Buffett’s buy: Alleghany shows Q1 underwriting rebound, but profit down

Alleghany Corporation, soon on its way to Warren Buffet’s Berkshire Hathaway group, bounced back in Q1 underwriting on primary carrier premium growth and improved loss cost experience, but delivered shareholders a decline in net profits as investment earnings fell and other operating costs surged.

Underwriting profits rose in excess of ten times or by $170 million against a suppressed prior year period to $187 million. Pre-cat underwriting profits of $237 million were up nearly 20% year on year.

Measured by combined ratio, Alleghany took 1.6 percentage points off versus the prior year period to 88.4% or 2.4 points ex-cat.

Net premiums earned were flat at $1.6 billion, below the net premium written growth of 2.2% which balanced a 2.6% decline for reinsurance against a 20.8% surge for primary coverage.

Global reinsurance unit TransRe axed an unspecified large whole account quota share treaty and ended Q1 with net written premiums down 2.6% year on year, management said. Adjusted for that deal, management claimed premiums growth of 11.2%.

The reinsurance unit took 5.7 percentage points off of its Q1 combined ratio to 93.9%, primarily reflecting a decrease in cat losses and an improved current year attritional loss ratio, management said.

TransRe’s current year Q1 cat losses came to $48 million, including $35 million from the war in Ukraine and $13 million on Australian floods. Those sums are well down on the pain delivered in Q1 2021 by winter storm Uri.

Wholesale specialty insurance unit RSUI recorded 25.5% growth in net written premium, reflecting double-digit rate growth in core product lines. The unit boasted a 66.9% combined ratio.

Commercial PO&C unit CapSpecialty increased Q! net written premiums by 6.1% year on year on growth in select specialty casualty and professional liability lines. The combined ratio edged up 0.2 pps on unfavourable prior year developments.

By the bottom line, the increase in underwriting income had been tempered by a 26% or $40 million decline in net investment income and a 42% increase in otherwise unspecified "other operating expense". Mark net profits down 30% to $168.9 million.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.