Interim Management Statement

RNS Number : 0699W

Catlin Group Limited

12 November 2010

 



12 November 2010                                                                                                                        

CATLIN GROUP LIMITED
INTERIM MANAGEMENT STATEMENT

HAMILTON, Bermuda - Catlin Group Limited ('CGL'; London Stock Exchange), the international specialty property/casualty insurer and reinsurer, has today issued its interim management statement.

Highlights at 30 September 2010

·      13 per cent increase in net premiums earned

·      29 per cent increase in gross premiums written by non-London underwriting hubs;

·      2 per cent decrease in gross premiums written by London hub

·      43 per cent of total gross premiums written by non-London underwriting hubs

·      0.5 per cent decrease in average weighted premium rates across Group's underwriting portfolio demonstrates underwriting discipline in competitive marketplace

·      Generally benign loss activity during third quarter

·      Estimate of Chilean earthquake, Deepwater Horizon losses unchanged

·      2.9 per cent year-to-date total investment return

·      Investment portfolio remains liquid and defensively positioned

US$m	30 Sept  2010	30 Sept 2009	Percent change
Gross premiums written	3,280	3,010	9%
Net premiums earned	2,349	2,082	13%
Investments and cash	7,945	7,521	6%
Total investment return to 30 September	2.9%	5.3%	--

Underwriting Operations

Group-wide net premiums earned increased by 13 per cent in the nine months ended 30 September 2010.  Approximately half of this increase is attributable to increases in premium volume and higher rates relating to business written in 2009 but not earned until 2010, with the remainder attributable to the embedded growth arising from the 2006 acquisition of Wellington Underwriting plc.

Gross premiums written increased during the nine-month period ended 30 September 2010 by 9 per cent to US$3.3 billion.  The table below shows the breakdown of gross premiums written by underwriting hub during the period ended 30 September 2010:

US$m	30 Sept 2010	30 Sept 2009	Percent change
London	1,877	1,920	(2%)
Bermuda	484	392	23%
US	530	429	24%
International (Asia, Europe and Canada)	389	269	45%
	3,280	3,010	9%

Gross premiums written by the London underwriting hub decreased by 2 per cent as the Group continued to reduce the volume of business underwritten in the London wholesale market because of competitive conditions for certain classes of business.  Gross premiums written in London as at 30 June 2010 had similarly decreased by 2 per cent.

The 29 per cent increase in gross premiums written by the Bermuda, US and International underwriting hubs reflects the opportunities for profitable growth available to Catlin as it pursues its strategy of expanding distribution outside the London market and as new underwriting teams hired in recent years gain traction.  Gross premiums written by these hubs accounted for 43 per cent of the Group's gross premium volume at 30 September 2010, compared with 36 per cent at 30 September 2009.

Gross premiums written by product group during the period ended 30 September 2010 are shown in the table below:

US$m	30 Sept 2010	30 Sept  2009	Percent change
Aerospace	301	319	(6%)
Casualty	620	600	3%
Energy/Marine	500	497	1%
Property	356	282	26%
Reinsurance	1,180	1,036	14%
Specialty/War & Political Risk	323	276	17%
	3,280	3,010	9%

The decrease in Aerospace premiums resulted largely from the reduction in satellite launches during 2010 compared with 2009 and selective underwriting of aviation business due to continued erosion of rate adequacy.  The volume of Casualty business underwritten during the third quarter decreased, as the Group continued to exercise caution when writing many types of Casualty business. Gross premiums written for longer-tail Casualty classes have reduced on a year-on-year basis, offset by an increased volume of shorter-tail niche business.

Gross premiums written for the Energy/Marine Product Group continued to be virtually flat at 30 September. Whilst offshore energy rates increased following the Deepwater Horizon loss in the second quarter, opportunities reduced due to the low level of drilling activity in the Gulf of Mexico. The growth in Property gross premiums written reflects new international contracts underwritten both in London and by the non-London hubs.

The growth in Reinsurance gross premium volume was due to the addition of several major new contracts.  The growth in Specialty/War & Political Risk premium volume resulted in part from improved pricing and conditions in the credit and political risk classes of business following the market losses sustained during the financial crisis.

Rating Environment

Average weighted premium rates decreased by 0.5 per cent across the Group's entire portfolio of business during the period ended 30 September 2010, compared with a 6 per cent increase in average weighted premium rates at 30 September 2009.  Average weighted premium rates decreased by 1.0 per cent for catastrophe-exposed business classes and decreased by 0.2 per cent for non-catastrophe classes during the nine-month period.

Claims and Operating Expenses

Loss activity was benign during the third quarter, with negligible insured losses incurred from Atlantic hurricanes despite an above normal season in terms of storm activity.  Claims incurred by the Group arising from the 4 September earthquake that struck New Zealand's South Island are not material.

The Group's combined losses from the 27 February Chilean earthquake and the Deepwater Horizon explosion are estimated at approximately US$180 million, net of reinsurance and reinstatements, unchanged from the Group's original estimates.

