Third Point Re enjoys improved results as CEO Malloy highlights shift in portfolio mix
Bermuda-based Third Point Re made a loss in the first half of 2020, partly because of the impact of COVID-19, but fared better in the second quarter alone as it continued to shift the mix of its portfolio into higher margin property and specialty lines.
The reinsurer unveiled its second quarter results on the same day it entered into a definitive merger agreement with multi-line re/insurer Sirius Group, in a cash and stock deal valuing at approximately $788 million.
CEO Daniel Malloy said he was "pleased" with the company's performance in the second quarter and first half of 2020, noting the uplift caused by a better performance in its investment portfolio, shift in business mix and improving market conditions.
The reinsurer's net profit rose to $124 million for Q2 2020, from $53.1 million in Q2 2019. In the first half of 2020, it made a net loss of $59.6 million, compared with a profit of $186 million in H1 2019.
Its combined ratio improved significantly to 98.3 percent in the second quarter of 2020, versus 101.1 percent in the same period of 2019. For the first half of the year, the company posted a combined ratio of 97.6 percent, compared with 102.5 percent in H1 2019.
Third Point Re's gross premiums written came to $157.6 million in Q2 2020, up from $82.6 million in the same period of 2019. However, the GWP total for the first half of 2020 came to $361.7 million, down from $402.2 million it reported for the first six months of 2019.
The company recognised COVID-19-related net loss of $9.9 million and $19.4 million for the second quarter and first half of 2020, respectively. These losses were driven primarily by contingency exposures (event cancellation) as well as certain casualty and multi-line quota share contracts.
"We were very pleased with our second quarter results with a return on equity for the quarter of 10.1%," said Malloy, chief executive officer of the company. "Our combined ratio for the second quarter was 98.3%, of which 7.0 percentage points, or $9.9 million, was attributable to the ongoing impacts of COVID-19. Our diluted book value per share at the end of the quarter was $14.37.
"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.
"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."
Third Point Re also announced that Siddhartha Sankaran, a current director, has been elected as chairman of the board, effective immediately. Joshua Targoff, the former chairman, will remain on the board.
In addition, the company appointed Mehdi Mahmud as a member of its board. Mahmud currently serves as chief executive officer and president of First Eagle Investment Management, a subsidiary of First Eagle Holdings.