To Our Stockholders

Alleghanys common stockholders equity per share at year-end 2015 was $486.02, an
increase of 4.4% from common stockholders equity per share of $465.51 at year-end 2014.
For 2015, Alleghany reported net earnings attributable to common stockholders of $560.3
million, or $35.14 per share, while changes in the market value of our investments and
other items reduced book value per share by $14.63 per share. For the five years ended
December 31, 2015, Alleghanys common stockholders equity per share increased at a
compound annual rate of 8.4%, compared to a compound annual rate of return of 12.6% for
the S&P 500 over the same time period. A year ago in my letter I suggested that the S&P
500 might be at an elevated level and unfortunately my observation is looking correct -since the end of 2014, the S&P 500 has had a negative total return.
The table below summarizes Alleghanys longer-term performance. For the ten years
ended December 31, 2015, Alleghanys common stockholders equity per share
increased at a compound annual rate of 8.6%, compared to a compound annual rate of
return of 7.3% for the S&P 500 over the same time period, and a compound annual rate
of return of 7.4% for the Russell 30003. Alleghanys share price appreciated at a 6.6%
compound annual rate of return over the past decade (adjusted for stock dividends).
Alleghanys share price performance lagged the growth in book value per share
because the share price was 119% of book value on December 31, 2005, and was 98%
of book value on December 31, 2015.
Although our growth rate in book value per share was modest in 2015, we are satisfied
with the result given the low levels of returns available elsewhere in the capital markets.
Over the past decade, our book value per share has increased in every year but one
2008 when it declined 5.0%, compared to a 37.0% decline in the S&P 500.
Performance Summary
Average Annual Return or Growth Rate
Periods Ended December 31, 2015
Alleghany
Stock Price2
4.4%
3.1%
8.5%
12.4%
8.4%
9.7%
8.6%
6.6%

BVPS1
1 year
3 years
5 years
10 years
1

S&P 500
1.4%
15.0%
12.6%
7.3%

Russell
30003
0.5%
14.7%
12.2%
7.4%

Book value per share.

Because Alleghany has not paid a common dividend during these periods, stock price appreciation
is equal to total return.
3 The Russell 3000 is a broader measure of stock market performance, and is less distorted by the performance of
mega cap stocks.
2

The table below summarizes the change in stockholders equity attributable to

Alleghany common stockholders in 2015 ($ in millions):
Amount
$
508

Net earnings before items below

% of Beg.
Equity
6.8%

Realized and change in unrealized gains,

net of tax:
Equity securities
Fixed income securities
Total

(73)
(98)
(171)

(1.0)
(1.4)
(2.4)

Share repurchases
Foreign exchange
Other items, net
Increase in common stockholders equity

(244)
(15)
3
81

(3.2)
(0.2)
0.0
1.0%

Strong underwriting results at TransRe and RSUI Group were the principal driver of
book value growth in 2015. Investment returns were negligible: including interest and
dividend income, our bond portfolios returned 0.3%, and our equity portfolios returned a
negative 1.5%. Although nominal growth in stockholders equity was only 1.0%, per
share growth was 4.4% as we reduced Alleghanys share count by 3.2% in 2015. This
4.4% increase in the per share value of Alleghany follows a 12.7% increase in 2014.
In 2015 we repurchased $244 million of Alleghany shares at an average price of
$468.45, or about a 4% discount to year-end 2015 common stockholders equity per
share. In addition, unlike much of Corporate America, we reduced our aggregate debt
outstanding. Debt to total capital was 15.5% at year-end 2015, compared to 19.1% at
year-end 2014. Total long-term debt decreased by $377 million from $1,767 million to
$1,390 million, and we ended 2015 with over $800 million of marketable investments
at Alleghany Corporation and its non-regulated subsidiaries. We are sometimes asked
why we are deleveraging at this point, with interest rates so low. The answer is when
heading into stormy seas it makes sense to batten down the hatches. We believe that
financial flexibility and corporate resiliency will be more valuable in 2016 and
beyond.

The table below summarizes our 2015 growth in book value per share in more detail:

Beginning Equity

RSUI
$1,587

Other4
$ 756

Total
$7,473

408

148

(48)

508

94

54

(9)

139

TransRe
$5,130

Operating Income
Net realized gains, after
tax
Impairment losses, after
tax
Net earnings

(46)
$ 456

(15)
$ 187

(26)
$ (83)

(87)
$ 560

Other Changes5
Capital Transactions
Ending Equity

(126)
(250)
$5,210

(58)
(150)
$1,566

(50)
156
$ 779

(234)
(244)
$7,555

(6.3)%
(18.4)%

6.8%
4.3%

Operating ROE
Growth in Book Value6
Growth in Book Value
Per Share

7.9%
6.4%

9.3%
8.1%

4.4%

TransRe and RSUI Group, which together account for 90% of our consolidated
stockholders equity, produced high single-digit returns on equity on an operating basis
(excluding net realized capital gains or losses and OTTI charges). Investment returns,
however, were weak in 2015 resulting in slightly lower growth in book value for each
company relative to the return on equity, which is consistent with the lackluster
performance of all investment classes in 2015.
Both TransRe and RSUI hold a significant amount of equity securities. In measuring
return on equity, we are including only the dividend income in the numerator of the
calculation, with unrealized appreciation or depreciation, net of taxes, flowing through
the balance sheet. Accordingly, return on equity understates the potential economic
return of an insurance enterprise, assuming equity investments appreciate over time.
As the table above shows, we had net assets of $779 million at the end of 2015 in addition
to the equity of TransRe and RSUI Group. The Other column includes our smaller
4

CapSpecialty, PacificComp, corporate assets, and Alleghany Capital Corporation investments, net of holding
company debt.
5 Principally the change in unrealized appreciation (depreciation) on investments, net of tax.
6 Dividends and share repurchases added back to ending equity.
5

insurance subsidiaries (CapSpecialty and PacificComp), Alleghany Capital Corporation

and its subsidiaries and investments, our holding company investments, and corporate
administration costs. There are many reasons why this figure is negative, but the most
important ones include 1) the relative underperformance of CapSpecialty and PacificComp
(although each company improved significantly in 2015); 2) operating losses at Stranded
Oil Resources Corporation; and 3) investments held for their total return (mostly equities)
where dividend income is less than the cost of holding company debt. I will have more to
say on each of these items later in this letter.
The table below summarizes the major items comprising our $779 million of net assets:
Parent cash & invested assets7
Parent debt
Parent debt, net of cash & invested assets

