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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9371
ALLEGHANY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 51-0283071
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212/752-1356
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NOT APPLICABLE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 1, 2001, 7,091,736 shares of Common Stock were outstanding, and
the aggregate market value (based upon the closing price of these shares on the
New York Stock Exchange) of the shares of Common Stock of Alleghany Corporation
held by non-affiliates was $1,129,404,478.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated part(s) of this Report:
PART
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Annual Report to Stockholders of Alleghany Corporation for
the year 2000............................................. I and II
Proxy Statement relating to Annual Meeting of Stockholders
of Alleghany Corporation to be held on April 27, 2001..... III
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ALLEGHANY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
DESCRIPTION PAGE
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PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 17
Item 3. Legal Proceedings........................................... 21
Item 4. Submission of Matters to a Vote of Security Holders......... 21
Supplemental Item Executive Officers of Registrant............................ 21
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 21
Item 6. Selected Financial Data..................................... 22
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 22
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................. 22
PART III
Item 10. Directors and Executive Officers of Registrant.............. 22
Item 11. Executive Compensation...................................... 22
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 22
Item 13. Certain Relationships and Related Transactions.............. 23
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 23
Signatures..................................................................... 30
Index to Financial Statement Schedules......................................... 32
FINANCIAL STATEMENT SCHEDULES.................................................. 33
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES.................. 41
Index to Exhibits.............................................................. 42
EXHIBITS.......................................................................
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PART I
ITEM 1. BUSINESS.
Alleghany Corporation ("Alleghany") was incorporated in 1984 under the laws
of the State of Delaware. In December 1986, Alleghany succeeded to the business
of its parent company, Alleghany Corporation, a Maryland corporation
incorporated in 1929, upon the parent company's liquidation.
Alleghany's principal executive offices are located at 375 Park Avenue, New
York, New York 10152 and its telephone number is (212) 752-1356. Alleghany is
engaged, through its subsidiary Alleghany Underwriting Holdings Ltd ("Alleghany
Underwriting") and its subsidiaries, in the property and casualty insurance and
reinsurance businesses. Alleghany is also engaged, through its subsidiaries
World Minerals Inc. ("World Minerals"), Celite Corporation ("Celite") and
Harborlite Corporation ("Harborlite") and their subsidiaries, in the industrial
minerals business. Alleghany conducts a steel fastener importing and
distribution business through its subsidiary Heads & Threads International LLC
("Heads & Threads"). Through its subsidiary Alleghany Properties, Inc.
("Alleghany Properties"), Alleghany owns and manages properties in California.
Until February 1, 2001, Alleghany was also engaged, through its subsidiary
Alleghany Asset Management, Inc. ("Alleghany Asset Management") and its
subsidiaries, in the financial services business. On that date, Alleghany Asset
Management merged with a wholly owned subsidiary of ABN AMRO North America
Holding Company ("ABN AMRO"). Alleghany received cash proceeds of $825 million
and recorded an after-tax gain of about $473.3 million, or approximately $67 per
share, excluding certain expenses relating to the closing of the sale. Alleghany
expects to receive an additional $17.0 million in cash from ABN AMRO as a post
closing purchase price adjustment based on the stockholder's equity of Alleghany
Asset Management on the closing date. In light of the transaction, Alleghany
Asset Management has been classified as a discontinued operation.
Until May 10, 2000, Alleghany was also engaged, through its subsidiary
Underwriters Re Group, Inc. and its subsidiaries ("Underwriters Re Group"), in
the property and casualty reinsurance and insurance businesses. On that date,
Underwriters Re Group was sold to Swiss Re America Holding Corporation.
Alleghany recorded pre-tax proceeds of about $649.0 million in cash. In
connection with the sale, Alleghany paid approximately $187.9 million in cash
(or $25.3125 per share) for the purchase from Underwriters Re Group of 7.425
million shares of Burlington Northern Santa Fe Corporation. Alleghany's pre-tax
gain on the sale was approximately $136.7 million, reflecting additional
adjustments from previously reported figures for the settlement of certain
outstanding obligations of Underwriters Re Group that were assumed by Alleghany
and the final resolution of post-closing purchase price adjustments. The tax on
the gain is approximately $7.1 million, resulting in an after-tax gain on the
sale of $129.6 million. The tax rate on the gain differs from the expected
statutory rate principally due to a difference between the tax and book bases of
Underwriters Re Group. Alleghany retained Underwriters Re Group's London-based
Lloyd's operations conducted through Alleghany Underwriting.
Until June 17, 1998, Alleghany was also engaged, through its subsidiaries
Chicago Title and Trust Company ("CT&T"), Chicago Title Insurance Company,
Security Union Title Insurance Company and Ticor Title Insurance Company and
their subsidiaries, in the sale and underwriting of title insurance and in other
real estate-related services businesses. On that date, Alleghany completed the
tax-free spin-off of Chicago Title Corporation, the newly formed holding company
of CT&T, to Alleghany stockholders. As a part of the spin-off, the common stock
of Chicago Title Corporation was listed on the New York Stock Exchange under the
symbol "CTZ." On March 20, 2000, Chicago Title Corporation merged with Fidelity
National Financial, Inc.
During 1994 and early 1995, Alleghany and its subsidiaries acquired a
substantial number of shares of common stock of Santa Fe Pacific Corporation
("Santa Fe"). On September 22, 1995, Santa Fe and Burlington Northern, Inc.
merged under a new holding company named Burlington Northern Santa Fe
Corporation ("BNSF"). As a result of the merger, the shares of Santa Fe
beneficially owned by Alleghany were converted into shares of BNSF. As of March
1, 2001, Alleghany owned approximately 17.95 million shares of BNSF, or about
4.6 percent of BNSF's currently outstanding common stock. BNSF owns one of the
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largest railroad networks in North America, providing transportation services to
shippers throughout the western two-thirds of the United States as well as to
Canada and Mexico.
In 2000, Alleghany studied a number of potential acquisitions. Alleghany
intends to continue to expand its operations through internal growth at its
subsidiaries as well as through possible operating-company acquisitions and
investments.
Reference is made to Items 7 and 8 of this Report for further information
about the business of Alleghany in 2000. The consolidated financial statements
of Alleghany, incorporated by reference in Item 8 of this Report, include the
accounts of Alleghany and its subsidiaries for all periods presented.
PROPERTY AND CASUALTY INSURANCE AND REINSURANCE BUSINESSES
General
On October 23, 1998, Alleghany's former subsidiary Underwriters Re Group
acquired Alleghany Underwriting (previously known as Venton Ltd.) and certain
related Bermuda operations for approximately $181.1 million in cash and
Alleghany common stock valued at approximately $8.9 million. Subsequent to the
purchase of Alleghany Underwriting, the Bermuda operations were transferred to
and operated as a branch of, Underwriters Re Group. Upon the sale of
Underwriters Re Group to Swiss Re America Holding Corporation on May 10, 2000,
Alleghany retained Alleghany Underwriting.
Alleghany Underwriting, through its subsidiaries, is a managing agent and
provider of corporate capital for syndicates in the Lloyd's insurance market.
Lloyd's is a market in which individual professional underwriters accept risks
on behalf of competing businesses or syndicates formed by both individual and
corporate members. The members' resources provide the security behind Lloyd's
policies. Considered as a franchise with common policyholder security, Lloyd's
is, according to Standard & Poor's, the world's fifth-largest commercial insurer
and sixth-largest reinsurer, operating in over 100 countries. Lloyd's carries an
A (Excellent) rating from A.M. Best Company, Inc., an independent industry
rating organization ("Best's"). According to Best's, the rating reflects the
financial strength, operating performance and market profile of Lloyd's. The
rating applies to the business written by active underwriting syndicates that
have common policyholder security and to all policies written since the 1993
year of account. Lloyd's also carries an A+ rating from Standard & Poor's.
Beginning in 2000, Alleghany Underwriting, through its subsidiaries,
operated as a single syndicate, Syndicate 376, and provided 100 percent of the
Syndicate's L275 million of capacity (equivalent to maximum gross premiums
written of approximately $600 million). For 2001, Alleghany Underwriting will
continue to manage Syndicate 376 and provide 100 percent of its L272.8 million
of capacity. Alleghany Underwriting's managing agent subsidiary is currently the
thirteenth-largest managing agent in Lloyd's, representing about 2.45 percent of
Lloyd's 2001 capacity. Alleghany Underwriting's underwriting activities are
supported by a secured $260 million letter of credit facility guaranteed by
Alleghany.
In 1998, Alleghany Underwriting and two affiliated companies provided
approximately L155 million, or 63 percent, of the total capacity of three
Lloyd's syndicates managed by Alleghany Underwriting: Syndicate 376
(non-marine), Syndicate 1183 (marine) and Syndicate 1207 (non-marine). In 1999,
Alleghany Underwriting provided L218 million, or 76 percent, of the capacity of
such syndicates. The remainder of the capacity in 1998 and 1999 was provided by
third-party members. In 1999, Alleghany Underwriting acquired the remaining
third-party capacity for approximately $19.0 million and merged Syndicates 1207
and 1183 into Syndicate 376.
Although Alleghany Underwriting is managing a single syndicate beginning
with the 2000 year of account, it continues to manage the three syndicates for
the prior open years of account. Lloyd's operates under a three-year "year of
account" accounting system. Typically, each "year of account" of a syndicate is
treated as a separate entity in which risk is underwritten for one year followed
by a two-year period of development. At the end of the three-year period, the
"reinsurance to close" mechanism is triggered whereby the members forming the
next year's underwriting syndicate reinsure the outstanding liabilities of the
closing syndicate. After buying reinsurance to close for a syndicate, profits or
losses are declared and settled.
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As a subscription market, Lloyd's has certain unique operating
characteristics. A risk is typically placed with several different insurers
(often including London insurance companies as well as a number of Lloyd's
syndicates) each of which is liable on a several, not joint, basis. Because
there are multiple syndicate participants in a typical insurance policy or
reinsurance treaty placed at Lloyd's, the central processing facilities provided
by Lloyd's facilitate policy signing, netting, settlement, accounting services,
premium fund collections and claims payments for the syndicates.
Although Alleghany Underwriting assumed the management of Syndicate 376 in
1988 and Syndicates 1183 and 1207 were established thereafter in 1991 and 1996,
respectively, the information herein relates to business written after 1992
since, in response to its financial crises, Lloyd's created Equitas in 1996 as a
group of companies to reinsure and handle the runoff of pre-1993 non-life
business ceded by Lloyd's syndicates.
Due to the complexity of converting Lloyd's accounting information to
accounting principles generally accepted in the U.S., the results of Alleghany
Underwriting were reported on a one-quarter lag for a transitional period (until
September 2000). The one-quarter lag has been eliminated in Alleghany's results
for the year ended December 31, 2000. Alleghany Underwriting's results for the
period October 1, 1999 through December 31, 1999 are reported in Alleghany's
Consolidated Statements of Changes in Common Stockholders' Equity as a retained
earnings adjustment, and its results for the period January 1, 2000 through
December 31, 2000 are reported in Alleghany's Consolidated Statement of
Earnings. In addition, Alleghany's results for the first three quarters of 2000
have been restated to include Alleghany Underwriting's corresponding quarters.
General Description of Business
Alleghany Underwriting's insurance and reinsurance operations focus
primarily on specialty commercial lines that Alleghany Underwriting believes
provide opportunities for strong profitability. Through the syndicates it
manages, Alleghany Underwriting underwrites risks across diverse commercial
classes, including property (marine and non-marine) and casualty (such as
financial institutions and directors and officers liability insurance), at
varying risk layers from primary coverage to high layer excess of loss. The
majority of Alleghany Underwriting's casualty business is on a claims-made
basis. Alleghany Underwriting's risks are located around the world, with an
emphasis on the United States. Over half of Alleghany Underwriting's business in
the 2000 year of account involved insureds located in the United States and
risks located in the United States of non-U.S. insureds. The United Kingdom,
Western Europe, Canada and Australia also contributed substantial amounts of
premium income. In 2000, approximately 59 percent of Alleghany Underwriting's
business was property and 41 percent casualty.
In general, property insurance protects the insured against financial loss
arising out of loss of property or its use caused by an insured peril. Casualty
insurance protects the insured against financial loss arising out of the
insured's obligation to others for loss or damage to persons or property. While
both property and casualty insurance may involve a high degree of loss
volatility, property losses are generally reported within a relatively short
time period after the event; in contrast, there tends to be a significant time
lag in the reporting and payment of casualty claims. Consequently, an insurer
generally knows of the losses associated with property risks in a shorter time
than losses associated with casualty risks.
Reinsurance is an agreement between two insurance companies in which one
company, the "reinsurer," agrees to indemnify the other company, the "cedent" or
"ceding company," for all or part of the insurance risks underwritten by the
ceding company. Reinsurance provides ceding companies with three major benefits:
(i) it reduces net liability on individual risks, (ii) it protects against
catastrophic losses, and (iii) it helps to maintain acceptable surplus and
reserve ratios. In addition, reinsurance provides the ceding company with
additional underwriting capacity. Ordinarily, a ceding company will enter into a
reinsurance agreement only if it will receive credit for the reinsurance ceded
on its statutory financial statements. In general, such credit is allowed if the
reinsurer meets the licensing and accreditation requirements of the ceding
company's domicile, or the reinsurance obligations are collateralized by letters
of credit, funds withheld or pledged trust agreements.
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Alleghany Underwriting writes reinsurance on both an excess of loss and pro
rata basis. Under excess of loss reinsurance contracts, the reinsurer agrees to
reimburse the ceding company for all losses in excess of a predetermined amount
(commonly referred to as the cedent's "retention"), generally up to a
predetermined limit. Excess of loss reinsurance is often written in "layers" or
levels, with one reinsurer (or a group of reinsurers) assuming the risk of loss
on the primary insurance policy in excess of the cedent's retention level up to
a predetermined level, above which the risk of loss is assumed by another
reinsurer or reverts to the cedent. Under pro rata reinsurance contracts, the
ceding company and reinsurer share the premiums as well as the losses and
expenses of any single risk, or an entire group of risks, based upon
contractually defined rates. Reinsurance written on an excess of loss basis
represented approximately 60 percent of Alleghany Underwriting's year 2000 net
reinsurance written premiums, with reinsurance written on a pro rata basis
representing the balance.
