ALLEGHANY CORP /DE, DEF 14A, 1997-03-24

ALLEGHANY CORP /DE
DEF 14A, 1997-03-24
TITLE INSURANCE

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<PAGE> 1

SCHEDULE 14A INFORMATION

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

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>

Alleghany Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.

(1) Title of each class of securities to which transaction applies:

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

(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE> 2

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 25, 1997 AT 2:00 P.M., LOCAL TIME
------------------

THE CHASE MANHATTAN BANK
270 PARK AVENUE
ELEVENTH FLOOR, ROOM C
NEW YORK, NEW YORK

Notice is hereby given that the 1997 Annual Meeting of Stockholders of
Alleghany Corporation (the "Company") will be held at The Chase Manhattan Bank,
270 Park Avenue, Eleventh Floor, Room C, New York, New York, on Friday, April
25, 1997 at 2:00 p.m., local time, for the following purposes:

1. To elect one director for a term expiring in 1998 and three
directors for terms expiring in 2000.

2. To consider and take action upon a proposal to ratify the selection
of KPMG Peat Marwick LLP, independent certified public accountants,
as auditors for the Company for the year 1997.

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, 1997 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
meeting in person.

By order of the Board of Directors

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

March 24, 1997 (LOGO)
<PAGE> 3

ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152

PROXY STATEMENT

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

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 25, 1997

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

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 1997 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, 1997.

The Board of Directors has fixed the close of business on March 3, 1997 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 1997 Annual Meeting.

On March 3, 1997, there were outstanding and entitled to vote 7,106,605
shares of Common Stock. The number of shares of Common Stock as of March 3,
1997, 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, 1997 to stockholders of record at the close of
business on April 1, 1997.

PRINCIPAL STOCKHOLDERS

As of March 3, 1997, approximately 36.1 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 Ann Kirby Kirby, the sister of Messrs. Kirby and
Mrs. Culbertson, primarily through a number of family trusts.
- ---------------
* See Note (4) on page 3.
<PAGE> 4

The following table sets forth the beneficial ownership of Common Stock as
of March 3, 1997 of certain persons believed by the Company to be the beneficial
owners of more than five percent of such class of securities.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------------------------
SOLE VOTING SHARED VOTING
NAME AND ADDRESS POWER AND SOLE POWER AND/OR SHARED PERCENT
OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
- ---------------------------------------- ------------------- -------- --------
<S> <C> <C> <C> <C>
F.M. Kirby.............. 287,603 617,384 904,987(1) 12.7
17 DeHart Street
P.O. Box 151
Morristown, NJ 07963
Allan P. Kirby, Jr. .... 562,394 -- 562,394(2) 7.9
14 E. Main Street
P.O. Box 90
Mendham, NJ 07945
Grace Kirby
Culbertson............ 138,317 251,287 389,604(3) 5.5
Blue Mill Road
Morristown, NJ 07960
Estate of Ann Kirby
Kirby................. 317,881 392,786 710,667(4) 10.0
c/o Carter, Ledyard &
Milburn
2 Wall Street
New York, NY 10005
Southeastern Asset
Management, Inc. ..... (5) (5) 682,332(5) 9.6
6075 Poplar Avenue
Suite 900
Memphis, TN 38119
Sasco Capital,
Incorporated.......... (6) -- 431,068(6) 6.1
10 Sasco Hill Road
Fairfield, CT 06430
</TABLE>

2
<PAGE> 5

- ---------------
(1) Includes 110,344 shares of Common Stock held by F.M. Kirby as sole trustee
of trusts for the benefit of his children; 423,756 shares held by a trust of
which Mr. Kirby is co-trustee and primary beneficiary; and 193,628 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 177,259 shares
directly.

(2) Includes 36,973 shares of Common Stock held by a child of Allan P. Kirby,
Jr., as to which Mr. Kirby holds an irrevocable power of attorney; 305,655
shares held by a trust of which Mr. Kirby is co-trustee and beneficiary; and
8,922 shares issuable under stock options granted pursuant to the Directors'
Stock Option Plan and the Amended and Restated Directors' Stock Option Plan.
Mr. Kirby disclaims beneficial ownership of the Common Stock held by his
child. Mr. Kirby held 210,844 shares directly.

(3) Includes 41,067 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 138,317 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 family of Mrs. Kirby has
declined to supply information with respect to its ownership of the
Company's Common Stock; therefore, the Company does not

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<PAGE> 6

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 1996 by Old Alleghany or
the Company; if Mrs. Kirby, her estate and the beneficiaries of her estate
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 190,624 shares.

