Edgar Filing: ALLEGHANY CORP /DE

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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ALLEGHANY CORPORATION
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(Name of Registrant as Specified In Its Charter)

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ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 2003 AT 10:30 A.M., LOCAL TIME
------------------------

J. P. MORGAN CHASE & CO.
270 PARK AVENUE
ELEVENTH FLOOR, ROOM C
NEW YORK, NEW YORK

Notice is hereby given that the 2003 Annual Meeting of Stockholders of
Alleghany Corporation (the "Company") will be held at J. P. Morgan Chase & Co.,
270 Park Avenue, Eleventh Floor, Room C, New York, New York, on Friday, April
25, 2003 at 10:30 a.m., local time, for the following purposes:

1. To elect three directors for terms expiring in 2006.

2. To consider and take action upon a proposal to ratify the selection of
KPMG LLP, independent certified public accountants, as independent
auditors for the Company for the year 2003.

3. To transact such other business as may properly come before the meeting,
or any adjournment or adjournments thereof.

Holders of common stock of the Company are entitled to vote for the election
of directors and on each of the other matters set forth above.

The stock transfer books of the Company will not be closed. The Board of
Directors has fixed the close of business on March 3, 2003 as the record date
for the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof.

You are cordially invited to be present. Stockholders who do not expect to
attend in person are requested to sign and return the enclosed form of proxy in
the envelope provided. At any time prior to their being voted, proxies are
revocable by written notice to the Secretary of the Company or by voting at the
Annual Meeting in person.

By order of the Board of Directors

ROBERT M. HART
Senior Vice President, General
Counsel and Secretary

March 24, 2003

ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152

PROXY STATEMENT
------------------------

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 25, 2003

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This statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Alleghany Corporation (the "Company") from holders
of the Company's outstanding shares of common stock ("Common Stock") entitled to
vote at the 2003 Annual Meeting of Stockholders of the Company (and at any and
all adjournments thereof) for the purposes referred to below and set forth in
the accompanying Notice of Annual Meeting of Stockholders. These proxy materials
are being mailed to stockholders on or about March 24, 2003.

The Board of Directors has fixed the close of business on March 3, 2003 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, said meeting. Holders of Common Stock are entitled to one vote for
each share held of record on the record date with respect to each matter to be
acted on at the 2003 Annual Meeting.

On March 3, 2003, there were outstanding and entitled to vote 7,264,002
shares of Common Stock. The number of shares of Common Stock as of March 3,
2003, and the share ownership information provided elsewhere herein, do not
include shares to be issued by the Company in respect of the dividend of one
share of Common Stock for every 50 shares of Common Stock outstanding to be paid
by the Company on April 25, 2003 to stockholders of record at the close of
business on April 1, 2003.

PRINCIPAL STOCKHOLDERS

As of March 3, 2003, approximately 36.2 percent* of the Company's
outstanding Common Stock was believed to be beneficially owned by F.M. Kirby,
Allan P. Kirby, Jr., their sister, Grace Kirby Culbertson, and the estate or one
or more beneficiaries of the estate of Ann Kirby Kirby, the sister of Messrs.
Kirby and Mrs. Culbertson, primarily through a number of family trusts.

The following table sets forth the beneficial ownership of Common Stock as
of March 3, 2003 of certain persons believed by the Company to be the beneficial
owners of more than five percent of such class of securities.

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
---------------------------------------------------------------
SOLE VOTING SHARED VOTING POWER
NAME AND ADDRESS POWER AND/OR SOLE AND/OR SHARED PERCENT
OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
------------------- ----------------- ------------------- --------- --------

F.M. Kirby....................... 308,672 670,170 978,842(1) 13.5
17 DeHart Street
P.O. Box 151
Morristown, NJ 07963
Allan P. Kirby, Jr. ............. 539,361 -- 539,361(2) 7.4
14 E. Main Street
P.O. Box 90
Mendham, NJ 07945
Grace Kirby Culbertson........... 152,784 255,553 408,337(3) 5.6
Blue Mill Road
Morristown, NJ 07960
Estate of Ann Kirby Kirby........ 317,881 392,786 710,667(4) 9.8
c/o Carter, Ledyard & Milburn
LLP
2 Wall Street
New York, NY 10005
Southeastern Asset Management,
Inc. .......................... (5) (5) 751,634(5) 10.3
6075 Poplar Avenue
Suite 900
Memphis, TN 38119

---------------

* See Note (4) on page 3.

Franklin Mutual Advisers, LLC.... 713,169 -- 713,169(6) 9.8
51 John F. Kennedy Parkway
Short Hills, NJ 07078
The PNC Financial Services Group,
Inc. .......................... (7) (7) 419,672(7) 5.8
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222

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(1) Includes 110,344 shares of Common Stock held by F.M. Kirby as sole trustee
of trusts for the benefit of his children; 467,858 shares held by a trust of
which Mr. Kirby is co-trustee and primary beneficiary; and 202,312 shares
held by trusts for the benefit of his children and his children's
descendants as to which Mr. Kirby was granted a proxy and, therefore, had
shared voting power. Mr. Kirby disclaims beneficial ownership of the Common
Stock held for the benefit of his children and for the benefit of his
children and his children's descendants. Mr. Kirby held 198,328 shares
directly.

(2) Includes 305,655 shares held by a trust of which Allan P. Kirby, Jr. is
co-trustee and beneficiary; and 14,812 shares issuable under stock options
granted pursuant to the Amended and Restated Directors' Stock Option Plan
and the 2000 Directors' Stock Option Plan. Mr. Kirby held 218,894 shares
directly.

(3) Includes 45,333 shares of Common Stock held by Grace Kirby Culbertson as
co-trustee of trusts for the benefit of her children; and 210,220 shares
held by trusts for the benefit of Mrs. Culbertson and her descendants, of
which Mrs. Culbertson is co-trustee. Mrs. Culbertson held 152,784 shares
directly.

(4) Prior to her death in 1996, Ann Kirby Kirby had disclaimed being a
controlling person or member of a controlling group with respect to the
Company, and had declined to supply information with respect to her
ownership of Common Stock. Since her death, the representatives of the
estate of Mrs. Kirby have declined to supply information with respect to
ownership of Common Stock by her estate or its beneficiaries; therefore, the
Company does not know whether her estate or any beneficiary of her estate
beneficially owns more than five percent of its Common Stock. However, Mrs.
Kirby filed a statement on Schedule 13D dated April 5, 1982 with the
Securities and Exchange Commission reporting beneficial ownership, both
direct and indirect through various trusts, of 710,667 shares of the common
stock of Alleghany Corporation, a Maryland corporation

and the predecessor of the Company ("Old Alleghany"). Upon the liquidation
of Old Alleghany in December 1986, stockholders received $43.05 in cash and
one share of Common Stock for each share of Old Alleghany common stock. The
stock ownership information provided herein as to the estate of Mrs. Kirby
is based solely on her statement on Schedule 13D and does not reflect the
two-percent stock dividends paid in each of the years 1985 through 1997 and
1999 through 2002 by Old Alleghany or the Company; if Mrs. Kirby, her estate
and her beneficiaries had continued to hold in the aggregate 710,667 shares
together with all stock dividends received in consequence through the date
hereof, the beneficial ownership reported herein would have increased by
284,429 shares.

(5) According to an amendment dated February 3, 2003 to a Schedule 13G statement
filed by Southeastern Asset Management, Inc. ("Southeastern"), an investment
advisor, Southeastern had sole voting power over 297,378 shares, shared
voting power over 383,622 shares and no voting power over 70,634 shares, for
a total of 751,634 shares. Its dispositive power with respect to such shares
was reported as follows: sole dispositive power over 368,012 shares and
shared dispositive power over 383,622 shares. O. Mason Hawkins, Chairman of
the Board and Chief Executive Officer of Southeastern, joined in the filing
of Southeastern's amendment to its Schedule 13G statement in the event that
he could be deemed to be a controlling person of Southeastern as a result of
his official positions with Southeastern, or his ownership of Southeastern's
voting securities. Mr. Hawkins expressly disclaimed such control.
Southeastern's amendment to its Schedule 13G statement indicated that all
shares set forth therein were owned legally by clients of Southeastern and
no such shares were owned directly or indirectly by Southeastern or Mr.
Hawkins, both of whom disclaimed beneficial ownership of such shares. The
statement also indicated that 386,622 shares over which Southeastern had
shared voting power and shared dispositive power were owned by a series of
Longleaf Partners Funds Trust, an open-end management investment company
registered under the Investment Company Act of 1940, as amended.

