Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH) ("Blue
Capital"), a Bermuda holding company that, through its operating
subsidiaries, 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 2017.
The Company’s net income and operating income was $4.1 million
($0.47 per share) for the three months ended March 31, 2017.
The Company’s fully converted book value per common share was
$20.49 at March 31, 2017, reflecting a 2.3% increase for the
quarter and a 7.7% increase over the past twelve months, each
inclusive of dividends declared in such periods.
Reinsurance premiums written for the current quarter were $17.0
million, modestly declining $(0.4) million or 2.6% compared to the
same period in 2016. The current quarter's reinsurance premium
decline was predominantly driven by a larger purchase of
reinsurance protection which offset premiums written.
The combined ratio for the current quarter was 56.5% compared to
52.2% in the same period a year ago. The increase in the combined
ratio was driven by higher loss and loss adjustment and reinsurance
acquisition ratios partially offset by a lower general and
administrative expense ratio. While loss and loss adjustment
expenses of $1.8 million were generally consistent across both
periods, the slightly lower earned premiums in the current quarter
led to a modestly higher loss ratio. Reinsurance acquisition costs
were $2.7 million in the current period compared to $2.2 million a
year ago as the current quarter included profit commissions on
quota share business while the year ago period reflected negative
commission adjustments. General and administrative expenses
for the current quarter were $1.3 million, or $0.2 million lower
than a year ago due to lower performance fees based on reduced
profitability.
During the first quarter of 2017, the Company declared a regular
dividend of $0.30 per common share, which was paid on April 15,
2017 and a special dividend of $0.59 per common share which was
paid on March 15, 2017.
Michael J. McGuire, Chairman and CEO, commented: "I am pleased
with the results we have generated in the first quarter, with
excellent underwriting profitability, solid growth in book value
per share inclusive of dividends and stable premium levels.
These strong results highlight the value of our disciplined
underwriting, our high quality portfolio management and our
important strategic alignment with Sompo Holdings, Inc. These core
principles and the continuity of our underwriting and portfolio
management teams position Blue Capital to continue its effective
and disciplined deployment of capital in a challenging market."
About Blue Capital
Blue Capital Reinsurance Holdings Ltd., through its operating
subsidiaries, offers collateralized reinsurance in the property
catastrophe market, leveraging underwriting expertise and
infrastructure from established resources. Underwriting decisions,
operations and other management services are provided to Blue
Capital by Blue Capital Management Ltd., a subsidiary of Endurance
Specialty Holdings Ltd. (a wholly owned subsidiary of Sompo
Holdings, Inc.), a recognized global specialty provider of property
and casualty insurance and reinsurance and a leading property
catastrophe and short tail reinsurer since 2001. Additional
information can be found in Blue Capital's public filings with the
U.S. Securities and Exchange Commission or at www.bcapre.bm.
Safe Harbor for Forward-Looking Statements
Some of the statements in this press release may include, and
Blue Capital may make related oral forward-looking statements which
reflect our current views with respect to future events and
financial performance. Such statements may include forward-looking
statements both with respect to us in general and the insurance and
reinsurance sectors specifically, both as to underwriting and
investment matters. Statements that include the words "should,"
"would," "expect," "estimates", "intend," "plan," "believe,"
"project," "target," "anticipate," "seek," "will," "deliver," and
similar statements of a future or forward-looking nature identify
forward-looking statements in this press release for purposes of
the U.S. federal securities laws or otherwise. We intend these
forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in the Private Securities
Litigation Reform Act of 1995.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or may be important
factors that could cause actual results to differ materially from
those indicated in the forward-looking statements. These factors
include, but are not limited to, the effects of competitors’
pricing policies, greater frequency or severity of claims and loss
activity, changes in market conditions, decreased demand for
property and casualty reinsurance, changes in the availability,
cost or quality of reinsurance or retrocessional coverage, our
inability to renew business previously underwritten or acquired,
uncertainties in our reserving process, changes to our tax status,
reduced acceptance of our existing or new products and services, a
loss of business from and credit risk related to our broker
counterparties, assessments for high risk or otherwise uninsured
individuals, possible terrorism or the outbreak of war, a loss of
key personnel, political conditions, changes in insurance
regulation, operational risk, including the risk of fraud and
errors and omissions, as well as technology breaches or failure,
changes in accounting policies, our investment performance, the
valuation of our invested assets, a breach of our investment
guidelines, 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, our dependence as a
holding company upon dividends or distributions from our operating
subsidiaries, the unavailability of capital in the future,
developments in the world’s financial and capital markets and our
access to such markets, government intervention in the insurance
and reinsurance industry, illiquidity in the credit markets,
changes in general economic conditions and other factors described
in our Annual Report on Form 10-K for the year
ended December 31, 2016.
