<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
ALLEGHANY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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 0-11.
(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:
------------------------------------------------------------------------
<PAGE> 2
(4) Date Filed:
<PAGE> 3
ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 23, 1999 AT 10:00 A.M., LOCAL TIME
------------------------
UNDERWRITERS RE GROUP, INC.
26050 MUREAU ROAD
CALABASAS, CALIFORNIA
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
Alleghany Corporation (the "Company") will be held at Underwriters Re Group,
Inc., 26050 Mureau Road, Calabasas, California, on Friday, April 23, 1999 at
10:00 a.m., local time, for the following purposes:
1. To elect three directors for terms expiring in 2002.
2. To consider and take action upon a proposal to ratify the selection
of KPMG LLP, independent certified public accountants, as auditors
for the Company for the year 1999.
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 1, 1999 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 22, 1999 (LOGO)
<PAGE> 4
ALLEGHANY CORPORATION
375 PARK AVENUE
NEW YORK, NEW YORK 10152
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 23, 1999
------------------------
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 1999 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 22, 1999.
The Board of Directors has fixed the close of business on March 1, 1999 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 1999 Annual Meeting.
On March 1, 1999, there were outstanding and entitled to vote 7,217,848
shares of Common Stock. The number of shares of Common Stock as of March 1,
1999, 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 26, 1999 to stockholders of record at the close of
business on April 1, 1999.
SPIN-OFF OF CHICAGO TITLE CORPORATION
On June 17, 1998, the Company distributed its shares of Chicago Title
Corporation ("Chicago Title"), a holding company for the title insurance and
real estate-related services business conducted by the Company's former
subsidiary, Chicago Title and Trust Company, to the Company's stockholders on a
pro rata basis. This spin-off was not taxable to the Company's stockholders
based upon an Internal Revenue Service ruling received by the Company in March
1998. The financial services business conducted through Alleghany Asset
Management, Inc. was not a part of the spin-off and remained with the Company.
<PAGE> 5
PRINCIPAL STOCKHOLDERS
As of March 1, 1999, approximately 35.9 percent* of the Company's
outstanding Common Stock was believed to be beneficially owned by F.M. Kirby,
Allan P. Kirby, Jr., their sister, Grace Kirby Culbertson, and the estate or one
or more beneficiaries of the estate of Ann Kirby Kirby, the sister of Messrs.
Kirby and Mrs. Culbertson, primarily through a number of family trusts.
The following table sets forth the beneficial ownership of Common Stock as
of March 1, 1999 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 POWER
NAME AND ADDRESS POWER AND/OR SOLE AND/OR SHARED PERCENT
OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
- ------------------- ----------------- ------------------- ------- --------
<S> <C> <C> <C> <C>
F.M. Kirby..................... 293,571 627,967 921,538(1) 12.8
17 DeHart Street
P.O. Box 151
Morristown, NJ 07963
Allan P. Kirby, Jr............. 567,782 -- 567,782(2) 7.9
14 E. Main Street
P.O. Box 90
Mendham, NJ 07945
Grace Kirby Culbertson......... 141,097 252,106 393,203(3) 5.4
Blue Mill Road
Morristown, NJ 07960
Estate of Ann Kirby Kirby...... 317,881 392,786 710,667(4) 9.8
c/o Carter, Ledyard & Milburn
2 Wall Street
New York, NY 10005
Southeastern Asset Management, (5) (5) 776,750(5) 10.8
Inc..........................
6075 Poplar Avenue Suite 900
Memphis, TN 38119
Sasco Capital, Incorporated.... (6) -- 466,846(6) 6.5
10 Sasco Hill Road
Fairfield, CT 06430
Franklin Mutual Advisers, 518,671 -- 518,671(7) 7.2
Inc. ........................
51 John F. Kennedy Parkway
Short Hills, NJ 07078
</TABLE>
- ------------------
* See Note (4) on page 3.
2
<PAGE> 6
- ---------------
(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 183,227 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 14,352 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 212,802 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.
