ALLCITY INSURANCE COMPANY

                                 45 MAIN STREET
                            BROOKLYN, NEW YORK 11201
                                 (718) 422-4000

                              --------------------

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

                                  JUNE 24, 2002
                              --------------------

  To the Shareholders:


         The Combined 2001 and 2002 Annual Meetings of Shareholders  ("Meeting")
of Allcity  Insurance  Company  ("Company")  will be held at the  offices of the
Company, 45 Main Street,  Brooklyn,  New York 11201 on Monday, June 24, 2002, at
2:00 p.m. for the following purposes:

                  (1) To consider  and act upon the  election of nine members of
         the Board of Directors of the Company.

                  (2) To  transact  such other  business  as may  properly  come
         before the Meeting.

         Shareholders  of record as of the close of business on May 15, 2002 are
entitled to vote at and take part in the business of the Meeting.

         All  shareholders  are urged to participate  either by sending in their
proxies or by attending the Meeting in person.

By order of the Board of Directors.




                                                              Lisa M. Bencivenga
                                                             Corporate Secretary
June 1, 2002



                         IMPORTANT FOR ALL SHAREHOLDERS

                  It is important  that your shares be represented at the Annual
Meeting of Shareholders. To be sure your interests are represented,  please sign
and return promptly the enclosed proxy in the envelope  provided.  No postage is
required.



                            ALLCITY INSURANCE COMPANY

                                 45 MAIN STREET
                            BROOKLYN, NEW YORK 11201
                                 (718) 422-4000
                              --------------------
                                 PROXY STATEMENT
                              --------------------
                             COMBINED 2001 AND 2002
                         ANNUAL MEETINGS OF SHAREHOLDERS

                                  JUNE 24, 2002

                  This proxy  statement  is  furnished  in  connection  with the
solicitation   of  proxies  for  use  at  the  Annual  Meeting  of  Shareholders
("Meeting") of Allcity Insurance Company ("Company"), to be held on Monday, June
24, 2002, at 2:00 p.m. at the offices of the Company, 45 Main Street,  Brooklyn,
New York 11201.  This proxy  statement  and the  accompanying  form of proxy are
being sent to shareholders on or about the date hereof.

                  The enclosed form of proxy is being  solicited by the Board of
Directors of the Company.  Where the shareholder  specifies a choice as provided
in the form of proxy with  respect to the matters to be acted  upon,  the shares
will be voted in accordance with the choice so specified; otherwise they will be
voted in accordance with the Board of Directors' recommendations.  A shareholder
executing and returning a proxy has the power to revoke it before it is voted by
sending written notice or a subsequently executed and dated proxy to the Company
at its  principal  office or by  attending  the  Meeting  and  voting in person.
Attendance at the Meeting will not in and of itself constitute the revocation of
a proxy.

                  The expense of  solicitation  of the proxies  will be borne by
the Company.  The  solicitation  will be made  primarily by mail, and directors,
officers and regular  employees of the Company may solicit proxies by telephone,
telecopier,  telegram  or in  person.  Brokerage  houses  and other  custodians,
nominees  and  fiduciaries  will be  reimbursed  for the  expense of  forwarding
documents to beneficial owners for whom they hold stock.

 VOTING PROCEDURES

                  There must be a quorum present for the Meeting.  A quorum is a
majority  of the  outstanding  stock  represented  in  person or by proxy at the
Meeting.  If you submit a properly executed proxy card, even if you abstain from
voting, then you will be considered part of the quorum.

                                     - 1 -


                  The  affirmative  vote of the  holders of a  plurality  of the
Common  Shares  voted  at the  Meeting  is  required  to  elect  each  director.
Consequently, only Common Shares that are voted in favor of a particular nominee
will be counted toward such nominee's achievement of a plurality.  Common Shares
present at the  Meeting  that are not voted for a  particular  nominee or Common
Shares present by proxy where the  shareholder  properly  withheld  authority to
vote for such nominee  (including  broker  non-votes) will not be counted toward
such nominee's achievement of a plurality.

