Alleghany’s 2018 results show firm ‘not immune’ from cat losses

Alleghany Corporation’s president and CEO admitted the firm was “not immune” from above average catastrophe losses in 2018 as he announced the 2018 year end results.

Full year net earnings (attributable to stockholders) were $39.5 million in 2018, down 56.2 percent from $90.1 million a year earlier. While the company recorded a loss of $712.1 million in Q4 2018 showing a dramatic drop from the $153.3 million profit reported for the last three months in 2017.

Alleghany said the results were negatively affected by the Japanese typhoons, California wildfires and hurricane Michael, as the property and casualty industry saw above average catastrophe losses for a second consecutive year.

However, the company's gross written premiums increased 3.5 percent in 2018 to $5.8 billion up from $5.6 billion in 2017. They were also up in the fourth quarter to $1.4 billion compared with $1.3 billion in Q4 2017.

And the company's combined ratio improved to 103.2 percent in 2018 from 106.4 percent a year earlier.

Highlighting the positives in a challenging year, Weston Hicks, president and CEO, said: “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.

"In addition, although our equity portfolio outperformed the broader equity markets, absolute returns were negative and higher interest rates caused a decline in the value of our fixed income portfolio. These market value adjustments resulted in a modest decline in book value for the year.

He said 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. 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."

He said that each of TransRe, RSUI and CapSpecialty delivered increased net premiums written during the year as they capitalized on an increase in business opportunities and a disciplined approach.

“Operating results were strong across all of our portfolio companies at Alleghany Capital in 2018 with each of them generating improved results. Operating earnings before income taxes and corporate expenses increased 46 percent to $93.3 million in 2018 compared with 2017, as Jazwares, IPS and W&W|AFCO Steel saw increased sales; Kentucky Trailer and Bourn & Koch drove margin improvement; and all of the portfolio companies benefited from a healthy economy.

"During 2018, Alleghany Capital executed one new platform and four portfolio company add-on transactions, which significantly expanded its investments and strengthened the position and earnings power of its portfolio companies."

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