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Third Point Re Reports Third Quarter 2017 Earnings Results

Net income available to Third Point Re common shareholders of $54.7 million, or $0.52 per diluted common share

HAMILTON, Bermuda, Nov. 8, 2017 /PRNewswire/ -- Third Point Reinsurance Ltd. ("Third Point Re" or the "Company") (TPRE) today announced results for its third quarter ended September 30, 2017.

Third Point Re reported net income available to common shareholders of $54.7 million, or $0.52 per diluted common share, for the three months ended September 30, 2017, compared to $72.1 million, or $0.68 per diluted common share, for the three months ended September 30, 2016. For the nine months ended September 30, 2017, Third Point Re reported net income available to common shareholders of $233.4 million, or $2.22 per diluted common share, compared to $74.3 million, or $0.70 per diluted common share, for the nine months ended September 30, 2016.

For the three months ended September 30, 2017, diluted book value per share increased by $0.50 per share, or 3.4%, to $15.24 per share as of September 30, 2017, from $14.74 per share as of June 30, 2017. For the nine months ended September 30, 2017, diluted book value per share increased by $2.08 per share, or 15.8%, to $15.24 per share from $13.16 per share as of December 31, 2016.

"Our strong performance for 2017 continued through the third quarter with a return on beginning shareholders' equity of 3.5%, bringing our nine month return to 16.8%," commented Rob Bredahl, President and Chief Executive Officer.  "Our investment manager, Third Point LLC continues to have a great year and has generated an investment return of 14.6% through the first nine months of the year and 17.6% through October 2017. We reported a combined ratio of 111.9% for the quarter ended September 30, 2017, which included $5.3 million, or 5.0 percentage points on our combined ratio, related to third quarter catastrophes. The small net loss from these events was within expectations given our limited exposure and reflects our decision to avoid highly volatile forms of reinsurance such as catastrophe excess of loss treaties."

The following table shows certain key financial metrics for the three and nine months ended September 30, 2017 and 2016:


Three months ended


Nine months ended


September 30,
 2017


September 30,
 2016


September 30,
 2017


September 30,
 2016


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

Gross premiums written

$

174.5



$

142.6



$

477.5



$

536.6


Net premiums earned

$

106.0



$

128.2



$

417.5



$

398.1


Net underwriting loss (1)

$

(12.6)



$

(8.3)



$

(33.3)



$

(40.5)


Combined ratio (1)

111.9

%


106.5

%


108.0

%


110.2

%

Net investment return on investments managed by Third Point LLC

3.6

%


4.0

%


14.6

%


6.0

%

Net investment income

$

89.0



$

88.4



$

324.8



$

134.6


Net investment income on float (2)

$

26.5



$

22.0



$

93.9



$

32.9


Net income available to Third Point Re common shareholders

$

54.7



$

72.1



$

233.4



$

74.3


Diluted earnings per share available to Third Point Re common
shareholders

$

0.52



$

0.68



$

2.22



$

0.70


Change in diluted book value per share (2)

3.4

%


5.2

%


15.8

%


5.4

%

Return on beginning shareholders' equity (2)

3.5

%


5.2

%


16.8

%


5.4

%

Net investments managed by Third Point LLC (3)

$

2,525.0



$

2,191.6



$

2,525.0



$

2,191.6


Invested asset leverage (3)

1.57



1.55



1.57



1.55




(1)

See the accompanying Segment Reporting for a calculation of net underwriting loss and combined ratio.

(2)

Net investment income on float, change in diluted book value per share and return on beginning shareholders' equity 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 net investment income on float, diluted book value per share and return on beginning shareholders' equity.

(3)

Prior year comparatives represent amounts as of December 31, 2016.

 

Segment Highlights

Property and Casualty Reinsurance Segment

Gross premiums written increased by $32.0 million, or 22.4%, to $174.5 million for the three months ended September 30, 2017 from $142.6 million for the three months ended September 30, 2016. Gross premiums written decreased by $59.1 million, or 11.0%, to $477.5 million for the nine months ended September 30, 2017 from $536.6 million for the nine months ended September 30, 2016.

The increase for the three months ended September 30, 2017 compared to the period year period was primarily due to new contracts, partially offset by timing differences. The decrease for the nine months ended September 30, 2017 compared to the prior year period was primarily due to contracts that we did not renew as a result of underlying terms and conditions, lower premium adjustments in the current year period and other timing differences partially offset by new premium.