INDEPENDENT AUDITORS

                  The  Company  has  been   advised  that   representatives   of
PricewaterhouseCoopers  LLP, the Company's  independent  auditors for the fiscal
year ending December 31, 2001, will attend the Meeting, will have an opportunity
to make a statement  if they desire to do so and will be available to respond to
appropriate questions.


                     VOTING SECURITIES AND PRINCIPAL HOLDERS

                  General. Shareholders of record as of the close of business on
                  -------
May 15,  2002  ("Record  Date")  are  entitled  to  notice of and to vote at the
Meeting.  As of the Record Date, there were outstanding  7,078,625 Common Shares
of the Company, which entitle shareholders to one vote in person or by proxy for
each share held. The following table sets forth, as of May 15, 2002  information
as to ownership of the Company's Common Shares by persons owning more than 5% of
such shares.  Information  as to  management's  ownership of  securities  of the
Company and the  Company's  parents is set forth under the caption  "ELECTION OF
DIRECTORS--Security Ownership of Management."

NAME AND ADDRESS                    AMOUNT AND NATURE           PERCENT OF
OF BENEFICIAL OWNER                 OF BENEFICIAL OWNERSHIP     CLASS
- -------------------                 -----------------------     -----

Empire Insurance Company            5,987,401 Common            84.6%
("Empire")                          Shares owned of
45 Main Street                      record
Brooklyn, New York 11201

Baldwin Enterprises, Inc.           471,407 Common               6.7%
529 East South Temple               Shares owned of
Salt Lake City, Utah 84102 record

         Leucadia National Corporation  ("Leucadia") controls Empire and Baldwin
Enterprises, Inc. and may be considered a "parent" of the Company.

                                     - 2 -


                              ELECTION OF DIRECTORS


                  Pursuant  to the  Company's  Charter,  By-laws and acts of the
Board of Directors,  the Board of Directors is presently comprised of 13 members
who are divided into three  classes,  Classes I, II and III,  serving  staggered
three-year  terms of office.  Class I consists of five  directors and Classes II
and III consist of four directors each.

                  At the  Meeting,  there will be an  election  of four Class II
directors,  who will  serve for a  two-year  term  expiring  at the 2004  Annual
Meeting of  Shareholders,  one Class I  director,  who will serve for a one-year
term to expire at the 2003  Annual  Meeting of  Shareholders  and four Class III
directors,  who will serve for a  three-year  term to expire at the 2005  Annual
Meeting of Shareholders.  Martin B. Bernstein, H.E. Scruggs, Louis V. Siracusano
and  Lucius  Theus  are the  Board  of  Directors'  nominees  for the  Class  II
directorships. Rocco J. Nittoli is the Board of Directors' nominee for the Class
I directorship.  Christopher J. Gruttemeyer,  James E. Jordan, Joseph A. Orlando
and  Harry H.  Wise are the  Board of  Directors'  nominees  for the  Class  III
directorships. All of the nominees are presently directors of the Company.

                  Carmen M.  Rivera  resigned  from the  offices of Senior  Vice
President and from her Class I directorship of the Company and Empire  effective
January 31, 2001. At a meeting of the Boards of Directors duly held on March 19,
2001,  the Boards of the Company and Empire  accepted Ms.  Rivera's  resignation
effective  January 31, 2001,  and in accordance  with the By-Laws of the Company
and Empire,  appointed Mr. Rocco J. Nittoli as a Class I Director of the Company
and Empire effective March 19, 2001, to serve as a director of the Company until
the 2001 Annual Meeting of Shareholders.

                  Francis M.  Colalucci  resigned  from the offices of Executive
Vice  President,  Chief  Financial  Officer and Treasurer and from his Class III
directorship of the Company and Empire effective April 30, 2001. At a meeting of
the Boards of Directors  duly held on March 19, 2001,  the Boards of the Company
and Empire accepted Mr. Colalucci's resignation effective April 30, 2001, and in
accordance with the By-Laws of the Company and Empire, appointed Mr. Christopher
J. Gruttemeyer as a Class III director of the Company and Empire effective March
19, 2001, to serve as a director of the Company and Empire until the 2001 Annual
Meeting of Shareholders.