(6) According to an amendment dated January 30, 2003 to a Schedule 13G statement
filed by Franklin Mutual Advisers, LLC ("Franklin"), Franklin had sole
voting power and sole dispositive power over 713,169 shares. The statement
indicated that such shares may be deemed to be beneficially owned by
Franklin, an investment advisory subsidiary of Franklin Resources, Inc.
("FRI"), and that, under Franklin's advisory contracts, all voting and
investment power over such shares was granted to Franklin. The statement
also indicated that Charles B. Johnson and Rupert H. Johnson, Jr. were the
principal shareholders of FRI, but beneficial ownership of the shares
reported therein are not attributed to FRI or Messrs. Johnson because
Franklin exercises voting and investment

powers over such shares independently of FRI and Messrs. Johnson. Franklin
disclaimed any economic interest or beneficial ownership of such shares.

(7) According to a Schedule 13G statement dated February 12, 2003 filed by The
PNC Financial Services Group, Inc. ("PNC"), a bank, PNC had sole voting
power over 1,170 shares, shared voting power over 305,655 shares, sole
dispositive power over 418,896 shares and shared dispositive power over
221,956 shares. PNC Bancorp, Inc. and PNC Bank, National Association,
subsidiaries of PNC, also joined in the filing.

1. ELECTION OF DIRECTORS

Pursuant to the Company's certificate of incorporation and by-laws, the
Board of Directors is divided into three separate classes of directors, which
are required to be as nearly equal in number as practicable. At each annual
meeting of stockholders, one class of directors is elected to a term of three
years. The Board of Directors currently consists of nine directors.

John J. Burns, Jr., Dan R. Carmichael and William K. Lavin have been
nominated by the Board of Directors for election as directors at the 2003 Annual
Meeting, each to serve for a term of three years, until the 2006 Annual Meeting
of Stockholders and until his successor is duly elected and qualified. Messrs.
Burns, Carmichael and Lavin were last elected by the stockholders of the Company
at their Annual Meeting on April 28, 2000.

Proxies in the enclosed form received from holders of Common Stock will be
voted for the election of the three nominees named above as directors of the
Company unless stockholders indicate otherwise. If any of the foregoing nominees
is unable to serve for any reason (which event is not anticipated), the shares
represented by the enclosed proxy may be voted for such other person or persons
as may be determined by the holders of such proxy unless stockholders indicate
otherwise. Directors will be elected by an affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy and
entitled to vote at the 2003 Annual Meeting. Thus, those nominees who receive
the highest, second-highest and third-highest numbers of votes for their
election as directors will be elected, regardless of the number of shares that
are not voted for the election of such nominees. Shares with respect to which
authority to vote for any nominee or nominees is withheld will not be counted in
the total number of shares voted for such nominee or nominees.

The following information includes the age, the year in which first elected
a director of the Company or Old Alleghany, the principal occupation (in
italics), and other directorships of each of the nominees named for election as
directors, and of the other current directors of the Company whose terms will
not expire until 2004 or 2005.

President, Alleghany Corporation;
Nominee for Election: director, Burlington Northern Santa Fe
John J. Burns, Jr. [PHOTO of John J. Burns, Corporation, Fidelity National Financial,
Age 71 Jr.] Inc., Mineral Holdings Inc. and World
Director since 1968 Minerals Inc. Chairman of the Nominating
Committee and member of the Executive
Committee.

President and Chief Executive Officer,
Nominee for Election: Ohio Casualty Corporation (property and
Dan R. Carmichael [PHOTO of Dan R. casualty insurance); director, Ohio
Age 58 Carmichael] Casualty Corporation and Platinum
Director since 1993 Underwriters Holdings, Ltd. Chairman of
the Compensation Committee and member of
the Audit Committee.

Nominee for Election: Financial Consultant; Chairman and
William K. Lavin [PHOTO of William K. Secretary, Novex Systems International,
Age 58 Lavin] Inc. Chairman of the Audit Committee and
Director since 1992 member of the Compensation Committee.

Allan P. Kirby, Jr. President, Liberty Square, Inc.
Age 71 [PHOTO of Alan P. Kirby, (investments); management of family and
Director since 1963 Jr.] personal affairs. Chairman of the
Term expires in 2004 Executive Committee.

Chairman and Chief Executive Officer,
GreenPoint Financial Corp. and its
Thomas S. Johnson subsidiary GreenPoint Bank (banking);
Age 62 [PHOTO of Thomas S. director, R.R. Donnelley & Sons Company,
Director since 1997 and Johnson] Online Resources Corporation, The Phoenix
for 1992-1993 Companies, Inc., and Lower Manhattan
Term expires in 2004 Development Corporation. Member of the
Audit Committee.

President, Saint Vincent College
(education); Vice Chairman, World Minerals
James F. Will Inc. and Chairman, Specialty Steel
Age 64 [PHOTO of James F. Will] Industry of North America; director,
Director since 1992 Breeze Industrial Products Corporation.
Term expires in 2004 Member of the Executive and Nominating
Committees.

F.M. Kirby Chairman of the Board, Alleghany
Age 83 [PHOTO of F.M. Kirby] Corporation. Member of the Executive
Director since 1958 Committee.
Term expires in 2005

Retired Executive, KeyCorp (banking);
Roger Noall Chairman, Victory Funds, and Victory
Age 67 [PHOTO of Roger Noall] Variable Insurance Funds; director, Elite
Director since 1996 Information Systems, Inc. and Inktomi
Term expires in 2005 Corporation. Member of the Compensation
and Nominating Committees.

Professor of Business Administration,
Fuqua School of Business at Duke
University (education); Chairman, Public
Rex D. Adams Broadcasting System, and Centre for
Age 63 [PHOTO of Rex D. Adams] Economic Policy Research; director,
Director since 1999 AMVESCAP PLC, and Vintage Petroleum, Inc.;
Term expires in 2005 trustee, Committee for Economic
Development, Vera Institute of Justice and
Woods Hole Oceanographic Institution.
Member of the Audit Committee.

All of the foregoing persons have had the principal occupations indicated
throughout the last five years, except as follows. Mr. Carmichael has been
President and Chief Executive Officer of Ohio Casualty Corporation since
December 12, 2000, and served as the President and Chief Executive Officer of
IVANS, Inc. (communications technology and remarketer) prior thereto. Mr. Will
has been President of Saint Vincent College since July 1, 2000. Prior

thereto, Mr. Will was President and Chief Executive Officer of Armco Inc. (steel
manufacturing and metals processing) until his retirement on September 30, 1999.
Mr. Noall was an Executive of KeyCorp from January 1, 1997 until his retirement
on March 1, 2000, and served as Senior Executive Vice President and Chief
Administrative Officer, and as General Counsel and Secretary, of KeyCorp prior
thereto. Mr. Adams has been a Professor of Business Administration at the Fuqua
School of Business at Duke University since July 1, 2001, and was Dean of the
Fuqua School of Business prior thereto.

F.M. Kirby and Allan P. Kirby, Jr. are brothers.

Jefferson W. Kirby, a son of F.M. Kirby, is a Vice President of the Company
and in that capacity was paid a total of $516,058 in salary, bonus, payout in
settlement of performance shares awarded under the 1993 Long-Term Incentive Plan
(the "1993 Plan") and other compensation, and was awarded 1,255 performances
shares under the 2002 Long-Term Incentive Plan (the "2002 Plan"), in 2002.

The Board of Directors held eight meetings in 2002. Each director attended
more than 75 percent of the aggregate number of meetings of the Board of
Directors and meetings of the committees of the Board of Directors on which he
served that were held in 2002.

The Executive Committee may exercise certain powers of the Board of
Directors regarding the management and direction of the business and affairs of
the Company when the Board of Directors is not in session. All action taken by
the Executive Committee is reported to and reviewed by the Board of Directors.
This committee held eight meetings in 2002.

The Audit Committee of the Board of Directors reviews and makes reports and
recommendations to the Board of Directors with respect to the following matters:
(i) the selection of the independent auditors of the Company and its
subsidiaries, (ii) the arrangements for and the scope of the audits to be
performed by the independent auditors, (iii) the audited consolidated annual
financial statements of the Company and its subsidiaries and management's
discussion and analysis thereof to be incorporated in the Company's Annual
Report on Form 10-K to the Securities and Exchange Commission, and whether to
recommend such incorporation, (iv) such other financial statements and financial
information published by the Company or included by it in filings with the
Securities and Exchange Commission as the committee may in its discretion deem
feasible and desirable, (v) the annual summary of non-audit services provided by
the Corporation's independent auditors, and (vi) the internal audit activities,
accounting procedures and controls of the Company and its subsidiaries. This
committee held six meetings in 2002.

