10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2019

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

Commission File Number         1-9371

ALLEGHANY CORPORATION

                      (Exact Name of Registrant as Specified in its Charter)

Delaware	51-0283071
State or Other Jurisdiction of Incorporation or Organization	I.R.S. Employer Identification No.
1411 Broadway, 34th Floor, NY, NY	10018
Address of Principal Executive Offices	Zip Code

212-752-1356

Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	Y	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒	Accelerated filer ☐
Non-accelerated filer  ☐	Smaller reporting company  ☐
Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐    No ☒

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.      Yes ☐    No ☐

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

14,430,187 Shares, par value $1.00 per share, as of July 30, 2019

ALLEGHANY CORPORATION

TABLE OF CONTENTS

		Page
PART I
ITEM 1.	Financial Statements		1
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		67
ITEM 4.	Controls and Procedures		69
PART II
ITEM 1.	Legal Proceedings		70
ITEM 1A.	Risk Factors		70
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		70
ITEM 6.	Exhibits		71
SIGNATURES			72

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

	June 30,			December 31,
	2019			2018
	(unaudited)
	($ in thousands, except share amounts)
Assets
Investments:
Securities at fair value:
Equity securities (cost: 2019 – $1,471,057; 2018 – $2,904,496)	$	2,292,803		$	3,572,790
Debt securities (amortized cost: 2019 – $13,756,921; 2018 – $11,895,850)		14,129,577			11,823,968
Short-term investments		1,054,793			893,776
		17,477,173			16,290,534
Commercial mortgage loans		691,437			676,532
Other invested assets		579,018			555,972
Total investments		18,747,628			17,523,038
Cash		824,818			1,038,763
Accrued investment income		101,384			91,913
Premium balances receivable		965,514			842,642
Reinsurance recoverables		1,667,516			1,921,278
Ceded unearned premiums		243,316			221,232
Deferred acquisition costs		502,645			464,546
Property and equipment at cost, net of accumulated depreciation and amortization		202,480			195,243
Goodwill		481,212			455,142
Intangible assets, net of amortization		587,807			553,136
Current taxes receivable		29,628			116,637
Net deferred tax assets		-			164,890
Funds held under reinsurance agreements		729,586			744,057
Other assets		1,272,844			1,012,379
Total assets	$	26,356,378		$	25,344,896
Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
Loss and loss adjustment expenses	$	11,631,798		$	12,250,294
Unearned premiums		2,464,150			2,267,078
Senior Notes and other debt		1,714,652			1,669,039
Reinsurance payable		186,018			168,667
Net deferred tax liabilities		42,868			-
Other liabilities		1,455,406			1,127,346
Total liabilities		17,494,892			17,482,424
Redeemable noncontrolling interests		175,572			169,762
Common stock (shares authorized: 2019 and 2018 – 22,000,000; shares issued: 2019 and 2018 – 17,459,961)		17,460			17,460
Contributed capital		3,608,069			3,612,830
Accumulated other comprehensive income (loss)		151,964			(202,003	)
Treasury stock, at cost (2019 – 3,029,099 shares; 2018 – 2,883,452 shares)		(1,404,627	)		(1,312,939	)
Retained earnings		6,313,048			5,577,362
Total stockholders’ equity attributable to Alleghany stockholders		8,685,914			7,692,710
Total liabilities, redeemable noncontrolling interests and stockholders’ equity	$	26,356,378		$	25,344,896

See accompanying Notes to Unaudited Consolidated Financial Statements.

1

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings and Comprehensive Income

(unaudited)

	Three Months Ended June 30,
	2019			2018
	($ in thousands, except per share amounts)
Revenues
Net premiums earned	$	1,356,008		$	1,236,959
Net investment income		142,745			126,273
Change in the fair value of equity securities		143,660			185,245
Net realized capital gains		12,354			6,462
Other than temporary impairment losses		-			-
Noninsurance revenue		603,906			342,725
Total revenues		2,258,673			1,897,664
Costs and Expenses
Net loss and loss adjustment expenses		796,803			738,210
Commissions, brokerage and other underwriting expenses		444,316			402,083
Other operating expenses		581,474			343,165
Corporate administration		25,967			14,119
Amortization of intangible assets		8,795			5,966
Interest expense		25,129			22,277
Total costs and expenses		1,882,484			1,525,820
Earnings before income taxes		376,189			371,844
Income taxes		71,356			73,440
Net earnings		304,833			298,404
Net earnings attributable to noncontrolling interest		9,374			3,288
Net earnings attributable to Alleghany stockholders	$	295,459		$	295,116
Net earnings	$	304,833		$	298,404
Other comprehensive income (loss):
Change in unrealized gains (losses), net of deferred taxes of $45,881and ($8,853) in 2019 and 2018,      respectively		172,602			(33,305	)
Less: reclassification for net realized capital gains and other than temporary impairments, net of taxes of   ($2,594) and ($1,357) for 2019 and 2018, respectively		(9,760	)		(5,105	)
Change in unrealized currency translation adjustment, net of deferred taxes of $844and ($2,797) for 2019 and   2018, respectively		3,175			(10,523	)
Retirement plans		104			209
Comprehensive income		470,954			249,680
Comprehensive income attributable to noncontrolling interests		9,374			3,288
Comprehensive income attributable to Alleghany stockholders	$	461,580		$	246,392
Basic earnings per share attributable to Alleghany stockholders	$	20.46		$	19.44
Diluted earnings per share attributable to Alleghany stockholders		20.46			19.44

See accompanying Notes to Unaudited Consolidated Financial Statements.

2

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings and Comprehensive Income

(unaudited)

	Six Months Ended June 30,
	2019			2018
	($ in thousands, except per share amounts)
Revenues
Net premiums earned	$	2,653,317		$	2,444,815
Net investment income		265,794			250,399
Change in the fair value of equity securities		536,013			142,596
Net realized capital gains		16,796			50,967
Other than temporary impairment losses		(10,020	)		(511	)
Noninsurance revenue		1,118,029			594,352
Total revenues		4,579,929			3,482,618
Costs and Expenses
Net loss and loss adjustment expenses		1,589,301			1,408,788
Commissions, brokerage and other underwriting expenses		864,442			808,378
Other operating expenses		1,083,892			608,062
Corporate administration		45,336			21,904
Amortization of intangible assets		15,695			11,230
Interest expense		48,660			43,808
Total costs and expenses		3,647,326			2,902,170
Earnings before income taxes		932,603			580,448
Income taxes		179,868			110,862
Net earnings		752,735			469,586
Net earnings attributable to noncontrolling interest		17,049			2,895
Net earnings attributable to Alleghany stockholders	$	735,686		$	466,691
Net earnings	$	752,735		$	469,586
Other comprehensive income (loss):
Change in unrealized gains (losses), net of deferred taxes of $94,630 and ($47,758) in 2019 and 2018,    respectively		355,989			(179,663	)
Less: reclassification for net realized capital gains and other than temporary impairments, net of taxes   of ($1,423) and ($991) for 2019 and 2018, respectively		(5,353	)		(3,726	)
Change in unrealized currency translation adjustment, net of deferred taxes of $608 and ($1,442) for   2019 and 2018, respectively		2,290			(5,423	)
Retirement plans		1,041			(1,113	)
Comprehensive income		1,106,702			279,661
Comprehensive income attributable to noncontrolling interests		17,049			2,895
Comprehensive income attributable to Alleghany stockholders	$	1,089,653		$	276,766
Basic earnings per share attributable to Alleghany stockholders	$	50.88		$	30.53
Diluted earnings per share attributable to Alleghany stockholders		50.82			30.52

See accompanying Notes to Unaudited Consolidated Financial Statements.

3

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Earnings and Comprehensive Income

(unaudited)

	Six Months Ended June 30, 2019
	Common Stock		Contributed Capital			Accumulated Other Comprehensive Income (loss)			Treasury Stock			Retained Earnings		Total Stockholders’ Equity Attributable to Alleghany Shareholders			Redeemable Non- controlling Interest
	($ in thousands, except share amounts)
Balance as of December 31, 2018
(17,459,961 shares of common stock issued; 2,883,452 in treasury)	$	17,460	$	3,612,830		$	(202,003	)	$	(1,312,939	)	$	5,577,362	$	7,692,710		$	169,762
Add (deduct):
Net earnings		-		-			-			-			440,227		440,227			7,675
Other comprehensive income (loss), net of tax:
Retirement plans		-		-			937			-			-		937			-
Change in unrealized appreciation of investments, net		-		-			187,794			-			-		187,794			-
Change in unrealized currency translation adjustment, net		-		-			(885	)		-			-		(885	)		-
Comprehensive income		-		-			187,846			-			440,227		628,073			7,675
Treasury stock repurchase		-		-			-			(80,486	)		-		(80,486	)		-
Other, net		-		(4,176	)		-			366			-		(3,810	)		(1,716	)
Balance as of March 31, 2019
(17,459,961 shares of common stock issued; 3,012,224 in treasury)		17,460		3,608,654			(14,157	)		(1,393,059	)		6,017,589		8,236,487			175,721
Add (deduct):
Net earnings		-		-			-			-			295,459		295,459			9,374
Other comprehensive income (loss), net of tax:
Retirement plans		-		-			104			-			-		104			-
Change in unrealized appreciation of investments, net		-		-			162,842			-			-		162,842			-
Change in unrealized currency translation adjustment, net		-		-			3,175			-			-		3,175			-
Comprehensive income		-		-			166,121			-			295,459		461,580			9,374
Treasury stock repurchase		-		-			-			(12,666	)		-		(12,666	)		-
Other, net		-		(585	)		-			1,098			-		513			(9,523	)
Balance as of June 30, 2019
(17,459,961 shares of common stock issued; 3,029,099 in treasury)	$	17,460	$	3,608,069		$	151,964		$	(1,404,627	)	$	6,313,048	$	8,685,914		$	175,572

	Six Months Ended June 30, 2018
	Common Stock		Contributed Capital			Accumulated Other Comprehensive Income (loss)			Treasury Stock			Retained Earnings			Total Stockholders’ Equity Attributable to Alleghany Shareholders			Redeemable Non- controlling Interest
	($ in thousands, except share amounts)
Balance as of December 31, 2017
(17,459,961 shares of common stock issued; 2,069,461 in treasury)	$	17,460	$	3,612,109		$	618,118		$	(824,906	)	$	5,091,282		$	8,514,063		$	106,530
Add (deduct):
Cumulative effect of adoption of new accounting pronouncements		-		-			(600,508	)		-			600,508			-			-
Net earnings		-		-			-			-			171,575			171,575			(393	)
Other comprehensive income (loss), net of tax:
Retirement plans		-		-			(1,322	)		-			-			(1,322	)		-
Change in unrealized appreciation of investments, net		-		-			(144,979	)		-			-			(144,979	)		-
Change in unrealized currency translation adjustment, net		-		-			5,100			-			-			5,100			-
Comprehensive income		-		-			(141,201	)		-			171,575			30,374			(393	)
Dividends paid		-		-			-			-			(153,967	)		(153,967	)		-
Treasury stock repurchase		-		-			-			(21,268	)		-			(21,268	)		-
Other, net		-		1,521			(29	)		2,677			29			4,198			31,494
Balance as of March 31, 2018
(17,459,961 shares of common stock issued; 2,097,820 in treasury)		17,460		3,613,630			(123,620	)		(843,497	)		5,709,427			8,373,400			137,631
Add (deduct):
Net earnings		-		-			-			-			295,116			295,116			3,288
Other comprehensive income (loss), net of tax:
Retirement plans		-		-			209			-			-			209			-
Change in unrealized appreciation of investments, net		-		-			(38,410	)		-			-			(38,410	)		-
Change in unrealized currency translation adjustment, net		-		-			(10,523	)		-			-			(10,523	)		-
Comprehensive income		-		-			(48,724	)		-			295,116			246,392			3,288
Treasury stock repurchase		-		-			-			(214,835	)		-			(214,835	)		-
Other, net		-		(1,015	)		37			447			(37	)		(568	)		(5,547	)
Balance as of June 30, 2018
(17,459,961 shares of common stock issued; 2,465,282 in treasury)	$	17,460	$	3,612,615		$	(172,307	)	$	(1,057,885	)	$	6,004,506		$	8,404,389		$	135,372

See accompanying Notes to Unaudited Consolidated Financial Statements.

4

ALLEGHANY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
	2019			2018
	($ in thousands)
Cash flows from operating activities
Net earnings	$	752,735		$	469,586
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		56,942			64,510
Change in the fair value of equity securities		(536,013	)		(142,596	)
Net realized capital (gains) losses		(16,796	)		(50,967	)
Other than temporary impairment losses		10,020			511
(Increase) decrease in reinsurance recoverables, net of reinsurance payable		271,113			147,456
(Increase) decrease in premium balances receivable		(122,872	)		(34,643	)
(Increase) decrease in ceded unearned premiums		(22,084	)		(18,282	)
(Increase) decrease in deferred acquisition costs		(38,099	)		(14,897	)
(Increase) decrease in funds held under reinsurance agreements		14,471			(13,318	)
Increase (decrease) in unearned premiums		197,072			97,516
Increase (decrease) in loss and loss adjustment expenses		(618,496	)		(355,757	)
Change in unrealized foreign currency exchange rate losses (gains)		(6,370	)		48,228
Other, net		231,955			(48,172	)
Net adjustments		(579,157	)		(320,411	)
Net cash provided by (used in) operating activities		173,578			149,175
Cash flows from investing activities
Purchases of debt securities		(4,197,740	)		(2,301,614	)
Purchases of equity securities		(134,894	)		(533,842	)
Sales of debt securities		1,876,234			1,667,526
Maturities and redemptions of debt securities		443,555			886,970
Sales of equity securities		1,950,478			269,567
Net (purchases) sales of short-term investments		(156,700	)		104,728
Net (purchases) sales and maturities of commercial mortgage loans		(14,905	)		(37,408	)
(Purchases) sales of property and equipment		(23,942	)		(13,164	)
Purchases of affiliates and subsidiaries, net of cash acquired		(64,084	)		(108,386	)
Other, net		8,842			50,415
Net cash provided by (used in) investing activities		(313,156	)		(15,208	)
Cash flows from financing activities
Treasury stock acquisitions		(93,152	)		(236,103	)
Increase (decrease) in other debt		46,006			38,452
Cash dividends paid		-			(153,967	)
Other, net		(31,344	)		5,317
Net cash provided by (used in) financing activities		(78,490	)		(346,301	)
Effect of foreign exchange rate changes on cash		4,123			(2,818	)
Net increase (decrease) in cash		(213,945	)		(215,152	)
Cash at beginning of period		1,038,763			838,375
Cash at end of period	$	824,818		$	623,223
Supplemental disclosures of cash flow information
Cash paid during period for:
Interest paid	$	48,203		$	42,562
Income taxes paid (refund received)		(20,672	)		22,135

See accompanying Notes to Unaudited Consolidated Financial Statements.

5 

ALLEGHANY CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

1. Summary of Significant Accounting Principles

(a) Principles of Financial Statement Presentation

This Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 of Alleghany Corporation (“Alleghany”).

Alleghany Corporation, a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006.

Although Alleghany’s primary sources of revenues and earnings are its reinsurance and insurance operations and investments, Alleghany also generates revenues and expenses from a diverse portfolio of middle market businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital Corporation (“Alleghany Capital”). Alleghany Capital’s businesses include:

• Precision Cutting Technologies, Inc. (“PCT”), the holding company for Bourn & Koch Inc., a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois;

• R.C. Tway Company, LLC (“Kentucky Trailer”), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets, headquartered in Louisville, Kentucky;

• IPS-Integrated Project Services, LLC (“IPS”), a technical service provider focused on the global pharmaceutical and biotechnology industries, headquartered in Blue Bell, Pennsylvania;

• Jazwares, LLC (together with its affiliates, “Jazwares”), a global toy, entertainment and musical instrument company, headquartered in Sunrise, Florida;

• WWSC Holdings, LLC (“W&W|AFCO Steel”), a structural steel fabricator and erector, headquartered in Oklahoma City, Oklahoma;

• CHECO Holdings, LLC (“Concord”), a hotel management and development company, headquartered in Raleigh, North Carolina; and

• a 45 percent equity interest in Wilbert Funeral Services, Inc. (“Wilbert”), a provider of products and services for the funeral and cemetery industries and precast concrete markets, headquartered in Overland Park, Kansas.

The results of Concord have been included in Alleghany’s consolidated results beginning with its acquisition by Alleghany Capital on October 1, 2018.

In addition, Alleghany owns certain other holding-company investments. Alleghany’s wholly-owned subsidiary Stranded Oil Resources Corporation (“SORC”) is an exploration and production company focused on enhanced oil recovery, headquartered in Golden, Colorado. Alleghany’s wholly-owned subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) owns and manages certain properties in the Sacramento, California region. Alleghany’s public equity investments are managed primarily through Alleghany’s wholly-owned subsidiary Roundwood Asset Management LLC.

Unless the context otherwise requires, references to “Alleghany” include Alleghany together with its subsidiaries.

The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All material inter-company balances and transactions have been eliminated in consolidation.

The portion of stockholders’ equity, net earnings and comprehensive income that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets, the Consolidated Statements of Earnings and Comprehensive Income and the Consolidated Statements of Changes in Stockholders’ Equity as noncontrolling interests. Because all noncontrolling interests have the option to sell their ownership interests to Alleghany in the future (generally through 2024), the portion of stockholders’ equity that is not attributable to Alleghany stockholders is presented on the Consolidated

6

Balance Sheets and the Consolidated Statements of Changes in Stockholders’ Equity as redeemable noncontrolling interests for all periods presented. In addition, Alleghany accretes the redeemable noncontrolling interests up to its future estimated redemption value over the period from the date of issuance to the earliest redemption date. The redemption value of the equity interests is generally based on the respective subsidiary’s earnings in specified periods preceding the redemption date, calculated based on either a specified formula or an independent fair market valuation. During the first six months of 2019, the noncontrolling interests outstanding were approximately as follows: Kentucky Trailer - 23 percent; IPS - 15 percent; Jazwares - 23 percent; W&W|AFCO Steel - 20 percent; and Concord - 15 percent. Prior to April 1, 2019, the noncontrolling interests of PCT were approximately 11 percent. Effective April 1, 2019, all noncontrolling interests of PCT have exercised their options and sold their ownership interests to Alleghany.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Alleghany relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from those reported results to the extent that those estimates and assumptions prove to be inaccurate. Changes in estimates are reflected in the Consolidated Statements of Earnings and Comprehensive Income in the period in which the changes are made.

(b) Other Significant Accounting Principles

Alleghany’s significant accounting principles can be found in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

(c) Recent Accounting Standards

Recently Adopted

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this new guidance in the first quarter of 2018 and has elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on Alleghany.

In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition.

In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. As part of its implementation, Alleghany elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by Alleghany’s lessors for certain of its leases). Alleghany also elected the package of practical expedients under the transition guidance, which allowed Alleghany to not reevaluate existing lease classifications, among others. As of January 1, 2019, Alleghany’s adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) for further information on Alleghany’s leases.

In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price

7

changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. Alleghany adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on Alleghany’s financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s equity securities, and Note 7(b) of this Form 10-Q for further information on accumulated other comprehensive income.

In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material impact on Alleghany’s results of operations and financial condition. See Note 10 of this Form 10-Q for further information on Alleghany’s noninsurance revenue.

Future Application of Accounting Standards

In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an available-for-sale (“AFS”) basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020. Although Alleghany expects to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, it does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s reinsurance recoverables.

In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s goodwill.

In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified

8

disclosures. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition.

2. Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of Alleghany’s consolidated financial instruments as of June 30, 2019 and December 31, 2018:

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)(1)	$	17,477.7	$	17,477.7	$	16,291.3	$	16,291.3
Liabilities
Senior Notes and other debt(2)	$	1,714.7	$	1,882.2	$	1,669.0	$	1,795.5

(1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below.

(2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

The following tables present Alleghany’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of June 30, 2019 and December 31, 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of June 30, 2019
Equity securities:
Common stock	$	2,285.4	$	3.3	$	-	$	2,288.7
Preferred stock		-		-		4.1		4.1
Total equity securities		2,285.4		3.3		4.1		2,292.8
Debt securities:
U.S. Government obligations		-		1,256.5		-		1,256.5
Municipal bonds		-		2,448.3		-		2,448.3
Foreign government obligations		-		783.4		-		783.4
U.S. corporate bonds		-		2,555.8		534.6		3,090.4
Foreign corporate bonds		-		1,291.2		145.9		1,437.1
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)(1)		-		1,915.9		-		1,915.9
Commercial mortgage-backed securities (“CMBS”)		-		788.4		-		788.4
Other asset-backed securities(2)		-		1,449.9		959.7		2,409.6
Total debt securities		-		12,489.4		1,640.2		14,129.6
Short-term investments		-		1,054.8		-		1,054.8
Other invested assets(3)		-		-		0.5		0.5
Total investments (excluding equity method investments and loans)	$	2,285.4	$	13,547.5	$	1,644.8	$	17,477.7
Senior Notes and other debt	$	-	$	1,551.6	$	330.6	$	1,882.2

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	Level 1		Level 2		Level 3		Total
	($ in millions)
As of December 31, 2018
Equity securities:
Common stock	$	3,563.9	$	3.5	$	-	$	3,567.4
Preferred stock		-		-		5.4		5.4
Total equity securities		3,563.9		3.5		5.4		3,572.8
Debt securities:
U.S. Government obligations		-		1,022.4		-		1,022.4
Municipal bonds		-		2,214.7		-		2,214.7
Foreign government obligations		-		947.9		-		947.9
U.S. corporate bonds		-		1,959.6		425.7		2,385.3
Foreign corporate bonds		-		1,226.4		126.9		1,353.3
Mortgage and asset-backed securities:
RMBS(1)		-		1,387.9		-		1,387.9
CMBS		-		533.3		-		533.3
Other asset-backed securities(2)		-		712.3		1,266.9		1,979.2
Total debt securities		-		10,004.5		1,819.5		11,824.0
Short-term investments		-		893.8		-		893.8
Other invested assets(3)		-		-		0.7		0.7
Total investments (excluding equity method investments and loans)	$	3,563.9	$	10,901.8	$	1,825.6	$	16,291.3
Senior Notes and other debt	$	-	$	1,510.5	$	285.0	$	1,795.5

(1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

(2) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method.

In the three and six months ended June 30, 2019, Alleghany transferred into Level 3 $1.3 million and $16.0 million, respectively, of financial instruments, principally due to a decrease in observable inputs related to the valuation of such assets. Specifically, during the first six months of 2019, there was an increase in the weight given to non-binding broker quotes and, as a result, there was a corresponding decrease in quoted prices for similar assets in active markets. Of the $16.0 million of transfers, $14.7 million related to foreign corporate bonds and $1.3 million related to U.S. corporate bonds.

In the three and six months ended June 30, 2019, Alleghany transferred out of Level 3 $13.9 million and $14.9 million, respectively, of financial instruments, principally due to an increase in observable inputs related to the valuation of such assets. Specifically, during the first six months of 2019, there was a decrease in the weight given to non-binding broker quotes and, as a result, there was a corresponding increase in quoted prices for similar assets in active markets. Of the $14.9 million of transfers, $12.1 million related to other asset-backed securities, with the remainder related to other types of debt securities.

There were no other material transfers between Levels 1, 2 or 3 in the six months ended June 30, 2019.

As further described in Note 3(h), on March 15, 2018, most of AIHL’s limited partnership interests in certain subsidiaries of Ares Management LLC (“Ares”) were converted into Ares common units. As a result of the conversion, as of March 15, 2018, $208.2 million of Ares common units, classified as equity securities, was transferred into Level 1, and $58.7 million of Ares limited partnership interests, classified as other invested assets, was transferred into Level 3. On September 24, 2018, AIHL’s remaining $56.9 million of Ares limited partnership interests were converted into Ares common units and, as a result, was transferred out of Level 3 and into Level 1.

In addition to the $58.7 million of Ares-related other invested assets transferred into Level 3, in the three and six months ended June 30, 2018, Alleghany transferred into Level 3 $1.3 million and $5.6 million, respectively, of financial instruments, principally due to a decrease in observable inputs related to the valuation of such assets, specifically, a decrease in non-binding broker quotes. Of the $5.6 million of transfers, $4.3 million related to preferred stock, $1.2 million related to U.S. corporate bonds and $0.1 million related to other invested assets.

In the three and six months ended June 30, 2018, Alleghany transferred out of Level 3 $151.9 million and $153.5 million, respectively, of financial instruments, principally due to an increase in observable inputs related to the valuation of such assets. Specifically, during the first six months

10

of 2018, there was a decrease in the weight given to non-binding broker quotes, and as a result, there was a corresponding increase in quoted prices for similar assets in active markets. Of the $153.5 million of transfers, $150.6 million related to RMBS in the second quarter of 2018, $1.6 million related to CMBS in the first quarter of 2018 and $1.3 million related to U.S. corporate bonds in the second quarter of 2018. 

There were no other material transfers between Levels 1, 2 or 3 in the six months ended June 30, 2018.

The following tables present reconciliations of the changes in Level 3 assets during the six months ended June 30, 2019 and 2018 measured at fair value:

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2019	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2019	$	5.4		$	425.7		$	126.9		$	-		$	1,266.9		$	0.7		$	1,825.6
Net realized/unrealized gains (losses) included in:
Net earnings(2)		(1.6	)		(10.0	)		(0.1	)		-			(0.7	)		(0.2	)		(12.6	)
Other comprehensive income (loss)		-			31.3			5.4			-			20.5			(0.1	)		57.1
Purchases		0.3			90.9			13.9			0.2			56.8			0.1			162.2
Sales		-			-			(5.6	)		-			(300.2	)		-			(305.8	)
Issuances		-			-			-			-			-			-			-
Settlements		-			(3.6	)		(7.7	)		-			(71.5	)		-			(82.8	)
Transfers into Level 3		-			1.3			14.7			-			-			-			16.0
Transfers out of Level 3		-			(1.0	)		(1.6	)		(0.2	)		(12.1	)		-			(14.9	)
Balance as of June 30, 2019	$	4.1		$	534.6		$	145.9		$	-		$	959.7		$	0.5		$	1,644.8

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2018	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			RMBS			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2018	$	1.9		$	260.0		$	75.2		$	161.8		$	1.6		$	1,101.3		$	7.5		$	1,609.3
Net realized/unrealized gains (losses) included in:
Net earnings(2)		-			-			(0.1	)		(0.3	)		-			1.0			1.1			1.7
Other comprehensive income (loss)		0.2			(6.9	)		(2.2	)		(5.3	)		-			(7.7	)		(3.5	)		(25.4	)
Purchases		-			117.3			23.8			-			-			495.1			-			636.2
Sales		(0.1	)		(2.5	)		(1.9	)		(5.6	)		-			(365.7	)		(5.6	)		(381.4	)
Issuances		-			-			-			-			-			-			-			-
Settlements		-			-			-			-			-			-			-			-
Transfers into Level 3		4.3			1.2			-			-			-			-			58.8			64.3
Transfers out of Level 3		-			(1.3	)		-			(150.6	)		(1.6	)		-			-			(153.5	)
Balance as of June 30, 2018	$	6.3		$	367.8		$	94.8		$	-		$	-		$	1,224.0		$	58.3		$	1,751.2

(1) Includes partnership and non-marketable equity investments accounted for at fair value.

(2) There were no other than temporary impairment (“OTTI”) losses recorded in net earnings related to Level 3 assets still held as of June 30, 2019 and 2018.

Net unrealized losses related to Level 3 assets as of June 30, 2019 and December 31, 2018 were not material.

The increase in senior notes and other debt included in Level 3 for the first six months of 2019 primarily reflects increased borrowings at IPS and PCT to fund acquisitions and W&W|AFCO Steel to support working capital needs.

See Note 1(c) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for Alleghany’s accounting policy on fair value. 

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3. Investments

(a) Unrealized Gains and Losses

The following tables present the amortized cost and the fair value of AFS securities as of June 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	1,242.2	$	17.3	$	(3.0	)	$	1,256.5
Municipal bonds		2,335.8		112.6		(0.1	)		2,448.3
Foreign government obligations		759.3		24.6		(0.5	)		783.4
U.S. corporate bonds		2,975.3		120.4		(5.3	)		3,090.4
Foreign corporate bonds		1,403.6		35.3		(1.8	)		1,437.1
Mortgage and asset-backed securities:
RMBS		1,878.3		40.6		(3.0	)		1,915.9
CMBS		766.0		23.0		(0.6	)		788.4
Other asset-backed securities(1)		2,396.4		27.7		(14.5	)		2,409.6
Total debt securities		13,756.9		401.5		(28.8	)		14,129.6
Short-term investments		1,054.8		-		-			1,054.8
Total investments	$	14,811.7	$	401.5	$	(28.8	)	$	15,184.4

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	1,042.4	$	2.4	$	(22.4	)	$	1,022.4
Municipal bonds		2,177.5		44.4		(7.2	)		2,214.7
Foreign government obligations		939.0		12.3		(3.4	)		947.9
U.S. corporate bonds		2,431.4		13.2		(59.3	)		2,385.3
Foreign corporate bonds		1,363.0		9.1		(18.8	)		1,353.3
Mortgage and asset-backed securities:
RMBS		1,392.4		10.3		(14.8	)		1,387.9
CMBS		536.9		2.8		(6.4	)		533.3
Other asset-backed securities(1)		2,013.3		4.4		(38.5	)		1,979.2
Total debt securities		11,895.9		98.9		(170.8	)		11,824.0
Short-term investments		893.8		-		-			893.8
Total investments	$	12,789.7	$	98.9	$	(170.8	)	$	12,717.8

(1) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(b) Contractual Maturity

The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of June 30, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

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	Amortized Cost		Fair Value
	($ in millions)
As of June 30, 2019
Short-term investments due in one year or less	$	1,054.8	$	1,054.8
Mortgage and asset-backed securities(1)		5,040.7		5,113.9
Debt securities with maturity dates:
One year or less		531.0		532.5
Over one through five years		3,377.5		3,443.2
Over five through ten years		2,707.6		2,808.6
Over ten years		2,100.1		2,231.4
Total debt securities	$	13,756.9	$	14,129.6

(1) Mortgage and asset-backed securities by their nature do not generally have single maturity dates.

(c) Net Investment Income

The following table presents net investment income for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Interest income	$	127.2		$	104.8		$	246.5		$	206.8
Dividend income		9.4			22.3			19.2			38.6
Investment expenses		(7.2	)		(6.6	)		(14.7	)		(18.6	)
Pillar Investments(1)		3.3			1.9			4.4			1.9
Limited partnership interests in certain subsidiaries of Ares(1)		-			(0.7	)		-			13.2
Other investment results		10.0			4.6			10.4			8.5
Total	$	142.7		$	126.3		$	265.8		$	250.4

(1) See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares.

As of June 30, 2019, non-income producing invested assets were immaterial.

(d) Change in the Fair Value of Equity Securities

The following table presents changes in the fair value of equity securities for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Change in the fair value of equity securities sold during the period	$	11.8	$	4.4	$	73.9	$	16.0
Change in the fair value of equity securities held at the end of the period		131.9		180.8		462.1		126.6
Change in the fair value of equity securities	$	143.7	$	185.2	$	536.0	$	142.6

In July 2019, Alleghany purchased an equity derivative to hedge the market risk on a significant portion of its consolidated equity portfolio.

(e) Realized Gains and Losses

The proceeds from sales of debt and equity securities were $1.3 billion and $0.8 billion for the three months ended June 30, 2019 and 2018, respectively, and $3.8 billion and $1.9 billion for the six months ended June 30, 2019 and 2018, respectively.  

 

13

Realized capital gains and losses for the three and six months ended June 30, 2019 primarily reflect capital gains and losses from the sale of debt securities.

Realized capital gains and losses for the three months ended June 30, 2018 primarily reflected the sale of debt securities. Realized capital gains and losses for the six months ended June 30, 2018 primarily reflected a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information on this conversion.

The following table presents amounts of gross realized capital gains and gross realized capital losses for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	($ in millions)
Gross realized capital gains	$	13.6		$	6.5	$	25.7		$	66.4
Gross realized capital losses		(1.2	)		-		(8.9	)		(15.4	)
Net realized capital gains	$	12.4		$	6.5	$	16.8		$	51.0

Gross realized capital losses exclude OTTI losses, as discussed below.

(f) OTTI losses

Alleghany holds its debt securities as AFS and, as such, these securities are recorded at fair value. Alleghany continually monitors the difference between amortized cost and the estimated fair value of its debt investments, which involves uncertainty as to whether declines in value are temporary in nature. The analysis of a security’s decline in value is performed in its functional currency. If the decline is deemed temporary, Alleghany records the decline as an unrealized loss in stockholders’ equity. If the decline is deemed to be other than temporary, Alleghany writes its amortized cost-basis down to the fair value of the security and records an OTTI loss on its statement of earnings. In addition, any portion of such decline related to a debt security that is believed to arise from factors other than credit is recorded as a component of other comprehensive income rather than charged against earnings.

Debt securities in an unrealized loss position are evaluated for OTTI if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost for an extended period of time (nine consecutive months or more); (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis.

If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records an OTTI loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the OTTI loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income.

In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities.

OTTI losses in the first six months of 2019 reflect $10.0 million of unrealized losses on debt securities, primarily related to the energy sector, that were deemed to be other than temporary and, as such, were required to be charged against earnings. The determination that unrealized losses on debt securities were other than temporary was primarily due to the deterioration of creditworthiness of the issuer. Of the $10.0 million of OTTI losses, none were incurred in the second quarter of 2019.

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OTTI losses in the first six months of 2018 reflected $0.5 million of unrealized losses on debt securities that were deemed to be other than temporary and, as such, were required to be charged against earnings. Of the $0.5 million of OTTI losses, none were incurred in the second quarter of 2018.

Upon the ultimate disposition of the securities for which OTTI losses have been recorded, a portion of the loss may be recoverable depending on market conditions at the time of disposition. After adjusting the amortized cost basis of securities for the recognition of OTTI losses, the remaining gross unrealized investment losses for debt securities as of June 30, 2019 were deemed to be temporary, based on, among other factors: (i) the duration of time and the relative magnitude to which the fair value of these investments had been below cost were not indicative of an OTTI loss; (ii) the absence of compelling evidence that would cause Alleghany to call into question the financial condition or near-term business prospects of the issuer of the security; and (iii) Alleghany’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery.

Alleghany may ultimately record a realized loss after having originally concluded that the decline in value was temporary. Risks and uncertainties are inherent in the methodology. Alleghany’s methodology for assessing other than temporary declines in value contains inherent risks and uncertainties which could include, but are not limited to, incorrect assumptions about financial condition, liquidity or future prospects, inadequacy of any underlying collateral and unfavorable changes in economic conditions or social trends, interest rates or credit ratings.

(g) Aging of Gross Unrealized Losses

The following tables present gross unrealized losses and related fair values for Alleghany’s AFS securities, grouped by duration of time in a continuous unrealized loss position, as of June 30, 2019 and December 31, 2018: 

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	40.7	$	0.1	$	336.0	$	2.9	$	376.7	$	3.0
Municipal bonds		2.2		-		23.2		0.1		25.4		0.1
Foreign government obligations		33.5		-		76.7		0.5		110.2		0.5
U.S. corporate bonds		121.1		2.6		180.9		2.7		302.0		5.3
Foreign corporate bonds		49.7		0.4		167.8		1.4		217.5		1.8
Mortgage and asset-backed securities:
RMBS		40.9		0.5		212.1		2.5		253.0		3.0
CMBS		18.0		-		19.4		0.6		37.4		0.6
Other asset-backed securities		566.8		6.0		404.7		8.5		971.5		14.5
Total temporarily impaired securities	$	872.9	$	9.6	$	1,420.8	$	19.2	$	2,293.7	$	28.8

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	78.5	$	0.9	$	690.5	$	21.5	$	769.0	$	22.4
Municipal bonds		312.4		2.5		202.5		4.7		514.9		7.2
Foreign government obligations		60.7		0.1		186.7		3.3		247.4		3.4
U.S. corporate bonds		1,187.9		39.4		379.7		19.9		1,567.6		59.3
Foreign corporate bonds		501.5		9.7		349.1		9.1		850.6		18.8
Mortgage and asset-backed securities:
RMBS		397.7		6.4		225.9		8.4		623.6		14.8
CMBS		199.1		1.3		109.5		5.1		308.6		6.4
Other asset-backed securities		1,442.8		36.7		121.6		1.8		1,564.4		38.5
Total temporarily impaired securities	$	4,180.6	$	97.0	$	2,265.5	$	73.8	$	6,446.1	$	170.8

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As of June 30, 2019, Alleghany held a total of 785 debt securities that were in an unrealized loss position, of which 502 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these debt securities consisted of losses related primarily to other asset-backed securities, U.S. corporate bonds, U.S. Government obligations and RMBS.

As of June 30, 2019, the vast majority of Alleghany’s debt securities were rated investment grade, with 3.5 percent of debt securities having issuer credit ratings that were below investment grade or not rated, compared with 4.4 percent as of December 31, 2018.

(h) Investments in Certain Other Invested Assets

In December 2012, TransRe obtained an ownership interest in Pillar Capital Holdings Limited (“Pillar Holdings”), a Bermuda- based insurance asset manager focused on collateralized reinsurance and catastrophe insurance-linked securities. Additionally, TransRe invested $175.0 million and AIHL invested $25.0 million in limited partnership funds managed by Pillar Holdings (the “Funds”). The objective of the Funds is to create portfolios with attractive risk-reward characteristics and low correlation with other asset classes, using the extensive reinsurance and capital market experience of the principals of Pillar Holdings. Alleghany has concluded that both Pillar Holdings and the Funds (collectively, the “Pillar Investments”) represent variable interest entities and that Alleghany is not the primary beneficiary, as it does not have the ability to direct the activities that most significantly impact each entity’s economic performance. Therefore, the Pillar Investments are not consolidated and are accounted for under the equity method of accounting. Alleghany’s potential maximum loss in the Pillar Investments is limited to its cumulative net investment. As of June 30, 2019, Alleghany’s carrying value in the Pillar Investments, as determined under the equity method of accounting, was $198.0 million, which is net of returns of capital received from the Pillar Investments.

In July 2013, AIHL invested $250.0 million in Ares, an asset manager, in exchange for a 6.25 percent equity stake in Ares, with an agreement to engage Ares to manage up to $1.0 billion in certain investment strategies. In May 2014, Ares completed an initial public offering of its common units. Upon completion of the initial public offering, Alleghany’s equity investment in Ares converted into limited partnership interests in certain Ares subsidiaries that were convertible into Ares common units. On March 15, 2018, most of AIHL’s limited partnership interests were converted into Ares common units. As a result of the conversion and with respect to the limited partnership interests that were converted into Ares common units, AIHL: (i) reclassified its converted interests from other invested assets to equity securities; (ii) increased its carrying value to $208.2 million to reflect the fair value of Ares common units; and (iii) recorded the $45.7 million increase in carrying value as a realized capital gain as of March 15, 2018. As a result of the conversion and with respect to the unconverted limited partnership interests, AIHL: (i) changed its accounting method from the equity method to fair value; (ii) increased its carrying value to $58.7 million to reflect the fair value of Ares limited partnership interests; and (iii) recorded the $12.9 million increase in carrying value as a component of net investment income as of March 15, 2018. On September 24, 2018, AIHL’s remaining Ares limited partnership interests were converted into Ares common units and, as a result, AIHL reclassified the remaining $56.9 million of its converted interests from other invested assets to equity securities. In the second quarter of 2019, AIHL sold all of its remaining holdings of Ares common units.

(i) Investments in Commercial Mortgage Loans

As of June 30, 2019, the carrying value of Alleghany’s commercial mortgage loan portfolio was $691.4 million, representing the unpaid principal balance on the loans. As of June 30, 2019, there was no allowance for loan losses. The commercial mortgage loan portfolio consists primarily of first mortgages on commercial properties in major metropolitan areas in the U.S. The loans earn interest at fixed- and floating-rates, mature in two to ten years from loan origination and the principal amounts of the loans were no more than approximately two-thirds of the property’s appraised value at the time the loans were made.

4. Reinsurance Ceded

Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite in order to reduce the effect of individual or aggregate exposure to losses, manage capacity, protect capital resources, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and enable them to increase gross premium writings and risk capacity without requiring additional capital. Alleghany’s reinsurance and insurance subsidiaries purchase reinsurance and retrocessional coverages from highly- rated third-party reinsurers. If the assuming reinsurers are unable or unwilling to meet the obligations assumed under the applicable reinsurance agreements, Alleghany’s reinsurance and insurance subsidiaries would remain liable for such reinsurance portion not paid by these reinsurers. As such, funds, trust agreements and letters of credit are held to collateralize a portion of Alleghany’s reinsurance recoverables and Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite or assume with multiple reinsurance programs.

TransRe enters into retrocession arrangements, including property catastrophe retrocession arrangements, in order to reduce the effect of individual or aggregate exposure to losses, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and increase gross premium writings and risk capacity without requiring additional capital.

RSUI reinsures its property lines of business through a program consisting of surplus share treaties, facultative placements, per risk and catastrophe excess of loss treaties. RSUI’s catastrophe reinsurance program and property per risk reinsurance program run on an annual basis from May 1 to the following April 30 and portions expired on April 30, 2019. Both programs were renewed on May 1, 2019 with substantially similar terms as the expired programs.

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5. Liability for Loss and LAE

(a) Liability Rollforward

The following table presents the activity in the liability for loss and LAE in the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019			2018
	($ in millions)
Reserves as of January 1	$	12,250.3		$	11,871.3
Less: reinsurance recoverables(1)		1,857.4			1,650.1
Net reserves as of January 1		10,392.9			10,221.2
Other adjustments		(1.4	)		2.0
Incurred loss and LAE, net of reinsurance, related to:
Current year		1,683.3			1,546.7
Prior years		(94.0	)		(137.9	)
Total incurred loss and LAE, net of reinsurance		1,589.3			1,408.8
Paid loss and LAE, net of reinsurance, related to:(2)
Current year		248.0			237.6
Prior years		1,651.5			1,366.1
Total paid loss and LAE, net of reinsurance		1,899.5			1,603.7
Foreign currency exchange rate effect		(6.6	)		(24.2	)
Net reserves as of June 30		10,074.7			10,004.1
Reinsurance recoverables as of June 30(1)		1,557.1			1,511.4
Reserves as of June 30	$	11,631.8		$	11,515.5

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.

(2) Includes paid losses, net of reinsurance, related to commutations.

Gross loss and LAE reserves as of June 30, 2019 decreased from December 31, 2018, primarily reflecting payments on catastrophe losses incurred in prior years and, to a lesser extent, favorable prior accident year loss reserve development.

