. As a result of the conversion and with respect to the limited partnership interests that were converted into Ares common units, AIHL: (i) reclassified its converted interests from other invested assets to equity securities; (ii) increased its carrying value to $ 208.2 58.7 (i) Investments in Commercial Mortgage Loans As of March 31, 2019, the carrying value of Alleghany’s commercial mortgage loan portfolio was $676.5 million, representing the unpaid principal balance on the loans. As of March 31, 2019, there was no allowance for loan losses. The commercial mortgage loan portfolio consists primarily of first mortgages on commercial properties in major metropolitan areas in the U.S. The loans earn interest at fixed- and floating-rates, mature in two to ten years from loan origination and the principal amounts of the loans were no more than approximately two-thirds of the property’s appraised value at the time the loans were made. |
Reinsurance Ceded
Reinsurance Ceded | 3 Months Ended |
Mar. 31, 2019 | |
Reinsurance Ceded | 4. Reinsurance Ceded Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite in order to reduce the effect of individual or aggregate exposure to losses, manage capacity, protect capital resources, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and enable them to increase gross premium writings and risk capacity without requiring additional capital. Alleghany’s reinsurance and insurance subsidiaries purchase reinsurance and retrocessional coverages from highly- rated third-party reinsurers. If the assuming reinsurers are unable or unwilling to meet the obligations assumed under the applicable reinsurance agreements, Alleghany’s reinsurance and insurance subsidiaries would remain liable for such reinsurance portion not paid by these reinsurers. As such, funds, trust agreements and letters of credit are held to collateralize a portion of Alleghany’s reinsurance recoverables and Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite or assume with multiple reinsurance programs. TransRe enters into retrocession arrangements, including property catastrophe retrocession arrangements, in order to reduce the effect of individual or aggregate exposure to losses, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and increase gross premium writings and risk capacity without requiring additional capital. RSUI reinsures its property lines of business through a program consisting of surplus share treaties, facultative placements, per risk and catastrophe excess of loss treaties. RSUI’s catastrophe reinsurance program and property per risk reinsurance program run on an annual basis from May 1 to the following April 30 and portions expired on April 30, 2019. Both programs were renewed on May 1, 2019 with substantially similar terms as the expired programs. |
Liability for Loss and LAE
Liability for Loss and LAE | 3 Months Ended |
Mar. 31, 2019 | |
Liability for Loss and LAE | 5. Liability for Loss and LAE (a) Liability Rollforward The following table presents the activity in the liability for loss and LAE in the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Reserves as of January 1 $ 12,250.3 $ 11,871.3 Less: reinsurance recoverables (1) 1,857.4 1,650.1 Net reserves as of January 1 10,392.9 10,221.2 Other adjustments (0.2 ) - Incurred loss and LAE, net of reinsurance, related to: Current year 829.9 756.3 Prior years (37.4 ) (85.7 ) Total incurred loss and LAE, net of reinsurance 792.5 670.6 Paid loss and LAE, net of reinsurance, related to: (2) Current year 75.3 100.5 Prior years 914.8 690.8 Total paid loss and LAE, net of reinsurance 990.1 791.3 Foreign currency exchange rate effect 17.2 49.9 Net reserves as of March 31 10,212.3 10,150.4 Reinsurance recoverables as of March 31 (1) 1,642.8 1,563.9 Reserves as of March 31 $ 11,855.1 $ 11,714.3 (1) Reinsurance recoverables in this table include only ceded loss and LAE reserves. (2) Includes paid losses, net of reinsurance, related to commutations. Gross loss and LAE reserves as of March 31, 2019 decreased from December 31, 2018, primarily reflecting payments on catastrophe losses incurred in prior years and, to a lesser extent, favorable prior accident year loss reserve development. (b) Liability Development The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three months ended March 31, 2019 and 2018: Three Months Ended 2019 2018 ($ in millions) Reinsurance Segment Property: Catastrophe events $ 8.4 (1) $ (30.4 ) (2) Non-catastrophe (19.1 ) (3) (11.0 ) (4) Total (10.7 ) (41.4 ) Casualty & other (25.7 ) (5) (30.2 ) (6) Total Reinsurance Segment (36.4 ) (71.6 ) Insurance Segment RSUI: Casualty (5.6 ) (7) (11.0 ) (8) Property and other 1.9 (9) (0.1 ) Total (3.7 ) (11.1 ) CapSpecialty 2.7 (10) (3.0 (11) Total incurred related to prior years $ (37.4 ) $ (85.7 ) (1) Primarily reflects unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year, partially offset by favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year. (2) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Maria and Harvey in the 2017 accident year. (3) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years. (4) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years. (5) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2012 through 2017 accident years and in the professional liability lines of business in the 2007 and prior accident years. (6) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2016 and 2017 accident years and in the shorter-tailed and longer-tailed lines of business in the 2005 through 2013 accident years. (7) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2017 accident year. (8) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in the 2009 accident year. (9) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricanes Harvey in the 2017 accident year and Florence in the 2018 accident year. The unfavorable prior accident year loss reserve development reflects the impact of a recent adverse court ruling. (10) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years. (11) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2019 | |
Income Taxes | 6. Income Taxes The effective tax rate on earnings before income taxes for the first three months of 2019 was 19.5 17.9 Alleghany believes that, as of March 31, 2019, it had no material uncertain tax positions. Interest and penalties related to unrecognized tax expenses (benefits) are recognized in income tax expense, when applicable. There were no material liabilities for interest or penalties accrued as of March 31, 2019. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2019 | |
Stockholders' Equity | 7. Stockholders’ Equity (a) Common Stock Repurchases In November 2015, the Alleghany Board of Directors authorized the repurchase of shares of common stock of Alleghany, par value $1.00 per share (“Common Stock”), at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2015 Repurchase Program”). In June 2018, the Alleghany Board of Directors authorized, upon the completion of the 2015 Repurchase Program, the repurchase of additional shares of Common Stock, at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2018 Repurchase Program”). In the fourth quarter of 2018, Alleghany completed the 2015 Repurchase Program and subsequent repurchases have been made pursuant to the 2018 Repurchase Program. As of March 31, 2019, Alleghany had $191.0 million remaining under its share repurchase authorization. The following table presents the shares of Common Stock that Alleghany repurchased in the three months ended March 31, 2019 and 2018: Three Months Ended 2019 2018 Shares repurchased 129,567 35,072 Cost of shares repurchased (in millions) $ 80.5 $ 21.3 Average price per share repurchased $ 621.19 $ 606.40 (b) Accumulated Other Comprehensive Income (Loss) The following tables present a reconciliation of the changes during the three months ended March 31, 2019 and 2018 in accumulated other comprehensive income (loss) attributable to Alleghany stockholders: Unrealized Unrealized Retirement Total ($ in millions) Balance as of January 1, 2019 $ (61.6 ) $ (124.7 ) $ (15.7 ) $ (202.0 ) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) before reclassifications 183.4 (0.9 ) 0.9 183.4 Reclassifications from accumulated other comprehensive income 4.4 - - 4.4 Total 187.8 (0.9 ) 0.9 187.8 Balance as of March 31, 2019 $ 126.2 $ (125.6 ) $ (14.8 ) $ (14.2 ) Unrealized Unrealized Retirement Total ($ in millions) Balance as of January 1, 2018 $ 718.2 $ (84.6 ) $ (15.5 ) $ 618.1 Cumulative effect of adoption of new accounting pronouncements (1) Reclassification of net unrealized gains on equity securities, net of tax (735.6 ) - - (735.6 ) Reclassification of stranded taxes 156.6 (18.2 ) (3.3 ) 135.1 Total (579.0 ) (18.2 ) (3.3 ) (600.5 ) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) before reclassifications (146.4 ) 5.1 (1.3 ) (142.6 ) Reclassifications from accumulated other comprehensive income 1.4 - - 1.4 Total (145.0 ) 5.1 (1.3 ) (141.2 ) Balance as of March 31, 2018 $ (5.8 ) $ (97.7 ) $ (20.1 ) $ (123.6 ) (1) See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act. The following table presents reclassifications out of accumulated other comprehensive income attributable to Alleghany stockholders during the three months ended March 31, 2019 and 2018: Accumulated Other Three Months Ended Comprehensive Income Component Line in Consolidated Statement of Earnings 2019 2018 ($ in millions) Unrealized appreciation of investments: Net realized capital gains (1) $ (4.4) $ 1.2 Other than temporary impairment losses 10.0 0.5 Income taxes (1.2) (0.3) Total reclassifications: Net earnings $ 4.4 $ 1.4 (1) For the three months ended March 31, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information. (c) Special Dividend In February 2018, the Alleghany Board of Directors declared a special dividend of $10.00 per share for stockholders of record on March 5, 2018. On March 15, 2018, Alleghany paid dividends to stockholders totaling $154.0 million. |
Earnings Per Share of Common St
Earnings Per Share of Common Stock | 3 Months Ended |
Mar. 31, 2019 | |
Earnings Per Share of Common Stock | 8. Earnings Per Share of Common Stock The following table presents a reconciliation of the earnings and share data used in the basic and diluted earnings per share computations for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions, except share amounts) Net earnings available to Alleghany stockholders $ 440.2 $ 171.6 Effect of dilutive securities - (1.3 ) Income available to common stockholders for diluted earnings per share $ 440.2 $ 170.3 Weighted average common shares outstanding applicable to basic earnings per share 14,481,255 15,389,283 Effect of dilutive securities 3,981 29,381 Adjusted weighted average common shares outstanding applicable to diluted earnings per share 14,485,236 15,418,664 Contingently issuable shares (1) 39,325 23,777 (1) Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2019 | |
Commitments and Contingencies | 9. Commitments and Contingencies (a) Legal Proceedings Certain of Alleghany’s subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. In the opinion of management, such provisions are adequate, and management does not believe that any pending litigation will have a material adverse effect on Alleghany’s consolidated results of operations, financial position or cash flows. (b) Leases Alleghany and its subsidiaries lease certain facilities, land, furniture and equipment under long-term, non-cancelable lease agreements that expire at various dates through 2038. Most of Alleghany’s leases relate to office facilities. Alleghany’s lease agreements do not contain any material restrictive covenants and are substantially all considered to be operating leases. Lease expense was $12.1 million in the first three months of 2019. The following table presents Alleghany’s consolidated lease liabilities and right-of-use lease assets related to operating leases as of March 31 , 2019 : As of March 31, 2019 Maturity of lease payments, by year ($ in millions) 1 year or less $ 37.9 More than 1 year to 2 years 34.1 More than 2 years to 3 years 30.7 More than 3 years to 4 years 25.6 More than 4 years to 5 years 24.9 More than 5 years 160.5 Total lease payments (1) $ 313.7 Less: interest (2) 69.8 Lease liabilities (3) $ 243.9 Right-of-use lease assets (4) $ 216.3 Prepaid lease assets, net of lease allowances and incentives 27.6 $ 243.9 (1) As of March 31, 2019, the weighted average lease term was approximately 12 (2) As of March 31, 2019, the weighted average discount rate was approximately 5 (3) Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet. (4) Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet. (c) Energy Holdings As of March 31, 2019, Alleghany had holdings in energy sector businesses of $418.2 million, comprised of $320.9 million of debt securities, $9.4 million of equity securities and $87.9 million of Alleghany’s equity attributable to SORC. |
