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Investments (Tables)
 9 Months Ended
Sep. 30, 2020
Investments [Abstract]  
Amortized 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 September 30, 2020 and December 31, 2019:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Allowance for Credit Losses(2)

 

 

Fair Value

 

 

 

($ in millions)

 

As of September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

$

1,187.3

 

 

$

52.1

 

 

$

(1.0

)

 

$

—

 

 

$

1,238.4

 

Municipal bonds

 

 

2,412.9

 

 

 

151.7

 

 

 

(3.5

)

 

 

—

 

 

 

2,561.1

 

Foreign government obligations

 

 

767.0

 

 

 

33.5

 

 

 

(0.4

)

 

 

—

 

 

 

800.1

 

U.S. corporate bonds

 

 

3,697.1

 

 

 

275.8

 

 

 

(9.6

)

 

 

(5.3

)

 

 

3,958.0

 

Foreign corporate bonds

 

 

1,260.1

 

 

 

48.0

 

 

 

(2.4

)

 

 

(0.2

)

 

 

1,305.5

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

2,432.8

 

 

 

80.1

 

 

 

(1.0

)

 

 

—

 

 

 

2,511.9

 

CMBS

 

 

855.2

 

 

 

40.2

 

 

 

(12.2

)

 

 

—

 

 

 

883.2

 

Other asset-backed securities(1)

 

 

2,319.5

 

 

 

49.8

 

 

 

(47.6

)

 

 

—

 

 

 

2,321.7

 

Total debt securities

 

 

14,931.9

 

 

 

731.2

 

 

 

(77.7

)

 

 

(5.5

)

 

 

15,579.9

 

Short-term investments

 

 

636.1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

636.1

 

Total investments

 

$

15,568.0

 

 

$

731.2

 

 

$

(77.7

)

 

$

(5.5

)

 

$

16,216.0

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

 

 

($ in millions)

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

$

1,198.5

 

 

$

19.3

 

 

$

(2.8

)

 

$

1,215.0

 

Municipal bonds

 

 

2,190.5

 

 

 

118.7

 

 

 

(1.3

)

 

 

2,307.9

 

Foreign government obligations

 

 

675.9

 

 

 

16.4

 

 

 

(1.6

)

 

 

690.7

 

U.S. corporate bonds

 

 

3,206.2

 

 

 

155.1

 

 

 

(2.3

)

 

 

3,359.0

 

Foreign corporate bonds

 

 

1,348.1

 

 

 

32.2

 

 

 

(2.9

)

 

 

1,377.4

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

1,785.1

 

 

 

56.1

 

 

 

(0.8

)

 

 

1,840.4

 

CMBS

 

 

849.9

 

 

 

23.2

 

 

 

(1.4

)

 

 

871.7

 

Other asset-backed securities(1)

 

 

2,544.5

 

 

 

24.8

 

 

 

(19.7

)

 

 

2,549.6

 

Total debt securities

 

 

13,798.7

 

 

 

445.8

 

 

 

(32.8

)

 

 

14,211.7

 

Short-term investments

 

 

914.8

 

 

 

—

 

 

 

—

 

 

 

914.8

 

Total investments

 

$

14,713.5

 

 

$

445.8

 

 

$

(32.8

)

 

$

15,126.5

 

 

(1)

Includes $760.5 million and $834.2 million of collateralized loan obligations as of September 30, 2020 and December 31, 2019, respectively.

(2)

See Note 1(c) of this Form 10-Q for further information regarding Alleghany’s adoption of new credit loss accounting guidance.

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 September 30, 2020. 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 September 30, 2020

 

 

 

 

 

 

 

 

Short-term investments due in one year or less

 

$

636.1

 

 

$

636.1

 

Mortgage and asset-backed securities(1)

 

 

5,607.5

 

 

 

5,716.8

 

Debt securities with maturity dates:

 

 

 

 

 

 

 

 

One year or less

 

 

488.0

 

 

 

492.5

 

Over one through five years

 

 

3,407.1

 

 

 

3,551.1

 

Over five through ten years

 

 

3,106.9

 

 

 

3,315.7

 

Over ten years

 

 

2,322.4

 

 

 

2,503.8

 

Total debt securities

 

$

14,931.9

 

 

$

15,579.9

 

 

(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 nine months ended September 30, 2020 and 2019:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

($ in millions)

 

Interest income

 

$

109.1

 

 

$

130.1

 

 

$

337.6

 

 

$

376.6

 

