Third Point Re Reports Second Quarter 2016 Earnings Results

2016 / 08 / 04

Gross Premiums Written of $196.9 million
Net Income of $53.4 million

HAMILTON, Bermuda, Aug. 4, 2016 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (NYSE: TPRE) today announced results for its second quarter ended June 30, 2016.

Third Point Re reported net income of $53.4 million, or $0.51 per diluted common share, for the second quarter of 2016, compared to net income of $15.7 million, or $0.15 per diluted common share, for the second quarter of 2015. For the six months ended June 30, 2016, Third Point Re reported net income of $2.2 million, or $0.02 per diluted common share, compared with net income of $66.1 million, or $0.62 per diluted common share, for the six months ended June 30, 2015.

For the three months ended June 30, 2016, diluted book value per share increased by $0.51 per share, or 4.1%, to $12.88 per share from $12.37 per share as of March 31, 2016. For the six months ended June 30, 2016, diluted book value per share increased by $0.03 per share, or 0.2%, to $12.88 per share from $12.85 per share as of December 31, 2015.

"During the second quarter, we generated premiums written of $196.9 million, an increase of 6.9% compared to the prior year's second quarter. Our combined ratio for the quarter was 119.2%, which was disappointing and reflects adverse development on several contracts in the quarter.  Market conditions in the lines of business that we focus on continue to present challenges in finding profitable underwriting opportunities," commented John Berger, Chairman and Chief Executive Officer. "Our investments performed well in the second quarter. We generated an investment return of 4.0% in the second quarter and a further 2.6% in July bringing the year to date return through July to 4.6%."

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


Three months ended


Six months ended


June 30, 
 2016


June 30, 
 2015


June 30, 
 2016


June 30, 
 2015


($ in millions, except for per share data and ratios)

Gross premiums written

$

196.9



$

184.3



$

394.0



$

397.7


Net premiums earned

$

133.1



$

120.6



$

269.9



$

259.7


Net underwriting loss (1) (2)

$

(25.6)



$

(9.4)



$

(32.2)



$

(13.2)


Combined ratio (1) (2)

119.2

%


107.8

%


111.9

%


105.1

%

Net investment return on investments managed by Third Point LLC

4.0

%


1.7

%


1.9

%


4.8

%

Net investment income

$

86.3



$

38.6



$

46.2



$

103.5


Net investment income on float (3)

$

19.1



$

9.8



$

10.8



$

28.4


Net income

$

53.4



$

15.7



$

2.2



$

66.1


Diluted earnings per common share

$

0.51



$

0.15



$

0.02



$

0.62


Increase in diluted book value per share (3)

4.1

%


1.1

%


0.2

%


4.2

%

Return on beginning shareholders' equity (3)

4.0

%


1.0

%


0.2

%


4.6

%

Net investments managed by Third Point LLC (4)

$

2,133.6



$

2,062.8



$

2,133.6



$

2,062.8


(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 comparatives represent amounts as of December 31, 2015.

Share Repurchase Program

During the three and six months ended June 30, 2016, Third Point Re repurchased 644,768 of its 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 Third Point Re were not cancelled and are classified as treasury shares. As of June 30, 2016, Third Point Re may repurchase up to an aggregate of $92.6 million of additional common shares under its share repurchase program.

Segment Highlights

Property and Casualty Reinsurance Segment

Gross premiums written increased by $12.7 million, or 6.9%, to $196.9 million for the three months ended June 30, 2016 from $184.2 million for the three months ended June 30, 2015. Gross premiums written decreased by $3.6 million, or 0.9%, to $394.0 million for the six months ended June 30, 2016 from $397.6 million for the six months ended June 30, 2015.

Net premiums earned for the three months ended June 30, 2016 increased by $12.7 million, or 10.6%, to $133.1 million. Net premiums earned for the six months ended June 30, 2016 increased by $10.4 million, or 4.0%, to $269.9 million.

The net underwriting loss and combined ratio for the three and six months ended June 30, 2016 included increases in the net underwriting loss of $12.9 million and $12.5 million, respectively, related to changes in estimates of prior years' loss reserves and the related impact of acquisition costs compared to $2.0 million and $3.0 million increases in the net underwriting loss for the three and six months ended June 30, 2015, respectively. The net impact of the adverse loss development for the three months ended June 30, 2016 was primarily due to:

  • $4.4 million of net adverse underwriting loss development relating to one multi-line contract written since 2014. This contract contains underlying commercial auto physical damage and auto extended warranty exposure. The adverse loss experience is a result of an increase in the number of reported claims and inadequate pricing in certain segments of the underlying business;
  • $4.3 million of net adverse underwriting loss development relating to a workers' compensation contract written in 2012, 2013, and 2014 under which we have been experiencing claims developing with higher than anticipated severity, which led to an increase in our previous loss assumptions on this contract;
  • $2.7 million of net adverse underwriting loss development relating to our Florida homeowners' reinsurance contracts primarily as a result of higher than anticipated water damage claims and an increase in the practice of assignment of benefits whereby homeowners assign their rights for filing and settling claims to attorneys and public adjusters, which has led to increases in the frequency of claims reported as well as the severity of losses and loss adjustment expenses. Contracts for which we experienced this adverse loss development have not been renewed; and
  • $1.9 million of net adverse underwriting loss development relating to non-standard auto contracts during the period, primarily due to the inability of cedents to promptly react to increasing frequency and severity trends, resulting in underpriced business and adverse selection.