Marketing
Alleghany Underwriting continues to develop strong long-term relationships
with its core clients and with the international broking community in order to
understand the business and offer a fast and efficient service. Alleghany
Underwriting's experienced underwriting team is able to respond quickly to
market opportunities and rate changes and, through the Lloyd's franchise, is
able to conduct business in a number of territories around the world. Alleghany
Underwriting writes a balance of insurance and reinsurance business across most
of the main classes of insurance. Underwriting expertise and detailed actuarial
analysis are, where appropriate, brought to bear on the accounts written to
maximize potential profitability. In addition to the traditional classes of
business, Alleghany Underwriting is innovative in its outlook in order to take
advantage of new opportunities and meet the ever changing needs of the business
community. Blended programs, covering a number of risks usually insured
separately, and multiple line insurance programs are offered utilizing non-
standard wording.
In general, Lloyd's syndicates, including those managed by Alleghany
Underwriting, may only access business through Lloyd's-registered brokers. The
Alleghany Underwriting-managed syndicates have strong and long-standing
relationships with the principal brokers in the Lloyd's market. Reflecting the
typical level of concentration, the Aon, Marsh, Willis, Miller and HSBC groups
produced a substantial portion of the business of the Alleghany
Underwriting-managed syndicates done in the Lloyd's market. Alleghany
Underwriting's five leading brokers accounted for 53.8 percent of Alleghany
Underwriting's gross written premiums in 2000. Over this period, the Aon group
and the Marsh group accounted for 20.1 percent and 14.7 percent, respectively,
and no other broker accounted for more than 10 percent of such premiums. Without
the replacement of business from other brokers, the termination of relationships
with either one of these brokers could have a material adverse effect on
Alleghany Underwriting's results of operations. No such terminations are
anticipated. From January 3, 2001, under new regulations promulgated by Lloyd's,
Alleghany Underwriting may trade with any accredited broker. Accreditation is
achieved by being registered in the broker's home country and by proving the
ability to interact with Lloyd's systems.
Certain lines of business are less suited to placement through the larger
international brokers, as many of the Lloyd's brokers tend to be. Alleghany
Underwriting has expertise in some of these classes and has established a
service company to develop the business. For year 2000, the service company
produced approximately $18.3 million of gross written premium from yacht and
marina insurance.
Underwriting Operations
Alleghany Underwriting has organized its underwriting activities under the
categories of direct and treaty business.
Direct
Direct business generally refers to risks that are individually
underwritten and includes primary insurance and reinsurance. The business is
accepted both facultatively, whereby each individual risk is seen and rated by
an Alleghany Underwriting underwriter, or under facilities such as lineslips,
consortia or binding authorities.
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Under these facilities, Alleghany Underwriting delegates the authority to accept
business, within specified underwriting criteria, to a third party who has
expertise in that particular class of business. With lineslips and consortia,
the third party will be another Lloyd's syndicate also participating on each
risk accepted and, in the case of binding authorities, the third party will act
as agent of Alleghany Underwriting. In general, such facilities are utilized for
smaller premium business.
Alleghany Underwriting's direct business focuses on the traditional marine
classes (hull, cargo, energy, war and liability), associated marine classes
(political risks and terrorism), casualty business (professional indemnity,
directors & officers liability, financial institutions and employment practices
liability) and non-marine property. The business is regularly monitored to
identify trends in rating and loss activity in order to maximize potential
profits. Direct business generated approximately $234 million, or 64 percent, of
Alleghany Underwriting's net written premiums in 2000.
Treaty
Alleghany Underwriting also provides reinsurance on a treaty basis. Treaty
reinsurance is based on a standing arrangement (a "treaty"), traditionally for a
year (but may be longer term), between a cedent and a reinsurer for the cession
and assumption of a certain class of risk specified in such treaty. Under most
treaties, the cedent is obligated to offer, and the reinsurer is obligated to
accept, a specified portion of a class of risk underwritten by the cedent.
Reinsurers assume classes of risk under treaties without having reviewed each
individual risk.
Alleghany Underwriting maintains a disciplined underwriting program,
writing a spread of property treaty reinsurance business, including catastrophe,
pro rata and risk excess business, as well as marine, aviation, satellite and
casualty treaty business. Alleghany Underwriting writes business at various
attachment points (i.e., dollar levels at which risk is assumed) depending on
where the best rewards are perceived; in recent years there has been an emphasis
away from the lower working layers which suffer from greater loss frequency.
Alleghany Underwriting also seeks to serve as lead or co-lead underwriter on a
greater proportion of its business in order to have more control over the
pricing and terms of the risks into which it enters and thereby achieve better
underwriting results. Treaty reinsurance generated approximately $129 million,
or 36 percent, of Alleghany Underwriting's net written premiums in 2000.
Reinsurance Arrangements
As is customary in the insurance and reinsurance industry, Alleghany
Underwriting reinsures a portion of the risks it underwrites. Alleghany
Underwriting buys reinsurance primarily to manage exposures in its direct and
treaty reinsurance businesses. Reinsurance serves to reduce the exposure to any
one policy or physical risk, or to a catastrophic accumulation of loss in one
event, to a level judged to be commensurate with Alleghany Underwriting's
financial resources. It also allows large losses to be managed over time.
Alleghany Underwriting has reinsurance agreements with a number of domestic
and international reinsurance companies and Lloyd's syndicates. In the event
that a reinsurer is unable to meet its obligations assumed under the reinsurance
agreement, Alleghany Underwriting remains liable for the portion reinsured.
Consequently, Alleghany Underwriting has established a committee to examine the
financial strength and stability of potential reinsurers prior to entering into
any arrangements with them. This committee utilizes the ratings given to
reinsurers by Best's and Standard & Poor's, as well as other specific
information available regarding the financial strength and stability, the
classes of business written and the management strength of the reinsurers. Once
reinsurance is placed, Alleghany Underwriting continues to monitor these
factors, in addition to the reinsurer's payment performance and outstanding
debt. Generally, Alleghany Underwriting requires that unpaid losses and loss
adjustment expenses be collateralized by letters of credit, funds withheld or
pledged trust agreements. Additionally, commutations may be taken to reduce or
eliminate credit exposure when necessary.
Alleghany Underwriting cedes approximately 36 percent of its direct
business income and 29 percent of its reinsurance treaty income to purchase
reinsurance that protects both frequency and severity of loss. With reinsurance,
Alleghany Underwriting intends to limit its loss from any single event to less
than 12.5 percent of
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its syndicates' capacity. Alleghany Underwriting purchases a combination of
pro-rata, per risk, per event and aggregate excess of loss protections to cover
its business. As of December 31, 2000, Alleghany Underwriting had reported
reinsurance receivables of $462.4 million.
Outstanding Losses and Loss Adjustment Expenses
In many cases, significant periods of time may elapse between the
occurrence of an insured loss, the reporting of such loss to the insurer and the
reinsurer, the insurer's payment of such loss and the subsequent payment by the
reinsurer. To recognize liabilities for unpaid losses (including reinsurance
costs, reinsurance recoverables, premiums receivable and bad debt), insurers and
reinsurers establish "reserves." These reserves are balance sheet liabilities
representing estimates of future amounts needed to pay claims and related
expenses with respect to insured events which have occurred, including events
which have not been reported to the insurer, or which may occur in the future.
The Alleghany Underwriting-managed syndicates establish reserves for the
estimated unpaid liability for losses and loss expenses for claims of which they
are notified under the terms of its policies and agreements. Such reserves are
determined by Alleghany Underwriting claims personnel (in conjunction with the
Lloyd's Claims Office and other insurers who may be leading a particular risk)
based upon a variety of factors, including an evaluation of the nature of the
claim, the coverage afforded by the policy, the jurisdiction in which the claim
is brought and general economic and social conditions. Additional reserves are
established on an aggregate basis to provide for losses incurred but not yet
reported ("IBNR") and to supplement the overall adequacy of reported case
reserves and estimated expenses of settling such claims, including legal and
other fees and general expenses of administering the claims adjustment process.
Alleghany Underwriting establishes IBNR reserves by using accepted loss
reserving standards and principles to estimate the ultimate liability for losses
and loss adjustment expenses. The process implicitly recognizes the impact of
inflation and other factors that affect claims reporting by taking into account
changes in historic loss reporting patterns and perceived probable trends.
Alleghany Underwriting engages an independent actuarial firm to review the
reserving methods and assumptions of the syndicates. Such reserves are
necessarily based on estimates and therefore the future losses and loss expenses
may differ from such reserves. Alleghany Underwriting reviews its aggregate loss
reserves each year with three quarterly reviews at which it updates its loss
reserves by applying the loss ratios determined generally in the previous review
to earned premiums to date, less incurred losses reported. Alleghany
Underwriting does not discount its reserves for anticipated investment income.
There are inherent uncertainties in estimating reserves due primarily to the
significant periods of time that may elapse between occurrence of an insured or
reinsured loss and reporting and ultimate settlement of such loss, the diversity
of development patterns among different lines of business and types of
reinsurance, and the necessary reliance on the ceding company for information
regarding reinsurance claims. Actual losses and loss expenses may deviate,
perhaps substantially, from reserves in Alleghany Underwriting's financial
statements, which could have a material adverse effect on Alleghany
Underwriting's financial condition and results of operations.
Changes in Historical Net Loss and LAE Reserves
The following table shows changes in historical net loss and LAE reserves
for Alleghany Underwriting for each year since 1998. Reported reserve
development is derived primarily from information included in statutory
financial statements of Alleghany Underwriting. The first line of the upper
portion of the table shows the net reserves at December 31 of each of the
indicated years, representing the estimated amounts of net outstanding losses
and LAE for claims arising during that year and in all prior years that are
unpaid, including losses that have been incurred but not yet reported to
Alleghany Underwriting. Prior years have been restated to reflect the current
corporate capital share provided by Alleghany. The first line relates purely to
the loss reserves associated with the corporate capital provided by subsidiaries
of Alleghany Underwriting to the Alleghany Underwriting-managed syndicates at
Lloyd's. The upper (paid) portion of the table shows the cumulative net amounts
paid as of December 31 of successive years with respect to the net reserve
liability for each year. The lower portion of the table shows the re-estimated
amount of the previously recorded net reserves for each year based on experience
as of the end of each succeeding year. The estimate changes as
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more information becomes known about claims for individual years. In evaluating
the information in the table, it should be noted that a reserve amount reported
in any period includes the effect of any subsequent change in such reserve
amount. For example, if a loss was first reserved in 1996 at $100,000 and was
determined in 1999 to be $150,000, the $50,000 deficiency would be included in
the Cumulative Redundancy (Deficiency) row shown below for each of the years
1996 through 1999.
Conditions and trends that have affected the development of the net reserve
liability in the past may not necessarily occur in the future. Accordingly, it
is not appropriate to extrapolate future redundancies or deficiencies based on
this table.
CHANGES IN HISTORICAL NET RESERVES FOR LOSSES AND LAE
(IN $ MILLIONS)
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999 2000
----- ----- -----
Net liability as of the end of year......................... $117 $231 $432
Cumulative amount of net liability paid as of:
One year later............................................ 49 119
Two years later........................................... 85
Net liability re-estimated as of:
One year later............................................ 129 302
Two years later........................................... 137
Cumulative Redundancy (Deficiency)........................ $(20) $(71) --
Gross Liability -- End of Year.............................. $193 $485 $856
Reinsurance Recoverable..................................... 76 254 424
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Net Liability -- End of Year................................ $117 $231 $432
==== ==== ====
Gross Re-estimated Liability -- Latest...................... $226 $545
Re-estimated Recoverable -- Latest.......................... 89 243
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Net Re-estimated Liability -- Latest........................ $137 $302
==== ====
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The reconciliation of beginning and ending reserves for Alleghany
Underwriting is shown below (dollars in thousands):
RECONCILIATION OF RESERVES FOR LOSSES AND LAE
2000 1999
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Reserve, net of reinsurance recoverables, as of January 1,
2000/October 1, 1998...................................... $230,819 $127,339
Incurred loss, net of reinsurance, related to:
Current year................................................ 215,280 149,359
Prior years................................................. 71,043 19,485
-------- --------
Total incurred loss, net of reinsurance..................... 286,323 168,844
-------- --------
Reinsurance to close adjustment, plus lag adjustment........ 78,320 17,830
-------- --------
Paid loss, net of reinsurance, related to:
Current year.............................................. (5,429) (30,253)
Prior years............................................... (158,510) (52,941)
-------- --------
Total paid loss, net of reinsurance......................... (163,939) (83,194)
-------- --------
Reserve, net of reinsurance recoverables, as of December 31,
2000/ September 30, 1999.................................. 431,523 230,819
Reinsurance recoverables, as of December 31, 2000/September
30, 1999.................................................. 424,382 185,684
-------- --------
Reserve, gross of reinsurance recoverables, as of December
31, 2000/ September 30, 1999.............................. $855,905 $416,503
======== ========
Investment Operations
The investment policy of the Alleghany Underwriting-managed syndicates is
to maximize overall return, in accordance with guidelines established by
Lloyd's. With rare exception, Lloyd's syndicates are required to provide profit
distributions to members (both individual names and corporate capital providers)
annually upon the close of each three-year underwriting cycle, and portfolio
managers engaged by Alleghany Underwriting to manage the syndicates' portfolios
have adopted a conservative approach to investments. Investments, which are held
in trust at Lloyd's, consist of cash and cash equivalents, bonds issued by
governments or public authorities and high quality corporate bonds.
The following table reflects investment results for the fixed maturity
portfolio of Alleghany Underwriting (dollars in thousands):
INVESTMENT RESULTS
NET NET PRE-TAX
PRE-TAX AFTER-TAX REALISED
AVERAGE INVESTMENT INVESTMENT GAINS EFFECTIVE AFTER-TAX
PERIOD INVESTMENTS(1) INCOME(2) INCOME(3) (LOSSES) YIELD(4) YIELD(5)
- ------ -------------- ---------- ---------- -------- --------- ---------
Year ended December 31, 2000........ $247,773 $16,922 $10,999 $ 210 6.83% 4.44%
Year ended September 30, 1999....... $171,100 $10,022 $ 6,514 $(1,673) 5.86% 3.81%
- ---------------
(1) Average of amortized cost of fixed maturities portfolio at beginning and end
of period. Fixed maturities include premium trust funds of $167.6 million at
September 30, 1999, and $313.3 million at December 31, 2000.
(2) After investment expenses, excluding realized gains or losses from sale of
investments.
(3) Net pre-tax investment income less appropriate income taxes.
(4) Net pre-tax investment income for the period divided by average investments
for the same period.
(5) Net after-tax investment income for the period divided by average
investments for the same period.
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COMPETITION
The Alleghany Underwriting-managed syndicates compete for business with
other Lloyd's syndicates, insurers in the U. K. and major international insurers
and reinsurers. On international risks, competition may also come from the
domestic insurers in the country of origin of the insured. Competition is based
on many factors, including underwriting expertise, premiums charged and overall
financial strength.
