Background
The
Catlin Group is a property/casualty insurer and reinsurer writing more
than 30 classes of business worldwide. The Group wrote gross premiums
of $1.4 billion in 2004.
The origins of the Group date back
to 1984, when Stephen Catlin formed Catlin Underwriting Agencies (CUAL)
to manage newly-formed Lloyd’s
marine Syndicate 1003, which commenced underwriting for the 1985 year
of account on behalf of capital provided by traditional Lloyd’s
Names.
From 1985 to 1995, Syndicate 1003
grew under CUAL’s
management from a start-up operation with premium capacity of £6
million ($10 million) into one of the largest syndicates trading at Lloyd’s,
with capacity of £170 million ($304 million). Syndicate 1003 closed
every year of account at a profit during a period that saw unprecedented
losses at Lloyd’s.
In 1995 following an investment in
the Group by Western General Insurance of Bermuda for a majority ownership
stake, Syndicate 2003, now known as the Catlin Syndicate, was formed
to write in parallel with Syndicate 1003 for 1996 under the common management
of CUAL. In due course, this capacity was consolidated into Syndicate
2003.
Catlin saw
an opportunity in 2001 to expand its capital base and achieve attractive returns.
The Group raised $482 million in private equity capital.
In August
2002, Catlin Bermuda, which had been established in 2000, began to underwrite
business as a Class 4 insurance company under Bermuda law. Catlin Bermuda allows
Catlin to participate in the active and growing Bermuda market and brings it
closer to clients and their brokers who place significant amounts of business
in that market.
In December
2003, the Group received FSA approval to establish Catlin UK and began to underwrite
through this third platform in January 2004. Catlin UK targets new opportunities
in the market for UK small and medium-sized commercial risks. Catlin UK is
now able to underwrite business in all member nations of the European Economic
Area.
Spotlight – Three platforms
The
Catlin Group operates three underwriting platforms:
- The Catlin Syndicate at Lloyd’s of London (Syndicate
2003) is the eighth largest syndicate at Lloyd’s, based on that
market’s 2005 premium capacity. It is a recognised leader of
numerous classes of specialty insurance and reinsurance. Over the past
20 years, the Catlin Syndicate and its predecessors have consistently
outperformed the Lloyd’s market as a whole.
- Catlin Bermuda (Catlin Insurance Company) underwrites
property treaty and casualty treaty reinsurance and property and casualty
insurance for US risks on a surplus lines basis.
- Catlin UK (Catlin Insurance Company (UK)) specialises
in writing commercial property, general liability, professional indemnity,
directors’ and
officers’ liability and commercial crime insurance for UK clients.
It also writes other classes of business written by the Catlin Syndicate.
The Group
also operates subsidiaries in Houston and New Orleans in the US, as
well as in the UK, Guernsey, Canada, Germany, Belgium, Singapore, Malaysia and
Australia. These subsidiaries, which underwrite on behalf of Catlin’s underwriting
platforms, allow Catlin to work more closely with local clients and
their brokers.
Analysis
The Catlin
Group’s annualised
return on average equity for the six months ended June 30, 2005 was 22.0
per cent (June 30, 2004: 23.3 per cent), reflecting the increased levels
of both net income and stockholders’ equity.
The Group’s
net result from underwriting operations rose by 14.4 per cent to $109.4 million
(2004: $95.6 million). The combined ratio at 30 June 2005 was 82.3 percent
(2004: 81.8 percent), reflecting the Group’s highly selective underwriting
and the generally low incidence of losses in the period.
The Group’s
approach to both new and renewal business has been highly selective, such that
the decrease in weighted average premium rates during the period was two percent.
The Group
maintained its conservative investment philosophy during the period, with assets
of $2.22 billion (2004: $1.71 billion) invested primarily in fixed maturities
and cash and cash equivalents. Net investment income and net realised gains
on investments amounted to $38.2 million (2004: $20.1 million). The annualised
total return on average investments was 3.1 percent (2004: 1.7 percent), reflecting
the higher yields available in the most recent period.
All four
business segments contributed to the Group’s performance, with an increasing
portion of Catlin’s business underwritten outside the Group’s traditional
Lloyd’s base. During the six months ended 30 June 2005, Catlin Bermuda
and Catlin UK accounted for 51 percent of the Group’s gross premiums
written (2004: 27 percent).
Business
originated by the Catlin Syndicate amounted to 73 percent of gross premiums
written (30 June 2004: 79 per cent), while business written by the corporate
platforms — Catlin Bermuda and Catlin UK — amounted to 27 percent
(2004: 21 percent).
Senior management
Chairman: Sir Graham Hearne
Chief executive: Stephen Catlin
CFO: Christopher Stooke
Financial data
(half-year to June 30, 2005)
Gross premiums written: $782 million, down 16 percent
Net premiums earned: $627 million, up 14 percent
Net income: $111.2 million, up 16 percent
Shareholders’ equity: $1.058 billion, up 16 percent
Website
www.catlin.com
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