<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.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(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 24, 1998 AT 10:00 A.M., LOCAL TIME
------------------
3343 PEACHTREE ROAD, N.E.
18TH FLOOR
ATLANTA, GEORGIA
Notice is hereby given that the 1998 Annual Meeting of Stockholders of
Alleghany Corporation (the "Company") will be held at 3343 Peachtree Road, N.E.,
18th Floor, Atlanta, Georgia, on Friday, April 24, 1998 at 10:00 a.m., local
time, for the following purposes:
1. To elect three directors for terms expiring in 2001.
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 1998.
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 2, 1998 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 23, 1998 (LOGO)
<PAGE> 3
ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 24, 1998
------------------
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 1998 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 23, 1998.
The Board of Directors has fixed the close of business on March 2, 1998 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 1998 Annual Meeting.
On March 2, 1998, there were outstanding and entitled to vote 7,373,739
shares of Common Stock.
SPIN-OFF OF CHICAGO TITLE AND TRUST COMPANY
On December 17, 1997, the Company announced its intention to establish the
title insurance and real estate-related services business now conducted by
Chicago Title and Trust Company ("CT&T"), as an independent, publicly traded
company. This is to be accomplished by a spin-off (the "Spin-Off") to the
Company's stockholders of shares of a newly formed holding company for CT&T to
be called Chicago Title Corporation. The Spin-Off, which is expected to occur in
the second quarter of 1998, is subject to receipt of an IRS ruling to the effect
that the Spin-Off will not be taxable. The common stock of Chicago Title
Corporation is expected to be listed on the New York Stock Exchange. The
financial services business conducted through Alleghany Asset Management, Inc.,
cur-
<PAGE> 4
rently a subsidiary of CT&T, will not be a part of the distribution and will
remain with the Company.
PRINCIPAL STOCKHOLDERS
As of March 2, 1998, approximately 35.1 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.
The following table sets forth the beneficial ownership of Common Stock as
of March 2, 1998 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............... 292,429 627,967 920,396(1) 12.5
17 DeHart Street
P.O. Box 151
Morristown, NJ 07963
Allan P. Kirby, Jr. ..... 562,353 -- 562,353(2) 7.6
14 E. Main Street
P.O. Box 90
Mendham, NJ 07945
Grace Kirby Culbertson... 141,097 252,106 393,203(3) 5.3
Blue Mill Road
Morristown, NJ 07960
Estate of Ann Kirby
Kirby.................. 317,881 392,786 710,667(4) 9.6
c/o Carter, Ledyard &
Milburn
2 Wall Street
New York, NY 10005
</TABLE>
- ---------------
* See Note (4) on page 4.
2
<PAGE> 5
<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>
Southeastern Asset (5) (5) 792,261(5) 10.7
Management,
Inc........ 6075 Poplar
Avenue
Suite 900
Memphis, TN 38119
Sasco Capital,
Incorporated........... (6) -- 497,414(6) 6.7
10 Sasco Hill Road
Fairfield, CT 06430
Franklin Mutual Advisers,
Inc. .................. 406,695 -- 406,695(7) 5.5
51 John F. Kennedy
Parkway
Short Hills, NJ 07078
</TABLE>
- ---------------
(1) Includes 110,344 shares of Common Stock held by F.M. Kirby as sole trustee
of trusts for the benefit of his children; 432,231 shares held by a trust of
which Mr. Kirby is co-trustee and primary beneficiary; and 195,736 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 182,085 shares
directly.
(2) Includes 34,973 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 of Mr. Kirby is co-trustee and beneficiary;
and 9,943 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 211,782 shares directly.
(3) Includes 41,886 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 141,097 shares directly.
3
<PAGE> 6
(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 its
ownership of the Company's Common Stock; 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 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 208,649 shares.
(5) According to an amendment dated February 4, 1998 to a Schedule 13G statement
filed by Southeastern Asset Management, Inc. ("Southeastern"), an investment
advisor, Southeastern had sole voting power over 466,621 shares, shared
voting power over 239,101 shares and no voting power over 86,539 shares, for
a total of 792,261 shares. Its dispositive power with respect to such shares
was reported as follows: sole dispositive power over 553,160 shares and
shared dispositive power over 239,101 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 112,828 shares and 126,273 shares, respectively, over which
Southeastern had shared or no voting power and shared dispositive power were
owned by two separate series of
4
<PAGE> 7
Longleaf Partners Funds Trust, an open-end management investment company
registered under the Investment Company Act of 1940, as amended.
