CatCo thrives through a baptism of fire
Bermuda-based CatCo has survived a baptism of fire during its catastrophe-heavy first year to give positive returns to investors and quadruple its capital base.
CEO Tony Belisle said in the CatCo Reinsurance Opportunities Funds annual report, which was sent out to shareholders on Friday, that CatCos portfolio of insurance-related investments fund held up exceedingly well in a tough 2011 for the industry.
The net asset value total return of ordinary shares of the CatCo Reinsurance Opportunities Fund, listed in London and on the Bermuda Stock Exchange, was 5.09 percent for 2011. In addition, a significant amount of capital was raised during May, 2011. These C Share investors received a total return of 8.58 percent.
Ignoring inflation adjustments, 2011 will go down as the most costly year ever for the insurance industry and, on an inflation-adjusted basis, it rivals 2005, the year of US hurricanes Katrina, Wilma and Rita, Mr Belisle said.
Total insured losses from natural catastrophes exceeded $100 billion, some four times greater than the trended 30-year average, he added. The year had been the first to see three natural catastrophes of more than $10 billion each, including the February 22 New Zealand earthquake, the March 11 Japan earthquake and the Thailand flooding between July and December.
CatCo Reinsurance Opportunities Fund acts a feeder fund for the CatCo Diversified Fund, a larger open-ended fund for private investors, which provides the capital for CatCo Re, a class 3 Bermuda reinsurer to write fully collateralised reinsurance contracts.
At year end, the listed funds net asset value was almost $340 million, while total funds invested by CatCos managers exceeded $1 billion, Mr Belisle said.
The listed fund raised more than $256 million in three share issuances last year, but Mr Belisle said the fund did not envision any further capital raising activity in 2012, barring significant catastrophic events.
Annual expected organic growth, as well as private fund investment, will satisfy any additional reinsurance buyer demand for CatCo Re Ltds retrocessional protections, he added.
The statement gave details of CatCo Res exposures by type of risk, the largest of which were US/Canada earthquake and US/Caribbean wind, each of which had a 13 percent share of total exposures.
The 2012 retrocessional reinsurance investment portfolio has been largely finalised, with all of the companys available capital deployed, and includes more than 35 non-correlated risk perils, Mr Belisle said.
With the exception of the offshore marine pillar, the portfolio is largely comprised of storm and earthquake risks diversified geographically across the worlds insured properties.
The 2012 projected no-loss portfolio returns are significantly higher as compared to the 2011 portfolio, with a lower average risk level. On a gross basis, all possible worst-case, single-event loss scenarios result in positive returns. Therefore, if the world experiences a more tolerable level of natural catastrophes in 2012, then the companys shareholders can look forward to higher returns in the year ahead.
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