Third Point Re Reports Strong Second Quarter Earnings; Affirms Appointment of Daniel Malloy as Chief Executive Officer and Appoints Mr. Malloy and Sid Sankaran as Members of the Board of Directors

Net income of $53.1 million, or $0.57 per diluted common share, for second quarter of 2019

Published

HAMILTON, Bermuda, Aug. 7, 2019 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (NYSE: TPRE) today announced results for its second quarter ended June 30, 2019, affirmed Daniel Malloy as Chief Executive Officer and added Mr. Malloy and Sid Sankaran, former Chief Financial Officer of AIG, Inc. to its Board of Directors.

Earnings Summary

Third Point Re reported net income available to common shareholders of $53.1 million, or $0.57 per diluted common share, for the three months ended June 30, 2019, compared to net income available to common shareholders of $19.6 million, or $0.19 per diluted common share, for the three months ended June 30, 2018. For the six months ended June 30, 2019, Third Point Re reported net income available to common shareholders of $186.0 million, or $2.00 per diluted common share, compared to a net loss available to common shareholders of $6.4 million, or $(0.06) per diluted common share, for the six months ended June 30, 2018.

"I am pleased with our second quarter results as we improved our combined ratio to 101.1% and Third Point LLC delivered another solid quarterly investment return of 2.9%, bringing our year-to-date return to 10.3%.  We delivered a return on equity of 4.0% for the quarter and 15.4% for the first half of the year," commented Dan Malloy, Chief Executive Officer.  "I would like to highlight that our 101.1% combined ratio for the quarter means we are on track to achieve our goal of delivering underwriting profitability, subject to catastrophe events, by year end.  This will be an important milestone for the company and a validation of our strategy to deliver value from both sides of our balance sheet.  We have continued to build out our underwriting team over the past year, where we have successfully recruited talented underwriters, to allow us to expand our portfolio into new profitable lines of business including property catastrophe and specialty.  We are encouraged with our progress to date with the build out of our team and portfolio positioning going better than expected."

Affirmation of Daniel Malloy as CEO and Appointment to the Board of Directors

The Board of Directors has concluded its review and consideration of the Company's leadership and has affirmed Daniel Malloy as Chief Executive Officer of the Company.  Mr. Malloy has also been added to the Company's Board of Directors and will serve on the Company's Executive Committee.

Josh Targoff, Chairman of the Company commented, "Dan Malloy has been a valued senior leader of the Company since its inception in 2012, and has successfully expanded Third Point Re's underwriting capabilities over the past quarter and positioned the Company for underwriting profit.  He has proven himself to be the leader this Company needs. His long history as an underwriter and keen, shareholder-focused business sense will serve the interests of all the Company's stakeholders."

Appointment of Sid Sankaran to the Board of Directors

The Company also announced the appointment of Sid Sankaran, currently Chief Financial Officer of Oscar Health, and former Chief Financial Officer and Chief Risk Officer of AIG, Inc., as a member of the Board of Directors.  Mr. Sankaran, 42 years old, brings a diverse set of skills and breadth of knowledge to the Board. Mr. Sankaran will serve on the Company's Audit Committee, Investment and Finance Committee and will serve as chair of the Company's Risk and Compliance Committee.

Mr. Targoff further commented, "I am delighted to welcome an executive of Sid's caliber to our Board. Sid's in-depth knowledge of the current insurance and reinsurance markets, his history of dealing with both regulators and ratings agencies, his understanding and appreciation for capital allocation, and his overall business sense and judgment will benefit our shareholders tremendously."

Mr. Sankaran stated, "I am excited about the prospect of joining Third Point Re. I believe the Company's structural advantages position it well and look forward to working with the board members and senior executives to realize the Company's full potential."

Additional Information on Financial Results

The following table shows certain key financial metrics for the three and six months ended June 30, 2019 and 2018:

Three months ended Six months ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios)
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4)
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 %
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 %
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4)
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) %
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) %
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio.
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders.
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018.
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4)
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 %
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 %
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4)
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) %
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) %
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1

Property and Casualty Reinsurance Segment

Gross premiums written

Gross premiums written increased by $32.9 million, or 66.1%, to $82.6 million for the three months ended June 30, 2019 from $49.8 million for the three months ended June 30, 2018. The increase in gross premiums written was primarily due to new contracts bound in the current year period, including $15.8 million of property catastrophe business.

Gross premiums written decreased by $25.9 million, or 6.0%, to $402.2 million for the six months ended June 30, 2019 from $428.1 million for the six months ended June 30, 2018. The decrease in gross premiums written was primarily due to the net impact of contract extensions, cancellations and contracts renewed with no comparable premium in the comparable period, as well as, contracts that we did not renew in the current year. This decrease was partially offset by new contracts in the current year period,  including $57.4 million of property catastrophe business.

Net premiums earned

The increase in net premiums earned in the three and six months ended June 30, 2019 compared to the three months ended June 30, 2018 was primarily due to a higher in-force underwriting portfolio.

Net underwriting results

The improvement in the net underwriting results for the three and six months ended June 30, 2019 compared to prior year periods was primarily due to a shift in the mix of business, including earnings on new property catastrophe and specialty business.

For the three and six months ended June 30, 2019, we recorded a net $0.1 million and $0.5 million improvement in the net underwriting results, respectively, related to favorable development of prior years' loss reserves net of the related impact of acquisition costs.

For the three and six months ended June 30, 2018, we recorded a net $2.4 million and $2.8 million improvement in the net underwriting results, respectively, related to favorable development of prior years' loss reserves net of the related impact of acquisition costs.

Investments

During 2019, we began reducing our investment risk by reallocating some of our investments in Third Point Enhanced Fund ("TP Fund") to fixed income investments.  This initial realignment of our investment strategy was being driven by several factors, including the following:

  • An increasing underwriting risk profile, including writing property catastrophe business, that requires additional risk capital to support these underwriting activities which, taken together with other actions, should improve our underwriting results over time;
  • The need for greater liquidity to pay potential claims also as a result of the changing underwriting risk profile, which now exposes us to natural catastrophe and other loss events where there could be a need to pay claims to our clients on short notice; and
  • To meet our targeted levels of risk-adjusted capitalization in accordance with our enterprise-wide risk appetite.

