Profits soar but cancellations and rate pressures hit Q2 premiums at TransRe

Net written premiums dipped at TransRe in the second quarter of 2017 because of cancellations, non-renewals, the impact of rate pressures and increased retentions by cedants. But the reinsurer’s profits soared and the CEO of its parent company Alleghany Corporation praised its disciplined approach.

The reinsurer’s net written premiums decreased to $978.8 million in the second quarter, a 3.1 percent decline on the year before. For the six months to June 30, its net written premiums decreased to $1.9 billion, a 6.7 percent decline.

But its underwriting profit increased to $62.2 million, compared with $12 million in the same period a year earlier. For the six months to June 30, its underwriting profit was $115.7 million, a 7.6 percent improvement.

The company said the decreases in the second quarter and first six months of 2017 from the corresponding 2016 periods primarily reflect cancellations, non-renewals and reduced participations in certain international treaties, the impact of rate pressures and increased retentions by cedants and, to a lesser extent, the impact of changes in foreign currency exchange rates.

The decrease in net premiums written in the first six months of 2017 from the first six months of 2016 also reflects lower premiums related to a large whole account quota share treaty, the company said.

Premiums related to this were $183.9 million and $180.0 million in the second quarter of 2017 and 2016, respectively, and $374.1 million and $424.8 million in the first six months of 2017 and 2016, respectively.

Premiums related to the Quota Share Treaty in the first six months of 2016 reflect elevated premiums written in the first quarter of 2016 due to differences between initial premium estimates at contract inception, which were recorded in the fourth quarter of 2015, and actual data subsequently reported.

TransRe’s 2017 second quarter combined ratio was 93.5 percent, compared with 98.8 percent for the 2016 second quarter, and TransRe’s combined ratio for the first six months of 2017 was 93.9 percent, compared with 94.4 percent for the first six months of 2016.

This lower combined ratio and higher underwriting profit for the second quarter and first six months of 2017 primarily reflects a lack of catastrophe losses compared with significant catastrophe losses in the 2016 periods, partially offset by less favorable prior accident year loss reserve development, the company said.

TransRe’s combined ratio in the first six months of 2017 was impacted by a $24.4 million unfavorable adjustment arising from the UK Ministry of Justice’s decision to significantly 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.

Weston Hicks, president and chief executive officer of Alleghany, said: “Our second quarter results reflect strong underwriting performance despite continuing price competition. The consolidated (re)insurance combined ratio was 92.4 percent in the second quarter of 2017, compared with 97.0 percent in the second quarter of last year.

“Each of our (re)insurance subsidiaries delivered profitable underwriting results in the second quarter and demonstrated excellent underwriting discipline in a challenging environment. The 2017 second quarter underwriting results reflect favorable prior accident year reserve development of $63.6 million, primarily at TransRe and RSUI, compared with $90.0 million of favorable prior accident year reserve development in the second quarter of 2016.

“The 2017 second quarter was impacted by $11.4 million of catastrophe losses, primarily at RSUI, compared with $124.8 million in catastrophe losses, primarily at TransRe, in the second quarter of 2016.”

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