Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Blue Capital Re experiences positive development as run-off continues


Blue Capital Reinsurance Holdings Ltd., the stock exchange listed, collateralised reinsurer owned by Sompo International Holdings Ltd., has experienced some positive development in prior year losses, as well positive premium adjustments and better than forecast expenses, as its run-off continues.

blue-capital-logoNYSE listed Blue Capital Re is a stock exchange listed vehicle that offered an insurance-linked securities (ILS) fund like return through a listed equity investment.

In recent years the company suffered from the back-to-back major catastrophe losses, as well as the fact it also exhibited the same below net asset value (NAV) valuation issues that have plagued all listed ILS structures so far.

Blue Capital Reinsurance Holdings (Blue Capital Re) shares had consistently been priced at a discount to the vehicles net asset value (NAV), as all listed ILS structures have ended up being. Alongside the catastrophe loss experience suffered and the fact it never achieved significant scale, this has made it harder to sustain the strategy, resulting in the company taking the decision to run-off the portfolio and return capital to its investors in July.

That running off process continues and Blue Capital Re provided an update yesterday, saying that as the winding down of the company continues its net assets in liquidation fell by $4.6 million dollars in Q4 2019, which was largely due to a special distribution to shareholders of $5 million, as it continued to return its capital to investors.

Offsetting that return of capital, the company also explained that it experienced some positive developments during the period.

Blue Capital Re said that it recorded a benefit of roughly $0.4 million during the period, which is related to positive adjustments to premiums and acquisition expenses, which it notes were coupled with “losses that were lower than anticipated.”

That is very positive for the holders of Blue Capital Re shares, as it is evidence the company had reserved prudently for some of the prior year catastrophe events to which it was exposed and has experienced positive development on some positions, as losses turned out to not be as severe as expected.

With the listed vehicle in run-off, investors will be hoping that the valuation and return of capital is as forecast or perhaps better, which positive development can only help the company to achieve.

At a time when other major global reinsurance firms have reported further loss creep in the fourth-quarter of 2019, Blue Capital Re has bucked that trend with a little positive reserve development in the same period.

Michael J. McGuire, Chairman and CEO, commented on the period, “During the fourth quarter, the Company’s orderly runoff continued with the payment of an additional special distribution that increased our total 2019 special distributions to over 20% of the June 30, 2019 fully converted book value per share. We continue to efficiently manage the run-off of the business and anticipate de-listing from the NYSE in March to reduce our operating expenses.”

Blue Capital Re’s book value per share sat at $7.65 at December 31st 2019, a 0.6% increase for the quarter and a 2.8% decrease for full year 2019, each inclusive of dividends. In Q4 the company declared a special distribution of $0.57 per common share, which was paid on December 20th 2019.

Register today for ILS Asia 2023, our next insurance-linked securities (ILS) market conference. Held in Singapore, July 13th, 2023.

Artemis ILS Asia 2023 - Insurance-linked securities conference in Singapore

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.