Segments of Business
Segments of Business | 3 Months Ended |
Mar. 31, 2019 | |
Segments of Business | 10. Segments of Business (a) Overview Alleghany’s segments are reported in a manner consistent with the way management evaluates the businesses. As such, Alleghany classifies its businesses into three reportable segments – reinsurance, insurance and Alleghany Capital. Reinsurance and insurance underwriting activities are evaluated separately from investment and other activities. Segment accounting policies are described in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K. The reinsurance segment consists of property and casualty reinsurance operations conducted by TransRe’s reinsurance operating subsidiaries and is further reported through two major product lines – property and casualty & other. TransRe provides property and casualty reinsurance to insurers and other reinsurers through brokers and on a direct basis to ceding companies. TransRe also writes a modest amount of property and casualty insurance business, which is included in the reinsurance segment. A significant portion of the premiums earned by TransRe’s operations are generated by offices located in Canada, Europe, Asia, Australia, Africa and those serving Latin America and the Caribbean. Although the majority of the premiums earned by these offices typically relate to the regions where they are located, a significant portion may be derived from other regions of the world, including the U.S. In addition, although a significant portion of the assets and liabilities of these foreign offices generally relate to the countries where ceding companies and reinsurers are located, most investments are located in the country of domicile of these offices. The insurance segment consists of property and casualty insurance operations conducted in the U.S. by AIHL through its insurance operating subsidiaries RSUI and CapSpecialty. RSUI also writes a modest amount of assumed reinsurance business, which is included in the insurance segment. The Alleghany Capital segment consists of industrial operations, non-industrial operations and corporate operations at the Alleghany Capital level. Industrial operations are conducted through Bourn & Koch, Kentucky Trailer, W&W|AFCO Steel and a 45 percent equity interest in Wilbert. Non-industrial operations are conducted through IPS, Jazwares and Concord. On October 1, 2018, Alleghany Capital acquired approximately 85 percent of the equity in Concord for $136.6 million, consisting of $68.6 million in cash paid on October 1, 2018 On February 7, 2018 Corporate activities are not classified as a segment. The primary components of corporate activities are Alleghany Properties, SORC and activities at the Alleghany parent company. In addition, corporate activities include interest expense associated with the senior notes issued by Alleghany, whereas interest expense associated with senior notes issued by TransRe is included in “Total Segments” and interest expense associated with other debt is included in Alleghany Capital. Information related to the senior notes and other debt can be found in Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K. (b) Results The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three months ended March 31, 2019 and 2018: Reinsurance Segment Insurance Segment Three Months Ended March 31, 2019 Property Casualty & other Total RSUI Cap Total Subtotal Alleghany Total Corporate Activities Consolidated ($ in millions) Gross premiums written $ 415.1 $ 816.5 $ 1,231.6 $ 299.0 $ 82.8 $ 381.8 $ 1,613.4 $ - $ 1,613.4 $ (6.8 ) $ 1,606.6 Net premiums written 316.2 791.4 1,107.6 201.4 76.7 278.1 1,385.7 - 1,385.7 - 1,385.7 Net premiums earned 308.9 720.3 1,029.2 192.4 75.7 268.1 1,297.3 - 1,297.3 - 1,297.3 Net loss and LAE 162.6 490.6 653.2 94.3 45.0 139.3 792.5 - 792.5 - 792.5 Commissions, brokerage and other underwriting expenses 103.7 232.3 336.0 53.5 30.6 84.1 420.1 - 420.1 - 420.1 Underwriting (loss) profit (4) $ 42.6 $ (2.6 ) $ 40.0 $ 44.6 $ 0.1 $ 44.7 84.7 - 84.7 - 84.7 Net investment income 117.9 1.3 119.2 3.8 123.0 Change in the fair value of equity securities 389.1 - 389.1 3.3 392.4 Net realized capital gains 4.1 0.3 4.4 - 4.4 Other than temporary impairment losses (10.0 ) - (10.0 ) - (10.0 ) Noninsurance revenue 5.4 505.0 510.4 3.7 514.1 Other operating expenses 29.7 465.4 495.1 7.3 502.4 Corporate administration 1.1 - 1.1 18.3 19.4 Amortization of intangible assets 0.2 6.7 6.9 - 6.9 Interest expense 6.7 4.3 11.0 12.5 23.5 Earnings (losses) before income taxes $ 553.5 $ 30.2 $ 583.7 $ (27.3 ) $ 556.4 Reinsurance Segment Insurance Segment Three Months Ended March 31, 2018 Property Casualty & other Total RSUI Cap Total Subtotal Alleghany Total Corporate Activities Consolidated ($ in millions) Gross premiums written $ 397.2 $ 718.4 $ 1,115.6 $ 274.6 $ 74.5 $ 349.1 $ 1,464.7 $ - $ 1,464.7 $ (6.0 ) $ 1,458.7 Net premiums written 305.1 691.9 997.0 187.0 69.3 256.3 1,253.3 - 1,253.3 - 1,253.3 Net premiums earned 275.1 685.1 960.2 180.9 66.7 247.6 1,207.8 - 1,207.8 - 1,207.8 Net loss and LAE 96.6 442.8 539.4 96.9 34.3 131.2 670.6 - 670.6 - 670.6 Commissions, brokerage and other underwriting expenses 93.1 228.9 322.0 53.5 30.8 84.3 406.3 - 406.3 - 406.3 Underwriting profit (4) $ 85.4 $ 13.4 $ 98.8 $ 30.5 $ 1.6 $ 32.1 130.9 - 130.9 - 130.9 Net investment income 118.4 1.6 120.0 4.1 124.1 Change in the fair value of equity securities (13.9 ) - (13.9 ) (28.6 ) (42.5 ) Net realized capital gains 43.8 0.7 44.5 - 44.5 Other than temporary impairment losses (0.5 ) - (0.5 ) - (0.5 ) Noninsurance revenue 5.7 242.7 248.4 3.2 251.6 Other operating expenses 17.0 240.0 257.0 7.9 264.9 Corporate administration (0.3 ) - (0.3 ) 8.1 7.8 Amortization of intangible assets (0.1 ) 5.4 5.3 - 5.3 Interest expense 6.7 1.3 8.0 13.5 21.5 Earnings (losses) before income taxes $ 261.1 $ (1.7 ) $ 259.4 $ (50.8 ) $ 208.6 (1) Primarily consists of the following assumed reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit. (2) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments. (3) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods. (4) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance. (c) Identifiable Assets and Equity The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets, and equity attributable to Alleghany, for Alleghany’s reportable segments and for corporate activities as of March 31, 2019: Identifiable Assets Invested Assets and Cash Equity Attributable to Alleghany ($ in millions) Reinsurance segment $ 16,799.8 $ 13,282.8 $ 5,091.1 Insurance segment 6,871.4 5,370.7 2,952.0 Subtotal 23,671.2 18,653.5 8,043.1 Alleghany Capital 1,758.1 129.1 862.2 Total segments 25,429.3 18,782.6 8,905.3 Corporate activities 363.8 310.7 (668.8 ) Consolidated $ 25,793.1 $ 19,093.3 $ 8,236.5 The debt associated with Alleghany Capital’s operating subsidiaries totaled $292.4 million and $284.5 million as of March 31, 2019 and December 31, 2018, respectively, and is generally used to support working capital needs and to help finance acquisitions. As of March 31, 2019, the $292.4 million includes: • $ 131.3 • $ 60.9 • $ 42.9 • $ 33.8 • $ 13.3 • $ 10.2 None of these liabilities are guaranteed by Alleghany or Alleghany Capital. (d) Alleghany Capital Noninsurance Revenue For Alleghany Capital’s industrial and non-industrial operations, noninsurance revenue consists of the sale of manufactured goods and services. The following table presents noninsurance revenue for the Alleghany Capital segment for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Industrial (1) $ 260.1 $ 145.5 Non-industrial (2) 244.9 97.1 Corporate & other - 0.1 Alleghany Capital $ 505.0 $ 242.7 (1) For the three months ended March 31, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. (2) For the three months ended March 31, 2019 and 2018, approximately 66 percent and 71 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. |
Summary of Significant Accoun_2
Summary of Significant Accounting Principles (Policies) | 3 Months Ended |
Mar. 31, 2019 | |
Principles of Financial Statement Presentation | (a) Principles of Financial Statement Presentation This Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) of Alleghany Corporation (“Alleghany”). Alleghany Corporation, a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006. Although Alleghany’s primary sources of revenues and earnings are its reinsurance and insurance operations and investments, Alleghany also generates revenues and expenses from a diverse portfolio of middle market businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital Corporation (“Alleghany Capital”). Alleghany Capital’s businesses include: • Bourn & Koch, Inc. (“Bourn & Koch”), a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois; • R.C. Tway Company, LLC (“Kentucky Trailer”), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets, headquartered in Louisville, Kentucky; • IPS-Integrated Project Services, LLC (“IPS”), a technical service provider focused on the global pharmaceutical and biotechnology industries, headquartered in Blue Bell, Pennsylvania; • Jazwares, LLC (together with its affiliates, “Jazwares”), a global toy, entertainment and musical instrument company, headquartered in Sunrise, Florida; • WWSC Holdings, LLC (“W&W|AFCO Steel”), a structural steel fabricator and erector, headquartered in Oklahoma City, Oklahoma; • CHECO Holdings, LLC (“Concord”), a hotel management and development company, headquartered in Raleigh, North Carolina; and • a 45 percent equity interest in Wilbert Funeral Services, Inc. (“Wilbert”), a provider of products and services for the funeral and cemetery industries and precast concrete markets, headquartered in Overland Park, Kansas. On February 7, 2018, W&W|AFCO Steel acquired Hirschfeld Holdings, LP (“Hirschfeld”). The results of Concord have been included in Alleghany’s consolidated results beginning with its acquisition by Alleghany Capital on October 1, 2018. In addition, Alleghany owns certain other holding-company investments. Alleghany’s wholly-owned subsidiary Stranded Oil Resources Corporation (“SORC”) is an exploration and production company focused on enhanced oil recovery, headquartered in Golden, Colorado. Alleghany’s wholly-owned subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) owns and manages certain properties in the Sacramento, California region. Alleghany’s public equity investments are managed primarily through Alleghany’s wholly-owned subsidiary Roundwood Asset Management LLC. Unless the context otherwise requires, references to “Alleghany” include Alleghany together with its subsidiaries. The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All material inter-company balances and transactions have been eliminated in consolidation. The portion of stockholders’ equity, net earnings and comprehensive income that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets, the Consolidated Statements of Earnings and Comprehensive Income and the Consolidated Statements of Changes in Equity as noncontrolling interests. In addition, Alleghany accretes the redeemable noncontrolling interests up to its future estimated redemption value over the period from the date of issuance to the earliest redemption date. Because all noncontrolling interests have the option to sell their ownership interests to Alleghany in the future (generally through 2024), the portion of stockholders’ equity that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets and the Consolidated Statements of Changes in Equity as redeemable noncontrolling interests for all periods presented. During the first three months of 2019, the noncontrolling interests outstanding were approximately as follows: Bourn & Koch - 11 percent; Kentucky Trailer - 23 percent; IPS - 15 percent; Jazwares - 23 percent; W&W|AFCO Steel - 20 percent; and Concord - 15 percent. In the first quarter of 2019, all noncontrolling interests of Bourn & Koch have exercised their options and sold their ownership interests to Alleghany, effective April 1, 2019. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Alleghany relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from those reported results to the extent that those estimates and assumptions prove to be inaccurate. Changes in estimates are reflected in the Consolidated Statements of Earnings and Comprehensive Income in the period in which the changes are made. (b) Other Significant Accounting Principles Alleghany’s significant accounting principles can be found in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K. |
