TPRE - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings, and welcome to the Third Point Reinsurance Third Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Chris Coleman, Chief Financial Officer. ahead. go Please

Chris Coleman

statements which will Welcome as President Call certain operator. results the to you you night, today cause Third Reinsurance from will begin, differ those will uncertainties. like the financial Point forward-looking issued www.thirdpointre.bm. would public earnings our Thank current today's differ I CEO. may Leading that other the including actual to factors many Actual results But forward-looking find refer Third to that remarks Earnings Company's XXXX filings, based expectations. call in a supplement, and release for Company's on earnings Rob the press Last remind available Quarter Limited XX-K, materially from of the Factors these materially could release on an website, statements. contain Bredahl, the Please you, risks where projected be third press the is and quarter of of and to we we XXXX. result and before Risk

as or the Forward-looking in only or of them and future obligation to of assumes speak date update revise made they light information, new the otherwise. statements Company events are no

to call earnings certain the will I over most In of in a measures At more management comparable reconciliation the the A presented non-GAAP addition, complete release. Bredahl. GAAP is Company's Company's refer the to management believes Rob? this will to turn these of understanding which measure measures, allow for press financial Rob time, results.

Rob Bredahl

Chris. you, Thank

we the impact briefly to quarter. comment investment Before the we discuss wanted the I account that restructuring during operating of completed results, on

investment Fund now sheet during restructure earnings separately The several are agreements new a transition mentioned under to completed in into an reporting our entered call, structure. and our we September, we this we from quarter’s structure. account managed a was during to investment last account As balance

the under broadly company of into investment plan structure. provisions remaining to Fund exposure stated new with liquidity quarter, last manage guidelines, similar investment level the a rates we As we similar redemption and

we to to at As change, expect PFIC level applied this threshold is at to and company this the a test exceed where result the asset of continue total the XX% Bermuda threshold year-end. exceed operating reserves

we financial plans Now, to move market on our discuss underwriting will and results, conditions.

generated underwriting more During are a in loss small of small quarter, challenging. discuss the loss. will driven a we market Reinsurance Chris net by shortly. combined conditions million, with loss financial investment our $XX results detail

in loss end back seeing Although and we in off. early those the on momentum XXXX, seem in of XXXX to at taper improvements were XXXX of the has some pricing of modest significant improvement events late the

are change. As two a by reinsurer, affected layers we pricing of

some improvement terms see and ceding being on share pace as to across to and flat. reinsurance pricing we with keep loss improvement net quota But contracts. underlying most commissions in seen in to trends continue about recent lines primary to say, us We some view is this difficult deals we’ve therefore pricing whether namely enough cost is

continue to we the I’ll shift As and underwriting we’ve our position appetite quarters, last gradually. couple to the talked company for of about gradually stress

to an sense some of this inception focus below company low-cost of add we which manage XXX. efficiency. optimal which a good to and level underwriting minimize of our to flowed results, but While and business environment, financial higher higher business, flow will primary our property albeit the it several From Investment think to down margin, pricing that our of the the to the driver the the We’ve expression our portfolio modest an for believe our portfolio. should generate underwriting underwriting – to risk CAT was it underwriting an improving allows reasons, capital to include remain not makes strategy amount margin of higher sense appetite great is optimism an company returns makes for gradually of with built reinsurance to key volatility. to bring ratio shift combined we now now exposure stable including investment of it us very

to We with are than than peers. volatility very can on we’ll year PMLs have higher correlation seventh however, completing limits, and since underwriting that our risk existing because portfolio to size use of much doubled earn more capital basis. and our of risk into Please margin we total little low diversified very our areas focus were We of with operation, that still lower areas most note inception risk and business. little we margin a our company a remain in our portfolio from starting capital-efficient on expect reinsurance

added XXXX, relationships, very with us underwriters During we’ve to well senior support two strong experienced as market with as help effort. this staff

hard improve our carefully to we addition to working managing in Now, underwriting our capital. results, are

of million open million $XX in common for we the $XX.XX our During quarter, per or the shares market approximately X.X share. repurchased

to the to Daniel? now appropriate our over who We investment I believe shares Loeb, back our hand call below will Daniel continue book an buying capital. results. of is that discuss use will

