Pillar Capital catastrophe losses evident in Alleghany results

by Artemis on November 3, 2017

Catastrophe losses suffered from third-quarter hurricanes Harvey, Irma and Maria by specialist insurance and reinsurance linked ILS asset manager Pillar Capital are evident in the results of its stakeholder financial services group Alleghany Corporation.

Alleghany Corporation and its reinsurance firm TransRe have an ownership stake and investments in specialist ILS manager Pillar Capital and its ILS funds, hence reports the contribution it makes to its income.

The figure tends to fluctuate, due to the changing nature of the market and Pillar’s ILS fund portfolios, but remains a source of additional income for Alleghany and a way it can benefit from the returns of the ILS market and alternative capital in reinsurance.

Naturally, the third-quarter of 2017 saw a negative income from Alleghany’s equity stake in Pillar’s ILS funds, likely due to the impacts of catastrophe loss events, while the value of its investments in Pillar also shrank, which could just be down to a capital event linked to this figure.

For Q3 2017 Alleghany reported a loss of -$9.4 million on its equity stake in the results of Pillar and its related ILS fund business, which compares to a profit of $5.9 million in Q3 2016.

For the first-nine months of 2017 Alleghany now also reports a loss for its equity income due from its Pillar stake, of -$2.9 million, compared to a positive income of $12.9 million in the prior year period.

It’s no surprise that Pillar’s ILS and collateralized reinsurance funds will have taken some losses, given the impact of hurricanes Harvey, Irma and Maria have been significant across the insurance-linked investments market.

TransRe has had an ownership stake in Pillar since 2012 when it invested $175m and Alleghany $25m in Pillar Capital’s limited partnership ILS and reinsurance-linked investment funds.

The value of Alleghany and reinsurance subsidiary TransRe’s stake in ILS manager Pillar Capital and its investments in the ILS funds also reflects the recent catastrophe losses, now being reported as $216.7 million, net of returns of capital, down from $226.5 million at the end of Q2 2017.

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