Investments boost profits at Allied World as reinsurance unit shrinks

In its last set of full-year results ahead of its acquisition by Fairfax, Allied World Assurance Company posted a solid set of results for 2016 with gross written premiums stable and an increase in its profits driven largely by its investment performance.

The company made a net profit of $255.2 million in 2016, compared with $83.9 million in 2015 – this was despite the company making a $40.9 million loss in the fourth quarter.

Its overall combined ratio in 2016 was 96.2 percent compared with 95.1 percent in 2015. But the performance of its different segments varied widely. Its global insurance segment posted a combined ratio of 121.6 percent in 2016; its North American insurance segment posted a combined ratio of 96.1 percent; its reinsurance segment posted a combined ratio of 82.3 percent.

Its profits were boosted by its investment income which contributed $217 million in 2016 compared with $182 million in 2015. The company also revealed that John Gauthier, its chief investment officer, has left the company with immediate effect (click  here for story).

The company’s gross written premiums were stable last year at around $3 billion but this again masked variation in the performance of individual units. Its reinsurance segment shrank to $706 million GWP in 2016 compared with $801 million in 2015. This was offset by growth in its insurance units, especially its international insurance segment.

Scott Carmilani, the president and chief executive of Allied World, said: “Allied World had a very good year in 2016 despite a challenging operating environment and an increase in natural catastrophes during the fourth quarter. For the full year, I am pleased that our 96.2 percent combined ratio and solid contributions from the investment portfolio helped generate an 8.3 percent return on tangible equity and grow our basic book value per share by 5.0 percent.

“Looking ahead, we are very excited to become a part of the Fairfax family of companies and believe this combination will better position us to grow our specialty businesses globally in 2017 and beyond."

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