Allied World Earnings Beat Est, Lag YoY - Analyst Blog

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Allied World Assurance Company Holdings ( AWH ) reported first quarter operating income of $2.38 per share, higher than the Zacks Consensus Estimate by 11.7%. Results were 0.4% lower than the year-ago earnings of $2.39.

Including net realized investment gains of $2.18 and foreign exchange loss of 7 cents, Allied World reported net income of $4.49 per share in the first quarter, down 21.2% from $5.70 per share in the year-ago period.

Quarterly Operational update

Total revenues declined 1.1% year over year to $576.3 million in the first quarter. The decline came on the back of waning net investment income (down 29.3% year over year) and net realized investment gains (down 40.4% year over year). However, it surpassed the Zacks Consensus Estimate of $509 million.

Net written premiums in the quarter increased 18% year over year to $695.1 million.

Total expenses of $411.8 million in the quarter showed an increase of 15.4% year over year due to increased net loss and loss expenses (up 13.3% year over year), acquisition costs (up 20.3% y ear over year), general and administrative expenses (up 17.5% year over year), interest expense (up 2.7% year over year) and foreign exchange loss ($2.5 million, compared to a profit of $0.1 million in the first quarter of 2012).

In the first quarter underwriting income for Allied World was $68.7 million, up 16.1% year over year.

The combined ratio improved 10 basis points year-over-year to 85.1%.

Segment Update

The U.S. Insurance segment reported underwriting loss of $7.6 million compared to an underwriting profit of $4.6 million in the prior-year period. Net premiums written in the segment were $192.3 million, up 25% year over year. Combined ratio deteriorated 720 basis points to 104.1%.

The International Insurance segment reported underwriting income of $31.3 million in the first quarter, up 57.5% year over year. Net premiums written in the segment were $77.7 million, up 7.1% year over year. Combined ratio improved 1220 basis points to 62.8%.

The Reinsurance segment reported underwriting income of $45 million in the reported quarter, up 29.7% year over year. Net premiums written in the quarter increased 17.3% year over year to $425.1 million. Combined ratio improved 290 basis points to 76.5%.

Share Repurchase Update

In the first quarter, Allied World spent $36.2 million to buy back 0.4 million shares at an average price of $83.88.

Dividend Update

On Mar 8, 2013, the board of directors proposed a 33.3% hike in its quarterly dividend to 50 cents per share. This increase in quarterly dividend is pending approval from the shareholders of Allied.

Financial Position

Allied World exited the quarter with cash and cash equivalents of $729.3 million, down 15.7% from $865.4 million at year end 2012.

As of Mar 31, 2013, total assets of Allied were $11.9 billion, down 0.9% from $12 billion at year end 2012.

Shareholders' equity increased 3.2% from $3.3 billion at year end 2012 to $3.4 billion at Mar 31, 2013. The debt to capital ratio of Allied improved 50 basis points from 19.4% at year end 2012 to 18.9% as of Mar 31, 2013.

Return on equity (ROE) was 10% in the first quarter, down 150 basis points from 11.5% in the prior-year quarter.

As of Mar 31, 2013, book value per share of Allied was $96.50, up 4.2% from $92.59 as of Dec 31, 2012.

Business Update

On Feb 27, 2013, Allied World U.S. launched a new surety line of business for clients in the country. The U.S. surety line will provide contract and commercial surety bonds, and environmental surety bonds. The environmental surety bonds will be offered either separately or along with Allied World U.S.'s environmental insurance. The surety line will focus on middle market accounts with $20 million capacity per contract and $50 million per aggregate program.

Performance of Few Other Property and casualty Insurers

Everest Re Group Ltd. ( RE ) reported first quarter 2013 operating earnings of $5.88 per share, substantially beating the Zacks Consensus Estimate of $4.32 per share. Earnings were also up 31.3% year over year.

Montpelier Re Holdings Limited ( MRH ) reported first quarter 2013 operating earnings of $1.18 per share, exceeding the Zacks Consensus Estimate of 89 cents per share. However, results were down 4.1% year over year.

Zacks Rank

Allied World currently carries a Zacks Rank #1 (Strong Buy). Among others in the industry HCC Insurance Holdings Inc. ( HCC ) with the same Zacks Rank is expected to report its first quarter 2013 results on Apr 30. Everest and Montpelier also share the same Zacks Rank as AWH.



ALLIED WORLD AS (AWH): Free Stock Analysis Report

HCC INS HLDGS (HCC): Free Stock Analysis Report

MONTPELIER RE (MRH): Free Stock Analysis Report

EVEREST RE LTD (RE): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AWH , HCC , MRH , RE

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