The Compensation Committee of the Board of Directors reviews the annual
recommendations of the chief executive officer and the Chairman of the Board
concerning the compensation

of officers of the Company and makes recommendations to the Board of Directors
with respect thereto. This committee also reviews the annual adjustments
proposed to be made to the compensation of the most highly paid officers of the
Company's subsidiaries, reports to the Board of Directors with respect thereto,
and makes such recommendations to the Board of Directors with respect thereto as
the committee may deem appropriate. This committee, which held four meetings in
2002, also administers the 2002 Plan.

The Nominating Committee of the Board of Directors screens candidates and
makes recommendations to the Board of Directors as to persons to be nominated by
the Board of Directors for election thereto by the stockholders or to be chosen
by the Board of Directors to fill newly created directorships or vacancies on
the Board of Directors. This committee held no meetings in 2002.

SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the beneficial ownership of Common Stock as
of March 3, 2003 of each of the nominees named for election as a director, each
of the other current directors and each of the executive officers named in the
Summary Compensation Table below.

AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
------------------------------------------------------------------
SOLE VOTING SHARED VOTING POWER
POWER AND SOLE AND/OR SHARED PERCENT
NAME OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
------------------------ ---------------- ------------------- ------- --------

John J. Burns, Jr. ...... 78,113 -- 78,113(1) 1.08
Dan R. Carmichael........ 13,991 330 14,321(2)(3) 0.20
William K. Lavin......... 11,807 -- 11,807(2) 0.16
Allan P. Kirby, Jr. ..... 539,361 -- 539,361(4) 7.41
Thomas S. Johnson........ 8,663 -- 8,663(2) 0.12
James F. Will............ 20,098 -- 20,098(2) 0.28
F.M. Kirby............... 308,672 670,170 978,842(5) 13.48
Roger Noall.............. 10,746 -- 10,746(2) 0.15
Rex D. Adams............. 4,086 -- 4,086(2) 0.06
Weston M. Hicks.......... 30,000 -- 30,000(6) 0.41
David B. Cuming.......... 42,418 -- 42,418 0.58
Robert M. Hart........... 15,944 -- 15,944 0.22

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(1) Includes 746 shares of Common Stock owned by Mr. Burns's wife. Mr. Burns had
no voting or investment power over these shares, and he disclaims beneficial
ownership of them. Also includes (i) 7,803 shares of Common Stock
representing the vesting of 7,803

performance shares in settlement of a special award of performance shares
(as adjusted for stock dividends) made to Mr. Burns in 1999, and (ii) 15,669
shares of Common Stock representing the vesting of 15,669 performance shares
in settlement of a special award of performance shares (as adjusted for
stock dividends and to reflect the spin-off by the Company of Chicago Title
Corporation in June 1998) made to Mr. Burns in 1996. In each case, the
payout in respect of the vested performance shares was deferred pursuant to
the terms of the special award until Mr. Burns's retirement as an officer of
the Company, and will be made one-half in shares of Common Stock and
one-half in cash (based upon the fair market value of one share of Common
Stock on the payout date for each performance share).

(2) Includes 12,890 shares of Common Stock in the case of Mr. Carmichael, 11,005
shares of Common Stock in the case of Mr. Lavin, 7,346 shares of Common
Stock in the case of Mr. Johnson, 14,812 shares of Common Stock in the case
of Mr. Will, 9,158 shares of Common Stock in the case of Mr. Noall and 3,795
shares of Common Stock in the case of Mr. Adams, issuable under stock
options granted pursuant to the Amended and Restated Directors' Stock Option
Plan and the 2000 Directors' Stock Option Plan.

(3) Includes 228 shares of Common Stock owned by Mr. Carmichael's wife. Mr.
Carmichael had no voting or investment power over these shares, and he
disclaims beneficial ownership of them.

(4) See Note (2) on page 3.

(5) See Note (1) on page 3.

(6) These shares were awarded pursuant to a restricted stock award and are
subject to Mr. Hicks's continuing employment with the Company and the
achievement of certain performance goals, as more fully described below in
Note (3) to the table relating to long-term incentive awards.

As of March 3, 2003, all nominees named for election as a director,
directors and executive officers as a group (13 persons) beneficially owned
1,764,119 shares, or 24.04 percent, of the outstanding Common Stock, adjusted to
include shares of Common Stock issuable within 60 days upon exercise of stock
options held by such nominees, directors and executive officers. Such nominees,
directors and executive officers had sole voting and investment power with
respect to 1,088,755 shares, shared voting and/or investment power with respect
to 670,500 shares and no voting or investment power with respect to 4,864
shares.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company has determined that, except as set forth below, no person who
at any time during 2002 was a director, officer or beneficial owner of more than
10 percent of the Common

Stock failed to file on a timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended, during 2002. Such determination is
based solely upon the Company's review of Forms 3, 4 and 5, and written
representations that no Form 5 was required, which were submitted to it during
or with respect to 2002. With regard to Ann Kirby Kirby who, prior to her death
in 1996, was believed by the Company to be a beneficial owner of more than 10
percent of the Common Stock based on her Schedule 13D statement filed with the
Securities and Exchange Commission in 1982, the Company had not received any
reports from Mrs. Kirby regarding changes in her ownership of Common Stock, and
the representatives of the estate of Mrs. Kirby have declined to supply
information with respect to ownership of Common Stock by her estate or
beneficiaries; therefore, the Company does not know whether her estate or any
beneficiary of her estate beneficially owned more than 10 percent of the Common
Stock during 2002 nor whether any such person was required to file reports
required by Section 16(a).

COMPENSATION OF DIRECTORS

Each director of the Company who is not an officer thereof receives an
annual retainer of $30,000, payable one-half in cash and one-half in shares of
Common Stock as more fully explained below, as well as $1,000 for each board
meeting attended in person and $500 for each conference telephone meeting
attended. In addition, the Chairman of the Executive Committee receives an
annual fee of $25,000, and each other member thereof who is not an officer of
the Company receives an annual fee of $7,500. In July 2002, a supplemental fee
of $10,000 was paid to each member of the Executive Committee who was not an
officer of the Company in respect of extraordinary service during the preceding
year. The Chairman of the Audit Committee receives an annual fee of $9,000, and
each other member thereof receives an annual fee of $6,500. A supplemental fee
of $3,000 was paid to the Chairman of the Audit Committee in respect of
attendance as Chairman of the Audit Committee at meetings held during 2002 of
the audit committees of the boards of directors of certain of the Company's
subsidiaries. The Chairman of the Compensation Committee receives an annual fee
of $4,500, and each other member thereof who is not an officer of the Company
receives an annual fee of $4,000. Each member of the Nominating Committee who is
not an officer of the Company receives $1,000 for each meeting attended and $500
for each conference telephone meeting attended.

Pursuant to the Directors' Equity Compensation Plan, each director of the
Company who is not an employee of the Company or any of its subsidiaries
receives his retainer in the beginning of each year of his term for the
following twelve-months' service as a director, exclusive of any per meeting
fees, committee fees or expense reimbursements, payable one-half

in shares of Common Stock, based on the market value (as defined in the plan) of
such shares on the date of payment, and one-half in cash. Each eligible director
received sixty-nine shares of Common Stock on May 1, 2002 and, as a result of an
increase in the annual retainer effective July 1, 2002, eleven shares of Common
Stock on August 16, 2002 in respect of the twelve-months' service beginning with
the 2002 Annual Meeting of Stockholders.

Pursuant to the 2000 Directors' Stock Option Plan, each director of the
Company who is not an employee of the Company or any of its subsidiaries
receives annually, as of the first business day after the conclusion of each
Annual Meeting of Stockholders of the Company, an option to purchase 1,000
shares of Common Stock (subject to antidilution adjustments) at a price equal to
the fair market value (as defined in the plan) of such shares on the date of
grant. On April 29, 2002, each eligible director received an option to purchase
1,000 shares of Common Stock at a price of $187.08 per share.

