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Allied World combined ratio up 2.8% in fourth quarter of 2016


February 2, 2017   by Canadian Underwriter


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Zug, Switzerland-based Allied World Assurance Company Holdings, AG has reported a combined ratio of 99.8% for the fourth quarter of 2016, ending Dec. 31, compared to 97% in the fourth quarter of 2015.

Teamwork in office with two unrecognizable businesswomen with financial chartsAllied World, a global provider of property, casualty and specialty insurance and reinsurance solutions, released its financial results on Wednesday. It reported a net loss of US$40.9 million for Q4 2016 compared to a net income of US$1.7 million for Q4 2015. Net income for the year ending Dec. 31 was US$255.2 million, up from net income of US$83.9 million for the year ending Dec. 31, 2015.

The company reported operating income of US$42.4 million for Q4 2016, similar to operating income of US$43 million for the fourth quarter of 2015, Allied World said in a press release. Operating income for 2016 was US$239.4 million, compared to operating income of US$212 million for 2015.

Gross premiums written (GPW) were US$671.7 million for Q4 2016, a 6.2% increase compared to US$632.4 million in Q4 2015. This result was driven by increases in the North American Insurance and Reinsurance segments, and offset a decrease in the Global Markets Insurance segment. The North American Insurance segment grew 10% to US$502.2 million, led by increases in casualty, professional lines and other specialty lines. Partially offsetting this were reductions in property lines, the release said.

The Global Markets Insurance segment decreased 8.4% to US$135.7 million, driven by reductions in several lines of business across Europe and Asia, Allied World reported. The Reinsurance segment increased 22.5% to US$33.8 million, driven by an increase in estimated premiums adjustments, compared to US$27.6 million in the prior-year period.

Related: Benefits of merging Fairfax and Allied World ‘far outweigh’ overlap in reinsurance: Fairfax Insurance COO

The loss and loss expense ratio for the most recent quarter was 67.2%, compared to 66.3% in the prior-year quarter. In addition, during Q4 2016, the company recorded US$49.9 million of net catastrophe losses, or 8.7 percentage points on the loss and loss expense ratio, (primarily due to Hurricane Matthew and the New Zealand earthquake) compared to no reported catastrophe losses in the fourth quarter of 2015.

Net premiums written (NPW) for the most recent quarter were US$445.3 million, compared to US$464.8 million in Q4 2015. For the full year of 2016 ending Dec. 31, NPW were US$2.2 billion compared to US$2.4 billion in FY 2015.

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

On Dec. 18, 2016, Allied World announced that it had entered into a definitive agreement to be acquired by Fairfax Financial Holdings Limited, whereby Fairfax will acquire all of the outstanding shares of the company for a total equity value of approximately US$4.9 billion, including a $5.00 special dividend to be paid by Allied World. The acquisition is anticipated to be completed in the second quarter of 2017.