Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

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.

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.