Filed Pursuant to Rule 424(b)(3)
Registration Number 333-134628
PROSPECTUS SUPPLEMENT NO. 3
(To the Prospectus dated August 6, 2007)
CastlePoint
26,646,589 Common Shares
CastlePoint Holdings, Ltd.
This prospectus supplement No. 3 supplements the prospectus dated
August 6, 2007 relating to the sale of up to 26,646,589 of the common shares of
CastlePoint Holdings, Ltd. by the selling shareholders named in the prospectus,
as supplemented by supplement No. 1 dated August 14, 2007 and supplement No. 2
dated October 1, 2007 (as so supplemented, the "prospectus"). The selling
shareholders will receive all proceeds from the sale of the common shares, and
therefore we will not receive any of the proceeds from their sale of our shares.
This prospectus supplement should be read in conjunction with the
prospectus, which is to be delivered with this prospectus supplement No. 3. This
prospectus supplement is not complete without, and may not be delivered or
utilized except in connection with, the prospectus with respect to the
securities described above. The information contained herein and attached hereto
supplements and supersedes, in part, the information contained in the
prospectus. This prospectus supplement is qualified by reference to the
prospectus except to the extent that the information in this prospectus
supplement supersedes the information contained in the prospectus.
INVESTING IN OUR SHARES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 18 OF THE PROSPECTUS TO READ ABOUT THE RISKS YOU SHOULD CONSIDER BEFORE
BUYING OUR SHARES.
This prospectus supplement is filed for the purpose of including the
information contained in our current report on Form 8-K, which was filed with
the Securities and Exchange Commission on November 7, 2007.
NONE OF THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION, THE REGISTRAR OF COMPANIES IN BERMUDA OR THE BERMUDA MONETARY
AUTHORITY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus supplement No. 3 is November 7, 2007
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported) November 7, 2007
--------------------------------------------
CastlePoint Holdings, Ltd.
--------------------------------------------------------------------------------
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(Exact name of registrant as specified in its charter)
Bermuda 001-33374 n/a
--------------------------------------------------------------------------------
(State or other Commission File (IRS Employer
jurisdiction of Number: Identification No.)
incorporation)
Victoria Hall, 11 Victoria Street, Hamilton, Bermuda HM 11
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (441) 294-6409
------------------------------------------
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.133-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On November 7, 2007, CastlePoint Holdings, Ltd. issued a press release reporting
its financial results for the third quarter ended September 30, 2007. A copy of
this press release is furnished hereunder as Exhibit 99.1 to this report and
incorporated herein.
The information provided in this Form 8-K, pursuant to "Item 2.02, Results of
Operations and Financial Condition", including the press release included as
exhibit 99.1, is being furnished and shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"),or
otherwise subject to the liabilities of that section, nor shall such information
be deemed incorporated by reference in any filing under the Securities Act of
1933, or the Exchange Act, except as shall be expressly set forth by specific
reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1: Press release titled "CastlePoint Reports Third Quarter 2007
Results" dated November 7, 2007.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized
CastlePoint Holdings, Ltd.
Date: November 7, 2007
By: /s/ Joel S. Weiner
------------------
Joel S. Weiner
Senior Vice-President and Chief Financial Officer
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EXHIBIT INDEX
99.1 Press release dated November 7, 2007
Exhibit 99.1
CastlePoint Reports Third Quarter 2007 Results
HAMILTON, Bermuda--(BUSINESS WIRE)--Nov. 7, 2007--CastlePoint
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Holdings, Ltd. (NASDAQ: CPHL) today reported net income of $10.5
million and diluted earnings per share of $0.27 for the third quarter
of 2007. Net income and diluted earnings per share excluding realized
and unrealized gains (losses) were $11.5 million and $0.30 per share,
respectively.
Key Highlights:
-- For the first nine months of 2007, CastlePoint reported net
income of $28.1 million and diluted earnings per share of
$0.78. Excluding realized and unrealized gains (losses),
reported net income was $29.1 million and $0.81 per diluted
share, respectively.