Daniel Loeb

for QX, offset of strategy, Point Semiconductors. strategy on In quarter good S&P Third NXP LLC X.X%. the Point industrials fees by in The by and and year-to-date Rob X.X% merger strength year. on the XXX losses and Through portfolio and by losing sectors in in equity partially gains third investments of bet arbitrage represents September, a was In by periods bringing Third equities returned credit returns XXXX other and account in financial The by X.X% TMT consumer. quarter, driven managed up morning. LLC. Reinsurance assets returned exposure Point Third XX.X% The the and portfolios Reinsurance same Investment overshadowed were for a in our our Point was losses Third down largely from average respectively. X% the our Thanks, for the expenses, net approximately the comparison, X.X% managed the portfolio a to third of was positive XX%

robust on during exposure to team QX. our credit the in limited exposure third class in quarter. generated Investments average Our returned results corporate weighted asset on sovereign and the credit X.X%

the past was time X.X%. The markets raise expected was fear portfolio. equity The the APS would for X.X% in when year-to-date on for of by month run Finally, faster QX. structured XX.X% the year, than the year the challenging ROA the HFN return the for added assets Fed a primarily at credit to to Investments outpacing quarter, of market faltering. U.S. in has time our at a a Fund return Index been that the its for outside had bringing impressive rates sell-off an growth and Mortgage Hedge portfolio triggered

market was While move of by over over sharp can and to cyclical. a short-term, volatility interest tend struggle. of a for long risk We we believe rates do especially we rate to moves in equities strength potentially to through escalating recession of for year-end. the periods remain proved combination not corporate concerns are This the the trade and the fear and together time, toxic expect equities elevated war. earnings The investors’ at exacerbated cause but in near-term,

studying in views. stocks we risk that and to inform evolution understand market increasingly in when it’s in management in to been our and becoming single portfolio taken considering in changes incorporating We’ve have October, As portfolio individual February, changes both the structure construction. better again place the security essential investing to saw and analysis

or shifts strategies fundamental quarters. investments become short the of investing to our of process book of credit sector take near-term, event-driven expect increasingly help among we we other late points a we approach, from into continues identify our catalysts and rotation. new in traditional these believe or integration shift position through tools data-driven combined better in the think fewer favor, opportunities. these looking of In As from to cycle move of should us large well to to on perform will factors our our coming to impending in players to With investment tactical out with these prices that capitalize pivotal new several tools inflection the us constructive well advantage equities

share Third throughout has to it’s some news, its Finally, company-specific implement program Reinsurance the Point repurchase year. continued

XX% sell of change during shares some or company one conviction I its recent the my to TP and sale prospects my quarter shareholders. RE had a The was below my third in due the shares. to remain I result, just in largest in of not a reduce ownership to to of As RE’s the company’s TP

the over Chris to call our to to turn I’d results. like continue financial Now,

Chris Coleman

Daniel. Thanks,

quarter Our value third diluted from book per XX, was the share $X.XX of was June $XX.XX, end decrease XXXX. of a the at which

reflects $X.XX loss the during diluted the in million, to book Although quarter offset quarter, of we repurchases or book the The $X which was the diluted discussed share investment net quarter discount net to loss at which share, million Daniel our share. the impact a for detail. to value our per helped returns per a for value $XX incurred

million of included year the and compared loss for to insignificant the prior million, our We a $X estimate $XXX third from by quarter written which The for the losses third million $XX was of was premiums XXX.X%, nine premium QX We to decreased Furthermore, did Michael was current million third underwriting million year quarter renew year the catastrophe in related to we five in gross a the other premiums losses less quarter no generated million current $XXX prior quarter. third X% that the period. on prior $XX CAT from $X gross million recorded premium quarter. third that written in the with recorded or points lower period losses year quarter combined due or Our prior and to prior the $XXX Gross events related in or Hurricane for ratio currently to-date. net catastrophe million the year's not in written contract $X combined XXX.X% primarily year’s period. period. contracts in comparable we The one months. than year to and renewed ratio the decrease

to-date, not through we CAT of share exposure property have contracts. have written XOL amount home small a contracts and we CAT quota property account residual Although

a XXXX, For the the net underwriting costs. net loss September impact related recorded million of in related to acquisition of XX, results of $X changes prior estimates year’s improvement ended quarter reserves, we in

general compared prior million Rob the XXXX to our to earlier, third beginning gradually quarter due for million, year a we expenses of Total the mix business improve ratio XXXX. for As administrative $XX and primarily mentioned $XX in to period. were in expect shift combined

of with the was net for investment comprised contracts and deposit the were payroll-related For by restructuring. liability offset and months million other in lower administrative Other primarily to is lower year compensation certain of contracts. costs, questions. of incentive primarily reinsurance the stock current The now were period. recognition conjunction year margin to The due income expense features period lower accounted economics we'll captures legal The plan accruals formula contracts. were time is based increase We in incurred interest performance in to the derived fees for contracts due our accounting deposit financial on crediting and from annual compensation was resulting expense reinsurance a accounted of $XX metrics. payroll-related Operator? certain and of professional due The certain million, in $XX revised income your underlying fees. call and prior due on professional expenses costs which estimates in these higher you expense open general commutation nine and period, compared for the contracts to the partially the assumptions deposit decreases and to reinsurance other fees thank

