According to numerous reports in the press, SAC Capital, the embattled hedge fund owned by Steven A. Cohen, is looking for a buyer for its year old reinsurer SAC Re, as the hedge fund continues to fight insider trading charges.
SAC Re, which launched in July 2012 with $500m of capital and looked set to follow the typical hedge fund reinsurer model of underwriting low-volatility business while investing the premiums and income in the SAC Capital investment strategies, has likely suffered from the connection to the insider trading charges. SAC Re’s initial capital injection came from SAC Capital, Capital Z Partners III, L.P. and other investors.
It would make a lot of sense for the reinsurer to find a new home at this time. It has an experienced team, all the infrastructure in place to allow a new owner to make a swift entry into the reinsurance market. For Cohen, owning the reinsurer is not an essential part of the SAC Capital business and right now he has other, more pressing issues to deal with.
The Wall Street Journal was first to report, late yesterday, that SAC Re might be up for sale. The WSJ suggests that hedge fund Pine River Capital Management has been approached about the sale, which is interesting as Pine River Capital has taken a keen interest in the reinsurance sector in recent months.
Speculation over the future of SAC Re mounted after the reinsurers ratings were placed under review by A.M. Best, with some commentators suggesting that SAC Re may find it more difficult to attract counterparties during reinsurance renewals while the connection to SAC Capital remained.
With the key January reinsurance renewals fast approaching, a quick sale for SAC Re would be ideal to allow it to negotiate renewals with a clean slate.
SAC Re reported shareholder equity of $533 million as of 31st December 2012, with $513.2 million invested in SAC Capital funds. Reuters reports SAC Re’s total assets at the end of 2012 as $567.8 million.
The sale of SAC Re could provide a very useful head-start into the reinsurance sector for another hedge fund or asset manager with ambitions to tap into reinsurance premium float. A number of hedge funds have been reported to be actively looking at the space right now, including Pine River and Searchlight Capital, or it could suit one of the private equity firms which have multiple interests in the reinsurance space.
We’ll update you should any further details on the sale of SAC Re become available.