A month has gone by since the last earnings report for Alleghany . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alleghany due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Alleghany Q3 Earnings Top Estimates, Revenues Rise Y/Y
Alleghany Corporation reported third-quarter 2020 adjusted income of $3.23 per share against the Zacks Consensus Estimate of a loss of $3.37 per share. The bottom line plunged 57.6% year over year attributable to soft performance at both its Insurance and Reinsurance segment.
Operational Update
Revenues increased 10.2% year over year to $1.7 billion on higher premiums. Net premiums written rose 15.8% year over year to $16 billion.
Net investment income came in at $129 million, down 12.5% year over year, due to a decline in fixed income investment yields.
Underwriting loss was $81.3 million against the year-ago quarter’s profit of $32.8 million. Combined ratio of 105.2% deteriorated 760 bps.
Total costs and expenses increased 16% to $.4 billion. Alleghany Capital’s adjusted pretax earnings were $67 million, up 45.7% from the year-ago quarter.
Segment Update
Reinsurance Segment: Net premiums written increased 13.6% to $1.3 billion owing to improving rates, growth in various traditional casualty and other professional liability lines of business in the United States and the United Kingdom, favorable forex and lower ceded premium ratios.
Underwriting loss was $23.4 million against the year-ago quarter’s income of $6 million, largely attributable to catastrophe losses, stemming from hurricanes Laura and Sally and COVID-19 global pandemic.
Combined ratio deteriorated 250 basis points to 102%, reflecting catastrophe losses, largely related to the pandemic.
Insurance Segment: Net premiums written increased 23.8% to $373.9 million, driven by growth at RSUI.
Underwriting loss was $57.9 million against the year-ago quarter’s income of $26.8 million. The combined ratio of the reported segment deteriorated 2560 basis points to 116.5%.
Financial Update
Cash balance was $1.3 billion, up 4.4% from 2019 end level. Debt balance of $2 billion increased 16.6% from 2019-end level.
Allegheny’s shareholder equity at the end of the third quarter was $8.6 billion, down 2% from 2019 end level.
Book value per share was $606.21 as of Sep 30, 2020, up 1.7% from the level as of Dec 31, 2019. During the reported quarter, the company bought back shares worth $70 million. As of Sep 30, 2020, the company had $513 million remaining under its share repurchase authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 44.57% due to these changes.
VGM Scores
At this time, Alleghany has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Alleghany has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Why Is Alleghany (Y) Up 2.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Alleghany . Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alleghany due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Alleghany Q3 Earnings Top Estimates, Revenues Rise Y/Y
Alleghany Corporation reported third-quarter 2020 adjusted income of $3.23 per share against the Zacks Consensus Estimate of a loss of $3.37 per share. The bottom line plunged 57.6% year over year attributable to soft performance at both its Insurance and Reinsurance segment.
Operational Update
Revenues increased 10.2% year over year to $1.7 billion on higher premiums. Net premiums written rose 15.8% year over year to $16 billion.
Net investment income came in at $129 million, down 12.5% year over year, due to a decline in fixed income investment yields.
Underwriting loss was $81.3 million against the year-ago quarter’s profit of $32.8 million. Combined ratio of 105.2% deteriorated 760 bps.
Total costs and expenses increased 16% to $.4 billion. Alleghany Capital’s adjusted pretax earnings were $67 million, up 45.7% from the year-ago quarter.
Segment Update
Reinsurance Segment: Net premiums written increased 13.6% to $1.3 billion owing to improving rates, growth in various traditional casualty and other professional liability lines of business in the United States and the United Kingdom, favorable forex and lower ceded premium ratios.
Underwriting loss was $23.4 million against the year-ago quarter’s income of $6 million, largely attributable to catastrophe losses, stemming from hurricanes Laura and Sally and COVID-19 global pandemic.
Combined ratio deteriorated 250 basis points to 102%, reflecting catastrophe losses, largely related to the pandemic.
Insurance Segment: Net premiums written increased 23.8% to $373.9 million, driven by growth at RSUI.
Underwriting loss was $57.9 million against the year-ago quarter’s income of $26.8 million. The combined ratio of the reported segment deteriorated 2560 basis points to 116.5%.
Financial Update
Cash balance was $1.3 billion, up 4.4% from 2019 end level. Debt balance of $2 billion increased 16.6% from 2019-end level.
Allegheny’s shareholder equity at the end of the third quarter was $8.6 billion, down 2% from 2019 end level.
Book value per share was $606.21 as of Sep 30, 2020, up 1.7% from the level as of Dec 31, 2019. During the reported quarter, the company bought back shares worth $70 million. As of Sep 30, 2020, the company had $513 million remaining under its share repurchase authorization.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 44.57% due to these changes.
VGM Scores
At this time, Alleghany has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Alleghany has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.