The following tables present the amortized cost and the fair value of AFS securities as of December 31, 2020 and 2019:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses⁽²⁾			Fair Value
	($ in millions)
As of December 31, 2020
Debt securities:
U.S. Government obligations	$	1,317.6	$	44.0	$	(1.5	)	$	—		$	1,360.1
Municipal bonds		2,489.1		168.3		(0.6	)		—			2,656.8
Foreign government obligations		846.6		33.4		(0.5	)		—			879.5
U.S. corporate bonds		3,262.0		289.7		(3.5	)		(2.5	)		3,545.7
Foreign corporate bonds		1,268.3		55.6		(0.7	)		(0.1	)		1,323.1
Mortgage and asset-backed securities:
RMBS		2,533.6		78.3		(0.5	)		—			2,611.4
CMBS		852.6		45.3		(7.6	)		—			890.3
Other asset-backed securities⁽¹⁾		2,328.7		47.6		(24.7	)		—			2,351.6
Total debt securities		14,898.5		762.2		(39.6	)		(2.6	)		15,618.5
Short-term investments		714.2		—		—			—			714.2
Total investments	$	15,612.7	$	762.2	$	(39.6	)	$	(2.6	)	$	16,332.7

	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

The following table presents the amortized cost and estimated fair value of debt securities by contractual maturity as of December 31, 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 December 31, 2020
Short-term investments due in one year or less	$	714.2	$	714.2
Mortgage and asset-backed securities⁽¹⁾		5,714.9		5,853.3
Debt securities with maturity dates:
One year or less		589.8		594.8
Over one through five years		3,457.8		3,605.7
Over five through ten years		2,826.5		3,042.4
Over ten years		2,309.5		2,522.3
Total debt securities	$	14,898.5	$	15,618.5

	Year Ended December 31,
	2020			2019			2018
	($ in millions)
Interest income	$	443.1		$	499.5		$	420.8
Dividend income		28.0			37.9			78.5
Investment expenses		(28.6	)		(28.9	)		(31.5	)
Partnerships and other investment results		48.4			41.7			32.7
Total	$	490.9		$	550.2		$	500.5

The proceeds from sales of equity securities were $1.7 billion in 2020, $2.3 billion in 2019 and $1.6 billion in 2018.

The following table presents changes in the fair value of equity securities for 2020, 2019 and 2018:

The proceeds from sales of debt securities were $4.0 billion, $3.6 billion and $3.6 billion for 2020, 2019 and 2018, respectively.

Realized capital gains and losses for 2020, 2019 and 2018 primarily reflect the sale of debt securities, except as noted in the following table. The following table presents the amounts of gross realized capital gains and gross realized capital losses for 2020, 2019 and 2018:

	Year Ended December 31,
	2020				2019				2018
	($ in millions)
Gross realized capital gains	$	134.6		⁽¹⁾	$	62.4			$	86.9		⁽⁴⁾
Gross realized capital losses		(131.5	)	⁽²⁾		(68.9	)	⁽³⁾		(90.1	)	⁽⁵⁾
Net realized capital gains	$	3.1			$	(6.5	)		$	(3.2	)

Gross realized loss amounts exclude change in allowance for credit losses on AFS securities, as discussed below.

Alleghany holds its debt securities as AFS and, as such, these securities are recorded at fair value. Credit losses for AFS securities are recorded through an allowance for credit losses. Changes in the allowance for credit losses are recorded for (or as a reversal of) credit losses on AFS securities. Any portion of a decline in fair value related to a debt security that is believed to arise from factors other than credit is recorded as a component of other comprehensive income rather than charged against earnings.

Alleghany continually monitors the difference between amortized cost and the estimated fair value of its debt investments. The analysis of a security’s decline in value is performed in its functional currency. Debt securities in an unrealized loss position are evaluated for credit losses if they meet any of the following criteria: (i) they are trading at a discount of at least 20 percent to amortized cost and have a credit rating below investment grade or are not rated; (ii) there has been a negative credit or news event with respect to the issuer that could indicate the existence of a credit loss; or (iii) Alleghany intends to sell, or it is more likely than not that Alleghany will sell, the debt security before recovery of its amortized cost basis.

