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Blue Capital - Portfolio Update

RNS Number : 3048E
Blue Capital Alternative Income Fd
08 February 2018
 

 

Correction: Portfolio Update

Please note that this announcement replaces the Portfolio Update announcement released on 5 February 2018. The column titles in the Portfolio Return Summary and Probable Maximum Loss tables referred to June 2017 when they should have referred to January 2017. All other information in the announcement remains unchanged.

Blue Capital Alternative Income Fund Limited (the "Company") (Ticker: "BCAI")

Portfolio Update

8 February 2018

Blue Capital Alternative Income Fund Limited, whose shares are admitted to trading on the London Stock Exchange's Specialist Fund Segment and the Bermuda Stock Exchange, is pleased to provide an update on the January 2018 reinsurance renewals.  

Mike McGuire, CEO of Blue Capital Management Ltd. ("Blue Capital"), commented:

"Following the significant industry losses experienced in 2017, we are pleased to report improved market conditions during the January renewal period.  On average, loss affected business benefited from renewing premium rate increases of 15%-20% while non-loss affected agreements benefited from rate increases of 3-5% (in each case compared to 2017 and net of expenses)."

 

As of 1 January 2018, the Company's ordinary share net asset value was $139.3 million, consisting of investments in Blue Capital Global Reinsurance SA‐1 (the "Master Fund") at fair value of US$137.0 million and cash on hand of $2.3 million.  Investments in the Master Fund were lower by US$62.2 million year on year primarily due to 2017 catastrophe loss activity.

 

The Master Fund has invested its assets in preferred shares of Blue Water Re Ltd. The combined investments represent collateral deployment across 76 different positions and 33 different clients generating an estimated US$41.1 million of net reinsurance premium written which is a decrease of US$5.7 million from the previous year.  The business underwritten by the Company is expected to produce a net rate on line (premium rate as percentage of limit) for the portfolio of 24%, which is an increase of 150 basis points when compared to the same period in 2017. The increase is due to an average risk adjusted price increase of 12% during the January renewals.

 

A breakdown of the current portfolio follows:

 

 

 

 

 

 

 

Capital Investment Summary

 

The following unaudited tables provide a breakdown of the current fair value of the Company's portfolio investments by contract type, zone and peril (as at 1 January 2018) and other net assets. 

 

Contract Type

Investment (US$ millions)

Investment as a % of Current Portfolio

Positions Held

Property Catastrophe Total

119.7

86.0%

75

     Prop Cat - First Event XOL

109.3

78.5%

68

     Prop Cat - Subsequent Event XOL

10.5

7.5%

7

     Prop Cat - Aggregate XOL

0.0

0.0%

0

Industry Loss Warranty Total

0.0

0.0%

0

     ILW - Subsequent Event XOL

0.0

0.0%

1

     ILW - First Event XOL

0.0

0.0%

0

     ILW - Aggregate XOL

0.0

0.0%

0

Cat Bond Total

0

0.0%

0

Retrocessional Hedging Total

0.0

0.0%

0

Current Portfolio

119.7

86.0%

76

Buffer Loss Collateral

16.5

11.8%


Cash & Sundry Net Assets

3.1

2.2%


Net Asset Value at 1 January 2018

139.3

100.0%


XOL = excess of loss                        ILW = Industry Loss Warranty                    

 

 

Asset Class

Investment (US$ millions)

Investment as a % of Current Portfolio

Positions Held

Traditional

119.7

86.0%

75

     Quota Share Retrocessional

48.0

34.5%

11

     Indemnity Reinsurance

39.3

28.2%

60

     Indemnity Retrocession

32.4

23.3%

14

Non-Traditional

0.0

0.0%

0

     Industry Loss Warranties

0.0

0.0%

1

     Other non-property catastrophe risks2

0.0

0.0%

0

     Cat Bonds

0.0

0.0%

0

Retrocessional Hedging

0.0

0.0%

0

Current Portfolio

119.7

86.0%

76

Buffer Loss Collateral

16.5

11.8%


Cash & Sundry Net Assets

3.1

2.2%


Net Asset Value at 1 January 2018

139.3

100.0%


1 Underlying positions held within the quota share retrocessional agreements are in excess of 1,400.

2 Contracts transacted in an International Swaps and Derivatives Association, Inc. contract format.

 

