Alleghany's (Y) Q3 Earnings Top Estimates, Revenues Fall Y/Y

Alleghany Corporation’s Y third-quarter 2019 operating earnings of $7.61 per share beat the Zacks Consensus Estimate by 25.2% on the back of higher revenues. In the year-ago quarter, the company had incurred a loss of $1.07 per share.

Alleghany Corporation Price, Consensus and EPS Surprise

Alleghany Corporation Price, Consensus and EPS Surprise

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

Operational Update

Revenues in the quarter declined 0.8% year over year to $2.2 billion.

Net premiums written rose 14.1% year over year to $1.4 billion, attributable to growth in gross premiums written in the recent quarters.

Net investment income came in at $148 million in the quarter, up 16.1% year over year. The upside was driven by higher interest income, partially offset by lower dividend income.

Total costs and expenses escalated 11.1% to $2 billion.

Segment Update

Reinsurance Segment: Net premiums written increased 12.8% to $1.1 billion owing to TransRe’s purchase of the renewal rights to a block of U.S. treaty reinsurance business, partially offset by a decrease in net premiums written related to a certain large whole account quota share treaty and the impact of changes in foreign currency exchange rates.

The segment's underwriting profit was $6 million against underwriting loss of $172.4 million reported in the year-ago quarter. Also, its third-quarter combined ratio contracted 1840 basis points (bps) to 99.5%, primarily due to significantly lower net catastrophe losses.

Insurance Segment: Net premiums written rose 19% year over year to $302.2 million driven  by robust contribution from CapSpecialty and RSUI.

Underwriting profit of $26.8 million declined 17.3% year over year. The combined ratio of this reported segment increased 320 bps to 90.9% due to lower favorable prior accident year loss reserve development, partially offset by lower catastrophe losses.

Financial Update

Alleghany exited the third quarter with $897.5 million cash, down 13.6% from the figure at 2018 end.

Senior notes and other debt increased 1.6% from the level at 2018 end to $1.7 billion.

Alleghany’s shareholder equity at the end of the third quarter increased 14.8% from the level as of Dec 31, 2018 to $8.8 billion.

Book value per share was $612.87 as of Sep 30, 2019, up 16.1% from the level as of Dec 31, 2018.

Share Repurchase Update

As of Sep 30, 2019, the company had $659 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

Of the insurance industry players that have reported third-quarter results so far, Reinsurance Group of America RGA, Brighthouse Financial Inc. BHF and CNA Financial Corporation CNA beat the respective Zacks Consensus Estimate for earnings.

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