Third Point Re Reports Third Quarter 2013 Earnings Results

2013 / 11 / 12
Net Income of $46.6 Million, or $0.46 Per Diluted Common Share

HAMILTON, Bermuda, Nov. 12, 2013 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (NYSE: TPRE) today announced results for its fiscal third quarter ended September 30, 2013.

"Following our initial public offering in August 2013, we are off to a strong start as a public company thanks to improving underwriting results and excellent investment results," commented John Berger , Chairman, Chief Executive Officer and Chief Underwriting Officer.  "While reinsurance market conditions remain challenging, we expect further improvement in our underwriting results as our reinsurance operation continues to gain scale."

Third Point Re reported net income during the third quarter of 2013 of $46.6 million, or $0.46 per diluted common share, compared with $39.6 million, or $0.45 per diluted common share, for the third quarter of 2012.  For the nine months ended September 30, 2013, Third Point Re reported net income of $147.2 million, or $1.59 per diluted common share, compared with $38.7 million, or $0.44 per diluted common share, for the nine months ended September 30,2012. 

Diluted book value per share was $12.35 as of September 30, 2013, an increase of $0.28, or 2.3%, for the third quarter and an increase of $1.46, or 13.4%, for the first nine months of 2013.  The increase in diluted book value per share reflects earnings per share for the quarter partially offset by the costs associated with Third Point Re's initial public offering (IPO), including underwriting and exchange listing, legal, accounting and related fees.  These non-recurring costs were netted against the capital raised and were not expensed through the income statement. 

The following table shows certain key financial metrics for the three and nine months ended September 30, 2013 and 2012:

 



For the three months ended
For the nine months ended


September 30, 2013
September 30, 2012
September 30, 2013
September 30, 2012


(In millions, except for per share data and ratios)
Gross premiums written $ 45.4
$ 41.7
$ 239.7
$ 162.5
Net premiums earned $ 66.3
$ 34.3
$ 162.2
$ 63.0
Underwriting loss (1) (2) $ (4.9)
$ (5.8)
$ (12.1)
$ (19.7)
Combined ratio (1) (2) 107.9%
117.0%
107.7%
131.3%









Net investment return on investments managed by Third Point LLC 4.3%
6.1%
16.9%
8.4%
Net investment income $ 53.4
$ 47.7
$ 166.1
$ 63.9
Net investment income on float (3) $ 7.1
$ 0.1
$ 15.1
$ 0.1









Net income $ 46.6
$ 39.6
$ 147.2
$ 38.7
Diluted earnings per share $ 0.46
$ 0.45
$ 1.59
$ 0.44
Growth in diluted book value per share (3) 2.3%
5.1%
13.4%
4.6%
Return on beginning shareholders' equity (3) 4.2%
5.2%
16.1%
5.1%

(1)Property and Casualty Reinsurance segment only.
(2)Underwriting loss and combined ratio are Non-GAAP financial measures. See the accompanying Segment Reporting for an explanation and calculation of 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 for an explanation andcalculation of net investment income on float, diluted book value per share and return on beginning shareholders' equity.

Segment Highlights

Property and Casualty Reinsurance Segment

Gross premiums written increased by $2.0 million, or 4.8%, to $43.7 million for the three months ended September 30, 2013 from $41.7 million for the three months ended September 30, 2012.   Gross premiums written increased by $68.7 million, or 42.3%, to $231.2 million for the nine months ended September 30, 2013 from $162.5 million for the nine months ended September 30, 2012. Third Point Re, through its class 4 reinsurance company Third Point Reinsurance Company Ltd., began underwriting on January 1, 2012. Increases in gross premiums written in 2013 are the result of the successful development of underwriting relationships with intermediaries and reinsurance buyers.

Net premiums earned for the three months ended September 30, 2013 increased $27.5 million, or 80.1%, to $61.8 million.  Net premiums earned for the nine months ended September 30, 2013 increased $92.8 million, or 147.3%, to $155.8 million.  The three and nine months ended September 30, 2013 reflects net premiums earned on a larger in-force underwriting portfolio compared to the three and nine month periods ended September 30, 2012.  In addition, the three and nine month periods ended September 30, 2013 include net premiums earned of $17.5 million and $39.8 million, respectively, related to retroactive reinsurance contracts where we record the gross premiums written and earned at the inception of the contract.

