Third Point Re 'committed' to partner hedge fund despite losses

Third Point Re said it remained committed to its investment partner Third Point LLC despite disappointing investment results that sent the firm to a significant loss for the fourth quarter and full year 2018.

Third Point Re ended 2018 with a quarterly net loss of $298mn after suffering a net investment loss of $276.8mn and an underwriting deficit of $24.4mn during the period.

The overall result for Q4 was equal to a net loss of $3.24 per common share compared with a net profit of $0.42 per share in the fourth quarter of 2017.

Despite the disappointing investment return, Rob Bredahl, Third Point Re’s president and chief executive, said his company remains committed to asset manager Third Point LLC, noting the firm’s “long-term track record and their ability to navigate challenging investment conditions”.

During the fourth quarter in 2017, Third Point Re posted net profit of $44.3mn, a result that was fuelled by net investment gains of $67.2mn that more than offset a net underwriting loss of $9.2mn.

The Q4 2018 result included a combined ratio of 111.6 percent, 4.5 percentage points higher than that recorded in 2017’s fourth quarter.

This included $18.5mn of catastrophe losses, equal to 8.8 points on its combined ratio.

While Third Point Re did not write any specific property catastrophe contracts last year, the bulk of the reinsurer’s exposure relates to losses sustained by various Californian utilities from the wildfires.

“The fourth quarter of 2018 was a difficult quarter for us,” Bredahl accepted.

“Poor investment performance combined with modest catastrophe losses led to a significant net loss for the quarter and year. Equity market weakness during the fourth quarter of 2018 led to an investment return of negative 11.4 percent in the quarter and negative 10.8 percent for the year.”

Despite the cat losses, Brehdal said the firm remained committed to its previously announced plans to begin writing “a modest amount” of catastrophe reinsurance in 2019.

“We are pleased with the portfolio that we have constructed at the important January 1 renewal date, which benefited from some modest improvements in pricing, and we continue to expect our combined ratio to trend to below 100 percent as we earn in the catastrophe premium and continue to expand our underwriting platform into other higher margin types of reinsurance and lines of business,” he said.