Blue Capital hits $790m, collateralized business grows at Montpelier Re

Blue Capital Management Ltd., the third-party reinsurance capital investment manager of Bermudian reinsurer Montpelier Re, has grown its assets under management to $790m as the collateralized reinsurance segment increased its contribution.

The collateralized reinsurance business at Montpelier Re has become increasingly important to the firm, allowing it to service cedent clients with both rated paper and fully-collateralized capacity. The management and deployment of third-party capital will also has the beneficial effect of reducing the reinsurers overall cost-of-capital, helping it to be more competitive in a challenging market environment.

In fact, Montpelier Re has been using the Blue Capital operations as one of its areas to maintain premiums, while it has been pulling back on underwriting at Montpelier Bermuda. Alongside the Montpelier at Lloyd’s unit and growth in specialty reinsurance lines, the collateralized reinsurance segment has been growing steadily.

President and CEO of Montpelier Re Christopher Harris commented on the reinsurers results; “The fourth quarter marked a strong end to a successful year for Montpelier. All operating segments delivered strong profitability, driving an increase in book value per share of 15% for the year. Our underwriting teams executed well, and we continued to see steady growth in capital under management at Blue Capital, which now stands at $790 million.”

Mr. Harris continued; “Based on the January renewals, we expect our net written premiums for the first quarter of 2015 to be flat versus the prior year, with planned growth in Individual Risk and Other Specialty lines offsetting the impact of targeted reductions in Property Catastrophe.”

Blue Capital operates the London stock exchange listed Blue Capital Global Reinsurance Fund Ltd., the New York listed collateralized reinsurer Blue Capital Global Reinsurance Ltd., as well as open ended funds, private mandates and sidecar type offerings.

Growth in this area, with assets under management now reaching $790m (up from $600m at the end of December 2013), has helped Montpelier Re to a growing income from the collateralized reinsurance business.

In its results, announced late yesterday, Montpelier Re reported fourth-quarter collateralized reinsurance premiums written of $8m, compared to just $1.5m in Q4 2013. For the full year 2014 premiums written in the collateralized reinsurance segment reached $83.4m, compared to $36.8m for 2013.

In terms of premiums earned the increase is even more significant, with collateralized reinsurance premiums earned of $22m in Q4 2014, compared to $8.7m in Q4 2013. While full-year 2014 premiums earned from collateralized reinsurance business hit $84.6m, up from $26.2m in 2013.

This growth in the collateralized reinsurance business at Montpelier Re, thanks to Blue Capital, alongside growth at Lloyd’s in specialty lines, has enabled the reinsurer to grow its overall consolidated premiums written to $650.9, from $603.1m in 2013. Premiums earned also grew to $645.2m, up from 2013’s $599.6m.

Montpelier Re’s Blue Capital Reinsurance Holdings Ltd., the New York Stock Exchange listed fully-collateralized reinsurer, also reported its quarterly results yesterday. The reinsurer achieved a total return to its shareholders of 8.7% for the year and announced a new special dividend of $0.66 per common share, which is payable in March.

William Pollett, President and CEO, commented; “We are pleased to have successfully concluded our first full year of operations generating a total return for our shareholders, as measured by growth in book value per share plus dividends, of 8.7%. We declared $1.56 of dividends for the full year, representing a dividend yield of 7.8% on the original IPO price of $20. This return was achieved by generating a combined ratio of 66.7%, a solid result by any standards.”

Blue Capital continues to demonstrate its importance as a strategy to Montpelier Re, helping it to navigate its way through a challenging reinsurance market environment particularly in property catastrophe underwriting where the collateralized capacity is perhaps most efficiently put to work.

At a time when Montpelier Re is reportedly assessing options for a sale or other restructure, the Blue Capital collateralized reinsurance business is providing attractive returns to investors and helping the reinsurer to maintain growth and earnings.