Interim Management Statement

RNS Number : 9929B

Catlin Group Limited

05 November 2009

 



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 2009

• 10 per cent increase in gross premiums written on a constant currency basis 

• Continued strong growth from Catlin US and international offices

• 6 per cent increase in average weighted premium rates across Group's underwriting portfolio 

• Benign third quarter in terms of losses

• 5.2 per cent year-to-date total investment return 

• 22 per cent increase in cash and investments to US$7.52 billion

• Defensive asset allocation continues

US$m	30 Sept 2009	30 Sept 2008	Unadjusted Percent change(1)	Adjusted Percent change(2)
Gross premiums written	3,010	2,858	5%	10%
Net premiums written	2,505	2,134	17%	24%
Net premiums earned	2,082	1,973	6%	11%
Investments and cash	7,521	6,184	22%	--
Total investment return to 30 September	5.2%	(0.9%)	--	--

(1) Not adjusted for foreign exchange movements

(2) Adjusted for foreign exchange movements

Underwriting Operations

Gross premiums written increased during the period ended 30 September 2009 by 5 per cent to US$3.01 billion. Using constant exchange rates, gross premiums written rose by 10 per cent, which is in line with the Group's business plan.

The following table shows the breakdown of gross premiums written by source of business during the period ended 30 September 2009:

Originating Business (US$m)	30 Sept 2009	30 Sept 2008	Unadjusted Percent change(1)	Adjusted Percent change(2)
Catlin Syndicate/Catlin UK	1,921	2,017	(5%)	1%
Catlin Bermuda	392	374	5%	5%
Catlin US	429	257	67%	67%
Catlin International	268	210	28%	39%
	3,010	2,858	5%	10%

(1) Not adjusted for foreign exchange movements

(2) Adjusted for foreign exchange movements

Whilst gross premiums written arising from London/UK-originating business decreased, London/UK volume increased slightly when constant exchange rates are used. Strong growth has been produced by Catlin US and Catlin International, the Group's international office network. This growth was anticipated and continues to demonstrate Catlin's commitment to further diversification of its underwriting portfolio as well as the benefits of its past investment in its global infrastructure.

Both net premiums written and net premiums earned increased during the period. A portion of this increase is due to the embedded growth resulting from the acquisition of Wellington Underwriting plc, specifically the lapse at 31 December 2008 of the quota-share reinsurance provided to the Catlin Syndicate at Lloyd's by some of the third-party Names that had provided capital to Wellington Syndicate 2020. 

Gross premiums written by product group during the nine-month period are shown in the table below:

US$m	30 Sept 2009	30 Sept 2008	Unadjusted Percent change(1)	Adjusted Percent change(2)
Aerospace	318	281	13%	17%
Casualty	590	525	12%	20%
Energy/Marine	503	516	(2%)	3%
Property	285	310	(8%)	--
Reinsurance	999	872	15%	17%
Specialty/War & Political Risk	315	354	(11%)	(6%)
	3,010	2,858	5%	10%

(1) Not adjusted for foreign exchange movement

(2) Adjusted for foreign exchange movements

The growth in gross premiums written in the Reinsurance Product Group and the reductions in Energy/Marine and Property premium volumes illustrate Catlin's flexible approach to capital allocation as the Group has reallocated catastrophe aggregate to Property Treaty Reinsurance, for which a better rating environment has been experienced. 

The growth in Aerospace premium volume shows the benefit of the improved rating environment following a period of depressed market conditions. The Group expects these rating improvements to continue into the main airline renewal season. In addition, the general aviation facility underwritten by W. Brown & Associates Insurance Services continues to provide good, profitable growth on behalf of Catlin US.

The Casualty premium growth is driven by shorter-tail classes, in particular shorter-tail Professional Lines business for which we are seeing good opportunities and much improved market conditions created from the global financial crisis. Volumes for long-tail Casualty classes remain static as less attractive margins continue to be available for these types of business, and the Group remains cautious about the potential impact of the recession.

Rating Environment

Market conditions were little changed during the third quarter of 2009. Average weighted premium rates increased by 6 per cent across the Group's entire portfolio of business during the nine-month period ended 30 September 2009; the Group reported an identical increase in average weighted premium rates as at 30 June 2009. Average weighted premium rates increased by 11 per cent for catastrophe-exposed business classes and increased by 3 per cent for non-catastrophe classes during the nine-month period. These average rate increases are consistent with those reported at 30 June.

Claims and Operating Expenses

The Group reported at the half year that large single-risk losses had exceeded normal levels during the six months ended 30 June 2009. However, the Group experienced a low frequency of large single-risk losses during the third quarter. In addition, the 2009 Atlantic hurricane season to date has been benign.

Operating expenditures remained in line with expectations for the nine months ended 30 September 2009.

