During 2017, we recorded a net loss of $43.2 million and declared and paid quarterly dividends of $0.30 per Common Share and RSU during each of the first three quarters. The aggregate dollar value of all dividends declared with respect to 2017, totaled $7.9 million.
Our multi-tiered risk management approach focuses on tracking exposed contract limits, estimating the potential net impact of a single natural catastrophe event and simulating our yearly net operating result to reflect an aggregation of modeled underwriting, investment and other risks. The Manager and the Board regularly review the outputs from this process and the Manager routinely seeks to refine and improve our risk management process.
For certain defined natural catastrophe region and peril combinations, the Manager assesses the probability and likely magnitude of losses using a combination of industry third-party models, proprietary models and underwriting judgment. The Manager attempts to model the estimated net impact from a single event, taking into account contributions from property catastrophe reinsurance (including retrocessional business), property pro-rata reinsurance and event-linked derivative securities, offset by the net benefit of any reinsurance or derivative protections we purchase and the benefit of premiums.
The table that follows details our estimated net impact from single event losses as of January 1, 2018 for selected zones at specified return periods. It is important to note that each catastrophe model we use contains its own assumptions as to the frequency and severity of loss events, and results may vary significantly from model to model.
Our consolidated results of operations for the years ended December 31, 2017, 2016 and 2015 were as follows:
During 2017, 2016 and 2015 we earned $46.0 million, $43.6 million and $38.3 million of reinsurance premiums, respectively. Our reinsurance premiums earned are primarily a function of the amount and timing of reinsurance premiums previously written.
During the year ended December 31, 2017 we recognized $2.3 million of net gains from derivative instruments. During the years ended December 31, 2016 and 2015, we recognized $1.2 million and $0.2 million of net loss from derivative instruments, respectively. The increase in net gains from derivative instruments in 2017 compared to net losses recorded in 2016 and 2015 was due to a $4.7 million recovery that was triggered and settled on the 2017 Outward ILW Swaps resulting from the third quarter catastrophe events, partially offset lower gains recorded in income from the Inward ILW Swaps.
(1) Other loss events for the year ended December 31, 2016 included a Texas hailstorm, a Japanese earthquake, Netherlands hail events, Typhoon Meranti and a New Zealand earthquake for which the losses were individually below $1.0 million.
On May 6, 2016, the Company entered into the 2016 Credit Facility with Endurance Investment Holdings Ltd. (the "Lender"), a wholly-owned subsidiary of Sompo International. The 2016 Credit Facility provides the Company with an unsecured $20.0 million revolving credit facility for working capital and general corporate purposes and expires on September 30, 2018. The 2016 Credit Facility replaces the 2014 Credit Agreement (together the "Credit Agreements") and related Guarantee Agreement which expired on April 29, 2016. Borrowings under the 2016 Credit Facility bear interest, set at the time of the borrowing, at a rate equal to the applicable LIBOR rate plus 150 basis points. A one-time fee of $20,000 was due to the Lender in connection with establishing the 2016 Credit Facility. The 2016 Credit Facility contains covenants that limit the Company’s ability, among other things, to grant liens on its assets, sell assets, merge or consolidate, or incur debt. If the Company fails to comply with any of these covenants, the Lender could revoke the facility and exercise remedies against the Company. In addition, in the event of a default in the performance of any of the agreements or covenants under certain management agreements with the Manager by the Company, the Lender has the right to terminate the 2016 Credit Facility. As of December 31, 2017, the Company was in compliance with all of its respective covenants associated with the 2016 Credit Facility.
During 2017, 2016 and 2015 we declared and paid quarterly cash dividends of $0.30 per Common Share and RSU during each of the first three quarters of the year. In addition, in the first quarter of 2017, 2016 and 2015, we declared a special dividend of $0.59, $1.24 and $0.66, respectively, per Common Share and RSU with respect to the 2016, 2015 and 2014 fiscal year. The total amount of dividends paid to holders of Common Shares and RSUs during 2017, 2016 and 2015 was $13.1 million, $18.8 million and $13.7 million, respectively.
