8th Aug 2014 06:49
LONDON (Alliance News) - Catlin Group Ltd Friday said its first-half pretax profit more than doubled, boosted by a significant jump in its net investment return as well as an improved underwriting performance.
In a statement, the property/casualty insurer and reinsurer said it made a USD318.0 million pretax profit in the six months ended June 30, compared with USD145.0 million in the corresponding period last year. Catlin said that gross premiums written increased by USD361.0 million to USD3.66 billion, modestly inflated by foreign-exchange movements and an increase in the value of multiyear contracts written during the period in the London and Bermuda underwriting hubs.
Premiums ceded to reinsurers increased by USD191.0 million to USD1.05 billion. This meant net premiums written increased to USD2.61 billion from USD2.44 billion, though Catlin expects growth in net premiums to lag growth in gross premiums in the full year due to increased amounts of premium ceded to third-party capital providers.
Its measure of net underwriting contribution increased to USD536.0 million from USD441.0 million, driven by its non-London underwriting hubs, which made up more of the total than at the same stage last year. Catlin was also able to boast an improved combined ratio - a measure of underwriting profitability and the lower the better - which fell to 85.0% from 88.1%.
"There has been considerable commentary about the current state of the marketplace. While it is true that rates for many classes of business have deteriorated during the first half of 2014, I do not believe that the rate environment is as bad as some observers contend, and margins are still adequate for most business classes," Chief Executive Stephen Catlin said in a statement.
The CEO said that the group's overall rating environment, for both insurance and reinsurance, in its US and international (Europe, Asia-Pacific and Canada) hubs is better than that in the London and Bermuda hubs.
While average weighted premium rates for insurance business rose by 2.3% in the US hub during the period, insurance rates decreased by an average of 1.8% in the international hubs. Average weighted rates at the London hub decreased by an average of 2.6%.
For reinsurance business, all areas saw declines in rates. They decreased by a weighted average of 1.0% in the US hub and 1.7% in the international hubs, compared with average rate decreases of 7.5% in Bermuda and 7.7% in London.
"Catlin's global footprint, which now produces significant business volumes and underwriting profits, provides us with greater flexibility and choice when deciding what business to write. This is a significant competitive advantage," Stephen Catlin said.
The improved underwriting contribution, combined with a jump in net investment return to USD142.0 million from USD9.0 million, driven by an improved performance from the fixed income portfolio as well as "continued strong performance" from other investment assets, contributed to a 14% increase in revenue to USD2.19 million.
Expenses increased by 5.9% to to USD1.88 billion due to higher policy acquisition costs and administrative and other expenses more than offsetting a small drop in losses and loss expenses.
Catlin increased its interim dividend by 0.5 pence to 10.5p per share.
By Samuel Agini; [email protected]; @samuelagini
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