Non-London markets help Catlin towards 27% profit hike

Catlin made a 2013 profit before tax of $432m (£263m), a 27% increase from the $339m it made in 2012.

The company’s combined ratio also improved by 4.4 points to 85.6 % (2012: 90%), thanks to the strong underwriting performance from its non-London operations.

Group’s underwriting operations

Catlin’s net underwriting contribution exceeded £1bn in 2013, an all-time record for the Lloyd’s insurer.

However, the gross written premium written (GWP) for the London underwriting base decreased by 2%, while net underwriting contribution was virtually flat.

But across the group the GWP rose by 7% in 2013 to $5.31bn (2012: $4.97)

This growth came entirely from the non-London underwriting hubs in America, Bermuda, Europe, Asia-Pacific and Canada.

Combined, their GWP increased by 16% and they accounted for 53 of the group’s total GWP volume (2012: 49%).

Chief executive Stephen Catlin said: “This performance is in line with expectations, as our London underwriting team chose not to renew some business in light of the increased competition in the London wholesale market.

“While we are delighted by the performance outside London in 2013, we believe there is still more profitable growth to come.”

Improving outlook on losses

The group incurred $156m in catastrophic losses during 2013, with a loss ratio of 52.3 %, the lowest since 2007.

The incurred losses from natural catastrophes decreased substantially compared with record levels in 2011.

The group also kept expenses under control during 2013 with the expenses ratio steady at 33.3% on a like-for-like basis.

Additionally, heavy investments were made during 2013 to improve IT systems and back-office efficiency as well as in the face of increasing regulation.

This amounted to $31m in 2013 and a 21% increase when compared with the previous year.

Hardening rates

Overall average rates in casualty classes increased by 6% during 2013.

They continued to increase strongly for most classes of US casualty business, which helped improve results for both the London and the US hubs, which write significant books of US casualty risks.

In addition rates for the group’s UK motor business continued to improve, contrary to wider market trends.

Underwriting outlook

The Lloyd’s insurer said in a statement: “The positive rate environment that prevailed from 2011 to 2013 appears to have run its course, partly due to the increase in capacity offered by both traditional and non-traditional players, and improved loss experience across a number of business classes.

“The group now faces a more challenging marketplace, particularly in terms of pricing. However, Catlin is in an excellent position to compete amid these market conditions, while rates are coming under pressure, acceptable margins exist across Catlin’s portfolio.”

Catlin Group chairman John Barton said: “Whilet it is now clear that market conditions are becoming increasingly competitive for many classes of business underwritten by Catlin, margins are still strong. I believe that Catlin has the strategy, the infrastructure and, most importantly, the people in place to continue to produce good results for shareholders.”