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Alleghany (Y) Q2 Earnings & Revenues Beat Estimates, Up Y/Y

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Alleghany Corporation (Y - Free Report) reported second-quarter 2018 operating earnings of $9.78 per share, which surpassed the Zacks Consensus Estimate of $8.71 by 12.3%. Moreover, the bottom line surged 49.1% from the year-ago quarter’s level.

Alleghany Corporation Price, Consensus and EPS Surprise

 

Alleghany Corporation Price, Consensus and EPS Surprise | Alleghany Corporation Quote

The company delivered net earnings of $19.44 per share in the reported quarter, which skyrocketed 194.5% from the prior-year quarter’s figure.

The quarter under review benefited from a better underwriting performance at TransRe, strong earnings at Alleghany Capital as well as strong equity gains. Also, higher investment income and lower tax contributed to this upside.

Operational Update

Revenues for the second quarter improved 10.2% from the year-ago quarter’s tally to 1.7 billion. Additionally, the top line beat the Zacks Consensus Estimate by 26.9%.

Net premiums written dipped 1.3% year over year to $1275.8 million.

Net investment income came in at $126.3 million in the quarter under consideration, up 24.2% year over year. This uptick is driven by higher dividend income, stemming from a rise in the size of equity portfolio as well as higher interest income.

Underwriting profit nudged up 1.5% year over year to $96.7 million.

Total costs and expenses increased 7.9% to $7.8 million.

Segment Update

Reinsurance Segment: Net premiums written slipped 0.2% to $976.6 million due to higher ceded premiums written, pertaining to an increase in retrocessional coverage purchased in 2018. However, increase in casualty premiums written by the European and Asia-Pacific operations and the impact of volatility in forex rates partially offset this downside.

Underwriting profit was $69.8 million, up 12.2% from the year-ago quarter’s number. The segment’s second-quarter combined ratio improved 70 basis points to 92.8%, reflecting higher net premiums earned.

Insurance Segment: Net premiums written were down 4.8 % to $299.2 million due to the sale of PacificComp in the fourth quarter of 2017. However, growth at CapSpecialty and RSUI limited this downside.

Underwriting profit of $26.9 million was down 18.7% from the year-ago quarter’s count. The combined ratio of the reported segment deteriorated 110 basis points to 89.5%, attributable to decrease in a favorable prior-year accident year loss reserve development and higher catastrophe loss incurred at RSUI.

Financial Update

Alleghany exited the second quarter with cash of $623.2 million, down 25.7% from $838.4 million at the end of 2017.

Debt balance of $1.6 billion rose 5.7% from 2017-end level.

Allegheny’s shareholder equity at the end of the second quarter declined 1.3% to $8.4 billion from $8.5 billion as of Dec 31, 2017.

Book value per share was $560.49 as of Jun 30, 2018, up 2.8% from the level as of Dec 31, 2017.

Share Repurchase Update

In the reported quarter, Alleghany bought back shares worth $214.8 million. In June, the company’s board of directors approved a buyback of additional shares up to an aggregate amount of $400 million. As of Jun 30, 2018, the company had $527.1 million remaining under its share repurchase authorization.

Zacks Rank

Alleghany 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 Insurers

Among other players from the insurance industry having reported second-quarter earnings so far, the bottom line of The Progressive Corporation (PGR - Free Report) , MGIC Investment Corporation (MTG - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.

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