TIDMCAT
RNS Number : 3428H
CATCo Reinsurance Opps Fund Ltd
12 March 2018
12 March 2018
CATCo Reinsurance Opportunities Fund Ltd. (the "Company")
Annual Financial Report
For the 12 month period 1 January 2017 to 31 December 2017
To: London Stock Exchange's Specialist Fund Segment, 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 2017 Annual Report for CATCo Reinsurance
Opportunities Fund Ltd. (the "Company"). Following an unprecedented
year of significant catastrophic events, in which three major
hurricanes and extensive wildfires had devastating impacts across
the Caribbean and the southern U.S., the Company recorded a
decrease of 27.60 per cent in the net asset value of its Ordinary
Shares.
Whilst the aforementioned events have heavily affected the
financial performance of the Company, the events of 2017 serve to
demonstrate the importance of the global reinsurance market and
highlight the ability of collateralized vehicles such as the
Company and others managed by Markel CATCo Investment Management
Ltd. (the "Investment Manager") to respond to global catastrophic
risk.
Despite the challenges that 2017 has presented, the Company
remains well-positioned to implement its investment policy and to
meet its reinsurance clients' needs, having taken advantage of the
expected increase in reinsurance premiums to raise significant
further capital. This further capital, together with the existing
available capital, has been fully deployed in the 2018 reinsurance
renewals. Furthermore, the Company's ability to raise $546 million
in a short period of time to capitalise on this market opportunity
further highlights the unique structure of the Company and the
capability of the Investment Manager to respond quickly to a
rapidly changing market environment.
Financial Performance Since Inception
The net asset value ("NAV") of the Ordinary Shares for the year
ended 2017 declined by 27.60 per cent (2016: Ordinary Shares plus
8.12 per cent). The cumulative NAV total returns since inception to
31 December 2017 of the Ordinary Shares issued on 20 December 2010
and the various issuances of class C Shares are listed as
follows:
Share Class NAV Total Returns
(Date of Issuance) since Inception
(to 31 December
2017)
------------------------------ ------------------
Ordinary Shares 27.26 per cent
(20 December 2010)
------------------------------ ------------------
C Shares issued 45.00 per cent
(20 May 2011 - converted
to Ordinary Shares in
August 2013)
------------------------------ ------------------
C Shares issued 30.31 per cent
(16 December 2011 -
converted to Ordinary
Shares in August 2013)
------------------------------ ------------------
C Shares issued -22.32 per cent
(2 November 2015 - converted
to Ordinary Shares in
May 2017)
------------------------------ ------------------
Side Pocket Investments (SPIs")
Due to the number of severe catastrophic events that occurred in
2017 and the nature of the underlying multi-pillared reinsurance
deal structures, more SPIs have been established in 2017 than any
other previous year since the Company's inception. Historically,
the SPIs contained within the Company's investment portfolio have
amounted to approximately 5 to 15 per cent of Ordinary Share NAV.
However, following the 2017 catastrophic activity, the SPIs
represent 65.9 per cent of Ordinary Share NAV as at 31 December
2017. In 2017, SPIs were established (inter alia) in relation to
hurricanes Harvey, Irma and Maria and the California wildfires.
These SPIs amount to 55 per cent of the Ordinary Share NAV as at 31
December 2017.
As reported in the 2017 interim statement, the Company continues
to hold SPIs in relation to underwriting years 2014 - 2016. As at
31 December 2017, the SPI amounts held are as follows:
-- 2014 SPIs, predominantly resulting from U.S. severe
convective storms, amount to approximately one per cent of the
Company's Ordinary Share NAV (31 December 2016: 1.6 per cent of
Ordinary Share NAV).
-- 2015 SPIs, principally relating to U.S. and Canada winter
storms and U.S. severe convective storms, amount to 1.6 per cent of
the Company's Ordinary Share NAV (31 December 2016: 3.2 per cent of
Ordinary Share NAV).
-- 2016 SPIs created for exposures to the Fort McMurray
wildfire, the Jubilee oil field off the Ghana coast, Hurricane
Matthew and the South Island earthquake in New Zealand amount to 8
per cent of the Company's NAV (31 December 2016: 7.0 per cent of
Ordinary Share NAV).
-- The combined SPIs amount to 65.9 per cent (2016 - 11.5 per
cent) of the Ordinary Share NAV with approximately, four per cent
of the 2014-2016 SPIs expected to be released in the first quarter
of 2018.
It is also important to note that the C Shares issued in
December 2017 will not have any exposure to losses from the
catastrophic events of 2017 or previous years.
C Share Conversion
As noted in the interim statement, the November 2015 C Shares
were converted into Ordinary Shares on 23 May 2017, following
determination by the Board that the Company's Ordinary Shares no
longer had any material uncertainty to their valuation as a result
of their exposure to the 2014 and 2015 SPIs.
Share Issuances
During the year, the Company engaged in significant capital
activity driven by buyer demand. Initially, in the first half of
2017, the Company raised gross proceeds of $45.9 million via a tap
issuance in order to satisfy mid-year demand.
In the second half of 2017, the hurricane events affecting parts
of the U.S. and the Caribbean resulted in increased pricing within
the retrocessional reinsurance market and an opportunity for the
Company to raise new capital to meet investor demand.
In November 2017, the Company launched a twelve month
fundraising programme and raised $546 million via a C Share
issuance in December 2017. The Directors anticipate issuing further
shares dependent on investor appetite, additional buyer demand and
appropriate risk and return levels.
2018 Portfolio
As a result of the 2017 catastrophic events, retrocessional
reinsurance market conditions hardened and price increases were
achieved by the underlying reinsurer. As a consequence, the 2018
portfolio illustrative maximum net return (assuming no losses)*,
including hedging costs, is approximately 23 per cent on invested
capital. This is approximately a 43 per cent increase over 2017's
illustrative maximum net return.
In addition, the overall risk profile of the 2018 portfolio
improved, with the maximum capital exposed to a worst-case single
event limited to 8 per cent (net), compared to 10 per cent for
2017. Further information about the 2018 portfolio is included in
the Investment Manager's Review.
* This figure represents the Company's projected net portfolio
returns, is for illustrative purposes only and does not take into
account any unforeseen costs, expenses or other factors which may
affect the Company or its assets.
Annual Dividend and Revised Dividend Policy
The Board believes that an appropriate dividend policy is an
effective way of returning value to investors and, since inception,
the Company has met its intentions of paying an annual dividend of
five per cent of the year end NAV plus LIBOR.
With respect to 2017, a dividend of $0.05476 per Ordinary Share
was paid to Shareholders on 26 February 2018. Since inception, the
Company has returned capital of $234 million to Ordinary and C
Share Shareholders via dividends and return of value distributions
with the original Ordinary Share Shareholders from December 2010
having received approximately 75 per cent of their original
investment through such distributions.
The Board announced on 15 November 2017 its decision to enhance
the dividend policy. The Company currently targets an annual
dividend of an amount equal to LIBOR plus five per cent of the net
asset value per share at the end of each fiscal year (the "Annual
Dividend"). In addition to this, the Board now intends to consider
paying a special dividend (the "Special Dividend") of which both
the Ordinary Shares and the C Shares will be eligible for. The
Special Dividend is expected to be an amount equal to the level of
accumulated profits of each share class in the relevant fiscal year
in excess of LIBOR plus 7.5 per cent. In line with the Annual
Dividend, the payment of a Special Dividend is at the Board's
discretion.
Discount Management
At launch, the Board put in place a trading discount related
tender offer, the objective of this discount control mechanism
being to provide Shareholders with liquidity in the event of the
share price trading at a persistent discount to NAV. Implementation
of such a discount control mechanism requires the availability of
liquidity in the Markel CATCo Diversified Fund, a segregated
account of the Markel CATCo Reinsurance Fund Ltd. (the "Master
Fund"). Liquidity is reduced due to the catastrophic events in
2017, which have led to 65.9 per cent of the portfolio being
cash-trapped.
The Board monitors any share price discount to NAV but does not
currently believe that it will be appropriate to make a tender
offer in the year ending 31 December 2018 as this would increase
the ongoing percentage of the portfolio which is cash-trapped. The
Board does not believe that this is in the best interests of the
Shareholders as a whole.
Shareholders
In my first year as Chairman of the Company, I would like to
extend my thanks to the Company's Shareholders for their continued
support of the strategy despite a year that resulted in significant
negative financial performance.
In addition, I would also like to acknowledge the hard work and
co-operation of both the Company's Board and the Investment Manager
throughout 2017, which have enabled the Company to respond
proactively to the current market conditions.
I look forward to serving you in my role as Chairman, and am
encouraged about the opportunities the 2018 portfolio presents.