Competition in the property and casualty insurance and reinsurance industry
has historically been cyclical in nature. Typically, a cycle operates as
follows. The ability of primary insurers and reinsurers to conduct business is
dependent generally upon their ability to purchase reinsurance. A surplus of
reinsurers allows primary insurers to obtain reinsurance more cheaply, thereby
enhancing profits. Enhanced profits increase the number of primary insurers,
which increases competition for business and consequently reduces premium rates.
As premium rates fall, the primary insurance business becomes less profitable
and insurers profit only at the expense of their reinsurers. As reinsurance
becomes less profitable, the reinsurance market contracts, consequently
increasing reinsurance rates. Reduced insurance rates and increased reinsurance
rates cause the primary insurance market to contract. Competition decreases in a
contracted primary insurance market, allowing insurance rates to increase again,
thereby enhancing profits of primary insurers. The enhanced profitability of
primary insurers is passed on to reinsurers. A profitable reinsurance market
will again lead to a surplus of reinsurers.
The insurance/reinsurance cycle operates at different stages depending on
the class of business involved. The historical pattern of these cycles may
change as the developing global nature of the industry evolves.
REGULATION
Alleghany Underwriting's operations in the U.K. are subject to regulation
by The Council of Lloyd's. Through its Regulatory Division, Lloyd's establishes
rules and regulations that must be adhered to by all businesses in the Lloyd's
market. These cover such areas as capital adequacy, related party transactions,
ownership and control, underwriting and management controls, standards of
conduct and conflicts of interest. The prior approval of Lloyd's was required
for the acquisition of Alleghany Underwriting by Underwriters Re Group in 1998.
Every member of Lloyd's, both corporate and individual, must deposit
capital with Lloyd's in the form of readily-realizable assets, such as cash,
securities, letters of credit or bank or other guarantees, which are held in
trust as additional security for policyholders. The capital requirements are
determined annually for each member by Lloyd's risk-based capital methodology,
subject to a minimum requirement of 45 percent of capacity, and is based on the
nature and quantity of risks. Alleghany Underwriting's underwriting activities
are supported by a secured $260 million letter of credit facility guaranteed by
Alleghany.
Lloyd's is at present primarily self-governing, subject to overall
supervision by the Treasury in the U.K. However, the U.K. government established
the Financial Services Authority ("FSA"), a single independent regulator that is
expected to become ultimately responsible for the regulation of the securities,
banking and insurance industries, including Lloyd's, beginning in 2001. While
the implications of future FSA regulation are not yet fully known, it is
expected that there will be a smooth transition and a high degree of continuity
in the day-to-day regulatory activities.
Employees
Alleghany Underwriting and its subsidiaries employed 103 persons as of
December 31, 2000.
INDUSTRIAL MINERALS BUSINESS
On July 31, 1991, a holding company subsidiary of Alleghany acquired all of
Manville Corporation's worldwide industrial minerals business, now conducted
principally through World Minerals. The present Chairman of the Board of World
Minerals currently owns an equity interest, including outstanding options, of
about 6.6 percent of World Minerals' immediate parent company.
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World Minerals, headquartered in Santa Barbara, California, is principally
engaged in the mining, production and sale of two industrial minerals, diatomite
and perlite.
Diatomite
World Minerals conducts its diatomite business through Celite. Celite is
believed to be the world's largest producer of filter-aid grade diatomite, which
it markets worldwide under the Celite(R) and Kenite(R) brand names; Celite also
markets filter-aid grade diatomite in Europe under the Primisil(R) brand name
and in Latin America and other areas under the Diactiv(R) brand name.
Diatomite is a silica-based mineral consisting of the fossilized remains of
microscopic freshwater or marine plants. Diatomite's primary applications are in
filtration and as a functional filler. Filtration accounts for the majority of
the worldwide diatomite market and for over 50 percent of Celite's diatomite
sales. Diatomite is used as a filter aid in the production of beer, food, juice,
wine, water, sweeteners, fats and oils, pharmaceuticals, chemicals, lubricants
and petroleum. Diatomite is used as a filler, mainly in paints, and as an
anti-block agent in plastic film.
In addition to diatomite, Celite also produces calcium silicate products
and magnesium silicate products, which are sold worldwide under the MicroCel(R)
and Celkate(R) brand names (except in portions of Europe where calcium silicate
products are sold under the Calflo(R) brand name). These products, which have
high surface area and adsorption and absorption capabilities, are used to
convert liquid, semi-solid and sticky ingredients into dry, free-flowing powders
in the production of rubber, sweeteners, flavorings and pesticides.
Celite has its world headquarters in Lompoc, California and owns, directly
or through wholly owned subsidiaries, diatomite mines and/or processing plants
in Lompoc, California; Quincy, Washington; Murat, France; Alicante, Spain;
Arica, Chile; Arequipa, Peru; Ayacucho, Peru; Tuxpan, Mexico; and Guadalajara,
Mexico. Celite also owns 48.6 percent of Kisilidjan, h.f., a joint venture with
the Government of Iceland which mines and processes diatomite from Lake Myvatn
in Iceland. Celite has entered into an agreement with Allied EFA to sell its
interests in the joint venture. Pursuant to the agreement, Celite will retain
the exclusive right to sell the diatomite products produced from the Icelandic
mine as long as such products continue to be produced. In 1995, World Minerals,
through various subsidiaries of Celite, acquired controlling interests in three
joint ventures which are engaged in the mining and processing of diatomite in
Jilin Province, Peoples Republic of China ("PRC").
Perlite
World Minerals conducts its worldwide perlite business through Harborlite.
World Minerals believes that Harborlite is the world's largest producer of
perlite filter aids and that Harborlite, which is also engaged in the business
of selling perlite ore, is one of the world's largest merchant producers of
perlite ore. These products are marketed worldwide under the Harborlite(R) and
Europerl(R) brand names.
Perlite is a volcanic rock which contains between 2 percent and 5 percent
natural combined water. When heated rapidly, the natural combined water turns
explosively to steam and the perlite ore "pops" in a manner similar to popcorn,
expanding up to twenty times its original volume and creating a soft material
with large surface area and correspondingly low density.
Perlite ore is mined at Harborlite's No Agua, New Mexico mine and is sold
primarily to companies that expand it in their own expansion plants and use it
in the manufacture of roofing board, formed pipe insulation and acoustical
ceiling tile. Perlite ore for filter aid and certain filler applications is
mined at Harborlite's Superior, Arizona mine and is expanded at Harborlite's six
expansion plants located within the United States. Expanded perlite is also
produced at Harborlite's European expansion plants at Hessle, United Kingdom and
Wissembourg, France, Barcelona, Spain and Milan, Italy, from perlite ore
obtained from Harborlite's perlite mine at Dikili, Turkey and from merchant ore
producers in Europe. Most of the expanded perlite is used as a filter aid in the
brewing, food, wine, sweetener, pharmaceutical, chemical and lubricant
industries, or as a filler and insulating medium in various construction
applications.
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On October 31, 1995, World Minerals acquired control of all of the
outstanding capital stock of two privately owned perlite filter aid companies
with operations in Italy and Spain, respectively, and a privately owned perlite
sales company in Spain. These are now part of Harborlite.
In 2000, Harborlite subsidiaries completed the acquisition of small perlite
expansion businesses in United Kingdom and Spain, which have been merged into
existing Harborlite businesses in those countries.
Harborlite has its world headquarters in Lompoc, California and owns,
directly or through wholly owned subsidiaries, a perlite mine and mill in No
Agua, New Mexico, a perlite loading facility in Antonito, Colorado, a perlite
mine and a mill in Superior, Arizona, a perlite mine and mill in Dikili, Turkey,
a perlite deposit in Central Mexico, and perlite expansion facilities in
Escondido, California; Green River, Wyoming; LaPorte, Texas; Youngsville, North
Carolina; Vicksburg, Michigan; Quincy, Florida; Wissembourg, France; Hessle,
England; Barcelona, Spain and Milan, Italy.
World Minerals conducts its business on a worldwide basis, with mining and
processing operations in eleven countries. In 2000, approximately 42 percent of
World Minerals' revenues (equal to 9.2 percent of Alleghany's consolidated
revenues) were generated by foreign operations, and an additional 15 percent of
World Minerals' revenues were generated by export sales from the United States.
While World Minerals believes that the international scope of its operations
gives it unique competitive advantages, international operations can be subject
to additional risks, such as currency fluctuations, changes in foreign legal
requirements and political instability. World Minerals closely monitors its
methods of operating in each country and adopts strategies responsive to
changing economic and political environments.
World Minerals minimizes its exposure to the risk of foreign currency
fluctuation by, among other things, causing its subsidiaries to declare and pay
dividends whenever feasible, and having its foreign subsidiaries invoice their
export customers in United States dollars or other "hard currencies." World
Minerals' foreign operations do not subject Alleghany to a material risk from
foreign currency fluctuation.
Celite's largest diatomite plant and mine is located near Lompoc,
California. Celite currently obtains all additional diatomite supplies from its
mines in the state of Washington, in France, Spain, Mexico, Chile, Peru, China,
and from Lake Myvatn in Iceland. Celite believes that diatomite reserves at
Washington, Mexico, Chile, Peru, China and Iceland are generally sufficient to
last for at least 20 more years at current rates of production. In 2000, the
Icelandic joint venture obtained conditional approval to mine a new area of Lake
Myvatn, which would last 20 to 25 years. The conditional approval contains
numerous conditions which could increase the joint venture's costs of mining and
which are being evaluated. Reserves at France (6 years), Lompoc (17 years) and
Spain (16 years) require drilling or investment to increase reserves to 20
years. France requires permitting and investment in a new deposit. Lompoc
requires investment in the mine to develop the 17 years of reserves and
investment in the plant to exceed 20 years of ore reserves. Programs are in
place for 2001 to increase the ore reserves and to understand the investments
required at its mines in France, Lompoc and Spain.
Harborlite obtains perlite ore in the United States from its No Agua and
Superior mines, and believes that its perlite ore reserves at each site are
sufficient to last at least 20 more years at the current rate of production. The
perlite used by Harborlite for expansion in Europe is obtained from Harborlite's
Dikili mine and from third parties in Europe. Ore reserves at Harborlite's
Dikili mine are believed to be sufficient to last at least 20 more years at the
current rate of production.
Celite's silicate products are produced from purchased magnesium and
calcium compounds and internally supplied diatomite.
World Minerals' operating subsidiaries experienced no interruptions in raw
materials availability in 2000. Barring unforeseen circumstances, World Minerals
anticipates no such interruptions in 2001. Celite and Harborlite believe that
they have taken reasonable precautions for the continuous supply of their
critical raw materials.
Many of Celite's and Harborlite's operations use substantial amounts of
energy, including electricity, fuel oil, natural gas and propane. In 2000,
Celite and Harborlite experienced the effects of unprecedented increases
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in the costs of natural gas, and temporary shutdowns as a result of electricity
shortages experienced in California. To mitigate the impact of higher natural
gas prices, World Minerals has switched from natural gas to oil at its Lompoc,
California plant. The electricity shortages have extended into 2001 and are
expected to continue until the energy crisis in California is resolved. Celite
and Harborlite have supply contracts for most of their energy requirements. Most
of such contracts are for one year or less. Celite and Harborlite have not
experienced any energy shortages outside of California and they believe that
they have taken reasonable precautions to ensure that their energy needs will be
met, barring any unusual or unpredictable developments.
From the time World Minerals began operations in 1991, none of its
customers accounted for 10 percent or more of World Minerals' annual sales.
World Minerals presently owns, controls or holds licenses either directly
or through its subsidiaries to approximately 16 United States and 81 foreign
patents and patent applications. While World Minerals considers all of its
patents and licenses to be valuable, World Minerals believes that none of its
patents or licenses is by itself material to its business.
World Minerals normally maintains approximately a one- to four-week supply
of inventory on certain products due to production lead times. Although
diatomite mining activities at Celite's principal mine in Lompoc, California may
be suspended during periods of heavy rainfall, World Minerals believes that,
because of the stockpiling of ore during dry periods, such suspensions do not
materially affect the supply of inventory. Barring unusual circumstances, World
Minerals does not experience backlogs of orders. World Minerals' business is not
seasonal to any material degree.
In order to bring more focused attention to the unique needs of various
areas of the world, World Minerals reorganized the management of its business in
2000 into three regional sectors. Sales, operations and finance functions are
now managed on a regional basis. Administrative, technical and support services
are provided to the regional sectors by World Minerals. Also in 2000, World
Minerals embarked on a major project to upgrade its information technology
capabilities.
World Minerals has research and development, environmental control and
quality control laboratories at its Lompoc production facilities and quality
control laboratories at each of its other production facilities. In 2000, World
Minerals spent approximately $2.5 million on company-sponsored research and
technical services (in addition to amounts spent on engineering and exploration)
related to the development and improvement of its products and services.
Competition
World Minerals believes that Celite is the world's largest producer of
filter-aid grade diatomite. The remainder of the market is shared by Celite's
four major competitors: Eagle-Picher Minerals (United States), Grefco (United
States), CECA (France) and Showa (Japan), and a number of smaller competitors.
World Minerals believes that Harborlite is the world's largest producer of
perlite filter aids and is one of the world's largest merchant producers of
perlite ore. Harborlite has two large competitors in the expanded perlite
market, Grefco and CECA, and many smaller competitors. Harborlite also has two
large competitors in the merchant perlite ore market, Grefco and Silver &
Baryte, and numerous smaller competitors.
The filter aid products of Celite and Harborlite compete with other filter
aids, such as cellulose, and other filtration technologies, such as crossflow
and centrifugal separation. Celite's silicates compete with a wide variety of
other synthetic mineral products.
In all of World Minerals' businesses, competition is principally on the
basis of service, product quality and performance, warranty terms, speed and
reliability of delivery, availability of the product and price.
Regulation
All of Celite's and Harborlite's domestic operations are subject to a
variety of federal, state and local environmental laws and regulations. These
laws and regulations establish potential liability for costs incurred in
cleaning up waste sites and impose limitations on atmospheric emissions,
discharges to domestic waters, and
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disposal of hazardous materials. Certain state and local jurisdictions have
adopted regulations that may be more stringent than corresponding federal
regulations. Celite and Harborlite believe that the impact of environmental
regulation on their respective operating results has been minimal due to their
environmental compliance programs; however, Celite and Harborlite cannot predict
the potential future impact of such regulations, given the increasing number and
complexity, and changing character, of such regulations.
Moreover, federal and state laws governing disposal of wastes impact
customers who must dispose of used filter-aid materials. World Minerals works
with its customers to implement disposal strategies to minimize the impact of
these disposal regulations.
