Blue Capital Reinsurance Holdings Ltd (BCRH), a newly formed reinsurance holding company seeking to offer collateralized reinsurance in the property catastrophe market, plans to raise $125 million in its upcoming IPO. The Pembroke, Bermuda-based firm will offer 6.3 million shares at a price of $20 per share; if the IPO does sell at $20, BCRH will command a market value of $175 million.
BCRH filed on October 7, 2013.
Lead Underwriters: Deutsche Bank Securities
Underwriters: Barclays Capital, Keefe, Bruyette & Woods, Raymond James and Associates, RBC Capital Markets LLC, Sterne, Agee and Leach , UBS Investment Bank
BCRH is a puppet reinsurance company of Montpelier Re Holdings Ltd (MRH), and will take its CEO and CFO from Montpelier subsidiaries. Montpelier Reinsurance Ltd, a wholly-owned subsidiary of Montpelier, will purchase 2.5 million shares (approximately 29% of outstanding shares) through a concurrent private agreement when the offering is completed. The firm will attempt to maximize returns, and particularly dividends, for shareholders by underwriting short-tail reinsurance contracts and investing in insurance securities. Reinsurance firms like BCRH offer to cover all or part of an insurance company's potential payout on a policy in exchange for a premium - insurance on insurance, essentially.
BCRH offers the following figures in its S-1 balance sheet as of September 30, 2013:
Total Assets: $1,020,000
Total Liabilities: $0.000
Stockholders' Equity: $1,020,000
BCRH must compete with other global reinsurance firms and Bermuda-based reinsurance firms, along with capital markets participants. Major competitors include Aeolus Capital Management, CatCo, Credit Suisse Asset Management, Leadenhall Capital, Lloyd's of London (LYG), Nephila Capital Ltd., Pillar Capital, RenaissanceRe Holdings Ltd. (RNR) and Validus Holdings Ltd (VR), and vehicles managed or sponsored by any of these competitors.
CEO William Pollett also serves as Senior Vice President and Chief Corporate Development and Strategy Officer and Treasurer of Montpelier Re Holdings Ltd. He also serves as President and CEO of Blue Water Re, another Montpelier subsidiary. He previously worked with ACE Group, first as CFO of ACE Tempest Re and then as Senior Financial Analyst and Senior Vice President at ACE Limited. Mr. Pollett also worked for the OIL Group of Companies in various capacities, including Treasurer and Vice President of its investment companies. Mr. Pollett is a Chartered Financial Analyst and a Chartered Accountant.
The chief draw of this IPO certainly must be the firm's intent to return a significant portion of its income to its investors over time. However, until the cash starts to flow to the shareholders, we would wait to invest in this offering. Our rating is neutral to avoid at the $20 price.
BCRH's relationship with Montpelier will grant it access to superior tools and information for analysis and will hopefully compel the firm to make good on its promise to return income, since Montpelier will be a significant shareholder. However, since BCRH lacks any history and it isn't yet clear how Montpelier will make use of the firm, this remains a somewhat risky IPO.