The decrease in net premiums earned in the three months ended September 30, 2017 compared to the three months ended September 30, 2016 was primarily due to a lower in-force underwriting portfolio. The increase in net premiums earned for the nine months ended September 30, 2017 was primarily due to $85.6 million of new retroactive exposures assumed in reinsurance contracts, which was fully earned when written, partially offset by a lower in-force underwriting portfolio. We did not write any retroactive reinsurance contracts in the three and nine months ended September 30, 2016.

The net underwriting loss and combined ratio for the three months ended September 30, 2017 included $5.3 million, or 5.0 percentage points, related to third quarter catastrophes.  There was an insignificant impact on our net underwriting result from changes in estimates of prior years' loss reserves, net of the related impact of acquisition costs, for the three and nine months ended September 30, 2017.

The net underwriting loss and combined ratio for the three and nine months ended September 30, 2016 did not include any impact of catastrophe losses. There was an insignificant impact on our net underwriting result from changes in estimates of prior years' loss reserves, net of the related impact of acquisition costs, for the three months ended September 30, 2016. The nine months ended September 30, 2016 included increases of $12.5 million in net underwriting loss from changes in estimates of prior years' reserves, net of related impact of acquisition costs.

Investments

The return on investments managed by Third Point LLC by strategy for the three and nine months ended September 30, 2017 and 2016 was as follows:


Three months ended


September 30, 2017


September 30, 2016


Long


Short


Net


Long


Short


Net

Equity

3.5

%


(0.9)

%


2.6

%


4.1

%


(2.2)

%


1.9

%

Credit

0.5

%


(0.1)

%


0.4

%


2.1

%


(0.1)

%


2.0

%

Other

0.9

%


(0.3)

%


0.6

%


0.2

%


(0.1)

%


0.1

%

Net investment return on investments
managed by Third Point LLC

4.9

%


(1.3)

%


3.6

%


6.4

%


(2.4)

%


4.0

%














Nine months ended


September 30, 2017


September 30, 2016


Long


Short


Net


Long


Short


Net

Equity

16.8

%


(3.0)

%


13.8

%


3.8

%


(2.5)

%


1.3

%

Credit

0.6

%


(0.5)

%


0.1

%


6.5

%


(0.7)

%


5.8

%

Other

1.9

%


(1.2)

%


0.7

%


0.1

%


(1.2)

%


(1.1)

%

Net investment return on investments
managed by Third Point LLC

19.3

%


(4.7)

%


14.6

%


10.4

%


(4.4)

%


6.0

%

For the three months ended September 30, 2017, the investment portfolio generated positive net returns from each investment strategy with equities remaining the strongest performing strategy for the quarter.  Gains generated from long investments in every sector except consumer were partially offset by losses in the short portfolios for most sectors as well as market hedges.  Performance was primarily attributable to long activist or long-term growth investments in the industrials, healthcare and technology, media and telecommunications sectors.  Within credit, long sovereign investments in Latin America and U.S.-based structured credit positions drove gains.  Exposure in the other strategy remains modest and positive returns from long risk arbitrage, currency, private and macroeconomic portfolios were partially offset by losses in the corresponding short portfolios. 

For the nine months ended September 30, 2017, the net investment results were primarily attributable to our equity portfolio.  Within equities, the investment account saw positive net returns from every sector led by healthcare, industrials, consumer and technology, media and telecommunications.  The long portfolio added meaningful returns while the short portfolio generated alpha amidst a strong broader market backdrop.  Within credit, gains in each sub-strategy on the long side were partially offset by negative performance by the short performing credit book.  Positive returns from risk arbitrage, private and currency investments negated modest detraction from macroeconomic hedges in the other strategy.

Board of Director Changes

In a separate press release, Third Point Re also today announced that John Berger, Chairman, will be stepping down from the Board effective December 22, 2017. Steven Fass, a current Board Director, will succeed Mr. Berger as interim Chairman. Rob Bredahl, President and Chief Executive Officer, will replace Mr. Berger on the Board as of December 22, 2017. The Board would like to thank Mr. Berger for his work as Chairman and he leaves with their best wishes.  John was instrumental in the formation of Third Point Re and the Board sincerely appreciates all of Mr. Berger's hard work in getting Third Point Re to its current position.

Share Repurchase Program

During the three months ended September 30, 2017, we did not repurchase any of our common shares.

During the nine months ended September 30, 2017, we repurchased 3,300,152 of our common shares in the open market for $40.9 million at a weighted average cost, including commissions, of $12.38 per share. Common shares repurchased were not canceled and are classified as treasury shares.

