Allied World Assurance Company Holdings experienced big drops in net income during the 2015 second quarter, due in large part to catastrophe and investment losses.

The Swiss insurer and reinsurer reported net income of $9.5 million, or $0.10 per diluted share, for the second quarter of 2015, compared to net income of $151.9 million, or $1.52 per diluted share, for the second quarter of 2014.

However, Allied World noted that gross premiums written in the quarter grew across both insurance segments, offset by a double digit decrease its reinsurance arm. But $25 million in catastrophe losses from New South Wales storms, $20 million in non-catastrophe weather and fire-related losses, and $60.1 million in market-to-market losses in investments dented net income, according to the company.

Here are Allied World’s Q2 2015 results in greater detail:

• Gross premiums written were $826.0 million, an 8.6 percent increase compared to $760.4 million in the second quarter of 2014.
— The North American Insurance segment grew 9.6 percent, led by growth in the Defense Base Act, Excess Casualty and Environmental lines. That was offset, however, by a continued decrease in the Healthcare line. Healthcare gross premiums written have decreased 16.8 percent compared to the prior year quarter and 30.1 percent compared to the same quarter two years ago.
— The Global Markets Insurance segment grew 83.5 percent, driven by the inclusion of the acquired Asian operations (from RSA) for the first time. This would have been 7.7 percent growth excluding the impact of the acquired Asian operations results. On a constant dollar basis, the segment grew 99 percent and 16.6 percent excluding the impact of the acquired Asian operations.
— Offsetting the growth in the two insurance segments was a 19.1 percent decrease in the Reinsurance segment driven by the non-renewal of several casualty and property treaties.
• Net premiums written were $603.7 million, a 9.0 percent increase compared to $553.9 million in the second quarter of 2014.
• Net premiums earned were $646.4 million, a 20.3 percent increase compared to $537.2 million in the second quarter of 2014.
• Underwriting income was $5.9 million, compared to underwriting income of $51.9 million in the second quarter of 2014.
• The combined ratio was 99.2, versus 90.3 in the second quarter of 2014.
• The loss and loss expense ratio was 66.8 in the second quarter of 2015 compared to 58.6 percent in the prior year quarter. During the second quarter of 2015, the company recorded net favorable reserve development on prior loss years of $21.8 million, a benefit of 3.4 percentage points to the loss and loss expense ratio, compared to $45.1 million a year ago, a benefit of 8.4 percentage points. The decrease in net favorable reserve development was mostly driven by reserve strengthening related to selected claims within large account North American professional lines and Healthcare.
• The total financial statement return on the company’s investment portfolio for the three months ended June 30, 2015 was 0.3 percent compared to 1.4 percent for the three months ended June 30, 2014.
• The decrease in total return was driven by an increase in unrealized losses within the fixed income portfolio due to rising bond yields.
• Net investment income increased 16.2 percent compared to the prior year quarter as a result of contributions from the fixed income portfolio as well as higher returns from our hedge fund and private equity portfolios.

President and CEO Scott Carmilani noted in prepared remarks that while the recently acquired Asian operations helped, catastrophe and current year events impacted the Q2 results. He said Allied World continues “to take steps to grow attractive insurance businesses,” with an eye on managing growth and minimizing exposure “to less attractive risks.”

Source: Allied World