CATCo Reinsurance Opportunities Fund Ltd. – Interim Results

Hamilton, Bermuda – 15 August, 2013 – CATCo Reinsurance Opportunities Fund Ltd. (the "Company”; Ticker: CAT.BH), have today released the Company’s Interim 2013 results to 30 June, 2013. The Chairman’s statement read:

“CHAIRMAN’S STATEMENT

Financial Performance

The net asset value capital return for the first six months of 2013 was 7.90%. The share price capital return was 3.74%, compared to the insurance-linked securities (“ILS”) benchmark total return of 3.47%. The NAV Total Returns Since Inception of Shares to 30 June 2013 of the Ordinary Shares issued on 20 December 2010, C Shares issued on 20 May 2011 and C Shares issued on 16 December 2011 respectively were 10.50%, 28.94% and 15.87%. In addition, there was a positive foreign exchange attribution for sterling investors which amounted to a further 6.81% capital return for the period.

Dividend

Following Shareholder approval at the Company Annual General Meeting held on 20 March 2013, the Board of Directors confirmed a final dividend of $0.05006 in respect of the Ordinary Shares which was paid to Shareholders on 27 March 2013.

Review

Since 1 January 2013, through a disciplined Board approved underwriting plan and process, the Managers have created a 2013 investment portfolio that has been de-risked year on year. With increased geographic exposures and risk pillars compared to previous years the investment portfolio, subject to no losses throughout the current year, has an expected net return to investors of 28%.

According to Guy Carpenter, one of the largest reinsurance brokers in the world, the “CATCo” products have generated a c.20% market share of the retrocessional sector, and have a clear brand recognition within the market place. This is very satisfying amidst a changeable retrocessional environment, and in only three years of existence.

During the period there was continued interest in the catastrophe reinsurance sectors from institutional investors, driven by low expected returns in corporate and government bond markets. As a consequence, institutional investors, pension funds, family office trusts, endowments and life insurers continued to allocate additional capital to ILS and collateralised reinsurance ahead of the June and July reinsurance renewals, in order to gain exposure to a new uncorrelated alternative asset class. ILS pricing for certain types of products and reinsurance renewals have therefore fallen significantly, in some cases by 25-35%, due to an oversupply of capital in the sector.

For buyers of reinsurance, this broader access to ILS and collateralised markets, along with stronger support from traditional reinsurers, has provided them with the ability to manage their catastrophe risks at multiple year terms inside their cost of equity capital.

However, in respect to the buying of retrocessional reinsurance, the picture has been less acute. In this specialist sector of reinsurance, it is the strength of relationships and continuity which remain so highly valued by cedants. The market reputation for CATCo’s products has meant that this recent oversupply of capital in the sector has had little or no effect on CATCo-Re Ltd, the Company’s reinsurance company, or its ability to retain or win new business..

2013 Catastrophe Activity

Following two years of above-average catastrophe loss activity, 2013’s global insured losses to date are below the last ten-year average. Catastrophe events have resulted in approximately USD20 billion insured losses for 2013 compared to a half-year average of approximately USD22.8 billion over the prior ten years.

During the period, there have been two notable catastrophic events: the Oklahoma tornados in the US; and the South Eastern European floods, which both occurred in May 2013. At the date of this report, based on the counterparty information available, neither event has had any impact to the Company’s current portfolio.

Update on Historical Catastrophic Activity

The US loss information service PCS has kept its fourth loss estimate for Superstorm Sandy stable at $18.75bn, which remains short of the $20bn mark at which significant industry loss warranty (ILW) capacity could be triggered.

However PCS, whose normal policy is to close files when it has produced two consecutive stable loss estimates for a disaster, has left its file on Superstorm Sandy open, in view of the unique characteristics of the storm. The existing retrocessional reinsurance loss reserve provision that is included in the Company’s Net Asset Value calculation is based on an insured industry loss of $20 billion. The Board of Directors remains of the opinion that there is no need to amend the existing retrocessional reinsurance loss reserve provision that is currently in place.

Impact of Side Pocket Investments

The current retrocessional reinsurance side pocket exposure, included in the Net Asset Value calculation, at 30 June 2013 equates to 7.34% of shareholder funds.

Regulatory Changes

During the period under review, the Board has reviewed carefully the impact of current and impending regulatory changes. Notable among these are the imminent application of FATCA rules in Bermuda and the implementation of the European AIFM Directive.

In relation to the former, the Bermudan Government is in the process of finalising a Model 2 Inter-Governmental Agreement with the United States. It has also recently announced its commitment to sign a similar agreement in relation to the wider G5 initiative on multilateral automatic exchange, the impact of which the Company will only be able fully to assess once finalised. However, the Board believes that the impact of FATCA on mutual fund companies such as CATCo should be manageable.

Regarding the latter, the deadline by which EU member states were required to transpose the European AIFM Directive into national law passed recently, and a co-operation agreement between the Bermudan Government with Europe has only recently been signed which allows the Company to continue to be marketed in the EU under the existing applicable private placement regimes. The Board is therefore currently assessing the implications for the Company but is confident that any changes required can be made in a way which minimises their impact on CATCo’s operations.

Outlook

The Company’s financial performance during the first half of the year has been very satisfactory as we are approaching US hurricane season.

To date, no global catastrophic events during 2013 have caused the necessary levels of damage required to have an impact on the portfolio. Assuming a hypothetical basis of no losses for the second half of 2013, the Company is on course to deliver a shareholder net return of 28%.

The 2013 portfolio demonstrates one of the Company’s core strengths; the quality and expertise of its management and underwriting team. Combined with the Company’s unique ability to provide clients with the foundations for their annual retrocessional reinsurance needs, this proves that CATCo continues to be a valued retrocessional partner to many of the industry’s reinsurance companies.

The Board strongly believes that offering tailor-made reinsurance solutions to meet clients’ needs enables the Company both to continue to perform strongly and to consolidate further its position in the retrocessional reinsurance market.

Nigel Barton

Chairman

For further information, please contact:

CATCo Investment Management Ltd

Jason Bibb, Director

Telephone: +1 441 531 2227

Email: jason.bibb@catcoim.com

Mark Way, Corporate Communications

Telephone: +44 7786 116991

Email: mark.way@catcoim.com  

Numis Securities Limited

David Benda / Hugh Jonathan

Telephone: +44 (0) 20 7260 1000

Prime Management Ltd

John Whiley    Tel: +1 (441) 295 0329