As of September 30, 2017, the Company is authorized to repurchase up to an aggregate of $51.7 million of additional common shares under its share repurchase program.

Conference Call Details

The Company will hold a conference call to discuss its third quarter 2017 results at 8:30 a.m. Eastern Time on November 9, 2017. The call will be webcast live over the Internet from the Company's website at www.thirdpointre.bm under "Investors". Participants should follow the instructions provided on the website to download and install any necessary audio applications. The conference call is also available by dialing 1-877-407-0789 (domestic) or 1-201-689-8562 (international). Participants should ask for the Third Point Reinsurance Ltd. third 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 13671485. The telephonic replay will be available until 11:59 p.m. (Eastern Time) on November 16, 2017.

Safe Harbor Statement Regarding Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond the Company's control. The Company cautions you that the forward-looking information presented in this press release is not a guarantee of future events, and that actual events may differ materially from those made in or suggested by the forward-looking information contained in this press release. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "plan," "seek," "comfortable with," "will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or the negative thereof or variations thereon or similar terminology. Actual events, results and outcomes may differ materially from the Company's expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following: (i) fluctuation in results of operations; (ii) more established competitors; (iii) losses exceeding reserves; (iv) downgrades or withdrawal of ratings by rating agencies; (v) dependence on key executives; (vi) dependence on letter of credit facilities that may not be available on commercially acceptable terms; (vii) dependence on financing available through our investment accounts to secure letters of credit and collateral for reinsurance contracts; (viii) potential inability to pay dividends; (ix) inability to service our indebtedness; (x) limited cash flow and liquidity due to our indebtedness; (xi) unavailability of capital in the future; (xii) fluctuations in market price of our common shares; (xiii) dependence on clients' evaluations of risks associated with such clients' insurance underwriting; (xiv) suspension or revocation of our  reinsurance licenses; (xv) potentially being deemed an investment company under U.S. federal securities law; (xvi) potential characterization of Third Point Reinsurance Ltd. and/or Third Point Reinsurance Company Ltd. ("Third Point Re BDA") as a passive foreign investment company; (xvii) future strategic transactions such as acquisitions, dispositions, merger or joint ventures; (xviii) dependence on Third Point LLC to implement our investment strategy; (xix) termination by Third Point LLC of our investment management agreements; (xx) risks associated with our investment strategy being greater than those faced by competitors; (xxi) increased regulation or scrutiny of alternative investment advisers affecting our reputation; (xxii) Third Point Reinsurance Ltd. and/or Third Point Re BDA potentially becoming subject to U.S. federal income taxation, including as a result of the bill currently proposed in the U.S House of Representatives; (xxiii) potentially becoming subject to U.S. withholding and information reporting requirements under the Foreign Account Tax Compliance Act; (xxiv) changes in Bermuda or other law and regulation that may have an adverse impact on our operations; and (xxv) 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 net investment income on float, book value per share, diluted book value per share and return on beginning shareholders' equity, are referred to as non-GAAP measures. These non-GAAP measures may be defined or calculated differently by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor our results and should not be viewed as a substitute for those determined in accordance with GAAP. Reconciliations of such measures to the most comparable GAAP figures are included in the attached financial information in accordance with Regulation G.

About the Company

The Company is a public company listed on the New York Stock Exchange which, through its wholly-owned subsidiaries Third Point 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.
Manoj Gupta - Head of Investor Relations and Business Development
investorrelations@thirdpointre.bm
+1 441-542-3333

 


THIRD POINT REINSURANCE LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of September 30, 2017 and December 31, 2016

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




September 30,
 2017


December 31,
 2016

Assets





Equity securities, trading, at fair value (cost - $1,676,001; 2016 - $1,385,866)


$

2,017,463



$

1,506,854


Debt securities, trading, at fair value (cost - $676,972; 2016 - $1,036,716)


