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Alleghany (Y) Q2 Earnings Beat Estimates, Revenues Fall Y/Y

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Alleghany Corporation (Y - Free Report) reported second-quarter 2020 adjusted income of 86 cents per share against the Zacks Consensus Estimate of a loss of $1.46 per share. The bottom line plunged 93.1% year over year attributable to soft performance at both its Insurance and Reinsurance segment.

Operational Update

Revenues declined 1.4% year over year to $2.2 billion on lower net investment income and noninsurance revenues.

Net premiums written rose 2.2% year over year to $1.5 billion.

Net investment income came in at $118.7 million, down 16.8% year over year, primarily attributable to reflect decreases in interest income due to low reinvestment yields on debt securities and lower yields on short-term investments and floating-rate debt securities.

Underwriting loss was $39.5 million against the year-ago quarter’s profit of $114.9 million.

Total costs and expenses increased 6.1% to $2 billion.

Alleghany Capital’s pretax earnings were $5.3 million, down 87.3% from the year-ago quarter.

Alleghany Corporation Price, Consensus and EPS Surprise

Alleghany Corporation Price, Consensus and EPS Surprise

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

Segment Update

Reinsurance Segment: Net premiums written declined 2.4% to $1.1 billion owing to an automobile-related premium rebates, decreases in the guaranty lines of business and the impact of changes in foreign currency exchange rates.

Underwriting loss was $30.3 million against the year-ago quarter’s income of $75.9 million. Combined ratio deteriorated 1000 basis points to 102.9%, reflecting catastrophe losses, largely related to the pandemic.

Insurance Segment: Net premiums written increased 17.4% to $391.5 million, driven by growth at RSUI.

Underwriting loss was $9.2 million against the year-ago quarter’s income of $39 million. The combined ratio of the reported segment deteriorated 2210 basis points to 102.9%.

Financial Update

Cash balance was $1.6 billion, up 40.2% from 2019 end level.

Debt balance of $2 billion increased 15.2% from 2019-end level.

Allegheny’s shareholder equity at the end of the second quarter was $8.5 billion, down 3.7% from 2019 end level.

Book value per share was $590.85 as of Jun 30, 2020, down 0.8% from the level as of Dec 31, 2019.

As of Jun 30, 2020, the company had $583 million remaining under its share repurchase authorization.

Zacks Rank

Alleghany currently 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 P&C Insurers

Of the insurance industry players that have reported second-quarter results so far, The Progressive Corporation (PGR - Free Report) , Cincinnati Financial (CINF - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings.

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