HAMILTON, Bermuda - October 31, 2016 -
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 third
quarter of 2016.
The Company's net income and operating income was
$3.3 million ($0.38 per share) for the third quarter of 2016 and
$10.3 million ($1.17 per share) for the nine months ended
September 30, 2016. The Company's fully converted book value
per common share was $20.44 at September 30, 2016, reflecting
a 1.9% increase for the quarter and a 5.5% increase year-to-date,
each inclusive of dividends declared in such periods.
Reinsurance premiums written for the current
quarter were $7.8 million increasing $1.9 million compared to the
same period in 2015. The current quarter's reinsurance premium
growth resulted from a greater level of quota share premium in the
current period which is recognized more evenly throughout the year
compared to a year ago when a greater percentage of premiums
related to excess of loss contracts which were recognized at
contract inception. On a year to date basis, the current
period's reinsurance premiums written of $34.5 million were 2.6% or
$0.9 million higher than the prior year.
The combined ratio for the current quarter was
63.5% compared to 50.8% in the same period a year ago. The increase
in the combined ratio was driven by higher loss and loss adjustment
expenses and higher reinsurance acquisition costs partially offset
by lower general and administrative expenses. Loss and loss
adjustment expenses for the current quarter were $2.6 million
compared to $1.4 million in the same period a year ago as a result
of a higher frequency of losses from smaller events.
Reinsurance acquisition costs were $2.9 million in the current
period compared to $2.0 million a year ago due to the larger
concentration of quota share business which maintains a higher
acquisition cost. General and administrative expenses for the
current quarter were $1.1 million, or $0.2 million lower than a
year ago due to lower performance fees based on reduced
profitability. On a year to date basis, the combined ratio was
66.4% in the current period compared to 46.1% in the prior
period. The deterioration in the current period's year to
date combined ratio was largely driven by a significantly higher
level of industry global catastrophe losses compared to a year ago,
partially offset by reduced general and administrative expenses,
reflecting lower performance fees.
During the third quarter of 2016, the Company
declared a regular dividend of $0.30 per common share, which was
paid on October 14, 2016.
Adam Szakmary, President and CEO, commented: "Our
third quarter and year to date results reflect our effective
underwriting and risk management capabilities as we generated
strong profitability despite a greater frequency of global loss
events in 2016. Our strategy of exclusively focusing on
catastrophe exposures to create a portfolio of risks diversified
across global geographies, products and insurers continues to
generate attractive shareholder returns."
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. (NYSE: ENH), 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.
Contacts
Investor Relations
Phone: +1 441 278 0988
Email: investorrelations@endurance.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, 2015 and Quarterly Report on Form 10-Q
for the quarter ended June 30, 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