656,118



1,057,957


Other investments, at fair value


30,932



82,701


Total investments in securities


2,704,513



2,647,512


Cash and cash equivalents


6,434



9,951


Restricted cash and cash equivalents


477,362



298,940


Due from brokers


387,786



284,591


Derivative assets, at fair value


75,781



27,432


Interest and dividends receivable


4,210



6,505


Reinsurance balances receivable


478,206



381,951


Deferred acquisition costs, net


223,091



221,618


Other assets


11,464



17,144


Total assets


$

4,368,847



$

3,895,644


Liabilities





Accounts payable and accrued expenses


$

24,580



$

10,321


Reinsurance balances payable


54,654



43,171


Deposit liabilities


126,491



104,905


Unearned premium reserves


615,375



557,076


Loss and loss adjustment expense reserves


699,369



605,129


Securities sold, not yet purchased, at fair value


405,845



92,668


Due to brokers


602,230



899,601


Derivative liabilities, at fair value


17,280



16,050


Performance fee payable to related party


73,210




Interest and dividends payable


1,917



3,443


Senior notes payable, net of deferred costs


113,688



113,555


Total liabilities


2,734,639



2,445,919


Commitments and contingent liabilities





Redeemable noncontrolling interests in related party (1)


16,813




Shareholders' equity





Preference shares (par value $0.10; authorized, 30,000,000; none issued)





Common shares (par value $0.10; authorized, 300,000,000; issued and outstanding, 107,383,405 (2016 - 106,501,299))


10,738



10,650


Treasury shares (3,944,920 shares (2016 - 644,768 shares))


(48,253)



(7,389)


Additional paid-in capital


1,099,998



1,094,568


Retained earnings


549,671



316,222


Shareholders' equity attributable to Third Point Re common shareholders


1,612,154



1,414,051


Noncontrolling interests in related party (1)


5,241



35,674


Total shareholders' equity


1,617,395



1,449,725


Total liabilities, noncontrolling interests and shareholders' equity


$

4,368,847



$

3,895,644




(1)

During the quarter ended September 30, 2017, the Company identified that a portion of its noncontrolling interest was redeemable.  This portion of the
noncontrolling interests had previously been presented in noncontrolling interests in related party within shareholders' equity when it should have been
presented in the mezzanine section of the consolidated balance sheet as redeemable noncontrolling interests in related party.  As of December 31, 2016,
$31.2 million of the noncontrolling interest in related party should have been presented in the mezzanine section of the consolidated balance sheet as
redeemable noncontrolling interests in related party.  Although this impacted total shareholders' equity, it did not impact shareholders' equity attributable to
Third Point Re common shareholders or retained earnings.  In addition, this change did not impact the condensed consolidated statements of income,
earnings per share or condensed consolidated statement of cash flows.  The Company has evaluated the effect of the incorrect presentation, both
qualitatively and quantitatively, and concluded that it did not have a material impact on, nor require amendment of, any previously filed annual or quarterly
consolidated financial statements or periodic reports.

 

 


THIRD POINT REINSURANCE LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the three and nine months ended September 30, 2017 and 2016

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



Three months ended


Nine months ended


September 30,
 2017


September 30,
 2016


September 30,
 2017


September 30,
 2016

Revenues








Gross premiums written

$

174,539



$

142,573



$

477,457



$

536,595


Gross premiums ceded



(927)



(2,550)



(2,352)


Net premiums written

174,539



141,646



474,907



534,243


Change in net unearned premium reserves

(68,564)



(13,463)



(57,365)



(136,136)


Net premiums earned

105,975



128,183



417,542



398,107


Net investment income before management and performance fees to
related parties

119,516



121,208



427,982



191,084


Management and performance fees to related parties

(30,548)



(32,852)



(103,179)



(56,492)


Net investment income

88,968



88,356



324,803



134,592


Total revenues

194,943



216,539



742,345



532,699


Expenses








Loss and loss adjustment expenses incurred, net

77,275



85,015



270,549



273,822


Acquisition costs, net

33,974



45,127



157,067



145,296


General and administrative expenses

13,218



12,354



38,804



33,885


Other expenses

3,846



347



8,852



6,226


Interest expense

2,074



2,069



6,151



6,163


Foreign exchange (gains) losses

5,437



(3,905)



10,233



(14,359)


Total expenses

135,824



141,007



491,656



451,033


Income before income tax expense

59,119



75,532



250,689



81,666


Income tax expense

(3,475)



(2,484)



(14,080)



(5,865)


Net income

55,644



73,048



236,609



75,801


Net income attributable to noncontrolling interests in related party

(959)



(967)



(3,160)



(1,473)


Net income available to Third Point Re common shareholders

$

54,685



$

72,081



$

233,449



$

74,328


Earnings per share available to Third Point Re common shareholders








Basic earnings per share available to Third Point Re common
shareholders

$

0.54



$

0.69



$

2.27



$

0.71


Diluted earnings per share available to Third Point Re common
shareholders

$

0.52



$

0.68



$

2.22



$

0.70


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








Basic

101,391,145



103,780,196



102,553,346



104,055,946


Diluted

104,679,574



105,795,313



105,040,251



105,590,668


 

 


THIRD POINT REINSURANCE LTD.

