Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Elementum fee revenue $37m in 2019. No significant Covid-19 impact in Q1 2020


Elementum Advisors, LLC, the insurance-linked securities (ILS) fund management and collateralised reinsurance underwriter that is 30% owned by White Mountains, earned $37 million in fee revenues in 2019, which was a roughly 9% increase in revenues on the previous year.

elementum-advisors-logoPartial owner White Mountains also disclosed recently that the Elementum ILS fund management business has not taken any significant impacts from the Covid-19 pandemic through the first-quarter of this year.

The Elementum ILS business had around $4.2 billion of ILS and reinsurance assets under its management across a range of funds for its investors as of the end of 2019, as detailed in our ILS investment manager directory.

White Mountains took its 30% stake in ILS fund manager Elementum Advisors in May 2019, confirming news that we originally broke in April of last year.

The company paid $55 million for a position in Elementum, valuing the ILS fund manager at roughly $183 million.

In a recent report, White Mountains disclosed just how profitable the ILS fund management side of the Elementum business can be, revealing that on the back of the roughly $4.2 billion of assets under management held at the end of 2019, the ILS fund manager generated some $37 million of fee revenue.

That’s a roughly 9% increase on the $34 million of fee revenue earned in 2018 by Elementum Advisors.

Just $200 million of new investor inflows were reported for 2019, down from an impressive $900 million in 2018, while EBITDA was flat at $14 million for both years.

For White Mountains, the investment it has made in Elementum delivered a 3% blended return in 2019 from June 1st, which is a weighted return across Elementum’s Zephyrus, NatCat and Directus ILS funds.

So the relationship seems to have got off to a profitable start, with White Mountains profiting from its investments in the Elementum ILS funds as well as from its 30% stake in the ILS fund manager it seems.

In the first-quarter of 2020, White Mountains said that, “Elementum’s business was not significantly impacted by the pandemic and is expected to have low correlation with the broader macroeconomic cycle and financial markets.”

But of course, counting institutional investors such as pension funds as the source of most of its third-party capital, Elementum is just as exposed as other ILS fund managers and collateralised reinsurance entities to the chances of investor redemptions and other impacts from volatile capital markets.

“In the near term, Elementum’s AUM and revenues may increase or decrease as institutional investors rebalance portfolios or seek liquidity as they assess the ILS and investment markets more broadly,” White Mountains warned.

Of course, Elementum is potentially as exposed as other ILS fund managers that write collateralised reinsurance business to the chances of trapped ILS capital and even some losses from the pandemic, so facing the same period of uncertainty as many in this industry are today.

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