The domestic mining operations of Celite and Harborlite are subject to
regulation by the Mine Safety and Health Administration ("MSHA"). This agency
establishes health and safety standards relating to noise, respiratory
protection and dust for employee work environments in the mining industry.
Celite's and Harborlite's domestic production facilities which are not under the
jurisdiction of MSHA are subject to regulation by the Occupational Safety and
Health Administration ("OSHA"), which establishes regulations regarding, among
other things, workplace conditions, and exposure to dust and noise. In addition,
certain state agencies exercise concurrent jurisdiction in these areas. During
1997, both MSHA and OSHA announced special emphasis programs to reduce the
incidence of silicosis in the workplace. Due to Celite's industrial hygiene and
monitoring programs, Celite does not expect these special emphasis programs to
impact its business in any material way.
World Minerals maintains a staff of experienced environmental, safety and
industrial hygiene professionals who assist plant personnel in complying with
environmental, health and safety regulations. Its environmental, safety and
industrial hygiene audit group also performs routine internal audits and reviews
of World Minerals' plant facilities worldwide. Due to these programs and
responsible management at the local plant level, compliance with such
regulations has been facilitated and the financial impact of such regulations on
operating results has been minimal.
Certain products of Celite and Harborlite are subject to the Hazard
Communication Standard promulgated by OSHA, which requires Celite and Harborlite
to disclose the hazards of those products to employees and customers. Celite's
diatomite products and certain of Harborlite's products contain varying amounts
of crystalline silica, a mineral which is among the most common found on earth.
In 1997, the International Agency for Research on Cancer ("IARC") reclassified
the inhalation of crystalline silica from occupational sources from "probably
carcinogenic to humans" to a category reflecting "sufficient evidence of human
carcinogenicity." Celite and Harborlite provide required warning labels on their
products containing in excess of 0.1 percent respirable crystalline silica,
advising customers of the IARC designation and providing recommended safety
precautions. Such requirements also mandate that industrial customers who
purchase diatomite or perlite for use as a filler in their products label such
products to disclose hazards which may result from the inclusion of crystalline
silica-based fillers, if such products contain in excess of 0.1 percent of
crystalline silica by volume. Due to labeling concerns, some manufacturers of
paint may be considering the use of other fillers in place of Celite's products.
However, Celite believes that the loss of these customers would not have a
material adverse effect on its operating results. Several states have also
enacted or adopted "right to know" laws or regulations, which seek to expand the
federal Hazard Communication Standard to include providing notice of hazards to
the general public, as well as to employees and customers.
Celite, through the industry-sponsored International Diatomite Producers
Association ("IDPA"), has participated in funding several studies to examine in
more detail the cancer risk to humans from occupational exposure to crystalline
silica. One such study, conducted by the University of Washington on diatomite
workers in Lompoc, California (the "Washington Study") found a modest increase
in lung cancer deaths in the cohort compared with national rates (indicated by a
standardized mortality ratio ("SMR") equal to 1.43). The standardized mortality
ratio compares the number of expected cancer deaths in the cohort with 1,
representing the number of cancer deaths in the population at large. The study
also found an increase in non-malignant respiratory disease ("NMRD") (SMR equal
to 2.59); this finding was expected because the NMRD category included silicosis
resulting from exposures in past decades.
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After the publication of the Washington Study, Celite conducted its own
review of the portion of the cohort representing the Lompoc plant and found that
more workers in this portion of the cohort may have been exposed to asbestos,
prior to World Minerals' purchase of the Lompoc plant, than originally thought.
Since exposure to asbestos has been found to cause lung cancer and respiratory
disease, this finding has raised concern that the Washington Study may have
overstated the adverse health effects of exposure to crystalline silica. IDPA
engaged an epidemiologist and an industrial hygienist to examine the cohort to
determine whether asbestos exposure was properly accounted for in the Washington
Study's results. The final IDPA report (the "Asbestos Study") was issued in
December 1994 and found:
"Although asbestos operations were small relative to the diatomaceous
earth operations, analyses in this report showed that exposure to asbestos
by workers was relatively common. For example, the number of cohort members
who were ever definitely, probably or possibly exposed to asbestos was
shown to involve approximately 60 percent of the cohort. Even when only men
employed in jobs definitely exposed to asbestos for more than [one] year in
the period 1950-1977 were considered, more than 8 percent of the cohort had
held such jobs."
The Asbestos Study's authors called for further analyses which fully take
into account the results of their study stating "[t]he interpretation of the
silica-lung cancer risk relationships based on the [Lompoc] cohort should await
the outcome of such analyses."
The results of the Asbestos Study were analyzed by the authors of the
Washington Study. They did not agree that asbestos was a likely confounder of
the results of the initial study.
In 1996, the Washington Study's authors, in association with researchers
from Tulane University, conducted a seven year follow-up study of the Lompoc
cohort. The follow-up study, funded by a grant from the National Institute for
Occupational Safety and Health, reported a lower SMR for the cohort (1.29 vs.
1.43), a weakened dose response relationship, which may suggest a less
conclusive indication of a causative relationship between occupational exposure
and cancer deaths, and a continued absence of excess lung cancers in workers
hired after 1960. Data errors later discovered in the follow-up study reduced
the final SMR to 1.22 and further weakened the dose response relationship. An
additional aspect of the study, which sought to compare results of the cohort
study to radiographic readings of the workers, confirmed that the risk of
silicosis to workers hired since 1950 and exposed to a cumulative crystalline
silica exposure equal to or less than 3 mg/m(3) over the working lifetime of the
workers has not been appreciably different than in non-exposed populations.
The various agreements covering the purchase of the business of Celite in
1991 provide for the indemnification of the holding company subsidiary of
Alleghany which acquired Celite by the various selling Manville entities in
respect of any environmental and health claims arising from the operations of
the business of Celite prior to its acquisition by the holding company
subsidiary.
Employees
As of December 31, 2000, World Minerals had 174 employees worldwide, Celite
had about 1,212 employees worldwide, and Harborlite had about 261 employees
worldwide. Approximately 328 of Celite's employees and 45 of Harborlite's
employees in the United States are covered by collective bargaining agreements.
All of the collective bargaining agreements covering workers at Celite and
Harborlite are in full force and effect.
WHOLESALE STEEL FASTENER BUSINESS
Heads & Threads, headquartered in Sayreville, New Jersey, is believed to be
one of the nation's leading importers and distributors of steel fasteners. The
Heads and Threads division (owned by Alleghany since 1974) was reorganized in
1999 as Heads & Threads International LLC. Heads & Threads imports and sells
commercial fasteners -- nuts, bolts, screws, washers, sockets, and
anchors -- for resale through distributors and packagers that serve original
equipment manufacturers, maintenance and repair operators, construction
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and retail customers. Heads & Threads has five distribution centers, one
packaging operation, and twelve warehouses serving major metropolitan areas with
same day or next day delivery.
In 1998, Heads & Threads acquired Gardenbolt International Corp,
substantially increasing its size and presence in East Coast markets and adding
a complementary direct from mill/stock for release business to its existing
stock business. In April 2000, Heads & Threads acquired the assets of Reynolds
Fasteners Inc., effectively doubling its size. Reynolds, a wholesale distributor
of fasteners headquartered in Edison, New Jersey, conducted a stock business
through twelve sales offices and warehouses nationwide. In November 2000, Heads
& Threads acquired the assets of the Atlas Screw & Specialty Division of
Pawtucket Fasteners Inc. Atlas, headquartered in New Bedford, Massachusetts, was
a relatively small wholesale distributor of fasteners, selling product in small
package quantities primarily in the eastern United States.
As a result of these three acquisitions, Heads & Threads underwent a
significant restructuring of corporate staff, systems, and operations.
Centralized functions, including purchasing, accounting, quality control and
traffic, were moved from its former headquarters in the Chicago area to
Sayreville, New Jersey. The acquired companies' computer systems are being
converted to the Heads & Threads SAP enterprise resource planning system, which
was installed in 1998. Multiple sales offices and warehouses were consolidated
into a single facility in each market served. New state of the art distribution
centers were opened in the Chicago, Atlanta, and Los Angeles markets.
Significant staff cuts were made to eliminate redundancies. The restructuring is
expected to be substantially completed in the first quarter of 2001.
The business is conducted under the Heads & Threads name. The Gardenbolt
and Reynolds names were used during a transition period immediately following
the acquisitions, but are no longer being used. The Atlas name has distinct
market value and, therefore, will continue to be used in 2001. While Heads &
Threads considers all of its trademarks and licenses to be valuable, Heads &
Threads believes that none is by itself material to its business.
Heads & Threads' operations are divided into three businesses -- stock,
direct from mill/stock for release, and packaged. Through its stock business,
product is purchased by Heads & Threads in anticipation of demand and warehoused
in its facilities throughout the United States. Customer purchases tend to be of
relatively small quantities for same day or next day delivery. This segment
represented approximately 85 percent of Heads & Threads' business in 2000. The
direct from mill/stock for release business involves large quantities of
standard or specialty product purchased by Heads & Threads specifically for a
customer order, which is shipped directly from the manufacturer to the customer
(direct from mill) or warehoused in a Heads & Threads facility and shipped to
the customer over time, with a definitive end date (stock for release). The
direct from mill/stock for release segment represented approximately 15 percent
of Heads & Threads' total business in 2000. The packaged business, which was
acquired in the Atlas transaction, comprises small pack quantities sold to
distributors and mill supply houses. Sales in the packaged business segment were
negligible in 2000.
Heads & Threads experiences a moderate reduction in sales in July and
December related to distributor and end user shutdowns, vacations, and holidays.
The business is not otherwise seasonal in nature.
Since Heads & Threads imports the vast majority of its fasteners, it is
necessary to forecast inventory requirements from six months to a year in
advance to allow time for shipments to reach their destinations in the United
States. Heads & Threads is required to maintain a six- to eight-month supply of
inventory due to the long lead times and customer requirements for immediate
delivery. Because of the large inventories it is required to hold and the price
sensitivity of the market it serves, Heads & Threads' margins can be adversely
affected when product replacement costs, and therefore, selling prices, change
quickly or dramatically. In 1998 and 1999, margins were negatively affected by
significant replacement cost decreases in product manufactured overseas
resulting in lower selling prices. These cost decreases were a result of excess
capacity and a strong U.S. dollar. Conversely, in 2000, margins were positively
impacted by replacement cost, and selling price, increases. The cost increases
were due to the shutdown of certain manufacturing facilities resulting in
reduced overseas production capacity.
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Heads & Threads uses a large number of suppliers for the standard stock
items it distributes in both bulk and packaged, and a smaller group of specialty
manufacturers for the direct from mill/stock for release business. Other than
the direct from mill/stock for release products, most items distributed by Heads
& Threads can be purchased from several sources, although preferred sourcing is
used for some stock items to facilitate quality control. Gem Year Industrial
(People's Republic of China) represented approximately 13 percent of the total
purchases in 2000. No other single supplier accounted for more than 5 percent of
Heads & Threads' purchases in 2000. The supply chain could be adversely affected
by political instability or conflicts involving Heads & Threads' principal
supplying countries, particularly China and Taiwan. Heads & Threads did not
experience any product supply disruptions in 2000. Barring unforeseen
circumstances, Heads & Threads anticipates no such interruptions in 2001.
Heads & Threads believes that its strength lies in its product coverage,
logistics services, and longtime customer and supplier relationships. Heads &
Threads imports and sells commercial fasteners for resale through distributors
and packagers that serve original equipment manufacturers, maintenance and
repair operators, construction and retail customers. As of December 31, 2000,
Heads & Threads' total number of active customer accounts (defined as accounts
having purchase activity within the last 90 days) was approximately 3100. None
of Heads & Threads' customers accounted for more than 10% or more of Heads &
Threads' annual sales.
At December 31, 2000, Heads & Threads had a customer order backlog of $23
million, primarily related to its direct from mill/stock for release business.
The entire backlog is expected to be filled in 2001.
Direct competitors include master distributors (distributors that
distribute to other distributors), domestic and Canadian manufacturers, direct
mill brokers, and repackagers. Indirect competitors include distributors,
foreign fastener manufacturers, trading companies, and suppliers of alternative
fastening solutions (other metals, plastics, and adhesives). Competition is
principally based on product availability, price, delivery, service, and product
quality.
Heads & Threads' costs are subject to fluctuations in foreign currency and
import duties. Increases in import duties may result from determinations by
United States federal agencies that foreign countries are violating United
States laws or intellectual property rights, or are following restrictive import
policies. Heads & Threads operations do not subject Alleghany to a material risk
from fluctuations in foreign currency or import duties.
At December 31, 2000, Heads & Threads had about 329 employees.
REAL ESTATE BUSINESS
Headquartered in Sacramento, California, Alleghany Properties owns and
manages, among other real estate and real estate-related assets, 20 properties
in California. Such properties are comprised primarily of improved and
unimproved commercial land and commercial and residential lots. A major portion
of the real estate assets of Alleghany Properties are located in North Natomas,
the only large undeveloped area in the City of Sacramento. Development in the
area had been delayed by flood plan zoning and wildlife habitat issues; however,
the area experienced considerable growth in its first season of development
activity beginning in 1998, including more than a dozen residential projects,
office buildings and a fully-leased retail shopping center. Contributing to the
growth, Alleghany Properties sold approximately 450 residential lots and a
multi-family site accommodating more than 270 apartment units. Further
development on some of the properties in the North Natomas area may be delayed
until a new Environmental Impact Statement is prepared and approved in response
to a recent adverse decision regarding endangered species permits for the area.
At December 31, 2000, Alleghany Properties had 4 employees.
ITEM 2. PROPERTIES.
Alleghany's headquarters is located in leased office space of about 11,000
square feet at 375 Park Avenue in New York City.
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Alleghany Underwriting leases approximately 13,000 square feet of office
space in London.
World Minerals' headquarters is located in leased premises of approximately
13,000 square feet in Santa Barbara, California. Celite, Harborlite and certain
departments of World Minerals share 16,800 square feet of leased premises in
Lompoc, California.
A description of the major plants and properties owned and operated by
Celite and Harborlite is set forth below. All of the following properties are
owned, with the exception of Plant #1 at Quincy, Washington, the headquarters
offices at Santa Barbara and Lompoc, California, the Nanterre, France, Beijing,
PRC, Santiago, Chile and Izmir, Turkey offices and the plant at Wissembourg,
France, which are leased.