For the three months ended June 30, 2019, the portfolio saw strong results across each investment strategy with long equity investments driving the majority of gains for the quarter.  Within equities, every sector, except energy, contributed to positive results on the long side and short equity investments and hedges reduced net investment income.  Each sub-strategy within the credit portfolio added to positive performance with strength in asset-backed securities contributing the most to our results for the period.  The macroeconomic and other portfolio was also positive as gains in arbitrage offset modest losses in currency hedges and the ventures portfolio. 

For the six months ended June 30, 2019, gains from the equity portfolio contributed to the majority of returns for the year.  The return on average exposure for the equity portfolio outpaced broader equity market index performance. Strong performance across long equity investments, primarily in the activist positions, were partially offset by losses from short equity investments and hedges.  The credit strategy was also a meaningful contributor to returns with positive results in corporate credit, sovereign debt, and asset-backed securities.  The macroeconomic and other portfolio also added to returns across each sub-strategy for the period.

Conference Call Details

The Company will hold a conference call to discuss its second quarter 2019 results at 8:30 a.m. Eastern Time on August 8, 2019. The call will be webcast live over the Internet from the Company's website at www.thirdpointre.bm under the "Investors" section. Participants should follow the instructions provided on the website to download and install any necessary audio applications. The conference call will also be available by dialing 1-855-327-6837 (domestic) or 1-631-891-4304 (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 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the replay passcode 10007261. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on August 15, 2019.

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:  results of operations fluctuate and may not be indicative of our prospects; more established competitors; losses exceeding reserves; highly cyclical property and casualty reinsurance industry; downgrade, withdrawal of ratings or change in rating outlook by rating agencies; significant decrease in our capital or surplus; dependence on key executives; dependence on letter of credit facilities that may not be available on commercially acceptable terms; inability to service our indebtedness; limited cash flow and liquidity due to our indebtedness; inability to raise necessary funds to pay principal or interest on debt; potential lack of availability of capital in the future; credit risk associated with the use of reinsurance brokers; future strategic transactions such as acquisitions, dispositions, mergers or joint ventures; technology breaches or failures, including cyber-attacks; lack of control over Third Point Enhanced LP ("TP Fund"); lack of control over the allocation and performance of TP Fund's investment portfolio; dependence on Third Point LLC to implement TP Fund's investment strategy; limited ability to withdraw our capital accounts from TP Fund; decline in revenue due to poor performance of TP Fund's investment portfolio; TP Fund's investment strategy involves risks that are greater than those faced by competitors; termination by Third Point LLC of our or TP Fund's investment management agreements; potential conflicts of interest with Third Point LLC; losses resulting from significant investment positions; credit risk associated with the default on obligations of counterparties; ineffective investment risk management systems; fluctuations in the market value of TP Fund's investment portfolio; trading restrictions being placed on TP Fund's investments; limited termination provisions in our investment management agreements; limited liquidity and lack of valuation data on certain TP Fund's investments; U.S. and global economic downturns; specific characteristics of investments in mortgage-backed securities and other asset-backed securities, in securities of issues based outside the U.S., and in special situation or distressed companies; loss of key employees at Third Point LLC; Third Point LLC's compensation arrangements may incentivize investments that are risky or speculative; increased regulation or scrutiny of alternative investment advisers affecting our reputation; suspension or revocation of our reinsurance licenses; potentially being deemed an investment company under U.S. federal securities law; failure of reinsurance subsidiaries to meet minimum capital and surplus requirements; changes in Bermuda or other law and regulation that may have an adverse impact on our operations; Third Point Re and/or Third Point Re BDA potentially becoming subject to U.S. federal income taxation; potential characterization of Third Point Re and/or Third Point Re BDA as a passive foreign investment company; subjection of our affiliates to the base erosion and anti-abuse tax; potentially becoming subject to U.S. withholding and information reporting requirements under the Foreign Account Tax Compliance Act; and other risks and factors listed under "Risk Factors" in the Company's most recent Annual Report on Form 10-K and other periodic and current disclosures filed with the Securities and Exchange Commission. All forward-looking statements speak only as of the date made and the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures and Other Financial Metrics

In presenting Third Point Re's results, management has included financial measures that are not calculated under standards or rules that comprise accounting principles generally accepted in the United States (GAAP). Such measures, including basic and diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders, 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 Re BDA and Third Point Reinsurance (USA) Ltd. ("Third Point Re USA"), writes property and casualty reinsurance business. Third Point Re BDA and Third Point Re USA each have an "A-" (Excellent) financial strength rating from A.M. Best Company, Inc.

Contact

Third Point Reinsurance Ltd.Christopher S. Coleman - Chief Financial Officerinvestorrelations@thirdpointre.bm+1 441-542-3333

 

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of June 30, 2019 and December 31, 2018 (expressed in thousands of U.S. dollars, except per share and share amounts)
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders. June 30, 2019 December 31, 2018
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1 Assets
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018. Investment in related party investment fund, at fair value (cost - $891,850; 2018 - $1,564,850) $ 824,352 $ 1,284,004
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4) Debt securities, trading, at fair value (cost - $577,274; 2018 - $252,362) 567,354 239,640
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 % Other investments, at fair value 3,010 84
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 % Total investments 1,394,716 1,523,728
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0 Cash and cash equivalents 93,757 104,183
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4) Restricted cash and cash equivalents 656,146 609,154
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06) Redemption receivable from related party investment fund 400,000
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) % Due from brokers 1,411
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) % Interest and dividends receivable 1,792 1,316
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1 Reinsurance balances receivable 696,170 602,448
Deferred acquisition costs, net 208,027 203,842
Unearned premiums ceded 15,473 17,552
Loss and loss adjustment expenses recoverable 3,655 2,031
Other assets 19,715 20,569
Total assets $ 3,489,451 $ 3,086,234
Liabilities
Accounts payable and accrued expenses $ 14,843 $ 7,261
Reinsurance balances payable 88,670 69,701
Deposit liabilities 148,845 145,342
Unearned premium reserves 702,398 602,936
Loss and loss adjustment expense reserves 1,021,776 937,157
Participation agreement with related party investment fund 2,297
Interest and dividends payable 3,022 3,055
Senior notes payable, net of deferred costs 113,999 113,911
Total liabilities 2,093,553 1,881,660
Commitments and contingent liabilities
Shareholders' equity
Preference shares (par value $0.10; authorized, 30,000,000; none issued)
Common shares (issued and outstanding: 93,994,924; 2018 - 93,639,610) 9,399 9,364
Additional paid-in capital 924,191 918,882
Retained earnings 462,308 276,328
Shareholders' equity attributable to Third Point Re common shareholders 1,395,898 1,204,574
Total liabilities and shareholders' equity $ 3,489,451 $ 3,086,234