$ 715
(997)
$ (282)

Investment in Ares Management, LP

CapSpecialty and PacificComp8
Alleghany Capital Corporation investments
Alleghany Properties
Other items, net
Total

225
332
482
37
(15)
$ 779

Only the parent invested assets above are carried at market value. All of the other
investments reflect our share of each companys results, in some cases with purchase
accounting adjustments.
*****
In the case of Ares Management, LP the conversion value of our investment based on
the quoted price of Ares at December 31, 2015 was $162 million, approximately $63
million below the carrying value of our investment. Because our investment is in the
form of a limited partnership interest in certain Ares subsidiaries that is convertible into
the publicly-traded units of Ares accounting conventions require that we carry the
investment at cost adjusted for our share of earnings.
We remain constructive on the companys long-term prospects. The depressed
valuation of Ares appears to reflect investor concerns about the global economic
outlook, as well as changes to the fixed income liquidity environment. As noted by
Michael Cembalest of JP Morgan, regulatory changes requiring increased bank capital
7
8

Includes investments of AIHL. Excludes marketable securities held at Transatlantic Holdings, Inc.
Shown net of intercompany eliminations. Gross combined equity of these two companies is $407 million.
6

has reduced their role as market liquidity providers. As noted in his analysis9, fixed
income trading revenue from global investment banks has declined from approximately
$120 billion in 2009 to an estimated $60 billion in 2015. Fixed income trading assets
credit in particular are down roughly 38% over that timeframe.
From a longer point of view, we believe that Ares, like other alternative asset
managers, is very well positioned to deliver superior returns to institutional investors
and is competitively advantaged against the now highly-regulated banking industry.
Tony Ressler has assembled a first class team of investment professionals that have an
excellent long-term performance record in direct lending, tradeable credit, private
equity, and real estate.
*****
We continued to make progress in 2015 in improving the results of CapSpecialty and
PacificComp. CapSpecialty produced an almost 15% increase in net premiums written
and reduced its underwriting loss by almost 50% in 2015. PacificComp generated a
47% increase in net premiums written and reduced its underwriting loss from $19.7
million in 2014 to $13.5 million in 2015. We believe that both companies have the
potential to achieve underwriting profitability in 2016.
We also continued to build out Alleghany Capitals portfolio of non-financial
businesses. In the fourth quarter of last year Alleghany Capital acquired an 84%
ownership interest in IPS-Integrated Project Services, a leading international provider
of technical consulting, design, engineering, construction, project control,
commissioning and qualification services for technically complex facilities, primarily
in the biotechnology and pharmaceutical industries.
In late 2015, Alleghany Properties completed its first property sale since the 2008
Financial Crisis, and as a result reported a small profit for the year. Further sales in
2016 and beyond are now possible as the development moratorium related to required
improvements in Sacramentos levy system has been lifted. Alleghany Properties
continues to own over 300 acres in the greater Sacramento area.
As mentioned above, Alleghanys consolidated debt to total capital ratio, which was
19.1% at the beginning of the year, declined to 15.5% at the end of the year, a result of
the repayment of debt that matured in 2015 at Transatlantic Holdings, Inc. As indicated
9

When The Levee Breaks, Eye On The Market, January 19, 2016.
7

in the table above, our debt net of holding company marketable investments was only
$282 million at the end of 2015. Accordingly, our net debt to total capital ratio at the
end of 2015 was 3.7%.
Alleghanys business model
Financial markets have been extremely favorable for the past six years. Following the
2008 Financial Crisis, equity investors have enjoyed a long period of positive returns,
as the S&P 500 recovered from its early 2009 low of 666 to over 2000 at the end of
2015. Insurance markets too have been accommodating. Global catastrophe losses have
been significantly below average levels for the past three years, and liability claims
inflation has been subdued. With conditions like this, it is easy to fall into the trap of
thinking that more risk is better.
Alleghanys approach is to increase risk when the market price of risk is high and to
decrease risk when it is low. Today, expected returns on most investment classes are
low, so we have tried, for the most part, to stay at the higher end of the quality
spectrum, whether we are talking about bonds or equities. In the (re)insurance world,
we have reduced tail risk, as evidenced by the fact that our exposure to losses from
extreme events is a smaller percentage of capital than it was several years ago.
Our (re)insurance subsidiaries provide the holding company with dividends to the extent
they are profitable and are unable to reinvest their earnings to support organic growth. In
2015, for example, TransRe sent $250 million to Alleghany, and RSUI paid dividends of
$150 million. Alleghanys role, in addition to assisting our (re)insurance subsidiaries in
managing their businesses, is to redeploy this capital. We have used these dividends to
make acquisitions at Alleghany Capital, reduce debt, or repurchase shares. In 2015, of the
total upstream dividends of $400 million, $244 million was used to repurchase Alleghany
common stock and $90 million was used to acquire a controlling interest in IPS-Integrated
Project Services. TransRe has also accumulated sufficient excess capital to retire a
meaningful portion of its debt that existed at the time of the Alleghany merger.
The combination of risks which are, for the most part, independent financial returns,
non-financial profits, and insurance risks produces less volatility in the aggregate
than each risk by itself. We believe that in combination, they provide our stockholders
with a return profile that is quite attractive relative to Alleghanys risk. For the longterm stockholder, we aim to produce attractive real returns with a very low chance of
permanent capital loss. Of course, the performance of our stock price which can be
easily blown around like leaves on an autumn day can deviate from market returns
over relatively short (3-5 year) periods of time based on investor preferences, stock
price momentum, and other factors beyond our control. Because stock prices today are
8

increasingly a function of basket trades (due to indexing), momentum strategies (due to

increased computer power and lower trading costs), and algorithmic trading, we focus
on what we can control growing the intrinsic value of Alleghany Corporation over
the long-term and hopefully making intelligent risk and capital allocation decisions.
Reinsurance and insurance subsidiaries
TransRe
In March of 2012, Alleghany acquired TransRe for total consideration valued at $3.5
billion. This acquisition which was a transformational deal has proven to be a huge
success for Alleghany, thanks to the efforts of Mike Sapnar, CEO of TransRe, and his
talented management team and staff.