Pursuant to the Non-Employee Directors' Retirement Plan, each person who
has served as a non-employee director of the Company after July 1, 1990 is
entitled to receive, after his retirement from the Board of Directors, an annual
retirement benefit payable in cash equal to the annual retainer payable to
directors of the Company at the time of such retirement. To be entitled to this
benefit, the director must have served as such for at least five years, and must
have continued so to serve either until the time he is required to retire by the
Company's retirement policy for directors or until he has attained age 70. The
Company's retirement policy for directors was adopted by Old Alleghany in 1979
and by the Company upon its formation in 1986. The retirement policy provides
that, except in respect of directors serving when the policy was first adopted,
the Board of Directors shall not select a person as a nominee for the Board of
Directors for a term that would anticipate such nominee serving beyond his or
her seventy-second birthday. Messrs. Burns, Allan P. Kirby, Jr. and F.M. Kirby
are not subject to such retirement policy since each of them was a director of
Old Alleghany in 1979. The benefit is paid from the date of the director's
retirement from the Board of Directors until the end of a period equal to his
length of service thereon or until his death, whichever occurs sooner.

Each of the non-employee directors of the Company's subsidiary World
Minerals Inc. ("World Minerals") and its subsidiaries, including Mr. Will, was
entitled to receive an annual retainer of $15,000 for his services as such, as
well as $600 for each board meeting or conference telephone meeting attended. As
a member of the Audit Committee of the World Minerals board, Mr. Will received
$500 for each committee meeting attended. As Vice Chairman of the World Minerals
board, Mr. Will was also entitled to receive an annual retainer of $25,000. In
2002, Mr. Will received a total of $44,400 for services in these capacities.

EXECUTIVE COMPENSATION

The information under this heading relates to the chief executive officer
and the four other most highly compensated executive officers of the Company
serving as executive officers at the end of 2002.

SUMMARY COMPENSATION TABLE

ANNUAL COMPENSATION
------------------------------------ LONG TERM
OTHER ANNUAL INCENTIVE ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION PLAN PAYOUTS COMPENSATION
POSITION YEAR SALARY (2) (3) (4) (6)
------------------ ---- -------- ---------- ------------ ------------ ------------

John J. Burns, Jr., .... 2002 $970,465 $ 593,410 $ 23,112 $1,442,639 $173,116
President and chief 2001 933,139 142,647 18,729 3,204,931(5) 168,652
executive officer 2000 880,320 394,745 24,251 1,397,497 158,779

F.M. Kirby,............. 2002 $456,161 $ -- $ 25,847 $ -- $ 99,753
Chairman of the 2001 438,616 -- 22,128 -- 92,033
Board 2000 413,789 -- 15,751 -- 80,372

Weston M. Hicks,........ 2002 $115,000 $ 450,000 $ 520 $ -- $ 625
Executive Vice
President(1)

David B. Cuming,........ 2002 $436,938 $ 251,151 $ 15,124 $ 595,807 $ 82,048
Senior Vice 2001 420,133 888,359 796,479 766,326 81,459
President 2000 396,352 142,008 16,584 664,577 76,279

Robert M. Hart,......... 2002 $436,938 $ 260,589 $ 6,421 $ 595,807 $ 73,152
Senior Vice 2001 420,133 1,092,488 884,790 766,326 73,264
President, General 2000 396,352 141,572 9,263 664,577 68,996
Counsel and
Secretary

---------------

(1) Mr. Hicks has been Executive Vice President of the Company since October 7,
2002.

(2) These amounts represent (i) bonuses earned under the Company's Management
Incentive Plan, which is a short-term incentive plan designed to reward
officers for achieving specified net earnings per share and/or individual
objectives; and (ii) for each of Messrs. Cuming and Hart, an additional
amount representing a special award in 2001 of shares of Common Stock under
the 1993 Plan, valued at $815,760 and $1,019,700, respectively.

(3) These amounts represent payments for reimbursement of taxes including
reimbursement of taxes incurred in respect of the special awards in 2001 of
shares of Common Stock under the 1993 Plan as described in Note (2) above,
and the reimbursement itself.

(4) These amounts represent payouts in settlement of performance shares awarded
under the 1993 Plan. Performance shares under the 1993 Plan entitle the
holder thereof to payouts of cash and/or Common Stock (in such proportion as
is determined by the Compensation Committee) up to a maximum amount equal to
the value of one share of Common Stock on the payout date for each
performance share, depending upon the average annual compound growth in the
Company's Earnings Per Share (as defined by the Compensation Committee
pursuant to the 1993 Plan) in a four-year award period commencing with the
year following that in which the performance shares were awarded; payouts
have generally been made one-half in cash and one-half in Common Stock.

(5) This amount includes a payout of $1,593,802 in respect of one-half of a
special award of an aggregate 31,212 performance shares made to Mr. Burns
under the 1993 Plan in 1999, as adjusted for stock dividends. These
performance shares entitled Mr. Burns to a payout one-half in cash and
one-half in Common Stock up to a maximum amount equal to the value of one
share of Common Stock on the payout date for each performance share,
depending upon the stockholders' equity per share equaling or exceeding $234
(as adjusted for stock dividends) as at the end of any fiscal quarter ending
on or before June 30, 2002 and occurring while Mr. Burns was chief executive
officer of the Company. This goal was achieved in the quarter ending March
31, 2001. Payout of 7,803 of these performance shares was deferred pursuant
to the terms of the special award until Mr. Burns's retirement as an officer
of the Company.

(6) The 2002 amounts listed for Messrs. Burns, Kirby, Cuming and Hart include
(i) savings benefits of $145,336, $68,314, $65,435 and $65,435,
respectively, credited pursuant to the Company's Deferred Compensation Plan;
and (ii) benefits, valued at $24,030, $31,439, $12,863 and $3,967,
respectively, pursuant to Securities and Exchange Commission rules, of life
insurance maintained by the Company on their behalf. Such life insurance
policies provide a death benefit to an executive officer who is an employee
at the time of his death equal to four times (or, in the case of Mr. Kirby,
two times) the amount of such executive officer's annual salary at January 1
of the year of his death. In the case of Mr. Burns, at his election, such
death benefit shall not exceed $3,000,000. The 2002 amounts listed for
Messrs. Burns, Hicks, Cuming and Hart also include compensation of $3,750,
$625, $3,750 and $3,750, respectively, in respect of other insurance
coverage.

LONG-TERM INCENTIVE PLAN -- AWARDS IN 2002

PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER NON-STOCK PRICE-BASED PLANS
NUMBER OF PERIOD UNTIL -----------------------------------
SHARES, UNITS OR MATURATION THRESHOLD TARGET MAXIMUM
NAME OTHER RIGHTS OR PAYMENT ($ OR #) ($ OR #) ($ OR #)
---- ---------------- ------------ --------- ---------- ----------

John J. Burns, Jr. ........ 7,890(1) 2003-2006 $3,518 $1,407,379 $2,111,068
F.M. Kirby................. -- -- -- -- --
Weston M. Hicks............ 3,168.3(2) 2003-2005 $1,500 -- $ 599,997
5,099(1) 2003-2006 $2,274 $ 909,534 $1,364,301
30,000(3) 2003-2012 0 -- 30,000
David B. Cuming............ 3,323(1) 2003-2006 $1,482 $ 592,740 $ 889,110
Robert M. Hart............. 3,323(1) 2003-2006 $1,482 $ 592,740 $ 889,110

---------------
(1) These amounts represent performance shares awarded for the 2003-2006 award
period under the 2002 Plan. These performance shares entitle the holder
thereof to payouts of cash and/or Common Stock (in such proportion as is
determined by the Compensation Committee) up to a maximum amount equal to
the value of one and one-half shares of Common Stock on the payout date for
each performance share awarded. Maximum payouts will be made in respect of
these performance shares only if average annual compound growth in the
Company's Book Value Per Share (as defined by the Compensation Committee
pursuant to the 2002 Plan) equals or exceeds 12 percent in the award period,
measured from a base of $189.73. Target payouts will be made at 100 percent
if such growth equals 8 percent. No payouts will be made if such growth is
less than 4 percent; payouts for growth between 4 percent and 12 percent
will be determined by interpolation.

(2) This amount represents performance shares awarded to Mr. Hicks for the
2003-2005 award period under the 2002 Plan in connection with his employment
by the Company in October 2002. These performance shares entitle Mr. Hicks
to a payout of cash and/or Common Stock (in such proportion as is determined
by the Compensation Committee) up to a maximum amount equal to the value of
one share of Common Stock on the payout date for each performance share
awarded. A maximum payout will be made in respect of these performance
shares only if average annual compound growth in the Company's Earnings Per
Share (as defined by the Compensation Committee pursuant to the 2002 Plan)
equals or exceeds 12 percent in the award period, measured from a base of
$10.45. No payout will be made if such growth is 8 percent or less; a payout
for growth between 8 percent and 12 percent will be determined by
interpolation. There is no estimated future

target payout because no performance target for these performance shares was
specified in the award.

