Third Point Re CEO John Berger
Third Point Re CEO John Berger

While many property/casualty reinsurers have forged M&A deals and others are likely to follow, Third Point Reinsurance’s CEO said he sees plenty of business opportunities for the Bermuda-based company if it remains solo.

“As consolidation continues to happen in the marketplace, there are very few truly independent reinsurance companies,” Chairman and CEO John Berger said during Third Point’s 2014 fourth-quarter earnings call. “We see opportunities.”

Berger explained, for example, that Third Point was able to write a multiline opportunity out of the London market worth $125 million, something that he hopes will be renewable, and happened because of Third Point’s status as a solo player.

The deal, he said, involved “a portfolio of businesses that was growing rapidly in the [client] company, and was becoming too big a percentage for the overall book.” But the client “did not want to share the business with someone that could be an overall threat.”

“We are uniquely positioned” to take advantage of those risks, Berger said.

With that in mind, Berger told analysts on the call that Third Point “is not actively looking” for acquisitions or merger partners.

“We’re aware of what is going on,” Berger said. “Our model is with the emphasis on more risk-taking on the investment side and tailoring our underwriting to that. It limits the companies that would make sense for us to acquire.”

Still, he left a small door open to the idea.

At the same time, we’re always interested,” Berger said. “When we get approached when someone is in play we are certainly aware of it.”

A bigger focus, Berger and other Third Point executives noted during the call, is the company’s set-up of formal U.S. operations to accelerate new growth opportunities.

“The purpose of forming the U.S. company is [to have] greater access to the business,” Berger said during the call. “We think having people on the ground actively looking for the types of deals we want will be beneficial.”

In the short term, however, the Bermuda-based company must contend with a money-losing fourth quarter, despite gains in other areas.

The fourth quarter produced $14.7 million in net losses, or a negative $0.14 per diluted common share. In the 2013 fourth quarter, Third Point produced $80.1 million in net income, or $0.75 per common share. Berger, in prepared remarks, blamed the overall results on “challenging investment market conditions.” He said that big gains in developing the company’s reinsurance business should help the company benefit from “future investment portfolio gains.”

Third Point’s combined ratio for the quarter is 100.2, a slight improvement over 106.3 in the 2013 fourth quarter. While a number under 100 would be considered healthier, Berger pointed out that the figure has steadily improved over the last few years.

At the same time, property/casualty reinsurance gross premiums written are booked at $253.8 million for Q4, versus $162.3 million in the 2013 fourth quarter. Net premiums earned landed at $183.6 million, up from $58.5 million over the same period last year.

Net investments losses came in at negative $6.5 million during the 2014 fourth quarter, versus $89.3 million in net investment income in the 2013 fourth quarter. Executives said that losses stemmed from regular volatility, plus the portfolio’s corporate and government credit strategies and a merger arbitrage position. Gains in healthcare and the consumer sectors offset some of this, Third Point said.

Executives also recapped its decision last December to wind down its catastrophe risk management segment, despite solid investment returns. Third Point reiterated that it is leaving the segment “due to challenging market conditions” plus competition with other collateralized reinsurance and insurance-linked securities vehicles.

For the full year, Third Point’s 2014 gross premiums written hit $613.3 million, and net premiums earned are booked at $44.5 million. In 2013, Third Point booked $402 million in gross premiums written and $220.7 million in net premiums earned.

Net income for 2014 came in at $50.4 million, or $0.47 per diluted share, versus $227.3 million, or $2.54 per diluted share in 2013.

Topics Reinsurance