AIG’s stake in AlphaCat funds & income from ILS operations recover in Q1

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American International Group, Inc. (AIG) has reported that the value of its investment stake in the insurance and reinsurance linked fund strategies managed by the AlphaCat Managers ILS unit recovered in the first-quarter of 2019, as too did the income it earned from ILS operations.

alphacat-managers-logoThe insurance-linked securities (ILS) operations of AlphaCat Managers, which looks after $4.2 billion of assets invested in catastrophe bonds and other collateralized reinsurance contracts, suffered at the end of 2018, as the wildfires and loss creep from prior events hit the manager, as they did almost the entire ILS market.

AIG had reported the value of its own investment stake in the AlphaCat ILS investment funds as $128 million at September 30th 2018, but the value then tumbled in Q4 to end the year at $116 million.

The first-quarter of 2019 saw a relatively loss free period for the ILS market, aside from continued loss creep, which allowed the value of AIG’s investments in the AlphaCat funds and investment strategies to jump back up to $124 million at March 31st 2019.

At the same time, the income that AIG reported from the ILS and collateralized reinsurance operations at AlphaCat Managers also saw a recovery after a fourth-quarter decline.

Looking back at the last three-quarters again, AIG reported $5 million of net investment income and $6 million of miscellaneous income from the AlphaCat ILS operations for the third-quarter of 2018.

Then for the fourth-quarter of 2018 that fell to a $12 million net investment loss and miscellaneous income of $5 million for Q4 2018, so aligned with the dip in the value of the insurance giant’s stake in its ILS operations funds.

But Q1 2019 saw both figures recover, with AIG reporting $1 million of net investment income and  a higher $8 million of miscellaneous income from the AlphaCat ILS operations during the last quarter.

AlphaCat’s results were hit in the fourth-quarter of 2018, as were the majority of the ILS market’s and the lower net income figure for the recent Q1 2019 could be a knock-on effect of those losses, or due to the loss creep that continued to affect many ILS fund managers through recent months.

But with no fresh major loss impacts so far this year, AIG will likely report ongoing improvements in these numbers, as its AlphaCat Managers ILS unit deals with its losses of the last two years and any trapped capital, moving forwards with an improved property catastrophe reinsurance rate environment that should also boost the investment income results and the value of the insurers stake in the ILS funds.

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