(3) This amount represents 30,000 shares of Common Stock granted to Mr. Hicks
pursuant to a restricted stock award under the 2002 Plan in connection with
his employment by the Company in October 2002. Under the terms of the award,
the restricted shares will vest (i) if the Company achieves average annual
compound growth in Stockholders' Equity Per Share (as defined in the award
agreement) equal to 10 percent or more as measured over a calendar year
period commencing January 1, 2003 and ending on December 31, 2006, 2007,
2008 or 2009, or (ii) if the performance goal set forth in clause (i) above
has not been achieved as of December 31, 2009, when the Company achieves
average annual compound growth in Stockholders' Equity Per share equal to 7
percent or more as measured over a calendar year period commencing January
1, 2003 and ending on December 31, 2010, 2011 or 2012. If the performance
goals are not achieved as of December 31, 2012, Mr. Hicks will forfeit all
of the restricted shares. If Mr. Hicks's employment with the Company is
terminated for any reason prior to the occurrence of any vesting date, he
shall forfeit his interest in any restricted shares that have not yet
vested; however, if the Company terminates Mr. Hicks's employment after
December 31, 2004 other than for Cause or Total Disability (as defined in
the award agreement), and the performance goal set forth in clause (ii)
above has been satisfied in all respects except for the passage of the
required period of time, that number of restricted shares equal to 30,000
multiplied by a fraction, the numerator of which is the number of full
calendar years beginning January 1, 2003 and ending on or before the date of
such termination, and the denominator of which is ten, will vest. There is
no estimated future target payout because no performance target for these
restricted shares was specified in the award agreement.

PENSION PLAN TABLE

The Company's Retirement Plan provides for designated employees, including
all of its current executive officers, retirement benefits in the form of an
annuity for the participant's life or, alternatively, actuarially equivalent
forms of benefits, including a lump sum.

The annual retirement benefit under the Company's Retirement Plan, if paid
in the form of a life annuity to a participant who retires on reaching age 65
with 15 or more years of service, is equal to 52.7625 percent of the
participant's average compensation, which is defined as the sum of (i) the
highest average annual base salary over a consecutive three-year period during
the last ten years of employment, plus (ii) one-half of the highest average
annual bonus over a consecutive five-year period during the last ten years of
employment; however, such benefit is reduced by 33.5 percent of his unreduced
primary Social Security benefit and by

67 percent of his accrued benefit under a previously terminated retirement plan
of the Company. (Annual base salary and annual bonus are the amounts that would
appear in the salary and bonus columns of the Summary Compensation Table for the
relevant years.) In the event a participant becomes totally disabled prior to
retirement, such participant's annual base salary shall equal his annual base
salary at the time of disability, and such participant's average annual bonus
shall be based on the average over the five consecutive years (or lesser period
of employment) prior to disability, each adjusted annually for inflation; such
participant's period of disability will be treated as continued employment for
all purposes under the Retirement Plan, including determining his years of
service.

Since the funds accumulated under the Company's Retirement Plan to provide
for each participant's annual retirement benefit are currently taxable to each
participant, the plan provides for the payment to the appropriate tax
authorities as withholding tax on behalf of each participant of an amount equal
to the income and employment tax liabilities imposed upon the participant by
reason of his participation in the plan. As a result, benefits payable in the
form of a lump sum are not taxable at the time of payment. Benefits payable in
the form of an annuity are taxable in part; the Retirement Plan provides that
such benefits will be increased to offset the impact of any such tax liability,
and the estimated benefits set forth in the table below include an estimate of
such increase.

A participant may retire as early as age 55, but the benefit payable at
that time will be reduced to reflect the commencement of benefit payments prior
to age 65. The benefit payable to a participant who retires after age 65 is
increased to reflect salary increases and additional years of service through
the actual date of retirement and the decreased period over which the normal
retirement benefit will be paid. The Retirement Plan also provides that a
participant over age 65 who is still in the employ of the Company may elect
prior to the actual date of retirement to receive the benefits to which he would
have been entitled had he retired on the date of such election. Pursuant to this
provision, Mr. Burns and Mr. Cuming each elected in February 2001 and Mr. Kirby
elected in 1996 to receive their then accrued benefits under the Retirement
Plan. Any additional benefits which accrue prior to their actual date of
retirement will be offset by the then equivalent value of the benefits
previously distributed. As a result, it is not likely that Messrs. Burns, Cuming
or Kirby will receive any additional benefits from the Retirement Plan.

The following table shows the estimated annual retirement benefit payable
under the Company's Retirement Plan (without giving effect to the Social
Security offset or the offset for benefits accrued under the previously
terminated retirement plan) to a participant who, upon retirement on December
31, 2002 at age 65, had achieved the average compensation and years of service
indicated. The amounts shown assume payment in the form of a straight life
annuity.

YEARS OF SERVICE
AVERAGE ----------------------
COMPENSATION 10 15 OR MORE
------------ -------- ----------

$ 125,000 .................................... $ 53,788 $ 80,682
150,000 .................................... 64,546 96,819
175,000 .................................... 75,303 112,955
200,000 .................................... 86,061 129,091
225,000 .................................... 96,819 145,228
250,000 .................................... 107,576 161,364
300,000 .................................... 129,091 193,637
400,000 .................................... 172,122 258,183
450,000 .................................... 193,637 290,456
500,000 .................................... 215,152 322,729
600,000 .................................... 258,183 387,274
700,000 .................................... 301,213 451,820
800,000 .................................... 344,244 516,366
900,000 .................................... 387,279 580,919
1,000,000 .................................... 430,310 645,466
1,100,000 .................................... 473,341 710,012

As of December 31, 2002, the credited years of service for Mr. Hart was 13
years. Mr. Hart's average compensation for purposes of the Retirement Plan was
$506,849. Mr. Hicks has not yet satisfied the eligibility requirements to begin
participating in the Retirement Plan.

EMPLOYMENT ARRANGEMENTS

On October 7, 2002, the Company entered into an employment agreement with
Mr. Hicks, pursuant to which Mr. Hicks has agreed to serve as Executive Vice
President of the Company. The Company will pay Mr. Hicks an initial base salary
at an annual rate of $600,000 to be reviewed annually commencing December 2002
and for calendar year 2004 will be at an annual rate of not less than $700,000.
Under the terms of Mr. Hicks' employment agreement, he was paid an annual bonus
of $450,000 for 2002 and is entitled to participate in the Management Incentive
Plan for 2003 with a target bonus opportunity of 50 percent of his annual base
salary. In addition, Mr. Hicks received an award of 5,099 performance shares
under the 2002 Plan for the four-year award period ending December 31, 2006, as
more fully described in Note (1) to the table relating to long-term incentive
awards, and an award of

3,168.3 performance shares under the 2002 Plan for the three-year award period
ending December 31, 2005, as more fully described in Note (2) to the table
relating to long-term incentive awards. If Mr. Hicks is terminated other than
for Cause or Total Disability (as defined in the employment agreement), or if he
is not elected chief executive officer of the Company by December 31, 2005 and a
decision is made by Mr. Hicks or the Company to terminate his employment, the
Company will continue to pay his base salary after such termination until such
payments total $1 million on a gross basis. The employment agreement also
provides that Mr. Hicks is eligible to participate in the Company's Executive
Retirement Plan and, effective January 1, 2003, the Company's Deferred
Compensation Plan, as well as all other employee benefit plans, programs,
practices or other arrangements in which other senior executives of the Company
are generally eligible to participate from time to time.

Pursuant to the terms of his employment agreement, Mr. Hicks and the
Company entered into a restricted stock award agreement dated as of October 7,
2002. Under this award agreement, Mr. Hicks received a restricted stock award of
30,000 shares of Common Stock under the 2002 Plan, as more fully described in
Note (3) to the table relating to long-term incentive awards. In the event that
Mr. Hicks is elected chief executive officer of the Company, he will receive a
restricted stock award of 25,000 shares of Common Stock under the 2002 Plan
which will have comparable terms and conditions as the first restricted stock
award except that the performance measurement periods will commence at the time
of the second restricted stock award.