Operator

with Phillips with proceed you. Thank Instructions] Michael Stanley. Morgan first [Operator from question. Please Our is your question

Michael Phillips

Thank you, everybody. and good morning

that I questions talking talk on of details the about through Loeb. your of for kind think that? kind talk limits first CAT, going probably picking to a property of you of about you guess, about my layers little can I are and most are

Daniel Loeb

Sure.

small kind of CAT writing are We a book.

the We unlike derive companies, a around a the with better focus the priced trying $XX within of CAT most diversification not projecting peak and million zones. zones, we are on other peak lot book are to

have – any good and diversification risk that given the we what amount we don’t CAT diversification. Just investment given a have we other of side, do on

has think the terms measurements risk of we of reinsurance or company CAT our a about the to of average XX% limited XXX of year PML, other PMLs In risk, surplus.

to going are We below half of be amount. that

Michael Phillips

and the you. guess, an gradual ratio to modest things get Thank comments, this like you the sub-XXX. as goal good. couple Okay, if in about of amounts order your I combined down example of comments to and commendable

it doing gradually. are You

Daniel Loeb

Right.

Michael Phillips

flat. with, that pricing is – so, take other you that if thought of is But about kind and the pricing

XXX how aggressive to So like quickly target a shifts. - it an that doing below seems these gradual get

how So, from more get a just on thoughts XXX? you there

Daniel Loeb

We earned have $XXX million of premium.

of million XXX will $XX it’s this and We so be additional at year profit.

example, XX% for an you expected ratio, if outcome just a writing below example. CAT book, are if so combined you writing are – And as that million the on $XX is

down all I that to think below it difficult bring So, don’t it’s XXX.

little to XXXX. don’t considering But, for bring big out our longer. hoping stick going without a need to. are are it might below take carefully necks in XXX we don’t a We It need we bit take to, to bite risk it down not sure, and we of and

Michael Phillips

Okay. this I could in a lines? on we professional mean, maybe comments That question comp little specific of workers get if and from makes guess shying Could kind I either – also same your maybe completely or that away market, reinsurance we liability for – professional sense. appetite and maybe both long the on

Daniel Loeb

have We – performing the it’s So, room. have think, looking – we a well. older And I We that reserves, am which are in do have, today. lot don’t reserves I heavily business two very workers concentrated those are and around California. of exposure some comp remaining,

on The the to watching and be add these been like It trends new employment it’s have are careful market our they tight we other we carefully. so looks and very deals. the good. it And exposure on renewal limited books, way to are with going loss heading are

Michael Phillips

the… Was

Daniel Loeb

you And mentioned professional liability. then,

Michael Phillips

Yes.

Daniel Loeb

professional limited liability, we liability. exposure So, have professional to

of couple contracts. a through it have quota We broader share

so, And there. underexposed pricing in not great are way, is but again, trending we yes,

Michael Phillips

It’s prior fact very or from was the very, on Okay, was amount, well. what Thanks. it mentioned but is that that small from? just comp that you development, the

Daniel Loeb

as just we’ve many about wasn’t deal, our was every it reserving process in particular. think talked - was anything No, I every it past, – times looks at the quarter. in It really

And of normal course the so, it’s just in reserving.

You a the have in ups was and and a couple of downs favorable a period. few that few effect development net million the of

Chris Coleman

Yes, meaningful. up movement, there where nothing there is and down amounts, but and probably small XX is contracts

Daniel Loeb

No major trend.

