Attached files
| file | filename |
|---|---|
| EX-99.3 - EXHIBIT 99.3 PRESS RELEASE - SiriusPoint Ltd | exhibit993-pressrelease.htm |
| EX-99.2 - EXHIBIT 99.2 FINANCIAL SUPPLEMENT - SiriusPoint Ltd | exhibit992-financialsupple.htm |
| 8-K - 8-K - SiriusPoint Ltd | form8-knovemberx2017.htm |
Third Point Re Reports Third Quarter 2017 Earnings Results
Net income available to Third Point Re common shareholders of $54.7 million, or $0.52 per diluted common share
HAMILTON, Bermuda, November 8, 2017, Third Point Reinsurance Ltd. (“Third Point Re” or the “Company”) (NYSE:TPRE) today announced results for its third quarter ended September 30, 2017.
Third Point Re reported net income available to common shareholders of $54.7 million, or $0.52 per diluted common share, for the three months ended September 30, 2017, compared to $72.1 million, or $0.68 per diluted common share, for the three months ended September 30, 2016. For the nine months ended September 30, 2017, Third Point Re reported net income available to common shareholders of $233.4 million, or $2.22 per diluted common share, compared to $74.3 million, or $0.70 per diluted common share, for the nine months ended September 30, 2016.
For the three months ended September 30, 2017, diluted book value per share increased by $0.50 per share, or 3.4%, to $15.24 per share as of September 30, 2017, from $14.74 per share as of June 30, 2017. For the nine months ended September 30, 2017, diluted book value per share increased by $2.08 per share, or 15.8%, to $15.24 per share from $13.16 per share as of December 31, 2016.
“Our strong performance for 2017 continued through the third quarter with a return on beginning shareholders’ equity of 3.5%, bringing our nine month return to 16.8%,” commented Rob Bredahl, President and Chief Executive Officer. “Our investment manager, Third Point LLC continues to have a great year and has generated an investment return of 14.6% through the first nine months of the year and 17.6% through October 2017. We reported a combined ratio of 111.9% for the quarter ended September 30, 2017, which included $5.3 million, or 5.0 percentage points on our combined ratio, related to third quarter catastrophes. The small net loss from these events was within expectations given our limited exposure and reflects our decision to avoid highly volatile forms of reinsurance such as catastrophe excess of loss treaties.”
The following table shows certain key financial metrics for the three and nine months ended September 30, 2017 and 2016:
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
($ in millions, except for per share data and ratios) | |||||||||||||||
Gross premiums written | $ | 174.5 | $ | 142.6 | $ | 477.5 | $ | 536.6 | |||||||
Net premiums earned | $ | 106.0 | $ | 128.2 | $ | 417.5 | $ | 398.1 | |||||||
Net underwriting loss (1) | $ | (12.6 | ) | $ | (8.3 | ) | $ | (33.3 | ) | $ | (40.5 | ) | |||
Combined ratio (1) | 111.9 | % | 106.5 | % | 108.0 | % | 110.2 | % | |||||||
Net investment return on investments managed by Third Point LLC | 3.6 | % | 4.0 | % | 14.6 | % | 6.0 | % | |||||||
Net investment income | $ | 89.0 | $ | 88.4 | $ | 324.8 | $ | 134.6 | |||||||
Net investment income on float (2) | $ | 26.5 | $ | 22.0 | $ | 93.9 | $ | 32.9 | |||||||
Net income available to Third Point Re common shareholders | $ | 54.7 | $ | 72.1 | $ | 233.4 | $ | 74.3 | |||||||
Diluted earnings per share available to Third Point Re common shareholders | $ | 0.52 | $ | 0.68 | $ | 2.22 | $ | 0.70 | |||||||
Change in diluted book value per share (2) | 3.4 | % | 5.2 | % | 15.8 | % | 5.4 | % | |||||||
Return on beginning shareholders’ equity (2) | 3.5 | % | 5.2 | % | 16.8 | % | 5.4 | % | |||||||
Net investments managed by Third Point LLC (3) | $ | 2,525.0 | $ | 2,191.6 | $ | 2,525.0 | $ | 2,191.6 | |||||||
Invested asset leverage (3) | 1.57 | 1.55 | 1.57 | 1.55 | |||||||||||
(1) | See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. |
(2) | Net investment income on float, change in diluted book value per share and return on beginning shareholders’ equity are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of net investment income on float, diluted book value per share and return on beginning shareholders’ equity. |
(3) | Prior year comparatives represent amounts as of December 31, 2016. |
Segment Highlights
Property and Casualty Reinsurance Segment
Gross premiums written increased by $32.0 million, or 22.4%, to $174.5 million for the three months ended September 30, 2017 from $142.6 million for the three months ended September 30, 2016. Gross premiums written decreased by $59.1 million, or 11.0%, to $477.5 million for the nine months ended September 30, 2017 from $536.6 million for the nine months ended September 30, 2016.
