FORM 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qa+VPTUrfDi32/zj1yno/QLgNQuULSkQKgPYjf0Hz7Pe6eFUUVBgCl+SjaWgdiC1 DDBKcJ9gr+k6JNlWbUhjTw== 0000950123-07-006894.txt : 20070507 0000950123-07-006894.hdr.sgml : 20070507 20070507161033 ACCESSION NUMBER: 0000950123-07-006894 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070507 DATE AS OF CHANGE: 20070507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLEGHANY CORP /DE CENTRAL INDEX KEY: 0000775368 STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331] IRS NUMBER: 510283071 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09371 FILM NUMBER: 07824126 BUSINESS ADDRESS: STREET 1: 375 PARK AVENUE STREET 2: SUITE 3201 CITY: NEW YORK STATE: NY ZIP: 10152 BUSINESS PHONE: 2127521356 MAIL ADDRESS: STREET 1: 375 PARK AVENUE STREET 2: SUITE 3201 CITY: NEW YORK STATE: NY ZIP: 10152 FORMER COMPANY: FORMER CONFORMED NAME: ALLEGHANY FINANCIAL CORP DATE OF NAME CHANGE: 19870115 10-Q 1 y34550e10vq.htm FORM 10-Q FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR QUARTERLY PERIOD ENDED MARCH 31, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD ENDING

COMMISSION FILE NUMBER 1-9371

ALLEGHANY CORPORATION

EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER

DELAWARE
STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION

51-0283071
INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER

7 TIMES SQUARE TOWER, 17TH FLOOR, NY, NY 10036
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE

212-752-1356
REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE

NOT APPLICABLE
FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST REPORT

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.

YES þ NOo

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELRATED FILER, AN ACCELERATED FILER OR A NON-ACCELERATED FILER. SEE DEFINITION OF ACCELERATED FILER AND LARGE ACCELERATED FILER IN RULE 12b-2 OF THE EXCHANGE ACT.

(CHECK ONE):

LARGE ACCELERATED FILER þ ACCELERATED FILER o NON-ACCELERATED FILER o

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT). 12b-2 OF THE EXCHANGE ACT).

YES o NO þ

INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.

8,148,689 SHARES AS OF APRIL 27, 2007

TABLE OF CONTENTS


PART 1. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 1A. RISK FACTORS
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
	ITEM 6. EXHIBITS
SIGNATURES
EX-10.1: RETIREMENT PLAN
EX-10.2: OFFICERS AND DIRECTORS DEFERRED COMPENSATION PLAN
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 2007 AND 2006
(dollars in thousands, except share and per share amounts)
(unaudited)


	2007			2006

Revenues
Net premiums earned	$	271,571		$	230,582
Net investment income		45,169			29,313
Realized capital gains		50,141			6,983
Other income		8,725			1,937

Total revenues		375,606			268,815


Costs and expenses
Loss and loss adjustment expenses		122,604			122,530
Commissions, brokerage and other underwriting expenses		71,278			57,385
Other operating expenses		13,166			10,829
Corporate administration		8,004			8,423
Interest expense		723			1,101

Total costs and expenses		215,775			200,268


Earnings before income taxes and minority interest		159,831			68,547

Income taxes		51,056			9,341


Earnings before minority interest		108,775			59,206

Minority interest, net of tax		2,357			0


Net earnings	$	106,418		$	59,206


Changes in other comprehensive income
Change in unrealized gains, net of deferred taxes	$	27,273		$	42,558
Less: reclassification for gains realized in net earnings, net of taxes		(32,592	)		(4,539	)
Other		13			444

Comprehensive income	$	101,112		$	97,669


Net earnings	$	106,418		$	59,206
Preferred dividends		4,306			0

Net earnings available to common stockholders	$	102,112		$	59,206


Basic earnings per share of common stock *	$	12.57		$	7.23

Diluted earnings per share of common stock *	$	11.90		$	7.21

Dividends per share of common stock		*			*

Average number of outstanding shares of common stock **		8,126,281			8,193,541


*		Adjusted to reflect the common stock dividend declared in February 2007.

**		In February 2007 and 2006, Alleghany declared a stock dividend consisting of one share of Alleghany common stock for every fifty shares outstanding.

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)


	March 31,
	2007		December 31,
	(unaudited)		2006

Assets
Investments
Available for sale securities at fair value:
Equity securities (cost: 2007 $480,839; 2006 $436,203)	$	903,629	$	872,900
Debt securities (cost: 2007 $2,820,772; 2006 $2,628,971)		2,819,257		2,622,307
Short-term investments		426,204		438,567

		4,149,090		3,933,774
Other invested assets		164,862		123,651

Total investments		4,313,952		4,057,425


Cash		33,260		68,332
Notes receivable		0		91,536
Premium balances receivable		210,302		222,958
Reinsurance recoverables		1,008,767		1,067,926
Ceded unearned premium reserves		306,132		324,988
Deferred acquisition costs		81,702		80,018
Property and equipment at cost, net of accumulated depreciation and amortization		18,038		18,404
Goodwill and other intangibles, net of amortization		157,972		159,772
Other assets		80,930		87,381


	$	6,211,055	$	6,178,740


Liabilities and Stockholders’ Equity
Losses and loss adjustment expenses	$	2,308,082	$	2,304,644
Unearned premiums		851,979		886,539
Reinsurance payable		99,853		114,454
Net deferred tax liabilities		32,899		62,937
Subsidiaries’ debt		0		80,000
Current taxes payable		104,904		29,499
Minority interest		80,232		77,875
Other liabilities		221,321		199,546

Total liabilities		3,699,270		3,755,494


Preferred stock (shares authorized: 2007 and 2006 - 1,132,000; issued and outstanding 2007 - 1,131,880; 2006 - 1,132,000)		299,495		299,527

Common stock (shares authorized: 2007 and 2006 - 22,000,000; issued and outstanding 2007 - 8,145,532; 2006 - 8,118,479)		7,986		7,959
Contributed capital		618,953		627,215
Accumulated other comprehensive income		270,564		275,871
Retained earnings		1,314,787		1,212,674

Total stockholders’ equity		2,511,785		2,423,246

	$	6,211,055	$	6,178,740


Shares of Common Stock Outstanding *		8,145,532		8,118,479


*		Adjusted to reflect the common stock dividend declared in February 2007.

See accompanying Notes to Unaudited Consolidated Financial Statements.

ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2007 AND 2006
(dollars in thousands)
(unaudited)


	2007			2006

Cash flows from operating activities
Net earnings	$	106,418		$	59,206
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		2,269			2,329
Net realized capital (gains) losses		(50,141	)		(6,983	)
(Increase) decrease in other assets		495			(4,926	)
(Increase) decrease in reinsurance receivable, net of reinsurance payable		44,558			79,740
(Increase) decrease in premium balances receivable		12,656			16,101
(Increase) decrease in ceded unearned premium reserves		18,856			16,191
(Increase) decrease in deferred acquisition costs		(1,684	)		(4,383	)
Increase (decrease) in other liabilities and current taxes		39,957			33,012
Increase (decrease) in unearned premiums		(34,560	)		(5,110	)
Increase (decrease) in losses and loss adjustment expenses		3,438			(99,116	)

Net adjustments		35,844			26,855

Net cash provided by operating activities		142,262			86,061

Cash flows from investing activities
Purchase of investments		(319,724	)		(462,117	)
Sales of investments		76,091			165,738
Maturities of investments		55,664			122,503
Purchases of property and equipment		(1,005	)		(781	)
Net change in short-term investments		15,594			113,190
Acquisition of insurance companies, net of cash acquired		0			(215	)
Other, net		(14,467	)		(3,742	)

Net cash (used in) provided by investing activities		(187,847	)		(65,424	)

Cash flows from financing activities
Treasury stock acquisitions		0			(39,186	)
Principal payments on long-term debt		(80,000	)		0
Decrease in notes receivable		91,535			0
Convertible preferred stock dividends paid		(4,306	)		0
Tax benefit on stock options exercised		1,062			163
Other, net		2,222			401

Net cash provided by (used in) financing activities		10,513			(38,622	)

Net (decrease) increase in cash		(35,072	)		(17,985	)
Cash at beginning of period		68,332			47,457

Cash at end of period	$	33,260		$	29,472


Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	506		$	890
Income taxes paid (refunds received)	$	1,390			($40,659	)

See accompanying Notes to Unaudited Consolidated Financial Statements.

Notes to Unaudited Consolidated Financial Statements
Alleghany Corporation and Subsidiaries

1. Principles of Financial Statement Presentation

This report should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2006 (the “2006 10-K”) of Alleghany Corporation (“Alleghany”).

The information in this report is unaudited, but reflects all adjustments which, in the opinion of management, are necessary to a fair statement of results of the interim periods covered thereby. All adjustments are of a normal and recurring nature except as described herein.

The accompanying consolidated financial statements include the results of Alleghany and its wholly-owned and majority-owned subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant inter-company balances and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those reported results to the extent that those estimates and assumptions prove to be inaccurate.

Certain prior year amounts have been reclassified to conform to the 2007 presentation.

2. Earnings Per Share of Common Stock

The following is a reconciliation of the income and share data used in the basic and diluted earnings per share computations for the three months ended March 31, 2007 and 2006 (in thousands, except share amounts):


	2007		2006

Net earnings	$	106,418	$	59,206
Preferred dividends		4,306		—

Income available to common stockholders for basic earnings per share		102,112		59,206
Preferred dividends		4,306		—
Effect of other dilutive securities		68		49

Income available to common stockholders for diluted earnings per share	$	106,486	$	59,255

Weighted average shares outstanding applicable to basic earnings per share		8,126,281		8,193,541
Preferred stock		784,124		—
Effect of other dilutive securities		39,666		28,485

Adjusted weighted average shares outstanding applicable to diluted earnings per share		8,950,071		8,222,026

Contingently issuable shares of 58,098 and 89,242 were potentially available during 2007 and 2006, respectively, but were not included in the computations of diluted earnings per share because the impact was anti-dilutive to the earnings per share calculation.

Earnings per share by quarter may not equal the amount for the full year due to rounding.

3. Commitments and Contingencies

(a) Leases

Alleghany leases certain facilities, furniture and equipment under long-term lease agreements.

(b) Litigation

Alleghany’s subsidiaries are parties to pending litigation and claims in connection with the ordinary course of their businesses. Each such subsidiary makes provisions for estimated losses to be incurred in such litigation and claims, including legal costs. In the opinion of management such provisions are adequate.

(c) Asbestos and Environmental Exposure

The reserves for unpaid losses and loss adjustment expenses of Alleghany Insurance Holdings LLC (“AIHL”) include $23.6 million and $23.5 million of gross and net reserves at March 31, 2007, respectively, and $23.8 and $23.7 million of gross and net reserves at December 31, 2006, respectively, for various liability coverages related to asbestos and environmental impairment claims that arose from reinsurance assumed by a subsidiary of Capitol Transamerica Corporation (“CATA”) between 1969 and 1976. This subsidiary exited this business in 1976. Although Alleghany is unable at this time to determine whether additional reserves, which could have a material impact upon its results of operations, may be necessary in the future, Alleghany believes that CATA’s asbestos and environmental reserves are adequate at March 31, 2007. Additional information concerning CATA’s asbestos and environmental exposure can be found in Note 13 to the Consolidated Financial Statements contained in the 2006 10-K.

(d) Indemnification Obligations

On July 14, 2005, Alleghany completed the sale of its world-wide industrial minerals business, World Minerals, Inc. (“World Minerals”), to Imerys USA, Inc. (the “Purchaser”), a wholly-owned subsidiary of Imerys, S.A., pursuant to a Stock Purchase Agreement, dated as of May 19, 2005, by and among the Purchaser, Imerys, S.A. and Alleghany (the “Stock Purchase Agreement”). Pursuant to the Stock Purchase Agreement, Alleghany undertook certain indemnification obligations, including a general indemnification for breaches of representations and warranties set forth in the Stock Purchase Agreement (the “Contract Indemnification”) and a special indemnification (the “Products Liability Indemnification”) related to products liability claims arising from events that occurred during pre-closing periods, including the period of Alleghany ownership (the “Alleghany Period”).

The representations and warranties to which the Contract Indemnification applies survive for a two-year period (with the exception of certain representations and warranties such as those related to environmental, real estate and tax matters, which survive for periods longer than two years) and generally, except for tax and certain other matters, apply only to aggregate losses in excess of $2.5 million, up to a maximum of approximately $123.0 million. The Stock Purchase Agreement provides that Alleghany has no responsibility for products liability claims arising in respect of events occurring after the closing, and that any products liability claims involving both pre-closing and post-closing periods will be apportioned on an equitable basis. Additional information concerning the Contract Indemnification and Products Liability Indemnification can be found in Note 13 to the Consolidated Financial Statements contained in the 2006 10-K.

Based on Alleghany’s experience to date and other analyses, Alleghany established a $600,000 reserve in connection with the Products Liability Indemnification for the Alleghany Period. The reserve was $499,000 at March 31, 2007.

(e) Equity Holdings Concentration

At March 31, 2007, Alleghany had a concentration of market risk in its available-for-sale equity securities portfolio of common stock of Burlington Northern Santa Fe Corporation (“Burlington Northern”), a railroad holding company, amounting to $402.2 million. During the first quarter of 2007, Alleghany sold approximately 809 thousand shares of Burlington Northern common stock for approximately $65.7 million of proceeds, resulting in an after-tax gain of approximately $36.3 million in the 2007 first quarter.

At March 31, 2007, Alleghany also had a concentration of market risk in its available-for-sale equity securities portfolio with respect to the common stock of certain energy sector companies amounting to $281.5 million.

