TIDMCAT
RNS Number : 1389V
CATCo Reinsurance Opps Fund Ltd
09 January 2013
CATCo Reinsurance Opportunities Fund Ltd. ("the Company")
Portfolio Update
To: SFM, London Stock Exchange Date: 9 January 2013
and Bermuda Stock Exchange
Key Points
-- Hurricane Sandy - no change to retrocessional reinsurance
loss reserve previously announced on 10 December 2012;
-- Costa Concordia - a retrocessional reinsurance loss reserve
representing 100% of the remaining 2012 Offshore Marine Exposure
was established at 31 December 2012;
-- Side Pocket Investments initiated at 31 December 2012 for
Hurricane Sandy and Costa Concordia exposures;
-- CATCo Reinsurance Fund (the "Master Fund") and other
segregated accounts managed by the Investment Managers received
significant additional investment of c.$350 million in its
participating shares during Q412 from private investors.
-- 98% of all 2013 available capital has been deployed with
multiple reinsurance counterparties;
-- The Master Fund's reinsurance investments for 2013 are all
performing in line with expectation, and in excess of the Company's
target returns of LIBOR +12-15% per annum; and
-- As of 1 January 2013, the Master Fund has deployed in excess
of $2 billion of collateralised retrocession reinsurance
capacity.
Throughout 2012, there were two significant events that impacted
the Company's 2012 investment portfolio - Hurricane Sandy, expected
to be the second costliest Atlantic hurricane on record, impacting
the Company's US Hurricane risk pillar exposure; and the cruise
ship Costa Concordia, which ran aground off the Italian coast
resulting in the costliest marine disaster, impacting the Company's
Offshore Marine risk pillar exposure. The Company's Ordinary
Shareholders are indirectly exposed to potential losses arising
from both of these events that occurred in 2012. All other 2012
investment exposures have been released by our reinsurance
counterparties with the exception of the twelve month reinsurance
transactions issued mid-year during 2012 and representing less than
4% of the Company's 2013 reinsurance exposures.
Hurricane Sandy ("Sandy") Update
On 31 October and 10 December 2012, the Board of Directors
released two separate announcements concerning the potential impact
from Sandy. The Investment Managers had modeled the projected loss
distribution for Sandy across CATCo-Re Ltd's (the "Reinsurance
Company") 2012 portfolio based upon PCS's estimated industry loss
as well as varying average expected industry insured
lossessuggested by Eqecat, AIR Worldwide and RMS. The Board of
Directors of the Reinsurance Company and the Master Fund have taken
a cautious approach to estimating the exposure to Sandy and a
retrocessional reinsurance loss reserve provision was included in
the Net Asset Value calculation at 30 November 2012 based on a best
estimate of the insured industry loss of $20 billion as at that
time. This is a retrocessional reinsurance loss reserve, and not a
crystalised loss, as the Reinsurer's protections are based on the
reinsurance counterparties actual paid claims. The Board of
Directors of the Reinsurance Company, the Master Fund or the
Investment Managers have no reason, at this time, to change the
retrocessional reinsurance loss reserve.
PCS will release a re-survey in January 2013 following their
initial estimate and will update the original loss estimate at that
time with new data gained from affected insurers. It is the
Directors intention to update the Company's Shareholders with any
additional information when this information is released.
Costa Concordia Update
On 21 December 2012, The Insurance Insider reported that, the
International Group (IG)'s insured loss estimate for the protection
and indemnity portion of the Costa Concordia insured loss had
increased to USD744 million. This brings the total insured loss
estimate, included the hull value, to roughly USD1.25 billion. The
Reinsurance Company and Master Fund's investment portfolio exposure
to this marine event is triggered at industry losses equal to or
greater than USD1.25 billion.
The increased loss estimate is largely due to the estimated
increase in clean up costs. The wreck removal plan had an original
timeline that assumed the parbuckling and refloating would be
completed in January of 2013, but is now projected to be completed
three to four months later, at significant additional cost.