Pursuant to the terms of his employment agreement, Mr. Hicks and the
Company entered into a restricted stock unit matching grant agreement dated as
of October 7, 2002. Under this matching grant agreement, Mr. Hicks received a
restricted stock unit matching grant under the 2002 Plan of two restricted stock
units for every share of Common Stock purchased by Mr. Hicks or received by him
pursuant to stock dividends thereon (the "Owned Shares") on or before September
30, 2003 up to a maximum of 30,000 restricted stock units in respect of up to a
maximum of 15,000 Owned Shares (in each case subject to increase to reflect any
stock dividend paid in 2003). The restricted stock units are notional units of
measurement denominated in shares of Common Stock and entitle Mr. Hicks to
payment on account of such restricted stock units in an amount equal to the Fair
Market Value (as defined in the matching grant agreement) on the payment date of
a number of shares of Common Stock equal to the number of restricted stock units
to which Mr. Hicks is entitled to payment. All of the restricted stock units
shall vest on October 7, 2012. If Mr. Hicks is terminated without Cause or by
reason of his death or Total Disability (as such terms are defined in the
matching grant agreement) prior to October 7, 2012, a pro rata portion of the
restricted stock units credited to him shall vest and become nonforfeitable on
the basis of 10 percent of such account for each full year of employment with
the Company measured from October 7, 2002. Mr. Hicks shall have maintained
unencumbered beneficial ownership of the Owned Shares continuously throughout
the period commencing with the initial

purchase of Owned Shares and ending October 7, 2012 or the earlier date of a pro
rata payout. To the extent that he fails to do so, he will forfeit two
restricted stock units for each Owned Share with respect to which he has not
maintained unencumbered beneficial ownership for the required period of time.
If, prior to October 7, 2012, Mr. Hicks voluntarily terminates his employment or
the Company terminates Mr. Hicks's employment for Cause, all of the restricted
units shall be forfeited. Mr. Hicks may not transfer the restricted stock units
and has no voting or other rights in respect of the restricted stock units.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors (the "Compensation
Committee") is currently composed of the three non-employee directors whose
names appear at the end of this report.

An important objective of the Compensation Committee is to ensure that the
compensation practices of the Company are competitive and effectively designed
to attract, retain and motivate highly-qualified personnel. In performing its
functions, the Compensation Committee in recent years has obtained and utilized
information and advice furnished by a nationally recognized compensation
consulting firm.

Compensation paid to the executive officers of the Company in 2000, 2001
and 2002 consisted chiefly of salary, cash bonuses under the Management
Incentive Plan which in large part were tied to the financial results of the
Company, and payouts of cash and Common Stock under the 1993 Plan which were
tied both to the price of the Common Stock and to the financial results of the
Company. These compensation practices help to link the interests of the
Company's executive officers with the interests of the Company's stockholders.

Annual Compensation

Salary adjustments for executive officers are generally made annually and
are based on salaries for the prior year, executive salary movements nationally
and in the New York market, individual performance and internal comparability
considerations.

Annual cash bonuses are paid to executive officers under the Management
Incentive Plan (except that Mr. Kirby did not receive any such bonuses in
respect of 2000, 2001 or 2002). This plan is designed to reward officers for the
achievement of specified corporate and/or individual objectives. The following
discussion relates to annual cash bonuses paid to executive officers other than
Mr. Hicks, who became Executive Vice President of the Company on October 7, 2002
and whose 2002 cash bonus amount was fixed pursuant to his employment agreement
with the Company.

Bonus opportunities for 2002 were adjusted from the prior year at the rate
of 4.0 percent (which was in proportion to changes in salaries). Maximum bonus
opportunities for executive officers of the Company as a percentage of salaries
for 2002 ranged from 76 percent of salary for Mr. Burns to 48 percent of salary
for the most junior executive officer of the Company. Target bonus opportunities
are equal to two-thirds of the maximum bonus opportunity, and are believed to
fall at or below the median of prevailing practices in a broad cross-section of
American industry reflecting the Company's policy of emphasizing long-term
corporate performance and long-term incentive compensation.

For 2002, the portion of the bonus opportunities which depended on
corporate objectives ranged from 80 percent of Mr. Burns's bonus opportunity to
50 percent of the bonus opportunity of the most junior executive officer of the
Company. The corporate objective under the Management Incentive Plan was the
achievement by the Company of a specified level of net earnings per share, which
was based on the planned net earnings per share for the year as approved by the
Board of Directors and included in the Alleghany Corporation Strategic Plan
2002-2006. Target bonus opportunities were to be earned if plan net earnings per
share were achieved, and maximum bonus opportunities were to be earned at 110
percent of plan. For any amounts to be earned, net earnings per share were
required to exceed 80 percent of plan. The Company's 2002 net earnings per share
exceeded 110 percent of the plan for 2002; therefore, the maximum amount was
earned on that portion of the bonus opportunities that was dependent on
corporate objectives.

The remainder of the bonus opportunities of the executive officers of the
Company for 2002 was based on achievement of individual objectives. Individual
objectives for the executive officers of the Company (other than Mr. Burns) were
determined, and the performance of such officers was assessed, by the chief
executive officer. Individual objectives for Mr. Burns were determined, and his
performance was assessed, by the Board of Directors upon the recommendation of
the Compensation Committee, which received the recommendation of the Chairman of
the Board with respect thereto. No amount was authorized in respect of Mr.
Burns's individual objectives for 2002 since such objectives were not achieved.

Long-Term Incentive Compensation

In addition to annual compensation, the Company provides long-term
incentive compensation to its executive officers pursuant to awards under the
2002 Plan (except that Mr. Kirby did not receive any such awards under the 2002
Plan in 2002 or under the predecessor to the 2002 Plan in 2000 or 2001). The
2002 Plan provides for long-term incentives based upon objective, quantifiable
measures of the Company's performance over a period of time. Until 2002, most of
the long-term incentive awards to the Company's executive officers have been
made in the

form of performance shares, which entitle the holder thereof to payouts in cash
and/or Common Stock (in such proportion as is determined by the Compensation
Committee) up to a maximum amount equal to the value of one share of Common
Stock on the payout date for each performance share awarded. Payouts generally
have been made one-half in cash and one-half in Common Stock. Maximum payouts
with respect to currently outstanding performance shares will be made only if
average annual compound growth in the Company's Earnings Per Share (as defined
by the Compensation Committee pursuant to the 1993 Plan) equals or exceeds 12
percent as measured from a specified base in the four-year award period
commencing with the year following that in which the performance shares were
awarded, and no payouts will be made if such growth is 8 percent or less;
payouts for growth between 8 percent and 12 percent will be determined by
interpolation. The Board of Directors and its Compensation Committee have
provided for antidilution adjustments with respect to performance shares. The
specified base Earnings Per Share is determined by reference to the projected
earnings for the year in which the performance shares were awarded, as adjusted
to eliminate certain non-recurring items. Subject to certain limitations, the
Compensation Committee provides for adjustments in the cash and/or Common Stock
to be paid with respect to performance share awards in order to adjust for the
effect upon Earnings Per Share of transactions of an extraordinary, unusual or
non-recurring nature, capital gains, or any purchase, pooling of interests,
disposal or discontinuance of any operations, change in accounting rules or
practices, retroactive restatement of earnings, or the like.

In 2002, the performance requirements applicable to performance shares
granted in 2002 were changed from those described above. The 2002 performance
shares entitle the holder thereof to cash and/or Common Stock (in such
proportion as is determined by the Compensation Committee) up to a maximum
amount equal to the value of one and one-half shares of Common Stock on the
payout date for each performance share awarded. Maximum payouts with respect to
such performance shares will be made only if average annual compound growth in
the Company's Book Value Per Share (as defined by the Compensation Committee
pursuant to the 2002 Plan) equals or exceeds 12 percent as measured from a
specified base in the four-year award period commencing with the year following
that in which the performance shares were awarded, target payouts will be made
at 100 percent if such growth equals 8 percent, and no payouts will be made if
such growth is less than 4 percent; payouts for growth between 4 percent and 12
percent will be determined by interpolation. This performance scale was
developed with the advice of the nationally recognized compensation consulting
firm referred to above; the target was determined to represent superior
performance based on the current economic outlook. The specified base Book Value
Per Share for the performance shares granted in 2002 was determined by reference
to the estimated book value for year-end 2002. Taking into account the changes
in the Company's businesses over the years and the

Company's current mix of businesses and liquidity, the Company's stated goal of
building stockholder value was determined to be better measured in book value
growth rather than growth in earnings per share. In addition, the enhancement of
the maximum payout from the value of one share of Common Stock to one and
one-half shares assures that management is incented to seek exceptional returns.

In determining the number of performance shares awarded each year, the
Compensation Committee has sought to achieve reasonable continuity in awards
from prior years. Also, the Compensation Committee considers changes in salaries
and the price of Common Stock. The number of performance shares awarded to an
executive officer in 2002 for the 2003-2006 award period was determined by
adjusting the prior year's award to reflect the increase in his salary from 2002
to 2003 and to reflect the movements in the price of the Common Stock.

