Here's Why You Should Add Alleghany (Y) To Your Portfolio
Zacks Investment Research | Jun 25, 2018 10:36PM ET
Alleghany Corporation (NYSE:Y) has built a reputation in the market as a property and casualty (P&C) insurer, engaged in insurance and reinsurance businesses and holding an excellent record in catering to its clients’ diverse needs. Over the years, the customers have gained a lot from the company’s compelling suite of varied insurance products and services. By retaining this favorable buzz among brokers, this Zacks Rank #1 (Strong Buy) P&C insurer consistently emerges stronger over time and is well poised to retain its purple patch in the near future.
Growth Drivers
Alleghany has been witnessing an upward trend pertaining to its top line, driven by a continued improvement in gross written premium. We expect the company to continue displaying this momentum in the near term, which in turn, is likely to accelerate its overall growth.
Further, the P&C insurer has been displaying improving underwriting results over a considerable period of time owing to strong underwriting performances at its segments, namely TransRe and RSUI, CapSpecialty and PacificComp. This has been further boosting the company’s results and we expect this positive phase to continue in the near term as well.
Investment income, a major contributor to insurers’ top line, has been on progress track over a considerable period of time, backed by rising interest rates. The P&C insurer anticipates witnessing better investment results in the short term on the back of a slow-but-steady improving pace of interest rates.
Alleghany’s growth trajectory remains impressive, courtesy of its strategic buyouts. Prudent acquisitions bear testimony to the company’s long-term growth strategy. The M&A activity has enabled the company to expand its product base and reach new industrial markets. We expect Alleghany to continue investing in such initiatives, which will likely extend its geographical footprint and add new capabilities to its portfolio.
A strong capital position aids the company to return value to its shareholders through buybacks. Moreover, a strong balance sheet has allowed the company to remain well-positioned to provide support to its units for taking advantage of growth opportunities.
With respect to book value per share, the company has been increasing the same since the financial crisis in 2008. It witnessed a five-year CAGR (2012-2017) of 7.9% and is in line with the 7-10% long-term annual growth target.
An Outperformer: Shares of Alleghany have lost 1.5% year to date, narrower than the Zacks Investment Research
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