Blue Capital Global Reinsurance Fnd Portfolio Update (8066V)

TIDMBCGR

RNS Number : 8066V

Blue Capital Global Reinsurance Fnd

02 February 2017

Blue Capital Global Reinsurance Fund Limited (Ticker: "BCGR")

2 February 2017

Portfolio Update

Blue Capital Global Reinsurance Fund Limited (the "Company" or "BCGR"), whose shares are admitted to trading on the London Stock Exchange's Specialist Fund Market (ticker: BCGR) and the Bermuda Stock Exchange, is pleased to provide an update on the January 2017 reinsurance renewals.

Adam Szakmary, President and CEO of Blue Capital Management Ltd. ("Blue Capital"), commented:

"I am very proud to report that BCGR has now begun its 5(th) year of operation with the continued focus on providing investors access to attractive, largely uncorrelated, investment returns of the traditional reinsurance and insurance linked securities market. The Company's preferred access to risk, proprietary methodology of portfolio construction, and its conservative approach to reserving allowed the Company to deliver superior portfolio returns. The Company posted a total Net Asset Value return (inclusive of dividends) of 8.3 per cent. in 2016, which is down year over year due to an increase in global loss activity.

The Company is also pleased to confirm its successful execution of renewals during the key January period. Although pricing pressures persisted during this renewal period, observed reductions began to moderate at approximately 3 per cent. compared with more significant reductions during previous renewal periods. We remain confident that we can deliver attractive returns for our Shareholders in spite of the current insurance market cycle and the pro forma modelled return expectations for the portfolio constructed are consistent with the Company's target return."

The Company's total investments after the January 2017 renewals reduced by US$25.0 million year over year, resulting in a total investment of US$183.5 million in Blue Capital Global Reinsurance SA--1 (the "Master Fund"). The Master Fund has invested substantially all of its assets in: (i) preferred shares of Blue Water Re Ltd., (ii) industry loss warranty ("ILW") derivatives and (iii) one catastrophe bond. The combined investments represent the deployment of US$177.6 million across 93 different positions and 39 different clients generating US$41.5 million of net insurance premium written and fixed ILW payments which is a decrease of US$3.1 million from the previous year. Changes in premium and exposure are directly attributable to portfolio construction adjustments made in response to changes in market conditions by asset class and region, and the redemption share process.

A further breakdown of the exposure of the current portfolio at 1 January 2017 is set out below.

Portfolio Return Summary(1)

 
 Illustrative Net Aggregate 
  Return Distribution            2017 Portfolio 
------------------------------  --------------- 
 Returns 
------------------------------  --------------- 
     No Loss Return                  14.2% 
    Expected Return Range*        6.4 - 10.1% 
------------------------------  --------------- 
 Probability of: 
------------------------------  --------------- 
     Mean or Greater Return           71% 
     Breakeven or Greater             80% 
     Loss to NAV Greater than 
      5%                              14% 
     Loss to NAV Greater than 
      10%                             10% 
     Loss to NAV Greater than 
      15%                              7% 
     Loss to NAV Greater than 
      25%                              3% 
     Loss to NAV Greater than 
      35%                              2% 
------------------------------  --------------- 
 

1 The portfolio return summary is provided for illustrative purposes only. The projections are derived by reference to the Company's projected portfolio as at 1 January 2017 and do not take into account actual costs, expenses or other factors which are not attributable to the portfolio. As such, the in force portfolio return summary should not in any way be construed as forecasting the Company's actual returns should no losses occur or otherwise.

Exposure Summary

The following unaudited tables provide a breakdown of the current portfolio's exposure by contract type, zone and peril as at 1 January 2017. The current portfolio exposure represents the fair value of the positions held by the Company.

 
                                                   Exposure as 
                                 Exposure           a % of Current   Positions 
 Contract Type                    (US$ millions)    Portfolio         Held 
------------------------------  ----------------  ----------------  ---------- 
 Property Catastrophe Total                161.3             87.9%          86 
------------------------------  ----------------  ----------------  ---------- 
     Prop Cat - First Event 
      XOL                                  143.5             78.2%          72 
     Prop Cat - Subsequent 
      Event XOL                             15.0              8.2%          10 
     Prop Cat - Aggregate XOL                2.8              1.5%           4 
------------------------------  ----------------  ----------------  ---------- 
 Industry Loss Warranty 
  Total                                     20.2             11.0%           6 
------------------------------  ----------------  ----------------  ---------- 
     ILW - Subsequent Event 
      XOL                                   20.2             11.0%           6 
     ILW - First Event XOL                   0.0              0.0%           0 
     ILW - Aggregate XOL                     0.0              0.0%           0 
------------------------------  ----------------  ----------------  ---------- 
 Cat Bond Total                              2.0              1.1%           1 
------------------------------  ----------------  ----------------  ---------- 
 Current Portfolio                         183.5              100%          93 
------------------------------  ----------------  ----------------  ---------- 
 