                                     - 3 -


                  Although  management  does  not  contemplate  that  any of the
nominees  will be unable to serve for any  reason,  in the event that any of the
nominees become  unavailable for election,  shares  represented by valid proxies
will be voted for the  election  of a  substitute  nominee to be  designated  by
management.

                  All of the persons named as proxies in the  accompanying  form
of proxy have advised the Company that they intend to vote shares represented by
proxies  received by them in favor of  management's  nominees in the election of
directors, unless the authority to do so is withheld.

FURTHER INFORMATION ABOUT NOMINEES FOR DIRECTORS


                  Information about each nominee's position with the Company and
Empire and principal occupation appears below.

Class II Directorships (Term Expires at 2004 Annual Meeting of Shareholders):
- ----------------------------------------------------------------------------

MARTIN B. BERNSTEIN, 68

         Position: Director of the Company and Empire since 1988.

         Principal Occupation: President  and  Director of  Ponderosa  Fibres of
                  America, Inc. (a pulp manufacturer for paper producers).


H.E. SCRUGGS, 45

         Position:President,   Chief  Executive  Officer  and  Director  of  the
                  Company and Empire since September 2000.

         Principal Occupation: President  and  Chief  Executive  Officer  of the
                  Company and Empire since September 2000.  Chairman of American
                  Investment  Bank,  another  Leucadia  subsidiary,  since 1997.
                  Member of the Utah Bar;  Director of MK Gold (an international
                  mining company) since March 2001.  Previously,  Vice President
                  of Leucadia from March 2000 to January 2002,  Chief  Executive
                  Officer of American Investment Bank from February 1997 through
                  November 2001; Vice President of American Investment Bank from
                  June 1995 to February 1997.

                                     - 4 -



LOUIS V. SIRACUSANO, 55

         Position: Director of the Company and Empire since 1985.

         Principal Occupation: Partner  with  McKenna,  Fehringer,  Siracusano &
                  Chianese (a law firm) since 1976.


LUCIUS THEUS, 79

         Position: Director of the Company and Empire since 1980.

         Principal Occupation: President,  The U.S.  Associates  (consultants in
                  civic affairs,  human resources and business management) since
                  1989.  Principal and Chief  Operating  Officer of The Wellness
                  Group,  Inc. (a provider of health  promotion  programs) since
                  1989.


Class I Directorship (Term Expires at 2003 Annual Meeting of Shareholders):
- ---------------------------------------------------------------------------

ROCCO J. NITTOLI, 43

         Position: Director of the Company and Empire since March 2001.

         Principal Occupation: Chief Operating Officer of the Company and Empire
                  since February 2001. Previously, Senior Vice President & Chief
                  Information  Officer of the Company  and Empire  from  January
                  2000 to February  2001,  Vice  President and Controller of the
                  Company and Empire  from  September  1997 to January  2000 and
                  Controller of Aegis Insurance Services, Inc. from October 1995
                  to September 1997.


Class III Directorships (Term Expires at 2005 Annual Meeting of Shareholders):
- ------------------------------------------------------------------------------

CHRISTOPHER J. GRUTTEMEYER, 36

         Position: Director of the Company and Empire since March 2001.

                                     - 5 -


         Principal Occupation: Vice  President  of the Company and Empire  since
                  December  2000.  Previously,  Assistant  Vice President of the
                  Company  and Empire  from  September  1999 to  December  2000;
                  Senior  Financial  Analyst  of the  Company  and  Empire  from
                  December  1996 to  September  1999;  Internal  Auditor  of the
                  Company and Empire from September 1994 to December 1996.


JAMES E. JORDAN, 58

         Position: Director of the Company and Empire since 1997.

         Principal Occupation: Private  investor  and  Director  of First  Eagle
                  SoGen  Mutual  Funds and J.Z.  Equity  Partners PLC (a British
                  investment trust company). Previously, Financial Consultant of
                  the Jordan  Company from 1984 to 2001 and President of William
                  Penn Corp. from 1986 to 1997.


JOSEPH A. ORLANDO, 46

         Position: Director of the Company and Empire since 1998.

