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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 2003
COMMISSION FILE NUMBER 1-9371
ALLEGHANY CORPORATION
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EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
DELAWARE
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STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION
51-0283071
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INTERNAL REVENUE SERVICE EMPLOYER IDENTIFICATION NUMBER
375 PARK AVENUE, NEW YORK NY 10152
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE
212-752-1356
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
NOT APPLICABLE
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT
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
YES [X] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASS OF
COMMON STOCK, AS OF THE CLOSE OF THE PERIOD COVERED BY THIS REPORT:
7,423,254 SHARES AS OF MARCH 31, 2003
ITEM 1. FINANCIAL STATEMENTS
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
(dollars in thousands, except share and per share amounts)
(unaudited)
2003 2002
----------- -----------
REVENUES
Net fastener sales $ 27,953 $ 27,932
Interest, dividend and other income 11,980 8,987
Net insurance premiums earned 33,415 29,023
Net mineral and filtration sales 62,048 57,463
Net gain on investment transactions 3,264 34,593
----------- -----------
Total revenues 138,660 157,998
----------- -----------
COSTS AND EXPENSES
Commissions and brokerage expenses 7,055 5,493
Salaries, administrative and other operating expenses 23,913 21,586
Loss and loss adjustment expenses 19,853 18,887
Cost of goods sold-fasteners 20,759 21,085
Cost of mineral and filtration sales 47,920 44,259
Interest expense 1,278 1,673
Corporate administration 6,300 5,763
----------- -----------
Total costs and expenses 127,078 118,746
----------- -----------
Earnings before income taxes 11,582 39,252
Income taxes 3,858 13,443
----------- -----------
Net earnings $ 7,724 $ 25,809
=========== ===========
Basic earnings per share of common stock ** $ 1.04 $ 3.44
=========== ===========
Diluted earnings per share of common stock ** $ 1.03 $ 3.42
=========== ===========
Dividends per share of common stock * *
=========== ===========
Average number of outstanding shares of common stock ** 7,413,145 7,497,240
=========== ===========
* In March 2003, Alleghany declared a dividend consisting of one share of
Alleghany common stock for every fifty shares outstanding.
** Adjusted to reflect the common stock dividend declared in March 2003.
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(dollars in thousands, except share and per share amounts)
(Unaudited)
March 31, December 31,
2003 2002
----------- -----------
ASSETS 3/31/2003 12/31/2002
Available for sale securities: --------- ----------
Equity securities (cost $465,267 $239,669) $ 637,391 $ 486,353
Debt securities (cost $369,033 $570,973) 430,008 580,606
Short-term investments 252,012 237,698
----------- -----------
1,319,411 1,304,657
Cash 26,647 27,423
Notes receivable 92,305 92,358
Accounts receivable 94,914 85,710
Reinsurance receivable 145,237 147,479
Deferred acquisition costs 22,250 22,547
Property and equipment - at cost, less accumulated depreciation and amortization 171,887 173,539
Inventory 84,067 81,978
Goodwill and other intangibles, net of amortization 105,997 112,858
Other assets 83,535 85,833
----------- -----------
$ 2,146,250 $ 2,134,382
=========== ===========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current taxes payable $ 26,052 $ 28,372
Losses and loss adjustment expenses 259,166 258,471
Other liabilities 147,329 147,411
Unearned premiums 63,569 64,115
Subsidiaries' debt 168,786 152,507
Net deferred tax liability 101,709 104,164
----------- -----------
Total liabilities 766,611 755,040
Common stockholders' equity 1,379,639 1,379,342
----------- -----------
$ 2,146,250 $ 2,134,382
=========== ===========
Shares of common stock outstanding 7,423,254 7,409,282 *
=========== ===========
Common stockholders' equity per share $ 185.85 $186.16 *
=========== ===========
* Adjusted to reflect the common stock dividend declared in March 2003.