TransRe has reported almost $1 billion of adjusted underwriting profits after

deducting $291 million of VOBA (Value of Business Acquired) amortization
expense related to purchase accounting, which produced an adjusted combined
ratio of 92.2% on $12.6 billion of net premiums earned.

TransRe has generated just shy of $1.6 billion of book value growth since
March 2012, which equates to a compound annual growth rate of 9.5%.

During this time, TransRe has paid Alleghany net dividends of $390 million,
redeemed $667 million of its debt at par value and added $1.2 billion to its book
value, which is up 30% to $5.2 billion at December 31, 2015 from $4.0 billion
at closing.

Including Alleghanys $495 million bargain purchase gain, TransRe has

contributed almost $2.1 billion to the growth in Alleghanys book value.

Alleghanys annualized return on investment through the end of 2015 is 13.5%,

assuming TransRe is valued at 1.0x book value.

Alleghanys book value per share is about 10+% higher than it would have been
had we not purchased TransRe in 2012.

TransRe had another terrific year in 2015. Not only did the company report its lowest
combined ratio in its history, but it had its third highest underwriting profit ever at
$327 million (the highest was 2014 at $345 million) and had its third consecutive year
with a combined ratio of under 90%. In addition to these very strong results, TransRe
was able to retain a diversified and well-underwritten book of business in a competitive
and challenging market.
9

But wait, theres more

TransRe was also able in 2015 to eliminate all of its legacy exposure to accident years
1986 and prior with its former parent company, American International Group, by
entering into a Commutation and Release agreement with the company. This is a
terrific outcome for both TransRe and AIG as it eliminates costly litigation for both
companies and allows TransRe to restore its trading relationship with one of the
worlds largest property and casualty insurers. TransRe was able to accomplish this
through extensive discussions and negotiations with AIG and other parties, at a cost
that exceeded its net carried reserves for the exposures of only $38 million.
TransRes reserves for outstanding claims remained strong at the end of 2015, and with
the elimination of its past exposures, the company offers solid gold security. With its
global reach, superior balance sheet strength, and breadth of product offerings, TransRe
is the go to market in reinsurance.
******
In 2015, TransRe was able to maintain what we believe will prove to be a profitable,
highly diversified book of reinsurance risk in an environment that remained highly
competitive and challenging. The combined ratio of 89.5% reflected solid property
results (66.3% combined ratio) with casualty and other lines coming in at 98.7%. In
order to maintain a properly priced portfolio, TransRe continues to be willing to
increase or decrease its treaty participations depending upon terms, conditions, and
underlying pricing and loss trends. For the 2015 underwriting year (treaty and
facultative), approximately 14% of the expiring portfolio was cancelled and
approximately 32% of the portfolio in force at the end of the underwriting year was
new. Like a duck smoothly floating on a lake, beneath the surface the feet are paddling
fast!
Many of the industry trends discussed last year remained a factor in 2015. Market
conditions are challenging, with quota share commission pressure and decreased
demand from large diversified clients (although this may be changing as their
underlying results have in some cases come under pressure). Because TransRe has
significant underwriting expertise and strong client relationships, it is able from
time-to-time to achieve differential terms, a testament to the clients view of the value
that TransRe provides.
In North America, TransRe is finding opportunities to grow in whole account
contracts, mortgage risk, and regional property and casualty insurers. In late 2015, the
10

company was successful in writing a large whole account contract that added
significantly to gross and net written premium in the quarter. In casualty lines
(traditional and specialty), TransRe is seeing reduced demand, in part due to the
exceptionally strong results that ceding companies have experienced over the past
decade or so. TransRes international business had mixed trends in 2015. There appears
to be plenty of opportunity to write business in Asia Pacific, although TransRe has
been selective in writing business and posted only modest premium growth in the
region. In Latin America, TransRe has been able to find some growth opportunities as
well through differentiated reinsurance transactions with existing customers. In Europe,
however, the effect of intense competition is more evident, as volumes declined in
2015.
Over the past several years, TransRe has made significant investments in creating
integrated underwriting and workflow systems to improve efficiency and to assist in
better risk profile management. The companys systems are among the best in the
industry and give TransRe a competitive advantage in analyzing and optimizing risk.
*****
The low interest rate environment of the past five years, along with technological and
product innovation, has created an alternative market for reinsurance risk that is
growing and becoming an increasingly important part of the global insurance risk
management system. Pension funds and other investors are increasingly looking to
diversify their financial risk with insurance risk, particularly in the property catastrophe
arena. From a ceding companys perspective, having non-traditional suppliers of
catastrophe reinsurance assume some portion of their catastrophe reinsurance needs has
lowered costs and improved flexibility. It remains an open question the extent to which
financial investors will trade forward in this market after a major loss event.
Historically, the personal and institutional relationships between insurer and reinsurer
become extremely important after major catastrophic events.
The TransRe Capital Partners division manages TransRes capital market vehicles as
well as traditional retrocessional transactions, and has a robust and growing position in
these new markets. Side car support now exceeds $400 million, and the company has
been active in using retrocessional coverage to improve its risk-reward profile. In
addition to its Pangaea facility, TransRe is also an investor in Pillar Capital
Management, which manages catastrophe reinsurance funds.

11

RSUI Group, Inc.