If Alleghany intends to sell, or it is more likely than not that Alleghany will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as a credit loss in earnings. To the extent that a debt security that is in an unrealized loss position is not impaired based on the preceding, Alleghany will consider a debt security to be impaired when it believes it to be probable that Alleghany will not be able to collect the entire amortized cost basis. For debt securities in an unrealized loss position as of the end of each quarter, Alleghany develops a best estimate of the present value of expected cash flows. If the results of the cash flow analysis indicate that Alleghany will not recover the full amount of its amortized cost basis in the debt security, Alleghany records a credit loss in earnings equal to the difference between the present value of expected cash flows and the amortized cost basis of the debt security. If applicable, the difference between the total unrealized loss position on the debt security and the total loss recognized in earnings is the non-credit related portion, which is recorded as a component of other comprehensive income.

In developing the cash flow analyses for debt securities, Alleghany considers various factors for the different categories of debt securities. For municipal bonds, Alleghany takes into account the taxing power of the issuer, source of revenue, credit risk and enhancements and pre-refunding. For mortgage and asset-backed securities, Alleghany discounts its best estimate of future cash flows at an effective rate equal to the original effective yield of the security or, in the case of floating rate securities, at the current coupon. Alleghany’s models include assumptions about prepayment speeds, default and delinquency rates, underlying collateral (if any), credit ratings, credit enhancements and other observable market data. For corporate bonds, Alleghany reviews business prospects, credit ratings and available information from asset managers and rating agencies for individual securities.

Change in allowance for credit losses on AFS securities in 2020 reflect $8.0 million of unrealized losses on debt securities, primarily related to the energy sector and lower-quality corporate bonds in other sectors due to a significant decline in

their fair value relative to their amortized costs in the spring of 2020, net of a subsequent reduction of the allowance for credit losses on AFS securities in 2020 arising from the improved bond market conditions and bond sales later in 2020.

Change in allowance for credit losses on AFS securities in 2019 reflects $19.7 million of unrealized losses on debt securities, primarily related to the deterioration of creditworthiness of the issuers in the domestic energy sector and certain foreign bonds due to a significant decline in fair value.

Change in allowance for credit losses on AFS securities in 2018 reflects $1.3 million of unrealized losses on debt securities, primarily in the energy and industrial sectors, related to the deterioration of creditworthiness of the issuers.

The following table presents a rollforward of Alleghany’s allowance for credit losses on AFS securities for 2020:

The gross unrealized investment losses for debt securities as of December 31, 2020 were deemed to be temporary, based on, among other factors: (i) the relative magnitude to which the fair value of these investments had been below cost were not indicative of a credit loss; (ii) the absence of compelling evidence that would cause Alleghany to call into question the financial condition or near-term business prospects of the issuer of the security; and (iii) Alleghany’s ability and intent to hold the security for a period of time sufficient to allow for any anticipated recovery.

Alleghany’s methodology for assessing credit losses contains inherent risks and uncertainties which could include, but are not limited to, incorrect assumptions about financial condition, liquidity or future prospects, inadequacy of any underlying collateral and unfavorable changes in economic conditions or social trends, interest rates or credit ratings.

Alleghany’s consolidated investment portfolio consists mainly of highly rated and liquid debt and equity securities listed on national securities exchanges. The overall credit quality of the debt securities portfolio is measured using the lowest rating of three large, reputable rating agencies. In this regard, the overall weighted-average credit quality rating of Alleghany’s debt securities portfolio as of December 31, 2020 and 2019, was AA-. Although a portion of Alleghany’s debt securities, which consist predominantly of municipal bonds, is insured by third-party financial guaranty insurance companies, the impact of such insurance was not significant to the debt securities’ credit quality rating as of December 31, 2020.