SEGMENT REPORTING



Three months ended September 30, 2017


Three months ended September 30, 2016


Property and
Casualty
Reinsurance


Corporate


Total


Property and
Casualty
Reinsurance


Corporate


Total

Revenues

($ in thousands)


($ in thousands)

Gross premiums written

$

174,539



$



$

174,539



$

142,573



$



$

142,573


Gross premiums ceded







(927)





(927)


Net premiums written

174,539





174,539



141,646





141,646


Change in net unearned premium reserves

(68,564)





(68,564)



(13,463)





(13,463)


Net premiums earned

105,975





105,975



128,183





128,183


Expenses












Loss and loss adjustment expenses incurred, net

77,275





77,275



85,015





85,015


Acquisition costs, net

33,974





33,974



45,127





45,127


General and administrative expenses

7,291



5,927



13,218



6,380



5,974



12,354


Total expenses

118,540



5,927



124,467



136,522



5,974



142,496


Net underwriting loss

(12,565)



 n/a



 n/a



(8,339)



 n/a



 n/a


Net investment income

26,531



62,437



88,968



22,031



66,325



88,356


Other expenses

(3,846)





(3,846)



(347)





(347)


Interest expense



(2,074)



(2,074)





(2,069)



(2,069)


Foreign exchange gains (losses)



(5,437)



(5,437)





3,905



3,905


Income tax expense



(3,475)



(3,475)





(2,484)



(2,484)


Net income attributable to noncontrolling interests in
related party



(959)



(959)





(967)



(967)


Segment income

$

10,120



$

44,565





$

13,345



$

58,736




Net income available to Third Point Re common
shareholders





$

54,685







$

72,081


Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

72.9

%






66.3

%





Acquisition cost ratio

32.1

%






35.2

%





Composite ratio

105.0

%






101.5

%





General and administrative expense ratio

6.9

%






5.0

%





Combined ratio

111.9

%






106.5

%


















Nine months ended September 30, 2017


Nine months ended September 30, 2016


Property and
Casualty
Reinsurance


Corporate


Total


Property and
Casualty
Reinsurance


Corporate


Total

Revenues

($ in thousands)


($ in thousands)

Gross premiums written

$

477,457



$



$

477,457



$

536,595



$



$

536,595


Gross premiums ceded

(2,550)





(2,550)



(2,352)





(2,352)


Net premiums written

474,907





474,907



534,243





534,243


Change in net unearned premium reserves

(57,365)





(57,365)



(136,136)





(136,136)


Net premiums earned

417,542





417,542



398,107





398,107


Expenses












Loss and loss adjustment expenses incurred, net

270,549





270,549



273,822





273,822


Acquisition costs, net

157,067





157,067



145,296





145,296


General and administrative expenses

23,252



15,552



38,804



19,527



14,358



33,885


Total expenses

450,868



15,552



466,420



438,645



14,358



453,003


Net underwriting loss

(33,326)



 n/a



 n/a



(40,538)



 n/a



 n/a


Net investment income

93,857



230,946



324,803



32,868



101,724



134,592


Other expenses

(8,852)





(8,852)



(6,226)





(6,226)


Interest expense



(6,151)



(6,151)





(6,163)



(6,163)


Foreign exchange gains (losses)



(10,233)



(10,233)





14,359



14,359


Income tax expense



(14,080)



(14,080)





(5,865)



(5,865)


Net income attributable to noncontrolling interests in
related party



(3,160)



(3,160)





(1,473)



(1,473)


Segment income (loss)

$

51,679



$

181,770





$

(13,896)



$

88,224




Net income available to Third Point Re common
shareholders





$

233,449







$

74,328


Property and Casualty Reinsurance - Underwriting Ratios (1):

Loss ratio

64.8

%






68.8

%





Acquisition cost ratio

37.6

%






36.5

%





Composite ratio

102.4

%






105.3

%





General and administrative expense ratio

5.6

%






4.9

%





Combined ratio

108.0

%






110.2

%





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







 

 

 

THIRD POINT REINSURANCE LTD.