ALLEGHANY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
(dollars in thousands)
(unaudited)
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,724 $ 25,808
Adjustments to reconcile net earnings to cash provided by (used in) operations:
Depreciation and amortization 4,923 4,629
Net gain on investment transactions (3,264) (34,593)
Tax benefit on stock options exercised 48 1,091
Other charges, net 2,826 17,885
Increase in account receivable (9,204) (5,613)
Decrease (increase) in deferred acquisition costs 297 (1,799)
Decrease (increase) in other assets including goodwill 7,070 (9,533)
Decrease in other liabilities and income taxes payable (2,402) (43,185)
(Decrease) increase in unearned premium reserve (546) 2,933
Increase in losses and loss adjustment expenses 695 6,173
Decrease (increase) in reinsurance receivable 2,242 (1,009)
---------- ----------
Net adjustments 2,685 (63,021)
---------- ----------
Cash provided by (used in) operations 10,409 (37,213)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (210,367) (4,563)
Sales of investments 192,549 70,401
Purchases of property and equipment (3,047) (2,598)
Net change in short-term investments (14,314) 185,741
Other, net 5,683 10,055
Acquisition of insurance companies, net of cash acquired 0 (221,056)
---------- ----------
Net cash (used in) provided by investing activities (29,496) 37,980
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (33,026) (42,429)
Proceeds of debt 49,305 40,294
Treasury stock acquisitions 0 (79)
Other, net 2,032 4,648
---------- ----------
Net cash provided by financing activities 18,311 2,434
---------- ----------
Net (decrease) increase in cash (776) 3,201
Cash at beginning of period 27,423 15,717
---------- ----------
Cash at end of period $ 26,647 $ 18,918
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 774 $ 892
Income taxes $ 2,511 $ 401
Notes to the Consolidated Financial Statements
This report should be read in conjunction with the Annual Report on
Form 10-K for the year ended December 31, 2002 (the "2002 Form 10-K") of
Alleghany Corporation (the "Company").
The information included in this report is unaudited but reflects all
adjustments which, in the opinion of management, are necessary to a fair
statement of the results of the interim periods covered thereby. All adjustments
are of a normal and recurring nature except as described herein.
Change in Accounting
In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, "Accounting for Stock-Based Compensation Transition and Disclosure"
("SFAS 148"). SFAS 148 amended FASB Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") to provide alternative methods of
transition for enterprises that elect to change to the SFAS 123 fair value
method of accounting for stock-based employee compensation and to amend the
disclosure requirements of SFAS 123. The Company maintains fixed option plans
and a performance-based stock plan.
Effective January 1, 2003, the Company adopted the fair value
recognition provisions of SFAS 123 prospectively for all employee awards
granted, modified or settled under any of it stock-based compensation plans
after January 1, 2003. Prior to 2003, the Company accounted for its fixed option
plans and performance based plan under the recognition and measurement
provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25").
During the first quarter of 2003 and 2002, respectively, no stock
options were granted under the Company's fixed option plans and therefore no
expense was recognized. With respect to its performance based plan, the Company
recognized after-tax compensation expense of $583,000 in the 2003 first quarter
(calculated pursuant to the prospective method under SFAS 123) and $511,000 in
the 2002 first quarter (calculated pursuant to APB 25).
Had the Company applied SFAS 123 to all option awards outstanding under
its fixed option plans during the 2003 and 2002 first quarters, the Company
would have recognized after-tax expense of $52,000 in the 2003 first quarter and
$77,000 in the 2002 first quarter. Had the Company applied SFAS 123 to all
awards outstanding under its performance based plan during the same periods, the
Company would have recognized additional after-tax expense of $873,000 in the
2003 first quarter and $385,000 in the 2002 first quarter.
5
The following table illustrates the effect on net earnings and
earnings per share if the fair value based method had been applied to all
outstanding and unvested awards under all of the Company plans in each period.
