Alleghany · 2020-02-13 · 4 Modest Financial Leverage and Conservative Risk Profile (1) Alleghany 2020 Senior Notes were redeemed on January 15, 2020. (2) Reflects net occurrence

AlleghanyBank of America Merrill Lynch 2020 Insurance Conference

February 13, 2020

2

“Conservatism dominates our

management philosophy. We

shun investment fads and

fashions in favor of acquiring

relatively few interests in

basic financial, industrial and

other enterprises that offer the

potential to deliver long-term

value to our investors”

Own high-quality underwriting franchises

― Underwrite for profit

― Grow premiums only when market allows

for profitable growth

― Consistently maintain appropriately

conservative loss reserves

Invest for total return when risk/reward is

attractive

Acquire quality businesses at reasonable prices

― Provide resources, support and oversight to

help them grow revenues, profits and

returns

Maintain a conservative financial and operating

risk profile

Hold significant unrestricted liquidity for

potential opportunities (and downturns)

Conservative Management Approach

Philosophy Strategy

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2

3

5

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Attractive & Consistent Returns

Note: As of September 30, 2019. Compound annual growth rates (“CAGR”) for BVPS and Stock Price include the impact of $10 special dividend paid in 2018.

Continued Focus on

BVPS Growth

Long-term Conservative Orientation

Quasi-autonomous Subsidiary Operating

Model

Target Annual Growth in BVPS:

7% - 10%

509.4

554.6

297.1

0

100

200

300

400

500

600

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Q3-2019

Ind

ex

ed

To

tal

Re

tur

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Y BVPS Y Share Price S&P 500 (Total Return)

CAGR

Q3 '19 YTD Since '13 Since '09 Since '99

Y BVPS 16.1% 7.4% 8.0% 8.6%

Y Share Price 28.0% 13.1% 12.1% 9.1%

S&P 500 (Total Return) 20.6% 10.9% 12.9% 5.7%

4

Modest Financial Leverage and Conservative Risk Profile

(1) Alleghany 2020 Senior Notes were redeemed on January 15, 2020.

(2) Reflects net occurrence PML (after-tax) in a 1-in-250 year event (having a likelihood of being exceeded in any single year of 0.4 percent) for largest single zone peril (i.e. Florida wind).

(3) Risk assets are defined as high yield bonds, below investment grade collateralized loan obligations (“CLOs”) and bank loans, publicly traded equity securities, private equity and partnership interests.

Debt to Capital Holding Company Liquidity

Peak Zone PML / Shareholder Equity(2) Risk Assets / Shareholders’ Equity(3)

(millions)

19.4%

15.8% 15.6% 14.7%

17.5%15.8%

2014 2015 2016 2017 2018 Q3-2019

Other Debt (ACC)

Senior Notes

$1,032

$821

$1,047

$1,383

$1,122

$1,294

2014 2015 2016 2017 2018 Q3-2019

0.51x 0.52x 0.53x

0.62x0.58x

0.34x

2014 2015 2016 2017 2018 Q3-2019

9%10%

7%8% 8%

6%

2014 2015 2016 2017 2018 Q3-2019

13.4% excl. 2020

notes (1)

5

90 years as a public company (NYSE: Y)

Alleghany Today

Notes: Financial data as of September 30, 2019 unless otherwise indicated. Gross premiums written for the trailing 12 months.

(1) As of September 30, 2019, YTD % Contribution to adjusted earnings before interest and taxes, excluding corporate items.

(2) Best’s Review March 2019 – Top 50 Global Reinsurers; ranking based on unaffiliated gross premiums written in 2018.

(3) A.M. Best U.S. Surplus Lines – Segment Review, September 2019.

Reinsurance53%(1)

Insurance27%(1)

InvestmentsAlleghany

Capital 20%(1)

TransRe RSUI CapSpecialty

GAAP equity of $5.3 billion

Gross premiums written of $4.7 billion

Top 15 global reinsurer(2)



10th largest U.S. excess & surplus lines group(3)



Focuses on niche specialty commercial lines

Asset Management

$16.2 billion fixed income

$2.1 billion equity portfolio

$0.6 billion other invested assets

Subsidiaries & Investments

6

Cumulative Results Over Holding Period

Subsidiary / Acquisition Date

Cash & Investments

Stockholders’ Equity

Years Held

Net Premiums

Written

Underwriting Profits

(Losses)Combined

RatioNet

Dividends IRR

$13,541

2.5x

$5,348 7 $28,320 $1,179 95.7% $1,492(1) 10.2%

3,837

2.1x1,858 16 11,776 1,785 84.2 1,124 11.6

846

2.1x

413 17 3,430 (28) 100.8 130 5.6

Total

(Re)insurance$18,257(2)

2.4x7,639(2)

($ in millions)

Current (Re)insurance Operations

Note: As of September 30, 2019.

