Third Point Re Reports Third Quarter 2016 Earnings Results

HAMILTON, Bermuda, Nov. 3, 2016 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (NYSE: TPRE) today announced results for its third quarter ended September 30, 2016.

Third Point Re reported net income of $72.1 million, or $0.68 per diluted common share, for the third quarter of 2016, compared to a net loss of $195.7 million, or $(1.88) per diluted common share, for the third quarter of 2015. For the nine months ended September 30, 2016, Third Point Re reported net income of $74.3 million, or $0.70 per diluted common share, compared with a net loss of $129.6 million, or $(1.25) per diluted common share, for the nine months ended September 30, 2015.

As of September 30, 2016, diluted book value per share increased by $0.67 per share, or 5.2%, to $13.55 per share from $12.88 per share as of June 30, 2016 and increased by $0.70 per share, or 5.4%, to $13.55 per share from $12.85 per share as of December 31, 2015.

"During the third quarter, we generated premiums written of $142.6 million, a decrease of 30.6% compared to the prior year's third quarter, primarily due to one large reserve cover that was written in the prior year period. Our combined ratio for the quarter was 106.5%, which was in line with expectations given current market conditions and lines of business on which we focus," commented John Berger, Chairman and Chief Executive Officer. "Our investments continued to perform well through the third quarter resulting in a 5.2% increase in diluted book value per share for the quarter."

The following table shows certain key financial metrics for the three and nine months ended September 30, 2016 and 2015:

 

 

Segment Highlights

Property and Casualty Reinsurance Segment

Gross premiums written decreased by $63.2 million, or 30.7%, to $142.6 million for the three months ended September 30, 2016 from $205.7 million for the three months ended September 30, 2015. Gross premiums written decreased by $66.7 million, or 11.1%, to $536.6 million for the nine months ended September 30, 2016 from $603.3 million for the nine months ended September 30, 2015. The decrease in the three and nine months ended September 30, 2016 compared to prior year periods was primarily a result of contracts that were not subject to renewal and contracts that did not renew due to pricing and/or terms and conditions, partially offset by new and renewal business.

Net premiums earned for the three months ended September 30, 2016 decreased by $80.8 million, or 38.7%, to $128.2 million. Net premiums earned for the nine months ended September 30, 2016 decreased by $70.3 million, or 15.0%, to $398.1 million. The decrease in net premiums earned was primarily due to retroactive reinsurance contracts of $91.6 million and $108.1 million that were written and earned in the three and nine months ended September 30, 2015, respectively. We did not write any retroactive reinsurance contracts in the comparable 2016 periods.

The net underwriting loss for the three months ended September 30, 2016 included $0.04 million of net favorable development compared to net adverse development of $1.4 million for the three months ended September 30, 2015 as a result of changes in estimates of prior years' loss reserves net of the impact of acquisition costs. The $0.04 million net favorable development for the quarter was a result of small offsetting movements within several lines of business.

The net underwriting loss for the nine months ended September 30, 2016 and 2015 included net adverse development of $12.5 million and $4.5 million, respectively, related to changes in estimates of prior years' loss reserves and the related impact of acquisition costs. The net adverse development for the nine months ended September 30, 2016 was primarily due to:

• $4.8 million of net adverse underwriting loss development relating to one multi-line contract;
• $3.5 million of net adverse underwriting loss development relating to our Florida homeowners' reinsurance contracts;
• $3.3 million of net adverse underwriting loss development relating to a workers' compensation contract; and
• $3.1 million of net adverse underwriting loss development relating to non-standard auto contracts.

Investments

The return on investments managed by Third Point LLC by asset class for the three and nine months ended September 30, 2016 and 2015 was as follows:

 

For the three months ended September 30, 2016, we generated positive performance in each of our investment strategies.  Within equities, we generated positive returns within each long equity sub-sector/strategy, with consumer and technology, media and telecommunications being notable performers.  The gains in our long equity portfolio were partially offset by losses in our short equity positions, including equity hedges.  Within our credit strategy, performing credit was the primary contributor to the positive returns for the quarter.  The macro and other strategy also contributed modestly to returns.

For the nine months ended September 30, 2016, we generated positive results despite a volatile market environment.  Within equities, positive performance within our long equity portfolio was reduced by losses from one long equity healthcare position. The net gains in our long equity portfolio were partially offset by losses in our short equity positions, including equity hedges.  Within credit, our sovereign and performing credit portfolios contributed positive performance with positions traded within the energy sector driving performing credit and one sovereign position contributing significantly to returns for the year to date period.  The macro and other category reduced returns for the nine months ended September 30, 2016 primarily due to negative performance from several currency and portfolio macroeconomic hedges.

Share Repurchase Program

During the three months ended September 30, 2016, we did not repurchase any of our common shares.

During the nine months ended September 30, 2016, we repurchased 644,768 of our common shares in the open market for an aggregate cost of $7.4 million at a weighted average cost, including commissions, of $11.46 per share. Common shares repurchased by the Company were not cancelled and are classified as treasury shares.

As of September 30, 2016, the Company may repurchase up to an aggregate of $92.6 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 2016 results at 8:30 a.m. Eastern Time on November 4, 2016. 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 13646898. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on November 11, 2016.

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) limited historical information about the Company; (ii) fluctuation in results of operations; (iii) more established competitors; (iv) losses exceeding reserves; (v) downgrades or withdrawal of ratings by rating agencies; (vi) dependence on key executives; (vii) dependence on letter of credit facilities that may not be available on commercially acceptable terms; (viii) potential inability to pay dividends; (ix) inability to service the Company's indebtedness; (x) limited cash flow and liquidity due to indebtedness; (xi) unavailability of capital in the future; (xii) fluctuations in market price of the Company's common shares; (xiii) dependence on clients' evaluations of risks associated with such clients' insurance underwriting; (xiv) suspension or revocation of reinsurance licenses; (xv) potentially being deemed an investment company under United States federal securities law; (xvi) potential characterization of Third Point Re and/or Third Point Reinsurance Company Ltd. 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 the Company's investment strategy; (xix) termination by Third Point LLC of the investment management agreements; (xx) risks associated with the Company's investment strategy being greater than those faced by competitors; (xxi) increased regulation or scrutiny of alternative investment advisers affecting the Company's reputation; (xxii) Third Point Reinsurance Ltd.  potentially becoming subject to United States federal income taxation; (xxiii) potentially becoming subject to United States withholding and information reporting requirements under the Foreign Account Tax Compliance Act provisions; (xxiv) changes in Bermuda law or other regulation that may have an adverse impact on the Company's operations; and (xxv) other risks and factors listed under "Risk Factors" in our 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 Reinsurance Company Ltd. and Third Point Reinsurance (USA) Ltd., writes property and casualty reinsurance business. Third Point Reinsurance Company Ltd. and Third Point Reinsurance (USA) Ltd. 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[email protected]+1 441-542-3333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 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. 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 non-controlling 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 (loss). 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

Return on beginning shareholders' equity as presented is a non-GAAP financial measure. Return on beginning shareholders' equity is calculated by dividing net income by the beginning shareholders' equity attributable to shareholders. We believe this metric is used by investors to supplement measures of our profitability. For the nine month ended September 30, 2016, we have also adjusted the beginning shareholders' equity for the impact of the shares repurchased on a weighted average basis. This adjustment increased the stated returns on beginning shareholders' equity.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/third-point-re-reports-third-quarter-2016-earnings-results-300357215.html

SOURCE Third Point Reinsurance Ltd.