The increase for the three months ended September 30, 2017 compared to the period year period was primarily due to new contracts, partially offset by timing differences. The decrease for the nine months ended September 30, 2017 compared to the prior year period was primarily due to contracts that we did not renew as a result of underlying terms and conditions, lower premium adjustments in the current year period and other timing differences partially offset by new premium.
The decrease in net premiums earned in the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to a lower in-force underwriting portfolio. The increase in net premiums earned for the nine months ended September 30, 2017 was primarily due to $85.6 million of new retroactive exposures assumed in reinsurance contracts, which was fully earned when written, partially offset by a lower in-force underwriting portfolio. We did not write any retroactive reinsurance contracts in the three and nine months ended September 30, 2016.
The net underwriting loss and combined ratio for the three months ended September 30, 2017 included $5.3 million, or 5.0 percentage points, related to third quarter catastrophes. There was an insignificant impact on our net underwriting result from changes in estimates of prior years’ loss reserves, net of the related impact of acquisition costs, for the three and nine months ended September 30, 2017.
The net underwriting loss and combined ratio for the three and nine months ended September 30, 2016 did not include any impact of catastrophe losses. There was an insignificant impact on our net underwriting result from changes in estimates of prior years’ loss reserves, net of the related impact of acquisition costs, for the three months ended September 30, 2016. The nine months ended September 30, 2016 included increases of $12.5 million in net underwriting loss from changes in estimates of prior years’ reserves, net of related impact of acquisition costs.
Investments
The return on investments managed by Third Point LLC by strategy for the three and nine months ended September 30, 2017 and 2016 was as follows:
Three months ended | |||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||
Long | Short | Net | Long | Short | Net | ||||||||||||
Equity | 3.5 | % | (0.9 | )% | 2.6 | % | 4.1 | % | (2.2 | )% | 1.9 | % | |||||
Credit | 0.5 | % | (0.1 | )% | 0.4 | % | 2.1 | % | (0.1 | )% | 2.0 | % | |||||
Other | 0.9 | % | (0.3 | )% | 0.6 | % | 0.2 | % | (0.1 | )% | 0.1 | % | |||||
Net investment return on investments managed by Third Point LLC | 4.9 | % | (1.3 | )% | 3.6 | % | 6.4 | % | (2.4 | )% | 4.0 | % | |||||
Nine months ended | |||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||
Long | Short | Net | Long | Short | Net | ||||||||||||
Equity | 16.8 | % | (3.0 | )% | 13.8 | % | 3.8 | % | (2.5 | )% | 1.3 | % | |||||
Credit | 0.6 | % | (0.5 | )% | 0.1 | % | 6.5 | % | (0.7 | )% | 5.8 | % | |||||
Other | 1.9 | % | (1.2 | )% | 0.7 | % | 0.1 | % | (1.2 | )% | (1.1 | )% | |||||
Net investment return on investments managed by Third Point LLC | 19.3 | % | (4.7 | )% | 14.6 | % | 10.4 | % | (4.4 | )% | 6.0 | % | |||||
For the three months ended September 30, 2017, the investment portfolio generated positive net returns from each investment strategy with equities remaining the strongest performing strategy for the quarter. Gains generated from long investments in every sector except consumer were partially offset by losses in the short portfolios for most sectors as well as market hedges. Performance was primarily attributable to long activist or long-term growth investments in the industrials, healthcare and technology, media and telecommunications sectors. Within credit, long sovereign investments in Latin America and U.S.-based structured credit
positions drove gains. Exposure in the other strategy remains modest and positive returns from long risk arbitrage, currency, private and macroeconomic portfolios were partially offset by losses in the corresponding short portfolios.
