PGGM / PFZW grows Vermeer Re investment again in Q1

Netherlands-based pension investor PGGM continues to steadily expand the capabilities of its joint-venture and rated underwriting vehicle Vermeer Reinsurance Ltd., subscribing for more shares in the company during the first-quarter of 2022.

Vermeer Reinsurance Ltd. is managed by RenaissanceRe and capitalised by PGGM, on behalf of its client the Dutch pension PFZW.

The pension investor has been building up Vermeer Re’s capabilities and balance-sheet, with incremental small investments in recent quarters.

During 2021, Stichting Pensioenfonds Zorg en Welzijn (PFZW), which is a healthcare and social welfare sector pension fund in the Netherlands, ultimately the end-investor in Vermeer Re, subscribed for another $50 million of participating, non-voting common shares in the reinsurer.

That took Vermeer Re’s balance-sheet assets to $1.3 billion, adding to the $45 million in shares subscribed for in 2020.

Ultimately, these incremental additions of capital show that PFZW, and its pension investment manager PGGM, have an appetite to continue expanding Vermeer, to match market opportunities, especially in the currently firming reinsurance environment.

Vermeer Reinsurance Ltd. (Vermeer Re) was launched in time for the January 2019 reinsurance renewals, as RenaissanceRe (RenRe) teamed up with long-time insurance-linked securities (ILS) institutional investor PGGM to launch the vehicle, which became the first managed and ‘A’ rated reinsurance vehicle for a single pension fund investor.

Vermeer Re started operations with an initial capitalisation of $600 million, invested by PGGM on behalf of the Dutch healthcare and social welfare sector’s PFZW pension.

PFZW retains all of the economic interests in Vermeer Reinsurance Ltd., meaning the increases in capital allocated have helped to grow the reinsurance vehicle, so it can write more risk each year and capitalise on improving reinsurance market conditions.

PFZW, via PGGM, added $355 million more in capital to Vermeer Re in 2019, which alongside retained earnings took Vermeer Re’s balance-sheet to roughly $1 billion by the start of 2020.

Then, the $45 million was added in 2020, followed by the $50 million of capital invested in 2021, which with retained earnings too the balance-sheet to $1.3 billion at the end of last year.

In the first-quarter of 2022, PGGM invested another $30 million through a further subscription of $30 million of participating, non-voting common shares of Vermeer.

That now takes the investors redeemable noncontrolling interest in Vermeer to $1.25 billion at March 31st 2022, while the balance-sheet remains at roughly $1.3 billion.

Impressively though, the income attributable to redeemable noncontrolling interests in Vermeer Re, which implies the investor, amounted to $18.7 million in the first-quarter, all of which was rolled back into the structure.

That’s much higher than the $6.5 million of income earned in the first-quarter a year earlier.

Each of these additional share purchases inject more capital into Vermeer, which given its A rated nature translates into even more in terms of actual underwriting capacity firepower, thanks to the leverage available within the structure.

By also rolling earnings back into Vermeer and retaining that capital too, the structure if steadily growing and becoming a more meaningful reinsurance player, delivering benefits for the investors and also RenaissanceRe, which earns fees on the arrangement.