TransRe boosts profits at Alleghany in Q1

TransRe helped boost the results of parent company Alleghany Corporation in the first quarter of 2018, though the company’s group CEO expressed disappointment that rate hikes in the reinsurance business were not higher following the high cat losses of 2017.

Alleghany posted total revenues of $1.58 billion in the first quarter, an increase of 3.4 percent compared with the same period a year earlier. Its net earnings were $171.6 million, an increase of 15 percent on the $149.2 million it posted a year earlier.

Its total net premiums written were $1.24 billion, a 1.6 percent increase on the year before.

Within this, its reinsurance unit TransRe posted increased net premiums written primarily due to the impact of changes in foreign currency exchange rates and increased writings in US casualty lines, partially offset by a decrease in premiums written related to a large whole-account quota share treaty.

The company noted that despite increased pricing in certain lines of business, it did not see sufficient improvement in rates to warrant meaningful growth in premium writings.

Its underwriting profit was markedly improved, however, reaching $98.8 million, an 85 percent increase on the same period the year before.

TransRe’s 2018 first quarter combined ratio was 89.7 percent, compared with 94.3 percent for the 2017 first quarter. TransRe’s higher underwriting profit and improved combined ratio for the 2018 first quarter primarily reflects an increase in favorable prior accident year loss reserve development.

TransRe’s combined ratio in the first quarter of 2017 reflected $24.4 million of unfavorable prior accident year loss reserve development arising from the UK Ministry of Justice’s decision to reduce the discount rate, referred to as the Ogden rate, used to calculate lump-sum bodily injury payouts in personal injury insurance claims in the UK.

On the insurance side of Alleghany’s business there was a 9.7 percent decrease in net premiums written, reaching $256.3 million. The company said reflects the sale of PacificComp in the fourth quarter of 2017, partially offset by growth at CapSpecialty and RSUI.

Excluding PacificComp from the first quarter of 2017, net premiums written increased by 5.2 percent in the first quarter of 2018.

For the first quarter of 2018, CapSpecialty’s net premiums written increased by 13.6 percent, and RSUI’s net premiums written increased by 2.4 percent.

The insurance segment’s 2018 first quarter combined ratio was 87 percent, compared with 83 percent for the 2017 first quarter. The higher combined ratio and lower underwriting profit for the 2018 first quarter primarily reflect several large non-catastrophe property losses incurred by RSUI in the first three months of 2018, partially offset by an increase in favorable prior accident year loss reserve development.

Weston Hicks, president and chief executive officer of Alleghany, said: “Our first quarter results reflect solid underwriting performance at TransRe, lower underwriting profits at RSUI due to higher non-catastrophe property losses, a non-recurring gain related to the conversion of our Ares partnership interest to publicly-traded partnership units, significantly lower corporate administration expenses due to a reduction in long-term incentive accruals, and a lower effective tax rate.”

He continued, “Our growth in book value per common share, including the $10 per share special dividend, was 0.3 percent in the first quarter of 2018. Book value per common share was primarily impacted by a decline in the carrying value of our fixed income investment portfolio due to rising interest rates. Investment results also include the impact of the conversion of the majority of our investment in Ares from a private limited partnership interest to publicly-traded partnership units, which resulted in a $46 million pre-tax gain and a $13 million increase in net investment income.”

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