Blue Capital Reinsurance Holdings Ltd. (BCRH), the exchange listed fully-collateralized reinsurance subsidiary of Bermuda reinsurer Montpelier Re, has reported a strong result for its first full quarter of operations.
Blue Capital Re is rather a unique model in the insurance linked investment space, offering collateralized reinsurance in the property catastrophe market as well as investing in various insurance-linked securities, in order to provide its shareholders with returns.
It operates as almost a sidecar facility in some respects, with the option to take quota shares from its parent Montpelier Re, but also underwrites reinsurance directly with its own client base as well as investing in other insurance and reinsurance linked securities and investment opportunities. For investors it resembles a fund based approach to investing in the sector with the benefits of listed share liquidity.
Q1 of 2014 is the reinsurers first full quarter of operations, having formed last June and then listed on the New York Stock Exchange in November.
Blue Capital Re reports that its book value per share rose by $0.40 during the quarter to reach $20.20 at March 31, 2014. The result reflects a 3.5% increase inclusive of dividends declared during the quarter. Net income and operating income for Blue Capital Re was reported as $6.1m (or $0.70 per share).
During Q1 of 2014 Blue Capital Re reports that it bound indemnity reinsurance contracts with expected total annual premiums of $41.0m and wrote $21.8m in premium. Since its inception, business generated by Blue Capital Re collectively represents $181.9m in total reinsurance contract limit.
Approximately 40% of the capital allocated to underwriting by Blue Capital Re was deployed into first event reinsurance coverages, 40% supported a catastrophe reinsurance quota share arrangement and the balance was deployed in support of second and subsequent event reinsurance coverages.
Blue Capital Re earned $10.2m of reinsurance premiums during the first quarter, representing approximately 25% of the expected total annual premium associated with its in-force reinsurance contracts at March 31, 2014, so putting it on target for the year. Another $0.1m was reported as earned from a derivative contract.
Low catastrophe losses helped Blue Capital Re to attain an enviable combined ratio of just 41%. It reported loss and loss adjustment expenses for the quarter at $0.9m, which largely represents losses that are believed to have occurred but for which no claims have been reported, which shows a disciplined attitude to reserving.
Blue Capital Re expects to close on a $20m revolving credit facility during the second quarter of 2014, it reports, which will be put to use as working capital, as and when the firm requires liquidity, allowing it to fully deploy all of the net proceeds it raised at its launch over the rest of this year.
William Pollett, President and CEO, commented on the strong start; “I am pleased to report that we generated a 3.5% increase in book value per share during our first full quarter of operations. Our underwriting team executed well during the key January renewal period, enabling us to construct a diversified portfolio of risks in-line with our expectations.”
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