In connection with Mr. Hicks' employment as Executive Vice President of the
Company, the Compensation Committee awarded Mr. Hicks (i) 5,099 performance
shares under the 2002 Plan for the four-year period ending December 31, 2006, as
more fully described in Note (1) to the table relating to long-term incentive
awards, (ii) 3,168.3 performance shares under the 2002 Plan for the three-year
award period ending December 31, 2005, as more fully described in Note (2) to
the table relating to long-term incentive awards, and (iii) a restricted stock
award of 30,000 shares of Common Stock under the 2002 Plan, as more fully
described in Note (3) to the table relating to long-term incentive awards. In
the event that Mr. Hicks is elected chief executive officer of the Company, he
will receive a restricted stock award of 25,000 shares of Common Stock under the
2002 Plan which will have comparable terms and conditions as the first
restricted stock award except that the performance measurement periods will
commence at the time of the second restricted stock award. Mr. Hicks also
received a restricted stock unit matching grant under the 2002 Plan of two
restricted stock units for every share of Common Stock purchased by Mr. Hicks on
or before September 30, 2003 up to a maximum of 30,000 restricted stock units
(subject to increase to reflect any stock dividend paid in 2003) in respect of
up to a maximum of 15,000 Owned Shares, as more fully described above under
"Employment Arrangements."

In the case of the Company's most senior executive officers, long-term
incentive compensation opportunities are believed to be close to the prevailing
practices in a broad cross section of American industry; in the case of the
Company's most junior executive officer, such opportunity is believed to be
somewhat more generous than such prevailing practices. The awards reflect the
Company's policy of emphasizing long-term corporate performance and long-term
incentive compensation opportunities over short-term results and short-term
incentive compensation opportunities.

Section 162(m) of the Internal Revenue Code of 1986

Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), disallows a deduction to the Company for any compensation paid to a
"covered employee" in excess of $1 million per year, subject to certain
exceptions. In general, "covered employees" include the chief executive officer
and the four other most highly compensated executive officers of the Company who
are in the employ of the Company and are officers at the end of the tax year.
Among other exceptions, the deduction limit does not apply to compensation that
meets the specified requirements for "performance-based compensation." In
general, those requirements include the establishment of objective performance
goals for the payment of such compensation by a committee of the Board of
Directors composed solely of two or more outside directors, stockholder approval
of the material terms of such compensation prior to payment, and certification
by the committee that the performance goals for the payment of such compensation
have been achieved. While the Compensation Committee believes that the Company
should seek to obtain maximum deductibility of compensation paid to executive
officers, the Compensation Committee also believes that the interests of the
Company and its stockholders are best served by assuring that appropriate
compensation arrangements are established to retain and incentivize executive
officers.

The Compensation Committee has endeavored, to the extent it deems
consistent with the best interests of the Company and its stockholders, to cause
awards of long-term incentive compensation to qualify as "performance-based
compensation" under Section 162(m). To that end, the 2002 Plan was submitted to
and approved by the stockholders of the Company at the 2002 Annual Meeting, so
that compensation payable pursuant to certain long-term incentive awards may
qualify for deductibility under Section 162(m). All of the performance shares,
restricted shares and restricted stock units awarded in 2002 to Messrs. Burns,
Hicks, Cuming and Hart described in the notes to the table relating to long-term
incentive awards are intended to qualify as "performance-based compensation" for
purposes of Section 162(m).

The Compensation Committee does not currently intend to structure the
annual cash bonuses under the Management Incentive Plan to comply with the
"performance-based compensation" rules of Section 162(m). Such bonuses do not
meet the requirement of Section 162(m) that they be payable "solely on account
of the attainment of one or more preestablished, objective performance goals,"
since in most cases such bonuses also have subjective performance goals. In
addition, the material terms of bonuses under the Management Incentive Plan were
not submitted for the approval of the stockholders of the Company, as required
by Section 162(m). The Compensation Committee believes the annual cash bonuses,
as currently structured, best serve the interests of the Company and its
stockholders by allowing the Company to recognize an executive officer's
contribution.

With respect to other compensation that has been or may be paid to
executive officers of the Company, the Compensation Committee may consider the
requirements of Section 162(m) and make determinations regarding compliance with
Section 162(m) based upon the best interests of the Company and its
stockholders.

Other Benefits

The Company also provides to its executive officers other benefits, such as
retirement income, death benefits and savings credits, including those described
elsewhere in this proxy statement. The amounts of these benefits generally are
tied directly to salaries, as variously defined in the relevant plans. Such
additional benefits are believed to be typical of the benefits provided by other
public companies to their executives.

Dan R. Carmichael
William K. Lavin
Roger Noall

Compensation Committee
of the Board of Directors

AUDIT COMMITTEE REPORT

The Audit Committee of the Board of Directors (the "Audit Committee") is
responsible for reviewing the financial accounting, financial reporting and
internal controls of the Company and its subsidiaries. The Audit Committee also
recommends to the Board, subject to stockholder ratification, the selection of
the Company's independent auditors. The Audit Committee is currently composed of
four independent directors whose names appear at the end of this report. The
Board of Directors has determined that the members of the Audit Committee have
the qualifications set forth in the New York Stock Exchange's listing standards
regarding financial literacy and accounting or related financial management
expertise, and that no member of the Audit Committee has any relationship with
the Company that may interfere with the exercise of his independence from
management and the Company as provided in such listing standards. On March 21,
2000, the Board of Directors adopted the Audit Committee Charter, which was
included as an appendix to the Company's proxy statement for the 2001 Annual
Meeting of Stockholders.

Management is responsible for the Company's internal controls and the
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon. The Audit Committee's responsibility is to monitor and
review these processes and the activities of the Company's independent auditors.
The Audit Committee members are not acting as professional accountants or
auditors, and their functions are not intended to duplicate or certify the
activities of management and the independent auditors or to certify the
independence of the auditors under applicable rules.

In this context, the Audit Committee has reviewed and discussed the
Company's audited financial statements as of December 31, 2002 and for the
fiscal year then ended with management and KPMG LLP, the Company's independent
auditors. The Audit Committee has discussed with KPMG LLP the matters required
to be discussed by Statement on Auditing Standards No. 61, "Communication with
Audit Committees," as amended, as issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants.

KPMG LLP reported to the Audit Committee regarding the critical accounting
policies and practices used in the preparation of the audited financial
statements as of December 31, 2002 and for the fiscal year then ended; any
alternative treatments within generally accepted accounting principles for
policies and practices related to material items that have been discussed with
management, including the ramifications of the use of such alternative
treatments and the treatments preferred by KPMG LLP; and any material written
communications between KPMG LLP and management.

KPMG LLP also provided to the Audit Committee the written disclosures and
the letter required by Standard No. 1, "Independence Discussions with Audit
Committees," as adopted by the Independence Standards Board, and the Audit
Committee discussed with KPMG LLP its independence. When considering KPMG LLP's
independence, the Audit Committee considered, among other matters, whether KPMG
LLP's provision of non-audit services to the Company is compatible with
maintaining the independence of KPMG LLP.

Based on the reviews and discussions with management and KPMG LLP referred
to above, the Audit Committee has recommended to the Board of Directors that the
audited financial statements as of December 31, 2002 and for the fiscal year
then ended be included in the Company's Annual Report on Form 10-K for such
fiscal year. The Audit Committee also recommended to the Board of Directors that
KPMG LLP be selected as independent auditors of the Company for the year 2003,
subject to stockholder ratification.

William K. Lavin
Rex D. Adams
Dan R. Carmichael
Thomas S. Johnson

Audit Committee
of the Board of Directors

PERFORMANCE GRAPH

The following graph compares for the years 1998-2002 the cumulative total
stockholder return on the Common Stock, the cumulative total return on the
Standard & Poor's 500 Stock Index (the "S&P 500") and the cumulative total
return on the common stock of a group of "peer" issuers. The graph shows the
value at the end of each such year of $100 invested as of January 1, 1998 in the
Common Stock, the S&P 500 and the common stock of a group of "peer" issuers.

In 2002, the Company was a moderately diversified business enterprise with
revenues generated by its operations in property and casualty insurance,
industrial minerals and steel fasteners.

"Peer" issuers for the Company are publicly held, diversified financial
services companies which have been selected for their similarities to the
Company in terms of lines of business, recent history of acquisitions and
dispositions, holding company structure and/or concentration of ownership,
although any "peer" issuer, in the Company's view, would be significantly
different from other "peer" issuers and from the Company due to the individual
character of its business. The Company has constructed a group of "peer" issuers
which, in addition to the Company, consists of American Financial Group, Inc.,
Loews Corporation, Old Republic International Corporation and Leucadia National
Corporation (collectively, the "Peer Group").

