Schedule II – Condensed Financial Information of Registrant

Condensed Balance Sheets

ALLEGHANY CORPORATION

December 31, 2014 and 2013


	2014		2013
	(in thousands)
Assets
Equity securities (cost: 2014 – $47,387; 2013 – $23,576)	$	49,432	$	44,536
Debt securities (amortized cost: 2014 – $70,282; 2013 – $70,758)		71,262		68,731
Short-term investments		152,943		78,101
Cash		10,535		17,356
Property and equipment at cost, net of accumulated depreciation and amortization		498		584
Other assets		24,694		22,712
Net deferred tax assets		41,803		31,097
Investment in subsidiaries		8,241,843		7,471,271

Total assets	$	8,593,010	$	7,734,388

Liabilities and Stockholders’ Equity
Senior Notes	$	997,025	$	698,910
Other liabilities		101,081		78,825
Current taxes payable		12,860		9,132

Total liabilities		1,110,966		786,867
Stockholders’ equity attributable to Alleghany stockholders		7,473,428		6,923,757
Noncontrolling interest		8,616		23,764

Stockholders’ equity		7,482,044		6,947,521

Total liabilities and stockholders’ equity	$	8,593,010	$	7,734,388

See accompanying Notes to Condensed Financial Statements

Schedule II – Condensed Financial Information of Registrant (continued)

Condensed Statements of Earnings

ALLEGHANY CORPORATION

Year ended December 31,


	2014		2013		2012
	(in thousands)
Revenues
Net investment income	$	8,169	$	7,540	$	10,702
Net realized capital gains		14,349		(4,769)		39,966
Other than temporary impairment losses		-		-		-
Gain on bargain purchase		-		-		494,940
Other income		265		188		193

Total revenues		22,783		2,959		545,801


Costs and Expenses
Interest expense		42,310		37,302		27,635
Corporate administration		45,741		36,111		75,806

Total costs and expenses		88,051		73,413		103,441


Operating (losses) profit		(65,268)		(70,454)		442,360
Equity in earnings of consolidated subsidiaries		997,177		925,690		276,916

Earnings before income taxes		931,909		855,236		719,276
Income taxes		251,777		225,882		17,032

Net earnings		680,132		629,354		702,244
Net earnings attributable to noncontrolling interest		893		933		-

Net earnings attributable to Alleghany stockholders	$	679,239	$	628,421	$	702,244

See accompanying Notes to Condensed Financial Statements

Schedule II – Condensed Financial Information of Registrant (continued)

Condensed Statements of Cash Flows

ALLEGHANY CORPORATION

Year ended December 31,


	2014		2013		2012
	(in thousands)
Cash flows from operating activities
Net earnings	$	680,132	$	629,354	$	702,244

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Equity in undistributed net (earnings) losses of consolidated subsidiaries		(722,445)		(674,337)		(246,566)
Depreciation and amortization		1,845		1,920		2,216
Net realized capital (gains) losses		(14,349)		4,769		(39,966)
Gain on bargain purchase		-		-		(494,940)
Increase (decrease) in other liabilities and taxes payable		22,654		11,737		(32,261)

Net adjustments		(712,295)		(655,911)		(811,517)

Net cash (used in) provided by operating activities		(32,163)		(26,557)		(109,273)


Cash flows from investing activities
Purchases of debt securities		-		-		(363,718)
Purchases of equity securities		(226,418)		-		(155,441)
Sales of debt securities		-		218,657		72,027
Maturities and redemptions of debt securities		121		1,078		2,312
Sales of equity securities		216,951		125,724		168,525
Net (purchase) sale in short-term investments		(74,842)		(59,247)		342,418
Purchases of property and equipment		(158)		(243)		(29)
Purchase of subsidiary, net of cash acquired		-		-		(828,222)
Other, net		383		15,910		(14,995)

Net cash (used in) provided by investing activities		(83,963)		301,879		(777,123)


Cash flows from financing activities
Proceeds from issuance of Senior Notes		297,942		-		399,592
Debt issue costs paid		(3,625)		-		(3,470)
Treasury stock acquisitions		(300,478)		(40,389)		(17,768)
Tax benefit on stock based compensation		-		-		295
Capital contributions to consolidated subsidiaries		(453,551)		(429,371)		(165,479)
Distributions from consolidated subsidiaries		566,723		218,800		661,500
Other, net		2,294		(8,385)		9,279

Net cash provided by (used in) financing activities		109,305		(259,345)		883,949


Effect of exchange rate changes on cash		-		-		-

Net (decrease) increase in cash		(6,821)		15,977		(2,447)
Cash at beginning of period		17,356		1,379		3,826

Cash at end of period	$	10,535	$	17,356	$	1,379


Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest paid	$	36,675	$	36,675	$	26,830
Income taxes paid (refunds received)		221,309		78,293		136,015

See accompanying Notes to Condensed Financial Statements

Schedule II – Condensed Financial Information of Registrant (continued)

Notes to Condensed Financial Statements

ALLEGHANY CORPORATION

1. Investment in Consolidated Subsidiaries. Reference is made to Notes 1 and 2 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

2. Income Taxes. Reference is made to Note 9 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

3. Commitments and Contingencies. Reference is made to Note 12 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

4. Stockholders’ Equity. Reference is made to Note 10 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K with respect to stockholders’ equity and surplus available for dividend payments to Alleghany from its subsidiaries.

5. Senior Notes. Reference is made to Note 8 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.

6. Gain on bargain purchase in 2012. Reference is made to Note 2 to the Consolidated Financial Statements set forth in Part II, Item 8, “Financial Statements and Supplementary Data” of this Form 10-K.