(6) According to a Schedule 13G statement, which was amended on January 30,
1998, filed by Sasco Capital, Incorporated ("Sasco"), Sasco had sole voting
power over 296,617 shares and sole dispositive power over 497,414 shares.
(7) According to a Schedule 13G statement filed by Franklin Mutual Advisers,
Inc. ("Franklin"), Franklin Resources, Inc. ("FRI") and Charles B. Johnson
and Rupert H. Johnson, Jr., which was amended on January 26, 1998, Franklin
had sole voting power and sole dispositive power over 406,695 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.
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.
Allan P. Kirby, Jr., Thomas S. Johnson and James F. Will have been
nominated by the Board of Directors for election as directors at the 1998 Annual
Meeting, each to serve for a term of three years, until the 2001 Annual Meeting
of Stockholders and until his successor is duly elected and qualified. Messrs.
Kirby and Will were last elected by the stockholders of the Company at their
Annual Meeting on April 28, 1995. Mr. Johnson was elected by the stockholders of
the Company at the Annual Meeting on April 25, 1997 to serve for the remainder
of the term of office left vacant by the death of John E. Tobin in January 1997.
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
5
<PAGE> 8
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 1998
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 1999 or 2000.
<TABLE>
<S> <C> <C>
PHOTO President, Liberty Square, Inc.(investments);
Nominee for Election: management of family and personal affairs;
Allan P. Kirby, Jr. director, Chicago Title and Trust Company,
Age 66 Chicago Title Insurance Company, and The
Director since 1963 Chicago Trust Company. Chairman of the
Executive Committee.
PHOTO
Nominee for Election: Chairman and Chief Executive Officer of
Thomas S. Johnson GreenPoint Financial Corp. and its subsidiary
Age 57 GreenPoint Bank (banking); director, R.R.
Director since 1997 and Donnelly & Sons Company and Online Resources
for 1992-1993 & Communications Corporation. Member of the
Audit Committee.
PHOTO
Nominee for Election: Chairman, President and Chief Executive
James F. Will Officer, Armco Inc. (steel manufacturing and
Age 59 metals processing). Member of the Executive
Director since 1992 and Nominating Committees.
</TABLE>
6
<PAGE> 9
<TABLE>
<S> <C> <C>
PHOTO
F.M. Kirby Chairman of the Board, Alleghany Corporation;
Age 78 director, World Minerals Inc. Member of the
Director since 1958 Executive Committee.
Term expires in 1999
PHOTO
Paul F. Woodberry Financial Consultant; director, BF
Age 70 Enterprises, Inc., World Minerals Inc.,
Director since 1979 Underwriters Re Group, Inc., and Alleghany
Term expires in 1999 Properties, Inc. and its subsidiary.
PHOTO
Roger Noall Executive, KeyCorp (banking); director,
Age 62 Broadway & Seymour, Inc. and trustee, The
Director since 1996 Victory Portfolios. Member of the
Term expires in 1999 Compensation Committee.
President, Alleghany Corporation; director,
PHOTO Burlington Northern Santa Fe Corporation,
John J. Burns, Jr. Chicago Title and Trust Company, Chicago
Age 66 Title Insurance Company, The Chicago Trust
Director since 1968 Company, Mineral Holdings Inc., World
Term Expires 2000 Minerals Inc., and Underwriters Re Group,
Inc. Chairman of the Nominating Committee and
member of the Executive Committee.
PHOTO
Dan R. Carmichael Chairman, President and Chief Executive
Age 53 Officer, IVANS, Inc. (communications
Director since 1993 technology and remarketer). Chairman of the
Term Expires in 2000 Compensation Committee and member of the
Audit Committee.
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C>
PHOTO
William K. Lavin Financial Consultant; director, Stratford
Age 53 Acquisition Corporation. Chairman of the
Director since 1992 Audit Committee and member of the
Term Expires in 2000 Compensation and Nominating Committees.
