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TransRe fails to shake underwriting loss in Q4

24th February 2021 - Author: Matt Sheehan

Alleghany Corporation has posted underwriting profit of $16.5 million in the fourth quarter of 2020, despite another period of losses for its reinsurance arm, TransRe.

TransReTransRe reported an underwriting loss of $34.6 million in Q4, which was an improvement on the $162.8 million loss it posted for the same period in 2019.

However, the reinsurance unit still fell to a loss in every other quarter of the year, meaning its overall 2020 underwriting loss was $167.2 million, well below the 2019 underwriting loss of $40.9 million.

Losses in the Q4 period were offset by the performance of Alleghany’s primary insurance business, which recorded underwriting profit of $51.1 million, leaving with the group with overall profit of $16.5 million.

But for the full year, the insurance segment’s $38.5 million underwriting profit was dwarfed by the TransRe loss, leaving Alleghany with a $128.7 million underwriting loss for 2020.

This compares with the group’s Q4 loss of $199.3 million in 2019 and $33.0 million profit for the full-year 2019 period.

Alleghany’s underwriting loss in 2020 included $801 million of catastrophe losses, $415 million of which were related to the COVID-19 pandemic, as well as hurricanes in the third quarter and a variety of smaller events.

TransRe’s combined ratios were 102.9% and 103.6% for the three months and year ended December 31, 2020, respectively, compared with 114.4% and 100.9% for the corresponding periods of 2019.

Catastrophe losses amounted to $146 million and $566 million for the Q4 and full-year periods, including pandemic losses of $76 million and $392 million. Catastrophe losses in 2020 also included significant losses for Hurricane Laura, Hurricane Sally and earthquakes in Puerto Rico.

On a more positive note, TransRe increased its net written premiums by 10.4% to $1.28 billion in Q4 and by 7.8% to $4.85 billion for the full year, reflecting improving rates and growth in various traditional casualty and other professional liability lines of business in the US.

Alleghany also reported that TransRe experienced “successful” January renewals, especially in its US casualty and specialty business, which grew materially.

“Alleghany grew book value per share, adjusted for the special dividend paid on March 16, 2020, by 4.5% in 2020 despite significant insurance and reinsurance losses recognized due to the Pandemic as well as operational and logistical challenges, primarily at Alleghany Capital’s subsidiaries,” said Weston Hicks, Alleghany’s President and Chief Executive Officer.

“While the Pandemic continues in 2021, we believe that our reserves for potential exposure are reasonable, and we have absorbed the vast majority of the financial impact from this unprecedented event,” he continued.

“Insurance and reinsurance market conditions continued to improve in 2020, with primary insurance pricing increasing at double-digit rates in the fourth quarter. Although our net premiums earned in 2020 have reflected strong rate increases, we have been cautious in recognizing the potential earnings benefit from better pricing due to the significant uncertainty that continues around both the Pandemic and the liability insurance market.”

“I am excited about Alleghany’s prospects going forward, with significant momentum in its insurance operations and an encouraging January reinsurance renewal season at TransRe.”

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