775368--2/27/2009--ALLEGHANY_CORP

related topics

{loss, insurance, financial}

{condition, economic, financial}

{tax, income, asset}

{loan, real, estate}

{regulation, government, change}

{capital, credit, financial}

{personnel, key, retain}

{product, market, service}

{operation, natural, condition}

Risk Factors Relating to our Investments and Assets A substantial amount of our assets is invested in debt securities and is subject to market fluctuations. Defaults, downgrades or other events impairing the value of our debt securities portfolio may reduce our earnings. We invest some of our assets in equity securities, which have declined and may continue to decline in value. If our business does not perform well, we may be required to recognize an impairment of our goodwill or other long-lived assets or to establish a valuation allowance against the deferred income tax asset, which could adversely affect our results of operations or financial condition. Risk Factors Relating to our Operating Units Our results may fluctuate as a result of many factors, including cyclical changes in the insurance and reinsurance industry. The reserves for losses and LAE of our insurance operating units are estimates and may not be adequate, which would require our insurance operating units to establish additional reserves. 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. 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. 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. Our insurance operating units face significant competitive pressures which may reduce premium rates and prevent them from pricing their products at attractive rates. 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 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 California, where EDC primarily operates, have caused and may continue to cause downward pressure on the rates charged by EDC. EDC s geographic concentration in California ties its performance to the business, economic and competitive conditions in California. Certain of these conditions have deteriorated and any further deterioration in these conditions in California could materially adversely affect EDC s financial condition and results of operations.

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775368--2/27/2009--ALLEGHANY_CORP_/DE