Third Point Re Reports Third Quarter 2015 Earnings Results

Gross Premiums Written of $205.6 million, an Increase of 62.6%

Combined Ratio of 102.8% for the Property and Casualty Reinsurance Segment

Nov 03, 2015, 16:23 ET from Third Point Reinsurance Ltd.

HAMILTON, Bermuda, Nov. 3, 2015 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (NYSE: TPRE) today announced results for its third quarter ended September 30, 2015.

Third Point Re reported a net loss of $195.7 million, or $(1.88) per diluted common share, for the third quarter of 2015, compared with a net loss of $6.0 million, or $(0.06) per diluted common share, for the third quarter of 2014. For the nine months ended September 30, 2015, Third Point Re reported a net loss of $129.6 million, or $(1.25) per diluted common share compared with net income of $65.1 million, or $0.61 per diluted common share, for the nine months ended September 30, 2014.

For the three months ended September 30, 2015, diluted book value per share decreased by $1.67 per share, or 11.8%, to $12.45 per share from $14.12 per share as of June 30, 2015. For the nine months ended September 30, 2015, diluted book value per share decreased by $1.10 per share, or 8.1%, to $12.45 per share from $13.55 per share as of December 31, 2014.

"During the third quarter, we were adversely affected by difficult market conditions that resulted in a net investment loss of $193.2 million in the quarter, representing an (8.7)% return in the quarter and a (4.3)% return for the year to date period.  Based on our estimated investment return for October of 4.6%, as posted on our website, our investment return for the year through October was 0.1%," commented John Berger, Chairman and Chief Executive Officer. "In the third quarter, we generated premiums written of $205.6 million, an increase of 62.6%, bringing our gross premiums for the year to date period to $603.3 million. We completed a $91.6 million adverse development cover in the quarter which was the main driver of the premium increase as well as the largest contributor to growth in investment float which totaled $601.5 million as of September 30, 2015. Our underwriting results for the period were as expected, and we believe we are well positioned to take advantage of improvements in investment performance in future periods."

The following table shows certain key financial metrics for the three and nine months ended September 30, 2015 and 2014:

Three months ended

Nine months ended

September 30,  2015

September 30,  2014

September 30,  2015

September 30,  2014

(In millions, except for per share data and ratios)

Gross premiums written

$

205.6

$

126.4

$

603.3

$

359.5

Net premiums earned

$

208.8

$

108.9

$

468.5

$

261.0

Net underwriting loss (1) (2)

$

(5.8)

$

(1.8)

$

(19.1)

$

(9.0)

Combined ratio (1) (2)

102.8%

101.7%

104.1%

103.6%

Net investment return on investments managed by Third Point LLC

(8.7)%

(0.04)%

(4.3)%

5.5%

Net investment income (loss)

$

(193.2)

$

1.6

$

(89.6)

$

92.1

Net investment income (loss) on float (3)

$

(52.0)

$

(0.1)

$

(23.6)

$

13.5

Net income (loss)

$

(195.7)

$

(6.0)

$

(129.6)

$

65.1

Diluted earnings (loss) per share

$

(1.88)

$

(0.06)

$

(1.25)

$

0.61

Growth in diluted book value per share (3)

(11.8)%

(0.3)%

(8.1)%

4.3%

Return on beginning shareholders' equity (3)

(12.8)%

(0.4)%

(8.9)%

4.7%

Net investments managed by Third Point LLC (4)

$

2,092.6

$

1,802.2

$

2,092.6

$

1,802.2

(1)

Property and Casualty Reinsurance segment only.

(2)

See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio.

(3)

Net investment income on float, diluted book value per share and return on beginning shareholders' equity are non-GAAP financial 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.

(4)

Prior year comparative represents amount at December 31, 2014.

 

Segment Highlights

Property and Casualty Reinsurance Segment

Gross premiums written increased by $80.8 million, or 64.7%, to $205.7 million for the three months ended September 30, 2015 from $124.9 million for the three months ended September 30, 2014. Gross premiums written increased by $255.8 million, or 73.6%, to $603.3 million for the nine months ended September 30, 2015 from $347.5 million for the nine months ended September 30, 2014.  The increase in premiums for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014 was primarily due to one new adverse development cover, new business written by our U.S. office, where we have seen additional opportunities as a result of our U.S. presence, and contracts that renewed in 2015 that did not have comparable premiums in the 2014 periods. The increase in premiums in the three and nine months ended September 30, 2015 was partially offset by contracts written or amended in 2014 that did not have comparable premiums in the current year periods and contracts for which we made a decision not to renew due to changes in pricing and/or terms and conditions. Since Third Point Re focuses on large transactions, which in some cases may not renew, period over period comparisons of gross premiums written may not be meaningful.

