Investment holding company Alleghany Corporation has posted an underwriting loss of $161.5 million for the full-year 2018, which was partially driven by catastrophe losses incurred by its reinsurance arm, Transatlantic Reinsurance Company (TransRe).
TransRe experienced $500.1 million of catastrophe losses in 2018, of which $167.2 million was attributable to Typhoon Jebi, $163.7 million to the California wildfires, $80.1 million to Hurricane Michael, $36.5 million to Hurricane Florence, and $29.7 million to Typhoon Trami.
Combined with $157.6 million cat losses in Alleghany’s insurance segment, the company incurred overall catastrophe losses of $657.7 million, which translated to $494.4 million after accounting for taxes, reinsurance and reinstatement premiums.
TransRe grew its net premiums written by 4.2% over 2018 when compared with the prior year, primarily due to increases in premiums written by the reinsurer’s North American and Asia Pacific operations.
For the fourth quarter of 2018 alone, TransRe grew its net premiums written by 11.8% due to the company’s purchase of certain renewal rights associated with a block of U.S treaty reinsurance.
Increases were offset to some extent by higher ceded premiums written due to an increase in retrocessional coverage purchased in 2018 and a reduction of TransRe’s quota share treaty participation.
TransRe’s combined ratio for the full year was 105.4%, compared with 106.9% in 2017, with catastrophe losses contributing 12.7%, compared with 15.3% in the previous year.
Its combined ratio for the fourth quarter was 120.1%, compared with 90.2% for Q4 2017, with catastrophe losses reflecting 29.4%, compared with just 0.5% in Q4 2017.
Catastrophe losses also contributed to a earnings loss of $890.7 million (pre-tax) for Alleghany in Q4 2018, although it managed to post a profit of $39.6 million for the full year, consistent with the $36.7 million reported in 2017.
Alleghany posted net investment income of $122.8 million for Q4 and $500.5 million for the full year, representing a decrease of 5.0% and an increase of 11.0%, respectively, when compared with the same periods in 2017.
“Our 2018 results reflect record earnings at Alleghany Capital, profitable but depressed operating results at TransRe and RSUI due to above-average catastrophe losses, and solid growth and improved earnings at CapSpecialty,” said Weston Hicks, President and Chief Executive Officer of Alleghany.
“The property and casualty industry experienced above average catastrophe losses for a second consecutive year in 2018. TransRe and RSUI were not immune from these catastrophe losses,” he continued. “Losses in 2018 resulted primarily from the Japanese typhoons, California wildfires and Hurricane Michael, which made landfall in The Florida Panhandle.”
“While catastrophe losses negatively affected 2018 results, favorable prior period reserve development, primarily in the casualty lines of business, and disciplined underwriting at both TransRe and RSUI resulted in favorable relative performance and a modest operating profit for the year,” Hicks explained.
“Each of TransRe, RSUI and CapSpecialty delivered increased net premiums written during the year as they capitalized on an increase in business opportunities and remained disciplined in their approach.”