AlphaCat premiums & income rise for Validus, as assets hit $3.66bn

Premiums underwritten and investment income earned by Validus Holdings from its AlphaCat Managers Ltd. insurance-linked securities (ILS) and third-party reinsurance capital arm were up in the first-quarter, as AlphaCat’s assets under management passed a new high of $3.66 billion.

Following the impacts of the loss events of 2017 which hit the AlphaCat ILS funds and vehicles as hard as any other ILS asset management unit, the manager has bounced back in the first-quarter, raising its capital under mananagement even further while its increased scale drove higher income and delivered more premiums underwritten.

AlphaCat Managers finished the first-quarter of 2018 with just over $3.66 billion of insurance and reinsurance-linked assets under management, a new high and up 26% on the level of assets under management a year earlier.

Of the $3.66 billion AuM, AlphaCat has $3.49 billion of third-party assets under management, which is up 31% on a year earlier, while Validus’ own stake in the ILS managers reinsurance investment vehicles has shrunk slightly to just under $180 million.

The increase scale of the AlphaCat Managers unit and its vehicles has driven considerably more premiums underwritten in the first-quarter of 2018, something that will set the unit up for enhanced profitability as long as catastrophe activity remains at expected levels.

During the first-quarter of 2018, the AlphaCat ILS funds underwrote gross reinsurance premiums amounting to $286.6 million, a 74% increase on the $165 million underwritten in the prior year quarter.

The bulk of these premiums were underwritten by the AlphaCat ILS Funds, with the higher risk strategy that targets a higher return underwriting accounting for about 58% of the reinsurance premiums underwritten.

Thanks to the quarter having relatively normal catastrophe loss activity and despite any impact of increased loss estimates from hurricane Irma, which has hit many ILS funds in recent weeks, AlphaCat Managers has generated a $5.3 million share of its investment income for Validus in the quarter, up from $4.8 million from Q1 2017.

That is a positive start to the year after the negative quarters seen in the second-half of 2017, when the impacts of hurricanes, earthquakes and wildfires hit most ILS funds.

AlphaCat’s investor base appears to have done well in Q1 2017, with income attributable to AlphaCat’s third-party investors growing to almost $10.9 million for the quarter, up from just over $7.5 million in the prior year period.

It’s a positive start to the year for the AlphaCat ILS unit, delivering higher investment income to parent Validus, while growing its assets under management and then putting them to work in underwriting a considerably larger portfolio of reinsurance for the year.

With the key mid-year renewals fast approaching, the AlphaCat team will be readying themselves to put their greater amount of capital back to work and hoping for a quieter year on the hurricane front in 2018.

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