Net premiums earned for the three months ended September 30, 2015 increased by $107.5 million, or 105.9%, to $209.0 million. Net premiums earned for the nine months ended September 30, 2015 increased by $217.2 million, or 86.4%, to $468.5 million.  The results for the three and nine months ended September 30, 2015 reflect net premiums earned related to the large adverse development cover written in the third quarter and net premiums earned on a larger in-force underwriting portfolio, including new business written, compared to the three and nine months ended September 30, 2014.

The net underwriting loss and combined ratio for the nine months ended September 30, 2015 included a $3.1 million loss related to windstorms and other weather activity that took place in the state of Texas in the second quarter. In addition, we recorded an increase in the net underwriting loss of $1.4 million and $4.5 million for the three and nine months ended September 30, 2015, respectively, related to development of reserves on prior years' contracts. This compares to a $0.2 million decrease in the net underwriting loss for the three months ended September 30, 2014 and a $1.4 million increase in net underwriting loss for the nine months ended September 30, 2014. These increases to the combined ratio compared to the prior year periods were partially offset by a lower general and administrative expense ratio due to proportionately higher net premiums earned.

Catastrophe Risk Management

The Catastrophe Risk Management segment includes the combined results of Third Point Reinsurance Opportunities Fund Ltd. (the "Catastrophe Fund"), Third Point Reinsurance Investment Management Ltd., and Third Point Re Cat Ltd. (the "Catastrophe Reinsurer").  In December 2014, the Company announced that it would no longer accept investments in the Catastrophe Fund, that no new business would be written in the Catastrophe Reinsurer and that the Company would be redeeming all existing investments in the Catastrophe Fund. Net assets under management for the Catastrophe Fund were $0.7 million as of September 30, 2015 compared to $119.7 million as of December 31, 2014.  During the nine months ended September 30, 2015, the Catastrophe Fund distributed $118.7 million (Third Point Re's share - $59.0 million) to its investors.

Investments

For the three months ended September 30, 2015, Third Point Re recorded a net investment loss of $193.2 million, compared to net investment income of $1.6 million for the three months ended September 30, 2014.  The return on investments managed by the Company's investment manager, Third Point LLC, was (8.7)% for the three months ended September 30, 2015 compared to (0.04)% for the three months ended September 30, 2014.  

For the nine months ended September 30, 2015, Third Point Re recorded a net investment loss of $89.6 million, compared to net investment income of $92.1 million for the nine months ended September 30, 2014. The return on investments managed by the Company's investment manager, Third Point LLC, was (4.3)% for the nine months ended September 30, 2015 compared to 5.5% for the nine months ended September 30, 2014.

The net investment results for the three and nine months ended September 30, 2015 were attributable to losses in the Company's long equity portfolio, which was partially offset by strong performance in equity short positions, structured credit and sovereign credit. During the third quarter, the equity portfolio posted negative returns in most sectors amidst a broader market decline. Specifically, several large positions in the healthcare sector detracted meaningfully from investment returns. The returns generated by the Company's investment portfolio will vary based on a number of factors, including the overall markets, individual security selection, and allocation of exposure by the investment manager across strategies.

Conference Call Details

The Company will hold a conference call to discuss its third quarter 2015 results at 8:30 a.m. Eastern Time on November 4, 2015. 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 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the replay passcode 13622747. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on November 11, 2015.

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) operational structure currently is being developed; (iii) fluctuation in results of operations; (iv) more established competitors; (v) losses exceeding reserves; (vi) downgrades or withdrawal of ratings by rating agencies; (vii) dependence on key executives; (viii) dependence on letter of credit facilities that may not be available on commercially acceptable terms; (ix) potential inability to pay dividends; (x) inability to service the Company's indebtedness; (xi) limited cash flow and liquidity due to indebtedness; (xii) unavailability of capital in the future; (xiii) fluctuations in market price of the Company's common shares; (xiv) dependence on clients' evaluations of risks associated with such clients' insurance underwriting; (xv) suspension or revocation of reinsurance licenses; (xvi) potentially being deemed an investment company under United States federal securities law; (xvii) potential characterization of Third Point Re and/or Third Point Reinsurance Company Ltd. as a passive foreign investment company; (xviii) future strategic transactions such as acquisitions, dispositions, merger or joint ventures; (xix) dependence on Third Point LLC to implement the Company's investment strategy; (xx) termination by Third Point LLC of the investment management agreements; (xxi) risks associated with the Company's investment strategy being greater than those faced by competitors; (xxii) increased regulation or scrutiny of alternative investment advisers affecting the Company's reputation; (xxiii) the Company potentially becoming subject to United States federal income taxation; (xxiv) the Company potentially becoming subject to United States withholding and information reporting requirements under the Foreign Account Tax Compliance Act provisions; 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

