Blue Capital Re breaks-even in Q4 on California wildfire & hurricanes

New York stock exchange listed fully collateralized reinsurer Blue Capital Reinsurance Holdings Ltd., a subsidiary of Sompo International Holdings Ltd., has reported break-even result for the fourth-quarter of 2017 following impacts from the California wildfires and additional losses from hurricanes earlier in the year.

Blue Capital Re reported a result of $0.0 million (or $0.00 per share) for Q4 2017 and a net loss of $43.2 million (or $4.94 per share) for the year ended December 31st 2017.

The company underwrites catastrophe reinsurance on a fully collateralized basis and invests in other insurance-linked securities (ILS), with underwriting, operations and management provided by the ILS asset manager unit of Sompo International, Blue Capital Management Ltd.

The impacts of the major third-quarter hurricanes continued to filter through into reinsurance and collateralized underwriters in Q4 and Blue Capital Re has increased its loss estimates which has been accounted for in Q4 of 2017.

The California wildfires are the other major catastrophe event that drove losses at Blue Capital Re in Q4 with the end result being reported loss and loss adjustment expenses of $7.3 million during the quarter.

Michael J. McGuire, Chairman and CEO of the company, commented on the quarter and year, “Our 2017 results were driven by the significant catastrophe losses which included a record setting three Category 4 hurricanes hitting the United States, earthquakes in Mexico and wildfires in California. Collectively, the 2017 events are estimated to have generated insurance industry losses in excess of $100 billion.

“Our portfolio performed in line with our modeled expectations and our teams are fully engaged in efficiently settling claims for our customers. Looking forward, pricing improvements are expected through 2018, particularly in loss affected areas. At January 1^st renewals, pricing reflected the impact of these events as our renewing business experienced an overall price increase of 12% — a reversal of pricing declines experienced in recent years. We remain well positioned to participate in the improving market for the benefit of our shareholders.”

Blue Capital Re recently said that it has increased its median return target for 2018 to as much as 14.9%, due to the expectation of prices rises across the reinsurance sector. The company said that some loss affected contracts are expected to see rate increases of as much as 25% which will boost return potential for the year.

The reinsurer underwrote $46.1 million of premiums during the full-year of 2017, up by $2.9 million over the prior year period.

The results reflect a company that underwrites pure property catastrophe risks, predominantly in the United States markets and hence Blue Capital Re was always going to be exposed to the major losses of 2017.

Being a stock exchange listed reinsurance company, Blue Capital Re offers investors an interesting and unique way to access similar returns to the broader ILS fund market through a more accessible investment vehicle.