James Keyes
Chairman,
CATCo Reinsurance Opportunities Fund Ltd.
9 March 2018
INVESTMENT Manager's Review
Following four years of relatively benign loss activity, the
Company experienced an extreme amount of insured loss activity in
2017, which is now recognized as the worst year in history for
insured losses, leading the Company to experience a decline in NAV
of 27.60 per cent for the year.
However, since the Tohoku, Japan earthquake of 2011 and up to
the 2017 hurricane loss events, the Company generated over 100 per
cent cumulative returns and returned capital of $234 million to
Shareholders by way of dividends and return of value
distributions.
Looking forward, the Company's 2018 portfolio has an
illustrative maximum return (assuming no losses)* that is 43 per
cent higher than the 2017 portfolio and includes significant risk
reduction. The Investment Manager remains very committed to its
unique reinsurance strategy, the Company's Shareholders and its
loyal reinsurance buyer base.
* This figure represents the Company's projected net portfolio
returns, is for illustrative purposes only and does not take into
account any unforeseen costs, expenses or other factors which may
affect the Company or its assets.
2017 Significant Loss Events Update
Global insured losses during 2017 are estimated to be $135
billion (source: Munich Re), making this the highest insured loss
year on record. However, the Company is not exposed to the majority
of the global catastrophes contributing to this insured loss
estimate. Major events during 2017 that are expected to have a
material impact to the Company include Hurricanes Harvey, Irma, and
Maria, and the California Wildfires.
After twelve years without a major hurricane (Category 3 or
greater) making landfall in the U.S., the 2017 Atlantic hurricane
season featured record breaking Hurricanes Harvey, Irma, and Maria.
All three storms made landfall in U.S. territories as Category 4
hurricanes, a first for any season since modern record keeping
began. Based on current insured loss estimates from Property Claims
Services (PCS), Hurricanes Harvey, Irma, and Maria are all now
within the top seven insured losses due to natural catastrophes to
occur within U.S. territories, since PCS records began in 1950.
According to PCS, Hurricane Maria, which devastated parts of the
Caribbean, and in particular Puerto Rico, is currently estimated at
$23.97 billion of insured loss. This makes Hurricane Maria the
second largest insured loss due to a natural catastrophe in U.S.
history, only behind Hurricane Katrina ($51.88 billion,
CPI-trended).
Hurricane Irma was also highly destructive for the Caribbean,
most notably the U.S. Virgin Islands, St. Martin, as well as
Antigua and Barbuda. Following this first wave of impact, Hurricane
Irma then continued on a path up the West Coast of Florida. PCS
currently estimates the total losses Hurricane Irma at $17.2
billion.
Hurricane Harvey, the first major hurricane to make landfall in
U.S. territory since Hurricane Wilma in 2005, now holds the record
for the highest total precipitation in the continental U.S. due to
a tropical cyclone. Hurricane Harvey stalled near the coastline of
Southeastern Texas, dropping torrential rains over the Houston
metropolitan region with total rainfall exceeding 50 inches. PCS
currently estimates the insured loss due to Hurricane Harvey at
$15.7 billion.
Insured losses due to wildfire events in 2017 that impacted
regions of Northern California in October, and Southern California
during December, are now estimated at $12.5 billion according to
PCS. The 2017 wildfires are now more than four times the cumulative
insured losses recorded in any previous year due to wildfires in
U.S. history.
Loss Reserves
During 2017, the Investment Manager established total loss
reserves of 47.4 per cent of the 2017 investor capital for the
following events:
(a) Hurricanes Harvey, Irma, and Maria 28.5 per cent (net of recoveries on hedges);
(b) California Wildfires 17.1 per cent; and
(c) Attritional losses of 1.8 per cent available for potential
losses due to the Mexico Earthquakes, Cyclone Debbie, and
U.S. Severe Convective Storms.
As a result, the 2017 side pocket investments represents
approximately 55 per cent of the Net Asset Value of Ordinary Shares
as at 31 December 2017. The Investment Manager believes that the
total loss reserves established for the 2017 loss events are
sufficient to provide for all cedant claims with respect to these
loss events, based on the information currently available. However,
there is still some level of industry uncertainty with regards to
the final insured loss impact of the 2017 loss events.
2018 Outlook
With 2017 producing the highest level of catastrophe losses on
record, the Investment Manager has been able to construct a
portfolio for Shareholders with a stronger return profile and
reduced risk levels as a result of rate increases and improved
reinsurance buyer contract terms.
According to Guy Carpenter, despite substantial insured losses
in 2017, overall traditional reinsurance industry capital did not
decline, leading to only a moderate year over year premium increase
of 6.1 per cent for 2018 renewals.
However, the large losses of 2017 translated into more favorable
opportunities for those in the ILS market. As a result of its
unique product offering, the Investment Manager secured for the
2018 portfolio an illustrative maximum net return (assuming no
losses)* of approximately 23 per cent on invested capital, a 43 per
cent increase over the 2017 portfolio illustrative maximum net
return of 16 per cent. These figures are inclusive of hedging
costs.
The Investment Manager also improved terms and conditions
related to the portfolio's underlying reinsurance contracts. As a
result, the maximum capital exposed to a worst-case single event is
limited to 8 per cent (net) for the 2018 portfolio, which
represents a 20 per cent reduction over the 10 per cent worst-case
single event net return for the 2017 portfolio. In addition, as a
result of the reduction in the worst-case single event net return,
the 2018 portfolio required the purchase of fewer ILW protections,
leading to further cost savings for investors.
Despite the large losses of 2017, the demand for Markel CATCo's
product increased for yet another year and is at its highest point
since the Company's inception, which has allowed the Investment
Manager to deploy 100 per cent of its available capital during the
2018 renewal process.
With a broad geographic spread, a balanced exposure to differing
risk perils and portfolio protections in place, the Investment
Manager has successfully built a stronger investment portfolio for
2018, with a return and risk profile significantly improved
compared to the 2017 portfolio.
Anthony Belisle
Chief Executive Officer
Markel CATCo Investment Management Ltd.
9 March 2018
REVIEW OF BUSINESS
A review of the Company's activities is given in the Chairman's
Statement and in the Investment Manager's Review. This includes a
review of the business of the Company and its principal activities,
and likely future developments of the business.
INVESTMENT OBJECTIVE
The investment objective of the Company and Markel CATCo
Reinsurance Fund Ltd. (the "Master Fund") is to give their
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 Preference Shares of Markel CATCo Re Ltd. (the
"Reinsurer"). The Company's investment policy appears below, and
the Investment Manager's Review appears above. Both explain how the
Company and the Master Fund have invested their assets with a view
to spreading investment risk in accordance with the Company's
investment policy.
Benchmark
Eurekahedge Insurance-Linked Securities index. This index is not
a benchmark used for investment performance measurement.
Investment Policy and Investment Strategy
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 Master Fund operates within the following limits:
-- no more than 20 per cent of its capital will be exposed to a single catastrophic event;
-- capital will only be exposed to catastrophic events at loss
levels that have not occurred more than twice in the past 40 years
on a trended loss estimate basis, unless otherwise approved by the
Board of Directors of the Master Fund;
-- capital will be exposed to aviation and marine (including
offshore energy) losses caused by catastrophes; and
-- at least 50 per cent of capital will be exposed to
residential and commercial property losses.
At 31 December 2017, the Portfolio of Investments re ects the
stated guidelines as each of the reinsurance arrangements entered
into by the Reinsurer contain several non-correlated pillars of
risk and provides a portfolio exposure to 50 diversified risk
pillars.
When investing, the Company's policy is to move freely between
different risk perils as opportunities arise. There are no limits
to geographical or sector exposures, except as stated above, but
these are reported to, and monitored by, the Board of Directors in
order to ensure that adequate diversification is achieved.
A portfolio review by the Investment Manager is given in the
Investment Manager's Review.
While there is a comparative index for the purpose of measuring
performance, no attention is paid to the composition of this index
when constructing the portfolio and the composition of the
portfolio is likely to vary substantially from that of the index. A
short term view is taken and there may be periods when the Net
Asset Value per Share declines both in absolute terms and relative
to the comparative index.
Share Capital
The Company's issued share capital at 1 January 2017 amounted to
273,224,673 Ordinary Shares and 102,510,018 C Shares.
On 23 May 2017, the Company converted the C Shares to Ordinary
Shares at a ratio of 0.0081 Ordinary Shares for every one C Share
held, and the C Shares were delisted that day. 82,835,718 Ordinary
Share were admitted to trading on 23 May 2017 as a result of the
conversion. Immediately following admission, the Company had
356,060,391 Ordinary Shares in issue.
