Interim Management Statement

RNS Number : 5449G

Catlin Group Limited

13 May 2011

 



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 for the period ended 31 March 2011.

Highlights at 31 March 2011

·     11 per cent increase in gross premiums written

·     52 per cent of total gross premiums written by non-London/UK underwriting hubs

·     10 per cent decrease in gross premiums written by London/UK hub

·     Average weighted premium rates across Group's underwriting portfolio broadly flat

·     Estimate of US$375 million in losses from first-quarter catastrophes unchanged

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

·     Investment portfolio remains liquid and defensively positioned

US$m	31 March 2011	31 March 2010	Percent change
Gross premiums written	1,412	1,272	11%
Net premiums earned	882	798	11%
Investments and cash	8,120	7,471	9%
Total investment return to 31 March	0.4%	0.9%	--

Underwriting Operations

Gross premiums written increased during the period ended 31 March 2011 by 11 per cent to US$1.4 billion (31 March 2010: US$1.3 billion). The percentage increase is virtually identical using constant rates of exchange. Net premiums earned also increased 11 per cent to US $882 million (31 March 2010: US$798 million).

The table below shows the breakdown of gross premiums written by underwriting hub during the period ended 31 March 2011:

US$m	31 March 2011	31 March 2010	Percent change
London/UK	677	754	(10%)
Bermuda	219	194	13%
US	205	174	18%
International (Asia, Europe and Canada)	311	150	107%
	1,412	1,272	11%

Gross premiums written by the London/UK underwriting hub decreased by 10 per cent as the Group continues to reduce the volume of business underwritten in the London wholesale market because of competitive conditions for certain classes of business, including Casualty business.

Gross premiums written by non-London underwriting hubs increased by 41 per cent in the first quarter and accounted for 52 per cent of gross premiums written by the Group (31 March 2010: 41 per cent):

·     The 13 per cent increase in gross premiums written by the Bermuda underwriting hub was largely the result of rate increases relating to the hub's international treaty reinsurance portfolio and reinstatement premiums paid following catastrophe events during the first quarter.

·     The 18 per cent increase in gross premiums written by the US hub reflects excellent new business development and higher retention rates for renewal business.

·     Gross premiums written by Catlin's International hubs (Asia, Europe and Canada) increased by 107 per cent.  Whilst considerable growth was reported by all three regions, the primary driver of this growth was new reinsurance business written in the European hub, largely following the start-up of Catlin Re Switzerland with effect from 1 January 2011.

Gross premiums written by product group during the period ended 31 March 2011 are shown in the table below.

US$m	31 March 2011	31 March 2010	Percent change
Aerospace	78	81	(4%)
Casualty	224	243	(8%)
Energy/Marine	192	177	8%
Property	115	120	(4%)
Reinsurance	686	506	36%
Specialty/War & Political Risk	128	145	(12%)

The decrease in Aerospace premiums resulted primarily from more selective underwriting relating to the Airline portfolio as rates in that market continued to decrease in the first quarter.

The volume of Casualty business underwritten decreased, particularly within the Long-Tail and London wholesale accounts, as the Group continued to exercise caution when writing many types of Casualty business. However, the Motor account, part of the Casualty Product Group, grew modestly on the back of continued rate increases.

Gross premiums written for the Energy/Marine Product Group increased as a result of growth in the Energy Liability account and the continued development of Hull and Cargo business. The Energy rating environment has been positive across the portfolio, although as expected wider Energy opportunities following the Deepwater Horizon explosion are still relatively slow in materialising.

The reduction in Property gross premiums written reflects a planned reduction in the US property book of business due to pricing levels.

Much of the growth in Reinsurance gross premium volume was due to the new business underwritten by Catlin Re Switzerland, along with reinstatement premiums paid in the aftermath of the catastrophes in the first quarter.

The reduction in gross premiums written for Specialty/War & Political Risk business is largely the result of more selective underwriting of Political Risk and Credit business. The Group continues to exercise caution when writing these classes of business in the light of continued economic and political uncertainties throughout the world.

