Financial services insurance and reinsurance group Alleghany Corporation continued to be negatively impacted by the hurricanes and catastrophes of 2017 through its equity investments in specialist asset manager ILS related to insurance and reinsurance , Pillar Capital and its funds.
Alleghany Corporation and its reinsurance entity TransRe hold an interest and investments in the specialized ILS manager, Pillar Capital and its ILS funds, and therefore reports the contribution of this investment to its income each quarter.
Since the major disaster losses of 2017, investment has been largely negative as the initial losses are realized and reverberate, but it also appears that the wave of losses that was widely reported with the hurricanes of 2017 is also continuing. .
For the third quarter of 2018, Alleghany stated that its partnership income “includes losses incurred on our interests in Pillar Capital Holdings Limited, or ‘Pillar Holdings”, and related funds resulting from significant disaster losses suffered in August. and September 2017 ”.
Alleghany reports that its Pillar investment income was $ -0.8 million for the third quarter of 2018 and positive $ 1.2 million for the first nine months of this year.
This is significantly better than the impact of – $ 9.4 million of its investments in Pillar Capital that Alleghany announced for the third quarter of 2017 and the – $ 2.9 million it announced for first nine months of last year.
But the continued realization of losses in ILS funds following the events of a year ago is evident in Alleghany’s results, which is perhaps not surprising given that the investment strategies of Pillar Capital are focusing on global real estate catastrophe exposures and focusing on the secured reinsurance side of the market.
The cause of the negative investment income for the third quarter of 2018 is most likely due to the fluctuation in losses associated with Hurricane Irma, which affected many private ILS and collateral reinsurance strategies during the last quarter.
However, the fact that Alleghany is reporting positive investment income from Pillar Capital’s investment for the first nine months is positive and suggests that once Irma’s uncertainty is lifted, we should see those numbers pick up.
It is also perhaps encouraging that Alleghany did not mention any impact on its investments in the loss pillar related to disasters in the third quarter, such as Hurricane Florence in the United States and Typhoon Jebi or Trami in Japan.
This suggests that the manager of ILS Pillar Capital did not have significant exposure to these specific loss events.
TransRe has had a stake in Pillar since 2012 when it invested $ 175 million and Alleghany $ 25 million in Pillar Capital’s limited partnership, ILS and reinsurance-related investment funds.
The value of Alleghany’s investments in Pillar Capital and its ILS funds was estimated at $ 201.3 million at the end of September, net of principal repayments.