(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
3
<PAGE> 7
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, 1999 to a Schedule 13G statement
filed by Southeastern Asset Management, Inc. ("Southeastern"), an investment
advisor, as of December 31, 1998, Southeastern had sole voting power over
444,357 shares, shared voting power over 239,101 shares and no voting power
over 93,292 shares, for a total of 776,750 shares. Its dispositive power
with respect to such shares was reported as follows: sole dispositive power
over 537,649 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 239,101 shares over which
Southeastern had shared voting power and shared dispositive power were owned
by a series of Longleaf Partners Funds Trust, an open-end management
investment company registered under the Investment Company Act of 1940, as
amended.
(6) According to an amendment dated February 8, 1999 to a Schedule 13G statement
filed by Sasco Capital, Incorporated ("Sasco"), as of December 31, 1998,
Sasco had sole voting power over 287,811 shares and sole dispositive power
over 466,846 shares.
(7) According to an amendment dated January 29, 1999 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., as of
December 31, 1998, Franklin had sole voting power and sole dispositive power
over 518,671 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,
but beneficial ownership of the shares reported therein are not attributed
to FRI or Messrs. Johnson because Franklin exercises voting and investment
powers over such shares independently of FRI and Messrs. Johnson. Franklin
disclaimed any economic interest or beneficial ownership of such shares.
4
<PAGE> 8
1. ELECTION OF DIRECTORS
Pursuant to the Company's certificate of incorporation and by-laws, the
Board of Directors is divided into three separate classes of directors, which
are required to be as nearly equal in number as practicable. At each annual
meeting of stockholders, one class of directors is elected to a term of three
years. The Board of Directors currently consists of nine directors.
Paul F. Woodberry, whose term expires this year, is retiring from the Board
of Directors at age 71, and is not a nominee for election for an additional
term. F.M. Kirby, Roger Noall and Rex D. Adams have been nominated by the Board
of Directors for election as directors at the 1999 Annual Meeting, each to serve
for a term of three years, until the 2002 Annual Meeting of Stockholders and
until his successor is duly elected and qualified. Messrs. Kirby and Noall were
last elected by the stockholders of the Company at their Annual Meeting on April
26, 1996. Mr. Adams has been nominated by the Board of Directors to fill the
vacancy resulting from Mr. Woodberry's retirement.
Proxies in the enclosed form received from holders of Common Stock will be
voted for the election of the three nominees named above as directors of the
Company unless stockholders indicate otherwise. If any of the foregoing nominees
is unable to serve for any reason (which event is not anticipated), the shares
represented by the enclosed proxy may be voted for such other person or persons
as may be determined by the holders of such proxy unless stockholders indicate
otherwise. Directors will be elected by an affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy and
entitled to vote at the 1999 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 2000 or 2001.
5
<PAGE> 9
<TABLE>
<S> <C> <C>
Nominee for Election: Chairman of the Board, Alleghany
F.M. Kirby [PHOTO of F.M. Kirby] Corporation; director, World Minerals Inc.
Age 79 Member of the Executive Committee.
Director since 1958
Nominee for Election: Executive, KeyCorp (banking); director,
Roger Noall [PHOTO of Roger Noall] Broadway & Seymour, Inc. and trustee, The
Age 63 Victory Portfolios. Member of the
Director since 1996 Compensation Committee.
Nominee for Election: Dean, Fuqua School of Business at Duke
Rex D. Adams [PHOTO of Rex D. Adams] University (education); Chairman, Centre
Age 59 for Economic Policy Research, director,
Public Broadcasting Service,
Public/Private Ventures and trustee,
Committee for Economic Development and
Woods Hole Oceanographic Institution.
John J. Burns, Jr. President, Alleghany Corporation;
Age 67 [PHOTO of John J. Burns] director, Burlington Northern Santa Fe
Director since 1968 Corporation, Chicago Title Corporation,
Term Expires 2000 Mineral Holdings Inc., World Minerals Inc.
and Underwriters Re Group, Inc. Chairman
of the Nominating Committee and member of
the Executive Committee.
Dan R. Carmichael President and Chief Executive Officer,
Age 54 [PHOTO of Dan R. IVANS, Inc. (communications technology and
Director since 1993 Carmichael] remarketer). Chairman of the Compensation
Term Expires in 2000 Committee and member of the Audit
Committee.
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C> <C>
William K. Lavin Financial Consultant; director, Chicago Title
Age 54 [PHOTO of William K. Corporation, Stratford Acquisition Corporation
Director since 1992 Lavin] and Underwriters Re Group, Inc. Chairman of the
Term Expires in 2000 Audit Committee and member of the Compensation
and Nominating Committees.
