Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

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 September 30, 2019 and December 31, 2018:

	September 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)(1)	$	17,582.0	$	17,582.0	$	16,291.3	$	16,291.3
Liabilities
Senior Notes and other debt(2)	$	1,695.3	$	1,908.9	$	1,669.0	$	1,795.5

(1) This table includes debt and equity securities, as well as partnership and non-marketable equity investments and derivatives 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 September 30, 2019 and December 31, 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of September 30, 2019
Equity securities:
Common stock	$	2,084.9	$	3.3	$	-	$	2,088.2
Preferred stock		-		-		4.1		4.1
Total equity securities		2,084.9		3.3		4.1		2,092.3
Debt securities:
U.S. Government obligations		-		1,288.2		-		1,288.2
Municipal bonds		-		2,348.7		-		2,348.7
Foreign government obligations		-		756.9		-		756.9
U.S. corporate bonds		-		2,754.7		571.3		3,326.0
Foreign corporate bonds		-		1,298.0		156.1		1,454.1
Mortgage and asset-backed securities:
Residential mortgage-backed securities (“RMBS”)(1)		-		1,934.0		1.7		1,935.7
Commercial mortgage-backed securities (“CMBS”)		-		821.5		-		821.5
Other asset-backed securities(2)		-		1,691.3		865.9		2,557.2
Total debt securities		-		12,893.3		1,595.0		14,488.3
Short-term investments		-		968.5		-		968.5
Other invested assets(3)		32.6		-		0.3		32.9
Total investments (excluding equity method investments    and loans)	$	2,117.5	$	13,865.1	$	1,599.4	$	17,582.0
Senior Notes and other debt	$	-	$	1,597.6	$	311.3	$	1,908.9

	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 $842.1 million and $1,266.9 million of collateralized loan obligations as of September 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. Also, as further described in Note 3(d), other invested assets as of September 30, 2019 includes the fair value of an exchange-traded equity derivative index put option (the “Put Option”), which is classified as Level 1.

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 nine months ended September 30, 2019 and 2018 measured at fair value:

				Debt Securities
										Mortgage and asset-backed
Nine Months Ended September 30, 2019	Preferred Stock			U.S. Corporate Bonds			Foreign Corporate Bonds			RMBS		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	)		(9.9	)		(0.2	)		-		(1.1	)		(0.1	)		(12.9	)
Other comprehensive income (loss)		-			40.0			3.5			-		16.7			(0.4	)		59.8
Purchases		0.3			123.2			27.3			1.7		68.3			0.1			220.9
Sales		-			-			(5.6	)		-		(378.8	)		-			(384.4	)
Issuances		-			-			-			-		-			-			-
Settlements		-			(6.3	)		(8.9	)		-		(99.8	)		-			(115.0	)
Transfers into Level 3		-			1.3			14.7			-		5.8			-			21.8
Transfers out of Level 3		-			(2.7	)		(1.6	)		-		(12.1	)		-			(16.4	)
Balance as of September 30, 2019	$	4.1		$	571.3		$	156.1		$	1.7	$	865.9		$	0.3		$	1,599.4

				Debt Securities
										Mortgage and asset-backed
Nine Months Ended September 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	)		-			1.5			1.2			2.3
Other comprehensive income (loss)		0.2			(7.4	)		(2.5	)		(5.3	)		-			(10.3	)		(4.0	)		(29.3	)
Purchases		2.0			153.7			38.9			-			-			705.3			-			899.9
Sales		(0.1	)		-			-			-			-			(56.7	)		(5.6	)		(62.4	)
Issuances		-			-			-			-			-			-			-			-
Settlements		-			(3.2	)		(2.9	)		(5.6	)		-			(361.2	)		-			(372.9	)
Transfers into Level 3		4.4			1.2			-			-			-			-			58.7			64.3
Transfers out of Level 3		-			(1.3	)		(0.2	)		(150.6	)		(1.6	)		-			(56.9	)		(210.6	)
Balance as of September 30, 2018	$	8.4		$	403.0		$	108.4		$	-		$	-		$	1,379.9		$	0.9		$	1,900.6

(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 September 30, 2019 and 2018.