</TABLE>
All of the foregoing persons have had the principal occupations indicated
throughout the last five years, except as follows. Mr. Johnson has served as
Chairman and Chief Executive Officer of GreenPoint Financial Corp. and its
subsidiary GreenPoint Savings Bank since August 1, 1993; he also served as
President of those entities from August 1, 1993 to October 16, 1997. Prior
thereto, he was a corporate director and investor. Mr. Will joined Armco Inc. on
April 24, 1992 as President and Chief Operating Officer and became President and
Chief Executive Officer of Armco Inc. effective January 1, 1994. 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. Mr. Carmichael has been President and
Chief Executive Officer of IVANS, Inc. since July 15, 1995 and Chairman since
March 1997. 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 June 1994 to July 15, 1995. 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 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.
F.M. Kirby and Allan P. Kirby, Jr. are brothers.
The Board of Directors held eight meetings in 1997. 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 1997.
8
<PAGE> 11
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 two meetings in 1997.
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 1997.
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 five meetings in
1997, 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 1997.
9
<PAGE> 12
SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of March 2, 1998 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........... 26,418 -- 26,418(1) 0.36
Dan R. Carmichael........... 3,929 204 4,133(2)(3) 0.05
William K. Lavin............ 4,632 -- 4,632(2) 0.06
Thomas S. Johnson........... 895 -- 895(2) 0.01
Allan P. Kirby, Jr.......... 562,353 -- 562,353(4) 7.63
James F. Will............... 4,412 -- 4,412(2) 0.06
F.M. Kirby.................. 292,429 627,967 920,396(5) 12.48
Paul F. Woodberry........... 12,820 17,443 30,263(2) 0.41
Roger Noall................. 2,181 -- 2,181(2) 0.03
David B. Cuming............. 26,988 -- 26,988 0.37
Robert M. Hart.............. 5,559 -- 5,559 0.08
Peter R. Sismondo........... 2,733 306 3,039 0.04
</TABLE>
- ---------------
(1) Includes 1,021 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 3,115 shares of Common Stock in the case of Mr. Carmichael, 4,197
shares of Common Stock in the case of Messrs. Lavin and Will, 333 shares in
the case of Mr. Johnson, 1,013 shares of Common Stock in the case of Mr.
Noall, and 7,576 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 212 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.
10
<PAGE> 13
All nominees named for election as a director, directors and executive
officers as a group (12 persons) beneficially owned 1,591,269 shares, or 21.5
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 945,349
shares, shared voting and/or investment power with respect to 645,920 shares and
no voting or investment power with respect to 1,233 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 1997 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 1997. 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 1997. 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 representatives of the
estate of Mrs. Kirby have declined to supply information with respect to its
ownership of the Company's Common Stock; therefore, the Company does not know
whether she, her estate, or any beneficiary of her estate beneficially owned
more than ten percent of its Common Stock during 1997 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
11
<PAGE> 14
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 9, 1997, each eligible director received sixty-two
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 28, 1997, each eligible director received an option
to purchase 1,000 shares of Common Stock at a price of $208.75 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 $1,300 for the first board meeting held in
January and $650 for each board meeting attended thereafter. In addition, each
non-employee member of the Finance, Audit and Personnel Committees of these
boards, including Mr. Kirby, receives $1,300 for the first committee meeting
held in January and $650 for each committee meeting attended thereafter. In
1997, Mr. Kirby received a total of $29,300 for services in these capacities.
12
<PAGE> 15
Each of the non-employee directors of the Company's subsidiary Underwriters
Re Group, Inc., 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 this board, including Mr. Woodberry, receives $750
for each committee meeting attended. In 1997, 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 1997, 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
$178.89 per share, which is equal to the book value per share of the Common
Stock as of December 31, 1995, adjusted for the stock dividends paid in 1996 and
1997) 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. A maximum of 6,500 shares of Common Stock may be paid in respect of this
incentive; any amount earned in excess of the value of 6,500 shares will be paid
in cash. 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 $490,000 in respect of such services performed in
1997, including a special consulting bonus of $200,000.
13
<PAGE> 16
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 1997.