For the nine months ended September 30, 2017, the net investment results were primarily attributable to our equity portfolio. Within equities, the investment account saw positive net returns from every sector led by healthcare, industrials, consumer and technology, media and telecommunications. The long portfolio added meaningful returns while the short portfolio generated alpha amidst a strong broader market backdrop. Within credit, gains in each sub-strategy on the long side were partially offset by negative performance by the short performing credit book. Positive returns from risk arbitrage, private and currency investments negated modest detraction from macroeconomic hedges in the other strategy.
Board of Director Changes
In a separate press release, Third Point Re also today announced that John Berger, Chairman, will be stepping down from the Board effective December 22, 2017. Steven Fass, a current Board Director, will succeed Mr. Berger as interim Chairman. Rob Bredahl, President and Chief Executive Officer, will replace Mr. Berger on the Board as of December 22, 2017. The Board would like to thank Mr. Berger for his work as Chairman and he leaves with their best wishes. John was instrumental in the formation of Third Point Re and the Board sincerely appreciates all of Mr. Berger’s hard work in getting Third Point Re to its current position.
Share Repurchase Program
During the three months ended September 30, 2017, we did not repurchase any of our common shares.
During the nine months ended September 30, 2017, we repurchased 3,300,152 of our common shares in the open market for $40.9 million at a weighted average cost, including commissions, of $12.38 per share. Common shares repurchased were not canceled and are classified as treasury shares.
As of September 30, 2017, the Company is authorized to repurchase up to an aggregate of $51.7 million of additional common shares under its share repurchase program.
Conference Call Details
The Company will hold a conference call to discuss its third quarter 2017 results at 8:30 a.m. Eastern Time on November 9, 2017. The call will be webcast live over the Internet from the Company’s website at www.thirdpointre.bm under “Investors”. Participants should follow the instructions provided on the website to download and install any necessary audio applications. The conference call is also available by dialing 1-877-407-0789 (domestic) or 1-201-689-8562 (international). Participants should ask for the Third Point Reinsurance Ltd. third quarter earnings conference call.
A replay of the live conference call will be available approximately three hours after the call. The replay will be available on the Company’s website or by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the replay passcode 13671485. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on November 16, 2017.
Safe Harbor Statement Regarding Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company’s control. The Company cautions you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “plan,” “seek,” “comfortable with,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from the Company’s expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: (i) fluctuation in results of operations; (ii) more established competitors; (iii) losses exceeding reserves; (iv) downgrades or withdrawal of ratings by rating agencies; (v) dependence on key executives; (vi) dependence on letter of credit facilities that may not be available on commercially acceptable terms; (vii) dependence on financing available through our investment accounts to secure letters of credit and collateral for reinsurance contracts; (viii) potential inability to pay dividends; (ix) inability to service our indebtedness; (x) limited cash flow and liquidity due to our indebtedness; (xi) unavailability of capital in the future; (xii) fluctuations in market price of our common shares; (xiii) dependence on clients’ evaluations of risks associated with such clients’ insurance underwriting; (xiv) suspension or revocation of our reinsurance licenses; (xv) potentially being deemed an investment company under U.S. federal securities law; (xvi) potential characterization of Third Point Reinsurance Ltd. and/or Third Point Reinsurance Company Ltd. (“Third Point Re BDA”) as a passive foreign investment company; (xvii) future strategic transactions
such as acquisitions, dispositions, merger or joint ventures; (xviii) dependence on Third Point LLC to implement our investment strategy; (xix) termination by Third Point LLC of our investment management agreements; (xx) risks associated with our investment strategy being greater than those faced by competitors; (xxi) increased regulation or scrutiny of alternative investment advisers affecting our reputation; (xxii) Third Point Reinsurance Ltd. and/or Third Point Re BDA potentially becoming subject to U.S. federal income taxation, including as a result of the bill currently proposed in the U.S House of Representatives; (xxiii) potentially becoming subject to U.S. withholding and information reporting requirements under the Foreign Account Tax Compliance Act; (xxiv) changes in Bermuda or other law and regulation that may have an adverse impact on our operations; and (xxv) other risks and factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and other periodic and current disclosures filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date made and the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures and Other Financial Metrics
In presenting Third Point Re’s results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including net investment income on float, book value per share, diluted book value per share and return on beginning shareholders’ equity, are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial information in accordance with Regulation G.
