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Tpre   investor presentation september 2013 v5 v001-r6sx3e
 

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    Tpre   investor presentation september 2013 v5 v001-r6sx3e Tpre investor presentation september 2013 v5 v001-r6sx3e Presentation Transcript

    • Chesney House, 96 Pitts Bay Road | Pembroke, HM08, Bermuda | www.thirdpointre.bm Investor Presentation September 2013
    • Forward‐Looking Statements and Non‐GAAP Measures 1 This presentation contains “forward-looking statements” that are based on management’s beliefs and assumptions and on information currently available to management. Most forward-looking statements contain words that identify them as forward-looking, such as “anticipates,” “believes,” “continues,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms that relate to future events. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Third Point Reinsurance Ltd. (“Third Point Re”) to be materially different from any projected results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent the beliefs and assumptions of Third Point Re only as of the date of this presentation and Third Point Re undertakes no obligation to update or revise publicly any such forward-looking statements, whether as a result of new information, future events or otherwise. As such, Third Point Re’s future results may vary from any expectations or goals expressed in, or implied by, the forward-looking statements included in this presentation, possibly to a material degree. Third Point Re cannot assure you that the assumptions made in preparing any of the forward-looking statements will prove accurate or that any long-term financial or operational goals and targets will be realized. For a discussion of some of the important factors that could cause Third Point Re’s results to differ materially from those expressed in, or implied by, the forward-looking statements included in this presentation, investors should read the Risk Factors set forth in the registration statement on file with the SEC related to our initial public offering completely and with the understanding that our actual future results may be materially different from what we expect. Any forward‐looking statements made by us in this presentation speak only as of the date of this presentation. We undertake no obligation to publicly update any forward‐ looking statement, whether as a result of new information, future developments or otherwise. Note to Certain Operating and Financial Data In addition to disclosing financial results that are determined in accordance with U.S. generally accepted accounting principles (“GAAP”), Third Point Re also discloses in this presentation certain non-GAAP financial information, including return on beginning shareholders’ equity, insurance float, book value per share, diluted book value per share and growth in diluted book value per share. These financial measures are not recognized measures under GAAP and are not intended to be, and should not be considered, in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Please see the definition and reconciliation to GAAP financials at the end of this presentation for further detail. In addition, this presentation contains various metrics and operating information that are based on internal company data. While management believes such information and data are reliable, they have not been verified by an independent source and there are inherent challenges and limitations involved in compiling data across various sources. This presentation includes certain non‐GAAP financial measures. See pages 17 and 18 for a definition of such non‐GAAP measures and a reconciliation of those measures to the most directly comparable GAAP measures.
    • Third Point Re: A Differentiated Equity Story 2 Key Facts and Figures: Business • Specialty property and casualty reinsurance Reinsurance Subsidiary • Class 4 Bermuda-domiciled reinsurer • A- financial strength rating from A.M. Best • Commenced underwriting on January 1, 2012, after a $784 million private capital raise Investment Manager • Third Point LLC, an SEC-registered investment manager, manages Third Point Re’s investment portfolio under a long-term investment management agreement • Daniel S. Loeb, founder of Third Point LLC, and related personal investment vehicles provided 10.8% of founding capital ($85 million) in Third Point Re Profitable reinsurance underwriting with superior investment management drives opportunity for equity returns Return on Beginning Shareholders Equity* • Year end 2012: 13.0% • YTD through 6/30/13: 11.6%1 1 Not annualized.
