TIDMCAT
RNS Number : 1808P
CATCo Reinsurance Opps Fund Ltd
14 August 2014
14 August 2014
CATCo Reinsurance Opportunities Fund Ltd. ("the Fund")
Interim Financial Report
For the Six Months Ended 30 June 2014
To: Specialist Fund Market, London Stock Exchange and Bermuda
Stock Exchange
CATCo Reinsurance Opportunities Fund Ltd. provides its
shareholders the opportunity to participate in the returns from
investments linked to catastrophe reinsurance risks, principally by
investing in fully collateralised reinsurance contracts and also
via a variety of insurance-based investments.
CHAIRMAN'S STATEMENT
The fund has enjoyed strong performance over the past six months
with no significant insured losses incurred on the 2014 portfolio.
This was both a result of the relatively low level of catastrophe
events in addition to de-risking the 2014 portfolio.
Financial performance and capital management
The Company's stated target annual net return is LIBOR plus 12
to 15 percent per annum. For 2014, the Board of Directors believe
there is an optimum level of capital needed to achieve this return,
beyond which they may begin to become impaired by competitive
forces resulting from an oversupply of capital in an attractive
investment sector. As a result, we practiced prudent capital
management and, in the best interest of all stakeholders, the
Directors agreed to return capital to Shareholders via means of a
Return of Value which was completed in January 2014 together with
enhancing value through a share buyback programme that took place
in May 2014.
A disciplined approach to underwriting has been maintained, with
the Manager prepared to reject retrocessional reinsurance
transactions that were unfavourable or not in line with investment
or underwriting guidelines. This has ensured the portfolio remains
strong and well protected.
The Manager, on behalf of CATCo-Re Ltd., has provided
retrocession capacity to multiple reinsurance counterparties,
predominantly traditional reinsurance counterparties and Lloyd's
syndicates.
Given the performance achieved since launch, the Company is
seeking better than targeted returns for 2014, assuming there are
no major losses that impact the portfolio during the remainder of
the year.
The net asset value ("NAV") capital return for the first six
months of 2014 was 4.27%, whilst the respective return for the
original Ordinary Shares issued on 20 December 2010 was 7.27%
following the contingent distribution paid in relation to the 2011
Tohoku, Japan earthquake. The share price capital return was 4.01%,
compared to the insurance-linked securities ("ILS") benchmark total
return of 2.41%. The Company's share price stood at a premium of
0.26% to NAV at 30 June 2014. The NAV Total Returns Since Inception
of Shares to 30 June 2014 of the Ordinary Shares issued on 20
December 2010, C Shares issued on 20 May 2011 and C Shares issued
on 16 December 2011 respectively were 33.17%, 51.90% and
36.51%.
The CATCo Group of Companies continue to build their brand and
reputation in the retrocession arena, now accounting for a fifth of
global market share of the retrocessional reinsurance market. Part
of the attractiveness of the CATCo products is their ability to be
tailored to client needs, with a broad selection of geographic
regions and risk pillars, offering diversification and reducing
exposure to any single event.
Catastrophic activity to 30 June 2014
The most notable catastrophe events in the first half of the
year from an insured-loss perspective stemmed from European winter
storms and severe weather in the US. In January, Europe continued
to be impacted by a series of low pressure weather systems that
brought high winds and heavy precipitation.
The month of April saw a dramatic increase in the level of
severe weather affecting the US. The biggest event was an outbreak
of severe weather and flash flooding that spanned several days
resulting in a number of fatalities and injuries. Thunderstorms,
tornadoes and heavy rain caused extensive damage to over 20 states
across the Plains, Mississippi Valley, Southeast, Midwest and
Mid-Atlantic. There were nearly 70 confirmed tornadoes that touched
down, including at least 11 of EF-3 or greater intensity.
Damage from severe US weather to date (with further events in
May and June) is likely to cost the insurance industry $5.5bn,
according to estimates by Impact Forecasting. While significant,
these are the lowest first half losses from severe weather since
2007. It is currently anticipated that they will result in a
negative drag on earnings for US property insurers, but the claims
are unlikely to trigger meaningful reinsurance payouts or have a
material impact on CATCo's 2014 portfolio.