(1) Total dividends to Alleghany of $1,800 million less a $309 million capital contribution in 2014 primarily to repay senior notes.

(2) Inclusive of AIHL Re.

March 6, 2012

July 1, 2003

January 1, 2002

7

Consolidated Underwriting Results for Past 10 Years

Note: 2019 YTD as of September 30, 2019. Underwriting profit is a non-GAAP financial measure. Refer to the appendix for further information.

Underwriting Profit Combined Ratio

2009-to-Date Underwriting Profits of $2.1 B and Combined Ratio of ~94.5%

84.7%

83.0%

93.4%94.1%

90.1%

88.8%89.0%

91.9%

106.4%

103.2%

94.3%94.5%

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Q3 '19YTD

Pre-TransRe

$129 $131

$50

$220

$421

$495 $467

$401

($316)

($162)

$232

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18 Q3 '19YTD

Pre-TransRe

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TransRe – Structural Competitive Advantages

History of Prudently Navigating Market Conditions and Opportunities

Diversified, global reinsurer with casualty & specialty expertise

Long-standing client and intermediary relationships

70% proportional business

Leads or co-leads more than half of its book

Strong balance sheet and infrastructure

Leveraging market position with third party capital

Generates recurring fee income

Net Premiums Written(1)

(Q3 2019 YTD)

Net premiums written up 13%

Combined ratio of 96.2%

Underwriting profit of $122mm

Q3 ’19 YTD Highlights

$2.8 billion(1)

(1) Excludes Farmers quota share treaty which contributed $509 million to net premiums written.

Personal Auto / Motor16%

Traditional Casualty

16%

Professional Liability

15%

Non-Catastrophe

Property20%

Catastrophe Property

7%

A&H8%

Guaranty8%

Marine & Energy

4%

Aviation2%

Engineering1%

Other Specialty3%

Property27%

Casualty47%

Specialty26%

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RSUI – Taking Advantage of Improving E&S Market

Continued New Business and Rate Momentum with Double Digit Renewal Rate Increases on Multiple Lines

Underwriting Profit

Cumulative Underwriting Profit: $1.8 billion

(Cumulative data for 2003 – Q3 2019 period)

30 years dedicated to wholesale specialty insurance market

Proven ability to generate underwriting profit and grow book value through cycles

Highly experienced underwriters

Nimble and reacts quickly to opportunities

Proprietary, in-house developed technology, models and analytical tools

Diversified profitable portfolio



Underwriting profit of $111mm


D&O Liability7%


23%

General Liability

7%

Umbrella / Excess

12%

Property49%

Alternative Structures

2%

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CapSpecialty – Repositioned for Greater Efficiency & Overall Profitability

Meaningful Progress Towards Its Goal of Becoming A Preferred Specialty Insurer for Small and Mid-Sized Businesses

Gross Premiums Written

$329 million

(2018)

Well-diversified specialty company

Niche product focus for small and mid-size businesses

Recognized experts in select classes

New CEO, Jack Sennott appointed July 1, 2019

Current focus on profitable growth, expense management & technology optimization



10-point improvement in expense ratio since 2014


Property & Casualty

29%

Healthcare20%

Specialty Casualty

20%


16%

Surety15%

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Alleghany Capital – Becoming a More Meaningful Contributor

(1) Adjusted earnings before income taxes (“Adjusted EBT”) represents noninsurance revenue less all operating expenses, and does not include: (i) amortization of intangible assets; (ii) change in the fair value of equity securities; (iii) net realized capital gains; (iv) other than temporary impairment ("OTTI") losses; and (v) income taxes.