Recent Accounting Standards | (c) Recent Accounting Standards Recently Adopted In February 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this new guidance in the first quarter of 2018 and has elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on Alleghany. In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. As part of its implementation, Alleghany elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by Alleghany’s lessors for certain of its leases). As of January 1, 2019, Alleghany’s adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) for further information on Alleghany’s leases. In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. Alleghany adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on Alleghany’s financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s equity securities, and Note 7(b) of this Form 10-Q for further information on accumulated other comprehensive income. In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material impact on Alleghany’s results of operations and financial condition. See Note 10 of this Form 10-Q for further information on Alleghany’s noninsurance revenue. Future Application of Accounting Standards In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an available-for-sale (“AFS”) basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020. Although Alleghany expects to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, it does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s reinsurance recoverables. In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s goodwill. In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified disclosures. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Carrying Value and Estimated Fair Value of Consolidated Financial Instruments | The following table presents the carrying value and estimated fair value of Alleghany’s consolidated financial instruments as of March 31, 2019 and December 31, 2018: March 31, 2019 December 31, 2018 Carrying Value Fair Value Carrying Value Fair Value ($ in millions) Assets Investments (excluding equity method investments and loans) (1) $ 17,075.7 $ 17,075.7 $ 16,291.3 $ 16,291.3 Liabilities Senior Notes and other debt (2) $ 1,676.4 $ 1,814.1 $ 1,669.0 $ 1,795.5 (1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments carried at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are carried at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below. (2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8 , “Financial Statements and Supplementary Data” of the 2018 Form 10 -K for additional information on the senior notes and other debt. |
Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs | The following tables present Alleghany’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of March 31, 2019 and December 31, 2018: Level 1 Level 2 Level 3 Total ($ in millions) As of March 31, 2019 Equity securities: Common stock $ 2,515.0 $ 3.5 $ - $ 2,518.5 Preferred stock - - 4.6 4.6 Total equity securities 2,515.0 3.5 4.6 2,523.1 Debt securities: U.S. Government obligations - 1,182.9 - 1,182.9 Municipal bonds - 2,469.7 - 2,469.7 Foreign government obligations - 779.7 - 779.7 U.S. corporate bonds - 2,316.3 433.7 2,750.0 Foreign corporate bonds - 1,270.3 151.4 1,421.7 Mortgage and asset-backed securities: Residential mortgage-backed securities (“RMBS”) (1) - 1,976.6 - 1,976.6 Commercial mortgage-backed securities (“CMBS”) - 588.6 0.2 588.8 Other asset-backed securities (2) - 931.3 1,179.0 2,110.3 Total debt securities - 11,515.4 1,764.3 13,279.7 Short-term investments - 1,272.4 - 1,272.4 Other invested assets (3) - - 0.5 0.5 Total investments (excluding equity method investments and loans) $ 2,515.0 $ 12,791.3 $ 1,769.4 $ 17,075.7 Senior Notes and other debt $ - $ 1,521.7 $ 292.4 $ 1,814.1 Level 1 Level 2 Level 3 Total ($ in millions) As of December 31, 2018 Equity securities: Common stock $ 3,563.9 $ 3.5 $ - $ 3,567.4 Preferred stock - - 5.4 5.4 Total equity securities 3,563.9 3.5 5.4 3,572.8 Debt securities: U.S. Government obligations - 1,022.4 - 1,022.4 Municipal bonds - 2,214.7 - 2,214.7 Foreign government obligations - 947.9 - 947.9 U.S. corporate bonds - 1,959.6 425.7 2,385.3 Foreign corporate bonds - 1,226.4 126.9 1,353.3 Mortgage and asset-backed securities: RMBS (1) - 1,387.9 - 1,387.9 CMBS - 533.3 - 533.3 Other asset-backed securities (2) - 712.3 1,266.9 1,979.2 Total debt securities - 10,004.5 1,819.5 11,824.0 Short-term investments - 893.8 - 893.8 Other invested assets (3) - - 0.7 0.7 Total investments (excluding equity method investments and loans) $ 3,563.9 $ 10,901.8 $ 1,825.6 $ 16,291.3 Senior Notes and other debt $ - $ 1,510.5 $ 285.0 $ 1,795.5 (1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS. (2) Includes $ 1,166.9 1,266.9 , respectively. (3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method. |
Reconciliations of Changes in Level Three Assets Measured at Fair Value | The following tables present reconciliations of the changes in Level 3 assets during the three months ended March 31, 2019 and 2018 measured at fair value: Debt Securities Mortgage and asset-backed Three Months Ended March 31 , 2019 Preferred Stock U.S. Bonds Foreign Bonds CMBS Other Asset- Securities Other Assets (1) Total ($ in millions) Balance as of January 1 , 2019 $ 5.4 $ 425.7 $ 126.9 $ - $ 1,266.9 $ 0.7 $ 1,825.6 Net realized/unrealized gains (losses) included in: Net earnings (2) - (9.9 ) - - - - (9.9 ) Other comprehensive income (loss) (0.8 ) 15.7 2.6 - 15.2 (0.2 ) 32.5 Purchases - 5.8 13.8 0.2 49.6 - 69.4 Sales - - (5.6 ) - (116.9 ) - (122.5 ) Issuances - - - - - - - Settlements - (2.6 ) (1.0 ) - (35.8 ) - (39.4 ) Transfers into Level 3 - - 14.7 - - - 14.7 Transfers out of Level 3 - (1.0 ) - - - - (1.0 ) Balance as of March 31 , 2019 $ 4.6 $ 433.7 $ 151.4 $ 0.2 $ 1,179.0 $ 0.5 $ 1,769.4 Debt Securities Mortgage and asset-backed Three Months Ended March 31 , 2018 Preferred Stock U.S. Bonds Foreign Bonds RMBS CMBS Other Asset- Securities Other Assets (1) Total ($ in millions) Balance as of January 1, 2018 $ 1.9 $ 260.0 $ 75.2 $ 161.8 $ 1.6 $ 1,101.3 $ 7.5 $ 1,609.3 Net realized/unrealized gains (losses) included in: Net earnings (2) - - - - - 0.4 1.2 1.6 Other comprehensive income (loss) 0.2 (5.4 ) (1.3 ) - - (3.3 ) (1.6 ) (11.4 ) Purchases - 36.2 - - - 128.2 - 164.4 Sales - (1.8 ) (0.9 ) - - (145.3 ) (5.5 ) (153.5 ) Issuances - - - - - - - - Settlements - - - - - - - - Transfers into Level 3 3.1 1.2 - - - - 58.7 63.0 Transfers out of Level 3 - - - - (1.6 ) - - (1.6 ) Balance as of March 31, 2018 $ 5.2 $ 290.2 $ 73.0 $ 161.8 $ - $ 1,081.3 $ 60.3 $ 1,671.8 (1) Includes partnership and non-marketable equity investments accounted for at fair value. (2) There were no other than temporary impairment (“ OTTI”) losses recorded in net earnings related to Level 3 assets still held as of March 31 , 2019 and 2018. |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Amortized Cost or Cost and Fair Value of Available For Sale Securities | The following tables present the amortized cost and the fair value of AFS securities as of March 31, 2019 and December 31, 2018: Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in millions) As of March 31, 2019 Debt securities: U.S. Government obligations $ 1,189.6 $ 6.3 $ (13.0 ) $ 1,182.9 Municipal bonds 2,386.4 84.4 (1.1 ) 2,469.7 Foreign government obligations 762.2 18.6 (1.1 ) 779.7 U.S. corporate bonds 2,708.7 53.5 (12.2 ) 2,750.0 Foreign corporate bonds 1,404.6 22.6 (5.5 ) 1,421.7 Mortgage and asset-backed securities: RMBS 1,958.9 25.4 (7.7 ) 1,976.6 CMBS 581.6 9.5 (2.3 ) 588.8 Other asset-backed securities (1) 2,121.5 9.4 (20.6 ) 2,110.3 Total debt securities 13,113.5 229.7 (63.5 ) 13,279.7 Short-term investments 1,272.4 - - 1,272.4 Total investments $ 14,385.9 $ 229.7 $ (63.5 ) $ 14,552.1 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value ($ in millions) As of December 31, 2018 Debt securities: U.S. Government obligations $ 1,042.4 $ 2.4 $ (22.4 ) $ 1,022.4 Municipal bonds 2,177.5 44.4 (7.2 ) 2,214.7 Foreign government obligations 939.0 12.3 (3.4 ) 947.9 U.S. corporate bonds 2,431.4 13.2 (59.3 ) 2,385.3 Foreign corporate bonds 1,363.0 9.1 (18.8 ) 1,353.3 Mortgage and asset-backed securities: RMBS 1,392.4 10.3 (14.8 ) 1,387.9 CMBS 536.9 2.8 (6.4 ) 533.3 Other asset-backed securities (1) 2,013.3 4.4 (38.5 ) 1,979.2 Total debt securities 11,895.9 98.9 (170.8 ) 11,824.0 Short-term investments 893.8 - - 893.8 Total investments $ 12,789.7 $ 98.9 $ (170.8 ) $ 12,717.8 (1) Includes $ 1,166.9 1,266.9 collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. |
Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity | The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of March 31, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Amortized Cost Fair Value ($ in millions) As of March 31, 2019 Short-term investments due in one year or less $ 1,272.4 $ 1,272.4 Mortgage and asset-backed securities (1) 4,662.0 4,675.7 Debt securities with maturity dates: One year or less 492.7 493.2 Over one through five years 3,141.4 3,169.6 Over five through ten years 2,710.4 2,756.9 Over ten years 2,107.0 2,184.3 Total debt securities $ 13,113.5 $ 13,279.7 (1) Mortgage and asset-backed securities by their nature do not generally have single maturity dates. |
Net Investment Income | The following table presents net investment income for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Interest income $ 119.2 $ 102.0 Dividend income 9.8 16.4 Investment expenses (7.5 ) (12.0 ) Pillar Investments (1) 1.2 - Limited partnership interests in certain subsidiaries of Ares (1) - 13.7 Other investment results 0.3 4.0 Total $ 123.0 $ 124.1 (1) See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares. |
Summary of Increases in Fair Value of Equity Securities | The following table presents changes in the fair value of equity securities for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Change in the fair value of equity securities sold during the period $ 62.1 $ 11.6 Change in the fair value of equity securities held at the end of the period 330.3 (54.2 ) Change in the fair value of equity securities $ 392.4 $ (42.6 ) |
Amounts of Gross Realized Capital Gains and Gross Realized Capital Losses of Available For Sale Securities | The following table presents amounts of gross realized capital gains and gross realized capital losses for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Gross realized capital gains $ 12.1 $ 60.3 Gross realized capital losses (7.7 ) (15.8 ) Net realized capital gains $ 4.4 $ 44.5 |
Gross Unrealized Losses and Related Fair Values for AFS Securities Grouped by Duration of Time in Continuous Unrealized Loss Position | The following tables present gross unrealized losses and related fair values for Alleghany’s AFS securities, grouped by duration of time in a continuous unrealized loss position, as of March 31, 2019 and December 31, 2018: Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in millions) As of March 31, 2019 Debt securities: U.S. Government obligations $ 19.3 $ - $ 665.4 $ 13.0 $ 684.7 $ 13.0 Municipal bonds 1.8 0.1 125.2 1.0 127.0 1.1 Foreign government obligations 14.2 - 111.2 1.1 125.4 1.1 U.S. corporate bonds 197.5 4.2 483.9 8.0 681.4 12.2 Foreign corporate bonds 75.6 0.8 314.9 4.7 390.5 5.5 Mortgage and asset-backed securities: RMBS 98.1 0.5 399.0 7.2 497.1 7.7 CMBS 88.3 0.1 91.4 2.2 179.7 2.3 Other asset-backed securities 1,084.5 16.9 229.9 3.7 1,314.4 20.6 Total temporarily impaired securities $ 1,579.3 $ 22.6 $ 2,420.9 $ 40.9 $ 4,000.2 $ 63.5 Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses ($ in millions) As of December 31, 2018 Debt securities: U.S. Government obligations $ 78.5 $ 0.9 $ 690.5 $ 21.5 $ 769.0 $ 22.4 Municipal bonds 312.4 2.5 202.5 4.7 514.9 7.2 Foreign government obligations 60.7 0.1 186.7 3.3 247.4 3.4 U.S. corporate bonds 1,187.9 39.4 379.7 19.9 1,567.6 59.3 Foreign corporate bonds 501.5 9.7 349.1 9.1 850.6 18.8 Mortgage and asset-backed securities: RMBS 397.7 6.4 225.9 8.4 623.6 14.8 CMBS 199.1 1.3 109.5 5.1 308.6 6.4 Other asset-backed securities 1,442.8 36.7 121.6 1.8 1,564.4 38.5 Total temporarily impaired securities $ 4,180.6 $ 97.0 $ 2,265.5 $ 73.8 $ 6,446.1 $ 170.8 |
Liability for Loss and LAE (Tab
Liability for Loss and LAE (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Activity in Liability for Loss and Loss Adjustment Expense | The following table presents the activity in the liability for loss and LAE in the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Reserves as of January 1 $ 12,250.3 $ 11,871.3 Less: reinsurance recoverables (1) 1,857.4 1,650.1 Net reserves as of January 1 10,392.9 10,221.2 Other adjustments (0.2 ) - Incurred loss and LAE, net of reinsurance, related to: Current year 829.9 756.3 Prior years (37.4 ) (85.7 ) Total incurred loss and LAE, net of reinsurance 792.5 670.6 Paid loss and LAE, net of reinsurance, related to: (2) Current year 75.3 100.5 Prior years 914.8 690.8 Total paid loss and LAE, net of reinsurance 990.1 791.3 Foreign currency exchange rate effect 17.2 49.9 Net reserves as of March 31 10,212.3 10,150.4 Reinsurance recoverables as of March 31 (1) 1,642.8 1,563.9 Reserves as of March 31 $ 11,855.1 $ 11,714.3 (1) Reinsurance recoverables in this table include only ceded loss and LAE reserves. (2) Includes paid losses, net of reinsurance, related to commutations. |