Investments

For the three months ended June 30, 2016, Third Point Re recorded net investment income of $86.3 million, compared to $38.6 million for the three months ended June 30, 2015. The return on investments managed by the Company's investment manager, Third Point LLC, was 4.0% for the three months ended June 30, 2016 compared to 1.7% for the three months ended June 30, 2015. For the six months ended June 30, 2016, Third Point Re recorded net investment income of $46.2 million, compared to $103.5 million for the six months ended June 30, 2015. The return on investments managed by the Company's investment manager, Third Point LLC, was 1.9% for the six months ended June 30, 2016 compared to 4.8% for the six months ended June 30, 2015.

The positive return for the three months ended June 30, 2016 was primarily a result of Third Point LLC's credit portfolio. Within credit, we saw positive performance in our sovereign, structured, and corporate portfolios. Within equities, significant gains in the healthcare and industrials sectors were partially offset by losses in hedges and the technology, media and telecommunications sector.   Additionally, for the six months ended June 30, 2016, outperformance from several core portfolio positions within our long equity portfolio were more than offset by losses from one healthcare position. The macro and other category reduced returns in the first half of 2016 as a result of a markdown of a private position and negative performance from several currency and macroeconomic hedges.

Conference Call Details

The Company will hold a conference call to discuss its second quarter 2016 results at 8:30 a.m. Eastern Time on August 5, 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. second 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 13639479. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on August 12, 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

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 June 30, 2016 and December 31, 2015

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



June 30, 
 2016


December 31, 
 2015

Assets




Equity securities, trading, at fair value (cost - $1,412,591; 2015 - $1,156,369)

$

1,458,015



$

1,231,077


Debt securities, trading, at fair value (cost - $1,220,744; 2015 - $1,049,652)

1,250,883



1,034,247


Other investments, at fair value

64,320



51,920


Total investments in securities

2,773,218



2,317,244


Cash and cash equivalents

7,038



20,407


Restricted cash and cash equivalents

280,069



330,915


Due from brokers

337,264



326,971


Derivative assets, at fair value

26,122



35,337


Interest and dividends receivable

7,492



10,687


Reinsurance balances receivable

429,358



294,313


Deferred acquisition costs, net

221,651



197,093


Other assets

14,159



12,141


Total assets

$

4,096,371



$

3,545,108


Liabilities and shareholders' equity




Liabilities




Accounts payable and accrued expenses

$

9,878



$

11,966


Reinsurance balances payable

45,747



24,119


Deposit liabilities

88,817



83,955


Unearned premium reserves

655,397



531,710


Loss and loss adjustment expense reserves

536,955



466,047


Securities sold, not yet purchased, at fair value

262,748



314,353


Securities sold under an agreement to repurchase

168,356



8,944


Due to brokers

794,141



574,962


Derivative liabilities, at fair value

16,401



15,392


Performance fee payable to related party

2,954




Interest and dividends payable

4,517



4,400


Senior notes payable, net of deferred costs

113,465



113,377


Total liabilities

2,699,376



2,149,225


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, 106,285,663 (2015 - 105,479,341))

10,629



10,548


Treasury shares (644,768 shares (2015 - nil shares))

(7,389)




Additional paid-in capital

1,086,258



1,080,591


Retained earnings

290,834



288,587


Shareholders' equity attributable to shareholders

1,380,332



1,379,726


Non-controlling interests

16,663



16,157


Total shareholders' equity

1,396,995



1,395,883


Total liabilities and shareholders' equity

$

4,096,371



$

3,545,108


 

THIRD POINT REINSURANCE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the three and six months ended June 30, 2016 and 2015

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



Three months ended


Six months ended


June 30, 
 2016


June 30, 
 2015


June 30, 
 2016


June 30, 
 2015

Revenues








Gross premiums written

$

196,866



$

184,342



$

394,022



$

397,676


Gross premiums ceded

(1,425)



(1,425)



(1,425)



(1,477)


Net premiums written

195,441



182,917



392,597



396,199


Change in net unearned premium reserves

(62,319)



(62,339)



(122,673)



