TIDMCAT
RNS Number : 1519N
CATCo Reinsurance Opps Fund Ltd
26 August 2011
CATCo Reinsurance Opportunities Fund Ltd. ("the Company")
Interim Results
For the period from 20 December 2010 to 30 June 2011
To: SFM, London Stock Exchange Date: 26 August 2011
and Bermuda Stock Exchange
Chairman's Statement
The spate of global catastrophic activity, such as floods,
earthquakes, tsunamis and tornadoes, experienced in the first half
of 2011 had significant impact on traditional and retrocessional
reinsurers alike. Whilst these events are likely to generate
significant industry losses and potentially limit retrocessional
capacity in 2012, this has had only minimal impact, if any, on the
Company's low frequency high-severity exposure profile.
To date no losses have been presented to the Company from it
retrocessional portfolio. However, as the Company's portfolio of
investments had potential exposure to these events in its Rest of
World, Japanese Earthquake and Japanese All Natural Perils Risk
Pillars to ensure shareholders are treated fairly, the Board of
Directors decided to extract the potential exposure (including
their future unearned premiums) from the existing portfolio and
initiate Side Pocket Investments which will be owned entirely by
all shareholders on the Company's share register prior to 31 March
2011. All investments received from new investors on or after 1
April 2011, have no exposure to the Side Pocket Investments. We
felt this was a prudent approach given the significant demand for
the Company Shares in the second half of 2011 following recent
events and the significant increase in retrocessional reinsurance
pricing.
Having invested almost all of our assets in the larger CATCo
Reinsurance Fund Ltd, the Managers have positioned the portfolio
with a broad mix of global retrocessional risk pillars that are
very well diversified. The Company, along with its investment
strategy, continues to be non-correlated with all financial
markets.
Our Manager, CATCo Investment Management Ltd, is optimistic that
US property catastrophe reinsurance prices will start to mirror the
more material improvements already seen in International
reinsurance and property retrocession, particularly as new risk
model RMSv11 becomes more widely adopted. Having already deployed
significant capital into existing and new retrocessional contracts
post certain events in the first half of 2011, they believe that
global retrocessional pricing for Company's protection will remain
favourable given the appetite from reinsurance counterparties and
the likelihood of retrocessional capacity erosion in 2012 from
other collateralised reinsurers.
I, together with my Board of Directors, am delighted that the
Company, along with the management team, is building an impressive
track record following our launch in December 2010 and we hope that
this can continue in our inaugural year ahead of the renewal season
in January 2012.
I would like to thank all those investors who supported the
launch of the Company, and the recent corporate transactions. As a
Board we will endeavor to ensure that the investment targeted
returns are achieved consistently in the future whilst applying
good corporate governance principles.
Director's Responsibility
In accordance with Chapter 4 of the Disclosure and Transparency
Rules, and to the best of their knowledge, each director of CATCo
Reinsurance Opportunity Fund Ltd, confirms that the financial
statements have been prepared in accordance with the applicable set
of accounting standards and give a true and fair view of the
assets, liabilities, financial position and net return of the
company. Each director of CATCo Reinsurance Opportunities Fund Ltd
confirms that there have been no related party transactions during
the six months to 30 June 2011.
By order of the Board
Anthony Taylor, Chairman
UNAUDITED STATEMENT OF ASSETS AND LIABILITIES
(Expressed in United States Dollars) 30 June 2011
-------------------------------------------- --------------
Assets
Investment in CATCo Reinsurance Fund Ltd.