Allan P. Kirby, Jr. President, Liberty Square, Inc.(investments);
Age 67 [PHOTO of Allan P. management of family and personal affairs;
Director since 1963 Kirby, Jr.] director, Chicago Title Corporation. Chairman
Term expires in 2001 of the Executive Committee.
Chairman and Chief Executive Officer of
Thomas S. Johnson GreenPoint Financial Corp. and its subsidiary
Age 58 [PHOTO of Thomas S. GreenPoint Bank (banking); director, R.R.
Director since 1997 and Johnson] Donnelley & Sons Company and Online Resources &
for 1992-1993 Communications Corporation. Member of the Audit
Term expires in 2001 Committee.
James F. Will Chairman, President and Chief Executive
Age 60 [PHOTO of James F. Will] Officer, Armco Inc. (steel manufacturing and
Director since 1992 metals processing); Member of the Executive and
Term expires in 2001 Nominating Committees.
</TABLE>
All of the foregoing persons have had the principal occupations indicated
throughout the last five years, except as follows. 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
7
<PAGE> 11
Corporation and KeyCorp. Mr. Adams has been Dean of Fuqua Business School since
June 1, 1996. Mr. Adams served as Executive Vice President, Administration of
Mobil Corporation (oil, gas and chemicals) prior thereto. 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. (insurance) from
February 1993 until July 15, 1995; he also was President and Chief Executive
Officer of The Shelby Insurance Company (insurance) from June 1994 to July 15,
1995. Mr. Lavin served as Vice Chairman of the Board and Chief Executive Officer
of Woolworth Corporation (retailing) from May 1994 to September 1994 and as
Chairman of the Board and Chief Executive Officer prior thereto.
F.M. Kirby and Allan P. Kirby, Jr. are brothers.
The Board of Directors held eight meetings in 1998. 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 in 1998.
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 three meetings in 1998.
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 1998.
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
1998, also administers 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
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<PAGE> 12
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 did not hold any meetings in 1998.
SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of March 1, 1999 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
POWER AND SOLE AND/OR SHARED PERCENT
NAME OF BENEFICIAL OWNER INVESTMENT POWER INVESTMENT POWER TOTAL OF CLASS
- ------------------------ ---------------- ------------------- ------- --------
<S> <C> <C> <C> <C>
F.M. Kirby............... 293,571 627,967 921,538(1) 12.76
Roger Noall.............. 2,867 -- 2,867(2) 0.04
Rex D. Adams............. -- -- -- --
John J. Burns, Jr........ 40,561 -- 40,561(3) 0.56
Dan R. Carmichael........ 5,961 204 6,165(2)(4) 0.08
William K. Lavin......... 7,358 -- 7,358(2) 0.10
Thomas S. Johnson........ 1,496 -- 1,496(2) 0.02
Allan P. Kirby, Jr....... 567,782 -- 567,782(5) 7.85
James F. Will............ 7,138 -- 7,138(2) 0.10
Paul F. Woodberry........ 8,613 25,417 34,030(2)(6) 0.47
David B. Cuming.......... 28,207 -- 28,207 0.39
Robert M. Hart........... 6,278 -- 6,278 0.09
Peter R. Sismondo........ 3,233 400 3,633 0.05
</TABLE>
- ---------------
(1) See Note (1) on page 3.
(2) Includes 1,662 shares of Common Stock in the case of Mr. Noall, 5,110 shares
of Common Stock in the case of Mr. Carmichael, 6,886 shares of Common Stock
in the case of Messrs. Lavin and Will, 547 shares of Common Stock in the
case of Mr. Johnson and 3,369 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 726 shares of Common Stock owned by Mr. Burns's wife. Mr. Burns had
no voting or investment power over these shares, and he disclaims beneficial
ownership of
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<PAGE> 13
them. Also includes 7,681 shares of Common Stock representing the vesting of
7,681 performance shares in partial settlement of one-half of a special
award of performance shares (as adjusted for stock dividends and to reflect
the spin-off of Chicago Title) made to Mr. Burns in 1996. The payout in
respect of the vested performance shares was deferred pursuant to the terms
of the special award until Mr. Burns's retirement as an officer of the
Company, and will be made at such time one-half in shares of Common Stock
and one-half in cash (based upon the fair market value of one share of
Common Stock on the payout date for each performance share).