4. Segment of Business

Information related to Alleghany’s reportable segment is shown in the table below. Property and casualty insurance and surety operations are conducted by AIHL through its insurance operating units RSUI Group, Inc. (“RSUI”), CATA, and Darwin Professional Underwriters, Inc. (“Darwin”). In addition, AIHL Re LLC (“AIHL Re”), established in June 2006, is a wholly-owned subsidiary of AIHL that is available to provide reinsurance to Alleghany group operating units and affiliates. Alleghany’s reportable segment is reported in a manner consistent with the way management evaluates the businesses. As such, insurance underwriting activities are evaluated separately from investment activities. Net realized capital gains are not considered relevant in evaluating investment performance on an annual basis. Segment accounting policies are the same as those described in Note 1 to the Consolidated Financial Statements in the 2006 10-K.

The primary components of “corporate activities” are Alleghany Properties Holdings LLC (“Alleghany Properties”), AIHL’s investment in Homesite Group Incorporated (“Homesite”), corporate investment, and other activities at the parent level, including strategic equity investments which are available to support the internal growth of subsidiaries and for acquisitions of, and substantial investments in, operating companies.



	For the three months
	ended March 31,
(in millions)	2007			2006

*Revenues:*
AIHL insurance group:
Net premiums earned
RSUI	$	166.6		$	162.1
CATA		47.3			41.2
Darwin		40.0			27.3
AIHL Re		17.7			—

		271.6			230.6

Net investment income		40.0			24.9
Net realized capital (losses) gains		(5.8	)		4.6
Other income		0.1			0.8

Total insurance group		305.9			260.9

Corporate activities:
Net investment income (1)		5.2			4.4
Net realized capital gains		55.9	(2)		2.4
Other income		8.6			1.1

Total	$	375.6		$	268.8

*Earnings before income taxes and minority interest:*
AIHL insurance group:
Underwriting profit (3)
RSUI	$	50.3		$	46.6
CATA		7.0			3.3
Darwin		2.8			0.8
AIHL Re		17.6			—

		77.7			50.7

Net investment income		40.0			24.9
Net realized capital (losses) gains		(5.8	)		4.6
Other income, less other expenses		(12.0	)		(9.4	)

Total insurance group		99.9			70.8

Corporate activities:
Net investment income (1)		5.2			4.4
Net realized capital gains		55.9	(2)		2.4
Other income		8.6			1.1
Corporate administration and other expenses		9.1			9.1
Interest expense		0.7			1.1

Total	$	159.8		$	68.5



(1)		Includes $2.9 million of Alleghany’s equity in earnings of Homesite, net of purchase accounting adjustments (See Note 16 to the Consolidated Financial Statements in the 2006 10-K).

(2)		Reflects net realized capital gains from the sale of approximately 809,000 shares of Burlington Northern common stock in the 2007 first quarter.

(3)		Represents net premiums earned less loss and loss adjustment expenses and underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income and other income or net realized capital gains. Underwriting expenses represent commission and brokerage expenses and that portion of salaries, administration and other operating expenses directly attributable to underwriting activities, whereas the remainder constitutes “other expenses.”

5. Income Taxes

Net earnings for the first three months of 2006 include a tax benefit of $10.8 million resulting from the release in the first quarter of 2006 of a valuation allowance Alleghany held with respect

to a portion of its deferred tax assets relating to unused foreign tax credits. The unused foreign tax credits arose from Alleghany’s ownership of World Minerals prior to its sale in July 2005. Primarily as a result of the release, Alleghany’s effective tax rate on earnings before taxes and minority interest was 13.6 percent for the 2006 first quarter, compared with 31.9 percent for the 2007 first quarter.

Alleghany’s 2003 and forward income tax returns remain open to examination.

6. Reinsurance

As discussed in the 2006 10-K, RSUI reinsures its property lines of business through a program consisting of surplus share treaties, facultative placements, per risk and catastrophe excess of loss treaties. RSUI’s catastrophe reinsurance program (which covers catastrophe risks including, among others, windstorms and earthquakes) and per risk reinsurance program run on an annual basis from May 1 to the following April 30 and thus expired on April 30, 2007. RSUI has placed substantially all of its catastrophe reinsurance program for the 2007-2008 period. Under the new program, RSUI’s catastrophe reinsurance program covers $400.0 million of losses, before co-participation by RSUI, in excess of a $100.0 million net retention after application of the surplus share treaties, facultative reinsurance and per risk covers, compared with coverage for $675.0 million of losses, before co-participation by RSUI, in excess of a $75.0 million net retention under the expired program. In addition, RSUI’s property per risk reinsurance program for the 2007-2008 period provides RSUI with reinsurance for $90.0 million of losses in excess of $10.0 million net retention per risk after application of the surplus share treaties and facultative reinsurance, which is substantially similar to the expired program.

As discussed in the 2006 10-K, RSUI reinsures its other lines of business through quota share treaties. RSUI’s Professional Liability quota share reinsurance treaty, which expired on April 1, 2007, provided reinsurance for policies with limits up to $10.0 million, with RSUI ceding 25 percent of the premiums and losses for policies with limits up to $1.0 million, and 50 percent of the premiums and losses on policies with limits greater than $1.0 million up to $10.0 million. This treaty was not renewed by RSUI, as management decided to retain all of this business.

AIHL Re was formed in June 2006 as a captive reinsurance subsidiary of AIHL to provide catastrophe reinsurance coverage for RSUI. AIHL Re and RSUI entered into a reinsurance agreement, effective July 1, 2006, whereby AIHL Re, in exchange for market-based premiums, took that portion of RSUI’s catastrophe reinsurance program not covered by third party reinsurers. This reinsurance coverage expired on April 30, 2007, and AIHL Re is not participating in RSUI’s catastrophe reinsurance program for the 2007-2008 period. AIHL Re and Homesite entered into a reinsurance agreement, effective April 1, 2007, whereby AIHL Re, in exchange for an annual premium that is estimated will not be in excess of $2.0 million, provides $20.0 million of excess-of-loss reinsurance coverage to Homesite under its catastrophe reinsurance program . Homesite’s catastrophe exposure is concentrated in the Northeast region of the United States.

participation by Darwin, in excess of $5.0 million of losses for non-publicly traded directors and officers (“D&O”) liability (other than Side-A only liability) and primary insurance agents errors and omissions (“E&O”) liability and for $5.0 million of losses for other non-medical lines, before a 15 percent co-participation by Darwin, in excess of $5.0 million of losses. The third layer provides coverage for $5.0 million of losses for Darwin’s Side-A only D&O liability, before a 10 percent co-participation by Darwin, in excess of $15.0 million of losses, and for $10.0 million of losses for Managed Care E&O liability, before a 10 percent co-participation by Darwin, in excess of $10.0 million of losses. As with its medical reinsurance program, premiums no longer vary depending on profitability as under the expired program, but ceding commissions may vary.

7. Debt and Notes Receivable

As of December 31, 2006, Alleghany Funding Corporation (“Alleghany Funding”) had outstanding notes payable of $80.0 million, which were secured by a $91.5 million installment note receivable. At the time of the debt issuance, Alleghany Funding also entered into a related interest rate swap agreement with a notional amount of $86.2 million for the purpose of matching interest expense with interest income. This swap was pay variable, receive variable, whereby Alleghany Funding paid a variable rate equal to the one-month commercial paper rate plus 0.0625 percent and received a variable rate equal to the three-month LIBOR rate plus 0.375 percent.

The notes payable, installment note receivable and swap matured on January 22, 2007, without gain or loss.

8. Recent Accounting Pronouncements

In March 2006, FASB Statement No. 155, “Accounting for Certain Hybrid Instruments, an amendment to FASB Statement No. 133 and 140” was issued. This Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, and establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. Alleghany has adopted the provisions of this Statement as of January 1, 2007, and the implementation did not have any material impact on its results of operations and financial condition.

In July 2006, FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” was issued. This Interpretation clarifies the accounting for income taxes recognized in an entity’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. Alleghany has adopted the provisions of this Interpretation as of January 1, 2007. The implementation did not have any impact on Alleghany’s results of operations and financial condition, and Alleghany did not have any unrecognized tax benefits as of January 1, 2007 or March 31, 2007.

and liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. Alleghany has adopted the provisions of SAB 108 as of January 1, 2007, and the implementation did not have any material impact on its results of operations and financial condition.

In September 2006, FASB Statement No. 157, “Fair Value Measurements,” was issued. This Statement provides guidance for using fair value to measure assets and liabilities. The Statement does not expand the use of fair value in any new circumstances. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Alleghany does not believe that this Statement will have a material impact on its results of operations and financial condition.

At the September 2006 meeting, the Emerging Issues Task Force reached a consensus with respect to Issue No. 06-4, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” The Issue addresses split-dollar life insurance, which is defined as an arrangement in which the employer and an employee share the cash surrender value and/or death benefits of the insurance policy. Additional information regarding this Issue can be found in Note 1.p. to the Consolidated Financial Statements contained in the 2006 10-K. Alleghany will adopt this Issue in the first quarter of 2008, and does not anticipate that it will have any material impact on its results of operations and financial condition.

In February 2007, FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115,” was issued. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value, at specified election dates, with unrealized gains and losses reported in earnings at each subsequent reporting date. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, “Fair Value Measurements.” Alleghany does not anticipate that this Statement will have any material impact on its results of operations and financial condition.

9. Subsequent Events

On April 27, 2007, AIHL entered into a definitive agreement to acquire Employers Direct Corporation (“EDC”) for a cash purchase price of approximately $195.0 million. The transaction is subject to certain closing conditions, including the receipt of all required regulatory approvals, and is expected to close in the third quarter of 2007.

EDC, which was founded in 2002, is an insurance holding company based in Agoura Hills, California that, through its wholly-owned subsidiary Employers Direct Insurance Company, writes workers’ compensation insurance on a direct basis in the State of California. For the year ended 2006, EDC had net premiums earned of approximately $139.5 million and net income of approximately $46.6 million. At December 31, 2006, EDC had total stockholders’ equity of approximately $131.7 million.


ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

References in Items 2, 3 and 4 of Part I, as well as in Part II, of this Form 10-Q to the “Company,” “Alleghany,” “we,” “us,” and “our” refer to Alleghany Corporation and its consolidated subsidiaries unless the context otherwise requires. “AIHL” refers to our insurance holding company subsidiary Alleghany Insurance Holdings LLC. “RSUI” refers to our subsidiary RSUI Group, Inc. and its subsidiaries. “AIHL Re” refers to AIHL Re LLC. “CATA” refers to our subsidiary Capitol Transamerica Corporation and its subsidiaries and also includes the results and operations of Platte River Insurance Company unless the context otherwise requires. “Darwin” refers to Darwin Professional Underwriters, Inc. and its subsidiaries. Unless the context otherwise requires, references to AIHL include the operations of RSUI, CATA, Darwin and AIHL Re. “Alleghany Properties” refers to our subsidiary Alleghany Properties Holdings LLC and its subsidiaries.

Cautionary Statement Regarding Forward-Looking Information

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk” contain disclosures which are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts, and can be identified by the use of words such as “may,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “believe,” “potential,” “should,” “continue” or the negative versions of those words or other comparable words. These forward-looking statements are based upon our current plans or expectations and are subject to a number of uncertainties and risks that could significantly affect current plans, anticipated actions and our future financial condition and results. These statements are not guarantees of future performance, and we have no specific intention to update these statements. The uncertainties and risks include, but are not limited to, risks relating to our insurance operating units such as

	•		significant weather-related or other natural or human-made catastrophes and disasters;

	•		the cyclical nature of the property and casualty industry;

	•		the long-tail and potentially volatile nature of certain casualty lines of business written by our insurance operating units;

	•		the cost and availability of reinsurance;

	•		exposure to terrorist acts;

	•		the willingness and ability of our insurance operating units’ reinsurers to pay reinsurance recoverables owed to our insurance operating units;

	•		changes in the ratings assigned to our insurance operating units;

	•		claims development and the process of estimating reserves;

	•		legal and regulatory changes;

	•		the uncertain nature of damage theories and loss amounts;

	•		increases in the levels of risk retention by our insurance operating units; and

	•		adverse loss development for events insured by our insurance operating units in either the current year or in prior years.

Additional risks and uncertainties include general economic and political conditions, including the effects of a prolonged U.S. or global economic downturn or recession; changes in costs; variations in political, economic or other factors; risks relating to conducting operations in a competitive environment; effects of acquisition and disposition activities, inflation rates or recessionary or expansive trends; changes in market prices of our significant equity investments; extended labor disruptions, civil unrest or other external factors over which we have no control; and changes in our plans, strategies, objectives, expectations or intentions, which may happen at

any time at our discretion. As a consequence, current plans, anticipated actions and future financial condition and results may differ from those expressed in any forward-looking statements made by us or on our behalf.

Business Overview

We are engaged, through AIHL and its subsidiaries RSUI, CATA and Darwin, in the property and casualty and surety insurance business. In addition, AIHL Re, a captive reinsurance subsidiary of AIHL, is available to provide reinsurance to Alleghany group operating units and affiliates. We also own and manage properties in the Sacramento, California region through our subsidiary Alleghany Properties and conduct corporate investment and other activities at the parent level, including the holding of strategic equity investments which are available to support the internal growth of subsidiaries and for acquisitions of, and substantial investments in, operating companies. On December 29, 2006, we acquired approximately 32.9 percent of the outstanding shares of common stock of Homesite Group Incorporated, or “Homesite,” a national, full-service, mono-line provider of homeowners insurance, for $120.0 million in cash, and this investment is reflected in our financial statements in other invested assets.

The following discussion and analysis presents a review of our results for the three months ended March 31, 2007 and 2006. You should read this review in conjunction with the consolidated financial statements and other data presented in this Form 10-Q as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Risk Factors” contained in our Report on Form 10-K for the year ended December 31, 2006, or the “2006 10-K.” Our 2007 first quarter results are not indicative of operating results in future periods.

Critical Accounting Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, or “GAAP,” requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period covered by the financial statements. Critical accounting estimates are defined as those estimates that are important to the presentation of our financial condition and results of operations and require us to exercise significant judgment.

