Blue Capital Alternative Income Fund Limited - Portfolio Update

Blue Capital Alternative Income Fund Limited, whose shares are admitted to trading on the London Stock Exchange's Specialist Fund Segment and the Bermuda Stock Exchange, is pleased to provide an update on the June 2017 reinsurance renewals.  

Mike McGuire, CEO of Blue Capital Management Ltd. ("Blue Capital"), commented:

"We are pleased to report strong portfolio execution during the June renewal period.  Overall market price reductions were larger than initially anticipated, with the Florida market being 5% - 7.5% down year on year.  However, due to the strength of our established long term relationships, the high quality of our underwriting and portfolio management teams and our strategic alignment with Sompo International, we were able to construct an attractive portfolio with risk adjusted pricing down 3%.” 

The Company’s total investments after the June 2017 renewals decreased by US$17.3 million year on year, resulting in a total investment at fair value of US$173.8 million in Blue Capital Global Reinsurance SA?1 (the "Master Fund"). Fair value is represented as collateral plus net earned premium less losses paid and reserved. The decrease in fair value is primarily attributable to the non-renewal of certain agreements with less favorable terms.  The Company intends to reinvest such assets in the latter half of the year.

The Master Fund has invested substantially all of its assets in: (i) preferred shares of Blue Water Re Ltd. and (ii) Industry loss warranty (“ILW”) derivatives. The combined investments represent collateral deployment of US$167.2 millionacross 98 different positions and 40 different clients generating US$41.1 million of net reinsurance premium written and fixed ILW payments which is an increase of US$0.7 million from the previous year.  

A breakdown of the current portfolio is set out below:

Capital Investment Summary

The following unaudited tables provide a breakdown of the current fair value of the Company’s portfolio investments by contract type, zone and peril (as at 1 June 2017).

XOL = excess of loss                         ILW = Industry Loss Warranty                     

¹ Underlying positions held within the quota share retrocessional agreements totals 1,500.

² Contracts transacted in an International Swaps and Derivatives Association, Inc. contract format.

Portfolio ReturnSummary¹

¹ The portfolio return summary is provided for illustrative purposes only. The projections are derived by reference to the Company's modelled portfolio as at 1 June 2017 and do not take into account actual costs, expenses or other factors which are not attributable to the portfolio. As such, the portfolio return summary should not in any way be construed as forecasting the Company’s actual returns should no losses occur or otherwise.

² Net aggregate return distribution between a mean and median catastrophe year.

Probable Maximum Loss

The exposures summarised below represent the sum of all collateral invested less reinsurance recoverable. Per the Company’s Investment Policy, the net first event Probable Maximum Loss (“PML”) in any one zone will not exceed 35% of the Company’s NAV (at the time the investment is made). For contracts that overlap zones, the total exposure is counted in each of the exposed zones.

¹ Value at Risk (“VaR”) represents the 99.0 percentile or the 1 in 100 year event for windstorm perils and the 99.6 percentile or the 1 in 250 year event for earthquake perils.

Enquiries:

For investor enquiries please contact:

Notes to editors:

Blue Capital, which serves as the investment manager for both the Company and Blue Water Master Fund Ltd., is wholly owned by Sompo International. Sompo International is a recognized global specialty provider of property and casualty insurance and reinsurance and a leading property catastrophe and short tail reinsurer since 2001. Blue Capital therefore benefits from Sompo International's underwriting expertise and successful track record managing a diversified portfolio of property catastrophe exposures through a global network of broker/client relationships.

The Company targets a dividend yield of LIBOR plus 6 per cent. per annum¹ on the original issue price of the Ordinary Shares in December 2012 and a net return to Shareholders (comprised of dividends and other distributions to Shareholders together with increases in the Company's Net Asset Value) of LIBOR plus 8 per cent. per annum¹ to be achieved over the longer term, net of fees.

Note 1: These are targets only and not profit forecasts. There can be no assurance that these targets will be met or that the Company will make any returns or distributions whatsoever or that investors will recover all or any of their investment. Prospective investors should decide for themselves whether or not the target returns and distributions are reasonable or achievable in deciding whether to invest in the Company.