Blue Capital Global Reinsurance Fund Limited – Half Yearly Report for the six months ended 30 June 2016

Hamilton, Bermuda – 26 August, 2016 – In a filing with the Bermuda Stock Exchange (“BSX”), Blue Capital Global Reinsurance Fund Limited (the "Company" or "BCGR"; BSX Ticker: BCGR.BH) today announced results for the six month ended 30 June 2016.

CHAIRMAN'S STATEMENT

On behalf of the Board of Directors (the “Directors”) of Blue Capital Global Reinsurance Fund Limited (the “Company”), I am pleased to present the Company’s interim report for the six month period ended 30 June 2016. During the period, the Company recorded a decline in net assets from operations of $0.3 million, repurchased shares totaling $0.3m and distributed $6.6 million in dividends to Shareholders, resulting in a decrease in the Company’s net assets to $216.1 million from $223.3 million at the beginning of the year.   

Capital Deployment

The Company’s investment in Blue Capital Global Reinsurance SA-I (the “Master Fund”) at 30 June 2016 was US$216.2 million, representing all of the Company’s capital excluding that retained for working capital purposes.

As at 30 June 2016, The Master Fund has invested substantially all of its assets in: (i) preferred shares of the Blue Water Re Ltd. (the “Reinsurer”) (ii) Industry loss warranty (“ILW”) derivatives and (iii) one catastrophe bond. The combined investments represent the deployment of US$187.5 million across 93 different positions and 40 different clients generating US$40.7 million of net insurance premium written and fixed ILW payments which is an increase of US$6.7 million from the previous year.  Current investments in portfolio retrocessional hedging total US$4.6 million which is an increase of US$2.9 million from the previous year.  Growth in premium is directly attributable to the investment policy changes and portfolio construction adjustments made to the portfolio in response to changes in market conditions since the Company’s initial public offering.

A further breakdown of the exposure of the portfolio is set out in the Investment Manager’s Report, below.

Financial Performance

During the first half of 2016, the net asset value (“NAV") of the Company's Ordinary Shares decreased by approximately 0.2 per cent. excluding the impact of dividends declared. The NAV per Ordinary Share moved from US$1.1217 at 31 December 2015 to US$1.0871 per share, with a US$0.033 per share dividend declared in January 2016 and paid in March 2016. As described in the Investment Manager's Report below, most of the portfolio has been allocated to U.S. wind-related risks, for which the premiums are earned between July and October.

During the first half of 2016, loss events, including adjustments to losses incurred in previous years, reduced the Company’s NAV by approximately US$0.037 per Ordinary Share. Further details in relation to these events are set out in the Investment Manager's Report below.

Dividend

The Company continues to target an annualised dividend of LIBOR plus 6 per cent. on the original issue price of its Ordinary Shares in December 2012. In January 2016, the Company declared a further dividend of $0.033 per Ordinary Share for the second half of 2015. The Company offered a scrip dividend alternative in respect of this second half dividend so that Shareholders could elect to receive new Ordinary Shares instead of all or part of their cash dividend. On 22 July 2016, the Company declared a dividend of US$0.033 per Ordinary Share. The Directors’ current intention is that, save for unforeseen circumstances, the second distribution in respect of the six months ended 31 December 2016 (expected to be paid in March 2017), will be for approximately the same amount.[1]

Credit Facility

On 16 May 2016, the Company entered into a credit facility (the "2016 Credit Facility") with Endurance Investment Holdings Ltd. (the "Lender"), a wholly-owned subsidiary of Endurance Specialty Holdings Ltd. (together with its subsidiaries “Endurance”), which holds indirectly 25.2 per cent. of the Company's issued ordinary shares and is the ultimate parent company of the Company's Investment Manager. The 2016 Credit Facility provides the Company with an unsecured US$20.0 million revolving credit facility for working capital and general corporate purposes and expires on 30 September 2018. The 2016 Credit Facility replaces the 364-day US$20.0 million revolving credit facility which expired on 13 May 2016. Borrowings under the 2016 Credit Facility bear interest, set at the time of the borrowing, at a rate equal to the applicable LIBOR rate plus 150 basis points. As at 30 June 2016, the 2016 Credit Facility was undrawn.

Outlook

The Company remains pleased with the diversified portfolio that the Investment Manager has created, which has attractive risk adjusted return characteristics, consistent with the Company’s investment objectives. I am pleased with the performance achieved by this portfolio in our first three years of operations, and I would like to thank our Shareholders for their support.

Looking ahead to the second half of the year, while little direct reinsurance will be bound prior to the January renewals, the Investment Manager will continue to look for opportunities to improve our portfolio and position us for the upcoming renewal season.

The Ordinary Shares traded at an average discount to their Net Asset Value of 9.6 per cent. over the period. The Company’s discount management policy, adopted at the time the Company was launched, includes a requirement for the Directors to consider a tender offer if the shares trade at an average discount of more than 5 per cent. to the net asset value per ordinary share over the three month period ending on 31 August each year. In the event this proves to be the case in 2016, the Directors intend to offer Shareholders the opportunity to tender up to 25 per cent of Ordinary Shares in accordance with this policy.

On 16 May 2016, Shareholders approved all the resolutions at the Annual General Meeting. Of the 199,108,914 Ordinary Shares outstanding, 78 per cent. were voted in favour of each of the proposals. No Ordinary Shares were voted against any of the proposals.

Chairman

To view the entire filing please click on the link below:

www.bsx.com/CompanyDocuments//2016%20Financials/2016%20Interim%20Management%20Statements/BCGR%20Half-Year%20Report_June%2030%202016.pdf