The underwriting loss from the Property and Casualty Reinsurance segment for the third quarter was $4.9 million and for the nine months ended September 30, 2013 was $12.1 million.  These results compare to underwriting losses of $5.8 million and $19.7 million in the three and nine month periods ended September 30, 2012, respectively. The combined ratio for the first nine months of 2013 was 107.7% compared to 131.3% in the previous year's first nine months.  The improvement in underwriting results was due primarily to crop losses recorded in the 2012 period and a drop in general and administrative expenses as a percentage of earned premium. For the nine months ended September 30, 2012, Third Point Re recorded a $5.2 million underwriting loss from its crop reinsurance portfolio due to the severe drought suffered by most of the US farm belt. 

Catastrophe Risk Management

The Catastrophe Risk Management segment includes the combined results of Third Point Reinsurance Opportunities Fund Ltd. ("Catastrophe Fund"), Third Point Reinsurance Investment Management Ltd. ("Catastrophe Fund Manager"), and Third Point Re Cat Ltd. (the "Catastrophe Reinsurer").  Results of the Catastrophe Risk Management segment are consolidated with Third Point Re's results because Third Point Recurrently controls a majority of the outstanding interests in these entities. Since 2013 was the first year of operation for the Catastrophe Risk Management segment, there is no previous period to which to compare this year's financial results.

After attributing income to non-controlling interests (i.e., the minority investors in the Catastrophe Fund), net income from the Catastrophe Risk Management segment was $2.7 million in the third quarter of 2013 and $2.6 million in the nine months ending September 30, 2013. Net assets under management were $100.5 million at September 30, 2013.

Investments

For the three months ended September 30, 2013, Third Point Re recorded net investment income of $53.4 million, compared to $47.7 million for the three months ended September 30, 2012. The return on investments managed by the Company's investment manager, Third Point LLC, was 4.3% for the three months ended September 30, 2013 compared to 6.1% for the three months ended September 30, 2012.

For the nine months ended September 30, 2013, the Company recorded net investment income of $166.1 million, compared to $63.9 million for the nine months ended September 30, 2012. The return on the Company's investments, as managed by Third Point LLC, was 16.9% for the nine months ended September 30, 2013 compared to 8.4% for the nine months ended September 30, 2012.

The primary driver of Third Point Re's net investment income is the returns generated by its investment manager, Third Point LLC.  Consistent with the first half of 2013, the returns for the three months ended September 30, 2013 were driven by equity positions and to a lesser extent by gains in structured credit.  Net investment income for the three and nine months ended September 30, 2013 also benefited from higher average investments managed by Third Point LLC compared to the prior year periods due to the net proceeds generated by Third Point Re's IPO and float contributed by its reinsurance operations.

Also impacting net investment income for the three months ended September 30, 2013 and for the nine months ended September 30, 2013 was the allocation of net investment income related to deposit and reinsurance contracts of $1.2 million and $2.7 million, respectively.  The 2012 periods had an insignificant amount of net investment income allocated to deposit liability contracts.

Conference Call Details

The Company will hold a conference call to discuss its third quarter 2013 results at 9:00 a.m. ET on November 12, 2013. The call will be webcast live over the Internet from the Company's website at 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) and entering passcode 10000697. Participants should ask for the Third Point Reinsurance third quarter earnings conference call.

A replay of the live conference call will be available approximately one hour 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 10000697.  The telephonic replay will be available until Tuesday, November 19, 2013.

Safe Harbor Statement Regarding Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the PrivateSecurities 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 our 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) unavailability of capital in the future; (xi) dependence on clients' evaluations of risks associated with such clients' insurance underwriting; (xii) suspension or revocation of reinsurance license; (xiii) potentially being deemed an investment company under U.S. federal securities law; (xiv) potential characterization of Third Point Re and/or Third Point Reinsurance Company Ltd. as a PFIC; (xv) dependence on Third Point LLC to implement the Company's investment strategy; (xvi) termination by Third Point LLC of the investment management agreement; (xvii) risks associated with the Company's investment strategy being greater than those faced by competitors (xviii) increased regulation or scrutiny of alternative investment advisers affecting the Company's reputation; (xix) potentially becoming subject to United States federal income taxation; (xx) potentially becoming subject to U.S. withholding and information reporting requirements under the FATCA provisions; and other risks and factors listed under "Risk Factors" in the prospectus on Form 424(b) dated as of August 14, 2013 and filed with the Securities and Exchange Commission on August 19, 2013. 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 underwriting income or loss,combined ratio, 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's wholly owned subsidiary Third Point Reinsurance Company Ltd. is a Bermuda property and casualty reinsurance company with an "A-" (Excellent) financial strength rating from A.M. Best Company, Inc. Third Point Reinsurance Company Ltd. was incorporated in October 2011 and commenced underwriting business on January 1, 2012. 