(4) 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.
(5) See Note (2) on page 3.
(6) Mr. Woodberry will retire as a director of the Company this year and is not
a nominee for an additional term. He is included in the above table pursuant
to Securities and Exchange Commission rules.
All nominees named for election as a director, directors and executive
officers as a group (13 persons, including Mr. Woodberry) beneficially owned
1,627,053 shares, or 22.42 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 972,127 shares, shared voting and/or investment power with
respect to 653,988 shares and no voting or investment power with respect to 938
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 1998 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 1998. 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 1998. 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
10
<PAGE> 14
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 1998 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 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 14, 1998, each eligible director received thirty-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 27, 1998, each eligible director received an option
to purchase 1,000 shares of Common Stock at a price of $342.8125 per share. As a
result of adjustments to reflect the spin-off of Chicago Title, such option
became an option to purchase 1,641 shares at a price of $208.96 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
11
<PAGE> 15
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
former subsidiaries Chicago Title and Trust Company and Chicago Title Insurance
Company was entitled to receive 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 was
entitled to receive $1,300 for the first committee meeting held in January and
$650 for each committee meeting attended thereafter. Allan P. Kirby Jr. served
on these boards and committees until July 15, 1998, and received a total of
$15,300 for services in these capacities in 1998.
Each of the non-employee directors of the Company's subsidiary Underwriters
Re Group, Inc. ("URG") and its subsidiaries, including Messrs. Lavin and
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. As chairman of the Audit Committee of the URG board, Mr. Lavin
receives $1,500 for each committee meeting attended. Each non-employee member of
the Compensation Committee of the URG board, including Mr. Woodberry, receives
$750 for each committee meeting attended. In 1998, Mr. Lavin, who was elected to
the URG board in August 1998, received a total of $6,750, and Mr. Woodberry
received a total of $24,000, for services in these capacities. Mr. Lavin also
received an additional $7,000 of directors' fees for time spent on URG
accounting matters after joining the URG board and Audit Committee.
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 1998, 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
12
<PAGE> 16
sale of the Company's former retail banking subsidiary. The incentive will be
paid in shares of the Company's Common Stock (valued at $109.04 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 and to reflect the
spin-off of Chicago Title) 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 11,095 shares of Common Stock, as
adjusted for stock dividends and the spin-off of Chicago Title, may be paid in
respect of this incentive; any amount earned in excess of the value of 11,095
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 $340,000 in respect of such services
performed in 1998. Mr. Woodberry will retire as a director of the Company this
year and is not a nominee for an additional term.
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 1998.
13
<PAGE> 17
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------- LONG-TERM
OTHER ANNUAL INCENTIVE ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION PLAN PAYOUTS COMPENSATION
POSITION YEAR SALARY (1) (2) (3) (5)
- ------------------ ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Burns, Jr.,... 1998 $800,000 $651,566 $23,643 $6,306,362(4) $146,139
President and chief 1997 655,750 400,964 12,029 1,171,965 111,835
executive officer 1996 610,000 390,315 5,808 1,048,187 97,725
F.M. Kirby,........... 1998 $376,035 $ -- $14,973 $ 793,690 $ 73,789
Chairman of the 1997 354,750 -- 8,181 540,080 62,629
Board 1996 330,000 -- 6,905 1,225,910 57,391
David B. Cuming,...... 1998 $360,188 $174,359 $13,171 $ 846,858 $ 67,572
Senior Vice 1997 339,800 166,656 7,489 576,845 58,704
President 1996 316,100 134,452 4,586 586,622 51,963
Robert M. Hart,....... 1998 $360,188 $178,140 $ 5,498 $ 846,858 $ 60,189
Senior Vice 1997 339,800 168,057 4,182 576,845 55,605
President, General 1996 316,100 181,445 40,350 586,622 51,029
Counsel and
Secretary
Peter R. Sismondo,.... 1998 $175,483 $ 42,298 $ 2,251 $ 433,680 $ 28,833
Vice President, 1997 165,550 38,205 1,814 282,510 29,536
Controller, 1996 154,000 31,572 1,491 286,210 24,707
Assistant Secretary
and Treasurer
</TABLE>
- ---------------
(1) These amounts represent (i) bonuses earned under the Company's Management
Incentive Plan, which is a short-term incentive plan designed to reward
officers for achieving specified net earnings per share and/or individual
objectives; (ii) for Mr. Burns in 1998, an additional amount representing
the portion of his 1997 bonus opportunity dependent on his personal
objectives, the assessment of which had been deferred pending completion of
the spin-off of Chicago Title, equal to $40,096; (iii) for Mr. Hart in 1996,
an additional amount representing an award of shares of Common Stock under
the Company's 1993 Long-Term Incentive Plan (the "1993 Plan"), valued at
$42,050.
