Former Marsh CEO Duperreault in Group Buying SAC Capital Reinsurance Unit

By Noah Buhayar, Katherine Burton and Zachary Tracer | December 10, 2013

Steven A. Cohen, the billionaire founder of SAC Capital Advisors LP, agreed to sell a reinsurer he formed in 2012 after the hedge fund firm reached a $1.8 billion deal to end a criminal investigation.

A group led by former Marsh & McLennan Cos. Chief Executive Officer Brian Duperreault entered an agreement to purchase the Bermuda-based operation, according to an e-mailed statement Monday from the buyers that didn’t disclose terms.

Duperreault is partnering with Two Sigma Investments LLC, the quantitative hedge fund-firm with about $16 billion in assets, according to the statement.

“They’re a technology company that has really been at the forefront of data analysis,” Duperreault said in a phone interview. “In addition to their ability to manage the money of this company, I look forward to working with them to expand the science of insurance.”

Cohen is among money managers who set up reinsurers in recent years to gain access to additional capital for investing while benefiting from tax advantages outside the United States. His hedge fund agreed to shutter its investment-advisory business as part of an accord to end both its prosecution and a money-laundering lawsuit filed by the Justice Department.

“We are proud of our role in founding SAC Re, but we are now focusing on our transition to a family office,” said Jonathan Gasthalter, a spokesman for SAC Capital Advisors at Sard Verbinnen & Co.

Two Sigma was started in 2001 by David Siegel, a former chief technology officer at Tudor Investment Corp., and John Overdeck, a former managing director at D.E. Shaw & Co. The New York-based firm uses complex mathematical models to decide when to buy and sell securities.

Viable Model

In November, SAC Capital agreed to pay the record fine and shutter its investment advisory business. U.S. Attorney Preet Bharara called SAC “a veritable magnet for market cheaters,” in an insider-trading scheme that dated back to 1999. Cohen will still manage his personal wealth.

Getting out of reinsurance is “largely due to what’s surrounding SAC,” Meyer Shields, an analyst at Keefe Bruyette & Woods, said in an interview before the announcement. “The model is viable.”

The reinsurer raised $500 million in a private placement from founding investors including Cohen and private-equity fund Capital Z Partners, according to a statement in 2012. The agreement with Duperreault was reported earlier today by the Wall Street Journal, which said the price was between $500 million and $1 billion.

Catastrophe Risk

Shareholders’ equity, a measure of assets minus liabilities, was $533 million as of Dec. 31, according to a financial statement posted by regulators in Bermuda, where the company is based. Assets at the time included $513.2 million invested with affiliated SAC funds.

The reinsurer will be named Hamilton Re, according to the statement. Duperreault said the company will focus on catastrophe risks and will seek opportunities in other types of coverage. Reinsurers shoulder risks for primary insurers.

Marsh & McLennan in 2012 announced Duperreault’s retirement after more than four years on the job. By cutting costs, streamlining operations and expanding through regional and international acquisitions, he helped the world’s largest insurance broker rebound from a 2004 bid-rigging scandal. Prior to Marsh & McLennan, he was CEO of insurer Ace Ltd.

 

–With assistance from Dan Reichl in San Francisco. Editors: Dan Kraut, David Scheer

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