About the Company
The Company is a public company listed on the New York Stock Exchange which, through its wholly-owned subsidiaries Third Point Re BDA and Third Point Reinsurance (USA) Ltd. (“Third Point Re USA”), writes property and casualty reinsurance business. Third Point Re BDA and Third Point Re USA each have an “A-” (Excellent) financial strength rating from A.M. Best Company, Inc.
Contact
Third Point Reinsurance Ltd.
Manoj Gupta - Head of Investor Relations and Business Development
investorrelations@thirdpointre.bm
+1 441-542-3333
THIRD POINT REINSURANCE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of September 30, 2017 and December 31, 2016
(expressed in thousands of U.S. dollars, except per share and share amounts)
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Equity securities, trading, at fair value (cost - $1,676,001; 2016 - $1,385,866) | $ | 2,017,463 | $ | 1,506,854 | ||||
Debt securities, trading, at fair value (cost - $676,972; 2016 - $1,036,716) | 656,118 | 1,057,957 | ||||||
Other investments, at fair value | 30,932 | 82,701 | ||||||
Total investments in securities | 2,704,513 | 2,647,512 | ||||||
Cash and cash equivalents | 6,434 | 9,951 | ||||||
Restricted cash and cash equivalents | 477,362 | 298,940 | ||||||
Due from brokers | 387,786 | 284,591 | ||||||
Derivative assets, at fair value | 75,781 | 27,432 | ||||||
Interest and dividends receivable | 4,210 | 6,505 | ||||||
Reinsurance balances receivable | 478,206 | 381,951 | ||||||
Deferred acquisition costs, net | 223,091 | 221,618 | ||||||
Other assets | 11,464 | 17,144 | ||||||
Total assets | $ | 4,368,847 | $ | 3,895,644 | ||||
Liabilities | ||||||||
Accounts payable and accrued expenses | $ | 24,580 | $ | 10,321 | ||||
Reinsurance balances payable | 54,654 | 43,171 | ||||||
Deposit liabilities | 126,491 | 104,905 | ||||||
Unearned premium reserves | 615,375 | 557,076 | ||||||
Loss and loss adjustment expense reserves | 699,369 | 605,129 | ||||||
Securities sold, not yet purchased, at fair value | 405,845 | 92,668 | ||||||
Due to brokers | 602,230 | 899,601 | ||||||
Derivative liabilities, at fair value | 17,280 | 16,050 | ||||||
Performance fee payable to related party | 73,210 | — | ||||||
Interest and dividends payable | 1,917 | 3,443 | ||||||
Senior notes payable, net of deferred costs | 113,688 | 113,555 | ||||||
Total liabilities | 2,734,639 | 2,445,919 | ||||||
Commitments and contingent liabilities | ||||||||
Redeemable noncontrolling interests in related party (1) | 16,813 | — | ||||||
Shareholders' equity | ||||||||
Preference shares (par value $0.10; authorized, 30,000,000; none issued) | — | — | ||||||
Common shares (par value $0.10; authorized, 300,000,000; issued and outstanding, 107,383,405 (2016 - 106,501,299)) | 10,738 | 10,650 | ||||||
Treasury shares (3,944,920 shares (2016 - 644,768 shares)) | (48,253 | ) | (7,389 | ) | ||||
Additional paid-in capital | 1,099,998 | 1,094,568 | ||||||
Retained earnings | 549,671 | 316,222 | ||||||
Shareholders’ equity attributable to Third Point Re common shareholders | 1,612,154 | 1,414,051 | ||||||
Noncontrolling interests in related party (1) | 5,241 | 35,674 | ||||||
Total shareholders' equity | 1,617,395 | 1,449,725 | ||||||
Total liabilities, noncontrolling interests and shareholders' equity | $ | 4,368,847 | $ | 3,895,644 | ||||
