The value of insurance, reinsurance and financial services group Alleghany Corporation and its reinsurer TransRe’s investments in specialist ILS manager Pillar Capital’s ILS funds increased during the third-quarter, while at the same time positive income continued to flow from the ILS operations.
Net investment income reported by Alleghany from its equity stake in the results of insurance and reinsurance linked specialist ILS asset manager Pillar Capital fluctuated again, coming in at $5.9m for Q3 2016, down from $7.3m in Q3 2015.
But Alleghany’s equity in the results of its Pillar investments has fluctuated from year to year, likely reflecting changing patterns in premium inflow and also in the ongoing shift most ILS fund managers have been making towards collateralised reinsurance underwriting.
For the first nine-months of 2016 the income flowing through from Alleghany’s equity stake in Pillar Capital is reported as $12.9m, down a little from the $14.9m reported for the first nine-months of 2015.
It will be important to note how the full-year figures compare as that will give us a better idea of whether the decline after Q3 is due to a fluctuation in premium income patterns, higher attritional losses suffered from the funds (which is possible this year) or perhaps the lower priced reinsurance market environment.
Meanwhile the value of Alleghany and reinsurance subsidiary TransRe’s investments in the Pillar Capital ILS funds increased again during the third-quarter, reflecting the returns made. TransRe invested $175m and Alleghany $25m in Pillar Capital’s limited partnership ILS and reinsurance-linked investment funds.
At the end of Q2 2016 the carrying valuation of those investments combined as a single figure was reported as $227.6m, net of capital returns. At the 30th September 2016 that figure had risen by 1.4% to $230.8m.
So Pillar Capital’s ILS funds continue to provide income to Alleghany, from the re/insurance group’s equity stake and investment income from the fund participation as well.
Alleghany has consistently benefited from the relationship, providing the firm with a way to participate in the ILS and collateralised reinsurance market for income and investment purposes and adding a collateralised offering which complements its traditional TransRe reinsurance product suite.