    • Investment Highlights 3 Total return business model Potential to perform in all market cycles Attractive financial profile Successful first 18 months of operations: 2012: $190mm in GWP; 13.0% ROE*; 1H2013: $194mm in GWP; 11.6% ROE* Best-in-class investment manager 21.0% net annualized returns since inception 1,2,3 Aligned investor sponsorship With reinsurance investment experience Deeply experienced and credentialed management team Disciplined and opportunistic underwriting approach Profitable reinsurance underwriting with superior investment management designed to deliver attractive equity returns over time * Non-GAAP measure; please see descriptions and reconciliations on slides 21 and 22; 1 From formation of Third Point Partners L.P., Third Point LLC’s oldest fund, in June 1995 through December 31, 2012; 2 Past performance is not necessarily indicative of future results. All investments involve risk including the loss of principal; 3 The historical performance of Third Point Partners L.P. (i) for the years 2001 through December 31, 2012 reflects the total return after incentive allocation for each such year as included in the audited statement of financial condition of Third Point Partners L.P. for those years and (ii) for the years 1995 through 2000 reflects the total return after incentive allocation for each such year as reported by Third Point Partners L.P. Total return after incentive allocation for the years 2001 through December 31, 2012 is based on the net asset value for all limited partners of Third Point Partners L.P. taken as a whole, some of whom pay no incentive allocation or management fees, whereas total return after incentive allocation for the years 1995 through 2000 is based on the net asset value for only those limited partners of Third Point Partners L.P. that paid incentive allocation and management fees. In each case, results are presented net of management fees, brokerage commissions, administrative expenses, and accrued performance allocation, if any, and include the reinvestment of all dividends, interest, and capital gains.
    • Total Return Business Model Offers Upside In Varying Markets 4 Dynamic Business Model Reinsurance: World-class underwriting team Investment Portfolio: World-class investment manager “Hard” Reinsurance Market Robust underwriting margin Superior investment returns Asset leverage Potential for attractive ROEs across underwriting cycles “Soft” Reinsurance Market Modest underwriting margin Superior investment returns Asset leverage
    • Deeply Experienced and Highly Credentialed Management Team 5 John Berger Chairman & CEO • CEO, Reinsurance, Vice Chairman of the Board, Alterra Capital Holdings Limited • CEO & President, Harbor Point Re Limited (Chubb Re spin-out) • CEO & President, Chubb Re, Inc. • President, F&G Re  Michael McKnight, Chief Actuary & Chief Risk Officer • Chief Actuary of Reinsurance, Alterra Capital Holdings Limited • Managing Director & Chief Underwriting Officer, Gerling Global International Reinsurance Co. Ltd. • Consulting Actuary and Profit Center Manager, Milliman, USA Manoj Gupta SVP, Underwriting • Lead Portfolio Manager, Catastrophe Reinsurance, Goldman Sachs Asset Management • Leader of Alternative Capacity and Credit Risk Solutions, Benfield Tonya Marshall EVP, General Counsel & Secretary • General Counsel & Board Secretary, The Bank of N.T. Butterfield & Son Limited • Associate Attorney, Conyers Dill & Pearman CEO Experience Robert Bredahl CFO & COO • CEO, Aon Benfield Securities • President, Aon Benfield Americas • CEO, Benfield U.S. Inc. & CEO, Benfield Advisory • Board Member, Benfield Group PLC  Tony Urban EVP, Underwriting • President & CEO, JRG Reinsurance Company, Ltd. • Chief Underwriting Officer & Head of Reinsurance Operations, Endurance Reinsurance Corporation of America • Executive Vice President & Chief Underwriting Officer, AXA Corporate Solutions Reinsurance Company  Dan Malloy EVP, Underwriting • Executive VP, Co Head of Specialty Lines, Aon Benfield • President & CEO, Stockton Reinsurance Ltd. • President, Center Re Bermuda 
    • Disciplined and Opportunistic Reinsurance Strategy 6 • Reinsurance strategy – Identify profitable reinsurance opportunities that generate stable underwriting profits – Target sub-sectors and specific situations where capacity and alternatives may be constrained – Flexibility to adjust level of volatility according to market conditions and expected margins – Current focus on quota share contracts • Third Point Re’s approach is to position itself for the expected improvement in P&C pricing over the medium term – Management has a track record of entering new lines of business to capitalize on market opportunities and produce strong underwriting results – Strong management relationships provide access to attractive underwriting opportunities • Asset leverage is expected to grow over time and help drive ROE – The Company expects to capture net investment income generated by float* primarily from the time-lag between receipt of premiums and payment of claims Disciplined and Opportunistic Underwriting Positive Asset Leverage (i.e. Float)* Reinsurance Operations Contribution to ROE Generating ROE from underwriting and positive asset leverage * Non-GAAP measure; please see descriptions and reconciliations on slides 21 and 22.