(1) | During the quarter ended September 30, 2017, the Company identified that a portion of its noncontrolling interest was redeemable. This portion of the noncontrolling interests had previously been presented in noncontrolling interests in related party within shareholders’ equity when it should have been presented in the mezzanine section of the consolidated balance sheet as redeemable noncontrolling interests in related party. As of December 31, 2016, $31.2 million of the noncontrolling interest in related party should have been presented in the mezzanine section of the consolidated balance sheet as redeemable noncontrolling interests in related party. Although this impacted total shareholders’ equity, it did not impact shareholders’ equity attributable to Third Point Re common shareholders or retained earnings. In addition, this change did not impact the condensed consolidated statements of income, earnings per share or condensed consolidated statement of cash flows. The Company has evaluated the effect of the incorrect presentation, both qualitatively and quantitatively, and concluded that it did not have a material impact on, nor require amendment of, any previously filed annual or quarterly consolidated financial statements or periodic reports. |
THIRD POINT REINSURANCE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three and nine months ended September 30, 2017 and 2016
(expressed in thousands of U.S. dollars, except per share and share amounts)
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Revenues | |||||||||||||||
Gross premiums written | $ | 174,539 | $ | 142,573 | $ | 477,457 | $ | 536,595 | |||||||
Gross premiums ceded | — | (927 | ) | (2,550 | ) | (2,352 | ) | ||||||||
Net premiums written | 174,539 | 141,646 | 474,907 | 534,243 | |||||||||||
Change in net unearned premium reserves | (68,564 | ) | (13,463 | ) | (57,365 | ) | (136,136 | ) | |||||||
Net premiums earned | 105,975 | 128,183 | 417,542 | 398,107 | |||||||||||
Net investment income before management and performance fees to related parties | 119,516 | 121,208 | 427,982 | 191,084 | |||||||||||
Management and performance fees to related parties | (30,548 | ) | (32,852 | ) | (103,179 | ) | (56,492 | ) | |||||||
Net investment income | 88,968 | 88,356 | 324,803 | 134,592 | |||||||||||
Total revenues | 194,943 | 216,539 | 742,345 | 532,699 | |||||||||||
Expenses | |||||||||||||||
Loss and loss adjustment expenses incurred, net | 77,275 | 85,015 | 270,549 | 273,822 | |||||||||||
Acquisition costs, net | 33,974 | 45,127 | 157,067 | 145,296 | |||||||||||
General and administrative expenses | 13,218 | 12,354 | 38,804 | 33,885 | |||||||||||
Other expenses | 3,846 | 347 | 8,852 | 6,226 | |||||||||||
Interest expense | 2,074 | 2,069 | 6,151 | 6,163 | |||||||||||
Foreign exchange (gains) losses | 5,437 | (3,905 | ) | 10,233 | (14,359 | ) | |||||||||
Total expenses | 135,824 | 141,007 | 491,656 | 451,033 | |||||||||||
Income before income tax expense | 59,119 | 75,532 | 250,689 | 81,666 | |||||||||||
Income tax expense | (3,475 | ) | (2,484 | ) | (14,080 | ) | (5,865 | ) | |||||||
Net income | 55,644 | 73,048 | 236,609 | 75,801 | |||||||||||
Net income attributable to noncontrolling interests in related party | (959 | ) | (967 | ) | (3,160 | ) | (1,473 | ) | |||||||
Net income available to Third Point Re common shareholders | $ | 54,685 | $ | 72,081 | $ | 233,449 | $ | 74,328 | |||||||
Earnings per share available to Third Point Re common shareholders | |||||||||||||||
Basic earnings per share available to Third Point Re common shareholders | $ | 0.54 | $ | 0.69 | $ | 2.27 | $ | 0.71 | |||||||
Diluted earnings per share available to Third Point Re common shareholders | $ | 0.52 | $ | 0.68 | $ | 2.22 | $ | 0.70 | |||||||
Weighted average number of common shares used in the determination of earnings per common share | |||||||||||||||
Basic | 101,391,145 | 103,780,196 | 102,553,346 | 104,055,946 | |||||||||||
Diluted | 104,679,574 | 105,795,313 | 105,040,251 | 105,590,668 | |||||||||||
THIRD POINT REINSURANCE LTD.
