LGT ILS Partners’ reinsurer Lumen Re reports higher revenues for 2022

Lumen Re, the rated reinsurance company of LGT ILS Partners, the specialist dedicated insurance-linked securities (ILS) investments unit of the private bank and asset manager LGT Capital Partners, has reported higher net premiums, revenues and profits for 2022, although gross premiums written declined in the year.

The results reflect a more profitable period for the Class 3A rated Bermuda based reinsurer, which provides a balance-sheet platform for the LGT ILS Partners insurance-linked securities (ILS) investment team, through which the majority of its reinsurance business is underwritten.

Having reported its annual results, Lumen Re reveals having underwritten 32% fewer gross premiums during the year, but the amount of reinsurance premiums ceded fell faster by 41%, resulting in an increase in the net premiums written and earned by the reinsurer.

Lumen Re reported $51.1 million of net premiums written in 2022, up 29% from the prior year.

That helped Lumen Re report revenues of almost $57.8 million for last year, up on the almost $51.6 million reported for 2021.

With expenses down, thanks to losses and loss adjustment expenses falling by 42% year-on-year, Lumen Re reported a net income for 2022 of almost $2 million, far better than the $32.3 million net loss reported in the more loss impacted 2021.

This despite Lumen Re’s evident exposure to Florida in a year when major hurricane Ian made landfall, as an ILS backed underwriting vehicle of collateralized peak peril reinsurance risks, and the company still delivering a profit.

Lumen Re had enacted a de-risking and re-underwriting process, to improve contract terms and raise attachments on the reinsurance contracts it underwrote, so as to prevent outsized losses and this appears to be having a positive effect on the results.

AM Best recently highlighted that Lumen Re’s loss ratio reduced significantly.

It’s also worth remembering that Lumen Re took onboard an external equity investor in 2022 as well, with US based investor The Kresge Foundation becoming an external equity investor in the reinsurance company.

In the Lumen Re results for 2022, evident is an issuance of just over 84.6 million non-voting shares that raised $84.6 million in equity capital, which after some buy-backs saw Lumen Re’s share capital ending that year at over $353 million, up on $310 million a year earlier.

Thanks to retained earnings from the more profitable underwriting year, Lumen Re’s total shareholder equity reached almost $364.6 million at the end of 2022, up from $317.6 million a year earlier.

Lumen Re remains at the heart of the LGT ILS Partners investment operations, providing an efficient way to access risk, through its own rated balance-sheet vehicle and with evidence the portfolio de-risking is having positive effects, we would expect that trend to continue into 2023, given the harder reinsurance market and more restrictive coverage terms that go with it.