Net Asset Value and Portfolio Update

RNS Number : 3620B

CATCo Reinsurance Opps Fund Ltd

30 January 2020

 

FOR IMMEDIATE RELEASE

30 January 2020

CATCo Reinsurance Opportunities Fund Ltd. (the "Company")

Net Asset Value ("NAV") and Portfolio Update

To: SFS, London Stock Exchange and Bermuda Stock Exchange
 

December 2019 NAV

Markel CATCo Investment Management Ltd., the Company's Investment Manager (the "Investment Manager"), announces the unaudited Net Asset Value ("NAVs") of the Company's Ordinary Shares and C Shares of $0.2659 and $0.5157 respectively, as at the close of business on 31 December 2019.

Estimated annual returns generated from the 2019 portfolio were approximately 4.3 per cent.

2017 Side Pockets

As previously announced, the Company's Ordinary Shareholders continue to be exposed to uncertainty regarding losses arising from 2017 major events, through the 2017 Side Pocket Investments. The reduction  of c. 3.6 per cent in the Ordinary Share NAV which occurred during December 2019 is driven by further claim settlements in relation to 2017 events, predominantly Hurricane Irma. This adjustment is equivalent to a c.1 per cent deterioration in the original Ordinary Share annual performance for the financial year 2017.

2018 Side Pockets

The 2018 Side Pocket loss reserves have been maintained at their existing levels during December 2019, and the Investment Manager currently considers these existing 2018 loss reserves to be sufficient, based on the latest industry loss information available.

2019 Side Pockets

The size of the 2019 Side Pocket as a percentage of NAV is equal to 26 per cent for the Ordinary Share NAV and 39 per cent of the C Share NAV as at 31 December 2019. The 2019 Side Pocket is expected to reduce in the coming months as cedants release capital and the Investment Manager is able to return capital to Shareholders. However, the exact timing and amount of this remain to be determined.

Repayment of non-trapped 2019 Portfolio

The Investment Manager continues to work closely with its cedants to agree the release of the 2019 portfolio's capital, a process which in previous years could be undertaken to a large extent pre year-end as part of the renewal negotiation.

The Investment Manager expects approximately 17 per cent of the Company's investment in the 2019 portfolio (equivalent to $4 million for Ordinary Class shares and $17 million for C Class shares) to be released by the Master Fund to the Company in mid-February 2020. The Investment Manager expects that the Board will determine the timing and method of this capital distribution, following discussions to be held with Shareholders by the Company's brokers, Numis Securities Limited.

Overview of existing Side Pocket Investments

While the capital return schedule is driven by the contractual arrangements with the cedants, capital releases from prior year Side Pocket Investments are also expected during Q1 2020, subject to the approval of the Bermuda Monetary Authority. In particular, the Investment Manager is currently working to release further capital from both 2016 and 2018 Side Pocket Investments.

Shareholders are reminded that cedants will typically release capital that is held in Side Pocket Investments on the earlier of: (i) the capital no longer being needed to cover potential losses (in accordance with the terms of the relevant reinsurance contract); or (ii) 36 months from the end of the relevant risk period.

The following table outlines the split of Side Pocket Investments held by the Ordinary Shares and C Shares respectively as at 31 December 2019:

Ordinary Shares	Value per Share	Side Pocket Investments % of Ordinary Share NAV
SPI 2016	$0.03	11%
SPI 2017	$0.08	30%
SPI 2018	$0.07	26%
SPI 2019	$0.07	26%

C Shares	Value per Share	Side Pocket Investments % of C Share NAV
SPI 2018	$0.27	53%
SPI 2019	$0.20	39%

Australia Wildfires

The Investment Manager continues to monitor the devastating effects of the Australian Wildfires. However, it remains too soon to be able to confirm what impact, if any, the Australian Wildfires will have on the 2019 portfolio. This has resulted in higher levels of trapped capital on the 2019 portfolio due to the proximity of the event to year-end.  The Investment Manager expects further clarity on this in the first half of 2020.

Management Fee Reduction

The Investment Manager has agreed to reduce the Management Fee on Side Pocket Investments for the financial year 2020 by 50 per cent of the original fee of 1.5 per cent. This is equal to an annual Management Fee of 0.75 per cent. The 2019 Management Fee on Side Pocket Investments had been reduced by 33.33 per cent to 1 per cent. The Management Fee on Side Pocket Investments will be reviewed again at the end of the current financial year.

This announcement contains Inside Information as defined under the Market Abuse Regulation (EU) No. 596/2014.

For further information:
Markel CATCo Investment Management Ltd. Judith Wynne General Counsel Telephone: [phone] Email: [e-mail] Mark Way Chief of Investor Marketing Telephone: [phone] Email: [e-mail]	Numis Securities Limited David Benda / Hugh Jonathan Telephone: [phone]

 

END

 

 

NAVDDGDBUDDDGGC