- Book value per share of $20.20, up 3.5%
from December 31, 2013,
- Quarterly operating earnings per share
of $0.70,
- Strong underwriting results highlighted
by a 41% combined ratio.
Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH) (the
“Company”), a Bermuda holding company that offers collateralized
reinsurance in the property catastrophe market and invests in
various insurance-linked securities, today reported its financial
results for the first quarter of 2014. The Company was formed on
June 24, 2013 and began trading on the New York Stock Exchange on
November 6, 2013.
The Company’s book value per common share (BVPS) was $20.20 at
March 31, 2014, an increase of $0.40 from December 31, 2013,
reflecting a 3.5% increase inclusive of dividends declared in the
quarter. The Company’s net income and operating income for the
quarter was $6.1 million ($0.70 per share).
The table below illustrates the components of our first quarter
2014 activities:
Amount in Impact per share Three
Month Period ended March 31, 2014 millions Earnings
BVPS
Net income and operating income $
6.1 $ .70 $ .70 Common
dividends declared (2.6 ) (.30 )
Net change
in book value $ 3.5 $ .40
During the first quarter of 2014, the Company bound indemnity
reinsurance contracts with expected total annual premiums of $41.0
million and wrote $21.8 million in premium. The business generated
by the Company since its inception collectively represents $181.9
million in total reinsurance contract limit.
Of the total capital deployed by the Company thus far,
approximately 40% was deployed in support of first event
reinsurance coverages, 40% was deployed in support of a catastrophe
quota share and the balance was deployed in support of second and
subsequent event reinsurance coverages.
During the quarter, the Company earned $10.2 million of
reinsurance premiums, representing approximately 25% of the
expected total annual premium associated with its in-force
reinsurance contracts at March 31, 2014. The Company also earned
$0.1 million from a derivative contract.
Loss and loss adjustment expenses for the quarter were $0.9
million, nearly all of which represents losses that are believed to
have occurred but for which no claims have been reported.
Acquisition costs were $2.2 million, which included $0.6 million
of accrued profit commissions.
General and administration expenses were $1.1 million, which
consisted of management fees of $0.7 million, public company
expenses of $0.3 million and administrative fees of $0.1
million.
As of March 31, 2014, the Company’s net exposures to: (i) a
single natural catastrophe occurrence within certain broadly
defined major catastrophe zones; and (ii) single event losses for
certain defined natural catastrophe region and peril combinations,
were each in compliance with its underwriting guidelines.
On March 31, 2014, the Company declared its first regular
quarterly dividend of $0.30 per share, which is payable on April
30, 2014 to all shareholders of record as of April 15, 2014.
The Company expects to close on a $20.0 million revolving credit
facility during the second quarter of 2014, which will allow it to
more effectively meet its short-term liquidity demands. Such a
facility would permit the Company to fully deploy all of the net
proceeds it raised in its Initial Public Offering during the
initial year of its operations.
William Pollett, President and CEO, commented: “I am pleased to
report that we generated a 3.5% increase in book value per share
during our first full quarter of operations. Our underwriting team
executed well during the key January renewal period, enabling us to
construct a diversified portfolio of risks in-line with our
expectations.”
Additional information can be found in the Company’s public
filings with the Securities and Exchange Commission and at
www.bcapre.bm.
Blue Capital Management Ltd. and Blue Capital Insurance Managers
Ltd., which serve as the Company’s investment manager and
reinsurance manager, respectively, are wholly-owned subsidiaries of
Montpelier Re Holdings Ltd. (NYSE: MRH, “Montpelier”), a leading
global provider of property catastrophe and short tail reinsurance
solutions with over $3.5 billion of assets. Through this
relationship, the Company benefits from Montpelier’s industry
leading proprietary reinsurance modelling tools, underwriting
expertise and broker/client relationships.
Application of the Safe Harbor of the
Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements within
the meaning of the United States (the “U.S.”) federal securities
laws, pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, that are not historical
facts, including statements about our beliefs and expectations.
These statements are based upon current plans, estimates and
projections. Forward-looking statements rely on a number of
assumptions concerning future events and are subject to a number of
uncertainties and various risk factors, many of which are outside
our control. See Item 1A “Risk Factors” contained in the Company’s
2013 Report on Form 10-K, as filed with the U.S. Securities and
Exchange Commission, for specific important factors that could
cause actual results to differ materially from those contained in
forward looking statements. You can identify forward-looking
statements in this earnings release by the use of words such as
“anticipates,” “estimates,” “expects,” “intends,” “plans” and
“believes,” and similar expressions or future or conditional verbs
such as “will,” “should,” “would,” “may” and “could.” These
forward-looking statements include, among others, statements
relating to our future financial performance, our business
prospects and strategy, our dividend policy and expected dividend
payout, anticipated financial position, liquidity and capital needs
and other similar matters. These forward-looking statements are
based on management’s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks
and changes in circumstances that are difficult to predict.