-- Net premiums written for the quarter were $90.6 million,
increased 107% from $43.7 for the same period in the prior
year.
-- Net combined ratio for the total of our reinsurance and
insurance segments was 89.5% for the quarter.
GAAP Financial Summary:
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
-------- --------- -------- ---------
($ in thousands, except per share
amounts)
Net premiums written $ 90,574 $ 43,664 $ 242,981 $ 116,406
Net premiums earned $ 65,610 $ 27,003 $ 167,146 $ 47,390
Net investment income:
Other net investment income $ 8,446 $ 3,791 $ 22,325 $ 6,697
Realized and unrealized
gains/(losses)(1) $ (908) $ 0 $ (908) $ 0
Total Net investment income $ 7,538 $ 3,791 $ 21,417 $ 6,697
Net realized (losses) gains on
investments $ (79) $ 7 $ (98) $ 10
Total revenues $ 74,736 $ 31,655 $ 192,367 $ 55,489
Net income $ 10,541 $ 5,385 $ 28,130 $ 3,773
EPS - Diluted $ 0.27 $ 0.18 $ 0.78 $ 0.22
Net income excl. realized and
unrealized gains (losses) (2) $ 11,528 $ 5,378 $ 29,136 $ 3,763
EPS - Diluted excl. realized &
unrealized gains (losses) (2) $ 0.30 $ 0.18 $ 0.81 $ 0.22
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(1) Realized and unrealized gains and losses from our investment in a
limited partnership were recorded as a component of net investment
income
(2) Excluding realized and unrealized gains (losses) on all
investments including limited partnerships.
Michael H. Lee, Chief Executive Officer of CastlePoint Holdings,
Ltd. stated "Despite the softening market conditions in the property
and casualty industry, we continue to see very strong demand for our
products at attractive margins. Our approach of providing paper,
capital and insurance services to solve our clients' problems is
resonating strongly with our clients. Based upon the agreements that
we have entered into thus far and the strong pipeline of business
opportunities that we are seeing, we anticipate strong premium growth
and earnings in the fourth quarter and in 2008."
Net earned premiums increased 143.0% to $65.6 million in the third
quarter of 2007 as compared to $27.0 million for the same period in
2006. Net premiums earned represented 72.4% of net premiums written
for the three months ended September 30, 2007 compared to 61.8% for
the same period in 2006.
Net investment income increased by 98.8% to $7.5 million for the
three months ended September 30, 2007, compared to $3.8 million for
the same period in 2006. Net investment income included a loss in a
limited partnership of $0.7 million in the quarter, including $0.2
million in investment income, $0.4 million in realized gains, and $1.3
million in unrealized losses. Excluding the realized and unrealized
investment gains (losses), the overall yield on our investment
portfolio was 5.2% for the three months ended September 30, 2007. The
overall investment portfolio is AA+ rated, and the total exposure to
subprime mortgages is approximately $11.0 million, $9.0 million of
which is rated A or above, and only $0.1 million is rated below
investment grade and relates to mortgages issued in 2005 and prior.
CastlePoint Re, our Bermuda based reinsurance subsidiary, assumed
40% of Tower's brokerage business in the quarter and 27% of its
premiums was from external clients other than Tower. Gross premiums
written increased by 58.0% to $69.0 million for the three months ended
September 30, 2007 compared to $43.7 million for the prior year
period. The combined ratio was 87.8% in the quarter as compared to
87.1% for the same prior year period.
CastlePoint Insurance Company had gross written premiums of $23.4
million from Tower's brokerage business in this quarter as well as
$5.3 million in written premiums from clients other than Tower.
Additional Highlights and Disclosures:
Dividend Declaration
CastlePoint Holdings, Ltd. Board of Directors has approved a
quarterly dividend of $0.025 per share payable December 31, 2007 to
stockholders of record as of December 17, 2007.
2007 Guidance
For the fourth quarter of 2007, we project our net income to be in
a range between $12.5 million and $15.5 million, and diluted earnings
per share to be in a range between $0.32 and $0.40 per share. For the
full year our guidance for net income is in a range of $40.5 million
to $43.5 million with diluted earnings per share between $1.10 and
$1.20.
