OREANDA-NEWS. Alleghany Corporation (NYSE-Y) announced today its financial results for the three and nine months ended September 30, 2015. Book value per common share1 was $476.13 as of September 30, 2015, an increase of 2.3% from book value per common share as of December 31, 2014, and a decrease of 0.5% from book value per common share as of June 30, 2015. Alleghany reported net earnings2 of $96.5 million, or $6.07 per diluted share for the 2015 third quarter, compared with $186.3 million, or $11.40 per diluted share for the 2014 third quarter. For the first nine months of 2015, Alleghany reported net earnings2 of $404.2 million, or $25.30 per diluted share, compared with $540.2 million, or $32.74 per diluted share for the first nine months of 2014. Operating earnings per diluted share were $7.03 for the 2015 third quarter, compared with $9.07 for the 2014 third quarter. Operating earnings per diluted share were $23.41 for the first nine months of 2015, compared with $25.23 for the first nine months of 2014.

Weston Hicks, President and chief executive officer of Alleghany stated, “Strong underwriting results at TransRe and RSUI led to solid operating performance and a combined ratio of 91.0% for Alleghany in the third quarter compared with an 87.6% combined ratio in the third quarter of last year. The results were impacted by higher catastrophe losses at TransRe, primarily due to the explosion in Tianjin China ($31.5 million) and modestly lower favorable prior year loss reserve development, primarily at RSUI. Softening market conditions and a strong dollar negatively impacted top-line premium writings.”

“We are encouraged by the continued progress at CapSpecialty and PacificComp as both companies successfully expand their niche product offerings. PacificComp saw its combined ratio improve to 109.4%, compared with 133.8% for the 2014 third quarter due to strong premium growth resulting in a lower expense ratio. CapSpecialty’s expense ratio improved in the quarter but its results were impacted by higher surety losses in the current accident year.”

Mr. Hicks continued, “Offsetting this operating performance was a drop in the market value of our equity portfolio due to a sharp decline in equity markets at quarter end, all of which has since reversed. Although this decline significantly contributed to the 0.5% decrease in book value per common share in the third quarter, Alleghany’s strong capital position allows it to invest in equities over a long-term time horizon to generate superior returns in exchange for quarterly volatility.”

“One positive aspect of the drop in the equity markets was the attractive price of Alleghany shares. During the quarter we spent $152.0 million repurchasing 324,661 shares at an average price of $468.11 per share and year to date we have repurchased an aggregate of 412,884 shares. At our current book value per share of $476.13, these purchases were immediately accretive to our shareholders and will continue to benefit shareholder returns in the future.”

Reinsurance Segment

The decrease in TransRe’s net premiums written in the third quarter and first nine months of 2015 from the corresponding 2014 periods reflects reduced participation on or non-renewal of certain treaties due to disciplined underwriting in a competitive market, the impact of changes in foreign exchange rates (approximately $40.1 million and $127.8 million for the third quarter and first nine months of 2015, respectively), and, to a lesser extent, higher ceded premium written due to an opportunistic increase in retrocessional reinsurance coverage purchased by TransRe in 2015. TransRe’s 2015 third quarter combined ratio was 92.6%, compared with 88.3% for the 2014 third quarter, and TransRe’s combined ratio was 89.9% for the first nine months of 2015, compared with 89.3% for the first nine months of 2014. TransRe’s higher combined ratio and lower underwriting profit for the third quarter and first nine months of 2015 primarily reflect the impact of lower net premiums earned and higher commission rates and employee-related costs. TransRe’s higher combined ratio and lower underwriting profit for the third quarter of 2015 also reflect higher catastrophe losses.

Insurance Segment

The insurance segment net premiums written in the third quarter and first nine months of 2015 roughly approximated net premiums written in the corresponding 2014 periods, as continued strong growth at PacificComp and CapSpecialty were offset by declines at RSUI. For the third quarter and first nine months of 2015, PacificComp’s net premiums written increased by 46.4% and 45.6%, respectively, CapSpecialty’s net premiums written increased by 14.5% and 14.5%, respectively, and RSUI’s net premiums written decreased by 8.6% and 6.3%, respectively. The insurance segment’s combined ratio was 86.7% for the 2015 third quarter, compared with 85.4% for the 2014 third quarter, and 87.6% for the first nine months of 2015 compared with 87.0% for the first nine months of 2014. The higher combined ratio and lower underwriting profit for the third quarter and first nine months of 2015 primarily reflect less favorable prior year loss reserve development overall and higher current year losses, partially offset by lower catastrophe losses.

INVESTMENT PERFORMANCE

Alleghany reported net investment income for the third quarter and first nine months of 2015 of $118.2 million and $334.6 million, respectively, a decrease of 0.1% and 2.4% from the corresponding 2014 periods. The decrease in net investment income in the first nine months of 2015 from the first nine months of 2014 primarily reflects lower dividend income due to equity portfolio reallocation during the second quarter of 2015 and lower interest income from lower reinvestment rates and, to a lesser extent, the impact of changes in foreign exchange rates and the drop in investable assets due to Alleghany’s share repurchase activity. Financial statement total return on investments was (0.6)% in the 2015 third quarter, compared with 0.2% for the 2014 third quarter. The decrease in total return in the quarter was due to timing as the drop in the market value of the equity portfolio coincided with a sharp decline in the equity markets in general at quarterend.

After-tax net unrealized gains on investments decreased by $135.6 million for the third quarter of 2015, reflecting a decrease in unrealized appreciation on Alleghany’s equity securities portfolio. After-tax net unrealized gains on investments decreased by $228.7 million for the first nine months of 2015, reflecting a decrease in unrealized appreciation on Alleghany’s equity and debt security portfolio. Other than temporary impairment charges (OTTI) in the quarter of $52.7 million resulted from losses on sales of equity securities subsequent to quarter-end, which were made to offset taxable gains in previous quarters.

About Alleghany Corporation

Alleghany Corporation (NYSE-Y) creates value through owning and managing operating subsidiaries and investments, anchored by a core position in property and casualty reinsurance and insurance. Alleghany’s property and casualty subsidiaries include: Transatlantic Holdings, Inc. (referred to herein as “TransRe”), a leading global reinsurer; RSUI Group, Inc. (referred to herein as “RSUI”), a national underwriter of property and liability specialty insurance coverages; CapSpecialty, Inc. (referred to herein as “CapSpecialty”), an underwriter of commercial property, casualty and surety insurance coverages; and Pacific Compensation Corporation (referred to herein as “PacificComp”), an underwriter of workers’ compensation insurance primarily in California.