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(b) Liability Development

The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Reinsurance Segment
Property:
Catastrophe events	$	(9.9	)(1)	$	5.1	(2)	$	(1.5	)(3)	$	(25.3	)(4)
Non-catastrophe		(6.3	)(5)		(18.8	)(6)		(25.4	)(7)		(29.8	)(6)
Total		(16.2	)		(13.7	)		(26.9	)		(55.1	)
Casualty & other:
Malpractice Treaties (8)		(1.4	)		(3.4	)		(1.4	)		(3.4	)
Other		(27.2	) (9)		(33.6	)(10)		(52.9	)(11)		(63.8	)(12)
Total		(28.6	)		(37.0	)		(54.3	)		(67.2	)
Total Reinsurance Segment		(44.8	)		(50.7	)		(81.2	)		(122.3	)
Insurance Segment
RSUI:
Casualty		(12.1	)(13)		(1.5	)(14)		(17.7	)(13)		(12.5	)(14)
Property and other		(0.4	)		0.1			1.5	(15)		-
Total		(12.5	)		(1.4	)		(16.2	)		(12.5	)
CapSpecialty		0.7	(16)		(0.1	)		3.4	(17)		(3.1	)(18)
Total incurred related to prior years	$	(56.6	)	$	(52.2	)	$	(94.0	)	$	(137.9	)

(1) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year.

(2) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricane Maria in the 2017 accident year, partially offset by favorable prior accident year loss reserve development related to Hurricane Harvey in the 2017 accident year and catastrophes in the 2016 accident year.

(3) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year.

(4) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Harvey and Maria in the 2017 accident year and catastrophes in the 2016 accident year.

(5) Primarily reflects favorable prior accident year loss reserve development in the 2018 accident year.

(6) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years.

(7) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

(8) Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

(9) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years.

(10) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2015 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(11) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years and the shorter-tailed lines of business in the 2012 through 2014 accident years.

(12) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2016 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(13) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

(14) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in recent accident years.

(15) Primarily reflects unfavorable prior accident year loss reserve development related to the assumed property reinsurance lines of business from catastrophe losses in recent accident years, partially offset by favorable prior accident year loss reserve development related to Superstorm Sandy in the 2012 accident year and by Hurricane Harvey in the 2017 accident year.

(16) Primarily reflects unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2016 accident year.

(17) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years.

(18) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years.

 

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6. Income Taxes

The effective tax rate on earnings before income taxes for the first six months of 2019 was 19.3 percent, compared with 19.1 percent for the first six months of 2018. The slight increase in the effective tax rate in the first six months of 2019 from the first six months of 2018 primarily reflects lower tax-exempt interest income arising from municipal bond securities, lower dividends received-deductions and higher state income taxes.

Alleghany believes that, as of June 30, 2019, it had no material uncertain tax positions. Interest and penalties related to unrecognized tax expenses (benefits) are recognized in income tax expense, when applicable. There were no material liabilities for interest or penalties accrued as of June 30, 2019.

7. Stockholders’ Equity

(a) Common Stock Repurchases

In November 2015, the Alleghany Board of Directors authorized the repurchase of shares of common stock of Alleghany, par value $1.00 per share (“Common Stock”), at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2015 Repurchase Program”). In June 2018, the Alleghany Board of Directors authorized, upon the completion of the 2015 Repurchase Program, the repurchase of additional shares of Common Stock, at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2018 Repurchase Program”). In the fourth quarter of 2018, Alleghany completed the 2015 Repurchase Program and subsequent repurchases have been made pursuant to the 2018 Repurchase Program. As of June 30, 2019, Alleghany had $178.3 million remaining under its share repurchase authorization.

The following table presents the shares of Common Stock that Alleghany repurchased in the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares repurchased		19,246		368,551		148,813		403,623
Cost of shares repurchased (in millions)	$	12.7	$	214.8	$	93.2	$	236.1
Average price per share repurchased	$	658.09	$	582.92	$	625.96	$	584.96

(b) Accumulated Other Comprehensive Income (Loss)

The following tables present a reconciliation of the changes during the six months ended June 30, 2019 and 2018 in accumulated other comprehensive income (loss) attributable to Alleghany stockholders:

	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2019	$	(61.6	)	$	(124.7	)	$	(15.7	)	$	(202.0	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		356.0			2.3			1.1			359.4
Reclassifications from accumulated other comprehensive income		(5.4	)		-			-			(5.4	)
Total		350.6			2.3			1.1			354.0
Balance as of June 30, 2019	$	289.0		$	(122.4	)	$	(14.6	)	$	152.0

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	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2018	$	718.2		$	(84.6	)	$	(15.5	)	$	618.1
Cumulative effect of adoption of new accounting pronouncements(1):
Reclassification of net unrealized gains on equity securities, net of tax		(735.6	)		-			-			(735.6	)
Reclassification of stranded taxes		156.6			(18.2	)		(3.3	)		135.1
Total		(579.0	)		(18.2	)		(3.3	)		(600.5	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		(179.7	)		(5.4	)		(1.1	)		(186.2	)
Reclassifications from accumulated other comprehensive income		(3.7	)		-			-			(3.7	)
Total		(183.4	)		(5.4	)		(1.1	)		(189.9	)
Balance as of June 30, 2018	$	(44.2	)	$	(108.2	)	$	(19.9	)	$	(172.3	)

(1) See Note 1(c) of this Form  10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act.

The following table presents reclassifications out of accumulated other comprehensive income attributable to Alleghany stockholders during the three and six months ended June 30, 2019 and 2018:

		Three Months Ended						Six Months Ended
Accumulated Other		June 30,						June 30,
Comprehensive Income Component	Line in Consolidated Statement of Earnings	2019			2018			2019			2018
					($ in millions)
Unrealized appreciation of investments:	Net realized capital gains(1)	$	(12.4	)	$	(6.5	)	$	(16.8	)	$	(5.3	)
	Other than temporary impairment losses		-			-			10.0			0.5
	Income taxes		2.6			1.4			1.4			1.1
Total reclassifications:	Net earnings	$	(9.8	)	$	(5.1	)	$	(5.4	)	$	(3.7	)

(1) For the six month period ended June 30, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information.

(c) Special Dividend

In February 2018, the Alleghany Board of Directors declared a special dividend of $10.00 per share for stockholders of record on March 5, 2018. On March 15, 2018, Alleghany paid dividends to stockholders totaling $154.0 million.

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8. Earnings Per Share of Common Stock

The following table presents a reconciliation of the earnings and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions, except share amounts)
Net earnings available to Alleghany stockholders	$	295.5	$	295.1	$	735.7	$	466.7
Effect of dilutive securities		-		-		-		-
Income available to common stockholders for diluted earnings per share	$	295.5	$	295.1	$	735.7	$	466.7
Weighted average common shares outstanding applicable to basic earnings per share		14,439,545		15,180,075		14,460,400		15,284,679
Effect of dilutive securities		-		-		14,960		4,915
Adjusted weighted average common shares outstanding applicable to diluted earnings per share		14,439,545		15,180,075		14,475,360		15,289,594
Contingently issuable shares(1)						46,973		57,766

(1) Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation.

9. Commitments and Contingencies

(a) Legal Proceedings

Certain of Alleghany’s subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. In the opinion of management, such provisions are adequate, and management does not believe that any pending litigation will have a material adverse effect on Alleghany’s consolidated results of operations, financial position or cash flows.

(b) Leases

Alleghany and its subsidiaries lease certain facilities, land, furniture and equipment under long-term, non-cancelable lease agreements that expire at various dates through 2038. Most of Alleghany’s leases relate to office facilities. Alleghany’s lease agreements do not contain any material restrictive covenants and are substantially all considered to be operating leases.

Lease expense was $9.7 million and $21.8 million in the three and six months ended June 30, 2019, respectively. The following table presents Alleghany’s consolidated lease liabilities and right-of-use lease assets related to operating leases as of June 30, 2019:

	As of June 30, 2019
Maturity of lease payments, by year	($ in millions)
1 year or less		$	37.9
More than 1 year to 2 years			34.9
More than 2 years to 3 years			30.9
More than 3 years to 4 years			26.6
More than 4 years to 5 years			25.6
More than 5 years			155.3
Total lease payments(1)		$	311.2
Less: interest(2)			66.6
Lease liabilities(3)		$	244.6
Right-of-use lease assets(4)		$	216.2
Prepaid lease assets, net of lease allowances and incentives			28.4
		$	244.6

(1) As of June 30, 2019, the weighted average lease term was approximately 12 years.

(2) As of June 30, 2019, the weighted average discount rate was approximately 5 percent.

(3) Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet.

(4) Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet.

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(c) Energy Holdings

As of June 30, 2019, Alleghany had holdings in energy sector businesses of $416.1 million, comprised of $323.9 million of debt securities, $5.4 million of equity securities and $86.8 million of Alleghany’s equity attributable to SORC.   

10. Segments of Business

(a) Overview

Alleghany’s segments are reported in a manner consistent with the way management evaluates the businesses. As such, Alleghany classifies its businesses into three reportable segments – reinsurance, insurance and Alleghany Capital.

Reinsurance and insurance underwriting activities are evaluated separately from investment and other activities. Segment accounting policies are described in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

The reinsurance segment consists of property and casualty reinsurance operations conducted by TransRe’s reinsurance operating subsidiaries and is further reported through two major product lines – property and casualty & other. TransRe provides property and casualty reinsurance to insurers and other reinsurers through brokers and on a direct basis to ceding companies. TransRe writes a modest amount of property and casualty insurance business, which is included in the reinsurance segment. A significant portion of the premiums earned by TransRe’s operations are generated by offices located in Canada, Europe, Asia, Australia, Africa and those serving Latin America and the Caribbean. Although the majority of the premiums earned by these offices typically relate to the regions where they are located, a significant portion may be derived from other regions of the world, including the U.S. In addition, although a significant portion of the assets and liabilities of these foreign offices generally relate to the countries where ceding companies and reinsurers are located, most investments are located in the country of domicile of these offices.

The insurance segment consists of property and casualty insurance operations conducted in the U.S. by AIHL through its insurance operating subsidiaries RSUI and CapSpecialty. RSUI also writes a modest amount of assumed reinsurance business, which is included in the insurance segment.

The Alleghany Capital segment consists of industrial operations, non-industrial operations and corporate operations at the Alleghany Capital level. Industrial operations are conducted through PCT, Kentucky Trailer, W&W|AFCO Steel and a 45 percent equity interest in Wilbert. Non-industrial operations are conducted through IPS, Jazwares and Concord.

On October 1, 2018, Alleghany Capital acquired approximately 85 percent of the equity in Concord for $136.6 million, consisting of $68.6 million in cash paid on October 1, 2018, $38.2 million of potential contingent consideration based on future profitability and $29.8 million of incremental debt. In connection with the acquisition, Alleghany recorded $83.0 million of goodwill and $70.8 million of finite-lived intangible assets related primarily to customer relationships.

On February 7, 2018, W&W|AFCO Steel acquired the outstanding equity of Hirschfeld Holdings, LP (“Hirschfeld”), a fabricator of steel bridges and structural steel for stadiums, airports and other large commercial and industrial projects, for $109.1 million, consisting of $94.4 million in cash and $14.7 million of incremental debt. The $94.4 million paid by W&W|AFCO Steel was funded by capital contributions from Alleghany and noncontrolling interests of $75.5 million and $18.9 million, respectively. In connection with the acquisition, Alleghany recorded $3.0 million of goodwill and $9.4 million of finite-lived intangible assets related primarily to customer relationships.

Corporate activities are not classified as a segment. The primary components of corporate activities are Alleghany Properties, SORC and activities at the Alleghany parent company.

In addition, corporate activities include interest expense associated with the senior notes issued by Alleghany, whereas interest expense associated with senior notes issued by TransRe is included in “Total Segments” and interest expense associated with other debt is included in Alleghany Capital. Information related to the senior notes and other debt can be found in Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

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(b) Results

The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three and six months ended June 30, 2019 and 2018:

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)		Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	381.6	$	829.1	$	1,210.7	$	372.4	$	93.8	$	466.2	$	1,676.9	$	-	$	1,676.9	$	(6.1	)	$	1,670.8
Net premiums written		305.9		807.0		1,112.9		246.9		86.7		333.6		1,446.5		-		1,446.5		-			1,446.5
Net premiums earned		303.2		771.7		1,074.9		202.4		78.7		281.1		1,356.0		-		1,356.0		-			1,356.0
Net loss and LAE		136.2		508.9		645.1		105.6		46.1		151.7		796.8		-		796.8		-			796.8
Commissions, brokerage and other underwriting expenses		103.8		250.1		353.9		57.9		32.5		90.4		444.3		-		444.3		-			444.3
Underwriting profit(4)	$	63.2	$	12.7	$	75.9	$	38.9	$	0.1	$	39.0		114.9		-		114.9		-			114.9
Net investment income														138.3		0.9		139.2		3.5			142.7
Change in the fair value of equity securities														143.3		-		143.3		0.4			143.7
Net realized capital gains														12.2		0.2		12.4		-			12.4
Other than temporary impairment losses														-		-		-		-			-
Noninsurance revenue														6.6		593.7		600.3		3.6			603.9
Other operating expenses														26.2		548.3		574.5		7.0			581.5
Corporate administration														1.8		-		1.8		24.2			26.0
Amortization of intangible assets														0.4		8.4		8.8		-			8.8
Interest expense														6.8		4.7		11.5		13.6			25.1
Earnings (losses) before income taxes													$	380.1	$	33.4	$	413.5	$	(37.3	)	$	376.2

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2018	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)			Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	345.1	$	726.6	$	1,071.7	$	318.8	$	88.7	$	407.5	$	1,479.2	$	-		$	1,479.2	$	(6.5	)	$	1,472.7
Net premiums written		275.9		700.7		976.6		216.9		82.3		299.2		1,275.8		-			1,275.8		-			1,275.8
Net premiums earned		292.1		689.2		981.3		184.7		71.0		255.7		1,237.0		-			1,237.0		-			1,237.0
Net loss and LAE		153.5		440.0		593.5		105.7		39.0		144.7		738.2		-			738.2		-			738.2
Commissions, brokerage and other underwriting expenses		94.8		223.2		318.0		53.7		30.4		84.1		402.1		-			402.1		-			402.1
Underwriting profit(4)	$	43.8	$	26.0	$	69.8	$	25.3	$	1.6	$	26.9		96.7		-			96.7		-			96.7
Net investment income														121.1		1.4			122.5		3.8			126.3
Change in the fair value of equity securities														146.8		-			146.8		38.4			185.2
Net realized capital gains														6.8		(0.1	)		6.7		(0.2	)		6.5
Other than temporary impairment losses														-		-			-		-			-
Noninsurance revenue														4.7		329.0			333.7		9.0			342.7
Other operating expenses														19.9		314.5			334.4		8.8			343.2
Corporate administration														0.8		-			0.8		13.3			14.1
Amortization of intangible assets														0.2		5.8			6.0		-			6.0
Interest expense														6.9		2.3			9.2		13.1			22.3
Earnings before income taxes													$	348.3	$	7.7		$	356.0	$	15.8		$	371.8

	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	796.7	$	1,645.6	$	2,442.3	$	671.4	$	176.6	$	848.0	$	3,290.3		$	-	$	3,290.3		$	(12.9	)	$	3,277.4
Net premiums written		622.1		1,598.4		2,220.5		448.3		163.3		611.6		2,832.1			-		2,832.1			-			2,832.1
Net premiums earned		612.1		1,492.0		2,104.1		394.8		154.4		549.2		2,653.3			-		2,653.3			-			2,653.3
Net loss and LAE		298.8		999.5		1,298.3		199.9		91.1		291.0		1,589.3			-		1,589.3			-			1,589.3
Commissions, brokerage and other underwriting expenses		207.5		482.4		689.9		111.4		63.1		174.5		864.4			-		864.4			-			864.4
Underwriting profit(4)	$	105.8	$	10.1	$	115.9	$	83.5	$	0.2	$	83.7		199.6			-		199.6			-			199.6
Net investment income														256.3			2.2		258.5			7.3			265.8
Change in the fair value of equity securities														532.4			-		532.4			3.6			536.0
Net realized capital gains														16.2			0.6		16.8			-			16.8
Other than temporary impairment losses														(10.0	)		-		(10.0	)		-			(10.0	)
Noninsurance revenue														12.0			1,098.7		1,110.7			7.3			1,118.0
Other operating expenses														55.8			1,013.8		1,069.6			14.3			1,083.9
Corporate administration														2.8			-		2.8			42.5			45.3
Amortization of intangible assets														0.6			15.1		15.7			-			15.7
Interest expense														13.6			9.0		22.6			26.1			48.7
Earnings (losses) before income taxes													$	933.7		$	63.6	$	997.3		$	(64.7	)	$	932.6

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	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2018	Property		Casualty  & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	742.3	$	1,445.0	$	2,187.3	$	593.4	$	163.2	$	756.6	$	2,943.9		$	-	$	2,943.9		$	(12.4	)	$	2,931.5
Net premiums written		581.0		1,392.7		1,973.7		403.8		151.7		555.5		2,529.2			-		2,529.2			-			2,529.2
Net premiums earned		567.2		1,374.3		1,941.5		365.6		137.7		503.3		2,444.8			-		2,444.8			-			2,444.8
Net loss and LAE		250.1		882.8		1,132.9		202.6		73.3		275.9		1,408.8			-		1,408.8			-			1,408.8
Commissions, brokerage and other underwriting expenses		187.9		452.1		640.0		107.2		61.2		168.4		808.4			-		808.4			-			808.4
Underwriting profit(4)	$	129.2	$	39.4	$	168.6	$	55.8	$	3.2	$	59.0		227.6			-		227.6			-			227.6
Net investment income														239.4			3.0		242.4			8.0			250.4
Change in the fair value of equity securities														132.7			-		132.7			9.9			142.6
Net realized capital gains														50.7			0.5		51.2			(0.2	)		51.0
Other than temporary impairment losses														(0.5	)		-		(0.5	)		-			(0.5	)
Noninsurance revenue														10.4			571.7		582.1			12.3			594.4
Other operating expenses														37.0			554.4		591.4			16.7			608.1
Corporate administration														0.5			-		0.5			21.4			21.9
Amortization of intangible assets														-			11.2		11.2			-			11.2
Interest expense														13.6			3.6		17.2			26.6			43.8
Earnings (losses) before income taxes													$	609.2		$	6.0	$	615.2		$	(34.7	)	$	580.5

(1) Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit.

(2) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments.

(3) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(4) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance.

(c) Identifiable Assets and Equity

The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets and equity attributable to Alleghany for Alleghany’s reportable segments and for corporate activities as of June 30, 2019:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	16,874.0	$	13,462.7	$	5,321.7
Insurance segment		7,122.3		5,535.2		3,096.5
Subtotal		23,996.3		18,997.9		8,418.2
Alleghany Capital		1,880.5		134.7		879.9
Total segments		25,876.8		19,132.6		9,298.1
Corporate activities		479.6		439.8		(612.2	)
Consolidated	$	26,356.4	$	19,572.4	$	8,685.9

The debt associated with Alleghany Capital’s operating subsidiaries totaled $330.6 million and $284.5 million as of June 30, 2019 and December 31, 2018, respectively, and is generally used to support working capital needs and to help finance acquisitions. As of June 30, 2019, the $330.6 million includes:

• $113.1 million of borrowings by W&W|AFCO Steel under its available credit facilities and term loans (including borrowings incurred and assumed from its acquisition of Hirschfeld);

• $64.0 million of term loans at Kentucky Trailer primarily related to borrowings to finance small acquisitions, including its acquisition of a controlling interest in a certain manufacturer of aluminum feed transportation equipment in December 2018, and borrowings under its available credit facilities;

• $51.5 million of borrowings by IPS under its available credit facility and term loans, in part to finance a small acquisition in May 2019;

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• $35.4 million of borrowings by Jazwares under its available credit facility;

• $33.4 million of term loans at Concord primarily related to borrowings to finance Alleghany Capital’s acquisition of Concord; and

• $33.2 million of term loans at PCT primarily related to borrowings to finance the acquisition of a waterjet orifice and nozzle manufacturer in 2016 and the acquisition of a consumable cutting tool manufacturer in June 2019.

None of these liabilities are guaranteed by Alleghany or Alleghany Capital.

(d) Alleghany Capital Noninsurance Revenue

For Alleghany Capital’s industrial and non-industrial operations, noninsurance revenue consists of the sale of manufactured goods and services. The following table presents noninsurance revenue for the Alleghany Capital segment for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Industrial(1)	$	318.3	$	221.9	$	578.4	$	367.4
Non-Industrial(2)		275.1		107.1		520.0		204.2
Corporate & other		0.3		-		0.3		0.1
Alleghany Capital	$	593.7	$	329.0	$	1,098.7	$	571.7

(1) For the three and six months ended June 30, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

(2) For the three and six months ended June 30, 2019, approximately 77 percent and 72 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. For the three and six months ended June 30, 2018, approximately 70 percent of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is a discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2019 and 2018. This discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, or this “Form 10-Q,” and our audited consolidated financial statements and Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the Annual Report on Form 10-K for the year ended December 31, 2018, or the “2018 Form 10-K.” This discussion contains forward-looking statements that involve risks and uncertainties and that are not historical facts, including statements about our beliefs and expectations. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and particularly under the headings “Risk Factors,” “Business” and “Note on Forward-Looking Statements” contained in Item 1A, Item 1, and Part I of the 2018 Form 10-K, respectively.

References in this Form 10-Q to the “Company,” “Alleghany,” “we,” “us,” and “our” refer to Alleghany Corporation and its consolidated subsidiaries unless the context otherwise requires. In addition, unless the context otherwise requires, references to

• “TransRe” are to our wholly-owned reinsurance holding company subsidiary Transatlantic Holdings, Inc. and its subsidiaries;

• “AIHL” are to our wholly-owned insurance holding company subsidiary Alleghany Insurance Holdings LLC;

• “RSUI” are to our wholly-owned subsidiary RSUI Group, Inc. and its subsidiaries;

• “CapSpecialty” are to our wholly-owned subsidiary CapSpecialty, Inc. and its subsidiaries;

• “AIHL Re” are to our wholly-owned subsidiary AIHL Re LLC;

• “Roundwood” are to our wholly-owned subsidiary Roundwood Asset Management LLC;

• “SORC” are to our wholly-owned subsidiary Stranded Oil Resources Corporation and its subsidiaries;

• “Alleghany Capital” are to our wholly-owned subsidiary Alleghany Capital Corporation and its subsidiaries;

• “PCT” are to our wholly-owned subsidiary Precision Cutting Technologies, Inc. and its subsidiaries (including Bourn & Koch, Inc.);

• “Kentucky Trailer” are to our majority-owned subsidiary R.C. Tway Company, LLC and its subsidiaries;

• “IPS” are to our majority-owned subsidiary IPS-Integrated Project Services, LLC and its subsidiaries;

• “Jazwares” are to our majority-owned subsidiary Jazwares, LLC and its subsidiaries and affiliates;

• “W&W|AFCO Steel” are to our majority-owned subsidiary WWSC Holdings, LLC and its subsidiaries;

• “Concord” are to our majority-owned subsidiary CHECO Holdings, LLC and its subsidiaries; and

• “Alleghany Properties” are to our wholly-owned subsidiary Alleghany Properties Holdings LLC and its subsidiaries.

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Note on Forward-Looking Statements

Certain statements contained in this Form 10-Q may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “may,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “potential,” “should” or the negative versions of those words or other comparable words. Forward-looking statements do not relate solely to historical or current facts, rather they are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. These statements are not guarantees of future performance. These forward-looking statements are based upon Alleghany’s current expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and Alleghany’s future financial condition and results. Factors that could cause these forward-looking statements to differ, possibly materially, from that currently contemplated include:

• significant weather-related or other natural or man-made catastrophes and disasters;

• the cyclical nature of the property and casualty reinsurance and insurance industries;

• changes in market prices of our significant equity investments and changes in value of our debt securities portfolio;

• adverse loss development for events insured by our reinsurance and insurance subsidiaries in either the current year or prior years;

• the long-tail and potentially volatile nature of certain casualty lines of business written by our reinsurance and insurance subsidiaries;

• the cost and availability of reinsurance;

• the reliance by our reinsurance and insurance operating subsidiaries on a limited number of brokers;

• legal, political, judicial and regulatory changes;

• increases in the levels of risk retention by our reinsurance and insurance subsidiaries;

• changes in the ratings assigned to our reinsurance and insurance subsidiaries;

• claims development and the process of estimating reserves;

• exposure to terrorist acts and acts of war;

• the willingness and ability of our reinsurance and insurance subsidiaries’ reinsurers to pay reinsurance recoverables owed to our reinsurance and insurance subsidiaries;

• the uncertain nature of damage theories and loss amounts;

• the loss of key personnel of our reinsurance or insurance operating subsidiaries;

• fluctuation in foreign currency exchange rates;

• the failure to comply with the restrictive covenants contained in the agreements governing our indebtedness;

• the ability to make payments on, or repay or refinance, our debt;

• risks inherent in international operations; and

• difficult and volatile conditions in the global market.

Additional risks and uncertainties include general economic and political conditions, including the effects of a prolonged U.S. or global economic downturn or recession; changes in costs; variations in political, economic or other factors; risks relating to conducting operations in a competitive environment; effects of acquisition and disposition activities, inflation rates, or recessionary or expansive trends; changes in interest rates; extended labor disruptions, civil unrest, or other external factors over which we have no control; changes in our plans, strategies, objectives, expectations, or intentions, which may happen at any time at our discretion; and other factors discussed in the 2018 Form 10-K and subsequent filings with the Securities and Exchange Commission, or the “SEC.” All forward-looking statements speak only as of the date they are made and are based on information available at that time. Alleghany does not undertake any obligation to update or revise any forward-looking statements to reflect subsequent circumstances or events. See Part I, Item 1A, “Risk Factors” of the 2018 Form 10-K for additional information. 

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Comment on Non-GAAP Financial Measures

Throughout this Form 10-Q, 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 U.S., 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 underwriting profit and operating earnings before income taxes, which are “non-GAAP financial measures,” as such term is defined in Item 10(e) of Regulation S-K promulgated by the SEC. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP. These measures may also be different from non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes. A discussion of our calculation and use of these financial measures is provided below.

Underwriting profit is a non-GAAP financial measure for our reinsurance and insurance segments. Underwriting profit represents net premiums earned less net loss and loss adjustment expenses, or “LAE,” and commissions, brokerage and other underwriting expenses, all as determined in accordance with GAAP and does not include: (i) net investment income; (ii) change in the fair value of equity securities; (iii) net realized capital gains; (iv) other than temporary impairment, or “OTTI” losses; (v) noninsurance revenue; (vi) other operating expenses; (vii) corporate administration; (viii) amortization of intangible assets; and (ix) interest expense. We use underwriting profit as a supplement to earnings before income taxes, the most comparable GAAP financial measure, to evaluate the performance of our reinsurance and insurance segments and believe that underwriting profit provides useful additional information to investors because it highlights net earnings attributable to our reinsurance and insurance segments’ 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. A reconciliation of underwriting profit to earnings before income taxes is presented within “Consolidated Results of Operations.”

Operating earnings before income taxes is a non-GAAP financial measure for our Alleghany Capital segment. Operating earnings before income taxes represents noninsurance revenue and net investment income less other operating expenses and interest expense, 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 (v) income taxes. Because operating earnings before income taxes excludes amortization of intangible assets, change in the fair value of equity securities, net realized capital gains, OTTI losses and income taxes, it provides an indication of economic performance that is not affected by levels of effective tax rates or levels of amortization resulting from acquisition accounting. We use operating 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 our noninsurance operating subsidiaries and investments. A reconciliation of operating earnings before income taxes to earnings before income taxes is presented within “Consolidated Results of Operations.”

28

Overview

The following overview does not address all of the matters covered in the other sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations or contain all of the information that may be important to our stockholders or the investing public. This overview should be read in conjunction with the other sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

• Net earnings attributable to Alleghany stockholders were $295.5 million in the second quarter of 2019, compared with $295.1 million in the second quarter of 2018, and were $735.7 million in the first six months of 2019, compared with $466.7 million in the first six months of 2018.

• Net investment income increased by 13.0 percent and 6.2 percent in the second quarter and first six months of 2019, respectively, from the corresponding 2018 periods.

• Net premiums written increased by 13.4 percent and 12.0 percent in the second quarter and first six months of 2019, respectively, from the corresponding 2018 periods.

• Underwriting profit was $114.9 million in the second quarter of 2019, compared with $96.7 million in the second quarter of 2018, and $199.6 million in the first six months of 2019, compared with $227.6 million in the first six months of 2018.

• The combined ratio for our reinsurance and insurance segments was 91.6 percent in the second quarter of 2019, compared with 92.2 percent in the second quarter of 2018, and 92.5 percent in the first six months of 2019, compared with 90.7 percent in the first six months of 2018.

• Catastrophe losses, net of reinsurance, were $16.3 million in the second quarter of 2019, compared with $14.3 million in the second quarter of 2018, and $19.6 million in the first six months of 2019, compared with $18.4 million in the first six months of 2018.

• Net favorable prior accident year loss reserve development was $56.6 million in the second quarter of 2019, compared with $52.2 million in the second quarter of 2018, and $94.0 million in the first six months of 2019, compared with $137.9 million in the first six months of 2018.

• Noninsurance revenue for Alleghany Capital was $593.7 million in the second quarter of 2019, compared with $329.0 million in the second quarter of 2018, and $1,098.7 million in the first six months of 2019, compared with $571.7 million in the first six months of 2018.

• Earnings before income taxes for Alleghany Capital were $33.4 million in the second quarter of 2019, compared with $7.7 million in the second quarter of 2018, and $63.6 million in the first six months of 2019, compared with $6.0 million in the first six months of 2018. Operating earnings before income taxes were $41.6 million in the second quarter of 2019, compared with $13.6 million in the second quarter of 2018, and $78.1 million in the first six months of 2019, compared with $16.7 million in the first six months of 2018.

As of June 30, 2019, we had total assets of $26.4 billion and total stockholders’ equity attributable to Alleghany stockholders of $8.7 billion. As of June 30, 2019, we had consolidated total investments of approximately $18.7 billion, consisting of $14.1 billion invested in debt securities, $2.3 billion invested in equity securities, $1.0 billion invested in short-term investments, $0.7 billion invested in commercial mortgage loans and $0.6 billion invested in other invested assets.

29

Consolidated Results of Operations

The following table presents our consolidated revenues, costs and expenses and earnings:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Revenues
Net premiums earned	$	1,356.0	$	1,237.0	$	2,653.3	$	2,444.8
Net investment income		142.7		126.3		265.8		250.4
Change in the fair value of equity securities		143.7		185.2		536.0		142.6
Net realized capital gains		12.4		6.5		16.8		51.0
Other than temporary impairment losses		-		-		(10.0)		(0.5)
Noninsurance revenue		603.9		342.7		1,118.0		594.4
Total revenues		2,258.7		1,897.7		4,579.9		3,482.7
Costs and Expenses
Net loss and loss adjustment expenses		796.8		738.2		1,589.3		1,408.8
Commissions, brokerage and other underwriting expenses		444.3		402.1		864.4		808.4
Other operating expenses		581.5		343.2		1,083.9		608.1
Corporate administration		26.0		14.1		45.3		21.9
Amortization of intangible assets		8.8		6.0		15.7		11.2
Interest expense		25.1		22.3		48.7		43.8
Total costs and expenses		1,882.5		1,525.9		3,647.3		2,902.2
Earnings before income taxes		376.2		371.8		932.6		580.5
Income taxes		71.3		73.4		179.9		110.9
Net earnings		304.9		298.4		752.7		469.6
Net earnings attributable to noncontrolling interests		9.4		3.3		17.0		2.9
Net earnings attributable to Alleghany stockholders	$	295.5	$	295.1	$	735.7	$	466.7

30

Alleghany’s segments are reported in a manner consistent with the way management evaluates the businesses. As such, Alleghany classifies its businesses into three reportable segments – reinsurance, insurance and Alleghany Capital. Alleghany determined that Alleghany Capital qualified as a reportable segment in the first quarter of 2018, reflecting the increased significance of Alleghany Capital’s business to Alleghany and its projected growth. Corporate activities are not classified as a segment.

See Note 10 to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional detail on our segments and corporate activities. The tables below present the results for our segments and for corporate activities for the three and six months ended June 30, 2019 and 2018:

	Segments
Three Months Ended June 30, 2019	Reinsurance Segment			Insurance Segment			Subtotal			Alleghany   Capital(1)		Total Segments			Corporate   Activities(2)			Consolidated
	($ in millions)
Gross premiums written	$	1,210.7		$	466.2		$	1,676.9		$	-	$	1,676.9		$	(6.1	)	$	1,670.8
Net premiums written		1,112.9			333.6			1,446.5			-		1,446.5			-			1,446.5
Net premiums earned		1,074.9			281.1			1,356.0			-		1,356.0			-			1,356.0
Net loss and LAE:
Current year (excluding catastrophe losses)		689.9			147.2			837.1			-		837.1			-			837.1
Current year catastrophe losses		-			16.3			16.3			-		16.3			-			16.3
Prior years		(44.8	)		(11.8	)		(56.6	)		-		(56.6	)		-			(56.6	)
Total net loss and LAE		645.1			151.7			796.8			-		796.8			-			796.8
Commissions, brokerage and other underwriting expenses		353.9			90.4			444.3			-		444.3			-			444.3
Underwriting profit(3)	$	75.9		$	39.0			114.9			-		114.9			-			114.9
Net investment income								138.3			0.9		139.2			3.5			142.7
Change in the fair value of equity securities								143.3			-		143.3			0.4			143.7
Net realized capital gains								12.2			0.2		12.4			-			12.4
Other than temporary impairment losses								-			-		-			-			-
Noninsurance revenue								6.6			593.7		600.3			3.6			603.9
Other operating expenses								26.2			548.3		574.5			7.0			581.5
Corporate administration								1.8			-		1.8			24.2			26.0
Amortization of intangible assets								0.4			8.4		8.8			-			8.8
Interest expense								6.8			4.7		11.5			13.6			25.1
Earnings (losses) before income taxes							$	380.1		$	33.4	$	413.5		$	(37.3	)	$	376.2
Loss ratio(4):
Current year (excluding catastrophe losses)		64.2	%		52.4	%		61.8	%
Current year catastrophe losses		-	%		5.8	%		1.2	%
Prior years		(4.2	%)		(4.2	%)		(4.2	%)
Total net loss and LAE		60.0	%		54.0	%		58.8	%
Expense ratio(5)		32.9	%		32.2	%		32.8	%
Combined ratio(6)		92.9	%		86.2	%		91.6	%

31

	Segments
Three Months Ended June 30, 2018	Reinsurance Segment			Insurance Segment			Subtotal			Alleghany   Capital(1)			Total Segments			Corporate   Activities(2)			Consolidated
	($ in millions)
Gross premiums written	$	1,071.7		$	407.5		$	1,479.2		$	-		$	1,479.2		$	(6.5	)	$	1,472.7
Net premiums written		976.6			299.2			1,275.8			-			1,275.8			-			1,275.8
Net premiums earned		981.3			255.7			1,237.0			-			1,237.0			-			1,237.0
Net loss and LAE:
Current year (excluding catastrophe losses)		644.2			131.9			776.1			-			776.1			-			776.1
Current year catastrophe losses		-			14.3			14.3			-			14.3			-			14.3
Prior years		(50.7	)		(1.5	)		(52.2	)		-			(52.2	)		-			(52.2	)
Total net loss and LAE		593.5			144.7			738.2			-			738.2			-			738.2
Commissions, brokerage and other underwriting expenses		318.0			84.1			402.1			-			402.1			-			402.1
Underwriting profit(3)	$	69.8		$	26.9			96.7			-			96.7			-			96.7
Net investment income								121.1			1.4			122.5			3.8			126.3
Change in the fair value of equity securities								146.8			-			146.8			38.4			185.2
Net realized capital gains								6.8			(0.1	)		6.7			(0.2	)		6.5
Other than temporary impairment losses								-			-			-			-			-
Noninsurance revenue								4.7			329.0			333.7			9.0			342.7
Other operating expenses								19.9			314.5			334.4			8.8			343.2
Corporate administration								0.8			-			0.8			13.3			14.1
Amortization of intangible assets								0.2			5.8			6.0			-			6.0
Interest expense								6.9			2.3			9.2			13.1			22.3
Earnings before income taxes							$	348.3		$	7.7		$	356.0		$	15.8		$	371.8
Loss ratio(4):
Current year (excluding catastrophe losses)		65.6	%		51.6	%		62.7	%
Current year catastrophe losses		-	%		5.6	%		1.2	%
Prior years		(5.2	%)		(0.6	%)		(4.2	%)
Total net loss and LAE		60.4	%		56.6	%		59.7	%
Expense ratio(5)		32.4	%		32.9	%		32.5	%
Combined ratio(6)		92.8	%		89.5	%		92.2	%

32

	Segments
Six Months Ended June 30, 2019	Reinsurance Segment			Insurance Segment			Subtotal			Alleghany   Capital(1)		Total Segments			Corporate   Activities(2)			Consolidated
	($ in millions)
Gross premiums written	$	2,442.3		$	848.0		$	3,290.3		$	-	$	3,290.3		$	(12.9	)	$	3,277.4
Net premiums written		2,220.5			611.6			2,832.1			-		2,832.1			-			2,832.1
Net premiums earned		2,104.1			549.2			2,653.3			-		2,653.3			-			2,653.3
Net loss and LAE:
Current year (excluding catastrophe losses)		1,379.5			284.2			1,663.7			-		1,663.7			-			1,663.7
Current year catastrophe losses		-			19.6			19.6			-		19.6			-			19.6
Prior years		(81.2	)		(12.8	)		(94.0	)		-		(94.0	)		-			(94.0	)
Total net loss and LAE		1,298.3			291.0			1,589.3			-		1,589.3			-			1,589.3
Commissions, brokerage and other underwriting expenses		689.9			174.5			864.4			-		864.4			-			864.4
Underwriting profit(3)	$	115.9		$	83.7			199.6			-		199.6			-			199.6
Net investment income								256.3			2.2		258.5			7.3			265.8
Change in the fair value of equity securities								532.4			-		532.4			3.6			536.0
Net realized capital gains								16.2			0.6		16.8			-			16.8
Other than temporary impairment losses								(10.0	)		-		(10.0	)		-			(10.0	)
Noninsurance revenue								12.0			1,098.7		1,110.7			7.3			1,118.0
Other operating expenses								55.8			1,013.8		1,069.6			14.3			1,083.9
Corporate administration								2.8			-		2.8			42.5			45.3
Amortization of intangible assets								0.6			15.1		15.7			-			15.7
Interest expense								13.6			9.0		22.6			26.1			48.7
Earnings (losses) before income taxes							$	933.7		$	63.6	$	997.3		$	(64.7	)	$	932.6
Loss ratio(4):
Current year (excluding catastrophe losses)		65.6	%		51.7	%		62.7	%
Current year catastrophe losses		-	%		3.6	%		0.7	%
Prior years		(3.9	%)		(2.3	%)		(3.5	%)
Total net loss and LAE		61.7	%		53.0	%		59.9	%
Expense ratio(5)		32.8	%		31.8	%		32.6	%
Combined ratio(6)		94.5	%		84.8	%		92.5	%

33

	Segments
Six Months Ended June 30, 2018	Reinsurance Segment			Insurance Segment			Subtotal			Alleghany   Capital(1)		Total Segments			Corporate   Activities(2)			Consolidated
	($ in millions)
Gross premiums written	$	2,187.3		$	756.6		$	2,943.9		$	-	$	2,943.9		$	(12.4	)	$	2,931.5
Net premiums written		1,973.7			555.5			2,529.2			-		2,529.2			-			2,529.2
Net premiums earned		1,941.5			503.3			2,444.8			-		2,444.8			-			2,444.8
Net loss and LAE:
Current year (excluding catastrophe losses)		1,255.2			273.1			1,528.3			-		1,528.3			-			1,528.3
Current year catastrophe losses		-			18.4			18.4			-		18.4			-			18.4
Prior years		(122.3	)		(15.6	)		(137.9	)		-		(137.9	)		-			(137.9	)
Total net loss and LAE		1,132.9			275.9			1,408.8			-		1,408.8			-			1,408.8
Commissions, brokerage and other underwriting expenses		640.0			168.4			808.4			-		808.4			-			808.4
Underwriting profit(3)	$	168.6		$	59.0			227.6			-		227.6			-			227.6
Net investment income								239.4			3.0		242.4			8.0			250.4
Change in the fair value of equity securities								132.7			-		132.7			9.9			142.6
Net realized capital gains								50.7			0.5		51.2			(0.2	)		51.0
Other than temporary impairment losses								(0.5	)		-		(0.5	)		-			(0.5	)
Noninsurance revenue								10.4			571.7		582.1			12.3			594.4
Other operating expenses								37.0			554.4		591.4			16.7			608.1
Corporate administration								0.5			-		0.5			21.4			21.9
Amortization of intangible assets								-			11.2		11.2			-			11.2
Interest expense								13.6			3.6		17.2			26.6			43.8
Earnings (losses) before income taxes							$	609.2		$	6.0	$	615.2		$	(34.7	)	$	580.5
Loss ratio(4):
Current year (excluding catastrophe losses)		64.7	%		54.3	%		62.5	%
Current year catastrophe losses		-	%		3.6	%		0.8	%
Prior years		(6.3	%)		(3.1	%)		(5.7	%)
Total net loss and LAE		58.4	%		54.8	%		57.6	%
Expense ratio(5)		33.0	%		33.5	%		33.1	%
Combined ratio(6)		91.4	%		88.3	%		90.7	%

(1) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(2) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(3) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets and interest expense. Underwriting profit is a non-GAAP financial measure and does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. See “Comment on Non-GAAP Financial Measures” herein for additional detail on the presentation of our results of operations.

(4) The loss ratio is derived by dividing the amount of net loss and LAE by net premiums earned, all as determined in accordance with GAAP.

(5) The expense ratio is derived by dividing the amount of commissions, brokerage and other underwriting expenses by net premiums earned, all as determined in accordance with GAAP.

(6) The combined ratio is the sum of the loss ratio and the expense ratio, all as determined in accordance with GAAP. The combined ratio represents the percentage of each premium dollar a reinsurance or an insurance company has to spend on net loss and LAE, and commissions, brokerage and other underwriting expenses.