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. was incorporated in October 2011 and commenced underwriting business on January 1, 2012.  Third Point Reinsurance (USA) Ltd. was incorporated in November 2014 and commenced underwriting business in February 2015.  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 investorrelations@thirdpointre.bm +1 441-542-3333

THIRD POINT REINSURANCE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of September 30, 2015 and December 31, 2014

(expressed in thousands of U.S. dollars, except per share and share amounts)

September 30,  2015

December 31,  2014

Assets

Equity securities, trading, at fair value (cost - $1,343,437; 2014 - $1,078,859)

$

1,289,840

$

1,177,796

Debt securities, trading, at fair value (cost - $739,897; 2014 - $546,933)

737,039

569,648

Other investments, at fair value

52,882

83,394

Total investments in securities and commodities

2,079,761

1,830,838

Cash and cash equivalents

10,819

28,734

Restricted cash and cash equivalents

604,428

417,307

Due from brokers

303,597

58,241

Securities purchased under an agreement to sell

29,852

Derivative assets, at fair value

27,337

21,130

Interest and dividends receivable

10,030

2,602

Reinsurance balances receivable

314,693

303,649

Deferred acquisition costs, net

192,451

155,901

Unearned premiums ceded

808

Loss and loss adjustment expenses recoverable

184

814

Other assets

14,231

3,512

Total assets

$

3,558,339

$

2,852,580

Liabilities and shareholders' equity

Liabilities

Accounts payable and accrued expenses

$

12,298

$

10,085

Reinsurance balances payable

34,833

27,040

Deposit liabilities

167,210

145,430

Unearned premium reserves

567,565

433,809

Loss and loss adjustment expense reserves

420,649

277,362

Securities sold, not yet purchased, at fair value

172,074

82,485

Due to brokers

695,019

312,609

Derivative liabilities, at fair value

22,495

11,015

Interest and dividends payable

1,673

697

Senior notes payable, net of deferred costs

113,332

Total liabilities

2,207,148

1,300,532

Commitments and contingent liabilities

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,105,479,341 (2014: 104,473,402))

10,548

10,447

Additional paid-in capital

1,078,327

1,065,489

Retained earnings

246,394

375,977

Shareholders' equity attributable to shareholders

1,335,269

1,451,913

Non-controlling interests

15,922

100,135

Total shareholders' equity

1,351,191

1,552,048

Total liabilities and shareholders' equity

$

3,558,339

$

2,852,580

 

THIRD POINT REINSURANCE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

For the three and nine months ended September 30, 2015 and 2014

(expressed in thousands of U.S. dollars, except per share and share amounts)

Three months ended

Nine months ended

September 30,  2015

September 30,  2014

September 30,  2015

September 30,  2014

Revenues

Gross premiums written

$

205,583

$

126,403

$

603,259

$

359,498

Gross premiums ceded

(375)

(150)

(1,852)

(150)

Net premiums written

205,208

126,253

601,407

359,348

Change in net unearned premium reserves

3,597

(17,305)

(132,949)

(98,388)

Net premiums earned

208,805

108,948

468,458

260,960

Net investment income (loss)

(193,156)

1,552

(89,627)

92,072

Total revenues

15,649

110,500

378,831

353,032

Expenses

Loss and loss adjustment expenses incurred, net

158,537

60,115

316,336

150,783

Acquisition costs, net

50,509

38,317

152,664

93,331

General and administrative expenses

9,822

10,124

35,797

29,698

Other expenses

670

2,982

5,686

4,789

Interest expense

2,074

5,162

Foreign exchange gains

(746)

(800)

Total expenses

220,866

111,538

514,845

278,601

Income (loss) before income tax (expense) benefit

(205,217)

(1,038)

(136,014)

74,431

Income tax (expense) benefit

7,781

(1,542)

5,768

(3,917)

Income (loss) including non-controlling interests

(197,436)

(2,580)

(130,246)

70,514

(Income) loss attributable to non-controlling interests

1,721

(3,417)

663

(5,440)

Net income (loss)

$

(195,715)

$

(5,997)

$

(129,583)

$

65,074

Earnings (loss) per share

Basic

$

(1.88)

$

(0.06)

$

(1.25)

$

0.63

Diluted

$

(1.88)

$

(0.06)

$

(1.25)

$

0.61

Weighted average number of ordinary shares used in the determination of earnings (loss) per share

Basic

104,117,448

103,295,920

103,931,871

103,275,204

Diluted

104,117,448

103,295,920

103,931,871

106,454,775

 

THIRD POINT REINSURANCE LTD.