The Company's maximum 2012 exposure to Offshore Marine risk was
4% of the 'expected' 2012 gross returns, assuming a total loss to
this cover from this event. In November 2012, the Investment
Managers had reached agreement to fully and finally commute 100% of
the exposure with respect to one of two reinsurance counterparties
(representing circa 40% of the total Offshore Marine portfolio
exposure), at a cost which represents circa 1.5% of the 2012 gross
return. This commutation was a settlement agreement reached between
the reinsured counterparty and the Reinsurance Company by which the
reinsurance obligation was terminated by an agreement by the
reinsurer to pay funds at present value that are not yet due under
the reinsurance agreement.
As a result of the IG's increased loss estimate, the Master
Fund's Board of Directors have decided to include a retrocessional
reinsurance loss reserve provision in the Net Asset Value
calculation at 31 December 2012 representing 100% of the remaining
Costa Concordia exposure.
2012 Side Pocket Investments
The Master Fund and other segregated accounts managed by the
Investment Managers have received new investment of c.$350 for
deployment at 1 January 2013., It is the intention of the Board of
Directors to extract the potential exposure to the recent loss
events, Sandy and Costa Concordia, and initiate Side Pocket
Investments.
2013 Investment Portfolio Deployment
At the date of this announcement, the Investment Manager on
behalf of the Reinsurance Company have agreed terms on new
reinsurance transactions with multiple reinsurance counterparties
that have utilized c. 98% of the available capital received from
existing and new investment in the Company, the Master Fund and
other separately managed Investment Funds.
The Company and Master Fund's reinsurance portfolio contains a
significantly diverse set of global risk pillars. The Master Fund's
diversified portfolio, including reinsurance protections, ensures
that exposure to a single loss event, no matter the magnitude of
the event, results in positive net portfolio returns for investors
in the current financial year with the exception of small negative
potential net returns due to a worst case single US earthquake or
hurricane event as detailed below:
Scenario Analysis
Worst Case Insured Single Loss Indicative Annualised
Event Net Return*
No Losses 27%
1 Aviation 27%
2 New Zealand Wind 26%
3 Miscellaneous 26%
4 Offshore Elemental Marine 26%
5 Terrorism 25%
6 Central America Wind 24%
7 South Africa Quake 24%
8 US Wildfire 24%
9 South East Asia Quake 22%
10 Canada Wind 21%
11 Israel Quake 21%
12 Philippines Wind 21%
13 India Quake 21%
14 South Korea Wind 20%
15 Taiwan Wind 20%
16 Mexico Wind 20%
17 Indonesia Quake 19%
18 Guam Wind 19%
19 Guam Quake 19%
20 Taiwan Quake 17%
21 China Wind/Flood 17%
22 Offshore Non-elemental Energy 15%
23 Hong Kong Wind 13%
24 Offshore Non-elemental Marine 13%
25 Europe Flood 12%
26 Central America Quake 11%
27 US/Canada Winterstorm 10%
28 Caribbean Wind 10%
29 China Quake 9%
30 US Severe Convective Storms 9%
31 Japan Wind 5%
32 Mexico Quake 5%
33 Caribbean Quake 4%
34 Europe Quake 4%
35 New Zealand Quake 4%
36 Europe Wind 3%
37 Australia Wind 3%
38 South America Quake 2%
39 Australia Quake 2%
40 Japan Quake 1%
41 US/Canada Quake -1%
42 US Wind -2%
*This information is based on research undertaken by CATCo.
CATCo IM may change its opinions and views without prior notice. It
does not constitute investment advice nor is it an invitation to
invest in this company. This is purely a scenario analysis and not
a forecast.
For further information, please contact:
Jason Bibb
CATCo Investment Management Ltd
Telephone: +1 (441) 531 2227
Email: jason.bibb@catcoim.com
David Benda / Hugh Jonathan
Numis Securities Limited
Telephone: +44 (0) 20 7260 1000
John Whiley
Prime Management Ltd
Tel: +1 (441) 295 0329
This information is provided by RNS
The company news service from the London Stock Exchange
END
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