Allied World improves profits as reinsurance unit shrinks

Allied World Assurance Company posted improved profits in the first quarter of 2017 largely driven by improved net realised investment gains but its reinsurance shrank in response to soft market conditions.

The company made a net profit of $80.3 million in the first quarter of 2017 compared with $74.1 million in the first quarter of 2016. Its operating profit in the quarter was $47.9 million, a decrease on the $59.0 million it posted a year earlier.

Its profits were mainly improved by net investment gains of $40.6 million compared with $18.8 million the year before.

The company’s gross premiums written were $860.9 million, a 0.3% decrease compared with $863.5 million for the first quarter of 2016. This was driven by growth in the North American insurance segment, partially offset by a decline in its reinsurance segment.

Its North American insurance segment grew by 4.6 percent, led, it said, by growth across programmes, excess casualty and environmental businesses, offset in part by declines in professional lines, healthcare and property businesses.

Its global markets insurance segment was essentially flat this quarter as growth across European businesses was offset by a reduction in the Asia Pacific region.

But its reinsurance segment decreased by 5.6 percent, driven largely by the reduction in property-catastrophe risk as well as the non-renewal of certain other property and casualty treaties.

During the quarter, the company experienced $11 million in catastrophe losses, or 2 percentage points on the loss and loss expense ratio, related to Cyclone Debbie, compared to no reportable catastrophe losses in prior year quarter. Of the $11 million, $7.5 million was recorded in the reinsurance segment and $3.5 million was recorded in the Global Markets Insurance segment.

Its combined ratio was 99.2 percent compared to 96.0 percent for the first quarter of 2016.

Scott Carmilani, president and chief executive, of Allied World, said: "Despite a challenging market environment, I am pleased with our ability to produce an annualized net income return on average shareholder's equity of 8.9 percent this quarter, while growing diluted book value per share by 2.8 percent from year-end 2016.

“Additionally, we have made great strides within the Global Markets Insurance segment, which generated a 14.4 percentage point improvement over the prior year period, as we are beginning to reap the benefits of the strategic re-underwriting of this segment. Looking ahead, I feel we are well positioned for continued growth in our core specialty businesses."