Alleghany to Acquire Capitol Transamerica.

Business Editors

NEW YORK--(BUSINESS WIRE)--July 20, 2001

Alleghany Corporation (NYSE:Y) today announced the signing of a definitive merger agreement under which Alleghany will acquire Capitol Transamerica Corporation (Nasdaq:CATA) at a price of $16.50 per share in cash for Capitol Transamerica's common stock.

Capitol Transamerica is an insurance holding company, based in Madison, WI, that writes specialty lines of property and casualty insurance as well as fidelity and surety coverages, primarily through its subsidiary, Capitol Indemnity Corporation ("CIC"). CIC operates in 37 states with a geographic concentration in the Midwestern and Plains States. CIC conducts business through independent and general insurance agents located throughout the United States. The Capitol Transamerica Group is rated A+ (Superior) by A.M. Best Company, Inc., an independent organization that analyzes the insurance industry.

The transaction, valued at approximately $182 million, has been approved by the Boards of Directors of Alleghany and Capitol Transamerica and is subject to closing conditions, including the approval of holders of two-thirds of Capitol Transamerica's outstanding shares of common stock and certain regulatory approvals. The parties expect that a closing will occur by the end of the year.

As reported under generally accepted accounting principles, Capitol Transamerica's consolidated assets and stockholders' equity as of March 31, 2001 were $283.0 million and $144.5 million, respectively, and its net income was $14.5 million on revenues of $109.5 million in 2000 and $1.9 million on revenues of $23.6 million in the first quarter of 2001. As of March 31, 2001, Capitol Transamerica's insurance subsidiaries reported total statutory surplus of $113.7 million.

John J. Burns, Jr., President and chief executive officer of Alleghany, said, "This acquisition reinforces our commitment to building shareholder value through the ownership of profitable operating companies. Capitol Transamerica has achieved a record of growth and profitability while building its quality specialty insurance franchise throughout the Midwest. We intend to support the continued growth of Capitol Transamerica and look forward to welcoming Capitol Transamerica to the Alleghany family of companies."

George A. Fait, Chairman and President of Capitol Transamerica, said, "We are fortunate to have found a partner in Alleghany that will enable us to continue our operations here in Madison. We look forward to contributing to the growth and prosperity of the company, and to further encourage our agents to increase production with us. Alleghany's support of Capitol Transamerica is gratifying and we intend to expand our operations by offering a wider range of products. The long-term investors in Capitol Transamerica have been rewarded in the past and this sale enables them to realize a cash benefit for the faith that they have had in the company, its management and employees."

Capitol Transamerica was advised by Lazard and Alleghany was advised by Merrill Lynch.

Alleghany Corporation is engaged through its subsidiaries, Alleghany Underwriting Holdings Ltd, World Minerals Inc. and Heads & Threads International LLC, in the businesses of global insurance and reinsurance, industrial minerals and industrial fasteners.

This press release contains forward-looking statements with respect to the anticipated effects of the merger and the expected time of the closing of the transaction. The actual results and timing of the transaction could be significantly different, depending, among other things, on the timing of regulatory matters associated with the transaction. Factors that could affect results include those set forth in filings made by Alleghany and Capitol Transamerica with the Securities and Exchange Commission. Although forward-looking statements help to provide complete information about future prospects, readers should keep in mind that forward-looking statements are much less reliable than historical information.