TIDMCAT
RNS Number : 1223W
CATCo Reinsurance Opps Fund Ltd
14 August 2015
14 August 2015
CATCo Reinsurance Opportunities Fund Ltd. ("the Fund")
Interim Financial Report
For the Six Months Ended 30 June 2015
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
Welcome to the CATCo Reinsurance Opportunities Fund Ltd. (the
"Company") 2015 Interim Report. Over the past six months the
Company has enjoyed a strong performance with no signi cant insured
losses incurred on the 2015 portfolio of catastrophic events. It
began the year with one of its most robust portfolios yet, taking
advantage of attractive pricing to purchase protections for the
portfolio. These protections include reinsurance products that due
to recent pricing pressure have been reducing in price, allowing
the Investment Manager ("the Manager") to cost effectively offset
some of the portfolio's own risk.
While reducing rates present a challenge, there was the
opportunity to further de-risk the portfolio for 2015 with higher
average attachment points and protections purchased. Overall, the
likelihood of a catastrophic event leading to a claim against the
Company is approximately 20 percent below that of 2014, signi
cantly reducing the impact of major loss events on the 2015
portfolio.
Having now entered the second six months of 2015, the Manager
will continue to target a 2015 gross return in excess of LIBOR plus
12 percent to 15 percent per annum, assuming there are no signi
cant losses between now and year end. At this stage in the year,
the annual performance is expected to be ahead of last year's
result, where the Manager achieved a net return for Shareholders of
14.08 percent.
Financial Performance and Capital Management
The Net Asset Value ("NAV") return for the rst six months of
2015 was 4.47 percent. The share price total return was 4.86
percent, compared to the Eurekahedge Insurance-Linked Securities
Advisers Index return of 1.26 percent. The NAV Total Returns since
Inception to 30 June 2015 of the Ordinary Shares issued on 20
December 2010, the C Shares issued on 20 May 2011 and the C Shares
issued on 16 December 2011 were, respectively, 51.78 percent, 73.61
percent and 56.02 percent.
The Company announced in January that it would again be
proposing a Return of Value to Shareholders of approximately $35mn
in aggregate, equating to roughly 10% of the Company's market
capitalisation as at 1 January 2015. This was approved at a Special
General Meeting on 29 January 2015, further details of which appear
in the Company's 2014 Annual Report, on page 20.
The Return of Value offers Shareholders the opportunity to
realise some of the premiums earned in 2014, and to take pro ts in
excess of the target annual distribution.
Dividends
The Return of Value is in addition to the Company's intended
annual dividend paid to Shareholders. On 30 January 2015, the
Company paid an annual dividend of $0.05929 in respect of the
Ordinary Shares for the nancial year ended 31 December 2014. This
equates to LIBOR plus 5 percent of the NAV as at the end of Fiscal
Year. The record date for this dividend was 16 January 2015 and the
ex-dividend date was 15 January 2015.
Side Pocket Investments (SPIs)
As at 30 June 2015, the Company's Side Pocket Investment in
relation to Superstorm Sandy, amounted to 0.73 percent of the
Company's NAV, whilst the total claim payments made in relation to
Sandy amounted to approximately 65 percent of the original
retrocessional reinsurance loss reserve established in 2012.
The Manager believes that a meaningful portion of the existing
liabilities associated with Sandy, which must be commuted by the
end of 2015, will be released by the counterparties over the
remaining months of the year. This may bene t Shareholders, with
the Company's NAV expected to increase in line with any released
capital.
The Side Pocket Investment created following the 2014 Severe
Convective Storms amounts to approximately 2.65 percent of NAV at
30 June 2015, compared to 3.50 percent at 31 December 2014. The
Manager expects this positive trend to continue in the second half
of the year as further side pocket releases from reinsurance
counterparties are anticipated.
CATCo Strengths
Competitive pressures in the reinsurance market have been the
inevitable result of excess capital and an extremely benign
catastrophe year in 2014, continuing so far into 2015. The strength
of the CATCo brand, market share and strong relationships continue
to shield the portfolio from the worst of these forces that are
clearly being felt elsewhere in the market.
