Playing the Long Game: An Interview with Weston Hicks, CEO of Alleghany Corporation
Hicks takes questions from attendees of his executive seminar at the 45th International Conference.
Weston M. Hicks is President and chief executive officer of Alleghany Corporation, a New York-based holding company whose principal operating businesses are in the commercial property and casualty reinsurance and insurance industries. Mr. Hicks joined Alleghany Corporation in October of 2002 as Executive Vice President, and became CEO in December of 2004.
Weston Hicks fell into the world of insurance after working in commercial banking and being randomly assigned to work in a division that serviced insurance companies. Before he knew it, he was an expert specializing in property and casualty insurance. This December marks 15 years of Hicks serving as the CEO of Alleghany Corporation, and we were fortunate to sit down with him to discuss his journey and insights in the insurance business.
Prior to Hicks first taking up the office of CEO, his predecessor had, in the late 1990’s, essentially divested all of Alleghany’s operating businesses. Alleghany had about $1.3 billion dollars of capital. Of this, only $300 million was in operating businesses while the rest was divided among treasury bonds and securities. One of Hicks’ proudest achievements was reinventing the company. Today, Alleghany has almost $9 billion in equity capital. They also have a division known as Alleghany Capital, which invests in primarily non-financial companies in a variety of industries.
Alleghany touts conservatism as their core philosophy, and thus it is no surprise that decisions are made through a long-term lens. Alleghany Capital is very much a reflection of this sentiment. Hicks explains that when a middle market private business wants to sell itself, a formal auction will be conducted and the companies will take the highest bid - usually from a private equity firm. However, this has not been Alleghany’s strategy. Instead, they look for companies that are willing to negotiate on a principle-to-principle basis and choose Alleghany because they are searching for a long-term, permanent owner that will run their company consistent with their values. Specifically, these values are both community and employee centric, as well as long-term oriented. If those beliefs resonate with owners, then a deal could be on the table.
Unlike other companies who are quick to hop on the latest fads, Alleghany opts for a more cautious approach. Hicks stresses the importance of looking at the durability of a company and avoiding companies with political risk, or risk of disruption. “Pick your disruptor,” he says in reference to the rapidly changing nature of the technology sector. While generally reluctant to buy into tech, Hick acknowledges that there are exceptions. For example, Alleghany invested in Jazwares, an innovative toy company at the intersection of media, tech, and play with product licences in Fortnite and Peppa Pig. Here, it was a bet on the management team and their demonstration that long-term viability rested not only on the nature of the business, but also the people.
This manifests in the company culture as well. Alleghany doesn’t tell its workers when to be in the office and when to leave the office - and this goes for both juniors and seniors in the company. “There’s always been a mindset that we’re playing the long game,” Hicks explains. Indeed, he recounts a time when Alleghany bought a company in California that became unprofitable. The whole process of recruiting and installing a new CEO, supporting a shift in strategy, and eventually divesting it to a good home took 10 years. Hicks thus encourages his employees to take care of their families, see that soccer game, take care of themselves, and do what’s important. But ultimately, remember to “get done what you need to get done.”
In a world that seems to operate at increasingly breakneck speeds, Alleghany’s slower, more measured approach may appear counterintuitive. However, as demonstrated by their success, there is much to be learned from their cautious strategy. With insurance being a fundamental part of the economy, a long-term trajectory is critical - and it takes discipline to see through overhyped trends and find companies that align in principle.
“There’s always been a mindset that we’re playing the long game”