 

 

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of June 30, 2019 and December 31, 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) For the three and six months ended June 30, 2019 and 2018 (expressed in thousands of U.S. dollars, except per share and share amounts)
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders. June 30, 2019 December 31, 2018 Three months ended Six months ended
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1 Assets June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018. Investment in related party investment fund, at fair value (cost - $891,850; 2018 - $1,564,850) $ 824,352 $ 1,284,004 Revenues
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4) Debt securities, trading, at fair value (cost - $577,274; 2018 - $252,362) 567,354 239,640 Gross premiums written $ 82,637 $ 49,765 $ 402,228 $ 428,125
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 % Other investments, at fair value 3,010 84 Gross premiums ceded (1,473) (3,479) (2,185) (18,125)
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 % Total investments 1,394,716 1,523,728 Net premiums written 81,164 46,286 400,043 410,000
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0 Cash and cash equivalents 93,757 104,183 Change in net unearned premium reserves 64,288 95,207 (101,541) (126,021)
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4) Restricted cash and cash equivalents 656,146 609,154 Net premiums earned 145,452 141,493 298,502 283,979
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06) Redemption receivable from related party investment fund 400,000 Net investment income from investment in related party investment fund 66,357 213,348
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) % Due from brokers 1,411 Net investment income before management and performance fees to related parties 2,774 45,668 10,736 53,507
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) % Interest and dividends receivable 1,792 1,316 Management and performance fees to related parties (1) (14,493) (24,540)
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1 Reinsurance balances receivable 696,170 602,448 Net investment income 69,131 31,175 224,084 28,967
Deferred acquisition costs, net 208,027 203,842 Total revenues 214,583 172,668 522,586 312,946
Unearned premiums ceded 15,473 17,552 Expenses
Loss and loss adjustment expenses recoverable 3,655 2,031 Loss and loss adjustment expenses incurred, net 82,334 84,000 177,402 176,620
Other assets 19,715 20,569 Acquisition costs, net 58,006 57,584 115,504 108,989
Total assets $ 3,489,451 $ 3,086,234 General and administrative expenses 19,650 9,696 31,782 19,177
Liabilities Other expenses 3,811 3,983 7,936 7,978
Accounts payable and accrued expenses $ 14,843 $ 7,261 Interest expense 2,051 2,051 4,080 4,080
Reinsurance balances payable 88,670 69,701 Foreign exchange gains (4,260) (8,847) (1,742) (2,236)
Deposit liabilities 148,845 145,342 Total expenses 161,592 148,467 334,962 314,608
Unearned premium reserves 702,398 602,936 Income (loss) before income tax (expense) benefit 52,991 24,201 187,624 (1,662)
Loss and loss adjustment expense reserves 1,021,776 937,157 Income tax (expense) benefit 74 (4,390) (1,644) (4,518)
Participation agreement with related party investment fund 2,297 Net income (loss) 53,065 19,811 185,980 (6,180)
Interest and dividends payable 3,022 3,055 Net income attributable to noncontrolling interests in related party (209) (219)
Senior notes payable, net of deferred costs 113,999 113,911 Net income (loss) available to Third Point Re common shareholders $ 53,065 $ 19,602 $ 185,980 $ (6,399)
Total liabilities 2,093,553 1,881,660 Earnings (loss) per share available to Third Point Re common shareholders
Commitments and contingent liabilities Basic earnings (loss) per share available to Third Point Re common shareholders $ 0.58 $ 0.20 $ 2.02 $ (0.06)
Shareholders' equity Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Preference shares (par value $0.10; authorized, 30,000,000; none issued) Weighted average number of common shares used in the determination of earnings (loss) per share
Common shares (issued and outstanding: 93,994,924; 2018 - 93,639,610) 9,399 9,364 Basic 91,776,870 99,498,901 91,723,636 100,342,636
Additional paid-in capital 924,191 918,882 Diluted 92,801,799 102,032,485 92,720,466 100,342,636
Retained earnings 462,308 276,328
Shareholders' equity attributable to Third Point Re common shareholders 1,395,898 1,204,574 (1) Effective August 31, 2018, Third Point Reinsurance Ltd., Third Point Reinsurance Company Ltd. ("Third Point Re BDA") and Third Point Reinsurance (USA) Ltd. ("Third Point Re USA") and together with Third Point Re BDA, the "TPRE Limited Partners", entered into a Limited Partnership Agreement (the "2018 LPA") to invest in Third Point Enhanced LP ("TP Fund"), a related party investment fund.  As a result,  the management and performance fees are presented within net investment income from investment in related party investment fund from the effective date of the 2018 LPA. Management and performance fees incurred prior to the effective date of the 2018 LPA are reflected in management and performance fees to related parties.
Total liabilities and shareholders' equity $ 3,489,451 $ 3,086,234

 

