Year-on-year, insurance and reinsurance holding company Alleghany Corporation saw an increased Q1 profit contribution from its investment and strategic partnership in insurance and reinsurance linked specialist ILS asset manager Pillar Capital.
Alleghany gained a stake in Pillar Capital when it acquired Transatlantic Holdings, including the property and casualty reinsurer TransRe, in 2012. TransRe became a strategic partner in Bermuda-based specialist ILS and reinsurance linked investment manager Pillar Capital that year.
TransRe, which also has an ownership holding in Pillar, invested $175m and Alleghany $25m in certain limited partnership ILS funds operated by Pillar Capital. Alleghany consolidates the investments in Pillar and funds as a single figure and reports that the value of its investments in Pillar was $242.3m at the 31st March 2015, up from $235.2m at the end of 2014.
In the first-quarter Alleghany reported that Pillar Capital provided it with $6.6m of investment income, up from $3.9m in the prior year period, which reverses the decline in income (year-on-year) that was seen in the last two quarters of 2014.
That perhaps suggests that either Pillar Capital faced some losses in those quarters or that the ILS manager had adjusted its book, meaning that premiums flowed through differently through 2014 compared to 2013. It will be interesting to see how this continues through the rest of 2015.
The relationship with Pillar Capital has been providing steady income boosts to Alleghany since it was established and it positions the firm well to take advantage of any turns in the market, where it could leverage the ILS capital itself or benefit from the increased income from it.