About CastlePoint Holdings, Ltd.
CastlePoint, a Bermuda-based holding company, through its
subsidiaries, CastlePoint Reinsurance Company, CastlePoint Management
Corp., and CastlePoint Insurance Company, provides property and
casualty insurance and reinsurance business solutions, products and
services to small insurance companies and program underwriting agents
in the United States.
CPHL-F
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. This press release or
any other written or oral statements made by or on behalf of
CastlePoint may include forward-looking statements that reflect
CastlePoint's current views with respect to future events and
financial performance. All statements other than statements of
historical fact included in this press release are forward-looking
statements. Forward-looking statements can generally be identified by
the use of forward-looking terminology such as "may," "will," "plan,"
"expect," "intend," "estimate," "anticipate," "believe" or "continue"
or their negative or variations or similar terminology. All
forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors
that could cause CastlePoint's actual results to differ materially
from those indicated in these statements. The company believes that
these factors include but are not limited to ineffectiveness or
obsolescence of its business strategy due to changes in current or
future market conditions; increased competition on the basis of
pricing, capacity, coverage terms or other factors; greater frequency
or severity of claims and loss activity, including as a result of
natural or man-made catastrophic events, than CastlePoint's
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; the ability to obtain
necessary governmental licenses; the ability to hire and retain
executive officers and other key personnel; the ability to make
certain acquisitions in a timely fashion necessary to fulfill the
company's business plan; the effects of acts of terrorism or war;
developments in the world's financial and capital markets that
adversely affect the performance of the company's investments; changes
in regulations or laws applicable to CastlePoint, its subsidiaries,
brokers or customers including tax laws in Bermuda and the United
States; acceptance of CastlePoint's products and services, including
new products and services; changes in the availability, cost or
quality of reinsurance and failure of CastlePoint's reinsurers to pay
claims timely or at all; decreased demand for the company's insurance
or reinsurance products; the effects of mergers, acquisitions and
divestitures; changes in rating agency policies or practices; changes
in legal theories of liability under CastlePoint's insurance policies
or the policies that it reinsures; changes in accounting policies or
practices; and changes in general economic conditions, including
inflation and other factors. Forward-looking statements speak only as
of the date on which they are made, and CastlePoint undertakes no
obligation to update publicly or revise any forward-looking statement,
whether as a result of new information, future developments or
otherwise.
For more information visit CastlePoint's website at
http://www.castlepoint.bm/.
CastlePoint Holdings, Ltd.
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2007 2006
------------- -------------
($ in thousands, except par
value and share amounts)
Assets
Fixed-maturity securities, available-for-
sale, at fair value (amortized cost
$494,769 for 2007; $293,878 for 2006) $ 494,332 $ 295,527
Equity securities, available-for-sale, at
fair value (cost $46,124 for 2007; $0 for
2006) 40,085 --
Short-term investments, available-for-
sale, at fair value (amortized cost $0
for 2007; $51,626 for 2006) -- 51,638
------------- -------------
Total available-for-sale investments 534,417 347,165
Investment in Tower Group, Inc. preferred
stock -- 40,000
Investment in Partnerships, equity method 9,351 --
Common trust securities - statutory
business trusts, equity method 4,022 3,094
------------- -------------
Total investments 547,790 390,259
Cash and cash equivalents 127,576 34,784
Accrued investment income 4,049 2,211
Assumed premiums receivable (primarily
with related parties) 93,111 44,930
Premiums receivable - programs (primarily
with related parties) 2,644 1,295
Prepaid reinsurance premiums 2,343 --
Deferred acquisition costs (primarily with
related parties) 55,613 30,363
Deferred income taxes 4,067 1,089
Funds held by reinsured companies 3,049 3,084
Deferred financing fees 3,703 577
Other assets 2,085 2,750
------------- -------------
Total Assets $ 846,030 $ 511,342
============= =============
Liabilities and Shareholders' Equity
Liabilities
Loss and loss adjustment expenses
(primarily with related parties) $ 100,810 $ 34,192
Unearned premium (primarily with related
parties) 164,359 86,181
Assumed losses payable (primarily with
related parties) 3,798 3,496
Premiums payable-programs (primarily with
related parties) 5,799 1,072
Accounts payable and accrued expenses 1,658 2,869
Payable for securities 21,703 --
Other liabilities 1,105 725
Subordinated debentures 134,022 103,094
------------- -------------
Total Liabilities $ 433,254 $ 231,629
------------- -------------
Shareholders' Equity
Common shares ($0.01 par value,
100,000,000 shares authorized; 38,289,430
and 29,580,000 shares issued in 2007 and
2006) 383 296
Additional paid-in-capital 384,492 269,472
Accumulated other comprehensive net (loss)
income (5,863) 1,657
Retained earnings 33,764 8,288
------------- -------------
Total Shareholders' Equity 412,776 279,713
------------- -------------
Total Liabilities and Shareholders'
Equity $ 846,030 $ 511,342
============= =============
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CastlePoint Holdings, Ltd.