Diversified Portfolio of High-Performing Businesses Helps Mitigate Individual Business Seasonality

Adjusted Earnings Before Tax(1) – 100% Basis Permanent capital provider to leading middle-market businesses

Partners with aligned entrepreneurial management teams / founders with high integrity

Acquire leaders in niche markets, or rapid share gainers in large fragmented markets

Accelerate operational efficiency improvements; follow-on capital for growth / add-on acquisitions

$25

$43

$64

$93

$140

$14

$31

$51

$82

$124

2015 2016 2017 2018 Q3 2019 YTD

Corporate Activity & Deal Expenses Non-Industrial

Industrial Adjusted EBT (Net of Corp. Activity & Deal Expenses)

($ millions)

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1) E&S market is firming

- Significant competitors retrenching

- Changing view of certain risks (e.g., wildfires, casualty inflation)

- Limits contraction

2) Reinsurance market slowly improving

3) Opportunistic capital allocation

1) Late in economic cycle (elevated sovereign, corporate and household debt)

2) Geopolitical uncertainty (including trade)

3) Low return world

4) High asset prices (public and private)

5) Industry consolidation

6) Increasing loss cost trends / social inflation in casualty lines

Key Macroeconomic & Industry Themes

Opportunities Challenges

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2

3

1

2

3

5

4

6

13

-6%

-3%

0%

3%

6%

9%

12%

15%

Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19

Renewal Rate Change (%)

RSUI – Accelerating Rate Increases and Increasing Opportunity

Note: Data is quarterly rate and new business submission increases over prior-year quarter.

-20%

-10%

0%

10%

20%

30%

40%

50%

Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19

New Business Submissions (Units)

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Jazware’s 4th acquisition since Alleghany’s investment

Deepens management talent

Adds iconic brands such as Pokémon and Cabbage Patch Kids to an already impressive portfolio

Acquired animal feed transportation assets

Deepens market share in animal feed transportation segment

Broadens geographic coverage

Alleghany Capital – 2019 Bolt-On Acquisitions

(1) Debt and equity.

Leading manufacturer of consumable precision cutting tools

Stable, recurring source of revenue for PCT

Significantly expands IPS footprint in the Northeast, a key biopharmaceutical hub

Adds highly experienced management team, particularly in construction management

Wicked Cool Toys (Oct-2019) Warren Manufacturing (Jul-2019)

CID Performance Tooling (Jun-2019) The Cardinal Group (Apr-2019)

$250 Million of Capital(1) Deployed in 2019

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Slowing U.S. & Global Growth

Source: World Bank. GDP growth (annual %) based on constant local currency and U.S. dollars for aggregates.

What Impact Will The Coronavirus Outbreak Have on Growth?

2.5%

1.8%

1.0%

5.7%

(6.0)%

(4.0)%

(2.0)%

0.0%

2.0%

4.0%

6.0%

8.0%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020E

World United States European Union East Asia & Pacific

16

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x

2009 2011 2013 2015 2017 2019

Shiller P/E - S&P 500

32.1x

Investment Environment Remains Challenging

Source: Bloomberg. Market data as of February 10, 2020

Treasury Yields & Credit Spreads Is the S&P 500 Overpriced?

(20%)

(10%)

0%

10%

20%

30%

2014 2015 2016 2017 2018 2019

Quarterly Earnings Growth

1.92%

Slowing Growth

1.56%

1.28%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

2010 2012 2014 2016 2018 2020

Yie

ld /

Sp

rea

d

UST 10Y BBB Credit Spreads

Jan 2018 -Feb 2020

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Alleghany’s Tactical Response

Prudently manage underwriting risks

- Reduction in emerging risks where future severity not reflected in current pricing (e.g., cyber)

- Conservatism in property-cat opportunities where rate still not sufficient (e.g., Florida reinsurance)

- Grow where significant rate, terms and conditions allow (Attritional Property, Umbrella / Excess, D&O, Professional Liability)

- Focus on aggregations and tail risk

De-risk investment portfolio

- Reduced size of equity portfolio by more than half

- Sold lower quality fixed income securities

Efficiently deploy capital

- Allocate capital to ACC to support bolt-on acquisitions at existing portfolio companies

- Return capital to shareholders

- Potential to de-lever balance sheet over time; retired $300 million of debt in January 2020

Maintain sufficient dry powder for eventual opportunities

- Significant holding company liquidity

- Meaningful debt capacity

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Key Takeaways

Long-term focus with track record of consistent growth in book value per share, despite significant headwinds over last 3 years

TransRe and RSUI are strong franchises in their respective market segments with improving outlook

Alleghany Capital has achieved critical mass with prospect of improved earnings contribution and double-digit return on equity

Holding company conservatively capitalized with significant optionality

Reiterating long-term goal of 7 to 10% growth in book value per share

Appendix

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Capital Allocation as of September 30, 2019

Note: All subsidiaries are majority owned unless otherwise stated. Market data as of February 10, 2020.