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)
------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Burns, Jr., 1997 $655,750 $400,964 $ 12,029 $1,171,965 $111,835
President and chief 1996 610,000 390,315 5,808 1,048,187 97,725
executive officer 1995 550,000 586,815 179,110 843,061 86,882
F.M. Kirby, Chairman 1997 $354,750 $ -- $ 8,181 $ 540,080 $ 62,629
of the Board 1996 330,000 -- 6,905 1,225,910 57,391
1995 300,000 -- 11,347 1,065,727 58,207
David B. Cuming, 1997 $339,800 $166,656 $ 7,489 $ 576,845 $ 58,704
Senior Vice 1996 316,100 134,452 4,586 586,622 51,963
President 1995 287,100 232,702 99,286 402,027 45,907
Robert M. Hart, 1997 $339,800 $168,057 $ 4,182 $ 576,845 $ 55,605
Senior Vice 1996 316,100 181,445 40,350 586,622 51,029
President, General 1995 287,100 237,646 89,288 402,027 56,673
Counsel and
Secretary
Peter R. Sismondo, 1997 $165,550 $ 38,205 $ 1,814 $ 282,510 $ 29,536
Vice President, 1996 154,000 31,572 1,491 286,210 124,707
Controller, 1995 140,000 51,222 18,234 186,425 21,772
Assistant Secretary
and 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; and (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. The 1997 amount for
Mr. Burns does not include the portion of his bonus opportunity dependent on
his personal objectives, the assessment of which has been deferred pending
completion of the Spin-Off.
14
<PAGE> 17
(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) The 1997 amounts listed for Messrs. Burns, Kirby, Cuming, Hart and Sismondo
include (i) savings benefits of $98,077, $53,058, $50,822, $50,822 and
$27,460, respectively, credited pursuant to the Company's Deferred
Compensation Plan; and (ii) benefits, valued at $10,728, $9,571, $4,852,
$1,753 and $404, 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 1997 amounts listed
for Messrs. Burns, Cuming, Hart and Sismondo also include compensation of
$3,030, $3,030, $3,030 and $1,672, respectively, in respect of other
insurance coverage.
15
<PAGE> 18
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1997
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE PAYOUTS
NUMBER OF OR OTHER UNDER NON-STOCK
SHARES, PERIOD UNTIL PRICE-BASED PLANS
UNITS OR MATURATION ---------------------------------
NAME OTHER RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
---- --------------- ------------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
John J. Burns, Jr. 4,384 1998-2001 $ 2,970 -- $1,188,064
F.M. Kirby -- -- -- -- --
David B. Cuming 1,811 1998-2001 $ 1,227 -- $ 490,781
Robert M. Hart 1,811 1998-2001 $ 1,227 -- $ 490,781
Peter R. Sismondo 931 1998-2001 $ 631 -- $ 252,301
</TABLE>
- ---------------
(1) These amounts represent performance shares awarded under the Company's 1993
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 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 $14.60 in respect of
performance shares for the 1998-2001 award period. 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. Upon consummation of the
Spin-Off, the number of performance shares awarded in 1997 shall be
increased, based upon the ratio of the average value of the Common Stock for
the five trading days before the Spin-Off compared to such value of the
Common Stock less the average value of the common stock of Chicago Title
Corporation, the new holding company for CT&T, during such five day period;
and the base Earnings Per Share for the performance shares for the 1998-2001
award period shall become $7.67, which excludes the projected earnings
contribution of CT&T. There is no estimated future target payout because
under the 1993 Plan no performance target for these performance shares is
specified.
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.
16
<PAGE> 19
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, pursuant to an amendment adopted
effective January 1, 1998, 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 of the annual
bonuses paid over a consecutive five-year period (or such lesser period that the
participant has been employed) 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 are reported as salary and bonuses paid under the Company's
Management Incentive Plan in 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 highest average over the five consecutive years (or lesser period of
employment) out of the ten years 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,
17
<PAGE> 20
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 December
31, 1997 at age 65, had achieved the average salary 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
900,000.................................. 387,279 580,919
1,000,000.................................. 430,310 645,466
1,100,000.................................. 473,341 710,012
</TABLE>
As of December 31, 1997, the credited years of service for Messrs. Burns,
Cuming, Hart and Sismondo were 29.8, 21, 8 and 10, respectively. The average
salary of each of Messrs. Burns, Cuming, Hart and Sismondo for purposes of the
Retirement Plan, giving effect to the amendment adopted effective January 1,
1998 referred to above, was $771,321, $378,672, $382,345, and $168,284,
respectively.