SEGMENT REPORTING
Three months ended September 30, 2017 | Three months ended September 30, 2016 | ||||||||||||||||||||||
Property and Casualty Reinsurance | Corporate | Total | Property and Casualty Reinsurance | Corporate | Total | ||||||||||||||||||
Revenues | ($ in thousands) | ($ in thousands) | |||||||||||||||||||||
Gross premiums written | $ | 174,539 | $ | — | $ | 174,539 | $ | 142,573 | $ | — | $ | 142,573 | |||||||||||
Gross premiums ceded | — | — | — | (927 | ) | — | (927 | ) | |||||||||||||||
Net premiums written | 174,539 | — | 174,539 | 141,646 | — | 141,646 | |||||||||||||||||
Change in net unearned premium reserves | (68,564 | ) | — | (68,564 | ) | (13,463 | ) | — | (13,463 | ) | |||||||||||||
Net premiums earned | 105,975 | — | 105,975 | 128,183 | — | 128,183 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Loss and loss adjustment expenses incurred, net | 77,275 | — | 77,275 | 85,015 | — | 85,015 | |||||||||||||||||
Acquisition costs, net | 33,974 | — | 33,974 | 45,127 | — | 45,127 | |||||||||||||||||
General and administrative expenses | 7,291 | 5,927 | 13,218 | 6,380 | 5,974 | 12,354 | |||||||||||||||||
Total expenses | 118,540 | 5,927 | 124,467 | 136,522 | 5,974 | 142,496 | |||||||||||||||||
Net underwriting loss | (12,565 | ) | n/a | n/a | (8,339 | ) | n/a | n/a | |||||||||||||||
Net investment income | 26,531 | 62,437 | 88,968 | 22,031 | 66,325 | 88,356 | |||||||||||||||||
Other expenses | (3,846 | ) | — | (3,846 | ) | (347 | ) | — | (347 | ) | |||||||||||||
Interest expense | — | (2,074 | ) | (2,074 | ) | — | (2,069 | ) | (2,069 | ) | |||||||||||||
Foreign exchange gains (losses) | — | (5,437 | ) | (5,437 | ) | — | 3,905 | 3,905 | |||||||||||||||
Income tax expense | — | (3,475 | ) | (3,475 | ) | — | (2,484 | ) | (2,484 | ) | |||||||||||||
Net income attributable to noncontrolling interests in related party | — | (959 | ) | (959 | ) | — | (967 | ) | (967 | ) | |||||||||||||
Segment income | $ | 10,120 | $ | 44,565 | $ | 13,345 | $ | 58,736 | |||||||||||||||
Net income available to Third Point Re common shareholders | $ | 54,685 | $ | 72,081 | |||||||||||||||||||
Property and Casualty Reinsurance - Underwriting Ratios (1): | |||||||||||||||||||||||
Loss ratio | 72.9 | % | 66.3 | % | |||||||||||||||||||
Acquisition cost ratio | 32.1 | % | 35.2 | % | |||||||||||||||||||
Composite ratio | 105.0 | % | 101.5 | % | |||||||||||||||||||
General and administrative expense ratio | 6.9 | % | 5.0 | % | |||||||||||||||||||
Combined ratio | 111.9 | % | 106.5 | % | |||||||||||||||||||
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | ||||||||||||||||||||||
Property and Casualty Reinsurance | Corporate | Total | Property and Casualty Reinsurance | Corporate | Total | ||||||||||||||||||
Revenues | ($ in thousands) | ($ in thousands) | |||||||||||||||||||||
Gross premiums written | $ | 477,457 | $ | — | $ | 477,457 | $ | 536,595 | $ | — | $ | 536,595 | |||||||||||
Gross premiums ceded | (2,550 | ) | — | (2,550 | ) | (2,352 | ) | — | (2,352 | ) | |||||||||||||
Net premiums written | 474,907 | — | 474,907 | 534,243 | — | 534,243 | |||||||||||||||||
Change in net unearned premium reserves | (57,365 | ) | — | (57,365 | ) | (136,136 | ) | — | (136,136 | ) | |||||||||||||
Net premiums earned | 417,542 | — | 417,542 | 398,107 | — | 398,107 | |||||||||||||||||
Expenses | |||||||||||||||||||||||
Loss and loss adjustment expenses incurred, net | 270,549 | — | 270,549 | 273,822 | — | 273,822 | |||||||||||||||||
Acquisition costs, net | 157,067 | — | 157,067 | 145,296 | — | 145,296 | |||||||||||||||||
General and administrative expenses | 23,252 | 15,552 | 38,804 | 19,527 | 14,358 | 33,885 | |||||||||||||||||
Total expenses | 450,868 | 15,552 | 466,420 | 438,645 | 14,358 | 453,003 | |||||||||||||||||
Net underwriting loss | (33,326 | ) | n/a | n/a | (40,538 | ) | n/a | n/a | |||||||||||||||
Net investment income | 93,857 | 230,946 | 324,803 | 32,868 | 101,724 | 134,592 | |||||||||||||||||
Other expenses | (8,852 | ) | — | (8,852 | ) | (6,226 | ) | — | (6,226 | ) | |||||||||||||
Interest expense | — | (6,151 | ) | (6,151 | ) | — | (6,163 | ) | (6,163 | ) | |||||||||||||
Foreign exchange gains (losses) | — | (10,233 | ) | (10,233 | ) | — | 14,359 | 14,359 | |||||||||||||||
Income tax expense | — | (14,080 | ) | (14,080 | ) | — | (5,865 | ) | (5,865 | ) | |||||||||||||
