Here's Why You Should Retain Alleghany (Y) Stock Right Now

Alleghany Corporation (NYSE:Y) has made a name for itself in the property and casualty reinsurance and insurance industry in the United States and across the world. The property and casualty (P&C) insurer has successfully managed to meet the ever-changing demands and expectations of its clients and has built a solid product and service portfolio over the years.

The P&C insurer has displayed a brilliant track record of top line growth over a considerable period of time, fueled by growth in gross premium written. Both the insurance and reinsurance segments have been experiencing premium growth, which in turn have been driving premium revenues.

Interestingly, Alleghany expects sustained strong underwriting performances by its insurance operating units TransRe, RSUI, CapSpecialty and PacificComp to drive improved results in the near term.

The company is also boosting its inorganic growth profile on the back of prudent acquisitions. This has not only diversified its operations across the world but also added capabilities to its portfolio.

The Zacks Rank #3 (Hold) P&C insurer has been generating sufficient capital and engaging in share buybacks, leading to an improved shareholders’ value. However, the company has not repurchased any shares in the first quarter of 2017 and neither ruled out the possibility of buying the same in the near term.

Notably, the company refrains from paying any dividend as it intends to deploy the capital in unlocking growth opportunities.

Additionally, Alleghany boasts a solid balance sheet with increase in liquidity and decrease in debt. With modest leverage (debt to equity was 17.9%) and well capitalized (about $1.1 billion of marketable securities and cash), the company is well-positioned to support its subsidiaries to take advantage of growth opportunities.

Although the shares of Alleghany rallied 11.39% in the last one year, yet it underperformed the Zacks categorized Property and Casualty Insurance industry’s increase of 18.87%. However, we expect a strong operational performance, strategic initiatives and a robust capital management to result in share price appreciation.

However, exposure to catastrophe losses will continue to pose challenges for the company and adversely affect its underwriting results.. Also, escalating expenses weighing on margin expansion remains a headwind.

Nonetheless, valuation is attractive at present as the stock is currently trading at a price to book multiple of 1.12, a 22.8% discount to the industry average of 1.45.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Assurant, Inc. (NYSE:AIZ) , Cigna Corporation (NYSE:CI) and Old Republic International Corporation (NYSE:ORI) . Each stock holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Assurant offers risk management solutions for housing and lifestyle markets worldwide. The company delivered positive surprises in three of the last four quarters with an average beat of 6.82%.

Cigna provides insurance plus related products and services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 1.35%.

Old Republic deals in insurance underwriting and related services business, primarily in the U.S. and Canada. The company delivered positive surprises in two of the last four quarters with an average beat of 12.71%.

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