Contacts
Third Point Reinsurance Ltd.
Rob Bredahl
Chief Financial Officer & Chief Operating Officer
investorrelations@thirdpointre.bm
441-542-3333 

THIRD POINT REINSURANCE LTD.

CONSOLIDATED BALANCE SHEETS

As of September 30, 2013 and December 31, 2012 

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






September 30, 2013


December 31, 2012

Assets

(unaudited)


(audited)

Equity securities, trading, at fair value (cost - $507,618; 2012 - $450,766)

$ 593,879


$ 500,929

Debt securities, trading, at fair value (cost - $402,563; 2012 - $249,110)

437,596


279,331

Other investments, at fair value

63,277


157,430

Total investments in securities and commodities

1,094,752


937,690

Cash and cash equivalents

18,663


34,005

Restricted cash and cash equivalents

159,290


77,627

Due from brokers

418,246


131,785

Securities purchased under an agreement to sell

37,921


60,408

Derivative assets, at fair value

27,532


25,628

Interest and dividends receivable

3,024


2,088

Reinsurance balances receivable

168,683


84,280

Deferred acquisition costs, net

58,563


45,383

Unearned premiums ceded

2,494


-

Loss and loss adjustment expenses recoverable

6,284


-

Other assets

4,054


3,123

Total assets

$ 1,999,506


$ 1,402,017

Liabilities and shareholders' equity




Liabilities




Accounts payable and accrued expenses

$ 5,457


$ 5,278

Reinsurance balances payable

8,579


-

Deposit liabilities

118,973


50,446

Unearned premium reserves

163,915


93,893

Loss and loss adjustment expense reserves

143,707


67,271

Securities sold, not yet purchased, at fair value

90,492


176,454

Due to brokers

41,065


66,107

Derivative liabilities, at fair value

21,240


12,992

Performance fee payable to related party

40,264


-

Interest and dividends payable

1,416


1,255

Total liabilities

635,108


473,696

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, 103,888,916 (2012: 78,432,132))

10,389


7,843

Additional paid-in capital

1,053,501


762,430

Retained earnings

245,494


98,271

Shareholders' equity attributable to shareholders

1,309,384


868,544

Non-controlling interests

55,014


59,777

Total shareholders' equity

1,364,398


928,321

Total liabilities and shareholders' equity

$ 1,999,506


$ 1,402,017







 

 

THIRD POINT REINSURANCE LTD.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

For the three and nine months ended September 30, 2013 and 2012 

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










Three months ended


Nine months ended


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2012

Revenues








Gross premiums written

$ 45,425


$ 41,651


$ 239,660


$ 162,479

Gross premiums ceded

-


-


(9,975)


-

Net premiums written

45,425


41,651


229,685


162,479

Change in net unearned premium reserves

20,904


(7,333)


(67,528)


(99,483)

Net premiums earned

66,329


34,318


162,157


62,996

Net investment income

53,371


47,686


166,129


63,911

Total revenues

119,700


82,004


328,286


126,907

Expenses








Loss and loss adjustment expenses incurred, net

39,349


24,709


103,679


53,680

Acquisition costs, net

21,117


10,856


49,111


13,706

General and administrative expenses

9,846


6,440


24,071


20,221

Total expenses

70,312


42,005


176,861


87,607

Income including non-controlling interests

49,388


39,999


151,425


39,300

Income attributable to non-controlling interests

(2,818)


(423)


(4,202)


(609)

Net income

$ 46,570


$ 39,576


$ 147,223


$ 38,691

Earnings per share








Basic

$ 0.52


$ 0.50


$ 1.77


$ 0.49

Diluted

$ 0.46


$ 0.45


$ 1.59


$ 0.44

Weighted average number of common shares used in
the determination of earnings per share








Basic

90,244,694


79,073,932


83,252,120


79,003,405

Diluted

100,176,416


87,888,983


92,438,629


87,031,196











 

THIRD POINT REINSURANCE LTD.