Net income attributable to noncontrolling interests in related party | — | (3,160 | ) | (3,160 | ) | — | (1,473 | ) | (1,473 | ) | |||||||||||||
Segment income (loss) | $ | 51,679 | $ | 181,770 | $ | (13,896 | ) | $ | 88,224 | ||||||||||||||
Net income available to Third Point Re common shareholders | $ | 233,449 | $ | 74,328 | |||||||||||||||||||
Property and Casualty Reinsurance - Underwriting Ratios (1): | |||||||||||||||||||||||
Loss ratio | 64.8 | % | 68.8 | % | |||||||||||||||||||
Acquisition cost ratio | 37.6 | % | 36.5 | % | |||||||||||||||||||
Composite ratio | 102.4 | % | 105.3 | % | |||||||||||||||||||
General and administrative expense ratio | 5.6 | % | 4.9 | % | |||||||||||||||||||
Combined ratio | 108.0 | % | 110.2 | % | |||||||||||||||||||
(1) Underwriting ratios are calculated by dividing the related expense by net premiums earned. | |||||||||||||||||||||||
THIRD POINT REINSURANCE LTD.
RECONCILIATION OF NON-GAAP MEASURES AND KEY PERFORMANCE INDICATORS
September 30, 2017 | December 31, 2016 | ||||||
Basic and diluted book value per share numerator: | ($ in thousands, except share and per share amounts) | ||||||
Shareholders’ equity attributable to Third Point Re common shareholders | $ | 1,612,154 | $ | 1,414,051 | |||
Effect of dilutive warrants issued to founders and an advisor | 46,512 | 46,512 | |||||
Effect of dilutive stock options issued to directors and employees | 54,572 | 52,930 | |||||
Diluted book value per share numerator | $ | 1,713,238 | $ | 1,513,493 | |||
Basic and diluted book value per share denominator: | |||||||
Issued and outstanding shares, net of treasury shares | 101,399,735 | 104,173,748 | |||||
Effect of dilutive warrants issued to founders and an advisor | 4,651,163 | 4,651,163 | |||||
Effect of dilutive stock options issued to directors and employees | 5,332,833 | 5,274,333 | |||||
Effect of dilutive restricted shares issued to directors and employees | 1,061,412 | 878,529 | |||||
Diluted book value per share denominator | 112,445,143 | 114,977,773 | |||||
Basic book value per share | $ | 15.90 | $ | 13.57 | |||
Diluted book value per share | $ | 15.24 | $ | 13.16 | |||
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
($ in thousands) | |||||||||||||||
Net investment income on float | $ | 26,531 | $ | 22,031 | $ | 93,857 | $ | 32,868 | |||||||
Net investment income on capital | 62,971 | 65,729 | 231,020 | 100,646 | |||||||||||
Net investment income on investments managed by Third Point LLC | 89,502 | 87,760 | 324,877 | 133,514 | |||||||||||
Net gain (loss) on investment in Kiskadee Fund | (534 | ) | 596 | (74 | ) | 1,078 | |||||||||
$ | 88,968 | $ | 88,356 | $ | 324,803 | $ | 134,592 | ||||||||
Three months ended | Nine months ended | ||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
($ in thousands) | |||||||||||||||
Net income available to Third Point Re common shareholders | $ | 54,685 | $ | 72,081 | $ | 233,449 | $ | 74,328 | |||||||
Shareholders’ equity attributable to Third Point Re common shareholders - beginning of period | 1,556,323 | 1,380,332 | 1,414,051 | 1,379,726 | |||||||||||
Impact of weighting related to shareholders’ equity from shares repurchased | — | — | (25,023 | ) | (3,348 | ) | |||||||||
Adjusted shareholders’ equity attributable to Third Point Re common shareholders - beginning of period | $ | 1,556,323 | $ | 1,380,332 | $ | 1,389,028 | $ | 1,376,378 | |||||||
Return on beginning shareholders’ equity attributable to Third Point Re common shareholders | 3.5 | % | 5.2 | % | 16.8 | % | 5.4 | % | |||||||
Non-GAAP Financial Measures and Key Performance Indicators
Book Value per Share and Diluted Book Value per Share
Book value per share and diluted book value per share are non-GAAP financial measures and there are no comparable GAAP measures. Book value per share is calculated by dividing shareholders’ equity attributable to Third Point Re common shareholders by the number of issued and outstanding shares at period end, net of treasury shares. Diluted book value per share represents book value per share combined with the impact from dilution of all in-the-money share options issued, warrants and unvested restricted shares outstanding as of any period end. For unvested restricted shares with a performance condition, we include the unvested restricted shares for which we consider vesting to be probable. Change in book value per share is calculated by taking the change