RSUI had another strong year in 2015, producing $158.1 million of underwriting profit
and a combined ratio of 80.4%. Underwriting profits were lower in 2015 compared to
2014 primarily due to lower premiums and an underwriting loss in the Directors and
Officers (D&O) product line. Although catastrophe losses were very low in 2015
($26.1 million compared to $44.4 million in 2014), this favorable comparison was
mostly offset by lower levels of favorable prior year reserve development. Prior year
net reserve changes added $11.9 million to underwriting profits in 2015, compared to
$35.4 million in the prior year. Most of this reduction was due to increases in prior year
reserves in D&O, which were partially offset by decreases in reserves for prior years in
other product lines.
Market conditions continue to be very competitive in the wholesale specialty insurance
market. RSUI remains focused on underwriting profit, and as a result it is writing less
new business which, compared to renewal business, is usually less favorably priced in
a deteriorating market. New business declined by 15% in 2014 and another 18% in
2015. This is to be expected, and shows that RSUI is maintaining underwriting
discipline in a challenging market. As a result of this discipline, renewal pricing
remains more or less stable. In 2015, RSUI estimates that it achieved modest renewal
rate increases in all of its product lines except for property.
RSUI has seen its top line shrink in past cycles. For example, in 2006 the company had
gross written premium of approximately $1.4 billion, and this declined to $0.9 billion
by 2010. Given the exceptionally strong underwriting results over the post-Sandy
period, we expect market conditions to remain challenging near-term. By being willing
to shrink when market conditions become more competitive, RSUI has been able to
preserve underwriting profitability through industry cycles. Since we acquired RSUI
Group in 2003, the company has produced an inception-to-date combined ratio of 82%.
RSUI is maintaining its investment in underwriting talent and remains well-positioned
to grow when market conditions allow. As the companys CEO Dave Leonard has said,
If you dont feed your chickens, eventually you wont have any eggs! In an
important initiative to remain a significant force in the specialty insurance marketplace
in the face of increased competition, RSUI has introduced what it calls a companion
facility whereby RSUI adds third-party capacity to sit side-by-side with RSUI on risks
that it believes are appropriately structured and priced. This allows the companys
underwriters to remain front and center with key producers in more challenging market
conditions.
12

Alleghany acquired RSUI in July of 2003 for an initial investment of $628 million.
Since then, our investment has been reduced to approximately $(146) million through
net upstream dividends of $774 million. The company has generated $1,549 million of
underwriting profits under our ownership, and its stockholders equity has compounded
at 11.1% adjusted for dividends and capital contributions. At year-end 2015, RSUIs
stockholders equity was approximately $1.6 billion.
CapSpecialty, Inc.
CapSpecialty made significant progress in its quest to return to underwriting profitability in
2015. The companys mission statement is to be the preferred specialty insurance and
surety company for small and mid-sized businesses in the U.S. The company pursues this
objective by hiring top underwriting talent, rebuilding the companys systems and operating
architecture, and reorganizing into industry practice groups. Under the leadership of
Stephen Sills, the company is well on its way to realizing its vision.
Net premiums written increased last year by almost 15%, resulting in an improvement
in the companys expense ratio from 49.9% in 2014 to 46.1% in 2015. CapSpecialty
has been refocusing its two legacy businesses binding authority and surety while
building out a third professional lines division. Professional lines grew 156% in 2015,
while the legacy property and casualty business and surety business declined modestly.
The combined ratio in 2015 was 102.6%, compared to 105.8% in 2014. If prior year
reserve development is excluded from both years, the combined ratio was 100.3%
compared to 105.7% in 2014.
Alleghany acquired Capitol Transamerica Corporation in January of 2002. Including
our investment in Platte River Insurance Company, which was combined with Capitol
Transamerica for management purposes, our initial investment was $242 million. Since
then, CapSpecialty as we now call it has returned approximately $130 million in
dividends to Alleghany, reducing our net investment to $112 million. At the end of
2015, CapSpecialty had stockholders equity of approximately $312 million.
Pacific Compensation Corporation
PacificComp again made very good progress in 2015 toward its goal of restoring
underwriting profitability. Jan Frank and her team have meticulously cultivated new
distribution relationships, implemented a rigorous underwriting platform, engineered
an efficient and high service organization, and significantly strengthened the
companys claims department.
13

As a reminder, PacificComp largely exited the California workers compensation

market in 2010 and 2011 as it judged that market prices were at a level that would not
allow it to make a profit. During that time PacificComp changed its distribution
strategy and repositioned its emphasis to lower hazard classes of risk in areas of the
state that historically offered the potential for better results. Beginning in 2012,
PacificComp emerged as essentially a new company, running off the legacy business
while building the new business platform. Legacy costs, along with reserve
adjustments for prior accident years, produced significant losses.
The results since we re-entered the market in late-2012 are encouraging, as illustrated
below:
Pacific Compensation Corporation
Summary of Results By Year ($ millions)

Net premiums written

2012
$ 19.0

2013
$ 40.8

2014
$ 69.5

2015
$101.9

Underwriting loss
Net investment income
Other income (expense)
Pretax loss

(31.2)
3.8
0.5
$ (26.9)

(33.2)
4.3
(0.9)
$ (29.8)

(19.7)
4.6
0.0
$ (15.1)

(13.5)
5.2
(0.3)
$ (8.6)

Loss ratio
Expense ratio
Combined ratio

120.0%
166.5%
286.5%

113.6%
71.7%
185.3%

81.7%
47.6%
129.3%

76.6%
36.9%
113.5%

Combined ratio Accident Year

253.2%

151.4%

125.8%

113.5%

****
Investments
Alleghanys equity portfolio returned (1.5%) in 2015, compared to the return of the
S&P 500 of +1.4% and the equal-weighted S&P 500 return of (2.2%).
In last years annual report, I said that the U.S. stock market appears to be fully- if not
over-valued, especially considering the fact that many companies are producing little
revenue growth and continue to enjoy record profit margins. Equities appear to offer
attractive returns only in comparison to the sub-2% interest rates offered on U.S.
14

government bonds. In early January, the stock market, as measured by the Russell 2000,
was about 20% below where it was at the end of 2014. I wish I had been wrong
Like most investors, we had a challenging year in 2015. As several investors have
observed, one would have to look back to 1937 to find a year in which there was so
little investment opportunity.
During 2015, we changed our equity investment strategy, reorganizing our approach to
be concentrated within individual sectors of the stock market but more diversified
across sectors. In total, our internally-managed equity portfolio had a value of $2,831
million at the end of the year10.
Our largest individual positions are shown below:
Company
Visa Inc.
Health Care SPDR
Alphabet Inc.
Walt Disney Company
CVS Health
JP Morgan Chase & Co.
Verizon Communications Inc.
Microsoft Corp.
PPG Industries Inc.
CSX Corp.
Roper Technologies
Boeing Co.
Subtotal
All other positions
Total