         Principal Occupation: Vice  President  and Chief  Financial  Officer of
                  Leucadia since 1996.


HARRY H. WISE, 63

         Position: Director of the Company and Empire since 1988.

         Principal Occupation: President and Director, H.W. Associates, Inc. (an
                  investment  advisory  firm);  President and Director,  Madison
                  Equity   Capital  Corp.  (a  sponsor  of  private   investment
                  partnerships).


                  The Board of Directors recommends that shareholders vote "FOR"
the election of each of the Board of Director's nominees.

                                     - 6 -


FURTHER INFORMATION ABOUT DIRECTORS CONTINUING IN OFFICE

                  The  following  directors  are  continuing  in office  for the
respective  periods  indicated and until their  successors are elected.  Each of
these  directors was elected  previously by the  shareholders  of the Company to
hold such office.  Information  about each director's  position with the Company
and Empire and principal occupation appears below.


Class I Directorships (Term Expires at 2003 Annual Meeting of Shareholders):
- ----------------------------------------------------------------------------

IAN M. CUMMING, 61

         Position: Director of the Company and Empire since 1988.

         Principal Occupation: Chairman  of the Board and a Director of Leucadia
                  since June 1978;  Chairman  of the Board of the FINOVA  Group,
                  Inc. (a middle market  lender) since August 2001.  Director of
                  Skywest,  Inc. (a Utah-based  regional air carrier) since June
                  1986.  Director  of MK Gold  Company  (an  international  gold
                  mining   company)   since  June  1995.   Director  of  HomeFed
                  Corporation  (a real  estate  development  company)  since May
                  1999.  Director of Carmike  Cinemas,  Inc.  (a motion  picture
                  exhibitor) since January 2002.


THOMAS E. MARA, 55

         Position: Director of the Company and Empire since 1994.

         Principal Occupation: Executive  Vice  President of Leucadia  since May
                  1980 and Treasurer of Leucadia since January 1993. Director of
                  MK Gold since February 2000.


JOSEPH S. STEINBERG, 57

         Position: Director of the Company and Empire since 1988 and Chairman of
                  the Board since August, 1998.

         Principal Occupation: President  of  Leucadia  since  January  1979 and
                  Director since December

                                     - 7 -


                  1978.  Director of Jordan  Industries,  Inc. (a public company
                  that owns and  manages  manufacturing  companies)  since  June
                  1988. Director of MK Gold Company since June 1995; Director of
                  HomeFed  Corporation since August 1998. Director of the FINOVA
                  Group,  Inc.  Since August 2001.  Director of White  Mountains
                  Insurance Group,  Ltd. (a publicly traded  insurance  company)
                  since June 2001.


DANIEL G. STEWART, 81

         Position: Director of the Company and Empire since 1980.

         Principal Occupation: Independent  consulting  actuary  since  November
                  1991.


INFORMATION CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD

                  During  fiscal  year 2000,  the Board of  Directors  held five
meetings and six meetings were held during fiscal year 2001.

                  The Board of  Directors  has  three  standing  committees:  an
Audit/Compensation   Committee,   an  Investment   Committee  and  an  Executive
Committee.

                  The   Audit/Compensation   Committee   assists  the  Board  of
Directors in fufilling its responsibility to oversee management's conduct of the
Company's financial reporting process, including selecting the Company's outside
auditors and  reviewing the financial  reports and other  financial  information
provided by the Company to  governmental  or  regulatory  bodies,  the public or
other users, the Company's systems of internal accounting and financial controls
and the annual  independent  audit of the Company's  financial  statements.  The
Audit/Compensation Committee also determines compensation for all executives and
administers  incentive plans for executive officers.  The Board of Directors has
adopted a charter  for the  Audit/Compensation  Committee,  which is attached as
Annex A to this Proxy Statement. The Audit/Compensation Committee met four times
during  fiscal  years 2000 and 2001.  The Audit  Committee  consists  of Messrs.
Daniel G. Stewart  (Chairman),  Martin B.  Bernstein,  Lucius Theus and Harry H.
Wise. All members of the  Audit/Compensation  Committee are "independent"  under
the rules of the National Association of Securities Dealers currently applicable
to the Company.