Rating Environment

The Group expects the rating environment to improve as the year progresses. Rates for many types of catastrophe-related business have already increased following the first-quarter natural catastrophes. However, average weighted premium rates across the Group's entire portfolio were broadly flat during the first quarter.

Claims and Operating Expenses

The Group announced on 20 April that its losses related to the 11 March Japanese earthquake and tsunami would amount to approximately US$200 million, net of reinsurance and reinstatements. Information received following that announcement has not caused the Group to change this estimate, which is based on total insured losses of between US$20 billion and US$30 billion. This estimate is still subject to a considerable degree of uncertainty as the full scale of economic damage arising from this tragedy will not be able to be estimated with precision for many months.

Catlin had earlier estimated that its losses from other first-quarter catastrophes - the January flooding in Brisbane and other areas of Australia and the February earthquake in Christchurch, New Zealand - would amount to US$175 million, net of reinsurance and reinstatements. There has been no material change in the loss estimates arising from either of these events.

Operating expenditures remained in line with expectations during the period ended 31 March 2011.

Investment Management

Total cash and investments amounted to US$8.12 billion at 31 March 2011, a 1 per cent increase compared with US$8.02 billion at 31 December 2010 and a 9 per cent increase compared with US$7.47 billion at 31 March 2010.

Total investment income for the period ended 31 March 2011 was US$33 million (31 March 2010: US$70 million).  The year-to-date total investment return was 0.4 per cent at 31 March 2011 (31 March 2010: 0.9 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 31 March 2011 is analysed in the table below:

US$m	Average allocation during period	Total return %
Fixed income	4,988	0.5%
Cash and short-term investments	2,929	0.2%
Funds	169	1.9%
Interest rate options	7	NM
	8,093	0.4%

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. During the first quarter, the Group increased its holding of fixed income securities by more than US$700 million, in line with the revised investment strategy that was detailed in the 2010 Annual Report and Accounts. 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 31 March 2011 (31 December 2010: 67 per cent; 31 March 2010: 64 per cent). 

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

"The first quarter of 2011 will be remembered for the high incidence of catastrophe losses, arising from the Japanese earthquake and tsunami, the New Zealand earthquake and the floods in Australia. This series of catastrophic events is unprecedented so early in a year, and we at Catlin wish to express our sympathy to those who have lost so much due to these natural events.

"We estimate that Catlin's losses related to these three events amount to US$375 million, net of reinsurance and reinstatement premiums. The estimate of US$200 million relating to the Japanese earthquake and tsunami remains uncertain, as the true cost of this tragedy - both in terms of human suffering and property damage - will not be known with any certainty for many months.

"Taken together, we expect these three catastrophes to be an earnings event rather than a capital event. In addition, under the structure of our catastrophe reinsurance programme, much of the losses from another major catastrophic event - such as an Atlantic
windstorm - will be recoverable.

"Rates for certain classes of business are starting to rise following the first-quarter catastrophes. In the light of the more than US$50 billion in natural catastrophe losses incurred since the beginning of this year - including the damage from tornadoes in the United States in April - combined with the prolonged low investment return environment, it would be totally appropriate for rates to increase on a widespread basis.

"Catlin is well-positioned to take advantage of underwriting opportunities as they develop.  The long-term investment in our international hub structure gives us the resources with which to increase volume quickly in all regions of the world when market conditions do improve. In the meantime, we will continue to underwrite prudently, taking advantage of opportunities produced by our global underwriting presence but refusing to write business that does not meet our standards. Our first-quarter performance - an 11 per cent overall increase in gross premiums written, but a 10 per cent decrease in gross premiums written by our London/UK hub - demonstrates this strategy.

"I believe Catlin is in an excellent position, and we continue to look ahead with confidence."

- 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 2010 amounted to US$4.1 billion.

2.   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.

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

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

5.   Catlin is the title sponsor of the Catlin Arctic Survey, an ongoing scientific project in the Arctic whose aim is to produce scientific data that scientists can use to predict the effects of climate change and other environmental changes. Additional information regarding the 2011 Catlin Arctic Survey, which concluded earlier this month, is available at www.catlinarcticsurvey.com.

 

END

 

 

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