in book value per share divided by the beginning of period book value per share. Change in diluted book value per share is calculated by taking the change in diluted book value per share divided by the beginning of period diluted book value per share. We believe that long-term growth in diluted book value per share is the most important measure of our financial performance because it allows our management and investors to track over time the value created by the retention of earnings. In addition, we believe this metric is used by investors because it provides a basis for comparison with other companies in our industry that also report a similar measure.
Net Investment Income on Float
Net investment income on float is an important aspect of our property and casualty reinsurance operation. In an insurance or reinsurance operation, float arises because premiums and proceeds from deposit accounted contracts are collected before losses are paid. In some instances, the interval between receipts and payments can extend over many years. During this time interval, insurance and reinsurance companies invest the premiums received and generate investment returns. Float is not a concept defined by U.S. GAAP and therefore, there are no comparable U.S. GAAP measures. Float, as a result, is considered to be a non-GAAP financial measure. We believe that net investment income generated on float is an important consideration in evaluating the overall contribution of our property and casualty reinsurance operation to our consolidated results. It is also explicitly considered as part of the evaluation of management’s performance for purposes of long-term incentive compensation.
Net Investment Return on Investments Managed by Third Point LLC
Net investment return represents the return on our investments managed by Third Point LLC, net of fees. The net investment return on investments managed by Third Point LLC is the percentage change in value of a dollar invested over the reporting period on our investment assets managed by Third Point LLC, net of total noncontrolling interest. The stated return is net of withholding taxes, which are presented as a component of income tax expense in our condensed consolidated statements of income. Net investment return is the key indicator by which we measure the performance of Third Point LLC, our investment manager.
Return on Beginning Shareholders’ Equity Attributable to Third Point Re Common Shareholders
Return on beginning shareholders’ equity attributable to Third Point Re common shareholders as presented is a non-GAAP financial measure. Return on beginning shareholders’ equity attributable to Third Point Re common shareholders is calculated by dividing net income available to Third Point Re common shareholders by the beginning shareholders’ equity attributable to Third Point Re common shareholders. We believe that return on beginning shareholders’ equity attributable to Third Point Re common shareholders is an important measure because it assists our management and investors in evaluating the Company’s profitability. For the nine months ended September 30, 2017, we have also adjusted the beginning shareholders’ equity attributable to Third Point Re common shareholders for the impact of the shares repurchased on a weighted average basis. This adjustment increased the stated returns on beginning shareholders’ equity attributable to Third Point Re common shareholders.
Invested Asset Leverage
Invested asset leverage is a ratio calculated by dividing our net investments managed by Third Point LLC by shareholders’ equity attributable to Third Point Re common shareholders and is a key metric in assessing the amount of insurance float generated by our reinsurance operation that has been invested by our investment manager, Third Point LLC. Given the sensitivity of our return on beginning shareholders’ equity to our net investment return on investments managed by Third Point LLC, invested asset leverage is an important metric that management monitors. It is also an important metric by which we evaluate our capital adequacy for rating agency and regulatory purposes. Maintaining an appropriate invested asset leverage in order to optimize the return potential of the Company, while maintaining sufficient rating agency and regulatory capital is an important aspect of how we manage the Company.