Blue Capital Global Reinsurance Fund first-half NAV growth beats 2014

by Artemis on August 27, 2015

London and Bermuda stock exchange listed reinsurance and insurance linked securities (ILS) investment fund, the Blue Capital Global Reinsurance Fund, has seen stronger NAV performance in the first-half of 2015, compared to a year earlier.

In the first six months of 2015 the fund’s investment manager, Blue Capital Management Ltd., a subsidiary of Bermudian insurance and reinsurance firm Endurance (following its acquisition of Montpelier Re), reports that the net asset value (NAV) of the fund’s Ordinary Shares increased by 1.9% after the impact of dividends declared.

In the first-half of 2014 the fund only saw an NAV increase of 1%, again after the impact of dividends. However, by the end of 2014 the fund reported an impressive 8.8% total net asset value return, due to the fact that the majority of its performance is delivered by U.S. hurricane and named storm risks through the second half of the year.

So that suggests that, after a much stronger start to 2015 where the NAV has grown by almost double the rate seen in 2014, the Blue Capital Global Reinsurance Fund may be in line for another good year, as long as major losses continue to remain scarce.

At the 30th June 2015 the fund had $212.9m invested in the master fund, Blue Capital Global Reinsurance SA-I, which represents all of the working capital. In turn, the master fund invested approximately 95% of its deployable assets in reinsurance-linked instruments and preferred shares of reinsurer Blue Water Re Ltd., which deployed US$191.1 million of funds across 112 different positions and 47 different clients.

The ILS fund’s NAV per Ordinary Share rose from US$1.0882 at 31st December 2014 to US$1.0751 per share, with a US$0.033 per share dividend declared in January 2015 and paid in March 2015, during the first six months of the year. The Ordinary Shares traded at an average discount to their Net Asset Value of 3.91%, during the period.

Continued low levels of global catastrophe loss activity helped the fund during the first six months, and loss events, including adjustments to prior year losses, only reduced the fund’s NAV by approximately US$0.005 per Ordinary Share.

The fund’s portfolio has been deployed largely into U.S. hurricane and named storm related risks, which pay the bulk of their premiums through the second half of the year. Hence, if losses remain low the fund should benefit from these premiums to be able to report a healthy full-year return again.

John Weale, Chairman of the Blue Capital Global Reinsurance Fund, commented; “The Investment Manager will continue to look for opportunities to improve our portfolio and position us for the upcoming renewal season.

“The Company is pleased with the diversified portfolio that the Investment Manager has created, which has attractive risk-adjusted return characteristics, consistent with the investment objectives.”

The directors of the Blue Capital Global Reinsurance Fund said that they may launch another placing programme, subject to demand for the fund’s shares, which would help the fund to grow its capital base further. The fund reports its total assets as $217.16m at the 30th June, up 16% on a year earlier.

It’s going to be interesting to see how the synergies with the larger and more diverse re/insurance business of Endurance can be used to build on the Blue Capital strategies.

With the acquisition only recently completed, it will likely take some time for any new direction to become apparent, but the greater scale and reach of Endurance will bring significant additional expertise to the manager and could result in some interesting opportunities for investors in the future.

Also read:

Szakmary replaces Pollett as CEO of Blue Capital Management.

Blue Capital Reinsurance Holdings beats estimates again, up 6% in 2015.

Blue Capital listed ILS fund portfolio hits 112 positions at renewal.

Blue Capital reports on reinsurance renewal, pricing down just 4%.

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