Our actual results may differ materially from those expressed
in, or implied by, the forward-looking statements included in this
press release as a result of various factors, including, among
others:
• the fact that we have little operating history;
• the possibility of severe or unanticipated losses from natural
and man-made catastrophes, including those that may result from
changes in climate conditions, including global temperatures and
expected sea levels;
• the effectiveness of our loss limitation methods;
• our dependence on our Chief Executive Officer and interim
Chief Financial Officer and our service providers;
• our ability to effectively execute our business plan and any
new ventures that we may enter into;
• acceptance of our business strategy, security and financial
condition by regulators, brokers and insureds;
• failure by any service provider to carry out its obligations
to us in accordance with the terms of its appointment;
• conflicts of interest that could result from our relationships
and potential overlaps in business with related parties, including
Montpelier Re Holdings Ltd. and its subsidiaries;
• the cyclical nature of the property catastrophe insurance and
reinsurance industry;
• the availability of capital and financing, including our
ability to raise more equity capital and our ability to release
capital from existing obligations to redeploy annually;
• the levels of new and renewal business achieved;
• the availability of opportunities to increase writings in our
core property and specialty insurance and reinsurance lines of
business and in specific areas of the casualty reinsurance market
and our ability to capitalize on those opportunities;
• the inherent uncertainty of our risk management process, which
is subject to, among other things, industry loss estimates and
estimates generated by modeling techniques;
• the accuracy of those estimates and judgments used in the
preparation of our financial statements, including those related to
revenue recognition, insurance and other reserves, reinsurance
recoverables, asset valuations, contingencies and litigation which,
for a new reinsurance company like us, are even more difficult to
make than those made in a mature company because of limited
historical information;
• the inherent uncertainties of establishing reserves for loss
and loss adjustment expenses and unanticipated adjustments to
premium estimates;
• changes in the availability, cost or quality of reinsurance or
retrocessional coverage;
• general economic and market conditions, including inflation,
volatility in the credit and capital markets, interest rates and
foreign currency exchange rates, and conditions specific to the
insurance and reinsurance markets in which we operate;
• changes in and the impact of governmental legislation or
regulation, including changes in tax laws in the jurisdictions
where we conduct business;
• statutory or regulatory developments, including as to tax
policy and reinsurance and other regulatory matters such as the
adoption of proposed legislation that would affect
Bermuda-headquartered companies or Bermuda-based insurers or
reinsurers;
• potential treatment of us as an investment company or a
passive foreign investment company for purposes of U.S. securities
laws or U.S. federal taxation, respectively;
• the amount and timing of any reinsurance recoverables and
reimbursements we actually receive from our reinsurers;
• the overall level of competition, and the related supply and
demand dynamics in our markets relating to growing capital levels
in our industry;
• declining demand due to increased retentions by cedants and
other factors;
• acts of terrorism, political unrest, outbreak of war and other
hostilities or other non-forecasted and unpredictable events;
• unexpected developments concerning the small number of
insurance and reinsurance brokers upon whom we rely for a large
portion of revenues;
• operational risks, including the risk of fraud and any errors
and omissions, as well as technology breaches or failures;
• our dependence as a holding company upon dividends or
distributions from our operating subsidiaries;
• changes in accounting principles or the application of such
principles by regulators; and
• the impact of any foreign currency fluctuations.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the dates on which they are made.
BLUE CAPITAL REINSURANCE HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS (In millions of U.S. dollars,
except share and per share amounts) Unaudited
March 31, December 31,
2014
2013
Assets Cash and cash equivalents
$
29.3 $ 173.8 Cash and cash equivalents pledged as collateral
100.1 - Reinsurance premiums receivable
10.7 -
Deferred reinsurance acquisition costs
0.9 - Funds held by
reinsured companies as collateral
54.0 - Other assets
0.1 1.7
Total
Assets $ 195.1
$ 175.5
Liabilities Loss and loss
adjustment expense reserves
$ 0.9 $ - Unearned
reinsurance premiums
11.6 - Accounts payable and accrued
expenses
4.4 0.7 Other liabilities
1.4
1.5 Total Liabilities
18.3 2.2 Commitments and
Contingent Liabilities
- -
Shareholders'
Equity Common Shares and additional paid-in capital
174.0 174.0 Retained earnings (deficit)
2.8
(0.7 ) Total Shareholders' Equity
176.8 173.3
Total Liabilities and Shareholders' Equity $
195.1 $ 175.5
Book value per
Common Share (1) $ 20.20 $ 19.80
Ending
Common Shares outstanding (000s) 8,750
8,750
1
This measure constitutes a "non-GAAP financial measure" as defined
in Regulation G and represents the Company's shareholders' equity
at March 31, 2014 and December 31, 2013, divided by its ending
Common Shares outstanding at those dates.
