The following is a discussion and analysis of our results of operations for the seven months ended July 31, 2019 and the year ended December 31, 2018, our plan of run-off subsequent to July 31, 2019 and our financial condition as of December 31, 2019 and 2018. This discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes thereto included elsewhere in this report.
We are a Bermuda exempted limited liability company which offered collateralized reinsurance in the property catastrophe market. Our principal objective was to maximize the expected total return for our shareholders, primarily through the payment of dividends, by underwriting a diversified portfolio of short-tail reinsurance contracts and investing in insurance-linked securities with what we believed to be attractive risk and return characteristics. We provided our shareholders with the opportunity to own an alternative asset class whose returns we believe have historically been largely uncorrelated to those of other asset classes, such as global equities, bonds and hedge funds.
Our 2019 results were impacted by significantly lower premium income as compared to the prior period, due to a smaller available capital base which limited deployment in the 2019 renewal seasons together with a shorter period of account. In addition, the Company did not write any business in the key June renewal period in the current year while it was considering strategic alternatives. In 2019, we incurred significantly lower loss and loss adjustment expenses compared to those reported a year ago which were elevated due to an increase in estimated losses related to Hurricane Irma. During the January 1, 2019 renewal period we maintained our close partnership with Sompo International and deployed all of our available capital into quota share contract business with attractive risk adjusted return potential.
As part of its plan to run-off and return capital to its shareholders, the Company declared and paid special distributions of $1.51 per share and $0.57 per share during the third and fourth quarters of 2019, respectively. The aggregate dollar value of all dividends and special distributions declared and paid with respect to 2019, totaled $20.9 million.
In the five month period ended December 31, 2019, our results reflect the net earnings associated with the completion of the final retrocessional quota share treaty entered into with Sompo International (the "Sompo Quota Share Agreement") together with minor premium adjustments from legacy business. In the five month period ended December 31, 2019, we recognized $4.8 million in premium earnings net of acquisition expense from the Sompo Quota Share Agreement and incurred loss and LAE in establishing estimated loss reserves totaling $4.6 million principally driven by losses from Typhoon Hagibis and Typhoon Faxai which both made landfall in Japan together with provisions for attritional losses. In addition, we recognized $2.0 million of net adverse loss and LAE reserve development in the run-off period on legacy business, primarily driven by a
In light of the adoption of the liquidation basis of accounting as of July 31, 2019 and the plan of run-off, the results of operations for periods after July 31, 2019 are not comparable to prior year periods.
Our consolidated results of operations for the seven months ended July 31, 2019 and year ended December 31, 2018 were as follows:
liquidation basis of accounting on July 31, 2019. In addition, the decrease is driven by a smaller capital base available for deployment to underwriting activity at January 1 and a subsequent curtailment of underwriting activity.
During the seven months ended July 31, 2019 and the year ended December 31, 2018, we earned $11.9 million and $33.4 million of reinsurance premiums, respectively. Our reinsurance premiums earned are primarily a function of the amount and timing of reinsurance premiums previously written.
Our reinsurance premiums written and earned during the seven months ended July 31, 2019 and the year ended December 31, 2018 included $0.4 million and $4.6 million, respectively of reinstatement premiums.
Blue Capital sought to diversify its exposure across geographic zones around the world in order to obtain a prudent spread of risk. The spread of these exposures was also a function of market conditions and opportunities.
(2) "Worldwide, excluding U.S." comprises reinsurance contracts that cover risks in more than one geographic area but specifically exclude the U.S.
During the seven months ended July 31, 2019, we established $2.3 million of losses and loss adjustment expense for the current year, nearly all of which constituted IBNR reserves. There were no individually significant loss events that impacted us during the seven month period ended July 31, 2019. In addition, during the seven months ended July 31, 2019, we recognized $3.4 million of net adverse loss and LAE reserve development primarily driven by a deterioration in losses incurred related to Typhoon Jebi.
The expenses we have incurred pursuant to the Investment Management Agreement and the Administrative Services Agreement has decreased in the seven months ended July 31, 2019 as compared to the year ended December 31, 2018, due to the lower equity base on which the management fee is determined together with the shorter period.
Our public company expenses incurred during the periods presented consisted of director fees, corporate insurance premiums, audit fees, share-based compensation and other expenses associated with being a publicly traded company. The decrease in these expenses during the current period of 2019 versus that of the 2018 period was due to the current period reflecting seven months of activity compared to a full year in 2018.
We were not subject to income taxes in any jurisdiction during the periods presented.
On May 6, 2016, the Company entered into a credit facility (the "2016 Credit Facility") with Endurance Investment Holdings Ltd. (the "Lender"), a wholly-owned subsidiary of Sompo International. The 2016 Credit Facility provided the Company with an unsecured $20.0 million revolving credit facility for working capital and general corporate purposes. Borrowings under the 2016 Credit Facility incurred 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 paid to the Lender in connection with establishing the 2016 Credit Facility. The 2016 Credit Facility was amended on July 31, 2018 to extend its expiry to September 30, 2020 under identical terms. On December 31, 2018, Endurance Investment Holdings Ltd. was merged into its parent, Endurance Specialty Insurance Ltd. and the obligations of the Lender were assumed by Endurance Specialty Insurance Ltd. On July 30, 2019, the parties terminated the 2016 Credit Facility in light of the Company's plan to cease active operations.