On 25 May 2017, the Company issued 35,606,039 Ordinary Shares,
which were admitted to trading on 31 May 2017. Immediately
following admission, the Company had 391,666,430 Ordinary Shares in
issue.
On 28 November 2017, the Company issued 543,000,000 C Shares
which were admitted to trading on 1 December 2017. This issuance
was made pursuant to the Initial Placing and Offer announced by the
Company on 8 November 2017. Immediately following admission, the
Company had 391,666,430 Ordinary Shares and 543,000,000 C Shares in
issue.
On 7 December 2017, the Company issued 3,367,863 C Shares which
were admitted to trading on 12 December 2017. This issuance was
made under the Placing Programmed announced by the Company on 8
November 2017. Immediately following admission, the Company had
391,666,430 Ordinary Shares and 546,367,863 C Shares in issue.
The Company's issued share capital at 1 January 2018 amounted to
391,666,430 Ordinary Shares and 546,367,863 C Shares. That number
is unchanged as at the date of this announcement, 12 March
2018.
Note 7 to the Financial Statements contains further details
relating to the C Shares.
Total Assets and Net Asset Value
At 31 December 2017, the Company had Total Net Assets of
$884.61mn and a Net Asset Value per Ordinary and C Share of $0.8915
and $0.9800 respectively.
Borrowing
The Company will not borrow for investment purposes, although it
may borrow for temporary cash ow purposes such as for satisfying
working capital requirements. The Master Fund will not borrow for
investment or other purposes but may invest in Insurance-Linked
Instruments which are themselves leveraged.
Duration
The Company does not have a fixed life. A continuation vote will
be put to Shareholders every five years.
Risk
The investment funds portfolio managed by the Investment Manager
consists of fully collateralised reinsurance contracts and are
largely uncorrelated to traditional asset classes. Risk is spread
across multiple non-correlated risk pillars which aims to limit the
amount of capital exposed with respect to a single catastrophic
event.
Monitoring Performance
At each Board meeting, the Directors consider a number of
performance measures to assess the Company's success in achieving
its objectives.
The key performance indicators used to measure the progress and
performance of the Company over time are established industry
measures and are as follows:
-- the movement in net asset value per Ordinary Share on a
gross, net and total return basis;
-- the movement in the Share price on a Share price and total return basis;
-- the discount; and
-- the total expense ratio
In addition to the above, the Board of Directors also considers
peer group comparative performance.
Management of Risk
The Investment Manager's risk objectives are closely linked to
their performance goals. They seek to optimise trade-offs to ensure
that they meet their return objectives, control the volatility of
these returns, track underlying liquidity and identify and manage
macro-factor risk.
The Board of Directors regularly reviews the major strategic
risks that the Board and the Investment Manager have identified,
and against these, the Board sets out the delegated controls
designed to manage those risks. The principal risks facing the
Company in addition to the reinsurance risks as discussed above
relate to the Company's investment activities and include market
price, interest rate, liquidity and credit risk. Such key risks
relating to investment 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 as previously outlined.
Operational disruption, accounting and legal risks are also
covered annually, and regulatory compliance is reviewed at each
Board meeting.
Results and Dividends
The total return attributable to Ordinary Shareholders for the
year amounted to (27.60) per cent (2016 - 8.12 per cent).
The Company currently targets an annual dividend of an amount
equal to LIBOR plus 5 per cent. of the net asset value per share at
the end of each fiscal year (the "Annual Dividend"). On 15 November
2017, the Company announced that, following feedback from
investors, the Board had decided to enhance the current dividend
policy, and it now intends to consider paying an additional special
dividend (the "Special Dividend") from 2019 (in respect of the
financial year ending 31 December 2018) onwards.
Both the Ordinary Shares and the C Shares will be eligible for
the Special Dividend, which is expected to be an amount equal to
the level of accumulated profits of each shares class in the
relevant fiscal year in excess of LIBOR plus 7.5% the "Performance
Threshold").
The payment of a Special Dividend is not a target, and the
Company's target returns and target distributions remain as stated
in the "Corporate Summary" section of this Annual Report and above.
Even where the Performance Threshold is met, as is the case with
the Annual Dividend, the payment of a Special Dividend is at the
Board's discretion.
On 31 January 2018, the Company announced an annual dividend of
$0.05476 in respect of each of the Ordinary Shares, for the year to
31 December 2017, payable on 26 February 2018. The record date for
this dividend was 9 February 2018 and the ex-dividend date 8
February 2018.
DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
The Board of Directors are responsible for preparing the annual
report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year.
Under that law, the Board of Directors have elected to prepare
the financial statements in accordance with US Generally Accepted
Accounting Principles ("US GAAP"). The financial statements are
required by the Bermuda Companies Act 1981 to present fairly in all
material respects the state of affairs of the Company and of the
profit or loss of the Company for that year. In preparing these
financial statements, the Board of Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent; and
-- state whether applicable Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements.
The Directors are responsible for keeping proper accounting
records that are sufficient to disclose the Company's transactions
and that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Bermuda Companies Act.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors consider that the Annual Report and Financial
Statements taken as a whole, are fair, balanced and understandable,
and provide the information necessary for Shareholders to assess
the Company's performance, business model and strategy.
The financial statements will be published on
www.catcoreoppsfund.com, which is maintained by the Investment
Manager, Markel CATCo Investment Management Ltd. The maintenance
and integrity of the website maintained by Markel CATCo Investment
Management Ltd. is, so far as it relates to the Company, the
responsibility of Markel CATCo Investment Management Ltd.
The Board of Directors are responsible for the maintenance and
integrity of the corporate and financial information included on
the Company's website. Legislation in Bermuda governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
In accordance with Chapter 4 of the Disclosure and Transparency
Rules, and to the best of their knowledge, each Director of CATCo
Reinsurance Opportunities Fund Ltd. confirms that the financial
statements have been prepared in accordance with the applicable set
of accounting standards and present fairly the assets, liabilities,
financial position and profit or loss of the Company.
Furthermore, each Director confirms that, to the best of his or
her knowledge, the management report (which consists of the
Chairman's Report, the Manager's Review, the Strategic Report and
the Directors' Report) includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that the Company faces.
Alastair Barbour
Chairman of the Audit Committee
9 March 2018
AUDITED STATEMENTS OF ASSETS AND LIABILITIES
(Expressed in United States 31 Dec. 31 Dec.
Dollars) 2017 2016
---------------------------------------- -------------- ------------
$ $
---------------------------------------- -------------- ------------
Assets
---------------------------------------- -------------- ------------
Investments in Master Funds,
at fair value (see Note 5) 347,692,465 463,116,346
---------------------------------------- -------------- ------------
Cash and cash equivalents 22,393,414 819,558
---------------------------------------- -------------- ------------
Advance subscription in Markel
CATCo Reinsurance Fund Ltd. 515,000,000
- Markel CATCo Diversified Fund -
---------------------------------------- -------------- ------------
Due from Markel CATCo Reinsurance
Fund Ltd. - Markel CATCo Diversified 100,000
Fund -
---------------------------------------- -------------- ------------
Other assets 40,618 20,257
---------------------------------------- -------------- ------------
Total assets 885,226,497 463,956,161
---------------------------------------- -------------- ------------
Liabilities
---------------------------------------- -------------- ------------
Accrued expenses and other liabilities 620,283 339,036
---------------------------------------- -------------- ------------
Total liabilities 620,283 339,036
---------------------------------------- -------------- ------------
Net assets 884,606,214 463,617,125
---------------------------------------- -------------- ------------
NAV per Share (see Note 7)
See accompanying Notes to Financial Statements
AUDITED STATEMENTS OF OPERATIONS
Year ended Year ended
31 Dec. 31 Dec.
(Expressed in United States Dollars) 2017 2016
---------------------------------------- -------------- ---------------
$ $
---------------------------------------- -------------- ---------------
Net investment loss allocated
from Master Funds
(see Note 5)
---------------------------------------- -------------- ---------------
Interest 855,847 142,741
---------------------------------------- -------------- ---------------
Miscellaneous Income - 11,874
---------------------------------------- -------------- ---------------
Management fee (6,678,874) (6,739,718)
---------------------------------------- -------------- ---------------
Professional fees and other (356,909) (312,932)
---------------------------------------- -------------- ---------------
Administrative fee (216,748) (229,233)
---------------------------------------- -------------- ---------------
Performance fee (1,373) (3,906,968)
---------------------------------------- -------------- ---------------
Net investment loss allocated
from Master Funds (6,398,057) (11,034,236)
---------------------------------------- -------------- ---------------
Company expenses
---------------------------------------- -------------- ---------------
Professional fees and other (1,629,446) (1,412,957)
---------------------------------------- -------------- ---------------
Management fee (66,234) (80,620)
---------------------------------------- -------------- ---------------
Administrative fee (60,000) (99,000)
---------------------------------------- -------------- ---------------
Total Company expenses (1,755,680) (1,592,577)
---------------------------------------- -------------- ---------------
Net investment loss (8,153,737) (12,626,813)
---------------------------------------- -------------- ---------------
Net realised gain and net increase
in unrealised depreciation on
securities allocated from Master
Funds
(see Note 5)
---------------------------------------- -------------------------------
Net realised gain on securities 46,131,007 57,663,896
---------------------------------------- -------------- ---------------
Net increase in unrealised depreciation
on securities (172,074,933) (11,149,939)
---------------------------------------- -------------- ---------------
Net (loss) / gain on securities
allocated from Master Funds (125,943,926) 46,513,957
---------------------------------------- -------------- ---------------
Net (decrease) / increase in
net assets resulting from operations (134,097,663) 33,887,144
---------------------------------------- -------------- ---------------
See accompanying Notes to Financial Statements
AUDITED STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
(Expressed in United States 31 Dec. 31 Dec.
