Alleghany to Sell Underwriters Re to Swiss Re

Alleghany Corporation says it has signed an agreement in principle to sell its Underwriters Re Group property and casualty reinsurance business to Swiss Re America Holding Corporation for $725 million in cash, subject to adjustment based upon the stockholders' equity of Underwriters Re at the closing date.

Alleghany will retain Underwriters Re's London-based Lloyd's operations conducted by Underwriters Re Agencies Ltd.

The transaction is subject to execution of a definitive stock purchase agreement and to regulatory approvals. It is expected that a definitive stock purchase agreement will be executed by the end of December and that a closing will occur in the first quarter of 2000.

Based on current unaudited financials and subject to results of operations, changes in value of investment securities and other matters that could affect stockholders' equity of Underwriters Re at closing, Alleghany expects to report an after-tax gain on the sale of more than $20 per share.

John Burns, Jr., Alleghany president and CEO, said ``This should prove to be an attractive transaction for all concerned. The year 1999 has seen a continued move toward consolidation in the reinsurance industry, with size and scale becoming increasingly important competitive factors. With this transaction, Underwriters Re will have access to the capital and other resources of one of the world's largest reinsurers and Swiss Re will obtain the complementary strengths of a premier U.S. broker-market reinsurer.

"While Alleghany has the utmost confidence in the future prospects of Underwriters Re, it recognizes that support of its future capital needs would require an ever increasing share of Alleghany's capital resources," he added. "Retention of the Lloyd's operations will enable Alleghany to participate in future improvements in insurance and reinsurance markets with a smaller and more flexible capital commitment.''

The Lloyd's operations of Underwriters Re Group will operate as a single syndicate for the 2000 underwriting year with approximately (pound)275 million of capacity, which is equal to a maximum gross premium written of approximately $600 million.

Upon completion of the transaction, Alleghany will assume or replace the letter of credit facility currently provided by Underwriters Re to support such Lloyd's underwriting activities and intends to rename such operations Alleghany Underwriting Ltd.