reports on Form 10-K and Form 10-Q 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)
|
|
September 30, 2016 |
|
December 31, 2015 |
Assets |
|
(Unaudited) |
|
|
Cash and
cash equivalents |
|
$ |
4.7 |
|
|
$ |
1.0 |
|
Cash and
cash equivalents pledged as collateral |
|
3.1 |
|
|
5.1 |
|
Reinsurance premiums receivable |
|
14.2 |
|
|
15.9 |
|
Deferred
reinsurance acquisition costs |
|
0.5 |
|
|
0.1 |
|
Funds
held by reinsured companies as collateral |
|
180.8 |
|
|
195.3 |
|
Other
assets |
|
1.3 |
|
|
0.2 |
|
Total Assets |
|
$ |
204.6 |
|
|
$ |
217.6 |
|
Liabilities |
|
|
|
|
Loss and
loss adjustment expense reserves |
|
$ |
10.3 |
|
|
$ |
4.0 |
|
Unearned
reinsurance premiums |
|
3.7 |
|
|
1.3 |
|
Debt |
|
- |
|
|
13.0 |
|
Reinsurance balances payable |
|
7.1 |
|
|
7.6 |
|
Other
liabilities |
|
4.3 |
|
|
4.1 |
|
Total Liabilities |
|
25.4 |
|
|
30.0 |
|
Shareholders' Equity |
|
|
|
|
Common
Shares and additional paid-in capital |
|
8.8 |
|
|
8.8 |
|
Additional paid-in capital |
|
165.4 |
|
|
165.3 |
|
Retained
earnings |
|
5.0 |
|
|
13.5 |
|
Total Shareholders' Equity |
|
179.2 |
|
|
187.6 |
|
Total Liabilities and Shareholders' Equity |
|
$ |
204.6 |
|
|
$ |
217.6 |
|
Common shares outstanding (000s) |
|
8,756 |
|
|
8,752 |
|
Common and common equivalent shares outstanding
(000s) |
|
8,769 |
|
|
8,762 |
|
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 September 30, |
|
Nine Months Ended September 30, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
|
|
|
|
|
|
|
Reinsurance premiums written |
|
$ |
7.8 |
|
|
$ |
5.9 |
|
|
$ |
34.5 |
|
|
$ |
33.6 |
|
Change in
net unearned reinsurance premiums |
|
2.6 |
|
|
3.6 |
|
|
(2.4 |
) |
|
(4.6 |
) |
Net
reinsurance premiums earned |
|
10.4 |
|
|
9.5 |
|
|
32.1 |
|
|
29.0 |
|
Net loss
from derivative instruments |
|
(0.5 |
) |
|
(0.3 |
) |
|
(0.5 |
) |
|
(0.3 |
) |
Total
revenues |
|
9.9 |
|
|
9.2 |
|
|
31.6 |
|
|
28.7 |
|
Expenses |
|
|
|
|
|
|
|
|
Underwriting expenses: |
|
|
|
|
|
|
|
|
Loss and
loss adjustment expenses - current year |
|
2.9 |
|
|
1.2 |
|
|
10.1 |
|
|
2.6 |
|
Loss and
loss adjustment expenses - prior year |
|
(0.3 |
) |
|
0.2 |
|
|
0.3 |
|
|
(0.3 |
) |
Acquisition costs |
|
2.9 |
|
|
2.0 |
|
|
7.2 |
|
|
6.5 |
|
General
and administrative expenses |
|
1.1 |
|
|
1.3 |
|
|
3.7 |
|
|
4.5 |
|
Non-underwriting expenses: |
|
|
|
|
|
|
|
|
Interest
expense |
|
- |
|
|
0.1 |
|
|
- |
|
|
0.1 |
|
Total
expenses |
|
6.6 |
|
|
4.8 |
|
|
21.3 |
|
|
13.4 |
|
Net income and comprehensive income |
|
$ |
3.3 |
|
|
$ |
4.4 |
|
|
$ |
10.3 |
|
|
$ |
15.3 |
|
Per share data: |
|
|
|
|
|
|
|
|
Basic and
diluted earnings per Common Share |
|
$ |
0.38 |
|
|
$ |
0.50 |
|
|
$ |
1.17 |
|
|
$ |
1.74 |
|
Dividends
declared per Common Share and RSU(1) |
|
0.30 |
|
|
0.30 |
|
|
2.14 |
|
|
1.56 |
|
Insurance ratios: |
|
|
|
|
|
|
|
|
Loss and
loss adjustment expense ratio |
|
25.0 |
% |
|
15.3 |
% |
|
32.3 |
% |
|
8.1 |
% |
Acquisition cost ratio |
|
28.2 |
% |
|
21.3 |
% |
|
22.4 |
% |
|
22.5 |
% |
General
and administrative expense ratio |
|
10.3 |
% |
|
14.2 |
% |
|
11.7 |
% |
|
15.5 |
% |
Combined
ratio |
|
63.5 |
% |
|
50.8 |
% |
|
66.4 |
% |
|
46.1 |
% |
RSU = restricted share unit
(1) The nine month
period ended September 30, 2016 includes a special dividend
with respect to 2015 of $1.24 per common share and RSU, which was
declared and paid during the first quarter of 2016.
