Profits climb at Catlin in 2014; benefits from strong growth
Catlin has posted a solid set of results for 2014, as it benefitted from growth in nearly all segments.
Its profits for the full year grew 7 percent to $418 million, compared with $392 million in 2013. The company’s gross written premiums (GWP) grew 2 percent to $5.97 billion in 2014, compared with $5.31 billion in 2013.
Catlin added that the growth in GWP was modestly inflated by items such as foreign exchange movements and an increase in the value of multiyear contracts written during 2014 in the London and Bermuda underwriting hubs. After adjusting for these items, the underlying growth in gross premiums written was approximately 7 percent.
The aggregate gross premiums written in non-London hubs increased by 13 per cent to $3.2 billion in 2014, compared with $2.8 billion in 2013.
In the London hub, GWP amounted to $2.8 billion in 2014, compared with $2.5 billion in 2013, a 12 per cent increase. Catlin said this was driven by growth in nearly all classes of business, particularly new and existing property business and growth of energy lines.
Catlin US posted GWP growth of 13 percent to $1.37 billion in 2014, compared with $1.21 billion in 2013. Similarly to the London hub, volume grew across most of the portfolio, with particular growth in direct casualty, casualty treaty, facultative reinsurance and energy business.
The Bermuda hub's volume was flat compared with 2013 at $577 million as volumes for property catastrophe excess of loss reinsurance decreased, due to the decision not to renew some business in light of rate reductions, but this was offset by additional property treaty specialty lines business.
Catlin’s international reporting segment, which includes the Asia-Pacific, Europe and Canada underwriting hubs, posted strong growth. GWP grew in all segments, with Europe posting 19 percent growth, Asia-Pacific posting 23 percent growth and Canada posting 14 percent growth.
However, its net underwriting contribution fell to $991 million in 2014, compared with $1 billion in 2013. Its combined ratio also deteriorated slightly to 86.8 percent for the year, compared with 85.6 percent for 2013.
John Barton, chairman of Catlin, said: “While I am pleased with Catlin’s performance in 2014, I also believe that the offer to acquire Catlin by XL Group would result in a business combination that will become a leader in the global property/casualty insurance industry and result in the realisation of significant value for our shareholders.”
Stephen Catlin, chief executive of Catlin, said: “Catlin continued to grow profitably during 2014, which demonstrates that our operating strategy – based on disciplined underwriting and diversification – has successfully differentiated Catlin from many of its peers.
“At the time of our initial public offering in 2004, Catlin set the goal to produce long-term shareholder returns that exceed the risk-free rate by 10 percentage points. I am happy to say that we have continued to meet that target. Catlin’s average return on net tangible assets since the IPO amounts to 16.8 per cent, while the risk-free return over that period has averaged 2.3 per cent. Average return on equity over the period was 13.2 per cent.
“I believe that the combination of XL and Catlin would result in a broader, better balanced and more efficient underwriting organisation that would be able to compete more effectively in the evolving marketplace. The acquisition would bring together two highly compatible cultures based on an underwriting-first mentality. Catlin for 30 years has been building a business for the future, and we would continue to do so as part of a new, dynamic organisation.”