Alleghany’s Earnings Lag, Revs Beat Ests

Zacks

Alleghany Corporation (Y) delivered operating earnings of $6.99 per share in the fourth quarter of 2013, lagging the Zacks Consensus Estimate of $7.38 by 5.3%. However, results rebounded from a loss of $5.40 per share incurred in the year-ago quarter.

Net income came in at $12.24 per share reversing the year-ago loss of $5.47 per share.

An improved top line coupled with lower expenses fueled the year-over-year improvement in the bottom line.

Behind the Headlines

Alleghany’s top line improved 9.8% year over year to $1.36 billion, attributable to higher net investment income, higher net realized investment gains and other income. The results comfortably exceeded the Zacks Consensus Estimate of $1.1 billion.

Net investment income surged 67% year over year to $131.2 million in the fourth quarter.

Interest expense of $21.8 million was flat year over year. Total costs and expenses of $1.05 billion declined 26% from the year-ago quarter.

Underwriting profit for the reported quarter came in at $98.7 million, rebounding from a loss of $222 million incurred in the year-ago quarter. The upsurge was driven by better results at both Reinsurance and Insurance segments that posted underwriting profit, reversing the year-ago loss. Combined ratio improved 2940 basis points year over year to 90.6% in the reported quarter attributable to strong underwriting performances at TransRe and RSUI.

Full-Year 2013 Highlights

Alleghany’s bottom line in the year came in at $29.76 per share, up 54.8% over 2012. Net income was $37.44 per share, down 17.7% from the 2012 equivalent.

Alleghany’s 2013 revenues improved 4.6% year over year to $4.97 billion.

Financial Update

Alleghany exited 2013 with cash balance of $498.3 million, down 23.3% from Dec 31, 2012.

Total assets of $23.4 billion increased 2.6% from the 2012-end level.

Total shareholders’ equity stood at nearly $7 billion as of Dec 31, up 7.8% from the 2012-end level.

Book value per share increased 8.9% to $412.96 as of Dec 31, 2013 from $379.13 as on Dec 31, 2012.

Return on equity was 9.4% in 2013, down from 15.1% in 2012.

Share Repurchase Update

Alleghany spent $40.4 million to buy back 0.11 million shares in 2013. The company has $241.9 million remaining under its $300 million authorization.

Performances by Other Property and Casualty Insurers

Allied World Assurance Company Holdings, AG (AWH) reported its fourth-quarter 2013 operating net income of $2.15 per share, lagging the Zacks Consensus Estimate by 10.2%. The results, nevertheless, rebounded from the year-ago loss of $1.60 per share.

Platinum Underwriters Holdings Ltd. (PTP) reported its fourth-quarter net earnings of $1.73 per share, which outpaced the Zacks Consensus Estimate of 50 cents. Results also surged 88% from the year-ago quarter level.

RLI Corporation (RLI) reported fourth-quarter operating earnings of 72 cents per share, surpassing both the Zacks Consensus Estimate by 28% and the year-ago figure by 60%.

Zacks Rank

Alleghany presently carries a Zacks Rank #3 (Hold).

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