Dividend income

 

 

4.9

 

 

 

9.7

 

 

 

20.2

 

 

 

28.9

 

Investment expenses

 

 

(7.6

)

 

 

(7.4

)

 

 

(22.1

)

 

 

(22.1

)

Partnerships and other investment results

 

 

22.9

 

 

 

15.4

 

 

 

24.2

 

 

 

30.2

 

Total

 

$

129.3

 

 

$

147.8

 

 

$

359.9

 

 

$

413.6

 

  
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 nine months ended September 30, 2020 and 2019:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

($ in millions)

 

Change in the fair value of equity securities sold during the period

 

$

3.4

 

 

$

(16.2

)

 

$

(110.8

)

 

$

57.7

 

Change in the fair value of equity securities held at the end of the period

 

 

89.4

 

 

 

(0.5

)

 

 

(77.2

)

 

 

461.6

 

Change in the fair value of equity securities

 

$

92.8

 

 

$

(16.7

)

 

$

(188.0

)

 

$

519.3

 
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 nine months ended September 30, 2020 and 2019:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

($ in millions)

 

Gross realized capital gains

 

$

21.4

 

 

$

12.6

 

 

$

108.8

 

 

$

38.3

 

Gross realized capital (losses)

 

 

(4.6

)

 

 

(8.7

)

 

 

(117.1

)

 

 

(17.5

)

Net realized capital gains

 

$

16.8

 

 

$

3.9

 

 

$

(8.3

)

 

$

20.8

 
Allowance for Credit Losses on Available for Sale Securities

The following table presents a rollforward of Alleghany’s allowance for credit losses on AFS securities for the three and nine months ended September 30, 2020:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2020

 

 

September 30, 2020

 

Allowance for Credit Losses

 

($ in millions)

 

Beginning balance

 

$

8.9

 

 

$

—

 

Beginning balance - cumulative effect of an accounting change(1)

 

 

—

 

 

 

—

 

Provision for credit losses

 

 

(3.4

)

 

 

10.9

 

Charge-offs

 

 

—

 

 

 

(5.4

)

Recoveries

 

 

—

 

 

 

—

 

Balance as of September 30, 2020

 

$

5.5

 

 

$

5.5

 

 

(1)

See Note 1(c) of this Form 10-Q for further information regarding Alleghany’s adoption of new credit loss accounting guidance.

Summary of Rating of Debt securities The following table presents the ratings of Alleghany’s debt securities as of September 30, 2020:

 

 

Ratings as of September 30, 2020

 

 

 

AAA / Aaa

 

 

AA / Aa

 

 

A

 

 

BBB / Baa

 

 

Below

BBB / Baa

or Not

Rated(1)

 

 

Total

 

 

 

($ in millions)

 

U.S. government obligations

 

$

—

 

 

$

1,238.4

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

1,238.4

 

Municipal bonds

 

 

222.4

 

 

 

1,772.2

 

 

 

463.8

 

 

 

95.7

 

 

 

7.0

 

 

 

2,561.1

 

Foreign government obligations

 

 

343.0

 

 

 

359.0

 

 

 

97.0

 

 

 

1.1

 

 

 

—

 

 

 

800.1

 

U.S. corporate bonds

 

 

9.5

 

 

 

284.2

 

 

 

1,715.9

 

 

 

1,580.2

 

 

 

368.2

 

 

 

3,958.0

 

Foreign corporate bonds

 

 

238.5

 

 

 

94.5

 

 

 

612.1

 

 

 

324.8

 

 

 

35.6

 

 

 

1,305.5

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

2.5

 

 

 

2,503.9

 

 

 

—

 

 

 

1.0

 

 

 

4.5

 

 

 

2,511.9

 

CMBS

 

 

280.6

 

 

 

420.8

 

 

 

181.5

 

 

 

0.3

 

 

 

—

 

 

 

883.2

 

Other asset-backed securities

 

 

891.8

 

 

 

582.0

 

 

 

408.7

 

 

 

341.8

 

 

 

97.4

 

 

 

2,321.7

 

Total debt securities

 

$

1,988.3

 

 

$

7,255.0

 

 

$

3,479.0

 

 

$

2,344.9

 

 

$

512.7

 

 

$

15,579.9

 

Percentage of debt securities

 

 

12.8

%

 

 

46.6

%

 

 

22.3

%

 

 

15.0

%

 

 

3.3

%

 

 

100.0

%

 

(1)

