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|Blue Capital Reinsurance Holdings Reports Fourth Quarter 2016 Financial Results and Declares Special Dividend|
PEMBROKE, Bermuda - February 1, 2017 - Blue Capital Reinsurance Holdings Ltd. (NYSE:BCRH) ("Blue Capital" or the "Company"), 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 fourth quarter of 2016.
The Company's net income was $4.0 million ($0.46 per share) for the fourth quarter of 2016 and $14.3 million ($1.63 per share) for the twelve months ended December 31, 2016. The Company's fully converted book value per common share was $20.90 at December 31, 2016, reflecting a 2.3% increase for the quarter and a 7.6% increase year-to-date, each inclusive of dividends declared in both periods.
Reinsurance premiums written for the current quarter and full year 2016 were $8.7 million and $43.2 million, increasing by $3.7 million and $4.6 million compared to the same periods in 2015 primarily due to increased participation in quota share contracts, partially offset by a decrease in direct written premiums.
The combined ratio for the current quarter and full year 2016 was 61.1% and 65.0% compared to 42.4% and 45.3% in the same periods in 2015. The increases in the current period combined ratios were driven by higher loss and loss adjustment expense ratios partially offset by lower acquisition and general and administrative expense ratios. Loss and loss adjustment expenses were $3.4 million for the current quarter and were $13.7 million for the current year compared to $0.3 million and $2.6 million, respectively, in 2015. The increase in loss and loss adjustment expenses was predominantly driven by a higher level of 2016 global loss activity, including Hurricane Matthew and the New Zealand earthquake in the fourth quarter and the Canadian wildfires, the Japanese earthquake, and U.S. severe weather activity, which occurred earlier in the year. General and administrative expenses were lower in the current periods compared to a year ago largely due to lower performance fees reflecting the higher catastrophe activity. Acquisition expenses were lower in the current periods compared to a year ago due to lower profit commissions.
The Company's Board of Directors has declared a special dividend of $0.59 per common share, which is payable on March 15, 2017 to all shareholders of record as of February 28, 2017. This special dividend, together with the regular dividends declared during each of the first three quarters of 2016, represents 90.6% of the Company's "Distributable Income" with respect to 2016. Distributable Income, a non-GAAP measure, has been defined within the Company's capital management policy to be its net income plus (minus) non-cash expenses (revenues) recorded in net income for the period.
Adam Szakmary, President and CEO, commented: "2016 was a solid year for Blue Capital as we generated growth in book value of 7.6% inclusive of dividends and a combined ratio of 65.0% against a backdrop of the costliest year for industry losses within the last five years. These results led to our declaring a special dividend for the third year in a row which, when combined with our previous 2016 regular quarterly dividends, represents a return of over 90% of total annual earnings. 2016 was also the first full year of the Company's operations since Blue Capital Management Ltd. was purchased by Endurance Specialty Holdings Ltd., resulting in greater access by the Company to a larger more diversified catastrophe portfolio, thereby enhancing our ability to effectively select risks and build a higher quality portfolio designed to generate shareholder value."
January Renewal Update
As of January 31, 2017 the Company bound indemnity reinsurance contracts with expected total annual premiums of $35.5 million, a decrease of $2.1 million when compared to the same period in 2016 as a result of a bound portfolio timing change year over year. The business underwritten by the Company is expected to produce a net rate on line for the portfolio of 21.2%, which is a 1.7% increase when compared to the same period in 2016 due to a shift to greater retrocessional market exposure because of a more favorable pricing environment.
The Company's in-force portfolio deployed as of January 31, 2017 consisted of approximately 29.8% in support of first event reinsurance coverages, 56.3% in support of catastrophe quota share coverages and the balance in support of second and subsequent event reinsurance coverages.
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. Endurance acquired Blue Capital Management Ltd. as part of its acquisition of Montpelier Re Holdings Ltd. and its subsidiaries in July 2015. 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.
BLUE CAPITAL REINSURANCE HOLDINGS LTD.
RSU = restricted share unit
BOOK VALUE AND FULLY CONVERTED BOOK VALUE PER COMMON SHARE(1)
(1) These measures constitute "non-GAAP financial measures" as defined in Regulation G.
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 and September 30, 2016 Forms10-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."
(1) Consisting of France, Germany, Switzerland and Austria.
Single Event Losses
The table that follows details the 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 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, 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
(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.
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 December 31, 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 December 31, 2016.
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.
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