REG - CATCo Re-ins Opps Fd - Net Asset Value and Portfolio Update

CATCo Reinsurance Opportunities FundAnnouncement

30/01/2020 07:01

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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.  Numis Securities Limited

 Judith Wynne                             David Benda / Hugh Jonathan

 General Counsel                          Telephone: +44 (0) 20 7260 1000

 Telephone: +1 441 493 9005

 Email: judith.wynne@markelcatco.com

 Mark Way

 Chief of Investor Marketing

 Telephone: +1 441 493 9001

 Email: mark.way@markelcatco.com

 

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