Interim Management Statement

RNS Number : 8318Q

Catlin Group Limited

12 November 2012

 



12 November 2012

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 2012

·     11 per cent increase in gross premiums written

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

·     Average weighted premium rates across entire portfolio increased by 5 per cent

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

US$m	Nine months ended 30 September 2012	Nine months ended 30 September 2011	Percentage change
Gross premiums written	4,082	3,676	11%
Investments and cash	8,902	8,393	6%
Total investment return to 30 September	1.8%	2.7%

Underwriting Operations

Gross premiums written during the nine months ended 30 September 2012 increased by 11 per cent to US$4.1 billion.

During the period, the Group changed the accounting method it utilises to recognise premiums for quota share reinsurance treaties underwritten by the Group's US underwriting hub. This change resulted in an increase of $101 million in gross premiums written.  Gross premiums written during the corresponding period of 2011 have not been restated; the increase in gross premiums written on a like-for-like basis was 8 per cent.

The table below shows the breakdown of gross premiums written by underwriting hub during the period ended 30 September 2012:

US$m	Nine months ended 30 September 2012	Nine months ended 30 September 2011	Percentage change
London/UK	2,014	1,868	8%
US	848	666	27%
International (Asia, Europe and Canada)	727	620	17%
Bermuda	493	522	(6%)
	4,082	3,676	11%

The increase in gross premiums written by the London/UK hub was the result both of price increases across many classes of business and increases in market share. The Group continues to respond to favourable underwriting opportunities in the London market as they arise.

The 27 per cent increase in gross premiums written by the US hub reflects the impact of the accounting change relating to quota share reinsurance treaties written by the hub.  Excluding the impact of the accounting change, gross premiums written by the US hub grew by 12 per cent, due to rate increases and new business written, particularly in Energy, Casualty and Reinsurance classes.

The 17 per cent increase in gross premiums written by the International hubs is the result of new reinsurance business written by Catlin Re Switzerland as well as organic growth throughout the rest of the Group's international network.

The 6 per cent decrease in gross premiums written by Catlin Bermuda largely reflects the lack of reinstatement premiums in 2012, which at 30 September had been a catastrophe-free year.  The decrease also reflects the decision earlier in the year not to renew certain Property Reinsurance contracts whose rate levels did not meet expectations.

Gross premiums written by Catlin's six product groups during the period ended 30 September 2012 are shown in the table below.

US$m	Nine months ended 30 September 2012	Nine months ended 30 September 2011	Percentage change
Aerospace	262	265	(1%)
Casualty	776	670	16%
Energy/Marine	621	559	11%
Property	431	388	11%
Reinsurance	1,623	1,481	10%
Specialty/War & Political Risk	362	326	11%

Note: Product group premiums exclude effects of Syndicate 2020 movements

The decrease in gross premiums written for Aerospace classes of business reflects continued rate pressure for Airline business as well as delays in the number of satellite launches during the period.  The increase in Casualty premium volume reflects the growth of the UK Motor portfolio as well as increased US Construction business for which rates are hardening.

The increase in Energy/Marine volume was primarily the result of new business written and increased rates in the Offshore Energy sector. The growth in Property premiums reflects both new business and larger lines on some existing accounts.

The growth in Reinsurance business reflects the additional volume underwritten by Catlin Re Switzerland as well as the impact of rate increases following the catastrophe events of 2011.  

Rating Environment

Rates continue to increase for many classes of business, particularly catastrophe-exposed business. Average weighted premium rates across the Group's underwriting portfolio increased by 5 per cent during the nine-month period ended 30 September 2012. Average weighted premium rates for catastrophe-exposed business increased by 9 per cent. Average weighted premium rates for non-catastrophe classes rose by 2 per cent.  

Claims and Operating Expenses

The Group had incurred no catastrophe losses at 30 September 2012. Operating expenditures remained in line with expectations during the period.

Investment Management

Total cash and investments amounted to US$8.9 billion at 30 September 2012, a 6 per cent increase compared with US$8.4 billion at 30 September 2011.

Total investment return for the period ended 30 September 2012 was US$156 million (30 September 2011: US$221 million). The year-to-date investment return was 1.8 per cent at 30 September 2012 (30 September 2011: 2.7 per cent). 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 nine-month period ended 30 September 2012 is analysed in the table below:

US$m	Average allocation during period	Total investment return	Year-to-date total investment return (%)
Fixed income	5,837	129	2.2%
Cash and short-term investments	2,374	26	1.1%
Other invested assets	319	1	0.3%
	8,530	156	1.8%

The fixed income portfolio benefitted from lower rates and narrower credit spreads during the third quarter.

The Group's investment portfolio remains defensively positioned given continued economic and financial market uncertainties. Overlays have been put in place by the Group to protect against significant movements in interest rates and to manage credit and equity risks actively.

The yield to maturity on the fixed income portfolio was 1.1 per cent at 30 September 2012 (30 June 2012: 1.3 per cent). The duration of the fixed income portfolio was 2.6 years at 30 September 2012 (30 June 2012: 2.6 years), which compares with a liability benchmark at that date of 2.6 years (30 June 2012: 2.7 years). The duration of the total cash and investment portfolio was 1.7 years at 30 September 2012 (30 June 2012: 1.7 years).

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 57 per cent at 30 September 2012 (30 June 2012: 57 per cent).

Hurricane Sandy

The losses caused by Hurricane Sandy are complex to assess, given the sheer size of the storm and the many different types of claims it has created. Like the New Zealand earthquake, Japanese earthquake/tsunami and Thai floods in 2011, existing catastrophe models are unlikely to predict the quantum of insured damage with a high degree of certainty. The losses to Catlin are expected to be clearer when the Group reports its 2012 full-year results.

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

"Catlin continued to perform well during the period ended 30 September 2012. Our business grew as planned, with double-digit increases in gross premiums written by our US and International underwriting hubs.  The rating environment remains good. Average weighted premium rates for catastrophe-exposed business have increased substantially so far during 2012, whilst rates for many non-catastrophe classes of business - including US Casualty business - continue to rise.

"Catlin wishes to express its sympathy to the victims of Hurricane Sandy. The storm has caused nearly 200 deaths in the Caribbean and the United States and has caused great suffering for millions of others who are homeless, have been without electricity, natural gas or water, or have faced transportation or other lifestyle hardships. Thankfully, none of our US employees or their family members were killed or injured by the storm. However, our New York office will be closed for several more weeks, and many of our employees' homes were without power for more than a week after the storm made landfall."

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For more information contact:

Media Relations:
James Burcke,	Tel:	[phone]
Head of Communications, London	Mobile:	[phone]
	E-mail:	[e-mail]
Liz Morley, Maitland	Tel:	[phone]
	E-mail:	[e-mail]
Investor Relations:
William Spurgin,	Tel:	[phone]
Head of Investor Relations, London	Mobile:	[phone]
	E-mail:	[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 2011 amounted to US$4.5 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 55 offices in 21 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 Seaview Survey, a major scientific expedition that is the first comprehensive study to document the composition and health of sections of the Great Barrier Reef across an unprecedented range of depths. The scientific data currently being gathered by the Catlin Seaview Survey will strengthen the understanding of how climate change and other environmental changes are likely to affect ocean ecosystems. More information is available at www.catlinseaviewsurvey.com.

 

END

 

 

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