CATCo Reinsurance Opps Fund Ltd Preliminary 2012 portfolio & SP investment update (3809H)
11 July 2012 - 4:00PM
UK Regulatory
TIDMCAT
RNS Number : 3809H
CATCo Reinsurance Opps Fund Ltd
11 July 2012
CATCo Reinsurance Opportunities Fund Ltd. (the "Company")
Preliminary 2012 portfolio and side pocket investment update
To: SFM, London Stock Exchange Date: 11 July 2012
and the Bermuda Stock Exchange
The Company's Ordinary Shareholders are indirectly exposed to
potential losses arising from the New Zealand earthquake that
occurred on 22 February 2011 and the Japan earthquake that occurred
on 11 March 2011 (respectively, the "NZ Exposure" and the "Japan
Exposure") through the Company's investment in CATCo Reinsurance
Fund Ltd - Diversified Fund (the "Master Fund") and ultimately
through CATCo-Re Ltd. ("CATCo-Re").
The Company's C Shareholders are not exposed to the NZ or Japan
Exposures and do not participate in any losses or premiums
attributable thereto.
The Company's investment manager, CATCo Investment Management
Ltd (the "Investment Manager"), has recently held meetings with the
two retrocessional reinsurance counterparties (the "Reinsurance
Counterparties") that represent the NZ and Japan Exposures and has
been informed that both Reinsurance Counterparties have implemented
a 100% loss reserve on their respective balance sheets associated
with CATCo-Re's protections. As a consequence, the Master Fund's
Board of Directors has resolved to include the same loss reserve
provision in the Net Asset Value calculation as at 30 June 2012,
which will, in turn, be reflected in the Company's Net Asset
Value.
Shareholders should note that this is a loss reserve, and not a
crystalised loss, as CATCo-Re's protections are based on the actual
paid claims. Based on the most recent loss advice, one Reinsurance
Counterparty, representing 31.4% of the Japan Exposure, has been
fully paid by CATCo-Re, so this loss is settled with them. This
Reinsurance Counterparty also represents 100% of the NZ Exposure,
but, to date, has not sought any loss payment from CATCo-Re related
to this. The other Reinsurance Counterparty, representing 68.6% of
the Japan Exposure, has not sought any loss payment from CATCo-Re
to date.
The Investment Manager has recently sought to commute the NZ and
Japan Exposures once the Reinsurance Counterparties' loss reserves
were better known. However, the proposals were rejected by the
Reinsurance Counterparties due to the expected size of their
respective reinsurance loss reserves.
Over the past 15 months, the Investment Manager has attended
numerous meetings with the Reinsurance Counterparties and, in
January 2012, CATCo-Re had implemented loss reserves representing
100% of the NZ Exposure and 30% of the Japan Exposure. The lower
reserve level on the Japan Exposure was driven by the fact that
CATCo-Re had specific retrocessional protections in place at the
time of the Japan earthquake. According to the Reinsurance
Counterparty representing 68.6% of the Japan Exposure, these
protections were expected to shield CATCo-Re from any losses in
relation to Japan. However, this Reinsurance Counterparty has now
significantly increased their Japan earthquake loss reserves. Prior
to the most recent loss advice from this Reinsurance Counterparty,
it had always been suggested that the insurance reserves being held
were well below those detailed in loss event deductibles set out in
the relevant Reinsurance Agreements. As such, the Investment
Manager had maintained the opinion, based on discussions with the
Reinsurance Counterparty, that it did not believe that there were
any potential losses related to this counterparty's Japan Exposure.
However, the earthquake and tsunami losses in the Tohoku region of
Japan last year have continued to escalate.
For illustrative purposes only, had the 100% loss reserve been
put in place at 31 December 2011 this would have equated to a NAV
per Ordinary Share of $0.8950.
The Board of Directors is currently assessing the most efficient
manner by which to merge the C Shares, which have no exposure to
the NZ and Japanese Exposures, with the Ordinary Shares.
-Ends-
For further information, please contact:
Jason Bibb, Director
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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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