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Downturn in TransRe profits offset Alleghany’s Q1 growth

9th May 2019 - Author: Matt Sheehan

Alleghany Corporation posted a 46.4% increase in revenue for the first quarter of 2019, offset by a downturn in the underwriting profit of its reinsurance subsidiary, Transatlantic Reinsurance Company (TransRe).

transre-logoTransRe generated underwriting profits of $40.0 million in Q1 2019, down 59.5% from $98.8 million when compared with the same period last year.

This was despite the reinsurance unit growing its net premiums written by 11.1%, from $997.0 million to $1.1 billion, over the period.

Alleghany attributed the decline in underwriting profit at TransRe to lower amounts of favourable prior year reserve development on catastrophes and a modestly higher attritional loss ratio.

The growth in premiums written mainly reflects the impact of TransRe’s August 2018 purchase of the renewal rights on a block of U.S. treaty reinsurance business, partially offset by a decrease in net premiums written related to a certain large whole account quota share treaty and the impact of changes in foreign currency exchange rates.

TransRe’s Q1 combined ratio deteriorated by 6.4 points to 96.1%, driven by a higher attritional loss ratio due to several large non-catastrophe losses and less favourable prior accident year loss reserve development on catastrophes.

“TransRe continues to maintain a strong balance sheet and is exercising discipline in responding to emerging market opportunities,” said Weston Hicks, President and Chief Executive Officer (CEO) of Alleghany.

“TransRe is encouraged by the recent favorable pricing response in the market following two consecutive years of elevated catastrophe losses and is well positioned to write more premiums and deploy additional capital should the pricing environment continue to improve.”

In contrast, Alleghany’s primary insurance operations grew their underwriting profit by 39.3% to $44.7 million in Q1 2019, meaning the Corporation’s overall underwriting profit was $84.7 million for the quarter, and 35.5% lower than last year.

Similarly, net premiums written for the insurance segment grew by 8.5% to $278.1 million, supporting overall premium growth of 10.6% for Alleghany, which wrote net premiums of $1.4 billion in Q1 2019.

“Alleghany’s results were led by investment outperformance, strong underwriting results at RSUI, and organic revenue and earnings growth at Alleghany Capital,” explained Weston. “Net premiums written growth of 10.6% was driven by an improving excess and surplus market and the favorable impact of two renewal rights transactions.”

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