TransRe shrinks business to protect underwriting quality
Alleghany Corporation’s TransRe is shrinking its business despite rate improvements in the property/casualty (P&C) market to protect underwriting quality.
Net premiums in Alleghany’s reinsurance segment shrank 3.5 percent year on year to $903.4 million in the fourth quarter of 2017. For the full year of 2017, net premiums declined 4 percent year on year to $3.81 billion.
The decreases in net premiums written in the fourth quarter and full-year 2017 from the corresponding 2016 periods primarily related to cancellations, non-renewals and reduced participations in certain treaties, the impact of rate pressures, and increased retentions by cedants, the company said. For the full-year 2017, the decrease in net premiums was partially offset by net reinstatement premiums written on treaties impacted by catastrophe losses.
The decrease in net premiums written at TransRe for 2017 compared to 2016 also reflects lower premiums related to a large whole-account quota share treaty.
The pricing environment in both the property and casualty reinsurance markets improved during the fourth quarter of 2017, Alleghany said in a Feb. 21 statement. However, given the significant catastrophe losses sustained by the industry, these increases were slightly below initial expectations for the property business and exceeded expectations for the casualty lines of business.
These improvements did not merit an increase in TransRe’s risk appetite, the company said. Should the pricing environment improve further, TransRe has significant capital available to deploy and meaningful third-party capital under management.
In the interim, TransRe will continue to underwrite selectively within the catastrophe exposed property market, utilizing the retrocessional reinsurance market to manage its net exposures. In addition, TransRe wants to expand in the casualty classes of business.
TransRe’s 2017 fourth quarter combined ratio was 90.2 percent, compared with 91.8 percent for the 2016 fourth quarter, and TransRe’s combined ratio for full-year 2017 was 106.9 percent, compared with 93.3 percent for full-year 2016.
In the fourth quarter, the underwriting profit in reinsurance increased 21 percent year on year to $95.7 million. In the full year 2017, however, it recorded a loss of $263.4 million after an underwriting profit of $260.6 million in 2016.
TransRe’s lower combined ratio and higher underwriting profit for the fourth quarter of 2017 primarily reflects lower catastrophe losses and higher levels of favourable development. TransRe’s higher combined ratio and underwriting loss for full-year 2017, compared with its combined ratio and underwriting profit for the full-year 2016 reflects an increase in catastrophe losses, primarily from three major US hurricanes, Mexican earthquakes and a series of wildfires in California.
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