Value ($ mm)
$ 232.7
225.1
221.7
212.3
210.2
191.5
172.6
166.4
150.7
129.8
128.1
101.2
$ 2,142.3
688.9
$ 2,831.2

Our approach is research-intensive. We look to find companies that can reliably grow
revenues, earnings, and dividends, or which perform an essential role in the economy
that will, over time, generate attractive economic returns. In the case of the health care
sector, we determined that we are best served by indexing hence the position in the
Health Care SPDR.
10

We also have a small amount of equity securities managed by an outside manager with a focus on small
capitalization stocks.
15

Our exposure by sector compared to the 10-year trailing average weight of each sector
in the S&P 500, was as follows:
Alleghany
Weight
14.5%
11.0%
2.5%
11.0%
9.6%
12.7%
7.1%
25.6%
6.0%
0.0%
100.0%

Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Materials
Technology
Telecommunications
Utilities
Total

Index
Weight
10.6%
10.6%
11.0%
16.5%
12.8%
10.7%
3.4%
18.0%
3.0%
3.4%
100.0%

As the above table shows, we are significantly overweight Consumer Discretionary,

Industrials, Materials, and Telecommunications, and underweight Energy, Financials,
and Utilities. We also consider our private investments in deciding how to allocate our
equity portfolio. In particular, we have a $206 million investment in energy through
Stranded Oil Resources Corporation and a $225 million investment in the alternative
asset management industry through Ares.
Our new strategy was implemented in the second quarter of the year. It took some time
to reposition the portfolio in 2015, but early results are encouraging. The go-forward
public equity portfolio outperformed the S&P 500 in 2015 and is continuing to perform
in line with expectations in 2016.
China joins the world in debtors prison
In his 2013 book entitled Debtors Prison: The Politics of Austerity Versus
Possibility, Robert Kuttner traces how economies and individuals have difficulty
growing when burdened by excessive debts. Economic growth since the 2008 Financial
Crisis has been disappointing, a result I believe of an over-indebted world.
China and the United States are the two largest economies in the world. Until recently,
China has had a de facto currency peg against the U.S. dollar. More recently, however,
China has been managing its currency against a basket of global currencies. Because
the U.S. dollar has appreciated against the Euro and the Yen, Chinas export economy
16

has become less competitive, and growth is slowing. As the U.S. central bank raises
interest rates (more on this later), China needs to devalue its currency to maintain a
stable relationship to its other trading partners. Should the Federal Reserve continue to
raise interest rates, the U.S. dollar may continue to appreciate, making the situation
worse. A significant devaluation by China could be extremely disruptive to the world
economy.
According to official government statistics, the service sector now accounts for 50.5%
of the Chinese economy, up from 48.1% in 2014, while manufacturing is 40.5%. As
industrial growth slows (from 7.3% in 2014 to 6.0% in 2015 according to government
statistics), Chinas challenge is to transition to a more service-oriented economy.
Services growth was 8.3% in 2015, compared to 7.8% in 2014. Transitions of this
nature historically have not occurred smoothly.
Since the 2008 Financial Crisis, corporate debt in China increased from 98% of GDP to
160%. Total debt in China has increased from 160% of GDP to 260% at the end of last
year. Debt-fueled economic growth may have resulted in unproductive capital
investments in China. Moreover, other emerging markets Latin America, which is the
commodity supplier to China and Southeast Asia, which is the technology component
supplier also borrowed, some in U.S. dollars, to invest in capacity to support Chinaled demand.
Chinas demographic profile, massive debt overhang, and underdeveloped social safety
net will make the transition to a consumer-driven, services-intensive economy difficult.
As market forces put pressure on the countrys economy, China has been selling
reserves to protect against capital flight and currency depreciation -- a sort of reverse
QE. Chinas foreign exchange reserves have declined from a high of $4 trillion in
mid-2014 to $3.2 trillion at the end of January of this year, a decline of almost $800
billion. This is reducing U.S. dollar liquidity.
We believe that in late 2015 and continuing in 2016, world financial markets are now
in a powerful negative feedback loop. As commodity prices fall, emerging market
commodity producers some of whom have borrowed in U.S. dollars are faced with
declining commodity prices and a strengthening U.S. dollar, a deadly combination. To
come up with more U.S. dollars to service debt, they have to sell a greater volume of
the commodity, which of course causes the price to fall further. In the case of the oil
market, excess production is reducing the price of oil and reducing the volume of
petrodollars in circulation. Sovereign Wealth Funds, which total over $7 trillion
worldwide, may increasingly sell assets to fund their countries fiscal deficits.
17

The United States has not yet resolved the debt crisis
From roughly 1980 through 2005, the United States went through 25-years of
increasing debt relative to the growth in the economy. Globalization contributed to
stagnant household incomes as industrial employment withered, but consumption grew
by tapping available borrowing capacity. Economist A. Gary Shilling has demonstrated
that a fall in the savings rate from roughly 12% in the early 1980s to 2% by 2005 added
roughly 0.5% per year to U.S. GDP growth. Although one would think that 8 years
after the start of the 2008 Financial Crisis things should be getting back to normal,
Shilling demonstrates that debt imbalances have not yet returned to normal and are
not likely to do so for another 6-8 years.
Despite sluggish economic growth the recovery from the Great Recession has been
the slowest on record corporations have for the most part maintained or improved
profit margins through widespread adoption of technology, business process
improvement, and cost cutting. In acting rationally from a micro point of view,
corporations are contributing to stagnating aggregate demand.
Central banks and large-scale asset purchases: in Hotel California11
The Federal Reserves response to the financial crisis (and the response of foreign
central banks as well) was to inject significant liquidity into the banking system
through so-called large scale asset purchases, or quantitative easing. The Federal
Reserves balance sheet expanded to approximately $3.5 trillion as it purchased large
amounts of mortgage-backed securities and treasury securities. After talking about the
need to normalize interest rates for over a year, in late 2015 the Federal Reserve began
the process of increasing interest rates by paying banks higher interest rates on excess
reserves in short, paying them not to lend. A 25 basis point increase in short-term
interest rates in late 2015 appears to have contributed to a further collapse in
commodity prices, widening high yield spreads, and a near 10% correction in the
equity market. We believe that when the Fed started quantitative easing, it entered
Hotel California. As the classic Eagles song concludes, you can check out any time
you like, but you can never leave.
It now appears with 20-20 hindsight that the excess liquidity provided by the Federal
Reserve contributed to a massive amount of dollar borrowing in emerging markets to
invest in commodity production to support debt-fueled industrial capacity in China.
According to one estimate, emerging markets account for approximately 45% of global
11

