Last year was a year of disasters but not necessarily a disastrous year for Bermuda-based insurance underwriter Catlin Group as customers accepted a hefty increase in premia as a result.
The operator of the biggest syndicate on Lloyd's of London stayed in profit in 2011, albeit only just, despite swallowing $961m in gross losses ($678m net) from natural catastrophes.
Net income before tax slumped to $71m in 2011 from $406m the year before.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Gross premiums written climbed to $4.51bn from $4.07bn the year before, while net premiums written advanced to $3.84bn from $3.32bn.
The net underwriting contribution more than halved to $32m from $683m in 2010 but the total investment return improved to $256m from $212m the year before.
Earnings per share plunged to 11 cents from 98 cents in 2010 but the company still raised its dividend; the US full year pay-out rises to 44.8 cents from 42.5 cents while the sterling pay-out improves to 28.0p from 26.5p.
Sir Graham Hearne, Chairman of Catlin Group, demonstrated his command of understatement when he described 2011 as a "tough year for the insurance industry" and, not surprisingly, preferred to take a longer term view of the company's performance.
"Since 31st March 2004, Catlin has produced total shareholder return amounting to 93 per cent, compared with average total shareholder return of 71 per cent for FTSE 350 companies during that same period," he noted.
Chief Executive Officer (CEO) Stephen Catlin, meanwhile, put his spin on the results, noting "gross premiums written increased by 11 per cent, and premium volume written by our non-London/UK underwriting hubs rose by 24 per cent."
"Our group-wide attritional loss ratio was 50 per cent, the lowest in five years," Catlin noted.
Fortunately, market conditions are improving, the CEO reckons, "especially for catastrophe-exposed business classes for which rates increased by 9 per cent at January 1st 2012 renewals."
As some cynics have observed, nothing prepares customers for a thumping increase in premia like a series of catastrophes.
"Whilst it may be too early to declare that the market has turned, nearly all signals are encouraging," Stephen Catlin surmised. We have a structure that is capable of substantial, profitable growth at a time when excellent opportunities are arising," he added.
The market seemed convinced, with the shares rising 16.7p to 443.1p in response to the update.
jh
-
FTSE 100 hits record highs – why is it rising and will we see more gains?Advice UK equities have been described as unloved for a long time but as the FTSE 100 hits new highs, we explain if now is the time to buy British.
-
How to invest in copperIt may be time to invest in copper as the red metal appears poised for a big jump. Dominic Frisby looks at what should investors should buy