APPROXIMATE
LOCATION AND NATURE OF PROPERTY SQUARE FOOTAGE PRODUCT OR USE
- ------------------------------- -------------- --------------
CELITE:
Lompoc, CA 997,410 Diatomite filter aids, fillers,
Production facility; 18 multi-story production silicates and specialty products
buildings; 5 one-story warehouse buildings; 6
one-story laboratory buildings; 4 multi-story bulk
handling buildings; 6 one-story office buildings; 2
one-story lunch and locker-room buildings; and 10
one-story shops.
Lompoc, CA 16,800 Administrative office
1 one-story building; and 3 units within 1 one-
story building.
Quincy, WA 60,941 Diatomite filter aids and
Production facility; Plant #1-1 multi-story fillers
production building and 7 one-story buildings.
Plant #2-1 multi-story production building and 6
one-story buildings.
Murat, Department of Cantal, France 77,000 Diatomite filter aids
Production facility; 1 one-story manufacturing
building; 2 one-story warehouses; and 1 one-story
office building.
Nanterre, France 6,600 Sales and administrative offices
1 single floor.
Guadalajara, Mexico 116,610 Diatomite filter aids and
Production facility; 2 multi-story production fillers
buildings; 2 multi-story pollution-control
buildings; and 20 one-story buildings.
Mexico City, Mexico 2,700 Sales and administrative offices
1 single floor condominium.
Arica, Chile 50,000 Diatomite filter aids
Production facility; 1 calcined line; 1
administration building; 1 laboratory; 1 warehouse
building; 1 changing room building; 1 maintenance
workshop; and 1 product warehouse.
Santiago, Chile 2,500 Offices
1 single floor in a multi-story, rented office
building.
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20
APPROXIMATE
LOCATION AND NATURE OF PROPERTY SQUARE FOOTAGE PRODUCT OR USE
- ------------------------------- -------------- --------------
Alicante, Spain 70,777 Diatomite filter aids and
Production facility; 2 multi-story manufacturing fillers
buildings; 3 one-story warehouses; 2 one-story
office buildings; 1 two-story laboratory; and 3
miscellaneous buildings.
Changbai County, Jilin Province, PRC 95,000 Diatomite filter aids
Production facility; 1 multi-story processing
facility; 4 one-story warehouse buildings; 1
multi-story office building; and 4 one-story
miscellaneous buildings.
Linjiang County, Jilin Province, PRC 74,665 Diatomite filter aids
Production facility; 1 multi-story production
facility; 1 two-story office building; 3 one-story
warehouse buildings; and 3 one-story miscellaneous
buildings.
Linjiang County, Jilin Province, PRC 142,000 Diatomite filter aids
Production facility; 3 multi-story production
facilities; 1 one-story office building; 2
one-story warehouse buildings; and 5 one-story
miscellaneous buildings.
Beijing, PRC 2,300 Offices
1 single floor in multi-story office building.
HARBORLITE:
Antonito, CO 9,780 Warehouse facilities for perlite
1 one-story manufacturing building and warehouse; 1 ore
one-story office building; and 1 one-story
warehouse.
No Agua, NM 40,550 Perlite ore
Production facility; 1 six-story mill building; 1
one-story office and shop building; and 8
miscellaneous one-story buildings.
Superior, AZ 6,900 Perlite ore
Production facility; 1 one-story warehouse
building; and 1 one-story office building.
Escondido, CA 8,450 Perlite filter aids
1 one-story warehouse building; and 1 one-story
office building.
Green River, WY 17,300 Perlite filter aids
1 one-story warehouse building; and 1 one-story
office building.
Vicksburg, MI 25,050 Perlite filter aids
2 one-story warehouse buildings; and 1 one-story
office building.
Youngsville, NC 22,500 Perlite filter aids
1 one-story warehouse building; 1 one-story
manufacturing building; and 1 one-story office
building.
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21
APPROXIMATE
LOCATION AND NATURE OF PROPERTY SQUARE FOOTAGE PRODUCT OR USE
- ------------------------------- -------------- --------------
Quincy, FL 18,450 Perlite filter aids
1 one-story warehouse building; 1 one-story
manufacturing building; and 1 one-story office
building.
LaPorte, TX 23,000 Perlite filter aids and fillers
1 one-story expansion warehouse and office
building.
Wissembourg, France 5,000 Perlite filter aids and fillers
a portion of 1 multi-story production and warehouse
building.
Hessle, Humberside, United Kingdom 36,700 Perlite filter aids and fillers
1 one-story manufacturing building; and 1 two-
story office building.
Dikili, Turkey 63,200 Perlite crushing mill
Production facility; 1 four-story manufacturing
building; 1 one-story warehouse building; 1 one-
story raw material warehouse; 1 one-story office
building; and 1 one-story maintenance shop.
Izmir, Turkey 1,000 Sales and administrative offices
1 single floor.
Barcelona, Spain 70,300 Perlite filter aids and fillers
Production facility; 1 one-story manufacturing and
warehouse building; 1 one-story raw material
warehouse; and 1 two-story office building.
El Ejido, Spain 21,520 Perlite fillers
1 one-story manufacturing building; 1 one-story
warehouse; and 1 one-story office building.
Milan, Italy 68,600 Perlite filter aids
Production facility; 1 one-story
manufacturing/warehouse building; 1 one-story raw
material warehouse; and 1 two-story office
building.
WORLD MINERALS:
Santa Barbara, CA 13,000 Headquarters office
1 one-story rented building.
Celite's largest mine is located on owned property immediately adjacent to
the City of Lompoc, California, and is the site of one of the most unusual
marine diatomite deposits in the world. The mine celebrated its 100th
anniversary of production in 1993 and has been in continuous operation for more
than 60 years. The Lompoc production facility has a rated capacity in excess of
200,000 tons annually and currently supplies more than 25 different grades of
products to the filtration and filler markets. The facility also houses World
Minerals' research and development, and health, safety and environmental
departments and Celite's quality control laboratories.
World Minerals, Celite and Harborlite also lease warehouses, office space
and other facilities in the United States and abroad. A joint venture between
Celite and the Government of Iceland has rights to mine diatomaceous earth in
sections of Lake Myvatn, Iceland, and Celite's joint ventures in PRC have rights
to mine diatomaceous earth in sections of Jilin Province, PRC.
20
22
Heads & Threads leases approximately 12,000 square feet of office space in
Sayreville, New Jersey for its headquarters. All of its five distribution
centers, one packaging operation and twelve warehouses are also in leased space,
ranging in size from about 16,000 square feet to 165,000 square feet. In 2000,
Heads & Threads sold the land and buildings it owned in Northbrook, Illinois,
which housed its former headquarters, and Woodside, New York.
ITEM 3. LEGAL PROCEEDINGS.
Alleghany's subsidiaries are parties to pending litigation and claims in
connection with the ordinary course of their businesses. Each such subsidiary
makes provision on its books, in accordance with generally accepted accounting
principles, for estimated losses to be incurred in such litigation and claims,
including legal costs. In the opinion of management, such provision is adequate
under generally accepted accounting principles as of December 31, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of 2000.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF REGISTRANT.
The name, age, current position, date elected and five-year business
history of each executive officer of Alleghany are as follows:
CURRENT POSITION BUSINESS EXPERIENCE
NAME AGE (DATE ELECTED) DURING LAST 5 YEARS
- ---- --- ---------------------------- ----------------------------
F.M. Kirby 81 Chairman of the Board (since Chairman of the Board,
1967) Alleghany.
John J. Burns, Jr. 69 President, chief operating President, chief operating
officer (since 1977) and officer and chief executive
chief executive officer officer, Alleghany.
(since 1992)
David B. Cuming 68 Senior Vice President and Senior Vice President and
chief financial officer chief financial officer,
(since 1989) Alleghany.
Robert M. Hart 56 Senior Vice President, Senior Vice President,
General Counsel (since 1994) General Counsel and
and Secretary (since 1995) Secretary, Alleghany.
Peter R. Sismondo 45 Vice President, Controller, Vice President, Controller,
Assistant Secretary, Treasurer, Assistant
principal accounting officer Secretary and principal
(since 1989) and Treasurer accounting officer,
(since 1995) Alleghany.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this Item with respect to the market price of
and dividends on Alleghany's common stock and related stockholder matters is
incorporated by reference from page 24 of Alleghany's Annual Report to
Stockholders for the year 2000, filed as Exhibit 13 hereto.
RECENT SALES OF UNREGISTERED SECURITIES.
Other than unregistered issuances of Alleghany common stock previously
reported in Alleghany's Quarterly Reports on Form 10-Q for the quarters ending
March 31, 2000, June 30, 2000 and September 30, 2000, and such issuances that
did not involve a sale consisting of issuances of common stock and other
21
23
securities pursuant to employee incentive plans, Alleghany did not sell any
Alleghany common stock during 2000 that was not registered under the Securities
Act.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item 6 is incorporated by reference from
page 24 of Alleghany's Annual Report to Stockholders for the year 2000, filed as
Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this Item 7 is incorporated by reference from
pages 3 through 4, 6 through 7, 11 through 13, 15 through 17, 19 through 21 and
26 through 28 of Alleghany's Annual Report to Stockholders for the year 2000,
filed as Exhibit 13 hereto.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this Item 7A is incorporated by reference from
pages 28 through 29 of Alleghany's Annual Report to Stockholders for the year
2000, filed as Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item 8 is incorporated by reference from
pages 30 through 46 of Alleghany's Annual Report to Stockholders for the year
2000, filed as Exhibit 13 hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.
As permitted by General Instruction G(3), information concerning the
executive officers of Alleghany is set forth as a supplemental item included in
Part I of this Form 10-K Report under the caption "Executive Officers of
Registrant." Information concerning the directors of Alleghany is incorporated
by reference from pages 5 through 9 of Alleghany's Proxy Statement, filed or to
be filed in connection with its Annual Meeting of Stockholders to be held on
April 27, 2001. Information concerning compliance with the reporting
requirements under Section 16 of the Securities Exchange Act of 1934, as
amended, is incorporated by reference from pages 10 through 11 of Alleghany's
Proxy Statement, filed or to be filed in connection with its Annual Meeting of
Stockholders to be held on April 27, 2001.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item 11 is incorporated by reference from
pages 12 through 17 of Alleghany's Proxy Statement, filed or to be filed in
connection with its Annual Meeting of Stockholders to be held on April 27, 2001.
The information set forth beginning with the middle of page 17 through page 21,
and page 23 through 24 of Alleghany's Proxy Statement, filed or to be filed in
connection with its Annual Meeting of Stockholders to be held on April 27, 2001,
is not "filed" as a part hereof.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item 12 is incorporated by reference from
pages 2 through 4, and from pages 9 through 10, of Alleghany's Proxy Statement,
filed or to be filed in connection with its Annual Meeting of Stockholders to be
held on April 27, 2001.
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24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item 13 is incorporated by reference from
page 12 of Alleghany's Proxy Statement, filed or to be filed in connection with
its Annual Meeting of Stockholders to be held on April 27, 2001.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
The consolidated financial statements of Alleghany and subsidiaries,
together with the report thereon of KPMG LLP, independent certified public
accountants, are incorporated by reference from the Annual Report to
Stockholders for the year 2000 into Item 8 of this Report.
2. Financial Statement Schedules.
The schedules relating to the consolidated financial statements of
Alleghany and subsidiaries, together with the report thereon of KPMG LLP,
independent certified public accountants, are detailed in a separate index
herein.
3. Exhibits.
The following are filed as exhibits to this Report:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.01 Restated Certificate of Incorporation of Alleghany, as
amended by Amendment accepted and received for filing by the
Secretary of State of the State of Delaware on June 23,
1988, filed as Exhibit 20 to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
3.02 By-Laws of Alleghany as amended April 18, 1995, filed as
Exhibit 3.1 to Alleghany's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, is incorporated herein by
reference.
*10.01 Description of Alleghany Management Incentive Plan, filed as
Exhibit 10.01 to Alleghany's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein by
reference.
*10.02 Alleghany Corporation Deferred Compensation Plan, as amended
and restated as of December 15, 1992, filed as Exhibit 10.03
to Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
*10.03 Alleghany 1993 Long-Term Incentive Plan, as amended and
restated effective as of January 1, 1994, filed as Exhibit
10.06(b) to Alleghany's Annual Report on Form 10-K for the
year ended December 31, 1994, is incorporated herein by
reference.
*10.04 Alleghany Supplemental Death Benefit Plan dated as of May
15, 1985 and effective as of January 1, 1985, filed as
Exhibit 10.08 to Old Alleghany's Annual Report on Form 10-K
for the year ended December 31, 1985, is incorporated herein
by reference (Securities and Exchange Commission File No.
1-9371).
*10.05(a) Trust Agreement Amendment made as of July 8, 1994 between
Alleghany and Chemical Bank, filed as Exhibit 10.08(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference.
23
25
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*10.05(b) Alleghany Retirement Plan, as amended and restated on March
14, 1995, filed as Exhibit 10.08(c) to Alleghany's Annual
Report on Form 10-K for the year ended December 31, 1994, is
incorporated herein by reference.
*10.05(c) Amendments to Alleghany Retirement Plan, effective as of
January 1, 1996, filed as Exhibit 10.1 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is incorporated herein by reference.
*10.05(d) Amendments to Alleghany Retirement Plan, effective as of
January 1, 1998, filed as Exhibit 10.05(d) to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1997, are incorporated herein by reference.
*10.06 Alleghany Retirement COLA Plan dated and effective as of
January 1, 1992, as adopted on March 17, 1992, filed as
Exhibit 10.7 to Alleghany's Annual Report on Form 10-K for
the year ended December 31, 1991, are incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
*10.07 Description of Alleghany Group Long Term Disability Plan
effective as of July 1, 1995, filed as Exhibit 10.10 to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference.
*10.08(a) Alleghany Amended and Restated Directors' Stock Option Plan
effective as of April 20, 1993, filed as Exhibit 10.1 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, is incorporated herein by reference.
*10.08(b) Alleghany 2000 Directors' Stock Option Plan effective April
28, 2000, filed as Exhibit A to Alleghany's Proxy Statement,
filed in connection with its Annual Meeting of Stockholders
held on April 28, 2000, is incorporated herein by reference.
*10.09 Alleghany Directors' Equity Compensation Plan, effective as
of January 16, 1995, filed as Exhibit 10.11 to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1994, is incorporated herein by reference.
*10.10 Alleghany Non-Employee Directors' Retirement Plan effective
July 1, 1990, filed as Exhibit 10.1 to Alleghany's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
10.11(a) 364-Day Revolving Credit Agreement dated as of November 22,
2000, by and between Alleghany, the banks which are
signatories thereto, and U.S. Bank National Association, as
agent for the banks ("The 364-Day Revolving Credit
Agreement").
10.11(b) List of Contents of Exhibits and Schedules to the 364-Day
Revolving Credit Agreement. Alleghany agrees to furnish
supplementally a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.
