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Investments (Tables)
 12 Months Ended
Dec. 31, 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 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

 

 

(1)

Includes $878.4 million and $834.2 million of collateralized loan obligations as of December 31, 2020 and 2019, respectively.

(2)

See Note 1(r) 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 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

 

 

(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 2020, 2019 and 2018:

 

 

 

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

 

 
Summary of Changes in Fair Value of Equity Securities

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

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

($ in millions)

 

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

 

$

(147.4

)

 

$

59.1

 

 

$

(175.6

)

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

 

 

36.9

 

 

 

650.6

 

 

 

(53.4

)

Change in the fair value of equity securities

 

$

(110.5

)

 

$

709.7

 

 

$

(229.0

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

)

 

 

(1)

Gross realized capital gains in 2020 include (i) a $15.0 million realized gain on a partial settlement and remeasurement of fair value of certain outstanding contingent consideration liabilities by Alleghany Capital in connection with its 2018 acquisition of Concord (the “Concord Settlement Gain”); (ii) 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”); and (iii) 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.

(2)

Gross realized capital losses in 2020 include (i) impairment charges of $76.0 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 for further information on this early redemption).

(3)

Gross realized capital losses in 2019 include $38.4 million from a derivative.  Specifically, on July 18, 2019, AIHL purchased an exchange-traded equity derivative index put option (the “Put Option”) for $38.4 million to hedge the downside equity market risk on approximately $1.0 billion of Alleghany’s equity portfolio. The Put Option did not qualify for hedge accounting. The Put Option expired worthless on December 31, 2019, and the resulting $38.4 million decline in value of the Put Option was recorded as a gross realized capital loss. Gross realized capital losses in 2019 also includes a $13.6 million loss from the December 2019 sale of a privately held investment accounted for under the equity method.

(4)

Gross realized capital gains in 2018 include a $45.7 million gain on AIHL’s conversion of its limited partnership interests in certain subsidiaries of Ares Management LLC (“Ares”) into Ares common units in 2018.

(5)

Gross realized capital losses in 2018 include a $35.4 million capital loss due to an impairment charge from the write-down of certain SORC assets arising from a decline in energy prices as of December 31, 2018.
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 2020:

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

 

($ in millions)

 

Allowance for Credit Losses

 

 

 

 

Beginning balance

 

$

—

 

Beginning balance - cumulative effect of an accounting change

 

 

—

 

Provision for credit losses

 

 

8.0

 

Charge-offs

 

 

(5.4

)

Recoveries

 

 

—

 

Balance as of December 31, 2020

 

$

2.6

 
Summary of Rating of Debt securities

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

%

 

(1)

Consists of $158.6 million of securities rated BB / Ba, $191.8 million of securities rated B, $26.0 million of securities rated CCC, $0.5 million of securities rated CC, $4.5 million of securities rated below CC and $52.3 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 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

 

 
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 2020:

 

 

 

Year Ended December 31,

 

 

 

2020

 

 

 

($ in millions)

 

Allowance for Credit Losses

 

 

 

 

Beginning balance

 

$

—

 

Beginning balance - cumulative effect of an accounting change

 

 

0.8

 

Provision for credit losses

 

 

0.6

 

Charge-offs

 

 

—

 

Recoveries

 

 

—

 

Balance as of December 31, 2020

 

$

1.4