My guest on the show today is Weston Hicks, the CEO of Alleghany Corporation. Alleghany is a Fortune 500, $9.3B market cap company that focuses primarily on the insurance and re-insurance industry. Weston became CEO all the way back in late 2004 and since then, the company has grown its book value significantly and, like a mini-Berkshire Hathaway, has built up an interesting portfolio of non-insurance businesses that includes everything from a machine tool company to a toy company. And the Berkshire parallels don’t end there. Weston is a value investor at heart and is well known for his eclectic shareholder letters where he dives deep into the insurance industry and the capital markets as a whole.

Weston was a key driver of the company’s 2011 transformational merger with TransRe, a deal that established Alleghany as a global insurance powerhouse.

After close to 20 years with the company, Weston will be retiring at the end of this year. So, I thought it would be a great opportunity to talk to Weston before he officially leaves the CEO seat and get his insights and perspectives, on a variety of topics, including:

- His thoughts on what makes a compounder

- The benefits and the setbacks associated with the merger with TransRe

- How to compensate people and establish a competitive advantage within the insurance industry

- The emergence of ESG and how that impacts a company that underwrites catastrophe risks

Click the timestamp to jump to each answer:

3:40 – Introduction and the transformational merger with TransRe

7:50 – Weston’s plan as CEO (why the diversification into reinsurance)

9:50 – What made TransRe such a compelling opportunity

11:30 – The difficulties of M&A and why Alleghany is unique as a company

13:30 – The big surprises from the TransRe deal

14:55 – Looking back on the TransRe transaction 10 years later

17:50 – The impact of new competition moving into reinsurance

20:24 – What makes insurance companies such effective compounders

23:19 – Compensation as a lever for performance

25:40 – The history of Alleghany’s investment strategy

28:11 – How involved the board is in capital allocation

32:00 – Alleghany’s capital allocation strategy, investing North Star, and inevitable missteps

36:20 – Alleghany Capital and family run businesses

40:47 – Growing Alleghany Capital & the insurance business

43:17 – Weston’s approach to growing shareholder wealth

48:30 – Hiring, compensation, and employee retention

52:08 – The emergence of ESG

57:20 – Why Alleghany utilizes special dividends

61:20 – Alleghany’s exceptional stock growth

64:40 – What about Alleghany makes Weston so comfortable stepping away

67:50 – Areas where Alleghany has had to adapt

70:25 – What is the most misunderstood aspect of Alleghany?

To get all the latest updates about the podcast, see who we’ll have on next, as well as watch the video version of the pod, please follow us on twitter at @InoculatedInves and subscribe to the SNN Network YouTube Channel at www.youtube.com/snnwire. 

iTunes: https://apple.co/3xlUvPY

Spotify: https://spoti.fi/3jxkxLl

Each new episode will be available every Tuesday morning on Apple, Spotify and all podcast streaming platforms.

All opinions expressed by your hosts and the podcast guests are solely their own opinions and do not reflect the opinion of Cove Street Capital or any affiliates. This podcast is for informational purposes only, it is not investment advice, and should not be relied upon for any investment decisions. We are not recommending the purchase or sale of any securities. The hosts and guests may be beneficial owners of the securities discussed. You should not assume that the securities discussed are or will be profitable.