                                     - 8 -


                  The information contained in this Proxy Statement with respect
to the  Audit/Compensation  Committee and the independence of the members of the
Audit/Compensation  Committee shall not be deemed to be "soliciting material" or
to be "filed" with the Securities and Exchange Commission (the "SEC"), nor shall
such  information be  incorporated by reference into any future filing under the
Securities  Act of 1933 or the  Securities  Exchange Act of 1934,  except to the
extent  that the  Company  specifically  incorporates  it by  reference  in such
filing.

                  The  Investment  Committee  assists the Board of  Directors in
evaluating the Company's investment portfolio. The Investment Committee met four
times  during  fiscal  year 2000 and five times  during  fiscal  year 2001.  The
Investment  Committee  consists of Messrs.  Harry H. Wise  (Chairman),  James E.
Jordan,  Thomas E. Mara, Rocco J. Nittoli,  and H.E. Scruggs. Mr. Christopher J.
Gruttemeyer is an alternate member of the Investment Committee.

                  The Executive  Committee has all of the powers of the Board of
Directors when not in session which can be legally  delegated to it, except such
powers as are  delegated  to the officers of the Company by the  Certificate  of
Incoporation and the by-laws of the Company.  The Executive  Committee met twice
during the fiscal year 2000 and did not meet seperately during fiscal year 2001.
The Executive Committee consists of Messrs. Joseph S. Steinberg (Chairman),  Ian
M. Cumming, Thomas E. Mara, Joseph A. Orlando, and H.E. Scruggs.


                        SECURITY OWNERSHIP OF MANAGEMENT

                  The  following   table  sets  forth   information   concerning
beneficial  ownership of the  Company's  Common Shares as of May 15, 2002 by all
directors and nominees and by all officers and  directors as a group.  Directors
and nominees not listed below did not own any of the Company's Common Shares.

AMOUNT AND NATURE                    PERCENT
NAME OF BENEFICIAL OWNER     OF BENEFICIAL OWNERSHIP              OF CLASS

Ian M. Cumming                         (l)                           (1)
Joseph S. Steinberg                    (1)                           (1)
H.E. Scruggs                           (2)                           (2)
Directors and Executive
Officers as a group
(14 persons)                           (3)                           (3)
- ---------------------------------------------------------------------------

                                     - 9 -


         (1) Although  neither Mr. Cumming nor Mr.  Steinberg  directly owns any
Common  Shares  of the  Company,  by  virtue  of their  respective  interest  of
approximately  18.0%  and  16.8%  in  Leucadia,  each  may be  deemed  to be the
beneficial owner of a proportionate  number of the shares of common stock of the
Company  beneficially  owned by  Leucadia  through its  subsidiaries  Empire and
Baldwin Enterprises.

         (2) Although Mr. Scruggs does not directly own any Common Shares of the
Company,  he  beneficially  owns common shares of Leucadia which  represent less
than 1% of Leucadia's common stock.

         (3) Aside from the beneficial  ownership  described in notes 1 and 2 to
this table, five directors beneficially own common shares of Leucadia,  which in
the aggregate, represent less than 1% of Leucadia's common stock.


                     COMPENSATION OF DIRECTORS AND OFFICERS
                     AND OTHER TRANSACTIONS WITH MANAGEMENT

COMPENSATION

                  The  Company  does  not  remunerate  its  executive   officers
directly.  Executive  officers of the Company are also officers of the Company's
parent,  Empire,  which pays all salaries.  The Company  operates under the same
general management as Empire and has full use of Empire's personnel, information
technology  systems  and  facilities.  All such  salaries  and  other  operating
expenses are shared by the Company and Empire pursuant to a pooling  arrangement
under  which 30% of such  expenses  are  charged  to the  Company.  The  amounts
reflected in the table below  represent the Company's 30% share of  compensation
expense.

                  The following  table sets forth certain  information  for H.E.
Scruggs,  Jr., President and Chief Executive Officer of the Company.  There were
no other  executive  officers  whose  salaries or bonuses  paid, or accrued for,
under the pooling  agreement  exceeded  $100,000 for the year ended December 31,
2001.