(5) According to an amendment dated January 31, 1997 to a Schedule 13G statement
filed by Southeastern Asset Management, Inc. ("Southeastern"), an investment
advisor, Southeastern had sole voting power over 456,114 shares, shared
voting power over 145,296 shares and no voting power over 80,922 shares, for
a total of 682,332 shares. Its dispositive power with respect to such shares
was reported as follows: sole dispositive power over 537,036 shares and
shared dispositive power over 145,296 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, or ownership of, its 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 110,616 shares and 34,680 shares, respectively, over which Southeastern
had shared voting and dispositive power were owned by two separate series of
Longleaf Partners Funds Trust, an open-end management investment company
registered under the Investment Company Act of 1940, as amended.

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<PAGE> 7

(6) According to a Schedule 13G statement dated January 30, 1997 filed by Sasco
Capital, Incorporated ("Sasco"), Sasco had sole voting power over 247,970
shares and sole dispositive power over 431,068 shares.

(7) According to a Schedule 13G statement dated February 12, 1997 filed by
Franklin Mutual Advisers, Inc. ("Franklin"), Franklin Resources, Inc.
("FRI") and Charles B. Johnson and Rupert H. Johnson, Jr., Franklin had sole
voting power and sole dispositive power over 396,722 shares. The statement
indicated that such shares may be deemed to be beneficially owned by
Franklin, an investment advisory subsidiary of 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 Messrs.
Johnson were the principal shareholders of FRI and that Messrs. Johnson and
FRI could be deemed to be the beneficial owners of the shares reported
therein. Franklin, FRI, and Messrs. Johnson disclaimed any economic interest
or beneficial ownership of such shares.

(8) According to a Schedule 13G statement filed by Neuberger & Berman LLC, a
broker-dealer and investment advisor, which statement was most recently
amended on February 6, 1997, Neuberger & Berman LLC had sole voting power
over 127,703 shares and shared dispositive power over 383,705 shares, which
number includes those shares over which it had sole voting power. The
statement indicated that Neuberger & Berman LLC was deemed to be a
beneficial owner since it had shared power to make decisions whether to
retain or dispose of the securities of many unrelated clients, but it
disclaimed any economic interest in such securities, stating that its
clients were the actual owners of the securities and had the sole right to
receive and the power to direct the receipt of dividends from or proceeds
from the sale of such securities. None of these clients had an interest that
related to five percent or more of these securities.

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 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 1997 Annual
Meeting, each to serve for a term of three years, until the 2000 Annual Meeting
of Stockholders and until his

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<PAGE> 8

successor is duly elected and qualified. Messrs. Burns, Carmichael and Lavin
were last elected by stockholders of the Company at their Annual Meeting on
April 22, 1994.

Due to the death in January 1997 of John E. Tobin, a director of the
Company or Old Alleghany since 1968, there is a vacancy in the class of
directors whose term expires at the 1998 Annual Meeting. The Nominating
Committee of the Board of Directors recommended Thomas S. Johnson to the Board
of Directors, and the Board of Directors has nominated Mr. Johnson, for election
as a director at the 1997 Annual Meeting to fill such vacancy. Mr. Johnson will
serve until the 1998 Annual Meeting and until his successor is duly elected and
qualified. Mr. Johnson was a director of the Company from April 1992 to July
1993; he became Chief Executive Officer of GreenPoint Bank in 1993 and, due to
regulatory restrictions applicable to interlocks among depository institutions,
which, at that time, included the Company as the owner of Sacramento Savings
Bank, was required to resign as a director of the Company. The Company sold
Sacramento Savings Bank in 1994, and such regulatory restrictions are no longer
applicable.

Proxies in the enclosed form received from holders of Common Stock will be
voted for the election of the four 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 1997 Annual Meeting. Thus, those nominees for the term
expiring in 2000 who receive the highest, second-highest and third-highest
numbers of votes for their election as directors, and the nominee for the term
expiring in 1998 who receives the highest number of votes, 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 1998 or 1999.

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<PAGE> 9

<TABLE>
<S> <C> <C>
Nominee for Election: PHOTO President, Alleghany Corporation; director,
John J. Burns, Jr. Burlington Northern Santa Fe Corporation,
Age 65 Armco Inc., Chicago Title and Trust Company,
Director since 1968 Chicago Title Insurance Company, The Chicago
Trust Company, Mineral Holdings Inc., World
Minerals Inc., and Underwriters Re Group,
Inc. and its subsidiaries. Chairman of the
Nominating Committee and member of the
Executive Committee.

Nominee for Election: PHOTO President and Chief Executive Officer, IVANS,
Dan R. Carmichael Inc. (communications technology and
Age 52 remarketer). Chairman of the Compensation
Director since 1993 Committee and member of the Audit Committee.

Nominee for Election: PHOTO Financial Consultant. Chairman of the Audit
William K. Lavin Committee and member of the Compensation and
Age 52 Nominating Committees.
Director since 1992

Nominee for Election: PHOTO Chairman and Chief Executive Officer of
Thomas S. Johnson GreenPoint Financial Corp. and its subsidiary
Age 56 GreenPoint Bank (banking); director, R.R.
Director 1992-1993 Donnelly & Sons Company and Online Resources
& Communications Corporation.

