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Alleghany's (Y) Q1 Earnings Surpass Estimates, Down Y/Y

Zacks Equity Research

Alleghany Corporation Y delivered first-quarter 2019 operating earnings of $9.66 per share, beating the Zacks Consensus Estimate by 32.5% on the back of higher revenues. However, the metric declined 14.1% year over year.

Operational Update

Revenues in the quarter improved 22.1% year over year to $1.9 billion, supported by solid organic growth and the buyout of Concord along with robust results in the company’s certain business lines.

Net premiums written rose 10.6% year over year to $1.4 billion, banking on a rising excess and surplus market as well as a favorable impact from two renewal rights transactions.

Net investment income came in at $123 million in the quarter under consideration, slipping 1% year over year. Negative returns from certain partnership investments and lower dividend income were mainly responsible for this downside.

Total costs and expenses escalated 28.2% to $1.7 billion.

Alleghany Corporation Price, Consensus and EPS Surprise

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

Segment Update

Reinsurance Segment: Net premiums written improved 11.1% to $1.4 billion owing to TransRe’s purchase during the period of certain renewal rights related to a block of U.S. treaty reinsurance. However, the same was offset to an extent by a decrease in net premiums written in relation to a large whole account quota share treaty plus an effect of changes in forex rates.

The segment's underwriting profit plunged 59.5% year over year to $40 million.Also, the segment’s first-quarter combined ratio expanded 640 basis points (bps) to 96.1%%.

Insurance Segment: Net premiums written rose 8.5% year over year in this segment owing to a robust contribution from CapSpecialty and RSUI.

Underwriting profit of $44.7 million surged 39.3% year over year. The combined ratio of this reported segment contracted 360 bps to 83.4%.

Financial Update

Alleghany exited the first quarter with $778 million cash, down 25% from the figure at 2018 end.

Senior notes and other debt inched up 0.4% from the level at 2018 end.

Alleghany’s shareholder equity at the end of the first quarter increased 7.1% to $8.2 billion from the level as of Dec 31, 2018.

Book value per share was $570.09 as of Mar 31, 2019, up 8% from the level as of Dec 31, 2018.

Share Repurchase Update

In the quarter under discussion, Alleghany bought back shares worth $80.5 million. As of Mar 31, 2019, the company had $191. million remaining under its share repurchase authorization.

Zacks Rank

Alleghany carries a Zacks Rank #3 (Hold). 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 having reported first-quarter earnings so far, the bottom-line figures of The Travelers Companies, Inc. TRV, Cincinnati Financial Corporation CINF and The Progressive Corporation PGR beat the respective Zacks Consensus Estimate.

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