    • Strong Relationships with Diverse and Leading Reinsurance Brokers 7 Aon Benfield 28% Guy Carpenter 21% Advocate RP 4% Towers Watson 4% Willis Re 8% All others (44 brokers) 35% Submissions Key Success Factors Multiple sources of submissions Access to desired types of business Long-standing relationships Submissions by broker (January 2012 – June 2013): 322 submissions, 18 bound reinsurance contracts
    • Property 35% Casualty 39% Specialty 26% Growing and Diversified Reinsurance Portfolio 8 Strong Premium Growth ($ millions) Portfolio Construction Expertise in writing all lines of property, casualty and specialty reinsurance Generate stable underwriting results over time Provide reinsurance where capacity/alternatives may be limited Level of reinsurance portfolio volatility will be driven by market conditions Limited catastrophe exposure 1 Excludes catastrophe fund premiums. $190.4 $120.8 $194.2 FY 2012 1H 2012 1H 2013 GWP: $377.9 million¹ Business Mix – Inception Through 6/30/13
    • Third Point Re’s Relationship With Third Point LLC 9 • Third Point LLC manages virtually all of Third Point Re’s investable assets • Exclusive relationship for an initial contractual term through 2016, followed by successive three-year terms on renewal – The company pays a standard 2% management fee and 20% performance allocation – Performance allocation is subject to a standard high water mark, loss carry-forward provision • Third Point Re investments are held in a separate account and managed by Third Point LLC on substantially the same basis as its main hedge funds – The account is subject to certain additional investment guidelines and parameters not employed by the main funds (i.e. limitations on exposure, increased liquidity, etc.) • Third Point Re has full ownership of and access to the investment portfolio to provide liquidity to pay claims and expenses Third Point LLC manages Third Point Re’s assets under a long-term investment management agreement
    • Best‐in‐Class Investment Management 10 21% net annualized returns since inception in 19955 Third Point LLC owned and led by Daniel S. Loeb Risk-adjusted returns driven by superior security selection and lower volatility 66 employees including 25 investment professionals6 Significant focus on risk management ¹ For Third Point Partners L.P. after fees, expenses and incentive allocation; ² Past performance is not necessarily indicative of future results; all investments involve risk including the loss of principal; ³ The historical performance of Third Point Partners L.P. (i) for the years 2001 through June 30, 2013 reflects the total return after incentive allocation for each such year as included in the audited statement of financial condition of Third Point Partners L.P. for those years and (ii) for the years 1995 through 2000 reflects the total return after incentive allocation for each such year as reported by Third Point Partners L.P. Total return after incentive allocation for the years 2001 through June 30, 2013 is based on the net asset value for all limited partners of Third Point Partners L.P. taken as a whole, some of whom pay no incentive allocation or management fees, whereas total return after incentive allocation for the years 1995 through 2000 is based on the net asset value for only those limited partners of Third Point Partners L.P. that paid incentive allocation and management fees. In each case, results are presented net of management fees, brokerage commissions, administrative expenses, and accrued performance allocation, if any, and include the reinvestment of all dividends, interest, and capital gains; 4 The illustrative return is calculated as a theoretical investment of $1,000 in Third Point Partners, L.P. at inception relative to the same theoretical investment in two hedge fund indices designed to track performance of certain “event-driven” hedge funds over the same period of time. All references to the Dow Jones Credit Suisse HFI Event Driven Index (“DJ-CS HFI”) and HFRI Event-Driven Total Index (“HFRI”) reflect performance calculated through June 30, 2013. The DJ-CS HFI is an asset-weighted index and includes only funds, as opposed to separate accounts. The DJ-CS HFI uses the Dow Jones Credit Suisse database and consists only of event driven funds deemed to be “event-driven” by the index and that have a minimum of $50 million in assets under management, a minimum of a 12-month track record, and audited financial statements. The HFRI consists only of event driven funds with a minimum of $50 million in assets under management or a minimum of a 12-month track record. Both indices state that returns are reported net of all fees and expenses. Please see the glossary included in the prospectus beginning on page