Allan P. Kirby, Jr. PHOTO President, Liberty Square, Inc.(investments);
Age 65 management of family and personal affairs;
Director since 1963 director, Chicago Title and Trust Company,
Term expires 1998 Chicago Title Insurance Company, and The
Chicago Trust Company. Chairman of the
Executive Committee.
</TABLE>

7
<PAGE> 10

<TABLE>
<S> <C> <C>
James F. Will PHOTO Chairman, President and Chief Executive
Age 58 Officer, Armco Inc. (steel manufacturing and
Director since 1992 metals processing). Member of the Audit and
Term expires 1998 Nominating Committees.

F.M. Kirby PHOTO Chairman of the Board, Alleghany Corporation;
Age 77 director, World Minerals Inc. Member of the
Director since 1958 Executive Committee.
Term expires in 1999

Paul F. Woodberry PHOTO Financial Consultant; director, BF
Age 69 Enterprises, Inc., World Minerals Inc.,
Director since 1979 Underwriters Re Group, Inc. and its
Term expires in 1999 subsidiaries, and Alleghany Properties, Inc.
and its subsidiary.

Roger Noall PHOTO Executive, KeyCorp (banking); director,
Age 61 Broadway & Seymour, Inc. Member of the
Director since 1996 Compensation Committee.
Term expires in 1999
</TABLE>

All of the foregoing persons have had the principal occupations indicated
throughout the last five years, except as follows. Mr. Carmichael became
President and Chief Executive Officer of IVANS, Inc. on July 15, 1995. Mr.
Carmichael served as President and Chief Executive Officer of Anthem Casualty
Insurance Group, Inc. from February 1993 until July 15, 1995; he also was
President and Chief Executive Officer of The Shelby Insurance Company from
January 1987 to February 1993 and from June 1994 to July 15, 1995. The Shelby
Insurance Company was owned by the Company from 1986 through 1991. Mr. Lavin
served as Vice Chairman of the Board and Chief Executive Officer of Woolworth
Corporation (retailing) until September 1994; he served as Chairman of the

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<PAGE> 11

Board and Chief Executive Officer from June 30, 1993 to May 1994 and as
Executive Vice President -- Finance and Administration and Chief Financial
Officer prior thereto. Prior to April 24, 1992, Mr. Will was employed by Cyclops
Industries, Inc. (steel manufacturing) as President and Chief Executive Officer.
Mr. Will joined Armco Inc. on that date as President and Chief Operating Officer
upon the merger of a wholly owned subsidiary of Armco Inc. and Cyclops
Industries, Inc., and became President and Chief Executive Officer of Armco Inc.
effective January 1, 1994. Mr. Johnson has served as Chairman, President and
Chief Executive Officer of GreenPoint Financial Corp. and its subsidiary
GreenPoint Bank since August 1, 1993; prior thereto he was a corporate director
and investor. Mr. Noall has been an Executive of KeyCorp since January 1, 1997.
Mr. Noall served as Senior Executive Vice President and Chief Administrative
Officer of KeyCorp from March 1, 1994 to December 31, 1996, and served in the
additional positions of General Counsel and Secretary from September 1, 1995 to
June 14, 1996. Prior to March 1, 1994, Mr. Noall was Vice Chairman of the Board
and Chief Administrative Officer of Society Corporation (banking). Mr. Noall
joined KeyCorp on that date upon the merger of Society Corporation and KeyCorp.

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

The Board of Directors held eight meetings in 1996. 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 on which he served that
were held during the period of his service in 1996.

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.

The Audit Committee of the Board of Directors reviews and makes reports and
recommendations to the Board of Directors with respect to the selection of the
independent auditors of the Company and its subsidiaries, the arrangements for
and the scope of the audits to be performed by them, and the internal audit
activities, accounting procedures and controls of the Company and its
subsidiaries, and reviews the annual consolidated financial statements of the
Company and its subsidiaries. This committee held three meetings in 1996.

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<PAGE> 12

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 of the most highly
paid employees of its division and makes recommendations to the Board of
Directors with respect thereto; and 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
1996, also administers the Company's 1983 Long-Term Incentive Plan (under which
the right to make awards of incentive compensation terminated on December 31,
1992) and the Company's 1993 Long-Term Incentive 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 two meetings in 1996.