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of June 30, 2019 and December 31, 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) For the three and six months ended June 30, 2019 and 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. SEGMENT REPORTING
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders. June 30, 2019 December 31, 2018 Three months ended Six months ended Three months ended June 30, 2019 Three months ended June 30, 2018
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1 Assets June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018. Investment in related party investment fund, at fair value (cost - $891,850; 2018 - $1,564,850) $ 824,352 $ 1,284,004 Revenues Revenues ($ in thousands) ($ in thousands)
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4) Debt securities, trading, at fair value (cost - $577,274; 2018 - $252,362) 567,354 239,640 Gross premiums written $ 82,637 $ 49,765 $ 402,228 $ 428,125 Gross premiums written $ 82,637 $ 82,637 $ 49,765 $ 49,765
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 % Other investments, at fair value 3,010 84 Gross premiums ceded (1,473) (3,479) (2,185) (18,125) Gross premiums ceded (1,473) (1,473) (3,479) (3,479)
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 % Total investments 1,394,716 1,523,728 Net premiums written 81,164 46,286 400,043 410,000 Net premiums written 81,164 81,164 46,286 46,286
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0 Cash and cash equivalents 93,757 104,183 Change in net unearned premium reserves 64,288 95,207 (101,541) (126,021) Change in net unearned premium reserves 64,288 64,288 95,207 95,207
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4) Restricted cash and cash equivalents 656,146 609,154 Net premiums earned 145,452 141,493 298,502 283,979 Net premiums earned 145,452 145,452 141,493 141,493
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06) Redemption receivable from related party investment fund 400,000 Net investment income from investment in related party investment fund 66,357 213,348 Expenses
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) % Due from brokers 1,411 Net investment income before management and performance fees to related parties 2,774 45,668 10,736 53,507 Loss and loss adjustment expenses incurred, net 82,334 82,334 84,000 84,000
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) % Interest and dividends receivable 1,792 1,316 Management and performance fees to related parties (1) (14,493) (24,540) Acquisition costs, net 58,006 58,006 57,584 57,584
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1 Reinsurance balances receivable 696,170 602,448 Net investment income 69,131 31,175 224,084 28,967 General and administrative expenses 6,769 6,769 4,963 4,963
Deferred acquisition costs, net 208,027 203,842 Total revenues 214,583 172,668 522,586 312,946 Total expenses 147,109 147,109 146,547 146,547
Unearned premiums ceded 15,473 17,552 Expenses Net underwriting loss $ (1,657) (1,657) $ (5,054) (5,054)
Loss and loss adjustment expenses recoverable 3,655 2,031 Loss and loss adjustment expenses incurred, net 82,334 84,000 177,402 176,620 Net investment income 69,131 31,175
Other assets 19,715 20,569 Acquisition costs, net 58,006 57,584 115,504 108,989 Corporate expenses (12,881) (4,733)
Total assets $ 3,489,451 $ 3,086,234 General and administrative expenses 19,650 9,696 31,782 19,177 Other expenses (3,811) (3,983)
Liabilities Other expenses 3,811 3,983 7,936 7,978 Interest expense (2,051) (2,051)
Accounts payable and accrued expenses $ 14,843 $ 7,261 Interest expense 2,051 2,051 4,080 4,080 Foreign exchange gains 4,260 8,847
Reinsurance balances payable 88,670 69,701 Foreign exchange gains (4,260) (8,847) (1,742) (2,236) Income tax benefit (expense) 74 (4,390)
Deposit liabilities 148,845 145,342 Total expenses 161,592 148,467 334,962 314,608 Net income attributable to noncontrolling interests in related party (209)
Unearned premium reserves 702,398 602,936 Income (loss) before income tax (expense) benefit 52,991 24,201 187,624 (1,662) Net income available to Third Point Re common shareholders $ 53,065 $ 19,602
Loss and loss adjustment expense reserves 1,021,776 937,157 Income tax (expense) benefit 74 (4,390) (1,644) (4,518) Property and Casualty Reinsurance - Underwriting Ratios (1):
Participation agreement with related party investment fund 2,297 Net income (loss) 53,065 19,811 185,980 (6,180) Loss ratio 56.6% 59.4%
Interest and dividends payable 3,022 3,055 Net income attributable to noncontrolling interests in related party (209) (219) Acquisition cost ratio 39.9% 40.7%
Senior notes payable, net of deferred costs 113,999 113,911 Net income (loss) available to Third Point Re common shareholders $ 53,065 $ 19,602 $ 185,980 $ (6,399) Composite ratio 96.5% 100.1%
Total liabilities 2,093,553 1,881,660 Earnings (loss) per share available to Third Point Re common shareholders General and administrative expense ratio 4.6% 3.5%
Commitments and contingent liabilities Basic earnings (loss) per share available to Third Point Re common shareholders $ 0.58 $ 0.20 $ 2.02 $ (0.06) Combined ratio 101.1% 103.6%
Shareholders' equity Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Preference shares (par value $0.10; authorized, 30,000,000; none issued) Weighted average number of common shares used in the determination of earnings (loss) per share
Common shares (issued and outstanding: 93,994,924; 2018 - 93,639,610) 9,399 9,364 Basic 91,776,870 99,498,901 91,723,636 100,342,636 Six months ended June 30, 2019 Six months ended June 30, 2018
Additional paid-in capital 924,191 918,882 Diluted 92,801,799 102,032,485 92,720,466 100,342,636 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total
Retained earnings 462,308 276,328 Revenues ($ in thousands) ($ in thousands)
Shareholders' equity attributable to Third Point Re common shareholders 1,395,898 1,204,574 (1) Effective August 31, 2018, Third Point Reinsurance Ltd., Third Point Reinsurance Company Ltd. ("Third Point Re BDA") and Third Point Reinsurance (USA) Ltd. ("Third Point Re USA") and together with Third Point Re BDA, the "TPRE Limited Partners", entered into a Limited Partnership Agreement (the "2018 LPA") to invest in Third Point Enhanced LP ("TP Fund"), a related party investment fund.  As a result,  the management and performance fees are presented within net investment income from investment in related party investment fund from the effective date of the 2018 LPA. Management and performance fees incurred prior to the effective date of the 2018 LPA are reflected in management and performance fees to related parties. Gross premiums written $ 402,228 $ 402,228 $ 428,125 $ 428,125
Total liabilities and shareholders' equity $ 3,489,451 $ 3,086,234 Gross premiums ceded (2,185) (2,185) (18,125) (18,125)
Net premiums written 400,043 400,043 410,000 410,000
Change in net unearned premium reserves (101,541) (101,541) (126,021) (126,021)
Net premiums earned 298,502 298,502 283,979 283,979
Expenses
Loss and loss adjustment expenses incurred, net 177,402 177,402 176,620 176,620
Acquisition costs, net 115,504 115,504 108,989 108,989
General and administrative expenses 12,993 12,993 9,787 9,787
Total expenses 305,899 305,899 295,396 295,396
Net underwriting loss $ (7,397) (7,397) $ (11,417) (11,417)
Net investment income 224,084 28,967
Corporate expenses (18,789) (9,390)
Other expenses (7,936) (7,978)
Interest expense (4,080) (4,080)
Foreign exchange gains 1,742 2,236
Income tax expense (1,644) (4,518)
Net income attributable to noncontrolling interests in related party (219)
Net income (loss) available to Third Point Re common shareholders $ 185,980 $ (6,399)
Property and Casualty Reinsurance - Underwriting Ratios (1):
Loss ratio 59.4% 62.2%
Acquisition cost ratio 38.7% 38.4%
Composite ratio 98.1% 100.6%
General and administrative expense ratio 4.4% 3.4%
Combined ratio 102.5% 104.0%
(1) Underwriting ratios are calculated by dividing the related expense by net premiums earned.