Since its launch in January 2011, the CATCo Group of Companies
("CATCo") has grown and maintained its share of the retrocessional
market, today providing approximately 27 percent of global retro
capacity to many of the world's leading reinsurance companies. The
Manager continues to practice a disciplined approach to
underwriting and risk selection as it navigates the soft
market.
At the 1 January 2015 reinsurance renewals, CATCo once again
experienced strong demand for its diversi ed, multi-pillared
product covering 50 perils. A signi cant proportion of renewals at
1 January were repeat business and 100 percent of capital was fully
deployed.
A disciplined approach to underwriting - with the Manager
prepared to turn down unfavourable deals - has ensured the
portfolio remains strong and well-diversi ed by both geographic
distribution and risk peril. CATCo-Re Ltd. is currently
retrocessionaire for over 30 reinsurance counterparties,
predominantly traditional reinsurers and Lloyd's syndicates.
Despite the pricing pressure, it has been apparent from activity
so far in 2015 that insurance-linked securities ("ILS") and ILS
funds remain highly attractive to pension funds and other
institutional investors. ILS pricing - while soft at present - is
becoming more stable. The low interest rate environment, growing
alternative investment allocations and non-correlating nature of
catastrophe risk has created long-term appetite for this asset
class.
The exible nature of the CATCo product allows it to be tailored
to meet individual reinsurers' needs, helps to continue the product
appeal and distinguishes CATCo from many of the other offerings in
the market. CATCo offers a broad selection of geographic zones and
risk pillars, that can be adapted to suit varying risk tolerances,
as well as offering all-important diversi cation and reducing
exposure to multiple loss events.
2015 Catastrophic Activity to Date
The year so far has been relatively uneventful from an insured
loss perspective. This quiet start to the year is re ected in the
2015 portfolio performance, which has seen no expected impact from
events in the rst half.
The year began with winter storms in Europe and the U.S. causing
hundreds of millions of dollars worth of damage. Parts of Western
Europe were struck by four powerful windstorms in quick succession
in January, while, in the U.S., two separate winter weather events
brought record snowfall to parts of the Northeast.
In February, Cyclones Lam and Marcia made landfall and the
associated strong winds, rain and high tides caused over USD381mn
of damage in Australia, according to the Insurance Council of
Australia. In March, Vanuatu was devastated by category 5 Cyclone
Pam, which ripped across the Paci c nation.
The most expensive losses so far in 2015 came in April from the
U.S. After a slow start to the tornado season, severe thunderstorms
caused an estimated USD2bn worth of insurance losses across parts
of the Plains, Midwest, Southeast and Mid-Atlantic. Dozens of
tornadoes touched down, including tornado that recorded 4 on the
Enhanced Fujita Scale (EF4) in the town of Fairdale, Illinois.
However, the most costly damage occurred as a result of large hail,
strong winds and ash ooding.
May was another month of billion dollar losses in the U.S. after
excessive rainfall and widespread severe weather. Meanwhile,
preliminary analysis of the earthquake in Nepal that read 7.3 on
the Richter scale - in a country with a low insurance penetration -
suggests economic losses will reach USD5bn. The earthquake that
struck China's Xinjiang province on 2 July that read 6.5 on the
Richter scale, is also not expected to result in signi cant
insurance claims.
The hurricane season is now underway in the North Atlantic and
the latest forecasts are for below-average activity in 2015. Cooler
waters and the El Niño meteorological cycle are some of the
drivers, with Colorado State University forecasters predicting the
coming months will include three hurricanes, one of which will
develop into a major storm of category 3 or above. However, it is
impossible to predict what catastrophe events could occur in the
next six months and there will undoubtedly be surprises.
