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Alleghany's (Y) Earnings Top Estimates in Q2, Improve Y/Y

Zacks Equity Research

Alleghany Corporation Y delivered second-quarter 2019 operating earnings of $12.40 per share, beating the Zacks Consensus Estimate by 30.8% on the back of higher revenues. Moreover, the metric increased 26.8% year over year.

Operational Update

Revenues in the quarter improved 23.3% year over year to $2.1 billion, supported by solid organic growth and the buyout of Concord.

Net premiums written rose 13.4% year over year to $1.4 billion, banking on a rising excess and surplus market, rate increases, better terms, more submissions and strong premium growth across most business lines.

Net investment income came in at $143 million in the quarter under consideration, up 13% year over year. This upside is driven by higher interest income and better partnership income.

Total costs and expenses escalated 25.7% to $3.6 billion.

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 14% to $1.1 billion owing to TransRe’s purchase of the renewal rights to a block of U.S. treaty reinsurance. However, the same was slightly offset by a decrease in net premiums written pertaining to a large whole account quota share treaty plus an effect of changes in forex rates.

The segment's underwriting profit declined 8.7% year over year to $75.9 million. Also, its second-quarter combined ratio expanded 10 basis points (bps) to 92.9%.

Insurance Segment: Net premiums written rose 11.5% year over year, riding on a robust contribution from CapSpecialty and RSUI.

Underwriting profit of $39 million surged 45% year over year. The combined ratio of this reported segment contracted 330 bps to 86.2%. This upside reflects higher favorable prior accident year loss reserve development and the impact of better net premiums earned at RSUI.

Financial Update

Alleghany exited the second quarter with $824 million cash, down 20.6% from the figure at 2018 end.

Senior notes and other debt inched up 2.7% from the level at 2018 end.

Alleghany’s shareholder equity at the end of the second quarter increased 13% to $8.7 billion from the level as of Dec 31, 2018.

Book value per share was $601.9 as of Jun 30, 2019, up 14.1% from the level as of Dec 31, 2018.

Share Repurchase Update

As of Jun 30, 2019, the company had $178 million remaining under its share repurchase authorization.

Zacks Rank and Performance of Other Players

Alleghany caries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Of the insurance industry players that have already reported second-quarter results, the bottom-line figures of The Progressive Corporation PGR and RLI Corp. RLI beat the respective Zacks Consensus Estimate. However, The Travelers Companies, Inc.’s TRV metric missed the mark.

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