 

THIRD POINT REINSURANCE LTD.NON-GAAP MEASURES AND RECONCILIATIONS & KEY PERFORMANCE INDICATORS

Non-GAAP Measures

Basic Book Value per Share and Diluted Book Value per Share

Basic book value per share and diluted book value per share are non-GAAP financial measures and there are no comparable GAAP measures. Basic book value per share, as presented, is a non-GAAP financial measure and is calculated by dividing shareholders' equity attributable to Third Point Re common shareholders by the number of common shares outstanding, excluding the total number of unvested restricted shares, at period end. Diluted book value per share, as presented, is a non-GAAP financial measure and represents basic 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. For unvested restricted shares with a performance condition, we include the unvested restricted shares for which we consider vesting to be probable. Change in basic book value per share is calculated by taking the change in basic book value per share divided by the beginning of period book value per share. Change in diluted book value per share is calculated by taking the change in diluted book value per share divided by the beginning of period diluted book value per share. 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.

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of June 30, 2019 and December 31, 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) For the three and six months ended June 30, 2019 and 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. SEGMENT REPORTING June 30, 2019 December 31, 2018
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Basic and diluted book value per share numerator: ($ in thousands, except share and per share amounts)
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders. June 30, 2019 December 31, 2018 Three months ended Six months ended Three months ended June 30, 2019 Three months ended June 30, 2018 Shareholders' equity attributable to Third Point Re common shareholders $ 1,395,898 $ 1,204,574
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1 Assets June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total Effect of dilutive warrants issued to founders and an advisor 34,950
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018. Investment in related party investment fund, at fair value (cost - $891,850; 2018 - $1,564,850) $ 824,352 $ 1,284,004 Revenues Revenues ($ in thousands) ($ in thousands) Effect of dilutive stock options issued to directors and employees 49,142
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4) Debt securities, trading, at fair value (cost - $577,274; 2018 - $252,362) 567,354 239,640 Gross premiums written $ 82,637 $ 49,765 $ 402,228 $ 428,125 Gross premiums written $ 82,637 $ 82,637 $ 49,765 $ 49,765 Diluted book value per share numerator $ 1,479,990 $ 1,204,574
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 % Other investments, at fair value 3,010 84 Gross premiums ceded (1,473) (3,479) (2,185) (18,125) Gross premiums ceded (1,473) (1,473) (3,479) (3,479) Basic and diluted book value per share denominator:
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 % Total investments 1,394,716 1,523,728 Net premiums written 81,164 46,286 400,043 410,000 Net premiums written 81,164 81,164 46,286 46,286 Common shares outstanding 93,994,924 93,639,610
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0 Cash and cash equivalents 93,757 104,183 Change in net unearned premium reserves 64,288 95,207 (101,541) (126,021) Change in net unearned premium reserves 64,288 64,288 95,207 95,207 Unvested restricted shares (2,214,087) (2,025,113)
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4) Restricted cash and cash equivalents 656,146 609,154 Net premiums earned 145,452 141,493 298,502 283,979 Net premiums earned 145,452 145,452 141,493 141,493 Basic book value per share denominator: 91,780,837 91,614,497
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06) Redemption receivable from related party investment fund 400,000 Net investment income from investment in related party investment fund 66,357 213,348 Expenses Effect of dilutive warrants issued to founders and an advisor 3,494,979
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) % Due from brokers 1,411 Net investment income before management and performance fees to related parties 2,774 45,668 10,736 53,507 Loss and loss adjustment expenses incurred, net 82,334 82,334 84,000 84,000 Effect of dilutive stock options issued to directors and employees 4,914,229
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) % Interest and dividends receivable 1,792 1,316 Management and performance fees to related parties (1) (14,493) (24,540) Acquisition costs, net 58,006 58,006 57,584 57,584 Effect of dilutive restricted shares issued to directors and employees 1,777,266 1,209,285
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1 Reinsurance balances receivable 696,170 602,448 Net investment income 69,131 31,175 224,084 28,967 General and administrative expenses 6,769 6,769 4,963 4,963 Diluted book value per share denominator 101,967,311 92,823,782
Deferred acquisition costs, net 208,027 203,842 Total revenues 214,583 172,668 522,586 312,946 Total expenses 147,109 147,109 146,547 146,547
Unearned premiums ceded 15,473 17,552 Expenses Net underwriting loss $ (1,657) (1,657) $ (5,054) (5,054) Basic book value per share $ 15.21 $ 13.15
Loss and loss adjustment expenses recoverable 3,655 2,031 Loss and loss adjustment expenses incurred, net 82,334 84,000 177,402 176,620 Net investment income 69,131 31,175 Diluted book value per share $ 14.51 $ 12.98
Other assets 19,715 20,569 Acquisition costs, net 58,006 57,584 115,504 108,989 Corporate expenses (12,881) (4,733)
