H1 net income down at Third Point

H1 net income down at Third Point

Bermuda's Third Point Re has reported net income of $71.1m for the first half, down from $100.7m in the first half of last year, on gross written premiums (GWP) of $233.1m, up from $194.2m in the corresponding period last year. Net premiums earned (NPE) rose to $152.0m, from $95.8m. The net underwriting loss was flat at $7.2m, although the increase in GPW meant that the combined ratio dropped to 104.9%, from 107.7% in the same period last year.

The return on beginning shareholders' equity declined to 5.1%, from 11.6%.

For Q2, GPW rose to $145.5m, from $98.2m in Q2 2013, with NPE rising tio $78.8m, from $62.3m. The combined ratio improved to 102.7%, from 105.5%. Net income improved to $31.3m, from $26.2m.

Third Point Reinsurance Investment Management Ltd, which operates Third Point Reinsurance Opportunities Fund Ltd, reported net income of $0.1m for the first half, up from a loss of $0.1m in the same period last year. Net asets under management were $11.4m as of June 30 2014.

Chairman, chief executive and chief underwriting officer John Berger said that "our combined ratio dropped to 102.7% from 105.5% in the prior year's second quarter as we continue to gain scale and Third Point LLC, our investment manager, successfully navigated market volatility through selective investments in securities and market hedges". Berger noted that Third Point had managed to maintain its underwriting margins so far in 2014, "despite challenging market conditions".

Third Point Re depends significantly on investment income from its float of $1.69bn. The return on investment was 5.5% for the first half, down from 12.2% for the first half of 2013. The reinsurer noted that performance in the investment portfolio "continued to be driven primarily by positive returns in both the corporate and structured credit portfolios during the second quarter of 2014".

Third Point Re said that its equity portfolio was well-diversified and that successful positions in Energy and Industrials & Commodities more than offset losses in the Technology, Media & Telecommunications and Financial sectors.

Third Point Re is backed by hedge fund Third Point LLC, run by Dan Loeb. Third Point operates a so-called "total return" strategy, compensating what can be a poorer technical underwriting performance with strong investment returns.

Third Point makes a point of emphasising that it marks to market its entire investment portfolio (managed by Third Point LLC) "and therefore, our investment results can vary significantly from period to period".

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