ALLEGHANY CORP /DE (Y)

2014 Climate Risk Disclosure Analysis

Industry Group: Insurance Services

Standard Industrial Classification: Fire, Marine & Casualty Insurance

Index Membership: Russell 3000

Financial Year End: Dec 2013

We are a Delaware corporation which owns and manages operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. We were incorporated in 1984 under the laws of the State of Delaware and in December 1986, we succeeded to the business of our parent company, Alleghany Corporation, which was incorporated in 1929. Prior to March 6, 2012, we were primarily engaged, through our wholly-owned subsidiary AIHL and its subsidiaries, in the property and casualty insurance business. AIHL's insurance operations are principally conducted by its subsidiaries RSUI, Capitol and PCC. Capitol has been a subsidiary of AIHL since January 2002, RSUI has been a subsidiary of AIHL since July 2003, and PCC has been a subsidiary of AIHL since July 2007. AIHL Re has been an indirect, wholly-owned subsidiary of Alleghany since its formation in 2006. AIHL Re is a captive reinsurance company which provides reinsurance to our insurance operating subsidiaries and affiliates. On March 6, 2012, or the 'Trans Re Acquisition Date,' we consummated a merger transaction, or the 'merger,' with Trans Re. As a result of the merger, Trans Re became one of our wholly-owned subsidiaries. Our reinsurance operations began upon consummation of the merger. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, 'Financial Statements and Supplementary Data' of this Form 10-K for additional detail on the merger... 10-K Filing (2014-02-25)