Changes to issued share capital
A Return of Value to Shareholders took place on 28 January 2014,
further details of which appear in the Company's 2013 Annual
Report, on pages 21 and 22.
On 19 May 2014, the Company bought back 5,700,000 Ordinary
Shares in the market at an average price of $1.025 per share. These
shares were subsequently cancelled. The resultant total number of
Ordinary Shares in issue, and the total number of voting rights, is
303,582,970.
Dividends
On 24 January 2014, the Company paid a contingent distribution
of $0.02887 per Ordinary Share. This distribution related to the
resolution of CATCo's remaining exposure to the Japan Earthquake of
11 March 2011.
On 31 January 2014, the Company paid an annual dividend of
$0.05737 in respect of the Ordinary Shares for the financial year
ended 31 December 2013.
Further details about both dividends appear in the Company's
2013 Annual Report, on page 20.
Outlook
Excess capacity in both property catastrophe reinsurance and
retrocession has resulted in a challenging operating environment
for participants in 2014 compared to previous years. In a low
interest rate environment, the appetite from capital market
investors for catastrophe risk remains high and there is a general
acceptance that the "new money" is here to stay.
However the flow of new money into the catastrophe risk sector
has now slowed down, resulting in a smaller number of new ILS
funds, sidecars and collateralised catastrophe writers being
formed. As property catastrophe prices soften, we are seeing the
ILS sector now diversifying into some other insurance classes in
which CATCo does not participate.
While competitive conditions in catastrophe classes persist, we
are of the view that CATCo has built a well-diversified portfolio
of risks emanating from high-quality clients which, combined
together, should generate superior returns for investors over
time.
Nigel Barton
Chairman
CATCo Reinsurance Opportunities Fund Ltd.
14 August 2014
DIRECTORS' REPORT
Risks and Uncertainties
The Board of Directors has identified a number of key risks that
affect the Company's business. The principal risks are:
Reinsurance Risk
The objective of the Company and of CATCo Reinsurance Fund Ltd.
- Diversified Fund (the "Master Fund") is to give its Shareholders
the opportunity to participate in the returns from investments
linked to catastrophe reinsurance risks, principally by investing
in fully collateralised Reinsurance Agreements accessed by
investments in preferred shares of the Reinsurer, CATCo-Re Ltd. The
Master Fund spreads investment risk by seeking exposure to multiple
non-correlated risk categories so as to endeavour to limit the
amount of capital at risk with respect to a single catastrophic
event. The Company's Annual Report 2013, on page 13, explains in
detail how the Company and the Master Fund ensure that appropriate
diversification is achieved.
Risks related to the Company's investment activities
These risks include, but are not limited to, market price,
counterparty, interest rate, liquidity and credit risk. Such key
risks relating to investment underwriting and strategy including
for example, inappropriate asset allocation or borrowing are
managed through investment policy guidelines and restrictions, and
by the process of oversight at each Board meeting. Operational
disruption, accounting and legal risks are also covered annually,
and regulatory compliance is reviewed at each Board meeting.
In the view of the Board, there have not been any changes to the
fundamental nature of these risks since the previous report, and
these principal risks and uncertainties are equally applicable to
the remaining six months of the financial year as they were to the
six months under review.
Related Party Disclosure and Transactions with the Investment
Manager
The Investment Manager is regarded as a related party and
details of the management fees payable are set out in the unaudited
Statement of Operations and note 6.
Going Concern Status
The Company's business activities, together with the factors
likely to affect its future development, performance and position,
are set out in the Chairman's Statement.
In accordance with the Financial Reporting Council's guidance on
going concern and liquidity risk issued in October 2009, the Board
of Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern.
The Company's assets consist of cash and a diverse portfolio of
retrocessional reinsurance investments which, in most
circumstances, are fully liquid at the end of their contractual
term. The Board of Directors have reviewed forecasts and they
believe that the Company has adequate financial resources to
continue its operational existence for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern
basis in preparing these accounts.