Consolidated Statements of Income and
Comprehensive Income
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
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2007 2006 2007 2006
($ in thousands, except share and per share
amounts)
Revenues
Net premiums
earned
(primarily with
related parties) $ 65,610 $ 27,003 $ 167,146 $ 47,390
Insurance service
revenue
(primarily with
related parties) 1,667 854 3,902 1,392
Net investment
income 7,538 3,791 21,417 6,697
Net realized
investment
(losses) gains (79) 7 (98) 10
------------ ------------ ------------ ------------
Total revenues 74,736 31,655 192,367 55,489
------------ ------------ ------------ ------------
Expenses
Loss and loss
adjustment
expenses
(primarily with
related parties) 34,482 13,919 87,790 25,297
Commission and
other
acquisition
expenses
(primarily with
related parties) 24,147 9,903 60,110 17,421
Other operating
expenses 4,268 2,448 11,983 8,998
Interest expense 2,254 -- 6,608 --
------------ ------------ ------------ ------------
Total expenses 65,151 26,270 166,491 51,716
------------ ------------ ------------ ------------
Income before
income taxes 9,585 5,385 25,876 3,773
Income tax benefit 956 -- 2,254 --
------------ ------------ ------------ ------------
Net income $ 10,541 $ 5,385 $ 28,130 $ 3,773
============ ============ ============ ============
Comprehensive
Income
Net income $ 10,541 $ 5,385 $ 28,130 $ 3,773
Other
comprehensive
income:
Gross unrealized
investment
holding (losses)
income arising
during period (2,032) 3,471 (7,977) 2,141
Less:
reclassification
adjustment for
gains included
in net income 287 7 268 10
------------ ------------ ------------ ------------
(2,319) 3,465 (8,245) 2,131
Income tax
recovery related
to items of
other
comprehensive
income 139 -- 724 --
------------ ------------ ------------ ------------
Total other
comprehensive
(loss) income (2,181) 3,645 (7,521) 2,131
------------ ------------ ------------ ------------
Comprehensive
Income $ 8,360 $ 8,850 $ 20,609 $ 5,904
============ ============ ============ ============
Earnings Per Share
Basic earnings
per common share $ 0.28 $ 0.18 $ 0.79 $ 0.22
============ ============ ============ ============
Diluted earnings
per common share $ 0.27 $ 0.18 $ 0.78 $ 0.22
============ ============ ============ ============
Weighted Average
Common Shares
Outstanding:
Basic 38,277,148 29,580,000 35,658,652 17,075,431
Diluted 38,549,306 29,780,879 36,008,824 17,075,431
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Reinsurance Segment Results of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
--------- --------- --------- ---------
($ in thousands)
Revenues
Premiums earned
Gross premiums earned $ 60,965 $ 27,003 $ 161,171 $ 47,390
Less: ceded premiums earned -- -- -- --
--------- --------- --------- ---------
Net premiums earned 60,965 27,003 161,171 47,390
--------- --------- --------- ---------
Expenses
Loss and loss adjustment
expenses
Gross loss and loss
adjustment expenses 31,485 13,919 84,075 25,297
Less: ceded loss and loss
adjustment expenses -- -- -- --
--------- --------- --------- ---------
Net loss and loss