We review our critical accounting estimates and assumptions quarterly. These reviews include evaluating the adequacy of reserves for unpaid losses and loss adjustment expenses and the reinsurance allowance for doubtful accounts, analyzing the recoverability of deferred tax assets, assessing goodwill for impairment and evaluating the investment portfolio for other-than-temporary declines in estimated fair value. Actual results may differ from the estimates used in preparing the consolidated financial statements.

Readers are encouraged to review our 2006 10-K for a more complete description of our critical accounting estimates.

Consolidated Results of Operations

The following table summarizes our consolidated revenues, costs and expenses and earnings for the three months ended March 31, 2007 and 2006.


(in thousands)	2007		2006

Revenues
Net premiums earned	$	271,571	$	230,582
Net investment income		45,169		29,313
Net realized capital gains		50,141		6,983
Other income		8,725		1,937

Total revenues		375,606		268,815

Costs and expenses
Loss and loss adjustment expenses		122,604		122,530
Commissions, brokerage and other underwriting expenses		71,278		57,385
Other operating expenses		13,166		10,829
Corporate administration		8,004		8,423
Interest expense		723		1,101

Total costs and expenses		215,775		200,268

Earnings before income taxes and minority interest		159,831		68,547
Income taxes		51,056		9,341

Earnings before minority interest		108,775		59,206
Minority interest, net of tax		2,357		—


Net earnings		106,418	$	59,506


Revenues:
AIHL	$	305,909	$	260,888
Corporate activities*		69,697		7,927

Earnings (loss) before income taxes and minority interest:
AIHL	$	99,897	$	70,859
Corporate activities*		59,934		(2,312	)


*		Corporate activities consist of Alleghany Properties, Homesite and corporate activities at the parent level.

Our earnings before income taxes and minority interest in the 2007 first quarter increased from the corresponding 2006 period, reflecting increases in net premiums earned, net investment income and other income, as well as substantially higher net realized capital gains. The increase in net premiums earned reflects growth at RSUI, CATA and Darwin, partially offset by increased commission, brokerage and other underwriting expenses related to such growth. The increase in net investment income primarily reflects strong underwriting cash flow, the reinvestment of net proceeds from our public offering of mandatory convertible preferred stock in June 2006, and receipt of net proceeds from the initial public offering of Darwin common stock in May 2006. The increase in other income reflects the sale of property by Alleghany Properties in the 2007 first quarter. The substantial increase in net realized capital gains reflects the sale by parent of 809 thousand shares of common stock of Burlington Northern Santa Fe Corporation, or “Burlington Northern,” for a net realized capital gain of $55.9 million.

The effective tax rate on net earnings before income taxes and minority interest was 31.9 percent for the 2007 first quarter, compared with 13.6 percent for the corresponding 2006 period. The effective tax rate in the 2006 first quarter includes a tax benefit of $10.8 million resulting from the release of a valuation allowance we held with respect to a portion of our deferred tax assets related to unused foreign tax credits. The unused foreign tax credits arose from our ownership of World Minerals, Inc. prior to its sale in July 2005. Net earnings for 2006 include this $10.8 million tax benefit.

AIHL Operating Unit Pre-Tax Results


(in millions)	RSUI			AIHL Re			CATA			Darwin			AIHL
Three months ended March 31, 2007

Gross premiums written	$	288.9			—		$	52.7		$	74.3		$	415.9
Net premiums written	$	156.4			—		$	50.6		$	48.9		$	255.9

Net premiums earned (1)	$	166.6		$	17.7		$	47.3		$	40.0		$	271.6
Loss and loss adjustment expenses		76.4			—			20.7			25.5			122.6
Underwriting expenses (2)		39.9			0.1			19.6			11.7			71.3

Underwriting profit (3)	$	50.3		$	17.6		$	7.0		$	2.8		$	77.7

Net investment income (1)														40.0
Net realized capital losses (1)														(5.8	)
Other income (1)														0.1
Other expenses (2)														(12.1	)

Earnings before income taxes and minority interest													$	99.9


Loss ratio (4)		45.9	%		—			43.8	%		63.7	%		45.1	%
Expense ratio (5)		24.0	%		0.3	%		41.5	%		29.1	%		26.2	%

Combined ratio (6)		69.9	%		0.3	%		85.3	%		92.8	%		71.3	%

Three months ended March 31, 2006

Gross premiums written	$	295.5			—		$	44.3		$	59.9		$	399.7
Net premiums written		162.7			—			42.2			36.8			241.7

Net premiums earned (1)	$	162.1			—		$	41.2		$	27.3		$	230.6
Loss and loss adjustment expenses		83.7			—			19.6			19.2			122.5
Underwriting expenses (2)		31.8			—			18.3			7.3			57.4

Underwriting profit (3)	$	46.6			—		$	3.3		$	0.8		$	50.7

Net investment income (1)														24.9
Net realized capital gains (1)														4.6
Other income (1)														0.8
Other expenses (2)														(10.2	)

Earnings before income taxes and minority interest													$	70.8


Loss ratio (4)		51.7	%		—			47.5	%		70.6	%		53.1	%
Expense ratio (5)		19.6	%		—			44.5	%		26.5	%		24.9	%
Combined ratio (6)		71.3	%		—			92.0	%		97.1	%		78.0	%


(1)		Represent components of total revenues.

(2)		Underwriting expenses represent commission and brokerage expenses and that portion of salaries, administration and other operating expenses directly attributable to underwriting activities, whereas the remainder constitutes other expenses.

(3)		Represents net premiums earned less loss and loss adjustment expenses and underwriting expenses, all as determined in accordance with GAAP, and does not include net investment income and other income or net realized capital gains. Underwriting profit does not replace net income determined in accordance with GAAP as a measure of profitability; rather, we believe that underwriting profit, which does not include net investment income and other income or net realized capital gains, enhances the understanding of AIHL’s insurance operating units’ operating results by highlighting net income attributable to their underwriting performance. With the addition of net investment income and other income and net realized capital gains, reported pre-tax net income (a GAAP measure) may show a profit despite an underlying underwriting loss. Where underwriting losses persist over extended periods, an insurance company’s ability to continue as an ongoing concern may be at risk. Therefore, we view underwriting profit as an important measure in the overall evaluation of performance.

(4)		Loss and loss adjustment expenses divided by net premiums earned, all as determined in accordance with GAAP.

(5)		Underwriting expenses divided by net premiums earned, all as determined in accordance with GAAP.

(6)		The sum of the loss ratio and expense ratio, all as determined in accordance with GAAP, representing the percentage of each premium dollar an insurance company has to spend on losses (including loss adjustment expenses) and underwriting expenses.

Discussion of individual AIHL operating unit results follows, and AIHL investment results are discussed below under “Investments.”

RSUI

The decrease in gross premiums written in the 2007 first quarter from the corresponding 2006 period primarily reflects increased competition and rate pressures in RSUI’s general liability, umbrella and property lines of business. RSUI’s net premiums earned in the 2007 first quarter increased from the corresponding 2006 period as a result of property and casualty premiums written during 2006 being earned in the 2007 first quarter. In addition, 2007 first quarter net premiums earned were higher compared with the corresponding 2006 period as a result of catastrophe reinsurance reinstatement premiums related to Hurricane Katrina which RSUI incurred during the 2006 first quarter. The decrease in loss and loss adjustment expenses in the 2007 first quarter from the corresponding 2006 period reflects lower property losses in the 2007 period, while the increase in underwriting expenses in the first quarter of 2007 from the corresponding 2006 period reflects higher salary and benefit expenses and lower ceding commissions on RSUI’s property surplus share reinsurance arrangements, which caused commission expenses incurred to increase. RSUI’s underwriting profit for the 2007 first quarter increased from the corresponding 2006 period, primarily reflecting an increase in net premiums earned and lower property losses incurred, partially offset by higher underwriting expenses. Rates at RSUI in the 2007 first quarter as compared with the 2006 first quarter reflect overall industry trends, with marginally decreased rates in all of RSUI’s lines of business due to increased competition, particularly for the general liability and umbrella lines of business.

RSUI reinsures its other lines of business through quota share treaties. RSUI’s Professional Liability quota share reinsurance treaty, which expired on April 1, 2007, provided reinsurance for policies with limits up to $10.0 million, with RSUI ceding 25 percent of the premiums and losses for policies with limits up to $1.0 million, and 50 percent of the premiums and losses on policies with limits greater than $1.0 million up to $10.0 million. This treaty was not renewed by RSUI, as management decided to retain all of this business.

AIHL Re

catastrophe losses during the period. This reinsurance coverage expired on April 30, 2007 and AIHL Re is not participating in RSUI’s catastrophe reinsurance program for the 2007-2008 period.

AIHL Re and Homesite entered into a reinsurance agreement, effective April 1, 2007, whereby AIHL Re, in exchange for annual premium that is estimated will not be in excess of $2.0 million, provides $20.0 million of excess-of-loss reinsurance coverage to Homesite under its catastrophe reinsurance program. Homesite’s catastrophe exposure is concentrated in the Northeast region of the United States.

CATA

CATA’s net premiums earned in the 2007 first quarter increased from the corresponding 2006 period, reflecting growth in gross and net premiums written in CATA’s property and casualty (including in excess and surplus markets) and commercial surety lines of business. The modest increase in loss and loss adjustment expenses in the 2007 first quarter from the corresponding 2006 period reflects growth in net premiums earned, partially offset by a $3.4 million release of prior year loss reserves from the 2006 accident year due to lower loss emergence in the property and surety lines of business. Underwriting expenses for the 2007 first quarter increased from the corresponding 2006 period, primarily reflecting higher commissions and other acquisition-related expenses as a consequence of increased premium volumes.

CATA’s underwriting profit for the 2007 first quarter increased from the corresponding 2006 period, primarily reflecting a $3.4 million release of prior year commercial surety and property loss reserves and an increase in net premiums earned, partially offset by increases in loss and loss adjustment expenses and underwriting expenses.

With respect to rates, CATA experienced increased competition in its property and casualty and commercial surety lines of business during the first quarter of 2007, compared with the corresponding 2006 period.

Darwin

The increase in gross premiums written at Darwin in the 2007 first quarter from the corresponding 2006 period reflects growth in all of Darwin’s liability lines of business. The increase in net premiums earned in the 2007 first quarter from the 2006 first quarter primarily reflects the increase in gross premiums written, as well as an increase in retentions under Darwin’s reinsurance programs. The increase in loss and loss adjustment expenses and underwriting expenses in the 2007 first quarter compared with the 2006 first quarter primarily reflects an increase in premium volume.

Darwin’s underwriting profit for the 2007 first quarter increased from the corresponding 2006 period, primarily reflecting an increase in net premiums earned and a release of prior year loss reserves and associated adjustment to ceded reinsurance premiums totaling $1.2 million, partially offset by increases in loss and loss adjustment expenses and underwriting expenses related to the growth of Darwin’s business. The $1.2 million reserve adjustment consisted of $0.8 million of loss reserve releases for the 2004 accident year, reflecting favorable loss emergence, and a corresponding $0.4 million reduction in ceded reinsurance premiums.

As discussed in the 2006 10-K, Darwin reinsures all of its lines of business through a program consisting of a variety of excess of loss treaties. In April 2007, Darwin substantially completed the renewal of its main reinsurance program. For Darwin’s medical lines of business, the new program provides coverage for $10.0 million of losses, before a 15 percent co-participation by Darwin, in excess of a $1.0 million net retention, with premiums no longer varying depending on profitability as under the expired program. For Darwin’s non-medical lines of business, the new program provides coverage in three layers. The first layer provides coverage for $3.0 million of losses, before a 25 percent co-participation by Darwin, in excess of a $2.0 million net retention. The second layer provides coverage for up to $10.0 million of losses, before a 15 percent co-participation by Darwin, in excess of $5.0 million of losses for non-publicly traded D&O liability (other than Side-A only liability) and primary insurance agents E&O liability and for $5.0 million of losses for other non-medical lines, before a 15 percent co-participation by Darwin, in excess of $5.0 million of losses. The third layer provides coverage for $5.0 million of losses for Darwin’s Side-A only D&O liability, before a 10 percent co-participation by Darwin, in excess of $15.0 million of losses, and for $10.0 million of losses for Managed Care E&O, before a 10 percent co-participation by Darwin, in excess of $10.0 million of losses. As with its medical reinsurance program, premiums no longer vary depending on profitability as under the expired program, but ceding commissions may vary.

Reserve Review Process

AIHL’s insurance operating units periodically analyze liabilities for unpaid losses and loss adjustment expenses, or “LAE,” established in prior years and adjust their expected ultimate cost, where necessary, to reflect positive or negative development in loss experience and new information, including, for certain catastrophic events, revised industry estimates of the magnitude of a catastrophe. Adjustments to previously recorded liabilities for unpaid losses and LAE, both positive and negative, are reflected in our financial results in the periods in which these adjustments are made and are referred to as prior year reserve development. The following table presents the reserves established in connection with the losses and LAE of AIHL’s insurance operating units on a gross and net basis by line of business. These reserve amounts represent the accumulation of estimates of ultimate losses (including for claims incurred but not yet reported, or “IBNR”) and LAE.


( in millions)	*Property*			*Casualty*			CMP*			*Surety*			*All Other*			*Total*
At December 31, 31, 2007
Gross loss and LAE reserves	$	474.5		$	1,640.5		$	87.8		$	19.1		$	86.2		$	2,308.1

Reinsurance recoverables on unpaid losses		(236.6	)		(658.1	)		(0.8	)		(0.2	)		(50.4	)		(946.1	)


Net loss and LAE reserves	$	237.9		$	982.4		$	87.0		$	18.9		$	35.8		$	1,362.0


At December 31, 2006
Gross loss and LAE reserves	$	598.3		$	1,515.0		$	86.2		$	18.4		$	86.7		$	2,304.6

Reinsurance recoverables on unpaid losses		(348.4	)		(608.7	)		(1.1	)		(0.2	)		(51.4	)		(1,009.8	)


Net loss and LAE reserves	$	249.9		$	906.3		$	85.1		$	18.2		$	35.3		$	1,294.8


*		Commercial multiple peril

Changes in Loss and LAE Reserves between March 31, 2007 and December 31, 2006.

