The third-party reinsurance capital and ILS fund management operations of Blue Capital are a “nice benefit” of the acquisition of Montpelier Re for insurance and reinsurance group Endurance, according to Mike McGuire, CFO.
Now that the acquisition of Montpelier Re is complete and integration done, Endurance has a chance to reflect on the positives of joining the merger and acquisitions party early, having made its approach for reinsurance firm Montpelier Re fairly early on.
Along with the insurance, reinsurance and Lloyd’s of London operations of Montpelier, Endurance also gained the third-party capital reinsurance and retrocession linked investment strategies and assets of manager Blue Capital Management Ltd.
“One of the nice benefits of our acquisition of Montpelier was the acquisition of the Blue Capital franchise and included in that our two public vehicles,” McGuire explained.
The public vehicles are the New York stock exchange listed collateralized reinsurance vehicle Blue Capital Reinsurance Holdings and the London stock exchange listed Blue Capital Global Reinsurance Fund. Between the two and alongside the private sidecar, closed ended funds and mandates that Blue Capital manages, Endurance has gained a compelling ILS and third-party reinsurance capital platform.
Endurance, through having acquired Blue Capital and Montpelier, now has its own stake in the Blue Capital Re vehicle. McGuire commented; “We are a large investor in that company, on or about a third of that business and we’ve been very pleased with the performance.”
And McGuire clearly sees an opportunity to grow the listed reinsurance vehicle, as it should be very attractive to investors given its equity listing in New York, in a low-overhead, fully collateralized reinsurer model.
“For investors seeking a direct investment in catastrophe reinsurance, and in a way that’s not significantly correlated to the broader financial markets, this is a great vehicle for investors,” he continued.
McGuire hinted that the acquisition has likely slowed down the growth of the Blue Capital vehicles, making it difficult to attract new investor capital while the transaction was going through. The book value per share of Blue Capital Re may also have suffered from uncertainty, but now the transaction is closed and with a solid third-quarter just reported, it’s likely the vehicle will seek to add more scale in quarters to come.
McGuire said; “I think the uncertainty over the last six months, with respect to Montpelier going through a sales process, certainly has impacted that, but we are quite happy with the underlying economic performance of Blue Capital and the contribution that it’s making.”
“As long as we continue to deploy the capital and earn the kind of returns that we’ve been generating so far then that should work itself out in terms of how you as investors, or more broadly investors, value that operation in the organisation,” he continued.
With many beginning to appreciate that having access to third-party capital management operations in reinsurance is actually a very attractive trait for a re/insurer, Endurance has gained a mature, diversified and respected asset management platform in Blue Capital, which it can now seek to grow and leverage alongside its traditional business.