Alleghany Corporation has reported a return to underwriting profitability across its business for the second quarter of 2021, driven by a strong year-on-year turnaround in the performance of its reinsurance operation, TransRe.
Overall, Alleghany has announced underwriting profit of $174 million for Q2 2021 and a combined ratio of 90.2%, compared with an underwriting loss of $40 million and a combined ratio of 102.8% for the prior year period.
Excluding the impacts of catastrophe events and also losses related to the COVID-19 pandemic, and the underwriting result for the quarter would have been $244 million, with a combined ratio of 86.2%.
Across both insurance and reinsurance, net premiums written increased by an impressive 27.1% to $1.9 billion.
Furthermore, net investment income jumped by almost 7% from $118.7 million in Q2 2020, to $126.9 million in Q2 2021.
For H1 2021, the result is also positive for Alleghany, as underwriting profit reached $190 million with a combined ratio of 94.4%, compared with a loss of $64 million and a combined ratio of 102.3% in H1 2020. Excluding cat losses and the impacts of the pandemic, and the firm’s H1 underwriting profit stands at $460 million, with a combined ratio of 86.4%.
Net premiums written increased by 20.6% in H1 2021 to $3.6 billion, when compared with the prior year period.
The investment result also improved for the half year period, rising by almost 22% to $280.4 million.
During both the second quarter and first half of 2021, TransRe, Alleghany’s reinsurance operation, was a strong contributor to the improved group-wide result.
The reinsurer’s net premiums written increased to $1.4 billion in Q2 and to $2.8 billion in H1, which reflects a continued rise in rates overall, says Alleghany.
Last year, TransRe fell to an underwriting loss in both Q2 and H1, but the absence of pandemic-related losses this year has benefited its performance.
In Q2 and H1 2021, TransRe has booked catastrophe losses of $27 million and $127 million, respectively, related to losses from Winter Storm Uri in the U.S. and other storms. In comparison, TransRe’s Q2 and H1 2020 result included pandemic losses of $115 million and $268 million, respectively.
In the previous quarter, TransRe said that an additional $18 million of COVID-19 losses took its total pandemic loss to $410 million since inception.
However, in Q2 2021, the reinsurer experienced net favourable development related to the pandemic of $1 million, which combined with $17 million of net adverse development in H1 2021, takes its total pandemic loss to $409 million since inception.
The reduction in pandemic losses and an improved attritional loss ratio, means that for Q2 2021, TransRe has reported underwriting profit of $124.2 million and a combined ratio of 91.1%, compared with a loss of $30.3 million a year earlier.
For H1 2021, TransRe’s underwriting profit stands at $129.1 million with a combined ratio of 95%, compared with an underwriting loss of $109.2 million for the prior year period.
Turning to Alleghany’s primary insurance business; net premiums written increased by nearly 20% in Q2 and by 16% in H1 2021, reaching $469 million and $829 million, respectively, which the firm says reflects growth at both RSUI and CapSpecialty.
Overall, the insurance segment has reported underwriting profit of $49.5 million in Q2 2021 compared with a loss of $9.2 million a year earlier. For H1 2021, the underwriting result improved from $45.3 million in 2020 to $61.2 million this year.
Weston Hicks, Chief Executive Officer (CEO) of Alleghany, commented: “Alleghany had an excellent quarter producing over $400 million in net earnings, or $29 per diluted share, and growing meaningfully across all segments. Favorable re/insurance market conditions, an improving economic environment, good investment results and excellent execution at our operating companies drove the strong result.”
Joe Brandon, President, added: “Continued rate increases and attractive new business opportunities at each of our re/insurance companies produced 27% growth in net premiums written, consolidated underwriting profit of $174 million and a combined ratio of 90.2%. Leading indicators continue to be strong across all three businesses.
“Alleghany Capital recorded revenue growth of 63% and pre-tax adjusted earnings of $61 million in the quarter driven primarily by Jazwares, W&W|AFCO Steel and IPS. On a trailing twelve month basis, Alleghany Capital’s adjusted earnings before taxes continued to grow and now exceed $250 million.
“We are pleased with the results in the first half of 2021 and even more so with the underlying performance and momentum in our businesses, positioning us to deliver attractive returns for stockholders.”