Directors' Responsibility Statement
The Directors are responsible for preparing the Half-Yearly
Financial Report in accordance with applicable law and regulations.
The Directors confirm that, to the best of their knowledge:
1. The condensed set of financial statements contained within
the Half-Yearly Financial Report has been prepared in accordance
with the applicable accounting standards.
2. The Chairman's Statement, the Financial Highlights and the
notes to the unaudited financial statements provides a fair review
of the information required by rule 4.2.7R of the Disclosure and
Transparency Rules (being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the condensed set of financial statements and a
description of the principal risks and uncertainties for the
remaining six months of the financial year) and rule 4.2.8R (being
related party transactions that have taken place during the first
six months of the financial year and that have materially affected
the financial position of the Company during that period; and any
changes in the related party transaction described in the last
annual report that could do so.)
The Half-Yearly Financial Report was approved by the Board on 14
August 2014 and the above responsibility statement was signed on
its behalf by the Chairman.
Nigel Barton
Chairman,
For and on behalf of the Board
14 August 2014
UNAUDITED STATEMENTS OF ASSETS AND LIABILITIES
(Expressed in United 30 June 2014 30 June 31 Dec. 2013
States Dollars) 2013
--------------------------- ------------- ------------- --------------
$ $ $
--------------------------- ------------- ------------- --------------
Assets
--------------------------- ------------- ------------- --------------
Investment in CATCo
Reinsurance Fund Ltd.-
CATCo Diversified
Fund, at fair value 331,804,083 361,235,811 408,828,848
--------------------------- ------------- ------------- --------------
Cash and cash equivalents 747,890 918,464 286,057
--------------------------- ------------- ------------- --------------
Other assets 93,320 36,543 67,032
--------------------------- ------------- ------------- --------------
Total assets 332,645,293 362,190,818 409,181,937
--------------------------- ------------- ------------- --------------
Liabilities
--------------------------- ------------- ------------- --------------
Accrued expenses and
other liabilities 185,982 154,368 149,988
--------------------------- ------------- ------------- --------------
Management fee payable 819 1,001 254
--------------------------- ------------- ------------- --------------
Total liabilities 186,801 155,369 150,242
--------------------------- ------------- ------------- --------------
Net assets 332,458,492 362,035,449 409,031,695
--------------------------- ------------- ------------- --------------
See accompanying notes
UNAUDITED STATEMENTS OF OPERATIONS
(Expressed in United States Six months Six months Year ended
Dollars) to 30 June to 30 31 Dec.
2014 June 2013 2013
------------------------------------ -------------- -------------- ---------------
$ $ $
------------------------------------ -------------- -------------- ---------------
Net investment loss allocated
from
CATCo Reinsurance Fund Ltd.
- CATCo Diversified Fund
------------------------------------ -------------- -------------- ---------------
Interest 11,695 11,670 12,903
------------------------------------ -------------- -------------- ---------------
Management fee (2,461,340) (2,641,665) (5,654,620)
------------------------------------ -------------- -------------- ---------------
Performance fee (1,567,459) (3,043,583) (8,643,163)
------------------------------------ -------------- -------------- ---------------
Professional fees and other (142,245) (155,352) (271,795)
------------------------------------ -------------- -------------- ---------------
Administrative fee (95,237) (113,597) (227,560)
------------------------------------ -------------- -------------- ---------------
Miscellaneous expenses (3,565) (17,778) (23,992)
------------------------------------ -------------- -------------- ---------------
Net investment loss allocated
from
CATCo Reinsurance Fund Ltd.
