775368--2/27/2008--ALLEGHANY_CORP

related topics

{loss, insurance, financial}

{condition, economic, financial}

{loan, real, estate}

{regulation, government, change}

{capital, credit, financial}

{regulation, change, law}

{personnel, key, retain}

{product, market, service}

{operation, natural, condition}

The reserves for losses and loss adjustment expenses of our insurance operating units are estimates and may not be adequate, which would require our insurance operating units to establish additional reserves. Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry. Our insurance operating units face significant competitive pressures which may reduce premium rates and prevent them from pricing their products at attractive rates. Because our insurance operating units are property and casualty insurers, we face losses from natural and human-made catastrophes. RSUI attempts to manage its exposure to catastrophe risk partially through the use of catastrophe modeling software. The failure of this software to accurately gauge the catastrophe-exposed risks RSUI writes could have a material adverse effect on our financial condition and results of operations. If market conditions cause reinsurance to be more costly or unavailable, our insurance operating units may be required to bear increased risks or reduce the level of their underwriting commitments. We cannot guarantee that the reinsurers used by our insurance operating units will pay in a timely fashion, if at all, and, as a result, we could experience losses even if reinsured. Based on RSUI s current estimate of Hurricane Katrina losses, RSUI does not have reinsurance coverage for additional losses in excess of such current estimate. Our insurance operating units are rated by A.M. Best and a decline in these ratings could affect the standing of our insurance operating units in the insurance industry and cause their premium volume and earnings to decrease. A significant amount of our assets is invested in debt securities and is subject to market fluctuations. We invest some of our assets in equity securities, which may decline in value. The businesses of our insurance operating units are heavily regulated, and changes in regulation may reduce their profitability and limit their growth. Insurance regulations in the State of California, where EDC primarily operates, have caused and may continue to cause downward pressure on the rates charged by EDC.

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775368--2/27/2008--ALLEGHANY_CORP_/DE