34

Comparison of the Three and Six Months Ended June 30, 2019 and 2018

Premiums. The following table presents our consolidated premiums:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Premiums written:
Gross premiums written	$	1,670.8	$	1,472.7		13.5%	$	3,277.4	$	2,931.5		11.8%
Net premiums written		1,446.5		1,275.8		13.4%		2,832.1		2,529.2		12.0%
Net premiums earned		1,356.0		1,237.0		9.6%		2,653.3		2,444.8		8.5%
The increases in gross premiums written in the second quarter and first six months of 2019 from the corresponding 2018 periods is attributable to increases at our reinsurance segment and, to a lesser extent, growth at RSUI and CapSpecialty. The increases at our reinsurance segment primarily reflect the impact of TransRe’s purchase on August 29, 2018 of certain renewal rights to a block of U.S. treaty reinsurance business focused on regional property and casualty, accident and health and personal auto lines of business, or the “Renewal Rights Purchase.” The increases in gross premiums written at our reinsurance segment was partially offset by a decrease in gross premiums written related to a certain large whole account quota share treaty, or the “Quota Share Treaty,” and the impact of changes in foreign currency exchange rates. Gross premiums written related to the Quota Share Treaty decreased to $163.7 million and $327.7 million in the second quarter and first six months of 2019, respectively, from $187.7 million and $371.7 million in the second quarter and first six months of 2018, respectively, reflecting a reduction of TransRe’s quota share participation. The increases in net premiums earned in the second quarter and first six months of 2019 from the corresponding 2018 periods reflect increases at our reinsurance segment and, to a lesser extent, RSUI and CapSpecialty, due to increases in gross premiums written in recent quarters. A detailed comparison of premiums by segment for the second quarter and first six months of 2019 and 2018 is contained in the following pages. Net loss and LAE. The following table presents our consolidated net loss and LAE:
	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Net loss and LAE:
Current year (excluding catastrophe losses)	$	837.1	$	776.1		7.9%	$	1,663.7	$	1,528.3		8.9%
Current year catastrophe losses		16.3		14.3		14.0%		19.6		18.4		6.5%
Prior years		(56.6)		(52.2)		8.4%		(94.0)		(137.9)		(31.8%)
Total net loss and LAE	$	796.8	$	738.2		7.9%	$	1,589.3	$	1,408.8		12.8%
Loss ratio:
Current year (excluding catastrophe losses)		61.8%		62.7%				62.7%		62.5%
Current year catastrophe losses		1.2%		1.2%				0.7%		0.8%
Prior years		(4.2%)		(4.2%)				(3.5%)		(5.7%)
Total net loss and LAE		58.8%		59.7%				59.9%		57.6%

The increases in net loss and LAE in the second quarter and first six months of 2019 from the corresponding 2018 periods reflect the impact of higher net premiums earned and lower favorable prior accident year loss reserve development at our reinsurance segment, partially offset by higher favorable prior accident year loss reserve development at RSUI.

A detailed comparison of net loss and LAE by segment for the second quarter and first six months of 2019 and 2018 is contained in the following pages.

35

Commissions, brokerage and other underwriting expenses. The following table presents our consolidated commissions, brokerage and other underwriting expenses:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Commissions, brokerage and other underwriting expenses	$	444.3	$	402.1		10.5%	$	864.4	$	808.4		6.9%
Expense ratio		32.8%		32.5%				32.6%		33.1%
The increases in commissions, brokerage and other underwriting expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher net premiums earned. A detailed comparison of commissions, brokerage and other underwriting expenses by segment for the second quarter and first six months of 2019 and 2018 is contained in the following pages. Underwriting profit. The following table presents our consolidated underwriting profit:
	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Underwriting profit	$	114.9	$	96.7		18.8%	$	199.6	$	227.6		(12.3%)
Combined ratio		91.6%		92.2%				92.5%		90.7%

The increase in underwriting profit in the second quarter of 2019 from the second quarter of 2018 reflects an increase at our insurance segment and, to a lesser extent, an increase at our reinsurance segment. The increase at our insurance segment primarily reflects the impact of higher net premiums earned and an increase in favorable prior accident year loss reserve development at RSUI, all as discussed above. The increase at our reinsurance segment primarily reflects the impact of higher net premiums earned, partially offset by lower favorable prior accident year loss reserve development, all as discussed above.

The decrease in underwriting profit in the first six months of 2019 from the first six months of 2018 reflects a decrease at our reinsurance segment, partially offset by an increase at our insurance segment. The decrease at our reinsurance segment primarily reflects lower favorable prior accident year loss reserve development, partially offset by the impact of higher net premiums earned, all as discussed above. The increase at our insurance segment primarily reflects the impact of higher net premiums earned and an increase in favorable prior accident year loss reserve development at RSUI, all as discussed above.

A detailed comparison of underwriting profit by segment for the second quarter and first six months of 2019 and 2018 is contained in the following pages.

Investment results. The following table presents our consolidated investment results:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Net investment income	$	142.7	$	126.3		13.0%	$	265.8	$	250.4		6.2%
Change in the fair value of equity securities		143.7		185.2		(22.4%)		536.0		142.6		275.9%
Net realized capital gains		12.4		6.5		90.8%		16.8		51.0		(67.1%)
Other than temporary impairment losses		-		-		-		(10.0)		(0.5)		1,900.0%

The increase in net investment income in the second quarter of 2019 from the second quarter of 2018 primarily reflects higher interest income and, to a lesser extent, higher partnership income, partially offset by lower dividend income.

The increase in net investment income in the first six months of 2019 from the first six months of 2018 primarily reflects higher interest income and, to a lesser extent, lower performance-based investment fees from our outside investment advisors, partially offset by lower partnership income and dividend income.

The increase in interest income and the decrease in dividend income primarily relate to a reallocation of a significant portion of our investment portfolio from equity securities to debt securities in the first quarter of 2019.

Partnership income in the first six months of 2018 included a $12.9 million increase in the carrying value of AIHL’s limited partnership interests in certain subsidiaries of Ares Management LLC, or “Ares.” See Note 3(h) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information.

36

The changes in the fair value of equity securities in the second quarter and first six months of 2019 reflect appreciation in the value of our equity securities portfolio, primarily from our holdings in the technology, industrial and financial sectors. The changes in the fair value of equity securities in the second quarter and first six months of 2018 reflected appreciation in the value of our equity securities portfolio, primarily from our holdings in the technology, industrial and energy sectors.

The increase in net realized capital gains in the second quarter of 2019 from the second quarter of 2018 reflects higher realized capital gains from the sale of debt securities.

The decrease in net realized capital gains in the first six months of 2019 from the first six months of 2018 primarily reflects a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units in the first six months of 2018. See Note 3(h) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information.

The increase in OTTI losses in the first six months of 2019 from the first six months of 2018 primarily reflects higher impairments of debt securities. OTTI losses in the first six months of 2019 reflect the deterioration of creditworthiness of certain issuers in the energy sector.

A detailed comparison of investment results for the second quarter and first six months of 2019 and 2018 is contained in the following pages.

Noninsurance revenue and expenses. The following table presents our consolidated noninsurance revenue and expenses:

	Three Months Ended         June 30,				Percent		Six Months Ended         June 30,				Percent
	2019		2018		Change		2019		2018		Change
					($ in millions)
Noninsurance revenue	$	603.9	$	342.7		76.2%	$	1,118.0	$	594.4		88.1%
Other operating expenses		581.5		343.2		69.4%		1,083.9		608.1		78.2%
Corporate administration		26.0		14.1		84.4%		45.3		21.9		106.8%
Amortization of intangible assets		8.8		6.0		46.7%		15.7		11.2		40.2%
Interest expense		25.1		22.3		12.6%		48.7		43.8		11.2%

Noninsurance revenue and Other operating expenses. Noninsurance revenue and other operating expenses primarily include sales and expenses associated with our Alleghany Capital segment. Other operating expenses also include the long-term incentive compensation of our reinsurance and insurance segments, which totaled $23.6 million and $18.1 million in the second quarter of 2019 and 2018, respectively, and $50.5 million and $32.4 million in the first six months of 2019 and 2018, respectively. The increases in long-term incentive compensation at our reinsurance and insurance segments in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect appreciation in the value of our debt portfolio in the second quarter and first six months of 2019 compared with the impact of a decline in appreciation of our debt portfolio in the corresponding 2018 periods. The increases in long-term incentive compensation at our reinsurance and insurance segments in the first six months of 2019 from the first six months of 2018 also reflect higher appreciation in the value of our equity portfolio.

On February 7, 2018, W&W|AFCO Steel acquired the outstanding equity of Hirschfeld Holdings, LP, or “Hirschfeld.” On October 1, 2018, Alleghany Capital acquired approximately 85 percent of the equity in Concord.

The increases in noninsurance revenue and other operating expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect higher sales at W&W|AFCO Steel, IPS and Jazwares, as well as the acquisition of Concord. The increase in noninsurance revenue and other operating expenses in the first six months of 2019 from the first six months of 2018 further reflect the acquisition of Hirschfeld. The increases in other operating expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods also reflect increases in long-term incentive compensation at our reinsurance and insurance segments, as discussed above.

Corporate administration. The increase in corporate administration expense in the second quarter of 2019 from the second quarter of 2018 reflects higher Alleghany parent-company long-term incentive compensation accruals due primarily to the impact of appreciation in the value of our debt securities portfolio in the second quarter of 2019 compared with depreciation in the second quarter of 2018, as well as a rise in the price per share of our common stock during the second quarter of 2019.

The increase in corporate administration expense in the first six months of 2019 from the first six months of 2018 reflects higher Alleghany parent-company long-term incentive compensation accruals due primarily to the impact of appreciation in the value of our debt securities portfolio in the first six months of 2019 compared with depreciation in the first six months of 2018, higher appreciation in the value of our equity securities portfolio and a rise in the price per share of our common stock during the first six months of 2019.

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Amortization of intangible assets. The increases in amortization expense in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the Concord acquisition and the acquisition by Kentucky Trailer of a manufacturer of aluminum feed transportation equipment based in Cedar Rapids, Iowa on December 28, 2018.

Interest expense. The increases in interest expense in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect increased borrowings at Kentucky Trailer, W&W|AFCO Steel and Jazwares to support working capital needs and acquisitions made during 2018, as well as borrowings at Concord (primarily used to finance Alleghany Capital’s acquisition of Concord).

A detailed comparison of noninsurance revenue and expenses for the second quarter and first six months of 2019 and 2018 is contained in the following pages.

Income taxes. The following table presents our consolidated income tax expense:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Income taxes	$	71.3	$	73.4		(2.9%)	$	179.9	$	110.9		62.2%
Effective tax rate								19.3%		19.1%

The slight decrease in income taxes in the second quarter of 2019 from the second quarter of 2018 primarily reflects an increase in federal income tax credits. The increase in income taxes in the first six months of 2019 from the first six months of 2018 primarily reflects an increase in earnings before income taxes and, to a lesser extent, a slight increase in the effective tax rate. The slight increase in the effective tax rate in the first six months of 2019 from the first six months of 2018 primarily reflects lower tax-exempt interest income arising from municipal bond securities, lower dividends received-deductions and higher state income taxes.

Net earnings. The following table presents our consolidated earnings:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
					($ in millions)
Earnings before income taxes	$	376.2	$	371.8		1.2%	$	932.6	$	580.5		60.7%
Net earnings attributable to Alleghany stockholders		295.5		295.1		0.1%		735.7		466.7		57.6%

The slight increase in earnings before income taxes in the second quarter of 2019 from the second quarter of 2018 primarily reflects the impact of growth at Alleghany Capital, higher underwriting profits and higher investment income, partially offset by lower appreciation in the value of our equity securities portfolio and higher corporate administration expenses, all as discussed above.

The increases in earnings before income taxes and net earnings attributable to Alleghany stockholders in the first six months of 2019 from the first six months of 2018 primarily reflect an increase in appreciation in the value of our equity securities portfolio, as discussed above.

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Reinsurance Segment Underwriting Results

The reinsurance segment is comprised of TransRe’s property and casualty & other lines of business. TransRe writes a modest amount of property and casualty insurance business, which is included in the reinsurance segment. For a more detailed description of our reinsurance segment, see Part I, Item 1, “Business—Segment Information—Reinsurance Segment” of the 2018 Form 10-K.

The following tables present the underwriting results of the reinsurance segment:

Three Months Ended June 30, 2019	Property		Casualty &    other(1)		Total
	($ in millions)
Gross premiums written	$	381.6	$	829.1	$	1,210.7
Net premiums written		305.9		807.0		1,112.9
Net premiums earned		303.2		771.7		1,074.9
Net loss and LAE:
Current year (excluding catastrophe losses)		152.4		537.5		689.9
Current year catastrophe losses		-		-		-
Prior years		(16.2)		(28.6)		(44.8)
Total net loss and LAE		136.2		508.9		645.1
Commissions, brokerage and other underwriting expenses		103.8		250.1		353.9
Underwriting profit(2)	$	63.2	$	12.7	$	75.9
Loss ratio(3):
Current year (excluding catastrophe losses)		50.3%		69.7%		64.2%
Current year catastrophe losses		-    %		-    %		-    %
Prior years		(5.3%)		(3.7%)		(4.2%)
Total net loss and LAE		45.0%		66.0%		60.0%
Expense ratio (4)		34.2%		32.4%		32.9%
Combined ratio(5)		79.2%		98.4%		92.9%

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Three Months Ended June 30, 2018	Property		Casualty &     other(1)		Total
	($ in millions)
Gross premiums written	$	345.1	$	726.6	$	1,071.7
Net premiums written		275.9		700.7		976.6
Net premiums earned		292.1		689.2		981.3
Net loss and LAE:
Current year (excluding catastrophe losses)		167.2		477.0		644.2
Current year catastrophe losses		-		-		-
Prior years		(13.7)		(37.0)		(50.7)
Total net loss and LAE		153.5		440.0		593.5
Commissions, brokerage and other underwriting expenses		94.8		223.2		318.0
Underwriting profit(2)	$	43.8	$	26.0	$	69.8
Loss ratio(3):
Current year (excluding catastrophe losses)		57.2%		69.2%		65.6%
Current year catastrophe losses		-    %		-    %		-    %
Prior years		(4.7%)		(5.4%)		(5.2%)
Total net loss and LAE		52.5%		63.8%		60.4%
Expense ratio(4)		32.5%		32.4%		32.4%
Combined ratio(5)		85.0%		96.2%		92.8%
Six Months Ended June 30, 2019	Property		Casualty &     other(1)		Total
	($ in millions)
Gross premiums written	$	796.7	$	1,645.6	$	2,442.3
Net premiums written		622.1		1,598.4		2,220.5
Net premiums earned		612.1		1,492.0		2,104.1
Net loss and LAE:
Current year (excluding catastrophe losses)		325.7		1,053.8		1,379.5
Current year catastrophe losses		-		-		-
Prior years		(26.9)		(54.3)		(81.2)
Total net loss and LAE		298.8		999.5		1,298.3
Commissions, brokerage and other underwriting expenses		207.5		482.4		689.9
Underwriting profit(2)	$	105.8	$	10.1	$	115.9
Loss ratio(3):
Current year (excluding catastrophe losses)		53.2%		70.6%		65.6%
Current year catastrophe losses		-    %		-    %		-    %
Prior years		(4.4%)		(3.6%)		(3.9%)
Total net loss and LAE		48.8%		67.0%		61.7%
Expense ratio(4)		33.9%		32.3%		32.8%
Combined ratio(5)		82.7%		99.3%		94.5%

40

Six Months Ended June 30, 2018	Property		Casualty &  other(1)		Total
			($ in millions)
Gross premiums written	$	742.3	$	1,445.0	$	2,187.3
Net premiums written		581.0		1,392.7		1,973.7
Net premiums earned		567.2		1,374.3		1,941.5
Net loss and LAE:
Current year (excluding catastrophe losses)		305.2		950.0		1,255.2
Current year catastrophe losses		-		-		-
Prior years		(55.1)		(67.2)		(122.3)
Total net loss and LAE		250.1		882.8		1,132.9
Commissions, brokerage and other underwriting expenses		187.9		452.1		640.0
Underwriting profit(2)	$	129.2	$	39.4	$	168.6
Loss ratio(3):
Current year (excluding catastrophe losses)		53.8%		69.1%		64.7%
Current year catastrophe losses		-    %		-    %		-    %
Prior years		(9.7%)		(4.9%)		(6.3%)
Total net loss and LAE		44.1%		64.2%		58.4%
Expense ratio(4)		33.1%		32.9%		33.0%
Combined ratio(5)		77.2%		97.1%		91.4%

(1) Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit.

(2) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets and interest expense. Underwriting profit is a non-GAAP financial measure and does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. See “Comment on Non-GAAP Financial Measures” herein for additional detail on the presentation of our results of operations.

(3) The loss ratio is derived by dividing the amount of net loss and LAE by net premiums earned, all as determined in accordance with GAAP.

(4) The expense ratio is derived by dividing the amount of commissions, brokerage and other underwriting expenses by net premiums earned, all as determined in accordance with GAAP.

(5) The combined ratio is the sum of the loss ratio and the expense ratio, all as determined in accordance with GAAP. The combined ratio represents the percentage of each premium dollar a reinsurance or an insurance company has to spend on net loss and LAE, and commissions, brokerage and other underwriting expenses.

41

Reinsurance Segment: Premiums. The following table presents premiums for the reinsurance segment:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
					($ in millions)
Property
Premiums written:
Gross premiums written	$	381.6	$	345.1		10.6%	$	796.7	$	742.3		7.3%
Net premiums written		305.9		275.9		10.9%		622.1		581.0		7.1%
Net premiums earned		303.2		292.1		3.8%		612.1		567.2		7.9%
Casualty & other
Premiums written:
Gross premiums written	$	829.1	$	726.6		14.1%	$	1,645.6	$	1,445.0		13.9%
Net premiums written		807.0		700.7		15.2%		1,598.4		1,392.7		14.8%
Net premiums earned		771.7		689.2		12.0%		1,492.0		1,374.3		8.6%
Total
Premiums written:
Gross premiums written	$	1,210.7	$	1,071.7		13.0%	$	2,442.3	$	2,187.3		11.7%
Net premiums written		1,112.9		976.6		14.0%		2,220.5		1,973.7		12.5%
Net premiums earned		1,074.9		981.3		9.5%		2,104.1		1,941.5		8.4%

Property. The increases in gross premiums written in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect higher premiums written by the domestic operations, which include the impact of the Renewal Rights Purchase and higher premiums written related to the Quota Share Treaty, partially offset by the impact of changes in foreign currency exchange rates. The increase in gross premiums written in the first six months of 2019 from the first six months of 2018 also reflects higher premiums written by the Asia-Pacific operations. Gross premiums written related to the Quota Share Treaty were $55.2 million and $41.3 million in the second quarter of 2019 and 2018, respectively, and were $119.4 million and $110.6 million in the first six months of 2019 and 2018, respectively, reflecting growth in property-related premiums, partially offset by a reduction of TransRe’s quota share participation. Excluding the impact of changes in foreign currency exchange rates, gross premiums written increased by 11.8 percent in the second quarter of 2019 from the second quarter of 2018, and increased by 8.9 percent in the first six months of 2019 from the first six months of 2018.

The increases in net premiums earned in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher gross premiums written in recent quarters, partially offset by the impact of changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, net premiums earned increased by 5.3 percent in the second quarter of 2019 from the second quarter of 2018 and increased by 10.0 percent in the first six months of 2019 from the first six months of 2018.

Casualty & other. The increases in gross premiums written in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect higher gross premiums written by the domestic operations, which include the impact of the Renewal Rights Purchase, and European operations, partially offset by a decrease in premiums written related to the Quota Share Treaty and the impact of changes in foreign currency exchange rates. Gross premiums written related to the Quota Share Treaty were $108.5 million and $146.4 million in the second quarter of 2019 and 2018, respectively, and were $208.3 million and $261.1 million in the first six months of 2019 and 2018, respectively, reflecting a reduction of TransRe’s quota share participation. Excluding the impact of changes in foreign currency exchange rates, gross premiums written increased by 15.2 percent in the second quarter of 2019 from the second quarter of 2018, and increased by 15.2 percent in the first six months of 2019 from the first six months of 2018.

The increases in net premiums earned in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher gross premiums written in recent quarters, partially offset by the impact of changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, net premiums earned increased by 13.1 percent in the second quarter of 2019 from the second quarter of 2018, and increased by 9.9 percent in the first six months of 2019 from the first six months of 2018.

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Reinsurance Segment: Net loss and LAE. The following table presents net loss and LAE for the reinsurance segment:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
					($ in millions)
Property
Net loss and LAE:
Current year (excluding catastrophe losses)	$	152.4	$	167.2		(8.9%)	$	325.7	$	305.2		6.7%
Current year catastrophe losses		-		-		-		-		-		-
Prior years		(16.2)		(13.7)		18.2%		(26.9)		(55.1)		(51.2%)
Total net loss and LAE	$	136.2	$	153.5		(11.3%)	$	298.8	$	250.1		19.5%
Loss ratio:
Current year (excluding catastrophe losses)		50.3%		57.2%				53.2%		53.8%
Current year catastrophe losses		-    %		-    %				-    %		-    %
Prior years		(5.3%)		(4.7%)				(4.4%)		(9.7%)
Total net loss and LAE		45.0%		52.5%				48.8%		44.1%
Casualty & other
Net loss and LAE:
Current year (excluding catastrophe losses)	$	537.5	$	477.0		12.7%	$	1,053.8	$	950.0		10.9%
Current year catastrophe losses		-		-		-		-		-		-
Prior years		(28.6)		(37.0)		(22.7%)		(54.3)		(67.2)		(19.2%)
Total net loss and LAE	$	508.9	$	440.0		15.7%	$	999.5	$	882.8		13.2%
Loss ratio:
Current year (excluding catastrophe losses)		69.7%		69.2%				70.6%		69.1%
Current year catastrophe losses		-    %		-    %				-    %		-    %
Prior years		(3.7%)		(5.4%)				(3.6%)		(4.9%)
Total net loss and LAE		66.0%		63.8%				67.0%		64.2%
Total
Net loss and LAE:
Current year (excluding catastrophe losses)	$	689.9	$	644.2		7.1%	$	1,379.5	$	1,255.2		9.9%
Current year catastrophe losses		-		-		-		-		-		-
Prior years		(44.8)		(50.7)		(11.6%)		(81.2)		(122.3)		(33.6%)
Total net loss and LAE	$	645.1	$	593.5		8.7%	$	1,298.3	$	1,132.9		14.6%
Loss ratio:
Current year (excluding catastrophe losses)		64.2%		65.6%				65.6%		64.7%
Current year catastrophe losses		-    %		-    %				-    %		-    %
Prior years		(4.2%)		(5.2%)				(3.9%)		(6.3%)
Total net loss and LAE		60.0%		60.4%				61.7%		58.4%

Property. The decrease in net loss and LAE in the second quarter of 2019 from the second quarter of 2018 primarily reflects lower non-catastrophe losses and, to a lesser extent, more favorable prior accident year loss reserve development, partially offset by the impact of higher net premiums earned. The increase in net loss and LAE in the first six months of 2019 from the first six months of 2018 primarily reflects less favorable prior accident year loss reserve development and the impact of higher net premiums earned.

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Net loss and LAE in the second quarter and first six months of 2019 and 2018 include (favorable) unfavorable prior accident year loss reserve development as presented in the table below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Catastrophe events	$	(9.9)	(1)	$	5.1	(2)	$	(1.5)	(3)	$	(25.3)	(4)
Non-catastrophe		(6.3)	(5)		(18.8)	(6)		(25.4)	(7)		(29.8)	(6)
Total	$	(16.2)		$	(13.7)		$	(26.9)		$	(55.1)

(1) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year.

(2) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricane Maria in the 2017 accident year, partially offset by favorable prior accident year loss reserve development related to Hurricane Harvey in the 2017 accident year and catastrophes in the 2016 accident year.

(3) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year.

(4) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Harvey and Maria in the 2017 accident year and catastrophes in the 2016 accident year.

(5) Primarily reflects favorable prior accident year loss reserve development in the 2018 accident year.

(6) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years.

(7) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 and 2018 reflects favorable loss emergence compared with loss emergence patterns assumed in earlier periods. The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 did not impact assumptions used in estimating TransRe’s loss and LAE liabilities for business earned in the first six months of 2019.

Casualty & other. The increase in net loss and LAE in the second quarter of 2019 from the second quarter of 2018 primarily reflects the impact of higher net premiums earned and less favorable prior accident year loss reserve development. The increase in net loss and LAE in the first six months of 2019 from the first six months of 2018 primarily reflects the impact of higher net premiums earned, less favorable prior accident year loss reserve development and several large non-catastrophe losses in early 2019.

Net loss and LAE in the second quarter and first six months of 2019 and 2018 include (favorable) unfavorable prior accident year loss reserve development as presented in the table below:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Malpractice Treaties(1)	$	(1.4)		$	(3.4)		$	(1.4)		$	(3.4)
Other		(27.2)	(2)		(33.6)	(3)		(52.9)	(4)		(63.8)	(5)
Total	$	(28.6)		$	(37.0)		$	(54.3)		$	(67.2)

(1) Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

(2) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years.

(3) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2015 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(4) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years and the shorter-tailed lines of business in the 2012 through 2014 accident years.

(5) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2016 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 and 2018 reflects favorable loss emergence compared with loss emergence patterns assumed in earlier periods. The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 did not impact assumptions used in estimating TransRe’s loss and LAE liabilities for business earned in the first six months of 2019.

44

Reinsurance Segment: Commissions, brokerage and other underwriting expenses. The following table presents commissions, brokerage and other underwriting expenses for the reinsurance segment:

	Three Months Ended June 30,						Percent		Six Months Ended June 30,						Percent
	2019			2018			Change		2019			2018			Change
	($ in millions)
Property
Commissions, brokerage and other underwriting expenses		$  103.8			$   94.8			9.5%		$  207.5			$  187.9			10.4%
Expense ratio		34.2	%		32.5	%				33.9	%		33.1	%
Casualty & other
Commissions, brokerage and other underwriting expenses		$  250.1			$  223.2			12.1%		$  482.4			$  452.1			6.7%
Expense ratio		32.4	%		32.4	%				32.3	%		32.9	%
Total
Commissions, brokerage and other underwriting expenses		$  353.9			$  318.0			11.3%		$  689.9			$  640.0			7.8%
Expense ratio		32.9	%		32.4	%				32.8	%		33.0	%
Property. The increases in commissions, brokerage and other underwriting expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher net premiums earned and higher overall commission rates. Casualty & other. The increases in commissions, brokerage and other underwriting expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher net premiums earned. The increase in commissions, brokerage and other underwriting expenses in the first six months of 2019 from the first six months of 2018 was partially offset by lower overall commission rates. Reinsurance Segment: Underwriting profit. The following table presents underwriting profit for the reinsurance segment:
	Three Months Ended June 30,						Percent		Six Months Ended June 30,						Percent
	2019			2018			Change		2019			2018			Change
	($ in millions)
Property
Underwriting profit	$	63.2		$	43.8			44.3%	$	105.8		$	129.2			(18.1%)
Combined ratio		79.2	%		85.0	%				82.7	%		77.2	%
Casualty & other
Underwriting profit	$	12.7		$	26.0			(51.2%)	$	10.1		$	39.4			(74.4%)
Combined ratio		98.4	%		96.2	%				99.3	%		97.1	%
Total
Underwriting profit	$	75.9		$	69.8			8.7%	$	115.9		$	168.6			(31.3%)
Combined ratio		92.9	%		92.8	%				94.5	%		91.4	%

Property. The increase in underwriting profit in the second quarter of 2019 from the second quarter of 2018 primarily reflects lower non-catastrophe losses, more favorable prior accident year loss reserve development and the impact of higher net premiums earned, all as discussed above. The decrease in underwriting profit in the first six months of 2019 from the first six months of 2018 primarily reflects less favorable prior accident year loss reserve development, partially offset by the impact of higher net premiums earned, all as discussed above.

Casualty & other. The decrease in underwriting profit in the second quarter of 2019 from the second quarter of 2018 primarily reflects less favorable prior accident year loss reserve development, as discussed above. The decrease in underwriting profit in the first six months of 2019 from the first six months of 2018 primarily reflects several large non-catastrophe losses in early 2019 and less favorable prior accident year loss reserve development, all as discussed above.

45

Insurance Segment Underwriting Results

The insurance segment is comprised of AIHL’s RSUI and CapSpecialty operating subsidiaries. RSUI also writes a modest amount of assumed reinsurance business, which is included in the insurance segment. For a more detailed description of our insurance segment, see Part I, Item 1, “Business—Segment Information—Insurance Segment” of the 2018 Form 10-K.

The underwriting results of the insurance segment are presented below:

Three Months Ended June 30, 2019	RSUI		CapSpecialty		Total
	($ in millions)
Gross premiums written	$	372.4	$	93.8	$	466.2
Net premiums written		246.9		86.7		333.6
Net premiums earned		202.4		78.7		281.1
Net loss and LAE:
Current year (excluding catastrophe losses)		102.4		44.8		147.2
Current year catastrophe losses		15.7		0.6		16.3
Prior years		(12.5)		0.7		(11.8)
Total net loss and LAE		105.6		46.1		151.7
Commissions, brokerage and other underwriting expenses		57.9		32.5		90.4
Underwriting profit(1)	$	38.9	$	0.1	$	39.0
Loss ratio(2):
Current year (excluding catastrophe losses)		50.6%		56.9%		52.4%
Current year catastrophe losses		7.8%		0.7%		5.8%
Prior years		(6.2%)		1.0%		(4.2%)
Total net loss and LAE		52.2%		58.6%		54.0%
Expense ratio(3)		28.6%		41.3%		32.2%
Combined ratio(4)		80.8%		99.9%		86.2%

46

Three Months Ended June 30, 2018	RSUI		CapSpecialty		Total
	($ in millions)
Gross premiums written	$	318.8	$	88.7	$	407.5
Net premiums written		216.9		82.3		299.2
Net premiums earned		184.7		71.0		255.7
Net loss and LAE:
Current year (excluding catastrophe losses)		93.4		38.5		131.9
Current year catastrophe losses		13.7		0.6		14.3
Prior years		(1.4)		(0.1)		(1.5)
Total net loss and LAE		105.7		39.0		144.7
Commissions, brokerage and other underwriting expenses		53.7		30.4		84.1
Underwriting profit(1)	$	25.3	$	1.6	$	26.9
Loss ratio(2):
Current year (excluding catastrophe losses)		50.6%		54.2%		51.6%
Current year catastrophe losses		7.4%		0.8%		5.6%
Prior years		(0.8%)		(0.1%)		(0.6%)
Total net loss and LAE		57.2%		54.9%		56.6%
Expense ratio(3)		29.1%		42.8%		32.9%
Combined ratio(4)		86.3%		97.7%		89.5%
Six Months Ended June 30, 2019	RSUI		CapSpecialty		Total
	($ in millions)
Gross premiums written	$	671.4	$	176.6	$	848.0
Net premiums written		448.3		163.3		611.6
Net premiums earned		394.8		154.4		549.2
Net loss and LAE:
Current year (excluding catastrophe losses)		197.3		86.9		284.2
Current year catastrophe losses		18.8		0.8		19.6
Prior years		(16.2)		3.4		(12.8)
Total net loss and LAE		199.9		91.1		291.0
Commissions, brokerage and other underwriting expenses		111.4		63.1		174.5
Underwriting profit(1)	$	83.5	$	0.2	$	83.7
Loss ratio(2):
Current year (excluding catastrophe losses)		49.9%		56.3%		51.7%
Current year catastrophe losses		4.8%		0.5%		3.6%
Prior years		(4.1%)		2.2%		(2.3%)
Total net loss and LAE		50.6%		59.0%		53.0%
Expense ratio(3)		28.2%		40.8%		31.8%
Combined ratio(4)		78.8%		99.8%		84.8%

47

Six Months Ended June 30, 2018	RSUI		CapSpecialty		Total
	($ in millions)
Gross premiums written	$	593.4	$	163.2	$	756.6
Net premiums written		403.8		151.7		555.5
Net premiums earned		365.6		137.7		503.3
Net loss and LAE:
Current year (excluding catastrophe losses)		197.5		75.6		273.1
Current year catastrophe losses		17.6		0.8		18.4
Prior years		(12.5)		(3.1)		(15.6)
Total net loss and LAE		202.6		73.3		275.9
Commissions, brokerage and other underwriting expenses		107.2		61.2		168.4
Underwriting profit(1)	$	55.8	$	3.2	$	59.0
Loss ratio(2):
Current year (excluding catastrophe losses)		54.0%		54.9%		54.3%
Current year catastrophe losses		4.8%		0.6%		3.6%
Prior years		(3.4%)		(2.3%)		(3.1%)
Total net loss and LAE		55.4%		53.2%		54.8%
Expense ratio(3)		29.3%		44.4%		33.5%
Combined ratio(4)		84.7%		97.6%		88.3%

 (1) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets and interest expense. Underwriting profit is a non-GAAP financial measure and does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. See “Comment on Non-GAAP Financial Measures” herein for additional detail on the presentation of our results of operations.

 (2) The loss ratio is derived by dividing the amount of net loss and LAE by net premiums earned, all as determined in accordance with GAAP.

 (3) The expense ratio is derived by dividing the amount of commissions, brokerage and other underwriting expenses by net premiums earned, all as determined in accordance with GAAP.

 (4) The combined ratio is the sum of the loss ratio and the expense ratio, all as determined in accordance with GAAP. The combined ratio represents the percentage of each premium dollar a reinsurance or an insurance company has to spend on net loss and LAE, and commissions, brokerage and other underwriting expenses.

48

Insurance Segment: Premiums. The following table presents premiums for the insurance segment:

	Three Months Ended						Six Months Ended				Percent
	June 30,				Percent		June 30,
	2019		2018		Change		2019		2018		Change
					($ in millions)
RSUI
Premiums written:
Gross premiums written	$	372.4	$	318.8		16.8%	$	671.4	$	593.4		13.1%
Net premiums written		246.9		216.9		13.8%		448.3		403.8		11.0%
Net premiums earned		202.4		184.7		9.6%		394.8		365.6		8.0%
CapSpecialty
Premiums written:
Gross premiums written	$	93.8	$	88.7		5.7%	$	176.6	$	163.2		8.2%
Net premiums written		86.7		82.3		5.3%		163.3		151.7		7.6%
Net premiums earned		78.7		71.0		10.8%		154.4		137.7		12.1%
Total
Premiums written:
Gross premiums written	$	466.2	$	407.5		14.4%	$	848.0	$	756.6		12.1%
Net premiums written		333.6		299.2		11.5%		611.6		555.5		10.1%
Net premiums earned		281.1		255.7		9.9%		549.2		503.3		9.1%

RSUI. The increases in gross premiums written in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect growth in most lines of business due to increases in business opportunities and improved general market conditions, particularly in the property lines of business.

The increases in net premiums earned in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect increases in gross premiums written in recent quarters, partially offset by higher ceded premiums earned related to the growth in the heavily-reinsured property lines of business.

CapSpecialty. The increases in gross premiums written in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect growth in the healthcare and specialty casualty lines of business due to increases in business opportunities and CapSpecialty’s expanded product offerings. In addition, the increase in gross premiums written in the first six months of 2019 from the first six months of 2018 periods reflects the impact of CapSpecialty’s purchase on February 20, 2018 of certain renewal rights to a small environmental block of business.

The increases in net premiums earned in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect increases in gross premiums written in recent quarters.

49

Insurance Segment: Net loss and LAE. The following table presents net loss and LAE for the insurance segment:

	Three Months Ended June 30,				Percent Change		Six Months Ended June 30,				Percent Change
	2019		2018					2019		2018
	($ in millions)
RSUI
Net loss and LAE:
Current year (excluding catastrophe losses)	$	102.4	$	93.4		9.6%	$	197.3	$	197.5		(0.1%)
Current year catastrophe losses		15.7		13.7		14.6%		18.8		17.6		6.8%
Prior years		(12.5)		(1.4)		792.9%		(16.2)		(12.5)		29.6%
Total net loss and LAE	$	105.6	$	105.7		(0.1%)	$	199.9	$	202.6		(1.3%)
Loss ratio:
Current year (excluding catastrophe losses)		50.6%		50.6%				49.9%		54.0%
Current year catastrophe losses		7.8%		7.4%				4.8%		4.8%
Prior years		(6.2%)		(0.8%)				(4.1%)		(3.4%)
Total net loss and LAE		52.2%		57.2%				50.6%		55.4%
CapSpecialty
Net loss and LAE:
Current year (excluding catastrophe losses)	$	44.8	$	38.5		16.4%	$	86.9	$	75.6		14.9%
Current year catastrophe losses		0.6		0.6		-   %		0.8		0.8		-   %
Prior years		0.7		(0.1)		(800.0%)		3.4		(3.1)		(209.7%)
Total net loss and LAE	$	46.1	$	39.0		18.2%	$	91.1	$	73.3		24.3%
Loss ratio:
Current year (excluding catastrophe losses)		56.9%		54.2%				56.3%		54.9%
Current year catastrophe losses		0.7%		0.8%				0.5%		0.6%
Prior years		1.0%		(0.1%)				2.2%		(2.3%)
Total net loss and LAE		58.6%		54.9%				59.0%		53.2%
Total
Net loss and LAE:
Current year (excluding catastrophe losses)	$	147.2	$	131.9		11.6%	$	284.2	$	273.1		4.1%
Current year catastrophe losses		16.3		14.3		14.0%		19.6		18.4		6.5%
Prior years		(11.8)		(1.5)		686.7%		(12.8)		(15.6)		(17.9%)
Total net loss and LAE	$	151.7	$	144.7		4.8%	$	291.0	$	275.9		5.5%
Loss ratio:
Current year (excluding catastrophe losses)		52.4%		51.6%				51.7%		54.3%
Current year catastrophe losses		5.8%		5.6%				3.6%		3.6%
Prior years		(4.2%)		(0.6%)				(2.3%)		(3.1%)
Total net loss and LAE		54.0%		56.6%				53.0%		54.8%

RSUI. Net loss and LAE in the second quarter of 2019 approximated those in the second quarter of 2018, primarily reflecting higher favorable prior accident year loss reserve development, offset by the impact of higher net premiums earned and higher catastrophe losses.

The slight decrease in net loss and LAE in the first six months of 2019 from the first six months of 2018 primarily reflects lower non-catastrophe property losses incurred and higher favorable prior accident year loss reserve development, partially offset by the impact of higher net premiums earned and higher catastrophe losses.

Catastrophe losses in the second quarter and first six months of 2019 primarily relate to severe weather and flooding in the Midwestern U.S. Catastrophe losses in the second quarter and first six months of 2018 primarily related to flooding and severe weather in the Northeastern U.S. and the State of California.

50

Net loss and LAE in the second quarter and first six months of 2019 and 2018 include (favorable) unfavorable prior accident year loss reserve development as presented in the table below:

	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
	($ in millions)
Casualty	$    (12.1)(1)	$      (1.5)(2)	$      (17.7)(1)	$      (12.5)(2)
Property and other	(0.4)	0.1	1.5(3)	-
Total	$    (12.5)	$      (1.4)	$      (16.2)	$      (12.5)

 (1) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

 (2) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in recent accident years.

 (3) Primarily reflects unfavorable prior accident year loss reserve development related to the assumed property reinsurance lines of business from catastrophe losses in recent accident years, partially offset by favorable prior accident year loss reserve development related to Superstorm Sandy in the 2012 accident year and by Hurricane Harvey in the 2017 accident year.

The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 and 2018 reflect favorable loss emergence compared with loss emergence patterns assumed in earlier periods. The favorable prior accident year loss reserve development in the second quarter and first six months of 2019 did not impact assumptions used in estimating RSUI’s loss and LAE liabilities for business earned in the first six months of 2019.

CapSpecialty. The increases in net loss and LAE in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect unfavorable prior accident year loss reserve development in the second quarter and first six months of 2019, compared with favorable prior accident year loss reserve development in the second quarter and first six months of 2018, the impact of higher net premiums earned and higher losses in the surety lines of business.

Net loss and LAE in the second quarter of 2019 includes unfavorable prior accident year loss reserve development primarily related to the professional liability lines of business in the 2016 accident year. Net loss and LAE in the first six months of 2019 also includes unfavorable prior accident year loss reserve development primarily related to certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years. The specific unfavorable prior accident year loss reserve development in the first six months of 2019 related to the terminated program reflects the impact of a recent adverse court ruling related to a single claim. The unfavorable prior accident year loss reserve development in the second quarter and first six months of 2019 did not impact assumptions used in estimating CapSpecialty’s loss and LAE liabilities for business earned in the first six months of 2019. Net loss and LAE in the first six months of 2018 included favorable prior accident year loss reserve development primarily in the surety lines of business primarily in the 2016 and 2017 accident years.

51

Insurance Segment: Commissions, brokerage and other underwriting expenses. The following table presents commissions, brokerage and other underwriting expenses for the insurance segment:

	Three Months Ended June 30,						Percent       Change			Six Months Ended June 30,						Percent       Change
	2019			2018						2019			2018
	($ in millions)
RSUI
Commissions, brokerage and other underwriting expenses	$	57.9		$	53.7			7.8	%	$	111.4		$	107.2			3.9	%
Expense ratio		28.6	%		29.1	%					28.2	%		29.3	%
CapSpecialty
Commissions, brokerage and other underwriting expenses	$	32.5		$	30.4			6.9	%	$	63.1		$	61.2			3.1	%
Expense ratio		41.3	%		42.8	%					40.8	%		44.4	%
Total
Commissions, brokerage and other underwriting expenses	$	90.4		$	84.1			7.5	%	$	174.5		$	168.4			3.6	%
Expense ratio		32.2	%		32.9	%					31.8	%		33.5	%

RSUI. The increases in commissions, brokerage and other underwriting expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher net premiums earned, partially offset by slightly lower overall commission rates.

CapSpecialty. The increases in commissions, brokerage and other underwriting expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the impact of higher net premiums earned, partially offset by one-time acquisition expenses incurred in the first six months of 2018 arising from CapSpecialty’s purchase of certain renewal rights associated with a small environmental block of business and lower short-term incentive compensation expense accruals.

Insurance Segment: Underwriting profit. The following table presents our underwriting profit (loss) for the insurance segment:

	Three Months Ended June 30,						Percent       Change			Six Months Ended June 30,						Percent       Change
	2019			2018						2019			2018
	($ in millions)
RSUI
Underwriting profit	$	38.9		$	25.3			53.8	%	$	83.5		$	55.8			49.6	%
Combined ratio		80.8	%		86.3	%					78.8	%		84.7	%
CapSpecialty
Underwriting profit	$	0.1		$	1.6			(93.8	%)	$	0.2		$	3.2			(93.8	%)
Combined ratio		99.9	%		97.7	%					99.8	%		97.6	%
Total
Underwriting profit	$	39.0		$	26.9			45.0	%	$	83.7		$	59.0			41.9	%
Combined ratio		86.2	%		89.5	%					84.8	%		88.3	%

RSUI. The increase in underwriting profit in the second quarter of 2019 from the second quarter of 2018 primarily reflects higher favorable prior accident year loss reserve development and the impact of higher net premiums earned, all as discussed above. The increase in underwriting profit in the first six months of 2019 from the first six months of 2018 primarily reflects lower non-catastrophe property losses incurred, the impact of higher net premiums earned and higher favorable prior accident year loss reserve development, all as discussed above.