(136,546)


Net premiums earned

133,122



120,578



269,924



259,653


Net investment income

86,346



38,611



46,236



103,529


Total revenues

219,468



159,189



316,160



363,182


Expenses








Loss and loss adjustment expenses incurred, net

104,131



76,053



188,807



157,799


Acquisition costs, net

48,482



47,498



100,169



102,155


General and administrative expenses

10,243



14,267



21,531



25,975


Other expenses

3,173



2,315



5,879



5,016


Interest expense

2,046



2,052



4,094



3,088


Foreign exchange (gains) losses

(8,068)



139



(10,454)



(54)


Total expenses

160,007



142,324



310,026



293,979


Income before income tax expense

59,461



16,865



6,134



69,203


Income tax expense

(5,310)



(708)



(3,381)



(2,013)


Income including non-controlling interests

54,151



16,157



2,753



67,190


Income attributable to non-controlling interests

(775)



(495)



(506)



(1,058)


Net income

$

53,376



$

15,662



$

2,247



$

66,132


Earnings per share








Basic

$

0.51



$

0.15



$

0.02



$

0.63


Diluted

$

0.51



$

0.15



$

0.02



$

0.62


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








Basic

104,132,797



103,927,761



104,195,336



103,837,545


Diluted

105,233,921



106,696,874



105,228,174



106,425,347


 

 

 

THIRD POINT REINSURANCE LTD.

SEGMENT REPORTING



Three months ended June 30, 2016


Property and Casualty Reinsurance


Catastrophe Risk
Management (2)


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$

196,866



$



$



$

196,866


Gross premiums ceded

(1,425)







(1,425)


Net premiums written

195,441







195,441


Change in net unearned premium reserves

(62,319)







(62,319)


Net premiums earned

133,122







133,122


Expenses








Loss and loss adjustment expenses incurred, net

104,131







104,131


Acquisition costs, net

48,482







48,482


General and administrative expenses

6,085





4,158



10,243


Total expenses

158,698





4,158



162,856


Net underwriting loss

(25,576)



 n/a


 n/a


 n/a

Net investment income

19,098





67,248



86,346


Other expenses

(3,173)







(3,173)


Interest expense





(2,046)



(2,046)


Foreign exchange gains





8,068



8,068


Income tax expense





(5,310)



(5,310)


Segment income (loss) including non-controlling interests

(9,651)





63,802



54,151


Segment income attributable to non-controlling interests





(775)



(775)


Segment income (loss)

$

(9,651)



$



$

63,027



$

53,376


Property and Casualty Reinsurance - Underwriting Ratios (1):







Loss ratio

78.2

%







Acquisition cost ratio

36.4

%







Composite ratio

114.6

%







General and administrative expense ratio

4.6

%







Combined ratio

119.2

%
















Six months ended June 30, 2016


Property and Casualty Reinsurance


Catastrophe Risk
Management (2)


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$

394,022



$



$



$

394,022


Gross premiums ceded

(1,425)







(1,425)


Net premiums written

392,597







392,597


Change in net unearned premium reserves

(122,673)







(122,673)


Net premiums earned

269,924







269,924


Expenses








Loss and loss adjustment expenses incurred, net

188,807







188,807


Acquisition costs, net

100,169







100,169


General and administrative expenses

13,147





8,384



21,531


Total expenses

302,123





8,384



310,507


Net underwriting loss

(32,199)



 n/a


 n/a


 n/a

Net investment income

10,837





35,399



46,236


Other expenses

(5,879)







(5,879)


Interest expense





(4,094)



(4,094)


Foreign exchange gains





10,454



10,454


Income tax expense





(3,381)



(3,381)


Segment income (loss) including non-controlling interests

(27,241)





29,994



2,753


Segment income attributable to non-controlling interests





(506)



(506)


Segment income (loss)

$

(27,241)



$



$

29,488



$

2,247


Property and Casualty Reinsurance - Underwriting Ratios (1):







Loss ratio

69.9

%







Acquisition cost ratio

37.1

%







Composite ratio

107.0

%







General and administrative expense ratio

4.9

%







Combined ratio

111.9

%







(1)

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

(2)

As of December 31, 2015, all investments in the Catastrophe Fund had been redeemed. In February 2016, the Company completed the dissolution of the Catastrophe
Fund and Catastrophe Reinsurer. As a result, there is no further activity in the Catastrophe Risk Management segment.

