There is evidence from the third-quarter 2023 results of White Mountains that its re/insurer subsidiary Ark is starting to see increasingly significant benefits delivered by the $250 million Outrigger Re collateralized reinsurance sidecar that it launched at the end of 2022.
White Mountains demonstrated its appetite for deploying capital to insurance-linked securities (ILS) and reinsurance-linked investments as it became the lead investor behind its subsidiary Ark Insurance Holdings’ $250 million collateralized reinsurance sidecar Outrigger Re Ltd.
We already reported earlier this year that the Outrigger Re sidecar investment was delivering benefits, by helping sponsoring re/insurer Ark to write more risk in the currently attractive reinsurance market environment.
After the third-quarter those benefits are becoming increasingly significant, with the premiums earned attributed to the Outrigger Re sidecar and the income it has generated both rising.
On the third-quarter of the year, Manning Rountree, CEO at White Mountains, said; “Ark produced an 81% combined ratio while growing premiums 17% year over year. WM Outrigger Re delivered a 44% combined ratio and $37 million of pre-tax income.”
While the combined ratio for the White Mountains share of Outrigger Re sidecar was 44% for Q3, for the first nine months it was slightly lower at 40%.
Premiums written by Outrigger Re reached $108 million after Q3, but more impressive is the significant uplift in premiums earned, as the underwriting portfolio started to earn out for White Mountains.
Premiums earned by its stake in Outrigger Re reached $61 million in Q3 2023 alone, taking the figure for the first-nine months of the year to $75 million.
That Q3 premium increase meant that pre-tax income for the period was reported as $37 million, while the pre-tax income earned by White Mountains stake in Outrigger Re had reached $53 million for the year to end of September.
Outrigger Re is a quota share sidecar to Ark, so commentary from its CEO is also helpful in explaining the sidecar’s performance.
Ian Beaton, CEO of Ark, said, “Ark had a good third quarter notwithstanding global catastrophe activity. The combined ratio was 81% in the quarter, an improvement of six points year-over-year. Gross written premiums were $251 million in the quarter and $1,667 million year-to-date, up 17% and 33%, respectively, from 2022 levels. Risk-adjusted rate change is up 11% in the quarter and 16% year-to-date. Momentum remains positive.”
While Ark is benefiting from the additional efficient reinsurance underwriting firepower that the Outrigger Re sidecar provides, it’s also clear that White Mountains is benefiting as well, with attractive income levels now earning through.
It’s also worth noting that, in Outrigger Re, the risk adjusted rate change to its portfolio of global property reinsurance was 17% in the third quarter of 2023 and 36% for the first nine months, which will have helped in driving the high earnings for White Mountains.
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