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Announcement:

Moody's Disclosures on Credit Rating of Alleghany Corporation

26 Apr 2012

New York, April 26, 2012 -- The following release represents Moody's Investors Service's summary credit opinion on Alleghany Corporation and includes certain regulatory disclosures regarding its ratings. This release does not constitute any change in Moody's ratings or rating rationale for Alleghany Corporation.

Moody's current ratings on Alleghany Corporation are:

Long Term Issuer Rating (domestic currency) ratings of Baa2

Senior Unsecured (domestic currency) ratings of Baa2

Senior Unsecured Shelf (domestic currency) ratings of (P)Baa2

RATING RATIONALE

Alleghany Corporation (NYSE: Y) is a holding company that focuses primarily on domestic and international property & casualty reinsurance (through Transatlantic Reinsurance Company - rated A1 for insurance financial strength (IFS)), specialty insurance through its Landmark American (IFS at A3) and RSUI subsidiaries, as well as managing the corporate equity portfolio and a small number of minority investments.

For an in-depth discussion of Transatlantic Reinsurance Company's credit profile, please see Moody's credit opinion on the company. The A3 rating on Landmark American reflects the credit profile of RSUI as a whole and is based on RSUI's profitable track record and established niche market position in commercial and excess and surplus lines property insurance as well as on its sound risk-adjusted capitalization. The ratings also consider the modest debt service requirements at the ultimate holding company that enable RSUI to retain a high percentage of earnings and the availability of some - albeit reduced in comparison to prior periods - holding company assets to support internal growth. These positive factors are tempered by somewhat higher than industry-average underwriting exposures to natural and man-made catastrophes, by competitive market conditions in the insurance group's chosen markets, and by reliance on reinsurance markets to support its underwriting capacity. Moody's has also analyzed the financial strength of Alleghany's other insurance operations, aside from RSUI (i.e. Capitol Transamerica Corporation and Pacific Compensation Insurance Company, formerly Employers Direct Insurance Company) to facilitate the assignment of a long-term issuer rating to the parent company. Each insurance unit operates autonomously, with its own management team, branding and operating platform.

Alleghany Corporation's long term issuer rating primarily reflects the underlying credit profiles of its principal subsidiary insurance operations, as well as the holding company's investment portfolio, its historically conservative consolidated financial leverage profile (which increased significantly with the acquisition of Transatlantic Holdings, but remains within Moody's tolerances for the current rating level). We also note that Alleghany Corp. has reported positive earnings in each of the past thirty years.

Credit Strengths

Key credit strengths of the insurance subsidiaries include:

- Strong competitive position in the domestic and international reinsurance (through Transatlantic) and U.S. excess-and-surplus lines (through RSUI and affiliates) markets.

- Good risk-adjusted capitalization of principal operating subsidiaries

- Profitable track record and stable management teams at RSUI and Transatlantic

- Liquid parent company assets exist to support insurance operations

Credit Challenges

Key credit challenges of the insurance subsidiaries include:

- Intense competition in Transatlantic's and RSUI's chosen markets

- Significant, exposures to natural and man-made catastrophes in RSUI's property insurance operations, and to reserve and pricing risk in Transatlantic's mostly casualty-focused operations.

- Moderate holding company leverage following the acquisition of Transatlantic Holdings.

Rating Outlook

The outlook for Alleghany's ratings is stable. The company's ratings were affirmed with a stable outlook on Nov. 21, 2011 in connection with the joint announcement by Alleghany and Transatlantic Holdings, Inc. (NYSE: TRH) of the merger agreement. Transatlantic Holdings' Baa1 senior debt rating and Transatlantic Reinsurance Company's A1 insurance financial strength rating were also affirmed with stable outlooks in connection with the announcement.

The rating and outlook affirmations were based on the following key considerations: 1) Alleghany's financial flexibility profile remaining within expectations post-acquisition at the current rating level, with greater overall capital resources and a broader shareholder and creditor base; 2) Moody's expectation that integration risk is modest, given the distinct business operations and expected management continuity at the core operating units (RSUI Indemnity and Transatlantic Reinsurance Company); 3) the structural subordination of Alleghany's creditors to those of TRH (whose senior unsecured debt is rated Baa1/stable); 4) benefits of diversification for Alleghany that are nevertheless mitigated by correlations between the fundamental business; and 5) a continued strong holding company liquidity profile.

What to Look for:

- Occasional acquisitions and divestitures - consistent with Alleghany's long-term pattern - although combination with Transatlantic appears to signal a stronger long-term commitment in the property/casualty insurance and reinsurance sector.

- Sustained underwriting profitability at Transatlantic and RSUI/AIHL overall, with some volatility related to casualty and property catastrophe losses, respectively

- Continued moderate holding company leverage

- Holding company cash and unencumbered liquid investments continuing to significantly exceed 75% of Alleghany Corporation's (ultimate parent-only) debt obligations at any given time.

What Could Change the Rating - Up

A combination of the following factors could move the ratings up:

- An upgrade of the IFS ratings of the reinsurance and insurance subsidiaries;

- Further reduction in gross and net catastrophe exposures, with reduced reliance on catastrophe reinsurance (as measured by modeled losses relative to statutory surplus);

- Sustained financial leverage below 20%; and

- Consolidated ROE's at or above 10% over the cycle.

What Could Change the Rating - Down

The following factors could move the ratings down:

- A downgrade of the IFS ratings of the reinsurance and insurance subsidiaries;

- Erosion of consolidated book value by more than 10% over a twelve-month period;

- Financial leverage above 20%;

- Holding company cash and liquidity investments falling below 75% of Alleghany Corp-only debt obligations.

The methodologies used in this rating were Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010, and Moody's Global Rating Methodology for Reinsurers published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Disclosures on Credit Rating of Alleghany Corporation
No Related Data.
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