Gross Reserves. The increase in gross loss and LAE reserves at March 31, 2007 from December 31, 2006 primarily reflects increases in casualty gross loss and LAE reserves at RSUI and Darwin, partially offset by a reduction in RSUI’s property gross loss and LAE reserves. The increase in casualty (which includes, among other lines, excess and umbrella, directors and officers liability, professional liability, general liability, medical malpractice liability and workers compensation) gross loss and LAE reserves primarily reflects anticipated loss reserves on current accident year gross premiums earned and limited gross paid loss activity for the current and prior casualty accident years. The decrease in property gross loss and LAE reserves is mainly due to gross loss payments on 2004 and 2005 hurricane related losses, principally Hurricane Katrina.

Net Reserves. The increase in net loss and LAE reserves at March 31, 2007 from December 31, 2006 primarily reflects increases in casualty net loss and LAE reserves at RSUI and Darwin. The increase in net loss and LAE reserves for the casualty lines of business primarily reflects anticipated loss reserves on current accident year net premiums earned and limited net paid loss activity for current and prior casualty accident years. Net loss and LAE reserves for property lines of business decreased, primarily reflecting loss payments, net of reinsurance recoveries, on 2004 and 2005 hurricane related losses.

Reinsurance Recoverables

At March 31, 2007, AIHL had total reinsurance recoverables of $1,008.8 million, consisting of $946.1 million of ceded outstanding losses and LAE and $62.7 million of recoverables on paid losses. Approximately 90.9 percent of AIHL’s reinsurance recoverables balance at March 31, 2007 was due from reinsurers having an A.M. Best financial strength rating of A (Excellent) or higher.

Corporate Activities Results from Operations

Corporate activities recorded a pre-tax gain of $59.9 million on revenues of $69.7 million for 2007 first quarter, compared with pre-tax loss of $2.3 million on revenues of $7.9 million in the corresponding period of 2006. The 2007 first quarter results primarily reflect net realized capital gains at the parent level of $55.9 million resulting from the sale of approximately 809 thousand shares of Burlington Northern common stock during the period. In addition, the 2007 results also benefited from the sale by Alleghany Properties of certain real estate holdings during the 2007 first quarter which generated a pre-tax gain of approximately $7.2 million, compared with immaterial sales activity in the comparable 2006 period.

For the 2007 first quarter, net investment income includes $2.9 million of Alleghany’s equity in earnings of Homesite, net of purchase accounting adjustments.

Investments

On a consolidated basis, Alleghany’s invested asset portfolio was approximately $4.3 billion as of March 31, 2007, an increase of 6.3 percent from approximately $4.1 billion at December 31, 2006. At March 31, 2007, the average duration of Alleghany’s debt securities portfolio was 4.12 years, compared with 4.21 years at December 31, 2006.

The invested asset portfolio generated net investment income of $45.2 million for the 2007 first quarter, of which $40.0 million was generated by AIHL and $5.2 million was generated

by corporate activities. These amounts were $29.3 million, $24.9 million, and $4.4 million, respectively, for the comparable 2006 period. The increase in AIHL’s net investment income in the first three months of 2007 was due principally to strong underwriting cash flow and the reinvestment of proceeds from Darwin’s initial public offering of common stock during the 2006 second quarter, as well as slightly higher average investment yields during the 2007 first quarter. The increase in net investment income for corporate activities in the first three months of 2007 is due principally to the reinvestment of proceeds from a mandatory convertible preferred stock offering (after capitalization of AIHL Re), which occurred during the 2006 second quarter.

The sales within our invested asset portfolio generated net realized capital gains of $50.1 million for the first three months of 2007, compared with $7.0 million for the corresponding 2006 period, reflecting net realized capital gains of $55.9 million at the parent-level, partially offset by a net realized capital loss of $5.8 million at AIHL. As noted above, the net realized capital gains for corporate activities in the 2007 first quarter were due to the sale of Burlington Northern common stock. As of March 31, 2007, we held approximately 5.0 million shares of Burlington Northern common stock with an aggregate market value at that date of approximately $402.2 million. AIHL’s $5.8 million net realized capital loss in the 2007 first quarter consisted of $6.6 million of unrealized losses related to AIHL’s mortgage- and asset-backed bond portfolio that were deemed to be other than temporary, partially offset by $0.8 million of net realized capital gains on the sale of securities by AIHL.

Financial Condition

Stockholders’ equity increased to $2,511.8 million as of March 31, 2007, compared with $2,423.2 million as of December 31, 2006, representing an increase of 3.7 percent, due to net earnings in the 2007 first quarter.

As of December 31, 2006, Alleghany Funding Corporation, or “Alleghany Funding,” had outstanding notes payable of $80.0 million, which were secured by a $91.5 million installment note receivable. At the time of the debt issuance, Alleghany Funding also entered into a related interest rate swap agreement with a notional amount of $86.2 million for the purpose of matching interest expense with interest income. This swap was pay variable, receive variable, whereby Alleghany Funding paid a variable rate equal to the one-month commercial paper rate plus 0.0625 percent and received a variable rate equal to the three-month LIBOR rate plus 0.375 percent. The notes payable, installment note receivable and swap matured on January 22, 2007, without gain or loss.

We and our subsidiaries have adequate internally generated funds and unused credit facilities to provide for the currently foreseeable needs of our and their businesses, respectively.

Recent Accounting Pronouncements

In July 2006, FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” was issued. This Interpretation clarifies the accounting for income taxes recognized in an entity’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. The implementation did not have any impact on Alleghany’s results of operations and financial condition, and Alleghany did not have any unrecognized tax benefits as of January 1, 2007 or March 31, 2007.

The Securities and Exchange Commission released Staff Accounting Bulletin No. 108 (“SAB 108”), in September 2006. SAB 108 provides guidance on how the effects of the carryover or reversal of prior year financial statement misstatements should be considered in quantifying a current period misstatement. In addition, upon adoption, SAB 108 permits an entity to adjust for the cumulative effect of immaterial errors relating to prior years in the carrying amount of assets and liabilities as of the beginning of the current fiscal year, with an offsetting adjustment to the opening balance of retained earnings. SAB 108 also requires the adjustment of any prior quarterly financial statements within the fiscal year of adoption for the effects of such errors on the quarters when the information is next presented. Alleghany has adopted the provisions of SAB 108 as of January 1, 2007, and the implementation did not have any material impact on its results of operations and financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss from adverse changes in market prices and rates, such as interest rates, foreign currency exchange rates and commodity prices. The primary market risk related to our non-trading financial instruments is the risk of loss associated with adverse changes in interest rates.

The primary market risk for our and our subsidiaries’ debt is interest rate risk at the time of refinancing. We monitor the interest rate environment to evaluate refinancing opportunities. We currently do not use derivatives to manage market and interest rate risks. One interest rate swap that we had matured in January 2007 at no gain or loss to us.

The table below presents a sensitivity analysis of our consolidated debt securities as of March 31, 2007. Sensitivity analysis is defined as the measurement of potential change in future earnings, fair values or cash flows of market sensitive instruments resulting from one or more selected hypothetical changes in interest rates over a selected time. In this sensitivity analysis model, we use fair values to measure its potential change, and a +/- 300 basis point range of change in interest rates to measure the hypothetical change in fair value of the financial instruments included in the analysis. The change in fair value is determined by calculating hypothetical March 31, 2007 ending prices based on yields adjusted to reflect a +/- 300 basis point range of change in interest rates, comparing these hypothetical ending prices to actual ending prices, and multiplying the difference by the par outstanding.

At March 31, 2007 ( in millions)


Interest rate shifts	-300		-200		-100		0		100			200			300

Debt securities, fair value	$	3,174.5	$	3,053.3	$	2,935.7	$	2,819.3	$	2,701.2		$	2,583.3		$	2,467.7

Estimated change in fair value	$	355.2	$	234.0	$	116.4		—	$	(118.1	)	$	(236.0	)	$	(351.6	)

This sensitivity analysis provides only a limited, point-in-time view of the market risk of the financial instruments discussed above. The actual impact of changes in equity prices and market interest rates on the financial instruments may differ significantly from those shown in the sensitivity analysis. The sensitivity analysis is further limited because it does not consider any actions we could take in response to actual and/or anticipated changes in interest rates.

Our 2006 10-K provides a more detailed discussion of the market risks affecting our operations.

ITEM 4. CONTROLS AND PROCEDURES.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, or “CEO,” and our Chief Financial Officer, or “CFO,” of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934. Based on that evaluation, our management, including the CEO and CFO, concluded that our disclosure controls and procedures are effective in timely alerting them to information required to be included in our periodic reports required to be filed with the U.S. Securities and Exchange Commission. Additionally, as of the end of the period covered by this report on Form 10-Q, there have been no changes in internal control over financial reporting that have occurred during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There are no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our 2006 10-K. Please refer to that section for disclosures regarding the risks and uncertainties related to our businesses.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table summarizes our common stock repurchases for the quarter ended March 31, 2007.


						Total Number of		Maximum
						Shares Purchased		Number of
						as Part of		Shares that May
	Total Number					Publicly		Yet Be Purchased
	of Shares			Average Price		Announced Plans		Under the Plans
Period	Purchased			Paid per Share		or Programs		or Programs
January 1, 2007 through January 31, 2007		534	(1)	$	390.50		—		—
February 1, 2007 through February 28, 2007		—			—		—		—
March 1, 2007 through March 31, 2007		—			—		—		—

Total		534	(1)	$	390.50		—		—


(1)		Represents the tender to us by a director of already-owned common stock as payment of the exercise price in connection with his exercise of an option to purchase 1,960 shares of our common stock (as adjusted for stock dividends and the spin-off by us of Chicago Title Corporation in 1998) under the Alleghany Corporation Amended and Restated Directors’ Stock Option Plan.

ITEM 6. EXHIBITS.


Exhibit Number		Description
10.1		Alleghany Retirement Plan, as amended

10.2		Alleghany Officers and Directors Deferred Compensation Plan, as amended.

10.3		Alleghany 2007 Long-Term Incentive Plan, filed as Exhibit 10.1 to Alleghany’s Current Report on Form 8-K filed on May 1, 2007, is incorporated herein by reference.

31.1		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.

31.2		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) or Rule 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this report on Form 10-Q.

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this report on Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ALLEGHANY CORPORATION Registrant
Date: May 7, 2007	/s/ Roger B. Gorham
	Roger B. Gorham
	Senior Vice President (and chief financial officer)

EX-10.1 2 y34550exv10w1.htm EX-10.1: RETIREMENT PLAN EX-10.1

Exhibit 10.1

ALLEGHANY CORPORATION RETIREMENT PLAN

(As Amended Through April 17, 2007)

This document sets forth the Alleghany Corporation Retirement Plan, as amended and restated effective as of December 31, 2006 and as thereafter amended to comply with the requirements of Section 409A of the Code.

The Plan, as so amended and restated, is intended to be a plan which is unfunded and is maintained by Alleghany Corporation primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees both within the meaning, and for the purposes, of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.

The rights under the Plan of any person who retired or otherwise terminated employment with Alleghany Corporation before the effective date of a particular amendment shall be determined solely under the terms of the Plan as in effect on the date of such retirement or other termination of employment, without regard to such amendment, except that such person’s benefit under the Plan may be paid at such time, and in such form, as may be permitted under the terms of the Plan as in effect on the date as of which the payment of such person’s benefit commences.

ARTICLE I.
DEFINITIONS

1.01 “Actuarial Equivalent” means with respect to a retirement benefit, an equivalent amount or amounts computed using (i) the mortality table prescribed in Section 417(e)(3)(A)(ii)(I) of the Code and (ii) the interest rate prescribed by the Internal Revenue Service under Section 417(e)(3)(A)(ii)(II) of the Code for the month immediately preceding the month in which such Actuarial Equivalent is being determined.

For purpose of this Section 1.01, all references to Section 417(e)(3) of the Code shall be administered without regard to the effects enacted under the Pension Protection Act of 2006. In addition, at such time as the Internal Revenue Service ceases to publish the relevant interest rate, the determination of an Actuarial Equivalent shall instead be computed using the U.S. 30-year Treasury rate in effect at the close of the first business day of the month in which such Actuarial Equivalent is being determined.

1.02 “Alleghany” means Alleghany Corporation and, solely for purposes of determining the date of a Participant’s Termination of Employment (other than by reason of his ceasing to be an officer), includes any corporation or other person treated as a single employer with Alleghany Corporation under Section 414(b) or (c) of the Code.

1.03 “Annuity Starting Date” means the first day on which an amount is payable to the Participant in accordance with this Plan.

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1.04 “Average Compensation” means, with respect to any Participant, the annual average of his Base Compensation and his Short-Term Incentive Compensation for the three consecutive calendar years in the period of ten calendar years ending with the calendar year in which he has a Termination of Employment, which results in the highest such average.

1.05 “Base Compensation” means the base salary earned by an Employee for the relevant period (whether or not such compensation is currently payable or deferred) for his services as such, which base salary shall not include (by way of illustration and not limitation) any non cash compensation, any savings benefit amounts, (any Short-Term Incentive Compensation), long term incentive bonuses, restricted stock or other extraordinary compensation, payments, allowances or reimbursements.