Dollars) 2017 2016
---------------------------------------- -------------- -------------
$ $
---------------------------------------- -------------- -------------
Operations
---------------------------------------- -------------- -------------
Net investment loss (8,153,737) (12,626,813)
---------------------------------------- -------------- -------------
Net realised gain on securities
allocated from Master Funds 46,131,007 57,663,896
---------------------------------------- -------------- -------------
Net increase in unrealised depreciation
on securities allocated from
Master Funds (172,074,933) (11,149,939)
======================================== ============== =============
Net (decrease) / increase in
net assets resulting from operations (134,097,663) 33,887,144
======================================== ============== =============
Capital share transactions
---------------------------------------- -------------- -------------
Issuance of Ordinary Shares 45,265,957 10,920,013
---------------------------------------- -------------- -------------
Issuance of Class C Shares 546,367,863 -
---------------------------------------- -------------- -------------
Dividend paid (25,557,987) (18,084,741)
---------------------------------------- -------------- -------------
Offering costs Ordinary Shares (688,389) (208,719)
---------------------------------------- -------------- -------------
Offering costs Class C Shares (10,927,358) -
---------------------------------------- -------------- -------------
Premium on issuance of shares 626,666 -
======================================== ============== =============
Net increase / (decrease) in
net assets resulting from
capital share transactions 555,086,752 (7,373,447)
======================================== ============== =============
Net increase in net assets 420,989,089 26,513,697
======================================== ============== =============
Net assets, at 1 January 463,617,125 437,103,428
======================================== ============== =============
Net assets, at 31 December 884,606,214 463,617,125
======================================== ============== =============
See accompanying Notes to Financial Statements
AUDITED STATEMENTS OF CASH FLOWS
Year Year ended
ended 31 Dec.
31 Dec. 2016
(Expressed in United States Dollars) 2017
--------------------------------------------------- ------------- --------------------
$ $
--------------------------------------------------- ------------- --------------------
Cash flows from operating activities
--------------------------------------------------- ------------- --------------------
Net (decrease) / increase in net
assets resulting from operations (134,097,663) 33,887,144
--------------------------------------------------- ------------- --------------------
Adjustments to reconcile net decrease
in net assets resulting from operations
to net cash (used in) / provided
by operating activities:
--------------------------------------------------- -----------------------------------
Net investment loss, net realised
gain and net increase in unrealised
depreciation on securities allocated
from Master Funds 132,341,983 (35,479,721)
--------------------------------------------------- ------------- --------------------
Sale of investment in Markel CATCo
Reinsurance Fund Ltd.
- Markel CATCo Diversified Fund,
and CATCo Reinsurance Fund Ltd.
- CATCo Diversified Fund 37,521,898 334,580,362
--------------------------------------------------- ------------- --------------------
Purchase of investment in Markel
CATCo Reinsurance Fund Ltd.
- Markel CATCo Diversified Fund (54,440,000) (414,700,000)
--------------------------------------------------- ------------- --------------------
Changes in operating assets and
liabilities:
--------------------------------------------------- ------------- --------------------
Advance subscription in Markel
CATCo Reinsurance Fund Ltd.
- Markel CATCo Diversified Fund (515,000,000) 88,000,000
--------------------------------------------------- ------------- --------------------
Due from related parties (100,000) -
--------------------------------------------------- ------------- --------------------
Other assets (20,361) 9,868
--------------------------------------------------- ------------- --------------------
Accrued expenses and other liabilities 143,145 56,047
--------------------------------------------------- ------------- --------------------
Net cash (used in) / provided by
operating activities (533,650,998) 6,353,700
--------------------------------------------------- ------------- --------------------
Cash flows from financing activities
--------------------------------------------------- ------------- --------------------
Issuance of Ordinary Shares 45,265,957 10,920,013
--------------------------------------------------- ------------- --------------------
Issuance of Class C Shares 546,367,863 -
--------------------------------------------------- ------------- --------------------
Dividend paid (25,557,987) (18,084,741)
--------------------------------------------------- ------------- --------------------
Offering costs Ordinary Shares (688,389) (208,719)
--------------------------------------------------- ------------- --------------------
Offering costs Class C Shares (10,789,256) -
--------------------------------------------------- ------------- --------------------
Premium on issuance of Ordinary
Shares 626,666 -
--------------------------------------------------- ------------- --------------------
Net cash provided by / (used in)
financing activities 555,224,854 (7,373,447)
--------------------------------------------------- ------------- --------------------
Net increase / (decrease) in cash
and cash equivalents 21,573,856 (1,019,747)
--------------------------------------------------- ------------- --------------------
Cash and cash equivalents, at 1
January 819,558 1,839,305
--------------------------------------------------- ------------- --------------------
Cash and cash equivalents, at 31
December 22,393,414 819,558
--------------------------------------------------- ------------- --------------------
See accompanying Notes to Financial Statements
NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2017
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 is organised as a
feeder fund to invest substantially all of its assets in Markel
CATCo Diversi ed Fund (the "Master Fund"). The Master Fund is a
segregated account of Markel 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 Company will establish a separate
account for each class of shares comprised in each segregated
account (each, a "SAC Fund"). Each SAC Fund is a separate
individually managed pool of assets constituting, in effect, a
separate fund with its own investment objective and policies and
managed by Markel CATCo Investment Management Ltd. (the "Investment
Manager"). The assets attributable to each SAC Fund 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, a Bermuda based limited
liability company. Subject to the ultimate supervision of the
Company's Board of Directors (the "Board"), the Investment Manager
is responsible for all of the Company's investment decisions. The
Investment Manager commenced operations on 8 December 2015 (Note
8).
Prior to 8 December 2015, the Company was managed by CATCo
Investment Management Ltd ("CIML"). The Investment Manager entered
into a Run-Off Services Agreement with CIML, under which the former
will provide services relating to the management of the run-off
business of CIML until such business is liquidated. The Company
maintains an investment in CATCo Diversified Fund, the former
Master Fund, (together the "Master Funds") details of which can be
found within Note 2.
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.
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 preference 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. The majority of the
Master Fund's exposure to reinsurance risk is obtained through its
investment (via preference shares) in Markel CATCo Re Ltd (the
"Reinsurer"). At 31 December 2017, the Company's ownership is 16%
of the Master Fund (31 December 2016: 16%) and 16% of CATCo
Diversified Fund (31 December 2016: 16%).
The Reinsurer and CATCo-Re Ltd., (together the "Reinsurers") are
Bermuda licensed Class 3 reinsurance companies, registered as a
segregated accounts companies under the SAC Act, through which the
Master Funds access the majority of their reinsurance risk
exposure. The Reinsurers will form a segregated account that
corresponds solely to the Master Funds investment in the Reinsurers
with respect to each particular reinsurance agreement.
The Reinsurers focus primarily on property catastrophe insurance
and may be exposed to losses arising from hurricanes, earthquakes,
typhoons, hailstorms, winterstorms, oods, tsunamis, tornados,
windstorms, extreme temperatures, aviation accidents, res,
wildfires, explosions, marine accidents, terrorism, satellite,
energy and other perils.
Basis of Presentation
The audited 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
("U.S. GAAP"). The Company is an investment company and follows the
accounting and reporting guidance contained within Topic 946,
"Financial Services Investment Companies", of the Financial
Accounting Standards Board ("FASB") Accounting Standards
Codification ("ASC").