(Favorable) Unfavorable Prior Accident Year Loss Reserve Development | The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three months ended March 31, 2019 and 2018: Three Months Ended 2019 2018 ($ in millions) Reinsurance Segment Property: Catastrophe events $ 8.4 (1) $ (30.4 ) (2) Non-catastrophe (19.1 ) (3) (11.0 ) (4) Total (10.7 ) (41.4 ) Casualty & other (25.7 ) (5) (30.2 ) (6) Total Reinsurance Segment (36.4 ) (71.6 ) Insurance Segment RSUI: Casualty (5.6 ) (7) (11.0 ) (8) Property and other 1.9 (9) (0.1 ) Total (3.7 ) (11.1 ) CapSpecialty 2.7 (10) (3.0 (11) Total incurred related to prior years $ (37.4 ) $ (85.7 ) (1) Primarily reflects unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year, partially offset by favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year. (2) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Maria and Harvey in the 2017 accident year. (3) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years. (4) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years. (5) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2012 through 2017 accident years and in the professional liability lines of business in the 2007 and prior accident years. (6) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2016 and 2017 accident years and in the shorter-tailed and longer-tailed lines of business in the 2005 through 2013 accident years. (7) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2017 accident year. (8) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in the 2009 accident year. (9) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricanes Harvey in the 2017 accident year and Florence in the 2018 accident year. The unfavorable prior accident year loss reserve development reflects the impact of a recent adverse court ruling. (10) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years. (11) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years. |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Schedule of Common Stock Repurchases | The following table presents the shares of Common Stock that Alleghany repurchased in the three months ended March 31, 2019 and 2018: Three Months Ended 2019 2018 Shares repurchased 129,567 35,072 Cost of shares repurchased (in millions) $ 80.5 $ 21.3 Average price per share repurchased $ 621.19 $ 606.40 |
Reconciliation of Accumulated Other Comprehensive Income | The following tables present a reconciliation of the changes during the three months ended March 31, 2019 and 2018 in accumulated other comprehensive income (loss) attributable to Alleghany stockholders: Unrealized Unrealized Retirement Total ($ in millions) Balance as of January 1, 2019 $ (61.6 ) $ (124.7 ) $ (15.7 ) $ (202.0 ) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) before reclassifications 183.4 (0.9 ) 0.9 183.4 Reclassifications from accumulated other comprehensive income 4.4 - - 4.4 Total 187.8 (0.9 ) 0.9 187.8 Balance as of March 31, 2019 $ 126.2 $ (125.6 ) $ (14.8 ) $ (14.2 ) Unrealized Unrealized Retirement Total ($ in millions) Balance as of January 1, 2018 $ 718.2 $ (84.6 ) $ (15.5 ) $ 618.1 Cumulative effect of adoption of new accounting pronouncements (1) Reclassification of net unrealized gains on equity securities, net of tax (735.6 ) - - (735.6 ) Reclassification of stranded taxes 156.6 (18.2 ) (3.3 ) 135.1 Total (579.0 ) (18.2 ) (3.3 ) (600.5 ) Other comprehensive income (loss), net of tax: Other comprehensive income (loss) before reclassifications (146.4 ) 5.1 (1.3 ) (142.6 ) Reclassifications from accumulated other comprehensive income 1.4 - - 1.4 Total (145.0 ) 5.1 (1.3 ) (141.2 ) Balance as of March 31, 2018 $ (5.8 ) $ (97.7 ) $ (20.1 ) $ (123.6 ) (1) See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act. |
Reclassifications of Accumulated Other Comprehensive Income | The following table presents reclassifications out of accumulated other comprehensive income attributable to Alleghany stockholders during the three months ended March 31, 2019 and 2018: Accumulated Other Three Months Ended Comprehensive Income Component Line in Consolidated Statement of Earnings 2019 2018 ($ in millions) Unrealized appreciation of investments: Net realized capital gains (1) $ (4.4) $ 1.2 Other than temporary impairment losses 10.0 0.5 Income taxes (1.2) (0.3) Total reclassifications: Net earnings $ 4.4 $ 1.4 (1) For the three months ended March 31, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information. |
Earnings Per Share of Common _2
Earnings Per Share of Common Stock (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Reconciliation of Earnings and Share Data used in Basic and Diluted (Losses) Earnings per Share Computations | The following table presents a reconciliation of the earnings and share data used in the basic and diluted earnings per share computations for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions, except share amounts) Net earnings available to Alleghany stockholders $ 440.2 $ 171.6 Effect of dilutive securities - (1.3 ) Income available to common stockholders for diluted earnings per share $ 440.2 $ 170.3 Weighted average common shares outstanding applicable to basic earnings per share 14,481,255 15,389,283 Effect of dilutive securities 3,981 29,381 Adjusted weighted average common shares outstanding applicable to diluted earnings per share 14,485,236 15,418,664 Contingently issuable shares (1) 39,325 23,777 (1) Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation. |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Operating Lease Liabilities and Right-of-Use Assets | The following table presents Alleghany’s consolidated lease liabilities and right-of-use lease assets related to operating leases as of March 31 , 2019 : As of March 31, 2019 Maturity of lease payments, by year ($ in millions) 1 year or less $ 37.9 More than 1 year to 2 years 34.1 More than 2 years to 3 years 30.7 More than 3 years to 4 years 25.6 More than 4 years to 5 years 24.9 More than 5 years 160.5 Total lease payments (1) $ 313.7 Less: interest (2) 69.8 Lease liabilities (3) $ 243.9 Right-of-use lease assets (4) $ 216.3 Prepaid lease assets, net of lease allowances and incentives 27.6 $ 243.9 (1) As of March 31, 2019, the weighted average lease term was approximately 12 (2) As of March 31, 2019, the weighted average discount rate was approximately 5 (3) Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet. (4) Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet. |
Segments of Business (Tables)
Segments of Business (Tables) | 3 Months Ended |
Mar. 31, 2019 | |
Results for Reportable Segments and Corporate Activities | The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three months ended March 31, 2019 and 2018: Reinsurance Segment Insurance Segment Three Months Ended March 31, 2019 Property Casualty & other Total RSUI Cap Total Subtotal Alleghany Total Corporate Activities Consolidated ($ in millions) Gross premiums written $ 415.1 $ 816.5 $ 1,231.6 $ 299.0 $ 82.8 $ 381.8 $ 1,613.4 $ - $ 1,613.4 $ (6.8 ) $ 1,606.6 Net premiums written 316.2 791.4 1,107.6 201.4 76.7 278.1 1,385.7 - 1,385.7 - 1,385.7 Net premiums earned 308.9 720.3 1,029.2 192.4 75.7 268.1 1,297.3 - 1,297.3 - 1,297.3 Net loss and LAE 162.6 490.6 653.2 94.3 45.0 139.3 792.5 - 792.5 - 792.5 Commissions, brokerage and other underwriting expenses 103.7 232.3 336.0 53.5 30.6 84.1 420.1 - 420.1 - 420.1 Underwriting (loss) profit (4) $ 42.6 $ (2.6 ) $ 40.0 $ 44.6 $ 0.1 $ 44.7 84.7 - 84.7 - 84.7 Net investment income 117.9 1.3 119.2 3.8 123.0 Change in the fair value of equity securities 389.1 - 389.1 3.3 392.4 Net realized capital gains 4.1 0.3 4.4 - 4.4 Other than temporary impairment losses (10.0 ) - (10.0 ) - (10.0 ) Noninsurance revenue 5.4 505.0 510.4 3.7 514.1 Other operating expenses 29.7 465.4 495.1 7.3 502.4 Corporate administration 1.1 - 1.1 18.3 19.4 Amortization of intangible assets 0.2 6.7 6.9 - 6.9 Interest expense 6.7 4.3 11.0 12.5 23.5 Earnings (losses) before income taxes $ 553.5 $ 30.2 $ 583.7 $ (27.3 ) $ 556.4 Reinsurance Segment Insurance Segment Three Months Ended March 31, 2018 Property Casualty & other Total RSUI Cap Total Subtotal Alleghany Total Corporate Activities Consolidated ($ in millions) Gross premiums written $ 397.2 $ 718.4 $ 1,115.6 $ 274.6 $ 74.5 $ 349.1 $ 1,464.7 $ - $ 1,464.7 $ (6.0 ) $ 1,458.7 Net premiums written 305.1 691.9 997.0 187.0 69.3 256.3 1,253.3 - 1,253.3 - 1,253.3 Net premiums earned 275.1 685.1 960.2 180.9 66.7 247.6 1,207.8 - 1,207.8 - 1,207.8 Net loss and LAE 96.6 442.8 539.4 96.9 34.3 131.2 670.6 - 670.6 - 670.6 Commissions, brokerage and other underwriting expenses 93.1 228.9 322.0 53.5 30.8 84.3 406.3 - 406.3 - 406.3 Underwriting profit (4) $ 85.4 $ 13.4 $ 98.8 $ 30.5 $ 1.6 $ 32.1 130.9 - 130.9 - 130.9 Net investment income 118.4 1.6 120.0 4.1 124.1 Change in the fair value of equity securities (13.9 ) - (13.9 ) (28.6 ) (42.5 ) Net realized capital gains 43.8 0.7 44.5 - 44.5 Other than temporary impairment losses (0.5 ) - (0.5 ) - (0.5 ) Noninsurance revenue 5.7 242.7 248.4 3.2 251.6 Other operating expenses 17.0 240.0 257.0 7.9 264.9 Corporate administration (0.3 ) - (0.3 ) 8.1 7.8 Amortization of intangible assets (0.1 ) 5.4 5.3 - 5.3 Interest expense 6.7 1.3 8.0 13.5 21.5 Earnings (losses) before income taxes $ 261.1 $ (1.7 ) $ 259.4 $ (50.8 ) $ 208.6 (1) Primarily consists of the following assumed reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit. (2) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments. (3) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods. (4) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance. |
Summary of Identifiable Assets and Equity | The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets, and equity attributable to Alleghany, for Alleghany’s reportable segments and for corporate activities as of March 31, 2019: Identifiable Assets Invested Assets and Cash Equity Attributable to Alleghany ($ in millions) Reinsurance segment $ 16,799.8 $ 13,282.8 $ 5,091.1 Insurance segment 6,871.4 5,370.7 2,952.0 Subtotal 23,671.2 18,653.5 8,043.1 Alleghany Capital 1,758.1 129.1 862.2 Total segments 25,429.3 18,782.6 8,905.3 Corporate activities 363.8 310.7 (668.8 ) Consolidated $ 25,793.1 $ 19,093.3 $ 8,236.5 |
Summary of Alleghany Capital Noninsurance Revenue | The following table presents noninsurance revenue for the Alleghany Capital segment for the three months ended March 31, 2019 and 2018: Three Months Ended March 31, 2019 2018 ($ in millions) Industrial (1) $ 260.1 $ 145.5 Non-industrial (2) 244.9 97.1 Corporate & other - 0.1 Alleghany Capital $ 505.0 $ 242.7 (1) For the three months ended March 31, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. (2) For the three months ended March 31, 2019 and 2018, approximately 66 percent and 71 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. |
Summary of Significant Accoun_3
Summary of Significant Accounting Principles - Additional Information (Detail) - USD ($) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2019 | Jan. 01, 2019 | ||
Significant Accounting Policies [Line Items] | |||||
Statutory federal income tax rate | 21.00% | 35.00% | |||
Right-of-use asset | [1] | $ 216,300 | |||
Lease liability | [2] | $ 243,900 | |||
Retained Earnings | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | $ 600,508 | ||||
Accumulated Other Comprehensive Income | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | [3] | (600,508) | |||
Accounting Standards Update 2016-01 | Retained Earnings | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | 736,000 | ||||
Accounting Standards Update 2016-01 | Accumulated Other Comprehensive Income | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | [3] | (735,600) | |||
Accounting Standards Update 2018-02 | Retained Earnings | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | (135,000) | ||||
Accounting Standards Update 2018-02 | Accumulated Other Comprehensive Income | |||||
Significant Accounting Policies [Line Items] | |||||
Cumulative effect of adoption of new accounting pronouncements | [3] | $ 135,100 | |||
Accounting Standards Update 2016-02 | |||||
Significant Accounting Policies [Line Items] | |||||
Right-of-use asset | $ 200,000 | ||||
Lease liability | $ 200,000 | ||||
Kentucky Trailer | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 23.00% | ||||
Integrated Project Services LLC | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 15.00% | ||||
Bourn & Koch, Inc. | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 11.00% | ||||
Jazwares, LLC | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 23.00% | ||||
WWSC Holdings, LLC | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 20.00% | ||||
Concord | |||||