 


Three months ended June 30, 2015


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$

184,191



$

151



$



$

184,342


Gross premiums ceded

(1,425)







(1,425)


Net premiums written

182,766



151





182,917


Change in net unearned premium reserves

(62,384)



45





(62,339)


Net premiums earned

120,382



196





120,578


Expenses








Loss and loss adjustment expenses incurred, net

76,053







76,053


Acquisition costs, net

47,475



23





47,498


General and administrative expenses

6,242



198



7,827



14,267


Total expenses

129,770



221



7,827



137,818


Net underwriting loss

(9,388)



 n/a


 n/a


 n/a

Net investment income

9,790



43



28,778



38,611


Other expenses

(2,315)







(2,315)


Interest expense





(2,052)



(2,052)


Foreign exchange losses





(139)



(139)


Income tax expense





(708)



(708)


Segment income (loss) including non-controlling interests

(1,913)



18



18,052



16,157


Segment income attributable to non-controlling interests



(64)



(431)



(495)


Segment income (loss)

$

(1,913)



$

(46)



$

17,621



$

15,662


Property and Casualty Reinsurance - Underwriting Ratios (1):







Loss ratio

63.2

%







Acquisition cost ratio

39.4

%







Composite ratio

102.6

%







General and administrative expense ratio

5.2

%







Combined ratio

107.8

%
















Six months ended June 30, 2015


Property and Casualty Reinsurance


Catastrophe Risk Management


Corporate


Total

Revenues

($ in thousands)

Gross premiums written

$

397,574



$

102



$



$

397,676


Gross premiums ceded

(1,477)







(1,477)


Net premiums written

396,097



102





396,199


Change in net unearned premium reserves

(136,598)



52





(136,546)


Net premiums earned

259,499



154





259,653


Expenses








Loss and loss adjustment expenses incurred, net

157,799







157,799


Acquisition costs, net

102,138



17





102,155


General and administrative expenses

12,809



431



12,735



25,975


Total expenses

272,746



448



12,735



285,929


Net underwriting loss

(13,247)



 n/a


 n/a


 n/a

Net investment income

28,365



68



75,096



103,529


Other expenses

(5,016)







(5,016)


Interest expense





(3,088)



(3,088)


Foreign exchange gains





54



54


Income tax expense





(2,013)



(2,013)


Segment income (loss) including non-controlling interests

10,102



(226)



57,314



67,190


Segment (income) loss attributable to non-controlling interests



16



(1,074)



(1,058)


Segment income (loss)

$

10,102



$

(210)



$

56,240



$

66,132


Property and Casualty Reinsurance - Underwriting Ratios (1):







Loss ratio

60.8

%







Acquisition cost ratio

39.4

%







Composite ratio

100.2

%







General and administrative expense ratio

4.9

%







Combined ratio

105.1

%







(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



June 30,  
2016


December 31,
2015

Basic and diluted book value per share numerator:

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

Total shareholders' equity

$

1,396,995



$

1,395,883


Less: non-controlling interests

(16,663)



(16,157)


Shareholders' equity attributable to shareholders

1,380,332



1,379,726


Effect of dilutive warrants issued to founders and an advisor

46,512



46,512


Effect of dilutive stock options issued to directors and employees

57,024



58,070


Diluted book value per share numerator

$

1,483,868



$

1,484,308


Basic and diluted book value per share denominator:


Issued and outstanding shares, net of treasury shares

103,716,629



104,256,745


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

5,683,740



5,788,391


Effect of dilutive restricted shares issued to directors and employees

1,157,384



837,277


Diluted book value per share denominator

115,208,916



115,533,576






Basic book value per share

$

13.31



$

13.23


Diluted book value per share

$

12.88



$

12.85





Three months ended


Six months ended


June 30, 
 2016


June 30,

 2015


June 30, 
2016


June 30,
 2015


($ in thousands)

Net investment income on float

$

19,098



$

9,790



$

10,837



$

28,365


Net investment income on capital

67,014



28,640



34,918



74,914


Net investment income on investments managed by Third Point LLC

86,112



38,430



45,755



103,279


Net gain on investment in Kiskadee Fund

234



139



481



183


Net investment income related to Catastrophe Reinsurer and Catastrophe Fund



42





67



$

86,346



$

38,611



$

46,236



$

103,529





Three months ended


Six months ended


June 30,
 
 2016


June 30, 
2015


June 30,
 
 2016


June 30, 
 2015


($ in thousands)

Net income

$

53,376



$

15,662



$

2,247



$

66,132


Shareholders' equity attributable to shareholders -  beginning of period

1,331,247



1,506,581



1,379,726



1,451,913


Impact of weighting related to shareholders' equity from shares repurchased

(2,609)





(1,305)




Adjusted shareholders' equity attributable to shareholders - beginning of period

$

1,328,638



$

1,506,581



$

1,378,421



$

1,451,913


Return on beginning shareholders' equity

4.0

%


1.0

%


0.2

%


4.6

%

 

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, net of treasury shares. 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 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 periods ended June 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-second-quarter-2016-earnings-results-300309591.html

SOURCE Third Point Reinsurance Ltd.