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Alleghany (Y) Down 8.8% Since Earnings Report: Can It Rebound?

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About a month has gone by since the last earnings report for Alleghany Corporation (Y - Free Report) . Shares have lost about 8.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important

Alleghany Earnings Miss Estimates in Q2, Revenues Beat

Alleghany reported second-quarter 2017 operating earnings of $6.37 per share, missing the Zacks Consensus Estimate of $8.10 by 27.5%. However, the bottom line improved 115% from the prior-year quarter.

The company witnessed solid underwriting discipline in the reported quarter despite a decline in the investment income and weak segmental performance.

Including one-time items, the company reported net income of $6.60 per share, up 32.3% year over year.

Operational Update

Operating revenues of $1.5 billion fell 1.8% year over year due to lower premiums earned and investment income. Revenues surpassed the Zacks Consensus Estimate of $1.3 billion by 13.7%.

Net premiums written declined 3.1% year over year to $1.3 billion.

Net investment income came in at $101.7 million in the quarter, down 4.9% year over year. The decrease in the reported quarter is attributable to $12.6 million charge related to the company’s equity investment in Ares, partially offset by higher income from partnerships and high interest income from bonds. Interest expenses were $20.9 million, up 2.7% year over year.

Underwriting profit surged 155.5% to $95.3 million. Combined ratio improved 460 basis points year over year.

Segment Update

Reinsurance Segment: Net premiums written declined 3.1% to $978.9 million driven by cancellation, non-renewals and reduced participation in international treaties, interest rate pressures, increased retention by cedants and foreign currency fluctuation rates. Underwriting profit skyrocketed 418.3% to $62.2 million.

Insurance Segment: Net premiums written declined 3% to $314.3 million. Underwriting profit increased 30.8% to $33.1million.

Financial Update

Alleghany exited the quarter with cash of $643.6 million compared with $594 million at the end of 2016.

Debt balance of $1.5 billion inched up 0.7% from Dec 2016-end level.

Allegheny’s shareholder equity at the end of the quarter was $8.4 billion compared with $7.9 billion at the 2016-end level.

Book value per share increased 6.2% from year-end 2016 to $547.06 as of Jun 30, 2017.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimate. There has been one revision higher for the current quarter

Alleghany Corporation Price and Consensus


Alleghany Corporation Price and Consensus | Alleghany Corporation Quote

VGM Scores

At this time, Alleghany's stock has an average Growth Score of C, however its Momentum is doing a bit better with a B. The stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.


Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Surprisingly, the stock has a Zacks Rank #5 (Strong Sell). We expect below average returns from the stock in the next few months.

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