BLUE
CAPITAL REINSURANCE HOLDINGS LTD. CONSOLIDATED STATEMENT OF
OPERATIONS AND COMPREHENSIVE INCOME (In millions of U.S.
dollars, except per share amounts) Unaudited
Three Month Period Ended
March 31, 2014 Revenues
Reinsurance premiums written
$ 21.8 Change in
unearned reinsurance premiums
(11.6 )
Reinsurance premiums earned
10.2 Net income from derivative
instruments
0.1
Total revenues
10.3 Expenses Loss and loss adjustment
expenses
0.9 Reinsurance acquisition costs
2.2
General and administrative expenses
1.1
Total expenses
4.2 Net income,
operating income and comprehensive income
$ 6.1 Basic and diluted
earnings per Common Share $ 0.70 Dividends
declared per Common Share
0.30 Insurance ratios: Loss and
loss adjustment expense ratio
8.5 % Acquisition costs
ratio
21.3 % General and administrative expense ratio
11.2 % Combined ratio
41.0
%
BLUE CAPITAL REINSURANCE
HOLDINGS LTD. CONSOLIDATED STATEMENT OF SHAREHOLDERS'
EQUITY Three Month Period Ended March 31, 2014 (In
millions of U.S. dollars) Unaudited
Total Common Additional
Retained shareholders' Shares at paid-in earnings
equity par value
capital (deficit) Opening balances at
January 1, 2014 $ 173.3 $ 8.8 $ 165.2 $ (0.7 ) Net income
6.1 - - 6.1 Dividends declared on Common Shares (2.6 )
- -
(2.6 )
Ending balances at March 31, 2014 $
176.8 $ 8.8
$ 165.2 $ 2.8
Dividends declared as a percentage of year-to-date net
income
42.6 %
BLUE CAPITAL REINSURANCE HOLDINGS
LTD.Natural Catastrophe Risk Management
The following discussion should be read in conjunction with the
“Risk Factors” contained in Item 1A of the Company's 2013 Form
10-K, as filed with the Securities and Exchange Commission, in
particular the risk factor entitled “Our stated catastrophe and
enterprise-wide risk management exposures are based on estimates
and judgments which are subject to significant uncertainties.”
Exposure Management
The Company's Investment and Insurance Managers (the “Managers”)
monitor our net exposure to a single natural catastrophe occurrence
within certain broadly defined major catastrophe zones. Our
February 15, 2014 projected net exposures by zone were in
compliance with our underwriting guidelines. Namely, our projected
net exposure to any one zone was below 50% of our shareholders'
equity at March 31, 2014. These broadly defined major catastrophe
zones are currently defined as follows:
North
America:
Europe:
Rest of
World:
U.S. - Northeast Western Central Europe (1) Australia U.S. -
Mid-Atlantic Eastern Europe New Zealand U.S. - Florida Southern
Europe Japan U.S. - Gulf
Northern Europe, Benelux and
Scandinavia
South America U.S. - New Madrid
U.K. and Ireland
Middle East U.S. - Midwest
U.S. - California U.S. - Hawaii Canada - Eastern Canada - Western
(1) Consisting of France, Germany, Switzerland and Austria.
Single Event Losses
For certain defined natural catastrophe region and peril
combinations, the Managers assess the probability and likely
magnitude of losses using a combination of industry third-party
models, proprietary models and underwriting judgment. The Managers
attempt to model the projected net impact from a single event,
taking into account contributions from property catastrophe
reinsurance (including retrocessional business), property pro-rata
reinsurance and event-linked derivative securities, offset by the
net benefit of any reinsurance or derivative protections we
purchase and the benefit of premiums.
The table that follows details the projected net impact from
single event losses as of February 15, 2014 for selected zones at
selected return period levels using AIR Worldwide Corporation's
CLASIC/2 model version 15.0, one of several industry-recognized
third-party vendor models. It is important to note that each
catastrophe model contains its own assumptions as to the frequency
and severity of loss events, and results may vary significantly
from model to model.
Since the Managers utilize a combination of third-party models,
proprietary models and underwriting judgement to project the net
impact from single event losses, our internal projections may be
higher or lower than those presented in the following table:
Net Impact From Single Event Losses at
Specified Return Periods
Net
Impact Percentage of March 31, 2014
(Millions)
Return Period
(1)
Shareholders’
Equity
U.S. - Florida hurricane
$45
1 in 100 year 25% U.K. and Ireland windstorm 32 1 in 100 year 18%
U.S. - Gulf hurricane 30 1 in 100 year 17% U.S. - California
earthquake 27 1 in 250 year 15% All other zones less than 15%
(1) A “100-year” return period can also be referred to as the
1.0% occurrence exceedance probability (“OEP”), meaning there is a
1.0% chance in any given year that this level will be exceeded. A
“250-year” return period can also be referred to as the 0.4% OEP,
meaning there is a 0.4% chance in any given year that this level
will be exceeded.
Our February 15, 2014 single event loss exposures were in
compliance with our underwriting guidelines. Namely, the projected
net impact from any one catastrophe loss event (excluding
earthquake) at the 1 in 100 year return period for any one zone did
not exceed 35% of our shareholders' equity at March 31, 2014, and
the projected net impact from any one earthquake loss event at the
1 in 250 year return period for any zone did not exceed 35% of our
shareholders' equity at March 31, 2014.
Our single event loss estimates represent snapshots as of
February 15, 2014. The composition of our in-force portfolio may
change materially at any time due to the acceptance of new
policies, the expiration of existing policies, and changes in our
outwards reinsurance and derivative protections.
Blue Capital Reinsurance Holdings Ltd.Investors:William Pollett,
441-299-7576President and CEOorGeneral Inquiries:441-278-5004
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