Hedge fund-backed reinsurer Third Point Re has reported an improved, albeit still negative underwriting result for the second-quarter and first-half of 2019, while the firm’s net income improved for both periods when compared with 2018.
Third Point Re has reported net income of $53.1 million for Q2 and $186 million for H1 2019, compared with $19.6 million in Q2 2018 and a net loss of $6.4 million in H1 2018.
The result for both periods was supported by an increase in net investment income from $31.2 million to $69.1 million in Q2, and from $29 million to a huge $224.1 million in H1 2019.
Somewhat offsetting the strong investment performance, Third Point Re’s second-quarter 2019 net underwriting result still produced a loss of $1.7 million, although this improved from the $5.1 million underwriting loss in Q2 2018. For the half-year, the reinsurer recorded an underwriting loss of $7.4 million, compared with an underwriting loss of $11.4 million in H1 2018.
As a result, Third Point Re’s combined ratio in Q2 strengthened from 103.6% in 2018 to 101.1%, while for the half-year the combined ratio strengthened from 104% to 102.5%.
The firm states that the improved underwriting result for both Q2 and H1, albeit slight, was mostly driven by a shift in business mix, which includes new earnings on property catastrophe and specialty business.
The reinsurer announced earlier this year that as it continues to evolve its underwriting platform, entering the property catastrophe arena, it expects this business to increasingly contribute to a positive underwriting result.
The firm’s Chief Executive Officer (CEO), Dan Malloy, commented: “I am pleased with our second quarter results as we improved our combined ratio to 101.1% and Third Point LLC delivered another solid quarterly investment return of 2.9%, bringing our year-to-date return to 10.3%. We delivered a return on equity of 4.0% for the quarter and 15.4% for the first half of the year.
“I would like to highlight that our 101.1% combined ratio for the quarter means we are on track to achieve our goal of delivering underwriting profitability, subject to catastrophe events, by year end. This will be an important milestone for the company and a validation of our strategy to deliver value from both sides of our balance sheet.
“We have continued to build out our underwriting team over the past year, where we have successfully recruited talented underwriters, to allow us to expand our portfolio into new profitable lines of business including property catastrophe and specialty. We are encouraged with our progress to date with the build out of our team and portfolio positioning going better than expected.”
For the second-quarter, Third Point Re’s gross premiums written (GPW) increased by more than 66% to $32.9 million, which includes $15.8 million of new contracts related to property catastrophe business.
For H1 2019, GPW declined by 6% to $402.2 million, which the firm attributes to the net impact of contract extensions, cancellations and contracts renewed with no comparable premium in the comparable period, and also contracts that it did not renew in the current year. This was somewhat offset by new contract growth in property catastrophe of $57.4 million.
Net premiums earned increased to $145.5 million in the second-quarter of 2019 and to $298.5 million in the first-half of the year.