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<PAGE> 13

SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the beneficial ownership of Common Stock as
of March 3, 1997 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.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
--------------------------------------------------------------
SOLE VOTING SHARED VOTING
POWER AND POWER AND/OR
NAME OF SOLE INVESTMENT SHARED INVESTMENT PERCENT OF
BENEFICIAL OWNER POWER POWER TOTAL CLASS
- ---------------------------- --------------- ----------------- ------- ----------
<S> <C> <C> <C> <C>
John J. Burns, Jr........... 24,322 -- 24,322(1) 0.34
Dan R. Carmichael........... 2,090 -- 2,090(2)(3) 0.03
William K. Lavin............ 2,460 -- 2,460(2) 0.03
Thomas S. Johnson........... -- -- -- 0.00
Allan P. Kirby, Jr.......... 562,394 -- 562,394(4) 7.92
James F. Will............... 2,244 -- 2,244(2) 0.03
F.M. Kirby.................. 287,603 617,384 904,987(5) 12.73
Paul F. Woodberry........... 11,399 15,635 27,034(2) 0.38
Roger Noall................. 1,086 -- 1,086 0.01
David B. Cuming............. 25,117 -- 25,117 0.35
Robert M. Hart.............. 4,108 -- 4,108 0.06
Peter R. Sismondo........... -- 2,911 2,911 0.04
</TABLE>

- ---------------
(1) Includes 954 shares of Common Stock owned by Mr. Burns's wife or daughter.
Mr. Burns had no voting or investment power over these shares, and he
disclaims beneficial ownership of them.

(2) Includes 1,033 shares of Common Stock in the case of Mr. Carmichael, 2,094
shares of Common Stock in the case of Messrs. Lavin and Will, and 7,727
shares of Common Stock in the case of Mr. Woodberry, issuable under stock
options granted pursuant to the Directors' Stock Option Plan and the
Amended and Restated Directors' Stock Option Plan.

(3) Includes 327 shares of Common Stock owned by Mr. Carmichael's wife or son.
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.

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<PAGE> 14

All nominees named for election as a director, directors and executive
officers as a group (12 persons) beneficially owned 1,558,753 shares, or 21.9
percent, of the outstanding Common Stock (adjusted to include shares of Common
Stock issuable upon exercise of stock options); such nominees, directors and
executive officers had sole voting and investment power with respect to 921,542
shares, shared voting and/or investment power with respect to 635,930 shares and
no voting or investment power with respect to 1,281 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 1996 was a director, officer or beneficial owner of more than
ten percent of the Company's 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 1996. 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, submitted to it during or with respect to 1996. 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 ten percent of the Company's 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 the Company's Common Stock, and the family of Mrs. Kirby has
declined to supply information with respect to its ownership of the Company's
Common Stock; therefore, it does not know whether she, her estate, or any
beneficiary of her estate beneficially owned more than ten percent of its Common
Stock during 1996 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 $26,000, payable one-half in cash and one-half in shares of
the Company's 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. The Chairman of the Audit
Committee receives an annual fee of $4,500, and each other member thereof
receives an annual fee of $3,600. The Chairman of the Compensation Committee
receives an annual fee of $3,500, and each other member thereof receives an
annual fee of $3,000. Each member of the Nominating Committee

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<PAGE> 15

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 in May of each year his retainer 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 the Company's Common
Stock, based on the market value (as defined in the plan) of such shares, and
one-half in cash. On May 10, 1996, each eligible director received sixty-seven
shares of Common Stock.

Pursuant to the Amended and Restated 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, 1996, each such director received an option to
purchase 1,000 shares of Common Stock at a price of $194.69 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
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 combined boards of the Company's
subsidiaries Chicago Title and Trust Company and Chicago Title Insurance
Company, including Allan P. Kirby, Jr., receives an annual retainer of $15,000
for his services as such, as well as $650 for each board meeting attended. In
addition, each non-employee member of the Finance, Audit and Personnel
Committees of these boards, including Mr. Kirby, receives $650 for each
committee meeting attended. In 1996, Mr. Kirby received a total of $28,000 for
services in these capacities.

13
<PAGE> 16

Each of the non-employee directors of the Company's subsidiary Underwriters
Re Group, Inc. and its subsidiaries, including Mr. Woodberry, receives an annual
retainer of $18,000 for his services as such, as well as $750 for each board
meeting attended or conference telephone meeting attended. In addition, each
non-employee member of the Compensation Committee of these boards, including Mr.
Woodberry, receives $750 for each committee meeting attended. In 1996, Mr.
Woodberry received a total of $24,000 for services in these capacities. Each of
the non-employee directors of the Company's subsidiary Alleghany Properties,
Inc. ("API"), including Mr. Woodberry, receives an annual retainer of $10,000
for his services as such. In addition, each non-employee member of the Executive
Committee of this board, including Mr. Woodberry, receives an annual retainer of
$15,000 for his services as such. In 1996, Mr. Woodberry received a total of
$25,000 for services in these capacities. In addition, in 1995 the Company
authorized the grant to Mr. Woodberry of a long-term incentive award equal to
1.5 percent of the proceeds in excess of $90 million from the sale of the real
estate assets owned by API and its subsidiary. The payment of such incentive
will be made twice a year commencing at the end of the year in which such
proceeds exceed $90 million, which was the net book value of such assets at the
time API acquired such assets in connection with the sale of the Company's
former retail banking subsidiary. The incentive will be paid in shares of the
Company's Common Stock (valued at $182.47 per share, which is equal to the book
value per share of the Common Stock as of December 31, 1995 adjusted for the
stock dividend paid in 1996) or, in the discretion of the Compensation
Committee, in a combination of Common Stock (as so valued) and cash in an amount
not to exceed one-half of such payout. In the event that Mr. Woodberry is
terminated as a director of API without cause after a change in control of the
Company or after more than 50 percent of the book value of the real estate
assets of API has been sold, the incentive shall be paid on the basis of the
aggregate of (i) the cash proceeds and book value of non-cash proceeds realized
to the date of his termination, plus (ii) the book value or appraised value
(depending on the type of asset) of the real estate assets of API remaining
unsold on the date of his termination. Mr. Woodberry also provides consulting
services to the Company and certain of its subsidiaries and received $290,000 in
respect of such services performed in 1996.