- CATCo Diversified Fund (4,258,151) (5,960,305) (14,808,227)
------------------------------------ -------------- -------------- ---------------
Company expenses
------------------------------------ -------------- -------------- ---------------
Professional fees and other (945,817) (632,658) (1,199,136)
------------------------------------ -------------- -------------- ---------------
Administrative fee (27,000) (27,000) (54,000)
------------------------------------ -------------- -------------- ---------------
Management fee (20,557) (8,135) (11,448)
------------------------------------ -------------- -------------- ---------------
Total Company expenses (993,374) (667,793) (1,264,584)
------------------------------------ -------------- -------------- ---------------
Net investment loss (5,251,525) (6,628,098) (16,072,811)
------------------------------------ -------------- -------------- ---------------
Net realised gain and net
(decrease)/increase in unrealised
appreciation on securities
allocated from CATCo Reinsurance
Fund Ltd. - CATCo Diversified
Fund
------------------------------------ -------------- -------------- ---------------
Net realised gain on securities 75,407,454 17,581,186 19,854,893
------------------------------------ -------------- -------------- ---------------
Net (decrease)/increase
in unrealised appreciation
on securities (56,102,355) 15,784,117 69,951,369
------------------------------------ -------------- -------------- ---------------
Net gain on securities 19,305,099 33,365,303 89,806,262
------------------------------------ -------------- -------------- ---------------
Net increase in net assets
resulting from operations 14,053,574 26,737,205 73,733,451
------------------------------------ -------------- -------------- ---------------
See accompanying notes
UNAUDITED STATEMENTS OF CHANGES IN NET ASSETS
(Expressed in United States Six months Six months Year ended
Dollars) to 30 June to 30 31 Dec.
2014 June 2013 2013
--------------------------------- ------------- ------------- --------------
$ $ $
--------------------------------- ------------- ------------- --------------
Operations
--------------------------------- ------------- ------------- --------------
Net investment loss (5,251,525) (6,628,098) (16,072,811)
--------------------------------- ------------- ------------- --------------
Net realised gain on securities 75,407,454 17,581,186 19,854,893
--------------------------------- ------------- ------------- --------------
Net (decrease)/increase
in unrealised appreciation
on securities (56,102,355) 15,784,117 69,951,369
--------------------------------- ------------- ------------- --------------
Net increase in net assets
resulting from operations 14,053,574 26,737,205 73,733,451
--------------------------------- ------------- ------------- --------------
Capital share transactions
--------------------------------- ------------- ------------- --------------
Dividends declared (21,218,256) (18,514,658) (18,514,658)
--------------------------------- ------------- ------------- --------------
Return of value distribution (63,536,808) - -
--------------------------------- ------------- ------------- --------------
Share buyback (see note (5,871,713) - -
4)
--------------------------------- ------------- ------------- --------------
Net decrease in net assets
resulting from capital
share transactions (90,626,777) (18,514,658) (18,514,658)
--------------------------------- ------------- ------------- --------------
Net (decrease)/increase
in net assets (76,573,203) 8,222,547 55,218,793
--------------------------------- ------------- ------------- --------------
Net assets, beginning of
period 409,031,695 353,812,902 353,812,902
--------------------------------- ------------- ------------- --------------
Net assets, end of period 332,458,492 362,035,449 409,031,695
--------------------------------- ------------- ------------- --------------
See accompanying notes
UNAUDITED STATEMENTS OF CASH FLOWS
(Expressed in United Six months Six months Year ended
States Dollars) to to 31 Dec.