6
For the three months ended
March 31, 2003 March 31, 2002
(in thousands, except per share amounts)
Net earnings, as reported $7,724 $25,808
Add: stock-based employee
compensation expense included in
reported net earnings, net of
related tax
583 511
Less: stock-based compensation
expense determined under fair value
method for all stock options, net
of related tax
(925) (462)
------ -------
Pro forma net earnings $7,382 $25,857
====== =======
Earnings per share
Basic - as reported $1.04 $3.44
Basic - pro forma $1.00 $3.45
Diluted - as reported $1.03 $3.42
Diluted - pro forma $0.99 $3.42
Comprehensive Income
The Company's total comprehensive (loss) income for the three months
ended March 31, 2003 and 2002 was $(1.9) million and $20.0 million,
respectively. Comprehensive (loss) income includes the Company's net earnings
adjusted for changes in unrealized depreciation of investments, which was $9.8
million and $5.6 million, and cumulative translation adjustments, which were
$0.2 million and $(0.2) million, for the three months ended March 31, 2003 and
2002, respectively.
7
Segment Information
Information concerning the Company's continuing operations by industry
segment is summarized below:
For the three months ended
----------------------------
March 31, March 31,
(dollars in millions) 2003 2002
------ ------
REVENUES
Property and casualty
Insurance $38.7 $30.7
Mining and filtration 62.1 56.9
Industrial fasteners 28.0 27.9
Corporate activities 9.9 42.5
------ ------
Total $138.7 $158.0
====== ======
EARNINGS BEFORE INCOME
TAXES
Property and casualty
Insurance $4.9 $1.2
Mining and filtration 4.9 2.9
Industrial fasteners 0.1 0.5
Corporate activities 1.7 34.6
---- -----
Total 11.6 39.2
Income taxes 3.9 13.4
---- -----
Net earnings $7.7 $25.8
==== =====
March 31, December 31,
(dollars in millions) 2003 2002
-------- --------
IDENTIFIABLE ASSETS
Property and casualty
Insurance $975.0 $666.8
Mining and filtration 310.1 320.9
Industrial fasteners 84.6 78.7
Corporate activities 776.6 1,068.0
-------- --------
Total $2,146.3 $2,134.4
======== ========
8
Contingencies
The Company's subsidiaries are parties to pending claims and litigation
in the ordinary course of their businesses. Each such operating unit makes
provisions on its books in accordance with generally accepted accounting
principles for estimated losses to be incurred as a result of such claims and
litigation, including related legal costs. In the opinion of management, such
provisions are adequate as of March 31, 2003.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The following discussion and analysis presents a review of the Company
and its subsidiaries for the three months ended March 31, 2003 and 2002,
respectively. This review should be read in conjunction with the consolidated
financial statements and other data presented herein as well as Management's
Discussion and Analysis of Financial Condition and Results of Operation
contained in the Company's 2002 Form 10-K.
The Company reported net earnings in the first quarter of 2003 of $7.7
million on revenues of $138.7 million, compared with net earnings of $25.8
million on revenues of $158.0 million in the first quarter of 2002. Net gains on
investment transactions after taxes in the first quarter of 2003 totalled $2.1
million, compared with $22.5 million in the corresponding 2002 period. Operating
income before the effect of investment transactions (representing net earnings
less the net gain or loss on investment transactions taxed at the federal tax
rate) in the first quarter of 2003 was $5.6 million, compared with $3.3 million
in the corresponding 2002 period.
Alleghany Insurance Holdings, a holding company for the
Company's insurance operations, consisting principally of Capitol Transamerica
Corporation, recorded pre-tax earnings of $4.9 million on revenues of $38.7
million in the first quarter of 2003, compared with pre-tax earnings of $1.2
million on revenues of $30.7 million in the 2002 first quarter. Alleghany
Insurance Holdings recorded pre-tax investment income of $4.4 million and
realized pre-tax investment gains of $0.9 million in the 2003 first quarter,
compared with pre-tax investment income of $3.3 million and realized pre-tax
investment losses of $1.6 million in the corresponding 2002 period. Alleghany
Insurance Holdings' 2003 pre-tax investment income reflects a larger invested
asset base, principally due to a capital contribution by the Company. Alleghany
Insurance Holdings had a combined ratio (the percentage of each premium dollar
an insurance company has to spend on claims and expenses) on a GAAP basis of
98.9% during the 2003 first quarter, compared with 100.4% in the 2002 first
quarter.