On the tenth anniversary of a year which saw Hurricane Katrina,
Rita and Wilma cost the industry USD60bn, CATCo is ever-mindful of
the often volatile nature of catastrophe risk, and maintains a
prudent approach. Many hazards occur without warning, and some of
the most signi cant insured catastrophe losses over the last two
years have arisen from extreme weather, aviation and marine
disasters.
Outlook
Downward rating pressure is being felt more signi cantly in the
traditional reinsurance sector, where the rst half of 2015 has seen
a high level of M&A activity. It is clear that traditional
reinsurers are looking at their existing business models and cost
of capital as they adapt to new realities in this market.
Many are withdrawing capacity from U.S. property catastrophe and
redeploying it into other classes of business. Meanwhile, an ILS
taskforce was set up by the London Market Group to look at ways of
attracting more of the business after UK Chancellor George Osborne
identi ed an ILS solution as critical to London's future in his
budget speech in March.
We believe that traditional cycles and business models within
catastrophe reinsurance are changing irreversibly. We expect
investor interest to remain strong. Capital is now able to move
with great ease into the sector post-event, and this process will
ensure catastrophe capacity remains plentiful and cost-effective
going forward.
Nigel Barton
Chairman,
CATCo Reinsurance Opportunities Fund Ltd.
14 August 2015
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 2014, 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 UK Corporate Governance Code issued by
the Financial Reporting Council on going concern and liquidity risk
issued in September 2014, 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 nancial resources to continue
its operational existence for the foreseeable future and at least
one year from the date of this interim report. 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 2015 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 2015
UNAUDITED STATEMENTS OF ASSETS AND LIABILITIES
(Expressed in United 30 June 30 June 31 Dec.
States Dollars) 2015 2014 2014
--------------------------- -------------- -------------- --------------
$ $ $
--------------------------- -------------- -------------- --------------
Assets
--------------------------- -------------- -------------- --------------
Investment in CATCo
Reinsurance Fund Ltd.-
CATCo Diversified Fund,
at fair value 323,618,163 331,804,083 363,800,160
--------------------------- -------------- -------------- --------------
Cash and cash equivalents 1,342,284 747,890 106,162
--------------------------- -------------- -------------- --------------
Other assets 114,067 93,320 30,566
--------------------------- -------------- -------------- --------------
Total assets 325,074,514 332,645,293 363,936,888
--------------------------- -------------- -------------- --------------
Liabilities
--------------------------- -------------- -------------- --------------
Accrued expenses and
other liabilities 89,638 185,982 211,261
--------------------------- -------------- -------------- --------------
Management fee payable 1,708 819 -
--------------------------- -------------- -------------- --------------
Total liabilities 91,346 186,801 211,261
--------------------------- -------------- -------------- --------------
Net assets 324,983,168 332,458,492 363,725,627
--------------------------- -------------- -------------- --------------
NAV per Share (see note 4)
See accompanying notes to unaudited Financial Statements
UNAUDITED STATEMENTS OF OPERATIONS
(Expressed in United States Six months Six months Year ended
Dollars) to 30 June to 30 31 Dec.