SEGMENT REPORTING

Three months ended September 30, 2015

Property and Casualty Reinsurance

Catastrophe Risk Management

Corporate

Total

Revenues

($ in thousands)

Gross premiums written

$

205,729

$

(146)

$

$

205,583

Gross premiums ceded

(375)

(375)

Net premiums written

205,354

(146)

205,208

Change in net unearned premium reserves

3,597

3,597

Net premiums earned

208,951

(146)

208,805

Expenses

Loss and loss adjustment expenses incurred, net

158,387

150

158,537

Acquisition costs, net

50,527

(18)

50,509

General and administrative expenses

5,872

32

3,918

9,822

Total expenses

214,786

164

3,918

218,868

Net underwriting loss

(5,835)

 n/a

 n/a

 n/a

Net investment income (loss)

(51,988)

1

(141,169)

(193,156)

Other expenses

(670)

(670)

Interest expense

(2,074)

(2,074)

Foreign exchange gains

746

746

Income tax benefit

7,781

7,781

Segment loss including non-controlling interests

(58,493)

(309)

(138,634)

(197,436)

Segment loss attributable to non-controlling interests

140

1,581

1,721

Segment loss

$

(58,493)

$

(169)

$

(137,053)

$

(195,715)

Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

75.8

%

Acquisition cost ratio

24.2

%

Composite ratio

100.0

%

General and administrative expense ratio

2.8

%

Combined ratio

102.8

%

Nine months ended September 30, 2015

Property and Casualty Reinsurance

Catastrophe Risk Management

Corporate

Total

Revenues

($ in thousands)

Gross premiums written

$

603,303

$

(44)

$

$

603,259

Gross premiums ceded

(1,852)

(1,852)

Net premiums written

601,451

(44)

601,407

Change in net unearned premium reserves

(133,001)

52

(132,949)

Net premiums earned

468,450

8

468,458

Expenses

Loss and loss adjustment expenses incurred, net

316,186

150

316,336

Acquisition costs, net

152,665

(1)

152,664

General and administrative expenses

18,681

463

16,653

35,797

Total expenses

487,532

612

16,653

504,797

Net underwriting loss

(19,082)

 n/a

 n/a

 n/a

Net investment income (loss)

(23,623)

69

(66,073)

(89,627)

Other expenses

(5,686)

(5,686)

Interest expense

(5,162)

(5,162)

Foreign exchange gains

800

800

Income tax benefit

5,768

5,768

Segment loss including non-controlling interests

(48,391)

(535)

(81,320)

(130,246)

Segment loss attributable to non-controlling interests

156

507

663

Segment loss

$

(48,391)

$

(379)

$

(80,813)

$

(129,583)

Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

67.5

%

Acquisition cost ratio

32.6

%

Composite ratio

100.1

%

General and administrative expense ratio

4.0

%

Combined ratio

104.1

%

(1)

Underwriting ratios are calculated by dividing the related expense by net premiums earned.

 

Three months ended September 30, 2014

Property and Casualty Reinsurance

Catastrophe Risk Management

Corporate

Total

Revenues

($ in thousands)

Gross premiums written

$

124,931

$

1,472

$

$

126,403

Gross premiums ceded

(150)

(150)

Net premiums written

124,781

1,472

126,253

Change in net unearned premium reserves

(23,294)

5,989

(17,305)

Net premiums earned

101,487

7,461

108,948

Expenses

Loss and loss adjustment expenses incurred, net

60,121

(6)

60,115

Acquisition costs, net

37,571

746

38,317

General and administrative expenses

5,556

648

3,920

10,124

Total expenses

103,248

1,388

3,920

108,556

Net underwriting loss

(1,761)

 n/a

 n/a

 n/a

Net investment income (loss)

(137)

882

807

1,552

Other expenses

(2,982)

(2,982)

Income tax expense

(1,542)

(1,542)

Segment income (loss) including non-controlling interests

(4,880)

6,955

(4,655)

(2,580)

Segment income attributable to non-controlling interests

(3,325)

(92)

(3,417)

Segment income (loss)

$

(4,880)