The following table presents the ratings of Alleghany’s debt securities as of December 31, 2020:

	Ratings as of December 31, 2020
	AAA / Aaa			AA / Aa			A			BBB / Baa			Below BBB / Baa or Not Rated⁽¹⁾			Total
	($ in millions)
U.S. Government obligations	$	5.9		$	1,354.2		$	—		$	—		$	—		$	1,360.1
Municipal bonds		225.9			1,869.6			467.5			86.4			7.4			2,656.8
Foreign government obligations		385.8			405.0			87.5			1.2			—			879.5
U.S. corporate bonds		8.7			137.3			1,473.1			1,553.8			372.8			3,545.7
Foreign corporate bonds		235.3			103.2			571.5			382.3			30.8			1,323.1
Mortgage and asset-backed securities:
RMBS		2.5			2,602.3			—			1.0			5.6			2,611.4
CMBS		279.4			408.4			200.0			2.5			—			890.3
Other asset-backed securities		924.0			647.6			376.3			386.6			17.1			2,351.6
Total debt securities	$	2,067.5		$	7,527.6		$	3,175.9		$	2,413.8		$	433.7		$	15,618.5
Percentage of debt securities		13.2	%		48.2	%		20.3	%		15.5	%		2.8	%		100.0	%

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 December 31, 2020 and 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 December 31, 2020
Debt securities:
U.S. Government obligations	$	255.9	$	1.5	$	—	$	—	$	255.9	$	1.5
Municipal bonds		36.2		0.6		—		—		36.2		0.6
Foreign government obligations		132.8		0.5		—		—		132.8		0.5
U.S. corporate bonds		168.5		3.5		2.4		—		170.9		3.5
Foreign corporate bonds		36.4		0.2		19.5		0.5		55.9		0.7
Mortgage and asset-backed securities:
RMBS		152.6		0.5		0.4		—		153.0		0.5
CMBS		133.5		7.6		3.8		—		137.3		7.6
Other asset-backed securities		547.9		13.4		533.9		11.3		1,081.8		24.7
Total temporarily impaired securities	$	1,463.8	$	27.8	$	560.0	$	11.8	$	2,023.8	$	39.6

	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

As of December 31, 2020, Alleghany held a total of 506 debt securities that were in an unrealized loss position, of which 115 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these debt securities consisted of losses related primarily to other asset-backed securities, U.S. corporate bonds and CMBS.

Investments with fair values of approximately $2.4 billion as of December 31, 2020, the substantial majority of which were debt securities and equity securities, were deposited with governmental authorities as required by law.

In December 2012, TransRe obtained an ownership interest in Pillar Capital Holdings Limited (“Pillar Holdings”), a Bermuda- based insurance asset manager focused on collateralized reinsurance and catastrophe insurance-linked securities. Additionally, TransRe and, to a lesser extent, AIHL invested in limited partnership funds managed by Pillar Holdings (the “Funds”). The objective of the Funds is to create portfolios with attractive risk-reward characteristics and low correlation with other asset classes, using the extensive reinsurance and capital market experience of the principals of Pillar Holdings. Alleghany has concluded that both Pillar Holdings and the Funds (collectively, the “Pillar Investments”) represent variable interest entities and that Alleghany is not the primary beneficiary, as it does not have the ability to direct the activities that most significantly impact each entity’s economic performance. Therefore, the Pillar Investments are not consolidated and are accounted for under the equity method of accounting. Alleghany’s potential maximum loss in the Pillar Investments is limited to its cumulative net investment. As of December 31, 2020 and 2019, Alleghany’s carrying value in the Pillar Investments, as determined under the equity method of accounting, was $173.3 million and $205.5 million, respectively, which is reported as a component of other invested assets and is net of returns of capital received from the Pillar Investments.

As of December 31, 2020 and 2019, the carrying value of Alleghany’s commercial mortgage loan portfolio was $670.2 million and $686.2 million, respectively, representing the unpaid principal balance on the loans, less allowance for credit losses. The estimated fair value of the commercial mortgage loan portfolio approximated carrying value of as December 31, 2020 and 2019. The commercial mortgage loan portfolio consists primarily of first mortgages on commercial properties in major metropolitan areas in the U.S. The loans earn interest at fixed- and floating-rates, and mature in two to ten years from loan origination. As of December 31, 2020, the vast majority of loans in Alleghany’s portfolio were originated in the 2016 through 2019 years.

The principal amounts of the loans were no more than approximately two-thirds of the property’s appraised value at the time the loans were made and the estimated fair value of underlying collateral was approximately double that of the commercial mortgage loan portfolio carrying value as of December 31, 2020. Fair value estimates of underlying collateral are updated on a rolling basis at least annually, with a portion of the portfolio updated each quarter. As of December 31, 2020, there was no loan in default or in arrears.

The following table presents a rollforward of Alleghany’s allowance for credit losses on commercial mortgage loans for 2020: