UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.              )

Filed by the Registrant ☑

Filed by a Party other than the Registrant ☐

Check the appropriate box:

ALLEGHANY CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

Alleghany Corporation (“Alleghany”) hereby gives notice that its 2019 Annual Meeting of Stockholders (the “2019 Annual Meeting”) will be held at The Penn Club, 30 West 44^th Street, New York, New York, on Friday, April 26, 2019 at 10:00 a.m., local time, for the following purposes:

Holders of Alleghany common stock at the close of business on March 1, 2019 are entitled to receive this Notice and vote for the election of directors and on each of the other matters set forth above at the 2019 Annual Meeting and any adjournments or postponements thereof.

You are cordially invited to attend the 2019 Annual Meeting. Representation of your shares at the 2019 Annual Meeting is very important. Whether or not you plan to attend in person, we encourage you to vote your shares promptly by using the Internet or telephone, or by signing and returning the enclosed proxy card in the envelope provided. You may revoke your proxy at any time before it is voted at the 2019 Annual Meeting by written notice to the Secretary of Alleghany, by submitting a new proxy with a later date, or by voting in person at the 2019 Annual Meeting.

Important Notice Regarding Internet Availability of Proxy Materials for the Alleghany Corporation 2019 Annual Meeting of Stockholders to be Held on April 26, 2019: Proxy materials relating to the 2019 Annual Meeting (notice of meeting, proxy statement, proxy and 2018 Annual Report to Stockholders on Form 10-K) are also available on the Internet at www.edocumentview.com/YAL.

Dear Alleghany Stockholder:

Thank you for your continued ownership and support of Alleghany Corporation. On behalf of Alleghany’s Board of Directors, it is my pleasure to invite you to join us at the upcoming Annual Meeting of Stockholders. If you are unable to make the Annual Meeting, I encourage you to cast your vote on the items discussed in the Proxy Statement using the attached proxy card or by voting via telephone or online as detailed in the Proxy Statement.

In 2019, Alleghany Corporation marks the 90th anniversary of its founding. The values that were instilled in this company by earlier generations continue to drive our success today. We believe that our culture is a competitive advantage and a key differentiator when recruiting, attracting acquisition candidates, and growing our business.

Our Board of Directors is comprised of a group of committed and highly qualified individuals who care deeply about our company and bring a diverse set of experiences and perspectives to our Board deliberations. Our directors’ skills and independent thought leadership have been invaluable to me and the management team in establishing our long-term business strategy and executing on that strategy. Appearing for the first time as a director candidate in the Proxy Statement is Lauren Tyler, who was appointed to the Board in January of this year. We are pleased that Lauren has joined the Board, bringing strategic, operational, and leadership capabilities which are only partly covered in the Proxy Statement. We encourage you to vote for her and the other directors on the ballot, as well as the other proposals, at the upcoming Annual Meeting.

As we think about the past year and where we will take the company into the future, we remain committed to ensuring that pay is aligned with performance and the interests of our long-term stockholders. The Compensation Committee letter to stockholders on pages 39 and 40 provides more detailed perspective on this front. The Alleghany Board and management team are focused on creating long-term value for our stockholders, and our governance, strategy and management compensation are designed with this focus in mind.

On behalf of Alleghany’s Board and management, we look forward to seeing you at the upcoming 2019 Annual Meeting of Stockholders. The attached Notice of Annual Meeting of Stockholders and Proxy Statement will serve as your guide to the business to be conducted at the meeting this year. Please participate in Alleghany’s future by casting your vote on the items discussed in the Proxy Statement whether in person or through the other voting options that are described.

Sincerely,

Jefferson W. Kirby

Chairman of the Board

PROXY STATEMENT SUMMARY

This summary highlights selected information that is discussed in more detail elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the full Proxy Statement before voting. Unless the context otherwise requires, references in this Proxy Statement to “Alleghany,” the “Company,” “we,” “our” or “us” refer to Alleghany Corporation, references to the “Board” refer to our Board of Directors, references to the “common stock” refer to our common stock, par value $1.00 per share, and references to the “2019 Annual Meeting” refer to our 2019 Annual Meeting of Stockholders and any and all adjournments or postponements thereof.

2019 ANNUAL MEETING INFORMATION

MEETING AGENDA AND BOARD RECOMMENDATIONS

HOW TO VOTE (pages 9 - 11)

You can vote by any of the following methods:

If you vote using the Internet or telephone, you must vote no later than 1:00 a.m., Eastern Daylight Time, on April 26, 2019.

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BOARD NOMINEES (page 28)

Karen Brenner Age 63 Director since 2009 Chair of the Nominating and     Governance Committee Member of the Audit Committee				Ms. Brenner has been an Executive Director of Law and Business Initiatives at New York University since 2012 and Clinical Professor of Business at the Leonard N. Stern School of Business at New York University since 2008. She teaches professional responsibility in law and business, corporate governance in law and business, and corporate transformation and leadership.   Ms. Brenner’s qualifications to serve on the Board also include her years of business experience as Chairman/Chief Executive Officer and/or a board member of public and private companies in a wide variety of industries, and as an advisor to private equity firms, venture capital companies, boards of directors and chief executive officers focusing on enhancing the value of operating companies.
John G. Foos Age 69 Director since 2012 Member of the Audit     Committee Member of the Nominating     and Governance Committee				Mr. Foos was Chief Financial Officer of Independence Blue Cross, a health insurance company, from 1989 until his retirement in November 2008. In addition, Mr. Foos currently serves as a director of Blue Cross Blue Shield of South Carolina, a South Carolina-owned and operated health insurance carrier, the HAI Group Companies, a provider of niche insurance programs and services for the public and affordable housing community, and Emerald Shelter Group, a not-for-profit that provides healthcare and affordable housing. Mr. Foos was a director of Transatlantic Holdings, Inc., or “TransRe,” prior to March 6, 2012.   Mr. Foos’s qualifications to serve on the Board also include his extensive experience in and knowledge of accounting and finance, which includes service as the Chief Financial Officer of Independence Blue Cross, in addition to his prior experience as a Partner with KPMG LLP and his financial literacy.
Lauren M. Tyler Age 57 Director since 2019				Ms. Tyler has been Head of Human Resources at J.P. Morgan Chase & Co., Asset & Wealth Management, or “J.P. Morgan,” overseeing all aspects of human resources, since 2015. Prior to that, Ms. Tyler was Global Chief Auditor for J.P. Morgan from 2012 to 2015 and Head of Investor Relations from 2009 to 2012.   Ms. Tyler’s qualifications to serve on the Board also include her over 30 years of business experience in banking, finance, and accounting, her experience in private equity and service as a Board member of private companies, and her financial expertise.

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GOVERNANCE SUMMARY

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PERFORMANCE SUMMARY

A summary of 2018 and long-term financial results highlights are as follows:

Alleghany Performance in 2018

Additional information regarding Alleghany’s 2018 results, including audited consolidated financial statements, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations, or “MD&A,” with respect to 2018 results, is contained in Alleghany’s Annual Report on Form 10-K for the year-ended December 31, 2018, or the “Form 10-K,” which was filed with the U.S. Securities and Exchange Commission, or the “SEC,” on February 20, 2019. Readers are urged to review the Form 10-K for a more complete discussion of Alleghany’s financial performance.

Alleghany Long-Term Performance

We believe that Alleghany’s performance is best measured over the long term, and that long-term growth in common stockholders’ equity per share is the best metric for evaluating such performance. In this regard, the table below shows the annual, and three- and ten-year average rolling, annualized growth in our common stockholders’ equity per share, adjusted for a 2018 cash dividend and historical stock dividends, during the five-year period from December 31, 2013 to December 31, 2018:

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As can be seen in the table above, Alleghany’s common stockholders’ equity per share has compounded over the three- and ten-year periods in the range of Alleghany’s stated strategic objective of 7-10% annual growth in common stockholders’ equity per share, although it trailed that objective in 2018 and the three-year periods ending in 2017 and 2018 primarily due to a decline in the market value of Alleghany’s equity portfolio in December 2018 and significant catastrophe losses in 2017 and 2018.

The chart below summarizes Alleghany’s common stockholders’ equity per share growth and stock price performance over the ten-year period from December 31, 2008 to December 31, 2018, compared with the S&P 500 Stock Index, or the “S&P 500,” with all values indexed to December 31, 2008. During this ten-year period, Alleghany’s common stockholders’ equity per share increased at a compound annual rate of 7.2% (adjusted for dividends), compared with a compound annual rate of return of 13.1% for the S&P 500, and the price of Alleghany common stock (adjusted for dividends) appreciated at a 9.1% compound annual rate of return.

As indicated by the data presented in the chart above, Alleghany’s growth in common stockholders’ equity per share has been relatively consistent, with the exception of 2018 when it was negatively impacted by a decline in the market value of Alleghany’s equity portfolio and significant catastrophe losses. The trading price of Alleghany’s common stock has been more volatile, reflecting the volatility of the stock market in general. In Alleghany’s view, growth in common stockholders’ equity per share is a better measure of fundamental performance and value creation as compared to the more volatile trading price of Alleghany’s common stock. As such, Alleghany focuses its executive compensation incentive program on building common stockholders’ equity per share over time.

COMPENSATION SUMMARY

Our executive compensation program is intended to provide competitive total compensation to each of Alleghany’s executive officers (as listed on page 23), or the “Named Executive Officers,” that is aligned with the interests of our stockholders in increasing our common stockholders’ equity per share at rates of 7-10% over the long term without employing excessive amounts of financial leverage and without taking imprudent risks. This approach enables us to manage risk to avoid loss of capital during periods of economic turmoil, which we believe creates maximum value for stockholders in the long term, even if it results in lower levels of capital appreciation during periods when economic conditions are more favorable.

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2018 Named Executive Officer Compensation

Set forth below is the 2018 compensation for each Named Executive Officer as determined under SEC rules. See the 2018 Summary Compensation Table and the accompanying notes to the table beginning on page 59 for more information.

Elements of 2018 Compensation

The principal elements of compensation paid to our Named Executive Officers and the percentage that these elements represent of the 2018 compensation for our chief executive officer and our other Named Executive Officers are reflected below.

With respect to such components of 2018 compensation:

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Long-Term Compensation Summary

During the ten-year performance period set out in the graph on page 5, we believe that Mr. Hicks’s compensation has been well-aligned with Alleghany’s long-term performance as can be seen in the table below:

10-year Pay-TSR⁽¹⁾ Alignment

($ thousands)

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QUESTIONS AND ANSWERS ABOUT ALLEGHANY’S 2019 ANNUAL MEETING

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If you properly sign and return your proxy card or submit your proxy using the Internet or telephone, your shares will be voted as you direct. If you sign and return your proxy card but do not specify how to vote, we will vote your shares in accordance with the Board’s recommendations: “FOR” each of the Board’s nominees for director; “FOR” the ratification of the selection of our independent registered public accounting firm; and “FOR” the advisory resolution on executive compensation.

The 2019 Annual Meeting will begin promptly on April 26, 2019, at 10:00 a.m., local time. You should allow adequate time for check-in procedures.

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A “broker non-vote” occurs when your broker submits a proxy for your shares but does not indicate a vote for a particular proposal because the broker does not have authority to vote on that proposal and has not received voting instructions from you. “Broker non-votes” are counted as present to determine whether there is a quorum for the 2019 Annual Meeting, but are not counted as votes for or against the proposal in question or as abstentions, nor are they counted to determine the number of votes present for the particular proposal.

Proposal 2: Ratification of Selection of Independent Registered Public Accounting Firm. The affirmative vote of a majority of the votes cast on this proposal is required to ratify the selection of our independent registered public accounting firm. Abstentions will have no effect on the results of this vote. The approval of Proposal 2 is a routine proposal on which a broker or other nominee is generally empowered to vote in the absence of voting instructions from the beneficial owner, so broker non-votes are unlikely to result from this proposal.

Proposal 3: Advisory Vote on Executive Compensation. The affirmative vote of a majority of the votes cast on this proposal is required to approve the advisory resolution on executive compensation. Abstentions and broker non-votes will have no effect on the results of this vote. Although this proposal is non-binding on the Board, the Board and the Compensation Committee will review and consider the voting results when making future decisions about Alleghany’s executive compensation program.

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If, in the future, you wish to receive a separate annual report to stockholders and proxy statement, a separate copy may be obtained, without charge, upon written or oral request to the office of the Secretary, Alleghany Corporation, 1411 Broadway, 34^th Floor, New York, New York 10018, telephone number (212) 752-1356. Eligible stockholders of record who receive multiple copies of our annual report to stockholders and proxy statement can request householding by contacting us in the same manner. Stockholders who own shares through a bank, broker or other nominee can request householding by contacting the nominee. We hereby undertake to deliver promptly, upon written or oral request, a separate copy of the annual report to stockholders and proxy statement to a stockholder at a shared address to which a single copy of the document was delivered.

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CORPORATE GOVERNANCE

Board Composition

Pursuant to Alleghany’s Restated Certificate of Incorporation and By-Laws, the Board is divided into three separate classes of directors, which are required to be as nearly equal in number as practicable. At each Annual Meeting of Stockholders, one class of directors is elected to a term of three years. Currently, there are three standing committees of the Board, namely the Audit Committee, Compensation Committee and Nominating and Governance Committee. Additional information regarding these committees is set out on pages 16 to 18.

The Board currently consists of nine directors. At a meeting of the Board on January 15, 2019, the Board increased its size from eight to nine directors and elected Lauren M. Tyler to fill the vacancy created by such increase in size. Ms. Tyler was elected for a term due to expire at the 2019 Annual Meeting. The directors nominated by the Board for election at the 2019 Annual Meeting to the class of 2022 are Karen Brenner, John G. Foos and Lauren M. Tyler. Each of the nominees is a current member of the Board and was recommended to the Board for nomination by the Nominating and Governance Committee. Mr. Foos and Ms. Brenner were last elected by stockholders at the 2016 Annual Meeting of Stockholders held on April 22, 2016.

As stated in our Corporate Governance Guidelines, the Board “currently believes that it is desirable over time to have a Board of between eight and ten members (allowing that a larger or smaller number may be necessary or advisable in periods of transition or other particular circumstances).” In March 2012, upon the closing of Alleghany’s acquisition of Transatlantic Holdings, Inc., or “TransRe,” three former members of the board of directors of TransRe joined the Alleghany Board, resulting in a 14-person Board. Through 2018, Alleghany intentionally allowed the Board to decrease in size through the mandatory and elective retirements of six Board members, resulting in an eight-member Board at 2018 year-end.

Cognizant of upcoming mandatory retirements, the Board in 2018 evaluated potential new Board members, as well as the characteristics desired in such potential Board members. In this regard, the Board sought candidates with diverse business and professional backgrounds and outstanding integrity and judgment, and such other skills and experience as would enhance the Board’s ability to best serve Alleghany’s interests. In addition, the Board specifically considered diversity as one of many factors in its evaluation. As discussed above, the Board’s evaluation culminated in the appointment of Ms. Tyler to the Board in January 2019, and she is standing for election at the 2019 Annual Meeting.

The following charts illustrate the characteristics of our incumbent directors, including independence, diversity, age and tenure.

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Director Independence

Pursuant to the NYSE’s listing standards, Alleghany is required to have a majority of independent directors, and no director qualifies as independent unless the Board affirmatively determines that the director has no material relationship with Alleghany. The Board has determined that none of the directors who served during any part of 2018, except Weston M. Hicks, our President and chief executive officer, has any material relationship with Alleghany other than in their capacities as members of the Board and committees thereof, and thus all of such directors, except Weston M. Hicks, are independent directors of Alleghany. With the January 2019 election of Lauren M. Tyler, whom the Board affirmatively determined has no material relationship with Alleghany, eight of Alleghany’s nine current directors are independent directors. All of the director nominees are independent. Assuming that all of Ms. Brenner, Mr. Foos and Ms. Tyler are elected, eight of nine directors will be independent.

Board Leadership

Currently, the position of Chairman of the Board, or the “Chairman,” and the position of President and chief executive officer are separate. It is the policy of the Board that the Chairman should not be an Alleghany officer. The current Chairman is an independent director. Pursuant to the Corporate Governance Guidelines, the duties of the Chairman include providing leadership to the Board in managing the business of the Board and ensuring that there is an effective structure for the operation of the Board and its committees. The Board believes that its leadership structure is appropriate given the composition of the Board and management, the Corporate Governance Guidelines and the tenure of a majority of the Board members.

Board Meetings

We have strong director engagement on our Board. The Board held eight meetings in 2018. Each director who was a director during 2018 attended at least 95% of the meetings of the Board and committees of the Board on which he or she served in 2018, with seven of such directors attending 100% of the Board and committee meetings. Executive sessions for independent directors are held at each regularly scheduled Board meeting. The Chairman, who is currently an independent director, presides at these executive sessions. Alleghany does not have a policy with regard to attendance by directors at annual meetings of stockholders. Two directors attended the 2018 Annual Meeting of Stockholders.

Board Evaluation

The Board believes that an effective director evaluation process allows it to gain insights into the effectiveness of the Board, its committees and its individual members, with the goal of continually enhancing Board performance. In this regard, each year the Board and each of its committees conducts an evaluation of their respective performance, effectiveness and fulfillment of fiduciary duties. The evaluation process is overseen by the Nominating and Governance Committee and is reviewed annually to determine whether it is designed effectively and assures that appropriate feedback is being sought and reviewed. Historically, the Board evaluation was done on an overall basis through completion of a written questionnaire by each director on an anonymous basis to encourage candid feedback, supplemented by individual director interviews with the Chairman.

In 2018, the Board determined to enhance the evaluation process by adding an individual director evaluation component, along with the completion of a director skills matrix. In this regard, the Nominating and Governance Committee approved evaluation questions which were to be considered by each director with respect to himself or herself, as well as each other director, along with a skills matrix questionnaire to be completed by each director. The Chairman of the Board, using the evaluation questions as a guide, then solicited a self-evaluation from each director, as well as an evaluation of each other director. The Chair of the Nominating and Governance Committee solicited from each director an evaluation of the Chairman of the Board. At the conclusion of such process, the Chairman of the Board discussed with each director the results of his or her individual evaluation,

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and the Chair of the Nominating and Governance Committee discussed such matters with the Chairman of the Board. The results of the written overall Board and committee evaluations were reported to and reviewed by the full Board. In general, based upon its most recent evaluation, the Board and each committee were satisfied with their respective performance and considered themselves to be operating effectively.

Chief Executive Officer and Senior Management Succession Planning

A key responsibility of our chief executive officer and Board in the area of risk management is ensuring that an effective process is in place to provide continuity of leadership over the long term. At least once each year, our Board conducts a review of chief executive officer and senior management succession planning. During this review, the chief executive officer provides the Board with recommendations on, and evaluations of, potential chief executive officer and senior management successors, succession timing for those positions, and development plans for the potential successors. Our Board reviews potential internal senior management candidates with our chief executive officer, including the qualifications, experience and development priorities for these individuals. Further, our Board periodically reviews the overall composition of our senior management’s qualifications, tenure and experience.

Our Board, in coordination with our Nominating and Governance Committee, also establishes steps to address emergency chief executive officer and senior management succession planning in extraordinary circumstances. Our emergency chief executive officer succession planning is intended to enable us to respond to unexpected position vacancies, including those resulting from a major catastrophe, by continuing our operations and minimizing potential disruption or loss of continuity to our business and operations.

Board Role in Risk Oversight

The Board oversees risk management directly and through its committees. Alleghany management regularly reports to the Board and, as appropriate, to its committees on management’s risk activities, Alleghany’s exposure and risk assessments. Enterprise risk management is a standing agenda item at each Board meeting and the chief risk officer, other Alleghany management and the Board discuss existing and emerging risks, controls and procedures, risk assessments and initiatives at such meetings. Each year, at the Board’s January meeting, the Board receives a formal report on enterprise risk management from Alleghany’s chief risk officer and, at the same meeting, considers Alleghany’s three-year financial projections and the evaluation of the President and chief executive officer, allowing the Board to consider risk and risk management in the context of Alleghany’s strategic plan and management’s performance. Each year, at the Audit Committee’s June meeting, it receives a formal report on enterprise risk management from Alleghany’s chief risk officer and a formal report on legal compliance and ethics from Alleghany’s chief compliance officer, which are also copied to the Board, and the chief risk officer and chief compliance officer subsequently report thereon to the Board. The Board receives updates on material developments with respect to risk management and legal compliance and ethics matters at its other regularly scheduled meetings.

