Third Point Re Reports 2015 Net Loss of $87.4M on Poor Investment Returns

By and | February 26, 2016

Third Point Reinsurance Ltd., which counts on Dan Loeb to oversee investments, swung to a profit in the fourth-quarter as the hedge fund manager’s results improved before a January slump.

Net income was $42.2 million, or 39 cents a share, compared with a loss of $14.7 million, or 14 cents, a year earlier, the Bermuda-based company said Thursday in a statement after the market closed. That missed the 47-cent estimate of six analysts surveyed by Bloomberg.

Third Point Re has dropped 15 percent since Dec. 31 in New York trading, adding to declines from 2014 and 2015. Some of Loeb’s top-performing holdings in the fourth quarter have slumped in the early weeks of 2016, including Allergan Plc, Amgen Inc. and Dow Chemical Co. Loeb’s hedge fund firm, Third Point LLC, said this month that it quadrupled exposure to single-name equity shorts in the past year.

“Although we’re disappointed with the results for the year, we’ve managed to avoid significant investment losses experienced by many others and remain committed to Third Point LLC given their long-term track record and their ability to navigate challenging investment conditions,’ Chief Executive Officer John Berger said in the statement.

Investments generated $61.6 million in the fourth quarter of 2015, compared with a loss of $6.5 million a year earlier. The improvement was largely due to gains in the long-short equity portfolio, including bets tied to health care, industrials and commodities. The portfolio that Loeb’s hedge fund firm oversees for the reinsurer dropped 3.3 percent in January, according to a table on the company’s website.

Underwriting Loss

The fourth-quarter underwriting loss for its insurance operations widened to $9.2 million from $500,000 in the last three months of 2014. Premium revenue tumbled about 27 percent to $134.4 million. The company opened an office in Short Hills, New Jersey, last year in an effort to help build sales in the U.S.

Reinsurers offer coverage for primary insurers. The business helps build investment portfolios for hedge fund managers, a strategy that can backfire in volatile markets. Also, competition for insurance contracts has driven down underwriting margins across the industry.

Money managers including David Einhorn have also struggled to generate profits in reinsurance ventures. Einhorn’s Greenlight Capital Re Ltd. posted four straight quarters of losses, while John Paulson has shuttered a venture that he started in 2012.

For the full year, Third Point Re’s net loss was $87.4 million, fueled by poor investment returns in the three months ended Sept. 30. That compares with net income of $50.4 million in 2014. Greenlight Re said Monday that its 2015 net loss was $326.4 million.

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