10.11(c) Five-Year Revolving Credit Agreement dated as of November
22, 2000, by and between Alleghany, the banks which are
signatories thereto, and U.S. Bank National Association, as
agent for the banks ("The Five-Year Revolving Credit
Agreement").
10.11(d) List of Contents of Exhibits and Schedules to the Five-Year
Revolving Credit Agreement. Alleghany agrees to furnish
supplementally a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.
10.12(a) Distribution Agreement dated as of June 16, 1998 by and
between Alleghany Corporation and Chicago Title Corporation
(the "Spin-Off Distribution Agreement"), filed as Exhibit
2.1(a) to Chicago Title Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, is
incorporated herein by reference (Securities and Exchange
Commission File No. 001-13995).
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26
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.12(b) List of Contents of Exhibits to the Spin-Off Distribution
Agreement, filed as Exhibit 2.1(b) to Chicago Title
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, is incorporated herein by reference
(Securities and Exchange Commission File No. 001-13995).
10.12(c) Tax Sharing Agreement dated as of June 17, 1998 by and among
Alleghany Corporation and Chicago Title Corporation, filed
as Exhibit 10.2 to Chicago Title Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998, is
incorporated herein by reference (Securities and Exchange
Commission File No. 001-13995).
10.13 Distribution Agreement dated as of May 1, 1987 between
Alleghany and MSL Industries, Inc., filed as Exhibit 10.21
to Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1987, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.14 Amendment to Distribution Agreement dated June 29, 1987,
effective as of May 1, 1987, between Alleghany and MSL
Industries, Inc., filed as Exhibit 10.22 to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1987, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.15(a) Note Purchase Agreement dated as of December 11, 1998 by and
among Alleghany Properties, Inc., Alleghany and United of
Omaha Life Insurance Company (the "Alleghany Properties 1998
Note Purchase Agreement"), filed as Exhibit 10.18(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1998, is incorporated herein by reference.
Agreements dated as of December 11, 1998 among Alleghany
Properties, Inc., Alleghany and each of Companion Life
Insurance Company, Hartford Life Insurance Company, The
Lincoln National Life Insurance Company, and First
Penn-Pacific Life Insurance Company are omitted pursuant to
Instruction 2 of Item 601 of Regulation S-K.
10.15(b) List of Contents of Annexes and Exhibits to the Alleghany
Properties 1998 Note Purchase Agreement, filed as Exhibit
10.18(b) to Alleghany's Annual Report on Form 10-K for the
year ended December 31, 1998, is incorporated herein by
reference.
10.16(a) Installment Sales Agreement dated December 8, 1986 by and
among Alleghany, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Merrill Lynch & Co., Inc., filed as Exhibit
10.10 to Alleghany's Annual Report on Form 10-K for the year
ended December 31, 1986, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.16(b) Intercreditor and Collateral Agency Agreement dated as of
October 20, 1997 among The Chase Manhattan Bank, Barclays
Bank PLC and Alleghany Funding Corporation, filed as Exhibit
10.1 to Alleghany's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, is incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
10.16(c) Master Agreement dated as of October 20, 1997 between
Barclays Bank PLC and Alleghany Funding Corporation, and
related Amended Confirmation dated October 24, 1997 between
Barclays Bank PLC and Alleghany Funding Corporation, filed
as Exhibit 10.2 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, are incorporated
herein by reference (Securities and Exchange Commission File
No. 1-9371).
10.16(d) Indenture dated as of October 20, 1997 between Alleghany
Funding Corporation and The Chase Manhattan Bank, filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, is incorporated
herein by reference (Securities and Exchange Commission File
No. 1-9371).
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27
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.17(a) Stock Purchase Agreement dated as of July 1, 1991 among
Celite Holdings Corporation, Celite Corporation and Manville
International, B.V. (the "Celite Stock Purchase Agreement"),
filed as Exhibit 10.2(a) to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
10.17(b) List of Contents of Exhibits and Schedules to the Celite
Stock Purchase Agreement, filed as Exhibit 10.2(b) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.18(a) Joint Venture Stock Purchase Agreement dated as of July 1,
1991 among Celite Holdings Corporation, Celite Corporation
and Manville Corporation (the "Celite Joint Venture Stock
Purchase Agreement"), filed as Exhibit 10.3(a) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.18(b) List of Contents of Exhibits and Schedules to the Celite
Joint Venture Stock Purchase Agreement, filed as Exhibit
10.3(b) to Alleghany's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991, is incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
10.19(a) Asset Purchase Agreement dated as of July 1, 1991 among
Celite Holdings Corporation, Celite Corporation and Manville
Sales Corporation (the "Celite Asset Purchase Agreement"),
filed as Exhibit 10.4(a) to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
10.19(b) List of Contents of Exhibits and Schedules to the Celite
Asset Purchase Agreement, filed as Exhibit 10.4(b) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.19(c) Amendment No. 1 dated as of July 31, 1991 to the Celite
Asset Purchase Agreement, filed as Exhibit 10.32(c) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.20(a) Acquisition Related Agreement dated as of July 1, 1991, by
and between Celite Holdings Corporation, Celite Corporation
and Manville Corporation (the "Celite Acquisition Related
Agreement"), filed as Exhibit 10.5(a) to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.20(b) List of Contents of Exhibits to the Celite Acquisition
Related Agreement, filed as Exhibit 10.5(b) to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.20(c) Amendment dated as of July 31, 1991 to Celite Acquisition
Related Agreement, filed as Exhibit 10.33(c) to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
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28
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.21(a) Credit Agreement dated as of March 17, 1999 among Mineral
Holdings Inc., World Minerals Inc., the Banks named therein
and The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent (the "World Minerals Credit Agreement"),
filed as Exhibit 10.1 to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, is
incorporated herein by reference.
10.21(b) List of Contents of Exhibits, Annexes and Schedules to the
World Minerals Credit Agreement, filed as Exhibit 10.2 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference.
10.21(c) Subordination Agreement dated as of March 17, 1999, among
Alleghany Corporation and The Chase Manhattan Bank, filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, is incorporated herein
by reference.
10.22(a) Stock Purchase Agreement dated as of December 30, 1999 by
and between Alleghany and Swiss Re America Holding
Corporation, filed as Exhibit 99.1 to Alleghany's Current
Report on Form 8-K dated December 30, 1999, is incorporated
herein by reference.
10.22(b) Closing Agreement, dated May 10, 2000, by and between Swiss
Re America Holding Corporation and Alleghany, filed as
Exhibit 99.2 to Alleghany's Current Report on Form 8-K dated
May 25, 2000, is incorporated herein by reference.
10.23 Agreement, effective as of December 20, 2000, by and among
Alleghany, Underwriters Reinsurance Company and London Life
and Casualty Reinsurance Corporation.
10.24(a) Agreement and Plan of Amalgamation dated as of July 30, 1998
by and among Underwriters Reinsurance Company, Underwriters
Acquisition Company Ltd. and Venton Holdings Ltd. (the
"Amalgamation Agreement"), filed as Exhibit 10.28(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1998, is incorporated herein by reference.
10.24(b) List of Contents of Exhibits to the Amalgamation Agreement,
filed as Exhibit 10.28(b) to Alleghany's Annual Report on
Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
10.24(c) Amendment No. 1 dated as of September 24, 1998 to the
Amalgamation Agreement (the "Amalgamation Amendment No. 1"),
filed as Exhibit 10.28(c) to Alleghany's Annual Report on
Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
10.24(d) List of Contents of Exhibits to the Amalgamation Amendment
No. 1, filed as Exhibit 10.28(d) to Alleghany's Annual
Report on Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
10.25(a) Credit Agreement dated as of August 14, 2000, by and among
Alleghany Underwriting Ltd, Alleghany Underwriting Capital
Ltd, Talbot Underwriting Limited, and Alleghany Underwriting
Capital (Bermuda) Ltd, as Borrowers and Account Parties;
Alleghany, as Guarantor; the Banks parties thereto from time
to time; Mellon Bank, N.A., as Issuing Bank, as
Administrative Agent and as Arranger; National Westminster
Bank plc, as Syndication Agent and ING Bank, N.V., as
Managing Agent (the "Alleghany Underwriting Credit
Agreement"), filed as Exhibit 10.1 to Alleghany's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000, is incorporated herein by reference.
10.25(b) List of Contents of Exhibits and Schedules to the Alleghany
Underwriting Credit Agreement, filed as Exhibit 10.2 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, is incorporated herein by
reference.
27
29
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.25(c) First Amendment to Credit Agreement dated as of February 1,
2001, by and among Alleghany Underwriting Ltd, Alleghany
Underwriting Capital Ltd, Talbot Underwriting Limited,
Alleghany Underwriting Capital (Bermuda) Ltd, Alleghany,
Alleghany Insurance Holdings LLC, the Banks and Agents which
have signed the signature pages thereto, and Mellon Bank,
N.A., as Bank, as Issuing Bank and as Administrative Agent
for the Banks and the Issuing Bank.
10.26(a) Agreement and Plan of Merger, dated as of October 18, 2000,
by and among ABN AMRO North America Holding Company,
Alleghany Asset Management, Inc. and Alleghany, filed as
Exhibit 2.1 to Alleghany's Current Report on Form 8-K dated
October 23, 2000, is incorporated herein by reference.
10.26(b) Amendment to the Agreement and Plan of Merger dated as of
January 17, 2001, by and among ABN AMRO North America
Holding Company, Alleghany Asset Management, Inc. and
Alleghany, filed as Exhibit 2.2 to Alleghany's Current
Report on Form 8-K dated February 14, 2001, is incorporated
herein by reference.
10.26(c) Closing Agreement dated as of February 1, 2001, by and among
ABN AMRO North America Holding Company, Alleghany Asset
Management, Inc. and Alleghany, filed as Exhibit 2.3 to
Alleghany's Current Report on Form 8-K dated February 14,
2001, is incorporated herein by reference.
10.27(a) Asset Purchase Agreement dated as of April 3, 2000 by and
among Heads & Threads International LLC, Acktion Corporation
and Reynolds Fasteners, Inc. (the "Heads & Threads Asset
Purchase Agreement"), filed as Exhibit 10.1 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, is incorporated herein by reference.
10.27(b) List of Contents of Schedules to the Heads & Threads Asset
Purchase Agreement, filed as Exhibit 10.2 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, is incorporated herein by reference.
10.28(a) Credit Agreement dated as of April 3, 2000 among Heads &
Threads International LLC, various lending institutions, and
American National Bank and Trust Company of Chicago, as
Agent (the "Heads & Threads Credit Agreement"), filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000, is incorporated herein
by reference.
10.28(b) List of Contents of Schedules and Exhibits to the Heads &
Threads Credit Agreement, filed as Exhibit 10.4 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, is incorporated herein by reference.
10.28(c) First Amendment dated as of April 28, 2000 to the Heads &
Threads Credit Agreement.
10.28(d) Second Amendment dated as of November 27, 2000 to the Heads
& Threads Credit Agreement.
13 Pages 3 through 4, 6 through 7, 11 through 13, 15 through
17, 19 through 21, 24, and 26 through 46 of the Annual
Report to Stockholders of Alleghany for the year 2000.
28
30
EXHIBIT
NUMBER DESCRIPTION
------- -----------
21 List of subsidiaries of Alleghany.
23 Consent of KPMG LLP, independent certified public
accountants, to the incorporation by reference of their
reports relating to the financial statements and related
schedules of Alleghany and subsidiaries in Alleghany's
Registration Statements on Form S-8 (Registration No.
333-37237), Form S-8 (Registration No. 333-57133) Form S-8
(Registration No. 333-76159), Form S-3 (Registration No.
33-55707), Form S-3 (Registration No. 33-62477), Form S-3
(Registration No. 333-09881), and Form S-3 (Registration No.
333-13971).
27 Financial Data Schedule.
- ---------------
* Compensatory plan or arrangement.
(b) Reports on Form 8-K.
Alleghany filed a report on Form 8-K dated October 23, 2000 to report in
Item 5 that on October 18, 2000, Alleghany entered into an Agreement and Plan of
Merger with ABN AMRO North America Holding Company and Alleghany Asset
Management, Inc., pursuant to which Alleghany Asset Management would become a
wholly owned subsidiary of ABN AMRO North America Holding Company.
29
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ALLEGHANY CORPORATION
(Registrant)
Date: March 20, 2001 By /s/ JOHN J. BURNS, JR.
----------------------------------------------------
John J. Burns, Jr.
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 20, 2001 By /s/ REX D. ADAMS
----------------------------------------------------
Rex D. Adams
Director
Date: March 20, 2001 By /s/ JOHN J. BURNS, JR.
----------------------------------------------------
John J. Burns, Jr.
President and Director
(principal executive officer)
Date: March 20, 2001 By /s/ DAN R. CARMICHAEL
----------------------------------------------------
Dan R. Carmichael
Director
Date: March 20, 2001 By /s/ DAVID B. CUMING
----------------------------------------------------
David B. Cuming
Senior Vice President
(principal financial officer)
Date: March 20, 2001 By /s/ THOMAS S. JOHNSON
----------------------------------------------------
Thomas S. Johnson
Director
Date: March 20, 2001 By /s/ ALLAN P. KIRBY, JR.
----------------------------------------------------
Allan P. Kirby, Jr.
Director
Date: March 20, 2001 By /s/ F.M. KIRBY
----------------------------------------------------
F.M. Kirby
Chairman of the Board and Director
30
32
Date: March 20, 2001 By /s/ WILLIAM K. LAVIN
-------------------------------------------------
William K. Lavin
Director
Date: March 20, 2001 By /s/ ROGER NOALL
----------------------------------------------------
Roger Noall
Director
Date: March 20, 2001 By /s/ PETER R. SISMONDO
----------------------------------------------------
Peter R. Sismondo
Vice President, Controller, Treasurer and
Assistant Secretary
(principal accounting officer)
Date: March 20, 2001 By /s/ JAMES F. WILL
----------------------------------------------------
James F. Will
Director
31
33
ALLEGHANY CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
I SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED
PARTIES..................................................... 33
II CONDENSED FINANCIAL INFORMATION OF REGISTRANT............... 34
III SUPPLEMENTARY INSURANCE INFORMATION......................... 38
IV REINSURANCE................................................. 39
VI SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY
INSURANCE OPERATIONS........................................ 40
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT......... 41
SCHEDULES...................................................
All other schedules are omitted since they are not required, are not
applicable, or the required information is set forth in the financial statements
or notes thereto.
