Rising estimates resulting from an excellent quarterly performance have sent this insurer to Zacks #1 (Strong Buy) rank again and it is the ‘Bull of the day’.
About the Company
Alleghany (Y) is a multi-line insurance company, operating through its subsidiaries, Transatlantic Holdings (reinsurer), RSUI Group (underwriter of property and liability specialty Insurance), Capitol Transamerica Corporation (underwriter of small commercial property, casualty and surety insurance) and Pacific Compensation Corporation (underwriter of workers’ compensation insurance).
Excellent Second Quarter Results
The company reported its second-quarter 2013 results on August 5, 2013. Operating net earnings of $6.78 per share were substantially higher than the Zack’s Consensus Estimate of $4.25 per share.
The company has delivered a positive surprise in all of the previous four quarters, with an average quarterly surprise of 62.2%.
Better than expected earnings were a result of increase in net investment income (up 10.5% year over year) and lower costs and expenses.
A decline in net loss and loss adjustment expenses, other operating expenses and corporate administration also aided the improvement.
The company spent $40.4 million in share buybacks during the first two quarters of the year. It had $241.9 million remaining on its currently effective $300 million share repurchase authorization.
Zacks consensus estimate for the current quarter has increased to $4.53 per share from $4.11 per share 60 days ago and similarly, the estimate for the current year has gone up to $30.42 per share from $26.00 per share.
The Bottom Line
For the five years ended December 31, 2012, Alleghany’s common stockholders’ equity per share increased at a compound annual rate of 6.1%, compared with a compound annual rate of return of 1.6% for the S&P 500 over the same time period.
The management believes that with their excellent portfolio of investments and businesses, they can produce 7-10% growth in book value per share per year over the long term, and can double shareholder value at least every ten years.
With an excellent portfolio and exceptional management philosophy, Alleghany looks like a min-version of Berkshire Hathaway.
Alleghany is a Zacks Rank#1 (Strong Buy) stock. It also has a Zacks recommendation of “Outperform”. Further, the Zacks Industry rank of 7 (out of 265) also indicates strong potential for outperformance in the short- to mid-term. I believe that this stock will be an excellent long-term addition to any portfolio.