                           SUMMARY COMPENSATION TABLE

                                                               Long Term
Name and Principal        Annual Compensation                Compensation
Position                  -------------------                ------------
- --------
                                               LTIP       All Other
H.E. Scruggs                Salary   Bonus   Payouts     Compensation

                                     - 10 -


President and CEO   Year    ($)        ($)       ($)         ($)
                    2001   32,366   140,513      (a)        2,688
                    2000    (a)        (a)       (a)        (a)

- -----------------------------------------------------------------------------
(a)      Mr. Scruggs received no compensation  from the Company or Empire during
         2000. He was compensated  directly by Leucadia in 2000. Mr. Scruggs was
         not employed by the Company prior to September 2000.

                  The  Company  does  not  directly  remunerate  directors.  The
directors  of the Company are also  directors  of Empire and their fees are paid
pursuant  to the  pooling  agreement  described  above.  Directors  who  are not
employees of Empire and the Company are paid an annual joint retainer of $5,000.
In addition,  eligible  directors  receive  $1,500 for each joint board  meeting
attended.  For  attendance at a meeting of a committee of the joint board,  such
directors  receive  $1,500 per  meeting.  In  addition,  each  Chairperson  of a
Committee  is entitled to $500 per annum.  All fees paid to such  directors  are
shared in accordance with the pooling arrangement.


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

                Section  16(a) of the  Securities  Exchange Act of 1934 requires
the Company's directors and executive officers and persons who own more than 10%
of the  Company's  common  stock to file  reports of  ownership  and  reports of
changes in ownership with the Securities Exchange Commission.  Based solely upon
written  representations from the Company's executive officers and directors and
greater than 10%  shareholders,  the Company believes that during the year ended
December 31, 2001 no persons  subject to the reporting  requirements  of Section
16(a) were required to file any such reports.

SHAREHOLDER RETURN PERFORMANCE GRAPH**

         Set forth below is a graph comparing the cumulative  total  shareholder
return on Common Shares against cumulative total return of the Standard & Poor's
500 Stock  Index  (the "S&P 500  Index")  and the  Standard  & Poor's  Financial
(Multi-Line  Insurance  Companies)  Index (the "S&P  Insurance  Index")  for the
five-year period commencing December 31, 1996 (as required by the SEC). The data
was furnished by Standard & Poor's Compustat Services, Inc.

- --------
** The  disclosure  contained  in this  section  of the Proxy  Statement  is not
incorporated  by  reference  into any prior  filings  by the  Company  under the
Securities Act of 1933 or the Securities  Exchange Act of 1934 that incorporated
future  filings or  portions  thereof  (including  this Proxy  Statement  or the
"Compensation" section of this Proxy Statement).

                                     - 11 -


COMPARISON OF FIVE-YEAR  CUMULATIVE  TOTAL RETURN OF THE COMPANY,  S&P 500 INDEX
AND S&P INSURANCE INDEX

         The following graph assumes that $100 was invested on December 31, 1996
in each of the Common Shares,  the S&P 500 Index and the S&P Insurance Index and
that all dividends were reinvested.

                      1996      1997     1998     1999      2000       2001
THE COMPANY            100    101.79   105.36    96.43     85.71       5.14
S&P 500 INDEX          100    133.36   171.48   207.56    188.66     166.24
S&P INSURANCE INDEX    100    152.53   168.04   214.09    301.19     248.22


AUDIT/COMPENSATION COMMITTEE REPORT

         The  following  is  the  report  of  the  Company's  Audit/Compensation
Committee  with respect to the Company's  audited  financial  statements for the
fiscal year ended December 31, 2001.

REVIEW WITH MANAGEMENT

         The  Audit/Compensation  Committee reviewed and discussed the Company's
audited financial statements with management.

REVIEW AND DISCUSSIONS WITH INDEPENDENT AUDITORS

         The Audit/Compensation  Committee discussed with PricewaterhouseCoopers
LLP, the Company's independent auditors, the matters required to be discussed by
Statement on Auditing  Standards No. 61  (Communication  with Audit  Committees)
regarding the auditor's judgments about the quality of the Company's  accounting
principles as applied in its financial reporting.