30 June 2014 30 June 2013
2013
------------------------------------------- -------------- ------------- -------------
$ $ $
------------------------------------------- -------------- ------------- -------------
Cash flows from operating
activities
------------------------------------------- -------------- ------------- -------------
Net increase in net
assets resulting from
operations 14,053,574 26,737,205 73,733,451
------------------------------------------- -------------- ------------- -------------
Adjustments to reconcile
net increase in net
assets resulting from
operations to net cash
provided by operating
activities:
------------------------------------------- -------------- ------------- -------------
Net investment loss,
net realised gain and
net (decrease)/increase
in unrealised appreciation
on securities allocated
from CATCo Reinsurance
Fund Ltd. - CATCo Diversified
Fund (15,046,948) (27,404,998) (74,998,034)
------------------------------------------- -------------- ------------- -------------
Sale of investment in
CATCo Reinsurance Fund
Ltd.- CATCo Diversified
Fund 92,071,713 19,500,000 19,500,000
------------------------------------------- -------------- ------------- -------------
Changes in operating
assets and liabilities:
------------------------------------------- -------------- ------------- -------------
Other assets (26,288) (11,140) (41,629)
------------------------------------------- -------------- ------------- -------------
Accrued expenses and
other liabilities 35,994 (99,070) (103,451)
------------------------------------------- -------------- ------------- -------------
Management fee payable 565 398 (349)
------------------------------------------- -------------- ------------- -------------
Net cash provided by
operating activities 91,088,610 18,722,395 18,089,988
------------------------------------------- -------------- ------------- -------------
Cash flows from financing
activities
------------------------------------------- -------------- ------------- -------------
Dividend paid (21,218,256) (18,514,658) (18,514,658)
------------------------------------------- -------------- ------------- -------------
Return of value distribution (63,536,808) - -
paid
------------------------------------------- -------------- ------------- -------------
Share buyback (5,871,713) - -
------------------------------------------- -------------- ------------- -------------
Net cash used in financing
activities (90,626,777) (18,514,658) (18,514,658)
------------------------------------------- -------------- ------------- -------------
Net increase/(decrease)
in cash and cash equivalents 461,833 207,737 (424,670)
------------------------------------------- -------------- ------------- -------------
Cash and cash equivalents,
beginning of period 286,057 710,727 710,727
------------------------------------------- -------------- ------------- -------------
Cash and cash equivalents,
end of period 747,890 918,464 286,057
------------------------------------------- -------------- ------------- -------------
See accompanying notes
(Expressed in United States Dollars)
1. Nature of Operations and Summary of Significant Accounting
Policies
Nature of Operations
CATCo Reinsurance Opportunities Fund Ltd. (the "Company") is a
closed-ended fund, registered and incorporated as an exempted
mutual fund company in Bermuda on 30 November 2010 and commenced
operations on 20 December 2010. The Company was organised as a
feeder fund to invest substantially all of its assets in CATCo
Diversified Fund (the "Master Fund"). The Master Fund is a
segregated account of CATCo Reinsurance Fund Ltd., a mutual fund
company incorporated in Bermuda and registered as a segregated
account company under the Segregated Accounts Company Act 2000, as
amended (the "SAC Act"). The Master Fund will establish a separate
account for each class of shares comprised in each segregated
account (each, an "Account"). Each Account is a separate
individually managed pool of assets constituting, in effect, a
separate fund with its own investment objective and policies and
overseen by CATCo Investment Management Ltd. (the "Investment
Manager"). The assets attributable to each segregated account of
the Master Fund shall only be available to creditors in respect of
that segregated account. Pursuant to an investment management
agreement, the Company is managed by the Investment Manager. Refer
to the Company's prospectus for more information.
The Company's Shares are listed and traded on the Specialist
Fund Market ("SFM"), a market operated by the London Stock
Exchange. The Company's Shares are also listed on the Bermuda Stock
Exchange following the Secondary Listing on 20 May 2011.
The objective of the Master Fund is to give the Shareholders the
opportunity to participate in the investment returns of various
insurance-based instruments, including preferred shares through
which the Master Fund would be exposed to reinsurance risk,
insurance-linked securities (such as notes, swaps and other
derivatives), and other financial instruments. All of the Master
Fund's exposure to reinsurance risk is obtained through its
investment (via preferred shares) in CATCo-Re Ltd. (the
"Reinsurer").
The Reinsurer is a Bermuda licensed Class 3 reinsurance company,
registered as a segregated accounts company under the SAC Act,
through which the Master Fund accesses all of its reinsurance risk
exposure. The Reinsurer will form a segregated account that
corresponds solely to the Master Fund's investment in the Reinsurer
with respect to each particular reinsurance agreement.
The Reinsurer focuses primarily on property catastrophe
insurance and may be exposed to losses arising from hurricanes,
earthquakes, typhoons, hailstorms, floods, tsunamis, tornados,
windstorms, extreme temperatures, aviation, fires, explosions,
marine and other perils.
Basis of Presentation
The unaudited financial statements are expressed in United
States dollars and have been prepared in conformity with accounting
principles generally accepted in the United States of America
("GAAP") as detailed in the Financial Accounting Standards Board's
Accounting Standards Codification.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid
investments, such as money market funds, that are readily
convertible to known amounts of cash and have original maturities
of three months or less.