Total assets $ 3,489,451 $ 3,086,234 General and administrative expenses 19,650 9,696 31,782 19,177 Other expenses (3,811) (3,983)
Liabilities Other expenses 3,811 3,983 7,936 7,978 Interest expense (2,051) (2,051)
Accounts payable and accrued expenses $ 14,843 $ 7,261 Interest expense 2,051 2,051 4,080 4,080 Foreign exchange gains 4,260 8,847
Reinsurance balances payable 88,670 69,701 Foreign exchange gains (4,260) (8,847) (1,742) (2,236) Income tax benefit (expense) 74 (4,390)
Deposit liabilities 148,845 145,342 Total expenses 161,592 148,467 334,962 314,608 Net income attributable to noncontrolling interests in related party (209)
Unearned premium reserves 702,398 602,936 Income (loss) before income tax (expense) benefit 52,991 24,201 187,624 (1,662) Net income available to Third Point Re common shareholders $ 53,065 $ 19,602
Loss and loss adjustment expense reserves 1,021,776 937,157 Income tax (expense) benefit 74 (4,390) (1,644) (4,518) Property and Casualty Reinsurance - Underwriting Ratios (1):
Participation agreement with related party investment fund 2,297 Net income (loss) 53,065 19,811 185,980 (6,180) Loss ratio 56.6% 59.4%
Interest and dividends payable 3,022 3,055 Net income attributable to noncontrolling interests in related party (209) (219) Acquisition cost ratio 39.9% 40.7%
Senior notes payable, net of deferred costs 113,999 113,911 Net income (loss) available to Third Point Re common shareholders $ 53,065 $ 19,602 $ 185,980 $ (6,399) Composite ratio 96.5% 100.1%
Total liabilities 2,093,553 1,881,660 Earnings (loss) per share available to Third Point Re common shareholders General and administrative expense ratio 4.6% 3.5%
Commitments and contingent liabilities Basic earnings (loss) per share available to Third Point Re common shareholders $ 0.58 $ 0.20 $ 2.02 $ (0.06) Combined ratio 101.1% 103.6%
Shareholders' equity Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Preference shares (par value $0.10; authorized, 30,000,000; none issued) Weighted average number of common shares used in the determination of earnings (loss) per share
Common shares (issued and outstanding: 93,994,924; 2018 - 93,639,610) 9,399 9,364 Basic 91,776,870 99,498,901 91,723,636 100,342,636 Six months ended June 30, 2019 Six months ended June 30, 2018
Additional paid-in capital 924,191 918,882 Diluted 92,801,799 102,032,485 92,720,466 100,342,636 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total
Retained earnings 462,308 276,328 Revenues ($ in thousands) ($ in thousands)
Shareholders' equity attributable to Third Point Re common shareholders 1,395,898 1,204,574 (1) Effective August 31, 2018, Third Point Reinsurance Ltd., Third Point Reinsurance Company Ltd. ("Third Point Re BDA") and Third Point Reinsurance (USA) Ltd. ("Third Point Re USA") and together with Third Point Re BDA, the "TPRE Limited Partners", entered into a Limited Partnership Agreement (the "2018 LPA") to invest in Third Point Enhanced LP ("TP Fund"), a related party investment fund.  As a result,  the management and performance fees are presented within net investment income from investment in related party investment fund from the effective date of the 2018 LPA. Management and performance fees incurred prior to the effective date of the 2018 LPA are reflected in management and performance fees to related parties. Gross premiums written $ 402,228 $ 402,228 $ 428,125 $ 428,125
Total liabilities and shareholders' equity $ 3,489,451 $ 3,086,234 Gross premiums ceded (2,185) (2,185) (18,125) (18,125)
Net premiums written 400,043 400,043 410,000 410,000
Change in net unearned premium reserves (101,541) (101,541) (126,021) (126,021)
Net premiums earned 298,502 298,502 283,979 283,979
Expenses
Loss and loss adjustment expenses incurred, net 177,402 177,402 176,620 176,620
Acquisition costs, net 115,504 115,504 108,989 108,989
General and administrative expenses 12,993 12,993 9,787 9,787
Total expenses 305,899 305,899 295,396 295,396
Net underwriting loss $ (7,397) (7,397) $ (11,417) (11,417)
Net investment income 224,084 28,967
Corporate expenses (18,789) (9,390)
Other expenses (7,936) (7,978)
Interest expense (4,080) (4,080)
Foreign exchange gains 1,742 2,236
Income tax expense (1,644) (4,518)
Net income attributable to noncontrolling interests in related party (219)
Net income (loss) available to Third Point Re common shareholders $ 185,980 $ (6,399)
Property and Casualty Reinsurance - Underwriting Ratios (1):
Loss ratio 59.4% 62.2%
Acquisition cost ratio 38.7% 38.4%
Composite ratio 98.1% 100.6%
General and administrative expense ratio 4.4% 3.4%
Combined ratio 102.5% 104.0%
(1) Underwriting ratios are calculated by dividing the related expense by net premiums earned.

Return on Beginning Shareholders' Equity Attributable to Third Point Re Common Shareholders

Return on beginning shareholders' equity attributable to Third Point Re common shareholders, as presented, is a non-GAAP financial measure. Return on beginning shareholders' equity attributable to Third Point Re common shareholders is calculated by dividing net income (loss) available to Third Point Re common shareholders by the beginning shareholders' equity attributable to Third Point Re common shareholders. We believe that return on beginning shareholders' equity attributable to Third Point Re common shareholders is an important measure because it assists our management and investors in evaluating the Company's profitability. When we repurchase our common shares, we also adjust the beginning shareholders' equity attributable to Third Point Re common shareholders for the impact of the shares repurchased on a weighted average basis. For a period where there was a loss, this adjustment decreased the stated returns on beginning shareholders' equity and for a period where there was a gain, this adjustment increased the stated returns on beginning shareholders' equity.

