Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Alleghany’s share of ILS manager Pillar Capital’s profit up for 2015


Insurance, reinsurance and financial services group Alleghany Corporation saw its investment income derived from its relationship with ILS manager Pillar Capital rise in 2015, as the profit contribution it received from the insurance linked asset manager beat the 2014 total.

The profit and investment income shared by insurance and reinsurance linked securities manager Pillar Capital to Alleghany, as a result of the firm’s investment in the ILS manager, has provided a positive source of additional and growing income.

For the full-year 2015 Alleghany reported $23.3 million of income from its investments in Pillar Capital, up from $22 million in 2014.

The fourth-quarter saw a slight dip in income from Pillar, likely a function of the market environment and lower returns in reinsurance, as well as changes in the deployment cycle of Pillar funds. For Q4 2015 Alleghany reported $8.4 million of Pillar income, compared to $9.5 million in Q4 2014.

Alleghany purchased its share in Pillar Capital when it acquired Transatlantic Holdings, including the property and casualty reinsurance firm TransRe, in 2012. TransRe had become a strategic partner in Bermuda-based specialist ILS and reinsurance linked investment manager Pillar Capital that year.

This valuable source of additional income helps to boost Alleghany’s investment earnings, as well as give the firm a foothold in the property catastrophe reinsurance space where Pillar Capital tends to play. The relationship is also one which Alleghany can hope to leverage even further when the market cycle turns, or hardens at all.

TransRe, which also has an ownership stake in Pillar Capital, invested $175m and Alleghany $25m in some of Pillar Capital’s limited partnership ILS and reinsurance-linked funds. Alleghany combines the value of these investments in the Pillar Capital ILS management company and its ILS funds as a single figure, with the value reported as $238.8 million at the end of 2015, up from $230.4 million at the 30th September last year.

The income earned by Alleghany reflects continued positive results from Pillar Capital’s ILS funds, despite the lower reinsurance rate environment. Part of this will be due to the increasing scale as the ILS manager adds more investor capital, so the increasing contribution will likely continue as that scale grows.

At the last count, we had Pillar Capital listed as having $370m of assets under management at the end of December 2015.

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