Valuation of Investment in Master Fund
The Company records its investment in the Master Fund at fair
value based upon an estimate made by the Investment Manager, in
good faith and in consultation or coordination with the
Administrator where practicable, using what the Investment Manager
believes in its discretion are appropriate techniques consistent
with market practices for the relevant type of investment. Fair
valuation in this context depends on the facts and circumstances of
the particular investment, including but not limited to prevailing
market and other relevant conditions, and refers to the amount for
which a financial instrument could be exchanged between
knowledgeable, willing parties in an arm's length transaction. Fair
value is not the amount that an entity would receive or pay in a
forced transaction or involuntary transaction.
Financial Instruments
The fair values of the Company's assets and liabilities, which
qualify as financial instruments under ASC 825, Financial
Instruments, approximate the carrying amounts presented in the
statement of assets and liabilities.
Investment Transactions and Related Investment Income and
Expenses
The Company records its proportionate share of the Master Fund's
income, expenses, realised gains and losses and increases and
decreases in unrealised appreciation on a monthly basis. In
addition, the Company incurs and accrues its own income and
expenses.
Investment transactions of the Master Fund are accounted for on
a trade-date basis. Realised gains or losses on the sale of
investments are calculated using the specific identification method
of accounting. Interest is recognised on the accrual basis.
Translation of Foreign Currency
Assets and liabilities denominated in foreign currencies are
translated into United States dollar amounts at the period-end
exchange rates. Transactions denominated in foreign currencies,
including purchases and sales of investments, and income and
expenses, are translated into United States dollar amounts on the
transaction date. Adjustments arising from foreign currency
transactions are reflected in the statement of operations.
The Company does not isolate the portion of the results of
operations arising from the effect of changes in foreign exchange
rates on investments from fluctuations arising from changes in
market prices of investments held. Such fluctuations are included
in net gain (loss) on investments in the statement of
operations.
Income Taxes
Under the laws of Bermuda, the Company is generally not subject
to income taxes. The company has received an undertaking from the
Minister of Finance in Bermuda that in the event that there is
enacted in Bermuda any legislation imposing income or capital gains
tax, such tax shall not until 31 March 2035 be applicable to the
Company. However, certain United States dividend income and
interest income may be subject to a 30% withholding tax. Further,
certain United States dividend income may be subject to a tax at
prevailing treaty or standard withholding rates with the applicable
country or local jurisdiction.
The Company is required to determine whether its tax positions
are more likely than not to be sustained upon examination by the
applicable taxing authority, including resolution of any related
appeals or litigation processes, based on the technical merits of
the position. The tax benefit recognised is measured as the largest
amount of benefit that has a greater than fifty percent likelihood
of being realised upon ultimate settlement with the relevant taxing
authority. De-recognition of a tax benefit previously recognised
results in the Company recording a tax liability that reduces
ending net assets. Based on its analysis, the Company has
determined that it has not incurred any liability for unrecognised
tax benefits as of 30 June 2014. However, the Company's conclusions
may be subject to review and adjustment at a later date based on
factors including, but not limited to, on-going analyses of and
changes to tax laws, regulations and interpretations thereof.
The Company recognises interest and penalties related to
unrecognised tax benefits in interest expense and other expenses,
respectively. No interest expense or penalties have been recognised
as of and for the period ended 30 June 2014.
Generally, the Company is subject to income tax examinations by
major taxing authorities for all tax years since its inception.
The Company may be subject to potential examination by U.S.
federal or foreign jurisdiction authorities in the areas of income
taxes. These potential examinations may include questioning the
timing and amount of deductions, the nexus of income among various
tax jurisdictions and compliance with U.S. federal or foreign tax
laws.
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires the Company's management to make estimates and
assumptions that affect the amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those
estimates.
Offering Costs
The costs associated with each capital raise are expensed as
incurred.
