8 October 2013

Is SAC Capital searching for a buyer for SAC Re?

Rumours are flying around regarding SAC Capital looking for a buyer for its Bermuda reinsurance business, SAC Re.

Bermuda:Re contacted SAC Re, but the company has declined to comment, but sources in Bermuda have indicated that the rumours have credence.

SAC Capital was charged with insider trading in recent months and the move may be an effort to head-off further pressure from prosecutors, as SAC Capital looks to clean up its image.

SAC Re has strong ties to SAC Capital, which stumped up around 25 percent of its starting capital and provides investment management capabilities to the reinsurer, which was launched in 2012. SAC Re was one of three major Bermuda start-ups in 2012, alongside Third Point Re and PaCRe.

Concerns regarding SAC Re were expressed by AM Best as early as July this year, when the rating agency placed the firm’s A- (Excellent) financial strength rating under review with negative implications.

Commenting on its concerns AM Best said: “The rating actions reflect A.M. Best’s concern with the business plan originally presented by SAC Re, which took into account invested assets being managed by S.A.C. Capital. Given the current circumstances surrounding the investment manager, the original business plan may be challenged. Presently, there is uncertainty as to whether the invested assets can be managed by S.A.C. Capital as well as whether there will be ramifications concerning any affiliation with S.A.C. Capital on the reinsurance franchise going forward.”

“This reputational risk is due to both the reinsurer and the investment manager sharing the same name, as SAC Re is not a “subsidiary” or a “unit” of S.A.C. Capital, and S.A.C. Capital only serves as the investment manager. Despite these recent events the risk-adjusted capitalization of SAC Re remains supportive of its current ratings.”