adjustment expenses 31,485 13,919 84,075 25,297
--------- --------- --------- ---------
Underwriting expenses
Ceding commission expense 20,929 9,286 54,634 16,405
Other underwriting expenses 1,125 331 2,614 535
--------- --------- --------- ---------
Total underwriting expenses 22,054 9,618 57,248 16,940
--------- --------- --------- ---------
Underwriting Profit $ 7,426 $ 3,465 $ 19,848 $ 5,153
========= ========= ========= =========
Loss Ratios
Gross 51.6% 51.5% 52.2% 53.4%
Net 51.6% 51.5% 52.2% 53.4%
Accident Year Loss Ratios
Gross 52.3% 51.5% 52.5% 53.4%
Net 52.3% 51.5% 52.5% 53.4%
Underwriting Expense Ratios
Gross 36.2% 35.6% 35.5% 35.7%
Net 36.2% 35.6% 35.5% 35.7%
Combined Ratios
Gross 87.8% 87.1% 87.7% 89.1%
Net 87.8% 87.1% 87.7% 89.1%
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Insurance Segment Results of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
---------- ---------- ---------- ----------
($ in thousands)
Revenues
Premiums earned
Gross premiums earned $ 6,063 $ -- $ 7,394 $ --
Less: ceded premiums
earned (1,419) -- (1,419) --
Net premiums earned 4,644 -- 5,975 --
Ceding commission
revenue -- -- -- --
---------- ---------- ---------- ----------
Total 4,644 -- 5,975 --
---------- ---------- ---------- ----------
Expenses
Loss and loss adjustment
expenses
Gross loss and loss
adjustment expenses 3,312 -- 4,030 --
Less: ceded loss and
loss adjustment
expenses (315) -- (315) --
---------- ---------- ---------- ----------
Net loss and loss
adjustment expenses 2,997 -- 3,715
---------- ---------- ---------- ----------
Underwriting expenses
Ceding commission
expense 1,997 -- 2,546 --
Other underwriting
expenses 130 -- 151 --
---------- ---------- ---------- ----------
Total underwriting
expenses 2,127 -- 2,697 --
---------- ---------- ---------- ----------
Underwriting Loss $ (480) $ -- $ (437) $ --
========== ========== ========== ==========
Loss Ratios
Gross 54.6% n/a 54.5% n/a
Net 64.5% n/a 62.2% n/a
Accident Year Loss Ratios
Gross 54.6% n/a 54.5% n/a
Net 64.5% n/a 62.2% n/a
Underwriting Expense
Ratios
Gross 35.1% n/a 36.5% n/a
Net 45.8% n/a 45.1% n/a
Combined Ratios
Gross 89.7% n/a 91.0% n/a
Net 110.3% n/a 107.3% n/a
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Insurance Services Segment Results of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
--------- --------- --------- ---------
($ in thousands)
Revenues
Direct commission revenue from
programs $ 1,667 $ 854 $ 3,902 $ 1,392
--------- --------- --------- ---------
Total Revenues 1,667 854 3,902 1,392
--------- --------- --------- ---------
Expenses
Direct commission expense from
programs 1,222 617 2,930 1,016
Other insurance services
expenses 1,435 1.032 4,567 1,757
--------- --------- --------- ---------
Total Expenses 2,657 1,649 7,496 2,773
--------- --------- --------- ---------
Insurance Services Loss $ (990) $ (795) $ (3,594) $ (1,381)
========= ========= ========= =========
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CONTACT: CastlePoint Holdings, Ltd.
Joel Weiner, 441-294-6400
Senior Vice President and Chief Financial Officer
Joel.Weiner@CastlePoint.bm
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