32
34
SCHEDULE I
ALLEGHANY CORPORATION AND SUBSIDIARIES
SUMMARY OF INVESTMENTS -- OTHER THAN
INVESTMENTS IN RELATED PARTIES
DECEMBER 31, 2000
(IN THOUSANDS)
AMOUNT AT
WHICH SHOWN
IN THE
FAIR BALANCE
TYPE OF INVESTMENT COST VALUE SHEET
- ------------------ -------- -------- -----------
Fixed maturities:
Bonds:
United States Government and government agencies and
authorities States, municipalities and political
subdivisions....................................... $ 0 $ 0 $ 0
Foreign governments.................................. 0 0 0
Public utilities..................................... 0 0 0
All other corporate bonds............................ 8,882 8,882 8,882
Redeemable preferred stock.............................. 0 0 0
-------- -------- --------
Fixed maturities................................... $ 8,882 $ 8,882 $ 8,882
-------- -------- --------
Equity securities:
Common stocks:
Banks, trust, and insurance companies................ $ 0 $ 0 $ 0
Industrial, miscellaneous, and all other............. 222,101 535,377 535,377
-------- -------- --------
Equity securities.................................. 222,101 $535,377 535,377
-------- ======== --------
Other long-term investments............................... 0 0
Short-term investments.................................... 342,341 342,341
-------- --------
Total investments............................... $573,324 $886,600
======== ========
33
35
SCHEDULE II
ALLEGHANY CORPORATION
CONDENSED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
(IN THOUSANDS)
2000 1999
---------- ----------
ASSETS
Equity securities (cost: 2000 $217,220; 1999 $131,398).... $ 530,391 $ 258,871
Short-term investments.................................... 337,104 120,514
Cash...................................................... 1,422 (110)
Accounts and other receivables, less allowances........... 5,649 5,782
Property and equipment -- at cost, less accumulated
depreciation........................................... 117 141
Other assets.............................................. 8,859 8,571
Net assets from discontinued operations................... 61,785 42,599
Investment in consolidated subsidiaries................... 404,530 849,934
---------- ----------
$1,349,857 $1,286,302
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Other liabilities......................................... $ 46,899 $ 56,767
Net deferred tax liability................................ 106,686 90,440
Long-term debt............................................ 31,198 31,198
---------- ----------
Total liabilities................................. 184,783 178,405
Commitments and contingent liabilities......................
Common stockholders' equity................................. 1,165,074 1,107,897
---------- ----------
$1,349,857 $1,286,302
========== ==========
See accompanying Notes to Condensed Financial Statements.
34
36
SCHEDULE II
ALLEGHANY CORPORATION
CONDENSED STATEMENTS OF EARNINGS
THREE YEARS ENDED DECEMBER 31, 2000
(IN THOUSANDS)
2000 1999 1998
--------- -------- -------
REVENUES:
Interest, dividend and other income...................... $ 32,077 $ 9,530 $73,477
Net gain on sale of subsidiary........................... 136,734 0 0
Net gain on investment transactions...................... 10,045 85,174 318
--------- -------- -------
Total revenues................................... 178,856 94,704 73,795
--------- -------- -------
Costs and Expenses:
Interest expense......................................... 3,002 4,397 6,597
General and administrative............................... 23,220 17,632 91,934
--------- -------- -------
Total costs and expenses......................... 26,222 22,029 98,531
--------- -------- -------
Operating gain (loss)............................ 152,634 72,675 (24,736)
Equity in (loss) earnings of consolidated subsidiaries..... (164,778) 34,995 80,019
--------- -------- -------
Earnings from continuing operations, before income
taxes................................................. (12,144) 107,670 55,283
Income taxes............................................... (46,119) 39,747 13,500
--------- -------- -------
Earnings from continuing operations...................... 33,975 67,923 41,783
Earnings from discontinued operations, net of tax........ 34,882 32,182 54,323
--------- -------- -------
Net earnings............................................. $ 68,857 $100,105 $96,106
========= ======== =======
See accompanying Notes to Condensed Financial Statements.
35
37
SCHEDULE II
ALLEGHANY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 2000
(IN THOUSANDS)
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Earnings from continuing operations................... $ 33,975 $ 67,923 $ 41,783
Adjustments to reconcile earnings from continuing
operations to cash provided by (used in) continuing
operations:
Depreciation and amortization...................... 44 23 894
Net (gain) loss on investment transactions......... (146,780) (85,174) (318)
Tax benefit on stock options exercised............. 3,127 2,241 2,473
Decrease (increase) in accounts and other
receivables, less allowances..................... 133 9,629 (7,432)
Decrease (increase) in other assets................ (288) 1,387 (15,327)
Increase (decrease) in other liabilities........... (32,784) 15,412 (8,562)
Other operating, net............................... 0 (6) 471
Equity in undistributed net earnings of
consolidated subsidiaries........................ 107,720 (28,434) (57,474)
--------- --------- ---------
Net adjustments.................................... (68,828) (84,922) (85,275)
--------- --------- ---------
Cash used in operating activities.................. (34,853) (16,999) (43,492)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments............................... (45,587) (6,777) (195)
Sales of investments.................................. 43,903 168,132 7,015
Capital contributions to consolidated subsidiaries.... (70,587) (11,050) (263)
Cash dividends from consolidated subsidiaries......... 5,970 5,202 53,452
Purchase of property and equipment.................... (20) 10 (2,613)
Disposition of property and equipment................. 0 0 0
Net change in short-term investments.................. (216,590) (120,507) 3,942
Proceeds from the sale of Underwriters Re Group, net
of cash disposed................................... 385,744 0 0
--------- --------- ---------
Net cash provided by (used in) investing
activities....................................... 102,833 35,010 61,338
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt.................. 0 (56,300) (100,800)
Proceeds of long-term debt............................ 0 38,100 125,359
Cash provided by discontinued operations.............. 16,255 15,000 12,278
Net cash transferred to subsidiary.................... 0 (358) 0
Treasury stock acquisitions........................... (86,245) (22,292) (72,135)
Other, net............................................ 3,542 6,730 18,451
--------- --------- ---------
Net cash (used in) provided by financing
activities....................................... (66,448) (19,120) (16,847)
--------- --------- ---------
Net (decrease) increase in cash.................... 1,532 (1,109) 999
CASH AT BEGINNING OF YEAR............................... (110) 999 0
--------- --------- ---------
CASH AT END OF YEAR..................................... $ 1,422 ($ 110) $ 999
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest................ $ 2,072 $ 5,374 $ 5,147
Cash paid during the year for income taxes............ $ 59,073 $ 16,455 $ 56,112
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Book value of spin-off of Chicago Title and Trust
Company............................................ $ 0 $ 0 $ 413,767
See accompanying Notes to Condensed Financial Statements.
36
38
SCHEDULE II
ALLEGHANY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. Investment in Consolidated Subsidiaries. Reference is made to Note 1 of
the Notes to Consolidated Financial Statements incorporated herein by reference.
2. Long-Term Debt. Reference is made to Note 6 of the Notes to
Consolidated Financial Statements incorporated herein by reference for
information regarding the significant provisions of the revolving credit loan
agreement of Alleghany. Included in long-term debt in the accompanying condensed
balance sheets is $19,123 and $12,075 in 2000 and 1999 of intercompany notes
payable to Alleghany Funding and World Minerals, respectively.
3. Income Taxes. Reference is made to Note 7 of the Notes to Consolidated
Financial Statements incorporated herein by reference.
4. Commitments and Contingencies. Reference is made to Note 13 of the
Notes to Consolidated Financial Statements incorporated herein by reference.
5. Stockholders' Equity. Reference is made to Note 8 of the Notes to
Consolidated Financial Statements incorporated herein by reference with respect
to stockholders' equity and surplus available for dividend payments to Alleghany
from its subsidiaries.
37
39
SCHEDULE III
ALLEGHANY CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(IN THOUSANDS)
AT DECEMBER 31 FOR THE YEAR ENDED DECEMBER 31
---------------------------------------------- ----------------------------------
FUTURE
POLICY OTHER BENEFITS,
BENEFITS, POLICY CLAIMS,
DEFERRED LOSSES, CLAIMS LOSSES
POLICY CLAIMS AND NET AND
ACQUISITION AND LOSS UNEARNED BENEFITS PREMIUM INVESTMENT SETTLEMENT
YEAR SEGMENT COST EXPENSES PREMIUMS PAYABLE REVENUE INCOME EXPENSES
- ---- ------------ ----------- ---------- -------- -------- -------- ---------- ----------
2000 Property and
casualty
reinsurance $48,800 $ 855,905 $217,754 $0 $365,568 $46,506 $392,006
======= ========== ======== == ======== ======= ========
1999 Property and
casualty
reinsurance $97,593 $1,973,924 $419,608 $0 $719,846 $95,194 $548,459
======= ========== ======== == ======== ======= ========
1998 Property and
casualty
reinsurance $93,397 $1,554,818 $389,603 $0 $420,809 $80,404 $288,259
======= ========== ======== == ======== ======= ========
FOR THE YEAR ENDED DECEMBER 31
-----------------------------------
AMORTIZATION
OF DEFERRED
POLICY OTHER
ACQUISITION OPERATING PREMIUMS
YEAR COSTS EXPENSES WRITTEN
- ---- ------------ --------- --------
2000
$109,126 $85,312 $364,140
======== ======= ========
1999
$172,527 $86,663 $725,436
======== ======= ========
1998
$113,170 $54,805 $438,162
======== ======= ========
38
40
SCHEDULE IV
ALLEGHANY CORPORATION AND SUBSIDIARIES
REINSURANCE
THREE YEARS ENDED DECEMBER 31, 2000
(IN THOUSANDS)
PERCENTAGE
CEDED TO ASSUMED OF AMOUNT
GROSS OTHER FROM OTHER NET ASSUMED
YEAR SEGMENT AMOUNT COMPANIES COMPANIES AMOUNT TO NET
- ---- ------------ -------- --------- ---------- -------- ----------
2000 Property and
casualty
reinsurance
premiums $287,566 $267,592 $345,594 $365,568 95%
======== ======== ======== ======== ==
1999 Property and
casualty
reinsurance
premiums $312,839 $182,683 $589,690 $719,846 82%
======== ======== ======== ======== ==
1998 Property and
casualty
reinsurance
premiums $144,812 $110,377 $386,374 $420,809 92%
======== ======== ======== ======== ==
39
41
SCHEDULE VI
ALLEGHANY CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION CONCERNING PROPERTY-CASUALTY INSURANCE OPERATIONS
(IN THOUSANDS)
DISCOUNT,
IF ANY,
RESERVES DEDUCTED CLAIMS AND CLAIM
FOR IN RESERVES ADJUSTMENT EXPENSES
UNPAID FOR UNPAID INCURRED RELATED TO
DEFERRED CLAIMS CLAIMS -------------------
AFFILIATION POLICY AND CLAIM AND CLAIM NET (1) (2)
WITH ACQUISITION ADJUSTMENT ADJUSTMENT UNEARNED EARNED INVESTMENT CURRENT PRIOR
REGISTRANT COST EXPENSES EXPENSES PREMIUMS PREMIUMS INCOME YEAR YEAR
----------- ----------- ---------- ----------- -------- -------- ---------- -------- --------
2000
Consolidated
property-casualty
entities................ $48,800 $ 855,905 $0 $217,754 $365,568 $46,506 $314,722 $ 77,284
------- ---------- -- -------- -------- ------- -------- --------
1999
Consolidated
property-casualty
entities................ $97,593 $1,973,924 $0 $419,608 $719,846 $95,194 $516,704 $ 31,755
------- ---------- -- -------- -------- ------- -------- --------
1998
Consolidated
property-casualty
entities................ $93,397 $1,554,818 $0 $389,603 $420,809 $80,404 $290,513 ($ 2,254)
------- ---------- -- -------- -------- ------- -------- --------
AMORTIZATION
OF DEFERRED PAID CLAIMS
AFFILIATION POLICY AND CLAIM
WITH ACQUISITION ADJUSTMENT PREMIUMS
REGISTRANT COSTS EXPENSES WRITTEN
----------- ------------ ----------- --------
2000
Consolidated
property-casualty
entities................ $109,126 $163,939 $364,140
-------- -------- --------
1999
Consolidated
property-casualty
entities................ $172,527 $395,035 $725,436
-------- -------- --------
1998
Consolidated
property-casualty
entities................ $113,170 $192,031 $438,162
-------- -------- --------
40
42
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Alleghany Corporation:
Under date of March 8, 2001, we reported on the consolidated balance sheets
of Alleghany Corporation and subsidiaries as of December 31, 2000 and 1999 and
the related consolidated statements of earnings, changes in common stockholders'
equity, and cash flows for each of the years in the three-year period ended
December 31, 2000 as contained in the 2000 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the Annual Report on Form 10-K for the year 2000. In connection
with our audits of the aforementioned consolidated financial statements, we also
have audited the related financial statements schedules as listed in the
accompanying index. These financial statements schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements schedules based on our audits.
In our opinion, such financial statements schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
KPMG LLP
New York, New York
March 8, 2001
41
43
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.01 Restated Certificate of Incorporation of Alleghany, as
amended by Amendment accepted and received for filing by the
Secretary of State of the State of Delaware on June 23,
1988, filed as Exhibit 20 to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1988, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
3.02 By-Laws of Alleghany as amended April 18, 1995, filed as
Exhibit 3.1 to Alleghany's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, is incorporated herein by
reference.
*10.01 Description of Alleghany Management Incentive Plan, filed as
Exhibit 10.01 to Alleghany's Annual Report on Form 10-K for
the year ended December 31, 1993, is incorporated herein by
reference.
*10.02 Alleghany Corporation Deferred Compensation Plan, as amended
and restated as of December 15, 1992, filed as Exhibit 10.03
to Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1992, is incorporated herein by reference.
*10.03 Alleghany 1993 Long-Term Incentive Plan, as amended and
restated effective as of January 1, 1994, filed as Exhibit
10.06(b) to Alleghany's Annual Report on Form 10-K for the
year ended December 31, 1994, is incorporated herein by
reference.
*10.04 Alleghany Supplemental Death Benefit Plan dated as of May
15, 1985 and effective as of January 1, 1985, filed as
Exhibit 10.08 to Old Alleghany's Annual Report on Form 10-K
for the year ended December 31, 1985, is incorporated herein
by reference (Securities and Exchange Commission File No.
1-9371).
*10.05(a) Trust Agreement Amendment made as of July 8, 1994 between
Alleghany and Chemical Bank, filed as Exhibit 10.08(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference.
*10.05(b) Alleghany Retirement Plan, as amended and restated on March
14, 1995, filed as Exhibit 10.08(c) to Alleghany's Annual
Report on Form 10-K for the year ended December 31, 1994, is
incorporated herein by reference.