52

CapSpecialty. The decreases in underwriting profit in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect unfavorable prior accident year loss reserve development in the second quarter and first six months of 2019, compared with favorable prior accident year loss reserve development in the second quarter and first six months of 2018, and higher losses in the surety lines of business, partially offset by the impact of higher net premiums earned, all as discussed above.

Investment Results for the Reinsurance and Insurance Segments

The following table presents the investment results for our reinsurance and insurance segments:

	Three Months Ended June 30,				Percent		Six Months Ended June 30,				Percent
	2019		2018		Change		2019		2018		Change
	($ in millions)
Net investment income		$     138.3		$    121.1		14.2%		$  256.3		$  239.4		7.1%
Change in the fair value of equity securities		143.3		146.8		(2.4%)		532.4		132.7		301.2%
Net realized capital gains		12.2		6.8		79.4%		16.2		50.7		(68.0%)
Other than temporary impairment losses		-		-		-		(10.0)		(0.5)		1,900.0%

Net investment income. The increase in net investment income in the second quarter of 2019 from the second quarter of 2018 primarily reflects higher interest income and, to a lesser extent, higher partnership income, partially offset by lower dividend income.

The increase in net investment income in the first six months of 2019 from the first six months of 2018 primarily reflects higher interest income and, to a lesser extent, lower performance-based investment fees from our outside investment advisors, partially offset by lower partnership income and dividend income.

The increase in interest income and the decrease in dividend income primarily relate to a reallocation of a significant portion of our investment portfolio from equity securities to debt securities in the first quarter of 2019.

Partnership income in the first six months of 2018 included a $12.9 million increase in the carrying value of AIHL’s limited partnership interests in certain subsidiaries of Ares. See Note 3(h) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information.

Change in the fair value of equity securities. The changes in the fair value of equity securities in the second quarter and first six months of 2019 reflect appreciation in the value of our equity securities portfolio, primarily from our holdings in the technology, industrial and financial sectors. The changes in the fair value of equity securities in the second quarter and first six months of 2018 reflected appreciation in the value of our equity securities portfolio, primarily from our holdings in the technology, industrial and energy sectors.

Net realized capital gains. The increase in net realized capital gains in the second quarter of 2019 from the second quarter of 2018 reflects higher realized capital gains from the sale of debt securities.

The decrease in net realized capital gains in the first six months of 2019 from the first six months of 2018 primarily reflects a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units in the first six months of 2018. See Note 3(h) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information.

Other than temporary impairment losses. OTTI losses in the first six months of 2019 reflect $10.0 million of unrealized losses on debt securities, primarily in the energy sector, that were deemed to be other than temporary and, as such, were required to be charged against earnings. The determination that unrealized losses on debt securities were other than temporary was primarily due to the deterioration of creditworthiness of the issuer.

OTTI losses in the first six months of 2018 reflected $0.5 million of unrealized losses on debt securities that were deemed to be other than temporary and, as such, were required to be charged against earnings.

Upon the ultimate disposition of the securities for which OTTI losses have been recorded, a portion of the loss may be recoverable depending on market conditions at the time of disposition. After adjusting the cost basis of securities for the recognition of OTTI losses, the remaining gross unrealized investment losses for debt securities as of June 30, 2019 were deemed to be temporary, based on, among other factors: (i) the duration of time and the relative magnitude to which the fair values of these securities had been below cost were not indicative of an OTTI loss; (ii) the absence of compelling evidence that would cause us to call into question the financial condition or near-term business prospects of the issuers of the securities; and (iii) our ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery.

See Note 3 to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional detail on gross unrealized investment losses for debt securities as of June 30, 2019.

53

Alleghany Capital Segment Results

The Alleghany Capital segment consists of: (i) industrial operations conducted through PCT, Kentucky Trailer, W&W|AFCO Steel and a 45 percent equity interest in Wilbert Funeral Services, Inc., or “Wilbert;” (ii) non-industrial operations conducted through IPS, Jazwares and Concord; and (iii) corporate operations at the Alleghany Capital level. Wilbert is accounted for under the equity method of accounting and is included in other invested assets.

The following table presents the results of the Alleghany Capital segment for the second quarter and first six months of 2019 and 2018:

	Three Months Ended June 30, 2019								Three Months Ended June 30, 2018
	Industrial		Non- industrial		Corp. & other(1)		Total(1)		Industrial		Non- industrial		Corp. & other(1)		Total(1)
	($ in millions)
Noninsurance revenue(2)	$	318.3	$	275.1	$	0.3	$	593.7	$	221.9	$	107.1	$	-	$	329.0
Net investment income		1.4		(0.2)		(0.3)		0.9		1.3		0.1		-		1.4
Net realized capital gains		0.2		-		-		0.2		0.2		(0.3)		-		(0.1)
Total revenues	$	319.9	$	274.9	$	-	$	594.8	$	223.4	$	106.9	$	-	$	330.3
Other operating expenses(2)		290.0		252.2		6.1		548.3		210.5		101.0		3.0		314.5
Amortization of intangible assets		3.9		4.5		-		8.4		2.4		3.4		-		5.8
Interest expense		3.1		1.6		-		4.7		1.7		0.6		-		2.3
Earnings (losses) before income taxes	$	22.9	$	16.6	$	(6.1)	$	33.4	$	8.8	$	1.9	$	(3.0)	$	7.7
Operating earnings (losses) before income taxes(3)	$	26.6	$	21.1	$	(6.1)	$	41.6	$	11.0	$	5.6	$	(3.0)	$	13.6
Add: net realized capital gains		0.2		-		-		0.2		0.2		(0.3)		-		(0.1)
Less: amortization of intangible assets		(3.9)		(4.5)		-		(8.4)		(2.4)		(3.4)		-		(5.8)
Earnings (losses) before income taxes	$	22.9	$	16.6	$	(6.1)	$	33.4	$	8.8	$	1.9	$	(3.0)	$	7.7
	Six Months Ended June 30, 2019								Six Months Ended June 30, 2018
	Industrial		Non- industrial		Corp. & other(1)		Total(1)		Industrial		Non- industrial		Corp. & other(1)		Total(1)
	($ in millions)
Noninsurance revenue(2)	$	578.4	$	520.0	$	0.3	$	1,098.7	$	367.4	$	204.2	$	0.1	$	571.7
Net investment income		2.4		(0.2)		-		2.2		2.9		0.1		-		3.0
Net realized capital gains		0.6		-		-		0.6		0.5		-		-		0.5
Total revenues	$	581.4	$	519.8	$	0.3	$	1,101.5	$	370.8	$	204.3	$	0.1	$	575.2
Other operating expenses(2)		534.4		468.3		11.1		1,013.8		353.0		196.5		4.9		554.4
Amortization of intangible assets		6.4		8.7		-		15.1		4.4		6.8		-		11.2
Interest expense		6.0		3.1		(0.1)		9.0		2.5		1.0		0.1		3.6
Earnings (losses) before income taxes	$	34.6	$	39.7	$	(10.7)	$	63.6	$	10.9	$	-	$	(4.9)	$	6.0
Operating earnings (losses) before income taxes(3)	$	40.4	$	48.4	$	(10.7)	$	78.1	$	14.8	$	6.8	$	(4.9)	$	16.7
Add: net realized capital gains		0.6		-		-		0.6		0.5		-		-		0.5
Less: amortization of intangible assets		(6.4)		(8.7)		-		(15.1)		(4.4)		(6.8)		-		(11.2)
Earnings (losses) before income taxes	$	34.6	$	39.7	$	(10.7)	$	63.6	$	10.9	$	-	$	(4.9)	$	6.0

(1) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(2) For industrial and non-industrial operations: (i) noninsurance revenue consists of the sale of manufactured goods and services; and (ii) other operating expenses consist of the cost of goods and services sold and selling, general and administrative expenses. Other operating expenses also include finders’ fees, legal and accounting costs and other transaction-related expenses of $1.0 million and $1.1 million for the second quarter of 2019 and 2018, respectively, and $1.4 million and $2.9 million for the first six months of 2019 and 2018, respectively.

(3) Operating earnings before income taxes is a non-GAAP financial measure and does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. See “Comment on Non-GAAP Financial Measures” herein for additional detail on the presentation of our results of operations. Operating earnings before income taxes represents noninsurance revenue and net investment income less other operating expenses and interest expense 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 impairment losses; and (v) income taxes.

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The changes in Alleghany Capital’s equity for the three and six months ended June 30, 2019 and 2018 are presented in the table below:

	Three Months Ended June 30,
	2019								2018
	Industrial		Non-   industrial		Corp. &   other(1)		Total(1)		Industrial		Non-   industrial		Corp. &   other(1)		Total(1)
	($ in millions)
Equity, beginning of period		$ 467.0		$ 437.6		$  (42.4)		$  862.2		$  442.7		$ 319.5		$    15.7		$ 777.9
Earnings (losses) before income taxes		22.9		16.6		(6.1)		33.4		8.8		1.9		(3.0)		7.7
Income taxes(2)		(0.8)		(0.4)		(5.3)		(6.5)		(0.4)		(0.2)		(0.7)		(1.3)
Net earnings attributable to noncontrolling interests(3)		(3.8)		(5.6)		-		(9.4)		(1.3)		(2.0)		-		(3.3)
Capital contributions (returns of capital) and other(4)		30.7		(37.6)		7.1		0.2		(10.6)		(7.1)		(5.1)		(22.8)
Equity, end of period		$  516.0		$ 410.6		$  (46.7)		$  879.9		$  439.2		$ 312.1		$     6.9		$ 758.2
	Six Months Ended June 30,
	2019								2018
	Industrial		Non- industrial		Corp. & other(1)		Total(1)		Industrial		Non- industrial		Corp. & other(1)		Total(1)
	($ in millions)
Equity, beginning of period		$  462.5		$ 443.3		$  (44.2)		$ 861.6		$  363.6		$ 331.3		$    (7.7)		$ 687.2
Earnings (losses) before income taxes		34.6		39.7		(10.7)		63.6		10.9		-		(4.9)		6.0
Income taxes(2)		(0.9)		(1.7)		(10.7)		(13.3)		(0.7)		(0.6)		(0.2)		(1.5)
Net earnings attributable to noncontrolling interests(3)		(6.0)		(11.0)		-		(17.0)		(1.3)		(1.6)		-		(2.9)
Capital contributions (returns of capital) and other(4)		25.8		(59.7)		18.9		(15.0)		66.7		(17.0)		19.7		69.4
Equity, end of period		$  516.0		$ 410.6		$  (46.7)		$ 879.9		$  439.2		$ 312.1		$     6.9		$ 758.2

(1) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(2) Federal income taxes for most Alleghany Capital subsidiaries are incurred at the Alleghany Capital corporate level. Estimated federal income tax (expense) benefit incurred at the Alleghany Capital corporate level attributable to industrial and non-industrial operations for the three months ended June 30, 2019 were ($5.0) million and ($3.5) million, respectively, and for the three months ended June 30, 2018 were ($1.9) million and ($0.4) million, respectively, and for the six months ended June 30, 2019 were ($7.3) million and ($8.3) million, respectively, and for the six months ended June 30, 2018 were ($2.1) million and ($0.0) million, respectively.

(3) During the first six months of 2019, the noncontrolling interests outstanding were approximately as follows: Kentucky Trailer - 23 percent; W&W|AFCO Steel - 20 percent; IPS - 15 percent; Jazwares - 23 percent; and Concord - 15 percent. Prior to April 1, 2019, the noncontrolling interests of PCT was approximately 11 percent. Effective April 1, 2019, all noncontrolling interests of PCT have exercised their options and sold their ownership interests to Alleghany.

(4) For the three and six months ended June 30, 2019, capital contributions primarily reflect funding provided by Alleghany Capital to PCT for the acquisition of a consumable cutting tool manufacturer in June 2019. For the six months ended June 30, 2018, capital contributions primarily reflect funding provided by Alleghany Capital to W&W|AFCO Steel for the acquisition of Hirschfeld.

Noninsurance revenue. The increases in noninsurance revenue in the second quarter and first six months of 2019 from the corresponding 2018 periods reflect increases in non-industrial and industrial operations. The increases in non-industrial noninsurance revenue reflect higher sales at IPS and Jazwares, as well as the acquisition of Concord. The increases in industrial noninsurance revenue primarily reflect higher sales at W&W|AFCO Steel. The increase in noninsurance revenue for industrial operations in the first six months of 2019 from the first six months of 2018 further reflects W&W|AFCO Steel’s acquisition of Hirschfeld in 2018.

Net investment income. The decrease in net investment income in the first six months of 2019 from the first six months of 2018 primarily reflects slightly lower Alleghany Capital earnings from its investment in Wilbert.

Other operating expenses. The increases in other operating expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect increases in non-industrial and industrial operations. The increases in non-industrial other operating expenses primarily reflect higher costs related to higher sales at IPS and Jazwares, as well as the impact of the acquisition of Concord. The increases in industrial other operating expenses primarily reflect higher costs related to higher sales at W&W|AFCO Steel. The increase in other operating expenses for industrial operations in the first six months of 2019 from the first six months of 2018 further reflects W&W|AFCO Steel’s acquisition of Hirschfeld in 2018.

Other operating expenses in the first six months of 2018 also reflect higher finders’ fees, legal and accounting costs and other transaction-related expenses, primarily related to W&W|AFCO Steel’s acquisition of Hirschfeld in 2018.

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Amortization of intangible assets. The increases in amortization expense in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the Concord acquisition and the acquisition by Kentucky Trailer of a manufacturer of aluminum feed transportation equipment based in Cedar Rapids, Iowa on December 28, 2018.

Interest expense. The increases in interest expense in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect increased borrowings at Kentucky Trailer, W&W|AFCO Steel and Jazwares to support working capital needs and acquisitions made during 2018, as well as borrowings at Concord (primarily used to finance Alleghany Capital’s acquisition of Concord).

Earnings (losses) before income taxes. The increases in earnings before income taxes in the second quarter and first six months of 2019 from corresponding 2018 periods primarily reflect increased earnings in the non-industrial and industrial operations. The increases in non-industrial earnings before income taxes primarily reflect the impact of higher sales and higher margins at Jazwares and, to a lesser extent, the acquisition of Concord and higher sales at IPS, all as discussed above. The increases in industrial earnings before income taxes primarily reflect higher sales and higher margins at W&W|AFCO Steel.

Corporate Activities Results

The primary components of corporate activities are Alleghany Properties, SORC and activities at the Alleghany parent company. The following table presents the results for corporate activities:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Net premiums earned	$	-	$	-	$	-	$	-
Net investment income		3.5		3.8		7.3		8.0
Change in the fair value of equity securities		0.4		38.4		3.6		9.9
Net realized capital gains		-		(0.2)		-		(0.2)
Other than temporary impairment losses		-		-		-		-
Noninsurance revenue		3.6		9.0		7.3		12.3
Total revenues		7.5		51.0		18.2		30.0
Net loss and loss adjustment expenses		-		-		-		-
Commissions, brokerage and other underwriting expenses		-		-		-		-
Other operating expenses		7.0		8.8		14.3		16.7
Corporate administration		24.2		13.3		42.5		21.4
Amortization of intangible assets		-		-		-		-
Interest expense		13.6		13.1		26.1		26.6
Earnings (losses) before income taxes	$	(37.3)	$	15.8	$	(64.7)	$	(34.7)

Net investment income. The slight decreases in net investment income in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect lower dividend income resulting from the reallocation of a portion of our investment portfolio at the Alleghany parent company-level from equity securities to debt securities, partially offset by higher interest income.

Change in the fair value of equity securities. The decreases in the change in the fair value of equity securities in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect the reallocation of a portion of our investment portfolio at the Alleghany parent company-level from equity securities to debt securities.

The change in the fair value of equity securities in the first six months of 2019 reflects appreciation in the value of the equity securities held at the Alleghany parent company-level, primarily from holdings in the technology sector in the first three months of 2019.

The changes in the fair value of equity securities in the second quarter and first six months of 2018 reflect increases in the value of the equity securities held at the Alleghany parent company-level, primarily from holdings in the energy sector.

Noninsurance revenue. The decreases in noninsurance revenue in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect lower property sales at Alleghany Properties.

Other operating expenses. The decreases in other operating expenses in the second quarter and first six months of 2019 from the corresponding 2018 periods primarily reflect reduced costs at SORC and, to a lesser extent, Alleghany Properties.

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Corporate administration.The increase in corporate administration expense in the second quarter of 2019 from the second quarter of 2018 reflects higher Alleghany parent-company long-term incentive compensation accruals due primarily to the impact of appreciation in the value of our debt securities portfolio in the second quarter of 2019, compared with depreciation in the second quarter of 2018, as well as a rise in the price per share of our common stock during the second quarter of 2019.

The increase in corporate administration expense in the first six months of 2019 from the first six months of 2018 reflects higher Alleghany parent-company long-term incentive compensation accruals due primarily to the impact of appreciation in the value of our debt securities portfolio in the first six months of 2019, compared with depreciation in the first six months of 2018, higher appreciation in the value of our equity securities portfolio and a rise in the price per share of our common stock during the first six months of 2019.

Interest expense. The slight increase in interest expense in the second quarter of 2019 from the second quarter of 2018 and the slight decrease in interest expense in the first six months of 2019 from the first six months of 2018 primarily reflect changes in interest credited on deferred compensation at Alleghany parent-company.

Earnings (losses) before income taxes. The losses before income taxes in the second quarter of 2019, compared with earnings before income taxes in the second quarter of 2018 and the increase in losses before income taxes in the first six months of 2019 from the first six months of 2018, primarily reflect significantly lower appreciation in the value of equity securities held at the Alleghany parent company-level, higher corporate administration expense and lower property sales at Alleghany Properties, all as discussed above.

Reserve Review Process

Our reinsurance and insurance subsidiaries analyze, at least quarterly, liabilities for unpaid loss and LAE established in prior years and adjust their expected ultimate cost, where necessary, to reflect favorable or unfavorable development in loss experience and new information, including, for certain catastrophe events, revised industry estimates of the magnitude of a catastrophe. Adjustments to previously recorded liabilities for unpaid loss and LAE, both favorable and unfavorable, are reflected in our financial results in the periods in which these adjustments are made and are referred to as prior accident year loss reserve development. The following table presents the reserves established in connection with the loss and LAE of our reinsurance and insurance segments on a gross and net basis by line of business. These reserve amounts represent the accumulation of estimates of ultimate loss (including for losses that have been incurred but not reported) and LAE.

			As of June 30, 2019					As of December 31, 2018
		Gross Loss and LAE Reserves			Reinsurance   Recoverables   on Unpaid Losses		Net Loss and   LAE Reserves		Gross Loss and LAE Reserves		Reinsurance    Recoverables   on Unpaid Losses		Net Loss and   LAE Reserves
						($ in millions)
Reinsurance Segment
Property	$	1,682.3		$	(540.6)	$	1,141.7	$	2,102.5	$	(701.8)	$	1,400.7
Casualty & other(1)		7,362.7			(297.9)		7,064.8		7,339.7		(261.9)		7,077.8
		9,045.0			(838.5)		8,206.5		9,442.2		(963.7)		8,478.5
Insurance Segment
Property		410.4			(143.6)		266.8		509.5		(187.1)		322.4
Casualty(2)		2,063.2			(574.4)		1,488.8		2,181.6		(700.3)		1,481.3
Workers’ Compensation		2.4			-		2.4		2.5		-		2.5
All other(3)		172.6			(62.4)		110.2		181.3		(73.1)		108.2
		2,648.6			(780.4)		1,868.2		2,874.9		(960.5)		1,914.4
Eliminations		(61.8)			61.8		-		(66.8)		66.8		-
Total	$	11,631.8		$	(1,557.1)	$	10,074.7	$	12,250.3	$	(1,857.4)	$	10,392.9

(1) Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; asbestos-related illness and environmental impairment liability; and credit.

(2) Primarily consists of the following direct lines of business: umbrella/excess; directors’ and officers’ liability; professional liability; and general liability.

(3) Primarily consists of commercial multi-peril and surety lines of business, as well as loss and LAE reserves for terminated lines of business and loss reserves acquired in connection with prior acquisitions for which the sellers provided loss reserve guarantees.

Changes in Gross and Net Loss and LAE Reserves between June 30, 2019 and December 31, 2018. Gross and net loss and LAE reserves as of June 30, 2019 decreased from December 31, 2018, primarily reflecting payments on catastrophe losses incurred in prior years and, to a lesser extent, favorable prior accident year loss reserve development.

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Reinsurance Recoverables

Our reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite in order to reduce the effect of individual or aggregate exposure to losses, manage capacity, protect capital resources, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and enable them to increase gross premiums writings and risk capacity without requiring additional capital. Our reinsurance and insurance subsidiaries generally purchase reinsurance and retrocessional coverages from highly-rated third-party reinsurers. If the assuming reinsurers are unable or unwilling to meet the obligations assumed under the applicable reinsurance agreements, our reinsurance and insurance subsidiaries would remain liable for such reinsurance portion not paid by these reinsurers. As such, funds, trust agreements and letters of credit are held to collateralize a portion of our reinsurance and insurance subsidiaries’ reinsurance recoverables, and our reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite or assume with multiple reinsurance programs.

As of June 30, 2019, our reinsurance and insurance subsidiaries had total reinsurance recoverables of $1,667.5 million, consisting of $1,557.1 million of ceded outstanding loss and LAE and $110.4 million of recoverables on paid losses. See Part I, Item 1, “Business — Reinsurance Protection” of the 2018 Form 10-K for additional information on the reinsurance purchased by our reinsurance and insurance subsidiaries.

The following table presents information regarding concentration of our reinsurance recoverables and the ratings profile of our reinsurers as of June 30, 2019:

Reinsurer(1)	Rating(2)		Amount	Percentage
			($ in millions)
Syndicates at Lloyd’s of London	A (Excellent)	$	134.2	8.0%
PartnerRe Ltd	A (Excellent)		97.2	5.8%
RenaissanceRe Holdings Ltd	A+ (Superior)		93.8	5.6%
Swiss Reinsurance Company	A+ (Superior)		90.2	5.4%
Fairfax Financial Holdings Ltd	A (Excellent)		86.6	5.2%
Liberty Mutual	A (Excellent)		77.9	4.7%
Third Point Reinsurance Group	A- (Excellent)		73.9	4.4%
W.R. Berkley Corporation	A+ (Superior)		72.7	4.4%
Kane SAC Ltd, Rondout Segregated Account(3)	not rated		71.2	4.3%
Kane SAC Ltd, Bowery Segregated Account(3)	not rated		61.9	3.7%
All other reinsurers			807.9	48.5%
Total reinsurance recoverables(4)		$	1,667.5	100.0%
Secured reinsurance recoverables(3)		$	599.4	35.9%

(1) Reinsurance recoverables reflect amounts due from one or more reinsurance subsidiaries of the listed company.

(2) Represents the A.M. Best Company, Inc. financial strength rating for the applicable reinsurance subsidiary or subsidiaries from which the reinsurance recoverable is due.

(3) Represents reinsurance recoverables secured by funds held, trust agreements or letters of credit.

(4) Approximately 70 percent of our reinsurance recoverables balance as of June 30, 2019 was due from reinsurers having an A.M. Best Company, Inc. financial strength rating of A (Excellent) or higher, with a majority of the other reinsurance recoverables being secured by funds held, trust agreements or letters of credit.

We had no allowance for uncollectible reinsurance as of June 30, 2019.

Critical Accounting Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that directly affect our reported financial condition and operating performance. More specifically, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. We rely on historical experience and on various other assumptions that we believe to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from reported results to the extent that estimates and assumptions prove to be inaccurate.

We believe our most critical accounting estimates are those with respect to the liability for unpaid loss and LAE reserves, fair value measurements of certain financial assets, OTTI losses on investments, goodwill and other intangible assets and reinsurance premium revenues, as they

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require management’s most significant exercise of judgment on both a quantitative and qualitative basis. The accounting estimates that result require the use of assumptions about certain matters that are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our financial condition, results of operations and cash flows would be affected, possibly materially.

See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” of the 2018 Form 10-K for a more complete description of our critical accounting estimates.

Financial Condition

Parent Level

General. In general, we follow a policy of maintaining a relatively liquid financial condition at our unrestricted holding companies. This policy has permitted us to expand our operations through internal growth at our subsidiaries and through acquisitions of, or substantial investments in, operating companies. As of June 30, 2019, we held total marketable securities and cash of $1,405.4 million compared with $1,122.3 million as of December 31, 2018. The increase in the six months ended June 30, 2019 primarily reflects appreciation in the value of the equity securities portfolio held at the holding company-level and the receipt of dividends from TransRe and RSUI, partially offset by repurchases of shares of our common stock, as discussed below. The $1,405.4 million is comprised of $430.0 million at the Alleghany parent company, $889.0 million at AIHL and $86.4 million at the TransRe holding company. We also hold certain non-marketable investments at our unrestricted holding companies. We believe that we have and will have adequate internally generated funds, cash resources and unused credit facilities to provide for the currently foreseeable needs of our business, and we had no material commitments for capital expenditures as of June 30, 2019.

Stockholders’ equity attributable to Alleghany stockholders was approximately $8.7 billion as of June 30, 2019, compared with approximately $7.7 billion as of December 31, 2018. The increase in stockholders’ equity in the first six months of 2019 primarily reflects net earnings and appreciation in the value of our debt securities portfolio due to a decrease in interest rates and credit spreads, partially offset by repurchases of our common stock, all as discussed below. As of June 30, 2019, we had 14,430,862 shares of our common stock outstanding, compared with 14,576,509 shares of our common stock outstanding as of December 31, 2018.

Debt. On September 9, 2014, we completed a public offering of $300.0 million aggregate principal amount of our 4.90% senior notes due on September 15, 2044. On June 26, 2012, we completed a public offering of $400.0 million aggregate principal amount of our 4.95% senior notes due on June 27, 2022. On September 20, 2010, we completed a public offering of $300.0 million aggregate principal amount of our 5.625% senior notes due on September 15, 2020. See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes.

Credit Agreement. On July 31, 2017, we entered into a five-year credit agreement, or the “Credit Agreement,” with certain lenders party thereto, which provides for an unsecured revolving credit facility in an aggregate principal amount of up to $300.0 million. The credit facility is scheduled to expire on July 31, 2022, unless earlier terminated. Borrowings under the Credit Agreement will be available for working capital and general corporate purposes, including permitted acquisitions and repurchases of common stock. Borrowings under the Credit Agreement bear a floating rate of interest based in part on our credit rating, among other factors. The Credit Agreement contains representations, warranties and covenants customary for bank loan facilities of this nature.

There were no borrowings under the Credit Agreement from inception through June 30, 2019.

Common Stock Repurchases. In November 2015, our Board of Directors authorized the repurchase of shares of our common stock at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million, or the “2015 Repurchase Program.” In June 2018, our Board of Directors authorized, upon the completion of the 2015 Repurchase Program, the repurchase of additional shares of our common stock at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million, or the “2018 Repurchase Program.” In the fourth quarter of 2018, we completed the 2015 Repurchase Program and subsequent repurchases have been made pursuant to the 2018 Repurchase Program. As of June 30, 2019, we had $178.3 million remaining under our repurchase authorization.

The following table presents the shares of our common stock that we repurchased in the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
Shares repurchased		19,246		368,551		148,813		403,623
Cost of shares repurchased (in millions)	$	12.7	$	214.8	$	93.2	$	236.1
Average price per share repurchased	$	658.09	$	582.92	$	625.96	$	584.96

Special Dividend. In February 2018, our Board of Directors declared a special dividend of $10.00 per share for stockholders of record on March 5, 2018. On March 15, 2018, we paid dividends to stockholders totaling $154.0 million.

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Investments in Certain Other Invested Assets. In December 2012, TransRe obtained an ownership interest in Pillar Capital Holdings, Limited, or “Pillar Holdings,” a Bermuda-based insurance asset manager focused on collateralized reinsurance and catastrophe insurance-linked securities. Additionally, TransRe invested $175.0 million and AIHL invested $25.0 million in limited partnership funds managed by Pillar Holdings, or the “Funds.” The objective of the Funds is to create portfolios with attractive risk- reward characteristics and low correlation with other asset classes, using the extensive reinsurance and capital market experience of the principals of Pillar Holdings. We have concluded that both Pillar Holdings and the Funds, or collectively, the “Pillar Investments,” represent variable interest entities and that we are not the primary beneficiary, as we do not have the ability to direct the activities that most significantly impact each entity’s economic performance. Therefore, the Pillar Investments are not consolidated and are accounted for under the equity method of accounting. Our potential maximum loss in the Pillar Investments is limited to our cumulative net investment. As of June 30, 2019, our carrying value in the Pillar Investments, as determined under the equity method of accounting, was $198.0 million, which is net of returns of capital received from the Pillar Investments.

In July 2013, AIHL invested $250.0 million in Ares, an asset manager, in exchange for a 6.25 percent equity stake in Ares, with an agreement to engage Ares to manage up to $1.0 billion in certain investment strategies. In May 2014, Ares completed an initial public offering of its common units. Upon completion of the initial public offering, our equity investment in Ares converted into limited partnership interests in certain Ares subsidiaries that were convertible into Ares common units. On March 15, 2018, most of AIHL’s limited partnership interests were converted into Ares common units. As a result of the conversion and with respect to the limited partnership interests that were converted into Ares common units, AIHL: (i) reclassified its converted interests from other invested assets to equity securities; (ii) increased its carrying value to $208.2 million to reflect the fair value of Ares common units; and (iii) recorded the $45.7 million increase in carrying value as a realized capital gain as of March 15, 2018. As a result of the conversion and with respect to the unconverted limited partnership interests, AIHL: (i) changed its accounting method from the equity method to fair value; (ii) increased its carrying value to $58.7 million to reflect the fair value of Ares limited partnership interests; and (iii) recorded the $12.9 million increase in carrying value as a component of net investment income as of March 15, 2018. On September 24, 2018, AIHL’s remaining Ares limited partnership interests were converted into Ares common units and, as a result, AIHL reclassified the remaining $56.9 million of its converted interests from other invested assets to equity securities. In the second quarter of 2019, AIHL sold all of its remaining holdings in Ares common units.

Investments in Commercial Mortgage Loans. As of June 30, 2019, the carrying value of our commercial mortgage loan portfolio was $691.4 million, representing the unpaid principal balance on the loans. As of June 30, 2019, there was no allowance for loan losses. Our commercial mortgage loan portfolio consists primarily of first mortgages on commercial properties in major metropolitan areas in the U.S. The loans earn interest at fixed- and floating-rates, mature in two to ten years from loan origination and the principal amounts of the loans were no more than approximately two-thirds of the property’s appraised value at the time the loans were made.

Energy Holdings. As of June 30, 2019, we had holdings in energy sector businesses of $416.1 million, comprised of $323.9 million of debt securities, $5.4 million of equity securities and $86.8 million of our equity attributable to SORC.

Subsidiaries

Financial strength is also a high priority of our subsidiaries, whose assets stand behind their financial commitments to their customers and vendors. We believe that our subsidiaries have and will have adequate internally generated funds, cash resources and unused credit facilities to provide for the currently foreseeable needs of their businesses. Our subsidiaries had no material commitments for capital expenditures as of June 30, 2019.

The obligations and cash outflow of our reinsurance and insurance subsidiaries include claim settlements, commission expenses, administrative expenses, purchases of investments and interest and principal payments on TransRe’s 8.00% senior notes due on November 30, 2039. In addition to premium collections, cash inflow is obtained from interest and dividend income, maturities and sales of investments and reinsurance recoveries. Because cash inflow from premiums is received in advance of cash outflow required to settle claims, our reinsurance and insurance operating units accumulate funds which they invest pending the need for liquidity. As the cash needs of a reinsurance or an insurance company can be unpredictable due to the uncertainty of the claims settlement process, the portfolios of our reinsurance and insurance subsidiaries consist primarily of debt securities and short-term investments to ensure the availability of funds and maintain a sufficient amount of liquid securities.

Included in Alleghany Capital is debt associated with its operating subsidiaries, which totaled $330.6 million as of June 30, 2019, which is generally used to support working capital needs and to help finance acquisitions. The $330.6 million includes:

• $113.1 million of borrowings by W&W|AFCO Steel under its available credit facilities and term loans (including borrowings incurred and assumed from its acquisition of Hirschfeld);

• $64.0 million of term loans at Kentucky Trailer primarily related to borrowings to finance small acquisitions, including its acquisition of a controlling interest in a certain manufacturer of aluminum feed transportation equipment in December 2018, and borrowings under its available credit facilities;

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• $51.5 million of borrowings by IPS under its available credit facility and term loans, in part to finance a small acquisition in May 2019;

• $35.4 million of borrowings by Jazwares under its available credit facility;

• $33.4 million of term loans at Concord primarily related to borrowings to finance Alleghany Capital’s acquisition of Concord; and

• $33.2 million of term loans at PCT primarily related to borrowings to finance the acquisition of a waterjet orifice and nozzle manufacturer in 2016 and the acquisition of a consumable cutting tool manufacturer in June 2019.

With respect to corporate activities, SORC has relied on Alleghany almost entirely to support its operations. From its formation in 2011 through June 30, 2019, we have invested $271.5 million in SORC.

Consolidated Investment Holdings

Investment Strategy and Holdings. Our investment strategy seeks to preserve principal and maintain liquidity while trying to maximize our risk-adjusted, after-tax rate of return. Our investment decisions are guided mainly by the nature and timing of expected liability payouts, management’s forecast of cash flows and the possibility of unexpected cash demands, such as, to satisfy claims due to catastrophe losses. Our consolidated investment portfolio consists mainly of highly rated and liquid debt and equity securities listed on national securities exchanges. The overall credit quality of the debt securities portfolio is measured using the lowest rating of Standard & Poor’s Ratings Services, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. In this regard, the overall weighted-average credit quality rating of our debt securities portfolio as of June 30, 2019 and December 31, 2018 was AA-. Although a portion of our debt securities, which consist predominantly of municipal bonds, are insured by third-party financial guaranty insurance companies, the impact of such insurance was not significant to the debt securities credit quality rating as of June 30, 2019. The following table presents the ratings of our debt securities as of June 30, 2019:

	Ratings as of June 30, 2019
	AAA / Aaa		AA / Aa		A		BBB / Baa		Below BBB / Baa or Not Rated(1)		Total
	($ in millions)
U.S. Government obligations	$	-	$	1,256.5	$	-	$	-	$	-	$	1,256.5
Municipal bonds		193.8		1,630.9		524.6		98.1		0.9		2,448.3
Foreign government obligations		493.8		187.0		94.9		7.7		-		783.4
U.S. corporate bonds		12.2		145.5		1,344.3		1,228.5		359.9		3,090.4
Foreign corporate bonds		258.7		168.4		651.4		300.6		58.0		1,437.1
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)		-		1,909.3		-		0.6		6.0		1,915.9
Commercial mortgage-backed securities (“CMBS”)		276.1		407.5		104.1		0.7		-		788.4
Other asset-backed securities		991.0		440.3		495.2		414.7		68.4		2,409.6
Total debt securities	$	2,225.6	$	6,145.4	$	3,214.5	$	2,050.9	$	493.2	$	14,129.6
Percentage of debt securities		15.8%		43.4%		22.8%		14.5%		3.5%		100.0%

(1) Consists of $80.7 million of securities rated BB / Ba, $223.7 million of securities rated B, $33.4 million of securities rated CCC, $0.4 million of securities rated CC, $2.2 million rated below CC and $152.8 million of not rated securities.

Our debt securities portfolio has been designed to enable management to react to investment opportunities created by changing interest rates, prepayments, tax and credit considerations or other factors, or to circumstances that could result in a mismatch between the desired duration of debt securities and the duration of liabilities and, as such, is classified as available-for-sale, or “AFS.”

Effective duration measures a portfolio’s sensitivity to changes in interest rates. In this regard, as of June 30, 2019 and December 31, 2018, our debt securities portfolio had an effective duration of approximately 4.2 years. As of June 30, 2019, approximately $4.0 billion, or 28 percent, of our debt securities portfolio represented securities with maturities of five years or less. See Note 3(b) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional detail on the contractual maturities of our consolidated debt securities portfolio. We may increase the proportion of our debt securities portfolio held in securities with maturities of more than five years should the yields of these securities provide, in our judgment, sufficient compensation for their increased risk. We do not believe that this strategy would reduce our ability to meet ongoing claim payments or to respond to significant catastrophe losses.

In the event paid losses accelerate beyond the ability of our reinsurance and insurance subsidiaries to fund these paid losses from current cash balances, current operating cash flow, dividend and interest receipts and security maturities, we would need to liquidate a portion of our investment

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portfolio, make capital contributions to our reinsurance and insurance subsidiaries, and/or arrange for financing. Strains on liquidity could result from: (i) the occurrence of several significant catastrophe events in a relatively short period of time; (ii) the sale of investments into a depressed marketplace to fund these paid losses; (iii) the uncollectibility of reinsurance recoverables on these paid losses; (iv) the significant decrease in the value of collateral supporting reinsurance recoverables; or (v) a significant reduction in our net premium collections.

We may, from time to time, make significant investments in the common stock of a public company, subject to limitations imposed by applicable regulations.

On a consolidated basis, as of June 30, 2019, our invested assets increased to approximately $18.7 billion from approximately $17.5 billion as of December 31, 2018, primarily reflecting appreciation in the value of our equity and debt securities portfolios, partially offset by repurchases of shares of our common stock, all as discussed above. The appreciation in the value of our debt securities portfolio reflects a decrease in interest rates and credit spreads. During the first quarter of 2019, we reallocated a significant portion of our investment portfolio from equity securities to debt securities.

Fair Value. The following table presents the carrying values and estimated fair values of our consolidated financial instruments as of June 30, 2019 and December 31, 2018:

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)(1)	$	17,477.7	$	17,477.7	$	16,291.3	$	16,291.3
Liabilities
Senior Notes and other debt(2)	$	1,714.7	$	1,882.2	$	1,669.0	$	1,795.5

(1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is discussed below.

(2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between willing, able and knowledgeable market participants at the measurement date. Fair value measurements are not adjusted for transaction costs. In addition, a three-tiered hierarchy for inputs is used in management’s determination of fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are market participant assumptions based on market data obtained from sources independent of the reporting entity. Unobservable inputs are the reporting entity’s own assumptions about market participant assumptions based on the best information available under the circumstances. In assessing the appropriateness of using observable inputs in making our fair value determinations, we consider whether the market for a particular security is “active” or not based on all the relevant facts and circumstances. A market may be considered to be inactive if there are relatively few recent transactions or if there is a significant decrease in market volume. Furthermore, we consider whether observable transactions are “orderly” or not. We do not consider a transaction to be orderly if there is evidence of a forced liquidation or other distressed condition; as such, little or no weight is given to that transaction as an indicator of fair value.

Although we are responsible for the determination of the fair value of our financial assets and the supporting methodologies and assumptions, we employ third-party valuation service providers to gather, analyze and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual instruments. When those providers are unable to obtain sufficient market observable information upon which to estimate the fair value for a particular security, fair value is determined either by requesting a quote, which is generally non-binding, from brokers who are knowledgeable about these securities or by employing widely accepted valuation models.

Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of widely accepted valuation models, provide a single fair value measurement for individual securities for which a fair value has been requested under the terms of service agreements. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, currency rates and other market observable information, as applicable. The valuation models take into account, among other things, market observable information as of the measurement date as well as the specific attributes of the security being valued including its term, interest rate, credit rating, industry sector and, when applicable, collateral quality and other issue or issuer specific information. When market transactions or other market observable data is limited, the extent to which judgment is applied in determining fair value is greatly increased.

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The three-tiered hierarchy used in management’s determination of fair value is broken down into three levels based on the reliability and observability of inputs as follows:

• Level 1: Valuations are based on unadjusted quoted prices in active markets that we have the ability to access for identical, unrestricted assets and do not involve any meaningful degree of judgment. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Our Level 1 assets include publicly traded common stocks and mutual funds (which are included on our Consolidated Balance Sheet in equity securities) where our valuations are based on quoted market prices.

• Level 2: Valuations are based on direct and indirect observable inputs other than quoted market prices included in Level 1. Level 2 inputs include quoted prices for similar assets in active markets and inputs other than quoted prices that are observable for the asset, such as the terms of the security and market-based inputs. Terms of the security include coupon, maturity date and any special provisions that may, for example, enable the investor, at its election, to redeem the security prior to its scheduled maturity date (such provisions may apply to all debt securities except U.S. Government obligations). Market-based inputs include interest rates and yield curves that are observable at commonly quoted intervals and current credit rating(s) of the security. Market-based inputs may also include credit spreads of all debt securities except U.S. Government obligations, and currency rates for certain foreign government obligations and foreign corporate bonds denominated in foreign currencies. Fair values are determined using a market approach that relies on the securities’ relationships to quoted prices for similar assets in active markets, as well as the other inputs described above. In determining the fair values for the vast majority of CMBS and other asset-backed securities, as well as a small portion of RMBS, an income approach is used to corroborate and further support the fair values determined by the market approach. The income approach primarily involves developing a discounted cash flow model using the future projected cash flows of the underlying collateral, and the terms of the security. Level 2 assets generally include short-term investments and most debt securities. Our Level 2 liabilities consist of the senior notes.

• Level 3: Valuations are based on techniques that use significant inputs that are unobservable. The valuation of Level 3 assets requires the greatest degree of judgment. These measurements may be made under circumstances in which there is little, if any, market activity for the asset. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment. In making the assessment, we consider factors specific to the asset. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assets classified as Level 3 principally include other asset-backed securities (primarily, collateralized loan obligations) and, to a lesser extent, U.S. and foreign corporate bonds (including privately issued securities), partnership investments, non-marketable equity investments, CMBS and commercial mortgage loans.

Mortgage-backed and asset-backed securities are initially valued at the transaction price. Subsequently, we use widely accepted valuation practices that produce a fair value measurement. The vast majority of fair values are determined using an income approach. The income approach primarily involves developing a discounted cash flow model using the future projected cash flows of the underlying collateral, as well as other inputs described below. A few Level 3 valuations are based entirely on non-binding broker quotes. These securities consist primarily of mortgage-backed and asset-backed securities where reliable pool and loan level collateral information cannot be reasonably obtained, and as such, an income approach is not feasible.

Since Level 3 valuations are based on techniques that use significant inputs that are unobservable with little or no market activity, the fair values under the market approach for Level 3 securities are less credible than under the income approach; however, the market approach, where feasible, is used to corroborate the fair values determined by the income approach. The market approach primarily relies on the securities’ relationships to quoted transaction prices for similarly structured instruments. To the extent that transaction prices for similarly structured instruments are not available for a particular security, other market approaches are used to corroborate the fair values determined by the income approach, including option adjusted spread analyses.

