Catlin profit falls 36% after investment dip

Lloyd’s insurer Catlin made a profit after tax of $118m (£76m) in the first half of 2013, down 36% on the $184m it made in last year’s first half.

The dip was mainly caused by a sharp drop in investment return to $16m (H1 2012: $87m), thanks to rising interest rates. This meant Catlin’s return on invested assets was just 0.4% (H1 2012: 2%).

Catlin’s combined operating ratio worsened by 2.6 percentage points to 88.9% (H1 2012: 86.3%) after the company paid out $126m in catastrophe losses in the first half.

Partly offsetting this was $56m of reserve releases from prior years (H1 2012: $30m).

Gross written premiums increased 10% to $3.3bn (H1 2012: $3bn).

‘Strong’ performance

Despite the fall in profits and slightly worse COR, chief executive Stephen Catlin hailed the company’s “strong underwriting performance” in the half year.

He said: “Our attritional loss ratio remains low, and our net underwriting contribution matched last year’s record amount, despite incurring nearly $100m in additional catastrophe claims in this year’s first half.”

He added: “Our global underwriting infrastructure continues to produce profitable growth. The share of our gross premiums written – and, more importantly, net underwriting contribution – produced by the non-London/UK underwriting hubs continues to grow. We see further promising opportunities ahead.”

He also noted that while the rise in interest rates had cut the value of Catlin’s investment portfolio in the short term, “Catlin’s investment returns will ultimately benefit from higher interest rates”.

‘Weaker than expected’

However, Shore Capital analyst Eamonn Flanagan said Catlin’s first-half results were “much weaker than we and the market had expected”.

He added: “Unlike its peers that have reported to date, Catlin has picked a much greater level of cat and large single-risk losses, thus confirming our fears over the growth strategy embarked upon by the company in recent years.”