Third Point Reinsurance Ltd., which counts on hedge fund manager Dan Loeb to oversee its portfolio, fell below the price of its 2013 initial public offering after investments faltered.
The reinsurer tumbled 2.3 percent to $12.49 at 4:04 p.m. in New York, erasing gains posted since the Bermuda-based company went public in August 2013 at $12.50 a share. That compares with a gain of about 18 percent in the Standard & Poor’s 500 Index in that period.
The investment portfolio dropped 1.4 percent in 2015, including losses in November and December. Dow Chemical Co. and Yum! Brands Inc., which were among the hedge fund’s top holdings as of Sept. 30, have slumped in early 2016. Meyer Shields, an analyst at Keefe, Bruyette & Woods, on Jan 3. cut his estimate for fourth-quarter operating profit to 47 cents a share from 91 cents.
“It was 100 percent about the investments,” Shields said by phone about his decision to lower the prediction. The analyst said that Third Point Re’s insurance underwriting team is “phenomenal.”
Still, the company’s insurance contracts have also generated losses in recent periods, pressured by increased competition from hedge funds and other investors pushing into the business. Chief Executive Officer John Berger said during an August conference call that he expects underwriting losses “probably for the foreseeable future.”
The reinsurer provides coverage for primary insurance companies, collecting premiums for Loeb to invest and also providing a tax benefit for the money manager. The Bermuda-based company traded for $18.53 a share at the end of 2013, then declined the next two years.
Hedge fund manager David Einhorn’s Greenlight Capital Re Ltd., based in the Cayman Islands, fell below its IPO price last month. It’s now trading at $18.59, compared with its $19 a share offering in 2007.
–With assistance from Simone Foxman and Lily Katz
- Einhorn’s Slump Erases Greenlight Capital Re Gains from 2007 IPO
- Third Point Re: ‘It’s Tough Out There’ with Ongoing Influx of Capital Market Capacity
- Third Point Re CEO: Reinsurance Not as Easy to Enter as Some People Think
- Hedge Fund-Backed Bermuda Ventures Could Be at Risk From IRS
- Third Point Re Says It’s a Real Insurer as IRS Weighs Tightening Tax Rules
- Hedge Funds Need to Be Wary of Push Into Catastrophe Risks: XL Group
- Loeb’s Third Point Re Set for IPO as Einhorn’s Truck Bet Shows Insurers’ Risk