Diversified Fund, at fair value $ 212,037,571
Cash and cash equivalents 45,686,267
Other assets 28,960
-------------------------------------------- --------------
Total assets 257,752,798
-------------------------------------------- --------------
Liabilities
Amounts due to CATCo Reinsurance Fund Ltd. 44,176,633
Accrued expenses and other liabilities 572,779
Management fee payable 1,207
-------------------------------------------- --------------
Total liabilities 44,750,619
-------------------------------------------- --------------
Net assets $ 213,002,179
-------------------------------------------- --------------
See accompanying notes to unaudited financial statements
UNAUDITED STATEMENT OF OPERATIONS
Period from 20 December 2010 (commencement of operations) to 30
June 2011
(Expressed in United States Dollars)
------------------------------------------------------- ------------
Net investment loss allocated from
CATCo Reinsurance Fund Ltd. - Diversified Fund
Management fee $ (819,876)
Performance fee (622,498)
Professional fees and other (97,740)
Administrative fee (61,070)
Miscellaneous expenses (23,626)
Total net investment loss allocated from (1,624,810)
CATCo Reinsurance Fund Ltd. - Diversified Fund
------------------------------------------------------- ------------
Fund investment income
Interest -
------------------------------------------------------- ------------
Fund expenses
Professional fees and other 292,883
Management fee 68,952
Administrative fee 16,500
------------------------------------------------------- ------------
Total Fund expenses 378,335
------------------------------------------------------- ------------
Net investment loss (2,003,145)
------------------------------------------------------- ------------
Realized and change in unrealized gain on investments
allocated
from CATCo Reinsurance Fund Ltd. - Diversified
Fund
Net change in unrealized appreciation on securities 7,227,292
------------------------------------------------------- ------------
Net gain on investments 7,227,292
------------------------------------------------------- ------------
Net increase in net assets resulting from operations $ 5,224,147
------------------------------------------------------- ------------
See accompanying notes to unaudited financial statements
UNAUDITED STATEMENT OF CHANGES IN NET ASSETS
Period from 20 December 2010 (commencement of operations) to 30
June 2011
(Expressed in United States Dollars)
------------------------------------------------------- --------------
Operations
Net investment loss $ (2,003,145)
Net change in unrealized appreciation on securities 7,227,292
------------------------------------------------------- --------------
Net increase in net assets resulting from operations 5,224,147
------------------------------------------------------- --------------
Capital share transactions
Issuance of shares 213,047,487
Offering costs (5,269,455)
------------------------------------------------------- --------------
Net change in net assets resulting from capital share
transactions 207,778,032
------------------------------------------------------- --------------
Net change in net assets 213,002,179
------------------------------------------------------- --------------
Net assets, beginning of period -
------------------------------------------------------- --------------
Net assets, end of period $ 213,002,179
------------------------------------------------------- --------------
See accompanying notes to unaudited financial statements
UNAUDITED STATEMENT OF CASH FLOWS
Period from 20 December 2010 (commencement of operations) to 30
June 2011
(Expressed in United States Dollars)
----------------------------------------------------------- --------------
Cash flows from operating activities
Net increase in net assets resulting from operations $ 5,224,147
Adjustments to reconcile net increase in net assets
resulting
from operations to net cash used in operating activities:
Net investment loss, realized gain (loss) and change
in (5,602,482)
unrealized appreciation on securities allocated from
CATCo Reinsurance Fund Ltd. - Diversified Fund
Changes in operating assets and liabilities:
Purchase of investment in CATCo Reinsurance Fund Ltd.- (206,435,089)
Diversified Fund
Other assets (28,960)
Amounts due to CATCo Reinsurance Fund Ltd. 44,176,633
Diversified Fund
Accrued expenses and other liabilities 572,779
Management fee payable 1,207
----------------------------------------------------------- --------------
Net cash used in operating activities (162,091,765)
----------------------------------------------------------- --------------
Cash flows from financing activities
Proceeds from issuance of shares 213,047,487
Offering costs (5,269,455)
----------------------------------------------------------- --------------
Net cash provided by financing activities 207,778,032
----------------------------------------------------------- --------------
Net change in cash 45,686,267
----------------------------------------------------------- --------------
Cash, beginning of period -
----------------------------------------------------------- --------------
Cash, end of period $ 45,686,267
----------------------------------------------------------- --------------
See accompanying notes to unaudited financial statements
Notes to the Unaudited Financial Statements
1. Nature of operations and summary of significant accounting
policies
CATCo Reinsurance Opportunities Fund Ltd. (the "Fund") is a
closed-ended fund, registered and incorporated as an exempted
mutual fund company in Bermuda on 30 November 2010 and commenced
operations on 20 December 2010. The Fund is organised as a feeder
fund to invest substantially all of its assets in CATCo Diversified
Fund (the "Master Fund"). The Master Fund is a segregated account
of CATCo Reinsurance Fund Ltd. a mutual fund company incorporated
in Bermuda and registered as a segregated account company under the
Segregated Accounts Company Act 2000, as amended (the "SAC Act").