Consists of $138.6 million of securities rated BB / Ba, $181.7 million of securities rated B, $22.9 million of securities rated CCC, $0.4 million of securities rated CC, $3.5 million of securities rated below CC and $165.6 million of not rated securities.
Gross Unrealized Losses and Related Fair Values for AFS Securities for which an Allowance for Credit Losses has Not Been Recorded 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 for which an allowance for credit losses has not been recorded, grouped by duration of time in a continuous unrealized loss position, as of September 30, 2020 and December 31, 2019:

 

 

 

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 September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

$

153.3

 

 

$

1.0

 

 

$

—

 

 

$

—

 

 

$

153.3

 

 

$

1.0

 

Municipal bonds

 

 

205.2

 

 

 

3.5

 

 

 

—

 

 

 

—

 

 

 

205.2

 

 

 

3.5

 

Foreign government obligations

 

 

110.7

 

 

 

0.4

 

 

 

0.1

 

 

 

—

 

 

 

110.8

 

 

 

0.4

 

U.S. corporate bonds

 

 

343.3

 

 

 

9.5

 

 

 

4.6

 

 

 

0.1

 

 

 

347.9

 

 

 

9.6

 

Foreign corporate bonds

 

 

131.5

 

 

 

1.4

 

 

 

20.3

 

 

 

1.0

 

 

 

151.8

 

 

 

2.4

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

289.4

 

 

 

1.0

 

 

 

0.4

 

 

 

—

 

 

 

289.8

 

 

 

1.0

 

CMBS

 

 

291.5

 

 

 

12.2

 

 

 

0.3

 

 

 

—

 

 

 

291.8

 

 

 

12.2

 

Other asset-backed securities

 

 

578.9

 

 

 

26.0

 

 

 

532.2

 

 

 

21.6

 

 

 

1,111.1

 

 

 

47.6

 

Total temporarily impaired securities

 

$

2,103.8

 

 

$

55.0

 

 

$

557.9

 

 

$

22.7

 

 

$

2,661.7

 

 

$

77.7

 

 

 

 

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, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations

 

$

120.3

 

 

$

2.0

 

 

$

99.7

 

 

$

0.8

 

 

$

220.0

 

 

$

2.8

 

Municipal bonds

 

 

90.2

 

 

 

1.3

 

 

 

4.3

 

 

 

—

 

 

 

94.5

 

 

 

1.3

 

Foreign government obligations

 

 

198.5

 

 

 

1.2

 

 

 

33.8

 

 

 

0.4

 

 

 

232.3

 

 

 

1.6

 

U.S. corporate bonds

 

 

113.8

 

 

 

1.6

 

 

 

27.6

 

 

 

0.7

 

 

 

141.4

 

 

 

2.3

 

Foreign corporate bonds

 

 

212.0

 

 

 

2.3

 

 

 

66.9

 

 

 

0.6

 

 

 

278.9

 

 

 

2.9

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

48.7

 

 

 

0.3

 

 

 

48.6

 

 

 

0.5

 

 

 

97.3

 

 

 

0.8

 

CMBS

 

 

126.8

 

 

 

1.4

 

 

 

1.2

 

 

 

—

 

 

 

128.0

 

 

 

1.4

 

Other asset-backed securities

 

 

422.9

 

 

 

2.7

 

 

 

715.9

 

 

 

17.0

 

 

 

1,138.8

 

 

 

19.7

 

Total temporarily impaired securities

 

$

1,333.2

 

 

$

12.8

 

 

$

998.0

 

 

$

20.0

 

 

$

2,331.2

 

 

$

32.8

 
Allowance for Credit Losses on Commercial Mortgage Loans

The following table presents a rollforward of Alleghany’s allowance for credit losses on commercial mortgage loans for the three and nine months ended September 30, 2020:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30, 2020

 

 

September 30, 2020

 

Allowance for Credit Losses

 

($ in millions)

 

Beginning balance

 

$

1.3

 

 

$

—

 

Beginning balance - cumulative effect of an accounting change(1)

 

 

—

 

 

 

0.8

 

Provision for credit losses

 

 

0.2

 

 

 

0.7

 

Charge-offs

 

 

—

 

 

 

—

 

Recoveries

 

 

—

 

 

 

—

 

Balance as of September 30, 2020

 

$

1.5

 

 

$

1.5

 

(1)

See Note 1(c) of this Form 10-Q for further information regarding Alleghany’s adoption of new credit loss accounting guidance.