Insurance, reinsurance and financial services group Alleghany Corporation and its reinsurer TransRe’s ownership stake and investment in specialist ILS manager Pillar Capital and its ILS funds delivered an increased contribution to its quarterly results in Q1 2017.
Alleghany reported that its net investment income earned through its equity stake in the results of insurance and reinsurance linked specialist ILS asset manager Pillar Capital rose year-on-year, reaching $3.4 million in Q1 2017, up from $3.1 million a year earlier.
This increase in investment income earned likely signals a better level of return from the Pillar Capital ILS funds that Alleghany’s investments are allocated to.
That is an encouraging start to the year, given the reinsurance and ILS sector has been hit with rising attritional losses and a number of major outbreaks of severe weather related loss events so far this year.
However, look back two years, to the end of Q1 2015 when the reported investment income was $6.6 million, or the end of Q1 2014 when it was $3.9 million, and it’s clear that the lower reinsurance returns and higher loss impacts that have had an effect on the ILS fund sector’s rates of return have also affected Pillar Capital.
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 the manager operates dipped in the first-quarter, which has been seen before as capital returns have taken place at year-end.
As a result, the total value of these investments tends to fluctuate throughout the year, with a dip at year-end.
At the end of the first-quarter of 2017 Alleghany reports that the carrying value of these investments was $225.9 million, net of returns of capital received from Pillar.
A year ago this figure was $225.4 million, so the value has not grown particularly but the investment income earned has proven stable and the returns of capital likely still an attractive boost to earnings for Alleghany Corporation.
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