G-1 for a description of how these indices are calculated. While Third Point Partners L.P. has been compared here with the performance of well-known and widely recognized indices, the indices have not been selected to represent an appropriate benchmark for Third Point Partners L.P., whose holdings, performance and volatility may differ significantlyfrom the securities that comprise the indices; 5 From formation of Third Point Partners L.P. in June 1995 through December 31, 2012; 6 As of 6/30/13. Illustrative Net Return1 Since Inception2,3,4 Third Point LLC Overview - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Jun-13 Jun-12 Jun-11 Jun-10 Jun-09 Jun-08 Jun-07 Jun-06 Jun-05 Jun-04 Jun-03 Jun-02 Jun-01 Jun-00 Jun-99 Jun-98 Jun-97 Jun-96 Jun-95 Third Point Partners L.P. S&P 500 HFRI DJ-CS HFI
    • Investment Management Strategy 11 • Investment philosophy – Value-oriented, event-driven approach to single security selection supplemented by a top-down view of portfolio construction and risk management – Value unlocked by discrete events or “catalysts” – Single portfolio composed of diversified investments • Investment process – Fundamental, bottom-up analysis using proprietary framework – Tactical considerations of entry points, position sizing and hedging • Investment areas of focus: Jan-08 Feb-09 Mar-10 Apr-11 May-12 Jun-13 Long / Short Equity Credit Macro ABS Arb Other
    • Attractive Financial Profile 12 Strong Balance Sheet • No debt • Low premium leverage • Liquid investment portfolio – 97% of investments within FAS 157 Liquidity Levels 1 and 2 Earnings Transparency/ Stability • Net investment income drops to the bottom line and is a key driver of profitability • Limited legacy reserves mitigate risk of adverse reserve development • Catastrophe exposure largely limited to Third Point Re’s $50 million investment in our Cat Fund ROE Expansion Potential • Potential to expand ROE due to increasing asset leverage and a potentially improving reinsurance market
    • Rigorous Risk Management 13 • Carefully defined risk appetite and controls • Quarterly reporting to the Board of Directors • Comprehensive internal capital model Underwriting Investment Management • Rigorous procedures • Lead underwriter on most transactions • Robust controls • Real time access to reports • Bi-annual operational review by independent investment advisory firm • Close partnership with Third Point LLC risk management team
    • Key Financial Highlights 14 3 months ended 6/30/13 6 months ended 6/30/13 Year ended 12/31/12 Gross premiums written $98,215 $194,235 $190,374 Gross premiums ceded 0 (9,975) 0 Net premiums earned 62,287 95,828 96,481 Net investment income 32,067 112,758 136,422 Total revenues $94,354 $208,586 $232,903 Loss and loss adjustment expenses incurred, net 45,692 64,330 80,306 Acquisition costs, net 14,921 27,994 24,604 General and administrative expenses 7,217 14,225 27,376 Total expenses $67,830 $106,549 $132,286 Income (loss) including non-controlling interests 26,524 102,037 100,617 (Income) attributable to non-controlling interests (301) (1,384) (1,216) Net income (loss) $26,223 $100,653 $99,401 3 months ended 6/30/13 6 months ended 6/30/13 Year ended 12/31/12 Loss ratio2 73.7% 68.0% 83.2% Acquisition cost ratio3 24.1% 29.6% 25.5% General and administrative expense ratio4 7.7% 10.1% 21.0% Combined ratio5 105.5% 107.7% 129.7% Net investment return6 3.2% 12.2% 17.7% Consolidated Income Statement ($000s) Selected Income Statement Ratios¹ • Generated $190 million of gross premium in first year of operation • Gross premium increased by 61% to $194 million in 1H2013 vs. 1H2012 • YTD combined ratio dropped to 105.5% in Q2 2013 as earned premium grew relative to general and administrative expenses • Strong investment returns from investments managed by Third Point LLC of 17.7% in 2012 and 12.2% in 1H2013 • July 2013 investment income from investments managed by Third Point LLC was a 2.6% return for the month Highlights 1 Underwriting ratios are for the property and casualty reinsurance segment only; 2 Loss ratio is calculated by dividing loss and loss adjustment expenses incurred, net, by net premiums earned; 3 Acquisition cost ratio is calculated by dividing acquisition costs, net by net premiums earned; 4 General and administrative expense ratio is calculated by dividing general and administrative expenses related to underwriting activities by net premiums earned; 5 Combined ratio is calculated by dividing the sum of loss and loss adjustment expenses incurred, net, acquisition costs, net and general and administrative expenses related to underwriting activities by net premiums earned; 6 Net investment return represents the return on our investments managed by Third Point LLC, net of fees.