14
<PAGE> 17

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 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION
-------------------------------------- LONG-TERM ALL
OTHER ANNUAL INCENTIVE OTHER
NAME AND PRINCIPAL BONUS COMPENSATION PLAN PAYOUTS COMPENSATION
POSITION YEAR SALARY (1) (2) (3)(4) (5)
- ------------------------ ----- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Burns, Jr., 1996 $ 610,000 $390,315 $ 5,808 $1,048,187 $ 97,725
President and chief 1995 550,000 586,815 179,110 843,061 86,882
executive officer 1994 500,000 681,801 331,311 -- 78,540

F.M. Kirby, 1996 $ 330,000 $ -- $ 6,905 $1,225,910 $ 57,391
Chairman of the Board 1995 300,000 -- 11,347 1,065,727 58,207
1994 300,000 183,885 15,060 -- 62,499

David B. Cuming, 1996 $ 316,100 $134,452 $ 4,586 $ 586,622 $ 51,963
Senior Vice President 1995 287,100 232,702 99,286 402,027 45,907
1994 267,100 199,465 73,860 -- 41,637

Robert M. Hart, 1996 $ 316,100 $181,445 $ 40,350 $ 586,622 $ 51,029
Senior Vice President 1995 287,100 237,646 89,288 402,027 56,673
and General Counsel 1994 77,904 197,149 65,627 -- --
since September 1994
and Secretary since
January 1, 1995

Peter R. Sismondo, 1996 $ 154,000 $ 31,572 $ 1,491 $ 286,210 $ 24,707
Vice President, 1995 140,000 51,222 18,234 186,425 21,772
Controller, Assistant 1994 130,000 30,483 114 -- 19,627
Secretary and, since
January 1, 1995,
Treasurer
</TABLE>

- ---------------
(1) These amounts represent (i) bonuses paid 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; (ii) for Mr. Hart, an award in 1996 of shares of Common Stock
under the Company's 1993 Long-Term Incentive Plan (the "1993 Plan"), valued
at $42,050; (iii) for each of Messrs. Burns, Cuming, Hart and Sismondo, an
award in 1995 of shares of Common Stock under the 1993 Plan, valued at
$196,500, $98,250, $98,250 and $19,650, respectively; and (iv) for each of
Messrs. Burns, Cuming and Hart, an award in 1994

15
<PAGE> 18

of shares of Common Stock under the 1993 Plan valued at $366,094, $73,219
and $73,219, respectively.

(2) These amounts represent payments for reimbursement of taxes, including
reimbursement of taxes incurred in respect of the awards of shares of Common
Stock under the 1993 Plan, as described in Note (1) above, and the
reimbursement itself.

(3) These amounts represent payouts in settlement of performance shares awarded
under the Company's 1983 Long-Term Incentive Plan (the "1983 Plan") (or in
the case of Mr. Hart, the 1993 Plan). 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 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 1983 Plan or 1993 Plan, as the case may be) in a four-year
award period commencing with the year following that in which the
performance shares were awarded; payouts have been made one-half in cash and
one-half in Common Stock.

(4) There were no payouts of long-term incentive compensation in 1994. The
payouts for the award period ending in 1993 would ordinarily have been made
in early 1994 but were accelerated into December 1993 in view of the
enactment of the Revenue Reconciliation Act of 1993 which removed a cap,
formerly at $135,000, on earnings received after December 31, 1993 that
would be subject to the Medicare hospital insurance payroll tax payable by
the Company and its employees.

(5) The 1996 amounts listed for Messrs. Burns, Kirby, Cuming, Hart and Sismondo
include (i) savings benefits of $91,125, $49,313, $47,234, $47,234 and
$23,013, respectively, credited pursuant to the Company's Deferred
Compensation Plan; and (ii) benefits, valued at $3,570, $8,078, $1,699, $765
and $139, 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. The 1996 amounts listed for
Messrs. Burns, Cuming, Hart and Sismondo also include compensation of
$3,030, $3,030, $3,030 and $1,555, respectively, in respect of other
insurance coverage.

