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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.