Three months ended Six months ended (1) See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio. THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of June 30, 2019 and December 31, 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) For the three and six months ended June 30, 2019 and 2018 (expressed in thousands of U.S. dollars, except per share and share amounts) THIRD POINT REINSURANCE LTD. SEGMENT REPORTING June 30, 2019 December 31, 2018 Three months ended Six months ended
June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Basic and diluted book value per share numerator: ($ in thousands, except share and per share amounts) June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018
($ in millions, except for per share data and ratios) (2) Change in diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders are non-GAAP financial measures. There are no comparable GAAP measures. See the accompanying Reconciliation of Non-GAAP Measures and Key Performance Indicators for an explanation and calculation of diluted book value per share and return on beginning shareholders' equity attributable to Third Point Re common shareholders. June 30, 2019 December 31, 2018 Three months ended Six months ended Three months ended June 30, 2019 Three months ended June 30, 2018 Shareholders' equity attributable to Third Point Re common shareholders $ 1,395,898 $ 1,204,574 ($ in thousands)
Gross premiums written $ 82.6 $ 49.8 $ 402.2 $ 428.1 Assets June 30, 2019 June 30, 2018 June 30, 2019 June 30, 2018 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total Effect of dilutive warrants issued to founders and an advisor 34,950 Net income (loss) available to Third Point Re common shareholders $ 53,065 $ 19,602 $ 185,980 $ (6,399)
Net premiums earned $ 145.5 $ 141.5 $ 298.5 $ 284.0 (3) Prior year comparatives represent amounts as of December 31, 2018. Investment in related party investment fund, at fair value (cost - $891,850; 2018 - $1,564,850) $ 824,352 $ 1,284,004 Revenues Revenues ($ in thousands) ($ in thousands) Effect of dilutive stock options issued to directors and employees 49,142 Shareholders' equity attributable to Third Point Re common shareholders - beginning of period 1,338,879 1,607,422 1,204,574 1,656,089
Net underwriting loss (1) $ (1.7) $ (5.1) $ (7.4) $ (11.4) Debt securities, trading, at fair value (cost - $577,274; 2018 - $252,362) 567,354 239,640 Gross premiums written $ 82,637 $ 49,765 $ 402,228 $ 428,125 Gross premiums written $ 82,637 $ 82,637 $ 49,765 $ 49,765 Diluted book value per share numerator $ 1,479,990 $ 1,204,574 Impact of weighting related to shareholders' equity from shares repurchased (7,606) (13,673)
Combined ratio (1) 101.1 % 103.6 % 102.5 % 104.0 % Other investments, at fair value 3,010 84 Gross premiums ceded (1,473) (3,479) (2,185) (18,125) Gross premiums ceded (1,473) (1,473) (3,479) (3,479) Basic and diluted book value per share denominator: Adjusted shareholders' equity attributable to Third Point Re common shareholders - beginning of period $ 1,338,879 $ 1,599,816 $ 1,204,574 $ 1,642,416
Net investment return on investments managed by Third Point LLC 2.9 % 1.0 % 10.3 % 0.8 % Total investments 1,394,716 1,523,728 Net premiums written 81,164 46,286 400,043 410,000 Net premiums written 81,164 81,164 46,286 46,286 Common shares outstanding 93,994,924 93,639,610 Return on beginning shareholders' equity attributable to Third Point Re common shareholders 4.0% 1.2% 15.4% (0.4)%
Net investment income $ 69.1 $ 31.2 $ 224.1 $ 29.0 Cash and cash equivalents 93,757 104,183 Change in net unearned premium reserves 64,288 95,207 (101,541) (126,021) Change in net unearned premium reserves 64,288 64,288 95,207 95,207 Unvested restricted shares (2,214,087) (2,025,113)
Net income (loss) available to Third Point Re common shareholders $ 53.1 $ 19.6 $ 186.0 $ (6.4) Restricted cash and cash equivalents 656,146 609,154 Net premiums earned 145,452 141,493 298,502 283,979 Net premiums earned 145,452 145,452 141,493 141,493 Basic book value per share denominator: 91,780,837 91,614,497
Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06) Redemption receivable from related party investment fund 400,000 Net investment income from investment in related party investment fund 66,357 213,348 Expenses Effect of dilutive warrants issued to founders and an advisor 3,494,979
Change in diluted book value per share (2) 4.0 % 1.6 % 11.8 % (0.1) % Due from brokers 1,411 Net investment income before management and performance fees to related parties 2,774 45,668 10,736 53,507 Loss and loss adjustment expenses incurred, net 82,334 82,334 84,000 84,000 Effect of dilutive stock options issued to directors and employees 4,914,229
Return on beginning shareholders' equity attributable to Third Point Re common shareholders (2) 4.0 % 1.2 % 15.4 % (0.4) % Interest and dividends receivable 1,792 1,316 Management and performance fees to related parties (1) (14,493) (24,540) Acquisition costs, net 58,006 58,006 57,584 57,584 Effect of dilutive restricted shares issued to directors and employees 1,777,266 1,209,285
Net investments managed by Third Point LLC (3) $ 2,472.0 $ 2,134.1 $ 2,472.0 $ 2,134.1 Reinsurance balances receivable 696,170 602,448 Net investment income 69,131 31,175 224,084 28,967 General and administrative expenses 6,769 6,769 4,963 4,963 Diluted book value per share denominator 101,967,311 92,823,782
Deferred acquisition costs, net 208,027 203,842 Total revenues 214,583 172,668 522,586 312,946 Total expenses 147,109 147,109 146,547 146,547
Unearned premiums ceded 15,473 17,552 Expenses Net underwriting loss $ (1,657) (1,657) $ (5,054) (5,054) Basic book value per share $ 15.21 $ 13.15
Loss and loss adjustment expenses recoverable 3,655 2,031 Loss and loss adjustment expenses incurred, net 82,334 84,000 177,402 176,620 Net investment income 69,131 31,175 Diluted book value per share $ 14.51 $ 12.98
Other assets 19,715 20,569 Acquisition costs, net 58,006 57,584 115,504 108,989 Corporate expenses (12,881) (4,733)
Total assets $ 3,489,451 $ 3,086,234 General and administrative expenses 19,650 9,696 31,782 19,177 Other expenses (3,811) (3,983)