Significant Accounting Policies [Line Items] | |||||
Ownership of interest held by noncontrolling partners | 15.00% | ||||
[1] | Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet. | ||||
[2] | Represents the present value of lease liabilities, and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet. | ||||
[3] | See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act. |
Carrying Values and Estimated F
Carrying Values and Estimated Fair Values of Consolidated Financial Instruments (Detail) - USD ($) $ in Millions | Mar. 31, 2019 | Dec. 31, 2018 | |
Assets | |||
Investments (excluding equity method investments and loans) | [1] | $ 17,075.7 | $ 16,291.3 |
Liabilities | |||
Senior Notes and other debt | [2] | 1,814.1 | 1,795.5 |
Carrying Value | |||
Assets | |||
Investments (excluding equity method investments and loans) | [1] | 17,075.7 | 16,291.3 |
Liabilities | |||
Senior Notes and other debt | [2] | $ 1,676.4 | $ 1,669 |
[1] | This table includes debt and equity securities, as well as partnership and non-marketable equity investments carried at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are carried at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below. | ||
[2] | See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt. |
Financial Instruments Measured
Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | $ 2,523,079 | $ 3,572,790 | |
Estimated fair value of available for sale debt securities | 13,279,741 | 11,823,968 | |
Estimated fair value of investments (excluding equity method investments and loans) | [1] | 17,075,700 | 16,291,300 |
Senior Notes and other debt | [2] | 1,814,100 | 1,795,500 |
Common Stock | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 2,518,500 | 3,567,400 | |
Preferred Stock | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 4,600 | 5,400 | |
U.S. Government obligations | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 1,182,900 | 1,022,400 | |
Municipal bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 2,469,700 | 2,214,700 | |
Foreign government obligations | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 779,700 | 947,900 | |
U.S. corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 2,750,000 | 2,385,300 | |
Foreign corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 1,421,700 | 1,353,300 | |
RMBS | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [3] | 1,976,600 | 1,387,900 |
CMBS | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 588,800 | 533,300 | |
Other asset-backed securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [4] | 2,110,300 | 1,979,200 |
Short-term Investments | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of investments (excluding equity method investments and loans) | 1,272,400 | 893,800 | |
Other invested assets | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of investments (excluding equity method investments and loans) | [5] | 500 | 700 |
Level 1 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 2,515,000 | 3,563,900 | |
Estimated fair value of investments (excluding equity method investments and loans) | 2,515,000 | 3,563,900 | |
Level 1 | Common Stock | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 2,515,000 | 3,563,900 | |
Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 3,500 | 3,500 | |
Estimated fair value of available for sale debt securities | 11,515,400 | 10,004,500 | |
Estimated fair value of investments (excluding equity method investments and loans) | 12,791,300 | 10,901,800 | |
Senior Notes and other debt | 1,521,700 | 1,510,500 | |
Level 2 | Common Stock | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 3,500 | 3,500 | |
Level 2 | U.S. Government obligations | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 1,182,900 | 1,022,400 | |
Level 2 | Municipal bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 2,469,700 | 2,214,700 | |
Level 2 | Foreign government obligations | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 779,700 | 947,900 | |
Level 2 | U.S. corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 2,316,300 | 1,959,600 | |
Level 2 | Foreign corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 1,270,300 | 1,226,400 | |
Level 2 | RMBS | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [3] | 1,976,600 | 1,387,900 |
Level 2 | CMBS | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 588,600 | 533,300 | |
Level 2 | Other asset-backed securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [4] | 931,300 | 712,300 |
Level 2 | Short-term Investments | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of investments (excluding equity method investments and loans) | 1,272,400 | 893,800 | |
Level 3 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 4,600 | 5,400 | |
Estimated fair value of available for sale debt securities | 1,764,300 | 1,819,500 | |
Estimated fair value of investments (excluding equity method investments and loans) | 1,769,400 | 1,825,600 | |
Senior Notes and other debt | 292,400 | 285,000 | |
Level 3 | Preferred Stock | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of equities | 4,600 | 5,400 | |
Level 3 | U.S. corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 433,700 | 425,700 | |
Level 3 | Foreign corporate bonds | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 151,400 | 126,900 | |
Level 3 | CMBS | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | 200 | ||
Level 3 | Other asset-backed securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [4] | 1,179,000 | 1,266,900 |
Level 3 | Other invested assets | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of investments (excluding equity method investments and loans) | [5] | $ 500 | $ 700 |
[1] | This table includes debt and equity securities, as well as partnership and non-marketable equity investments carried at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are carried at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below. | ||
[2] | See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt. | ||
[3] | Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS. | ||
[4] | Includes $1,166.9 million and $1,266.9 million of collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. | ||
[5] | Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method. |
Financial Instruments Measure_2
Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs (Parenthetical) (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | $ 13,279,741 | $ 11,823,968 | |
Other asset-backed securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | [1] | 2,110,300 | 1,979,200 |
Collateralized loan obligations | Other asset-backed securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Estimated fair value of available for sale debt securities | $ 1,166,900 | $ 1,266,900 | |
[1] | Includes $1,166.9 million and $1,266.9 million of collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions | Sep. 24, 2018 | Mar. 15, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers out of Level 3 | $ 1 | $ 1.6 | |||
Gross transfers into Level 3 | 14.7 | 63 | |||
All Investment Issuers Other Than Ares | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 3 | 4.3 | ||||
Preferred Stock | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 3 | 3.1 | ||||
Common Stock | Ares | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 1 | $ 56.9 | $ 208.2 | |||
Common Stock | Ares | Insurance Segment | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 1 | 208.2 | ||||
U.S. corporate bonds | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers out of Level 3 | 1 | ||||
Gross transfers into Level 3 | 1.2 | ||||
Foreign corporate bonds | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 3 | $ 14.7 | ||||
Other invested assets | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers into Level 3 | [1] | 58.7 | |||
Other invested assets | Limited partnership interests in certain subsidiaries of Ares | Insurance Segment | |||||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||
Gross transfers out of Level 3 | $ 56.9 | ||||
Gross transfers into Level 3 | $ 58.7 | $ 58.7 | |||
[1] | Includes partnership and non-marketable equity investments accounted for at fair value. |
Reconciliations of Changes in L
Reconciliations of Changes in Level Three Assets Measured at Fair Value (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | $ 1,825.6 | $ 1,609.3 | |
Net realized/unrealized gains (losses) included in: | |||
Net earnings | [1] | (9.9) | 1.6 |
Other comprehensive income | 32.5 | (11.4) | |
Purchases | 69.4 | 164.4 | |
Sales | (122.5) | (153.5) | |
Settlements | (39.4) | ||
Transfers into Level 3 | 14.7 | 63 | |
Transfers out of Level 3 | (1) | (1.6) | |
Ending balance | 1,769.4 | 1,671.8 | |
Preferred Stock | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 5.4 | 1.9 | |
Net realized/unrealized gains (losses) included in: | |||
Other comprehensive income | (0.8) | 0.2 | |
Transfers into Level 3 | 3.1 | ||
Ending balance | 4.6 | 5.2 | |
U.S. corporate bonds | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 425.7 | 260 | |
Net realized/unrealized gains (losses) included in: | |||
Net earnings | [1] | (9.9) | |
Other comprehensive income | 15.7 | (5.4) | |
Purchases | 5.8 | 36.2 | |
Sales | (1.8) | ||
Settlements | (2.6) | ||
Transfers into Level 3 | 1.2 | ||
Transfers out of Level 3 | (1) | ||
Ending balance | 433.7 | 290.2 | |
Foreign corporate bonds | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 126.9 | 75.2 | |
Net realized/unrealized gains (losses) included in: | |||
Other comprehensive income | 2.6 | (1.3) | |
Purchases | 13.8 | ||
Sales | (5.6) | (0.9) | |
Settlements | (1) | ||
Transfers into Level 3 | 14.7 | ||
Ending balance | 151.4 | 73 | |
RMBS | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 161.8 | ||
Net realized/unrealized gains (losses) included in: | |||
Ending balance | 161.8 | ||
CMBS | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 1.6 | ||
Net realized/unrealized gains (losses) included in: | |||
Purchases | 0.2 | ||
Transfers out of Level 3 | (1.6) | ||
Ending balance | 0.2 | ||
Other Asset Backed Securities | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | 1,266.9 | 1,101.3 | |
Net realized/unrealized gains (losses) included in: | |||
Net earnings | [1] | 0.4 | |
Other comprehensive income | 15.2 | (3.3) | |
Purchases | 49.6 | 128.2 | |
Sales | (116.9) | (145.3) | |
Settlements | (35.8) | ||
Ending balance | 1,179 | 1,081.3 | |
Other invested assets | |||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||
Beginning balance | [2] | 0.7 | 7.5 |
Net realized/unrealized gains (losses) included in: | |||
Net earnings | [1],[2] | 1.2 | |
Other comprehensive income | [2] | (0.2) | (1.6) |
Sales | [2] | (5.5) | |
Transfers into Level 3 | [2] | 58.7 | |
Ending balance | [2] | $ 0.5 | $ 60.3 |
[1] | There were no other than temporary impairment (“OTTI”) losses recorded in net earnings related to Level 3 assets still held as of March 31, 2019 and 2018. | ||
[2] | Includes partnership and non-marketable equity investments accounted for at fair value. |
Amortized Cost or Cost and Fair
Amortized Cost or Cost and Fair Value of Available For Sale Securities (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost or Cost | $ 14,385,900 | $ 12,789,700 | |
Gross Unrealized Gains | 229,700 | 98,900 | |
Gross Unrealized Losses | (63,500) | (170,800) | |
Fair Value | 14,552,100 | 12,717,800 | |
Debt securities, amortized cost | 13,113,522 | 11,895,850 | |
Debt securities, gross unrealized gains | 229,700 | 98,900 | |
Debt securities, gross unrealized losses | (63,500) | (170,800) | |
Debt securities, fair value | 13,279,741 | 11,823,968 | |
U.S. Government obligations | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 1,189,600 | 1,042,400 | |
Debt securities, gross unrealized gains | 6,300 | 2,400 | |
Debt securities, gross unrealized losses | (13,000) | (22,400) | |
Debt securities, fair value | 1,182,900 | 1,022,400 | |
Municipal bonds | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 2,386,400 | 2,177,500 | |
Debt securities, gross unrealized gains | 84,400 | 44,400 | |
Debt securities, gross unrealized losses | (1,100) | (7,200) | |
Debt securities, fair value | 2,469,700 | 2,214,700 | |
Foreign government obligations | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 762,200 | 939,000 | |
Debt securities, gross unrealized gains | 18,600 | 12,300 | |
Debt securities, gross unrealized losses | (1,100) | (3,400) | |
Debt securities, fair value | 779,700 | 947,900 | |
U.S. corporate bonds | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 2,708,700 | 2,431,400 | |
Debt securities, gross unrealized gains | 53,500 | 13,200 | |
Debt securities, gross unrealized losses | (12,200) | (59,300) | |
Debt securities, fair value | 2,750,000 | 2,385,300 | |
Foreign corporate bonds | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 1,404,600 | 1,363,000 | |
Debt securities, gross unrealized gains | 22,600 | 9,100 | |