18
<PAGE> 21
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.
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 1995, 1996
and 1997 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, 1996 or 1997). This plan is designed to reward
officers for the achievement of specified corporate and/or individual
objectives. Bonus opportunities for 1995 and 1996
- ---------------
* The 1993 Plan replaced, and is substantially similar to, the Company's 1983
Plan.
19
<PAGE> 22
were adjusted from the prior year in proportion to changes in salaries; bonus
opportunities for 1997 were adjusted at the rate of 10 percent, which is in
excess of average salary increases of 7.5 percent from 1996. Bonus opportunities
for executive officers of the Company as a percentage of salaries for 1997
ranged from 76 percent of salary for Mr. Burns to 26 percent of salary for the
most junior executive officer of the Company, 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 1997, 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
1997-2001. 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 exceeded 110 percent of the plan
for 1997; therefore, the maximum amounts were earned on that 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 1997 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 will be assessed, by the Board of Directors upon
the recommendation of the Compensation Committee, which will receive the
recommendation of the Chairman of the Board with respect thereto. The assessment
of Mr. Burns's performance for 1997 has been deferred pending the completion of
the Spin-Off.
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 1995, 1996
or 1997). 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
20
<PAGE> 23
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 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 1997 for the 1998-2001 award period was determined by
adjusting the prior year's award for changes in his salary from 1997 to 1998 and
the price of the Common Stock from late 1996 to late 1997.
Upon consummation of the Spin-Off, antidilution adjustments to the number
of performance shares awarded for the 1998-2001 award period will be made, based
on the ratio of the average value of the Common Stock for the five trading days
before the Spin-Off compared to such value of the Common Stock less the average
value of the common stock of Chicago Title Corporation, the new holding company
for CT&T, for such five day period. Similar adjustments will be made to all
other outstanding performance shares. Base Earnings Per Share in respect of
performance shares awarded for the 1998-2001 award period automatically will be
reduced by the projected earnings contribution of CT&T. Earnings Per Share in
respect of all other outstanding performance shares shall
21
<PAGE> 24
not be adjusted, but shall treat the Spin-Off as a sale of CT&T, based on the
fair market value of the new holding company for CT&T at the date of the
Spin-Off, with the resulting gain reflected in 1998 earnings.
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
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
22
<PAGE> 25
qualify for deductibility under Section 162(m). All of the performance shares
awarded in 1997 to Messrs. Burns, Cuming and Hart described in Note (1) to the
table relating to long-term incentive awards are intended to qualify as
"performance-based compensation" for purposes of Section 162(m). The adjustments
described above in respect of the Spin-Off are believed to comply with the
requirements 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
23
<PAGE> 26
PERFORMANCE GRAPH
The following graph compares for the years 1993-97 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 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 thirteen 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.
The Company has constructed a 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.
24
<PAGE> 27
1993 1994 1995 1996 1997
Alleghany $109.43 $118.23 $157.09 $171.56 $235.04
S&P 500 $110.08 $111.53 $153.45 $188.68 $251.63
Peer Group $102.22 $ 92.02 $148.87 $169.93 $221.57
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 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 1998. 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 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
25
<PAGE> 28
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 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.
26
<PAGE> 29
In accordance with the rules of the Securities and Exchange Commission, any
proposal of a stockholder intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
November 23, 1998 in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 1999
Annual Meeting, scheduled for Friday, April 23, 1999.
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 1998
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 23, 1998
27
<PAGE> 30
PROXY ALLEGHANY CORPORATION PROXY
PROXY FOR ANNUAL MEETING ON APRIL 24, 1998
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 3343 Peachtree Road, N.E., 18th Floor, Atlanta, Georgia, on Friday,
April 24, 1998 at 10:00 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.
<PAGE> 31
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 WITHHOLD FOR ALL
ALL ALL EXCEPT
1. Election of Directors
Alan P. Kirby, Jr. Thomas S. Johnson James F. Will / / / / / /
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 Peat Marwick LLP as
independent auditors for the year 1998. / / / / / /
Dated: , 1998
------------
-------------------
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.
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