Earnings and book value per share improved at Alleghany Corporation Y in the third quarter, thanks to decreased catastrophe losses in property-casualty insurance and capital gains from sales of equities in the investment portfolio. Book value per common share increased to $300 from $285 sequentially and from $278 at the start of the year. The insurance holding company reported that its largest subsidiary, RSUI, contributed a $33 million underwriting profit as the quarterly combined ratio--insurance expenses divided by earned premium--sank to 79%, a huge improvement from 122% in last year's third quarter. Overall, the combined ratio for all insurance operations was 86% for the quarter. Investment results were boosted by capital gains from sales of energy stocks in the quarter, though we cannot help but think that Alleghany's decision to gradually unload its large position in Burlington Northern BNI over the past couple of years was premature in light of Berkshire Hathaway's BRK.B recent announcement of plans to take over the railroad. Third-quarter and year-to-date results are in line with our expectations, and our fair value estimate is unchanged.

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