Investment Management

Total net investment income for the nine-month period ended 30 September 2009 was US$364 million, representing a 5.2 per cent year-to-date total net investment return.  The investment return is calculated after valuing all investments on a mark-to-market basis. This compares with total net investment return of 2.9 per cent for the six-month period ended 30 June 2009 and total net investment return of -0.9 per cent for the nine-month period ended 30 September 2008.

The Group's investment performance during the nine-month period by major asset category is analysed in the table below:

US$m	Average allocation during period	Return %
Fixed income	48%	6.8%
Cash and short-terms	41%	1.0%
Equity and hedge funds	11%	14.4%
	100%	5.2%

Approximately 45 per cent of the return produced by the fixed income portfolio during the nine month period resulted from narrowing spreads, which led to some recovery of the unrealised losses sustained by the Group during 2008. The Group also benefited from the recovery in the value of equity/hedge fund holdings.

The Group continues to maintain the defensive asset allocation and liquidity levels that it adopted during 2008 in the light of the continued uncertainty in investment markets. 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 59 per cent at 30 September 2009, unchanged from 30 June 2009.  

During the first half, the Group reinforced this defensive position by disposing of its equity holdings and issuing redemption notices for approximately one-third of its hedge fund/fund of funds holdings. The Group issued redemption notices for an additional 30 per cent of the hedge fund/fund of funds holdings during the third quarter.

Total cash and investments amounted to US$7.52 billion at 30 September 2009, an increase of 7 per cent compared with 30 June 2009. The Group's total cash and investments have increased by 22 per cent compared with 30 September 2008.  The increase includes the US$289 million raised through the Rights Issue concluded in March and approximately $400 million gained through the reinsurance to close of Wellington Syndicate 2020 into the Catlin syndicate during the first half.

Other Developments

Among other developments since 30 June 2009:

• Catlin opened an office in Rome in September. The office, which initially underwrites various classes of treaty reinsurance, is Catlin's second in Italy and its tenth in Europe.

• Scientific findings based on the data gathered during the Catlin Arctic Survey were released on 15 October. A team of researchers from the University of Cambridge concluded that the Arctic sea ice is thinning rapidly and that the Arctic Ocean could be largely ice-free in as little as 10 years.  

The Catlin Arctic Survey's findings were reported by newspapers, magazines, and radio and television broadcasters around the world.

In addition, Time magazine in September selected the three explorers who conducted the Catlin Arctic Survey - Pen Hadow, Martin Hartley and Ann Daniels - as among the publication's 'Heroes of the Environment' for 2009.

Stephen Catlin, Chief Executive of Catlin Group Limited, said:

"I am happy to report a good performance during the third quarter of 2009. Our underwriting operations have performed well, as there were no catastrophes during the quarter and a low incidence of large single-risk losses. Our investment portfolio continued to produce strong results, although it is clear that our year-to-date investment performance is not sustainable over the long term. 

"Rates continued to increase across our overall book of business, providing good margins in nearly all classes of business. Earnings from Catlin US and our international offices also increased, and we fully expect continued, profitable growth from these two operations.

"We continue to look ahead with confidence. Whilst the market's good performance during 2009 means that conditions may be challenging for some classes of business during 2010, we believe that Catlin remains well-positioned to grow, both in terms of premium volume and underwriting profitability."

- 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 through four underwriting platforms and an international network of offices. Gross premiums written in 2008 exceeded US$3.4 billion. Catlin shares are traded on the London Stock Exchange (ticker symbol: CGL). More information can be found at www.catlin.com.

2.  Catlin's four underwriting platforms are:

• The Catlin Syndicate at Lloyd's of London (Syndicate 2003), which is a recognised leader of numerous classes of specialty insurance and reinsurance. The Catlin Syndicate was the largest at Lloyd's in 2008 based on gross premiums written of US$2.4 billion.  Catlin also operates a life syndicate (Syndicate 3002) at Lloyd's.

• Catlin Bermuda (Catlin Insurance Company Ltd.), which is a leading participant in the Bermuda market, underwriting a diversified portfolio of property treaty, casualty treaty, political risk and terrorism, and structured risk coverages.

• Catlin UK (Catlin Insurance Company (UK) Ltd.), which specialises in underwriting commercial non-life insurance for UK clients through a network of regional offices. Catlin UK also underwrites many other classes of commercial insurance. 

• Catlin US, which encompasses Catlin's operations based in the United States (including Catlin Insurance Company Inc and Catlin Specialty Insurance Company Inc.). Catlin US underwrites a wide variety of specialty property/casualty insurance and reinsurance products from a network of offices throughout the United States.  More information is available at www.catlinus.com.

3.  Catlin's international network of offices allows the Group to diversify further its risk portfolio and to work more closely with local policyholders and brokers. Catlin has offices in Austria, Australia, Belgium, Bermuda, Brazil, Canada, France, Germany, Guernsey, India, Italy, Japan, Malaysia, Norway, Singapore, Spain, Switzerland, the United Kingdom and the United States.

 

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