Blue Capital Re beats estimates, book value up 3% for Q1

Blue Capital Reinsurance Holdings Ltd. (BCRH), the NY stock exchange listed collateralized reinsurance subsidiary of Bermuda-based Montpelier Re, beat analysts expectations in its results announcement yesterday.

The reinsurer, established as an insurance-linked investment vehicle to allow a different class of investor to access the strategies of investment manager Blue Capital Management Ltd., reported a first quarter 2015 profit of $5.4m.

Blue Capital Re provides fully collateralized reinsurance to cedents and also invests in some insurance-linked securities (ILS) as well. Investors benefit from a total-return approach, combining book value per share growth and dividends to reap attractive returns.

The net income and operating profit for the quarter translates to $0.62 per share, which beat the expectations of a number of analysts which had expected an average of $0.55 per share.

Blue Capital Re’s fully converted book value per common share hit $20.28 at March 31st, which reflects a 3.0% increase for the quarter and an 8.3% increase for the past twelve months inclusive of dividends.

During the quarter Blue Capital Re underwrote $20.1m of premiums, slightly down in Q1 2014, which translated to revenues of $9.8m, again very slightly down on a year earlier when $10.3m were reported, no real surprise in the current market given the property catastrophe risk focus.

William Pollett, President and CEO, commented; “We had a strong first quarter start in our second year of operations. Our annualized return was 12% for the quarter and the portfolio remains well-positioned going into the mid-year renewal season.”

A special dividend of $0.66 per common share with respect to 2014 business was paid on March 13th and a Q1 2015 regular dividend of $0.30 per share was paid for this quarter. Alongside book value per share the dividends boost the total-return of the reinsurer and this investment strategy.

By returning much of its profit in the form of dividends Blue Capital Re remains a good opportunity for investors to access the reinsurance-linked asset class through a different, stock exchange listed type of collateralized reinsurance vehicle.

The stock exchange listing means investors have the benefits of full, exchange traded liquidity, while also giving greater access to more retail-type investors, as anyone can invest in the exchange listed reinsurance company.

Of course, with Montpelier Re being acquired by Endurance, the Blue Capital Management unit and its vehicles such as Blue Capital Reinsurance Holdings will be changing owners. The combined entity will provide greater access to new opportunities to Blue Capital Re and potentially more chances for diversification as well. That may prove attractive to investors.