RECONCILIATION OF NON-GAAP MEASURES AND KEY PERFORMANCE INDICATORS






September 30,
 2017


December 31,
 2016


Basic and diluted book value per share numerator:


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


Shareholders' equity attributable to Third Point Re common shareholders


$

1,612,154


$

1,414,051


Effect of dilutive warrants issued to founders and an advisor


46,512


46,512


Effect of dilutive stock options issued to directors and employees


54,572


52,930


Diluted book value per share numerator


$

1,713,238


$

1,513,493


Basic and diluted book value per share denominator:






Issued and outstanding shares, net of treasury shares


101,399,735


104,173,748


Effect of dilutive warrants issued to founders and an advisor


4,651,163


4,651,163


Effect of dilutive stock options issued to directors and employees


5,332,833


5,274,333


Effect of dilutive restricted shares issued to directors and employees


1,061,412


878,529


Diluted book value per share denominator


112,445,143


114,977,773








Basic book value per share


$

15.90


$

13.57


Diluted book value per share


$

15.24


$

13.16





Three months ended


Nine months ended


September 30,
 2017


September 30,
 2016


September 30,
 2017


September 30,
 2016



($ in thousands)

Net investment income on float

$

26,531



$

22,031



$

93,857



$

32,868


Net investment income on capital

62,971



65,729



231,020



100,646


Net investment income on investments managed by Third Point LLC

89,502



87,760



324,877



133,514


Net gain (loss) on investment in Kiskadee Fund

(534)



596



(74)



1,078



$

88,968



$

88,356



$

324,803



$

134,592





Three months ended


Nine months ended


September 30,
 2017


September 30,
 2016


September 30,
 2017


September 30,
 2016



($ in thousands)

Net income available to Third Point Re common shareholders

$

54,685



$

72,081



$

233,449



$

74,328


Shareholders' equity attributable to Third Point Re common shareholders
- beginning of period

1,556,323



1,380,332



1,414,051



1,379,726


Impact of weighting related to shareholders' equity from shares
repurchased





(25,023)



(3,348)


Adjusted shareholders' equity attributable to Third Point Re common
shareholders - beginning of period

$

1,556,323



$

1,380,332



$

1,389,028



$

1,376,378


Return on beginning shareholders' equity attributable to Third Point Re
common shareholders

3.5

%


5.2

%


16.8

%


5.4

%

 

Non-GAAP Financial Measures and Key Performance Indicators

Book Value per Share and Diluted Book Value per Share

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

Net Investment Income on Float

Net investment income on float is an important aspect of our property and casualty reinsurance operation. In an insurance or reinsurance operation, float arises because premiums and proceeds from deposit accounted contracts are collected before losses are paid. In some instances, the interval between receipts and payments can extend over many years. During this time interval, insurance and reinsurance companies invest the premiums received and generate investment returns. Float is not a concept defined by U.S. GAAP and therefore, there are no comparable U.S. GAAP measures. Float, as a result, is considered to be a non-GAAP financial measure. We believe that net investment income generated on float is an important consideration in evaluating the overall contribution of our property and casualty reinsurance operation to our consolidated results. It is also explicitly considered as part of the evaluation of management's performance for purposes of long-term incentive compensation.

Net Investment Return on Investments Managed by Third Point LLC

Net investment return represents the return on our investments managed by Third Point LLC, net of fees. The net investment return on investments managed by Third Point LLC is the percentage change in value of a dollar invested over the reporting period on our investment assets managed by Third Point LLC, net of total noncontrolling interest. The stated return is net of withholding taxes, which are presented as a component of income tax expense in our condensed consolidated statements of income. Net investment return is the key indicator by which we measure the performance of Third Point LLC, our investment manager. 

Return on Beginning Shareholders' Equity  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 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. For  the nine months ended September 30, 2017, we have also adjusted the beginning shareholders' equity attributable to Third Point Re common shareholders for the impact of the shares repurchased on a weighted average basis. This adjustment increased the stated returns on beginning shareholders' equity attributable to Third Point Re common shareholders.

Invested Asset Leverage

Invested asset leverage is a ratio calculated by dividing our net investments managed by Third Point LLC by shareholders' equity attributable to Third Point Re common shareholders and is a key metric in assessing the amount of insurance float generated by our reinsurance operation that has been invested by our investment manager, Third Point LLC.  Given the sensitivity of our return on beginning shareholders' equity to our net investment return on investments managed by Third Point LLC, invested asset leverage is an important metric that management monitors.  It is also an important metric by which we evaluate our capital adequacy for rating agency and regulatory purposes.  Maintaining an appropriate invested asset leverage in order to optimize the return potential of the Company, while maintaining sufficient rating agency and regulatory capital is an important aspect of how we manage the Company.

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