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 Investments in Master Fund
The Company records its investments in the Master Funds at the
net asset value as reported by the Master Funds, which is the
Company's proportionate interest in the net assets of the Master
Funds. The performance of the Company is directly affected by the
performance of the Master Funds and is subject to the same risks to
which the Master Funds are subject. Valuation of investments held
by the Master Funds, including, but not limited to the valuation
techniques used and classi cation within the fair value hierarchy
of investments held are discussed as follows:
Fair Value - Definition and Hierarchy (Master Funds)
Fair value is de ned as the price that would be received to sell
an asset or paid to transfer a liability (i.e., the "exit price")
in an orderly transaction between market participants at the
measurement date.
In determining fair value, the Investment Manager uses various
valuation approaches. A fair value hierarchy for inputs is used in
measuring fair value that maximises the use of observable inputs
and minimises the use of unobservable inputs by requiring that the
most observable inputs are to be used when available. Observable
inputs are those that market participants would use in pricing the
asset or liability based on market data obtained from sources
independent of the Investment Manager. Unobservable inputs re ect
the assumptions of the Investment Manager in conjunction with both
Board of Directors of each of the respective Master Funds (the
"Board of the Master Funds") about the inputs market participants
would use in pricing the asset or liability developed based on the
best information available in the circumstances.
The fair value hierarchy is categorised into three levels based
on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active
markets for identical assets or liabilities that the Master Funds
have the ability to access. Valuation adjustments are not applied
to Level 1 investments. Since valuations are based on quoted prices
that are readily and regularly available in an active market,
valuation of these investments does not entail a signi cant degree
of judgment.
Level 2 - Valuations based on quoted prices in markets that are
not active or for which all signi cant inputs are observable,
either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and
signi cant to the overall fair value measurement. The availability
of valuation techniques and observable inputs can vary from
investment to investment and are affected by a wide variety of
factors, including the type of investment, whether the investment
is new and not yet established in the marketplace, and other
characteristics particular to the transaction. To the extent that
valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value
requires more judgment. Those estimated values do not necessarily
represent the amounts that may be ultimately realised due to the
occurrence of future circumstances that cannot be reasonably
determined. Because of the inherent uncertainty of valuation, those
estimated values may be materially higher or lower than the values
that would have been used had a ready market for the investments
existed. Accordingly, the degree of judgment exercised by the
Investment Manager in determining fair value is greatest for
investments categorised in Level 3 of the fair value hierarchy. In
certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for
disclosure purposes, the level in the fair value hierarchy within
which the fair value measurement falls in its entirety, is
determined based on the lowest level input that is signi cant to
the fair value measurement.
Fair value is a market-based measure considered from the
perspective of a market participant rather than an entity-speci c
measure. Therefore, even when market assumptions are not readily
available, the Master Funds' own assumptions are set to re ect
those that market participants would use in pricing the asset or
liability at the measurement date. The Master Funds use prices and
inputs that are current as of the measurement date, including
periods of market dislocation. In periods of market dislocation,
the observability of prices and inputs may be reduced for many
investments. This condition could cause an investment to be
reclassi ed to a lower level within the fair value hierarchy.
Fair Value - Valuation Techniques and Inputs
Investments in Securities (Master Funds)
The value of preference shares issued by the Reinsurers and
subscribed for by the Master Funds and held with respect to a
reinsurance agreement will equal:
i. the amount of capital invested in such preference shares; plus
ii. the amount of net earned premium (as described below) that
has been earned period-to-date for such contract; plus
iii. the amount of the investment earnings earned to date on
both the capital invested in such preference shares and the
associated reinsurance premiums in respect of such contract;
minus
iv. the amount of any loss estimates associated with potential
claims triggering covered events (see "Covered Event Estimates"
below); minus
v. the amount of any risk margin considered necessary to reflect
uncertainty and to compensate a market participant for bearing the
uncertainty of cash flows in an exit of the reinsurance
transaction.
Reinsurance Protections
Included within the Master Fund's investment in the Reinsurer
are certain preference shares issued by the Reinsurer and
subscribed for by the Master Fund in relation to reinsurance
purchased specifically to meet the desired level of risk as set out
in the Company's investment strategy ("Reinsurance Protections").
The underlying premiums are amortised over the duration of the
contracts.
Derivative Financial Instruments
The Master Funds invests in derivative financial instruments
such as industry loss warranties ("ILWs"), which are recorded at
fair value as at the reporting date. Realised and unrealised
appreciation or depreciation in fair values are included in net
gain on securities in the Statements of Operations in the year in
which the changes occur.
The fair value of derivative financial instruments at the
reporting date generally reflects the amount that the Master Funds
would receive or pay to terminate the contract at the reporting
date. These derivative financial instruments used by the Master
Funds are fair valued similar to preference shares held with
respect to reinsurance agreements, unless otherwise unavailable,
except that following a Covered Event (as defined below), loss
information from the index provider on the trade will be used.
Investments in Securities held by the Reinsurers
Earned Premiums
Premiums shall be considered earned with respect to computing
the Master Funds' net asset value in direct proportion to the
percentage of the risk that is deemed to have expired year-to-date.
Generally, all premiums, net of acquisition costs, shall be earned
uniformly over each month of the risk period. However, for certain
risks, there is a clearly demonstrable seasonality associated with
these risks. Accordingly, seasonality factors are utilised for the
recognition of certain instruments, including preference shares
relating to reinsurance agreements, ILWs and risk transfer
derivative agreements, where applicable. Prior to the investment in
any seasonal contract, the Investment Manager is required to
produce a schedule of seasonality factors, which will govern the
income recognition and related fair value price for such seasonal
contract in the absence of a covered event. The Investment Manager
may rely on catastrophe modeling software, historical catastrophe
loss information or other information sources it deems reliable to
produce the seasonality factors for each seasonal contract.
Covered Event Estimates
The Investment Manager provides monthly loss estimates for all
incurred loss events ("Covered Events") potentially affecting
investments relating to a retrocessional reinsurance agreement of
the Reinsurers. As the Reinsurers' reinsurance agreements are fully
collateralised, any loss estimates above the contractual thresholds
as contained in the reinsurance agreements will require capital to
be held in a continuing reinsurance trust account with respect to
the maximum contract exposure with respect to the applicable
Covered Event.
"Fair Value" Pricing used by the Master Funds
Any investment that cannot be reliably valued using the
principles set forth above (a "Fair Value Instrument") is marked at
its fair value, based upon an estimate made by the Investment
Manager, in good faith and in consultation or coordination with the
Administrator, as defined in Note 10, 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 nancial 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
liquidation.
The process used to estimate a fair value for an investment may
include a single technique or, where appropriate, multiple
valuation techniques, and may include (without limitation and in
the discretion of the Investment Manager, or in the discretion of
the Administrator subject to review by the Investment Manager where
practicable) the consideration of one or more of the following
factors (to the extent relevant): the cost of the investment to the
Master Funds, a review of comparable sales (if any), a discounted
cash ow analysis, an analysis of cash ow multiples, a review of
third-party appraisals, other material developments in the
investment (even if subsequent to the valuation date), and other
factors.
For each Fair Value Instrument, the Investment Manager and/or
the Administrator, may as practicable, endeavor to obtain quotes
from broker-dealers that are market makers in the related asset
class, counterparties, the Master Funds' prime brokers or lending
agents and/or pricing services. The Investment Manager, may, but
will not be required to, input pricing information into models
(including models that are developed by the Investment Manager or
by third parties) to determine whether the quotations accurately re
ect fair value.
In addition, the Investment Manager, may in its discretion,
consult with the members of the investment team to determine the
appropriate valuation of an instrument or additional valuation
techniques that may be helpful to such valuation.
From time to time, the Investment Manager may change its fair
valuation technique as applied to any investment if the change
would result in an estimate that the Investment Manager in good
faith believes is more representative of fair value under the
circumstances.
The determination of fair value is inherently subjective in
nature, and the Investment Manager has a con ict of interest in
determining fair value in light of the fact that the valuation
determination may affect the amount of the Investment Manager's
management and performance fee.
At any given time, a substantial portion of the Master Funds'
portfolio positions may be valued by the Investment Manager using
the fair value pricing policies. Prices assigned to portfolio
positions by the Administrator or the Investment Manager may not
necessarily conform to the prices assigned to the same nancial
instruments if held by other accounts or by affiliates of the
Investment Manager.
Side Pocket Investments
The Board of the Master Fund, in consultation with the
Investment Manager, may classify certain Insurance-Linked
Instruments as Side Pocket Investments in which only investors who
are shareholders at the time of such classi cation can participate
("Side Pocket Investments"). This typically will happen if a
Covered Event has recently occurred or seems likely to occur under
an Insurance-Linked Instrument, because determining the fair value
of losses once a Covered Event has occurred under an
Insurance-Linked Instrument is often both a highly uncertain and a
protracted process. When a Side Pocket Investment is established,
the Master Fund converts a corresponding portion of each investor's
Ordinary Shares into Side Pocket Shares (Note 7).
