Alleghany (Y) Completes Pricing of $500 Million Senior Notes

Alleghany Corporation Y announced the pricing of $500 million aggregate principal amount of senior notes. The notes carry an interest rate of 3.250% and are scheduled to mature in 2051. The senior notes were priced at 98.639% of par.

The company plans to deploy the net proceeds from the sale of senior notes for general corporate purposes, which may include the repayment of senior notes that carry an interest rate of 4.95% and are scheduled to mature in 2022.

The company issued senior notes amid a low interest rate environment to get hold of more funds and enhance financial flexibility without affecting its liquidity. As of Jun 30, 2021, Alleghany’s cash balance increased 10.1% from 2020 end level.  Also, in the first half of 2021, cash from operating activities surged more than threefold year over year.

As of Jun 30, 2021, total debt of the company was about $2.1 billion, down 3.4% from 2020 end. The debt-to-capital ratio at the end of the second quarter was 18.4, improved 120 basis points from fourth-quarter end and better than the industry average of 20.2. The debt level of the company has been decreasing over the last few years and thus its debt to capital has been improving. However, the latest offering will increase the debt-to-capital ratio by 350 basis points.

Further, times interest earned of 13.7 at second-quarter end was good when compared with the fourth-quarter end figure of 2.8. The firm’s times interest earned ratio has been improving over the years. The improvement in this ratio indicates that the firm will be able to meet current obligations in the near future without any difficulties.

By capitalizing on the low interest rate environment, the company is also attempting to reduce its interest burden, thus facilitating margin expansion. Also, the company’s operational strength should enable it to service debt uninterruptedly, thereby maintaining the stock’s creditworthiness.

Recently, Assurant, Inc. AIZ announced the pricing of $350 million aggregate principal amount of senior notes. The notes carry an interest rate of 2.650% and are scheduled to mature in 2032.

Alleghany currently carries a Zacks Rank #2 (Buy). This property and casualty insurer has gained 23.7% in the past year compared with the industry’s increase of 25.9%.

Image Source: Zacks Investment Research

Other Stocks That Warrant a Look

Some other top-ranked stocks from the property and casualty insurance industry are American Financial Group, Inc. AFG and Cincinnati Financial Corporation CINF, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial surpassed estimates in each of the last four quarters, with the average surprise being 52.82%.

Cincinnati Financial surpassed estimates in three of the last four quarters, with the average surprise being 36.01%.

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