The foregoing review of important factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included herein and elsewhere,
including the risk factors included in Blue Capital’s most recent
report on Form 10-K and other documents of Blue Capital on file
with the Securities and Exchange Commission. Any forward-looking
statements made in this material are qualified by these cautionary
statements, and there can be no assurance that the actual results
or developments anticipated by Blue Capital will be realized or,
even if substantially realized, that they will have the expected
consequences to, or effects on, Blue Capital or its business or
operations. Except as required by law, Blue Capital undertakes no
obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future
developments or otherwise.
The contents of any website referenced in this press release are
not incorporated by reference herein.
|
BLUE CAPITAL REINSURANCE HOLDINGS
LTD. |
CONSOLIDATED BALANCE SHEETS |
(In millions of U.S. dollars, except share
amounts) |
|
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
Assets |
|
(Unaudited) |
|
|
Cash and cash
equivalents |
|
$ |
4.1 |
|
|
$ |
1.6 |
|
Cash and cash
equivalents pledged as collateral |
|
3.1 |
|
|
3.1 |
|
Reinsurance premiums
receivable |
|
13.5 |
|
|
7.7 |
|
Deferred reinsurance
acquisition costs |
|
1.0 |
|
|
0.1 |
|
Funds held by reinsured
companies as collateral |
|
181.9 |
|
|
191.4 |
|
Other assets |
|
0.4 |
|
|
0.8 |
|
Total Assets |
|
$ |
204.0 |
|
|
$ |
204.7 |
|
Liabilities |
|
|
|
|
Loss and loss
adjustment expense reserves |
|
$ |
10.9 |
|
|
$ |
11.1 |
|
Unearned reinsurance
premiums |
|
7.7 |
|
|
0.9 |
|
Reinsurance balances
payable |
|
1.9 |
|
|
7.1 |
|
Other liabilities |
|
3.9 |
|
|
2.3 |
|
Total Liabilities |
|
24.4 |
|
|
21.4 |
|
Shareholders’
Equity |
|
|
|
|
Common Shares and
additional paid-in capital |
|
8.8 |
|
|
8.8 |
|
Additional paid-in
capital |
|
165.5 |
|
|
165.5 |
|
Retained earnings |
|
5.3 |
|
|
9.0 |
|
Total Shareholders’ Equity |
|
179.6 |
|
|
183.3 |
|
Total
Liabilities and Shareholders’ Equity |
|
$ |
204.0 |
|
|
$ |
204.7 |
|
Common shares
outstanding (000s) |
|
8,756 |
|
|
8,756 |
|
Common and
common equivalent shares outstanding (000s) |
|
8,769 |
|
|
8,769 |
|
|
|
|
|
|
|
|
BLUE CAPITAL REINSURANCE HOLDINGS
LTD. |
CONSOLIDATED STATEMENTS OF NET INCOME AND
COMPREHENSIVE INCOME |
(In millions of U.S. dollars, except per share
data) |
Unaudited |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2017 |
|
2016 |
Revenues |
|
|
|
|
Reinsurance premiums written |
|
$ |
17.0 |
|
|
$ |
17.4 |
|
Change in
net unearned reinsurance premiums |
|
(6.8 |
) |
|
(7.1 |
) |
Net
reinsurance premiums earned |
|
10.2 |
|
|
10.3 |
|
Net
(loss) income from derivative instruments |
|
(0.4 |
) |
|
0.1 |
|
Net
investment income |
|
0.1 |
|
|
— |
|
Total
revenues |
|
9.9 |
|
|
10.4 |
|
Expenses |
|
|
|
|
Underwriting expenses: |
|
|
|
|
Loss and
loss adjustment expenses - current year |
|
1.3 |
|
|
1.0 |
|
Loss and
loss adjustment expenses - prior year |
|
0.5 |
|
|
0.7 |
|
Acquisition costs |
|
2.7 |
|
|
2.2 |
|
General
and administrative expenses |
|
1.3 |
|
|
1.5 |
|
Total
expenses |
|
5.8 |
|
|
5.4 |
|
Net income and
comprehensive income |
|
$ |
4.1 |
|
|
$ |
5.0 |
|
Per share
data: |
|
|
|
|
Basic and