2015 June 2014 2014
-------------------------------------- -------------- -------------- ---------------
$ $ $
-------------------------------------- -------------- -------------- ---------------
Net investment loss allocated
from CATCo Reinsurance Fund
Ltd. -
CATCo Diversified Fund
-------------------------------------- -------------- -------------- ---------------
Interest 5,044 11,695 15,251
-------------------------------------- -------------- -------------- ---------------
Other income - - 140,791
-------------------------------------- -------------- -------------- ---------------
Management fee (2,389,613) (2,461,340) (5,136,652)
-------------------------------------- -------------- -------------- ---------------
Performance fee (1,542,079) (1,567,459) (5,083,337)
-------------------------------------- -------------- -------------- ---------------
Professional fees and other (148,653) (142,245) (288,299)
-------------------------------------- -------------- -------------- ---------------
Administrative fee (80,980) (95,237) (190,215)
-------------------------------------- -------------- -------------- ---------------
Miscellaneous expenses - (3,565) -
-------------------------------------- -------------- -------------- ---------------
Net investment loss allocated
from CATCo Reinsurance Fund
Ltd. -
CATCo Diversified Fund (4,156,281) (4,258,151) (10,542,461)
-------------------------------------- -------------- -------------- ---------------
Company expenses
-------------------------------------- -------------- -------------- ---------------
Professional fees and other (724,419) (945,817) (1,646,002)
-------------------------------------- -------------- -------------- ---------------
Administrative fee (27,000) (27,000) (54,000)
-------------------------------------- -------------- -------------- ---------------
Management fee (12,564) (20,557) (22,314)
-------------------------------------- -------------- -------------- ---------------
Total Company expenses (763,983) (993,374) (1,722,316)
-------------------------------------- -------------- -------------- ---------------
Net investment loss (4,920,264) (5,251,525) (12,264,777)
-------------------------------------- -------------- -------------- ---------------
Net realised gain and net
decrease in unrealised appreciation
on securities allocated
from CATCo Reinsurance Fund
Ltd. -
CATCo Diversified Fund
-------------------------------------- -------------- -------------- ---------------
Net realised gain on securities 45,577,396 75,407,454 78,813,489
-------------------------------------- -------------- -------------- ---------------
Net decrease in unrealised
appreciation on securities (26,403,112) (56,102,355) (18,697,603)
-------------------------------------- -------------- -------------- ---------------
Net gain on securities 19,174,284 19,305,099 60,115,886
-------------------------------------- -------------- -------------- ---------------
Net increase in net assets
resulting from operations 14,254,020 14,053,574 47,851,109
-------------------------------------- -------------- -------------- ---------------
See accompanying notes to unaudited Financial Statements
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.
2015 June 2014 2014
--------------------------------- --------------- --------------- ---------------
$ $ $
--------------------------------- --------------- --------------- ---------------
Operations
--------------------------------- --------------- --------------- ---------------
Net investment loss (4,920,264) (5,251,525) (12,264,777)
--------------------------------- --------------- --------------- ---------------
Net realised gain on securities 45,577,396 75,407,454 78,813,489
--------------------------------- --------------- --------------- ---------------
Net decrease in unrealised
appreciation on securities (26,403,112) (56,102,355) (18,697,603)
--------------------------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations 14,254,020 14,053,574 47,851,109
--------------------------------- --------------- --------------- ---------------
Capital share transactions
--------------------------------- --------------- --------------- ---------------
Dividends declared (17,999,434) (21,218,256) (23,748,656)
--------------------------------- --------------- --------------- ---------------
Return of value distribution (34,997,045) (63,536,808) (63,536,808)
--------------------------------- --------------- --------------- ---------------
Share buyback - (5,871,713) (5,871,713)
--------------------------------- --------------- --------------- ---------------
Net decrease in net assets
resulting from capital
share transactions (52,996,479) (90,626,777) (93,157,177)
--------------------------------- --------------- --------------- ---------------
Net decrease in net assets (38,742,459) (76,573,203) (45,306,068)
--------------------------------- --------------- --------------- ---------------
Net assets, beginning of
period 363,725,627 409,031,695 409,031,695
--------------------------------- --------------- --------------- ---------------
Net assets, end of period 324,983,168 332,458,492 363,725,627
--------------------------------- --------------- --------------- ---------------
See accompanying notes to unaudited Financial Statements
UNAUDITED STATEMENTS OF CASH FLOWS
(Expressed in United States Six months Six months Year ended
Dollars) to to 31 Dec.
