Blue Capital Re helped by lower cat losses, as collateralized portfolio grows

New York stock exchange listed fully collateralized reinsurer Blue Capital Reinsurance Holdings Ltd. reported higher income for the second-quarter as catastrophe losses came in significantly below the prior year. At the same time the company has expanded its underwriting portfolio of collateralized reinsurance year-on-year.

Blue Capital Re is operated by the insurance and reinsurance linked investment specialists Blue Capital Management, a division of Sompo International (previously Endurance). The company offers a novel, stock exchange listed way to access the returns of collateralized reinsurance underwriting, so provides investors with many of the benefits of an ILS fund investment strategy but with greater access to liquidity.

In the second-quarter of 2017 Blue Capital Re underwrote a growing portfolio, with $12.1 million premiums written, up from $9.3 million for the prior year quarter.

The growth seen was predominantly due to “an increase in direct written premium” the company explained, which is positive for investors as a larger and likely broader portfolio will assist in delivering returns.

Helped by a much lower level of major catastrophe losses in the quarter, Blue Capital Re reported a net income of $4.6 million ($0.52 per share) for the second quarter of 2017, up from $2 million in Q2 2016, and $8.7 million ($0.99 per share) for the six months ended June 30th 2017, up from $6.9 million for H1 2016.

The lower level of losses meant that Blue Capital Re’s combined ratio came in at 56.1% for Q2 2017 and 56.3% for the year-to-date compared to 82.0% and 67.8% in the same periods a year ago.

Higher reinsurance acquisition and general and administrative expense ratios partially offset the improved loss ratio, but this is also positive as it implies a better protected portfolio, with the acquisition costs going into enlarging the underwriting book.

The end result is a 2.5% increase in book value per share for the second-quarter and a 9.2% increase over the past twelve months, inclusive of dividends declared.

Michael J. McGuire, Chairman and CEO of the company, commented on the Q2 results; “I am pleased with the strong results we have generated in the first six months of 2017 as evidenced by our excellent underwriting profitability and expanding premium base which led to solid growth in book value per share inclusive of dividends.

“While market conditions remain competitive,  our established long term relationships, our high quality underwriting and portfolio management teams and our strategic alignment with Sompo International have allowed us to maintain an attractive portfolio for our shareholders.”

Blue Capital Re offers a way for investors to access reinsurance linked returns via a stock exchange, which has benefits for certain types of investor and enables Blue Capital to tap into equity investment markets.

Now it is part of the larger Sompo Holdings group, after the acquisition of Endurance, the opportunities to acquire diversified risks will increase and the vehicle will offer an interesting way to piggy-back on the performance of the Sompo International and its underwriting teams.