American International Group’s (AIG) insurance-linked securities and collateralised reinsurance investment manager entity, AlphaCat Managers, saw a slight decline in ILS assets under management during the third-quarter of the year, but delivered its parent improved investment fee income.
AlphaCat Managers ended the second quarter with $4.3 billion of total ILS assets under management (AuM), $4.2 billion of which was from third-party investors.
Q2 represented the first quarter of ILS assets growth for a while for AlphaCat, as the ILS management unit experienced similar challenges to the rest of the market, in terms of the hangover from prior year losses and trapped collateral, plus the volatility and uncertainty created by the global pandemic.
At the end of the third-quarter of 2020, AlphaCat’s ILS assets under management had fallen by $100 million, to end September at $4.2 billion, with $4.1 billion of the total coming from third-party investors.
This could possibly be down to a realisation of some catastrophe losses during the quarter, or perhaps related to the pandemic as a number of ILS funds have set reserves and even realised some small losses from it, or, perhaps more likely, a shift in investor allocations.
AlphaCat’s overall ILS asset base has been able to remain relatively stable through the last year or so and while a portion will likely still be trapped currently, or held for potential losses to develop as we see across the ILS market, AIG’s ILS unit remains one of the larger players in the ILS market.
AIG reports on the contribution to its investment income that AlphaCat delivers through fees and shares and for the third-quarter of 2020 this figure rose slightly.
AIG reported that AlphaCat delivered it $9 million of net investment income in Q3, of which $8 million is fee income from asset management activities and $1 million is the income from direct investment activities.
That compares to Q2 where AlphaCat delivered AIG $6 million of income, as $8 million came from the asset management side, but -$2 million was lost on direct investment activities last quarter.
AIG will be eyeing opportunities for its AlphaCat Managers ILS unit as we move towards the year-end, as its focus on collateralized reinsurance and retrocession should put it in good stead to access the hardening price environment and build a 2021 portfolio that promises attractive no-loss returns.