30 June 30 June 2014
2015 2014
--------------------------------- --------------- --------------- ---------------
$ $ $
--------------------------------- --------------- --------------- ---------------
Cash flows from operating
activities
--------------------------------- --------------- --------------- ---------------
Net increase in net assets
resulting from operations 14,254,020 14,053,574 47,851,109
--------------------------------- --------------- --------------- ---------------
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
in unrealised appreciation
on securities allocated
from CATCo Reinsurance
Fund Ltd. -
CATCo Diversified Fund (15,018,003) (15,046,948) (49,573,425)
--------------------------------- --------------- --------------- ---------------
Sale of investment in CATCo
Reinsurance Fund Ltd.-
CATCo Diversified Fund 55,200,000 92,071,713 104,902,113
--------------------------------- --------------- --------------- ---------------
Purchase of investment
in CATCo Reinsurance Fund
Ltd. -
CATCo Diversified Fund - - (10,300,000)
--------------------------------- --------------- --------------- ---------------
Changes in operating assets
and liabilities:
--------------------------------- --------------- --------------- ---------------
Other assets (83,501) (26,288) 36,466
--------------------------------- --------------- --------------- ---------------
Accrued expenses and other
liabilities (121,623) 35,994 61,273
--------------------------------- --------------- --------------- ---------------
Management fee payable 1,708 565 (254)
--------------------------------- --------------- --------------- ---------------
Net cash provided by operating
activities 54,232,601 91,088,610 92,977,282
--------------------------------- --------------- --------------- ---------------
Cash flows from financing
activities
--------------------------------- --------------- --------------- ---------------
Dividend paid (17,999,434) (21,218,256) (23,748,656)
--------------------------------- --------------- --------------- ---------------
Return of value distribution
paid (34,997,045) (63,536,808) (63,536,808)
--------------------------------- --------------- --------------- ---------------
Share buyback - (5,871,713) (5,871,713)
--------------------------------- --------------- --------------- ---------------
Net cash used in financing
activities (52,996,479) (90,626,777) (93,157,177)
--------------------------------- --------------- --------------- ---------------
Net increase/(decrease)
in cash and cash equivalents 1,236,122 461,833 (179,895)
--------------------------------- --------------- --------------- ---------------
Cash and cash equivalents,
beginning of period 106,162 286,057 286,057
--------------------------------- --------------- --------------- ---------------
Cash and cash equivalents,
end of period 1,342,284 747,890 106,162
--------------------------------- --------------- --------------- ---------------
See accompanying notes to unaudited Financial Statements
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
(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
Diversi ed 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 nancial 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, oods, tsunamis, tornados,
windstorms, extreme temperatures, aviation accidents, res,
explosions, marine accidents 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"). The Company is an investment company and follows the
accounting and reporting guidance contained within Topic 946 of the
Financial Accounting Standards Board's Accounting Standards Codi
cation.
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 Prime
Management Limited (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 nancial instruments under ASC 825, Financial
Instruments, approximate the carrying amounts presented in the
unaudited 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 speci c identi cation 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 re ected in the unaudited 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 uctuations arising from changes in market
prices of investments held. Such uctuations are included in net
decrease in unrealised appreciation on securities in the unaudited
Statements 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 bene t recognised is measured as the largest
amount of bene t that has a greater than fty percent likelihood of
being realised upon ultimate settlement with the relevant taxing
authority. De-recognition of a tax bene t 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 bene ts as of 30 June 2015. 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 bene ts in interest expense and other expenses,
respectively. No interest expense or penalties have been recognised
as of and for the period ended 30 June 2015.
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. The Company was not subjected to any tax examinations during
the period ended 30 June 2015.
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 2015,
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 speci cally to the Reinsurer and are re
ected 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 uses its own
models and historical loss analysis data as well as assessments
from counter-parties to estimate the level of reserves required. In
addition, the Reinsurer records risk margin to re ect uncertainty
surrounding cash ows relating to loss reserves.
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 re ected 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 2015, the Reinsurer paid claims of
$17,324,980 pertaining to the Superstorm Sandy in October 2012 and
the 2014 U.S. Severe Convective Storm exposure.
4. CAPITAL SHARE TRANSACTIONS
As of 30 June 2015, the Company has authorised capital stock of
500,000,000 unclassi ed shares of par value $0.0001 per Share.