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
Statements of Assets and Liabilities.
Investment Transactions and Related Investment Income and
Expenses
The Company records its proportionate share of the Master Funds'
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 Funds 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 income and expense are 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 Statements 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
gain on securities in the 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 per cent 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 31 December 2017 and 2016. 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 tax-related expense or penalties have
been recognised as of and for the years ended 31 December 2017 and
2016.
Generally, the Company may be subjected to income tax
examinations by relevant major taxing authorities for all tax years
since its inception.
The Company may be subject to potential examination by United
States 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 United States federal
or foreign tax laws. The Company was not subjected to any tax
examinations during the years ended 31 December 2017 and 2016.
Use of Estimates
The preparation of Financial Statements in conformity with U.S.
GAAP requires the Company's management to make estimates and
assumptions that affect the reported 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
against paid-in capital and the Company's existing cash reserves as
incurred. The amount expensed against paid-in capital should not
exceed 2% of the net proceeds of the Initial Placing and Offer.
2. SCHEDULE OF THE COMPANY'S SHARE OF THE INVESTMENTS HELD IN
THE MASTER FUNDS AND FAIR VALUE MEASUREMENTS
The following table re ects the Company's proportionate share of
the fair value of investments in the Reinsurers held by the Master
Funds at 31 December 2017.
Preference Shares $ Fair Value
- Investments in Markel CATCo Re Ltd.
Class A 1,155,227
Class B 4,079,104
Class D 4,538,516
Class E 1,848,506
Class F 4,602,089
Class H 103,750
Class I 952,936
Class J 611,923
Class K 919,730
Class L 921,522
Class M 1,379,548
Class N 901,043
Class O 1,533,743
Class P 5,406,226
Class Q 766,078
Class R 327,599
Class S 8,474,513
Class U 979,442
Class V 192,343
Class Y 637,123
Class Z 2,407,285
Class BA 814,211
Class BB 1,007,976
Class BC 831,679
Class BE 600,399
Class BM 1,171,335
Class BN 2,348,975
Class BO 2,355,958
Class BQ 2,597,739
Class BR 1,265,990
Class BS 85,616
Class BW 2,345,213
Class BX 536,335
Class BY 13,163,527
Class BZ 19,117,771
Class CA 4,815,954
Class CB 26,741,990
Class CC 22,580,368
Class CD 3,945,663
Class CE 7,423,112
Class CF 4,045,010
Class CG 854,363
Class CH 18,918,754
Class CI 3,538,019
Class CJ 5,997,536
Class CK 3,879,779
Class CL 4,086,112
Class CM 3,818,574
Class CN 2,933,690
Class CO 10,483,680
Class CP 6,472,549
Class CQ 6,843,757
Class CR 3,208,291
Class CS 5,456,695
Class CT 5,681,549
Class CU 1,603,055
Class CV 7,063,007
Class CW 2,709,492
Class CX 24,662,043
Class CY 2,669
Class CZ 2,669
Class AW 6,000,000
Class AX 8,400,000
Class AY 8,400,000
Class AZ 8,400,000
Expense Cell 92,289
Total Investments in Markel
CATCo Re Ltd. $310,041,637
Preference Shares $ Fair
- Investments in CATCo-Re Value
Ltd.
Class AE 1,462,096
Class AF 893,636
Class BJ 1,406,969
Class BW 17,700
Class DC 584,590
Class DE 149,646
Class DF 879,421
Class DG 227,006
Class DL 968,287
Class DM 146,587
Class DN 1,158,063
Class DV 417,182
Total Investments in CATCo-Re
Ltd. $8,311,183
Investments in Markel CATCo $ Fair
Re Ltd. Value
- Aquilo Re
Class AQ002 27,660
Class AQ003 11,205
Total Investments in Markel
CATCo Re Ltd. - Aquilo Re $38,865
Total Investments in Preference
Shares $318,391,685
The following table re ects the Company's proportionate share of
the fair value of investments in the Reinsurers held by the Master
Funds at 31 December 2016.
Preference Shares $ Fair Value
- Investments in Markel CATCo Re Ltd.
Class A 27,444,563
Class B 11,714,124
Class C 4,217,525
Class D 20,768,970
Class E 1,456,100
Class F 34,081,333
Class G 20,923,116
Class H 6,239,253
Class I 22,049,112
Class J 6,246,001
Class K 2,163,040
Class L 9,368,899
Class M 3,244,520
Class N 4,679,440
Class O 5,152,761
Class P 47,467,366
Class Q 7,336,796
Class R 4,415,684
Class S 5,933,215
Class T 8,466,064
Class U 3,119,626
Class V 5,211,726
Class W 1,478,259
Class X 1,093,007
Class Y 5,929,661
Class Z 2,370,483
Class BA 793,206
Class BB 7,151,367
Class BC 791,816
Class BD 2,379,027
Class BE 7,726,069
Class BF 9,371,882
Class BM 1,137,365
Class BN 2,284,789
Class BO 2,280,551
Class BP 5,753,082
Class BQ 6,027,176
Class BR 1,411,318
Class BS 8,922,565
Class BT 27,215,619
Class BU 780,567
Class BV 2,253,634
Class BW 2,268,713
Expense Cell 128,019
Total Investments in Markel
CATCo Re Ltd. $361,247,409
Preference Shares $ Fair Value
- Investments in CATCo-Re
Ltd
Class AE 1,536,115
Class AF 898,753
Class BF 705,363
Class BJ 1,739,074
Class BW 582,346
Class CM 711,384
Class DC 248,639
Class DE 114,245
Class DF 373,316
Class DG 171,725
Class DL 1,455,090
Class DM 907,344
Class DN 1,042,388
Class DP 2,502,853
Class DV 567,772
Class DZ 332,657
Total Investments in CATCo-Re
Ltd. 13,889,064
Investments in Markel CATCo-Re $ Fair
Ltd. Value
- Aquilo Re
Class AQ002 77,841
Class AQ003 29,584
Class AQ004 8,571
Total Investments in Markel
CATCo Re Ltd. - Aquilo Re $115,996
Total Investments in Preference
Shares $375,252,469
Included within the Company's investment in Master Funds is cash
and cash equivalents held in trust by the Master Fund representing
the Company's proportionate share of derivative transactions
entered into by the Master Fund amounting to approximately
$113,652,588 (31 December 2016: $ 85,882,181) as of 31 December
2017.
The preference shares relating to Reinsurance Protections are
valued at $31,200,000 (31 December 2016: $Nil) representing the
unamortised portion of premium paid and claims recoverable as at 31
December 2017.
As at 31 December 2017, 66.16% of total investments held by the
Master Funds are classified as Side Pocket Investments (31 December
2016: 10.50%).
In accordance with FASB ASC Sub-topic 820-10, certain
investments that are measured at fair value using the net asset
value per share (or its equivalent) practical expedient are not
required to be classified within the fair value hierarchy. As the
Company's investments as at 31 December 2017 comprised solely of
investments in other investment companies, the Master Fund, which
are valued using the net asset value per share (or its equivalent)
practical expedient, no fair value hierarchy has been
disclosed.
The Company considers all short-term investments with daily
liquidity as cash equivalents and are classified as Level 1 within
the fair value hierarchy. No cash equivalents were held as at 31
December 2017 (31 December 2016: $Nil).
The table below summarises information about the signi cant
unobservable inputs used in determining the fair value of the
Master Funds' Level 3 assets:
Type of Investment Valuation Unobservable Range
Technique Input
------------------- -------------- ----------------- ----------------
Preference Premium Premiums 12 months
Shares earned earned -
straight
line for
uniform
perils
-------------- ----------------- ----------------
Premiums 5 to 6 months
earned -
seasonality
adjusted
for non-uniform
perils
-------------- ----------------- ----------------
Loss reserves Loss reserves* 0 to contractual
limit
-------------- ----------------- ----------------
Risk margin Risk margin 0% to 7.5%
* Based on proprietary models and historical loss analysis data
as well as assessments from counter-parties.
As described in Note 6, signi cant increases or decreases in
loss reserves of the Reinsurers would result in a signi cantly
lower or higher fair value measurement.
3. CONCENTRATION OF CREDIT RISK
In the normal course of business, the Company maintains its cash
balances, (not assets supporting retrocessional reinsurance
transactions) in nancial institutions, which at times may exceed
federally insured limits. The Company is subject to credit risk to
the extent any nancial institution with which it conducts business
is unable to ful ll contractual obligations on its behalf.