diluted earnings per Common Share |
|
$ |
0.47 |
|
|
$ |
0.57 |
|
Dividends
declared per Common Share and RSU(1) |
|
0.89 |
|
|
1.54 |
|
Insurance
ratios: |
|
|
|
|
Loss and
loss adjustment expense ratio |
|
17.1 |
% |
|
16.9 |
% |
Acquisition cost ratio |
|
26.5 |
% |
|
20.7 |
% |
General
and administrative expense ratio |
|
12.9 |
% |
|
14.6 |
% |
Combined
ratio |
|
56.5 |
% |
|
52.2 |
% |
|
|
|
|
|
|
|
RSU = restricted share unit(1) The three month period ended
March 31, 2017 includes a special dividend with respect to
2016 of $0.59 per common share and RSU, which was declared and paid
during the first quarter of 2017.
|
BLUE CAPITAL REINSURANCE HOLDINGS
LTD. |
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY |
(In millions of U.S. dollars) |
Unaudited |
|
|
|
|
|
|
|
|
|
|
|
Totalshareholders’equity |
|
CommonShares, atpar value |
|
Additionalpaid-incapital |
|
Retainedearnings |
Balance at
January 1, 2017 |
|
$ |
183.3 |
|
|
$ |
8.8 |
|
|
$ |
165.5 |
|
|
$ |
9.0 |
|
Net
income |
|
4.1 |
|
|
— |
|
|
— |
|
|
4.1 |
|
Dividends declared on
Common Shares and RSUs |
|
(7.8 |
) |
|
— |
|
|
— |
|
|
(7.8 |
) |
Balance at
March 31, 2017 |
|
$ |
179.6 |
|
|
$ |
8.8 |
|
|
$ |
165.5 |
|
|
$ |
5.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totalshareholders’equity |
|
CommonShares, atpar value |
|
Additionalpaid-incapital |
|
Retainedearnings |
Balance at
January 1, 2016 |
|
$ |
187.6 |
|
|
$ |
8.8 |
|
|
$ |
165.3 |
|
|
$ |
13.5 |
|
Net income |
|
5.0 |
|
|
— |
|
|
— |
|
|
5.0 |
|
Dividends declared on
Common Shares and RSUs |
|
(13.5 |
) |
|
— |
|
|
— |
|
|
(13.5 |
) |
Balance at March 31,
2016 |
|
$ |
179.1 |
|
|
$ |
8.8 |
|
|
$ |
165.3 |
|
|
$ |
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BOOK VALUE AND FULLY CONVERTED BOOK VALUE PER
COMMON SHARE(1) |
Unaudited |
|
|
|
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
March 31, 2016 |
Book value per
share numerator (in millions of U.S. dollars): |
|
|
|
|
|
|
[A]
Shareholders’ Equity (in millions of U.S. dollars) |
|
$ |
179.6 |
|
|
$ |
183.3 |
|
|
$ |
179.1 |
|
Book value per
share denominators (in thousands of shares): |
|
|
|
|
|
|
[B]
Common Shares outstanding |
|
8,756 |
|
|
8,756 |
|
|
8,752 |
|
Restricted Share Units outstanding |
|
13 |
|
|
13 |
|
|
10 |
|
[C]
Fully converted book value per common share denominator |
|
8,769 |
|
|
8,769 |
|
|
8,762 |
|
Book value per
common share [A]/[B] |
|
$ |
20.52 |
|
|
$ |
20.93 |
|
|
$ |
20.47 |
|
Fully converted
book value per common share [A]/[C] |
|
$ |
20.49 |
|
|
$ |
20.90 |
|
|
$ |
20.44 |
|
Change in fully
converted book value per common share:(2) |
|
|
|
|
|
|
From
December 31, 2016 |
|
2.3 |
% |
|
|
|
|
From
March 31, 2016 |
|
7.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) These measures constitute "non-GAAP financial measures" as
defined in Regulation G. Management believes that these
non-GAAP measures, which may be defined differently by other
companies, better explain Blue Capital’s results of operations in a
manner that allows for a more complete understanding of the
underlying trends in Blue Capital’s business. However, these
measures should not be viewed as a substitute for those determined
in accordance with GAAP.(2) Computed as the change in fully
converted book value per common share plus common dividends