In the case of a Participant who becomes Totally Disabled, the Participant shall be treated as earning Base Compensation, for the period which begins on the date on which he becomes Totally Disabled and which ends on his Normal Retirement Date, at an annual rate which is equal to his annual rate of base salary immediately prior to the date on which he becomes Totally Disabled. Such amount shall be adjusted on the first day of each Plan Year included in such period to take into account the percentage increase, if any, in the CPIU over the previous Plan Year. The “CPIU” is the U.S. City Average All Items Consumer Price Index for all Urban Consumers, published by the U.S. Department of Labor, Bureau of Labor Statistics, or any successor index designated by the Department of Labor.

1.06 “Beneficiary” means the person or persons last designated by a Participant, on a form provided by, and filed with, the Plan Administrator, to receive benefits under Article V following the Participant’s death. If all the persons so designated are individuals and if there is no such individual living at the death of the Participant, or if no such person has been designated, then the Participant’s Beneficiary shall be his estate, and if such Participant and his Beneficiaries all die before all the specified monthly payments have been made under a period certain option elected by the Participant, the commuted value of the balance shall be paid in a lump sum to the estate of the last to survive of the Participant and his Beneficiaries.

1.07 “Board” means the Board of Directors of Alleghany or the Executive Committee thereof.

1.08 “Code” means the Internal Revenue Code of 1986, as amended.

1.09 “Early Retirement Date” means, with respect to any Participant, the first day of the calendar month coinciding with or next following the latest of (a) the date on which he incurs a Termination of Employment, (b) the date on which he attains age 55, (c) the date (not later than his Normal Retirement Date) elected by him (where such election is made in accordance with Section 5.07), or (d) completion of 5 years of service.

1.10 “Employee” means any individual in the employ of Alleghany. No person who is engaged by, or performs services for, Alleghany pursuant to any agreement or arrangement designating such engagement or services as that of a “consultant,” “independent contractor” or

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other words of similar meaning shall be deemed an Employee.

1.11 “Employment Commencement Date” means the first day on which an Employee is employed as a common-law employee by Alleghany.

1.12 “ERISA” means the Employee Retirement Income Security Act of 1974 and the regulations thereunder, as from time to time amended and in effect.

1.13 “Late Retirement Date” means the first day of the calendar month coinciding with or next following the date on which a Participant incurs a Termination of Employment after his Normal Retirement Date.

1.14 “Normal Retirement Date” means the first day of the calendar month coinciding with or next following the first date on which a Participant has attained at least age 65 and has completed at least 5 Years of Service.

1.15 “Participant” means an Employee who has been selected to participate in the Plan as provided in Article II or who has any accrued retirement benefits under the Plan which have not been distributed in full to him (or his Beneficiary).

1.16 “Plan” means the plan set forth herein as modified or amended from time to time.

1.17 “Plan Administrator” means the person serving from time to time as the Treasurer of Alleghany, or if no person is so serving at the time of reference, then Alleghany.

1.18 “Plan Year” means a calendar year.

1.19 “Short-Term Incentive Compensation” means the amount of the cash bonus accrued by an Employee in respect of the relevant period (whether or not such amount is currently paid or deferred) under the Alleghany Management Incentive Plan (or any plan adopted by the Board in replacement of such plan).

In the case of a Participant who becomes Totally Disabled, the Participant shall be treated as accruing Short-Term Incentive Compensation for the period which begins on the date on which he becomes Totally Disabled and which ends on his Normal Retirement Date (the “Disability Period”), at an annual rate which is equal to his average annual rate of Short-Term Incentive Compensation. For this purpose, a Participant’s average annual rate of Short-Term Incentive Compensation shall mean the average of his Short-Term Incentive Compensation for the three consecutive calendar years in the period of the ten calendar years which immediately precedes the date he becomes Totally Disabled and which results in the highest such average, or if he had not been employed by the Alleghany for at least 3 complete, consecutive calendar years, then the annual average of his Short-Term Incentive Compensation for all full calendar years during which he was so employed. Such average annual rate of Short-Term Incentive Compensation shall be adjusted, for each calendar year in the Disability Period, to take into account the percentage increase, if any, in the CPIU (as defined in Section 1.04) over the

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previous calendar year.

1.20 “Spouse” shall mean the person to whom the Participant is lawfully married under applicable law at the time of reference.

1.21 “Termination of Employment” means, and an Employee shall be treated as having incurred, a termination of employment as of the first date on which he ceases for any reason to be an officer of Alleghany, as provided in the By Laws of Alleghany. A Participant who becomes Totally Disabled shall not be treated as having incurred a Termination of Employment for any purpose of the Plan until the earliest of the date on which he ceases to be Totally Disabled (assuming he does not resume his employment with Alleghany on such date), his Normal Retirement Date or the date of his death. Solely for purposes of determining the date of the commencement of any Participant’s benefits, the date of a Participant’s Termination of Employment shall not be earlier than the date of the Participant’s “termination of employment” within the meaning of Treasury Regulation Section 1.409A-1(h)(1).

1.22 “Totally Disabled” means a physical and/or mental incapacity of such condition that it qualifies an individual (after the waiting period required thereunder) for benefits under the Alleghany Corporation Group Long Term Disability Plan, as in effect from time to time.

1.23 “Year of Service” shall mean as to any Participant, the number of whole or fractional periods of 12 consecutive months (such fraction being computed on the basis of complete months) which are included in the period which begins on the date on which he first became a Participant and which ends on the date of his final Termination of Employment (which, for the avoidance of doubt, shall include the period while he is Totally Disabled). The Board may, by resolution, grant additional Years of Service to a Participant for such period prior to the date he first became a Participant as the Board shall determine, which grant shall be set forth opposite the Participant’s name on Exhibit II attached hereto. Further, a Participant employed prior to the effective date of the Plan, January 1, 1989, shall be credited with that additional number of Years of Service which is set forth opposite his name on Exhibit I attached hereto.

ARTICLE II.
PARTICIPATION

2.01 Participation. Each Employee who has been elected by the Board to the position of an officer of Alleghany, as provided in the By Laws of Alleghany, and who is designated by the Board to participate in the Plan shall become a Participant effective on the later of his Employment Commencement Date or the date specified by the Board.

2.02 Re Employment of Former Participant. If a Participant or former Participant who incurred a Termination of Employment shall again become an Employee and he is again designated by the Board to participate in the Plan, such Employee shall again become a Participant or resume his active participation in the Plan, as applicable, effective on the later of the date of his re-employment or the date specified by the Board. A Participant or former Participant who again becomes an Employee, but is not designated by the Board to participate in

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the Plan, shall not again become (or resume being) a Participant and his Years of Service and Base Salary and Short-Term Incentive Compensation during his subsequent period of employment shall be disregarded in calculating his benefits under this Plan.

ARTICLE III.
VESTING AND BENEFIT ENTITLEMENT

3.01 Vesting and Entitlement. A Participant shall have a nonforfeitable right to 100 percent of, and shall be entitled to receive, his retirement benefit as determined pursuant to Article IV if he has completed at least 5 Years of Service.

3.02 Termination before Vesting. A Participant who terminates his employment with Alleghany before he has completed at least 5 Years of Service shall not be entitled to any retirement benefit under this Plan unless he is thereafter re employed by Alleghany and completes at least 5 Years of Service.

ARTICLE IV.
RETIREMENT BENEFITS

4.01 Retirement Benefit at Normal Retirement Date. The annual retirement benefit of a Participant, calculated as a monthly annuity which starts on the Participant’s Normal Retirement Date, is payable to the Participant for his life, and after the Participant’s death continues to the Participant’s Spouse, if any, for her life in the same monthly amount as was being received by the Participant, shall equal the product of (i) 66.67% of the Participant’s Average Compensation, (ii) a fraction, not greater than one, the numerator of which is the number of his whole and fractional Years of Service and the denominator of which is 15 and (iii) an Actuarial Equivalent factor, not greater than 1, to reflect the additional value of the Spouse’s benefit on account of the number of years and months, if any, by which the Spouse is younger than the Participant.

4.02 Reduction for Prior Distributions. In the case of any Participant identified on Exhibit III who received a prior distribution of retirement benefits, the Participant’s annual retirement benefit otherwise payable under Article IV shall be offset by the Actuarial Equivalent of amounts shown in Exhibit III.

4.03 Retirement Benefit at Late Retirement Date.

If a Participant terminates employment with Alleghany after his Normal Retirement Date, then such Participant shall be entitled to receive the greater of:

(a) the annual retirement benefit determined in accordance with the formula in Section 4.01, reduced (if applicable) as set forth in Section 4.02, based on the Participant’s Years of Service and Average Compensation calculated as of his Normal Retirement Date, then increased from the Participant’s Normal Retirement Date until his Annuity Starting Date using the rate of interest in effect at the close of the first business

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day of each such calendar year for U.S. Treasury obligations with a then maturity date of one year; or

(b) the annual retirement benefit determined in accordance with the formula in Section 4.01, reduced (if applicable) as set forth in Section 4.02, based on the Participant’s Years of Service and Average Compensation calculated as of his Late Retirement Date.

4.04 Retirement Benefit at Early Retirement Date. The annual retirement benefit payable to a Participant whose retirement benefits commence prior to his Normal Retirement Date shall equal the annual retirement benefit determined in accordance with the formula in Section 4.01, reduced (if applicable) as set forth in Section 4.02, further adjusted as follows:

(a) if the Participant terminated his employment with Alleghany either (i) on or after attaining age 55 and completing at least 20 Years of Service or (ii) on or after attaining age 60 and completing at least 10 Years of Service, then his annual retirement benefit shall be reduced by 3% for each year (interpolated for fractional years) by which his Annuity Starting Date is prior to the date he would attain his Normal Retirement Date; and

(b) in all other cases, his annual retirement benefit shall be reduced by 6% for each year (interpolated for fractional years) by which his Annuity Starting Date is prior to the date he would attain his Normal Retirement Date.

ARTICLE V.
FORMS OF RETIREMENT BENEFITS

5.01 Calculation of Amount of Benefit Payments. The actual amount of a Participant’s retirement benefit distribution under this Article V in the form elected shall be the Actuarial Equivalent of the annual retirement benefit payable to the Participant pursuant to Section 4.01, 4.03 or 4.04, as applicable to the Participant, including taking account of the actual age of the Participant’s Spouse, if any.

5.02 Automatic Form of Benefit.

(a) Unless he shall elect to the contrary, a Participant who is married on his Annuity Starting Date shall receive a retirement benefit for his life payable monthly beginning on his Annuity Starting Date, with such monthly annuity continued to the Participant’s Spouse (if she has survived him) for the remainder of her life in the same monthly amount as the Participant was receiving prior to his death. For purposes of this Plan, an individual will not be treated as the Participant’s Spouse unless she was lawfully married to the Participant on his Annuity Starting Date (or, in the case of a Participant’s death prior to his Annuity Starting Date, on his date of death).

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(b) Unless he shall elect to the contrary, a Participant who is not married on his Annuity Starting Date shall receive his retirement benefits as monthly payments which shall continue for as long as the Participant lives after payments begin.

5.03 Optional Forms. In lieu of the form of benefit provided for by Section 5.02, a Participant may elect to receive his retirement benefits in any of the following optional forms:

(a) a single life option, under which the Participant’s retirement benefit shall consist of monthly payments which shall continue for as long as the Participant lives after payments begin;

(b) a period certain option, under which the Participant shall receive a retirement benefit payable in equal monthly installments during his lifetime and ending with the payment due on the first day of the month in which the Participant’s death occurs, but with the provision that not less than 120 monthly installments shall be made to him and his Beneficiaries;

(c) a joint and survivor option, under which a Participant shall receive a monthly retirement benefit for his life with a survivor annuity for the life of his Beneficiary which is equal to 50% or 100%, as he shall have elected, of the monthly benefit for the Participant’s life; or

(d) a lump sum option, under which the Participant shall receive a single lump sum payment equal to the retirement benefit to which he is then entitled.

5.04 Death Benefit for Spouse.

(a) If a Participant has completed at least 5 Years of Service, dies before his Annuity Starting Date and is survived by a Spouse (a “Surviving Spouse”), then his Surviving Spouse shall receive an annuity for the life of the Surviving Spouse which shall be the same as the amount of the benefit that would have been paid to such Surviving Spouse under Section 5.02(a) if (i) in the case of a Participant who dies after attaining age 55, the Participant had retired on the day before his death; or (ii) in the case of a Participant who dies on or before attaining age 55, the Participant had separated from service on the date of his death, survived until age 55, and retired at that time.

(b) In the case of a Participant who dies after attaining age 55, such benefit to the Surviving Spouse shall commence as of the first day of the month coinciding with or next following the date of the Participant’s death, or, in the case of a Participant who dies on or before attaining age 55, such benefit to the Surviving Spouse shall commence on the first day of the month coinciding with or next following the date the Participant would have attained age 55.

5.05 Commencement of Benefits; Payments to Specified Employees.

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(a) Payment of a Participant’s retirement benefit to the Participant shall be made or commence on (and in no event shall be paid or commence later than thirty (30) days after) the first day of the calendar month coinciding with or next following the date elected by the Participant or at such other time as provided in the Plan, but in no event may the date for payment or commencement of any Participant’s retirement benefits under the Plan precede the later of the date of the Participant’s Termination of Employment or his Early Retirement Date.

(b) In the absence of a Participant’s effective election, payment of a Participant’s retirement benefit shall be made in the form provided under Section 5.02, and payment of such retirement benefit shall commence on the later of (x) the first day of the calendar month coinciding with or next following the date the Participant has a Termination of Employment or (y) the date the Participant attains his Normal Retirement Date.

(c) Notwithstanding any other provision of the Plan to the contrary, if on the date of a Participant’s Termination of Employment the Participant was a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) then (i) payment of the Participant’s retirement benefits under this Plan shall not commence before the first day of the month that is more than six months after his Termination of Employment, and (ii) the aggregate amount of any retirement benefit payments that would have been made to the Participant because of his Termination of Employment in the absence of clause (i) shall be paid to the Participant in a lump sum on the date the payment of his retirement benefits commences under clause (i) with interest on each such retirement benefit payment deferred from the date the payment was otherwise due until it is actually paid at the interest rate used to determine Actuarial Equivalences on the date such payment is actually made. The “identification date” for determining whether an Employee is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) shall be December 31st of each year.