Management monitors the nancial condition of such nancial
institutions and does not anticipate any losses from these
counterparties. At 31 December 2017 and 2016, cash and cash
equivalents are held with HSBC Bank Bermuda Ltd. which has a credit
rating of A- as issued by Standard & Poor's.
4. CONCENTRATION OF REINSURANCE RISK
The following table illustrates the diversi ed risk pro le of
the Reinsurer's portfolio by geography and peril as at 31 December
2017 and 2016. Reinsurance Protections purchased specifically to
meet the desired level of risk as set out in the Company's
investment strategy have not been considered.
Geographic Distribution
31 Dec. 31 Dec.
2017 2016
1. North America/Caribbean 44% 39%
2. All Other 17% 17%
3. Europe 10% 10%
4. Global Backup Protection 6% 9%
5. Japan 6% 7%
6. Global Marine/Energy/Terrorism/Aviation/Satellite 6% 6%
Mexico/Central America/
7. South America 5% 6%
8. Australia/New Zealand 4% 4%
9. Asia Excluding Japan 2% 2%
Exposure by Risk Peril
31 Dec. 31 Dec.
2017 2016
1. Wind 38% 35%
2. Earthquake 18% 21%
3. Backup Protection 14% 21%
4. Any Natural Peril 10% 8%
5. Marine/Energy/Aviation/Satellite 4% 4%
6. Winterstorm/Wildfire 4% 3%
7. Severe Convective Storm 4% 2%
8. Other 4% 2%
9. Terrorism 2% 2%
10. Flood 2% 2%
5. INVESTMENTS IN MASTER FUNDS, AT FAIR VALUE
The following table summarises the Company's Investments in the
Master Funds:
31 Dec. 2017 31 Dec.
2016
------------ ------------
Investment in Markel CATCo
Reinsurance Fund Ltd. - Markel
CATCo Diversified Fund, at
fair value $338,085,861 $446,049,992
Investment in CATCo Reinsurance
Fund Ltd. - CATCo Diversified
Fund, at fair value $9,606,604 $17,066,354
Investments in Master Funds,
at fair value $347,692,465 $463,116,346
------------ ------------
As of 31 December 2017, the total balance of investments held in
the Master Funds of $347,692,465 (31 December 2016: $463,116,346)
is exclusive of undeployed cash, accruals (including management and
performance fee), derivative financial instruments and other assets
and liabilities recorded by the Master Funds. The total investment
in Preference Shares held by the Master Funds of $318,391,685
(2016: $375,252,469) is net of these holdbacks (Note 2).
The net investment loss allocated from Master Funds, and the net
realised gain and net decrease in unrealised appreciation on
securities allocated from Master Funds in the Statements of
Operations consisted of the combined results from the Company's
Investments in the Master Funds as detailed below:
(Expressed in 2017 2017 2017 2016 2016 2016
United States Investment in Investment Total Investment in Investment Total
Dollars) Master Fund in CATCo Master Fund in CATCo
Diversified Diversified
Fund Fund
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net investment
loss allocated
from
Master Funds
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Interest $ 855,847 $ - $ 855,847 $ 141,428 $ 1,313 $ 142,741
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Miscellaneous
income - - - - 11,874 11,874
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Management fee (6,516,021) (162,853) (6,678,874) (6,435,246) (304,472) (6,739,718)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Performance fee (1,373) - (1,373) (a) (3,483,332) (423,636) (3,906,968)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Professional
fees and other (346,146) (10,763) (356,909) (270,343) (42,589) (312,932)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Administrative
fee (200,983) (15,765) (216,748) (201,816) (27,417) (229,233)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net investment
loss allocated
from Master
Funds $ (6,208,676) $ (189,381) $ (6,398,057) $ (10,249,309) $ (784,927) $(11,034,236)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net realised
gain and net
increase in
unrealised
depreciation on
securities
allocated from
Master Funds
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net realised
gain on
securities(b) $ 44,749,677 $ 1,381,330 $ 46,131,007 $ 4,672,504 $ 52,991,392 $ 57,663,896
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net increase in
unrealised
depreciation
on
securities(c) (170,924,879) (1,150,054) (172,074,933) 36,926,797 (48,076,736) (11,149,939)
--------------- ------------- ------------ ------------- ------------- ------------- -------------
Net (loss)/
gain on
securities
allocated from
Master Funds $(126,175,202) $ 231,276 $ (125,943,926) $ 41,599,301 $ 4,914,656 $ 46,513,957
--------------- ------------- ------------ ------------- ------------- ------------- -------------
a) Performance fee relates to SPI releases during 2017
b) Includes gross realised gain on securities of: 2017-
$59,362,678 (2016: $63,572,316) and gross realised loss on
securities of: 2017- $13,231,671 (2016: $5,908,420)
c) Includes gross increase in unrealised appreciation on
securities of: 2017 - $49,629,713 (2016: $70,091,133) and gross
decrease in unrealised appreciation on securities of: 2017-
$221,704,646 (2016: $81,241,072)
6. LOSS RESERVES
The following disclosures on loss reserves are included for
information purposes and relate speci cally to the Reinsurers and
are re ected through the valuations of investments held by the
Company.
The reserve for unpaid losses and loss expenses recorded by the
Reinsurers includes estimates for losses incurred but not reported
as well as losses pending settlement. The Reinsurers make 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 Reinsurers use proprietary models and historical
loss analysis data as well as assessments from counter-parties to
estimate the level of reserves required. The process of estimating
loss reserves is a complex exercise, involving many variables and a
reliance on actuarial modeled catastrophe loss analysis. However,
there is no precise method for evaluating the adequacy of loss
reserves when industry loss estimates are not final, and actual
results could differ from original estimates.
In addition, the Reinsurers record risk margin to reflect
uncertainty surrounding cash flows relating to loss reserves. The
risk margin is set by the actuarial team of Markel CATCo Investment
Management Ltd and/or CATCo Investment Management Ltd. (who are,
respectively, the "Insurance Manager" in relation to the Reinsurer
or CATCo-Re Ltd., as the case may be).
Future adjustments to the amounts recorded as of year-end,
resulting from the continual review process, as well as differences
between estimates and ultimate settlements, will be re ected in the
Reinsurers' Statements 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.
The Reinsurer's loss reserves for losses pertaining to
Hurricanes Harvey, Irma and Maria and the California Wildfires
represent the Insurance Manager's best estimate of ultimate
settlement values. The reserves are subject to significant
uncertainty due to industry loss estimates varying from final
insured losses. A significant range of industry loss estimates is
evident within the actual reinsured client losses reported to the
Reinsurer. The timing and the amount of losses reported to the
Reinsurer is in the control of third parties, and has a direct
effect on loss reserves, which may require re-estimation as new
information becomes available.
The Insurance Manager believes that the total loss reserve
established for the 2017 loss events are sufficient to provide for
all unpaid losses and loss expenses with respect to Hurricanes
Harvey, Irma and Maria and the California Wildfires, based on the
industry information currently available. However, there is still a
level of industry uncertainty with regard to the final insured loss
impact of the 2017 loss events. Therefore, actual results may
materially differ if actual reinsured client losses differ from the
established loss reserves. The significant uncertainty underlying
the industry loss estimates could result in the need to further
adjust loss reserves, either in the event that reserves are found
to be insufficient or, conversely, if loss reserves are found to be
too conservative.
As part of the reserving process, the Insurance Manager reviews
loss reserves on a monthly basis and will make adjustments, if
necessary. Future adjustments in loss reserves could have further
material impact on investor earnings, which may result in either an
increase or decrease to the valuation of the 2017 investments held
by the Company. As at 31 December 2017, Side Pocket Investments
amounting to 55 per cent of the Ordinary Share NAV were
established. The Side Pocket Investments reflect 100 per cent of
any potential liability that may exist with the Reinsurer's
counterparties in excess of the loss reserves held by the
Reinsurer. These Side Pocket Investments will be released should
they no longer be required by the reinsurance counterparties. In
order to provide a level of sensitivity analysis around the
Company's held reserves, the Insurance Manager's professional
actuaries have examined the projected impact of both a 20 per cent
increase and decrease in the applied industry insured loss
estimates for the 2017 hurricane events and the 2017 California
wildfires. The results of this analysis are that a 20 per cent
increase in the applied industry insured loss estimates is expected
to represent a reduction in the 2017 annual NAV return of circa 8
per cent. In addition, a 20 per cent decrease in the applied
industry insured loss estimates is expected to represent an
increase in the 2017 annual NAV return of circa 9 per cent.
