Catlin Group Limited Financial Results - 06.03.08

Catlin Group Limited announces record financial results for the year ended 31 December 2007. The results for Syndicate 2020 are expected to be released on 13 March.
  Key Points

• 4 per cent increase in income before tax to US$543 million
  
• 8 per cent increase in net income available to common shareholders to
  
• US$462 million
  
• 21 per cent return on average equity;
  
• 33 per cent return on net tangible assets
  
• 24 per cent increase in gross premiums written to US$3.4 billion
• Combined ratio of 84 per cent (2006: 87 per cent)
  
• Total investment return of 4.5 per cent including subprime provision
  
• 49 per cent increase in stockholders' equity to US$3.0 billion
  
• 20 per cent increase in cash and investments to US$6.0 billion
  
• 19 per cent increase in book value per share to US$9.59
  
• 29 per cent increase in net tangible assets per share to US$6.57
  
• 17 per cent increase in unearned premiums to US$1.5 billion
  
• 9 per cent increase in total dividend to 25.1 pence (50.2 US cents) per
• Successful integration of Catlin-Wellington operations
  
• Excellent business retention
  
• Growth in US and international offices
  2008 Outlook:
  
• Further rate softening, but margins to remain good
  
• Stable premium volume (decrease in London; growth from Catlin US, international offices)
  
• Embedded growth in earned premiums from Wellington acquisition
  
• Anticipated acquisition-related synergies increased to more than US$125million annually

Sir Graham Hearne, Chairman of Catlin Group Limited, said:
"Catlin is reporting record financial results today, including an 8 per cent increase in net income available to common shareholders, a return on average equity of 21 per cent and an increase in net tangible assets per share of 29 per cent. We have entered 2008 in a strong position and are confident of our prospects. This confidence is reflected in the proposed total dividend of 25.1 pence per share, an increase of 9 per cent."
Stephen Catlin, Chief Executive of Catlin Group Limited, said:
"2007 was a landmark year for Catlin. All parts of our business performed well, and we successfully integrated Wellington's operations with our own. We advanced our strategy of further diversifying our risk portfolio and expanding our distribution capabilities through the development of Catlin US and our international offices.
"The progress in our operations outside London and the embedded growth emerging from the Wellington acquisition should enable us to maintain business volumes even in the challenging underwriting conditions anticipated during 2008. Those factors, combined with more than US$125 million in annual cost synergies, provide the Group with a strong foundation for ongoing success."
Syndicate 2020
"The Wellington acquisition will provide Catlin with embedded growth for several years. The embedded growth is linked to the third-party Lloyd's Names who had provided approximately 33 per cent of the capacity of Wellington Syndicate 2020 during 2006. Catlin acquired this capacity in December 2006 and, as part of that transaction, the Names were given the opportunity to participate in a 12.5 per cent quota share reinsurance of the enlarged Catlin Syndicate for 2007 and 2008. Whilst the Names did not participate on Catlin Syndicate during 2007, they were still entitled to their share of profits from premiums which earned during 2007 but were written by Syndicate 2020 in 2006 and prior years. The proportion of Syndicate premiums and resulting profits attributable to Names will decrease during 2008 and reduce to nil during 2009. The Names' quota share reinsurance will have a similar impact. This reinsurance arrangement will terminate at the end of 2008, and the Names' residual interest will cease by the end of 2010. This embedded growth means that the net premiums earned by Catlin will increase through 2011 as the Names' participation unwinds, even if the underlying gross premium volume holds steady".