Specialist insurance and reinsurance linked ILS asset manager Pillar Capital delivered slightly lower income to its stakeholder financial services group Alleghany Corporation during the second-quarter of the year, possibly a reflection of the lower available returns in reinsurance due to the softened market.
Each quarter Alleghany Corporation reports how much it has earned from the company and its reinsurer TransRe’s ownership stake and investment in specialist ILS manager Pillar Capital and its ILS funds. The figure tends to fluctuate, due to the changing nature of the market and Pillar’s ILS fund portfolios, but remains a source of additional income for the group and a way it can benefit from the returns of the ILS market and alternative capital in reinsurance.
In the second-quarter of 2017 Alleghany reports that the net investment income earned through its equity stake in the results of insurance and reinsurance linked specialist ILS asset manager Pillar Capital was $3.2 million, down from $3.6 million in Q2 2016.
For the first-half that takes Alleghany’s investment income from its investment in Pillar Capital to $6.6 million, again down from 2016’s first-half income of $7 million.
Given catastrophe losses have not been particularly high again, although Pillar’s ILS funds will no doubt have felt some attritional impact from events such as the U.S. convective storm season, it seems reasonable to assume that at least part of the reason for the year-on-year dip is a generally lower rate environment in reinsurance markets.
Despite the dip the income is still healthy, given the size of the Pillar ILS funds. Originally, TransRe took an ownership stake in Pillar back in 2012 also investing $175m and Alleghany $25m in Pillar Capital’s limited partnership ILS and reinsurance-linked investment funds.
The value of Alleghany and reinsurance subsidiary TransRe’s stake in ILS manager Pillar Capital and its investments in the ILS funds is reported as $226.5 million at the end of Q2 2017, up from $225.9 million at the end of Q1 and net of capital returns to Alleghany.