Following on from its announcement on 7 December 2018 that its manager Markel CATCo Investment Management Ltd, is subject to enquiries, by the US and Bermuda governments, into loss reserves recorded in late 2017 and early 2018 (click here to read the story), CATCo Reinsurance Opportunities (CATCo) has now announced that its board has noted the significant discount at which both its Ordinary and C shares are trading relative to the last published NAV and is considering a number of options to address this. It says that, subject to liquidity created from the release of capital from the underlying investment portfolio, the Board will conduct share buybacks as early in 2019 as possible. Specifically, it is planning a 2019 redemption opportunity.
2019 Redemption opportunity
CATCo’s board says that, notwithstanding the increased pricing within the retrocessional reinsurance market resulting from recent catastrophic events, it intends to offer shareholders the opportunity to elect to convert their shareholdings into redemption shares in 2019. Redemption shares would continue to participate pro rata in each of the underlying reinsurance contracts comprising the relevant share class’s portfolio as at the date of their issue, but will not participate in any new investments from that date. As the related reinsurance contracts expire, it is anticipated that the Company would redeem the redemption shares with the proceeds received from underlying investments. CATCo says that it expects to offer these elections in Q2 2019 and, conditional on shareholder approval, are expected to become effective shortly prior to the 2019 mid-year renewals. Shareholders who do not so elect will continue in their current share class.
Possible new C share issue
CATCo’s board has also said that, subject to investor demand, the Board may approve the issuance of a new C Share class to provide exposure to 2019 mid-year reinsurance contract renewals.
About CATCo Reinsurance Opportunities
CATCo Reinsurance Opportunities aims to give its shareholders the opportunity to participate in the returns from investments linked to catastrophe reinsurance risks, principally by investing in fully collateralised reinsurance contracts but also via a variety of insurance-based investments, including insurance-linked swaps and industry loss warranties, insurance-linked securities as well as other financial instruments.
The fund will target an internal rate of return in excess of LIBOR plus 12 percent to 15 percent per annum including a distribution by way of dividend in respect of each Fiscal Year, of an amount equal to LIBOR plus 5 percent of the Net Asset Value at the end of each Fiscal Year.
CATCo Reinsurance Opportunities intends to spread investment risk by seeking exposure to several non-correlated risk categories which limits the amount of capital at risk with respect to a single catastrophic event.
About Markel Corporation
Markel Corporation is a diverse financial holding company serving a variety of niche markets. The Company’s principal business markets and underwrites specialty insurance products. In each of the Company’s businesses, it seeks to provide quality products and excellent customer service so that it can be a market leader. The financial goals of the Company are to earn consistent underwriting and operating profits and superior investment returns to build shareholder value. Visit Markel Corporation on the web at www.markelcorp.com.