Wednesday, August 14, 2013

Dan Loeb's Third Point Reinsurance IPO (TPRE)

From Renaissance Capital via NASDAQ:
Third Point Reinsurance ( TPRE ), a Bermuda-based specialty property and casualty reinsurer, plans to raise $300 million by offering 22.2 million shares at a price range of $12.50 to $14.50. At the midpoint of the proposed range, Third Point Reinsurance would command a market value of $1.4 billion. Third Point Reinsurance, which was founded in 2011, booked $397 million in sales over the last 12 months. The Pembroke, Bermuda-based company plans to list on the NYSE under the symbol TPRE. J.P. Morgan, Credit Suisse, Morgan Stanley and BofA Merrill Lynch are the joint bookrunners on the deal. 
From the Brooklyn Investor:
So Third Point Reinsurance Ltd. (TPRE) filed their S-1 recently.  This is basically part of a move by hedge funds to seek 'permanent capital', like Einhorn's Greenlight Re (GLRE).

The insurance business is only ramping up now so there isn't much to chew on in terms of analysis.  Like GLRE, the key is going to be underwriting profits (or at least break-even) and investment returns.  If TPRE can generate float at a low cost and Third Point can generate some decent returns, this can be a great investment.

Third Point Investment Returns
Of course, the big question is how the insurance operation is going to turn out.  The investments will be managed on the same basis as the hedge fund and the historical returns are pretty good.  Third Point LLC has AUM of $13.2 billion (as of June 2013) and has returned 21.0%/year from June 1995 through December 2012.

The five and ten year returns (through December 2012) were:

Five year:    +9.7%/year
Ten year:   +17.7%/year

Third Point will own 8.5% of TPRE after the offering.  Kelso and Pine Bank will own 26.5% and 13.4% respectively....MORE
HT: Abnormal Returns