   XOL = excess of loss                        ILW = Industry Loss Warranty 
 
                                                         Expsoure as 
                                       Exposure           a % of Current   Positions 
 Asset Class                            (US$ millions)    Portfolio         Held 
------------------------------------  ----------------  ----------------  ---------- 
 Traditional                                     161.3             87.9%          86 
------------------------------------  ----------------  ----------------  ---------- 
     Quota Share Retrocessional 
      Agreements                                  72.1             39.3%          3* 
     Indemnity Reinsurance                        63.1             34.4%          71 
     Indemnity Retrocession                       26.1             14.2%          12 
------------------------------------  ----------------  ----------------  ---------- 
 Non-Traditional                                  21.4              21.7           4 
------------------------------------  ----------------  ----------------  ---------- 
     Other non-property catastrophe 
      risks                                       11.3              6.2%           1 
     Industry Loss Warranties                      8.1              4.4%           2 
     Cat Bonds                                     2.0              1.1%           1 
------------------------------------  ----------------  ----------------  ---------- 
 Retrocessional Hedging                            0.8              0.4%           3 
------------------------------------  ----------------  ----------------  ---------- 
 Current Portfolio                               183.5              100%          93 
------------------------------------  ----------------  ----------------  ---------- 
 

*Underlying positions held within the quota share retrocessional agreements totals 1,457

Probable Maximum Loss

The exposures summarised below represent the sum of all collateral invested less reinsurance recoverable. Per the Master Fund's Investment Policy, the net first event Probable Maximum Loss ("PML") in any one zone will not exceed 35 per cent. of the Company's Net Asset Value (at the time the investment is made). For contracts that overlap zones, the total exposure is counted in each of the exposed zones.

Value at Risk ("VaR") represents a 1 in 100 year event for windstorm perils and a 1 in 250 year event for earthquake perils.

 
                                 First Event 
                                  VaR as a 
 Territory / Region / Peril       % of NAV 
------------------------------  ------------ 
 US - Florida Hurricane                31.0% 
------------------------------  ------------ 
 Japan Earthquake                      13.3% 
------------------------------  ------------ 
 US - California Earthquake            12.3% 
------------------------------  ------------ 
 US - Gulf Hurricane                   11.2% 
------------------------------  ------------ 
 US - Northeast Hurricane               8.8% 
------------------------------  ------------ 
 US - MidAtlantic Hurricane             8.3% 
------------------------------  ------------ 
 UK & Ireland Windstorm                 6.6% 
------------------------------  ------------ 
 Japan Windstorm                        4.9% 
------------------------------  ------------ 
 All other territory / region         < 5.0% 
  / peril zones 
------------------------------  ------------ 
 

For further information please contact:

Adam Szakmary,

President and CEO, Blue Capital Management Ltd. [phone]

[e-mail]

Gary Gould [phone]

Jefferies International Limited

Notes to editors

Blue Capital, which serves as the investment manager for both the Company and Blue Water Master Fund Ltd., provides innovative catastrophe reinsurance-linked investment products for institutional and retail investors. Catastrophe reinsurance is an alternative asset class the returns from which have historically been largely uncorrelated to those of other asset classes including global equities, bonds, hedge funds and other alternative investments.

Blue Capital is wholly owned by Endurance Specialty Holdings Ltd. (NYSE: ENH, "Endurance"), a recognized global specialty provider of property and casualty insurance and reinsurance since 2001. Additional information can be found at www.bcgr.bm.

The Company targets a dividend yield of LIBOR plus 6 per cent. per annum(1) on the original issue price of the Ordinary Shares in December 2012 and a net return to Shareholders (comprised of dividends and other distributions to Shareholders together with increases in the Company's Net Asset Value) of LIBOR plus 8 per cent. per annum(1) to be achieved over the longer term, net of fees.

(1 These are targets only and not profit forecasts. There can be no assurance that these targets will be met or that the Company will make any returns or distributions whatsoever or that investors will recover all or any of their investment. Prospective investors should decide for themselves whether or not the target returns and distributions are reasonable or achievable in deciding whether to invest in the Company.)

This information is provided by RNS

The company news service from the London Stock Exchange

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February 02, 2017 03:00 ET (08:00 GMT)