With respect to the Company's outstanding borrowings of $4.0 million at December 31, 2018, $3.0 million was repaid on April 8, 2019 and while outstanding, was subject to annual interest rates ranging between 3.91% and 4.15% and $1.0 million was repaid on April 18, 2019, and was subject to annual interest rates ranging between 4.07% and 4.11%.
The 2016 Credit Facility contained covenants that limited the Company’s ability, among other things, to grant liens on its assets, sell assets, merge or consolidate, or incur debt. Had the Company failed to comply with any of these covenants, the Lender could have revoked the facility and exercised 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 had the right to terminate the 2016 Credit Facility.
During the seven month period ended July 31, 2019, we declared (i) a first quarter 2019 regular dividend of $0.15 per Common Share and RSU which was paid on April 15, 2019; and (ii) a second quarter 2019 regular dividend of $0.15 per Common Share and RSU, which was paid on July 15, 2019. The total dollar amount of dividends paid during the seven month period ended July 31, 2019 was $2.6 million. In accordance with our plan to cease active operations and return capital to shareholders, on August 30, 2019 we declared a special distribution of $1.51 per common share which was paid on September 30, 2019 to shareholders on record as of September 16, 2019. On November 22, 2019, we declared a special distribution of $0.57 per common share which was paid on December 20, 2019 to shareholders on record as of December 6, 2019.
Our total net assets in liquidation (formerly shareholders' equity) was $67.3 million and $90.7 million at December 31, 2019 and 2018, respectively. The decrease in our total net assets in liquidation was mostly attributable to the declaration of special distributions of $13.3 million and $5.0 million to holders of Common Shares and RSUs in the third and fourth quarter of 2019, respectively. It is unlikely that we will need to raise additional capital in the future following our decision to pursue an orderly run-off and we anticipate that our capital resources will be sufficient to meet all future obligations.
The Company's contractual obligations as of December 31, 2019 are summarized as follows:
As of December 31, 2019, our total shareholders' equity (now net assets in liquidation) was $67.3 million. As our net assets in liquidation decline as we return capital to shareholders over the period of run-off, we would expect to pay the Manager a decreasing Management Fee over time. Within our liquidation basis of accounting estimates as of December 31, 2019, we expect to pay a cumulative Management Fee of approximately $0.6 million over the course of the period of run-off pursuant to this agreement.
As a result of the net losses recorded in the years ended December 31, 2018 and 2017, the company did not incur a Performance fee in 2019, and management estimates that the Company will not pay any future Performance Fee due to the rolling three year high water mark provision and the decision to pursue an orderly run-off of the Company.
We currently expect to pay the Manager approximately $0.8 million over the course of the period of run-off pursuant to this agreement.
Neither the Company nor its operating subsidiaries had any commitments for operating leases or capital expenditures at December 31, 2019 and neither the Company nor its operating subsidiaries expect any material expenditures of this type during the next 12 months or for the foreseeable future.
As of December 31, 2019, we were not subject to any off-balance sheet arrangements that we believe are material to our investors.
We experienced a net decrease of $0.9 million in our cash and cash equivalents during the seven months ended July 31, 2019 and a net decrease of $3.8 million during the year ended December 31, 2018.
Most of our direct and fronted reinsurance contracts are comprised of business that has both a low frequency of claims occurrence and a high potential severity of loss, primarily from claims arising from natural and man-made catastrophes. Given the high-severity, low-frequency nature of these events, the losses typically generated therefrom do not lend themselves to traditional actuarial reserving methods, such as statistical calculations of a range of estimates surrounding the best point estimate of our loss and LAE reserves. Therefore, our reserving approach for these types of coverages is to estimate the ultimate cost associated with a single loss event rather than to analyze the historical development patterns of past losses as a means of estimating ultimate losses for an entire accident year. We estimate our reserves for these large events on a contract-by-contract basis by means of a review of policies with known or potential exposure to a particular loss event.
The uncertainties inherent in the reserving process, together with the potential for unforeseen developments, including changes in laws and the prevailing interpretation of policy terms, may result in our ultimate paid loss and LAE amounts being significantly greater or less than the loss and LAE reserves we initially established. Any adjustments to our loss and LAE reserves are reflected in our financial results during the period in which they are determined.
All of our reinsurance contracts were typically written on a losses-occurring basis, which means that all loss events occurring during the period of the contract are covered, regardless of the inception dates of the underlying policies. Any loss events occurring after the expiration of a losses-occurring contract are not covered.
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 2019 and 2018.
with those earned premiums. Additionally, the liquidation value of the Company's other assets and liabilities includes management's estimate of investment income to be generated from the expected collateral balances supporting our insurance liabilities over the estimated period of run-off and estimates for corporate expenses and management and administrative fees over the period.
The actual amounts realized for assets and settlement of liabilities and the actual costs of liquidation may differ materially from the estimated amounts.
The financial statements and supplementary data have been filed as a part of this Annual Report on Form 10-K as indicated in the Index to Consolidated Financial Statements and Financial Statement Schedules appearing on page 74 of this report.