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Investments (Tables)
 6 Months Ended
Jun. 30, 2021
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 June 30, 2021 and December 31, 2020:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Allowance for Credit Losses

 

 

Fair Value

 

 

 

($ in millions)

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government obligations

 

$

2,024.3

 

 

$

31.0

 

 

$

(8.4

)

 

$

—

 

 

$

2,046.9

 

Municipal bonds

 

 

2,452.1

 

 

 

150.1

 

 

 

(1.4

)

 

 

—

 

 

 

2,600.8

 

Foreign government obligations

 

 

817.8

 

 

 

20.0

 

 

 

(4.6

)

 

 

—

 

 

 

833.2

 

U.S. corporate bonds

 

 

3,128.5

 

 

 

215.3

 

 

 

(10.8

)

 

 

(0.4

)

 

 

3,332.6

 

Foreign corporate bonds

 

 

1,260.0

 

 

 

35.2

 

 

 

(4.1

)

 

 

—

 

 

 

1,291.1

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

1,906.3

 

 

 

52.1

 

 

 

(10.9

)

 

 

—

 

 

 

1,947.5

 

CMBS

 

 

869.4

 

 

 

41.2

 

 

 

(2.1

)

 

 

—

 

 

 

908.5

 

Other asset-backed securities(1)

 

 

2,872.7

 

 

 

38.4

 

 

 

(6.8

)

 

 

—

 

 

 

2,904.3

 

Total debt securities

 

 

15,331.1

 

 

 

583.3

 

 

 

(49.1

)

 

 

(0.4

)

 

 

15,864.9

 

Short-term investments

 

 

379.0

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

379.0

 

Total investments

 

$

15,710.1

 

 

$

583.3

 

 

$

(49.1

)

 

$

(0.4

)

 

$

16,243.9

 

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Allowance for Credit Losses

 

 

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

 

 

(1)

Includes $1,356.3 million and $878.4 million of collateralized loan obligations as of June 30, 2021 and December 31, 2020, respectively.

 
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 June 30, 2021. 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 June 30, 2021

 

 

 

 

 

 

 

 

Short-term investments due in one year or less

 

$

379.0

 

 

$

379.0

 

Mortgage and asset-backed securities(1)

 

 

5,648.4

 

 

 

5,760.3

 

Debt securities with maturity dates:

 

 

 

 

 

 

 

 

One year or less

 

 

592.7

 

 

 

599.9

 

Over one through five years

 

 

3,774.9

 

 

 

3,888.2

 

Over five through ten years

 

 

2,856.9

 

 

 

2,981.2

 

Over ten years

 

 

2,458.2

 

 

 

2,635.3

 

Total debt securities

 

$

15,331.1

 

 

$

15,864.9

 

 

(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 six months ended June 30, 2021 and 2020:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

($ in millions)

 

Interest income

 

$

99.0

 

 

$

109.2

 

 

$

199.0

 

 

$

228.5

 

Dividend income

 

 

29.9

 

 

 

5.2

 

 

 

46.6

 

 

 

15.2

 

Investment expenses

 

 

(6.9

)

 

 

(7.2

)

 

 

(12.9

)

 

 

(14.4

)

Partnerships and other investment results

 

 

4.9

 

 

 

11.5

 

 

 

47.7

 

 

 

1.4

 

Total

 

$

126.9

 

 

$

118.7

 

 

$

280.4

 

 

$

230.7

 

  

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 six months ended June 30, 2021 and 2020:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

($ in millions)

 

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

 

$

11.1

 

 

$

50.7

 

 

$

7.9

 

 

$

(114.2

)

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

 

 

192.8

 

 

 

191.5

 

 

 

308.7

 

 

 

(166.6

)

Change in the fair value of equity securities

 

$

203.9

 

 

$

242.2

 

 

$

316.6

 

 

$

(280.8

)
Amounts of Gross Realized Capital Gains and Gross Realized Capital Losses of Available For Sale Securities

Realized capital gains and losses for the three and six months ended June 30, 2021 and 2020 primarily reflect the sale of debt securities, except as noted in the following table. The following table presents amounts of gross realized capital gains and gross realized capital losses for the three and six months ended June 30, 2021 and 2020:

 

 

 

Three Months Ended

June 30,

 

 

 

Six Months Ended

June 30,

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

 

 

 

($ in millions)

Gross realized capital gains

 

$

21.3

 

 

 

$

28.5

 

(1)

 

$

42.3

 

 

 

$

87.4

 

(3)

Gross realized capital losses

 

 

(8.4

)

 

 

 

(66.6

)

(2)

 

 

(16.4

)

 

 

 

(112.5

)

(4)

Net realized capital gains

 

$

12.9

 

 

 

$

(38.1

)

 

 

$

25.9

 

 

 

$

(25.1

)

 

 

(1)

Gross realized capital gains in the three months ended June 30, 2020 include a gain of $16.3 million on April 1, 2020 in connection with Alleghany Capital’s acquisition of an additional approximately 55 percent of Wilbert that it did not previously own, and the remeasurement of its pre-existing approximately 45 percent equity ownership to estimated fair value (the “Wilbert Remeasurement Gain”).

(2)

Gross realized capital losses in the three months ended June 30, 2020 include impairment charges of $44.5 million from write-downs of SORC oil field assets prior to SORC’s December 31, 2020 sale.

(3)

Gross realized capital gains in the six months ended June 30, 2020 include (i) the $16.3 million Wilbert Remeasurement Gain; and (ii) a $5.0 million realized gain from a reduction of certain contingent consideration liabilities at the PCT-level in connection with its acquisition of a provider of high-performance solid carbide end mills in June 2019.