(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.
14
<PAGE> 18
(3) These amounts represent payouts in settlement of performance shares awarded
under the 1993 Plan or the Company's 1983 Long-Term Incentive Plan (the
"1983 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 1993
Plan or 1983 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) This amount includes $4,585,542 in respect of 20,483 performance shares, as
adjusted for stock dividends and to reflect the spin-off of Chicago Title,
which constituted one-half of a special award of performance shares made to
Mr. Burns under the 1993 Plan in 1996. These performance shares entitled Mr.
Burns to a payout one-half in cash and one-half in Common Stock up to a
maximum amount equal to the value of one share of Common Stock on the payout
date for each performance share, depending upon the closing market price of
the Common Stock exceeding $312 for each of any 20 consecutive trading days
ending on or before December 31, 1999 and occurring while Mr. Burns was
chief executive officer of the Company. The goal was achieved in early 1998
prior to the spin-off of Chicago Title. Payout of 7,681 of these performance
shares was deferred pursuant to the terms of the special award until Mr.
Burns's retirement as an officer of the Company.
(5) The 1998 amounts listed for Messrs. Burns, Kirby, Cuming, Hart and Sismondo
include (i) savings benefits of $119,098, $56,272, $53,901, $53,901 and
$26,260, respectively, credited pursuant to the Company's Deferred
Compensation Plan; and (ii) benefits, valued at $23,875, $17,517, $10,505,
$3,122 and $721, 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 1998 amounts listed
for Messrs. Burns, Cuming, Hart and Sismondo also include compensation of
$3,166, $3,166, $3,166 and $1,852, respectively, in respect of other
insurance coverage.
15
<PAGE> 19
LONG-TERM INCENTIVE PLAN -- AWARDS IN 1998
<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF SHARES, PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
UNITS OR OTHER MATURATION -------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ---- ----------------- ------------ --------- ------ ----------
<S> <C> <C> <C> <C> <C>
John J. Burns, Jr............. 6,535 1999-2002 $3,118 -- $1,247,368
F.M. Kirby.................... -- -- -- -- --
David B. Cuming............... 2,699 1999-2002 $1,288 -- $ 515,172
Robert M. Hart................ 2,699 1999-2002 $1,288 -- $ 515,172
Peter R. Sismondo............. 1,388 1999-2002 $ 662 -- $ 264,935
</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 $8.00 in respect of
performance shares for the 1999-2002 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. 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.
The annual retirement benefit under the Company's Retirement Plan, if paid
in the form of a life annuity to a participant who retires on reaching age 65
with 15 or more years of service, is equal to 52.7625 percent of the
participant's average compensation, which is defined as the sum of (i) the
highest average annual base salary over a consecutive three-year period during
the last ten years of employment, plus (ii) one-half of the highest average
annual bonus over a consecutive five-year period during the last ten years of
employment; however, such benefit is reduced by 33.5 percent of his unreduced
primary Social Security benefit and by 67 percent of his accrued benefit under a
previously terminated retirement plan of the Company. (Annual base salary and
annual bonus are the amounts that would appear in the salary and
16
<PAGE> 20
bonus columns of the Summary Compensation Table for the relevant years.) In the
event a participant becomes totally disabled prior to retirement, such
participant's annual base salary shall equal his annual base salary at the time
of disability, and such participant's average annual bonus shall be based on the
average over the five consecutive years (or lesser period of employment) prior
to disability, each adjusted annually for inflation; such participant's period
of disability will be treated as continued employment for all purposes under the
Retirement Plan, including determining his years of service.