9
World Minerals recorded revenues of $62.1 million in the 2003 first
quarter, compared with $56.9 million in the 2002 first quarter, primarily
reflecting the favorable impact of the strengthening of the Euro against the
dollar (had foreign exchange rates been constant with those of the 2002 first
quarter, World Minerals' revenues would have increased approximately 4% instead
of 9%) and a modest increase in tonnage volume shipped, despite continued
sluggish demand. Pre-tax earnings in the first quarter of 2003 were $4.9
million, compared with $2.9 million in the 2002 first quarter, reflecting
improved revenues, cost controls and net reductions of approximately $0.4
million in energy costs (particularly natural gas) at U.S. and Latin American
plants.
Heads & Threads recorded pre-tax earnings of $0.1 million on revenues
of $28.0 million in the 2003 first quarter, compared with pre-tax earnings of
$0.5 million on revenues of $27.9 million in the 2002 first quarter. The 2003
results primarily reflect reduced demand in the U.S. economy, competitive
pricing pressures and increases in the cost of steel from China.
As of March 31, 2003, the Company beneficially owned approximately 16.0
million shares, or 4.3 percent, of the outstanding common stock of Burlington
Northern Santa Fe Corporation, which had an aggregate market value on that date
of approximately $398.4 million, or $24.90 per share, compared with a market
value on December 31, 2002 of $416.2 million, or $26.01 per share. The aggregate
cost of such shares is approximately $181.8 million, or $11.36 per share.
The Company has previously announced that it may purchase shares of its
common stock in open market transactions from time to time. In the first quarter
of 2003, the Company did not purchase any shares of its common stock. As of
March 31, 2003, the Company had 7,423,254 shares of common stock outstanding
(which includes the stock dividend declared in March 2003).
The Company's common stockholders' equity per share at March 31, 2003
was $185.85, a slight decrease from common stockholders' equity per share of
$186.16 as of December 31, 2002 (both as adjusted for the stock dividend
declared in March 2003).
The Company's results in the first three months of 2003 are not
indicative of operating results in future periods. The Company and its
subsidiaries have adequate internally generated funds and unused credit
facilities to provide for the currently foreseeable needs of its and their
businesses.
Information regarding the Company's accounting policies is included in
the Company's 2002 Form 10-K and the Notes to the Consolidated Financial
Statements included in this report on Form 10-Q.
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss from adverse changes in market prices
and rates, such as interest rates, foreign currency exchange rates and commodity
prices. The primary market risk related to the Company's non-trading financial
instruments is the risk of loss associated with adverse changes in interest
rates. The investment portfolios of the Company and its insurance subsidiaries
may contain, from time-to-time, debt securities with fixed maturities that
expose them to risk related to adverse changes in interest rates.
The table below presents a sensitivity analysis of the Company's debt
securities and subsidiary debt that are sensitive to changes in interest rates.
Sensitivity analysis is defined as the measurement of potential changes in
future earnings, fair values or cash flows of market sensitive instruments
resulting from one or more selected hypothetical changes in interest rates over
a selected period of time. In this sensitivity analysis model, the Company uses
fair values to measure its potential change, and a +/- 300 basis point range of
change in interest rates to measure the hypothetical change in fair value of the
financial instruments included in the analysis. The change in fair value is
determined by calculating a hypothetical March 31, 2003 ending price based on
yields adjusted to reflect a +/ - 300 change in interest rates, comparing such
hypothetical ending price to actual ending price and multiplying the difference
by the par outstanding.
SENSITIVITY ANALYSIS
At March 31, 2003
(dollars in millions)
Interest Rate Shifts -300 -200 -100 0 100 200 300
- ------------------------- -----------------------------------------------------------------------------
ASSETS
Debt securities $465.9 $458.2 $447.7 $430.0 $426.0 $413.9 $402.0
Estimated change in value $35.9 $28.2 $17.7 -- $(4.0) $(16.1) $(28.0)
LIABILITIES
Subsidiaries' debt $170.1 $169.7 $169.2 $168.8 $169.4 $169.9 $170.5
Estimated change in value $1.3 $0.9 $0.4 -- $(0.6) $(1.1) $(1.7)
The Company's 2002 Form 10-K provides a more detailed discussion of the
market risks affecting its operations. Based on the Company's estimates as of
March 31, 2003, no material change has occurred in its liabilities, as compared
to amounts disclosed in its 2002 Form 10-K.