Debt securities, gross unrealized losses | (5,500) | (18,800) | |
Debt securities, fair value | 1,421,700 | 1,353,300 | |
RMBS | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 1,958,900 | 1,392,400 | |
Debt securities, gross unrealized gains | 25,400 | 10,300 | |
Debt securities, gross unrealized losses | (7,700) | (14,800) | |
Debt securities, fair value | [1] | 1,976,600 | 1,387,900 |
CMBS | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | 581,600 | 536,900 | |
Debt securities, gross unrealized gains | 9,500 | 2,800 | |
Debt securities, gross unrealized losses | (2,300) | (6,400) | |
Debt securities, fair value | 588,800 | 533,300 | |
Other Asset Backed Securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Debt securities, amortized cost | [2] | 2,121,500 | 2,013,300 |
Debt securities, gross unrealized gains | [2] | 9,400 | 4,400 |
Debt securities, gross unrealized losses | [2] | (20,600) | (38,500) |
Debt securities, fair value | [2] | 2,110,300 | 1,979,200 |
Short-term Investments | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Amortized Cost or Cost | 1,272,400 | 893,800 | |
Gross Unrealized Gains | 0 | 0 | |
Gross Unrealized Losses | 0 | 0 | |
Fair Value | $ 1,272,400 | $ 893,800 | |
[1] | Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS. | ||
[2] | Includes $1,166.9 million and $1,266.9 million of collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. |
Amortized Cost or Cost and Fa_2
Amortized Cost or Cost and Fair Value of Available For Sale Securities (Parenthetical) (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Schedule of Available-for-sale Securities [Line Items] | |||
Estimated fair value of available for sale debt securities | $ 13,279,741 | $ 11,823,968 | |
Other Asset Backed Securities | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Estimated fair value of available for sale debt securities | [1] | 2,110,300 | 1,979,200 |
Other Asset Backed Securities | Collateralized loan obligations | |||
Schedule of Available-for-sale Securities [Line Items] | |||
Estimated fair value of available for sale debt securities | $ 1,166,900 | $ 1,266,900 | |
[1] | Includes $1,166.9 million and $1,266.9 million of collateralized loan obligations as of March 31, 2019 and December 31, 2018, respectively. |
Net Investment Income (Detail)
Net Investment Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Net Investment Income [Line Items] | |||
Interest income | $ 119,200 | $ 102,000 | |
Dividend income | 9,800 | 16,400 | |
Investment expenses | (7,500) | (12,000) | |
Other investment results | 300 | 4,000 | |
Net investment income | 123,049 | 124,126 | |
Limited partnership interests in certain subsidiaries of Ares | |||
Net Investment Income [Line Items] | |||
Equity results | [1] | 0 | 13,700 |
Pillar Capital Holdings Limited And Managed Funds | |||
Net Investment Income [Line Items] | |||
Equity results | [1] | $ 1,200 | $ 0 |
[1] | See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares. |
Investments - Summary of Increa
Investments - Summary of Increases in Fair Value of Equity Securities (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Change in the fair value of equity securities sold during the period | $ 62,100 | $ 11,600 |
Change in the fair value of equity securities held at the end of the period | 330,300 | (54,200) |
Change in the fair value of equity securities | $ 392,353 | $ (42,649) |
Investments - Additional Inform
Investments - Additional Information (Detail) $ in Thousands | Sep. 24, 2018USD ($) | Mar. 15, 2018USD ($) | Jul. 31, 2013USD ($) | Dec. 31, 2012USD ($) | Mar. 31, 2019USD ($)Investment | Mar. 31, 2018USD ($) | Dec. 31, 2018USD ($) |
Investments [Line Items] | |||||||
Securities impairment test description | Debt securities in an unrealized loss position are evaluated for OTTI if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost for an extended period of time (nine consecutive months or more); (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis.If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records an OTTI loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the OTTI loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income.In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities. | ||||||
Other than temporary impairment losses | $ 10,020 | $ 511 | |||||
Percentage of debt securities owned with credit rating below investment grade or not rated | 3.60% | 4.40% | |||||
Commercial mortgage loans | $ 676,503 | $ 676,532 | |||||
Allowance for loan losses on commercial mortgage loans | 0 | ||||||
Other invested assets | 563,468 | 555,972 | |||||
Proceeds From Sale Of Debt And Equity Securities | 2,500,000 | 1,200,000 | |||||
Net realized capital gains | 4,442 | 44,505 | |||||
Net Investment Income | 123,049 | 124,126 | |||||
Available-for-sale Securities | 14,552,100 | 12,717,800 | |||||
Equity securities | 2,523,079 | 3,572,790 | |||||
Pillar Capital Holdings Limited And Managed Funds | |||||||
Investments [Line Items] | |||||||
Other invested assets | $ 194,700 | ||||||
Pillar Capital Holdings Limited And Managed Funds | Reinsurance Segment | |||||||
Investments [Line Items] | |||||||
Investment in other invested asset | $ 175,000 | ||||||
Pillar Capital Holdings Limited And Managed Funds | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Investment in other invested asset | $ 25,000 | ||||||
Limited partnership interests in certain subsidiaries of Ares Management LLC | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Net Investment Income | $ 12,900 | ||||||
Ares | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Investment in other invested asset | $ 250,000 | ||||||
Percentage of equity stake | 6.25% | ||||||
Net realized capital gains | 45,700 | $ 45,700 | |||||
Debt Securities | |||||||
Investments [Line Items] | |||||||
Number of securities in an unrealized loss position for 12 months or more | Investment | 894 | ||||||
Number of securities in an unrealized loss position | Investment | 1,352 | ||||||
Other invested assets | Limited partnership interests in certain subsidiaries of Ares Management LLC | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Available-for-sale Securities | 58,700 | ||||||
Common Stock | |||||||
Investments [Line Items] | |||||||
Equity securities | $ 2,518,500 | $ 3,567,400 | |||||
Common Stock | Ares | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Reclassification of converted interests from other invested assets to equity securities | $ 56,900 | ||||||
Equity securities | $ 208,200 | ||||||
Maximum [Member] | |||||||
Investments [Line Items] | |||||||
Term of commercial mortgage loans | 10 years | ||||||
Percentage of principal amounts of commercial mortgage loans to the property's appraised value | 66.70% | ||||||
Maximum [Member] | Ares | Insurance Segment | |||||||
Investments [Line Items] | |||||||
Investment commitment in investment fund | $ 1,000,000 | ||||||
Minimum [Member] | |||||||
Investments [Line Items] | |||||||
Term of commercial mortgage loans | 2 years | ||||||
Minimum [Member] | Debt Securities | |||||||
Investments [Line Items] | |||||||
Percentage of unrealized loss to cost where a security would be evaluated for other than temporarily impairment | 20.00% |
Amortized Cost and Estimated Fa
Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | |
Schedule of Available-for-sale Securities [Line Items] | |||
Short-term investments due in one year or less, amortized cost | $ 1,272,400 | ||
Mortgage and asset-backed securities, amortized cost | [1] | 4,662,000 | |
Debt securities with maturity dates, amortized cost: | |||
One year or less | 492,700 | ||
Over one through five years | 3,141,400 | ||
Over five through ten years | 2,710,400 | ||
Over ten years | 2,107,000 | ||
Debt securities, amortized cost | 13,113,522 | $ 11,895,850 | |
Short-term investments due in one year or less, fair value | 1,272,383 | 893,776 | |
Mortgage and asset-backed securities, fair value | [1] | 4,675,700 | |
Debt securities with maturity dates, fair value: | |||
One year or less | 493,200 | ||
Over one through five years | 3,169,600 | ||
Over five through ten years | 2,756,900 | ||
Over ten years | 2,184,300 | ||
Total debt securities, fair value | $ 13,279,741 | $ 11,823,968 | |
[1] | Mortgage and asset-backed securities by their nature do not generally have single maturity dates. |
Amounts of Gross Realized Capit
Amounts of Gross Realized Capital Gains and Gross Realized Capital Losses (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Schedule of Gross Gains (Losses) [Line Items] | ||
Gross realized capital gains | $ 12,100 | $ 60,300 |
Gross realized capital losses | (7,700) | (15,800) |
Net realized capital gains | $ 4,442 | $ 44,505 |
Gross Unrealized Losses and Rel
Gross Unrealized Losses and Related Fair Values for Available-for-Sale Securities Grouped by Duration of Time in Continuous Unrealized Loss Position (Detail) - USD ($) $ in Millions | Mar. 31, 2019 | Dec. 31, 2018 |
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | $ 1,579.3 | $ 4,180.6 |
Securities, less than 12 months, gross unrealized losses | 22.6 | 97 |
Securities, 12 months or more, fair value | 2,420.9 | 2,265.5 |
Securities, 12 months or more, gross unrealized losses | 40.9 | 73.8 |
Total, fair value | 4,000.2 | 6,446.1 |
Total, gross unrealized losses | 63.5 | 170.8 |
U.S. Government obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 19.3 | 78.5 |
Securities, less than 12 months, gross unrealized losses | 0.9 | |
Securities, 12 months or more, fair value | 665.4 | 690.5 |
Securities, 12 months or more, gross unrealized losses | 13 | 21.5 |
Total, fair value | 684.7 | 769 |
Total, gross unrealized losses | 13 | 22.4 |
Municipal bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 1.8 | 312.4 |
Securities, less than 12 months, gross unrealized losses | 0.1 | 2.5 |
Securities, 12 months or more, fair value | 125.2 | 202.5 |
Securities, 12 months or more, gross unrealized losses | 1 | 4.7 |
Total, fair value | 127 | 514.9 |
Total, gross unrealized losses | 1.1 | 7.2 |
Foreign government obligations | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 14.2 | 60.7 |
Securities, less than 12 months, gross unrealized losses | 0.1 | |
Securities, 12 months or more, fair value | 111.2 | 186.7 |
Securities, 12 months or more, gross unrealized losses | 1.1 | 3.3 |
Total, fair value | 125.4 | 247.4 |
Total, gross unrealized losses | 1.1 | 3.4 |
U.S. corporate bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 197.5 | 1,187.9 |
Securities, less than 12 months, gross unrealized losses | 4.2 | 39.4 |
Securities, 12 months or more, fair value | 483.9 | 379.7 |
Securities, 12 months or more, gross unrealized losses | 8 | 19.9 |
Total, fair value | 681.4 | 1,567.6 |
Total, gross unrealized losses | 12.2 | 59.3 |
Foreign corporate bonds | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 75.6 | 501.5 |
Securities, less than 12 months, gross unrealized losses | 0.8 | 9.7 |
Securities, 12 months or more, fair value | 314.9 | 349.1 |
Securities, 12 months or more, gross unrealized losses | 4.7 | 9.1 |
Total, fair value | 390.5 | 850.6 |
Total, gross unrealized losses | 5.5 | 18.8 |
RMBS | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 98.1 | 397.7 |
Securities, less than 12 months, gross unrealized losses | 0.5 | 6.4 |
Securities, 12 months or more, fair value | 399 | 225.9 |
Securities, 12 months or more, gross unrealized losses | 7.2 | 8.4 |
Total, fair value | 497.1 | 623.6 |
Total, gross unrealized losses | 7.7 | 14.8 |
CMBS | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 88.3 | 199.1 |
Securities, less than 12 months, gross unrealized losses | 0.1 | 1.3 |
Securities, 12 months or more, fair value | 91.4 | 109.5 |
Securities, 12 months or more, gross unrealized losses | 2.2 | 5.1 |
Total, fair value | 179.7 | 308.6 |
Total, gross unrealized losses | 2.3 | 6.4 |
Other asset-backed securities | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Securities, less than 12 months, fair value | 1,084.5 | 1,442.8 |
Securities, less than 12 months, gross unrealized losses | 16.9 | 36.7 |
Securities, 12 months or more, fair value | 229.9 | 121.6 |
Securities, 12 months or more, gross unrealized losses | 3.7 | 1.8 |
Total, fair value | 1,314.4 | 1,564.4 |
Total, gross unrealized losses | $ 20.6 | $ 38.5 |
Activity in the Liability for L
Activity in the Liability for Loss and Loss Adjustment Expense (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Liability for Claims and Claims Adjustment Expense [Line Items] | |||
Reserves as of January 1 | $ 12,250,294 | $ 11,871,300 | |
Less: reinsurance recoverables | [1] | 1,857,400 | 1,650,100 |
Net reserves as of January 1 | 10,392,900 | 10,221,200 | |
Other adjustments | (200) | ||
Incurred loss and LAE, net of reinsurance, related to: | |||
Current year | 829,900 | 756,300 | |
Prior years | (37,400) | (85,700) | |