Disclosure Breakdown

Disclosure Rank

93rd percentile in Russell 3000

Disclosure Abstract

item 1. Business
31 Relevance:
3%
Natural disasters such as hurricanes, other windstorms, earthquakes and other catastrophes have the potential to materially and adversely affect our operating results.
32 Relevance:
2%
RSUI's catastrophe reinsurance program (which covers catastrophe risks including, among others, windstorms, and earthquakes) and per risk reinsurance program run on an annual basis from May 1 to the following April 30 and thus will expire on April 30, 2014.
37 Relevance:
2%
Our U.S. insurance companies also are required to participate in various involuntary pools, principally involving workers' compensation and windstorms.
38 Relevance:
4%
The impact of Super Storm Sandy which caused widespread property damage and flooding to large areas of the East Coast and Northeastern U.S. in October 2012, has resulted in increased calls for state and federal legislative and regulatory intervention in the reinsurance and insurance business, especially in catastrophe prone areas.
item 1a. Risk Factors
42 Relevance:
34%
Natural or man-made catastrophes can be caused by various events, including hurricanes, other windstorms, earthquakes and floods, as well as terrorist activities. The frequency and severity of catastrophes in any short period of time are inherently unpredictable. The extent of gross losses from a catastrophe is a function of both the total amount of insured exposure in the area affected by the event and the severity of the event, potentially mitigated by any reinsurance coverage purchased by our reinsurance and insurance subsidiaries. Most catastrophes are restricted to limited geographic areas; however, hurricanes, other windstorms, earthquakes and floods may produce significant damage when those areas are heavily populated. It is therefore possible that a catastrophic event or multiple catastrophic events could produce significant losses and have a material adverse effect on our financial condition and results of operations. In addition, longer-term natural catastrophe trends may be changing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain and snow. Climate change, to the extent it produces rising temperatures and changes in weather patterns, could impact the frequency or severity of weather events such as hurricanes, other windstorms and tornado activity. To the extent climate change increases the frequency and severity of such weather events, our reinsurance and insurance subsidiaries, particularly Trans Re and RSUI, may face increased claims, particularly with respect to properties located in coastal areas. Our reinsurance and insurance subsidiaries take certain measures to mitigate the impact of such events by considering these risks in their underwriting and pricing decisions, including their management of aggregate exposure levels, and through the purchase of reinsurance. To the extent broad environmental factors, exacerbated by climate change or otherwise, lead to increases in insured losses, particularly if those losses exceed the expectations of our insurance subsidiaries, our financial condition and results of operations could be materially and adversely affected.
item 6. Selected Consolidated Financial Data
56 Relevance:
29%
We have significant exposure to both natural catastrophes, such as hurricanes, other windstorms and earthquakes, as well as man-made catastrophes. Longer-term natural catastrophe trends may be changing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures, and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain and snow. Climate change, to the extent it produces rising temperatures and changes in weather patterns, could impact the frequency and severity of weather events such as hurricanes, other windstorms and tornado activity. To the extent climate change increases the frequency and severity of such weather events, our reinsurance and insurance subsidiaries may face increased claims, particularly with respect to properties located in coastal areas.
57 Relevance:
2%
Catastrophe losses in 2012 included $433.4 million of losses incurred by Trans Re and RSUI related to Super Storm Sandy, which also resulted in assumed (net of ceded) reinstatement premiums of $21.4 million, for a total pre-tax earnings impact of $412.0 million.
58 Relevance:
2%
As described above, the decrease in catastrophe losses in 2013 from 2012 reflects the fact that 2012 includes significant losses from Super Storm Sandy.
58 Relevance:
2%
As described above, the increase in catastrophe losses in 2012 from 2011 reflects the fact that we incurred significant losses from Super Storm Sandy in 2012.
61 Relevance:
2%
As described above, the decrease in catastrophe losses in 2013 from 2012 reflects the fact that we incurred significant losses from Super Storm Sandy in 2012.
62 Relevance:
9%
In addition, the decrease in both gross premiums written and net premiums earned reflects the absence of significant assumed reinstatement premiums, compared with $25.3 million recorded in 2012 related to Super Storm Sandy. The decrease in net losses and LAE primarily reflects a decrease in catastrophe losses and an increase in favorable prior accident year development on loss reserves, partially offset by the inclusion of operations from Trans Re for the entire year for 2013, compared with the 300 day period subsequent to the Trans Re Acquisition Date for 2012. Net loss and LAE includes catastrophe losses, net of reinsurance, of $92.1 million in 2013, compared with $252.2 million of catastrophe losses in 2012, all of which related to Super Storm Sandy. Catastrophe losses in 2013 primarily reflect net losses from flooding in Germany in May 2013, flooding in Central Europe and Canada in June 2013, hurricanes in Mexico in September 2013 and hailstorms in Germany and Canada in July 2013. Net loss and LAE for 2013 reflect $184.7 million of favorable prior accident year development on loss reserves, compared with $56.6 million of favorable development in 2012. For 2013, the $184.7 million favorable development includes $73.7 million related to Super Storm Sandy.
63 Relevance:
2%
The increase in net losses and LAE primarily reflects the inclusion of operations from Trans Re for the entire year for 2013, compared with the 300 day period subsequent to the Trans Re Acquisition Date for 2012, partially offset by a lower loss ratio in the current accident year including an absence of catastrophe losses in 2013, compared with $26.2 million of catastrophe losses, net of reinsurance, incurred in 2012 related to Super Storm Sandy.
65 Relevance:
9%
Catastrophe losses in 2013 include flooding in Colorado in September 2013 and severe weather in the Midwestern U.S., including tornados in Oklahoma in May 2013. Catastrophe losses in 2012 include $155.0 million of net losses from Super Storm Sandy in October 2012. In addition, there was $6.2 million of ceded premiums related to Super Storm Sandy in 2012. Catastrophe losses in 2011 primarily reflect net losses from severe weather, particularly tornados, in the Southeastern and Midwestern U.S. in April and May 2011, as well as from Hurricane Irene, which affected the East Coast of the U.S. in August 2011. In addition, RSUI incurred a $14.4 million property loss arising from the magnitude 5.8 earthquake that occurred in Northern Virginia in August 2011. This earthquake was not classified as a catastrophic event by the property and casualty industry. Net loss and LAE for 2013 reflect $8.0 million of unfavorable prior accident year development on property loss reserves, compared with $17.0 million of unfavorable prior accident year development in 2012 and $3.3 million of favorable prior accident year development in 2011. For 2013, the $8.0 million includes $8.5 million of unfavorable development from Hurricane Katrina in 2005, which arose from a significant claim that settled for a larger amount than previously estimated due to an adverse court ruling, partially offset by net favorable development with respect to other property reserves. For 2012, the $17.0 million includes $9.7 million of unfavorable development from Hurricane Ike in 2008.
66 Relevance:
2%
RSUI's catastrophe reinsurance program (which covers catastrophe risks including, among others, windstorms and earthquakes) and per risk reinsurance program run on an annual basis from May 1 to the following April 30 and thus will expire on April 30, 2014.
71 Relevance:
5%
The Homesite losses in 2012 reflect the impact of increased homeowners insurance claims from severe weather during the year, and $13.2 million of losses representing our share of Homesite's loss from Super Storm Sandy in October 2012, partially offset by the favorable impact of higher premium rates. Homesite losses in 2011 primarily reflect the impact of increased homeowners insurance claims from severe weather, particularly tornados, in the southeastern and midwestern U.S., as well as from Hurricane Irene.
72 Relevance:
4%
The slight increase in gross and net loss and LAE reserves in the insurance segment primarily reflects the impact of higher net premiums earned in 2013, partially offset by the impact of property loss claims resulting from Super Storm Sandy paid by RSUI in 2013. Changes in Gross and Net Loss and LAE Reserves between December 31, 2012 and December 31, 2011 The significant increase in gross and net loss and LAE reserves as of December 31, 2012 compared with December 31, 2011 is primarily due to reserves acquired as a result of the merger, and, to a lesser extent, the impact of Super Storm Sandy.
91 Relevance:
3%
Natural disasters such as hurricanes, other windstorms, earthquakes and other catastrophes have the potential to materially and adversely affect our operating results.
item 7a. Quantitative and Qualitative Disclosures about Market Risk
130 Relevance:
2%
RSUI's catastrophe reinsurance program (which covers catastrophe risks including, among others, windstorms and earthquakes) and per risk reinsurance program run on an annual basis from May 1 to the following April 30 and thus will expire on April 30, 2014.
131 Relevance:
6%
The slight increase in gross loss and LAE reserves in the insurance segment primarily reflects the impact of higher net premiums earned in 2013, partially offset by the impact of property loss claims resulting from Super Storm Sandy paid by RSUI in 2013.
Notes to Consolidated Financial Statements, continued 6. Liability for Loss and LAE, continued The significant increase in gross loss and LAE reserves as of December 31, 2012 compared with December 31, 2011 is primarily due to reserves acquired as a result of the merger, and to a lesser extent, the impact of Super Storm Sandy. The above reserve changes included (decreases) increases in prior year net reserves, which are summarized for 2013, 2012 and 2011 as follows:
 * Year Ended December 31,
 * 2013 2012 2011
(in millions)
Reinsurance:
Property $(184.7) $- $-
Casualty and other (39.4) - -
(224.1) - -
Insurance:
RSUI
Casualty (25.9) (48.1) (56.2)
Property and other 8.0 17.0 (3.3)
(17.9) (31.1) (59.5)
Capitol 25.8 13.2 5.0
PCC 13.2 5.6 28.7
Total incurred related to prior years $(203.0) $(12.3) $(25.8)
The more significant prior year adjustments affecting 2013, 2012 and 2011 are summarized as follows:
Reinsurance Segment - Property. The $184.7 million favorable prior accident year development includes $73.7 million related to Super Storm Sandy.

Computed in 1.94 seconds