(1) Excludes $350 million par value senior notes at TransRe that mature in 2039. Also excludes $311 million of debt at ACC.

(2) Parent cash and marketable securities exclude cash at the TransRe holding company ($88 million at 9/30/2019), which is included in TransRe capital.

(3) Primarily deferred compensation and deferred taxes, as well as ACC parent.

amounts in millions, except book value per share

Consolidated: Alleghany Capital Operating Entities:

Stockholders' Equity $ 8,829 89.9% W&W|AFCO Steel $ 275 2.8%

Parent Company Debt(1) 994 10.1% Jazwares 233 2.4%

Total Capital $ 9,823 100.0% Concord 109 1.1%

Precision Cutting Technologies 103 1.0%

Shares outstanding (mm) 14.41 Wilbert (45% investment) 79 0.8%

BVPS $ 612.87 IPS 69 0.7%

Market Capitalization $ 11,795 Kentucky Trailer 79 0.8%

Total Alleghany Capital $ 947 9.6%

(Re)insurance: Other:

TransRe $ 5,348 54.5% Parent cash and marketable securities(2) $ 1,206 12.3%

RSUI 1,858 18.9% Stranded Oil 88 0.9%

CapSpecialty 413 4.2% Alleghany Properties 24 0.2%

AIHL Re 20 0.2% Other items, net(3) (81) (0.8%)

Total (Re)insurance $ 7,639 77.8% Total Other $ 1,237 12.6%

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Company Description Founded Revenue(1) Acquired % Owned

Manufactures specialty machine tools and, through DTI, supplies waterjet cutting consumables

1975 $37 2012 100%

Manufactures highly-engineered custom trailers and truck bodies for a variety of niche markets

1879 $227 2013 77%

Fabricates and erects heavy structural steel for bridges and large structures

1945 $926 2017 80%

Supplies products and services to the funeral and precast concrete markets

1880 $171 2017 45%

Manages and develops hotels in the U.S. and Canada

1985 $172 2018 85%

Provides technical consulting for the biopharmaceutical and other highly-complex manufacturing environments

1989 $599 2015 84%

Global toy, entertainment, and musical instrument company

1997 $358 2016(2) 77%

(1) LTM 3Q 2019. Revenues are on 100% basis in $millions.

(2) 30% stake acquired in 2014. Additional 50% acquired in 2016. 3% stake sold in Q1 2018.

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Non-GAAP Financial Measures

This document and the remarks made during the presentation today may also contain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most direct comparable GAAP measures and related information are provided in our financial supplement and Form 10-K and 10-Q filings, which are available on our website at www.alleghany.com, and below.

Adjusted Earnings Before Income Taxes

Adjusted earnings before income taxes represents noninsurance revenue less all operating expenses, and does not include: (i) amortization of intangible assets; (ii) change in the fair value of equity securities; (iii) net realized capital gains; (iv) OTTI losses; and (vii) income taxes. Because adjusted earnings before income taxes excludes income taxes, change in the fair value of equity securities, net realized capital gains, OTTI losses and amortization of intangible assets, it provides an indication of economic performance that is not affected by investment activity, levels of effective tax rates or levels of amortization resulting from acquisition accounting. Alleghany uses adjusted earnings before income taxes as a supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the performance of certain of its noninsurance operating subsidiaries and investments. A reconciliation of adjusted earnings before income taxes to earnings before income taxes is presented on page 35 of the 3Q 2019 financial supplement.

Underwriting Profit

Underwriting profit represents net premiums earned less net loss and LAE and commissions, brokerage and other underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income, net realized capital gains, OTTI losses, other revenue, other operating expenses, corporate administration, amortization of intangible assets and interest expense. Alleghany consistently uses underwriting profit as a supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the performance of its segments and believes that underwriting profit provides useful additional information to investors because it highlights net earnings attributable to a segment's underwriting performance. Earnings before income taxes may show a profit despite an underlying underwriting loss, and when underwriting losses persist over extended periods, a reinsurance or an insurance company's ability to continue as an ongoing concern may be at risk.

Documents

Alleghany · 2020-02-13 · 4 Modest Financial Leverage and Conservative Risk Profile (1) Alleghany 2020 Senior Notes were redeemed on January 15, 2020. (2) Reflects net occurrence