Alleghany Corporation (Y) reported net earnings of $11.40 per share for the third quarter of 2014, outperforming the Zacks Consensus Estimate of $7.82 by 45.8%. Results also improved 68.9% year over year.
Solid underwriting results at the Reinsurance and Insurance segments drove the bottom line.
Behind the Headlines
Alleghany’s top line improved 13.7% year over year to $1.35 billion, largely attributable to a rise in net premiums earned, net investment income, net realized capital gains and other income.
Net investment income rose 2.6% year over year to $118.3 million in the reported quarter. The rise came on the back of an increased allocation of the debt securities portfolio to higher yielding securities and more favorable reinvestment rates, partially offset by the absence of gains from Alleghany’s investment in Homesite.
Total costs and expenses of $1.09 billion increased 4.3% from the year-ago quarter due to rise in commissions, brokerage and other underwriting expenses, along with other operating expenses, corporate administration expense and interest expense.
Underwriting profit came in at $140.8 million, up significantly from $61.8 million in the year-ago quarter. The upsurge was driven by strong results at both Reinsurance and Insurance segments.
Combined ratio improved 650 basis points year over year to 87.6% in the reported quarter, on the back of strong underwriting performance at TransRe and RSUI due to lower cat losses.
Total net premiums written increased 9.1% from the year-ago quarter to $1.12 billion. This mainly resulted from a rise in net premiums written in TransRe owing to an increase in participation of certain long-term clients in the reinsurance programs. Net premiums written also rose in the insurance segment owing to strong growth in PacificComp and a moderate rise in CapSpecialty and RSUI.
Financial Update
Alleghany exited third-quarter 2014 with cash balance of $607.6 million, up 21.9% from Dec 31, 2013.
The company’s total assets of $23.9 billion increased 2.4% from 2013-end.
Total shareholders’ equity came in at nearly $7.4 billion as of Sep 30, 2014, up 6.7% from the 2013-end level.
Book value per share increased 10.4% to $456.10 as of Sep 30, 2014 from $412.96 as of Dec 31, 2013.
In the reported quarter, the company completed offering of 4.90% senior notes worth $300 million, the proceeds of which were used by TransRe to redeem 5.75% senior notes worth $300 million due on Dec 14, 2015.
Zacks Rank
Alleghany now has a Zacks Rank #1 (Strong Buy).
Performance of Other Property and Casualty Insurers
Everest Re Group Ltd. (RE) reported third-quarter 2014 operating earnings of $6.12 per share, way ahead of the Zacks Consensus Estimate of $4.97. Earnings were also up 45.7% year over year.
W.R. Berkley Corporation (WRB) posted third-quarter 2014 operating income of $1.06 per share, outperforming the Zacks Consensus Estimate by 16.5% and improving 37.7% year over year. The earnings beat came on the back of growth in premiums written, investment income and capital gains.
The Chubb Corporation’s (CB) third-quarter operating income of $2.17 per share surpassed the Zacks Consensus Estimate by 11.3% and improved 5% from the prior-year quarter.
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