The Audit Committee oversees the integrity of Alleghany’s financial statements, compliance with legal and regulatory requirements, the qualifications, performance and independence of independent auditors and the performance of internal audit and internal controls over financial reporting, all of which contribute to risk oversight. The Nominating and Governance Committee ensures the development of appropriate corporate governance and oversees the evaluation of the Board and management. The Compensation Committee regularly monitors compensation policies, practices and outstanding awards to determine whether Alleghany’s risk management and incentive objectives are being met with respect to group-wide employee incentives. The Board believes that risk oversight is a responsibility of the entire Board, and it does not look to any individual director or committee to lead it in discharging this responsibility.

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Committees of the Board

Committee Membership

The following table sets forth the current members of each of the committees and the number of meetings held during 2018:

The Board has determined that each committee member is independent as defined in the NYSE’s listing standards with respect to membership on each committee on which he or she serves. The Board also has determined that each member of the Audit Committee has the qualifications set forth in the NYSE’s listing standards regarding financial literacy and accounting or related financial management expertise and is an audit committee financial expert as defined by the SEC.

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Committee Responsibilities

Each of the committees listed below operates pursuant to a charter, a copy of which is available on Alleghany’s website at www.alleghany.com or may be obtained, without charge, upon written request to the Secretary of Alleghany at Alleghany’s principal executive offices. The primary functions of each committee are as follows:

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Directors’ Nominations and Qualifications

The Nominating and Governance Committee identifies and recommends candidates for election to the Board, consistent with general criteria approved by the Board. The Board has not approved any specific criteria that must be met by each director nominee nor established a procedure for identifying and evaluating nominees for director. The Board believes that establishing such criteria is best left to an evaluation of Alleghany’s needs at the time that a nomination is considered. The Board generally seeks members with diverse business and professional backgrounds and outstanding integrity and judgment, and such other skills and experience as will enhance the Board’s ability to best serve Alleghany’s interests. As a general matter, the Nominating and Governance Committee does consider diversity in identifying and evaluating possible nominees for director.

The Nominating and Governance Committee will receive at any time and will consider from time to time suggestions from stockholders regarding proposed director candidates. In this regard, a stockholder may submit a recommendation regarding a proposed director nominee in writing to the Nominating and Governance Committee in care of the Secretary of Alleghany at Alleghany’s principal executive offices. Any such persons recommended by a stockholder will be evaluated in the same manner as persons identified by the Nominating and Governance Committee.

A director is required to notify the Nominating and Governance Committee when a director’s principal occupation or business association changes substantially. The Nominating and Governance Committee will

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consider whether any such change may materially interfere with the director’s service as a director of Alleghany and make a recommendation to the Board in this regard.

During 2018, at the request of the Board, the Nominating and Governance Committee undertook a process to identify a new director. The Nominating and Governance Committee determined that it would seek to identify a candidate who would have complementary business experience and would enhance board diversity. The Nominating and Governance Committee solicited directors to determine criteria for a prospective director and engaged Spencer Stuart, a nationally recognized search firm, to assist the Nominating and Governance Committee in identifying and evaluating potential nominees, including those potential nominees proposed by the directors. Spencer Stuart provided background information to the Nominating and Governance Committee regarding potential candidates meeting its search criteria and regularly communicated with the Nominating and Governance Committee to discuss such potential candidates. After review and discussion, the Nominating and Governance Committee and Spencer Stuart identified potential nominees to be interviewed. The Nominating and Governance Committee regularly reported to the Board regarding the search’s progress. The leading candidates were then interviewed by the members of the Nominating and Governance Committee, Jefferson W. Kirby, Chairman of the Board, and Weston M. Hicks, Alleghany’s President and chief executive officer. At its meeting on November 19, 2018, the Nominating and Governance Committee determined to recommend to the Board that Ms. Lauren M. Tyler, a potential nominee who met the criteria outlined by the Board, was qualified to join the Board and that she should meet with directors at the Board’s meeting the following day and, subject to the Board’s concurrence, Ms. Tyler should be elected to the Board at its January 15, 2019 meeting. The Board met with Ms. Tyler at its meeting on November 20, 2018, and Ms. Tyler was elected as a director by the Board at its January 15, 2019 meeting, to serve until the 2019 Annual Meeting.

Communications with Directors

Interested parties may communicate directly with any individual director, the independent directors as a group or the Board as a whole by mailing such communication to the Secretary of Alleghany at Alleghany’s principal executive offices. Any such communications will be delivered unopened:

Stockholder Engagement

Alleghany is committed to the interests of its stockholders and recognizes that communicating with stockholders on a regular basis is a critical part of this commitment. In this regard, Alleghany actively engages with its stockholders in order to understand fully their viewpoints concerning Alleghany and to help stockholders better understand Alleghany’s strategy and performance. Management regularly engages with investors by participating in industry conferences, and also meets in person and by telephone with stockholders at other times throughout the year to solicit input and answer questions. Management also communicates to stockholders the Board’s willingness to meet with them upon request and shares stockholder viewpoints with the Board. We believe our regular engagement with stockholders has been productive and provides an open exchange of ideas and perspectives for both Alleghany and its stockholders. Although we are open to meeting with all Alleghany stockholders, in 2018, we met with non-affiliated stockholders who held shares representing approximately 53% of Alleghany’s shares of common stock held by non-affiliates.

Director Retirement Policy

Alleghany’s retirement policy for directors provides that a director must retire from the Board at the next Annual Meeting of Stockholders following his or her 75^th birthday.

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Codes of Ethics

Alleghany has adopted an Employee Code of Business Conduct and Ethics for all employees of Alleghany and its subsidiaries, a Financial Personnel Code of Ethics for its chief executive officer, chief financial officer, chief accounting officer and all other officers in its Finance Department, a Director Code of Business Conduct and Ethics for members of the Board, a Code of Business Conduct and Ethics for Our Business Partners for third parties with whom we do business, and the Corporate Governance Guidelines. A copy of each of these documents is available on Alleghany’s website at www.alleghany.com or may be obtained, without charge, upon written request to the Secretary of Alleghany at Alleghany’s principal executive offices. Alleghany will disclose on its website any substantive amendments to its codes of ethics and any waivers from the provisions of its codes of ethics made with respect to its chief executive officer, chief financial officer or chief accounting officer (or persons performing similar functions), as well as with respect to any other executive officer or any director of Alleghany.

Majority Election of Directors

The By-Laws provide for a majority voting standard for the election of directors for uncontested elections. In connection with such provision of the By-Laws, the Corporate Governance Guidelines provide that a director nominee, as a condition of his or her nomination, shall tender to the Board at the time of nomination an irrevocable resignation effective if such nominee fails to receive the majority vote required by the By-Laws and the Board determines to accept such resignation. In the event that a director nominee fails to receive the requisite majority vote, the Nominating and Governance Committee will evaluate such resignation in light of Alleghany’s best interests and make a recommendation to the Board as to whether it should accept the resignation. In making its recommendation, the Nominating and Governance Committee may consider any factors it deems relevant, including:

The Board, by vote of independent directors other than the director whose resignation is being evaluated, will act on the tendered resignation and will publicly disclose its decision and rationale within 90 days following certification of the stockholder vote.

Director Stock Ownership Guidelines

Directors are expected to achieve ownership of common stock, or restricted stock units, having an aggregate value (based upon the higher of market value or book value) equal to at least five times the annual board retainer within five years of election to the Board, and to maintain such a level thereafter.

Hedging and Pledging Policies

Alleghany maintains a policy on insider trading and compliance that prohibits directors from directly or indirectly purchasing or using financial instruments designed to hedge or offset any decrease in the market value of Alleghany securities that they own. In addition, under such policy, directors are prohibited from pledging Alleghany securities as collateral.

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Related Party Transactions

The Board has adopted a written Related Party Transaction Policy, or “the Policy.” Pursuant to the Policy, all related party transactions must be approved in advance by the Board. Under the Policy, a related party transaction means any transaction, other than compensation for services as an officer or director authorized and approved by the Compensation Committee or the Board, in which Alleghany or any of its subsidiaries is a participant and in which any of the following persons has or will have a direct or indirect material interest:

A person who has a position or relationship with a firm, corporation or other entity may be deemed to have an indirect interest in any transaction in which that entity engages. However, a person is not deemed to have an interest if such interest arises only from such person’s position as a director of another corporation and/or such person’s direct and indirect ownership of less than 10% of the equity of such firm, corporation or other entity.

Under the Policy, all newly proposed related party transactions are referred to the Nominating and Governance Committee for review and consideration of its recommendation to the Board. Following this review, the related party transaction and the Nominating and Governance Committee’s analysis and recommendations are presented to the full Board (other than any directors interested in the transaction) for approval. The Nominating and Governance Committee reviews existing related party transactions annually, with the goals of ensuring that such transactions are being pursued in accordance with all of the understandings and commitments made at the time they were approved, ensuring that payments being made with respect to such transactions are appropriately reviewed and documented, and reaffirming that such transactions remain in the best interests of Alleghany. The Nominating and Governance Committee reports any such findings to the Board.

As initially disclosed in the proxy statement prepared for the 2017 Annual Meeting of Stockholders, Zachary A. Hicks, a son of Weston M. Hicks, Alleghany’s President and chief executive officer, commenced employment with TransRe as an underwriter in March 2017. Zachary Hicks’s 2018 aggregate compensation was $125,365 and was established in accordance with TransRe’s employment and compensation practices applicable to employees with equivalent qualifications, experience, and responsibilities. Zachary Hicks is also eligible to participate in TransRe’s employee benefit programs on the same basis as other eligible employees. Mr. Hicks did not participate in TransRe’s compensation decisions relating to Zachary Hicks.

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PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of each person who, based upon filings made by such person with the SEC, as of March 1, 2019, was the beneficial owner of more than five percent of the outstanding common stock.

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EXECUTIVE OFFICERS

The name, age, current position, date elected and prior business experience of each of the Named Executive Officers is as follows:

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SECURITIES OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of March 1, 2019, the beneficial ownership of common stock of each of the nominees named for election as a director, each of the other current directors, each of the executive officers named in the Summary Compensation Table on page 59 and all nominees, directors and executive officers as a group.

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Section 16(a) Beneficial Ownership Reporting Compliance

Alleghany has determined that, except as set forth below, no person who at any time during 2018 was a director, officer or beneficial owner of more than 10% of common stock failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” during 2017. This determination is based solely upon Alleghany’s review of Forms 3, 4 and 5, and written representations that no Form 5 was required, which such persons submitted to Alleghany during or with respect to 2018. In February 2018, the Board declared a special dividend of $10.00 per share for stockholders of record on March 5, 2018. Under the 2005 Directors’ Plan, 2010 Directors’ Plan and 2015 Directors’ Plan, when Alleghany pays a cash dividend on its common stock, each director holding restricted stock units, or “RSUs,” awarded under such plans is credited with a corresponding dividend on his or her RSUs in the form of additional RSUs. Due to inadvertent administrative oversight, the Form 4 required to be filed for each non-employee director credited with a dividend payment on his or her RSUs in the form of additional RSUs was not filed within two business days of the date of the dividend payment. Such Forms 4 were filed on May 23, 2018.

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PROPOSAL 1. ELECTION OF DIRECTORS

Nominees for Election

Karen Brenner, John G. Foos and Lauren M. Tyler have been nominated by the Board for election as directors at the 2019 Annual Meeting, each to serve for a term of three years, subject to Alleghany’s director retirement policy, until the 2022 Annual Meeting of Stockholders and until his or her successor is duly elected and qualified. Each of the nominees is a current member of the Board and was recommended to the Board for nomination by the Nominating and Governance Committee. Ms. Brenner and Mr. Foos were last elected by stockholders at the 2016 Annual Meeting of Stockholders held on April 22, 2016. At a Board meeting on January 15, 2019, the Board increased its size from eight to nine directors and elected Lauren M. Tyler to fill the vacancy created by such increase in size. Ms. Tyler was elected for a term to expire at the 2019 Annual Meeting.

Information about Voting

Proxies received from Alleghany stockholders of record will be voted for the election of the three nominees named above as Alleghany directors unless such stockholders indicate otherwise. If any of the foregoing nominees is unable to serve for any reason, which is not anticipated, the shares represented by proxy may be voted for such other person or persons as may be determined by the holders of such proxy unless stockholders indicate otherwise. A nominee for director shall be elected to the Board if such nominee receives the affirmative vote of a majority of the votes cast with respect to the election of such nominee. A majority of votes cast means the number of votes cast “for” a nominee’s election must exceed the number of votes cast “against” the nominee’s election. Abstentions and broker non-votes (see pages 10 and 11) do not count as votes cast “for” or “against” the nominee’s election, but will be counted as present at the meeting for quorum purposes.

Director Qualifications

The following information includes for each of the nominees named for election as director at the 2019 Annual Meeting, and each of the other directors of Alleghany:

In addition to the information regarding the specific experience, qualifications, attributes and skills that led the Board to the conclusion that each of the nominees named for election as director should be elected as a director of Alleghany, Alleghany believes that each of the nominees, and each of the other directors of Alleghany, has a reputation for integrity, honesty and adherence to high ethical standards. Alleghany also believes that each of the nominees, and each of the other directors of Alleghany, has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment to service to Alleghany and to the Board.

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Nominees for Election

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Other Alleghany Directors

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Compensation of Directors

The information under this heading relates to the compensation during 2018 of those non-employee directors who served on the Board at any time during 2018. Employee directors are not separately compensated for their service on the Board.

2018 Director Compensation

Fees Earned or Paid in Cash

Following is information regarding fees earned and paid in cash to directors for service on the Board and its Committees:

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Stock Awards

Pursuant to the 2015 Directors’ Plan, each year as of the first business day following an annual meeting of stockholders, each individual who was elected or continues to serve as a member of the Board and who is not an employee of Alleghany or any of its subsidiaries receives, at the individual director’s election, either a number of shares of restricted common stock or restricted stock units (each equivalent to one share of common stock) equal to $140,000 divided by the average of the closing sales prices of the common stock on the 30 consecutive trading days preceding the grant date as reported by the NYSE. Such shares of restricted common stock or restricted stock units, as the case may be, are subject to potential forfeiture until the first annual meeting of stockholders following the date of grant and are subject to restrictions upon transfer until the third anniversary of the date of grant.

On April 30, 2018, each eligible director received either 234 shares of restricted common stock or 234 restricted stock units, reflecting such number of shares or restricted stock units equal to $140,000 divided by the average of the closing sales prices of the common stock on the 30 consecutive trading days preceding the grant date as reported by the NYSE. Each director is permitted to defer payment of the restricted stock units, and all whole restricted stock units will be paid in the form of whole shares of common stock.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES TO THE BOARD SET FORTH IN THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE. EACH NOMINEE SHALL BE ELECTED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST WITH RESPECT TO THE ELECTION OF SUCH NOMINEE. A MAJORITY OF VOTES CAST MEANS THE NUMBER OF VOTES CAST “FOR” A NOMINEE’S ELECTION MUST EXCEED THE NUMBER OF VOTES CAST “AGAINST” THE NOMINEE’S ELECTION. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE NO EFFECT ON THE RESULTS OF THIS VOTE.

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PROPOSAL 2. RATIFICATION OF SELECTION OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2019

The Audit Committee has selected Ernst & Young LLP, or “E&Y,” as Alleghany’s independent registered public accounting firm for fiscal 2019. Although ratification by stockholders is not a prerequisite to the ability of the Audit Committee to select E&Y as Alleghany’s independent registered public accounting firm, the Audit Committee and the Board believe that such ratification is desirable. If stockholders do not ratify the selection of E&Y, the Audit Committee will reconsider its selection of E&Y. The Audit Committee may, however, select E&Y notwithstanding the failure of stockholders to ratify its selection. Alleghany expects that representatives of E&Y will be present at the 2019 Annual Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

2018 and 2017 Fees

The following table summarizes the fees billed for professional audit services rendered by E&Y for the audit of Alleghany’s annual consolidated financial statements for 2018 and 2017 and fees for other services rendered by E&Y for 2018 and 2017.

The amounts shown for “Audit Fees” represent the aggregate fees for professional services E&Y rendered for the audit of Alleghany’s annual consolidated financial statements for each of the last two fiscal years, the reviews of Alleghany’s financial statements included in its Quarterly Reports on Form 10-Q and the services provided in connection with statutory and regulatory filings during each of the last two fiscal years. “Audit Fees” also include fees for professional services E&Y rendered for the audit of the effectiveness of internal control over financial reporting. The amounts shown for “Audit-Related Fees” represent the fees billed in each of the last two fiscal years for assurance and related services, including regulatory exams, that are reasonably related to the performance of the audit or review of Alleghany’s financial statements and that are not reported under “Audit Fees.” These services include consents and procedures for registration statements and responses to regulatory requests. The amounts for “Tax Fees” represent fees E&Y incurred with respect to tax compliance work related to its review of Alleghany’s federal income tax return, as well as the services provided in 2017 in connection with the tax compliance work related to Alleghany Capital’s acquisition of a majority interest in WWSC Holdings, LLC.

Pre-Approval Policies and Procedures

Audit and permissible non-audit services that Alleghany’s independent registered public accounting firm may provide to Alleghany must be pre-approved by the Audit Committee or, between meetings of the Audit Committee, by its Chairman pursuant to authority delegated to him by the Audit Committee. The Chairman reports all pre-approval decisions made by him at the next meeting of the Audit Committee, and he has undertaken to confer with the Audit Committee to the extent that any engagement for which his pre-approval is sought is expected to generate fees for the independent registered public accounting firm in excess of $100,000. When considering the independence of the independent registered public accounting firm, the Audit Committee considers, among other matters, whether the provision of non-audit services by the independent registered public accounting firm to Alleghany is compatible with maintaining the independence of the independent registered public accounting firm. All audit and permissible non-audit services rendered in 2018 and 2017 were pre-approved pursuant to these procedures.

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THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE. THIS PROPOSAL SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST ON THIS PROPOSAL. ABSTENTIONS WILL HAVE NO EFFECT ON THE RESULTS OF THIS VOTE. THE APPROVAL OF THIS PROPOSAL IS A ROUTINE PROPOSAL ON WHICH A BROKER OR OTHER NOMINEE IS GENERALLY EMPOWERED TO VOTE IN THE ABSENCE OF VOTING INSTRUCTIONS FROM THE BENEFICIAL OWNER, SO BROKER NON-VOTES ARE UNLIKELY TO RESULT FROM THIS PROPOSAL.

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Audit Committee Report

The Audit Committee is currently composed of the four independent directors whose names appear at the end of this report. Management is responsible for Alleghany’s internal controls and the financial reporting process. Alleghany’s independent registered public accounting firm is responsible for performing an independent audit of Alleghany’s annual consolidated financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. The Audit Committee’s responsibility is to monitor and review these processes and the activities of Alleghany’s independent registered public accounting firm. The Audit Committee members are not acting as professional accountants or auditors, and their responsibilities are not intended to duplicate or certify the activities of management and the independent registered public accounting firm or to certify the independence of the independent registered public accounting firm under applicable rules.

For fiscal 2018, Ernst & Young LLP acted as Alleghany’s independent registered public accounting firm. In this context, the Audit Committee has met to review and discuss Alleghany’s audited consolidated financial statements as of December 31, 2018 and for the fiscal year then ended, including Alleghany’s specific disclosure under management’s discussion and analysis of financial condition and results of operations and critical accounting estimates, with management and Ernst & Young LLP. The Audit Committee has discussed with Ernst & Young LLP the matters required to be discussed by Statement on Auditing Standard No. 16, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board, or the “PCAOB.” Ernst & Young LLP reported to the Audit Committee regarding the critical accounting estimates and practices and the estimates and assumptions used by management in the preparation of the audited consolidated financial statements as of December 31, 2018 and for the fiscal year then ended, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of use of such alternative treatments and the treatment preferred by Ernst & Young LLP.

Ernst & Young LLP provided a report to the Audit Committee describing Ernst & Young LLP’s internal quality-control procedures and related matters. Ernst & Young LLP also provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the PCAOB regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with Ernst & Young LLP its independence. When considering Ernst Young LLP’s independence, the Audit Committee considered, among other matters, whether Ernst & Young LLP’s provision of non-audit services to Alleghany is compatible with maintaining the independence of Ernst & Young LLP. All audit and permissible non-audit services in 2018 and 2017 were pre-approved pursuant to these procedures.

Based on the reviews and discussions with management and Ernst & Young LLP referred to above, the Audit Committee has recommended to the Board that the audited consolidated financial statements as of December 31, 2018 and for the fiscal year then ended be included in Alleghany’s Annual Report on Form 10-K for such fiscal year.

William K. Lavin

Karen Brenner

John G. Foos

Raymond L.M. Wong

Audit Committee of the Board of Directors

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PROPOSAL 3. ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Exchange Act, we are providing stockholders with the opportunity to cast an advisory vote on the 2018 compensation we paid to the executive officers who are named in the Summary Compensation Table on page 59, also referred to as our “Named Executive Officers.” For 2018, Weston M. Hicks, Joseph P. Brandon, Christopher K. Dalrymple, and John L. Sennott, Jr. were our Named Executive Officers.

Please read the Compensation Discussion and Analysis beginning on page 39 of this Proxy Statement as well as the Summary Compensation Table and other related compensation tables, notes and narrative appearing on pages 59 through 72 of this Proxy Statement, which provide detailed information on the compensation of our Named Executive Officers for 2018.

For a discussion of the results of past advisory votes on the compensation of our Named Executive Officers and the Compensation Committee’s response to such results, see “Compensation Discussion and Analysis —Compensation Committee Process — Advisory Vote on Executive Compensation” on page 49.

The Compensation Committee and the Board believe that Alleghany’s 2018 executive compensation program was designed appropriately and ensured that management’s interests were aligned with the interests of Alleghany stockholders. Accordingly, we are asking our stockholders to vote in favor of the following advisory resolution at the 2019 Annual Meeting:

RESOLVED, that the stockholders of Alleghany Corporation (“Alleghany”) approve, on an advisory basis, the compensation of Alleghany’s named executive officers as disclosed pursuant to Item 402 of Securities and Exchange Commission Regulation S-K in the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables, notes and narrative set forth in the proxy statement for Alleghany’s 2019 Annual Meeting of Stockholders.

Although this advisory vote, commonly referred to as “say-on-pay,” is not binding on Alleghany, the Compensation Committee or the Board, the Board and the Compensation Committee will review and consider the voting results when making future decisions about our executive compensation program.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE. THIS PROPOSAL SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES CAST ON THIS PROPOSAL. ABSTENTIONS AND BROKER NON-VOTES WILL HAVE NO EFFECT ON THE RESULTS OF THIS VOTE.

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COMPENSATION COMMITTEE REPORT

The Compensation Committee has met to review and discuss with Alleghany’s management the specific disclosure contained under the heading “Compensation Discussion and Analysis” beginning on page 39. Based on its review and discussions with management regarding such disclosure, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in Alleghany’s Annual Report on Form 10-K for the year ended December 31, 2018.

Raymond L.M. Wong

Ian H. Chippendale

William K. Lavin

Phillip M. Martineau

Compensation Committee of the Board of Directors

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COMPENSATION DISCUSSION AND ANALYSIS

Dear Alleghany Stockholder,

Due to SEC proxy rules and regulations, most of the compensation information contained in the Summary Compensation Table on page 59 was set back in January of 2018, and the analysis and determinations regarding such information also look backwards to that time. Before turning to that historical information, we thought it would be helpful to first discuss Alleghany’s overall corporate structure and philosophy, how that philosophy and structure inform our executive compensation program and the results of a review we did during 2018 of our compensation process and program. The results of this review informed decisions we made with respect to compensation for 2019.

On a group-wide basis, Alleghany has over 9,000 employees. Yet at the parent-level, Alleghany is managed by a small group of professionals consisting of four executive officers and 15 officers. This small team is responsible for overseeing, not operating, Alleghany’s subsidiaries; making capital allocation decisions; managing Alleghany’s group-wide investment portfolios; and managing financial reporting, legal and compliance functions and other public company obligations. With respect to our subsidiaries, the parent-company does not run them on a day-to-day basis — their subsidiary executive teams do. Instead, the parent company’s small professional team provides our subsidiaries with strategic guidance, sets risk parameters, and ensures that management incentives are appropriate.

Alleghany’s extensive history and focus on its long-term legacy inform our culture, strategy and compensation. From a culture perspective, although we must offer competitive compensation, we do not seek to compete for executive talent solely on the basis of compensation. We also compete by offering a unique professional opportunity to work in a high integrity environment where the focus is on building stockholder value over the very long term. Our collaborative, team-oriented culture is a key driver of retention. Our retention efforts, which include compensation aspects, result in parent-level employees with long tenures, which fits with our long-term financial results orientation.

From a strategic perspective, Alleghany’s long-term value proposition is to make a reasonable return in good times and preserve capital in bad times. We have an aversion to doing things which, although they may have the potential for significant gain, also bring with them greater chance of a permanent loss of capital. With that in mind, our financial objective in the current economic environment is to grow our common stockholders’ equity per share at a rate of 7-10% over the long term without employing excessive amounts of financial leverage and without taking imprudent risks.

Our compensation program is designed to provide compensation to the parent company professional team that is aligned with the above objective. Alleghany’s executives are primarily compensated through annual cash compensation, consisting of salary and an annual incentive opportunity, and a long-term plan which provides annual awards of performance shares and restricted stock units. With respect to annual incentive opportunities, we generally think of annual incentive compensation as variable pay linked to the achievement of strategic and operational objectives by management during the year and not “incentive” pay intended to send strong messages about performance differences based on a rigid formulaic approach. Our annual incentive awards are capped and not the most meaningful part of management compensation. After completing our 2018 review and considering a number of alternative approaches, we concluded that, in Alleghany’s current configuration, the existing structure of our annual incentive compensation program, with its funding occurring only upon generation of positive earnings, its capped upside, and our ability to adjust payouts in light of our evaluation of Alleghany performance and individual contributions, remains the optimal approach and is in the best interests of Alleghany and its stockholders.

With respect to long-term incentive compensation, executive awards are made primarily in the form of performance shares, and these awards comprise a significant amount of our executive compensation.

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Since 2003, performance share payouts have been based on management’s ability to grow common stockholders’ equity per share relative to Alleghany’s cost of equity capital, an approach we believe aligns executive compensation with the returns provided to Alleghany’s long-term owners. If Alleghany suffers a decline in common stockholders’ equity per share in any one year, like it did in 2018, it (i) negatively impacts all outstanding performance share awards, (ii) reduces or eliminates the number of performance shares that are paid out, and (iii) because the stock price is likely to be lower than it would have been without a decline in common stockholders’ equity in that one year, the dollar value of any shares earned is reduced even further. In this regard, we note that for the performance share award period 2015-2018 which just ended, management did not achieve the threshold performance necessary for any payout of performance shares, which we believe is evidence that they are held fully accountable for Alleghany’s longer-term financial results.

With respect to our focus on common stockholders’ equity per share as the metric for performance share awards, after concluding our 2018 review, we continue to believe that this metric is the most appropriate yardstick against which management’s performance should be measured. Over long periods of time (a decade or more), Alleghany’s stock price has tended to grow at the same rate as the growth rate of its common stockholders’ equity per share. Over shorter time-periods, however, the two can move in very different directions, due to general market sentiment and changes in investor expectations about the future relative growth rate of Alleghany’s common stockholders’ equity per share compared to other alternatives in the stock market. Although we provide a substantial percentage of compensation to our executive officers through stock-based vehicles, we do not believe in linking the number of performance shares earned to stock price performance, or reducing the number of performance shares earned in the event that the stock price performance is negative.

We see three primary issues with using stock price as a specific performance metric in incentive plans. First, a company’s stock price may move up or down over short periods of time (less than five years) due to cyclical trends in its industry, changes in investor preferences, or other reasons that are unrelated to a company’s performance. Second, a company’s risk profile may not be adequately tested over short periods of time. If a stockholder invests in a company for long-term growth in capital, it is imperative that the company not suffer a permanent loss. Management in an insurance or reinsurance holding company can produce what may appear to be good short-term results, either by encouraging premium growth through more aggressive pricing or taking more “tail risk” in its operations. The negative effects of such actions may not show up over short periods of time, but time is the enemy of the imprudent risk taker. Eventually companies are tested, and it is only then that a stockholder finds out how well management has controlled risk. Third, extreme stock market moves can produce perverse results, even if measured on a relative basis. A stock market bubble can reward management when an increasing share price overcomes the impact of poor financial performance. Similarly, a stock market crash can penalize management when excellent financial performance is masked by share price declines unrelated to the company. Relative performance can be impacted by short-term volatility more so than steady, long-term results.

In sum, we believe that Alleghany’s approach to holding company executive compensation is timeless and effective. It is designed to incentivize performance over the long-term and link executives’ interests with those of Alleghany’s long-term stockholders. We believe that the program, although we may refine it in the future as circumstances or needs warrant, is effective in achieving our strategic objectives and aligns management’s interests with those of all of Alleghany’s stockholders.

Sincerely

Raymond L.M. Wong

Ian H. Chippendale

William K. Lavin    

Phillip M. Martineau

Compensation Committee of the Board of Directors

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Review of Executive Compensation Process and Program in 2018

After passage of the Tax Cuts and Jobs Act of 2017, or the “TCJA,” and due to certain internal considerations, the Compensation Committee determined to conduct a review of the primary components of Alleghany’s parent-level compensation program to ensure that it continued to support the objectives and principles discussed above on pages 39 and 40. As part of this, the Compensation Committee considered changes to annual incentive compensation, long-term incentive compensation, and the peer companies we reference below when thinking about compensation and performance. Results of this review are set out in further detail below.

As part of its review, in June 2018, after a competitive process, the Compensation Committee selected Semler Brossy Consulting Group, LLC, or “Semler Brossy,” as its new compensation consultant. In making this selection, the Compensation Committee reviewed and assessed Semler Brossy’s independence as a firm and the individuals providing advice to the Compensation Committee and determined that the firm and its relevant individual advisors were independent.