Operating expenditures remained in line with expectations for the nine months ended 30 September 2010.

Investment Management

Total cash and investments amounted to US$7.95 billion at 30 September 2010, a 3 per cent increase compared with US$7.69 billion at 31 December 2009 and a 6 per cent increase compared with US$7.52 billion at 30 September 2009.

Total investment income for the nine-month period ended 30 September 2010 was US$223 million (30 September 2009: US$368 million).  The year-to-date total investment return was 2.9 per cent at 30 September 2010 (30 September 2009: 5.3 per cent).  The investment return is calculated after valuing all investments on a mark-to-market basis.

The Group's investment performance by major asset category during the period ended 30 September 2010 is analysed in the table below:

US$m	Average allocation during period	Return %
Fixed income	4,043	4.6%
Cash and short-term investments	3,329	0.5%
Global bond/hedge funds - run-off	220	1.3%
Global bond/hedge funds - strategic	63	12.2%
Interest rate options	4	N/M
	7,659	2.9%

The Group continues to maintain a defensive asset allocation and liquidity levels in the light of continued uncertainty in investment markets, and the Group has positioned the portfolio to optimise performance in a variety of economic scenarios.  The percentage of total cash and investments held in liquid assets - defined as cash, cash equivalents, government securities and fixed income securities with less than six months to maturity - was 67 per cent at 30 September 2010 (31 December 2009: 62 per cent; 30 September 2009: 59 per cent). 

Foreign Exchange

For the nine-month period at 30 September 2010 the Group reported a small foreign exchange gain, compared with a foreign exchange loss of US$49 million reported at 30 June 2010. 

In other developments during the third quarter of 2010:

·     The Group continues to proceed with the formation of Zurich-based Catlin Re Switzerland. Authorisation from Swiss regulatory authorities is expected in the near future so that the company can begin writing a portfolio of European specialty reinsurance - business not currently underwritten by the Group - with effect from 1 January 2011.  In August, Peter Schmidt, formerly Chief Market Officer of Atradius N.V., was appointed as Chief Executive Officer-European Reinsurance as well as CEO of Catlin Re Switzerland.  Other underwriting appointments have been made during the third quarter.

·   The Group established two Canadian offices in Montreal and Vancouver, bringing the number of Canadian offices to four.  The Group also established an office in Miami, which will focus on developing treaty reinsurance opportunities in Latin America.

Commenting on the Group's performance, Stephen Catlin, Chief Executive of Catlin Group Limited, said:

"I am pleased to report that all areas of the Catlin Group performed well during the third quarter.  Our Bermuda, US and International underwriting hubs continue to report meaningful and profitable premium growth, with the non-London hubs now accounting for 43 per cent of the Group's total gross premiums written.

"Whilst there have been a large number of Atlantic storms during the current hurricane season, so far the Group has incurred no losses from these events, and overall loss activity was benign in the third quarter.  Our estimate of the two major losses that occurred earlier this year - the Chilean earthquake and the Deepwater Horizon oil rig explosion - has not changed during the third quarter.

"Catlin is on track for a good performance in 2010, despite the two large losses early in the year.  Investment performance has been satisfactory in an uncertain economic environment.  Whilst the rating environment is also challenging, we believe there are still good margins available for many classes of business.  We look forward with confidence, especially with regard to the continued profitable growth of our underwriting hubs outside London, including the development of Catlin Re Switzerland."

- ends -

For more information contact:

Media Relations:
James Burcke, Head of Communications, London	Tel: Mobile: E-mail:	[phone] [phone] [e-mail]
Liz Morley, Maitland	Tel: E-mail:	[phone] [e-mail]
Investor Relations:
William Spurgin, Head of Investor Relations, London	Tel: Mobile: E-mail:	[phone] [phone] [e-mail]

Notes to editors:

1.   Catlin Group Limited, headquartered in Bermuda, is an international specialist property/casualty insurer and reinsurer writing more than 30 classes of business worldwide through six underwriting hubs. Gross premiums written in 2009 amounted to more than US$3.7 billion.

2.   Catlin shares are traded on the London Stock Exchange (ticker symbol: CGL). More information about Catlin can be found at catlin.com.

3.   Catlin has established operating hubs in London, Bermuda, the United States, the Asia-Pacific region, Europe and Canada.  Through these hubs, Catlin works closely with policyholders and their brokers.  The hubs also provide Catlin with product and geographic diversity. Altogether, Catlin operates more than 50 offices in 20 countries.

4.   Catlin's underwriting units are rated 'A' by A.M. Best and Standard & Poor's.

5.   Catlin is the title sponsor of the Catlin Arctic Survey, a unique collaboration between polar explorers and research scientists to improve society's knowledge of potential environmental changes.  Catlin Arctic Survey 2010, which concluded in May, focused on how rising carbon emissions may affect oceans and sea life.  More information is available at CatlinArcticSurvey.com.

 

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