Assets under management within the reinsurance linked fund strategies managed by AIG’s specialist insurance-linked securities (ILS) unit AlphaCat Managers rose by $200 million during the third-quarter of 2019 to reach $4.3 billion.
AlphaCat Managers had ended the first-half of the year with $4.1 billion of ILS assets under management, $4 billion of which was from third-party investors.
After the third-quarter the figures had risen, to $4.3 billion of assets as AlphaCat raised some fresh capital from third-party investors and its third-party capital AuM reached $4.2 billion.
AlphaCat invests these assets into catastrophe bonds and other collateralized reinsurance contracts, offering a range of cat bond funds, private ILS funds and sidecar like structures to third-party investors.
During the third-quarter the investment performance of the AlphaCat funds must have improved, as AIG reported net investment income of $8 million for Q3, bouncing back from a -$1 million net investment loss in Q2.
At the same time AIG has also reported $8 million of miscellaneous income earned from the AlphaCat operations during the third-quarter of 2019, which is the same amount as in Q2.
Year-to-date, AIG has now earned $8 million of investment income and $24 million of miscellaneous income from AlphaCat’s ILS investment strategies over the first-nine months.
Q3’s investment income is now the highest seen since AIG acquired AlphaCat’s parent insurance and reinsurance firm Validus.
It suggests that the recovery from prior year losses has continued apace in Q3, enabling the ILS funds under AlphaCat’s operation to deliver improving performance, in turn delivering increasing income to parent AIG.
AlphaCat’s ILS strategies will now likely have some losses to deal with from recent catastrophe events, including the Japanese typhoons Faxai and Hagibis, as well as any losses suffered from hurricane Dorian’s impacts that flow through this quarter.
But the fact the fund’s have returned to growth, raised fresh investor capital and delivered positive income, is all suggesting that the prior year catastrophe events are increasingly being put behind AlphaCat, which bodes well for its investors and parent AIG.
Fundraising has been challenging for ILS fund managers over 2019 so far, but the market is now beginning to show signs of returning to growth, with fresh capital additions likely to begin to flow towards year-end.
Inflows are likely to be at a relatively reserved pace though, as ILS fund managers will also be aware that raising too much capital could negatively affect their chances of securing the best pricing at renewals.
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