Alleghany (Y) Beats on Both Top and Bottom Lines in Q3
Alleghany Corporation Y reported third-quarter 2017 loss of $22.03 per share, narrower than the Zacks Consensus Estimate of a loss of $28.83. The bottom line compared unfavorably with $9.44 earned in the year-ago quarter.
The company suffered due to huge cat loss in the quarter.
Alleghany Corporation Price, Consensus and EPS Surprise
Alleghany Corporation Price, Consensus and EPS Surprise | Alleghany Corporation Quote
Including one-time items, the company reported net loss of $20.90 per share, which compared unfavorably with $10.09 per share earned in the year-ago quarter.
Operational Update
Operating revenues of $1.6 billion fell 1.8% year over year due to lower premiums earned and investment income. The top line however, surpassed the Zacks Consensus Estimate of $1.3 billion by 14.3%.
Net premiums written increased 1.9% year over year to $1.3 billion.
Net investment income came in at $104.7 million in the quarter, down 13.2% year over year. The decrease is attributable to adverse results from collateralized reinsurance funds, which were also hurt by third-quarter catastrophe events.
Total expenses surged 57% year over year to $2.2 billion, largely due to increase in net loss and loss adjustment expenses.
Catastrophe loss of $491 million was wider than $21-million loss in the year-ago quarter.
Underwriting loss of $65.4 million compared unfavorably with underwriting income of $111.9 million in the year-ago quarter. Combined ratio deteriorated to 152.4% from 91% in the year-ago quarter.
Segment Update
Reinsurance Segment: Net premiums written increased 1.2% to $978.5 million, driven by reinstatement premiums written related to significant catastrophe loss that occurred in the reported quarter.
Underwriting loss was $474.9 million versus $74.1 million income in the year-ago quarter.
Insurance Segment: Net premiums written increased 4.4% to $281.8 million, driven by sustained growth at PacificComp and CapSpecialty. Underwriting loss was $175.5 million versus $37.8 million income in the year-ago quarter.
Financial Update
Alleghany exited the quarter with cash of $701.8 million compared with $594 million at the end of 2016.
Debt balance of $1.5 billion inched up 0.7% from December 2016-end level.
Allegheny’s shareholder equity at the end of the quarter was $8.2 billion compared with $7.9 billion at 2016-end level.
Book value per share was $532.40 as of Sep 30, 2017, up 3.3% from Dec 31, 2016, driven by strong equity and moderate bond market returns.
Net cash from operations totaled $426 million in the first nine months of 2017, down 25.7% year over year.
Alleghany bought back shares worth 8.5 million and has $370.7 million remaining under its authorization.
Divestiture
In September, Alleghany has signed an agreement to divest its Pacific Compensation Insurance Company to Copper Point Mutual Insurance Company for a total cash consideration of $150 million. The transaction is expected to close at the end of this year.
Zacks Rank
Alleghany carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Among other players from the insurance industry that have reported third-quarter earnings so far, the bottom line of The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI beat the respective Zacks Consensus Estimate.
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