This discussion is a tribute to the late, great Eagles musician Glenn Frey, who passed away earlier this year at
the age of 67.
18

capital spending,12 half of which is commodity-related. The Bank for International

Settlements estimates that there is $9.8 trillion of U.S. dollar-denominated debt
outstanding from non-U.S. borrowers. One of our advisors speculated that of this ~$10
trillion short position in the U.S. dollar, about $2 trillion is in China, $3 trillion is in the
commodity complex, and $5 trillion is somewhere else. As the world scrambles for
U.S. dollars, the currency continued to appreciate in 2015, while world GDP
denominated in U.S. dollars actually contracted by 5% last year13. Theres gonna be a
heartache tonight, a heartache tonight, I know. Already Russia, Brazil, and much of
Latin America is in or near recession. Europe is growing modestly, but its banks no
doubt have much of the exposure to emerging markets.
The economic expansion, now over six years old, can only be described as a tequila
sunrise, as the hangover from the debt-fueled housing and then commodity boom
continues to suppress economic activity. We agree with several observers that the
Federal Reserve will be forced to back off from its stated goal of interest rate
normalization, as the massive short squeeze in the U.S. dollar and commodity
complex runs its course.
The Federal Reserve, with its dual mandate of full employment and price stability, has
been trying to move inflation up to 2%, while at the same time it is worried that a
tighter labor market will lead to increased inflationary pressure. In 2015, the CPI
increased 0.7% and excluding food and energy the increase was 2.1%. Interestingly,
the prices of most items are falling, but services which include shelter, medical care
and transportation in particular increased 2.9% in 2015. Although real wages
increased 2.5% last year, this increase was not enough for the average household to
keep up with its rent, take care of its health, and pay transportation costs. To the extent
there has been inflation, it appears to have emerged in asset prices, health care costs,
and the real estate complex.
While the Federal Reserve is no doubt well-intentioned when it says it is concerned
that a tight labor market will lead to unwanted inflation, we believe that the reality is
that the Federal Reserve in particular wants to raise interest rates to prove that it can.
Some have speculated that the Federal Reserve also wants to raise interest rates
because with a strengthening U.S. dollar it is easier for the U.S. Government to attract
the funds necessary to fund the issuance of treasury securities as foreign central banks
are selling. Certainly we dont know the truth. But as the song says, you cant hide
those lyin eyes.
12
13

Source: Michael Goldstein, Empirical Research Partners.

Source: A.G. van Bergeijk
19

There is a significant risk that if the Federal Reserve continues to raise interest rates in
response to what appears to be a steadily improving U.S. employment market, the U.S.
dollar will continue to strengthen, exacerbating economic challenges elsewhere in the
world. We hope they decide to take it easy.
Energy markets likely to remain challenging
Because we have two private investments in the energy industry, we spend a lot of time
thinking about the outlook for the energy complex. Fundamentally we agree with one
of our advisors14 who says that when it comes to predicting oil prices, nobody knows
nuttin Nevertheless, heres how we see it at this point.
Unlike past oil price crashes, the current situation appears to have been the result of
excess supply rather than a collapse in demand. It is certainly possible of course that
policymakers could drive the world economy into a contraction, in which case there
will be a demand problem as well. But so far this does not appear to have happened.
The success of U.S. shale producers and geopolitical factors have resulted in the global
oil complex producing roughly 1.6 million barrels per day of excess supply, or about
2% of demand. Demand continues to grow despite global economic growth of 3% or
less, and was up 1.8 million barrels per day in 2015 according to the IEA. As a result of
these supply and demand trends, OECD inventories are about 10% above their longterm averages. This is the first time in recent history that oil prices have dropped and
there has not been a supply response from OPEC. In early 2016, oil prices were below
$30 a barrel, which is approaching the average cash cost of non-OPEC producers.
In 2016, analysts at Bernstein Research project global demand growth at about
1.5 million barrels per day, while non-OPEC supply is projected to fall by 0.7 mm
barrels per day. Although OPEC continues to produce full out there is little spare
capacity in OPEC and financial strains on major OPEC producers are evident. Because
this is a long-cycle business, a recovery in oil prices is unlikely to be quick.
Geopolitical aspects of oil supply add to the uncertainty. Daniel Yergin has succinctly
described the situation as a battle for market share representing a geopolitical
struggle between Saudi Arabia and Iran. He goes on to note that in 1974, Iran supplied
10% of the worlds oil production and Saudi Arabia supplied 14%. In 2015 Iran
supplied 3%, while Saudi Arabia supplied 11%. With a fiscal deficit of ~20% of its
GDP, Saudi Arabia is paying a high price for maintaining market share.
14

Michael Goldstein, Empirical Research Partners.