11
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision, and with the
participation, of the Company's management, including the chief executive
officer and chief financial officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as of a
date (the "Evaluation Date") within 90 days prior to the filing date of this
report. Based upon that evaluation, the chief executive officer and chief
financial officer concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were effective in timely alerting them to the
material information relating to the Company required to be included in its
periodic SEC filings. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect internal
controls subsequent to the Evaluation Date.
Forward-Looking Statements
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Quantitative and Qualitative Disclosures About Market Risk"
contain disclosures which are forward-looking statements. Forward-looking
statements include all statements that do not relate solely to historical or
current facts, and can be identified by the use of words such as "may," "will,"
"expect," "project," "estimate," "anticipate," "plan" or "continue." These
forward-looking statements are based upon the Company's current plans or
expectations and are subject to a number of uncertainties and risks that could
significantly affect current plans, anticipated actions and the Company's future
financial condition and results. These statements are not guarantees of future
performance, and the Company has no specific intention to update these
statements. The uncertainties and risks include, but are not limited to, those
relating to conducting operations in a competitive environment and conducting
operations in foreign countries, effects of acquisition and disposition
activities, adverse loss development for events insured by the Company's
insurance operations in either the current year or prior years, general economic
and political conditions, including the effects of a prolonged U.S. or global
economic downturn or recession, changes in costs, including changes in labor
costs, energy costs and raw material prices, variations in political, economic
or other factors such as currency exchange rates, inflation rates, recessionary
or expansive trends, changes in market prices of the Company's significant
equity investments, tax, legal and regulatory changes, extended labor
disruptions, significant weather-related or other natural or human-made
disasters, especially with respect to their impact on losses at the Company's
insurance subsidiaries, civil unrest or other external factors over which the
Company has no control, and changes in the Company's plans, strategies,
objectives, expectations or intentions, which may happen at any time at the
Company's discretion. As a consequence, current plans, anticipated actions and
future financial condition and results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company.
12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit Number Description
-------------- -----------
10.1 Credit Agreement dated as of March
12, 2003 among Mineral Holdings,
Inc., World Minerals Inc.,
designated subsidiary borrowers,
the Banks named therein and Union
Bank of California, N.A., as Sole
Lead Arranger, Administrative
Agent and Collateral Agent (the
"World Minerals Credit
Agreement").
10.2 List of Contents of Exhibits,
Annexes and Schedules to the World
Minerals Credit Agreement. The
Company agrees to furnish
supplementally a copy of any
omitted exhibit, annex or schedule
to the Securities and Exchange
Commission upon request.
10.3 Subordination Agreement dated as
of March 12, 2003 between the
Company and Union Bank of
California, N.A., as
Administrative Agent and
Collateral Agent.
10.4 Credit Agreement dated as of April
30, 2003 between Heads & Threads
International LLC and LaSalle
Bank, N.A. (the "Heads & Threads
Credit Agreement").
10.5 List of Contents of Exhibits,
Annexes and Schedules to the Heads
& Threads Credit Agreement.
Alleghany agrees to furnish
supplementally a copy of any
omitted exhibit, annex or schedule
to the Securities and Exchange
Commission upon request.
99.1 Certifications pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
13
(b) Reports on Form 8-K.
Alleghany filed a report on Form 8-K dated April 25, 2003 to report
in Item 9 information required to be furnished under Item 12 pursuant to interim
guidance issued by the Securities and Exchange Commission regarding a press
release reporting on the Company's financial results as of and for the quarter
ended March 31, 2003.
14
SIGNATURES
Pursuant to the requirements 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: May 15, 2003 /s/ David B. Cuming
-------------------
David B. Cuming
Senior Vice President
(and chief financial officer)
15
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, John J. Burns, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alleghany
Corporation (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
16
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ John J. Burns, Jr.
-----------------------
John J. Burns, Jr.
President and chief executive officer
17
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, David B. Cuming, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alleghany
Corporation (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
18
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ David B. Cuming
--------------------
David B. Cuming
Senior Vice President and chief financial officer
19