*10.05(c) Amendments to Alleghany Retirement Plan, effective as of
January 1, 1996, filed as Exhibit 10.1 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is incorporated herein by reference.
*10.05(d) Amendments to Alleghany Retirement Plan, effective as of
January 1, 1998, filed as Exhibit 10.05(d) to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1997, are incorporated herein by reference.
*10.06 Alleghany Retirement COLA Plan dated and effective as of
January 1, 1992, as adopted on March 17, 1992, filed as
Exhibit 10.7 to Alleghany's Annual Report on Form 10-K for
the year ended December 31, 1991, are incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
*10.07 Description of Alleghany Group Long Term Disability Plan
effective as of July 1, 1995, filed as Exhibit 10.10 to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1995, is incorporated herein by reference.
*10.08(a) Alleghany Amended and Restated Directors' Stock Option Plan
effective as of April 20, 1993, filed as Exhibit 10.1 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, is incorporated herein by reference.
*10.08(b) Alleghany 2000 Directors' Stock Option Plan effective April
28, 2000, filed as Exhibit A to Alleghany's Proxy Statement,
filed in connection with its Annual Meeting of Stockholders
held on April 28, 2000, is incorporated herein by reference.
42
44
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*10.09 Alleghany Directors' Equity Compensation Plan, effective as
of January 16, 1995, filed as Exhibit 10.11 to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1994, is incorporated herein by reference.
*10.10 Alleghany Non-Employee Directors' Retirement Plan effective
July 1, 1990, filed as Exhibit 10.1 to Alleghany's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1990, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
10.11(a) 364-Day Revolving Credit Agreement dated as of November 22,
2000, by and between Alleghany, the banks which are
signatories thereto, and U.S. Bank National Association, as
agent for the banks ("The 364-Day Revolving Credit
Agreement").
10.11(b) List of Contents of Exhibits and Schedules to the 364-Day
Revolving Credit Agreement. Alleghany agrees to furnish
supplementally a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.
10.11(c) Five-Year Revolving Credit Agreement dated as of November
22, 2000, by and between Alleghany, the banks which are
signatories thereto, and U.S. Bank National Association, as
agent for the banks ("The Five-Year Revolving Credit
Agreement").
10.11(d) List of Contents of Exhibits and Schedules to the Five-Year
Revolving Credit Agreement. Alleghany agrees to furnish
supplementally a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request.
10.12(a) Distribution Agreement dated as of June 16, 1998 by and
between Alleghany Corporation and Chicago Title Corporation
(the "Spin-Off Distribution Agreement"), filed as Exhibit
2.1(a) to Chicago Title Corporation's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998, is
incorporated herein by reference (Securities and Exchange
Commission File No. 001-13995).
10.12(b) List of Contents of Exhibits to the Spin-Off Distribution
Agreement, filed as Exhibit 2.1(b) to Chicago Title
Corporation's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, is incorporated herein by reference
(Securities and Exchange Commission File No. 001-13995).
10.12(c) Tax Sharing Agreement dated as of June 17, 1998 by and among
Alleghany Corporation and Chicago Title Corporation, filed
as Exhibit 10.2 to Chicago Title Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998, is
incorporated herein by reference (Securities and Exchange
Commission File No. 001-13995).
10.13 Distribution Agreement dated as of May 1, 1987 between
Alleghany and MSL Industries, Inc., filed as Exhibit 10.21
to Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1987, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.14 Amendment to Distribution Agreement dated June 29, 1987,
effective as of May 1, 1987, between Alleghany and MSL
Industries, Inc., filed as Exhibit 10.22 to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1987, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.15(a) Note Purchase Agreement dated as of December 11, 1998 by and
among Alleghany Properties, Inc., Alleghany and United of
Omaha Life Insurance Company (the "Alleghany Properties 1998
Note Purchase Agreement"), filed as Exhibit 10.18(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1998, is incorporated herein by reference.
Agreements dated as of December 11, 1998 among Alleghany
Properties, Inc., Alleghany and each of Companion Life
Insurance Company, Hartford Life Insurance Company, The
Lincoln National Life Insurance Company, and First
Penn-Pacific Life Insurance Company are omitted pursuant to
Instruction 2 of Item 601 of Regulation S-K.
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EXHIBIT
NUMBER DESCRIPTION
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10.15(b) List of Contents of Annexes and Exhibits to the Alleghany
Properties 1998 Note Purchase Agreement, filed as Exhibit
10.18(b) to Alleghany's Annual Report on Form 10-K for the
year ended December 31, 1998, is incorporated herein by
reference.
10.16(a) Installment Sales Agreement dated December 8, 1986 by and
among Alleghany, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Merrill Lynch & Co., Inc., filed as Exhibit
10.10 to Alleghany's Annual Report on Form 10-K for the year
ended December 31, 1986, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.16(b) Intercreditor and Collateral Agency Agreement dated as of
October 20, 1997 among The Chase Manhattan Bank, Barclays
Bank PLC and Alleghany Funding Corporation, filed as Exhibit
10.1 to Alleghany's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997, is incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
10.16(c) Master Agreement dated as of October 20, 1997 between
Barclays Bank PLC and Alleghany Funding Corporation, and
related Amended Confirmation dated October 24, 1997 between
Barclays Bank PLC and Alleghany Funding Corporation, filed
as Exhibit 10.2 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, are incorporated
herein by reference (Securities and Exchange Commission File
No. 1-9371).
10.16(d) Indenture dated as of October 20, 1997 between Alleghany
Funding Corporation and The Chase Manhattan Bank, filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997, is incorporated
herein by reference (Securities and Exchange Commission File
No. 1-9371).
10.17(a) Stock Purchase Agreement dated as of July 1, 1991 among
Celite Holdings Corporation, Celite Corporation and Manville
International, B.V. (the "Celite Stock Purchase Agreement"),
filed as Exhibit 10.2(a) to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
10.17(b) List of Contents of Exhibits and Schedules to the Celite
Stock Purchase Agreement, filed as Exhibit 10.2(b) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.18(a) Joint Venture Stock Purchase Agreement dated as of July 1,
1991 among Celite Holdings Corporation, Celite Corporation
and Manville Corporation (the "Celite Joint Venture Stock
Purchase Agreement"), filed as Exhibit 10.3(a) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.18(b) List of Contents of Exhibits and Schedules to the Celite
Joint Venture Stock Purchase Agreement, filed as Exhibit
10.3(b) to Alleghany's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1991, is incorporated herein by
reference (Securities and Exchange Commission File No.
1-9371).
10.19(a) Asset Purchase Agreement dated as of July 1, 1991 among
Celite Holdings Corporation, Celite Corporation and Manville
Sales Corporation (the "Celite Asset Purchase Agreement"),
filed as Exhibit 10.4(a) to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991, is
incorporated herein by reference (Securities and Exchange
Commission File No. 1-9371).
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46
EXHIBIT
NUMBER DESCRIPTION
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10.19(b) List of Contents of Exhibits and Schedules to the Celite
Asset Purchase Agreement, filed as Exhibit 10.4(b) to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.19(c) Amendment No. 1 dated as of July 31, 1991 to the Celite
Asset Purchase Agreement, filed as Exhibit 10.32(c) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by reference
(Securities and Exchange Commission File No. 1-9371).
10.20(a) Acquisition Related Agreement dated as of July 1, 1991, by
and between Celite Holdings Corporation, Celite Corporation
and Manville Corporation (the "Celite Acquisition Related
Agreement"), filed as Exhibit 10.5(a) to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.20(b) List of Contents of Exhibits to the Celite Acquisition
Related Agreement, filed as Exhibit 10.5(b) to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.20(c) Amendment dated as of July 31, 1991 to Celite Acquisition
Related Agreement, filed as Exhibit 10.33(c) to Alleghany's
Annual Report on Form 10-K for the year ended December 31,
1991, is incorporated herein by reference (Securities and
Exchange Commission File No. 1-9371).
10.21(a) Credit Agreement dated as of March 17, 1999 among Mineral
Holdings Inc., World Minerals Inc., the Banks named therein
and The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent (the "World Minerals Credit Agreement"),
filed as Exhibit 10.1 to Alleghany's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, is
incorporated herein by reference.
10.21(b) List of Contents of Exhibits, Annexes and Schedules to the
World Minerals Credit Agreement, filed as Exhibit 10.2 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, is incorporated herein by reference.
10.21(c) Subordination Agreement dated as of March 17, 1999, among
Alleghany Corporation and The Chase Manhattan Bank, filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1999, is incorporated herein
by reference.
10.22(a) Stock Purchase Agreement dated as of December 30, 1999 by
and between Alleghany and Swiss Re America Holding
Corporation, filed as Exhibit 99.1 to Alleghany's Current
Report on Form 8-K dated December 30, 1999, is incorporated
herein by reference.
10.22(b) Closing Agreement, dated May 10, 2000, by and between Swiss
Re America Holding Corporation and Alleghany, filed as
Exhibit 99.2 to Alleghany's Current Report on Form 8-K dated
May 25, 2000, is incorporated herein by reference.
10.23 Agreement, effective as of December 20, 2000, by and among
Alleghany, Underwriters Reinsurance Company and London Life
and Casualty Reinsurance Corporation.
10.24(a) Agreement and Plan of Amalgamation dated as of July 30, 1998
by and among Underwriters Reinsurance Company, Underwriters
Acquisition Company Ltd. and Venton Holdings Ltd. (the
"Amalgamation Agreement"), filed as Exhibit 10.28(a) to
Alleghany's Annual Report on Form 10-K for the year ended
December 31, 1998, is incorporated herein by reference.
10.24(b) List of Contents of Exhibits to the Amalgamation Agreement,
filed as Exhibit 10.28(b) to Alleghany's Annual Report on
Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
45
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EXHIBIT
NUMBER DESCRIPTION
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10.24(c) Amendment No. 1 dated as of September 24, 1998 to the
Amalgamation Agreement (the "Amalgamation Amendment No. 1"),
filed as Exhibit 10.28(c) to Alleghany's Annual Report on
Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
10.24(d) List of Contents of Exhibits to the Amalgamation Amendment
No. 1, filed as Exhibit 10.28(d) to Alleghany's Annual
Report on Form 10-K for the year ended December 31, 1998, is
incorporated herein by reference.
10.25(a) Credit Agreement dated as of August 14, 2000, by and among
Alleghany Underwriting Ltd, Alleghany Underwriting Capital
Ltd, Talbot Underwriting Limited, and Alleghany Underwriting
Capital (Bermuda) Ltd, as Borrowers and Account Parties;
Alleghany, as Guarantor; the Banks parties thereto from time
to time; Mellon Bank, N.A., as Issuing Bank, as
Administrative Agent and as Arranger; National Westminster
Bank plc, as Syndication Agent and ING Bank, N.V., as
Managing Agent (the "Alleghany Underwriting Credit
Agreement"), filed as Exhibit 10.1 to Alleghany's Quarterly
Report on Form 10-Q for the quarter ended September 30,
2000, is incorporated herein by reference.
10.25(b) List of Contents of Exhibits and Schedules to the Alleghany
Underwriting Credit Agreement, filed as Exhibit 10.2 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2000, is incorporated herein by
reference.
10.25(c) First Amendment to Credit Agreement dated as of February 1,
2001, by and among Alleghany Underwriting Ltd, Alleghany
Underwriting Capital Ltd, Talbot Underwriting Limited,
Alleghany Underwriting Capital (Bermuda) Ltd, Alleghany,
Alleghany Insurance Holdings LLC, the Banks and Agents which
have signed the signature pages thereto, and Mellon Bank,
N.A., as Bank, as Issuing Bank and as Administrative Agent
for the Banks and the Issuing Bank.
10.26(a) Agreement and Plan of Merger, dated as of October 18, 2000,
by and among ABN AMRO North America Holding Company,
Alleghany Asset Management, Inc. and Alleghany, filed as
Exhibit 2.1 to Alleghany's Current Report on Form 8-K dated
October 23, 2000, is incorporated herein by reference.
10.26(b) Amendment to the Agreement and Plan of Merger dated as of
January 17, 2001, by and among ABN AMRO North America
Holding Company, Alleghany Asset Management, Inc. and
Alleghany, filed as Exhibit 2.2 to Alleghany's Current
Report on Form 8-K dated February 14, 2001, is incorporated
herein by reference.
10.26(c) Closing Agreement dated as of February 1, 2001, by and among
ABN AMRO North America Holding Company, Alleghany Asset
Management, Inc. and Alleghany, filed as Exhibit 2.3 to
Alleghany's Current Report on Form 8-K dated February 14,
2001, is incorporated herein by reference.
10.27(a) Asset Purchase Agreement dated as of April 3, 2000 by and
among Heads & Threads International LLC, Acktion Corporation
and Reynolds Fasteners, Inc. (the "Heads & Threads Asset
Purchase Agreement"), filed as Exhibit 10.1 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, is incorporated herein by reference.
10.27(b) List of Contents of Schedules to the Heads & Threads Asset
Purchase Agreement, filed as Exhibit 10.2 to Alleghany's
Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, is incorporated herein by reference.
10.28(a) Credit Agreement dated as of April 3, 2000 among Heads &
Threads International LLC, various lending institutions, and
American National Bank and Trust Company of Chicago, as
Agent (the "Heads & Threads Credit Agreement"), filed as
Exhibit 10.3 to Alleghany's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2000, is incorporated herein
by reference.
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48
EXHIBIT
NUMBER DESCRIPTION
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10.28(b) List of Contents of Schedules and Exhibits to the Heads &
Threads Credit Agreement, filed as Exhibit 10.4 to
Alleghany's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000, is incorporated herein by reference.
10.28(c) First Amendment dated as of April 28, 2000 to the Heads &
Threads Credit Agreement.
10.28(d) Second Amendment dated as of November 27, 2000 to the Heads
& Threads Credit Agreement.
13 Pages 3 through 4, 6 through 7, 11 through 13, 15 through
17, 19 through 21, 24, and 26 through 46 of the Annual
Report to Stockholders of Alleghany for the year 2000.
21 List of subsidiaries of Alleghany.
23 Consent of KPMG LLP, independent certified public
accountants, to the incorporation by reference of their
reports relating to the financial statements and related
schedules of Alleghany and subsidiaries in Alleghany's
Registration Statements on Form S-8 (Registration No.
333-37237), Form S-8 (Registration No. 333-57133) Form S-8
(Registration No. 333-76159), Form S-3 (Registration No.
33-55707), Form S-3 (Registration No. 33-62477), Form S-3
(Registration No. 333-09881), and Form S-3 (Registration No.
333-13971).
27 Financial Data Schedule.
- ---------------
* Compensatory plan or arrangement.
47