20

Because all non-OPEC producers are losing money at this point, capital investment is
plummeting. According to Wood MacKensie Ltd., $380 billion of investment in 68
major upstream projects have been delayed since the oil price crash. These projects had
an average breakeven price of $62/barrel and account in the aggregate for 27 billion of
reserves. OPEC itself expects non-OPEC supply to decline by 660,000 barrels in 2016,
but Iran of course is coming back to market post-sanctions.
Although the timing is difficult, if not impossible to predict, we continue to believe that
oil prices will be significantly higher in 2-3 years. Our investment in Stranded Oil
Resources Corporation gives us a call option on higher oil prices in the future.
Alleghanys investment strategy
Because we have to maintain a large fixed income portfolio that is, for the most part,
funded by (re)insurance reserves, we believe that our business model is inherently
well-positioned to maintain value in a deflationary environment. The average quality of
our fixed income portfolio at the end of 2015 was AA-, and the duration of the
portfolio was 4.6 years.
If we had a high level of conviction that deflation was going to dominate the global
economic outlook, we would probably eliminate most of our equity exposure and, to
the extent allowed, extend the duration of our bond portfolio by adding long-term
government bonds. Unfortunately, things arent that simple. A move to a highly
defensive posture would cost us income in the short-term and would only pay-off if
there is a massive reset that would present us with the opportunity to redeploy funds
at more attractive returns.
There are likely to be policy responses to deflationary pressures, and although investors
worry that central banks are out of ammo, they are not (yet) completely powerless.
Moreover, for industries and companies that are able to grow and maintain
profitability, the present value of their future cash flows increases significantly in a low
interest rate environment. The problem, of course, is that the universe of companies
with these characteristics is not a large number.
We do believe that the world is moving toward investment markets that will be
characterized by very low real and nominal returns on both fixed income and equity
securities due to a combination of high valuations and slow economic growth. Our goal
is to maintain a balanced position that will lock-in as much income as possible, while
intelligently re-deploying capital into businesses (or share repurchases) that will add to
economic value for Alleghany stockholders.
21

Alleghany Capital Corporation

Alleghany Capital oversees our private capital investments in non-financial companies.
Our strategy is to invest in closely-held businesses with meaningful cash generative
capabilities, where the owners and managers are seeking a long-term home for their
businesses or patient capital to support growth. In addition, Alleghany Capital has
made growth capital investments in more speculative ventures where we believe
entrepreneurs have high-return opportunities. A brief update on each of Alleghany
Capitals major investments is shown below:

15

Bourn & Koch is a Rockford, Illinois based manufacturer of precision machine

tools with a complementary spare parts and service business. Alleghany
purchased an 80% interest in Bourn & Koch in 2012 and increased its position
to approximately 88% in December 2015. In 2015, Bourn & Koch experienced a
slowdown in revenue as weakness in the industrial sector slowed capital
equipment purchases and the expected delivery of several machines in backlog
slipped to 2016. As a result, the companys backlog entering 2016 is higher than
it was entering 2015. The company continues to generate strong free cash flow
and as of the end of 2015 we had received cumulative cash distributions
(including tax distributions) of $24.8 million in comparison to a gross
investment (excluding deal expenses) of $55.0 million. In 2015, the company
produced EBITDA of $5.9 million (vs. $6.4 million in 2014), of which our 80%
share15 was $4.7 million.

R.C. Tway Company (Kentucky Trailer), based in Louisville, Kentucky, is

the leading manufacturer of custom trailer and truck bodies for the moving and
storage industry and other niche markets. At the end of 2015, Alleghany owned
approximately 80% of the common equity of Kentucky Trailer. In October 2015
Kentucky Trailer completed its third acquisition since Alleghany made its
investment, purchasing Smit Mobile Equipment B. V. This acquisition,
following the acquisition of Advanced Mobility in 2014, has made Kentucky
Trailer a leading global manufacturer of mobile medical imaging trailers. Our
cumulative gross investment in Kentucky Trailer was approximately $42.6
million at the end of the year. In 2015, including 3 months of results from the
Smit acquisition, Kentucky Trailer generated EBITDA of $12.3 million (vs.
$8.3 million in 2014) of which our share was $9.9 million.

Jazwares is a Sunrise, Florida based toy company in which Alleghany acquired

a 30% interest in July 2014. Jazwares continues to combine toy industry

Our ownership position increased on 12/31/15.

22

expertise with new media savvy, launching the highly innovative JazWings
platform, an online brand incubator, and the TubeHeroes product line, a line of
toys based on YouTube celebrities, in 2015. We acquired our interest for
approximately $60.3 million (excluding transaction fees) and have received
$13.4 million in cash distributions (including tax distributions) since our initial
investment. In 2015, Jazwares produced EBITDA of $35.8 million (vs.
approximately $41.3 million in 2014) with the growth in new brands such as
Peppa Pig and TubeHeroes offset by some mature brands natural decline and
start-up spending on the new JazWings platform. Our share of 2015 EBITDA
was $10.7 million.

IPS-Integrated Project Services (IPS), which is headquartered in Blue Bell,

Pennsylvania, delivers technical consulting, design and engineering,
construction management, and commissioning, qualification and validation
services, primarily for highly complex research and production facilities
operated by the global pharmaceutical and biotechnology industries. Alleghany
purchased approximately 84% of IPS in October 2015. In 2015, IPS generated
EBITDA (excluding acquisition expenses and adjustments) of $16.5 million.
Because we only owned 84% of IPS during the seasonally slow months of
November and December 2015, our share of the companys EBITDA was $1.3
million. IPS is entering 2016 with a significantly larger backlog than last year.

Stranded Oil Resources Corporation was formed in 2011 to acquire legacy oil
fields and apply innovative enhanced oil recovery techniques. After completing
construction of its underground facility in 2014, Stranded Oil commenced its
drilling program in 2015. The drilling program, however, was delayed by
third-party equipment problems that have since been corrected as well as a
longer than expected trial-and-error process determining the optimum well
completion technique for the reservoir. After the delays encountered in 2015, we
expect production to commence in 2016. We have an economic interest of
approximately 80% of Stranded Oil and have invested approximately $245.2
million in the company as of the end of 2015, including the January 2015
purchase of the Teapot Dome Oilfield from the U.S. Department of Energy for
$45.2 million and purchase of conventional oil and gas acreage in Louisiana. In
2015, Stranded Oil had negative EBITDA of $19.7 million as a result of
(i) delays in the Fredonia drilling program and (ii) the significant decline in oil
prices which overwhelmed production increases and the pace of cost cutting at
Stranded Oils conventional oil fields.