Unobservable inputs, significant to the measurement and valuation of mortgage-backed and asset-backed securities, are generally used in the income approach, and include assumptions about prepayment speed and collateral performance, including default, delinquency and loss severity rates. Significant changes to any one of these inputs, or combination of inputs, could significantly change the fair value measurement for these securities.

The impact of prepayment speeds on fair value is dependent on a number of variables including whether the securities were purchased at a premium or discount. A decrease in interest rates generally increases the assumed rate of prepayments, and an increase in interest rates generally decreases the assumed speed of prepayments. Increased prepayments increase the yield on securities purchased at a discount and reduce the yield on securities purchased at a premium. In a decreasing prepayment environment, yields on securities purchased at a discount are reduced but are increased for securities purchased at a premium. Changes in default assumptions on underlying collateral are generally accompanied by directionally similar changes in other collateral performance factors, but generally result in a directionally opposite change in prepayment assumptions.

Our Level 3 liabilities consist of the debt of Alleghany Capital’s operating subsidiaries.

We employ specific control processes to determine the reasonableness of the fair values of our financial assets and liabilities. Our processes are designed to ensure that the values received or internally estimated are accurately recorded and that the data inputs and the valuation techniques used are appropriate, consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value. We assess the

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reasonableness of individual security values received from valuation service providers through various analytical techniques. In addition, we validate the reasonableness of fair values by comparing information obtained from our valuation service providers to other third-party valuation sources for selected securities. We also validate prices obtained from brokers for selected securities through reviews by those who have relevant expertise and who are independent of those charged with executing investing transactions.

In addition to such procedures, we review the reasonableness of our classification of securities within the three-tiered hierarchy to ensure that the classification is consistent with GAAP.    

The following tables present the estimated fair values of our financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of June 30, 2019 and December 31, 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of June 30, 2019
Equity securities:
Common stock	$	2,285.4	$	3.3	$	-	$	2,288.7
Preferred stock		-		-		4.1		4.1
Total equity securities		2,285.4		3.3		4.1		2,292.8
Debt securities:
U.S. Government obligations		-		1,256.5		-		1,256.5
Municipal bonds		-		2,448.3		-		2,448.3
Foreign government obligations		-		783.4		-		783.4
U.S. corporate bonds		-		2,555.8		534.6		3,090.4
Foreign corporate bonds		-		1,291.2		145.9		1,437.1
Mortgage and asset-backed securities:
RMBS(1)		-		1,915.9		-		1,915.9
CMBS		-		788.4		-		788.4
Other asset-backed securities(2)		-		1,449.9		959.7		2,409.6
Total debt securities		-		12,489.4		1,640.2		14,129.6
Short-term investments		-		1,054.8		-		1,054.8
Other invested assets(3)		-		-		0.5		0.5
Total investments (excluding equity method investments and loans)	$	2,285.4	$	13,547.5	$	1,644.8	$	17,477.7
Senior Notes and other debt	$	-	$	1,551.6	$	330.6	$	1,882.2

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	Level 1		Level 2		Level 3		Total
				($ in millions)
As of December 31, 2018
Equity securities:
Common stock	$	3,563.9	$	3.5	$	-	$	3,567.4
Preferred stock		-		-		5.4		5.4
Total equity securities		3,563.9		3.5		5.4		3,572.8
Debt securities:
U.S. Government obligations		-		1,022.4		-		1,022.4
Municipal bonds		-		2,214.7		-		2,214.7
Foreign government obligations		-		947.9		-		947.9
U.S. corporate bonds		-		1,959.6		425.7		2,385.3
Foreign corporate bonds		-		1,226.4		126.9		1,353.3
Mortgage and asset-backed securities:
RMBS(1)		-		1,387.9		-		1,387.9
CMBS		-		533.3		-		533.3
Other asset-backed securities(2)		-		712.3		1,266.9		1,979.2
Total debt securities		-		10,004.5		1,819.5		11,824.0
Short-term investments		-		893.8		-		893.8
Other invested assets(3)		-		-		0.7		0.7
Total investments (excluding equity method investments and loans)	$	3,563.9	$	10,901.8	$	1,825.6	$	16,291.3
Senior Notes and other debt	$	-	$	1,510.5	$	285.0	$	1,795.5

(1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

(2) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method.

Municipal Bonds. The following table provides the fair value of our municipal bonds as of June 30, 2019, categorized by state and revenue source. Special revenue bonds are debt securities for which the payment of principal and interest is available solely from the cash flows of the related projects. As issuers of revenue bonds do not have the ability to draw from tax revenues or levy taxes to fund obligations, revenue bonds may carry a greater risk of default than general obligation bonds.

	Special Revenue
State	Education		Hospital		Housing		Lease Revenue		Special Tax			Transit		Utilities		All Other Sources		Total Special Revenue		Total General Obligation		Total Fair Value
											($ in millions)
New York	$	9.5	$	-	$	1.8	$	-	$	108.7		$	73.0	$	26.9	$	7.6	$	227.5	$	9.3	$	236.8
Texas		12.6		-		0.2		6.7		8.7			39.1		64.5		2.4		134.2		62.5		196.7
Massachusetts		19.5		5.6		8.3		-		25.5			24.1		17.4		0.3		100.7		75.0		175.7
California		11.2		41.1		-		2.3		1.3			21.1		54.5		-		131.5		38.3		169.8
Pennsylvania		2.3		1.4		9.5		-		-			34.5		4.2		17.9		69.8		38.2		108.0
Washington		-		-		1.7		-		7.0			11.1		28.4		2.3		50.5		45.7		96.2
Ohio		42.9		0.6		0.1		-		2.2			-		19.3		11.2		76.3		19.7		96.0
Colorado		22.5		10.3		-		12.9		-			6.7		12.0		-		64.4		19.5		83.9
Utah		5.7		-		-		-		25.2			18.9		21.2		-		71.0		6.6		77.6
Florida		-		0.3		3.8		-		11.4			35.1		6.7		11.0		68.3		6.4		74.7
All other states		129.2		92.0		36.9		59.7		81.2			72.4		130.4		129.8		731.6		190.9		922.5
Total	$	255.4	$	151.3	$	62.3	$	81.6	$	271.2		$	336.0	$	385.5	$	182.5	$	1,725.8	$	512.1		2,237.9
Total advanced refunded / escrowed maturity funds																							210.4
Total municipal bonds																						$	2,448.3

Recent Accounting Standards

Recently Adopted

In February 2018, the Financial Accounting Standards Board, or the “FASB,” issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017, or the “Tax Act.” The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax

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expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. We adopted this new guidance in the first quarter of 2018 and have elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on us.

In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. We adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on our results of operations and financial condition.

In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on our results of operations and financial condition. As part of its implementation, we elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by our lessors for certain of its leases). We also elected the package of practical expedients under the transition guidance, which allowed us to not reevaluate existing lease classifications, among others. As of January 1, 2019, our adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for further information on our leases.

In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. We adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on our financial condition. See Note 3 to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for further information on our equity securities, and Note 7(b) to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for further information on accumulated other comprehensive income.

In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. We adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material

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impact on our results of operations and financial condition. See Note 10 to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q of this Form 10-Q for further information on our noninsurance revenue.

Future Application of Accounting Standards

In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an AFS basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. We will adopt this guidance in the first quarter of 2020. Although we expect to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, we do not currently believe that the implementation will have a material impact on our results of operations and financial condition. See Note 3 to Notes to Unaudited Consolidated Financial Statements set forth in Part I, Item 1, “Financial Statements” of this Form 10-Q for further information on our investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on our reinsurance recoverables.

In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. We will adopt this guidance in the first quarter of 2020 and do not currently believe that the implementation will have a material impact on our results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on our goodwill.

In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified disclosures. We will adopt this guidance in the first quarter of 2020 and do not currently believe that the implementation will have a material impact on our results of operations and financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of loss from adverse changes in market prices and rates. The primary market risk related to our debt securities is the risk of loss associated with adverse changes in interest rates. We hold our debt securities as AFS. Any changes in the fair value in these securities, net of tax, would be recorded as a component of other comprehensive income. However, if a decline in fair value relative to cost is believed to be other than temporary, a loss is generally recorded on our statement of earnings. We also invest in equity securities which are subject to fluctuations in market value. In addition, significant portions of our assets (principally investments) and liabilities (principally loss and LAE reserves and unearned premiums) are exposed to changes in foreign currency exchange rates. The net change in the carrying value of assets and liabilities denominated in foreign currencies is generally recorded as a component of other comprehensive income.

The sensitivity analyses presented below provide only a limited, point-in-time view of the market risk of our financial instruments. The actual impact of changes in market interest rates, equity market prices and foreign currency exchange rates may differ significantly from those shown in these sensitivity analyses. The sensitivity analyses are further limited because they do not consider any actions we could take in response to actual and/or anticipated changes in equity market prices, market interest rates or foreign currency exchange rates. In addition, these sensitivity analyses do not provide weight to risks related to market issues such as liquidity and the credit worthiness of investments.

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Interest Rate Risk

The primary market risk for our debt securities is interest rate risk at the time of refinancing. We monitor the interest rate environment to evaluate reinvestment and refinancing opportunities. We generally do not use derivatives to manage market and interest rate risks. The table below presents a sensitivity analysis as of June 30, 2019 of our (i) consolidated debt securities and (ii) senior notes and other debt, which are sensitive to changes in interest rates. Sensitivity analysis is defined as the measurement of potential change in future earnings, fair values or cash flows of market sensitive instruments resulting from one or more selected hypothetical changes in interest rates over a selected time period. In the sensitivity analysis model below, we use a +/- 300 basis point range of change in interest rates to measure the hypothetical change in fair value of the financial instruments included in the analysis. The change in fair value is determined by calculating hypothetical June 30, 2019 ending prices based on yields adjusted to reflect a +/- 300 basis point range of change in interest rates, comparing these hypothetical ending prices to actual ending prices, and multiplying the difference by the par outstanding. The selected hypothetical changes in interest rates do not reflect what could be the potential best or worst case scenarios.

	-300		-200		-100			0		100		200		300
							($ in millions)
Assets:
Debt securities, fair value	$	15,435.2	$	15,238.8	$	14,718.8		$	14,129.6	$	13,522.0	$	12,924.3	$	12,357.7
Estimated change in fair value		1,305.6		1,109.2		589.2			-		(607.6)		(1,205.3)		(1,771.9)
Liabilities:
Senior Notes and other debt, fair value	$	2,336.0	$	2,158.1	$	2,008.5		$	1,882.2	$	1,774.5	$	1,682.3	$	1,603.0
Estimated change in fair value		453.8		275.9		126.3			-		(107.7)		(199.9)		(279.2)

Equity Risk

Our equity securities are subject to fluctuations in market value. The table below presents our equity market price risk and reflects the effect of a hypothetical increase or decrease in market prices as of June 30, 2019 on the estimated fair value of our consolidated equity portfolio. The selected hypothetical price changes do not reflect what could be the potential best or worst case scenarios.

As of June 30, 2019
($ in millions)
Estimated Fair Value	Hypothetical Price Change	Estimated Fair Value After Hypothetical Change in Price		Hypothetical Percentage Increase (Decrease) in     Stockholders’ Equity
$             2,292.8	20% Increase	$	2,751.4		4.2%
	20% Decrease		1,834.2		(4.2%)

In July 2019, we purchased an equity derivative to hedge the market risk on a significant portion of our consolidated equity portfolio.

In addition to debt and equity securities, we invest in several partnerships which are subject to fluctuations in market value. Our partnership investments are included in other invested assets and are accounted for at fair value or using the equity method, and had a carrying value of $392.6 million as of June 30, 2019.

Foreign Currency Exchange Rate Risk

Foreign currency exchange rate risk is the potential change in value arising from changes in foreign currency exchange rates. Our reinsurance operations located in foreign countries maintain some or all of their capital in their local currency and conduct business in their local currency, as well as the currencies of the other countries in which they operate. To mitigate this risk, we maintain investments denominated in certain foreign currencies in which the claims payments will be made. As of June 30, 2019, the largest foreign currency net asset exposures for these foreign operations were the Euro and the Canadian Dollar. The table below presents our foreign currency exchange rate risk and shows the effect of a hypothetical increase or decrease in foreign currency exchange rates against the U.S. Dollar as of June 30, 2019 on the estimated net carrying value of our foreign currency denominated assets, net of our foreign currency denominated liabilities. The selected hypothetical changes do not reflect what could be the potential best or worst case scenarios.

As of June 30, 2019
($ in millions)
Estimated Fair Value	Hypothetical Price Change	Estimated Fair Value After Hypothetical Change in Price		Hypothetical Percentage Increase (Decrease) in     Stockholders’ Equity
$                 229.3(1)	20% Increase	$	275.2		0.4%
	20% Decrease		183.4		(0.4%)

(1) Denotes a net asset position as of June 30, 2019.

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer, or “CEO,” and our chief financial officer, or “CFO,” of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-Q pursuant to Rule 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of that date to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and timely reported as specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow for timely decisions regarding required disclosure. Our disclosure controls and procedures were designed to provide such assurance; however, we note that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control Over Financial Reporting

No changes occurred during the quarter ended June 30, 2019 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

Certain of our subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. We believe such provisions are adequate and do not believe that any pending litigation will have a material adverse effect on our consolidated results of operations, financial position or cash flows. See Note 12(a) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

Item 1A. Risk Factors.

There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors” of the 2018 Form 10-K. Please refer to that section for disclosures regarding what we believe are the more significant risks and uncertainties related to our businesses.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) Issuer Purchases of Equity Securities.

The following table presents our common stock repurchases for the quarter ended June 30, 2019:

	Total Number of   Shares Repurchased		Average Price     Paid per Share		Total Number of   Shares Purchased   as Part of Publicly Announced Plans or Programs(1)		Approximate Dollar Value of Shares That May   Yet be Purchased   Under the Plans or Programs(1)  (in millions)
April 1 to April 30		6,417	$	620.07		6,417	$	187.0
May 1 to May 31		6,644		675.49		6,644		182.5
June 1 to June 30		6,185		678.84		6,185		178.3
Total		19,246		658.09		19,246

(1) In June 2018, our Board of Directors authorized the repurchase of shares of our common stock, at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million.

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Item 6. Exhibits.

Exhibit        Number	Description
31.1	Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) of the Exchange Act.
31.2	Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) of the Exchange Act.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this Form 10-Q.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this Form 10-Q.
101	Interactive Data Files formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018; (ii) Consolidated Statements of Earnings and Comprehensive Income for the three and six months ended June 30, 2019 and 2018; (iii) Consolidated Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2019 and 2018; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018; and (v) Notes to Unaudited Consolidated Financial Statements.
104	Cover Page Interactive Data File, formatted in Inline XBRL.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ALLEGHANY CORPORATION (Registrant)
Date: August 6, 2019	By:	/s/ Kerry J. Jacobs
		Kerry J. Jacobs
		Senior Vice President and chief financial officer (principal financial officer)

72

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Weston M. Hicks, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Alleghany Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 6, 2019

/s/ Weston M. Hicks

Weston M. Hicks

President and chief executive officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kerry J. Jacobs, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Alleghany Corporation (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 6, 2019

/s/ Kerry J. Jacobs

Kerry J. Jacobs

Senior Vice President and chief financial officer

EX-32.1

Exhibit 32.1

ALLEGHANY CORPORATION

CERTIFICATION

In connection with the periodic report of Alleghany Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the “Report”), I, Weston M. Hicks, President and chief executive officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification, which accompanies the Report, has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: August 6, 2019	By:	/s/ Weston M. Hicks
		Weston M. Hicks
		President and chief executive officer

EX-32.2

Exhibit 32.2

ALLEGHANY CORPORATION

CERTIFICATION

In connection with the periodic report of Alleghany Corporation (the “Company”) on Form 10-Q for the quarter ended June 30, 2019, as filed with the Securities and Exchange Commission (the “Report”), I, Kerry J. Jacobs, Senior Vice President and chief financial officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to my knowledge:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification, which accompanies the Report, has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Date: August 6, 2019	By:	/s/ Kerry J. Jacobs
		Kerry J. Jacobs
		Senior Vice President and chief financial officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 30, 2019
Document Information [Line Items]
Amendment Flag	false
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	ALLEGHANY CORP /DE
Entity Central Index Key	0000775368
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Trading Symbol	Y
Entity Common Stock, Shares Outstanding		14,430,187
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Address, Address Line One	1411 Broadway, 34th Floor
Entity Address, City or Town	NY
Entity Address, Postal Zip Code	10018
Entity Address, State or Province	NY
Entity Tax Identification Number	51-0283071
City Area Code	212
Local Phone Number	752-1356
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation, State or Country Code	DE
Entity File Number	1-9371
Title of 12(b) Security	Common Stock
Security Exchange Name	NYSE
Entity Shell Company	false
Entity Current Reporting Status	Yes
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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investments:
Equity securities	$ 2,292,803	$ 3,572,790
Debt securities	14,129,577	11,823,968
Short-term investments	1,054,793	893,776
Marketable Securities, Total	17,477,173	16,290,534
Commercial mortgage loans	691,437	676,532
Other invested assets	579,018	555,972
Total investments	18,747,628	17,523,038
Cash	824,818	1,038,763
Accrued investment income	101,384	91,913
Premium balances receivable	965,514	842,642
Reinsurance recoverables	1,667,516	1,921,278
Ceded unearned premiums	243,316	221,232
Deferred acquisition costs	502,645	464,546
Property and equipment at cost, net of accumulated depreciation and amortization	202,480	195,243
Goodwill	481,212	455,142
Intangible assets, net of amortization	587,807	553,136
Current taxes receivable	29,628	116,637
Net deferred tax assets		164,890
Funds held under reinsurance agreements	729,586	744,057
Other assets	1,272,844	1,012,379
Total assets	26,356,378	25,344,896
Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity
Loss and loss adjustment expenses	11,631,798	12,250,294
Unearned premiums	2,464,150	2,267,078
Senior Notes and other debt	1,714,652	1,669,039
Reinsurance payable	186,018	168,667
Net deferred tax liabilities	42,868
Other liabilities	1,455,406	1,127,346
Total liabilities	17,494,892	17,482,424
Redeemable noncontrolling interests	175,572	169,762
Common stock	17,460	17,460
Contributed capital	3,608,069	3,612,830
Accumulated other comprehensive income (loss)	151,964	(202,003)
Treasury stock	(1,404,627)	(1,312,939)
Retained earnings	6,313,048	5,577,362
Total stockholders' equity attributable to Alleghany stockholders	8,685,914	7,692,710
Total liabilities, redeemable noncontrolling interests and stockholders' equity	$ 26,356,378	$ 25,344,896

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Equity securities, cost	$ 1,471,057	$ 2,904,496
Debt securities, amortized cost	$ 13,756,921	$ 11,895,850
Common stock, Shares authorized	22,000,000	22,000,000
Common stock, Shares issued	17,459,961	17,459,961
Treasury stock, shares	3,029,099	2,883,452

XML

Consolidated Statements of Earnings and Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues
Net premiums earned	$ 1,356,008	$ 1,236,959	$ 2,653,317	$ 2,444,815
Net investment income	142,745	126,273	265,794	250,399
Change in the fair value of equity securities	143,660	185,245	536,013	142,596
Net realized capital gains	12,354	6,462	16,796	50,967
Other than temporary impairment losses		0	(10,020)	(511)
Noninsurance revenue	603,906	342,725	1,118,029	594,352
Total revenues	2,258,673	1,897,664	4,579,929	3,482,618
Costs and Expenses
Net loss and loss adjustment expenses	796,803	738,210	1,589,301	1,408,788
Commissions, brokerage and other underwriting expenses	444,316	402,083	864,442	808,378
Other operating expenses	581,474	343,165	1,083,892	608,062
Corporate administration	25,967	14,119	45,336	21,904
Amortization of intangible assets	8,795	5,966	15,695	11,230
Interest expense	25,129	22,277	48,660	43,808
Total costs and expenses	1,882,484	1,525,820	3,647,326	2,902,170
Earnings before income taxes	376,189	371,844	932,603	580,448
Income taxes	71,356	73,440	179,868	110,862
Net earnings	304,833	298,404	752,735	469,586
Net earnings attributable to noncontrolling interest	9,374	3,288	17,049	2,895
Net earnings attributable to Alleghany stockholders	295,459	295,116	735,686	466,691
Net earnings	304,833	298,404	752,735	469,586
Other comprehensive income (loss):
Change in unrealized gains (losses), net of deferred taxes	172,602	(33,305)	355,989	(179,663)
Less: reclassification for net realized capital gains and other than temporary impairments, net of taxes	(9,760)	(5,105)	(5,353)	(3,726)
Change in unrealized currency translation adjustment, net of deferred taxes	3,175	(10,523)	2,290	(5,423)
Retirement plans	104	209	1,041	(1,113)
Comprehensive income	470,954	249,680	1,106,702	279,661
Comprehensive income attributable to noncontrolling interests	9,374	3,288	17,049	2,895
Comprehensive income attributable to Alleghany stockholders	$ 461,580	$ 246,392	$ 1,089,653	$ 276,766
Basic earnings per share attributable to Alleghany stockholders	$ 20.46	$ 19.44	$ 50.88	$ 30.53
Diluted earnings per share attributable to Alleghany stockholders	$ 20.46	$ 19.44	$ 50.82	$ 30.52

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Consolidated Statements of Earnings and Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Change in unrealized gains (losses), deferred taxes	$ 45,881	$ (8,853)	$ 94,630	$ (47,758)
Reclassification for net realized capital gains and other than temporary impairments,taxes	(2,594)	(1,357)	(1,423)	(991)
Change in unrealized currency translation adjustment, deferred taxes	$ 844	$ (2,797)	$ 608	$ (1,442)

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Contributed Capital	Accumulated Other Comprehensive Income (loss)	Treasury Stock	Retained Earnings
Beginning Balance at Dec. 31, 2017	$ 8,514,063	$ 17,460	$ 3,612,109	$ 618,118	$ (824,906)	$ 5,091,282
Cumulative effect of adoption of new accounting pronouncements on beginning balance at Dec. 31, 2017				(600,508)		600,508
Net earnings	171,575					171,575
Other comprehensive income (loss), net of tax:
Retirement plans	(1,322)			(1,322)
Change in unrealized appreciation of investments, net	(144,979)			(144,979)
Change in unrealized currency translation adjustment, net	5,100			5,100
Comprehensive income attributable to Alleghany stockholders	30,374			(141,201)		171,575
Dividends paid	(153,967)					(153,967)
Treasury stock repurchase	(21,268)				(21,268)
Other, net	4,198		1,521	(29)	2,677	29
Ending Balance at Mar. 31, 2018	8,373,400	17,460	3,613,630	(123,620)	(843,497)	5,709,427
Redeemable noncontrolling interests balance at Dec. 31, 2017	106,530
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	(393)
Comprehensive income (loss) attributable to noncontrolling interest	(393)
Other net changes to redeemable noncontrolling interest	31,494
Redeemable noncontrolling interests balance at Mar. 31, 2018	137,631
Beginning Balance at Dec. 31, 2017	8,514,063	17,460	3,612,109	618,118	(824,906)	5,091,282
Cumulative effect of adoption of new accounting pronouncements on beginning balance at Dec. 31, 2017				(600,508)		600,508
Net earnings	466,691
Other comprehensive income (loss), net of tax:
Retirement plans	(1,113)
Change in unrealized currency translation adjustment, net	(5,423)
Comprehensive income attributable to Alleghany stockholders	276,766
Treasury stock repurchase	(236,100)
Ending Balance at Jun. 30, 2018	8,404,389	17,460	3,612,615	(172,307)	(1,057,885)	6,004,506
Redeemable noncontrolling interests balance at Dec. 31, 2017	106,530
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	2,895
Comprehensive income (loss) attributable to noncontrolling interest	2,895
Redeemable noncontrolling interests balance at Jun. 30, 2018	135,372
Beginning Balance at Mar. 31, 2018	8,373,400	17,460	3,613,630	(123,620)	(843,497)	5,709,427
Net earnings	295,116					295,116
Other comprehensive income (loss), net of tax:
Retirement plans	209			209
Change in unrealized appreciation of investments, net	(38,410)			(38,410)
Change in unrealized currency translation adjustment, net	(10,523)			(10,523)
Comprehensive income attributable to Alleghany stockholders	246,392			(48,724)		295,116
Treasury stock repurchase	(214,835)				(214,835)
Other, net	(568)		(1,015)	37	447	(37)
Ending Balance at Jun. 30, 2018	8,404,389	17,460	3,612,615	(172,307)	(1,057,885)	6,004,506
Redeemable noncontrolling interests balance at Mar. 31, 2018	137,631
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	3,288
Comprehensive income (loss) attributable to noncontrolling interest	3,288
Other net changes to redeemable noncontrolling interest	(5,547)
Redeemable noncontrolling interests balance at Jun. 30, 2018	135,372
Beginning Balance at Dec. 31, 2018	7,692,710	17,460	3,612,830	(202,003)	(1,312,939)	5,577,362
Net earnings	440,227					440,227
Other comprehensive income (loss), net of tax:
Retirement plans	937			937
Change in unrealized appreciation of investments, net	187,794			187,794
Change in unrealized currency translation adjustment, net	(885)			(885)
Comprehensive income attributable to Alleghany stockholders	628,073			187,846		440,227
Treasury stock repurchase	(80,486)				(80,486)
Other, net	(3,810)		(4,176)		366
Ending Balance at Mar. 31, 2019	8,236,487	17,460	3,608,654	(14,157)	(1,393,059)	6,017,589
Redeemable noncontrolling interests balance at Dec. 31, 2018	169,762
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	7,675
Comprehensive income (loss) attributable to noncontrolling interest	7,675
Other net changes to redeemable noncontrolling interest	(1,716)
Redeemable noncontrolling interests balance at Mar. 31, 2019	175,721
Beginning Balance at Dec. 31, 2018	7,692,710	17,460	3,612,830	(202,003)	(1,312,939)	5,577,362
Net earnings	735,686
Other comprehensive income (loss), net of tax:
Retirement plans	1,041
Change in unrealized currency translation adjustment, net	2,290
Comprehensive income attributable to Alleghany stockholders	1,089,653
Treasury stock repurchase	(93,200)
Ending Balance at Jun. 30, 2019	8,685,914	17,460	3,608,069	151,964	(1,404,627)	6,313,048
Redeemable noncontrolling interests balance at Dec. 31, 2018	169,762
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	17,049
Comprehensive income (loss) attributable to noncontrolling interest	17,049
Redeemable noncontrolling interests balance at Jun. 30, 2019	175,572
Beginning Balance at Mar. 31, 2019	8,236,487	17,460	3,608,654	(14,157)	(1,393,059)	6,017,589
Net earnings	295,459					295,459
Other comprehensive income (loss), net of tax:
Retirement plans	104			104
Change in unrealized appreciation of investments, net	162,842			162,842
Change in unrealized currency translation adjustment, net	3,175			3,175
Comprehensive income attributable to Alleghany stockholders	461,580			166,121		295,459
Treasury stock repurchase	(12,666)				(12,666)
Other, net	513		(585)		1,098
Ending Balance at Jun. 30, 2019	8,685,914	$ 17,460	$ 3,608,069	$ 151,964	$ (1,404,627)	$ 6,313,048
Redeemable noncontrolling interests balance at Mar. 31, 2019	175,721
Redeemable Non-controlling Interest
Net earnings attributable to redeemable noncontrolling interest	9,374
Comprehensive income (loss) attributable to noncontrolling interest	9,374
Other net changes to redeemable noncontrolling interest	(9,523)
Redeemable noncontrolling interests balance at Jun. 30, 2019	$ 175,572

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Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - shares	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Common stock, Shares issued	17,459,961	17,459,961	17,459,961	17,459,961	17,459,961	17,459,961
Treasury stock, shares	3,029,099	3,012,224	2,883,452	2,465,282	2,097,820	2,069,461

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net earnings	$ 752,735	$ 469,586
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization	56,942	64,510
Change in the fair value of equity securities	(536,013)	(142,596)
Net realized capital (gains) losses	(16,796)	(50,967)
Other than temporary impairment losses	10,020	511
(Increase) decrease in reinsurance recoverables, net of reinsurance payable	271,113	147,456
(Increase) decrease in premium balances receivable	(122,872)	(34,643)
(Increase) decrease in ceded unearned premiums	(22,084)	(18,282)
(Increase) decrease in deferred acquisition costs	(38,099)	(14,897)
(Increase) decrease in funds held under reinsurance agreements	14,471	(13,318)
Increase (decrease) in unearned premiums	197,072	97,516
Increase (decrease) in loss and loss adjustment expenses	(618,496)	(355,757)
Change in unrealized foreign currency exchange rate losses (gains)	(6,370)	48,228
Other, net	231,955	(48,172)
Net adjustments	(579,157)	(320,411)
Net cash provided by (used in) operating activities	173,578	149,175
Cash flows from investing activities
Purchases of debt securities	(4,197,740)	(2,301,614)
Purchases of equity securities	(134,894)	(533,842)
Sales of debt securities	1,876,234	1,667,526
Maturities and redemptions of debt securities	443,555	886,970
Sales of equity securities	1,950,478	269,567
Net (purchases) sales of short-term investments	(156,700)	104,728
Net (purchases) sales and maturities of commercial mortgage loans	(14,905)	(37,408)
(Purchases) sales of property and equipment	(23,942)	(13,164)
Purchases of affiliates and subsidiaries, net of cash acquired	(64,084)	(108,386)
Other, net	8,842	50,415
Net cash provided by (used in) investing activities	(313,156)	(15,208)
Cash flows from financing activities
Treasury stock acquisitions	(93,152)	(236,103)
Increase (decrease) in other debt	46,006	38,452
Cash dividends paid		(153,967)
Other, net	(31,344)	5,317
Net cash provided by (used in) financing activities	(78,490)	(346,301)
Effect of foreign exchange rate changes on cash	4,123	(2,818)
Net increase (decrease) in cash	(213,945)	(215,152)
Cash at beginning of period	1,038,763	838,375
Cash at end of period	824,818	623,223
Supplemental disclosures of cash flow information
Interest paid	48,203	42,562
Income taxes paid (refund received)	$ (20,672)	$ 22,135

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Summary of Significant Accounting Principles

6 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Principles

1. Summary of Significant Accounting Principles

(a) Principles of Financial Statement Presentation

This Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 of Alleghany Corporation (“Alleghany”).

Alleghany Corporation, a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006.

Although Alleghany’s primary sources of revenues and earnings are its reinsurance and insurance operations and investments, Alleghany also generates revenues and expenses from a diverse portfolio of middle market businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital Corporation (“Alleghany Capital”). Alleghany Capital’s businesses include:

• Precision Cutting Technologies, Inc. (“PCT”), the holding company for Bourn & Koch Inc., a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois;

• R.C. Tway Company, LLC (“Kentucky Trailer”), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets, headquartered in Louisville, Kentucky;

• IPS-Integrated Project Services, LLC (“IPS”), a technical service provider focused on the global pharmaceutical and biotechnology industries, headquartered in Blue Bell, Pennsylvania;

• Jazwares, LLC (together with its affiliates, “Jazwares”), a global toy, entertainment and musical instrument company, headquartered in Sunrise, Florida;

• WWSC Holdings, LLC (“W&W|AFCO Steel”), a structural steel fabricator and erector, headquartered in Oklahoma City, Oklahoma;

• CHECO Holdings, LLC (“Concord”), a hotel management and development company, headquartered in Raleigh, North Carolina; and

• a 45 percent equity interest in Wilbert Funeral Services, Inc. (“Wilbert”), a provider of products and services for the funeral and cemetery industries and precast concrete markets, headquartered in Overland Park, Kansas.

The results of Concord have been included in Alleghany’s consolidated results beginning with its acquisition by Alleghany Capital on October 1, 2018.

In addition, Alleghany owns certain other holding-company investments. Alleghany’s wholly-owned subsidiary Stranded Oil Resources Corporation (“SORC”) is an exploration and production company focused on enhanced oil recovery, headquartered in Golden, Colorado. Alleghany’s wholly-owned subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) owns and manages certain properties in the Sacramento, California region. Alleghany’s public equity investments are managed primarily through Alleghany’s wholly-owned subsidiary Roundwood Asset Management LLC.

Unless the context otherwise requires, references to “Alleghany” include Alleghany together with its subsidiaries.

The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All material inter-company balances and transactions have been eliminated in consolidation.

The portion of stockholders’ equity, net earnings and comprehensive income that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets, the Consolidated Statements of Earnings and Comprehensive Income and the Consolidated Statements of Changes in Stockholders’ Equity as noncontrolling interests. Because all noncontrolling interests have the option to sell their ownership interests to Alleghany in the future (generally through 2024), the portion of stockholders’ equity that is not attributable to Alleghany stockholders is presented on the Consolidated

Balance Sheets and the Consolidated Statements of Changes in Stockholders’ Equity as redeemable noncontrolling interests for all periods presented. In addition, Alleghany accretes the redeemable noncontrolling interests up to its future estimated redemption value over the period from the date of issuance to the earliest redemption date. The redemption value of the equity interests is generally based on the respective subsidiary’s earnings in specified periods preceding the redemption date, calculated based on either a specified formula or an independent fair market valuation. During the first six months of 2019, the noncontrolling interests outstanding were approximately as follows: Kentucky Trailer - 23 percent; IPS - 15 percent; Jazwares - 23 percent; W&W|AFCO Steel - 20 percent; and Concord - 15 percent. Prior to April 1, 2019, the noncontrolling interests of PCT were approximately 11 percent. Effective April 1, 2019, all noncontrolling interests of PCT have exercised their options and sold their ownership interests to Alleghany.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Alleghany relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from those reported results to the extent that those estimates and assumptions prove to be inaccurate. Changes in estimates are reflected in the Consolidated Statements of Earnings and Comprehensive Income in the period in which the changes are made.

(b) Other Significant Accounting Principles

Alleghany’s significant accounting principles can be found in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

(c) Recent Accounting Standards

Recently Adopted

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this new guidance in the first quarter of 2018 and has elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on Alleghany.

In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition.

In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. As part of its implementation, Alleghany elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by Alleghany’s lessors for certain of its leases). Alleghany also elected the package of practical expedients under the transition guidance, which allowed Alleghany to not reevaluate existing lease classifications, among others. As of January 1, 2019, Alleghany’s adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) for further information on Alleghany’s leases.

In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price

changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. Alleghany adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on Alleghany’s financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s equity securities, and Note 7(b) of this Form 10-Q for further information on accumulated other comprehensive income.

In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material impact on Alleghany’s results of operations and financial condition. See Note 10 of this Form 10-Q for further information on Alleghany’s noninsurance revenue.

Future Application of Accounting Standards

In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an available-for-sale (“AFS”) basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020. Although Alleghany expects to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, it does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s reinsurance recoverables.

In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s goodwill.

In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified

disclosures. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Fair Value of Financial Instruments

2. Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of Alleghany’s consolidated financial instruments as of June 30, 2019 and December 31, 2018:

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)(1)	$	17,477.7	$	17,477.7	$	16,291.3	$	16,291.3
Liabilities
Senior Notes and other debt(2)	$	1,714.7	$	1,882.2	$	1,669.0	$	1,795.5

(1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below.

(2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

The following tables present Alleghany’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of June 30, 2019 and December 31, 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of June 30, 2019
Equity securities:
Common stock	$	2,285.4	$	3.3	$	-	$	2,288.7
Preferred stock		-		-		4.1		4.1
Total equity securities		2,285.4		3.3		4.1		2,292.8
Debt securities:
U.S. Government obligations		-		1,256.5		-		1,256.5
Municipal bonds		-		2,448.3		-		2,448.3
Foreign government obligations		-		783.4		-		783.4
U.S. corporate bonds		-		2,555.8		534.6		3,090.4
Foreign corporate bonds		-		1,291.2		145.9		1,437.1
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)(1)		-		1,915.9		-		1,915.9
Commercial mortgage-backed securities (“CMBS”)		-		788.4		-		788.4
Other asset-backed securities(2)		-		1,449.9		959.7		2,409.6
Total debt securities		-		12,489.4		1,640.2		14,129.6
Short-term investments		-		1,054.8		-		1,054.8
Other invested assets(3)		-		-		0.5		0.5
Total investments (excluding equity method investments and loans)	$	2,285.4	$	13,547.5	$	1,644.8	$	17,477.7
Senior Notes and other debt	$	-	$	1,551.6	$	330.6	$	1,882.2

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of December 31, 2018
Equity securities:
Common stock	$	3,563.9	$	3.5	$	-	$	3,567.4
Preferred stock		-		-		5.4		5.4
Total equity securities		3,563.9		3.5		5.4		3,572.8
Debt securities:
U.S. Government obligations		-		1,022.4		-		1,022.4
Municipal bonds		-		2,214.7		-		2,214.7
Foreign government obligations		-		947.9		-		947.9
U.S. corporate bonds		-		1,959.6		425.7		2,385.3
Foreign corporate bonds		-		1,226.4		126.9		1,353.3
Mortgage and asset-backed securities:
RMBS(1)		-		1,387.9		-		1,387.9
CMBS		-		533.3		-		533.3
Other asset-backed securities(2)		-		712.3		1,266.9		1,979.2
Total debt securities		-		10,004.5		1,819.5		11,824.0
Short-term investments		-		893.8		-		893.8
Other invested assets(3)		-		-		0.7		0.7
Total investments (excluding equity method investments and loans)	$	3,563.9	$	10,901.8	$	1,825.6	$	16,291.3
Senior Notes and other debt	$	-	$	1,510.5	$	285.0	$	1,795.5

(1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

(2) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method.

In the three and six months ended June 30, 2019, Alleghany transferred into Level 3 $1.3 million and $16.0 million, respectively, of financial instruments, principally due to a decrease in observable inputs related to the valuation of such assets. Specifically, during the first six months of 2019, there was an increase in the weight given to non-binding broker quotes and, as a result, there was a corresponding decrease in quoted prices for similar assets in active markets. Of the $16.0 million of transfers, $14.7 million related to foreign corporate bonds and $1.3 million related to U.S. corporate bonds.

In the three and six months ended June 30, 2019, Alleghany transferred out of Level 3 $13.9 million and $14.9 million, respectively, of financial instruments, principally due to an increase in observable inputs related to the valuation of such assets. Specifically, during the first six months of 2019, there was a decrease in the weight given to non-binding broker quotes and, as a result, there was a corresponding increase in quoted prices for similar assets in active markets. Of the $14.9 million of transfers, $12.1 million related to other asset-backed securities, with the remainder related to other types of debt securities.

There were no other material transfers between Levels 1, 2 or 3 in the six months ended June 30, 2019.

As further described in Note 3(h), on March 15, 2018, most of AIHL’s limited partnership interests in certain subsidiaries of Ares Management LLC (“Ares”) were converted into Ares common units. As a result of the conversion, as of March 15, 2018, $208.2 million of Ares common units, classified as equity securities, was transferred into Level 1, and $58.7 million of Ares limited partnership interests, classified as other invested assets, was transferred into Level 3. On September 24, 2018, AIHL’s remaining $56.9 million of Ares limited partnership interests were converted into Ares common units and, as a result, was transferred out of Level 3 and into Level 1.

In addition to the $58.7 million of Ares-related other invested assets transferred into Level 3, in the three and six months ended June 30, 2018, Alleghany transferred into Level 3 $1.3 million and $5.6 million, respectively, of financial instruments, principally due to a decrease in observable inputs related to the valuation of such assets, specifically, a decrease in non-binding broker quotes. Of the $5.6 million of transfers, $4.3 million related to preferred stock, $1.2 million related to U.S. corporate bonds and $0.1 million related to other invested assets.

In the three and six months ended June 30, 2018, Alleghany transferred out of Level 3 $151.9 million and $153.5 million, respectively, of financial instruments, principally due to an increase in observable inputs related to the valuation of such assets. Specifically, during the first six months

of 2018, there was a decrease in the weight given to non-binding broker quotes, and as a result, there was a corresponding increase in quoted prices for similar assets in active markets. Of the $153.5 million of transfers, $150.6 million related to RMBS in the second quarter of 2018, $1.6 million related to CMBS in the first quarter of 2018 and $1.3 million related to U.S. corporate bonds in the second quarter of 2018. 

There were no other material transfers between Levels 1, 2 or 3 in the six months ended June 30, 2018.

The following tables present reconciliations of the changes in Level 3 assets during the six months ended June 30, 2019 and 2018 measured at fair value:

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2019	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2019	$	5.4		$	425.7		$	126.9		$	-		$	1,266.9		$	0.7		$	1,825.6
Net realized/unrealized gains (losses) included in:
Net earnings(2)		(1.6	)		(10.0	)		(0.1	)		-			(0.7	)		(0.2	)		(12.6	)
Other comprehensive income (loss)		-			31.3			5.4			-			20.5			(0.1	)		57.1
Purchases		0.3			90.9			13.9			0.2			56.8			0.1			162.2
Sales		-			-			(5.6	)		-			(300.2	)		-			(305.8	)
Issuances		-			-			-			-			-			-			-
Settlements		-			(3.6	)		(7.7	)		-			(71.5	)		-			(82.8	)
Transfers into Level 3		-			1.3			14.7			-			-			-			16.0
Transfers out of Level 3		-			(1.0	)		(1.6	)		(0.2	)		(12.1	)		-			(14.9	)
Balance as of June 30, 2019	$	4.1		$	534.6		$	145.9		$	-		$	959.7		$	0.5		$	1,644.8

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2018	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			RMBS			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2018	$	1.9		$	260.0		$	75.2		$	161.8		$	1.6		$	1,101.3		$	7.5		$	1,609.3
Net realized/unrealized gains (losses) included in:
Net earnings(2)		-			-			(0.1	)		(0.3	)		-			1.0			1.1			1.7
Other comprehensive income (loss)		0.2			(6.9	)		(2.2	)		(5.3	)		-			(7.7	)		(3.5	)		(25.4	)
Purchases		-			117.3			23.8			-			-			495.1			-			636.2
Sales		(0.1	)		(2.5	)		(1.9	)		(5.6	)		-			(365.7	)		(5.6	)		(381.4	)
Issuances		-			-			-			-			-			-			-			-
Settlements		-			-			-			-			-			-			-			-
Transfers into Level 3		4.3			1.2			-			-			-			-			58.8			64.3
Transfers out of Level 3		-			(1.3	)		-			(150.6	)		(1.6	)		-			-			(153.5	)
Balance as of June 30, 2018	$	6.3		$	367.8		$	94.8		$	-		$	-		$	1,224.0		$	58.3		$	1,751.2

(1) Includes partnership and non-marketable equity investments accounted for at fair value.