During 2017, the Reinsurer paid claims of $400,161,779 (31
December 2016: $50,431,965) predominantly in relation to the 2017
Hurricane Irma, Hurricane Harvey and Hurricane Maria events and the
2016 Jubilee Oil Field and Canada Wildfire events. CATCo-Re Ltd.
paid claims of $1,889,027 (31 December 2016: $32,007,856)
predominantly in relation to the U.S. Severe Convective Storm
events.
7. CAPITAL SHARE TRANSACTIONS
As of 31 December 2017, the Company has authorised share capital
of 1,500,000,000 (31 December 2016: 1,500,000,000) unclassified
shares of US$0.0001 each and Class B Shares ("B Shares") of such
nominal value as the Board may determine upon issue.
As of 31 December 2017, the Company has issued 391,666,430 (31
December 2016: 273,224,673) Class 1 ordinary shares (the "Ordinary
Shares") and 546,367,863 (31 December 2016: 102,510,018) Class C
Shares ("C Shares").
Transactions in shares during the year, the shares outstanding
and the net asset value ("NAV") per share are as follows:
31 December
2017
Beginning Adjustment Share Ending Ending Ending
shares following Issuance Shares Net Assets NAV
Share Per
Capital Share
Consolidation
Class 1
Ordinary
Shares 273,224,673 82,835,718 35,606,039 391,666,430 $349,165,708 $0.8915
Class C
Shares 102,510,018 (102,510,018) 546,367,863 546,367,863 $535,440,506 * $0.9800
------------ --------------- ------------ ------------ ------------- --- --------
$884,606,214
-------------
31 December
2016
Beginning Adjustment Share Ending Ending Ending
Shares following Issuance Shares Net Assets NAV
Share Per
Capital Share
Consolidation
Class 1
Ordinary
Shares 273,224,673 - - 273,224,673 $355,855,825 $1.3024
Class C
Shares 91,835,018 - 10,675,000 102,510,018 $107,761,300 ** $1.0512
------------ --------------- ------------ ------------ ------------- --- --------
$463,617,125
-------------
* Net of issuance costs of $10,927,358
** Net of issuance costs of $208,719
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 Link Market Services (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 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 Pocket Investments 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 26 January 2017, the Board declared a dividend of 0.07180 per
share in respect of the Ordinary Shares. The record date for these
dividends was 3 February 2017 and the ex-dividend date was 2
February 2017. The dividends were paid to shareholders on 17
February 2017. On 31 May 2017, the Company completed its conversion
of 102,510,018 Class C Shares at a rate of $1.2636 into Ordinary
Shares of 82,835,718.
8. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to the Investment Management Agreement dated 8 December
2015, 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. The Investment Manager
earns a fee for such services (Note 9).
9. 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. CIML is the Investment Manager of CATCo Diversified Fund
and the Insurance Manager of CATCo-Re Ltd.
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 Funds' shares as at the last
calendar day of each calendar month. Management fees related to the
investment in the Master Funds shares are charged in the Master
Funds and allocated to the Company. Performance fees are charged in
the Master Funds and allocated to the Company.
Markel, which holds the entire share capital of the Investment
Manager, holds 5.16% (31 December 2016: 0%) of the voting rights of
the Ordinary Shares and 0% (31 December 2016: 24.39%) of the voting
rights of the C Shares issued in the Company as of 31 December
2017.
In addition, two of the Directors of the Company are also
shareholders of the Company. The Directors holdings are immaterial,
representing below 1% of the Company NAV.
10. ADMINISTRATIVE FEE
SS&C Fund Services (Bermuda) Ltd, a division of SS&C
GlobeOp serves as the Company's administrator (the "Administrator")
and performs certain administrative services on behalf of the
Company. The Administrator is a licensed fund administrator
pursuant to the provisions of the Bermuda Investment Funds Act. The
Administrator receives a xed monthly fee.
Please refer to Note 13 for subsequent appointment of new
administrator effective 19 January 2018.
11. FINANCIAL HIGHLIGHTS
Financial highlights for the years ended 31 December 2017 and
2016 are as follows:
2017 2016
--------------------------------- ---------------------- ----------------------
Class 1 Class Class Class
Ordinary C Shares 1 C Shares
United States Dollar Shares Ordinary
Shares
--------------------------------- ---------- ---------- ---------- ----------
Per Share operating
performance
--------------------------------- ---------- ---------- ---------- ----------
Net Asset Value,
beginning of year $1.3024 $1.0000 $1.2705 $0.9800
--------------------------------- ---------- ---------- ---------- ----------
Income (loss) from
investment operations:
--------------------------------- ---------- ---------- ---------- ----------
Net investment
loss (0.0040) - (0.0065) (0.0044)
--------------------------------- ---------- ---------- ---------- ----------
Performance Fee* (0.0004) - (0.0105) (0.0083)
--------------------------------- ---------- ---------- ---------- ----------
Management Fee (0.0178) - (0.0191) (0.0153)
--------------------------------- ---------- ---------- ---------- ----------
Net (loss) gain
on investments (0.3169) - 0.1342 0.0992
--------------------------------- ---------- ---------- ---------- ----------
Total from investment
operations (0.3391) 0.0000 0.0981 0.0712
--------------------------------- ---------- ---------- ---------- ----------
Dividend (0.0718) - (0.0662) -
--------------------------------- ---------- ---------- ---------- ----------
Premium on issuance 0.0016 - - -
--------------------------------- ---------- ---------- ---------- ----------
Offering cost (0.0016) (0.0200) - -
--------------------------------- ---------- ---------- ---------- ----------
Net Asset Value,
end of year $0.8915 $0.9800 $1.3024 $1.0512
--------------------------------- ---------- ---------- ---------- ----------
Total net asset
value return
--------------------------------- ---------- ---------- ---------- ----------
Total net asset
value return before
performance fee (26.00)% -% 8.56% 8.12%
--------------------------------- ---------- ---------- ---------- ----------
Performance fee* (0.03)% -% (0.83)% (0.85)%
--------------------------------- ---------- ---------- ---------- ----------
Total net asset
value return after
performance fee (26.03)%^ -% 7.73%+ 7.27%
--------------------------------- ---------- ---------- ---------- ----------
Ratios to average
net assets
--------------------------------- ---------- ---------- ---------- ----------
Expenses other
than performance
fee (2.09)% -% (2.24)% (2.05)%
--------------------------------- ---------- ---------- ---------- ----------
Performance fee*^
˚ (0.08)% -% (0.88)% (0.80)%
--------------------------------- ---------- ---------- ---------- ----------
Total expenses
after performance
fee (2.01)% -% (3.12)% (2.85)%
--------------------------------- ---------- ---------- ---------- ----------
Net investment
loss (1.70)% -% (2.84)% (2.86)%
--------------------------------- ---------- ---------- ---------- ----------
+ Adjusting the opening capital to reflect the dividend declared
on 29 January 2016, the normalised total return for 2016 is
equivalent to 8.12%
^ Adjusting the opening capital to reflect the dividend declared
on 26 January 2017, the normalised total return for 2017 is
equivalent to -27.59%
* The performance fee is charged in the Master Funds
˚ Performance fee relates to crystalized performance fee from
Side Pocket investments
The ratios to weighted average net assets are calculated for
each class of shares 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 years ended 31 December 2017 and
2016. The per share amounts and ratios re ect income and expenses
allocated from the Master Funds.
12. INDEMNIFICATIONS OR WARRANTIES
In the ordinary course of its business, the Company may enter
into contracts or agreements that contain indemni cations 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.
13. SUBSEQUENT EVENTS
Effective 19 January 2018, the Board of Directors has approved
the appointment of Centaur Fund Services (Bermuda) Limited as the
Company's administrator. Centaur Fund Services (Bermuda) Limited is
a licensed and regulated fund administrator pursuant to the
provisions of the Bermuda Monetary Authority under the Bermuda
Investments Funds Act 2006.
On 31 January 2018, the Board declared a nal dividend of
$0.05476 per share in respect of the Ordinary Shares. The record
date for this dividend was 9 February 2018 and the ex-dividend date
was 8 February 2018. The final dividend was paid to shareholders on
26 February 2018.
These Financial Statements were approved by the Board and
available for issuance on 9 March 2018. Subsequent events have been
evaluated through this date.
For further information:
Judith Wynne
General Counsel
Markel CATCo Investment Management Ltd.
Telephone: +1 441 493 9005
Email: judith.wynne@markelcatco.com
Mark Way
Chief Operating Officer
Markel CATCo Investment Management Ltd.
Telephone: +1 441 493 9001
Email: mark.way@markelcatco.com
David Benda / Hugh Jonathan
Numis Securities Limited
Telephone: +44 (0) 20 7260 1000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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