Total incurred loss and LAE, net of reinsurance | 792,498 | 670,578 | |
Paid loss and LAE, net of reinsurance, related to: | |||
Current year | [2] | 75,300 | 100,500 |
Prior years | [2] | 914,800 | 690,800 |
Total paid loss and LAE, net of reinsurance | [2] | 990,100 | 791,300 |
Foreign currency exchange rate effect | 17,200 | 49,900 | |
Net reserves as of March 31 | 10,212,300 | 10,150,400 | |
Reinsurance recoverables as of March 31 | [1] | 1,642,800 | 1,563,900 |
Reserves as of March 31 | $ 11,855,124 | $ 11,714,300 | |
[1] | Reinsurance recoverables in this table include only ceded loss and LAE reserves. | ||
[2] | Includes paid losses, net of reinsurance, related to commutations. |
(Favorable) Unfavorable Prior A
(Favorable) Unfavorable Prior Accident Year Loss Reserve Development (Detail) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | |||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | $ (37.4) | $ (85.7) | ||
Reinsurance Segment | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (36.4) | (71.6) | ||
Reinsurance Segment | Property | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (10.7) | (41.4) | ||
Reinsurance Segment | Property | Property Catastrophe | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | 8.4 | [1] | (30.4) | [2] |
Reinsurance Segment | Property | Property Non-catastrophe | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (19.1) | [3] | (11) | [4] |
Reinsurance Segment | Casualty & Other | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (25.7) | [5] | (30.2) | [6] |
Insurance Segment | RSUI | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (3.7) | (11.1) | ||
Insurance Segment | RSUI | Casualty Insurance | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | (5.6) | [7] | (11) | [8] |
Insurance Segment | RSUI | Property and Other Insurance | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | 1.9 | [9] | (0.1) | |
Insurance Segment | CapSpecialty Incorporated | ||||
Claims Development [Line Items] | ||||
Claims incurred related to prior years | $ 2.7 | [10] | $ (3) | [11] |
[1] | Primarily reflects unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year, partially offset by favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year. | |||
[2] | Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Maria and Harvey in the 2017 accident year. | |||
[3] | Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years. | |||
[4] | Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years. | |||
[5] | Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2012 through 2017 accident years and in the professional liability lines of business in the 2007 and prior accident years. | |||
[6] | Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed lines of business in the 2016 and 2017 accident years, and in the shorter-tailed and longer-tailed lines of business in the 2005 through 2013 accident years. | |||
[7] | Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2017 accident year. | |||
[8] | Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in the 2009 accident year. | |||
[9] | Primarily reflects unfavorable prior accident year loss reserve development related to Hurricanes Harvey in the 2017 accident year and Florence in the 2018 accident year. The unfavorable prior accident year loss reserve development reflects the impact of a recent adverse court ruling. | |||
[10] | Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years. | |||
[11] | Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years. |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Income Taxes [Line Items] | ||
Interest or penalties accrued for uncertain tax positions | $ 0 | |
Effective income tax rate | 19.50% | 17.90% |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands | Mar. 15, 2018 | Feb. 28, 2018 | Mar. 31, 2019 | Mar. 31, 2018 | Jun. 30, 2018 | Nov. 30, 2015 |
Stockholders Equity Note [Line Items] | ||||||
Dividends paid | $ 154,000 | $ 153,967 | ||||
Par value of common stock | $ 1 | |||||
Dividend Declared [Member] | ||||||
Stockholders Equity Note [Line Items] | ||||||
Dividend record date | Mar. 5, 2018 | |||||
Dividend payable nature | Special | |||||
Special dividend declared per share | $ 10 | |||||
2015 Repurchase Program | ||||||
Stockholders Equity Note [Line Items] | ||||||
Aggregate amount of common stock authorized for repurchase | $ 400,000 | |||||
2018 Repurchase Program | ||||||
Stockholders Equity Note [Line Items] | ||||||
Aggregate amount of common stock authorized for repurchase | $ 400,000 | |||||
Remaining authorized repurchases under share repurchase program | $ 191,000 |
Schedule of Common Stock Repurc
Schedule of Common Stock Repurchases (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Schedule Of Common Share Purchase [Line Items] | ||
Shares repurchased | 129,567 | 35,072 |
Cost of shares repurchased (in millions) | $ 80,486 | $ 21,268 |
Average price per share repurchased | $ 621.19 | $ 606.40 |
Reconciliation of Accumulated O
Reconciliation of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2019 | Mar. 31, 2018 | Dec. 31, 2017 | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | $ 7,692,710 | $ 8,514,063 | ||
Other comprehensive income (loss), net of tax: | ||||
Ending Balance | 8,236,487 | 8,373,400 | ||
Accumulated Other Comprehensive Income | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (202,003) | 618,118 | ||
Cumulative effect of adoption of new accounting pronouncements | [1] | $ (600,508) | ||
Other comprehensive income (loss), net of tax: | ||||
Other comprehensive income (loss) before reclassifications | 183,400 | (142,600) | ||
Reclassifications from accumulated other comprehensive income | 4,400 | 1,400 | ||
Total | 187,800 | (141,200) | ||
Ending Balance | (14,157) | (123,620) | ||
Accumulated Other Comprehensive Income | Accounting Standards Update 2016-01 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | (735,600) | ||
Accumulated Other Comprehensive Income | Accounting Standards Update 2018-02 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | 135,100 | ||
Unrealized Appreciation of Investments | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (61,600) | 718,200 | ||
Cumulative effect of adoption of new accounting pronouncements | [1] | (579,000) | ||
Other comprehensive income (loss), net of tax: | ||||
Other comprehensive income (loss) before reclassifications | 183,400 | (146,400) | ||
Reclassifications from accumulated other comprehensive income | 4,400 | 1,400 | ||
Total | 187,800 | (145,000) | ||
Ending Balance | 126,200 | (5,800) | ||
Unrealized Appreciation of Investments | Accounting Standards Update 2016-01 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | (735,600) | ||
Unrealized Appreciation of Investments | Accounting Standards Update 2018-02 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | 156,600 | ||
Unrealized Currency Translation Adjustment | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (124,700) | (84,600) | ||
Cumulative effect of adoption of new accounting pronouncements | [1] | (18,200) | ||
Other comprehensive income (loss), net of tax: | ||||
Other comprehensive income (loss) before reclassifications | (900) | 5,100 | ||
Reclassifications from accumulated other comprehensive income | 0 | 0 | ||
Total | (900) | 5,100 | ||
Ending Balance | (125,600) | (97,700) | ||
Unrealized Currency Translation Adjustment | Accounting Standards Update 2018-02 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | (18,200) | ||
Retirement Plans | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Beginning Balance | (15,700) | (15,500) | ||
Cumulative effect of adoption of new accounting pronouncements | [1] | (3,300) | ||
Other comprehensive income (loss), net of tax: | ||||
Other comprehensive income (loss) before reclassifications | 900 | (1,300) | ||
Reclassifications from accumulated other comprehensive income | 0 | 0 | ||
Total | 900 | (1,300) | ||
Ending Balance | $ (14,800) | $ (20,100) | ||
Retirement Plans | Accounting Standards Update 2018-02 | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Cumulative effect of adoption of new accounting pronouncements | [1] | $ (3,300) | ||
[1] | See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act. |
Reclassifications of Accumulate
Reclassifications of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Net realized capital gains | $ (4,442) | $ (44,505) | |
Other than temporary impairment losses | 10,020 | 511 | |
Income taxes | 108,512 | 37,422 | |
Unrealized Appreciation of Investments | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Total reclassifications | 4,400 | 1,400 | |
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Appreciation of Investments | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Net realized capital gains | [1] | (4,400) | 1,200 |
Other than temporary impairment losses | 10,000 | 500 | |
Income taxes | $ (1,200) | $ (300) | |
[1] | For the three months ended March 31, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information. |
Reclassifications of Accumula_2
Reclassifications of Accumulated Other Comprehensive Income (Parenthetical) (Detail) - USD ($) $ in Thousands | Mar. 15, 2018 | Mar. 31, 2019 | Mar. 31, 2018 |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Net realized capital gains | $ 4,442 | $ 44,505 | |
Insurance Segment | Ares | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Net realized capital gains | $ 45,700 | $ 45,700 |
Reconciliation of Earnings and
Reconciliation of Earnings and Share Data used in Basic and Diluted Earnings per Share Computations (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Earnings Per Share Disclosure [Line Items] | |||
Net earnings available to Alleghany stockholders | $ 440,227 | $ 171,575 | |
Effect of dilutive securities | 0 | (1,300) | |
Income available to common stockholders for diluted earnings per share | $ 440,200 | $ 170,300 | |
Weighted average common shares outstanding applicable to basic earnings per share | 14,481,255 | 15,389,283 | |
Effect of dilutive securities | 3,981 | 29,381 | |
Adjusted weighted average common shares outstanding applicable to diluted earnings per share | 14,485,236 | 15,418,664 | |
Contingently issuable shares | [1] | 39,325 | 23,777 |
[1] | Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation. |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Line Items] | ||||
Rent expense | $ 12,100 | |||
Investments, debt securities | 13,279,741 | $ 11,823,968 | ||
Investments, equity securities | 2,523,079 | 3,572,790 | ||
Stockholders' equity | $ 8,236,487 | $ 7,692,710 | $ 8,373,400 | $ 8,514,063 |
Maximum | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Non-cancelable operating leases, expiration date | 2038 | |||
Energy Sector Business | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Investments and equity in consolidated subsidiaries | $ 418,200 | |||
Investments, debt securities | 320,900 | |||
Investments, equity securities | 9,400 | |||
Energy Sector Business | Stranded Oil Resources Corporation | ||||
Commitments and Contingencies Disclosure [Line Items] | ||||
Stockholders' equity | $ 87,900 |
Consolidated Lease Liabilities
Consolidated Lease Liabilities And Right-Of-Use Lease Assets Related To Operating Leases (Detail) $ in Millions | Mar. 31, 2019USD ($) | |
Maturity of lease payments, by year | ||
1 year or less | $ 37.9 | |
More than 1 year to 2 years | 34.1 | |
More than 2 years to 3 years | 30.7 | |
More than 3 years to 4 years | 25.6 | |
More than 4 years to 5 years | 24.9 | |
More than 5 years | 160.5 | |
Total lease payments | 313.7 | [1] |
Less: interest | 69.8 | [2] |
Lease liabilities | 243.9 | [3] |
Right-of-use lease assets | 216.3 | [4] |
Prepaid lease assets, net of lease allowances and incentives | 27.6 | |
Right-of-use lease assets and prepaid lease assets, net of lease allowances and incentives | $ 243.9 | |
[1] | As of March 31, 2019, the weighted average lease term was approximately 12 years. | |
[2] | As of March 31, 2019, the weighted average discount rate was approximately 5 percent. | |
[3] | Represents the present value of lease liabilities, and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet. | |
[4] | Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet. |
Consolidated Lease Liabilitie_2
Consolidated Lease Liabilities And Right-Of-Use Lease Assets Related To Operating Leases (Parenthetical) (Detail) | Mar. 31, 2019 |
Commitments and Contingencies Disclosure [Abstract] | |
weighted average discount rate | 5.00% |
weighted average lease tern | 12 years |
Segments of Business - Addition
Segments of Business - Additional Information (Detail) $ in Thousands | Oct. 01, 2018USD ($) | Feb. 07, 2018USD ($) | Mar. 31, 2019USD ($)Segment | Dec. 31, 2018USD ($) |
Segment Reporting Information [Line Items] | ||||
Number of reportable segments | Segment | 3 | |||
Debt amount | $ 1,676,421 | $ 1,669,039 | ||
