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Analyst Blog

On May 27, 2014, shares of Alleghany Corporation (Y - Snapshot Report) reached a 52-week high of $14.55. With about 0.05 million shares exchanging hands in the last trading session, the share price was $422.13 at the close.

The momentum was driven by earnings strength that clocked a 65.5% positive surprise, continued focus on enhancement of shareholders’ value and strong scores from rating agencies. The year-to-date return from the stock came in at 5.5%, ahead of the S&P’s return of 3.4%.

With respect to earnings performance, this Zacks Rank #2 (Buy) property and casualty insurer delivered positive surprise in three of the last four quarters with an average beat of 31.3%. A sturdy underwriting performance both at TransRe and RSUI, drove last quarter’s results. Net premiums written of Alleghany improved 3.7% driven by higher insurance and re insurance premiums.

Alleghany bought back 0.24 million shares for $94.6 million in the first quarter and has $147.3 million remaining under its authorization. Share buybacks lower the share count thereby enhancing shareholders’ value.

Alleghany scores strongly with the credit rating agencies. A.M. Best Company upgraded the financial strength rating to A+ (Superior) from A (Excellent) for RSUI’s wholly owned subsidiaries. Also, TransRe and its insurance subsidiaries’ outlook was upgraded to positive by the rating agency.

A steady operational performance by Alleghany helped the Zacks Consensus Estimate to move north in the last 30 days. The Zacks Consensus Estimate is currently pegged at $29.35 for 2014 (up 6.7%) and $28.35 for 2015 (up 0.7%).

Other Stocks to Consider

Some other property and casualty insurers worth considering include W.R. Berkley Corp. (WRB - Analyst Report), AmTrust Financial Services, Inc. (AFSI - Snapshot Report) and Atlas Financial Holdings, Inc. (AFH - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).

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