Blue Capital’s profits decline after high cat losses

Blue Capital Reinsurance Holdings, headquartered in Bermuda, has reported a steep decline in its profits in the second quarter of 2016, due to higher levels of catastrophe losses worldwide. However, the company said rate decreases slowed in the mid-year renewals compared with a year before.

The company, which provides collateralised reinsurance and invests in insurance-linked securities, made a profit of $2 million in the Q2 2016 compared with $5.5 million in the same period last year. During the first six months of 2016, the company made $6.9 million compared with $10.9 million a year earlier.

Reinsurance premiums written for the current quarter and year to date were $9.3 million and $26.7 million, increasing $1.7 million and declining $1 million compared with the same periods in 2015.

This year’s quarter’s premiums written improved from $0.7 million of reinstatement premiums compared to no reinstatement premiums received in the same period a year ago, the company said.

The combined ratio for the current quarter was 82 percent and 67.8 percent year to date compared with 43.1 percent and 43.8 percent in the same periods a year ago.

The increase in both periods’ combined ratios was driven by higher loss and loss adjustment expenses partially offset by lower reinsurance acquisition costs and general and administrative expenses, Blue Capital said.

Loss and loss adjustment expenses for the current quarter were $6 million compared with $0.1 million in the same period a year ago driven by a higher frequency of global catastrophe events in the current quarter which included the Fort McMurray wildfires in Canada, the convective storms in Texas and Europe and the Kumamoto earthquake in Japan.

“The second quarter included a greater frequency of global catastrophe events and the Blue Capital’s ability to generate a profit reflects our strong risk management and the benefits of maintaining a portfolio of diverse catastrophe risks,” said Adam Szakmary, Blue Capital’s president and chief executive officer.

“During mid-year renewals, our portfolio’s average price decline of approximately 3 percent moderated compared to the 5 percent decline experience a year ago. Through our advantageous partnership with Endurance and the leveraging of our experienced underwriters, we were able to assemble an attractive portfolio during the mid-year renewals.”