At the direction of the Compensation Committee, Semler Brossy reviewed Alleghany’s executive compensation program and process, including by meeting with the Compensation Committee and members of management. At the Compensation Committee’s September 2018 meeting, Semler Brossy summarized its initial findings, reporting that it did not believe there was a need to make significant changes to Alleghany’s existing compensation program. However, Semler Brossy suggested a few refinements for consideration to ensure that the compensation program continued to align with Alleghany’s strategy, culture and range of appropriate competitive practices. The Compensation Committee asked that Semler Brossy work with management during the remainder of 2018 to consider such possible refinements, including peer group development, design of the annual incentive plan and objectives thereof, the structure of Alleghany’s long-term incentive plan and metrics thereof and various program governance and related items. After the completion of such work, the Compensation Committee determined the following with respect to certain aspects of Alleghany’s executive compensation program.

TCJA and Performance-Linked Pay

Despite the elimination of tax benefits for performance-based pay under the TCJA, the Compensation Committee determined that linking a substantial portion of executive annual compensation to performance continued to be appropriate and in the best interests of Alleghany and its stockholders.

Annual Incentive Plan

No change was made to the current structure of executive annual incentive awards under the 2015 Management Incentive Plan, or the “2015 MIP.” Although the Compensation Committee analyzed and discussed various changes, including adding an explicit quantitative metric to annual performance goals for executives, the Compensation Committee ultimately determined, as discussed on page 39, that the current approach to annual incentive compensation was appropriate at this time and in the best interests of Alleghany and its stockholders.

Long-Term Incentive Plan    

After reviewing and discussing analyses at its 2018 meetings and January 2019 meeting, the Compensation Committee determined that Alleghany’s long-term incentive program was generally well-structured and suited to support the strategic objective of growing common stockholders’ equity per share 7-10% over the long-term without taking imprudent risks. The Compensation Committee did determine to refine its approach to long-term incentives with the following revisions for 2019 awards:

Form of Long-Term Incentive Awards for Mr. Hicks and Mr. Brandon. Historically, Mr. Hicks’s and Mr. Brandon’s long-term incentive opportunities were denominated solely in performance shares, the payout of

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which is based on achievement of the specified performance goal of growth in common stockholders’ equity per share, while such opportunities for Mr. Sennott and Mr. Dalrymple were divided two-thirds in performance shares and one-third in time-based restricted stock units which cliff-vest four years from the date of grant. For 2019, Mr. Hicks’s and Mr. Brandon’s long-term incentive opportunities have been divided 75% in the form of performance shares and 25% in the form of restricted stock units. This change was made in order to help further balance risk in our long-term incentive program and maintain a focus on rewarding longer-term performance. In making this decision, the Compensation Committee also considered factors including peer group and general industry market practice, as well as grant practices for other members of Alleghany management.

Performance Share Award Period. Historically, payouts of performance shares awards were based solely on the growth in common stockholders’ equity per share over a single four-year performance period. The Compensation Committee determined to adjust the awards beginning in 2019 (outstanding awards will not be adjusted) so that performance periods were staggered such that 25% will be paid out based on a three-year performance period (January 1, 2019 to December 31, 2020), 50% will be paid out based on a four-year performance period (January 1, 2019 to December 31, 2021) and 25% will be paid out based on a five-year performance period (January 1, 2019 to December 31, 2022). This staggered payout schedule avoids the “cliff effect” at the end of any particular four-year award period which can, in certain circumstances, turn a long-term plan into a short-term plan and incent unwanted behavior.

Peer Group

As part of its review of the Company’s executive compensation program, Semler Brossy also developed a peer group of companies that might compete with us for executive talent to be used for market comparison purposes. Although we do not seek to set our executive compensation primarily based on any benchmarks or peer group, we believe that information regarding pay levels and practices at other companies is nevertheless useful in two respects. First, we recognize that our compensation levels and practices must be competitive in the marketplace. Second, independent marketplace information is one of the many factors that we consider in assessing the reasonableness of compensation. In this regard, in considering compensation for the Named Executive Officers for 2019, the Compensation Committee considered comparative market data from the following peer companies identified by Semler Brossy:

This peer group was developed to reflect publicly traded companies that generally as a group (i) approximate our scope of business and that of our subsidiaries, including revenue and market capitalization, (ii) are similar to us in the importance to their business of capital allocation, investments and risk management, (iii) compete with us for a comparable pool of executive talent, and (iv) reflect our global presence. The peer companies identified by Semler Brossy were the same as those identified by the Compensation Committee’s former compensation consultant other than replacing Progressive Corporation and Erie Indemnity Company with The Hanover Insurance Group and The Hartford Financial Services Group.

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2018 Compensation Program Summary

2018 total direct compensation (salary, annual incentive and long-term equity based awards) in aggregate for our Named Executive Officers is summarized below.

Annual Compensation Component		Key Features/Purpose		Aggregate Amounts Involved
Salary		Provides a fixed amount of cash compensation.   The Compensation Committee generally makes salary adjustments annually, based on salaries for the prior year, general inflation, individual performance and internal comparability considerations.
Annual Cash Incentives		Provides a pay-for-performance component if Alleghany generates positive earnings, based on an evaluation of Alleghany’s performance and individual contributions, with individual awards “capped” at approximately 150% of target.   The Compensation Committee determines individual results for participants and payouts based on overall financial and operational performance of management.
Long-Term Equity-Based Incentives		Performance Shares: Provides pay-for-performance component focused on achievement of longer-term financial objective of increasing book value per share at rates of 7-10% over the long term without employing excessive amounts of financial leverage and without taking imprudent risks. Individual performance share awards are “capped” at 150% of target.   Awards made in January 2018 pay out to participants based on the average annual compound growth in our book value per share from the award date through year-end 2021, with growth at 7% paying out at target, growth at 9% paying out at maximum and growth below 5% paying zero.   Restricted Stock Units: Grants of restricted stock units to our chief financial officer and General Counsel provide a retention element of total compensation and incent the prudence we desire them to have in their respective roles.   The value of such awards depends on the market price of our common stock. The awards cliff-vest four years from date of grant.
		Aggregate NEO 2018 Direct Compensation Amount = $18.4 million

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We believe the following practices further align our compensation program with our stockholders’ interests:

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Alleghany Performance in 2018

Additional information regarding Alleghany’s 2018 results, including audited consolidated financial statements, as well as MD&A with respect to 2018 results, is contained in the Form 10-K, which was filed with the SEC on February 20, 2019. Readers are encouraged to review the Form 10-K for a more complete discussion of Alleghany’s financial performance.

Alleghany Long-Term Performance

We believe that Alleghany’s performance is best measured over the long term, and that long-term growth in common stockholders’ equity per share is the best metric for evaluating such performance. In this regard, the table below shows the annual, and three- and ten-year average rolling, annualized growth in our common stockholders’ equity per share, adjusted for a 2018 cash dividend and historical stock dividends, during the five-year period from December 31, 2013 to December 31, 2018:

As can be seen in the table above, Alleghany’s common stockholders’ equity per share has compounded over the three- and ten-year periods in the range of Alleghany’s stated strategic objective of 7-10% annual growth in common stockholders’ equity per share, although it trailed that objective in 2018 and the three-year periods ending in 2017 and 2018 primarily due to a decline in the market value of Alleghany’s equity portfolio in December 2018 and significant catastrophe losses in 2017 and 2018.

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The chart below summarizes Alleghany’s common stockholders’ equity per share growth and stock price performance over the ten-year period from December 31, 2008 to December 31, 2018, compared with the S&P 500, with all values indexed to December 31, 2008. During this ten-year period, Alleghany’s common stockholders’ equity per share increased at a compound annual rate of 7.2% (adjusted for dividends), compared with a compound annual rate of return of 13.1% for the S&P 500, and the price of Alleghany common stock (adjusted for dividends) appreciated at a 9.1% compound annual rate of return.

As indicated by the data presented in the chart above, Alleghany’s growth in common stockholders’ equity per share has been relatively consistent, with the exception of 2018 when it was negatively impacted by a decline in the market value of Alleghany’s equity portfolio and significant catastrophe losses. The trading price of Alleghany’s common stock has been more volatile, reflecting the volatility of the stock market in general. In Alleghany’s view, growth in common stockholders’ equity per share is a better measure of fundamental performance and value creation as compared to the more volatile trading price of Alleghany’s common stock. As such, Alleghany focuses its executive compensation incentive program on building common stockholders’ equity per share over time.

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During the ten-year performance period set out in the graph on page 46, we believe that Mr. Hicks’s compensation has been well-aligned with Alleghany’s long-term performance as can be seen in the table below.

10-year Pay-TSR⁽¹⁾ Alignment

($ thousands)

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Compensation Committee Process

Compensation Determination Timetable

General Setting of Salary and Incentive Awards

Salary adjustments for the coming year and new incentive awards are generally made annually by the Compensation Committee at its regularly scheduled January meeting or meetings. At its meetings in January 2018, the Compensation Committee determined 2018 salaries, 2018 annual incentive award opportunities and 2018-2021 long-term incentive awards for all of the Named Executive Officers. This meeting followed the January 2018 Board meeting, at which the Board reviewed and discussed:

Setting of Mr. Hicks’s 2018 Compensation

In determining Mr. Hicks’s 2018 compensation, the Compensation Committee at its January 2018 meeting reviewed Mr. Hicks’s 2017 performance and 2018 priorities, as well as all components of Mr. Hicks’s 2017 compensation, including annual salary, annual cash incentive compensation in respect of 2017, outstanding performance share awards, values of previous awards of restricted stock and benefits under Alleghany’s Deferred Compensation Plan, Alleghany’s medical, long-term disability and other employee welfare plans and the freezing of the Retirement Plan at year-end 2013. After this review and the Compensation Committee’s consideration of input from its compensation consultant at the time, Frederic W. Cook & Co. Inc., or “F.W. Cook,” the Committee determined to increase Mr. Hicks’s 2018: (i) salary to $1,030,000 from $1,000,000, (ii) target annual incentive opportunity to 200% from 190% of salary, and (iii) target long-term incentive opportunity for the 2018-2021 award period to 460% from 450% of salary. These increases in target opportunities reflect the Compensation Committee’s consideration of internal comparability factors, its assessment of Mr. Hicks’s superior performance over a long-term period, very positive 2017 results for Alleghany and its stockholders, and its emphasis on tying increases in Mr. Hicks’s compensation substantially to performance-based components.