16
<PAGE> 19

LONG-TERM INCENTIVE PLAN -- AWARDS IN 1996

<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF PERIOD UNDER NON-STOCK
SHARES, UNTIL PRICE-BASED PLANS
UNITS OR MATURATION -----------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
- ----------------------------------- ------------ ----------- --------- ------ ----------
<S> <C> <C> <C> <C> <C>
John J. Burns, Jr. 24,000(1) 1996-1999 $645,600 -- $7,512,000
F.M. Kirby -- -- -- -- --
David B. Cuming 2,148(2) 1997-2000 $ 1,129 -- $ 451,617
Robert M. Hart 2,148(2) 1997-2000 $ 1,129 -- $ 451,617
Peter R. Sismondo 1,103(2) 1997-2000 $ 580 -- $ 231,905
</TABLE>

- ---------------
(1) This amount represents a special award of performance shares under the 1993
Plan to Mr. Burns. Such amount does not reflect antidilution adjustments
made 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,
1997 to stockholders of record at the close of business on April 1, 1997.
The payout of these performance shares will be made 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 awarded.
The maximum payout in respect of one-half of such award will be made if the
closing market price of the Common Stock for each of any twenty consecutive
trading days ending on or before December 31, 1999 and occurring while Mr.
Burns is chief executive officer of the Company equals or exceeds $312, and
no payout will be made if such closing market price does not equal or exceed
$269. The maximum payout in respect of the remaining one-half of such award
will be made if stockholders' equity per share of Common Stock equals or
exceeds $314 as at the end of any year ending on or before December 31, 1999
and while Mr. Burns is chief executive officer of the Company, and no payout
will be made if such stockholders' equity per share of Common Stock does not
equal or exceed $272. The payout for market prices between $269 and $312,
and for stockholders' equity per share of Common Stock between $272 and
$314, will be determined by interpolation. Upon fulfillment of the
performance conditions, the payout in respect of 15,000 of such performance
shares will be made at any time at the election of Mr. Burns, and the payout
in respect of the remaining 9,000 performance shares will be deferred until
the month after Mr. Burns ceases to be an officer of the Company or, at his
option, later. There is no estimated future target payout because under the
1993 Plan no performance target for these performance shares is specified.

17
<PAGE> 20

(2) These amounts represent performance shares awarded under the Company's 1993
Plan. Such amounts do not reflect antidilution adjustments made 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, 1997 to
stockholders of record at the close of business on April 1, 1997. 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 share 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 Earnings Per Share (as defined by the
Compensation Committee pursuant to the 1993 Plan) equals or exceeds 12
percent in the award period, measured from a base of $11.38, 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. There is no
estimated future target payout because under the 1993 Plan no performance
target for these performance shares is specified. The Compensation Committee
granted to Mr. Burns in February 1997, instead of December 1996, an award of
4,517 performance shares with performance criteria as described above, in
order to qualify the award pursuant to the 1993 Plan as "performance-based
compensation" for purposes of Section 162(m) of the Internal Revenue Code of
1986, as amended, and thus to preserve the Company's right to a tax
deduction in respect of such compensation.

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 benefit, 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 salary, which is defined as the highest average annual
base salary (the amount that would appear in the salary column of the Summary
Compensation Table for the relevant years) over a consecutive three-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

18
<PAGE> 21

Company. 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 adjusted annually for inflation, and 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. Kirby elected in 1996 to receive his benefits under, and no
longer participates in, 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 January 1,
1997 at age 65, had achieved the average salary

19
<PAGE> 22

and years of service indicated. The amounts shown assume payment in the form of
a straight life annuity.

<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE -------------------------
SALARY 10 15 OR MORE
-------------------------------------- -------- ----------
<S> <C> <C>
$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
</TABLE>

As of December 31, 1996, the credited years of service for Messrs. Burns,
Cuming, Hart and Sismondo were 28.8, 20, 7 and 9, respectively. As of December
31, 1996, the average salary of each of Messrs. Burns, Cuming, Hart and Sismondo
for purposes of the Retirement Plan was $552,500, $289,697, $289,697, and
$141,139, respectively.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee of the Board of Directors
are Dan R. Carmichael, William K. Lavin and Roger Noall. Mr. Carmichael was
President and Chief Executive Officer of the Shelby Insurance Company from
January 1987 to February 1993 and from June 1994 to July 15, 1995; the Company
owned The Shelby Insurance Company from 1986 through 1991.

John J. Burns, Jr., the Company's President and chief executive officer,
served on the Compensation Committee of the Board of Directors of Armco Inc.
("Armco") until April 26, 1996. James F. Will, who is a director of the Company,
is President and Chief Executive Officer and a director of Armco.