5.07 Time of Elections.

(a) At any time within 30 days after an Employee is first designated as a Participant, the Participant may affirmatively elect (an “Election”): (i) the form in which the Participant’s retirement benefit shall be paid, and (ii) the date or dates and/or event or events for payment of his retirement benefit under the Plan (each such date or dates and/or event or events being referred to herein as a “Payment Date”); provided, however, that no Election shall be given effect (and such Election shall be deemed void) if the Payment Date is, or results in, an Annuity Starting Date that is earlier than the date of the Participant’s Termination of Employment. Each Payment Date must be objectively determinable, and while an Employee may amended or revise the Employee’s Election at any time within the 30 day period after an Employee is first designated as a Participant, such Election in effect on the close of business on such 30^th day shall be irrevocable (except as specifically provided herein). If within 30 days after an Employee is first

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designated as a Participant, the Participant has not made an effective Election, then for purposes of the Plan, payment of a Participant’s retirement benefit shall be made in the form provided under Section 5.02, and payment of such retirement benefit shall commence on the later of (x) the first day of the calendar month coinciding with or next following the date the Participant has a Termination of Employment or (y) the date the Participant attains his Normal Retirement Date.

(b) At least twelve months prior to the date any amount would have been paid to the Participant on a specified Payment Date (the actual date of payment pursuant to Section 5.07(a) hereof or, in the absence of such an election, the date such amount would have been payable pursuant to Section 5.05(b) hereof being the “Original Payment Date”), a Participant may elect (an “Amended Election”) to defer distribution of the amount payable on, or beginning as of, that Original Payment Date to a date after that Original Payment Date or to change the form in which the Participant’s retirement benefit shall be paid (any such later date shall then becomes the Payment Date); provided, however, that (a) such Amended Election will not take effect for (and so shall be null and void until) at least 12 months after the date on which it is made, and (b) the distribution of the amount to which the Amended Election applies cannot be made until at least 5 years from that Original Payment Date. Except as set forth herein, a Participant’s Amended Election may otherwise provide for distribution at any time or in any form as could have been elected in an original Election. There shall be no limit on the number of Amended Elections that a Participant may make.

(c) Each election shall be in writing on a form provided by and filed with the Plan Administrator, and shall specify the form of benefit the Participant elects and the Payment Date or Dates of the payment of such retirement benefit. Any election, once made, shall be irrevocable, except as provided in Section 5.07(b).

5.08 Special 409A Provisions.

(a) The Plan is intended to be operated in compliance with Section 409A of the Code. If any provision of the Plan is subject to more than one interpretation, then the Plan shall be interpreted in a manner that is consistent with Section 409A of the Code.

(b) Unless a Participant elects otherwise, entitlement to any benefit payable as an annuity will be treated as a single payment, made on the first day on which a payment is to be made under the annuity, for purposes of applying Section 5.07(b) hereof with respect to Amended Elections. In addition, actuarial equivalent forms of annuitites shall be

(e) Notwithstanding any other provision of this Section 5.07 to the contrary, each Participant in this Plan as of December 31, 2007, may on or before December 31, 2007, make, modify or revoke any election as to the time or form of payment of all or any of his retirement benefit permitted to be made under this Plan, and all such elections in effect at the close of business on December 31, 2007, shall be irrevocable, except as

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otherwise provided herein.

5.08 Termination of Benefit. If the period of any retirement benefit is measured by the life of an individual, the last payment to such individual shall be the last payment due on, or immediately prior to, the date of the individual’s death. No benefit shall be payable under the Plan with respect to any Participant after such Participant’s death unless specifically provided for in the Plan.

5.09 Withholding. Alleghany shall have the right to deduct from all payments made hereunder any federal, state, local or foreign income or employment taxes required, in the sole judgment of Alleghany, to be withheld with respect to such payments. Notwithstanding any provision of this Plan to the contrary, each Participant, as a condition to the entitlement to any retirement benefits accruing under this Plan shall pay, or have made arrangements satisfactory to Alleghany for the payment of, any employment taxes on retirement benefits accruing under this Plan.

5.06 Automatic Payments. Notwithstanding any Participant’s election pursuant to this Plan as to the time or form of his benefits, the following shall apply:

(a) If any monthly payment that would otherwise be made to any person under the Plan is less than $1,000, then, if the Plan Administrator shall so direct, the aggregate of the amounts which shall be paid to such person in any year shall be paid in quarterly, semiannual or annual installments; and

(b) If the Actuarial Equivalent value of the Participant’s nonforfeitable retirement benefit as of the date of his Termination of Employment or the retirement benefit payable to the Participant’s Surviving Spouse as of the date of the Participant’s death, in either case, does not exceed $100,000 if paid as a lump sum, then an amount equal to such Actuarial Equivalent value of such retirement benefits shall be paid to the Participant or the Participant’s Spouse in a lump sum in lieu of any retirement benefits to which he or she may be entitled to under this Plan.

ARTICLE VI.
PLAN ADMINISTRATION

6.01 Plan Administrator Records. The Plan Administrator shall keep or cause to be kept all data, records and documents relating to the administration of the Plan.

6.02 Employment of Experts. The Plan Administrator may employ or engage such independent actuaries, accountants, counsel, and other experts or persons as the Plan Administrator may deem necessary in connection with discharging its duties under the Plan.

6.03 Payment of Expenses. All expenses incurred in connection with the

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administration of the Plan, including, but not limited to, the compensation of any actuary, accountant, counsel, and other experts or persons who shall be employed by the Plan Administrator in connection with the administration of the Plan shall be paid by Alleghany.

6.04 Indemnification of Plan Administrator. Alleghany shall indemnify and hold harmless to the fullest extent permitted by law the Plan Administrator and any Employee of Alleghany to whom Plan responsibilities are delegated by the Plan Administrator from and against any liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by Alleghany) incurred by or asserted against the Plan Administrator or such Employee by reason of the occupying or having occupied positions in connection with the Plan, except that no indemnification shall be provided if the Plan Administrator or such Employee personally profited from any act or transaction in respect of which indemnification is sought.

6.05 Binding Action. To the fullest extent permitted by law, all actions taken and decisions made by the Plan Administrator shall be final, conclusive and binding on all persons having any interest in the Plan or in any benefits payable thereunder.

ARTICLE VII.
POWERS AND DUTIES OF PLAN ADMINISTRATOR

7.01 Administration Powers. The Plan Administrator shall have the power to take all action and to make all decisions necessary or proper in order to carry out its duties and responsibilities under the provisions of the Plan, including without limitation, the following:

(a) To make and enforce such rules and regulations as the Plan Administrator shall deem necessary or proper for the efficient administration of the Plan;

(b) To interpret the Plan and its rules and regulations; and

(c) To delegate to one or more persons the authority to administer the Plan, with such duties, powers and authority relative to the administration of the Plan as the Plan Administrator shall determine, and in so doing to limit its own duties and responsibilities to the extent specified in such appointment.

The Plan Administrator shall report to the Compensation Committee of the Board each year concerning the administration and operation of the Plan.

7.02 Plan Administrator Claims Review Authority and Procedures. Any claim for benefits or other payments under the Plan shall be determined in accordance with the procedure set forth below. A claim for benefits or other payments may be filed by a Participant, the surviving Spouse of a Participant, a Beneficiary of a Participant or the authorized representative of such Participant, Surviving Spouse or Beneficiary (the “claimant”).

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(a) Initial Claim Determination. Any claim for benefits or other payments under the Plan shall be made by filing a written statement of such claim with the person or persons designated by the Plan Administrator to process and make initial determinations as to such claims. In the event such claim is denied in whole or in part, such person or persons shall notify the claimant of the denial within 90 days after the date on which the claim was filed. However, if the Plan Administrator determines that special circumstances require an extension of time for deciding the claim, the Plan Administrator shall furnish written notice of the extension to the claimant prior to the expiration of such 90 day period. This notice shall indicate the special circumstances requiring the extension, and the date by which the Plan expects to render the determination on the claim. If an extension is taken, and if the claim is denied in whole or in part, the person or persons who processed and denied the claim shall notify the claimant of the denial within 180 days after the date on which the claim was filed.

(b) Initial Notification of Claim Denial. Any notification of a whole or partial denial of a claim shall be in writing. Such notification shall set forth, in a manner calculated to be understood by the claimant:

(i) the specific reason or reasons for the denial;

(ii) reference to the specific provisions of the Plan on which the denial was based;

(iii) a description of any additional material or information necessary for the claimant to perfect the claim, and an explanation of why such material or information is necessary; and

(iv) an explanation of the review procedure under subsection (c), including a description of the time limits applicable to such procedure and a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse determination of the claim on review.

(c) Review Procedure. A claimant whose claim is denied in whole or in part under subsection (a) shall be entitled to have such denial reviewed by the Plan Administrator, by filing a written request for such review with the Plan Administrator within 60 days after its receipt of the notification of the claim denial under subsection (b). The claimant may request and shall be provided, free of charge, reasonable access to, and copies of, all documents, records and other information which is relevant to the claim, and which is in the possession of the Plan Administrator or Alleghany. The claimant may provide comments, documents, records and other information relating to the claim to the Plan Administrator to consider when reviewing the claim. Upon receipt of a request for a review of a denied claim, the Plan Administrator shall make a full and fair review of the claim. Such review shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether the same was submitted or considered in the initial claim determination.

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(d) Decision on Review. The Plan Administrator shall make a decision with respect to such claim, and shall notify the claimant of its decision, within 60 days after its receipt of the claimant’s written request for review. However, if the Plan Administrator determines that special circumstances, such as the need to hold a hearing, require an extension of time for deciding the claim, the Plan Administrator shall provide a written notice of the extension to the claimant prior to the expiration of such 60 day period. This notice shall indicate the special circumstances requiring the extension, and the date by which the Plan expects to render the determination on review. If an extension is taken, the Plan Administrator shall notify the claimant of its decision on the claim within 120 days after the date on which the request to review the denial of the claim was filed. However, if the Plan Administrator determines that an extension is needed because the claimant must submit additional information in order for the Plan Administrator to make its determination on the claim, and the Plan Administrator requests such additional information from the claimant in the notification of extension, then the 120 day period for making the determination on review shall be tolled for the period which starts on the date on which such notification is sent to the claimant, and which ends on the date on which the claimant provides such additional information to the Plan Administrator.

(e) Notification of Decision on Review. The notification of the Plan Administrator’s decision on review shall be in writing. If the claim is denied, the notification shall set forth, in a manner calculated to be understood by the claimant:

(i) the specific reason or reasons for the claim denial;

(ii) reference to the specific Plan provisions on which the claim denial was based;

(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information which is relevant to the claim, and which is in the possession of the Plan Administrator or Alleghany; and

(iv) a statement of the claimant’s right to bring an action with respect to the matter raised in the claim under Section 502(a) of ERISA.

The Plan Administrator shall provide the claimant with reasonable access to, and copies of, any documents, records and other information which the claimant is entitled to receive, as indicated in the notification.

7.03 Conflicts of Interest. The Plan Administrator shall not participate in the resolution of any question which relates directly or indirectly to him and which, if applied to him, would significantly vary his eligibility for, or the amount of, any benefit payable to him. In cases involving the disqualification under this Section 7.03 of the Plan Administrator, the questions at issue shall be certified to the Compensation Committee of the Board for resolution.

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ARTICLE VIII.
LIMITATION OF RIGHTS AND OBLIGATIONS

8.01 Plan is Voluntary. Although it is the intention of Alleghany that the Plan shall be continued, the Plan is entirely voluntary on the part of Alleghany and the Plan’s continuance is not a contractual obligation of Alleghany. Notwithstanding any termination of the Plan by Alleghany, Alleghany agrees as a contractual obligation with the Participants to pay all amounts as shall be necessary to provide the retirement benefits accrued by them under the Plan as of the date of any such termination of the Plan.

8.02 Creation of Certain Employment Rights. The Plan shall be deemed to constitute a contract between Alleghany and each Participant and is consideration or inducement for the employment of the Participant by Alleghany. Notwithstanding the foregoing, nothing contained in the Plan shall be deemed (a) to give any person the right to be retained in the service of Alleghany or to be continued as an officer of Alleghany or (b) to interfere with the right of Alleghany to discharge any person at any time without regard to the effect which such discharge shall have upon his rights or potential rights, if any, under the Plan.

8.03 Distributions Only from Alleghany. Each Participant and any other person who shall claim any retirement benefit or other rights under the Plan shall be entitled to look only to Alleghany for any payment or benefit, and no member of the Board, officer or employee of Alleghany shall be liable in any manner if Alleghany shall fail to meet its obligations hereunder. Each Participant shall be only an unsecured general creditor of Alleghany with respect to the retirement benefits to which he is entitled under this Plan.

ARTICLE IX.
AMENDMENT AND TERMINATION

9.01 Amendment. The Plan may be amended, whether prospectively or retroactively, in whole or in part, at any time, or from time to time, whether upon termination or otherwise, as to any or all of its provisions, by, or pursuant to authorization contained in, a resolution adopted by the Board; provided, however, that no amendment may reduce the accrued benefit of any Participant (calculated as if the Plan then terminated).

9.02 Termination. The Board may at any time terminate the Plan, in whole or part.

9.03 Payment of Benefits upon Termination. Upon termination of the Plan, benefits may be paid directly by Alleghany or by means of insurance and/or annuity contracts purchased from one or more insurance companies either (a) by payment of the benefits when and as called for under the Plan until such time as all benefits are paid, or (b) by distribution of the Actuarial Equivalent of the accrued retirement benefits of each Participant, in cash in one lump sum or (c) by the purchase of annuity contracts of such type as the Board shall determine; provided, however, that no payment shall be made in a form or at a time which shall violate Section 409A of the Code. For this and all other purposes of the Plan, the accrued benefit of any Participant shall equal the retirement benefit (or the lump sum Actuarial Equivalent thereof) the Participant

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would have been entitled to receive at the time of reference if his Termination of Employment were the date of the Plan termination or the time of reference, as the case may be, and the Participant’s retirement benefits were payable as of the date, and in the form, then elected by the Participant pursuant to Section 5.07 or as otherwise provided in the Plan.