SEGMENT REPORTING

(UNAUDITED)


Three Months Ended September 30, 2013


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$ 43,714


$ 1,711


$ -


$ 45,425

Gross premiums ceded

-


-


-


-

Net premiums written

43,714


1,711


-


45,425

Change in net unearned premium reserves

18,051


2,853


-


20,904

Net premiums earned

61,765


4,564


-


66,329

Net investment income

-


2,089


51,282


53,371

Total revenues

61,765


6,653


51,282


119,700

Expenses








Loss and loss adjustment expenses incurred, net

39,349


-


-


39,349

Acquisition costs, net

20,541


576


-


21,117

General and administrative expenses

6,739


949


2,158


9,846

Total expenses

66,629


1,525


2,158


70,312

Underwriting loss

(4,864)


 n/a 


 n/a 


 n/a 

Income including non-controlling interests

 n/a 


5,128


49,124


49,388

Income attributable to non-controlling interests

 n/a 


(2,432)


(386)


(2,818)

Net income (loss)

$ (4,864)


$ 2,696


$ 48,738


$ 46,570

Property and Casualty Reinsurance - Underwriting Ratios:








Loss ratio (1)

63.7%







Acquisition cost ratio (2)

33.3%







General and administrative expense ratio (3)

10.9%







Combined ratio (4)

107.9%
















Nine Months Ended September 30, 2013


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$ 231,229


$ 8,431


$ -


$ 239,660

Gross premiums ceded

(9,975)


-


-


(9,975)

Net premiums written

221,254


8,431


-


229,685

Change in net unearned premium reserves

(65,408)


(2,120)


-


(67,528)

Net premiums earned

155,846


6,311


-


162,157

Net investment income

-


3,210


162,919


166,129

Total revenues

155,846


9,521


162,919


328,286

Expenses








Loss and loss adjustment expenses incurred, net

103,291


388


-


103,679

Acquisition costs, net

48,353


758


-


49,111

General and administrative expenses

16,265


2,721


5,085


24,071

Total expenses

167,909


3,867


5,085


176,861

Underwriting loss

(12,063)


 n/a 


 n/a 


 n/a 

Income including non-controlling interests

 n/a 


5,654


157,834


151,425

Income attributable to non-controlling interests

 n/a 


(3,027)


(1,175)


(4,202)

Net income (loss)

$ (12,063)


$ 2,627


$ 156,659


$ 147,223

Property and Casualty Reinsurance - Underwriting Ratios:







Loss ratio (1)

66.3%







Acquisition cost ratio (2)

31.0%







General and administrative expense ratio (3)

10.4%







Combined ratio (4)

107.7%















(1) Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.



(2) Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.



(3) General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.

(4) Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.

 

THIRD POINT REINSURANCE LTD.

SEGMENT REPORTING

(UNAUDITED)


Three Months Ended September 30, 2012


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$ 41,651


$ -


$ -


$ 41,651

Gross premiums ceded

-


-


-


-

Net premiums written

41,651


-


-


41,651

Change in net unearned premium reserves

(7,333)


-


-


(7,333)

Net premiums earned

34,318


-


-


34,318

Net investment income

-


-


47,686


47,686

Total revenues

34,318


-


47,686


82,004

Expenses








Loss and loss adjustment expenses incurred, net

24,709


-


-


24,709

Acquisition costs, net

10,856


-


-


10,856

General and administrative expenses

4,571


995


874


6,440

Total expenses

40,136


995


874


42,005

Underwriting loss

(5,818)


 n/a 


 n/a 


 n/a 

Income (loss) including non-controlling interests

 n/a 


(995)


46,812


39,999

Income attributable to non-controlling interests

 n/a 


-


(423)


(423)

Net income (loss)

$ (5,818)


$ (995)


$ 46,389


$ 39,576

Property and Casualty Reinsurance - Underwriting ratios:








Loss ratio (1)

72.0%







Acquisition cost ratio (2)

31.6%







General and administrative expense ratio (3)

13.4%







Combined ratio (4)

117.0%
















Nine Months Ended September 30, 2012


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$ 162,479


$ -


$ -


$ 162,479

Gross premiums ceded

-


-


-


-

Net premiums written

162,479


-


-


162,479

Change in net unearned premium reserves

(99,483)


-


-


(99,483)

Net premiums earned

62,996


-


-


62,996

Net investment income

-


-


63,911


63,911

Total revenues

62,996


-


63,911


126,907

Expenses








Loss and loss adjustment expenses incurred, net

53,680


-


-


53,680

Acquisition costs, net

13,706


-


-


13,706

General and administrative expenses

15,299


995


3,927


20,221

Total expenses

82,685


995


3,927


87,607

Underwriting loss

(19,689)


 n/a 


 n/a 


 n/a 

Income (loss) including non-controlling interests

 n/a 


(995)