As of 30 June 2015, the Company has issued 273,224,673 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
2015 is as follows:
Adjustment
following
Beginning Share Capital Ending Net Ending NAV
Shares Consolidation Ending Shares Assets Per Share
Class 1
-
Ordinary
Shares 303,582,970 (30,358,297) 273,224,673 $324,983,168 $1.1894
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 5 January 2015, the Board declared a nal dividend of $0.05929
per Share in respect of the Ordinary Shares with a record date of
16 January 2015. The nal dividend was paid to Shareholders on 30
January 2015.
In addition, the Board announced on 5 January 2015 that the
proposed Return of Value to Shareholders of $0.11528 per existing
Ordinary Share, equivalent to approximately $35,000,000, and
subsequent share capital consolidation were approved. Following the
share capital consolidation, a total of 273,224,673 Ordinary Shares
were issued effective 30 January 2015 and the Return of Value paid
to Shareholders on 9 February 2015 amounted to $34,997,045.
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 Insurance Manager of 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, which holds the entire share capital of
the Investment Manager, holds 5.76% of the voting rights of the
Ordinary Shares issued in the Company as of 30 June 2015.
In addition, the Directors of the Company are also Shareholders
of the Company.
7. ADMINISTRATIVE FEE
Prime Management Limited, a division of SS&C GlobeOp, serves
as the Company's Administrator and performs certain administrative
services on behalf of the Company. For the provision of the service
under the Administration Agreement, the Administrator receives a
xed fee.
8. FINANCIAL HIGHLIGHTS FOR THE ORDINARY SHARES
Financial highlights for the Ordinary Shares for the period 1
January 2015 to 30 June 2015 are as follows:
Class 1
Per share operating performance Ordinary
Share
------------------------------------------ ---------
Net Asset Value, beginning of period $1.1981
------------------------------------------ ---------
Income/(loss) from investment operations:
------------------------------------------ ---------
Net investment loss (0.0052)
------------------------------------------ ---------
Performance fee (0.0056)
------------------------------------------ ---------
Management fee (0.0087)
------------------------------------------ ---------
Net gain on investments 0.0701
------------------------------------------ ---------
Total from investment operations 0.0506
------------------------------------------ ---------
Dividend (0.0593)
------------------------------------------ ---------
Net Asset Value, end of period $1.1894
------------------------------------------ ---------
Total Net Asset Value return 4.69%
------------------------------------------ ---------
Total Net Asset Value return before
performance fee 4.69%
------------------------------------------ ---------
Performance fee* (0.47)%
------------------------------------------ ---------
Total Net Asset Value return after
performance fee** 4.22%
------------------------------------------ ---------
Ratio to average net assets (1.07)%
------------------------------------------ ---------
Expenses other than performance fee (1.07)%
------------------------------------------ ---------
Performance fee* (0.47)%
------------------------------------------ ---------
Total expenses after performance fee (1.54)%
------------------------------------------ ---------
Net investment loss (1.63)%
------------------------------------------ ---------
* The performance fee is charged in the Master Fund.
**Adjusting the opening capital to reflect the dividend declared
on 5 January 2015, the normalised total return for the period 1
January 2015 to 30 June 2015 is equivalent to 4.47%.
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 2015 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
In July 2015, the Investment Manager was advised of a loss from
a USD2 billion U.S. Northeast Winter storm event which occurred in
Q1 2015. The maximum impact of this reported loss to the Company's
NAV would be 50 bps.
The unaudited Financial Statements were approved by management
and Board of Directors and available for issuance on 14 August
2015. Subsequent events have been evaluated through this date.
For further information,
please contact:
CATCo Investment Management
Ltd.
Judith Wynne, General Counsel
Mobile: +44 7986 205364
Telephone: +1 441 493 9005
Email: judith.wynne@catcoim.com
Mark Way, Investor Relations
Director
Mobile: +44 7786 116991
Telephone: +1 441 293 0050
Email: mark.way@catcoim.com
Numis Securities Limited
David Benda / Hugh Jonathan
Telephone: +44 (0) 20 7260
1000
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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