Since the funds accumulated under the Company's Retirement Plan to provide
for each participant's annual retirement benefit are currently taxable to each
participant, the plan provides for the payment to the appropriate tax
authorities as withholding tax on behalf of each participant of an amount equal
to the income and employment tax liabilities imposed upon the participant by
reason of his participation in the plan. As a result, benefits payable in the
form of a lump sum are not taxable at the time of payment. Benefits payable in
the form of an annuity are taxable in part; the Retirement Plan provides that
such benefits will be increased to offset the impact of any such tax liability,
and the estimated benefits set forth in the table below include an estimate of
such increase.
A participant may retire as early as age 55, but the benefit payable at
that time will be reduced to reflect the commencement of benefit payments prior
to age 65. The benefit payable to a participant who retires after age 65 is
increased to reflect salary increases and additional years of service through
the actual date of retirement and the decreased period over which the normal
retirement benefit will be paid. The Retirement Plan also provides that a
participant over age 65 who is still in the employ of the Company may elect
prior to the actual date of retirement to receive the benefits to which he would
have been entitled had he retired on the date of such election. Pursuant to this
provision, Mr. 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, 1998 at age 65, had achieved the average compensation and years of service
indicated. The amounts shown assume payment in the form of a straight life
annuity.
17
<PAGE> 21
<TABLE>
<CAPTION>
YEARS OF SERVICE
AVERAGE ----------------------
COMPENSATION 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, 1998, the credited years of service for Messrs. Burns,
Cuming, Hart and Sismondo were 30.75, 22, 9 and 11, respectively. The average
compensation of each of Messrs. Burns, Cuming, Hart and Sismondo for purposes of
the Retirement Plan was $887,652, $410,692, $413,847, and $182,003,
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.
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.
18
<PAGE> 22
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 1996, 1997
and 1998 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 1996, 1997 or 1998). This plan is designed to reward
officers for the achievement of specified corporate and/or individual
objectives. Bonus opportunities for 1996 and 1998 were adjusted from the prior
year in proportion to changes in salaries; bonus opportunities for 1997 were
adjusted from the prior year at the rate of 10 percent, which was 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 1998 ranged
from 76 percent of salary for Mr. Burns to 25 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 1998, 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
- ---------------
* The 1993 Plan replaced, and is substantially similar to, the Company's 1983
Plan.
19
<PAGE> 23
year as approved by the Board of Directors and included in the Alleghany
Corporation Strategic Plan 1998-2002. 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. Pursuant to the terms of the Management
Incentive Plan, the Company's 1998 net earnings per share were adjusted to
include Chicago Title's net earnings in 1998 (exclusive of any compensation or
other charges related to its spin-off from the Company in June 1998) to the
extent not included in the Company's pre-spin-off net earnings and, as so
adjusted, exceeded 110 percent of the plan for 1998; 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 1998 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. Mr. Burns earned the maximum
amount on that portion of his cash bonus opportunity for 1998 that was dependent
on individual objectives as a result of the Company's acquisition of Venton
Holdings Ltd. in October 1998.
Determination of Mr. Burns's achievement of individual objectives for 1997,
which constituted 20 percent of his cash bonus opportunity for that year, was
deferred and assessed after the satisfaction of certain conditions to the
spin-off of Chicago Title and, on the basis of such assessment, Mr. Burns earned
40 percent of the 1997 cash bonus opportunity dependent upon individual
performance.
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 1996, 1997
or 1998). 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
generally have been made one-
20
<PAGE> 24
half in cash and one-half in Common Stock. Maximum payouts with respect to
currently outstanding performance shares will be made only if average annual
compound growth in the Company's Earnings Per Share (as defined by the
Compensation Committee pursuant to the 1993 Plan) equals or exceeds 12 percent
as measured from a specified base in the four-year award period commencing with
the year following that in which the performance shares were awarded, and no
payouts will be made if such growth is 8 percent or less; payouts for growth
between 8 percent and 12 percent will be determined by interpolation. The Board
of Directors and its Compensation Committee have provided for antidilution
adjustments with respect to performance shares. The specified base Earnings Per
Share is determined by reference to the projected earnings 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. Pursuant to the provisions of
the 1993 Plan, the Compensation Committee made appropriate adjustments in 1998
to outstanding performance share awards to reflect the spin-off of Chicago
Title.