    • Key Financial Highlights (Cont’d) 15 As of 6/30/13 As of 12/31/12 Total assets $1,606,495 $1,402,017 Total liabilities 581,634 473,696 Total shareholders’ equity $1,024,861 $928,321 Non-controlling interests (52,196) (59,777) Shareholders' equity attributable to shareholders $972,665 $868,544 6 months ended 6/30/131 Year ended 12/31/12 Diluted book value per share* $12.07 $10.89 Growth in diluted book value per share* 10.9% 11.9% Return on beginning shareholders’ equity* 11.6% 13.0% Selected Balance Sheet Data ($000s) Selected Balance Sheet Metrics * Non-GAAP measure; please see descriptions and reconciliations on slides 21 and 22. 1 Not annualized. As of 7/31/13 As of 6/30/13 As of 12/31/12 Total investments managed by Third Point LLC $1,130,038 $1,034,726 $925,453 Investments ($000s)
    • Investment Highlights 16 Total return business model Attractive financial profile Best-in-class investment manager Aligned investor sponsorship Deeply experienced and credentialed management team Profitable reinsurance underwriting with superior investment management designed to deliver attractive equity returns over time
    • Non‐GAAP Measures 17 Book value per share Book value per share as used by our management is a non-GAAP measure, as it is calculated after deducting the impact of non- controlling interests. Diluted book value per share is also a non-GAAP measure and represents book value per share combined with the impact from dilution of all in-the-money share options issued, warrants and unvested restricted shares outstanding as of any period end. We believe that long-term growth in diluted book value per share is the most important measure of our financial performance because it allows our management and investors to track over time the value created by the retention of earnings. In addition, we believe this metric is used by investors because it provides a basis for comparison with other companies in our industry that also report a similar measure. The following table sets forth the computation of basic and diluted book value per share as of June 30, 2013 and December 31, 2012: As of 6/30/13 As of 12/31/12 Basic and diluted book value per share numerator: Total shareholders’ equity 1,024,861 $928,321 Less: Non-controlling interests 52,196 59,777 Shareholders’ equity attributable to shareholders $972,665 $868,544 Effect of dilutive warrants issued to founders and an advisor 36,480 36,480 Effect of dilutive stock options issued to directors and employees 52,090 51,670 Diluted book value per share numerator $1,061,235 $956,694 Basic and diluted book value per share denominator: Issued and outstanding shares 78,432,132 78,432,132 Effect of dilutive warrants issued to founders and an advisor 3,648,006 3,648,006 Effect of dilutive stock options issued to directors and employees 5,194,404 5,167,045 Effect of dilutive restricted shares issued to employees 624,300 619,300 Diluted book value per share numerator 87,898,842 87,866,483 Basic book value per share $12.40 $11.07 Diluted book value per share $12.07 $10.89 ($000s, Except Share and Per Share Amounts)
    • Non‐GAAP Measures (Cont’d) 18 Growth in diluted book value per share Calculated by taking the change in diluted book value per share divided by the beginning of period diluted book value per share. Return on beginning shareholders’ equity Calculated by dividing net income by the beginning of year shareholders’ equity attributable to shareholders and is a commonly used calculation to measure profitability. For purposes of this calculation, we add back the impact of subscriptions receivable to shareholders’ equity attributable to shareholders as of December 31, 2011. Management believes this adjustment more fairly presents the return on equity over the period. Insurance float In an insurance or reinsurance operation, float arises because premiums and proceeds associated with deposit accounted reinsurance contracts are collected before losses are paid. In some instances, the interval between premium receipts and loss payments can extend over many years. During this time interval, insurance and reinsurance companies invest the premiums received and generate investment returns. Although float can be calculated using numbers determined under U.S. GAAP, float is a non-GAAP financial measure and, therefore, there is no comparable U.S. GAAP measure.