$

3,630

$

(4,747)

$

(5,997)

Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

59.2

%

Acquisition cost ratio

37.0

%

Composite ratio

96.2

%

General and administrative expense ratio

5.5

%

Combined ratio

101.7

%

Nine months ended September 30, 2014

Property and Casualty Reinsurance

Catastrophe Risk Management

Corporate

Total

Revenues

($ in thousands)

Gross premiums written

$

347,495

$

12,003

$

$

359,498

Gross premiums ceded

(150)

(150)

Net premiums written

347,345

12,003

359,348

Change in net unearned premium reserves

(96,069)

(2,319)

(98,388)

Net premiums earned

251,276

9,684

260,960

Expenses

Loss and loss adjustment expenses incurred, net

150,789

(6)

150,783

Acquisition costs, net

92,477

854

93,331

General and administrative expenses

17,020

2,160

10,518

29,698

Total expenses

260,286

3,008

10,518

273,812

Net underwriting loss

(9,010)

 n/a

 n/a

 n/a

Net investment income

13,458

944

77,670

92,072

Other expenses

(4,789)

(4,789)

Income tax expense

(3,917)

(3,917)

Segment income (loss) including non-controlling interests

(341)

7,620

63,235

70,514

Segment income attributable to non-controlling interests

(3,854)

(1,586)

(5,440)

Segment income (loss)

$

(341)

$

3,766

$

61,649

$

65,074

Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

60.0

%

Acquisition cost ratio

36.8

%

Composite ratio

96.8

%

General and administrative expense ratio

6.8

%

Combined ratio

103.6

%

(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,  2015

December 31, 2014

Basic and diluted book value per share numerator:

($ in thousands, except share and per share amounts)

Total shareholders' equity

$

1,351,191

$

1,552,048

Less: non-controlling interests

(15,922)

(100,135)

Shareholders' equity attributable to shareholders

1,335,269

1,451,913

Effect of dilutive warrants issued to founders and an advisor

46,512

46,512

Effect of dilutive stock options issued to directors and employees

58,070

61,705

Diluted book value per share numerator

$

1,439,851

$

1,560,130

Basic and diluted book value per share denominator:

Issued and outstanding shares

104,217,321

103,397,542

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

5,788,391

6,151,903

Effect of dilutive restricted shares issued to directors and employees

954,829

922,610

Diluted book value per share denominator

115,611,704

115,123,218

Basic book value per share

$

12.81

$

14.04

Diluted book value per share

$

12.45

$

13.55

 

Three months ended

Nine months ended

September 30,  2015

September 30,  2014

September 30,  2015

September 30,  2014

($ in thousands)

Net investment income (loss) on float

$

(51,988)

$

(137)

$

(23,623)

$

13,458

Net investment income (loss) on capital

(141,971)

807

(67,057)

77,670

Net investment income (loss) on investments managed by Third Point LLC

(193,959)

670

(90,680)

91,128

Investment income on cash held by the Catastrophe Reinsurer and Catastrophe Fund

2

27

29

84

Net gain on catastrophe bond held by Catastrophe Reinsurer

75

10

80

Net gain on investment in Kiskadee Fund

801

984

Net gain on reinsurance contract derivatives written by the Catastrophe Reinsurer

780

30

780

$

(193,156)

$

1,552

$

(89,627)

$

92,072

 

Three months ended

Nine months ended

September 30,  2015

September 30,  2014

September 30,  2015

September 30,  2014

($ in thousands)

Net income (loss)

$

(195,715)

$

(5,997)

$

(129,583)

$

65,074

Shareholders' equity attributable to shareholders -  beginning of period

$

1,526,004

$

1,467,229

$

1,451,913

$

1,391,661

Return on beginning shareholders' equity

(12.8)%

(0.4)%

(8.9)%

4.7%

 

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. Book value per share is calculated by dividing shareholders' equity attributable to shareholders by the number of issued and outstanding shares at period end. Diluted book value per share is calculated by dividing shareholders' equity attributable to shareholders and adjusted to include unvested restricted shares and the exercise of all in-the-money options and warrants. For unvested restricted shares with a performance condition, we include the unvested restricted shares for which we consider vesting to be probable. We believe that long-term growth in diluted book value per share is the most important measure of our financial performance because it allows 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 from reinsurance contracts 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 and as a result, is considered to be a non-GAAP 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 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 (loss) by the beginning of year shareholders' equity attributable to shareholders. We believe this metric is used by investors to supplement measures of our profitability.

 

SOURCE Third Point Reinsurance Ltd.



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