Michael Phillips

some you in on, you Okay, trying get guess, give how talked to also about last on quarters and of business if targeting one, talking you’ve lines what details specific some me And great. lines prior gone? more into I folks maybe little the that? that’s specialty about your of details are

Daniel Loeb

doing and we on taking increase as margin Yes, we risk business phases. higher in focus the are

we CAT which talked So, writing is, phase the one book about.

until We covers. writing up pro a this are also some been be of or reserve whether almost year, rata, share excess has business business, it our XXX% quota

an a we excess ratio. premium, contract, So also moving less instead which a expected much covers. aggregate means to layer loss, stop are we but a it’s And share low lower of quota might write loss

really that we And this business so There that’s the for of major year. lines the is like that have namely, changes or business. we additions written, couple mortgage

business. rapidly and then, are the hitting had exposure and sort that earn long is in And time portfolio. And warranties mortgage in, historically. peak we’ve Chris, the the in earn are that’s growing We of maintaining takes reps heat business to we’ve and business low and we comes we probably same a written that a of like the across as

plan warranties coverages. increase and our we to indemnity reps So portfolio on

Michael Phillips

Okay, I very your it. you much appreciate great. Thank thoughts. for

Operator

from with Please with Bank America. Cohen proceed is Jay question. your question next of Our

Jay Cohen

– Thanks. of relative going about for you I much. forward? but the in? Hi I some to new them, that can’t Should not for past to five forecasts? deals And – add you reasonable – expect to large come I we quarters baseline I are premium Or our which you’ll last guys. just good as volume models starting these these points know, years. think been forecast guess, our of low wanted do are quite but would CAT, is and see we couple have ask the know

Daniel Loeb

a the large very and first quarter. we increase Jay, had in Yes,

year of of million. right number years dates last renewal year runrate have $XXX that around deals two per been where the has shifted we in shifted. the of we it we in next because premium, a see And have year. also years couple and for our recognized to premium annum one to The none the is be and been it multiple next hard premium, have maybe expect numbers, year. deals so, and And been It’s our

our to some premium and easier at been consistent now. so, earned our premium earned think has for And it’s time relatively look I

Jay Cohen

that makes premiums, CAT And of to loss guess, the now should we in I if or access expect seasonality sense. you writing could Yes, change start some covers?

Daniel Loeb

And how the going decided we two hurricane the premium. options straight-line other We season. haven’t the yet CAT are the earn through way do are to to to recognition and premium it

yet. And we made haven’t determination that so

let do. you we will We know when

Jay Cohen

Thanks. great. Okay,

Operator

Meyer from Please KBW. question Our Shields question. next Instructions] proceed with with [Operator is your

Meyer Shields

there Great, associated the accounts quantifying thank investment the or of Good you. fees way quickly, Chris restructure? morning. professional is Rob, with Really any

Rob Bredahl

was incurred reconfigured. quarter to about the there cost get work of the that $X related to yes, legal roughly Sure, just and million accounting in all

was one-time this that So hit a obviously quarter.

So, this small, that. relatively quarter for in amount a but tiny

Meyer Shields

trying I of premium And of it, being to is CAT? am underwriting the are have the call aside things, Do the $XX but any anticipated running piece annual couple Okay. that contract impacts you together to a a and setting itself in possibility at, sort expansion dropped. million on $XXX there books million

Chris Coleman

it’s had No, take individual to new that quarter. that, non-renewal hard $XX first I contract in one across. just million because the and mean, mean, and I contract, try also a we offsetting extrapolate

as and the we year. million premium add and out runrate kind is of Rob a still business reasonable pointed new subtract normal per of $XXX sort to non-renewal you So, that about business, of think continue

Rob Bredahl

any see in the major don’t level. premium changes We earned

Meyer Shields

Okay.

are Final recent of we’ve discussion things? was trends your that reflecting I question about heard terms hoping an a in can cost kinds I own of you helpful. for inflecting update – lot and guess, that’s of of quarters loss loss talk Now you how some in in

Rob Bredahl

pricing there you for a is two reinsurance as know, layers company. of Meyer, Sure.

rate other are primary calls, underlying very cost calls loss is and by this of number to in pricing play primary companies calls the pushing controlled in hard. earnings company – interested earnings also pure adversely reinsurance primary week, I trends but was the optimism. a are company. lot hear that’s We are company of moving the earnings the a increases lines, And primary There

And so cost they loss pace seem or to of are think ahead those trends. they keeping getting

We our they quota we behind. terms. and reflect where are on example lower in reinsurance uncertainty our sure We for falling or contracts. that think this where ceding share commission are We not

are it trends so, and very And we on companies with The generalize. But line-by-line. are primary what are doing. focused tough to different the starts

Meyer Shields

you very much. Okay. Thank

Operator

our and for session. like answer end would reached turn to We have question management back call the remarks. I of to over the closing

Rob Bredahl

Thanks, look everybody We talking during our forward for to you quarterly joining to call. us. next

us. If with you have please in time, the mean in touch any questions get

Operator

Thank conference. concludes you. This today's

You your for thank this time at may lines you disconnect and participation. your

SiriusPoint (SPNT) 7 Nov 182018 Q3 Earnings call transcript