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CatCo planning 10% return

CatCo Reinsurance has announced that, after a year where there were no significant calls on the reinsurance they had written, they are planning to make a 10% return of capital to shareholders. This comes on top of a 5.929 cent dividend. The capital return will be done by way a of a B share scheme and will give shareholders the equivalent of 11.528 cents per share. All shareholders get issued new B shares; one for each ordinary share they hold. These are then either bought back by the company for 11.528 cents per share or alternatively shareholders can elect to receive a dividend of 11.528 cents per B share instead. After this the B shares become worthless and are cancelled. Then CatCo will consolidate its ordinary shares in such a way that the net asset value before and after the B share issuance is the same. Shareholders end up with the same value as before but now part in cash and part in shares. UK resident shareholders can, in theory, opt to choose whether the payment is treated as a dividend or a return of capital for tax purposes – we say in theory because HMRC is notoriously fickle about changing the treatment of these things without warning and sometimes retrospectively.

There’s no option to rollover the cash in the company. CatCo has decided it doesn’t need the extra capital for 2015. 2015’s portfolio is already in place – new contracts came into force on 1 January. This targets an internal rate of return in excess of LIBOR plus 12 per cent. to 15 per cent. per annum

CAT : CatCo planning 10% return

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