BLUE CAPITAL REINSURANCE HOLDINGS
LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
(In millions of U.S. dollars)
Unaudited
|
|
Total
shareholders'
equity |
|
Common
Shares, at
par value |
|
Additional
paid-in
capital |
|
Retained
earnings |
Balance
at January 1, 2016 |
|
$ |
187.6 |
|
|
$ |
8.8 |
|
|
$ |
165.3 |
|
|
$ |
13.5 |
|
Net income |
|
10.3 |
|
|
- |
|
|
- |
|
|
10.3 |
|
Expense
recognized for RSUs |
|
0.1 |
|
|
- |
|
|
0.1 |
|
|
- |
|
Dividends
declared on Common Shares and RSUs |
|
(18.8 |
) |
|
- |
|
|
- |
|
|
(18.8 |
) |
Balance at September 30, 2016 |
|
$ |
179.2 |
|
|
$ |
8.8 |
|
|
$ |
165.4 |
|
|
$ |
5.0 |
|
|
|
Total
shareholders'
equity |
|
Common
Shares, at
par value |
|
Additional
paid-in
capital |
|
Retained
earnings |
Balance
at January 1, 2015 |
|
$ |
180.5 |
|
|
$ |
8.8 |
|
|
$ |
165.2 |
|
|
$ |
6.5 |
|
Net
income |
|
15.3 |
|
|
- |
|
|
- |
|
|
15.3 |
|
Expense
recognized for RSUs |
|
0.1 |
|
|
- |
|
|
0.1 |
|
|
- |
|
Dividends
declared on Common Shares and RSUs |
|
(13.7 |
) |
|
- |
|
|
- |
|
|
(13.7 |
) |
Balance
at September 30, 2015 |
|
$ |
182.2 |
|
|
$ |
8.8 |
|
|
$ |
165.3 |
|
|
$ |
8.1 |
|
BOOK VALUE AND
FULLY CONVERTED BOOK VALUE PER COMMON SHARE(1)
Unaudited
|
|
September 30, 2016 |
|
June 30, 2016 |
|
Dec. 31, 2015 |
|
September 30, 2015 |
Book value per share numerator (in
millions of U.S. dollars): |
|
|
|
|
|
|
|
|
[A] Shareholders' Equity (in millions of U.S.
dollars) |
|
$ |
179.2 |
|
|
$ |
178.5 |
|
|
$ |
187.6 |
|
|
$ |
182.2 |
|
Book value per share denominators (in
thousands of shares): |
|
|
|
|
|
|
|
|
[B] Common Shares outstanding |
|
8,756 |
|
|
8,756 |
|
|
8,752 |
|
|
8,752 |
|
Restricted Share Units outstanding |
|
13 |
|
|
13 |
|
|
10 |
|
|
7 |
|
[C] Fully converted book value per common
share denominator |
|
8,769 |
|
|
8,769 |
|
|
8,762 |
|
|
8,759 |
|
Book value per common share [A]/[B] |
|
$ |
20.47 |
|
|
$ |
20.38 |
|
|
$ |
21.44 |
|
|
$ |
20.82 |
|
Fully converted book value per common share
[A]/[C] |
|
$ |
20.44 |
|
|
$ |
20.35 |
|
|
$ |
21.41 |
|
|
$ |
20.80 |
|
Change
in fully converted book value per common share:(2) |
|
|
|
|
|
|
|
|
From June
30 2016 |
|
1.9 |
% |
|
|
|
|
|
|
From
December 31, 2015 |
|
5.5 |
% |
|
0.027 |
|
|
|
|
From
September 30, 2015 |
|
8.9 |
% |
|
0.115 |
|
|
|
|
(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 $0.30, $2.14 and $2.14 during the three, nine
and twelve month periods ended September 30, 2016,
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 2015 Form 10-K and June 30, 2016
Form 10-Q, 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 Manager (the
"Manager") monitors our net exposure to any one catastrophe loss
event in any single zone within certain broadly defined major
catastrophe zones. On June 1, 2016 our 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 September 30, 2016. 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 Losses
For 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 June 1, 2016 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 September 30,
2016
Shareholders' Equity |
U.S. -
Florida hurricane |
|
$ |
54 |
|
|
1 in 100 year |
|
30 |
% |
Japan
earthquake |
|
32 |
|
|
1 in 250 year |
|
18 |
% |
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 June 1, 2016 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
September 30, 2016, 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
September 30, 2016.
Our single event loss estimates represent
snapshots as of June 1, 2016. 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 June 1, 2016 to September 30, 2016.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Endurance Specialty Holdings Ltd via
Globenewswire
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