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Alleghany (Y) & Units' Credit Ratings Retained by A.M. Best

Zacks Equity Research

Alleghany Corporation’s Y Long-Term Issuer Credit Ratings (ICRs) and the Long-Term Issue Credit Ratings (Long-Term IRs) of “a-” has recently been reiterated by A.M. Best.

The credit rating agency also retained the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Transatlantic Reinsurance Company and its affiliates (collectively referred to as TransRe).

At the same time, the rating agency has also reiterated the FSR of A+ (Superior) and the Long-Term ICRs of “aa-” for RSUI Indemnity Company and its reinsured affiliates, jointly dubbed RSUI Group.

The FSR of A (Excellent) and the Long-Term ICRs of “a” for Capitol Indemnity Corporation and its two subsidiaries, operating under a pooling agreement and collectively called CapSpecialty Insurance Group, have also been retained by the rating giant. The outlook for all ratings remains stable.

The rating affirmations of TransRe came on the back of a solid risk-adjusted capitalization, strong enterprise risk management and steady operating performance. The ratings also exhibit TransRe’s robust business profile and varied business lines in terms of product and geography.

A.M. Best anticipates that while TransRe’s returns will be comparatively higher than peers, the company will consistently produce favorable results with lower volatility, supportive of its ratings. Due to recent catastrophic events, the credit rating agency has also assumed losses from Hurricanes Harvey, Irma and Maria to remain within the company’s risk-tolerance level.

The ratings of RSUI reflect the group’s strong risk-adjusted capitalization and superior underwriting results, having surpassed the industry’s performance. The ratings of CapSpecialty represent its strong risk-adjusted capitalization and an ongoing process to re-organize the book of business to produce stable results.

Rating affirmations or upgrades by credit rating agencies have always played a vital role in retaining investor confidence as well as exhibiting the stocks’ credit worthiness. On the contrary, rating downgrades denote deteriorating finances, thereby escalating the cost of further debt issuances. We expect these ratings to not only help Allegany retain investors’ faith but also aid the company in writing more business going forward.

Zacks Rank and Share Price Movement

Alleghany carries a Zacks Rank #4 (Sell). Shares of the company have underperformed the industry over a year. While the stock has gained 5.8%, the industry has rallied 26.2%. We expect the company’s growth initiatives and a solid capital position to drive its shares up in the near term.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Atlas Financial Holdings, Inc AFH, Markel Corporation MKL and Mercury General Corporation MCY.

Atlas Financial Holdings, which sports a Zacks Rank #1 (Strong Buy), engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive earnings surprises in two of the last four quarters with an average beat of 57.94%.

Markel markets and underwrites specialty insurance products in the United States and internationally. It delivered positive earnings surprises in two of the last four quarters with an average beat of 21.06% Markel carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mercury General, which carries a Zacks Rank #2, engages in writing personal automobile insurance in the United States. The company came up with positive earnings surprises in three of the last four quarters with an average beat of 1.06%.

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