Blue Capital Reinsurance Holdings Ltd. BCRH S
October 10, 2018 - 12:49pm EST by
2018 2019
Price: 10.00 EPS 0 0
Shares Out. (in M): 9 P/E 0 0
Market Cap (in $M): 90 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 90 TEV/EBIT 0 0
Borrow Cost: General Collateral

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BCRH is a tiny (~$90 million market cap) specialty reinsurance company.

Company description

Blue Capital Reinsurance Holdings Ltd. provides collateralized reinsurance in the property catastrophe market and invests in various insurance-linked securities. The Company conducts its operations through its subsidiaries, including Blue Capital Re Ltd. (Blue Capital Re), which provides collateralized reinsurance, and Blue Capital Re ILS Ltd. (Blue Capital Re ILS), which conducts hedging and other investment activities. Blue Capital Re provides reinsurance to third-party insurance and reinsurance companies through reinsurance contracts, either directly with the cedant or on a fronted basis. Blue Capital Re ILS may purchase catastrophe bonds to access certain risks. Blue Capital Re or Blue Capital Re ILS may buy and sell industry loss warranties as a way to access certain risks. Blue Capital Re ILS' portfolio may include over-the-counter or exchange-traded futures or options listed on catastrophe indexes, such as catastrophe or weather derivatives.

Here is a link to the most recent deck.

The thesis here is straight forward so no lengthy narrative is necessary.

BCRH lost a tremendous amount of equity in 2017 due to hurricane activity. Losses resulted in a 30% decline in book value (in line with their estimated book loss of 30% for a Florida hurricane).

From BCRH’s 7/31/2017 8-k

BCRH apparently under reserved for the 2017 hurricanes. The company continues to record losses in excess of its accruals.

From Q2 2018 10-Q

I expect another significant loss again this year due to hurricane michael. In BCRH’s presentation they lay out their risk exposures. Currently a 1 in 100-year Florida Hurricane has an estimated impact of $37 million or 30% of BCRH’s current equity.

Book Value is $14.21

Current Price: $10.00

P/B = ~.7x

Price target is $7.00 per share.

BCRH P/B multiple




I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Hurricane Losses

Continued adverse developments

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