[LINE GRAPH]

ALLEGHENY S&P 500 PEER GROUP
--------- ------- ----------

1998 105.86 128.58 96.28

1999 106.62 155.63 68.26

2000 120.47 141.46 113.11

2001 115.08 124.65 112.75

2002 108.26 97.10 103.10

The foregoing performance graph is based on the following assumptions: (i)
cash dividends are reinvested on the ex-dividend date in respect of such
dividend; (ii) the two-percent stock dividends paid by the Company in each of
the years 1999 through 2002 are included in the cumulative total stockholder
return on the Common Stock; and (iii) total returns on the common stock of
"peer" issuers are weighted by stock market capitalization at the beginning of
each year. On June 17, 1998, the Company distributed its shares of Chicago Title
Corporation to the Company's stockholders on a pro rata basis. Accordingly, of
the five years shown in the above graph, five and one-half months represent the
performance of the Company prior to the spin-off and four years and six and
one-half months represent the performance of the Company after the spin-off. The
graph accounts for the spin-off as though it were paid in cash and reinvested in
Common Stock of the Company on the date of the spin-off.

2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected KPMG LLP, independent certified public
accountants, as independent auditors for the Company for the year 2003. A
resolution will be submitted to stockholders at the Annual Meeting for
ratification of such selection. Although ratification by stockholders is not a
prerequisite to the ability of the Board of Directors to select KPMG LLP as the
Company's independent auditors, the Company believes such ratification to be
desirable. If the stockholders do not ratify the selection of KPMG LLP, the
selection of independent auditors will be reconsidered by the Board of
Directors; however, the Board of Directors may select KPMG LLP notwithstanding
the failure of the stockholders to ratify its selection.

The following table summarizes the fees for professional audit services
rendered by KPMG LLP for the audit of the Company's annual financial statements
for the years 2002 and 2001, and fees billed for other services rendered by KPMG
LLP for the years ended December 31, 2002 and 2001:

2002 2001
---------- ----------

Audit Fees................................. $1,384,300 $1,283,500
Audit-Related Fees......................... 302,700 444,500
Tax Fees................................... 106,400 71,000
All Other Fees............................. -- 85,000
---------- ----------
Total...................................... $1,793,400 $1,884,000

The amounts shown for "Audit Fees" represent the aggregate fees for
professional services rendered for the audit by KPMG LLP of the Company's annual
financial statements for each of the last two fiscal years, the reviews by KPMG
LLP of the Company's financial statements included in its Quarterly Reports on
Form 10-Q during each of the last two fiscal years, consents for registration
statements and services provided in connection with statutory and regulatory
filings. The amounts shown for "Audit-Related Fees" represent the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by KPMG LLP that are reasonably related to the performance of the audit or
review of the Company's financial statements and are not reported under "Audit
Fees." These services include due diligence assistance in connection with
acquisitions, consultations with KPMG LLP on accounting and audit matters, the
verification of certain incentive compensation calculations requested by the
Board of Directors, and audit work performed on certain of the Company's benefit
plans. The amounts shown for "Tax Fees" represent the aggregate fees billed in
each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance and review regarding accounting
treatment of various tax matters. The amounts shown for "All other fees"
represent the aggregate fees billed in 2001 for professional services rendered
in the form of oversight assistance in connection with the implementation of
production information systems.

Audit services to be provided by KPMG LLP to the Company must be
pre-approved by the Audit Committee or, between meetings of the Audit Committee,
by its Chairman pursuant to authority delegated by the Audit Committee. The
Chairman reports all pre-approval decisions made by him at the next meeting of
the Audit Committee, and he has undertaken to confer with the Audit Committee to
the extent that any engagement for which his pre-approval is sought is expected
to generate fees for KPMG LLP in excess of $100,000.

The Audit Committee has considered whether the provision of non-audit
services are compatible with maintaining the independence of KPMG LLP.

The Board of Directors recommends a vote "FOR" this resolution. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
a contrary vote. The resolution may be adopted by a majority of the votes cast
with respect thereto.

KPMG LLP was Old Alleghany's independent auditors from 1947 and has been
the Company's independent auditors since its incorporation in November 1984.

It is expected that a representative of KPMG LLP will be present at the
Annual Meeting, will have an opportunity to make a statement if he desires to do
so, and will be available to respond to appropriate questions.

3. ALL OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING

As of the date of this statement, the Board of Directors knows of no
business that will be presented for consideration at the Annual Meeting other
than that referred to above. As to other business, if any, that may come before
the Annual Meeting, proxies in the enclosed form will be voted in accordance
with the judgment of the person or persons voting the proxies.

STOCKHOLDER NOMINATIONS AND PROPOSALS

The Nominating Committee of the Board of Directors will receive at any time
and will consider from time to time suggestions from stockholders as to persons
to be nominated by the Board of Directors for election thereto by the
stockholders or to be chosen by the Board of Directors to fill newly created
directorships or vacancies on the Board of Directors.

The Company's by-laws require that there be furnished to the Company
written notice with respect to the nomination of a person for election as a
director (other than a person nominated by or at the direction of the Board of
Directors), as well as the submission of a proposal (other than a proposal
submitted by or at the direction of the Board of Directors), at a meeting of
stockholders. In order for any such nomination or submission to be proper, the

notice must contain certain information concerning the nominating or proposing
stockholder and the nominee or the proposal, as the case may be, and must be
furnished to the Company generally not less than 30 days prior to the meeting. A
copy of the applicable by-law provisions may be obtained, without charge, upon
written request to the Secretary of the Company at its principal executive
offices.

In accordance with the rules of the Securities and Exchange Commission, any
proposal of a stockholder intended to be presented at the Company's 2004 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
November 25, 2003 in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 2004
Annual Meeting, scheduled for Friday, April 23, 2004.

ADDITIONAL INFORMATION

At any time prior to their being voted, the enclosed proxies are revocable
by written notice to the Secretary of the Company or by appearance at the Annual
Meeting and voting in person. A quorum comprising the holders of a majority of
the outstanding shares of Common Stock on the record date must be present in
person or represented by proxy for the transaction of business at the 2003
Annual Meeting.

Solicitation of proxies will be made by mail, telephone and, to the extent
necessary, by telegrams and personal interviews. Expenses in connection with the
solicitation of proxies will be borne by the Company. Brokers, custodians and
fiduciaries will be requested to transmit proxy material to the beneficial
owners of Common Stock held of record by such persons, at the expense of the
Company. The Company has retained Georgeson Shareholder Communications Inc. to
aid in the solicitation of proxies, and for its services the Company expects to
pay fees of approximately $9,000 plus expenses.

By order of the Board of Directors

ROBERT M. HART
Senior Vice President, General
Counsel
and Secretary

March 24, 2003

PROXY PROXY

ALLEGHANY CORPORATION
PROXY FOR ANNUAL MEETING ON APRIL 25, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints F.M. Kirby, John J. Burns, Jr. and
Robert M. Hart proxies, each with the power to appoint his substitute and with
authority in each to act in the absence of the other, to represent and to vote
all shares of stock of Alleghany Corporation which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Alleghany Corporation to be
held at J. P. Morgan Chase & Co., 270 Park Avenue, Eleventh Floor, Room C, New
York, New York, on Friday, April 25, 2003 at 10:30 a.m., local time, and any
adjournments thereof, as indicated on the proposals described in the Proxy
Statement, and all other matters properly coming before the meeting.

IMPORTANT -- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE

ALLEGHANY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [/]

A VOTE FOR ITEMS 1 AND 2 IS RECOMMENDED BY THE BOARD OF DIRECTORS

1. Election of Directors FOR ALL
Nominees: FOR WITHHOLD EXCEPT
John J. Burns, Jr. // // //
Dan R. Carmichael
William K. Lavin

INSTRUCTION: To withhold authority to vote for an
individual nominee, write that nominee's name
in the following space:

------------------------------------------------

FOR AGAINST ABSTAIN
2. Ratification of KPMG LLP as // // //
independent auditors for the
Company for the year 2003.

Please sign exactly as your
name or names appear hereon.
For joint accounts, both
owners should sign. When
signing as executor,
administrator, attorney,
trustee or guardian, etc.,
please give your full title.

-----------------------------
Signature

Dated: 2003
---------------------,

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR ITEMS 1 AND 2.