Pursuant to an investment management agreement, the Fund is managed
by CATCo Investment Management Ltd. (the "Investment Manager").
Refer to the Fund's prospectus for more information.
The Fund's Shares are listed and traded on Specialist Fund
Market ("SFM"), a market operated by the London Stock Exchange. The
Fund's Shares are also listed on the Bermuda Stock Exchange
following the Secondary Listing on 20 May 2011.
The objective of the Master Fund is to give the shareholders the
opportunity to participate in the investment returns of various
insurance-based instruments, including preference shares through
which the Master Fund would be exposed to reinsurance risk,
insurance-linked securities (such as notes, swaps and other
derivatives), and other financial instruments. All of the Master
Fund's exposure to reinsurance risks is obtained through its
investment (via preferred shares) in CATCo-Re Ltd. (the
"Reinsurer").
Basis of Presentation
The unaudited financial statements are expressed in United
States dollars and have been prepared in conformity with accounting
principles generally accepted in the United States of America
("GAAP") as detailed in the Financial Accounting Standards Board's
Accounting Standards Codification.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid
investments, such as money market funds, that are readily
convertible to known amounts of cash and have original maturities
of three months or less.
Valuation of Investment in Master Fund
The Fund records its investment in the Master Fund at fair value
based upon an estimate made by the Investment Manager, in good
faith and in consultation or coordination with the Administrator
where practicable, using what the Investment Manager believes in
its discretion are appropriate techniques consistent with market
practices for the relevant type of investment. Fair valuation in
this context depends on the facts and circumstances of the
particular investment, including but not limited to prevailing
market and other relevant conditions, and refers to the amount for
which a financial instrument could be exchanged between
knowledgeable, willing parties in an arm's length transaction. Fair
value is not the amount that an entity would receive or pay in a
forced transaction or involuntary liquidation.
Investment Transactions and Related Investment Income and
Expense
The Fund records its proportionate share of the Master Fund's
income, expenses, and realized and changes in unrealized gains and
losses on a monthly basis. In addition, the Fund incurs and accrues
its own expenses.
1. Nature of operations and summary of significant accounting
policies (continued)
Financial Instruments
The fair values of the Fund's assets and liabilities, which
qualify as financial instruments under ASC 825, Financial
Instruments, approximate the carrying amounts presented in the
statement of assets and liabilities.
Income Taxes
Under the laws of Bermuda, the Fund is generally not subject to
income taxes, until 31 March 2035. However, certain United States
dividend income and interest income may be subject to a 30%
withholding tax. Further, certain United States dividend income may
be subject to a tax at prevailing treaty or standard withholding
rates with the applicable country or local jurisdiction.
The Fund is required to determine whether its tax positions are
more likely than not to be sustained upon examination by the
applicable taxing authority, including resolution of any related
appeals or litigation processes, based on the technical merits of
the position. The tax benefit recognized is measured as the largest
amount of benefit that has a greater than fifty percent likelihood
of being realized upon ultimate settlement with the relevant taxing
authority. De-recognition of a tax benefit previously recognized
results in the Fund recording a tax liability that reduces ending
net assets. Based on its analysis, the Fund has determined that it
has not incurred any liability for unrecognized tax benefits as of
30 June 2011. However, the Fund's conclusions may be subject to
review and adjustment at a later date based on factors including,
but not limited to, on-going analyses of and changes to tax laws,
regulations and interpretations thereof.
The Fund recognizes interest and penalties related to
unrecognized tax benefits in interest expense and other expenses,
respectively. No interest expense or penalties have been recognized
as of and for the period ended 30 June 2011.