(4)

Gross realized capital losses in the six months ended June 30, 2020 include (i) impairment charges of $74.4 million from write-downs of SORC oil field assets prior to SORC’s December 31, 2020 sale; and (ii) a $7.1 million realized loss as a result of an early redemption of debt (see Note 8 to Notes to Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of the 2020 Form 10-K).

 
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 six months ended June 30, 2021 and 2020:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

($ in millions)

 

Allowance for Credit Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

0.6

 

 

$

31.4

 

 

$

2.6

 

 

$

—

 

Beginning balance - cumulative effect of an accounting change

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Provision for credit losses

 

 

(0.2

)

 

 

(17.0

)

 

 

(2.2

)

 

 

14.4

 

Charge-offs

 

 

—

 

 

 

(5.5

)

 

 

—

 

 

 

(5.5

)

Recoveries

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Ending balance

 

$

0.4

 

 

$

8.9

 

 

$

0.4

 

 

$

8.9

 

 
Summary of Rating of Debt securities The following table presents the ratings of Alleghany’s debt securities as of June 30, 2021:

 

 

Ratings as of June 30, 2021

 

 

 

AAA / Aaa

 

 

AA / Aa

 

 

A

 

 

BBB / Baa

 

 

Below

BBB / Baa

or Not

Rated(1)

 

 

Total

 

 

 

($ in millions)

 

U.S. Government obligations

 

$

1.3

 

 

$

2,045.6

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

2,046.9

 

Municipal bonds

 

 

213.1

 

 

 

1,832.2

 

 

 

462.6

 

 

 

84.7

 

 

 

8.2

 

 

 

2,600.8

 

Foreign government obligations

 

 

399.5

 

 

 

346.5

 

 

 

86.0

 

 

 

1.2

 

 

 

—

 

 

 

833.2

 

U.S. corporate bonds

 

 

20.0

 

 

 

141.1

 

 

 

1,323.7

 

 

 

1,480.2

 

 

 

367.6

 

 

 

3,332.6

 

Foreign corporate bonds

 

 

205.4

 

 

 

71.9

 

 

 

574.8

 

 

 

402.5

 

 

 

36.5

 

 

 

1,291.1

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

2.5

 

 

 

1,938.4

 

 

 

—

 

 

 

0.9

 

 

 

5.7

 

 

 

1,947.5

 

CMBS

 

 

313.1

 

 

 

387.9

 

 

 

201.2

 

 

 

6.3

 

 

 

—

 

 

 

908.5

 

Other asset-backed securities

 

 

1,262.1

 

 

 

749.5

 

 

 

415.0

 

 

 

421.3

 

 

 

56.4

 

 

 

2,904.3

 

Total debt securities

 

$

2,417.0

 

 

$

7,513.1

 

 

$

3,063.3

 

 

$

2,397.1

 

 

$

474.4

 

 

$

15,864.9

 

Percentage of debt securities, before allowance for credit losses

 

 

15.2

%

 

 

47.4

%

 

 

19.3

%

 

 

15.1

%

 

 

3.0

%

 

 

100.0

%

 

(1)

Consists of $151.6 million of securities rated BB / Ba, $184.9 million of securities rated B, $30.0 million of securities rated CCC, $0.6 million of securities rated CC, $3.0 million of securities rated below CC and $104.3 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 June 30, 2021 and December 31, 2020:

 

 

 

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 June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government obligations

 

$

1,030.2

 

 

$

8.4

 

 

$

—

 

 

$

—

 

 

$

1,030.2

 

 

$

8.4

 

Municipal bonds

 

 

120.8

 

 

 

1.4

 

 

 

0.1

 

 

 

—

 

 

 

120.9

 

 

 

1.4

 

Foreign government obligations

 

 

258.1

 

 

 

4.4

 

 

 

13.1

 

 

 

0.2

 

 

 

271.2

 

 

 

4.6

 

U.S. corporate bonds

 

 

356.3

 

 

 

10.7

 

 

 

13.3

 

 

 

0.1

 

 

 

369.6

 

 

 

10.8

 

Foreign corporate bonds

 

 

211.0

 

 

 

3.2

 

 

 

22.2

 

 

 

0.9

 

 

 

233.2

 

 

 

4.1

 

Mortgage and asset-backed securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RMBS

 

 

903.0

 

 

 

10.9

 

 

 

0.4

 

 

 

—

 

 

 

903.4

 

 

 

10.9

 

CMBS

 

 

18.4

 

 

 

0.2

 

 

 

43.6

 

 

 

1.9

 

 

 

62.0

 

 

 

2.1

 

Other asset-backed securities

 

 

810.5

 

 

 

1.7

 

 

 

361.4

 

 

 

5.1

 

 

 

1,171.9

 

 

 

6.8

 

Total temporarily impaired securities

 

$

3,708.3

 

 

$

40.9

 

 

$

454.1

 

 

$

8.2

 

 

$

4,162.4

 

 

$

49.1

 

 

 

 

 

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

 
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 six months ended June 30, 2021 and 2020:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

($ in millions)

 

Allowance for Credit Losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

1.6

 

 

$

2.0

 

 

$

1.4

 

 

$

—

 

Beginning balance - cumulative effect of an accounting change

 

 

—

 

 

 

—

 

 

 

—

 

 

 

0.8

 

Provision for credit losses

 

 

(1.0

)

 

 

(0.7

)

 

 

(0.8

)

 

 

0.5

 

Charge-offs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Recoveries

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Ending balance

 

$

0.6

 

 

$

1.3

 

 

$

0.6

 

 

$

1.3