Hedge fund-backed reinsurer Third Point Re improved its net income to $124 million during the second quarter of 2020, helped by a recovery in the investment markets following pandemic-induced volatility in Q1.
The Q2 figure compares with a net income of $53.1 million for the same period last year, although the reinsurer’s H1 income remains in the red by $59.6 million versus a gain of $186 million last year.
Third Point Re’s results came alongside an announcement that it plans to combine with international multi-line re/insurer Sirius Group in a transaction valued at around $788 million.
As in the first quarter of the year, Third Point Re managed to maintain underwriting profitability, posting an income of $2.4 million versus a loss of $1.7 million in Q2 2019.
Looking at the first six months of 2020, underwriting income totaled $6.8 million, compared with a loss of $7.4 million for the same period last year.
Third Point Re attributed the improvement in underwriting results to a shift in business mix, partially offset by the impact of the COVID-19 pandemic.
The company’s combined ratio improved from 101.1% to 98.3% for Q2 and from 102.5% to 97.6% for H1.
During the quarter it recognized net losses of $9.9 million, or 7 points on the combined ratio, relating to COVID-19, and for the six month period it recognized losses of $19.4 million, or 6.8 points on the combined ratio.
These losses were driven primarily by contingency exposures (event cancellation) as well as certain casualty and multi-line quota share contracts.
In its property and casualty reinsurance segment, Third Point Re increased gross premiums written by $75 million, or 90.8%, to $157.6 million during Q2
The increase was primarily due to new contracts bound in the current year period, including new property catastrophe and specialty contracts in line with our changing underwriting strategy.
But for the H1 period, gross premiums written decreased by $40.5 million, or 10.1%, to $361.7 million unrenewed contracts that no longer fit with the company’s new underwriting strategy.
“We were very pleased with our second quarter results,” said CEO Dan Malloy. “Our investment portfolio had a significant bounce back in the second quarter with a 5.8% return on the consolidated investment portfolio with significant contributions from our investment in the Third Point Enhanced Fund as well as from our opportunistic credit investments that we made at the end of the first quarter.”
Malloy continued: “Our shift in business mix into higher margin property and specialty lines is benefiting from improving market conditions and with historically low interest rates, we expect to benefit from our differentiated investment strategy.”
“Our capital position remains strong and we are well positioned to continue to deliver increasing shareholder value from both underwriting and investments.”
