Leadenhall AUM reaches $5.5bn, as it sets out stall for further growth

Leadenhall Capital Partners, the London headquartered insurance and reinsurance linked investment manager, has grown its assets under management by almost 6% to $5.5 billion since last June.

As we reported earlier this week, Japanese primary insurance group Mitsui Sumitomo has acquired an 80% ownership stake in the insurance-linked securities (ILS) specialist fund manager, taking on this stake from MS Amlin.

Leadenhall has steadily increased its overall ILS assets under management in recent years, rising from $4.7 billion as of 1st January 2018, to $5.2 billion as of 1st June 2018, and now $5.5 billion as of 1st January 2019.

Of this, around $3 billion is invested in non-life ILS, so collateralised reinsurance, retrocession and catastrophe bond assets. The non-life ILS portfolio has grown from $2.8 billion at January 2018.

In life ILS, Leadenhall continues to expand its portfolio, now counting $2.5 billion in life and alternative credit investments, up from $1.9 billion in January 2018.

The firm said growth has been driven by new initiatives such as the launch of 2 new Open Ended Funds and a managed account in Leadenhall’s Non-Life insurance-linked securities business, as well as 1 new Closed Ended Fund focused on the life insurance-linked business.

Leadenhall said that the firms existing ILS funds have also experienced growth, with an emphasis on the managers strategies focused on investments in the mid-to-remote layers of non-life insurance-linked risk and life insurance-linked risk.

Lorenzo Volpi, Leadenhall’s Head of Business Development, commented on the firms growth, “Insurance linked investments is now a mature asset class, with maintained strong appetite from traditional alternative investors targeting higher risks and returns with greater potential to benefit from premium increases for riskier layers at the June renewals, but also attracting a traditional and fixed income investor base looking at lower risk and return profiles, which have been less affected by the recent loss events.”

Leadenhall provided more explanation of the rationale behind the change in ownership structure, as ultimate parent MS&AD Group’s largely non-life business Mitsui Sumitomo Insurance acquired the 80% interest in Leadenhall from MS Amlin Corporate Services Limited.

The ILS manager said this is a “logical business reorganization within a large group like MS&AD which has both insurance and asset management interests.”

Leadenhall, as an asset management company, sits more naturally within Mitsui Sumitomo Insurance’s Financial Services Division, which is also responsible for other asset management activities, the company said.

Once the pending merger between Sumitomo Mitsui Asset Management and Daiwa SB Investments takes place, Mitsui Sumitomo Insurance will hold a 15% stake in an asset manager with roughly JPY20 trillion of assets under management, meaning it can become a significant force to help drive further growth for Leadenhall.

“MSI’s Financial Services Division can further support Leadenhall’s AUM growth with its contacts with institutional investors, alternative asset managers and fixed income investors interested in non- life, life and alternative credit insurance linked investments, particularly in Japan,” the company explained.

John Wells, Leadenhall’s Chairman, added, “Japan represents an important share of the overall investments in the ILS sector and with the support of our parent we are well positioned to enhance our market penetration in the area.”

Leadenhall also announced today that it has recently formed an exclusive relationship with Masaaki Katsuyama (operating under the Teneo Partners brand) who will support the ILS managers business development in Japan.

Katsuyama-san had previously worked with Leadenhall’s Chairman John Wells and CEO Luca Albertini at Swiss Re, while more recently he worked at Guy Carpenter in Japan and is recognised as one of the most experienced ILS practitioners in the country.

Leadenhall also said that the cooperation with Mitsui Sumitomo Insurance’s Financial Services Division is likely to include seeding new fund initiatives, designing alternative risk transfer products for clients specifically in Japan, which could help to expand use of the collateralised reinsurance and ILS product there, as well as overseas.

The pair will also asses potential for cooperation in the life and alternative credit space and the relationship is also expected to support Leadenhall’s governance structure through the addition of a member to Leadenhall’s Management Board who has experience of other investments and asset management activities within the broader Group.

Luca Albertini, Leadenhall’s CEO, commented, “These changes are about supporting the development of Leadenhall’s aspirations to grow, to diversify its investor base, to enrich its offerings but is also about bringing more resources to support and strengthen our current relationship with MS Amlin and its Reinsurance Business Unit in particular.”

Leadenhall said that the 10 years of cooperation with MS Amlin has delivered significant benefits and while the pair maintain independent underwriting teams Leadenhall is highly confident the cooperation will continue.

The company explained that investment limits transacted in cooperation with MS Amlin were roughly $360 million in 2014 when MS Amlin grew its stake in Leadenhall to 75%. That business expanded with Leadenhall’s AUM, reaching $520 million in 2015, $714 million in 2016, $1.1 billion in 2017 and $1.5 billion in 2018.

“Should Leadenhall be successful in achieving further growth we fully expect the cooperation with MS Amlin to grow as well and benefit all parties,” the company said.

Leadenhall said that it believes that recent M&A in the ILS sector supports its view that investing in private ILS by managers is best served working closely with a reliable partner that has a traditional balance sheet, where an alignment of interest exists based on the success of the investment operations.

The manager said that its strong relationship with MS Amlin remains intact and continues to be represented on the Leadenhall Board at the highest level by James Illingworth (MS Amlin Group CUO), who has served on the board for the last 10 years.

James Illingworth, MS Amlin Group CUO, said, “A closer cooperation of MSI, MS Amlin and Leadenhall will bring tangible benefits to all and support an enhanced range of offering to Leadenhall’s investors, which has been and will continue to be a source of competitive advantage to MS Amlin and its clients.”

Leadenhall Capital Partners has set out its stall for further expansion and expects to benefit from continued synergies within the MS Amlin and wider Mitsui Sumitomo and MS&AD groups.

The close cooperation with a significant Japanese asset management group that is also part of one of the largest non-life insurance holding groups, and the close relationship with MS Amlin, promise to deliver both steady asset growth as well as access to unique underwriting and investment opportunities.

Leadenhall Capital Partners sits firmly in the top 10 ILS fund managers in the world by assets under management.