Blue Capital Re continues run-off proceedings; releases Q3 figures
Blue Capital Reinsurance Holdings has reported its results and financial position for the third quarter of 2019.
The company announced in July of 2019 that it is currently winding down its operations and going into run-off. It previously offered collateralised reinsurance in the property catastrophe market and invested in various insurance-linked securities.
As a result of the decision to pursue an orderly run-off and return capital to shareholders, in accordance with accounting principles generally accepted in the US, the company’s basis of accounting transitioned from the going concern basis of accounting to the liquidation basis of accounting, effective July 31, 2019. Under the liquidation basis, all assets are stated at their estimated liquidation value and all liabilities, including estimated costs associated with implementing the run-off and liquidation of the company, are stated at their estimated settlement amounts over the remaining estimated liquidation period. Under the liquidation basis, the company's financial results are presented in a consolidated statement of net assets and a consolidated statement of changes in net assets.
All financial results and disclosures prior to adopting the liquidation basis on July 31, 2019, are presented on a going concern basis, which presents assets and liabilities in the normal course of business. As a result, the consolidated balance sheet as of December 31, 2018, the consolidated statements of income and comprehensive income and the consolidated statements of changes in shareholders' equity for the period January 1, 2019 through July 31, 2019 are presented on a going concern basis, consistent with the company’s annual report on Form 10-K for the year ended December 31, 2018.
The company recorded a net loss of $1.1 million for the one month period ended July 31, 2019 and net income of $1.7 million for the seven month period ended July 31, 2019.
Blue Capital Re realised attritional losses related to catastrophe events that occurred during the current quarter, as well as increased claim estimates related to 2017 and 2018 catastrophes, which contributed to the decline in the company’s book value per share.
In addition, the company’s book value per share declined because, under the liquidation basis of accounting, the company is obligated to record loss estimates for claims related to events that occur after the end of the third quarter, such as Typhoon Hagibis and the California wildfires, which are still ongoing. The company’s loss estimates for Typhoon Hagibis and the California wildfires have been derived from the utilization of proprietary catastrophe modelling, standard industry models, an in-depth review of in-force contracts and initial indications from clients and brokers. The company’s actual losses may ultimately differ materially from estimated losses due to the nature of the risks assumed, the complexity of the assessment of damages and the number of reported claims received to date. The company’s actual losses from Typhoon Hagibis and the California wildfires might prove to be more costly than initial estimated losses and could impact net assets in future reporting periods.
Lastly the company said that its book value per share declined due to future estimated net expenses to be recognized in the current period as a result of the adoption of the liquidation basis of accounting.
Michael J. McGuire, chairman and CEO, commented: “During the third quarter the company continued to implement an orderly runoff and achieved a strong first step through declaring and paying a special distribution of $1.51 per common share, which represented nearly 15 percent of the June 30, 2019 fully converted book value per share. We remain focused on winding down operations as quickly and efficiently as possible.”