23

ORX Exploration is a Louisiana-based oil and gas exploration company in

which Alleghany owns a 40% interest. The company has secured and developed
a number of on-shore, sub-salt oil and gas resource opportunities called the
Louisiana Heritage Play. ORX continues to pursue multiple options to develop
the Louisiana Heritage Play with outside industry partners, but was challenged
in 2015 by the decline in oil and natural gas prices, which has significantly
reduced capital budgets across the industry. At the end of 2015, we carried our
investment in ORX at zero.
*****

24

Board of Directors Changes

In 2016 Alleghany will be losing two directors due to the boards mandatory retirement
policy based on age. Stephen Bradley, who joined the Alleghany board in 2012 with
the TransRe acquisition, has been a valuable advisor during the past four years,
especially when it comes to matters of strategy. Tom Johnson, who has been a director
of Alleghany for 20 years, has made contributions too numerous to name. I want to
thank Stephen and Tom for their advice and counsel over the years and wish them well
in their future endeavors.
Outlook
Over the past two years, Alleghanys book value per share has increased by $73.06 per
share, or 17.7%, solidly within our 7-10% long-term annual growth objective. With
over $18 billion of cash and invested assets, our ability to grow book value per share
depends in part on our ability to generate returns on these assets.
As I have noted in prior years, the world economy appears to be transitioning to a
slower growth, deflationary environment. Factors contributing to deflation include
world economies in a debtors prison; excess capacity in commodity markets;
deteriorating demographics in OECD countries as well as China; automation and
robotics eliminating jobs; technology allowing for capitalism to be replaced by the
sharing economy; and a continued lack of income growth for the vast majority of the
country, in part a result of highly concentrated savings. In such an environment, it is
possible that our growth will depend on capital reallocation and the effect of deflation
on our $10 billion of net loss reserves.
Despite the sluggish macroeconomic environment and soft (re)insurance markets, our
objective continues to be to grow Alleghanys book value per share by 7% to 10% per
year over the long-term. In times past this may not have seemed like a lofty goal; in
todays world, we will have to work both hard and smart to get there.

Yours sincerely,

Weston M. Hicks
President
25

Comment on Non-GAAP Financial Measures

Our analysis of our financial condition and results of operations is based on our consolidated financial statements
which have been prepared in accordance with accounting principles generally accepted in the United States, or
GAAP. Our results of operations have been presented in the way that we believe will be the most meaningful
and useful to investors, analysts, rating agencies and others who use financial information in evaluating our
performance. This presentation includes the use of adjusted earnings before interest, taxes, depreciation and
amortization expense, or Adjusted EBITDA, which is a non-GAAP financial measure for certain of our
non-insurance operating subsidiaries and investments, as such term is defined in Item 10(e) of Regulation S-K
promulgated by the SEC. Adjusted EBITDA represents other income less certain other expenses, and does not
include: (1) depreciation expense; (2) amortization of intangible assets; (3) interest expense; (4) certain
acquisition accounting impacts; (5) certain adjustments related to our investment in Jazwares; (6) net investment
income; (7) net realized capital gains; and (8) other than temporary impairment. We use Adjusted EBITDA as a
supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the
performance of certain of our non-insurance operating subsidiaries and investments, and believe that Adjusted
EBITDA provides useful additional information to investors regarding performance. A reconciliation of Adjusted
EBITDA to earnings before income taxes is provided below for 2015 and 2014.
2015
Corporate
Activities

Total
Segments

2014
Consolidated

Corporate
Activities

Total
Segments

Consolidated

($ in millions)
Revenues (expenses) for Corporate Activities:
EBITDA for Bourn & Koch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
EBITDA for Kentucky Trailer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alleghanys share of EBITDA for its investment in Jazwares . . . . . . . . . . . . . . .
EBITDA for IPS (commencing October 31, 2015) . . . . . . . . . . . . . . . . . . . . . . .
EBITDA for SORC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EBITDA for SORC, Bourn & Koch, Kentucky Trailer, IPS and Alleghanys
investment in Jazwares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: depreciation expense for SORC, Bourn & Koch, Kentucky Trailer and
IPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: amortization of intangible assets for SORC, Bourn & Koch, Kentucky
Trailer and IPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: interest expense for SORC, Bourn & Koch, Kentucky Trailer and IPS . . .
Add: acquisition accounting impacts for SORC, Bourn & Koch, Kentucky
Trailer and IPS(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: earnings before taxes attributable to noncontrolling interest for Bourn &
Koch, Kentucky Trailer and IPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduct: adjustments to equity in earnings of Jazwares(2) . . . . . . . . . . . . . . . . . . .
Subtotal, earnings before incomes taxes of SORC, Bourn & Koch,
Kentucky Trailer, IPS and equity in Jazwares earnings . . . . . . . . . . . .
Add: interest expense for all other entities within corporate activities . . . . . . . .
Add: corporate administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: other income (losses)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal, earnings before incomes taxes of corporate activities . . . . . . . . . . .
Revenues (expenses) for Reinsurance and Insurance Segments:
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than temporary impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions, brokerage and other underwriting expenses . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal, earnings before incomes taxes of total segments . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1)
(2)
(3)

5.9
12.3
10.7
1.3
(19.7)

6.4
8.3
9.0
(15.2)

10.5

8.5

(12.4)

(6.6)

(3.1)
(1.5)

(0.3)
(0.8)

(0.1)

(3.5)

1.9
(0.8)

2.7
(5.8)

(5.5)
(52.0)
(45.6)
(43.0)

(5.8)
(42.4)
(45.8)
12.2

(146.1)
-

$ (146.1)
$ 4,230.3
427.6
242.6
(125.5)
6.5
(2,339.8)
(1,423.9)
(80.4)
(0.9)
5.3
(38.3)

(146.1)

(81.8)
-

903.5
$

903.5

903.5
$

757.4

(81.8)

(81.8)

$ 4,410.6
448.9
230.0
(36.3)
4.0
(2,494.5)
(1,421.3)
(85.7)
(1.3)
6.1
(46.8)
1,013.7
$ 1,013.7

1,013.7
$

931.9

Reflects the increase in the cost of goods sold arising from the valuation of inventory at fair value as of the acquisition date.
Reflects the removal of Alleghanys portion of Jazwares Adjusted EBITDA prior to Alleghanys investment on July 31, 2014 (applicable for 2014), and
adjustments for depreciation, amortization and interest expense.
Includes other revenues less other operating expenses, amortization of intangible assets and interest expense associated with Alleghany Properties and
Alleghany Capital Corporations other private capital investments and subsidiaries, among others, and investment activity for Alleghany Corporation.

26