Payouts of Awards in Respect of 2018 Performance

The Compensation Committee generally determines the payout of awards for prior performance periods at a meeting in late February, upon the completion of the year-end audit of prior year financial statements. With respect to 2018, the Compensation Committee determined payouts to the Named Executive Officers, including Mr. Hicks, of 2018 annual incentive awards and 2015-2018 long-term incentive awards at its February 20, 2019 meeting. Annual incentive payout determinations were based on Board and Compensation Committee discussions and determinations regarding Alleghany’s financial performance for 2018 and applicable award periods, an evaluation of Mr. Hicks’s 2018 performance, and the recommendation of Mr. Hicks regarding the individual performance of the other Named Executive Officers. With respect to the 2015-2018 long-term incentive awards, no payouts were made as threshold performance was not achieved.

Compensation Committee Advisors and Services

The Compensation Committee retained Semler Brossy as a compensation consultant commencing in June 2018 to assist the Compensation Committee in its review of executive and director compensation practices,

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including the competitiveness of Alleghany executive compensation, executive compensation program design matters, market trends and technical considerations.

The nature and scope of services that Semler Brossy provides to the Compensation Committee include the following: competitive market compensation analyses; assistance with the redesign of any director or management compensation or benefit programs as necessary or requested; assistance with respect to analyzing the impact of regulatory and/or accounting developments on our compensation plans and programs; and preparation for and attendance at selected Compensation Committee meetings. Semler Brossy is also available to advise the Compensation Committee and management on various executive compensation matters involving our operating subsidiaries. The Chairman of the Compensation Committee reviews and approves all services provided by Semler Brossy and fees to be paid by Alleghany to Semler Brossy. As discussed on page 42, the Compensation Committee has been advised by Semler Brossy as to the compensation levels of other companies that might compete with us for executive talent.

From January 2018 to June 2018, the Compensation Committee was advised by its compensation consultant, F.W. Cook. During this time, F.W. Cook assisted the Compensation Committee in its review of executive and director compensation practices, including the competitiveness of Alleghany executive compensation, executive compensation program design matters, market trends and technical considerations. The Compensation Committee reviewed and assessed F.W. Cook’s independence as a firm and the individuals providing advice to the Compensation Committee and determined that the firm and the relevant individual advisors were independent.

Advisory Vote on Executive Compensation

Consistent with the Board’s recommendation and the non-binding stockholder vote at the 2017 Annual Meeting of Stockholders, Alleghany holds a stockholder advisory vote on executive compensation, commonly referred to as “say-on-pay,” every year. The Compensation Committee monitors the results of Alleghany’s “say-on-pay” proposal and related stockholder feedback when evaluating the effectiveness of Alleghany’s compensation policies and disclosures, particularly in the event of a negative vote or significant change in the percentage of favorable votes with regard to such proposal. Alleghany also actively engages with its significant stockholders to gauge their opinions on a range of topics, including executive compensation. We view this as an important opportunity to develop broader relationships with key investors over the long term and to engage in open dialogue on compensation and governance related issues.

At our Annual Meeting of Stockholders in April 2018, we received strong support for our executive compensation program, with approximately 98% stockholder approval of our say-on-pay proposal. When setting compensation for 2019, the Compensation Committee considered both the level of voting support from our stockholders on our say-on-pay vote, as well as stockholder feedback and Semler Brossy’s observations when evaluating our executive compensation plans and determined that no material changes to the Alleghany’s executive compensation program were warranted. The Compensation Committee will continue to review the design of the executive compensation program in light of future “say-on-pay” votes, developments in executive compensation, and Alleghany’s pay-for-performance philosophy to ensure that the executive compensation program continues to serve the best interests of Alleghany and its stockholders.

Elements of 2018 Compensation

The principal elements of compensation paid to our Named Executive Officers in respect of 2018 consisted of:

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In addition, our Named Executive Officers receive a benefit, assuming the completion of five years of service with Alleghany, under the Retirement Plan, although such benefit was frozen in 2013.

The percentage that these elements represent of the 2018 compensation for our chief executive officer and our other Named Executive Officers is reflected below.

Set out below in more detail is a description and analysis of each of these elements of our compensation program.

Salary

We seek to pay salaries that are sufficiently competitive to attract and retain executive talent. The Compensation Committee generally makes salary adjustments annually, in consultation with its compensation consultant, based on salaries for the prior year, general inflation, individual performance and internal comparability considerations. The following actions were taken with respect to 2018 salaries for our Named Executive Officers:

		2018 Salary($)								2017 Salary ($)				Rationale
Mr. Hicks		$	1,030,000							$	1,000,000			3% increase reflecting 2017 contributions, continued emphasis on performance-linked compensation and first salary increase since 2011.
Mr. Brandon			875,000								850,000			3% increase reflecting 2017 contributions and continued emphasis on performance-linked compensation.
Mr. Dalrymple			690,000								670,000			3% increase reflecting 2017 contributions and continued emphasis on performance-linked compensation.
Mr. Sennott			690,000								670,000			3% increase reflecting 2017 contributions and continued emphasis on performance-linked compensation.

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Annual Cash Incentive Compensation

We generally pay annual cash incentives to our Named Executive Officers under the 2015 MIP. The intent of these annual cash incentive awards is to provide a pay-for-performance element for the achievement of Alleghany’s shorter-term objectives.

In making 2018 awards under the 2015 MIP, the Compensation Committee recognized that, given the nature of Alleghany’s business and long-term approach, evaluating how Alleghany achieves shorter-term objectives can be a subjective process, but believed the subjectivity is mitigated by the fact that these 2018 annual cash incentive awards were subject to two meaningful limitations. First, no payout to any Named Executive Officer could exceed the amount of his maximum annual incentive opportunity set at the beginning of 2018, resulting in an approximate $3.1 million maximum award opportunity for Mr. Hicks and an aggregate maximum award opportunity of approximately $6.2 million for our Named Executive Officers as a group. Second, funding of the 2018 Incentive Pool Amount (as defined below) is limited to a specified level of earnings produced by management in 2018. To the extent the funding of the 2018 Incentive Pool Amount had been less than the aggregate maximum award amount of approximately $6.2 million for our Named Executive Officers as a group, a pro-rata reduction of individual award amounts would have occurred. To the extent that Alleghany had a loss for 2018, no payout would have been made under the 2015 MIP. In sum, payouts under the 2015 MIP for 2018 performance are the lesser of (i) the 2018 Incentive Pool Amount and (ii) the maximum opportunity for management (as may be reduced by the Compensation Committee for individual performance).

Process

The Compensation Committee makes annual incentive awards for the upcoming year and determines each Named Executive Officer’s appropriate target amount in January of that year after evaluating projected earnings for the prior year. 2018 target annual incentive awards and maximum incentive opportunities were as follows:

The differing target awards as a percentage of salary reflect the Compensation Committee’s determinations of appropriate levels and mix of compensation components, taking into account varying levels of responsibility, internal comparability, the implicit impact of the various Named Executive Officer levels on the accomplishment of Alleghany’s financial, strategic and operational objectives and competitive considerations. For 2018 annual incentive awards, the opportunities for each of our Named Executive Officers, expressed as a percentage of salary, were the same as those set forth above for 2017, except for Mr. Hicks whose opportunity at target was increased to 200% of salary, or $2,060,000, with a maximum opportunity of $3,090,000 reflecting the Compensation Committee’s consideration of internal comparability factors, its assessment of Mr. Hicks’s superior performance over a long-term period, very positive 2017 results for Alleghany and its stockholders, and its emphasis on tying increases in Mr. Hicks’s compensation substantially to performance-based components.

Payout of awards is tied to the achievement of a specified financial performance objective, subject to reduction in respect of Alleghany performance and/or individual performance. The financial performance objective is set in January, after evaluating projected earnings for 2018 and determining each Named Executive

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Officer’s appropriate target opportunity amount. With respect to individual performance objectives, each of our Named Executive Officers submits individual objectives for the coming year, with Mr. Hicks submitting his to the Board and the other Named Executive Officers submitting their individual objectives to Mr. Hicks. These objectives are in addition to the core responsibilities of our Named Executive Officers. Status updates on the achievement of such individual objectives and performance of core responsibilities are given through the year by each Named Executive Officer, culminating in a final report made in advance of payout determinations made by the Board and Compensation Committee at the beginning of the following year. In this regard, Mr. Hicks provides a self-evaluation to the Board of his performance against objectives during the year and Messrs. Brandon, Dalrymple and Sennott provide Mr. Hicks with the same, which Mr. Hicks then reviews with the Compensation Committee.

Financial Performance Objective

The 2018 financial performance goal established by the Compensation Committee for annual incentive awards to our Named Executive Officers was based on a funding approach, which was capped at an amount equal to 3% of 2018 earnings before income taxes, as reported in Alleghany’s audited financial statements, as adjusted, or the “2018 Incentive Pool Amount,” to:

With respect to catastrophe losses, RSUI’s 2014-2017 catastrophe average, or the “RSUI CAT Average,” was $85.2 million compared with 2018 actual catastrophe losses of $133.4 million, net of prior year development and reinsurance reinstatement premiums. TransRe’s 2014-2017 catastrophe average, or the “TransRe CAT Average,” was $166.5 million compared with 2018 actual catastrophe losses of $446.5 million, net of prior year development and reinsurance reinstatement premiums. The use of the RSUI CAT Average and TransRe CAT Average rather than the actual amount of their respective 2018 catastrophe losses was based upon the Compensation Committee’s acknowledgement that RSUI and TransRe are significant writers of catastrophe exposed property (re)insurance and that management cannot predict the occurrence or severity of catastrophe losses in any particular year. Using a four-year average recognizes that catastrophe losses are a cost of doing business and accounts for them in a manner consistent with Alleghany’s focus on long-term performance. In this regard, actual catastrophe losses impact funding calculations for annual incentive pools during the four-year averaging period in which they are included. A year in which Alleghany experiences significant catastrophe losses, such as it did during 2018, will impact MIP annual incentive pool funding for the subsequent four years, holding management fully accountable for such catastrophe losses.

