Shareholders in the retrocessional reinsurance linked investment focused CATCo Reinsurance Opportunities Fund Ltd. benefited from an 18.1% total-return over the course of 2015, as dividends boosted the 11.58% net return.
The 11.58% net return that insurance and reinsurance linked investment manager CATCo returned to shareholders could have been as high as 14%, equaling the 2014 figure, were it not for the UK floods at the end of the year.
The provision of dividends and capital return throughout the year make the share price total-return of the fund much higher, which helps to make this type of ILS investment a buy and hold style investment for many shareholders.
The flooding saw investment manager Markel CATCo Investment Management Ltd. establishing a side-pocket, which must amount to roughly 2.5% of NAV, as it prudently reserved in case of losses. However Markel CATCo says that it expects to release at least a portion of this back to investors during 2016, when the loss picture from the UK floods is better understood.
During 2015 Markel CATCo also grew the size of the London and Bermuda exchange listed retro reinsurance fund, adding $88.44 million in October and another $3.4 million in December, from both new and existing investors.
Nigel Barton, chairman of the fund, commented; “I would like to thank Shareholders for their continued support throughout 2015 and increased support for 2016. In addition the Board greatly appreciates the hard work demonstrated by the Investment Management team during 2015 resulting in another successful year for the Company. I would also like to welcome Markel Corporation as the new owners of the Investment Manager.”
Tony Belisle, CEO of Markel CATCo, explained the fund portfolio construction for 2016, saying that it has “a broad geographic spread and balanced exposure to differing risk perils.”
Belisle also explained that Markel CATCo continues to take advantage of the soft reinsurance market conditions to protect itself, enabling “the purchase of broader balance sheet protections for 2016, mainly in the form of ILWs, at a similar price year-on-year.”
Given the expectation that rates will continue to decline, while high levels of competition pressure the reinsurance market, Belisle said Markel CATCo will “continue to practice underwriting discipline and prudent capital management and will look to take advantage of the challenging operating environment. The ability to further de-risk the portfolio will also be taken on an opportunistic basis.”
The CATCo Reinsurance Opportunities Fund Ltd. continues to provide investors with a unique, higher yielding, reinsurance linked investment opportunity that is listed on stock exchange’s to provide liquidity and simple access.
Few listed opportunities exist in the ILS sector and the Markel CATCo fund remains the highest returning of these funds or vehicles, given its focus on retrocessional reinsurance linked investments.