Hedge fund style reinsurer Third Point Re has announced record net income of $132.9 million for the first-quarter of 2019, a significant improvement on the $26 million net loss reported for the same period in 2018.
The improvement was driven by an investment gain of $155 million for the quarter, which compares to an investment loss of $2.2 million in Q1 2018. This more than offset an improved but still negative underwriting return of $5.7 million, which compares to an underwriting loss of $6.4 million in the prior year first-quarter.
In light of the underwriting loss recorded in Q1 2019, Third Point Re’s combined ratio hit 103.8%, strengthening slightly from the 104.5% reported last year.
Third Point Re’s newly appointed Chief Executive Officer (CEO), Daniel Malloy, commented: “We are pleased with our first quarter performance, which resulted in a return on beginning shareholders’ equity of 11% for the period driven by strong investment returns. We generated net income of $132.9 million in the quarter which was a record quarter for Third Point Re.
“Consistent with our ongoing plans to increase our focus on higher margin business, we wrote a modestly sized property cat portfolio at 1/1 and announced the hiring of a specialty lines underwriting team. Both of these efforts to expand our underwriting platform have gone better than expected and were critical steps in reshaping our underwriting portfolio in order to achieve underwriting profitability. Our combined ratio for the quarter was 103.8% and we expect this to improve over time as we execute on our underwriting plan.”
Third Point Re’s gross written premiums declined by more than 15% to $319.6 million in the first-quarter, which the firm says is a result of “certain contracts that did not renew due to underlying pricing, terms and conditions and contracts written in the prior year period on a multi year basis with no comparable premium in the current year period.”
Net premiums earned jumped slightly in Q1 2019 to $153 million, compared with $142 million a year earlier.
The company’s loss ratio improved slightly in the first-quarter when compared with the previous year, to 62.1%, while its acquisition cost ratio moved from 36.1% to 37.6%, in Q1 2019.
A strong investment performance more than offset continued challenges on the underwriting side of the business for Third Point Re in the first-quarter of 2019. It will be interesting to see whether the firm can maintain its strong investment performance while producing a positive underwriting return as the market moves through the second-quarter of 2019 and beyond.