Liabilities Other expenses 3,811 3,983 7,936 7,978 Interest expense (2,051) (2,051)
Accounts payable and accrued expenses $ 14,843 $ 7,261 Interest expense 2,051 2,051 4,080 4,080 Foreign exchange gains 4,260 8,847
Reinsurance balances payable 88,670 69,701 Foreign exchange gains (4,260) (8,847) (1,742) (2,236) Income tax benefit (expense) 74 (4,390)
Deposit liabilities 148,845 145,342 Total expenses 161,592 148,467 334,962 314,608 Net income attributable to noncontrolling interests in related party (209)
Unearned premium reserves 702,398 602,936 Income (loss) before income tax (expense) benefit 52,991 24,201 187,624 (1,662) Net income available to Third Point Re common shareholders $ 53,065 $ 19,602
Loss and loss adjustment expense reserves 1,021,776 937,157 Income tax (expense) benefit 74 (4,390) (1,644) (4,518) Property and Casualty Reinsurance - Underwriting Ratios (1):
Participation agreement with related party investment fund 2,297 Net income (loss) 53,065 19,811 185,980 (6,180) Loss ratio 56.6% 59.4%
Interest and dividends payable 3,022 3,055 Net income attributable to noncontrolling interests in related party (209) (219) Acquisition cost ratio 39.9% 40.7%
Senior notes payable, net of deferred costs 113,999 113,911 Net income (loss) available to Third Point Re common shareholders $ 53,065 $ 19,602 $ 185,980 $ (6,399) Composite ratio 96.5% 100.1%
Total liabilities 2,093,553 1,881,660 Earnings (loss) per share available to Third Point Re common shareholders General and administrative expense ratio 4.6% 3.5%
Commitments and contingent liabilities Basic earnings (loss) per share available to Third Point Re common shareholders $ 0.58 $ 0.20 $ 2.02 $ (0.06) Combined ratio 101.1% 103.6%
Shareholders' equity Diluted earnings (loss) per share available to Third Point Re common shareholders $ 0.57 $ 0.19 $ 2.00 $ (0.06)
Preference shares (par value $0.10; authorized, 30,000,000; none issued) Weighted average number of common shares used in the determination of earnings (loss) per share
Common shares (issued and outstanding: 93,994,924; 2018 - 93,639,610) 9,399 9,364 Basic 91,776,870 99,498,901 91,723,636 100,342,636 Six months ended June 30, 2019 Six months ended June 30, 2018
Additional paid-in capital 924,191 918,882 Diluted 92,801,799 102,032,485 92,720,466 100,342,636 Property and Casualty Reinsurance Total Property and Casualty Reinsurance Total
Retained earnings 462,308 276,328 Revenues ($ in thousands) ($ in thousands)
Shareholders' equity attributable to Third Point Re common shareholders 1,395,898 1,204,574 (1) Effective August 31, 2018, Third Point Reinsurance Ltd., Third Point Reinsurance Company Ltd. ("Third Point Re BDA") and Third Point Reinsurance (USA) Ltd. ("Third Point Re USA") and together with Third Point Re BDA, the "TPRE Limited Partners", entered into a Limited Partnership Agreement (the "2018 LPA") to invest in Third Point Enhanced LP ("TP Fund"), a related party investment fund.  As a result,  the management and performance fees are presented within net investment income from investment in related party investment fund from the effective date of the 2018 LPA. Management and performance fees incurred prior to the effective date of the 2018 LPA are reflected in management and performance fees to related parties. Gross premiums written $ 402,228 $ 402,228 $ 428,125 $ 428,125
Total liabilities and shareholders' equity $ 3,489,451 $ 3,086,234 Gross premiums ceded (2,185) (2,185) (18,125) (18,125)
Net premiums written 400,043 400,043 410,000 410,000
Change in net unearned premium reserves (101,541) (101,541) (126,021) (126,021)
Net premiums earned 298,502 298,502 283,979 283,979
Expenses
Loss and loss adjustment expenses incurred, net 177,402 177,402 176,620 176,620
Acquisition costs, net 115,504 115,504 108,989 108,989
General and administrative expenses 12,993 12,993 9,787 9,787
Total expenses 305,899 305,899 295,396 295,396
Net underwriting loss $ (7,397) (7,397) $ (11,417) (11,417)
Net investment income 224,084 28,967
Corporate expenses (18,789) (9,390)
Other expenses (7,936) (7,978)
Interest expense (4,080) (4,080)
Foreign exchange gains 1,742 2,236
Income tax expense (1,644) (4,518)
Net income attributable to noncontrolling interests in related party (219)
Net income (loss) available to Third Point Re common shareholders $ 185,980 $ (6,399)
Property and Casualty Reinsurance - Underwriting Ratios (1):
Loss ratio 59.4% 62.2%
Acquisition cost ratio 38.7% 38.4%
Composite ratio 98.1% 100.6%
General and administrative expense ratio 4.4% 3.4%
Combined ratio 102.5% 104.0%
(1) Underwriting ratios are calculated by dividing the related expense by net premiums earned.

Key Performance Indicator

Net Investment Return on Investments Managed by Third Point LLC

Net investment return represents the return on our net investments managed by Third Point LLC, net of fees. The net investment return on net investments managed by Third Point LLC is the percentage change in value of a dollar invested over the reporting period on our net investment assets managed by Third Point LLC. Effective August 31, 2018, we transitioned from our separately managed account structure to investing in TP Fund. In addition, collateral assets and certain other investment assets are managed by Third Point LLC. The net investment return reflects the combined results of investments managed on behalf of Third Point Re BDA and Third Point Re USA prior to the transition date of August 31, 2018 and the investments in TP Fund, collateral assets and certain other investment assets subsequent to the date of transition. Prior to the transition date of August 31, 2018, the stated return was net of noncontrolling interests and net of withholding taxes, which were presented as a component of income tax expense in our condensed consolidated statements of income. Net investment return is the key indicator by which we measure the performance of Third Point LLC, TP Fund's investment manager.

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SOURCE Third Point Reinsurance Ltd.

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