Catlin profit eroded by catastrophes and interest rates

Lloyd’s insurer Catlin made a profit before tax of $406m for the full year of 2010, down 30% on the $603m it made in 2009.

The insurer’s reported combined ratio increased slightly to 89.8% from 89.1%.

The profit fall came despite a 9.5% increase in gross written premium to $4.1bn from $3.7bn.

Catlin attributed the reduction in part to poorer investment returns caused by low interest rates and the catastrophe losses suffered during the year.

The insurer’s total investment return for 2010 was $212m, almost half the $419m it made in 2009. The combination of the Chilean and New Zealand earthquakes and the December floods in Australia resulted in catastrophe losses of $218m, compared with nothing in 2009.

Catlin also announced it had cut the gross premiums written from its London/UK underwriting operation for the fourth year running. as competition for London wholesale business increased. The company’s non-London underwriting hubs now account for 46% of underwriting contribution compared with 39% in 2009.

In addition, Catlin reduced volumes across the group for business classes such as long-tail casualty and aerospace, for which rates have been “under the most pressure.”

Catlin released $144m from prior year reserves during 2010, amounting to 3% of total reserves. This compares with $94m, or 2% of reserves, in 2009. Catlin said the release demonstrates favourable loss development in prior years and was within the company’s expected range.