As of March 3, 1997, the Company and its subsidiaries owned 5,643,355
shares of Armco common stock, or 5.3 percent of the outstanding common stock of
Armco. A

20
<PAGE> 23

portion of such shares was acquired upon the merger in April 1992 of Cyclops
Industries, Inc., formerly a wholly owned subsidiary of the Company, into a
wholly owned subsidiary of Armco. As a condition of the merger, the Company and
certain of its affiliates agreed to refrain from acquiring more than 15 percent
of the outstanding voting securities of Armco for five years from the date of
the merger.

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 recognized national compensation
consulting firm.

Compensation paid to the executive officers of the Company in 1994, 1995
and 1996 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 Company's 1983 Plan and
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,
individual performance, length of service and internal comparability
considerations.

Annual cash bonuses are paid to executive officers under the Company's
Management Incentive Plan (except that Mr. Kirby did not receive any such
bonuses in respect of 1995 or 1996). This plan is designed to reward officers
for the achievement of specified corporate and/or individual objectives. Bonus
opportunities for 1994, 1995 and 1996 were adjusted from the prior year in
proportion to changes in salaries. Bonus opportunities for executive officers of
the Company as a percentage of salaries are believed to be modest relative to
prevailing practices in a broad cross-section of American industry and

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

* The 1993 Plan replaced, and is substantially similar to, the Company's 1983
Plan.

21
<PAGE> 24

reflect the Company's policy of emphasizing long-term corporate performance and
long-term incentive compensation.

For 1996, the portion of the cash bonus opportunities which depended on
corporate objectives ranged from 80 percent of Mr. Burns's bonus opportunity to
50 percent of the cash 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
1996-2000. Target amounts were to be earned if plan net earnings per share were
achieved, and maximum amounts 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 net earnings per share approximated plan net earnings per
share for 1996, as adjusted; therefore, amounts approximately equal to the
target amounts were earned on the portion of the cash bonus opportunities that
was dependent on corporate objectives.

The remainder of the cash bonus opportunities of the executive officers of
the Company for 1996 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 objective for 1996 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
1993 Plan (except that Mr. Kirby did not receive any such awards in 1994, 1995
or 1996). This plan provides for long-term incentives based upon objective,
quantifiable measures of the Company's performance over a period of time. 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
have been generally made one-half in cash and one-half in Common Stock. Maximum
payouts with respect to currently outstanding performance shares will

22
<PAGE> 25

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 and
the 1983 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 per share 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 may provide 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 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 1996 for the 1997-2000 award period was determined by
adjusting the prior year's award for changes in his salary from 1996 to 1997 and
the price of the Common Stock from late 1995 to late 1996.

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.

In 1996, the Compensation Committee granted a special award of 24,000
performance shares for the 1996-99 award period to Mr. Burns, to reward his
continuing contributions to the Company and to ensure his retention until such
time as he is succeeded. The terms of such performance shares, the value of
which depends upon significant growth in the market value of the Common Stock
and stockholders' equity per share of Common Stock, are consistent with similar
arrangements of comparable public

23
<PAGE> 26

companies. Such terms are more fully described in Note (1) to the table relating
to long-term incentive awards.

In 1996, the Compensation Committee also made a special tax paid grant
under the 1993 Plan to Mr. Hart in recognition of his special accomplishments in
1996 (which grant is reflected in the columns labelled "Bonus" and "Other Annual
Compensation" in the Summary Compensation Table).

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

The Revenue Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code of 1986, as amended. Section 162(m), which became effective for tax
years beginning January 1, 1994, 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." Those requirements include the establishment of objective
performance goals by a committee of the Board of Directors composed solely of
two or more outside directors, stockholder approval of the material terms of the
performance goals under which the compensation is to be paid prior to payment of
such compensation, and certification by the committee that the performance goals
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." To that end, the 1993 Plan was amended, and submitted to and
approved by the stockholders of the Company at the 1995 Annual Meeting of
Stockholders, so that compensation payable pursuant to certain long-term
incentive awards under the 1993 Plan as amended may qualify for deductibility
under Section 162(m). All of the performance shares awarded in 1996 to Messrs.
Cuming and Hart described in Note (2) to the table relating to long-term
incentive awards are intended to qualify as "performance-based compensation" for
purposes of Section 162(m). Of the 24,000 performance shares awarded to Mr.
Burns in 1996 and described in Note (1) to such table, 15,000 performance
shares, the maximum

24
<PAGE> 27

number permitted to be awarded as "performance-based compensation" to a
participant in any calendar year under the 1993 Plan, are also intended to so
qualify; the Company believes that the deferred payout of the remaining 9,000
performance shares will preserve the Company's deduction for compensation in
respect thereof. As described in Note (2) to such table, the Compensation
Committee granted an award of performance shares to Mr. Burns in February 1997,
instead of December 1996, in order to qualify such award 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 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 performance goals 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 may be paid to executive officers
of the Company in the future, the Compensation Committee will consider the
requirements of Section 162(m) and will make determinations 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

25
<PAGE> 28

PERFORMANCE GRAPH

The following graph compares for the years 1992-96 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 two groups of "peer" issuers.