 

 

Portfolio Return Summary1

 

Illustrative Net Aggregate Return Distribution

2018 Portfolio

January 2017 Portfolio

Returns



    Expected Return Range2

8-13%

6-10%

Probability of:



     Mean or Greater Return

67%

71%

     Breakeven or Greater

85%

80%

     Loss to NAV Greater than 5%

9%

14%

     Loss to NAV Greater than 10%

6%

10%

     Loss to NAV Greater than 15%

4%

7%

     Loss to NAV Greater than 25%

2%

3%

     Loss to NAV Greater than 35%

1%

2%

 

1 The portfolio return summary is provided for illustrative purposes only. The projections are derived by reference to the Company's modelled portfolio as at 1 January 2018 and do not take into account actual costs, expenses or other factors which are not attributable to the portfolio. As such, the portfolio return summary should not in any way be construed as forecasting the Company's actual returns should no losses occur or otherwise.

 

2 Net aggregate return distribution between a mean and median catastrophe year.

 

Probable Maximum Loss

The exposures summarized below represent the first event exposure by major zone as a percentage of the Company's net asset value.  Per Blue Capital's underwriting guidelines, the net first event Probable Maximum Loss in any one zone should not exceed 35% of the Company's net asset value (at the time the investment is made).

 

Territory / Region / Peril

First Event VaR1 as a % of Net Asset Value Jan 2018

First Event VaR1 as a % of Net Asset Value Jan 2017

US - Florida Hurricane

28.7%

31.0%

US - California Earthquake

18.2%

13.3%

US - Gulf Hurricane

17.2%

12.3%

Japan Earthquake

15.5%

11.2%

US - Northeast Hurricane

13.9%

8.8%

US - Mid-Atlantic Hurricane

11.2%

8.3%

UK & Ireland Windstorm

7.8%

6.6%

Japan Windstorm

7.2%

4.9%

All other territory / region / peril zones

< 5.0%

< 5.0%

 

1 Value at Risk ("VaR") represents the 99.0 percentile or the 1 in 100 year event for windstorm perils and the 99.6 percentile or the 1 in 250 year event for earthquake perils.

 

Enquiries:

For investor enquiries please contact:

Blue Capital Management Ltd.

Michael J. McGuire

 +1 441 278 0988

Email: investorrelations@Sompo-Intl.com




Stifel Nicolaus Europe Limited

 +44 (0)20 7710 7600

Neil Winward


Mark Bloomfield


Tunga Chigovanyika


 

Notes to editors:

Blue Capital, which serves as the investment manager for both the Company and Blue Water Master Fund Ltd., is wholly owned by Sompo International Holdings Ltd. ("Sompo International"). Sompo International is a recognized global specialty provider of property and casualty insurance and reinsurance and a leading property catastrophe and short tail reinsurer since 2001. Blue Capital therefore benefits from Sompo International's underwriting expertise and successful track record managing a diversified portfolio of property catastrophe exposures through a global network of broker/client relationships.

The Company targets a dividend yield of LIBOR plus 6 per cent. per annum1 on the original issue price of the Ordinary Shares in December 2012 and a net return to Shareholders (comprised of dividends and other distributions to Shareholders together with increases in the Company's Net Asset Value) of LIBOR plus 8 per cent. per annum1 to be achieved over the longer term, net of fees.

Note 1: These are targets only and not profit forecasts. There can be no assurance that these targets will be met or that the Company will make any returns or distributions whatsoever or that investors will recover all or any of their investment. Prospective investors should decide for themselves whether or not the target returns and distributions are reasonable or achievable in deciding whether to invest in the Company.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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