2. Concentration of Credit Risk
In the normal course of business, the Company maintains its cash
balances (not assets supporting retrocessional transactions) in
financial institutions, which at times may exceed federally insured
limits. The Company is subject to credit risk to the extent any
financial institution with which it conducts business is unable to
fulfill contractual obligations on its behalf. Management monitors
the financial condition of such financial institutions and does not
anticipate any losses from these counterparties. At 30 June 2014,
cash and cash equivalents are held with HSBC Bank Bermuda Ltd.
which has a credit rating of A as issued by Standard &
Poor's.
3. Loss Reserves
The following disclosures on loss reserves are included for
information and relate specifically to the Reinsurer and are
reflected through the valuations of investments held by the
Company.
The reserve for unpaid losses and loss expenses recorded by the
Reinsurer includes estimates for losses incurred but not reported
as well as losses pending settlement.
The Reinsurer makes a provision for losses on contracts only
when an event that is covered by the contract has occurred. When a
potential loss event has occurred, the Reinsurer obtains and uses
assessments from counterparties as a baseline, incorporating its
own models and historical data regarding loss development, to
determine the level of reserves required.
Future adjustments to the amounts recorded as of period-end,
resulting from the continual review process, as well as differences
between estimates and ultimate settlements, will be reflected in
the Reinsurer's statement of operations in future periods when such
adjustments become known. Future developments may result in losses
and loss expenses materially greater or less than the reserve
provided.
In the six months to 30 June 2014, the Reinsurer paid claims of
$24,477,280 pertaining to the Tohoku, Japan earthquake in March
2011 and Superstorm Sandy in October 2012.
The existing Side Pocket Investment valuation remains accurate
based on current information available to the Manager through
reinsurance counterparties.
4. Capital Share Transactions
As of 30 June 2014, the Company has authorised share capital of
500,000,000 unclassified shares of par value $0.0001 per share.
As of 30 June 2014, the Company has issued 303,582,970 Class 1
Ordinary Shares.
Transactions in shares during the period, and the shares
outstanding and the net asset value ("NAV") per share as of 30 June
2014 is as follows:
Beginning Adjustment Share Ending
Shares following Buyback Shares
Share Capital
Consolidation
-------------------- ------------ --------------- ------------ ------------
Class 1 - Ordinary
Shares 369,849,337 (60,566,367) (5,700,000) 303,582,970
Beginning Dividend Return Share Ending Ending
Net Assets Paid of Buyback Net Assets NAV
Value Per
Amount Share
------------------ -------------- -------------- --------------- -------------- ------------- --------
Class 1 -
Ordinary Shares $ 409,031,695 ($21,218,256) ($ 63,536,808) ($ 5,871,713) $332,458,492 $1.0951
The Company has been established as a closed-ended fund and, as
such, Shareholders do not have the right to redeem their shares.
The shares are held in trust by Capita IRG Trustees Limited (the
"Depository") in accordance with the Depository Agreement between
the Company and the Depository. The Depository holds the shares and
in turn issues depository interests in respect of the underlying
shares which have the same rights and characteristics of the
shares.
The Board of Directors of the Company (the "Board") has the
ability to issue C Shares during any period when the Master Fund
has designated one or more investments as "Side Pocket
Investments". This typically will happen if a covered or other
pre-determined event has recently occurred or seems likely to occur
under an Insurance-Linked Instrument. In such circumstances, only
those Shareholders on the date that the investment has been
designated as a Side Pocket Investment will participate in the
potential losses and premiums attributable to such Side Pocket
investment. Any shares issued when side pockets exist will be as C
Shares that will participate in all of the Master Fund's portfolio
other than in respect of potential losses and premiums attributable
to any Side Pocket Investments in existence at the time of issue.
If no Side Pocket Investments are in existence at the time of
proposed issue, it is expected that the Company will issue further
Ordinary Shares.
On 14 January 2014, the Board declared a final dividend of
$0.05737 per share in respect of the Ordinary Shares
with a record date of 24 January 2014. The final dividend was
paid to Shareholders on 31 January 2014.
In addition, the Board announced on 14 January 2014 that it had
declared a contingent distribution in relation to the cessation of
the Japanese Tohoku earthquake loss reserve for 2011 of $0.02887
per share to Ordinary Shares. The contingent dividend was paid to
Shareholders on 24 January 2014.
