Third Point Reinsurance Ltd., which counts hedge-fund manager Daniel Loeb as a founding shareholder, filed for a U.S. initial public offering to help it expand underwriting and increase investments.
JPMorgan Chase & Co. (JPM), Credit Suisse Group AG (CSGN) and Morgan Stanley (MS) are leading the offering, according to a regulatory filing yesterday from Bermuda-based Third Point Re. The sale amount of $250 million listed in the document is a placeholder used to calculate registration fees and may change.
Loeb, 51, the founder of Third Point LLC, is seeking to raise funds from public markets less than two years after starting the reinsurer. Almost all of the company’s assets are managed by his hedge fund, yesterday’s filing shows. Reinsurers take risks from primary carriers in exchange for a portion of their premium revenue and invest the money.
Funds from the offering will be used to boost “underwriting capacity in order to support the growth of our reinsurance premium writings,” the company said in the filing. “To the extent that this additional surplus is not immediately needed to pay claims or expenses, it will be invested consistent with past practice pursuant to the terms of our investment management agreement with Third Point LLC.”
Funds affiliated with private-equity firm Kelso & Co. own more than 30 percent of Third Point Re’s common stock, while Pine Brook Road Partners LLC, also a private-equity firm, holds 17 percent, the filing shows. Loeb controls a stake of 11 percent. All three of those owners are based in New York.
Existing shareholders plan to sell stock in the offering, the filing shows, without indicating which owners. The company, which is seeking to be listed on the New York Stock Exchange under the ticker TPRE, didn’t say how many shares it would offer or at what price.
Loeb is among money managers including David Einhorn, Steven A. Cohen, and John Paulson who have set up reinsurers in Bermuda and the Cayman Islands to invest in their funds. One benefit is that the new ventures represent a pool of capital that’s less subject to redemption.
There’s also a tax advantage for the managers. By funneling a fund investment through a reinsurer in a tax haven, rather than owning it directly, a manager can reduce taxes on investment gains and postpone paying the bill for years.
Third Point Re provides a backstop to carriers that have sold policies to both individuals and businesses. The reinsurer, whose primary market is the U.S., is seeking to expand by adding sales in Europe, Asia and South America. The company also has begun to write so-called quota-share deals, in which it takes a portion of a client’s premiums in return for shouldering some losses and expenses.
Third Point Re had net income of $99.4 million last year and $74.4 million in the first three months of 2013, driven by investments, the filing shows. Its property-casualty reinsurance segment posted an underwriting loss in both periods, in part because of administrative expenses. Shareholders’ equity was $944.7 million as of March 31.
Third Point Re is led by Chief Executive Officer John Berger, who was 61 as of yesterday and previously the CEO of reinsurance at Alterra Capital Holdings Ltd. He also held positions at a predecessor to Travelers Cos. (TRV) and General Re.
Greenlight Capital Re Ltd. (GLRE), the reinsurer that counts Einhorn as its chairman, has boosted premium sales since going public in May 2007. The company’s shares have climbed almost 40 percent from the IPO price through yesterday’s close.
Loeb, who managed $11.7 billion as of the first quarter, specializes in so-called event-driven investing, buying and selling stocks or bonds of companies going through corporate changes like spinoffs or mergers. He has pushed companies, including Yahoo! Inc. and Sony Corp., to make changes with the goal of driving up share prices.
His main fund has climbed 12.6 percent this year through June 30 and produced an annualized return of 17.8 percent since inception in December 1996, according to reports sent to investors.
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