AlphaCat Managers, the insurance-linked securities and collateralised reinsurance investment manager entity of insurance giant American International Group’s (AIG) delivered its parent $10 million of income for the first-quarter of 2020.
At the same time, the amount of ILS and reinsurance assets under management of AlphaCat Managers dipped slightly in the period, to end the first-quarter at $4.2 billion, down from $4.3 billion at the end of 2019.
The decline in ILS assets at AlphaCat was likely due to the mark-to-market decline in catastrophe bond valuations seen as a result of the Covid-19 pandemic, as almost every ILS fund manager took a dip in asset value as a result of the global pandemic.
Any cat bond related mark-to-market decline would be expected to be recovered over the next few months, as cat bond secondary market prices recover from the financial market volatility.
AIG has adjusted the way it reports for income earned from the AlphaCat Managers ILS business slightly, with the fee income now being reported as a component of Net Investment Income.
For the first-quarter of 2020 fee income earned from the AlphaCat ILS business was $10 million, $8 million of which was fee income from asset management activities and $2 million of income from direct investment activities.
That compares to $9 million earned for Q4 2019, $16 million for Q3 2019, $7 million for Q2 2019 and $9 million for Q1 2019.
Income from the AlphaCat ILS funds has of course been subject to a reduction due to trapped collateral and the fact the ILS manager will still be dealing with some prior year loss events, but had remained relatively stable otherwise.
On assets under management, having ended 2019 with $4.3 billion of ILS assets, $4.2 billion of which was from third-party investors, AlphaCat’s ILS AuM dipped slightly by $100 million, to $4.2 billion of ILS assets, $4.1 billion of which was from third-party investors at the end of Q1 2020.
As said, we’d expect any mark-to-market decline in cat bond values in the AlphaCat ILS fund portfolios to be recovered over the coming months.