On 27 January 2014, the Board announced that the proposed return
of value to Shareholders of $0.20 per existing
Ordinary Share, equivalent to approximately $74,000,000, and the
subsequent share capital consolidation were approved. Following the
share capital consolidation, a total of 299,577,962 Ordinary Shares
were issued effective 28 January 2014. In addition, a total of
9,705,008 Ordinary Shares were issued effective 29 January
2014.
On 19 May 2014, the Company completed a share buyback of
5,700,000 Ordinary Shares for cancellation in the market at an
average price of USD 1.025 per share, resulting in a total amount
paid including commission of $5,871,713.
5. Investment Management Agreement
Pursuant to the Investment Management Agreement dated 16
December 2010, the Investment Manager is empowered to formulate the
overall investment strategy to be carried out by the Company and to
exercise full discretion in the management of the trading,
investment transactions and related borrowing activities of the
Company in order to implement such strategy.
6. Related Party Transactions
The Investment Manager of the Company is also the Investment
Manager of the Master Fund and the Reinsurer. The Investment
Manager is entitled to a management fee, calculated and payable
monthly in arrears equal to 1/12 of 1.5% of the net asset value of
the Company which is not attributable to the Company's investment
in the Master Fund Shares as at the last calendar day of each
calendar month. Management fees related to the investment in the
Master Fund Shares are charged in the Master Fund and allocated to
the Company. Performance fees are charged in the Master Fund and
allocated to the Company.
Qatar Insurance Company, an affiliate of the Investment Manager,
holds 5.40% of voting rights of the Ordinary Shares issued in the
Company. In addition, the Directors of the Company are also
Shareholders of the Company.
7. Administrative Fee
Prime Management Limited (the "Administrator"), a subsidiary of
SS&C GlobeOp, serves as the Company's Administrator and
performs certain administrative and clerical services on behalf of
the Company. For the provision of the service under the
Administration Agreement, the Administrator receives a fixed
fee.
8. Financial Highlights
Class 1
Ordinary Shares
Per share operating performance
Net asset value, beginning
of period 1.1059
Income/(loss) from investment
operations:
Net investment loss (0.0031)
Performance fee (0.0051)
Management fee (0.0080)
Net gain on investments 0.0628
Total from investment
operations 0.0466
Dividend (0.0574)
Net asset value, end of
period 1.0951
Total net asset value
return
Total net asset value
return before
performance fee 4.60%
Performance fee* (0.46)%
Total net asset value
return after performance
fee** 4.14%
Ratio to average net assets
Expenses other than performance
fee (0.99)%
Performance fee* (0.46)%
Total expenses after performance
fee (1.45)%
Net investment loss (1.45)%
* The performance fee is charged in the Master Fund.
**Adjusting the opening capital to reflect the dividend declared
on 14 January 2014, the normalised total return for the period 1
January to 30 June 2014 is equivalent to 4.27%.
The ratios to weighted average net assets are calculated for
each Class of share taken as a whole. An individual Shareholder's
return and ratios to weighted average net assets may vary from
these amounts based on the timing of capital transactions. Returns
and ratios shown above are for the period ended 30 June 2014 and
have not been annualised.
9. Indemnifications or Warranties
In the ordinary course of its business, the Company may enter
into contracts or agreements that contain indemnifications or
warranties. Future events could occur that lead to the execution of
these provisions against the Company. Based on its history and
experience, management believes that the likelihood of such an
event is remote.
10. Subsequent Events
The unaudited financial statements were approved by management
and Board of Directors and available for issuance on 14 August
2014. Subsequent events have been evaluated through this date and
no events require further disclosure.
For further information,
please contact:
CATCo Investment Management
Ltd
Jason Bibb, Director
Telephone: +1 441 531 2227
Email: jason.bibb@catcoim.com
Mark Way, Corporate Communications
Telephone: +44 7786 116991
Email: mark.way@catcoim.com
Numis Securities Limited
David Benda / Hugh Jonathan
Telephone: +44 (0) 20 7260
1000
Prime Management Ltd
John Whiley
Tel: +1 (441) 295 0329
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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