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Alleghany (Y) Q1 Earnings Beat Estimates, Revenues Rise Y/Y

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Alleghany Corporation reported first-quarter 2021 adjusted income of $9.81 per share, which beat the Zacks Consensus Estimate by nearly 110%. The bottom line also increased 96.6% year over year.

The company witnessed growth in premiums and net investment income, partially offset by higher expenses.

Alleghany Corporation Price, Consensus and EPS Surprise

Operational Update

Operating revenues improved 24.8% year over year to $2.5 billion on higher net premiums earned and net investment income.

Net premiums written rose 14.4% year over year to $1.7 billion on higher premiums in Reinsurance and Insurance segments.

Net investment income came in at $153.5 million, up 37.1% year over year, attributable to higher partnership income and, to a lesser extent, higher dividend income, partially offset by lower interest income.

Combined ratio improved 270 basis points (bps) year over year to 99%.
Underwriting profit was $16.7 million against the year-ago quarter’s loss of $24.4 million.

Total costs and expenses increased 20.9% to $2.3 billion due to higher net loss and loss adjustment expenses, commissions, brokerage and other underwriting expenses, other operating expenses, corporate administration, amortization of intangible assets and interest expense.

Segment Update

Reinsurance Segment: Net premiums written rose 15.2% to $1.4 billion owing to an overall improving rate, growth in various U.S. professional liability and agricultural lines of business, and to a lesser extent, the impact of favorable changes in foreign exchange rates. The uptick was partially offset by declines in shorter tail casualty lines including automobile, and accident and health.

Underwriting profit was $5 million against the year-ago quarter’s loss of $78.9 million. Combined ratio improved 740 basis points to 99.6%, reflecting lower catastrophe and pandemic losses.

Insurance Segment: Net premiums written increased 11.5% to $359.9 million, driven by growth at both RSUI and CapSpecialty.

Underwriting income of $11.7 million declined 78.5% year over year. The combined ratio of the reported segment deteriorated 1440 basis points to 96.9%.

Alleghany Capital: Pre-tax earnings were $35.7 million in the first quarter compared with $0.3 million in the year-ago period. This significant jump was owing to higher earnings in both non-industrial and industrial sub-segments, partially offset by an increase in long-term incentive compensation accruals in Alleghany Capital’s corporate operations.

Financial Update

Cash balance was $1.2 billion, up 51.3% from the 2020-end level.

Debt balance of $2 billion decreased 2.6% from the 2020-end level.
Allegheny’s shareholder equity at the end of the first quarter dipped 0.7% to $8.7 billion from the level at 2020 end.

Book value per share was $623.78 as of Mar 31, 2021, flat with the level as of Dec 31, 2020.

Cash outflow from operating activities was $111.5 million in the March quarter compared with the cash used in operating activities of $81.6 million in year-ago quarter.

Share Repurchase Update

Allegheny bought back shares worth $63.2 million in the quarter. As of Mar 31, 2021, the company had $369.2 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.

Other Insurance Releases

First-quarter earnings of Assurant, Inc. (AIZ - Free Report) , Prudential Financial, Inc. (PRU - Free Report) and Everest Re Group, Ltd. beat the respective Zacks Consensus Estimate.

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