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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2019 and 2018:

	December 31, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
	($ in millions)
Assets
Investments (excluding equity method investments and loans)⁽¹⁾	$	17,632.3	$	17,632.3	$	16,291.3	$	16,291.3

Liabilities
Senior Notes and other debt⁽²⁾	$	1,751.1	$	1,962.7	$	1,669.0	$	1,795.5

(1)

This table includes debt and equity securities, as well as partnership and non-marketable equity investments carried 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 carried 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 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 December 31, 2019 and 2018:

	Level 1		Level 2		Level 3		Total
	($ in millions)
As of December 31, 2019
Equity securities:
Common stock	$	2,498.1	$	3.3	$	—	$	2,501.4
Preferred stock		—		2.1		2.0		4.1
Total equity securities		2,498.1		5.4		2.0		2,505.5
Debt securities:
U.S. Government obligations		—		1,215.0		—		1,215.0
Municipal bonds		—		2,307.9		—		2,307.9
Foreign government obligations		—		690.7		—		690.7
U.S. corporate bonds		—		2,754.0		605.0		3,359.0
Foreign corporate bonds		—		1,208.7		168.7		1,377.4
Mortgage and asset-backed securities:
RMBS⁽¹⁾		—		1,838.5		1.9		1,840.4
CMBS		—		865.9		5.8		871.7
Other asset-backed securities⁽²⁾		—		1,692.9		856.7		2,549.6
Total debt securities		—		12,573.6		1,638.1		14,211.7
Short-term investments		—		914.8		—		914.8
Other invested assets⁽³⁾		—		—		0.3		0.3
Total investments (excluding equity method investments and loans)	$	2,498.1	$	13,493.8	$	1,640.4	$	17,632.3
Senior Notes and other debt	$	—	$	1,595.6	$	367.1	$	1,962.7

	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 $834.2 million and $1,266.9 million of collateralized loan obligations as of December 31, 2019 and 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 during 2019 and 2018 in Level 3 assets measured at fair value:

				Debt Securities
										Mortgage and asset - backed
Year Ended December 31, 2019	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, 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⁾		(1.7	)		(6.5	)		(5.9	)			—		—			(1.1	)		(0.1	)		(15.3	)
Other comprehensive income (loss)		—			39.4			7.5				0.1		—			16.7			(0.3	)		63.4
Purchases		0.3			184.8			42.7				1.8		6.0			82.3			0.1			318.0
Sales		—			—			(5.6	)			—		—			(378.3	)		(0.1	)		(384.0	)
Issuances		—			—			—				—		—			—			—			—
Settlements		—			(37.0	)		(10.0	)			—		—			(116.7	)		—			(163.7	)
Transfers into Level 3		—			1.3			14.7				—		—			5.8			—			21.8
Transfers out of Level 3		(2.0	)		(2.7	)		(1.6	)			—		(0.2	)		(18.9	)		—			(25.4	)
Balance as of December 31, 2019	$	2.0		$	605.0		$	168.7			$	1.9	$	5.8		$	856.7		$	0.3		$	1,640.4

				Debt Securities
										Mortgage and asset-backed
Year Ended December 31, 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⁾		—			(0.9	)		(0.1	)		(0.3	)		—			1.6			1.2			1.5
Other comprehensive income (loss)		(2.7	)		(11.5	)		(2.9	)		(5.3	)		—			(42.3	)		(4.2	)		(68.9	)
Purchases		2.0			182.3			58.9			—			—			846.3			—			1,089.5
Sales		(0.1	)		—			—			—			—			(65.0	)		(5.7	)		(70.8	)
Issuances		—			—			—			—			—			—			—			—
Settlements		—			(4.8	)		(4.0	)		(5.6	)		—			(564.0	)		—			(578.4	)
Transfers into Level 3		4.3			1.9			—			—			—			—			58.8			65.0
Transfers out of Level 3		—			(1.3	)		(0.2	)		(150.6	)		(1.6	)		(11.0	)		(56.9	)		(221.6	)
Balance as of December 31, 2018	$	5.4		$	425.7		$	126.9		$	—		$	—		$	1,266.9		$	0.7		$	1,825.6

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

(2)	There were no OTTI losses recorded in net earnings related to Level 3 instruments still held as of December 31, 2019 and 2018.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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