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Individual Performance Objectives

In January 2018, Mr. Hicks provided the Board, and Messrs. Brandon, Dalrymple and Sennott provided Mr. Hicks, with their 2018 objectives that were in addition to performance of their core responsibilities. These core responsibilities and 2018 objectives for our Named Executive Officers included the following:

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Payouts with respect to 2018 Performance

Based on our 2018 financial results, the 2018 Incentive Pool Funding Amount was approximately $11.2 million, so that Messrs. Hicks, Brandon, Dalrymple and Sennott were eligible to receive maximum payout in February 2019 of their 2018 incentive opportunities, aggregating to approximately $6.2 million, under the 2015 MIP based on achievement of the financial performance goal, subject to reduction for individual performance.

At its meeting on February 20, 2019, the Compensation Committee evaluated Alleghany’s overall corporate performance and the individual performance of Mr. Hicks, and Mr. Hicks’s recommendation regarding the individual performance of the other Named Executive Officers. With respect to Alleghany’s operating performance and achievement of strategic objectives, the Compensation Committee noted the following positive factors, among others, during 2018:

These positive factors were partially offset by factors including an underwriting loss for 2018 at TransRe, primarily due to elevated catastrophe losses, and a 2018 fourth quarter impairment charge at Stranded Oil Resources Corporation.

After consideration of these and other factors, the Compensation Committee determined to make a payout to Mr. Hicks of his 2018 annual incentive opportunity at $2,163,000, representing 105% of his target opportunity and 70% of his maximum opportunity, compared with a payment of his prior year annual incentive award at 112.5% of target and 75% of his maximum opportunity. Regarding individual performance of the other Named Executive Officers, Mr. Hicks’s recommendations reflected the factors cited above, Mr. Hicks’s assessment of superior performance with respect to their core responsibilities, and achievement of their 2018 objectives. Following the evaluations by Mr. Hicks of the other Named Executive Officers, the Compensation Committee authorized payouts of 2018 annual bonus opportunities at maximum to Messrs. Brandon, Dalrymple and Sennott under the 2015 MIP for an aggregate payout to them in the amount of approximately $3.1 million.

Long-Term Equity-Based Incentive Compensation

In 2018, we made awards of long-term incentive compensation to our Named Executive Officers under the 2017 Long-Term Incentive Plan, or the “2017 LTIP.” Historically, long-term incentive awards have been made primarily in the form of performance shares and, in certain cases, shares of restricted stock and restricted stock units. Awards of performance shares under the 2017 LTIP are intended to provide a pay-for-performance component of compensation based upon the achievement of longer-term financial objectives focused on growth in book value per share. Awards of restricted stock or restricted stock units under the 2017 LTIP are intended to provide a retention component of compensation, the value of which is tied to the market price of our common stock.

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Performance Shares

For the 2018-2021 award period, the Compensation Committee based the number of performance shares awarded to each Named Executive Officer upon a percentage of such officer’s 2018 salary (as determined by the Compensation Committee) divided by the average closing prices of common stock for the 30-day period prior to the mailing of material for the meeting of the Compensation Committee at which such awards were made. Such percentages of 2018 salary were as follows:

The differing target awards as a percentage of salary reflect the Compensation Committee’s determinations of appropriate levels and mix of compensation components, taking into account varying levels of responsibility, internal comparability, the implicit impact of the various Named Executive Officers on the accomplishment of Alleghany’s financial, strategic and operational objectives, and competitive considerations. With respect to Mr. Hicks in particular, his 2018 performance share award reflected the Compensation Committee’s determination to tie Mr. Hicks’s compensation closely to Alleghany’s financial performance and its views of the challenge of meeting the financial performance goals for the 2018-2021 award period in light of the current interest rate and (re)insurance market environments. For 2018 performance share awards, the opportunities for each of our Named Executive Officers, expressed as a percentage of salary, were the same as those set forth above for 2017, except for Mr. Hicks whose opportunity at target was increased to 460% of salary from 450% of salary.

In making performance share awards for the 2018-2021 period, the Compensation Committee considered:

Taking into account such conditions, the Compensation Committee set the following performance goals for the 2018-2021 period:

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The Compensation Committee believed that the above payout thresholds would continue to be challenging to meet, particularly in light of slow economic growth, a prolonged period of very low interest rates when a significant portion of Alleghany’s (re)insurance subsidiary investment assets are required to be held in high-quality fixed income securities, relatively high current valuations in equity markets and the imperative to maintain underwriting discipline, even if it means shrinking top-line growth, in the continuing extremely competitive reinsurance and insurance markets due to an abundance of both traditional and new alternative underwriting capacity.

Restricted Stock Units

In 2018, long-term incentive opportunities for Mr. Dalrymple and Mr. Sennott included restricted stock units, representing awards set at 50% of their respective base salaries, which cliff-vest four years from date of grant. These grants of restricted stock units are intended to further balance risk in our long-term incentive program and maintain a focus on rewarding longer-term performance.

Perquisites

Our general practice is to not provide perquisites or other personal benefits to our Named Executive Officers. In 2018, no Named Executive Officer received more than $10,000 in perquisites or other personal benefits.

Deferred Compensation Plan

We credit an amount equal to 15% of a Named Executive Officer’s base salary to the Deferred Compensation Plan each year. Entitlement to this savings benefit is not based on performance. As it is our intention that a significant portion of compensation for our Named Executive Officers be contingent on performance objectives, the savings benefit offered by the Deferred Compensation Plan provides a stable component of total compensation. In addition, the Deferred Compensation Plan permits our Named Executive Officers to elect to defer the receipt, and thus the taxation, of all or part of their base salary and their annual cash bonus. A participant may choose to have savings benefit credit amounts and deferred salary and bonus amounts either credited with interest, treated as though invested in our common stock or increased or decreased by an amount proportionate to the growth or decline in our stockholders’ equity per share.

Retirement Plan

Retirement benefits for our Named Executive Officers are provided under the Retirement Plan. Under the Retirement Plan, a participant must have completed five years of service with Alleghany or a subsidiary of Alleghany before he or she is vested in, and thus has a right to receive, any retirement benefits following his or her termination of employment. Effective December 31, 2013, the Retirement Plan was closed to new participants and no additional benefits for existing participants accrue after such date. Any participant who was not vested in his or her accrued benefit as of December 31, 2013 will continue to have future service with Alleghany credited toward the Retirement Plan’s five-year vesting requirement.

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Financial Statement Restatements

It is our Board’s policy that the Compensation Committee will, to the extent permitted by governing law, have the sole and absolute authority to make retroactive negative adjustments to any cash or equity-based incentive compensation awarded or paid to any of our officers where the award or payment was predicated upon the achievement of performance goals that were subsequently restated or otherwise adjusted in a manner that would reduce the size of any such award or payment. In this regard, the Compensation Committee is authorized to have Alleghany seek to recover any amount the Compensation Committee determines was inappropriately received by any officer.

Hedging and Pledging Policies

We maintain a policy on insider trading and compliance that prohibits our officers from directly or indirectly purchasing or using financial instruments that are designed to hedge or offset any decrease in the market value of Alleghany securities they own. In addition, under such policy, officers are prohibited from pledging Alleghany securities as collateral.

Executive Officer Stock Ownership Guidelines

We expect our executive officers to achieve ownership of our common stock having an aggregate value (based upon the higher of market value or book value) equal to a multiple of base salary, as follows: for our President and chief executive officer, the multiple is five times base salary; for our Executive Vice President, the multiple is four times base salary; for our Senior Vice Presidents, the multiple is three times base salary; and for our Vice Presidents, the multiple is one times base salary. We expect our executive officers to retain 75% of the shares of common stock (net of taxes) paid out to them under our long-term incentive plans until they achieve their applicable ownership levels, and they are expected to maintain such levels thereafter.

Tax Considerations

The TCJA substantially modified Section 162(m) of Internal Revenue Code of 1986, as amended, or the “Code,” and, among other things, eliminated the performance-based exception to the $1 million deduction limit effective as of January 1, 2018. As a result, beginning in 2018, compensation paid to the Named Executive Officers in excess of $1 million will generally be nondeductible, regardless of whether it is performance-based. In addition, beginning in 2018, the executive officers subject to Section 162(m), or, the “Covered Employees,” will include any individual who served as the chief executive officer or chief financial officer at any time during the taxable year and the three other most highly compensated officers (other than the chief executive officer and chief financial officer) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual will remain a Covered Employee for all future years, including following any termination of employment.

The TCJA includes a transition rule under which the changes to Section 162(m) described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and is not materially modified after that date. To the extent applicable to existing contracts and awards, the Compensation Committee may avail itself of this transition rule. However, because of uncertainties as to the application and interpretation of the transition rule, no assurances can be given at this time that our existing contracts and awards, even if in place on November 2, 2017, will meet the requirements of the transition rule. Moreover, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals in the best interest of the company, the Compensation Committee does not limit its actions with respect to executive compensation to preserve deductibility under Section 162(m) if the Compensation Committee determines that doing so is in the best interests of Alleghany.

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Compensation Policies and Practices Relating to Risk Management

Risk analysis has always been part of our design and review of our group-wide executive incentive plans, and the Compensation Committee regularly monitors compensation policies, practices and outstanding awards to determine whether our risk management and incentive objectives are being met with respect to group-wide employee incentives. Our material risks include investment risk (debt and equity), as well as catastrophe losses and material mispricing of risk at our insurance and reinsurance subsidiaries. The Board’s and management’s risk oversight is discussed on page 15. The Compensation Committee does not believe that risks arising from our group-wide compensation policies and practices for our employees are reasonably likely to have a material adverse effect on Alleghany. In this regard, as discussed on page 43, our short- and long-term incentive plans are capped at individual levels so as not to incent imprudent risk taking to achieve outsized payouts. In addition, our officers are required to own a substantial amount of common stock to ensure that they maintain a significant stake in our long-term success, and we have in place a compensation clawback policy applicable to our officers to further discourage imprudent risk taking. Further, we do not grant stock options to officers as we do not wish to reward or punish them for exogenous short-term market price movements. The management teams of our insurance and reinsurance subsidiaries are incented to write profitable business and have no incentives to grow premium volume by underpricing risk. The Compensation Committee seeks to set realistic incentive goals, monitors them in light of economic conditions and our strategy and risk appetite, and will consider appropriate adjustments in respect thereof in the event of any conflict between incentives and the Board’s strategy and risk appetite.

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EXECUTIVE COMPENSATION

The information under this heading relates to the compensation of our Named Executive Officers during 2018, 2017 and 2016.

Summary Compensation Table

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