(2) There were no other than temporary impairment (“OTTI”) losses recorded in net earnings related to Level 3 assets still held as of June 30, 2019 and 2018.

Net unrealized losses related to Level 3 assets as of June 30, 2019 and December 31, 2018 were not material.

The increase in senior notes and other debt included in Level 3 for the first six months of 2019 primarily reflects increased borrowings at IPS and PCT to fund acquisitions and W&W|AFCO Steel to support working capital needs.

See Note 1(c) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for Alleghany’s accounting policy on fair value. 

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Investments

6 Months Ended

Jun. 30, 2019

Investments

3. Investments

(a) Unrealized Gains and Losses

The following tables present the amortized cost and the fair value of AFS securities as of June 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	1,242.2	$	17.3	$	(3.0	)	$	1,256.5
Municipal bonds		2,335.8		112.6		(0.1	)		2,448.3
Foreign government obligations		759.3		24.6		(0.5	)		783.4
U.S. corporate bonds		2,975.3		120.4		(5.3	)		3,090.4
Foreign corporate bonds		1,403.6		35.3		(1.8	)		1,437.1
Mortgage and asset-backed securities:
RMBS		1,878.3		40.6		(3.0	)		1,915.9
CMBS		766.0		23.0		(0.6	)		788.4
Other asset-backed securities(1)		2,396.4		27.7		(14.5	)		2,409.6
Total debt securities		13,756.9		401.5		(28.8	)		14,129.6
Short-term investments		1,054.8		-		-			1,054.8
Total investments	$	14,811.7	$	401.5	$	(28.8	)	$	15,184.4

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	1,042.4	$	2.4	$	(22.4	)	$	1,022.4
Municipal bonds		2,177.5		44.4		(7.2	)		2,214.7
Foreign government obligations		939.0		12.3		(3.4	)		947.9
U.S. corporate bonds		2,431.4		13.2		(59.3	)		2,385.3
Foreign corporate bonds		1,363.0		9.1		(18.8	)		1,353.3
Mortgage and asset-backed securities:
RMBS		1,392.4		10.3		(14.8	)		1,387.9
CMBS		536.9		2.8		(6.4	)		533.3
Other asset-backed securities(1)		2,013.3		4.4		(38.5	)		1,979.2
Total debt securities		11,895.9		98.9		(170.8	)		11,824.0
Short-term investments		893.8		-		-			893.8
Total investments	$	12,789.7	$	98.9	$	(170.8	)	$	12,717.8

(1) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(b) Contractual Maturity

The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of June 30, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	($ in millions)
As of June 30, 2019
Short-term investments due in one year or less	$	1,054.8	$	1,054.8
Mortgage and asset-backed securities(1)		5,040.7		5,113.9
Debt securities with maturity dates:
One year or less		531.0		532.5
Over one through five years		3,377.5		3,443.2
Over five through ten years		2,707.6		2,808.6
Over ten years		2,100.1		2,231.4
Total debt securities	$	13,756.9	$	14,129.6

(1) Mortgage and asset-backed securities by their nature do not generally have single maturity dates.

(c) Net Investment Income

The following table presents net investment income for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Interest income	$	127.2		$	104.8		$	246.5		$	206.8
Dividend income		9.4			22.3			19.2			38.6
Investment expenses		(7.2	)		(6.6	)		(14.7	)		(18.6	)
Pillar Investments(1)		3.3			1.9			4.4			1.9
Limited partnership interests in certain subsidiaries of Ares(1)		-			(0.7	)		-			13.2
Other investment results		10.0			4.6			10.4			8.5
Total	$	142.7		$	126.3		$	265.8		$	250.4

(1) See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares.

As of June 30, 2019, non-income producing invested assets were immaterial.

(d) Change in the Fair Value of Equity Securities

The following table presents changes in the fair value of equity securities for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Change in the fair value of equity securities sold during the period	$	11.8	$	4.4	$	73.9	$	16.0
Change in the fair value of equity securities held at the end of the period		131.9		180.8		462.1		126.6
Change in the fair value of equity securities	$	143.7	$	185.2	$	536.0	$	142.6

In July 2019, Alleghany purchased an equity derivative to hedge the market risk on a significant portion of its consolidated equity portfolio.

(e) Realized Gains and Losses

The proceeds from sales of debt and equity securities were $1.3 billion and $0.8 billion for the three months ended June 30, 2019 and 2018, respectively, and $3.8 billion and $1.9 billion for the six months ended June 30, 2019 and 2018, respectively.  

Realized capital gains and losses for the three and six months ended June 30, 2019 primarily reflect capital gains and losses from the sale of debt securities.

Realized capital gains and losses for the three months ended June 30, 2018 primarily reflected the sale of debt securities. Realized capital gains and losses for the six months ended June 30, 2018 primarily reflected a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information on this conversion.

The following table presents amounts of gross realized capital gains and gross realized capital losses for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	($ in millions)
Gross realized capital gains	$	13.6		$	6.5	$	25.7		$	66.4
Gross realized capital losses		(1.2	)		-		(8.9	)		(15.4	)
Net realized capital gains	$	12.4		$	6.5	$	16.8		$	51.0

Gross realized capital losses exclude OTTI losses, as discussed below.

(f) OTTI losses

Alleghany holds its debt securities as AFS and, as such, these securities are recorded at fair value. Alleghany continually monitors the difference between amortized cost and the estimated fair value of its debt investments, which involves uncertainty as to whether declines in value are temporary in nature. The analysis of a security’s decline in value is performed in its functional currency. If the decline is deemed temporary, Alleghany records the decline as an unrealized loss in stockholders’ equity. If the decline is deemed to be other than temporary, Alleghany writes its amortized cost-basis down to the fair value of the security and records an OTTI loss on its statement of earnings. In addition, any portion of such decline related to a debt security that is believed to arise from factors other than credit is recorded as a component of other comprehensive income rather than charged against earnings.

Debt securities in an unrealized loss position are evaluated for OTTI if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost for an extended period of time (nine consecutive months or more); (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis.

If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records an OTTI loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the OTTI loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income.

In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities.

OTTI losses in the first six months of 2019 reflect $10.0 million of unrealized losses on debt securities, primarily related to the energy sector, that were deemed to be other than temporary and, as such, were required to be charged against earnings. The determination that unrealized losses on debt securities were other than temporary was primarily due to the deterioration of creditworthiness of the issuer. Of the $10.0 million of OTTI losses, none were incurred in the second quarter of 2019.

OTTI losses in the first six months of 2018 reflected $0.5 million of unrealized losses on debt securities that were deemed to be other than temporary and, as such, were required to be charged against earnings. Of the $0.5 million of OTTI losses, none were incurred in the second quarter of 2018.

Upon the ultimate disposition of the securities for which OTTI losses have been recorded, a portion of the loss may be recoverable depending on market conditions at the time of disposition. After adjusting the amortized cost basis of securities for the recognition of OTTI losses, the remaining gross unrealized investment losses for debt securities as of June 30, 2019 were deemed to be temporary, based on, among other factors: (i) the duration of time and the relative magnitude to which the fair value of these investments had been below cost were not indicative of an OTTI loss; (ii) the absence of compelling evidence that would cause Alleghany to call into question the financial condition or near-term business prospects of the issuer of the security; and (iii) Alleghany’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery.

Alleghany may ultimately record a realized loss after having originally concluded that the decline in value was temporary. Risks and uncertainties are inherent in the methodology. Alleghany’s methodology for assessing other than temporary declines in value contains inherent risks and uncertainties which could include, but are not limited to, incorrect assumptions about financial condition, liquidity or future prospects, inadequacy of any underlying collateral and unfavorable changes in economic conditions or social trends, interest rates or credit ratings.

(g) Aging of Gross Unrealized Losses

The following tables present gross unrealized losses and related fair values for Alleghany’s AFS securities, grouped by duration of time in a continuous unrealized loss position, as of June 30, 2019 and December 31, 2018: 

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	40.7	$	0.1	$	336.0	$	2.9	$	376.7	$	3.0
Municipal bonds		2.2		-		23.2		0.1		25.4		0.1
Foreign government obligations		33.5		-		76.7		0.5		110.2		0.5
U.S. corporate bonds		121.1		2.6		180.9		2.7		302.0		5.3
Foreign corporate bonds		49.7		0.4		167.8		1.4		217.5		1.8
Mortgage and asset-backed securities:
RMBS		40.9		0.5		212.1		2.5		253.0		3.0
CMBS		18.0		-		19.4		0.6		37.4		0.6
Other asset-backed securities		566.8		6.0		404.7		8.5		971.5		14.5
Total temporarily impaired securities	$	872.9	$	9.6	$	1,420.8	$	19.2	$	2,293.7	$	28.8

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	78.5	$	0.9	$	690.5	$	21.5	$	769.0	$	22.4
Municipal bonds		312.4		2.5		202.5		4.7		514.9		7.2
Foreign government obligations		60.7		0.1		186.7		3.3		247.4		3.4
U.S. corporate bonds		1,187.9		39.4		379.7		19.9		1,567.6		59.3
Foreign corporate bonds		501.5		9.7		349.1		9.1		850.6		18.8
Mortgage and asset-backed securities:
RMBS		397.7		6.4		225.9		8.4		623.6		14.8
CMBS		199.1		1.3		109.5		5.1		308.6		6.4
Other asset-backed securities		1,442.8		36.7		121.6		1.8		1,564.4		38.5
Total temporarily impaired securities	$	4,180.6	$	97.0	$	2,265.5	$	73.8	$	6,446.1	$	170.8

As of June 30, 2019, Alleghany held a total of 785 debt securities that were in an unrealized loss position, of which 502 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these debt securities consisted of losses related primarily to other asset-backed securities, U.S. corporate bonds, U.S. Government obligations and RMBS.

As of June 30, 2019, the vast majority of Alleghany’s debt securities were rated investment grade, with 3.5 percent of debt securities having issuer credit ratings that were below investment grade or not rated, compared with 4.4 percent as of December 31, 2018.

(h) Investments in Certain Other Invested Assets

In December 2012, TransRe obtained an ownership interest in Pillar Capital Holdings Limited (“Pillar Holdings”), a Bermuda- based insurance asset manager focused on collateralized reinsurance and catastrophe insurance-linked securities. Additionally, TransRe invested $175.0 million and AIHL invested $25.0 million in limited partnership funds managed by Pillar Holdings (the “Funds”). The objective of the Funds is to create portfolios with attractive risk-reward characteristics and low correlation with other asset classes, using the extensive reinsurance and capital market experience of the principals of Pillar Holdings. Alleghany has concluded that both Pillar Holdings and the Funds (collectively, the “Pillar Investments”) represent variable interest entities and that Alleghany is not the primary beneficiary, as it does not have the ability to direct the activities that most significantly impact each entity’s economic performance. Therefore, the Pillar Investments are not consolidated and are accounted for under the equity method of accounting. Alleghany’s potential maximum loss in the Pillar Investments is limited to its cumulative net investment. As of June 30, 2019, Alleghany’s carrying value in the Pillar Investments, as determined under the equity method of accounting, was $198.0 million, which is net of returns of capital received from the Pillar Investments.

In July 2013, AIHL invested $250.0 million in Ares, an asset manager, in exchange for a 6.25 percent equity stake in Ares, with an agreement to engage Ares to manage up to $1.0 billion in certain investment strategies. In May 2014, Ares completed an initial public offering of its common units. Upon completion of the initial public offering, Alleghany’s equity investment in Ares converted into limited partnership interests in certain Ares subsidiaries that were convertible into Ares common units. On March 15, 2018, most of AIHL’s limited partnership interests were converted into Ares common units. As a result of the conversion and with respect to the limited partnership interests that were converted into Ares common units, AIHL: (i) reclassified its converted interests from other invested assets to equity securities; (ii) increased its carrying value to $208.2 million to reflect the fair value of Ares common units; and (iii) recorded the $45.7 million increase in carrying value as a realized capital gain as of March 15, 2018. As a result of the conversion and with respect to the unconverted limited partnership interests, AIHL: (i) changed its accounting method from the equity method to fair value; (ii) increased its carrying value to $58.7 million to reflect the fair value of Ares limited partnership interests; and (iii) recorded the $12.9 million increase in carrying value as a component of net investment income as of March 15, 2018. On September 24, 2018, AIHL’s remaining Ares limited partnership interests were converted into Ares common units and, as a result, AIHL reclassified the remaining $56.9 million of its converted interests from other invested assets to equity securities. In the second quarter of 2019, AIHL sold all of its remaining holdings of Ares common units.

(i) Investments in Commercial Mortgage Loans

As of June 30, 2019, the carrying value of Alleghany’s commercial mortgage loan portfolio was $691.4 million, representing the unpaid principal balance on the loans. As of June 30, 2019, there was no allowance for loan losses. The commercial mortgage loan portfolio consists primarily of first mortgages on commercial properties in major metropolitan areas in the U.S. The loans earn interest at fixed- and floating-rates, mature in two to ten years from loan origination and the principal amounts of the loans were no more than approximately two-thirds of the property’s appraised value at the time the loans were made.

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Reinsurance Ceded

6 Months Ended

Jun. 30, 2019

Reinsurance Ceded

4. Reinsurance Ceded

Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite in order to reduce the effect of individual or aggregate exposure to losses, manage capacity, protect capital resources, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and enable them to increase gross premium writings and risk capacity without requiring additional capital. Alleghany’s reinsurance and insurance subsidiaries purchase reinsurance and retrocessional coverages from highly- rated third-party reinsurers. If the assuming reinsurers are unable or unwilling to meet the obligations assumed under the applicable reinsurance agreements, Alleghany’s reinsurance and insurance subsidiaries would remain liable for such reinsurance portion not paid by these reinsurers. As such, funds, trust agreements and letters of credit are held to collateralize a portion of Alleghany’s reinsurance recoverables and Alleghany’s reinsurance and insurance subsidiaries reinsure portions of the risks they underwrite or assume with multiple reinsurance programs.

TransRe enters into retrocession arrangements, including property catastrophe retrocession arrangements, in order to reduce the effect of individual or aggregate exposure to losses, reduce volatility in specific lines of business, improve risk-adjusted portfolio returns and increase gross premium writings and risk capacity without requiring additional capital.

RSUI reinsures its property lines of business through a program consisting of surplus share treaties, facultative placements, per risk and catastrophe excess of loss treaties. RSUI’s catastrophe reinsurance program and property per risk reinsurance program run on an annual basis from May 1 to the following April 30 and portions expired on April 30, 2019. Both programs were renewed on May 1, 2019 with substantially similar terms as the expired programs.

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Liability for Loss and LAE

6 Months Ended

Jun. 30, 2019

Liability for Loss and LAE

5. Liability for Loss and LAE

(a) Liability Rollforward

The following table presents the activity in the liability for loss and LAE in the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019			2018
	($ in millions)
Reserves as of January 1	$	12,250.3		$	11,871.3
Less: reinsurance recoverables(1)		1,857.4			1,650.1
Net reserves as of January 1		10,392.9			10,221.2
Other adjustments		(1.4	)		2.0
Incurred loss and LAE, net of reinsurance, related to:
Current year		1,683.3			1,546.7
Prior years		(94.0	)		(137.9	)
Total incurred loss and LAE, net of reinsurance		1,589.3			1,408.8
Paid loss and LAE, net of reinsurance, related to:(2)
Current year		248.0			237.6
Prior years		1,651.5			1,366.1
Total paid loss and LAE, net of reinsurance		1,899.5			1,603.7
Foreign currency exchange rate effect		(6.6	)		(24.2	)
Net reserves as of June 30		10,074.7			10,004.1
Reinsurance recoverables as of June 30(1)		1,557.1			1,511.4
Reserves as of June 30	$	11,631.8		$	11,515.5

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.

(2) Includes paid losses, net of reinsurance, related to commutations.

Gross loss and LAE reserves as of June 30, 2019 decreased from December 31, 2018, primarily reflecting payments on catastrophe losses incurred in prior years and, to a lesser extent, favorable prior accident year loss reserve development.

(b) Liability Development

The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Reinsurance Segment
Property:
Catastrophe events	$	(9.9	)(1)	$	5.1	(2)	$	(1.5	)(3)	$	(25.3	)(4)
Non-catastrophe		(6.3	)(5)		(18.8	)(6)		(25.4	)(7)		(29.8	)(6)
Total		(16.2	)		(13.7	)		(26.9	)		(55.1	)
Casualty & other:
Malpractice Treaties (8)		(1.4	)		(3.4	)		(1.4	)		(3.4	)
Other		(27.2	) (9)		(33.6	)(10)		(52.9	)(11)		(63.8	)(12)
Total		(28.6	)		(37.0	)		(54.3	)		(67.2	)
Total Reinsurance Segment		(44.8	)		(50.7	)		(81.2	)		(122.3	)
Insurance Segment
RSUI:
Casualty		(12.1	)(13)		(1.5	)(14)		(17.7	)(13)		(12.5	)(14)
Property and other		(0.4	)		0.1			1.5	(15)		-
Total		(12.5	)		(1.4	)		(16.2	)		(12.5	)
CapSpecialty		0.7	(16)		(0.1	)		3.4	(17)		(3.1	)(18)
Total incurred related to prior years	$	(56.6	)	$	(52.2	)	$	(94.0	)	$	(137.9	)

(1) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year.

(2) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricane Maria in the 2017 accident year, partially offset by favorable prior accident year loss reserve development related to Hurricane Harvey in the 2017 accident year and catastrophes in the 2016 accident year.

(3) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year.

(4) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Harvey and Maria in the 2017 accident year and catastrophes in the 2016 accident year.

(5) Primarily reflects favorable prior accident year loss reserve development in the 2018 accident year.

(6) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years.

(7) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

(8) Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

(9) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years.

(10) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2015 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(11) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years and the shorter-tailed lines of business in the 2012 through 2014 accident years.

(12) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2016 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(13) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

(14) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in recent accident years.

(15) Primarily reflects unfavorable prior accident year loss reserve development related to the assumed property reinsurance lines of business from catastrophe losses in recent accident years, partially offset by favorable prior accident year loss reserve development related to Superstorm Sandy in the 2012 accident year and by Hurricane Harvey in the 2017 accident year.

(16) Primarily reflects unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2016 accident year.

(17) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years.

(18) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years.

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Income Taxes

6 Months Ended

Jun. 30, 2019

Income Taxes

6. Income Taxes

The effective tax rate on earnings before income taxes for the first six months of 2019 was 19.3 percent, compared with 19.1 percent for the first six months of 2018. The slight increase in the effective tax rate in the first six months of 2019 from the first six months of 2018 primarily reflects lower tax-exempt interest income arising from municipal bond securities, lower dividends received-deductions and higher state income taxes.

Alleghany believes that, as of June 30, 2019, it had no material uncertain tax positions. Interest and penalties related to unrecognized tax expenses (benefits) are recognized in income tax expense, when applicable. There were no material liabilities for interest or penalties accrued as of June 30, 2019.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity

7. Stockholders’ Equity

(a) Common Stock Repurchases

In November 2015, the Alleghany Board of Directors authorized the repurchase of shares of common stock of Alleghany, par value $1.00 per share (“Common Stock”), at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2015 Repurchase Program”). In June 2018, the Alleghany Board of Directors authorized, upon the completion of the 2015 Repurchase Program, the repurchase of additional shares of Common Stock, at such times and at prices as management determines to be advisable, up to an aggregate of $400.0 million (the “2018 Repurchase Program”). In the fourth quarter of 2018, Alleghany completed the 2015 Repurchase Program and subsequent repurchases have been made pursuant to the 2018 Repurchase Program. As of June 30, 2019, Alleghany had $178.3 million remaining under its share repurchase authorization.

The following table presents the shares of Common Stock that Alleghany repurchased in the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares repurchased		19,246		368,551		148,813		403,623
Cost of shares repurchased (in millions)	$	12.7	$	214.8	$	93.2	$	236.1
Average price per share repurchased	$	658.09	$	582.92	$	625.96	$	584.96

(b) Accumulated Other Comprehensive Income (Loss)

The following tables present a reconciliation of the changes during the six months ended June 30, 2019 and 2018 in accumulated other comprehensive income (loss) attributable to Alleghany stockholders:

	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2019	$	(61.6	)	$	(124.7	)	$	(15.7	)	$	(202.0	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		356.0			2.3			1.1			359.4
Reclassifications from accumulated other comprehensive income		(5.4	)		-			-			(5.4	)
Total		350.6			2.3			1.1			354.0
Balance as of June 30, 2019	$	289.0		$	(122.4	)	$	(14.6	)	$	152.0

	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2018	$	718.2		$	(84.6	)	$	(15.5	)	$	618.1
Cumulative effect of adoption of new accounting pronouncements(1):
Reclassification of net unrealized gains on equity securities, net of tax		(735.6	)		-			-			(735.6	)
Reclassification of stranded taxes		156.6			(18.2	)		(3.3	)		135.1
Total		(579.0	)		(18.2	)		(3.3	)		(600.5	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		(179.7	)		(5.4	)		(1.1	)		(186.2	)
Reclassifications from accumulated other comprehensive income		(3.7	)		-			-			(3.7	)
Total		(183.4	)		(5.4	)		(1.1	)		(189.9	)
Balance as of June 30, 2018	$	(44.2	)	$	(108.2	)	$	(19.9	)	$	(172.3	)

(1) See Note 1(c) of this Form  10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act.

The following table presents reclassifications out of accumulated other comprehensive income attributable to Alleghany stockholders during the three and six months ended June 30, 2019 and 2018:

		Three Months Ended						Six Months Ended
Accumulated Other		June 30,						June 30,
Comprehensive Income Component	Line in Consolidated Statement of Earnings	2019			2018			2019			2018
					($ in millions)
Unrealized appreciation of investments:	Net realized capital gains(1)	$	(12.4	)	$	(6.5	)	$	(16.8	)	$	(5.3	)
	Other than temporary impairment losses		-			-			10.0			0.5
	Income taxes		2.6			1.4			1.4			1.1
Total reclassifications:	Net earnings	$	(9.8	)	$	(5.1	)	$	(5.4	)	$	(3.7	)

(1) For the six month period ended June 30, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information.

(c) Special Dividend

In February 2018, the Alleghany Board of Directors declared a special dividend of $10.00 per share for stockholders of record on March 5, 2018. On March 15, 2018, Alleghany paid dividends to stockholders totaling $154.0 million.

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Earnings Per Share of Common Stock

6 Months Ended

Jun. 30, 2019

Earnings Per Share of Common Stock

8. Earnings Per Share of Common Stock

The following table presents a reconciliation of the earnings and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions, except share amounts)
Net earnings available to Alleghany stockholders	$	295.5	$	295.1	$	735.7	$	466.7
Effect of dilutive securities		-		-		-		-
Income available to common stockholders for diluted earnings per share	$	295.5	$	295.1	$	735.7	$	466.7
Weighted average common shares outstanding applicable to basic earnings per share		14,439,545		15,180,075		14,460,400		15,284,679
Effect of dilutive securities		-		-		14,960		4,915
Adjusted weighted average common shares outstanding applicable to diluted earnings per share		14,439,545		15,180,075		14,475,360		15,289,594
Contingently issuable shares(1)						46,973		57,766

(1) Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies

9. Commitments and Contingencies

(a) Legal Proceedings

Certain of Alleghany’s subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. In the opinion of management, such provisions are adequate, and management does not believe that any pending litigation will have a material adverse effect on Alleghany’s consolidated results of operations, financial position or cash flows.

(b) Leases

Alleghany and its subsidiaries lease certain facilities, land, furniture and equipment under long-term, non-cancelable lease agreements that expire at various dates through 2038. Most of Alleghany’s leases relate to office facilities. Alleghany’s lease agreements do not contain any material restrictive covenants and are substantially all considered to be operating leases.

Lease expense was $9.7 million and $21.8 million in the three and six months ended June 30, 2019, respectively. The following table presents Alleghany’s consolidated lease liabilities and right-of-use lease assets related to operating leases as of June 30, 2019:

	As of June 30, 2019
Maturity of lease payments, by year	($ in millions)
1 year or less		$	37.9
More than 1 year to 2 years			34.9
More than 2 years to 3 years			30.9
More than 3 years to 4 years			26.6
More than 4 years to 5 years			25.6
More than 5 years			155.3
Total lease payments(1)		$	311.2
Less: interest(2)			66.6
Lease liabilities(3)		$	244.6
Right-of-use lease assets(4)		$	216.2
Prepaid lease assets, net of lease allowances and incentives			28.4
		$	244.6

(1) As of June 30, 2019, the weighted average lease term was approximately 12 years.

(2) As of June 30, 2019, the weighted average discount rate was approximately 5 percent.

(3) Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet.

(4) Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet.

(c) Energy Holdings

As of June 30, 2019, Alleghany had holdings in energy sector businesses of $416.1 million, comprised of $323.9 million of debt securities, $5.4 million of equity securities and $86.8 million of Alleghany’s equity attributable to SORC.   

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Segments of Business

6 Months Ended

Jun. 30, 2019

Segments of Business

10. Segments of Business

(a) Overview

Alleghany’s segments are reported in a manner consistent with the way management evaluates the businesses. As such, Alleghany classifies its businesses into three reportable segments – reinsurance, insurance and Alleghany Capital.

Reinsurance and insurance underwriting activities are evaluated separately from investment and other activities. Segment accounting policies are described in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

The reinsurance segment consists of property and casualty reinsurance operations conducted by TransRe’s reinsurance operating subsidiaries and is further reported through two major product lines – property and casualty & other. TransRe provides property and casualty reinsurance to insurers and other reinsurers through brokers and on a direct basis to ceding companies. TransRe writes a modest amount of property and casualty insurance business, which is included in the reinsurance segment. A significant portion of the premiums earned by TransRe’s operations are generated by offices located in Canada, Europe, Asia, Australia, Africa and those serving Latin America and the Caribbean. Although the majority of the premiums earned by these offices typically relate to the regions where they are located, a significant portion may be derived from other regions of the world, including the U.S. In addition, although a significant portion of the assets and liabilities of these foreign offices generally relate to the countries where ceding companies and reinsurers are located, most investments are located in the country of domicile of these offices.

The insurance segment consists of property and casualty insurance operations conducted in the U.S. by AIHL through its insurance operating subsidiaries RSUI and CapSpecialty. RSUI also writes a modest amount of assumed reinsurance business, which is included in the insurance segment.

The Alleghany Capital segment consists of industrial operations, non-industrial operations and corporate operations at the Alleghany Capital level. Industrial operations are conducted through PCT, Kentucky Trailer, W&W|AFCO Steel and a 45 percent equity interest in Wilbert. Non-industrial operations are conducted through IPS, Jazwares and Concord.

On October 1, 2018, Alleghany Capital acquired approximately 85 percent of the equity in Concord for $136.6 million, consisting of $68.6 million in cash paid on October 1, 2018, $38.2 million of potential contingent consideration based on future profitability and $29.8 million of incremental debt. In connection with the acquisition, Alleghany recorded $83.0 million of goodwill and $70.8 million of finite-lived intangible assets related primarily to customer relationships.

On February 7, 2018, W&W|AFCO Steel acquired the outstanding equity of Hirschfeld Holdings, LP (“Hirschfeld”), a fabricator of steel bridges and structural steel for stadiums, airports and other large commercial and industrial projects, for $109.1 million, consisting of $94.4 million in cash and $14.7 million of incremental debt. The $94.4 million paid by W&W|AFCO Steel was funded by capital contributions from Alleghany and noncontrolling interests of $75.5 million and $18.9 million, respectively. In connection with the acquisition, Alleghany recorded $3.0 million of goodwill and $9.4 million of finite-lived intangible assets related primarily to customer relationships.

Corporate activities are not classified as a segment. The primary components of corporate activities are Alleghany Properties, SORC and activities at the Alleghany parent company.

In addition, corporate activities include interest expense associated with the senior notes issued by Alleghany, whereas interest expense associated with senior notes issued by TransRe is included in “Total Segments” and interest expense associated with other debt is included in Alleghany Capital. Information related to the senior notes and other debt can be found in Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

(b) Results

The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three and six months ended June 30, 2019 and 2018:

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)		Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	381.6	$	829.1	$	1,210.7	$	372.4	$	93.8	$	466.2	$	1,676.9	$	-	$	1,676.9	$	(6.1	)	$	1,670.8
Net premiums written		305.9		807.0		1,112.9		246.9		86.7		333.6		1,446.5		-		1,446.5		-			1,446.5
Net premiums earned		303.2		771.7		1,074.9		202.4		78.7		281.1		1,356.0		-		1,356.0		-			1,356.0
Net loss and LAE		136.2		508.9		645.1		105.6		46.1		151.7		796.8		-		796.8		-			796.8
Commissions, brokerage and other underwriting expenses		103.8		250.1		353.9		57.9		32.5		90.4		444.3		-		444.3		-			444.3
Underwriting profit(4)	$	63.2	$	12.7	$	75.9	$	38.9	$	0.1	$	39.0		114.9		-		114.9		-			114.9
Net investment income														138.3		0.9		139.2		3.5			142.7
Change in the fair value of equity securities														143.3		-		143.3		0.4			143.7
Net realized capital gains														12.2		0.2		12.4		-			12.4
Other than temporary impairment losses														-		-		-		-			-
Noninsurance revenue														6.6		593.7		600.3		3.6			603.9
Other operating expenses														26.2		548.3		574.5		7.0			581.5
Corporate administration														1.8		-		1.8		24.2			26.0
Amortization of intangible assets														0.4		8.4		8.8		-			8.8
Interest expense														6.8		4.7		11.5		13.6			25.1
Earnings (losses) before income taxes													$	380.1	$	33.4	$	413.5	$	(37.3	)	$	376.2

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2018	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)			Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	345.1	$	726.6	$	1,071.7	$	318.8	$	88.7	$	407.5	$	1,479.2	$	-		$	1,479.2	$	(6.5	)	$	1,472.7
Net premiums written		275.9		700.7		976.6		216.9		82.3		299.2		1,275.8		-			1,275.8		-			1,275.8
Net premiums earned		292.1		689.2		981.3		184.7		71.0		255.7		1,237.0		-			1,237.0		-			1,237.0
Net loss and LAE		153.5		440.0		593.5		105.7		39.0		144.7		738.2		-			738.2		-			738.2
Commissions, brokerage and other underwriting expenses		94.8		223.2		318.0		53.7		30.4		84.1		402.1		-			402.1		-			402.1
Underwriting profit(4)	$	43.8	$	26.0	$	69.8	$	25.3	$	1.6	$	26.9		96.7		-			96.7		-			96.7
Net investment income														121.1		1.4			122.5		3.8			126.3
Change in the fair value of equity securities														146.8		-			146.8		38.4			185.2
Net realized capital gains														6.8		(0.1	)		6.7		(0.2	)		6.5
Other than temporary impairment losses														-		-			-		-			-
Noninsurance revenue														4.7		329.0			333.7		9.0			342.7
Other operating expenses														19.9		314.5			334.4		8.8			343.2
Corporate administration														0.8		-			0.8		13.3			14.1
Amortization of intangible assets														0.2		5.8			6.0		-			6.0
Interest expense														6.9		2.3			9.2		13.1			22.3
Earnings before income taxes													$	348.3	$	7.7		$	356.0	$	15.8		$	371.8

	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	796.7	$	1,645.6	$	2,442.3	$	671.4	$	176.6	$	848.0	$	3,290.3		$	-	$	3,290.3		$	(12.9	)	$	3,277.4
Net premiums written		622.1		1,598.4		2,220.5		448.3		163.3		611.6		2,832.1			-		2,832.1			-			2,832.1
Net premiums earned		612.1		1,492.0		2,104.1		394.8		154.4		549.2		2,653.3			-		2,653.3			-			2,653.3
Net loss and LAE		298.8		999.5		1,298.3		199.9		91.1		291.0		1,589.3			-		1,589.3			-			1,589.3
Commissions, brokerage and other underwriting expenses		207.5		482.4		689.9		111.4		63.1		174.5		864.4			-		864.4			-			864.4
Underwriting profit(4)	$	105.8	$	10.1	$	115.9	$	83.5	$	0.2	$	83.7		199.6			-		199.6			-			199.6
Net investment income														256.3			2.2		258.5			7.3			265.8
Change in the fair value of equity securities														532.4			-		532.4			3.6			536.0
Net realized capital gains														16.2			0.6		16.8			-			16.8
Other than temporary impairment losses														(10.0	)		-		(10.0	)		-			(10.0	)
Noninsurance revenue														12.0			1,098.7		1,110.7			7.3			1,118.0
Other operating expenses														55.8			1,013.8		1,069.6			14.3			1,083.9
Corporate administration														2.8			-		2.8			42.5			45.3
Amortization of intangible assets														0.6			15.1		15.7			-			15.7
Interest expense														13.6			9.0		22.6			26.1			48.7
Earnings (losses) before income taxes													$	933.7		$	63.6	$	997.3		$	(64.7	)	$	932.6

	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2018	Property		Casualty  & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	742.3	$	1,445.0	$	2,187.3	$	593.4	$	163.2	$	756.6	$	2,943.9		$	-	$	2,943.9		$	(12.4	)	$	2,931.5
Net premiums written		581.0		1,392.7		1,973.7		403.8		151.7		555.5		2,529.2			-		2,529.2			-			2,529.2
Net premiums earned		567.2		1,374.3		1,941.5		365.6		137.7		503.3		2,444.8			-		2,444.8			-			2,444.8
Net loss and LAE		250.1		882.8		1,132.9		202.6		73.3		275.9		1,408.8			-		1,408.8			-			1,408.8
Commissions, brokerage and other underwriting expenses		187.9		452.1		640.0		107.2		61.2		168.4		808.4			-		808.4			-			808.4
Underwriting profit(4)	$	129.2	$	39.4	$	168.6	$	55.8	$	3.2	$	59.0		227.6			-		227.6			-			227.6
Net investment income														239.4			3.0		242.4			8.0			250.4
Change in the fair value of equity securities														132.7			-		132.7			9.9			142.6
Net realized capital gains														50.7			0.5		51.2			(0.2	)		51.0
Other than temporary impairment losses														(0.5	)		-		(0.5	)		-			(0.5	)
Noninsurance revenue														10.4			571.7		582.1			12.3			594.4
Other operating expenses														37.0			554.4		591.4			16.7			608.1
Corporate administration														0.5			-		0.5			21.4			21.9
Amortization of intangible assets														-			11.2		11.2			-			11.2
Interest expense														13.6			3.6		17.2			26.6			43.8
Earnings (losses) before income taxes													$	609.2		$	6.0	$	615.2		$	(34.7	)	$	580.5

(1) Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit.

(2) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments.

(3) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(4) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance.

(c) Identifiable Assets and Equity

The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets and equity attributable to Alleghany for Alleghany’s reportable segments and for corporate activities as of June 30, 2019:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	16,874.0	$	13,462.7	$	5,321.7
Insurance segment		7,122.3		5,535.2		3,096.5
Subtotal		23,996.3		18,997.9		8,418.2
Alleghany Capital		1,880.5		134.7		879.9
Total segments		25,876.8		19,132.6		9,298.1
Corporate activities		479.6		439.8		(612.2	)
Consolidated	$	26,356.4	$	19,572.4	$	8,685.9

The debt associated with Alleghany Capital’s operating subsidiaries totaled $330.6 million and $284.5 million as of June 30, 2019 and December 31, 2018, respectively, and is generally used to support working capital needs and to help finance acquisitions. As of June 30, 2019, the $330.6 million includes:

• $113.1 million of borrowings by W&W|AFCO Steel under its available credit facilities and term loans (including borrowings incurred and assumed from its acquisition of Hirschfeld);

• $64.0 million of term loans at Kentucky Trailer primarily related to borrowings to finance small acquisitions, including its acquisition of a controlling interest in a certain manufacturer of aluminum feed transportation equipment in December 2018, and borrowings under its available credit facilities;

• $51.5 million of borrowings by IPS under its available credit facility and term loans, in part to finance a small acquisition in May 2019;

• $35.4 million of borrowings by Jazwares under its available credit facility;

• $33.4 million of term loans at Concord primarily related to borrowings to finance Alleghany Capital’s acquisition of Concord; and

• $33.2 million of term loans at PCT primarily related to borrowings to finance the acquisition of a waterjet orifice and nozzle manufacturer in 2016 and the acquisition of a consumable cutting tool manufacturer in June 2019.

None of these liabilities are guaranteed by Alleghany or Alleghany Capital.

(d) Alleghany Capital Noninsurance Revenue

For Alleghany Capital’s industrial and non-industrial operations, noninsurance revenue consists of the sale of manufactured goods and services. The following table presents noninsurance revenue for the Alleghany Capital segment for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Industrial(1)	$	318.3	$	221.9	$	578.4	$	367.4
Non-Industrial(2)		275.1		107.1		520.0		204.2
Corporate & other		0.3		-		0.3		0.1
Alleghany Capital	$	593.7	$	329.0	$	1,098.7	$	571.7

(1) For the three and six months ended June 30, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

(2) For the three and six months ended June 30, 2019, approximately 77 percent and 72 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. For the three and six months ended June 30, 2018, approximately 70 percent of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

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Summary of Significant Accounting Principles (Policies)

6 Months Ended

Jun. 30, 2019

Principles of Financial Statement Presentation

(a) Principles of Financial Statement Presentation

This Quarterly Report on Form 10-Q (this “Form 10-Q”) should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 of Alleghany Corporation (“Alleghany”).

Alleghany Corporation, a Delaware corporation, owns and manages certain operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Through its wholly-owned subsidiary Transatlantic Holdings, Inc. (“TransRe”), Alleghany is engaged in the property and casualty reinsurance business. TransRe has been a subsidiary of Alleghany since March 2012. Through its wholly-owned subsidiary Alleghany Insurance Holdings LLC (“AIHL”), Alleghany is engaged in the property and casualty insurance business. AIHL’s insurance operations are principally conducted by its subsidiaries RSUI Group, Inc. (“RSUI”) and CapSpecialty, Inc. (“CapSpecialty”). RSUI has been a subsidiary of AIHL since July 2003 and CapSpecialty has been a subsidiary of AIHL since January 2002. AIHL Re LLC (“AIHL Re”), a captive reinsurance company which provides reinsurance to Alleghany’s current and former insurance operating subsidiaries and affiliates, has been a subsidiary of Alleghany since its formation in May 2006.

Although Alleghany’s primary sources of revenues and earnings are its reinsurance and insurance operations and investments, Alleghany also generates revenues and expenses from a diverse portfolio of middle market businesses that are owned and managed through its wholly-owned subsidiary Alleghany Capital Corporation (“Alleghany Capital”). Alleghany Capital’s businesses include:

• Precision Cutting Technologies, Inc. (“PCT”), the holding company for Bourn & Koch Inc., a manufacturer/remanufacturer of specialty machine tools and supplier of replacement parts, accessories and services for a variety of cutting technologies, headquartered in Rockford, Illinois;

• R.C. Tway Company, LLC (“Kentucky Trailer”), a manufacturer of custom trailers and truck bodies for the moving and storage industry and other markets, headquartered in Louisville, Kentucky;

• IPS-Integrated Project Services, LLC (“IPS”), a technical service provider focused on the global pharmaceutical and biotechnology industries, headquartered in Blue Bell, Pennsylvania;

• Jazwares, LLC (together with its affiliates, “Jazwares”), a global toy, entertainment and musical instrument company, headquartered in Sunrise, Florida;

• WWSC Holdings, LLC (“W&W|AFCO Steel”), a structural steel fabricator and erector, headquartered in Oklahoma City, Oklahoma;

• CHECO Holdings, LLC (“Concord”), a hotel management and development company, headquartered in Raleigh, North Carolina; and

• a 45 percent equity interest in Wilbert Funeral Services, Inc. (“Wilbert”), a provider of products and services for the funeral and cemetery industries and precast concrete markets, headquartered in Overland Park, Kansas.

The results of Concord have been included in Alleghany’s consolidated results beginning with its acquisition by Alleghany Capital on October 1, 2018.

In addition, Alleghany owns certain other holding-company investments. Alleghany’s wholly-owned subsidiary Stranded Oil Resources Corporation (“SORC”) is an exploration and production company focused on enhanced oil recovery, headquartered in Golden, Colorado. Alleghany’s wholly-owned subsidiary Alleghany Properties Holdings LLC (“Alleghany Properties”) owns and manages certain properties in the Sacramento, California region. Alleghany’s public equity investments are managed primarily through Alleghany’s wholly-owned subsidiary Roundwood Asset Management LLC.

Unless the context otherwise requires, references to “Alleghany” include Alleghany together with its subsidiaries.

The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All material inter-company balances and transactions have been eliminated in consolidation.

The portion of stockholders’ equity, net earnings and comprehensive income that is not attributable to Alleghany stockholders is presented on the Consolidated Balance Sheets, the Consolidated Statements of Earnings and Comprehensive Income and the Consolidated Statements of Changes in Stockholders’ Equity as noncontrolling interests. Because all noncontrolling interests have the option to sell their ownership interests to Alleghany in the future (generally through 2024), the portion of stockholders’ equity that is not attributable to Alleghany stockholders is presented on the Consolidated

Balance Sheets and the Consolidated Statements of Changes in Stockholders’ Equity as redeemable noncontrolling interests for all periods presented. In addition, Alleghany accretes the redeemable noncontrolling interests up to its future estimated redemption value over the period from the date of issuance to the earliest redemption date. The redemption value of the equity interests is generally based on the respective subsidiary’s earnings in specified periods preceding the redemption date, calculated based on either a specified formula or an independent fair market valuation. During the first six months of 2019, the noncontrolling interests outstanding were approximately as follows: Kentucky Trailer - 23 percent; IPS - 15 percent; Jazwares - 23 percent; W&W|AFCO Steel - 20 percent; and Concord - 15 percent. Prior to April 1, 2019, the noncontrolling interests of PCT were approximately 11 percent. Effective April 1, 2019, all noncontrolling interests of PCT have exercised their options and sold their ownership interests to Alleghany.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Alleghany relies on historical experience and on various other assumptions that it believes to be reasonable under the circumstances to make judgments about the carrying value of assets and liabilities and reported revenues and expenses that are not readily apparent from other sources. Actual results may differ materially from those reported results to the extent that those estimates and assumptions prove to be inaccurate. Changes in estimates are reflected in the Consolidated Statements of Earnings and Comprehensive Income in the period in which the changes are made.

(b) Other Significant Accounting Principles

Alleghany’s significant accounting principles can be found in Note 1 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K.