         The Audit/Compensation  Committee also received the written disclosures
and  the  letter  from   PricewaterhouseCoopers  LLP  required  by  Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
and has discussed with PricewaterhouseCoopers LLP their independence.

                                     - 12 -


CONCLUSION

         Based  upon  the  review  and  discussions   referred  to  above,   the
Audit/Compensation  Committee  recommended  to the Board of  Directors  that its
audited  consolidated  financial  statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended  December 31, 2001 for filing with
the SEC.
SUBMITTED BY THE AUDIT/COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS


         Daniel G. Stewart,         Chairman
         Martin B. Bernstein
         Lucius Theus
         Harry H. Wise

         The information  contained in the foregoing  report shall not be deemed
to be  "soliciting  material"  or to be  "filed"  with the SEC,  nor shall  such
information  be  incorporated  by  reference  into any future  filing  under the
Securities  Act of 1933 or the  Securities  Exchange Act of 1934,  except to the
extent  that the  Company  specifically  incorporates  it by  reference  in such
filing.


INDEPENDENT ACCOUNTING FIRM FEES

         The following table sets forth the aggregate fees billed to the Company
for the  fiscal  year  ended  December  31,  2001 by the  Company's  independent
accounting firm, PricewaterhouseCoopers LLP:

         Audit Fees                             $137,760
         Financial Information Systems
         Design and Implementation Fees         $ 27,000
         All Other Fees                         $125,642(a)(b)
                                                ---------
         Total                                  $290,402
                                                ---------

(a)  Includes fees for tax consulting and other non-audit services.

(b) The  Audit/Compensation  Committee has  considered  whether the provision of
these  services  is  compatible  with  the   maintenance  of  the   accountant's
independence.

ANNUAL REPORT

         Copies of the Company's  2000 and 2001 Annual  Reports to  Shareholders
are being furnished to shareholders concurrently herewith.


PROPOSALS BY SHAREHOLDERS

                                     - 13 -


         Proposals  that  shareholders  wish to include in the  Company's  Proxy
Statement  and form of proxy  for  presentation  at the  Company's  2003  Annual
Meeting of Shareholders, scheduled for October 21, 2003, must be received by the
Company  at 45 Main  Street,  Brooklyn,  New York  11201,  Attention  of Lisa M.
Bencivenga, Secretary, no later than June 3, 2003.

         Any such proposal must be in accordance  with the rules and regulations
of the SEC. With respect to proposals  submitted by a shareholder other than for
inclusion  in the  Company's  2003 Proxy  Statement  and related  form of proxy,
timely notice of any such proposal must be received by the Company in accordance
with the By-Laws and the rules and regulations of the Company no later than June
3, 2003.  Any proxies  solicited by the Board of  Directors  for the 2003 Annual
Meeting may confer  discretionary  authority to vote on any proposals  notice of
which is not timely received.


                                  OTHER MATTERS

                Management  knows  of no  other  business  to  come  before  the
Meeting; however, if any other business properly comes before the Meeting, it is
the intention of the persons named in the proxy to vote in accordance with their
best judgment of what is in the best interests of the Company.

                To assure  representation  of your interest if you cannot attend
the Meeting, please sign and return promptly the proxy in the enclosed envelope.


By Order of the Board of Directors.


                               Lisa M. Bencivenga
                               Corporate Secretary

June 1, 2002

                                     - 14 -

                                                                         ANNEX A

                            ALLCITY INSURANCE COMPANY
                             AUDIT COMMITTEE CHARTER

PURPOSE
________________________________________________________________________________
         The  primary   purpose  of  the   Audit/Compensation   Committee   (the
"Committee") is to assist the Board of Directors (the "Board") in fulfilling its
responsibility  to  oversee  management's  conduct  of the  Company's  financial
reporting process, including the overview of (i) the financial reports and other
financial  information  provided by the Company to  governmental  or  regulatory
bodies,  the public or other  users,  (ii) the  Company's  systems  of  internal
accounting and financial  controls and (iii) the annual independent audit of the
Company's financial statements.