ARTICLE X.
LIMITATION ON ASSIGNMENT

10.01 Spendthrift Provision. In order that the benefits hereunder shall be fully protected against claims of all sorts, direct or otherwise, none of the benefits provided hereunder to any person shall be assignable or transferable voluntarily, nor shall they be subject to the claims of any beneficiary or creditor whatsoever, nor subject to attachment, garnishment or other legal process by any creditor or to the jurisdiction of any bankruptcy court or any insolvency proceedings by operation of law, or otherwise. No person shall have any right to alienate, anticipate, pledge, sell, transfer, assign, commute, or encumber any of such benefits voluntarily or involuntarily.

10.02 Incompetence of Participant or Beneficiary. If the Plan Administrator receives evidence satisfactory to him that a person entitled to receive any payment under the Plan is legally incompetent to receive such payment and to give valid release therefor, such payment may be made to the guardian, committee, or other representative of such person duly appointed by a court of competent jurisdiction. If a person or institution other than a guardian, committee, or other representative of such person who has been duly appointed by a court of competent jurisdiction is then maintaining or has custody of such incompetent person, the payment may be made to such other person or institution and the release of such other person or institution shall be valid and complete discharge for the payment.

ARTICLE XI.
MISCELLANEOUS

11.01 Governing Laws. This Plan and all provisions thereof shall be construed and administered according to the laws of the State of New York without giving effect to the principle of conflicts of law thereof.

11.02 Name. The name of this Plan is the “Alleghany Corporation Retirement Plan.”

11.03 Titles and Heading not to Control. The titles to the Articles and the headings of Sections in the Plan are placed herein for convenience of reference only, and in case of any conflict, the text of this instrument, rather that such titles or headings, shall control.

11.04 Gender and Person. The masculine pronoun shall include the feminine, the feminine pronoun shall include the masculine and the singular shall include the plural wherever the context so requires.

11.05 Preservation of Pre-Amendment Accrued Benefits. Notwithstanding any

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provision of the Plan to the contrary, each Participant who was employed by Alleghany on December 31, 2006, shall always be entitled to receive no less than the amount of the retirement benefits (and any related tax distributions) which such Participant had accrued as of December 31, 2006, payable in such amounts, subject to such adjustments and utilizing such factors and methods pursuant to the terms and provisions of the Plan as in effect prior to its amendment effective as of December 31, 2006; provided that the foregoing shall not entitle any Participant to payment of his retirement benefits prior to the time provided in this Plan as in effect at the time such retirement benefits commence. The amount of the retirement benefits (and any tax distributions) that a Participant may be entitled to receive pursuant to the provisions of this Section 11.05 are in lieu of, and not in addition to, the retirement benefits and entitlements to which such Participant is then entitled to under this Plan as so amended effective as of December 31, 2006.

11.06 Alleghany Capital Partners LLC. The Board may designate officers of Alleghany Capital Partners LLC (“ACP”) to participate in the Plan and accrue benefits hereunder as if each such designated officer were an officer of Alleghany (each an “ACP Participant”). During the period such ACP Participant is an officer of ACP, such ACP Participant shall be treated as employed by, and an officer of, Alleghany for purposes of applying the provisions of the Plan relating to participation, vesting and the entitlement to, and amount of, retirement benefits.

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ALLEGHANY CORPORATION RETIREMENT PLAN

EXHIBIT I

Pre-Effective Date Years of Service


		Years of
Name Sismondo, Peter		Service at 12/31/88 1.0

EXHIBIT II

Special Grants of Additional Years of Service


Name		Additional Years of Service
Hart, Robert M.		5

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EXHIBIT III

Benson Chapman


	Accumulation of
Retirement	Secular Lump Sum
Age	Payment
63		1,851,387
64		1,917,111
65		1,985,169
66		2,055,643
67		2,128,618
68		2,204,185
69		2,282,433
70		2,363,459
71		2,447,362
72		2,534,243
73		2,624,209
74		2,717,368
75		2,813,834

Robert Hart


	Accumulation of
Retirement	Secular Lump Sum
Age	Payment
60		5,718,868
61		5,921,889
62		6,132,116
63		6,349,806
64		6,575,224
65		6,808,644
66		7,050,350
67		7,300,638
68		7,559,810
69		7,828,183
70		8,106,084
71		8,393,850
72		8,691,832
73		9,000,393
74		9,319,906
75		9,650,763

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EXHIBIT III (con’t)

Peter Sismondo


		Accumulation of		Ongoing Single		Ongoing Single		Accumulation of
Retirement		Secular Annuity		Life Secular		Life Tax-Qualified		Tax-Qualified
Age		Payments		Annuity Payments		Annuity Payments		Annuity Payments
	55		0		140,252		1,473.44		0
	56		143,397		140,252		1,536.59		0
	57		292,731		140,252		1,599.74		0
	58		448,248		140,252		1,662.89		0
	59		610,203		140,252		1,726.03		0
	60		778,862		140,252		1,789.18		0
	61		954,505		140,252		1,852.33		0
	62		1,137,418		140,252		1,915.48		0
	63		1,327,905		140,252		1,978.62		0
	64		1,526,278		140,252		2,041.77		0
	65		1,732,863		140,252		2,104.92		0
	66		1,948,001		140,252		2,104.92		2,152
	67		2,172,045		140,252		2,104.92		4,393
	68		2,405,365		140,252		2,104.92		6,727
	69		2,648,345		140,252		2,104.92		9,158
	70		2,901,384		140,252		2,104.92		11,689
	71		3,164,898		140,252		2,104.92		14,325
	72		3,439,322		140,252		2,104.92		17,070
	73		3,725,108		140,252		2,104.92		19,929
	74		4,022,724		140,252		2,104.92		22,907
	75		4,332,663		140,252		2,104.92		26,007

Note: In applying the reduction in Section 4.02, the amounts shown above in this Exhibit III: (i) as “Accumulations of Secular Annuity Payments” and “Accumulation of Tax-Qualified Annuity Payments” are converted from a lump sum to the form provided in Article IV on an Actuarial Equivalent basis, and (ii) as “Annuity Payments” are converted from an annual amount payable monthly of the annuity form so specified to the form provided in Article IV on an Actuarial Equivalent basis. In each case, such Actuarial Equivalent basis shall be determined as of the date the Participant’s retirement benefits commence, and if the date the Participant’s retirement benefits commence is other than the first day of the month coinciding with or next following the retirement age indicated, the amount utilized will be based upon the amounts shown above interpolated for completed months between the retirement ages indicated and the date such retirement benefits commence.

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EX-10.2 3 y34550exv10w2.htm EX-10.2: OFFICERS AND DIRECTORS DEFERRED COMPENSATION PLAN EX-10.2

Exhibit 10.2

ALLEGHANY CORPORATION OFFICERS, HIGHLY
COMPENSATED EMPLOYEES AND DIRECTORS
DEFERRED COMPENSATION PLAN

Alleghany Corporation Officers, Highly Compensated Employees and Directors Deferred Compensation Plan (the “Plan”), effective as of January 1, 2002, provides for unfunded deferred compensation arrangements for officers, certain highly compensated employees and directors of Alleghany Corporation, a Delaware corporation (“Alleghany”), as well as a savings benefit for officers and certain highly compensated employees of Alleghany.

1. Purposes of the Plan.

The purposes of the Plan are (i) to provide a means to defer a portion of the compensation of the officers of Alleghany, highly compensated employees of Alleghany designated by the Board of Directors of Alleghany (the “Board”) and directors of Alleghany and (ii) to provide a savings benefit for officers of Alleghany and highly compensated employees of Alleghany designated by the Board.

2. Administration of the Plan.

The Plan shall be administered by an officer of Alleghany (the “Plan Administrator”) appointed by the Board to serve as administrator under the direction of the Board (the “Plan Administrator”). The Board shall have full power and authority to interpret, construe, administer, and amend the Plan, provided, however, that no amendment to the Plan shall reduce the benefits to which any Participant (as defined below) may be entitled hereunder, and the Board’s interpretation and construction thereof and actions taken thereunder shall be binding on all persons for all purposes.

3. Participation.

All officers who have completed one year of full-time service and other officers and highly compensated employees of Alleghany designated by the Board (“Savings Benefit Participants”) shall participate in the Plan in respect of the savings benefit described in section 4(b) hereof, and directors (“Director Participants”) and officers and certain highly compensated employees of Alleghany designated by the Board (“Officer Participants”) of Alleghany shall be eligible to participate in the Plan by deferring amounts described in section 4(c) hereof. The term “Participants” as used in the Plan shall include Savings Benefit Participants, Director Participants and Officer Participants collectively.

4. Deferred Compensation.

(a) Prime Rate Accounts. Alleghany shall establish in respect of each Savings Benefit Participant a separate book reserve account (“Savings Benefit Prime Rate Account”), and shall credit to such Savings Benefit Prime Rate Account (or if section 4(e) shall apply, to the Savings Benefit Common Stock Account described thereunder), for eventual payment on the basis set forth in section 4(f) hereof, the savings benefit described in section 4(b) below.

Subject to the limitations set forth in section 4(g) hereof and to such administrative rules as may be established by the Plan Administrator, each Participant may from time to time enter into one or more agreements with Alleghany (“Deferred Compensation Agreements”) which in the aggregate may provide for the establishment of one or more separate book reserve accounts “Deferred Compensation Prime Rate Accounts” and for the crediting to such Deferred Compensation Prime Rate Accounts or if section 4(e) shall apply, to the Deferred Compensation Common Stock Accounts of Officer Participants described thereunder for eventual payment on the basis set forth in section 4(g) below, of the items described in section 4(c) below. Savings

Benefit Prime Rate Accounts and Deferred Compensation Prime Rate Accounts are together referred to herein as “Prime Rate Accounts.”

(b) Savings Benefit. On the 30th days of March, June, September and December of each year, Alleghany will credit each Savings Benefit Prime Rate Account (or if section 4(e) shall apply, the Savings Benefit Common Stock Account described thereunder) with an amount equal to 3.75% of the base annual salary (excluding bonuses, commissions, severance pay, amounts deferred under this section 4(b) and contributions to employee benefit plans maintained by Alleghany, but including base annual salary deferred under section 4(c)(1) below) payable to the Savings Benefit Participant by Alleghany during the quarter then ended.

(c) Optional Deferral. Deferred Compensation Agreements entered into by Officer Participants and Director Participants of Alleghany may provide for the deferral of all or any part of the following (as applicable):

(1) The base annual salary (determined as provided in section 4(b) above) payable to such person by Alleghany;

(2) Directors’ fees payable to such person by Alleghany;

(3) Entitlements of such person under the Alleghany Corporation Management Incentive Plan or any similar bonus plan of Alleghany;

(4) Entitlements of such person under the Alleghany Corporation 2002 Long-Term Incentive Plan, the Alleghany Corporation 1993 Long-Term Incentive Plan or any successor long-term incentive plan (collectively, “Long-Term Incentive Plans”); and

(5) Any cash bonus to which such person may become entitled other than pursuant to a plan referred to in section 4(c)(3) or section 4(c)(4).

Amounts described in sections 4(c)(1) through 4(c)(5) shall be credited to the specified Deferred Compensation Prime Rate Account (or if section 4(e) shall apply, to the Deferred Compensation Common Stock Account described thereunder) in lieu of payment in the ordinary course and as of the times when they would have been payable in the ordinary course. Entitlements in Common Stock of Alleghany shall be valued at the mean between the high and low prices thereof on the New York Stock Exchange Consolidated Tape on the date of crediting.

(d) Interest. Amounts credited to a Prime Rate Account shall, while held in such Prime Rate Account, be deemed to earn interest at the prime rate compounded on an annual basis and credited to the Prime Rate Account on December 31st of each year or, if earlier, on the date of transfer or payment of amounts out of such Prime Rate Account. The “prime rate” for purposes hereof shall mean the rate of interest announced by JP Morgan Chase Bank, N.A. as its prime rate at the close of the last business day of each month, which rate shall be deemed to remain in effect through the last business day of the next month.

(e) Common Stock Accounts. Upon the request of an Officer Participant made by written notice given to the Plan Administrator, Alleghany shall establish in respect of such Officer Participant a common stock account (“Savings Benefit Common Stock Account”) to which all or a portion of the amounts described in section 4(b) shall be credited. A Deferred Compensation Agreement entered into between an Officer Participant and Alleghany may provide for the establishment of a common stock account (“Deferred Compensation Common Stock Account”) to which all or a portion of the amounts deferred thereunder shall be credited;

provided, however, that the sum of the amounts credited to an Officer Participant’s Savings Benefit Common Stock Account and Deferred Compensation Common Stock Account (including amounts credited thereto in respect of dividend income) may at no time exceed an amount equal to (x) 30% of the cumulative base annual salary (determined as provided in section 4(b) above) of such Officer Participant during the period in respect of which the savings benefit referred to in section 4(b) has been credited for such Officer Participant less (y) the sum of the original credits actually paid out to such Officer Participant in accordance with the provisions of section 4(f) hereof. Savings Benefit Common Stock Accounts and Deferred Compensation Common Stock Accounts are together referred to herein as “Common Stock Accounts.”