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 1998 for the 1999-2002 award period was determined by
adjusting the prior year's award to reflect the increase in his salary from 1998
to 1999 and to reflect the decrease in the price of the Common Stock from late
1997 to late 1998 as a result of the spin-off of Chicago Title.
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
21
<PAGE> 25
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 1998 to Messrs.
Burns, Cuming, Hart and Sismondo 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 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.
22
<PAGE> 26
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
PERFORMANCE GRAPH
The following graph compares for the years 1994-98 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 revenues
currently generated by its operations in property and casualty reinsurance and
insurance, industrial minerals, financial services and steel fasteners. Except
for the steel fastener operations, all of these businesses 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.
23
<PAGE> 27
Performance Graph
<TABLE>
<CAPTION>
ALLEGHANY S&P 500 PEER GROUP
--------- ------- ----------
<S> <C> <C> <C>
'1994' 108.04 101.32 89.06
'1995' 143.55 139.40 145.90
'1996' 156.78 171.40 166.96
'1997' 214.79 228.59 217.07
'1998' 227.38 293.91 219.59
</TABLE>
The foregoing performance graph is based on the following assumptions: (i)
any cash dividend is reinvested on the ex-dividend date in respect of such
dividend; (ii) the two-percent stock dividends paid by the Company in each of
the years 1994 through 1997 are included in the cumulative total stockholder
return on the Common Stock; and (iii) total returns on the common stock of
"peer" issuers are weighted by stock market capitalization at the beginning of
each year. On June 17, 1998, the Company distributed its shares of Chicago Title
to the Company's stockholders on a pro rata basis. Accordingly, of the five
years shown in the above graph, four years and five and one-half months
represent the performance of the Company prior to the spin-off and six and
one-half months represent the performance of the Company after the spin-off. The
graph accounts for the spin-off as though the market price of the spin-off was
paid in cash and reinvested in Common Stock of the Company on the date of the
spin-off.
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG LLP, independent certified public
accountants, as independent auditors for the Company for the year 1999. A
resolution will be
24
<PAGE> 28
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 LLP as the Company's independent auditors,
the Company believes such ratification to be desirable. If the stockholders do
not ratify the selection of KPMG LLP, the selection of independent auditors will
be reconsidered by the Board of Directors; however, the Board of Directors may
select KPMG LLP notwithstanding the failure of the stockholders to ratify its
selection.
The Board of Directors recommends a vote "FOR" this resolution. Proxies
solicited by the Board of Directors will be so voted unless stockholders specify
a contrary vote. The resolution may be adopted by a majority of the votes cast
with respect thereto.
KPMG LLP was Old Alleghany's independent auditors since 1947 and the
Company's independent auditors since its incorporation in November 1984.
It is expected that a representative of KPMG LLP will be present at the
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
25
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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 the Company's 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 2000 Annual
Meeting of Stockholders must be received by the Secretary of the Company by
November 23, 1999 in order for the proposal to be considered for inclusion in
the Company's notice of meeting, proxy statement and proxy relating to the 2000
Annual Meeting, scheduled for Friday, April 21, 2000.
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 1999
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 $9,000 plus expenses.
By order of the Board of Directors
ROBERT M. HART
Senior Vice President, General
Counsel
and Secretary
March 22, 1999
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<PAGE> 30
PROXY PROXY
ALLEGHANY CORPORATION
Proxy For Annual Meeting On April 23, 1999
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 Underwriters Re Group, Inc., 26050 Mureau Road, Calabasas, California,
on Friday, April 23, 1999 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
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<PAGE> 31
ALLEGHANY CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
A vote FOR Items 1 and 2 is recommended by the Board of Directors.
For Withheld For All
All All Except
1. Election of Directors
F.M. Kirby Roger Noall Rex D. Adams [ ] [ ] [ ]
Instruction: To withhold authority to vote for an individual nominee, write that
nominee's name in the following space: ___________________________
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.
For Against Abstain
2. Ratification of KPMG LLP as independent
auditors for the year 1999. [ ] [ ] [ ]
Dated: ______________, 1999
___________________________
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,
trustees or guardian, etc., please give your full title.
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FOLD AND DETACH HERE