Generally, the Fund is subject to income tax examinations by
major taxing authorities for all tax years since its inception.
The Fund may be subject to potential examination by U.S. federal
or foreign jurisdiction authorities in the areas of income taxes.
These potential examinations may include questioning the timing and
amount of deductions, the nexus of income among various tax
jurisdictions and compliance with U.S. federal or foreign tax
laws.
Use of Estimates
The preparation of unaudited financial statements in conformity
with accounting principles generally accepted in the United States
of America requires the Fund's management to make estimates and
assumptions that affect the amounts disclosed in the unaudited
financial statements and accompanying notes. Actual results could
differ from those estimates.
2. Concentration of Credit Risk
In the normal course of business, the Fund maintains its cash
balances in financial institutions, which at times may exceed
federally insured limits. The Fund is subject to credit risk to the
extent any financial institution with which it conducts business is
unable to fulfill contractual obligations on its behalf. Management
monitors the financial condition of such financial institutions and
does not anticipate any losses from these counterparties.
3. Capital Share Transactions
As of 30 June 2011, the Fund has authorized capital stock of
500,000,000 unclassified shares of par value $0.0001 per share.
The Fund had an initial placing which closed on 20 December 2011
raising $80,392,000 through the issuance of 80,392,000 Ordinary
Shares. On 31 March 2011, a further $7,358,750 was raised through
an additional issuance of 7,250,000 Ordinary Shares. The Fund had a
further placing opening on 18 May 2011, resulting in $124,446,737
being raised through the issuance of 124,446,737 C Shares on 20 May
2011 and $850,000 being raised through the issuance of 850,000 C
Shares on 23 May 2011.
As of 30 June 2011, the Fund has issued 87,642,000 Class 1
Ordinary Shares and 125,296,737 Class 2 C Shares (collectively the
"Shares").
Transactions in Shares during the period, and the Shares
outstanding and the net asset value ("NAV") per Share as of 30 June
2011 is as follows:
Beginning Shares Shares Ending
Shares Issued Redeemed Shares
----------- ----------- ------------- --------- ------------- -----------
Class 1 -
Ordinary
shares - 87,642,000 - 87,642,000
Class 2 -
C Shares - 125,296,737 - 125,296,737
Beginning Amounts Amounts Ending Ending NAV
Shares Issued Redeemed Net Assets Per Share
----------- ----------- ------------- --------- ------------- -----------
Class 1 -
Ordinary
shares $ - $87,750,750 $ - $90,051,735 $1.0275
Class 2 -
C Shares $ - $125,296,737 $ - $122,950,444 $0.9813
The Fund has been established as a closed-ended fund and, as
such, shareholders do not have the right to redeem their Shares.
The Shares are held in trust by Capita IRG Trustees Limited (the
"Depository") in accordance with the Depository Agreement between
the Fund and the Depository. The Depository holds the Shares and in
turn issues depository interests in respect of the underlying
Shares which have the same rights and characteristics of the
Shares.
The Board of Directors of the Fund (the "Board") has the ability
to issue C Shares during any period when the Master Fund has
designated one or more investments as "Side Pocket Investments".
This typically will happen if a covered or other pre-determined
event has recently occurred or seems likely to occur under an
Insurance- Linked Instrument. In such circumstances, only those
Shareholders on the date that the investment has been designated as
a Side Pocket Investment will participate in the potential losses
and premiums attributable to such Side Pocket investment. This is
achieved by the Fund issuing a tranche of C Shares that will
participate in all of the Master Fund's portfolio other than in
respect of potential losses and premiums attributable to any Side
Pocket Investments in existence at the time of issue. If no Side
Pocket Investments are in existence at the time of proposed issue,
it is expected that the Fund will issue further Ordinary
Shares.
The Board does not currently believe that the Fund will
ultimately suffer any losses arising from the New Zealand and the
Japanese earthquakes which occurred in the first quarter of 2011.