Amounts credited to a Common Stock Account shall, while held in such Common Stock Account, reflect the investment experience which the account would have had if the amount so designated had been invested (without commissions or other transaction expenses) and held in whole or fractional shares of common stock of Alleghany (“Alleghany Common Stock”) during such period. Common Stock Accounts shall be adjusted as appropriate to reflect cash and stock dividends, stock splits, and other similar distributions or transactions which, from time to time, occur with respect to Alleghany Common Stock during the appropriate period. Dividends and other distributions shall be automatically credited to the Common Stock Account at their cash value or the fair market value of any non-cash dividend or other distribution and shall be deemed to purchase Alleghany Common Stock on the date of payment thereof. Alleghany Common Stock shall be deemed acquired, and shall be valued for purposes of payout or transfer, at a price per share equal to the mean between the high and low prices thereof on the applicable date on the New York Stock Exchange Consolidated Tape.

Subject to rules which may be established by the Plan Administrator or by the Board, the designation of the account to which the amounts described in section 4(b) shall be credited, or the allocation of such amounts between accounts, may from time to time be changed. Subject to the provisions of section 5(h) hereof and to rules which may be established by the Plan Administrator or by the Board, an Officer Participant may direct that amounts credited to a Prime Rate Account be transferred to a Common Stock Account, or that amounts credited to a Common Stock Account be transferred to a Prime Rate Account, by written notice given to the Plan Administrator. Except as may otherwise be agreed to by the Plan Administrator, amounts transferred as set forth above shall be paid according to the same payout schedule in effect with respect to such amounts prior to the transfer.

(f) Payout of Section 4(b) Amounts. All amounts theretofore credited to a Savings Benefit Prime Rate Account and/or to an Officer Participant’s Savings Benefit Common Stock Account shall be paid to the Participant in a lump sum (or in such installments as approved by the chief executive officer of Alleghany in his sole discretion) at the conclusion of the then current five-year savings benefit deferral period or, if earlier, upon the date of the Participant’s termination of employment with Alleghany or such date or dates after such termination as approved by the chief executive officer of Alleghany in his sole discretion. The Board may, at its sole option, cause any savings benefit deferral period to terminate at such earlier time as the Board may, in its sole discretion, determine, in which event the next succeeding five-year savings benefit deferral period shall commence on the day following the date the preceding period terminated. The first five-year savings benefit deferral period commenced on January 2, 1984 and terminated on December 15, 1988.

Subject to rules which may be established by the Plan Administrator or by the Board, a Participant may defer payment of all or a portion of the amounts otherwise payable to him (including as a result of successive deferrals) at the conclusion of each savings benefit deferral period until completion of the next succeeding savings benefit deferral period or, if earlier, until the date of the Participant’s termination with Alleghany (or such date or dates after such termination as approved by the chief executive officer of Alleghany in his sole discretion), by giving written notice to the Plan Administrator not later than six months prior to the date on which such amount would otherwise be paid.

(g) Payout of Section 4(c) Amounts. Each Deferred Compensation Agreement entered into between Alleghany and a Participant shall set forth the terms for payment in cash of amounts attributable to compensation deferred thereunder (a “Payout Schedule”) subject to the following:

(1) A Payout Schedule may provide for a lump sum payment or for payment in annual installments.

(2) Payments shall not extend beyond the year in which the Participant attains age 90.

(3) All payments shall be made in the month of January.

(4) The amount of each annual installment payment shall be computed by dividing the then balance of such Deferred Compensation Prime Rate Account and/or Deferred Compensation Common Stock Account by the number of installments remaining, including the current installment; provided, however, that a different method of computation may be specified if agreed to by Alleghany.

(5) In addition to the normal payout schedule specified with respect to such Deferred Compensation Prime Rate Account and/or Deferred Compensation Common Stock Account, special payout schedules may be specified with respect to such account to apply, respectively, in the event of (i) the Participant’s disability, (ii) his death or (iii) the termination of his employment or his ceasing to be a director of Alleghany.

(6) Notwithstanding the foregoing or any provision of any Deferred Compensation Agreement, whether in effect as of the date hereof or subsequently entered into, the Board may at its sole option direct that payment to a Participant of amounts described in section 4(c) shall occur at such earlier time as the Board may, in its sole discretion, designate.

Deferred Compensation Agreements entered into between a Director Participant and Alleghany may provide in aggregate for payment in accordance with no more than two Payout Schedules. Deferred Compensation Agreements entered between an Officer Participant and Alleghany may provide in the aggregate for payment in accordance with no more than two Payout Schedules applicable to Deferred Compensation Prime Rate Accounts and two Payout Schedules applicable to Deferred Compensation Common Stock Accounts.

(h) Beneficiaries. A Savings Benefit Participant may designate a beneficiary to receive payment of the value of amounts credited to his Savings Benefit Prime Rate Account and/or to his Savings Benefit Common Stock Account following the Participant’s death by filing a written notice with the Plan Administrator. In the case of deferral by a Director Participant of amounts described in section 4(c), a beneficiary for each Deferred Compensation Prime Rate Account following a different Payout Schedule may be designated in the Deferred Compensation

Agreement or Agreements providing for such deferral. In the case of deferral by an Officer Participant of amounts described in section 4(c), a beneficiary for each Deferred Compensation Prime Rate Account or Deferred Compensation Common Stock Account following a different Payout Schedule may be designated in the Deferred Compensation Agreement or Agreements providing for such deferral. A Participant may at any time, and from time to time, change beneficiaries by filing a written notice with the Plan Administrator.

(i) Hardship. Notwithstanding anything herein contained to the contrary, upon the request of a Participant and based on a showing of financial hardship caused by accident or illness, or by an event beyond the control of the Participant, the Board may, in its sole discretion, vary the manner and time of making the payments under section 4(g) from those provided for in the Participant’s Deferred Compensation Agreement.

(j) Deferred Compensation Agreements. Deferred Compensation Agreements shall be entered into by the parties:

(1) No later than June 15th and December 15th with respect to amounts described in sections 4(c)(1) and 4(c)(2) which would otherwise be payable during the next six calendar months;

(2) With respect to entitlements under the Alleghany Corporation Management Incentive Plan or any similar bonus plan, no later than December 15th of the year prior to the year during which the bonus is earned;

(3) With respect to entitlements under the Long-Term Incentive Plans, (i) in the case of awards of performance shares, no later than September 1 of the calendar year preceding the year in which the Participant would otherwise be entitled to payment with respect

to such performance shares, and (ii) in the case of other forms of awards, as the Plan Administrator may designate;

(4) With respect to any bonus referred to in section 4(c)(5), no less than two weeks prior to the authorization of such bonus by Alleghany.

The Plan Administrator may prescribe forms of Deferred Compensation Agreement. Deferred Compensation Agreements shall be executed on behalf of Alleghany either by the Chairman of the Board or by the President of Alleghany, except that in the case of a Deferred Compensation Agreement with the Chairman of the Board such Deferred Compensation Agreement shall be executed on behalf of Alleghany by the President of Alleghany and in the case of a Deferred Compensation Agreement with the President such Deferred Compensation Agreement shall be executed on behalf of Alleghany by the Chairman of the Board of Alleghany. Subject to the provisions of section 5(h) hereof, Deferred Compensation Agreements may be amended or modified by agreement of the Participant and Alleghany, including amendments or modifications to extend or accelerate scheduled payments.

5. General Provisions.

(a) This Plan is intended to constitute a plan which is unfunded and is maintained by Alleghany primarily for the purpose of providing deferred compensation for the directors, officers and certain highly compensated employees of Alleghany, representing a select group of management or highly compensated employees of Alleghany within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended. Nothing in the Plan shall create, or be construed to create, a trust or fiduciary relationship of any kind between Alleghany and a Participant, his designated beneficiary, or any

other person. Any amounts deferred under the Plan shall be construed for all purposes as a part of the general funds of Alleghany, and any right to receive payments from Alleghany under the Plan shall be no greater than the right of any unsecured general creditor. Alleghany may, but need not, purchase any securities or instruments as a means of hedging its obligations to any Participant under the Plan, but if it does, neither the Participant, his beneficiary nor any other person shall have any interest therein or other right to such property. All payments hereunder shall be made in cash and no Participant shall be entitled hereunder to any shares of Alleghany Common Stock.

(b) The right of any Participant to any amount payable pursuant to this Plan shall not be assigned, transferred, pledged or encumbered except by the laws of descent and distribution.

(c) Participation in the Plan shall not be construed as conferring upon any Participant the right to continue as a director of Alleghany or in the employ of Alleghany as an executive or in any other capacity.

(d) The Board may at any time, in its sole discretion, suspend the availability of the Common Stock Account or impose limitations upon the frequency and amount of transfers to and from the Common Stock Account.

(e) No employee benefits to which a Participant would be entitled under any other employee benefit plan or arrangement maintained by Alleghany for its employees shall be decreased or modified because of the deferral of salary under the Plan.

(f) Payment by Alleghany to a Participant or to a Participant’s beneficiary or beneficiaries, as designated or otherwise determined pursuant to the provisions of the Plan, shall be binding on all interested parties and on such Participant’s heirs, executors, administrators and

assigns, and shall discharge Alleghany and its directors, officers and employees from all claims, demands, actions or causes of action of every kind arising out of or on account of such Participant’s participation in the Plan, known or unknown, for himself, his heirs, executors, administrators and assigns.

(g) Notwithstanding the provisions of sections 4(f) and 4(g) hereof, but subject to section 5(h) hereof, all amounts described in sections 4(b) and 4(c) hereof and credited to a Participant’s Prime Rate Account and/or an Officer Participant’s Common Stock Account, together with interest and/or dividend income accrued thereon, shall become immediately due and payable to such Participant in the event of the liquidation of Alleghany or in the event that a petition shall be filed or a case commenced in respect of Alleghany (by Alleghany or by any other person) under Title 11 of the United States Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or that any court shall appoint a receiver, liquidator, trustee (or similar official of Alleghany) or order the winding-up or liquidation of the affairs of Alleghany, and such case or order shall continue unstayed and in effect for a period of sixty consecutive days.

(h) Notwithstanding any other provision hereof, the Plan Administrator shall give effect to a transfer of amounts between a Common Stock Account and a Prime Rate Account only if an Officer Participant directs such transfer by written notice given to the Plan Administrator during the period beginning on the third business day and ending on the twelfth business day following the issuance by Alleghany of a press release setting forth its quarterly or annual summary statement of sales and earnings (“Common Stock Account Transfer Period”). An amendment or modification of a Payout Schedule set forth in a Deferred Compensation Agreement providing for deferral of amounts described in section 4(c) hereof and crediting of

such amounts to a Common Stock Account shall be entered into by Alleghany and an Officer Participant only during a Common Stock Account Transfer Period. The Plan Administrator may establish other rules in respect of transfers of amounts to and from Common Stock Accounts and execution of amendments to Deferred Compensation Agreements providing for crediting of amounts to Common Stock Accounts.

(i) All amounts deferred under the Plan shall be subject to employment taxes, and all payments shall be subject to income tax withholding, if applicable. Each Participant shall make arrangements satisfactory to Alleghany with respect to the collection of such taxes with respect to all amounts deferred or payable hereunder.

(j) The Plan is the successor plan to the Alleghany Corporation Deferred Compensation Plan (the “Old Plan”). Accordingly, effective as of January 1, 2002, each separate book reserve account maintained by Alleghany pursuant to the Old Plan as of the close of business on December 31, 2001, for each person who is or was an officer or director (“Old Plan Participants”) shall be transferred to, and shall become, a separate book reserve account for such Participant under this Plan, and all amounts to which any such Old Plan Participant was therefore entitled to under the Old Plan shall instead be paid pursuant to this Plan. Further, each election and beneficiary designation of an Old Plan Participant in effect under the Old Plan shall be given effect as if made pursuant to this Plan. Finally, each reference to the Old Plan in any Deferred Compensation Agreement of an Old Plan Participant shall be deemed to refer to this Plan.

(k) The Board may designate officers of Alleghany Capital Partners LLC (“ACP”) to participate in the Plan and accrue benefits hereunder as if such officer were an officer of Alleghany (each an “ACP Participant”). During the period an ACP Participant is an officer of

ACP, such ACP Participant shall be treated as employee of Alleghany and a Savings Benefit Participant and an Officer Participant for purposes of the Plan.

EX-31.1 4 y34550exv31w1.htm EX-31.1: CERTIFICATION EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Weston M. Hicks, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of Alleghany Corporation (the “Registrant”);

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

	4.		The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.



Date: May 7, 2007	/s/ Weston M. Hicks
	Weston M. Hicks
	President and chief executive officer

EX-31.2 5 y34550exv31w2.htm EX-31.2: CERTIFICATION EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Roger B. Gorham, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of Alleghany Corporation (the “Registrant”);

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

	4.		The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

	a.		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.		evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.		disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

Exhibit 31.2

	a.		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

	b.		any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 7, 2007



	/s/ Roger B. Gorham
	Roger B. Gorham
	Chief Financial Officer

EX-32.1 6 y34550exv32w1.htm EX-32.1: CERTIFICATION EX-32.1

Exhibit 32.1

ALLEGHANY CORPORATION

CERTIFICATION

In connection with the periodic report of Alleghany Corporation (the “Company”) on Form 10-Q for the quarter ended March 31,2007, as filed with the Securities and Exchange Commission (the “Report”), I, Weston M. Hicks, President and chief executive officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:

(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification, which accompanies the Report, has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.



Date: May 7, 2007	By:	/s/ Weston M. Hicks
		Weston M. Hicks
		President and chief executive officer

EX-32.2 7 y34550exv32w2.htm EX-32.2: CERTIFICATION EX-32.2

Exhibit 32.2

ALLEGHANY CORPORATION

CERTIFICATION

In connection with the periodic report of Alleghany Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2007, as filed with the Securities and Exchange Commission (the “Report”), I, Roger B. Gorham, Senior Vice President and chief financial officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that:

(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

This Certification, which accompanies the Report, has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.



Date: May 7, 2007	By:	/s/ Roger B. Gorham
		Roger B. Gorham
		Senior Vice President and chief financial officer

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