declared of $0.89 and $1.49 during the three and twelve month
periods ended March 31, 2017, respectively.
BLUE CAPITAL REINSURANCE HOLDINGS
LTD.Natural Catastrophe Risk
Management
The following discussion should be read in conjunction with the
"Risk Factors" included in Item 1A of the Company’s 2016
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 ManagementThe Company’s Investment and Insurance
Manager (the "Manager") monitors our net exposure to any one
catastrophe loss event in any single zone within certain broadly
defined major catastrophe zones. Our January 1, 2017 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 projected shareholders’ equity at March 31,
2017. These broadly defined major catastrophe zones are 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 |
|
South
America |
U.S. -
New Madrid |
|
and
Scandinavia |
|
Middle
East |
U.S. -
Midwest |
|
U.K. and
Ireland |
|
|
U.S. -
California |
|
|
|
|
U.S. -
Hawaii |
|
|
|
|
Canada -
Eastern |
|
|
|
|
Canada -
Western |
|
|
|
|
(1) Consisting of France, Germany, Switzerland and Austria.
Single Event LossesFor certain defined natural catastrophe
region and peril combinations, the Manager assesses the probability
and likely magnitude of losses using a combination of industry
third-party models, proprietary models and underwriting judgment.
The Manager attempts 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 our projected net impact from
single event losses as of January 1, 2017 for selected zones at
specified return periods. It is important to note that each
catastrophe model we use contains its own assumptions as to the
frequency and severity of loss events, and results may vary
significantly from model to model.
Since the Manager utilizes a combination of third-party models,
its own proprietary models and underwriting judgment to project the
net impact from single event losses, our internal projections may
be higher or lower than those presented in the table below:
|
Net Impact From Single Event Losses at Specified
Return Periods |
|
|
|
|
|
|
|
|
|
Net Impact(Millions) |
|
Return Period(1) |
|
Percentage of March 31, 2017
Shareholders’ Equity |
U.S. - Florida
hurricane |
|
$ |
53 |
|
|
1 in
100 year |
|
30% |
Japan earthquake |
|
34 |
|
|
1 in
250 year |
|
19% |
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 an
estimated 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 an estimated 0.4% chance in any
given year that this level will be exceeded.
On January 1, 2017 our projected single event loss exposures
were within 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 projected shareholders’ equity at March 31, 2017,
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 projected shareholders’ equity at March 31, 2017.
Our single event loss estimates represent snapshots as of
January 1, 2017. The composition of our in-force portfolio may
change materially at any time due to the acceptance of new
policies, losses incurred, the expiration of existing policies and
changes in our ceded reinsurance and derivative protections. There
were no material changes made to the composition of our in-force
portfolio from January 1, 2017 to March 31, 2017.
Contacts
Investor Relations
Phone: +1 441 278 0988
Email: investorrelations@Sompo-Intl.com
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