AXIS Re Ventures grows value of third-party capital to $61.6m

by Artemis on October 30, 2014

Bermuda headquartered insurance and reinsurance group AXIS Capital Holdings has increased the value of third-party investors non-controlling interests in its reinsurance capital management unit, AXIS Re Ventures, by 17% to $61.625m in Q3.

At the end of the first-half, AXIS reported that non-controlling interests, which are the third-party investors share in its AXIS Re Ventures vehicles, sat at $52.795m up 5% from the initial $50m of third-party capital it had raised. This third-party capital came from an allocation made by New York based mutual ILS fund manager Stone Ridge Asset Management.

Now, at the end of Q3 2014, the non-controlling interests reported by AXIS have grown by just under 17% to reach $61.635m. The strong increase is likely due to some small additional capital raise, less than $10m, as Stone Ridge reported its $50m investment in preference shares of Axis Ventures Re Cell 0001 Class A was worth $53.329,343m at the end of July 2014, a 6% increase.

It seems unlikely that the increase in AXIS’ Ventures Re capital to $61.625m could only be related to this third-party capital injection, which would suggest that it has raised an additional small amount from another investor during Q3.

Interestingly, AXIS has also disclosed a little more details about the amount of business it has ceded to AXIS Ventures Reinsurance Limited, its third-party reinsurance capital vehicle, in the third-quarter results.

AXIS said that to date its Ventures Re third-party capital unit has only assumed business written by AXIS Capital, so has not been underwriting business of its own. All of this business has been fully collateralized using the third-party reinsurance capital raised from investors.

It looks like AXIS ceded almost $32.9m of net premiums to Ventures Re during the third-quarter, some of which appear to be agricultural reinsurance premiums, making good on its ambitions to share some of its agricultural business with third-party capital, which we reported earlier this year.

AXIS was hit by losses in its agricultural reinsurance business, largely due to commodity price changes it seems, during the third-quarter and some of those have been borne by Ventures Re, resulting in a recovery being made from the agriculture reserves that were ceded to the third-party reinsurance vehicle. The recovery AXIS made from AXIS Ventures Reinsurance amounts to $6.164m for the quarter, which we assume is solely related to the agricultural loss.

It’s interesting as the initial $50m of third-party reinsurance capital from Stone Ridge was invested in collateralized catastrophe reinsurance and has been segregated into its own cell. That would suggest that Stone Ridge’s allocation to AXIS Ventures Re won’t have been impacted, but the investors that the additional capital injection came from may have taken the hit on their own. It’s possible that this was an investor specifically looking for access to agricultural reinsurance risks.

Also worth noting, AXIS still lists the name of its third-party capital management unit as AXIS Re Ventures on its website, but the Bermuda domiciled vehicle and segregated cell where the initial investments sit are named AXIS Ventures Re(insurance).

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