The closing date for the buy-out schemes for the Markel CATCo retrocessional reinsurance investment funds was yesterday March 28th and as a result distributions of the remaining value in the ILS fund strategies to investors have begun.
Having received the necessary Bermuda court approval and bankruptcy support from the US earlier in March, the process to unwind the retro reinsurance ILS fund strategies managed by Markel subsidiary Markel CATCo is now underway.
It marks the beginning of what should be a relatively quick process to pay back value to investors in both the private Markel CATCo retro insurance-linked securities (ILS) fund, the public and listed CATCo Reinsurance Opportunities Fund and also the collateralized reinsurance focused Aquilo Fund.
With all conditions met, the closing date for the CATCo funds Schemes of Arrangement to implement the buy-out was yesterday, March 28th 2022, the manager said today.
As a result, yesterday a Deed of Release became effective and binding on all Scheme Creditors, while the Markel CATCo private fund already began initiating distributions to investors.
The public fund expects the early consent fee will be paid to all shareholders as of March 30th, while distributions will be made to shareholders in the CATCO Reinsurance Opportunities Fund, covering off 147,812,135 Ordinary Shares and 82,398,162 C Shares.
On April 6th 2022, the manager expects that 99% of the total issued share capital of this public CATCo investment fund will be redeemed.
In terms of the amount of capital to be returned, Markel CATCo expects the distribution from the public fund will amount to USD 51,727,869 for holders of Ordinary Shares; and USD 53,856,768 for holders of C Shares.
What this works out as is roughly USD 0.3465 per Ordinary Share held by an investor and USD 0.6471 per C Share held.
This is close to where the net asset value now sits for each class of shares in the CATCo funds, but is significantly higher than when they were at their lows of $0.14 per ordinary share and $0.19 per C share.
So that’s an almost 145% increase in share price since the lows for the Ordinary share class and 241% for the C share class, a significant recovery in valuation and of shareholders investments.
As a reminder, Markel is funding a significant proportion of the buy-outs for investors, while investors also stand to benefit from any continued upside in valuations as the retrocession and reinsurance books are run-off.
Some investors that bought into the public fund at the lowest NAV’s have done well through this process, with their patience rewarded as they are now set to make a tidy profit at the improved buyout terms.
As we explained recently, the threat of any future litigation was also quelled with the court approvals and bankruptcy support, meaning Markel can now proceed to pay-back investors and then run-off the retro and reinsurance portfolios from the CATCo funds.
That running off may take some time still, but for Markel the most public part of this saga is drawing to a close, with the majority of investors set to be satisfied with the recovery they will now make as distributions flow to them.