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Alleghany (Y) Q1 Earnings Miss Estimates, Revenues Rise Y/Y

Zacks Equity Research

Alleghany Corporation Y reported first-quarter 2020 adjusted income of $4.99 per share, which missed the Zacks Consensus Estimate by nearly 5%. The bottom line plunged 48.3% year over year.

The company witnessed better results at Insurance segment but the performance of the Reinsurance segment was soft.

Operational Update

Operating revenues improved 4.6% year over year to $2 billion on higher net premiums earned.

Net premiums written rose 10.7% year over year to $1.5 billion.

Net investment income came in at $112 million, down 8.9% year over year, attributable to losses on credit-related partnership investments.

Underwriting loss was $24 million against the year-ago quarter’s profit of $85 million. Losses include $153 million of catastrophe losses at TransRe related to the COVID-19 pandemic.

Total costs and expenses increased 10.4% to $1.9 billion.

Alleghany Capital’s pretax earnings were $0.3 million, down from $30.2 million in the year-ago quarter.

Alleghany Corporation Price, Consensus and EPS Surprise

Alleghany Corporation Price, Consensus and EPS Surprise
Alleghany Corporation Price, Consensus and EPS Surprise

Alleghany Corporation price-consensus-eps-surprise-chart | Alleghany Corporation Quote

Segment Update

Reinsurance Segment: Net premiums written improved 9.3% to $1.2 billion owing to an increase in various domestic casualty lines of business written, including general liability, professional liability and umbrella lines of business, partially offset by a slight decrease in property lines of business written globally and the impact of changes in foreign currency exchange rates.

Underwriting loss was $1678.9 million against year-ago quarter’s income of $40 million. Combined ratio deteriorated 1090 basis points to 107%, reflecting catastrophe losses, largely related to the Pandemic.

Insurance Segment: Net premiums written increased 16% to $322.7 million, driven by growth at RSUI.

Underwriting income of $54.5 million improved 21.9% year over year. The combined ratio of the reported segment improved 90 basis points to 82.5%.

Financial Update

Cash balance was $1.6 billion, up 31.9% from 2019 end level.

Debt balance of $1.5 billion decreased 13.5% from 2019-end level.

Allegheny’s shareholder equity at the end of the first quarter increased 14.1% to $7.9 billion down 10.5% from 2019 end level.

Book value per share was $549.07 as of Mar 31, 2020, down 7.7% from the level as of Dec 31, 2019.

Cash outflow from operating activities was $7.3 billion, lower than $66.4 billion outflow in year ago quarter.

Share Repurchase Update

Allegheny bought back shares worth $44 million in the quarter.

As of Mar 31, 2020, the company had $583 million remaining under its share repurchase authorization.

Zacks Rank

Alleghany currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Insurance Releases

Among other players from the insurance industry that have reported first-quarter earnings so far, the bottom line of Brown & Brown, Inc. BRO beat the Zacks Consensus Estimate while that of RLI Corp. RLI and Travelers Companies TRV missed the same.

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