Concord | ||||
Segment Reporting Information [Line Items] | ||||
Ownership interest acquired | 85.00% | |||
WWSC Holdings, LLC | Hirschfeld Holdings LP | ||||
Segment Reporting Information [Line Items] | ||||
Business acquisition date | Feb. 7, 2018 | |||
Wilbert Funeral Services, Inc | ||||
Segment Reporting Information [Line Items] | ||||
Equity interest percentage | 45.00% | |||
Operating Segments | Alleghany Capital Corporation Segment | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | $ 292,400 | $ 284,500 | ||
Operating Segments | Alleghany Capital Corporation Segment | Concord | ||||
Segment Reporting Information [Line Items] | ||||
Business acquisition date | Oct. 1, 2018 | |||
Ownership interest acquired | 85.00% | |||
Purchase price for acquisition | $ 136,600 | |||
Cash consideration paid for acquisition | 68,600 | |||
Potential contingent consideration on acquisition | 38,200 | |||
Incremental debt acquired | 29,800 | |||
Goodwill | 83,000 | |||
Finite-lived intangible assets acquired | $ 70,800 | |||
Operating Segments | Alleghany Capital Corporation Segment | WWSC Holdings, LLC | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | 131,300 | |||
Operating Segments | Alleghany Capital Corporation Segment | WWSC Holdings, LLC | Hirschfeld Holdings LP | ||||
Segment Reporting Information [Line Items] | ||||
Business acquisition date | Feb. 7, 2018 | |||
Purchase price for acquisition | $ 109,100 | |||
Cash consideration paid for acquisition | 94,400 | |||
Incremental debt acquired | 14,700 | |||
Goodwill | 3,000 | |||
Finite-lived intangible assets acquired | 9,400 | |||
Capital contributions from Alleghany | 75,500 | |||
Capital contributions from noncontrolling interests | $ 18,900 | |||
Operating Segments | Alleghany Capital Corporation Segment | Jazwares, LLC | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | 42,900 | |||
Operating Segments | Alleghany Capital Corporation Segment | Kentucky Trailer | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | 60,900 | |||
Operating Segments | Alleghany Capital Corporation Segment | Bourn and Koch, Incorporated | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | 13,300 | |||
Operating Segments | Alleghany Capital Corporation Segment | Integrated Project Services LLC | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | 10,200 | |||
Operating Segments | Alleghany Capital Corporation Segment | Concord | ||||
Segment Reporting Information [Line Items] | ||||
Debt amount | $ 33,800 |
Results for Reportable Segments
Results for Reportable Segments and Corporate Activities (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Segment Reporting Information [Line Items] | |||
Gross premiums written | $ 1,606,600 | $ 1,458,700 | |
Net premiums written | 1,385,700 | 1,253,300 | |
Net premiums earned | 1,297,309 | 1,207,856 | |
Net loss and LAE | 792,498 | 670,578 | |
Commissions, brokerage and other underwriting expenses | 420,126 | 406,295 | |
Underwriting profit | [1] | 84,700 | 130,900 |
Net investment income | 123,049 | 124,126 | |
Change in the fair value of equity securities | 392,353 | (42,649) | |
Net realized capital gains | 4,442 | 44,505 | |
Other than temporary impairment losses | (10,020) | (511) | |
Noninsurance revenue | 514,123 | 251,627 | |
Other operating expenses | 502,418 | 264,897 | |
Corporate administration | 19,369 | 7,785 | |
Amortization of intangible assets | 6,900 | 5,264 | |
Interest expense | 23,531 | 21,531 | |
Earnings before income taxes | 556,414 | 208,604 | |
Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 1,613,400 | 1,464,700 | |
Net premiums written | 1,385,700 | 1,253,300 | |
Net premiums earned | 1,297,300 | 1,207,800 | |
Net loss and LAE | 792,500 | 670,600 | |
Commissions, brokerage and other underwriting expenses | 420,100 | 406,300 | |
Underwriting profit | [1] | 84,700 | 130,900 |
Net investment income | 119,200 | 120,000 | |
Change in the fair value of equity securities | 389,100 | (13,900) | |
Net realized capital gains | 4,400 | 44,500 | |
Other than temporary impairment losses | (10,000) | (500) | |
Noninsurance revenue | 510,400 | 248,400 | |
Other operating expenses | 495,100 | 257,000 | |
Corporate administration | 1,100 | (300) | |
Amortization of intangible assets | 6,900 | 5,300 | |
Interest expense | 11,000 | 8,000 | |
Earnings before income taxes | 583,700 | 259,400 | |
Operating Segments | Reinsurance Segment | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 1,231,600 | 1,115,600 | |
Net premiums written | 1,107,600 | 997,000 | |
Net premiums earned | 1,029,200 | 960,200 | |
Net loss and LAE | 653,200 | 539,400 | |
Commissions, brokerage and other underwriting expenses | 336,000 | 322,000 | |
Underwriting profit | [1] | 40,000 | 98,800 |
Operating Segments | Reinsurance Segment | Property | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 415,100 | 397,200 | |
Net premiums written | 316,200 | 305,100 | |
Net premiums earned | 308,900 | 275,100 | |
Net loss and LAE | 162,600 | 96,600 | |
Commissions, brokerage and other underwriting expenses | 103,700 | 93,100 | |
Underwriting profit | [1] | 42,600 | 85,400 |
Operating Segments | Reinsurance Segment | Casualty & Other | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | [2] | 816,500 | 718,400 |
Net premiums written | [2] | 791,400 | 691,900 |
Net premiums earned | [2] | 720,300 | 685,100 |
Net loss and LAE | [2] | 490,600 | 442,800 |
Commissions, brokerage and other underwriting expenses | [2] | 232,300 | 228,900 |
Underwriting profit | [1],[2] | (2,600) | 13,400 |
Operating Segments | Insurance Segment | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 381,800 | 349,100 | |
Net premiums written | 278,100 | 256,300 | |
Net premiums earned | 268,100 | 247,600 | |
Net loss and LAE | 139,300 | 131,200 | |
Commissions, brokerage and other underwriting expenses | 84,100 | 84,300 | |
Underwriting profit | [1] | 44,700 | 32,100 |
Operating Segments | Insurance Segment | RSUI | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 299,000 | 274,600 | |
Net premiums written | 201,400 | 187,000 | |
Net premiums earned | 192,400 | 180,900 | |
Net loss and LAE | 94,300 | 96,900 | |
Commissions, brokerage and other underwriting expenses | 53,500 | 53,500 | |
Underwriting profit | [1] | 44,600 | 30,500 |
Operating Segments | Insurance Segment | CapSpecialty Incorporated | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 82,800 | 74,500 | |
Net premiums written | 76,700 | 69,300 | |
Net premiums earned | 75,700 | 66,700 | |
Net loss and LAE | 45,000 | 34,300 | |
Commissions, brokerage and other underwriting expenses | 30,600 | 30,800 | |
Underwriting profit | [1] | 100 | 1,600 |
Operating Segments | Alleghany Capital Corporation Segment | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | [3] | 0 | |
Net premiums written | [3] | 0 | |
Net premiums earned | [3] | 0 | |
Net loss and LAE | [3] | 0 | |
Commissions, brokerage and other underwriting expenses | [3] | 0 | |
Underwriting profit | [1],[3] | 0 | 0 |
Net investment income | [3] | 1,300 | 1,600 |
Change in the fair value of equity securities | [3] | 0 | 0 |
Net realized capital gains | [3] | 300 | 700 |
Other than temporary impairment losses | [3] | 0 | 0 |
Noninsurance revenue | [3] | 505,000 | 242,700 |
Other operating expenses | [3] | 465,400 | 240,000 |
Corporate administration | [3] | 0 | 0 |
Amortization of intangible assets | [3] | 6,700 | 5,400 |
Interest expense | [3] | 4,300 | 1,300 |
Earnings before income taxes | [3] | 30,200 | (1,700) |
Operating Segments | Reinsurance Segment and Insurance Segment | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | 1,613,400 | 1,464,700 | |
Net premiums written | 1,385,700 | 1,253,300 | |
Net premiums earned | 1,297,300 | 1,207,800 | |
Net loss and LAE | 792,500 | 670,600 | |
Commissions, brokerage and other underwriting expenses | 420,100 | 406,300 | |
Underwriting profit | [1] | 84,700 | 130,900 |
Net investment income | 117,900 | 118,400 | |
Change in the fair value of equity securities | 389,100 | (13,900) | |
Net realized capital gains | 4,100 | 43,800 | |
Other than temporary impairment losses | (10,000) | (500) | |
Noninsurance revenue | 5,400 | 5,700 | |
Other operating expenses | 29,700 | 17,000 | |
Corporate administration | 1,100 | (300) | |
Amortization of intangible assets | 200 | (100) | |
Interest expense | 6,700 | 6,700 | |
Earnings before income taxes | 553,500 | 261,100 | |
Corporate activities | |||
Segment Reporting Information [Line Items] | |||
Gross premiums written | [4] | (6,800) | (6,000) |
Net premiums written | [4] | 0 | |
Net premiums earned | [4] | 0 | |
Net loss and LAE | [4] | 0 | |
Commissions, brokerage and other underwriting expenses | [4] | 0 | |
Underwriting profit | [1],[4] | 0 | 0 |
Net investment income | [4] | 3,800 | 4,100 |
Change in the fair value of equity securities | [4] | 3,300 | (28,600) |
Net realized capital gains | [4] | 0 | 0 |
Other than temporary impairment losses | [4] | 0 | 0 |
Noninsurance revenue | [4] | 3,700 | 3,200 |
Other operating expenses | [4] | 7,300 | 7,900 |
Corporate administration | [4] | 18,300 | 8,100 |
Amortization of intangible assets | [4] | 0 | 0 |
Interest expense | [4] | 12,500 | 13,500 |
Earnings before income taxes | [4] | $ (27,300) | $ (50,800) |
[1] | 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance. | ||
[2] | Primarily consists of the following assumed reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit. | ||
[3] | Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments. | ||
[4] | Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods. |
Summary of Identifiable Assets
Summary of Identifiable Assets and Equity (Detail) - USD ($) $ in Thousands | Mar. 31, 2019 | Dec. 31, 2018 | Mar. 31, 2018 | Dec. 31, 2017 |
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | $ 25,793,057 | $ 25,344,896 | ||
Invested Assets and Cash | 19,093,300 | |||
Equity attributable to Alleghany | 8,236,487 | $ 7,692,710 | $ 8,373,400 | $ 8,514,063 |
Operating Segments | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 25,429,300 | |||
Invested Assets and Cash | 18,782,600 | |||
Equity attributable to Alleghany | 8,905,300 | |||
Operating Segments | Reinsurance Segment | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 16,799,800 | |||
Invested Assets and Cash | 13,282,800 | |||
Equity attributable to Alleghany | 5,091,100 | |||
Operating Segments | Insurance Segment | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 6,871,400 | |||
Invested Assets and Cash | 5,370,700 | |||
Equity attributable to Alleghany | 2,952,000 | |||
Operating Segments | Reinsurance Segment and Insurance Segment | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 23,671,200 | |||
Invested Assets and Cash | 18,653,500 | |||
Equity attributable to Alleghany | 8,043,100 | |||
Operating Segments | Alleghany Capital Corporation Segment | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 1,758,100 | |||
Invested Assets and Cash | 129,100 | |||
Equity attributable to Alleghany | 862,200 | |||
Corporate activities | ||||
Segment Reporting Information [Line Items] | ||||
Identifiable Assets | 363,800 | |||
Invested Assets and Cash | 310,700 | |||
Equity attributable to Alleghany | $ (668,800) |
Summary of Alleghany Capital No
Summary of Alleghany Capital Non-Insurance Revenue (Detail) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2019 | Mar. 31, 2018 | ||
Other Revenues [Line Items] | |||
Noninsurance revenue | $ 514,123 | $ 251,627 | |
Operating Segments | |||
Other Revenues [Line Items] | |||
Noninsurance revenue | 510,400 | 248,400 | |
Operating Segments | Alleghany Capital Corporation Segment | |||
Other Revenues [Line Items] | |||
Noninsurance revenue | [1] | 505,000 | 242,700 |
Operating Segments | Alleghany Capital Corporation Segment | Industrial Segment | |||
Other Revenues [Line Items] | |||
Noninsurance revenue | [2] | 260,100 | 145,500 |
Operating Segments | Alleghany Capital Corporation Segment | Non-industrial Segment | |||
Other Revenues [Line Items] | |||
Noninsurance revenue | [3] | $ 244,900 | 97,100 |
Operating Segments | Alleghany Capital Corporation Segment | Corporate & Other | |||
Other Revenues [Line Items] | |||
Noninsurance revenue | $ 100 | ||
[1] | Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments. | ||
[2] | For the three months ended March 31, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. | ||
[3] | For the three months ended March 31, 2019 and 2018, approximately 66 percent and 71 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018. |
Summary of Alleghany Capital _2
Summary of Alleghany Capital Non-Insurance Revenue (Parenthetical) (Detail) | 3 Months Ended | |
Mar. 31, 2019 | Mar. 31, 2018 | |
Operating Segments | Alleghany Capital Corporation Segment | Non-Industrial Segment | Transferred over Time [Member] | ||
Other Revenues [Line Items] | ||
Noninsurance revenue percentage | 66.00% | 71.00% |