Recent Accounting Standards

(c) Recent Accounting Standards

Recently Adopted

In February 2018, the Financial Accounting Standards Board (the “FASB”) issued guidance on certain tax effects caused by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act, among other things, reduced the U.S. corporate federal income tax rate for the 2018 tax year from 35.0 percent to 21.0 percent. Under such circumstances, GAAP requires that the value of deferred tax assets and liabilities be reduced through tax expense. The new guidance provides an option to reclassify any stranded tax amounts that remain in accumulated other comprehensive income to retained earnings, either retrospectively or at the beginning of the period in which the adoption is elected. This guidance became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this new guidance in the first quarter of 2018 and has elected to reclassify stranded tax amounts that remain in accumulated other comprehensive income, in the amount of approximately $135 million, to retained earnings as of January 1, 2018. See Note 7(b) of this Form 10-Q for additional information on accumulated other comprehensive income. See Note 9 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the Tax Act and its impact on Alleghany.

In August 2017, the FASB issued guidance that simplifies the requirements to achieve hedge accounting, better reflects the economic results of hedging in the financial statements and improves the alignment between hedge accounting and a company’s risk management activities. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition.

In February 2016, the FASB issued guidance on leases. Under this guidance, a lessee is required to recognize lease liabilities and corresponding right-of-use assets for leases with terms of more than one year, whereas under the prior guidance, a lessee is only required to recognize assets and liabilities for those leases qualifying as capital leases. This guidance also requires new disclosures about the amount, timing and uncertainty of cash flows arising from leases. The accounting by lessors remains largely unchanged. This guidance is effective in the first quarter of 2019 for public entities, with early adoption permitted. A modified retrospective transition approach was elected for all leases in existence as of, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Alleghany adopted this guidance in the first quarter of 2019 and the implementation did not have a material impact on its results of operations and financial condition. As part of its implementation, Alleghany elected to not separate lease components from non-lease components (such as office cleanings, security and maintenance services provided by Alleghany’s lessors for certain of its leases). Alleghany also elected the package of practical expedients under the transition guidance, which allowed Alleghany to not reevaluate existing lease classifications, among others. As of January 1, 2019, Alleghany’s adoption of this guidance resulted in recognition of an additional right-of-use asset of approximately $0.2 billion and a corresponding lease liability of $0.2 billion. See Note 9(b) for further information on Alleghany’s leases.

In January 2016, the FASB issued guidance that changes the recognition and measurement of certain financial instruments. This guidance requires investments in equity securities (except those accounted for under the equity method of accounting, but including partnership investments not accounted for under the equity method) to be measured at fair value with changes in fair value recognized in net earnings. For equity securities that do not have readily determinable fair values, measurement may be at cost, adjusted for any impairment and changes resulting from observable price

changes for a similar investment of the same issuer. This guidance also changes the presentation and disclosure of financial instruments by: (i) requiring that financial instrument disclosures of fair value use the exit price notion; (ii) requiring separate presentation of financial assets and financial liabilities by measurement category and form, either on the balance sheet or the accompanying notes to the financial statements; (iii) requiring separate presentation in other comprehensive income for the portion of the change in a liability’s fair value resulting from instrument-specific credit risk when an election has been made to measure the liability at fair value; and (iv) eliminating the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. This guidance is effective for fiscal years beginning after December 15, 2017 for public entities, including interim periods within those fiscal years. Except for the change in presentation for instrument-specific credit risk, this guidance does not permit early adoption. Alleghany adopted this guidance in the first quarter of 2018. As of January 1, 2018, approximately $736 million of net unrealized gains of equity securities, net of deferred taxes, were reclassified from accumulated other comprehensive income to retained earnings. Subsequently, all changes in unrealized gains or losses of equity securities, net of deferred taxes, were presented in the Consolidated Statements of Earnings rather than the Consolidated Statements of Comprehensive Income, under the caption “change in the fair value of equity securities.” Results arising from partnership investments, whether accounted for under the equity method or at fair value, continue to be reported as a component of net investment income. The implementation did not have a material impact on Alleghany’s financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s equity securities, and Note 7(b) of this Form 10-Q for further information on accumulated other comprehensive income.

In May 2014, the FASB, together with the International Accounting Standards Board, issued guidance on the recognition of revenue from contracts with customers. Under this guidance, revenue is recognized as the transfer of goods and services to customers takes place and in amounts that reflect the payment or payments that are expected to be received from the customers for those goods and services. This guidance also requires new disclosures about revenue. Revenue related to insurance and reinsurance contracts and revenue from investments are not impacted by this guidance, whereas noninsurance revenue arising from the sale of manufactured goods and services is generally included within the scope of this guidance. This guidance, and all related amendments, became effective in the first quarter of 2018 for public entities, with early adoption permitted in 2017. Alleghany adopted this guidance in the first quarter of 2018 using the modified retrospective transition approach and the implementation did not have a material impact on Alleghany’s results of operations and financial condition. See Note 10 of this Form 10-Q for further information on Alleghany’s noninsurance revenue.

Future Application of Accounting Standards

In June 2016, the FASB issued guidance on credit losses. Under this guidance, a company is required to measure all expected credit losses on loans, reinsurance recoverables and other financial assets accounted for at cost or amortized cost, as applicable. Estimates of expected credit losses are to be based on historical experience, current conditions and reasonable and supportable forecasts. Credit losses for securities accounted for on an available-for-sale (“AFS”) basis are to be measured in a manner similar to GAAP as currently applied and cannot exceed the amount by which the fair value is less than the amortized cost, although the new guidance removes the length of time a security has been in an unrealized loss position as a possible indication of a credit impairment. Credit losses for all financial assets are to be recorded through an allowance for credit losses. Subsequent reversals in credit loss estimates are permitted and are to be recognized in earnings. This guidance also requires new disclosures about the significant estimates and judgments used in estimating credit losses, as well as the credit quality of financial assets. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020. Although Alleghany expects to initially record an increase in an allowance for credit losses on certain financial assets accounted for at cost or amortized cost, it does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 3 of this Form 10-Q for further information on Alleghany’s investments. See Note 5(b) to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s reinsurance recoverables.

In January 2017, the FASB issued guidance that simplifies the subsequent measurement of goodwill. Under this guidance, if an initial qualitative assessment indicates that the fair value of an operating subsidiary may be less than its carrying amount, an impairment charge is recognized for the amount by which the carrying amount of the operating subsidiary exceeds its estimated fair value. Any resulting impairment loss recognized cannot exceed the total amount of goodwill associated with the operating subsidiary. This guidance is effective in the first quarter of 2020 for public entities, with early adoption permitted. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition. See Note 2 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for further information on Alleghany’s goodwill.

In August 2018, the FASB issued guidance that changes the financial statement disclosure requirements for measuring fair value. With respect to financial instruments classified as “Level 3” in the fair value disclosure hierarchy, the guidance requires certain additional disclosures for public entities related to amounts included in other comprehensive income and significant unobservable inputs used in the valuation, while removing disclosure requirements related to an entity’s overall valuation processes. The guidance also removes certain disclosure requirements related to transfers between financial instruments classified as “Level 1” and “Level 2” and provides clarification on certain other existing disclosure requirements. This guidance is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted with respect to any eliminated or modified

disclosures. Alleghany will adopt this guidance in the first quarter of 2020 and does not currently believe that the implementation will have a material impact on its results of operations and financial condition.

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Carrying Value and Estimated Fair Value of Consolidated Financial Instruments

The following table presents the carrying value and estimated fair value of Alleghany’s consolidated financial instruments as of June 30, 2019 and December 31, 2018:

	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)(1)	$	17,477.7	$	17,477.7	$	16,291.3	$	16,291.3
Liabilities
Senior Notes and other debt(2)	$	1,714.7	$	1,882.2	$	1,669.0	$	1,795.5

(1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below.

(2) See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs

The following tables present Alleghany’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used as of June 30, 2019 and December 31, 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of June 30, 2019
Equity securities:
Common stock	$	2,285.4	$	3.3	$	-	$	2,288.7
Preferred stock		-		-		4.1		4.1
Total equity securities		2,285.4		3.3		4.1		2,292.8
Debt securities:
U.S. Government obligations		-		1,256.5		-		1,256.5
Municipal bonds		-		2,448.3		-		2,448.3
Foreign government obligations		-		783.4		-		783.4
U.S. corporate bonds		-		2,555.8		534.6		3,090.4
Foreign corporate bonds		-		1,291.2		145.9		1,437.1
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)(1)		-		1,915.9		-		1,915.9
Commercial mortgage-backed securities (“CMBS”)		-		788.4		-		788.4
Other asset-backed securities(2)		-		1,449.9		959.7		2,409.6
Total debt securities		-		12,489.4		1,640.2		14,129.6
Short-term investments		-		1,054.8		-		1,054.8
Other invested assets(3)		-		-		0.5		0.5
Total investments (excluding equity method investments and loans)	$	2,285.4	$	13,547.5	$	1,644.8	$	17,477.7
Senior Notes and other debt	$	-	$	1,551.6	$	330.6	$	1,882.2

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of December 31, 2018
Equity securities:
Common stock	$	3,563.9	$	3.5	$	-	$	3,567.4
Preferred stock		-		-		5.4		5.4
Total equity securities		3,563.9		3.5		5.4		3,572.8
Debt securities:
U.S. Government obligations		-		1,022.4		-		1,022.4
Municipal bonds		-		2,214.7		-		2,214.7
Foreign government obligations		-		947.9		-		947.9
U.S. corporate bonds		-		1,959.6		425.7		2,385.3
Foreign corporate bonds		-		1,226.4		126.9		1,353.3
Mortgage and asset-backed securities:
RMBS(1)		-		1,387.9		-		1,387.9
CMBS		-		533.3		-		533.3
Other asset-backed securities(2)		-		712.3		1,266.9		1,979.2
Total debt securities		-		10,004.5		1,819.5		11,824.0
Short-term investments		-		893.8		-		893.8
Other invested assets(3)		-		-		0.7		0.7
Total investments (excluding equity method investments and loans)	$	3,563.9	$	10,901.8	$	1,825.6	$	16,291.3
Senior Notes and other debt	$	-	$	1,510.5	$	285.0	$	1,795.5

(1) Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

(2) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

(3) Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method.

Reconciliations of Changes in Level Three Assets Measured at Fair Value

The following tables present reconciliations of the changes in Level 3 assets during the six months ended June 30, 2019 and 2018 measured at fair value:

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2019	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2019	$	5.4		$	425.7		$	126.9		$	-		$	1,266.9		$	0.7		$	1,825.6
Net realized/unrealized gains (losses) included in:
Net earnings(2)		(1.6	)		(10.0	)		(0.1	)		-			(0.7	)		(0.2	)		(12.6	)
Other comprehensive income (loss)		-			31.3			5.4			-			20.5			(0.1	)		57.1
Purchases		0.3			90.9			13.9			0.2			56.8			0.1			162.2
Sales		-			-			(5.6	)		-			(300.2	)		-			(305.8	)
Issuances		-			-			-			-			-			-			-
Settlements		-			(3.6	)		(7.7	)		-			(71.5	)		-			(82.8	)
Transfers into Level 3		-			1.3			14.7			-			-			-			16.0
Transfers out of Level 3		-			(1.0	)		(1.6	)		(0.2	)		(12.1	)		-			(14.9	)
Balance as of June 30, 2019	$	4.1		$	534.6		$	145.9		$	-		$	959.7		$	0.5		$	1,644.8

				Debt Securities
										Mortgage and asset-backed
Six Months Ended June 30, 2018	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			RMBS			CMBS			Other Asset- backed Securities			Other Invested Assets(1)			Total
	($ in millions)
Balance as of January 1, 2018	$	1.9		$	260.0		$	75.2		$	161.8		$	1.6		$	1,101.3		$	7.5		$	1,609.3
Net realized/unrealized gains (losses) included in:
Net earnings(2)		-			-			(0.1	)		(0.3	)		-			1.0			1.1			1.7
Other comprehensive income (loss)		0.2			(6.9	)		(2.2	)		(5.3	)		-			(7.7	)		(3.5	)		(25.4	)
Purchases		-			117.3			23.8			-			-			495.1			-			636.2
Sales		(0.1	)		(2.5	)		(1.9	)		(5.6	)		-			(365.7	)		(5.6	)		(381.4	)
Issuances		-			-			-			-			-			-			-			-
Settlements		-			-			-			-			-			-			-			-
Transfers into Level 3		4.3			1.2			-			-			-			-			58.8			64.3
Transfers out of Level 3		-			(1.3	)		-			(150.6	)		(1.6	)		-			-			(153.5	)
Balance as of June 30, 2018	$	6.3		$	367.8		$	94.8		$	-		$	-		$	1,224.0		$	58.3		$	1,751.2

(1) Includes partnership and non-marketable equity investments accounted for at fair value.

(2) There were no other than temporary impairment (“OTTI”) losses recorded in net earnings related to Level 3 assets still held as of June 30, 2019 and 2018.

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Investments (Tables)

6 Months Ended

Jun. 30, 2019

Amortized Cost or Cost and Fair Value of Available For Sale Securities

The following tables present the amortized cost and the fair value of AFS securities as of June 30, 2019 and December 31, 2018:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	1,242.2	$	17.3	$	(3.0	)	$	1,256.5
Municipal bonds		2,335.8		112.6		(0.1	)		2,448.3
Foreign government obligations		759.3		24.6		(0.5	)		783.4
U.S. corporate bonds		2,975.3		120.4		(5.3	)		3,090.4
Foreign corporate bonds		1,403.6		35.3		(1.8	)		1,437.1
Mortgage and asset-backed securities:
RMBS		1,878.3		40.6		(3.0	)		1,915.9
CMBS		766.0		23.0		(0.6	)		788.4
Other asset-backed securities(1)		2,396.4		27.7		(14.5	)		2,409.6
Total debt securities		13,756.9		401.5		(28.8	)		14,129.6
Short-term investments		1,054.8		-		-			1,054.8
Total investments	$	14,811.7	$	401.5	$	(28.8	)	$	15,184.4

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	1,042.4	$	2.4	$	(22.4	)	$	1,022.4
Municipal bonds		2,177.5		44.4		(7.2	)		2,214.7
Foreign government obligations		939.0		12.3		(3.4	)		947.9
U.S. corporate bonds		2,431.4		13.2		(59.3	)		2,385.3
Foreign corporate bonds		1,363.0		9.1		(18.8	)		1,353.3
Mortgage and asset-backed securities:
RMBS		1,392.4		10.3		(14.8	)		1,387.9
CMBS		536.9		2.8		(6.4	)		533.3
Other asset-backed securities(1)		2,013.3		4.4		(38.5	)		1,979.2
Total debt securities		11,895.9		98.9		(170.8	)		11,824.0
Short-term investments		893.8		-		-			893.8
Total investments	$	12,789.7	$	98.9	$	(170.8	)	$	12,717.8

(1) Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity

The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of June 30, 2019. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized Cost		Fair Value
	($ in millions)
As of June 30, 2019
Short-term investments due in one year or less	$	1,054.8	$	1,054.8
Mortgage and asset-backed securities(1)		5,040.7		5,113.9
Debt securities with maturity dates:
One year or less		531.0		532.5
Over one through five years		3,377.5		3,443.2
Over five through ten years		2,707.6		2,808.6
Over ten years		2,100.1		2,231.4
Total debt securities	$	13,756.9	$	14,129.6

(1) Mortgage and asset-backed securities by their nature do not generally have single maturity dates.

Net Investment Income

The following table presents net investment income for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Interest income	$	127.2		$	104.8		$	246.5		$	206.8
Dividend income		9.4			22.3			19.2			38.6
Investment expenses		(7.2	)		(6.6	)		(14.7	)		(18.6	)
Pillar Investments(1)		3.3			1.9			4.4			1.9
Limited partnership interests in certain subsidiaries of Ares(1)		-			(0.7	)		-			13.2
Other investment results		10.0			4.6			10.4			8.5
Total	$	142.7		$	126.3		$	265.8		$	250.4

(1) See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares.

Summary of Changes in Fair Value of Equity Securities

The following table presents changes in the fair value of equity securities for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Change in the fair value of equity securities sold during the period	$	11.8	$	4.4	$	73.9	$	16.0
Change in the fair value of equity securities held at the end of the period		131.9		180.8		462.1		126.6
Change in the fair value of equity securities	$	143.7	$	185.2	$	536.0	$	142.6

Amounts of Gross Realized Capital Gains and Gross Realized Capital Losses of Available For Sale Securities

The following table presents amounts of gross realized capital gains and gross realized capital losses for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
	($ in millions)
Gross realized capital gains	$	13.6		$	6.5	$	25.7		$	66.4
Gross realized capital losses		(1.2	)		-		(8.9	)		(15.4	)
Net realized capital gains	$	12.4		$	6.5	$	16.8		$	51.0

Gross Unrealized Losses and Related Fair Values for AFS Securities Grouped by Duration of Time in Continuous Unrealized Loss Position

The following tables present gross unrealized losses and related fair values for Alleghany’s AFS securities, grouped by duration of time in a continuous unrealized loss position, as of June 30, 2019 and December 31, 2018: 

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of June 30, 2019
Debt securities:
U.S. Government obligations	$	40.7	$	0.1	$	336.0	$	2.9	$	376.7	$	3.0
Municipal bonds		2.2		-		23.2		0.1		25.4		0.1
Foreign government obligations		33.5		-		76.7		0.5		110.2		0.5
U.S. corporate bonds		121.1		2.6		180.9		2.7		302.0		5.3
Foreign corporate bonds		49.7		0.4		167.8		1.4		217.5		1.8
Mortgage and asset-backed securities:
RMBS		40.9		0.5		212.1		2.5		253.0		3.0
CMBS		18.0		-		19.4		0.6		37.4		0.6
Other asset-backed securities		566.8		6.0		404.7		8.5		971.5		14.5
Total temporarily impaired securities	$	872.9	$	9.6	$	1,420.8	$	19.2	$	2,293.7	$	28.8

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	($ in millions)
As of December 31, 2018
Debt securities:
U.S. Government obligations	$	78.5	$	0.9	$	690.5	$	21.5	$	769.0	$	22.4
Municipal bonds		312.4		2.5		202.5		4.7		514.9		7.2
Foreign government obligations		60.7		0.1		186.7		3.3		247.4		3.4
U.S. corporate bonds		1,187.9		39.4		379.7		19.9		1,567.6		59.3
Foreign corporate bonds		501.5		9.7		349.1		9.1		850.6		18.8
Mortgage and asset-backed securities:
RMBS		397.7		6.4		225.9		8.4		623.6		14.8
CMBS		199.1		1.3		109.5		5.1		308.6		6.4
Other asset-backed securities		1,442.8		36.7		121.6		1.8		1,564.4		38.5
Total temporarily impaired securities	$	4,180.6	$	97.0	$	2,265.5	$	73.8	$	6,446.1	$	170.8

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Liability for Loss and LAE (Tables)

6 Months Ended

Jun. 30, 2019

Activity in Liability for Loss and Loss Adjustment Expense

The following table presents the activity in the liability for loss and LAE in the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019			2018
	($ in millions)
Reserves as of January 1	$	12,250.3		$	11,871.3
Less: reinsurance recoverables(1)		1,857.4			1,650.1
Net reserves as of January 1		10,392.9			10,221.2
Other adjustments		(1.4	)		2.0
Incurred loss and LAE, net of reinsurance, related to:
Current year		1,683.3			1,546.7
Prior years		(94.0	)		(137.9	)
Total incurred loss and LAE, net of reinsurance		1,589.3			1,408.8
Paid loss and LAE, net of reinsurance, related to:(2)
Current year		248.0			237.6
Prior years		1,651.5			1,366.1
Total paid loss and LAE, net of reinsurance		1,899.5			1,603.7
Foreign currency exchange rate effect		(6.6	)		(24.2	)
Net reserves as of June 30		10,074.7			10,004.1
Reinsurance recoverables as of June 30(1)		1,557.1			1,511.4
Reserves as of June 30	$	11,631.8		$	11,515.5

(1) Reinsurance recoverables in this table include only ceded loss and LAE reserves.

(2) Includes paid losses, net of reinsurance, related to commutations.

(Favorable) Unfavorable Prior Accident Year Loss Reserve Development

The following table presents the (favorable) unfavorable prior accident year loss reserve development for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	($ in millions)
Reinsurance Segment
Property:
Catastrophe events	$	(9.9	)(1)	$	5.1	(2)	$	(1.5	)(3)	$	(25.3	)(4)
Non-catastrophe		(6.3	)(5)		(18.8	)(6)		(25.4	)(7)		(29.8	)(6)
Total		(16.2	)		(13.7	)		(26.9	)		(55.1	)
Casualty & other:
Malpractice Treaties (8)		(1.4	)		(3.4	)		(1.4	)		(3.4	)
Other		(27.2	) (9)		(33.6	)(10)		(52.9	)(11)		(63.8	)(12)
Total		(28.6	)		(37.0	)		(54.3	)		(67.2	)
Total Reinsurance Segment		(44.8	)		(50.7	)		(81.2	)		(122.3	)
Insurance Segment
RSUI:
Casualty		(12.1	)(13)		(1.5	)(14)		(17.7	)(13)		(12.5	)(14)
Property and other		(0.4	)		0.1			1.5	(15)		-
Total		(12.5	)		(1.4	)		(16.2	)		(12.5	)
CapSpecialty		0.7	(16)		(0.1	)		3.4	(17)		(3.1	)(18)
Total incurred related to prior years	$	(56.6	)	$	(52.2	)	$	(94.0	)	$	(137.9	)

(1) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year.

(2) Primarily reflects unfavorable prior accident year loss reserve development related to Hurricane Maria in the 2017 accident year, partially offset by favorable prior accident year loss reserve development related to Hurricane Harvey in the 2017 accident year and catastrophes in the 2016 accident year.

(3) Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year.

(4) Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Harvey and Maria in the 2017 accident year and catastrophes in the 2016 accident year.

(5) Primarily reflects favorable prior accident year loss reserve development in the 2018 accident year.

(6) Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years.

(7) Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

(8) Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

(9) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years.

(10) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2015 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(11) Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years and the shorter-tailed lines of business in the 2012 through 2014 accident years.

(12) Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2016 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

(13) Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

(14) Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in recent accident years.

(15) Primarily reflects unfavorable prior accident year loss reserve development related to the assumed property reinsurance lines of business from catastrophe losses in recent accident years, partially offset by favorable prior accident year loss reserve development related to Superstorm Sandy in the 2012 accident year and by Hurricane Harvey in the 2017 accident year.

(16) Primarily reflects unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2016 accident year.

(17) Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years.

(18) Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Common Stock Repurchases

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Shares repurchased		19,246		368,551		148,813		403,623
Cost of shares repurchased (in millions)	$	12.7	$	214.8	$	93.2	$	236.1
Average price per share repurchased	$	658.09	$	582.92	$	625.96	$	584.96

Reconciliation of Accumulated Other Comprehensive Income

The following tables present a reconciliation of the changes during the six months ended June 30, 2019 and 2018 in accumulated other comprehensive income (loss) attributable to Alleghany stockholders:

	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2019	$	(61.6	)	$	(124.7	)	$	(15.7	)	$	(202.0	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		356.0			2.3			1.1			359.4
Reclassifications from accumulated other comprehensive income		(5.4	)		-			-			(5.4	)
Total		350.6			2.3			1.1			354.0
Balance as of June 30, 2019	$	289.0		$	(122.4	)	$	(14.6	)	$	152.0

	Unrealized Appreciation of Investments			Unrealized Currency Translation Adjustment			Retirement Plans			Total
	($ in millions)
Balance as of January 1, 2018	$	718.2		$	(84.6	)	$	(15.5	)	$	618.1
Cumulative effect of adoption of new accounting pronouncements(1):
Reclassification of net unrealized gains on equity securities, net of tax		(735.6	)		-			-			(735.6	)
Reclassification of stranded taxes		156.6			(18.2	)		(3.3	)		135.1
Total		(579.0	)		(18.2	)		(3.3	)		(600.5	)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications		(179.7	)		(5.4	)		(1.1	)		(186.2	)
Reclassifications from accumulated other comprehensive income		(3.7	)		-			-			(3.7	)
Total		(183.4	)		(5.4	)		(1.1	)		(189.9	)
Balance as of June 30, 2018	$	(44.2	)	$	(108.2	)	$	(19.9	)	$	(172.3	)

(1) See Note 1(c) of this Form  10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act.

Reclassifications of Accumulated Other Comprehensive Income

The following table presents reclassifications out of accumulated other comprehensive income attributable to Alleghany stockholders during the three and six months ended June 30, 2019 and 2018:

		Three Months Ended						Six Months Ended
Accumulated Other		June 30,						June 30,
Comprehensive Income Component	Line in Consolidated Statement of Earnings	2019			2018			2019			2018
					($ in millions)
Unrealized appreciation of investments:	Net realized capital gains(1)	$	(12.4	)	$	(6.5	)	$	(16.8	)	$	(5.3	)
	Other than temporary impairment losses		-			-			10.0			0.5
	Income taxes		2.6			1.4			1.4			1.1
Total reclassifications:	Net earnings	$	(9.8	)	$	(5.1	)	$	(5.4	)	$	(3.7	)

(1) For the six month period ended June 30, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information.

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Earnings Per Share of Common Stock (Tables)

6 Months Ended

Jun. 30, 2019

Reconciliation of Earnings and Share Data used in Basic and Diluted (Losses) Earnings per Share Computations

The following table presents a reconciliation of the earnings and share data used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions, except share amounts)
Net earnings available to Alleghany stockholders	$	295.5	$	295.1	$	735.7	$	466.7
Effect of dilutive securities		-		-		-		-
Income available to common stockholders for diluted earnings per share	$	295.5	$	295.1	$	735.7	$	466.7
Weighted average common shares outstanding applicable to basic earnings per share		14,439,545		15,180,075		14,460,400		15,284,679
Effect of dilutive securities		-		-		14,960		4,915
Adjusted weighted average common shares outstanding applicable to diluted earnings per share		14,439,545		15,180,075		14,475,360		15,289,594
Contingently issuable shares(1)						46,973		57,766

(1) Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation.

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Operating Lease Liabilities and Right-of-Use Assets

The following table presents Alleghany’s consolidated lease liabilities and right-of-use lease assets related to operating leases as of June 30, 2019:

	As of June 30, 2019
Maturity of lease payments, by year	($ in millions)
1 year or less		$	37.9
More than 1 year to 2 years			34.9
More than 2 years to 3 years			30.9
More than 3 years to 4 years			26.6
More than 4 years to 5 years			25.6
More than 5 years			155.3
Total lease payments(1)		$	311.2
Less: interest(2)			66.6
Lease liabilities(3)		$	244.6
Right-of-use lease assets(4)		$	216.2
Prepaid lease assets, net of lease allowances and incentives			28.4
		$	244.6

(1) As of June 30, 2019, the weighted average lease term was approximately 12 years.

(2) As of June 30, 2019, the weighted average discount rate was approximately 5 percent.

(3) Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet.

(4) Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet.

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Segments of Business (Tables)

6 Months Ended

Jun. 30, 2019

Results for Reportable Segments and Corporate Activities

The following tables present segment results for Alleghany’s three reportable segments and for corporate activities for the three and six months ended June 30, 2019 and 2018:

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)		Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	381.6	$	829.1	$	1,210.7	$	372.4	$	93.8	$	466.2	$	1,676.9	$	-	$	1,676.9	$	(6.1	)	$	1,670.8
Net premiums written		305.9		807.0		1,112.9		246.9		86.7		333.6		1,446.5		-		1,446.5		-			1,446.5
Net premiums earned		303.2		771.7		1,074.9		202.4		78.7		281.1		1,356.0		-		1,356.0		-			1,356.0
Net loss and LAE		136.2		508.9		645.1		105.6		46.1		151.7		796.8		-		796.8		-			796.8
Commissions, brokerage and other underwriting expenses		103.8		250.1		353.9		57.9		32.5		90.4		444.3		-		444.3		-			444.3
Underwriting profit(4)	$	63.2	$	12.7	$	75.9	$	38.9	$	0.1	$	39.0		114.9		-		114.9		-			114.9
Net investment income														138.3		0.9		139.2		3.5			142.7
Change in the fair value of equity securities														143.3		-		143.3		0.4			143.7
Net realized capital gains														12.2		0.2		12.4		-			12.4
Other than temporary impairment losses														-		-		-		-			-
Noninsurance revenue														6.6		593.7		600.3		3.6			603.9
Other operating expenses														26.2		548.3		574.5		7.0			581.5
Corporate administration														1.8		-		1.8		24.2			26.0
Amortization of intangible assets														0.4		8.4		8.8		-			8.8
Interest expense														6.8		4.7		11.5		13.6			25.1
Earnings (losses) before income taxes													$	380.1	$	33.4	$	413.5	$	(37.3	)	$	376.2

	Reinsurance Segment						Insurance Segment
Three Months Ended June 30, 2018	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal		Alleghany Capital(2)			Total Segments		Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	345.1	$	726.6	$	1,071.7	$	318.8	$	88.7	$	407.5	$	1,479.2	$	-		$	1,479.2	$	(6.5	)	$	1,472.7
Net premiums written		275.9		700.7		976.6		216.9		82.3		299.2		1,275.8		-			1,275.8		-			1,275.8
Net premiums earned		292.1		689.2		981.3		184.7		71.0		255.7		1,237.0		-			1,237.0		-			1,237.0
Net loss and LAE		153.5		440.0		593.5		105.7		39.0		144.7		738.2		-			738.2		-			738.2
Commissions, brokerage and other underwriting expenses		94.8		223.2		318.0		53.7		30.4		84.1		402.1		-			402.1		-			402.1
Underwriting profit(4)	$	43.8	$	26.0	$	69.8	$	25.3	$	1.6	$	26.9		96.7		-			96.7		-			96.7
Net investment income														121.1		1.4			122.5		3.8			126.3
Change in the fair value of equity securities														146.8		-			146.8		38.4			185.2
Net realized capital gains														6.8		(0.1	)		6.7		(0.2	)		6.5
Other than temporary impairment losses														-		-			-		-			-
Noninsurance revenue														4.7		329.0			333.7		9.0			342.7
Other operating expenses														19.9		314.5			334.4		8.8			343.2
Corporate administration														0.8		-			0.8		13.3			14.1
Amortization of intangible assets														0.2		5.8			6.0		-			6.0
Interest expense														6.9		2.3			9.2		13.1			22.3
Earnings before income taxes													$	348.3	$	7.7		$	356.0	$	15.8		$	371.8

	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2019	Property		Casualty & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	796.7	$	1,645.6	$	2,442.3	$	671.4	$	176.6	$	848.0	$	3,290.3		$	-	$	3,290.3		$	(12.9	)	$	3,277.4
Net premiums written		622.1		1,598.4		2,220.5		448.3		163.3		611.6		2,832.1			-		2,832.1			-			2,832.1
Net premiums earned		612.1		1,492.0		2,104.1		394.8		154.4		549.2		2,653.3			-		2,653.3			-			2,653.3
Net loss and LAE		298.8		999.5		1,298.3		199.9		91.1		291.0		1,589.3			-		1,589.3			-			1,589.3
Commissions, brokerage and other underwriting expenses		207.5		482.4		689.9		111.4		63.1		174.5		864.4			-		864.4			-			864.4
Underwriting profit(4)	$	105.8	$	10.1	$	115.9	$	83.5	$	0.2	$	83.7		199.6			-		199.6			-			199.6
Net investment income														256.3			2.2		258.5			7.3			265.8
Change in the fair value of equity securities														532.4			-		532.4			3.6			536.0
Net realized capital gains														16.2			0.6		16.8			-			16.8
Other than temporary impairment losses														(10.0	)		-		(10.0	)		-			(10.0	)
Noninsurance revenue														12.0			1,098.7		1,110.7			7.3			1,118.0
Other operating expenses														55.8			1,013.8		1,069.6			14.3			1,083.9
Corporate administration														2.8			-		2.8			42.5			45.3
Amortization of intangible assets														0.6			15.1		15.7			-			15.7
Interest expense														13.6			9.0		22.6			26.1			48.7
Earnings (losses) before income taxes													$	933.7		$	63.6	$	997.3		$	(64.7	)	$	932.6

	Reinsurance Segment						Insurance Segment
Six Months Ended June 30, 2018	Property		Casualty  & other(1)		Total		RSUI		Cap Specialty		Total		Subtotal			Alleghany Capital(2)		Total Segments			Corporate Activities(3)			Consolidated
	($ in millions)
Gross premiums written	$	742.3	$	1,445.0	$	2,187.3	$	593.4	$	163.2	$	756.6	$	2,943.9		$	-	$	2,943.9		$	(12.4	)	$	2,931.5
Net premiums written		581.0		1,392.7		1,973.7		403.8		151.7		555.5		2,529.2			-		2,529.2			-			2,529.2
Net premiums earned		567.2		1,374.3		1,941.5		365.6		137.7		503.3		2,444.8			-		2,444.8			-			2,444.8
Net loss and LAE		250.1		882.8		1,132.9		202.6		73.3		275.9		1,408.8			-		1,408.8			-			1,408.8
Commissions, brokerage and other underwriting expenses		187.9		452.1		640.0		107.2		61.2		168.4		808.4			-		808.4			-			808.4
Underwriting profit(4)	$	129.2	$	39.4	$	168.6	$	55.8	$	3.2	$	59.0		227.6			-		227.6			-			227.6
Net investment income														239.4			3.0		242.4			8.0			250.4
Change in the fair value of equity securities														132.7			-		132.7			9.9			142.6
Net realized capital gains														50.7			0.5		51.2			(0.2	)		51.0
Other than temporary impairment losses														(0.5	)		-		(0.5	)		-			(0.5	)
Noninsurance revenue														10.4			571.7		582.1			12.3			594.4
Other operating expenses														37.0			554.4		591.4			16.7			608.1
Corporate administration														0.5			-		0.5			21.4			21.9
Amortization of intangible assets														-			11.2		11.2			-			11.2
Interest expense														13.6			3.6		17.2			26.6			43.8
Earnings (losses) before income taxes													$	609.2		$	6.0	$	615.2		$	(34.7	)	$	580.5

(1) Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit.

(2) Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments.

(3) Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

(4) 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance.

Summary of Identifiable Assets and Equity

The following table presents identifiable assets, the portion of identifiable assets related to cash and invested assets and equity attributable to Alleghany for Alleghany’s reportable segments and for corporate activities as of June 30, 2019:

	Identifiable Assets		Invested Assets and Cash		Equity Attributable to Alleghany
	($ in millions)
Reinsurance segment	$	16,874.0	$	13,462.7	$	5,321.7
Insurance segment		7,122.3		5,535.2		3,096.5
Subtotal		23,996.3		18,997.9		8,418.2
Alleghany Capital		1,880.5		134.7		879.9
Total segments		25,876.8		19,132.6		9,298.1
Corporate activities		479.6		439.8		(612.2	)
Consolidated	$	26,356.4	$	19,572.4	$	8,685.9

Summary of Alleghany Capital Noninsurance Revenue

For Alleghany Capital’s industrial and non-industrial operations, noninsurance revenue consists of the sale of manufactured goods and services. The following table presents noninsurance revenue for the Alleghany Capital segment for the three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	($ in millions)
Industrial(1)	$	318.3	$	221.9	$	578.4	$	367.4
Non-Industrial(2)		275.1		107.1		520.0		204.2
Corporate & other		0.3		-		0.3		0.1
Alleghany Capital	$	593.7	$	329.0	$	1,098.7	$	571.7

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Summary of Significant Accounting Principles - Additional Information (Detail) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	Mar. 31, 2019	Jan. 01, 2019
Significant Accounting Policies [Line Items]
Statutory federal income tax rate		21.00%	35.00%
Right-of-use asset	[1]			$ 216,200
Lease liability	[2]			$ 244,600
Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements			$ 600,508
Accumulated Other Comprehensive Income
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements			(600,508)
Accounting Standards Update 2016-01 | Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements			736,000
Accounting Standards Update 2016-01 | Accumulated Other Comprehensive Income
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[3]		(735,600)
Accounting Standards Update 2018-02 | Retained Earnings
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements			(135,000)
Accounting Standards Update 2018-02 | Accumulated Other Comprehensive Income
Significant Accounting Policies [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[3]		$ 135,100
Accounting Standards Update 2016-02
Significant Accounting Policies [Line Items]
Right-of-use asset						$ 200,000
Lease liability						$ 200,000
Wilbert Funeral Services, Inc
Significant Accounting Policies [Line Items]
Equity interest percentage				45.00%
Kentucky Trailer
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners				23.00%
Integrated Project Services LLC
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners				15.00%
Precision Cutting Technologies
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners					11.00%
Jazwares, LLC
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners				23.00%
WWSC Holdings, LLC
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners				20.00%
Concord
Significant Accounting Policies [Line Items]
Ownership of interest held by noncontrolling partners				15.00%

[1] Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet.

[2] Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet.

[3] See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act.

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Carrying Values and Estimated Fair Values of Consolidated Financial Instruments (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Assets
Investments (excluding equity method investments and loans)	[1]	$ 17,477.7	$ 16,291.3
Liabilities
Senior Notes and other debt	[2]	1,882.2	1,795.5
Carrying Value
Assets
Investments (excluding equity method investments and loans)	[1]	17,477.7	16,291.3
Liabilities
Senior Notes and other debt	[2]	$ 1,714.7	$ 1,669.0

[1] This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below.

[2] See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

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Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs (Detail) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		$ 2,292,803	$ 3,572,790
Estimated fair value of available for sale debt securities		14,129,577	11,823,968
Estimated fair value of investments (excluding equity method investments and loans)	[1]	17,477,700	16,291,300
Senior Notes and other debt	[2]	1,882,200	1,795,500
Common Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		2,288,700	3,567,400
Preferred Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		4,100	5,400
U.S. Government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		1,256,500	1,022,400
Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		2,448,300	2,214,700
Foreign government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		783,400	947,900
U.S. corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		3,090,400	2,385,300
Foreign corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		1,437,100	1,353,300
RMBS
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[3]	1,915,900	1,387,900
CMBS
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		788,400	533,300
Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[4]	2,409,600	1,979,200
Short-term Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of investments (excluding equity method investments and loans)		1,054,800	893,800
Other invested assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of investments (excluding equity method investments and loans)	[5]	500	700
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		2,285,400	3,563,900
Estimated fair value of investments (excluding equity method investments and loans)		2,285,400	3,563,900
Level 1 | Common Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		2,285,400	3,563,900
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		3,300	3,500
Estimated fair value of available for sale debt securities		12,489,400	10,004,500
Estimated fair value of investments (excluding equity method investments and loans)		13,547,500	10,901,800
Senior Notes and other debt		1,551,600	1,510,500
Level 2 | Common Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		3,300	3,500
Level 2 | U.S. Government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		1,256,500	1,022,400
Level 2 | Municipal bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		2,448,300	2,214,700
Level 2 | Foreign government obligations
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		783,400	947,900
Level 2 | U.S. corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		2,555,800	1,959,600
Level 2 | Foreign corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		1,291,200	1,226,400
Level 2 | RMBS
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[3]	1,915,900	1,387,900
Level 2 | CMBS
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		788,400	533,300
Level 2 | Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[4]	1,449,900	712,300
Level 2 | Short-term Investments
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of investments (excluding equity method investments and loans)		1,054,800	893,800
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		4,100	5,400
Estimated fair value of available for sale debt securities		1,640,200	1,819,500
Estimated fair value of investments (excluding equity method investments and loans)		1,644,800	1,825,600
Senior Notes and other debt		330,600	285,000
Level 3 | Preferred Stock
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of equities		4,100	5,400
Level 3 | U.S. corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		534,600	425,700
Level 3 | Foreign corporate bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		145,900	126,900
Level 3 | Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[4]	959,700	1,266,900
Level 3 | Other invested assets
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of investments (excluding equity method investments and loans)	[5]	$ 500	$ 700

[1] This table includes debt and equity securities, as well as partnership and non-marketable equity investments accounted for at fair value that are included in other invested assets. This table excludes investments accounted for using the equity method and commercial mortgage loans that are accounted for at unpaid principal balance. The fair value of short-term investments approximates amortized cost. The fair value of all other categories of investments is disclosed below.

[2] See Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2018 Form 10-K for additional information on the senior notes and other debt.

[3] Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

[4] Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

[5] Includes partnership and non-marketable equity investments accounted for at fair value, and excludes investments accounted for using the equity method.

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Financial Instruments Measured at Fair Value and Level of Fair Value Hierarchy of Inputs (Parenthetical) (Detail) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		$ 14,129,577	$ 11,823,968
Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities	[1]	2,409,600	1,979,200
Collateralized loan obligations | Other asset-backed securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Estimated fair value of available for sale debt securities		$ 952,500	$ 1,266,900

[1] Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

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Fair Value of Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions				3 Months Ended			6 Months Ended
		Sep. 24, 2018	Mar. 15, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3				$ 13.9	$ 151.9		$ 14.9	$ 153.5
Gross transfers into Level 3				$ 1.3			16.0	64.3
All Investment Issuers Other Than Ares
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers into Level 3					1.3			5.6
Other Asset Backed Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3							12.1
CMBS
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3						$ 1.6	0.2	1.6
RMBS
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3					150.6			150.6
Preferred Stock
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers into Level 3								4.3
Common Stock | Ares | Insurance Segment
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers into Level 1		$ 56.9	$ 208.2
U.S. corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3					$ 1.3		1.0	1.3
Gross transfers into Level 3							1.3	1.2
Foreign corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3							1.6
Gross transfers into Level 3							$ 14.7
Other invested assets
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers into Level 3	[1]							58.8
Other invested assets | All Investment Issuers Other Than Ares
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers into Level 3								$ 0.1
Other invested assets | Limited partnership interests in certain subsidiaries of Ares | Insurance Segment
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Gross transfers out of Level 3		$ 56.9
Gross transfers into Level 3			$ 58.7

[1] Includes partnership and non-marketable equity investments accounted for at fair value.