59,984


39,300

Income attributable to non-controlling interests

 n/a 


-


(609)


(609)

Net income (loss)

$ (19,689)


$ (995)


$ 59,375


$ 38,691

Property and Casualty Reinsurance - Underwriting ratios:








Loss ratio (1)

85.2%







Acquisition cost ratio (2)

21.8%







General and administrative expense ratio (3)

24.3%







Combined ratio (4)

131.3%















(1) Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net by net premiums earned.



(2) Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned.




(3) General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned.

(4) Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned.









 

THIRD POINT REINSURANCE LTD.

RECONCILIATION OF NON-GAAP MEASURES

(UNAUDITED)


September 30,
2013


December 31,
2012

Basic and diluted book value per share numerator:

(In thousands, except share and
per share amounts)

Total shareholders' equity

$ 1,364,398


$ 928,321

Less:  non-controlling interests

55,014


59,777

Shareholders' equity attributable to shareholders

1,309,384


868,544

Effect of dilutive warrants issued to founders and an advisor

46,512


36,480

Effect of dilutive stock options issued to directors and employees

66,276


51,670

Fully diluted book value per share numerator:

$ 1,422,172


$ 956,694

Basic and diluted book value per share denominator:


Issued and outstanding shares

103,264,616


78,432,132

Effect of dilutive warrants issued to founders and an advisor

4,651,163


3,648,006

Effect of dilutive stock options issued to directors and employees

6,608,987


5,167,045

Effect of dilutive restricted shares issued to employees

624,300


619,300

Diluted book value per share denominator:

115,149,066


87,866,483





Basic book value per share

$ 12.68


$ 11.07

Diluted book value per share

$ 12.35


$ 10.89

 


For the three months ended


For the nine months ended


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2012


($ in thousands)

Net investment income on float

$ 7,072


$ 91


$ 15,128


$ 91

Net investment income on capital

45,455


47,595


150,465


63,820

Net investment income on investments managed
   by Third Point LLC

52,527


47,686


165,593


63,911

Other investment income 

28


-


44


-

Deposit liabilities and reinsurance contracts
    investment income allocation

(1,246)


-


(2,675)


-

Net unrealized gain on catastrophe risk
    derivatives

2,062


-


3,167


-

Net investment income

$ 53,371


$ 47,686


$ 166,129


$ 63,911

















 


For the three months ended


For the nine months ended


September 30, 2013


September 30, 2012


September 30, 2013


September 30, 2012


($ in thousands)

Net income

$ 46,570


$ 39,576


$ 147,223


$ 38,691

Shareholders' equity attributable to shareholders -
   beginning of period

972,665


764,856


868,544


585,425

Subscriptions receivable

-


-


-


177,507

Impact of weighting related to shareholders'
   equity from IPO

128,860


-


43,111


-

Adjusted shareholders' equity attributable to
   shareholders - beginning of period

$ 1,101,525


$ 764,856


$ 911,655


$ 762,932

Return on beginning shareholders' equity

4.2%


5.2%


16.1%


5.1%









 Book Value per Share

Book value per share as used by our management is a non-GAAP measure, as it is calculated after deducting the impact of non-controlling interests, and adding back subscriptions receivable. In addition, diluted book value per share is also a non-GAAP measure and 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

Insurance float is an important aspect of our property and casualty reinsurance operation. In an insurance or reinsurance operation, float arises because premiums and proceeds associated with deposit accounted reinsurance contracts are collected before losses are paid. In some instances, the interval between premium receipts and loss payments can extend over many years. During this time interval, insurance and reinsurance companies invest the premiums received and generate investment returns. Although float can be calculated using numbers determined under U.S. GAAP, float is a non-GAAP financial measure and, therefore, there is no comparable U.S. GAAP measure.

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 and is a commonly used calculation to measure profitability. For purposes of this calculation, we add back the impact of subscriptions receivable to shareholders' equity attributable to shareholders as of December 31, 2011. For the three and nine months ended September 30, 2013, we have also adjusted the beginning shareholders' equity for the impact of the issuance of shares in our IPO on a weighted average basis. These adjustments lower the stated returns on beginning shareholders' equity.

 

SOURCE Third Point Reinsurance Ltd.