However, potential exposure to these events, including future
unearned premiums, has been designated a Side Pocket Investment
which will be owned entirely by the Ordinary Shareholders on 31
March 2011. For such time as the potential exposure to these events
is designated as a Side Pocket Investment, new shares issued
pursuant to the placing will be issued as C Shares and will have no
exposure to such Side Pocket Investment, nor the future unearned
premium or any potential losses arising from them.
4. Investment Management Agreement
Pursuant to the Investment Management Agreement dated 16
December 2010, the Investment Manager is empowered to formulate the
overall investment strategy to be carried out by the Fund and to
exercise full discretion in the management of the trading,
investment transactions and related borrowing activities of the
Fund in order to implement such strategy.
5. Related Party Transactions
The Investment Manager is entitled to a management fee,
calculated and payable monthly in arrears equal to 1/12 of 1.5% of
the net asset value of the Fund which is not attributable to the
Fund's investment in the Master Fund Shares as at the last calendar
day of each calendar month. Management and performance fees are
charged in the Master Fund at 1.5% p.a and 10% p.a. respectively.
Qatar Insurance Company, an affiliate of the Investment Manager,
holds 12.8% of voting rights of the Shares issued in the Fund. In
addition, two of the Directors of the Fund and two of the directors
of the Master Fund are also Shareholders of the Fund.
6. Administrator
Prime Management Limited (the "Administrator") serves as the
Fund's Administrator and performs certain administrative and
clerical services on behalf of the Fund. For the provision of the
service under the Administration Agreement, the Administrator
receives an annual flat fee.
7. Indemnifications or Warranties
In the ordinary course of its business, the Fund may enter into
contracts or agreements that contain indemnifications or
warranties. Future events could occur that lead to the execution of
these provisions against the Fund. Based on its history and
experience, management believes that the likelihood of such event
is remote.
8. Subsequent Events
There are no subsequent events of which management is aware that
would materially impact the unaudited financial statements or the
notes thereto.
These unaudited financial statements were approved by management
and Board of Directors and available for issuance on 10 August
2011. Subsequent events have been evaluated through this date.
9. Financial Highlights
Financial highlights for the Ordinary Shares are for the period
20 December 2010 (commencement of operations) to 30 June 2011 while
the C Shares are for the period 20 May 2011 to 30 June 2011 and are
as follows:
Class 1 Class 2
Ordinary Shares C Shares
United States Dollar United States Dollar
Per share operating performance
Net asset value, beginning
of period 1.0000 1.0000
Offering costs (0.0230) (0.0272)
Income (loss) from investment
operations:
Net investment loss (0.0171) (0.0035)
Net gain on investments 0.0676 0.0120
-------------------------------- --------------------- ---------------------
Total from investment
operations 0.0505 0.0085
-------------------------------- --------------------- ---------------------
Net asset value, end of period 1.0275 0.9813
-------------------------------- --------------------- ---------------------
Total return
Total return before
performance fee 3.33% (1.77)%
Performance fee* (0.58) (0.10)
-------------------------------- --------------------- ---------------------
Total return after performance
fee 2.75% (1.87)%
-------------------------------- --------------------- ---------------------
Ratio to average net assets
Expenses other than
performance fee (1.25)% (0.25)%
Performance fee* (0.58) (0.10)
-------------------------------- --------------------- ---------------------
Total expenses after
performance fee (1.83)% (0.35)%
-------------------------------- --------------------- ---------------------
Net investment loss (1.71)% (0.35)%
-------------------------------- --------------------- ---------------------
Returns and ratios shown above are for the period ended June 30,
2011 and have not been annualized.
* The performance fee is charged in the Master Fund.
For further information, please contact:
Jason Bibb
CATCo Investment Management Ltd
Telephone: +1 (441) 531 2227
Email: jason.bibb@catcoim.com
David Benda / Hugh Jonathan
Numis Securities Limited
Telephone: +44 (0) 20 7260 1000
Michael Toyer / John Whiley
Prime Management Ltd
Tel: +1 (441) 295 0329
- ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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