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Reconciliations of Changes in Level Three Assets Measured at Fair Value (Detail) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2019		Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019		Jun. 30, 2018
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					$ 1,609.3	$ 1,825.6		$ 1,609.3
Net realized/unrealized gains (losses) included in:
Net earnings	[1]					(12.6)		1.7
Other comprehensive income (loss)						57.1		(25.4)
Purchases						162.2		636.2
Sales						(305.8)		(381.4)
Settlements						(82.8)
Transfers into Level 3		$ 1.3				16.0		64.3
Transfers out of Level 3		(13.9)		$ (151.9)		(14.9)		(153.5)
Ending balance		1,644.8		1,751.2		1,644.8		1,751.2
Preferred Stock
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					1.9	5.4		1.9
Net realized/unrealized gains (losses) included in:
Net earnings	[1]					(1.6)
Other comprehensive income (loss)								0.2
Purchases						0.3
Sales								(0.1)
Transfers into Level 3								4.3
Ending balance		4.1		6.3		4.1		6.3
U.S. corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					260.0	425.7		260.0
Net realized/unrealized gains (losses) included in:
Net earnings	[1]					(10.0)
Other comprehensive income (loss)						31.3		(6.9)
Purchases						90.9		117.3
Sales								(2.5)
Settlements						(3.6)
Transfers into Level 3						1.3		1.2
Transfers out of Level 3				(1.3)		(1.0)		(1.3)
Ending balance		534.6		367.8		534.6		367.8
Foreign corporate bonds
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					75.2	126.9		75.2
Net realized/unrealized gains (losses) included in:
Net earnings	[1]					(0.1)		(0.1)
Other comprehensive income (loss)						5.4		(2.2)
Purchases						13.9		23.8
Sales						(5.6)		(1.9)
Settlements						(7.7)
Transfers into Level 3						14.7
Transfers out of Level 3						(1.6)
Ending balance		145.9		94.8		145.9		94.8
RMBS
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					161.8			161.8
Net realized/unrealized gains (losses) included in:
Net earnings	[1]							(0.3)
Other comprehensive income (loss)								(5.3)
Sales								(5.6)
Transfers out of Level 3				(150.6)				(150.6)
CMBS
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					1.6			1.6
Net realized/unrealized gains (losses) included in:
Purchases						0.2
Transfers out of Level 3					(1.6)	(0.2)		(1.6)
Other Asset Backed Securities
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance					1,101.3	1,266.9		1,101.3
Net realized/unrealized gains (losses) included in:
Net earnings	[1]					(0.7)		1.0
Other comprehensive income (loss)						20.5		(7.7)
Purchases						56.8		495.1
Sales						(300.2)		(365.7)
Settlements						(71.5)
Transfers out of Level 3						(12.1)
Ending balance		959.7	[2]	1,224.0		959.7	[2]	1,224.0
Other invested assets
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning balance	[3]				$ 7.5	0.7		7.5
Net realized/unrealized gains (losses) included in:
Net earnings	[1],[3]					(0.2)		1.1
Other comprehensive income (loss)	[3]					(0.1)		(3.5)
Purchases	[3]					0.1
Sales	[3]							(5.6)
Transfers into Level 3	[3]							58.8
Ending balance	[3]	$ 0.5		$ 58.3		$ 0.5		$ 58.3

[1] There were no other than temporary impairment (“OTTI”) losses recorded in net earnings related to Level 3 assets still held as of June 30, 2019 and 2018.

[2] Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

[3] Includes partnership and non-marketable equity investments accounted for at fair value.

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Amortized Cost or Cost and Fair Value of Available For Sale Securities (Detail) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost or Cost		$ 14,811,700	$ 12,789,700
Gross Unrealized Gains		401,500	98,900
Gross Unrealized Losses		(28,800)	(170,800)
Fair Value		15,184,400	12,717,800
Debt securities, amortized cost		13,756,921	11,895,850
Debt securities, gross unrealized gains		401,500	98,900
Debt securities, gross unrealized losses		(28,800)	(170,800)
Debt securities, fair value		14,129,577	11,823,968
U.S. Government obligations
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		1,242,200	1,042,400
Debt securities, gross unrealized gains		17,300	2,400
Debt securities, gross unrealized losses		(3,000)	(22,400)
Debt securities, fair value		1,256,500	1,022,400
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		2,335,800	2,177,500
Debt securities, gross unrealized gains		112,600	44,400
Debt securities, gross unrealized losses		(100)	(7,200)
Debt securities, fair value		2,448,300	2,214,700
Foreign government obligations
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		759,300	939,000
Debt securities, gross unrealized gains		24,600	12,300
Debt securities, gross unrealized losses		(500)	(3,400)
Debt securities, fair value		783,400	947,900
U.S. corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		2,975,300	2,431,400
Debt securities, gross unrealized gains		120,400	13,200
Debt securities, gross unrealized losses		(5,300)	(59,300)
Debt securities, fair value		3,090,400	2,385,300
Foreign corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		1,403,600	1,363,000
Debt securities, gross unrealized gains		35,300	9,100
Debt securities, gross unrealized losses		(1,800)	(18,800)
Debt securities, fair value		1,437,100	1,353,300
RMBS
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		1,878,300	1,392,400
Debt securities, gross unrealized gains		40,600	10,300
Debt securities, gross unrealized losses		(3,000)	(14,800)
Debt securities, fair value	[1]	1,915,900	1,387,900
CMBS
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost		766,000	536,900
Debt securities, gross unrealized gains		23,000	2,800
Debt securities, gross unrealized losses		(600)	(6,400)
Debt securities, fair value		788,400	533,300
Other Asset Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Debt securities, amortized cost	[2]	2,396,400	2,013,300
Debt securities, gross unrealized gains	[2]	27,700	4,400
Debt securities, gross unrealized losses	[2]	(14,500)	(38,500)
Debt securities, fair value	[2]	2,409,600	1,979,200
Short-term Investments
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost or Cost		1,054,800	893,800
Fair Value		$ 1,054,800	$ 893,800

[1] Primarily includes government agency pass-through securities guaranteed by a government agency or government sponsored enterprise, among other types of RMBS.

[2] Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

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Amortized Cost or Cost and Fair Value of Available For Sale Securities (Parenthetical) (Detail) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value of available for sale debt securities		$ 14,129,577	$ 11,823,968
Other Asset Backed Securities
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value of available for sale debt securities	[1]	2,409,600	1,979,200
Other Asset Backed Securities | Collateralized loan obligations
Schedule of Available-for-sale Securities [Line Items]
Estimated fair value of available for sale debt securities		$ 952,500	$ 1,266,900

[1] Includes $952.5 million and $1,266.9 million of collateralized loan obligations as of June 30, 2019 and December 31, 2018, respectively.

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Net Investment Income (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net Investment Income [Line Items]
Interest income		$ 127,200	$ 104,800	$ 246,500	$ 206,800
Dividend income		9,400	22,300	19,200	38,600
Investment expenses		(7,200)	(6,600)	(14,700)	(18,600)
Other investment results		10,000	4,600	10,400	8,500
Net investment income		142,745	126,273	265,794	250,399
Limited partnership interests in certain subsidiaries of Ares
Net Investment Income [Line Items]
Equity results	[1]		(700)		13,200
Pillar Capital Holdings Limited And Managed Funds
Net Investment Income [Line Items]
Equity results	[1]	$ 3,300	$ 1,900	$ 4,400	$ 1,900

[1] See Note 3(h) of this Form 10-Q for discussion of the Pillar Investments, as defined therein, and limited partnership interests in certain subsidiaries of Ares.

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Summary of Changes in Fair Value of Equity Securities (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Change in the fair value of equity securities sold during the period	$ 11,800	$ 4,400	$ 73,900	$ 16,000
Change in the fair value of equity securities held at the end of the period	131,900	180,800	462,100	126,600
Change in the fair value of equity securities	$ 143,660	$ 185,245	$ 536,013	$ 142,596

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Investments - Additional Information (Detail) $ in Thousands			1 Months Ended		3 Months Ended		6 Months Ended
	Sep. 24, 2018 USD ($)	Mar. 15, 2018 USD ($)	Jul. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Jun. 30, 2019 USD ($) Investment	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) Investment	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Investments [Line Items]
Securities impairment test description							Debt securities in an unrealized loss position are evaluated for OTTI if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost for an extended period of time (nine consecutive months or more); (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis. If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records an OTTI loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the OTTI loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income. In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities.
Other than temporary impairment losses						$ 0	$ 10,020	$ 511
Percentage of debt securities owned with credit rating below investment grade or not rated					3.50%		3.50%		4.40%
Commercial mortgage loans					$ 691,437		$ 691,437		$ 676,532
Allowance for loan losses on commercial mortgage loans					0		0
Other invested assets					579,018		579,018		555,972
Proceeds From Sale Of Debt And Equity Securities					1,300,000	800,000	3,800,000	1,900,000
Net realized capital gains					12,354	6,462	16,796	50,967
Net Investment Income					142,745	$ 126,273	265,794	250,399
Available-for-sale Securities					15,184,400		15,184,400		12,717,800
Equity securities					2,292,803		2,292,803		3,572,790
Pillar Capital Holdings Limited And Managed Funds
Investments [Line Items]
Other invested assets					$ 198,000		$ 198,000
Pillar Capital Holdings Limited And Managed Funds | Reinsurance Segment
Investments [Line Items]
Investment in other invested asset				$ 175,000
Pillar Capital Holdings Limited And Managed Funds | Insurance Segment
Investments [Line Items]
Investment in other invested asset				$ 25,000
Limited partnership interests in certain subsidiaries of Ares Management LLC | Insurance Segment
Investments [Line Items]
Net Investment Income		$ 12,900
Ares | Insurance Segment
Investments [Line Items]
Investment in other invested asset			$ 250,000
Percentage of equity stake			6.25%
Net realized capital gains		45,700						$ 45,700
Debt Securities
Investments [Line Items]
Number of securities in an unrealized loss position for 12 months or more | Investment					502		502
Number of securities in an unrealized loss position | Investment					785		785
Other invested assets | Limited partnership interests in certain subsidiaries of Ares Management LLC | Insurance Segment
Investments [Line Items]
Available-for-sale Securities		58,700
Common Stock
Investments [Line Items]
Equity securities					$ 2,288,700		$ 2,288,700		$ 3,567,400
Common Stock | Ares | Insurance Segment
Investments [Line Items]
Reclassification of converted interests from other invested assets to equity securities	$ 56,900
Equity securities		$ 208,200
Maximum [Member]
Investments [Line Items]
Term of commercial mortgage loans							10 years
Percentage of principal amounts of commercial mortgage loans to the property's appraised value					66.70%		66.70%
Maximum [Member] | Ares | Insurance Segment
Investments [Line Items]
Investment commitment in investment fund			$ 1,000,000
Minimum [Member]
Investments [Line Items]
Term of commercial mortgage loans							2 years
Minimum [Member] | Debt Securities
Investments [Line Items]
Percentage of unrealized loss to cost where a security would be evaluated for other than temporarily impairment					20.00%		20.00%

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Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity (Detail) - USD ($) $ in Thousands		Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Short-term investments due in one year or less, amortized cost		$ 1,054,800
Mortgage and asset-backed securities, amortized cost	[1]	5,040,700
Debt securities with maturity dates, amortized cost:
One year or less		531,000
Over one through five years		3,377,500
Over five through ten years		2,707,600
Over ten years		2,100,100
Debt securities, amortized cost		13,756,921	$ 11,895,850
Short-term investments due in one year or less, fair value		1,054,793	893,776
Mortgage and asset-backed securities, fair value	[1]	5,113,900
Debt securities with maturity dates, fair value:
One year or less		532,500
Over one through five years		3,443,200
Over five through ten years		2,808,600
Over ten years		2,231,400
Total debt securities, fair value		$ 14,129,577	$ 11,823,968

[1] Mortgage and asset-backed securities by their nature do not generally have single maturity dates.

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Amounts of Gross Realized Capital Gains and Gross Realized Capital Losses (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule of Gross Gains (Losses) [Line Items]
Gross realized capital gains	$ 13,600	$ 6,500	$ 25,700	$ 66,400
Gross realized capital losses	(1,200)		(8,900)	(15,400)
Net realized capital gains	$ 12,354	$ 6,462	$ 16,796	$ 50,967

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Gross Unrealized Losses and Related Fair Values for Available-for-Sale Securities Grouped by Duration of Time in Continuous Unrealized Loss Position (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	$ 872.9	$ 4,180.6
Securities, less than 12 months, gross unrealized losses	9.6	97.0
Securities, 12 months or more, fair value	1,420.8	2,265.5
Securities, 12 months or more, gross unrealized losses	19.2	73.8
Total, fair value	2,293.7	6,446.1
Total, gross unrealized losses	28.8	170.8
U.S. Government obligations
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	40.7	78.5
Securities, less than 12 months, gross unrealized losses	0.1	0.9
Securities, 12 months or more, fair value	336.0	690.5
Securities, 12 months or more, gross unrealized losses	2.9	21.5
Total, fair value	376.7	769.0
Total, gross unrealized losses	3.0	22.4
Municipal bonds
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	2.2	312.4
Securities, less than 12 months, gross unrealized losses		2.5
Securities, 12 months or more, fair value	23.2	202.5
Securities, 12 months or more, gross unrealized losses	0.1	4.7
Total, fair value	25.4	514.9
Total, gross unrealized losses	0.1	7.2
Foreign government obligations
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	33.5	60.7
Securities, less than 12 months, gross unrealized losses		0.1
Securities, 12 months or more, fair value	76.7	186.7
Securities, 12 months or more, gross unrealized losses	0.5	3.3
Total, fair value	110.2	247.4
Total, gross unrealized losses	0.5	3.4
U.S. corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	121.1	1,187.9
Securities, less than 12 months, gross unrealized losses	2.6	39.4
Securities, 12 months or more, fair value	180.9	379.7
Securities, 12 months or more, gross unrealized losses	2.7	19.9
Total, fair value	302.0	1,567.6
Total, gross unrealized losses	5.3	59.3
Foreign corporate bonds
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	49.7	501.5
Securities, less than 12 months, gross unrealized losses	0.4	9.7
Securities, 12 months or more, fair value	167.8	349.1
Securities, 12 months or more, gross unrealized losses	1.4	9.1
Total, fair value	217.5	850.6
Total, gross unrealized losses	1.8	18.8
RMBS
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	40.9	397.7
Securities, less than 12 months, gross unrealized losses	0.5	6.4
Securities, 12 months or more, fair value	212.1	225.9
Securities, 12 months or more, gross unrealized losses	2.5	8.4
Total, fair value	253.0	623.6
Total, gross unrealized losses	3.0	14.8
CMBS
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	18.0	199.1
Securities, less than 12 months, gross unrealized losses		1.3
Securities, 12 months or more, fair value	19.4	109.5
Securities, 12 months or more, gross unrealized losses	0.6	5.1
Total, fair value	37.4	308.6
Total, gross unrealized losses	0.6	6.4
Other asset-backed securities
Schedule of Available-for-sale Securities [Line Items]
Securities, less than 12 months, fair value	566.8	1,442.8
Securities, less than 12 months, gross unrealized losses	6.0	36.7
Securities, 12 months or more, fair value	404.7	121.6
Securities, 12 months or more, gross unrealized losses	8.5	1.8
Total, fair value	971.5	1,564.4
Total, gross unrealized losses	$ 14.5	$ 38.5

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Activity in the Liability for Loss and Loss Adjustment Expense (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Liability for Claims and Claims Adjustment Expense [Line Items]
Reserves as of January 1				$ 12,250,294	$ 11,871,300
Less: reinsurance recoverables	[1]			1,857,400	1,650,100
Net reserves as of January 1				10,392,900	10,221,200
Other adjustments				(1,400)	2,000
Incurred loss and LAE, net of reinsurance, related to:
Current year				1,683,300	1,546,700
Prior years		$ (56,600)	$ (52,200)	(94,000)	(137,900)
Total incurred loss and LAE, net of reinsurance		796,803	738,210	1,589,301	1,408,788
Paid loss and LAE, net of reinsurance, related to:
Current year	[2]			248,000	237,600
Prior years	[2]			1,651,500	1,366,100
Total paid loss and LAE, net of reinsurance	[2]			1,899,500	1,603,700
Foreign currency exchange rate effect				(6,600)	(24,200)
Net reserves as of June 30		10,074,700	10,004,100	10,074,700	10,004,100
Reinsurance recoverables as of June 30	[1]	1,557,100	1,511,400	1,557,100	1,511,400
Reserves as of June 30		$ 11,631,798	$ 11,515,500	$ 11,631,798	$ 11,515,500

[1] Reinsurance recoverables in this table include only ceded loss and LAE reserves.

[2] Includes paid losses, net of reinsurance, related to commutations.

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(Favorable) Unfavorable Prior Accident Year Loss Reserve Development (Detail) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2019		Jun. 30, 2018		Jun. 30, 2019		Jun. 30, 2018
Claims Development [Line Items]
Claims incurred related to prior years		$ (56.6)		$ (52.2)		$ (94.0)		$ (137.9)
Reinsurance Segment
Claims Development [Line Items]
Claims incurred related to prior years		(44.8)		(50.7)		(81.2)		(122.3)
Reinsurance Segment | Property
Claims Development [Line Items]
Claims incurred related to prior years		(16.2)		(13.7)		(26.9)		(55.1)
Reinsurance Segment | Property | Property Catastrophe
Claims Development [Line Items]
Claims incurred related to prior years		(9.9)	[1]	5.1	[2]	(1.5)	[3]	(25.3)	[4]
Reinsurance Segment | Property | Property Non-catastrophe
Claims Development [Line Items]
Claims incurred related to prior years		(6.3)	[5]	(18.8)	[6]	(25.4)	[7]	(29.8)	[6]
Reinsurance Segment | Casualty & Other
Claims Development [Line Items]
Claims incurred related to prior years		(28.6)		(37.0)		(54.3)		(67.2)
Reinsurance Segment | Casualty & Other | Malpractice Treaties
Claims Development [Line Items]
Claims incurred related to prior years	[8]	(1.4)		(3.4)		(1.4)		(3.4)
Reinsurance Segment | Casualty & Other | All Other Casualty and Other
Claims Development [Line Items]
Claims incurred related to prior years		(27.2)	[9]	(33.6)	[10]	(52.9)	[11]	(63.8)	[12]
Insurance Segment | RSUI
Claims Development [Line Items]
Claims incurred related to prior years		(12.5)		(1.4)		(16.2)		(12.5)
Insurance Segment | RSUI | Casualty Insurance
Claims Development [Line Items]
Claims incurred related to prior years		(12.1)	[13]	(1.5)	[14]	(17.7)	[13]	(12.5)	[14]
Insurance Segment | RSUI | Property and Other Insurance
Claims Development [Line Items]
Claims incurred related to prior years		(0.4)		0.1		1.5	[15]
Insurance Segment | CapSpecialty Incorporated
Claims Development [Line Items]
Claims incurred related to prior years		$ 0.7	[16]	$ (0.1)		$ 3.4	[17]	$ (3.1)	[18]

[1] Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year.

[2] Primarily reflects unfavorable prior accident year loss reserve development related to Hurricane Maria in the 2017 accident year, partially offset by favorable prior accident year loss reserve development related to Hurricane Harvey in the 2017 accident year and catastrophes in the 2016 accident year.

[3] Primarily reflects favorable prior accident year loss reserve development related to wildfires in California in the 2018 accident year, partially offset by unfavorable prior accident year loss reserve development related to Typhoon Jebi in the 2018 accident year.

[4] Primarily reflects favorable prior accident year loss reserve development related to Hurricanes Harvey and Maria in the 2017 accident year and catastrophes in the 2016 accident year.

[5] Primarily reflects favorable prior accident year loss reserve development in the 2018 accident year.

[6] Primarily reflects favorable prior accident year loss reserve development in the 2016 and 2017 accident years.

[7] Primarily reflects favorable prior accident year loss reserve development in the 2016 through 2018 accident years.

[8] Represents certain malpractice treaties pursuant to which the increased underwriting profits created by the favorable prior accident year loss reserve development are largely retained by the cedants. As a result, the favorable prior accident year loss reserve development is largely offset by an increase in profit commission expense incurred when such favorable prior accident year loss reserve development occurs.

[9] Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years.

[10] Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2015 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

[11] Primarily reflects favorable prior accident year loss reserve development in the longer-tailed lines of business in the 2013 and prior accident years and the shorter-tailed lines of business in the 2012 through 2014 accident years.

[12] Primarily reflects favorable prior accident year loss reserve development in the shorter-tailed casualty lines of business in the 2016 and 2017 accident years and the longer-tailed lines of business in the 2008 through 2010 accident years.

[13] Primarily reflects favorable prior accident year loss reserve development in the directors’ and officers’ liability and umbrella/excess lines of business in the 2011 through 2015 accident years, partially offset by unfavorable prior accident year loss reserve development in the professional liability lines of business in recent accident years.

[14] Primarily reflects favorable prior accident year loss reserve development in the umbrella/excess lines of business in the 2005 through 2012 accident years, partially offset by unfavorable prior accident year loss reserve development in the directors’ and officers’ liability lines of business in recent accident years.

[15] Primarily reflects unfavorable prior accident year loss reserve development related to the assumed property reinsurance lines of business from catastrophe losses in recent accident years, partially offset by favorable prior accident year loss reserve development related to Superstorm Sandy in the 2012 accident year and by Hurricane Harvey in the 2017 accident year.

[16] Primarily reflects unfavorable prior accident year loss reserve development in the professional liability lines of business in the 2016 accident year.

[17] Primarily reflects unfavorable prior accident year loss reserve development in certain specialty lines of business written through a program administrator in connection with a terminated program in the 2009 and 2010 accident years.

[18] Primarily reflects favorable prior accident year loss reserve development in the surety lines of business in the 2016 and 2017 accident years.

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Income Taxes [Line Items]
Interest or penalties accrued for uncertain tax positions	$ 0
Effective income tax rate	19.30%	19.10%

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Stockholders' Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	6 Months Ended
	Mar. 15, 2018	Feb. 28, 2018	Jun. 30, 2018	Jun. 30, 2019	Nov. 30, 2015
Stockholders Equity Note [Line Items]
Dividends paid	$ 154,000		$ 153,967
Par value of common stock				$ 1.00
Dividend Declared [Member]
Stockholders Equity Note [Line Items]
Dividend record date		Mar. 05, 2018
Dividend payable nature		special
Special dividend declared per share		$ 10.00
2015 Repurchase Program
Stockholders Equity Note [Line Items]
Aggregate amount of common stock authorized for repurchase					$ 400,000
2018 Repurchase Program
Stockholders Equity Note [Line Items]
Aggregate amount of common stock authorized for repurchase			$ 400,000
Remaining authorized repurchases under share repurchase program				$ 178,300

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Schedule of Common Stock Repurchases (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Schedule Of Common Share Purchase [Line Items]
Shares repurchased	19,246		368,551		148,813	403,623
Cost of shares repurchased (in millions)	$ 12,666	$ 80,486	$ 214,835	$ 21,268	$ 93,200	$ 236,100
Average price per share repurchased	$ 658.09		$ 582.92		$ 625.96	$ 584.96

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Reconciliation of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance		$ 8,236,487	$ 8,373,400	$ 7,692,710	$ 8,514,063
Other comprehensive income (loss), net of tax:
Ending Balance		8,685,914	8,404,389	8,685,914	8,404,389
Accumulated Other Comprehensive Income
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance		(14,157)	(123,620)	(202,003)	618,118
Cumulative effect of adoption of new accounting pronouncements						$ (600,508)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications				359,400	(186,200)
Reclassifications from accumulated other comprehensive income				(5,400)	(3,700)
Total				354,000	(189,900)
Ending Balance		151,964	(172,307)	151,964	(172,307)
Accumulated Other Comprehensive Income | Accounting Standards Update 2016-01
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					(735,600)
Accumulated Other Comprehensive Income | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					135,100
Unrealized Appreciation of Investments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance				(61,600)	718,200
Cumulative effect of adoption of new accounting pronouncements	[1]					(579,000)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications				356,000	(179,700)
Reclassifications from accumulated other comprehensive income		(9,800)	(5,100)	(5,400)	(3,700)
Total				350,600	(183,400)
Ending Balance		289,000	(44,200)	289,000	(44,200)
Unrealized Appreciation of Investments | Accounting Standards Update 2016-01
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					(735,600)
Unrealized Appreciation of Investments | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					156,600
Unrealized Currency Translation Adjustment
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance				(124,700)	(84,600)
Cumulative effect of adoption of new accounting pronouncements	[1]					(18,200)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications				2,300	(5,400)
Total				2,300	(5,400)
Ending Balance		(122,400)	(108,200)	(122,400)	(108,200)
Unrealized Currency Translation Adjustment | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					(18,200)
Retirement Plans
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning Balance				(15,700)	(15,500)
Cumulative effect of adoption of new accounting pronouncements	[1]					(3,300)
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss) before reclassifications				1,100	(1,100)
Total				1,100	(1,100)
Ending Balance		$ (14,600)	$ (19,900)	$ (14,600)	$ (19,900)
Retirement Plans | Accounting Standards Update 2018-02
Accumulated Other Comprehensive Income (Loss) [Line Items]
Cumulative effect of adoption of new accounting pronouncements	[1]					$ (3,300)

[1] See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new investment accounting guidance and new guidance on certain tax effects caused by the Tax Act.

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Reclassifications of Accumulated Other Comprehensive Income (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized capital gains		$ (12,354)	$ (6,462)	$ (16,796)	$ (50,967)
Other than temporary impairment losses			0	10,020	511
Income taxes		71,356	73,440	179,868	110,862
Unrealized Appreciation of Investments
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications		(9,800)	(5,100)	(5,400)	(3,700)
Reclassification out of Accumulated Other Comprehensive Income | Unrealized Appreciation of Investments
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized capital gains	[1]	(12,400)	(6,500)	(16,800)	(5,300)
Other than temporary impairment losses				10,000	500
Income taxes		$ 2,600	$ 1,400	$ 1,400	$ 1,100

[1] For the six month period ended June 30, 2018, excludes a $45.7 million pre-tax gain from AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares into Ares common units. See Note 3(h) of this Form 10-Q for additional information.

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Reclassifications of Accumulated Other Comprehensive Income (Parenthetical) (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Mar. 15, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized capital gains		$ 12,354	$ 6,462	$ 16,796	$ 50,967
Insurance Segment | Ares
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized capital gains	$ 45,700				$ 45,700

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Reconciliation of Earnings and Share Data used in Basic and Diluted Earnings per Share Computations (Detail) - USD ($) $ in Thousands		3 Months Ended				6 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share Disclosure [Line Items]
Net earnings available to Alleghany stockholders		$ 295,459	$ 440,227	$ 295,116	$ 171,575	$ 735,686	$ 466,691
Income available to common stockholders for diluted earnings per share		$ 295,500		$ 295,100		$ 735,700	$ 466,700
Weighted average common shares outstanding applicable to basic earnings per share		14,439,545		15,180,075		14,460,400	15,284,679
Effect of dilutive securities						14,960	4,915
Adjusted weighted average common shares outstanding applicable to diluted earnings per share		14,439,545		15,180,075		14,475,360	15,289,594
Contingently issuable shares	[1]					46,973	57,766

[1] Contingently issuable shares were potentially available in the periods presented, but were not included in the diluted earnings per share computations because the impact was anti-dilutive to the earnings per share calculation.

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Line Items]
Rent expense	$ 9,700	$ 21,800
Investments, debt securities	14,129,577	14,129,577		$ 11,823,968
Investments, equity securities	2,292,803	2,292,803		3,572,790
Stockholders' equity	8,685,914	$ 8,685,914	$ 8,236,487	$ 7,692,710	$ 8,404,389	$ 8,373,400	$ 8,514,063
Maximum
Commitments and Contingencies Disclosure [Line Items]
Non-cancelable operating leases, expiration date		2038
Energy Sector Business
Commitments and Contingencies Disclosure [Line Items]
Investments and equity in consolidated subsidiaries	416,100	$ 416,100
Investments, debt securities	323,900	323,900
Investments, equity securities	5,400	5,400
Energy Sector Business | Stranded Oil Resources Corporation
Commitments and Contingencies Disclosure [Line Items]
Stockholders' equity	$ 86,800	$ 86,800

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Consolidated Lease Liabilities And Right-Of-Use Lease Assets Related To Operating Leases (Detail) $ in Millions	Jun. 30, 2019 USD ($)
Maturity of lease payments, by year
1 year or less	$ 37.9
More than 1 year to 2 years	34.9
More than 2 years to 3 years	30.9
More than 3 years to 4 years	26.6
More than 4 years to 5 years	25.6
More than 5 years	155.3
Total lease payments	311.2	[1]
Less: interest	66.6	[2]
Lease liabilities	244.6	[3]
Right-of-use lease assets	216.2	[4]
Prepaid lease assets, net of lease allowances and incentives	28.4
Right-of-use lease assets and prepaid lease assets, net of lease allowances and incentives	$ 244.6

[1] As of June 30, 2019, the weighted average lease term was approximately 12 years.

[2] As of June 30, 2019, the weighted average discount rate was approximately 5 percent.

[3] Represents the present value of lease liabilities and is reported as a component of other liabilities on Alleghany’s Consolidated Balance Sheet.

[4] Reported as a component of other assets on Alleghany’s Consolidated Balance Sheet.

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Consolidated Lease Liabilities And Right-Of-Use Lease Assets Related To Operating Leases (Parenthetical) (Detail)	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
weighted average discount rate	5.00%
weighted average lease tern	12 years

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Segments of Business - Additional Information (Detail) $ in Thousands			6 Months Ended
	Oct. 01, 2018 USD ($)	Feb. 07, 2018 USD ($)	Jun. 30, 2019 USD ($) Segment	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | Segment			3
Debt amount			$ 1,714,652	$ 1,669,039
Concord
Segment Reporting Information [Line Items]
Ownership interest acquired	85.00%
WWSC Holdings, LLC | Hirschfeld Holdings LP
Segment Reporting Information [Line Items]
Business acquisition date			Feb. 07, 2018
Wilbert Funeral Services, Inc
Segment Reporting Information [Line Items]
Equity interest percentage			45.00%
Operating Segments | Alleghany Capital Corporation Segment
Segment Reporting Information [Line Items]
Debt amount			$ 330,600	$ 284,500
Operating Segments | Alleghany Capital Corporation Segment | Concord
Segment Reporting Information [Line Items]
Business acquisition date	Oct. 01, 2018
Ownership interest acquired	85.00%
Purchase price for acquisition	$ 136,600
Cash consideration paid for acquisition	68,600
Incremental debt acquired	29,800
Goodwill	83,000
Potential contingent consideration on acquisition	38,200
Finite-lived intangible assets acquired	$ 70,800
Operating Segments | Alleghany Capital Corporation Segment | WWSC Holdings, LLC
Segment Reporting Information [Line Items]
Debt amount			113,100
Operating Segments | Alleghany Capital Corporation Segment | WWSC Holdings, LLC | Hirschfeld Holdings LP
Segment Reporting Information [Line Items]
Business acquisition date		Feb. 07, 2018
Purchase price for acquisition		$ 109,100
Cash consideration paid for acquisition		94,400
Incremental debt acquired		14,700
Goodwill		3,000
Finite-lived intangible assets acquired		9,400
Capital contributions from Alleghany		75,500
Capital contributions from noncontrolling interests		$ 18,900
Operating Segments | Alleghany Capital Corporation Segment | Jazwares, LLC
Segment Reporting Information [Line Items]
Debt amount			35,400
Operating Segments | Alleghany Capital Corporation Segment | Kentucky Trailer
Segment Reporting Information [Line Items]
Debt amount			64,000
Operating Segments | Alleghany Capital Corporation Segment | Integrated Project Services LLC
Segment Reporting Information [Line Items]
Debt amount			51,500
Operating Segments | Alleghany Capital Corporation Segment | Concord
Segment Reporting Information [Line Items]
Debt amount			33,400
Operating Segments | Alleghany Capital Corporation Segment | Precision Cutting Technologies, Inc
Segment Reporting Information [Line Items]
Debt amount			$ 33,200

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Results for Reportable Segments and Corporate Activities (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Gross premiums written		$ 1,670,800	$ 1,472,700	$ 3,277,400	$ 2,931,500
Net premiums written		1,446,500	1,275,800	2,832,100	2,529,200
Net premiums earned		1,356,008	1,236,959	2,653,317	2,444,815
Net loss and LAE		796,803	738,210	1,589,301	1,408,788
Commissions, brokerage and other underwriting expenses		444,316	402,083	864,442	808,378
Underwriting profit	[1]	114,900	96,700	199,600	227,600
Net investment income		142,745	126,273	265,794	250,399
Change in the fair value of equity securities		143,660	185,245	536,013	142,596
Net realized capital gains		12,354	6,462	16,796	50,967
Other than temporary impairment losses			0	(10,020)	(511)
Noninsurance revenue		603,906	342,725	1,118,029	594,352
Other operating expenses		581,474	343,165	1,083,892	608,062
Corporate administration		25,967	14,119	45,336	21,904
Amortization of intangible assets		8,795	5,966	15,695	11,230
Interest expense		25,129	22,277	48,660	43,808
Earnings before income taxes		376,189	371,844	932,603	580,448
Operating Segments
Segment Reporting Information [Line Items]
Gross premiums written		1,676,900	1,479,200	3,290,300	2,943,900
Net premiums written		1,446,500	1,275,800	2,832,100	2,529,200
Net premiums earned		1,356,000	1,237,000	2,653,300	2,444,800
Net loss and LAE		796,800	738,200	1,589,300	1,408,800
Commissions, brokerage and other underwriting expenses		444,300	402,100	864,400	808,400
Underwriting profit	[1]	114,900	96,700	199,600	227,600
Net investment income		139,200	122,500	258,500	242,400
Change in the fair value of equity securities		143,300	146,800	532,400	132,700
Net realized capital gains		12,400	6,700	16,800	51,200
Other than temporary impairment losses				(10,000)	(500)
Noninsurance revenue		600,300	333,700	1,110,700	582,100
Other operating expenses		574,500	334,400	1,069,600	591,400
Corporate administration		1,800	800	2,800	500
Amortization of intangible assets		8,800	6,000	15,700	11,200
Interest expense		11,500	9,200	22,600	17,200
Earnings before income taxes		413,500	356,000	997,300	615,200
Operating Segments | Reinsurance Segment
Segment Reporting Information [Line Items]
Gross premiums written		1,210,700	1,071,700	2,442,300	2,187,300
Net premiums written		1,112,900	976,600	2,220,500	1,973,700
Net premiums earned		1,074,900	981,300	2,104,100	1,941,500
Net loss and LAE		645,100	593,500	1,298,300	1,132,900
Commissions, brokerage and other underwriting expenses		353,900	318,000	689,900	640,000
Underwriting profit	[1]	75,900	69,800	115,900	168,600
Operating Segments | Reinsurance Segment | Property
Segment Reporting Information [Line Items]
Gross premiums written		381,600	345,100	796,700	742,300
Net premiums written		305,900	275,900	622,100	581,000
Net premiums earned		303,200	292,100	612,100	567,200
Net loss and LAE		136,200	153,500	298,800	250,100
Commissions, brokerage and other underwriting expenses		103,800	94,800	207,500	187,900
Underwriting profit	[1]	63,200	43,800	105,800	129,200
Operating Segments | Reinsurance Segment | Casualty & Other
Segment Reporting Information [Line Items]
Gross premiums written	[2]	829,100	726,600	1,645,600	1,445,000
Net premiums written	[2]	807,000	700,700	1,598,400	1,392,700
Net premiums earned	[2]	771,700	689,200	1,492,000	1,374,300
Net loss and LAE	[2]	508,900	440,000	999,500	882,800
Commissions, brokerage and other underwriting expenses	[2]	250,100	223,200	482,400	452,100
Underwriting profit	[1],[2]	12,700	26,000	10,100	39,400
Operating Segments | Insurance Segment
Segment Reporting Information [Line Items]
Gross premiums written		466,200	407,500	848,000	756,600
Net premiums written		333,600	299,200	611,600	555,500
Net premiums earned		281,100	255,700	549,200	503,300
Net loss and LAE		151,700	144,700	291,000	275,900
Commissions, brokerage and other underwriting expenses		90,400	84,100	174,500	168,400
Underwriting profit	[1]	39,000	26,900	83,700	59,000
Operating Segments | Insurance Segment | RSUI
Segment Reporting Information [Line Items]
Gross premiums written		372,400	318,800	671,400	593,400
Net premiums written		246,900	216,900	448,300	403,800
Net premiums earned		202,400	184,700	394,800	365,600
Net loss and LAE		105,600	105,700	199,900	202,600
Commissions, brokerage and other underwriting expenses		57,900	53,700	111,400	107,200
Underwriting profit	[1]	38,900	25,300	83,500	55,800
Operating Segments | Insurance Segment | CapSpecialty Incorporated
Segment Reporting Information [Line Items]
Gross premiums written		93,800	88,700	176,600	163,200
Net premiums written		86,700	82,300	163,300	151,700
Net premiums earned		78,700	71,000	154,400	137,700
Net loss and LAE		46,100	39,000	91,100	73,300
Commissions, brokerage and other underwriting expenses		32,500	30,400	63,100	61,200
Underwriting profit	[1]	100	1,600	200	3,200
Operating Segments | Alleghany Capital Corporation Segment
Segment Reporting Information [Line Items]
Net investment income	[3]	900	1,400	2,200	3,000
Net realized capital gains	[3]	200	(100)	600	500
Noninsurance revenue	[3]	593,700	329,000	1,098,700	571,700
Other operating expenses	[3]	548,300	314,500	1,013,800	554,400
Amortization of intangible assets	[3]	8,400	5,800	15,100	11,200
Interest expense	[3]	4,700	2,300	9,000	3,600
Earnings before income taxes	[3]	33,400	7,700	63,600	6,000
Operating Segments | Reinsurance Segment and Insurance Segment
Segment Reporting Information [Line Items]
Gross premiums written		1,676,900	1,479,200	3,290,300	2,943,900
Net premiums written		1,446,500	1,275,800	2,832,100	2,529,200
Net premiums earned		1,356,000	1,237,000	2,653,300	2,444,800
Net loss and LAE		796,800	738,200	1,589,300	1,408,800
Commissions, brokerage and other underwriting expenses		444,300	402,100	864,400	808,400
Underwriting profit	[1]	114,900	96,700	199,600	227,600
Net investment income		138,300	121,100	256,300	239,400
Change in the fair value of equity securities		143,300	146,800	532,400	132,700
Net realized capital gains		12,200	6,800	16,200	50,700
Other than temporary impairment losses				(10,000)	(500)
Noninsurance revenue		6,600	4,700	12,000	10,400
Other operating expenses		26,200	19,900	55,800	37,000
Corporate administration		1,800	800	2,800	500
Amortization of intangible assets		400	200	600
Interest expense		6,800	6,900	13,600	13,600
Earnings before income taxes		380,100	348,300	933,700	609,200
Corporate activities
Segment Reporting Information [Line Items]
Gross premiums written	[4]	(6,100)	(6,500)	(12,900)	(12,400)
Net investment income	[4]	3,500	3,800	7,300	8,000
Change in the fair value of equity securities	[4]	400	38,400	3,600	9,900
Net realized capital gains	[4]		(200)		(200)
Noninsurance revenue	[4]	3,600	9,000	7,300	12,300
Other operating expenses	[4]	7,000	8,800	14,300	16,700
Corporate administration	[4]	24,200	13,300	42,500	21,400
Interest expense	[4]	13,600	13,100	26,100	26,600
Earnings before income taxes	[4]	$ (37,300)	$ 15,800	$ (64,700)	$ (34,700)

[1] 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, change in the fair value of equity securities, net realized capital gains, OTTI losses, noninsurance revenue, other operating expenses, corporate administration, amortization of intangible assets or interest expense. Underwriting profit does not replace earnings before income taxes determined in accordance with GAAP as a measure of profitability. Rather, Alleghany believes that underwriting profit enhances the understanding of its reinsurance and insurance segments’ operating results by highlighting net earnings attributable to their underwriting performance. Earnings before income taxes (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, a reinsurance or an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, Alleghany views underwriting profit as an important measure in the overall evaluation of performance.

[2] Primarily consists of the following reinsurance lines of business: directors’ and officers’ liability; errors and omissions liability; general liability; medical malpractice; ocean marine and aviation; auto liability; accident and health; mortgage reinsurance; surety; and credit.

[3] Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments.

[4] Includes elimination of minor reinsurance activity between segments. Also, includes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods.

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Summary of Identifiable Assets and Equity (Detail) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Segment Reporting Information [Line Items]
Identifiable Assets	$ 26,356,378		$ 25,344,896
Invested Assets and Cash	19,572,400
Equity attributable to Alleghany	8,685,914	$ 8,236,487	$ 7,692,710	$ 8,404,389	$ 8,373,400	$ 8,514,063
Operating Segments
Segment Reporting Information [Line Items]
Identifiable Assets	25,876,800
Invested Assets and Cash	19,132,600
Equity attributable to Alleghany	9,298,100
Operating Segments | Reinsurance Segment
Segment Reporting Information [Line Items]
Identifiable Assets	16,874,000
Invested Assets and Cash	13,462,700
Equity attributable to Alleghany	5,321,700
Operating Segments | Insurance Segment
Segment Reporting Information [Line Items]
Identifiable Assets	7,122,300
Invested Assets and Cash	5,535,200
Equity attributable to Alleghany	3,096,500
Operating Segments | Reinsurance Segment and Insurance Segment
Segment Reporting Information [Line Items]
Identifiable Assets	23,996,300
Invested Assets and Cash	18,997,900
Equity attributable to Alleghany	8,418,200
Operating Segments | Alleghany Capital Corporation Segment
Segment Reporting Information [Line Items]
Identifiable Assets	1,880,500
Invested Assets and Cash	134,700
Equity attributable to Alleghany	879,900
Corporate activities
Segment Reporting Information [Line Items]
Identifiable Assets	479,600
Invested Assets and Cash	439,800
Equity attributable to Alleghany	$ (612,200)

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Summary of Alleghany Capital Non-Insurance Revenue (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Other Revenues [Line Items]
Noninsurance revenue		$ 603,906	$ 342,725	$ 1,118,029	$ 594,352
Operating Segments
Other Revenues [Line Items]
Noninsurance revenue		600,300	333,700	1,110,700	582,100
Operating Segments | Alleghany Capital Corporation Segment
Other Revenues [Line Items]
Noninsurance revenue	[1]	593,700	329,000	1,098,700	571,700
Operating Segments | Alleghany Capital Corporation Segment | Industrial Segment
Other Revenues [Line Items]
Noninsurance revenue	[2]	318,300	221,900	578,400	367,400
Operating Segments | Alleghany Capital Corporation Segment | Non-industrial Segment
Other Revenues [Line Items]
Noninsurance revenue	[3]	275,100	$ 107,100	520,000	204,200
Operating Segments | Alleghany Capital Corporation Segment | Corporate & Other
Other Revenues [Line Items]
Noninsurance revenue		$ 300		$ 300	$ 100

[1] Excludes certain minor, legacy investments that were previously reflected in Alleghany Capital in 2018 and prior periods, to align with management’s view of reportable segments.

[2] For the three and six months ended June 30, 2019 and 2018, the vast majority of noninsurance revenue was recognized as goods and services transferred to customers over time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

[3] For the three and six months ended June 30, 2019, approximately 77 percent and 72 percent, respectively, of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. For the three and six months ended June 30, 2018, approximately 70 percent of noninsurance revenue was recognized as services transferred to customers over time, with the remainder recognized as goods transferred at a point in time. See Note 1(c) of this Form 10-Q for additional information on Alleghany’s adoption of new revenue recognition accounting guidance effective in the first quarter of 2018.

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Summary of Alleghany Capital Non-Insurance Revenue (Parenthetical) (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating Segments | Alleghany Capital Corporation Segment | Non-Industrial Segment | Transferred over Time [Member]
Other Revenues [Line Items]
Noninsurance revenue percentage	77.00%	70.00%	72.00%	70.00%