TransRe drives Alleghany profits

Alleghany has posted solid results for 2014, driven by growth in underwriting profits at TransRe and its insurance segment.

Overall, gross premiums written (GWP) hit $5.1 billion in 2014, an increase of 4.3 percent compared with $4.9 billion in 2013. Its reinsurance segment, TransRe, benefitted from GWP growth of 5.2 percent to $3.6 billion in 2014, compared with $3.4 billion in 2013, driven by strong growth in property (6.7 percent) and casualty and other (4.4 percent).

The insurance segment posted GWP growth of 2.6 percent, driven by a 67.9 percent hike in GWP in PacificComp to $70.5 million and an increase of 16.4 percent in CapSpecialty.

Underwriting profits increased to $494.8 million in 2014, compared with $420.7 million for 2013, reflecting higher profits for the insurance segment and TransRe.

TransRe’s underwriting profit for 2014 was $345 million, compared with $334 million for 2013 and its combined ratio improved slightly to 89.6 percent in 2014, compared with 89.9 percent for 2013. Alleghany said the lower combined ratio and higher underwriting profit for TransRe primarily reflect lower catastrophe losses and lower casualty losses, partially offset by less favourable prior accident year development on loss reserves and to a lesser extent, higher underwriting expenses.

The increase in expenses at TransRe is due to higher commission rates and the lack of favourable impact arising from the acquisition method of accounting, which was present for a portion of 2013.

The insurance segment’s underwriting profit for 2014 grew to $149.8 million compared with $86.7 million for 2013 and the insurance segment’s combined ratio for 2014 was 86.1 percent, compared with 91 percent for 2013.

Alleghany said this primarily reflect favourable prior accident year development on loss reserves in 2014, primarily from RSUI, compared with unfavourable development in 2013, primarily from CapSpecialty, and lower catastrophe losses at RSUI in 2014, compared with 2013.

Weston Hicks, president and chief executive officer, said: “Our two largest franchises TransRe and RSUI both produced excellent underwriting results in the fourth quarter and in 2014 benefitted from a light property catastrophe loss year. These two businesses contributed to a consolidated combined ratio of 88.9 percent for the quarter compared with 90.6 percent for the fourth quarter of last year and 88.8 percent in 2014 compared with 90.1 percent for last year.

“Focusing on the longer-term, RSUI’s strong underwriting expertise and experience has helped produce a remarkable inception to date combined ratio of 81.8 percent over our 11-plus years of ownership. While we have owned TransRe for slightly less than three years, its results have also been impressive, producing a combined ratio of 90.1 percent over our ownership period while maintaining excellent customer relationships and a strong balance sheet.”

“Despite competitive headwinds, net premiums written were up 2.5% in the quarter aided by top line growth primarily in our reinsurance segment where TransRe benefitted from favourable signings with its clients, particularly in the property line of business.

“Net premiums written in the insurance segment in the fourth quarter of 2014 were flat compared to those of the fourth quarter of 2013, with continued top-line expansion at both PacificComp and CapSpecialty being offset by a decline in premium volume at RSUI as the company maintains underwriting discipline in a more competitive market, particularly in property lines.

“While we anticipate that PacificComp and CapSpecialty will continue to find opportunities to expand their current premium bases, our two major holdings will likely find top-line growth challenging in this environment.”