Our total shareholders’ equity (or total capital) was $127.1 million and $183.3 million at December 31, 2017 and 2016, respectively. The decrease in our total capital during the year ended December 31, 2017 was primarily the result of recording net loss of $43.2 million and declaring $13.1 million in dividends to holders of Common Shares and RSUs.
We may need to raise additional capital in the future, by issuing new debt, equity or hybrid securities, in order to enable us to, among other things: write new business; enter into other reinsurance opportunities; cover or pay losses; manage working capital requirements; repurchase Common Shares; respond to, or comply with, any changes in the capital requirements, if any, that the BMA or other regulatory bodies may require; acquire new businesses; or invest in existing businesses. We intend to rely on future offerings of Common Shares to raise additional equity capital; however, we cannot assure you that we will be able to successfully raise additional capital. In the event that we incur indebtedness for any of these purposes or other purposes, we intend to limit our borrowing to an amount no greater than 50% of our shareholders’ equity at the time of the borrowing. However, subject to the approval of the Board, we may borrow an amount in excess of 50% of our shareholders’ equity at the time of the borrowing.
Each of the reinsurance contracts that Blue Capital Re writes is required to be fully-collateralized by cash and cash equivalents or funds held by reinsurance companies. This collateral is not available to Blue Capital Re for any other purpose until the expiration of the applicable reinsurance contract (or, in the event of a covered loss, the resolution of such loss under
The Company's contractual obligations as of December 31, 2017 are summarized as follows:
The Company expects to fund the obligations noted in the table above from funds currently held as collateral.
As of December 31, 2017, our total shareholders’ equity was $127.1 million. Assuming that our average total shareholders’ equity remains at this level in future periods, we would expect to pay the Manager a Management Fee of approximately $1.9 million per year pursuant to this agreement.
Since the Underwriting and Insurance Management Agreement is dependent on our future performance, we are unable to determine the amount of Performance Fees we would expect to pay the Manager in future periods pursuant to this agreement. During 2017, we have incurred $0.4 million in Performance Fees pursuant to this agreement.
As of December 31, 2017, if we were to terminate either the Investment Management Agreement or the Underwriting and Insurance Management Agreement, we would be required to pay the Manager a one-time termination fee of approximately $6.4 million.
As of December 31, 2017, we were not subject to any off-balance sheet arrangements that we believe are material to our investors.
During the year ended December 31, 2015, the modest increase in cash from operating activities was generated by net operating profits and the decrease in cash from financing activities was from the payment of dividends partially offset by increased borrowings under the Credit Agreement.
Since we rely on ceding company estimates of case and IBNR reserves in the process of establishing our own loss and LAE reserves, we maintain certain procedures designed to mitigate the risk that this information is incomplete or inaccurate. These procedures may include: (i) ceding company audits to facilitate loss reporting and identify inaccurate or incomplete claim reporting; and (ii) underwriting reviews to ascertain that the losses ceded are covered as provided under the contract terms. We also utilize catastrophe model outputs and industry market share information to evaluate the reasonableness of reported losses, which are also compared to loss reports received from other cedants. These procedures are incorporated in our internal control processes on an ongoing basis and are regularly evaluated and amended as market conditions, risk factors and unanticipated areas of exposure develop.
We have determined that our best estimates for our gross and net loss and LAE reserves at December 31, 2017 and 2016 were $43.4 million and $11.1 million respectively. The following table summarizes the composition of these reserves at December 31, 2017 and 2016:
We routinely review the creditworthiness of our cedants on the basis of our market knowledge, the cedant’s current financial strength ratings, the timeliness of cedants’ past payments and the status of current balances owing. Based on our reviews, we have determined that we did not require an allowance for uncollectible reinsurance premiums receivable as of 2017 and 2016.