The Company is a moderately diversified business enterprise with the
majority of its revenues currently generated by its title insurance and
reinsurance operations and most of the remainder from its industrial minerals
and steel fastener operations. Except for the steel fastener operations, all of
these businesses were acquired within the last twelve years and are conducted
through subsidiaries.

"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. In past years, the Company had compared its
performance to a group of "peer" issuers that, in addition to the Company,
consisted of American Express Company, Loews Corporation, Old Republic
International Corp., Transamerica Corporation, Lincoln National Corporation and
American Financial Group, Inc. (collectively, the "Old Peer Group"), as well as
ITT Corporation and Kemper Corporation.

In December 1995, ITT Corporation was divided into three public companies
that separately conduct the businesses formerly conducted by ITT Corporation. In
March 1996, Kemper Corporation was acquired by Zurich Insurance Group. As a
result, these companies were no longer able to be included in the group of
"peer" issuers for the Company. In addition, American Express Company no longer
satisfies the selection criteria outlined above due to the nature of the
business now conducted by it and its relative size in comparison to the Company.
Accordingly, the Company has constructed a new group of "peer" issuers which, in
addition to the Company, consists of Loews Corporation, Old Republic
International Corp., Transamerica Corporation, Lincoln National Corporation,
American Financial Group, Inc. and Reliance Group Holdings, Inc. (collectively,
the "New Peer Group").

The Company has also determined that, in connection with such change in the
group of "peer" issuers, it will change the assumption it uses with respect to
the reinvestment

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<PAGE> 29

of dividends to one which it believes is more commonly used in such graphs by
other companies, as described below.

<TABLE>
<CAPTION>
MEASUREMENT PERIOD OLD PEER NEW PEER
(FISCAL YEAR COVERED) ALLEGHANY S&P 500 GROUP GROUP
<S> <C> <C> <C> <C>
1991 $ 100 $ 100 $ 100 $ 100
1992 $ 122.91 $ 107.62 $ 119.93 $ 120.97
1993 $ 134.5 $ 118.46 $ 135.19 $ 123.66
1994 $ 145.32 $ 120.03 $ 136.18 $ 111.32
1995 $ 193.08 $ 165.13 $ 206.91 $ 180.09
1996 $ 210.87 $ 203.05 $ 259.55 $ 205.57
</TABLE>

The foregoing performance graph is based on the following assumptions: (i)
in the case of the Old Peer Group, cash dividends are reinvested at the end of
the month in which such dividends are received and, in the case of the New Peer
Group, cash dividends are reinvested on the ex-dividend date in respect of such
dividend; (ii) the Company's annual two-percent stock dividends 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.

2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, as independent auditors for the Company for the
year 1997. A resolution will be submitted to stockholders at the meeting for
ratification of such selection. Although ratification by stockholders is not a
prerequisite to the ability of the

27
<PAGE> 30

Board of Directors to select KPMG Peat Marwick 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 Peat Marwick LLP, the selection
of independent auditors will be reconsidered by the Board of Directors; however,
the Board of Directors may select KPMG Peat Marwick LLP notwithstanding the
failure of the stockholders to ratify its selection.

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 Peat Marwick LLP were Old Alleghany's independent auditors since 1947
and the Company's independent auditors since its incorporation in November 1984.

It is expected that a representative of KPMG Peat Marwick LLP will be
present at the 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 MEETING

As of the date of this statement, the Board of Directors knows of no
business that will be presented for consideration at the meeting other than that
referred to above. As to other business, if any, that may come before the
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

28
<PAGE> 31

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 1998 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
November 24, 1997 in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 1998
Annual Meeting, scheduled for Friday, April 24, 1998.

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
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 1997
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 Kissel-Blake Inc. to aid in the solicitation
of proxies, and for its services the Company expects to pay fees of
approximately $8,000 plus expenses.

By order of the Board of Directors

ROBERT M. HART

Senior Vice President, General
Counsel
and Secretary
March 24, 1997

29
<PAGE> 32
ALLEGHANY CORPORATION

PROXY FOR ANNUAL MEETING ON APRIL 25,1997

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 the Chase Manhattan Bank, 270 Park Avenue, Eleventh Floor, Room C, New
York, New York, on Friday, April 25, 1997 at 2:00 p.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.

<PAGE> 33
PROXY

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

For All
For Withhold Except

1. Election of Directors / / / / / /

John J. Burns, Jr. Dan R. Carmichael
William K. Lavin Thomas S. Johnson

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

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

For Against Abstain

2. Ratification of appointment of KPMG / / / / / /
Peat Marwick LLP as independent auditors
for the year 1997.

Dated: , 1997
----------------------

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

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.

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.