Dan Loeb, the famous investor at the head of Third Point LLC is currently working with bankers from Morgan Stanley, Credit Suisse AG and JPMorgan Chase & Co. (NYSE:JPM) to organize a public debut for Third Point Re, the re-insurance arm of the hedge fund. The news was originally reported by Jessica Toonkel and Olivia Oran of Reuters.
Third Point launched its re-insurance arm last year with $750 million in capital. The firm Third Point Re is based in Bermuda, and the Reuters report suggests that it will be spun off in an IPO later in 2013. The IPO is set to raise about $250 million for the company.
Third Point RE is led by John Berger, who was once in charge of the reinsurance arm at Alterra Capital Holding Ltd. The presence of an experienced reinsurance executive at the helm is a prerequisite for a re-insurer that plans to go public. Dan Loeb has secured that for Third Point Re.
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Dan Loeb’s Performance:
On the hedge fund side of business, Dan Loeb has been performing very well so far in 2013. According to the most recent documents available to us, Third Point LLC gained 1.4 percent in April and the company’s assets under management closed in on a record $13 billion.
According to the April letter, Third Point LLC was up by 10.5 percent for 2013 through April. Dan Loeb’s fund was by far one of the top performing hedge funds so far in 2013, despite the difficulties in the industry in that period.
Re-insurers act as insurers for insurance companies. The most obvious parallel to Dan Loeb’s Third Point Re is Greenlight Capital Re Ltd (NYSE:GLRE), a similar re-insurance vehicle that investor David Einhorn set up in 2004, and that had its IPO in 2007. That firm’s shares are just now returning to the levels they went public at after a rocky and volatile ride during the financial crisis.
Hedge funds have begun to see re-insurance businesses as a good bet as natural disasters take their toll on the insurance industry. One time disasters can be a windfall and destroy insurers and re-insurers are a must in the current environment. Hedge funds are happy to collect the premium checks from the insurance industry.
How the market will react to the debut of Loeb’s Third Point Re remains to be seen and people close to the matter appear to be remaining tight lipped. None of the banks involved, nor Third Point itself, were willing to comment on the story.