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Alleghany (Y) Q3 Earnings Top Estimates, Revenues Rise Y/Y

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Alleghany Corporation (Y - Free Report) 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.

Alleghany Corporation Price, Consensus and EPS Surprise

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 second 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.

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.

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) , The Travelers Companies (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings.

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