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TransRe results help Alleghany return to profitability in Q3

6th November 2019 - Author: Matt Sheehan

Alleghany Corporation has returned to profitability during the third quarter of 2019, helped by positive results from its reinsurance business, TransRe.

TransReAlleghany posted operating earnings of $109.8 million in Q3 2019, compared to a loss of $16.0 million for the same period last year.

Similarly, the company recorded underwriting profits of $32.8 million, versus a loss of $140.0 in Q3 2018.

This partly due to the performance of TransRe, which reported underwriting profit of $6.0 million last quarter, compared to a loss of $172.4 million in the previous year, and a 12.8% increase in net premiums written, totalling $1.1 billion.

The reinsurance segment’s third quarter combined ratio also improved to 99.5%, compared with 117.9% in Q3 2018.

TransRe benefited from significantly lower net catastrophe losses this year, with year-to-date losses amounting to $76 million, compared to $196 million last year.

This year’s cat losses mostly stemmed from Typhoon Faxai and Hurricane Dorian, Alleghany explained, while the 2018 losses were largely caused by Typhoon Jebi, Hurricane Florence, and Typhoon Trami.

However, Alleghany warned that there remains significant uncertainty about the loss estimates for Faxai, given the nature and location of the event.

Furthermore, the Q3 results do not take into account losses from Typhoon Hagibis, which affected many regions also impacted by Faxai, and which is likely to weigh heavily on TransRe’s Q4 results.

Alleghany’s primary insurance segment posted a 17.3% downturn in Q3 underwriting profits, totalling $26.8 million, and a 19.0% increase in net written premiums, which came to $302.2 million.

Looking at the first nine months of the year, Alleghany also performed well, with operating earnings increasing 39.7% to $428.9 million and underwriting profit up 164.9% to 232.3%.

Again, these results were helped by TransRe, which recorded underwriting profit of $122.0 million for the period, versus a loss of $3.8 million last year, as well as 12.6% growth in net premiums written, which amounted to $3.3 billion.

TransRe’s combined ratio was 96.2% for the first nine months of 2019, compared to 100.1% for the same period in 2018.

The insurance segment posted a 20.5% increase in underwriting profit for the nine-month period, at $110.3 million, and net written premiums were up 12.9% to $913.9 million.

Alleghany reported net investment income of $148 million for Q3 2019 and $414 million for 9M 2019, representing an increase of 16.1% and 9.5%, respectively, from the corresponding 2018 periods.

Weston Hicks, President and Chief Executive Officer at Alleghany, commented on the results: “Despite a small decline in the fair value of Alleghany’s equity portfolio and seasonal catastrophe losses in the quarter, Alleghany’s book value per share grew due to strong growth in net investment income, unrealized appreciation of the fixed income portfolio, record earnings at Alleghany Capital, and solid ex-catastrophe underwriting results at both RSUI and TransRe.”

“The excess and surplus lines underwriting environment continues to tighten and RSUI is benefiting from accelerating rate increases, improved terms, increased submissions and strong premium growth across most lines of business,” Hicks explained.

“TransRe’s casualty business is benefiting from improving original rate trends on its proportional business and some modest reductions in ceding commissions.”

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