Last year's benign claims backdrop, which allowed for a $167m (£102m) reserves writeback, significantly explains Lloyd's insurer Catlin's (CGL) decent earnings hike. Indeed, Catlin's combined ratio (of claims to premiums) improved by over four percentage points to 85.6 per cent, which signals impressive underwriting profitability.
Low claims, however, are also driving pricing pressure. On average, Catlin's rates rose 0.8 per cent in 2013 but, at January's renewals, rates fell 3.2 per cent overall with renewal pricing on catastrophe-exposed classes having slipped 6 per cent. But non-catastrophe lines are holding up better - renewal rates on casualty business, for instance, rose 4 per cent.
The investment portfolio staged something of a comeback, too. The full-year return reached 1.5 per cent, although that significantly reflected a 22.1 per cent return from Catlin's small higher-risk portfolio, largely focused on special situation equities and select private equity investments. But 93 per cent remains invested in cash and bonds and, with bond yields rising, the portfolio remains under pressure.
JP Morgan Cazenove expects adjusted EPS of 83¢ for 2014 (from 103¢ in 2013) and net tangible assets (NTA) of 435p a share.
CATLIN (CGL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 553p | MARKET VALUE: | £2bn | |
| TOUCH: | 553-555p | 12-MONTH HIGH: | 597p | LOW: 449p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 882¢* | COMBINED RATIO: | 85.6% | |
| Year to 31 Dec | Gross premiums ($bn) | Pre-tax profit ($m) | Investment return ($m) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 3.72 | 603 | 414 | 25.0 |
| 2010 | 4.07 | 406 | 205 | 26.5 |
| 2011 | 4.51 | 71 | 248 | 28.0 |
| 2012 | 4.97 | 339 | 158 | 29.5 |
| 2013 | 5.31 | 432 | 124 | 31.0 |
| % change | +7 | +27 | -22 | +5 |
Ex-div: 19 Feb Payment: 20 Mar *Includes intangible assets of $720m, or 199¢ a share Capacity owned: 100 per cent £1=$1.64 | ||||
