Alleghany Corporation has reported a combined ratio of 99% for the first quarter of 2021 against 101.7% for the prior year period, helped in part by a $5 million underwriting gain at TransRe despite the impacts of winter storms in the U.S. and the pandemic.
Overall, Alleghany has announced total revenue growth of 79% to approximately $2.7 billion for Q1 2021, while net premiums written spiked by 14.4% to roughly $1.8 billion, and net investment income improved by more than 37% to $153.5 million.
Across its operations, the carrier has recorded an underwriting profit of $16.7 million against a loss of $24.4 million for the prior year period; and net earnings attributable to Alleghany stockholders of $230 million, compared with a loss of $361.2 million in Q1 2020.
During the period, TransRe, Alleghany’s reinsurance business, witnessed net premiums written growth of 15.2%, year-on-year, to roughly $1.4 billion.
The firm attributes this growth to generally improving rates overall, growth in various U.S. professional liability and agricultural lines of business and, to a lesser extent, the impact of changes in foreign exchange rates. However, gains here were somewhat offset by declines in shorter tail casualty lines including automobile and accident and health.
In Q1 2021, TransRe has recorded an underwriting profit of $5 million against a loss of $78.9 million for the prior year period, resulting in a combined ratio of 99.6%, compared with 107% for Q1 2020.
Alleghany attributes the improvement in TransRe’s combined ratio to lower losses related to both natural catastrophes and the pandemic.
During Q1 2021, TransRe incurred $100 million of winter storm losses and $18 million of pandemic-related losses, which takes TransRe’s total pandemic loss to $410 million since inception.
Excluding the impact of catastrophes and the pandemic, and TransRe’s underwriting profit reached $123 million in Q1 2021, representing year-on-year growth of 31.5%.
Within Alleghany’s insurance business, net premiums written increased by 11.5% in Q1 2021 to $359.9 million, reflecting growth at both RSUI and CapSpecialty.
Overall, the insurance segment’s underwriting result fell from a gain of $54.5 million in Q1 2020 to a gain of $11.7 million in Q1 2021.
At RSUI, net premiums written increased 11.5% as the combined ratio weakened from 75.8% to 96%, primarily driven by elevated catastrophe losses of $80 million as a result of the winter storms.
CapSpecialty’s net premiums written increased 11.8% in Q1 2021 as the combined ratio improved from 101.3% to 99.6%.
Weston Hicks, Chief Executive Officer (CEO) of Alleghany, commented: “Alleghany produced over $230 million of net earnings in the quarter, or $16.37 per share, with our businesses performing well in an improving economic environment, continuing favorable re/insurance market conditions and the benefit of strong investment earnings. Book value per share was flat in the first quarter of 2021, however, as unrealized bond losses offset our solid operating performance.”
Joe Brandon, President, added: “Each of our re/insurance operations delivered double digit net premium growth, reflecting continued broad-based rate increases, and each produced a modest underwriting profit despite incurring a total of $181 million of catastrophe losses related to Winter Storm Uri and related storms. Underwriting profit, excluding catastrophe and Pandemic losses, was $216 million, an increase of 37% over last year’s first quarter.
“Alleghany Capital had an excellent first quarter with strong earnings from W&W|AFCO Steel, IPS and Wilbert. On a trailing twelve month basis, Alleghany Capital’s adjusted earnings before taxes continue to grow and now exceed $195 million.
“Looking ahead, we continue to see encouraging underlying momentum across our businesses, reflected in continued rate increases and strong, profitable growth at our re/insurance operations and the breadth of current projects, backlogs and order flow at Alleghany Capital.”