Third Point Re: ‘It’s Tough Out There’ with Ongoing Influx of Capital Market Capacity

By | September 11, 2015

Executives at Dan Loeb’s reinsurer, which is headed for its second-straight annual decline in New York trading, told investors not to count on a quick rebound in the industry as competition intensifies.

“It’s tough out there,” Robert Bredahl, Third Point Reinsurance Ltd.’s chief operating officer, said at a conference Thursday in New York. “The market has been soft and we think it’s become noticeably softer. I think a lot of it is the influx of capital-market capacity.”

Hedge funds, pensions and wealthy individuals have entered reinsurance seeking weather-related investments that are uncorrelated to financial markets. That’s pushed down prices and spurred traditional reinsurers to look beyond the property-catastrophe market into niches where Bermuda-based Third Point Re had sought to distinguish itself.

“We’re not hopeful of any immediate change,” Bredahl said. “In fact, if there’s a big loss and pricing begins to spike, we think that spike is going to be cut off with additional capital coming in.”

Billionaire Warren Buffett said in May that the industry has peaked. He has pushed his Berkshire Hathaway Inc. in recent years into utilities and industrial operations, reducing the company’s reliance on reinsurance.

Third Point Re shares traded for $13.97 at 9:45 a.m. in New York on Thursday, unchanged from Wednesday’s close and down 3.6 percent from Dec. 31. The company slumped 22 percent in 2014. David Einhorn’s Greenlight Capital Re Ltd., based in Cayman Islands, has tumbled 26 percent this year, partially due to poor investing performance.

The reinsurers allow public shareholders to gain access to Einhorn and Loeb’s investing strategies. The ventures also give the money managers access to lower tax rates and permanent capital to reinvest.

Reinsurers take on risks from primary carriers. Loeb’s company has entered contracts tied to automobiles, executive liabilities and Florida homes while shunning coverage of the largest natural disasters. Third Point Re sold shares in a 2013 initial public offering for $12.50 a piece.

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