         In  discharging  its  oversight  role,  the  Committee  is empowered to
investigate  any matter brought to its attention.  The Committee shall have full
access to all books, records,  facilities and personnel of the Company and shall
have the  power to  retain  outside  counsel,  auditors  or other  experts  when
necessary.  The Board and the  Committee are in place to represent the Company's
shareholders; accordingly, the outside auditor and Internal Audit Department are
ultimately accountable to the Board and the Committee.

         While the  Committee has the  responsibilities  and powers set forth in
this Charter,  it is not the duty of the Committee to plan or conduct  audits or
to determine that the Company's  financial  statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent  auditor. Nor is it the duty of
the  Committee  to conduct  investigations,  to resolve  disagreements,  if any,
between management and the independent auditor or to assure compliance with laws
and regulations.

         The  Committee  shall  review the adequacy of this Charter on an annual
basis.

MEMBERSHIP
________________________________________________________________________________



         The Committee  shall be comprised of not less than three members of the
Board,  and the Committee's  composition will meet the requirements of the Audit
Committee Policy of the National Association of Securities Dealers. Accordingly,
all members of the Committee will be directors:

                                      A-1


1.       Who have no  relationship  to the Company that may  interfere  with the
         exercise of their  independence from management and the Company (except
         as permitted by National Association of Securities Dealers), and

2.       Who are financially  literate or who become financially literate within
         a reasonable  period of time after  appointment  to the  Committee.  In
         addition,  at least one member of the Committee will have accounting or
         related financial management expertise.


KEY RESPONSIBILITIES
________________________________________________________________________________

         The  Committee's job is one of oversight.  The Company's  management is
responsible  for preparing the Company's  financial  statements  and the outside
auditors are responsible for auditing those financial statements.  The Committee
recognizes  that financial  management and the outside  auditors have more time,
knowledge  and  detailed  information  regarding  the Company  than do Committee
members.  Accordingly,  in  carrying  out its  oversight  responsibilities,  the
Committee  will not provide any expert or special  assurance as to the Company's
financial  statements  or  any  professional  certification  as to  the  outside
auditor's work.

     The following  functions  shall be the common  recurring  activities of the
Committee in carrying out its oversight function.  These functions are set forth
as a guide with the understanding that the Committee may diverge from this guide
as appropriate given the circumstances.

o        The Committee shall review with management and the outside auditors the
         audited  financial  statements to be included in the  Company's  Annual
         Report  on  Form  10-K  (or  the  Annual  Report  to   Shareholders  if
         distributed  prior to the filing of Form 10-K) and review and  consider
         with the outside  auditors  the matters  required  to be  discussed  by
         Statement of Auditing  Standards  ("SAS") No. 61, as such statement may
         be  amended  from  time to time,  including,  without  limitation,  the
         amendments contained in SAS No. 90.
o        As a whole, or through the Committee  chair, the Committee shall review
         with the outside auditors the Company's interim financial results to be
         included  in the  Company's  quarterly  reports  to be  filed  with the
         Securities  and  Exchange  Commission  and the  matters  required to be
         discussed  by SAS No. 61 and 90;  this  review  will occur prior to the
         Company's filing of the Form 10-Q.

                                      A-2


o        The Committee  shall discuss with  management and the outside  auditors
         the quality and  adequacy of the  Company's  internal  controls.  o The
         Committee shall:
o        Meet   independently  with  internal  and  outside  auditors  at  least
         annually;  and
o        Request from the outside auditors annually,  a formal written statement
         delineating  all  relationships  between  the  auditor  and the Company
         consistent with Independence Standards Board Standard Number 1;
o        Discuss with the outside auditors any such disclosed  relationships and
         their impact on the outside auditor's independence; and
o        Recommend  that the  Board  take  appropriate  action  to  oversee  the
         independence of the outside auditor.
o        The  Committee,  subject  to any  action  that may be taken by the full
         Board,  shall have the ultimate  authority and responsibility to select
         (or  nominate  for   shareholder   approval),   evaluate   and,   where
         appropriate, replace the outside auditor.

                                      A-3