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Alleghany (Y) Earnings Miss Estimates in Q2, Revenues Beat


Alleghany Corporation (Y) 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.

Alleghany Corporation Price, Consensus and EPS Surprise

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

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.

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 Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, the bottom line of Brown & Brown, Inc. BRO and Fidelity National Financial, Inc. FNF have topped their respective Zacks Consensus Estimates, while The Progressive Corporation PGR lagged the same.

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