A low claims backdrop and a better-than-average investment performance helped Catlin (CGL) more than double half-year profit. Indeed, the Lloyd’s insurer’s combined ratio (of claims to premiums) improved by more than three percentage points to an impressively profitable 85 per cent.
But that benign claims environment - along with an influx of new capital into the sector - has left prices under pressure. Overall, Catlin’s premium rates fell 3.2 per cent, with the group’s catastrophe-exposed business having seen rates fall 6.4 per cent. Still, management says its non-Lloyd's operations are sustaining firmer pricing: in the US, for example, rates rose 2.3 per cent. Around 48 per cent of Catlin’s s underwriting contribution now comes from outside of Lloyd’s. Management says growth opportunities still exist in those markets, despite less than buoyant conditions overall.
Meanwhile, the investment book delivered a 1.6 per cent return in the half, at a time when Catlin’s rivals are generally reporting returns nearer 1 per cent. That’s significantly because 7 per cent of the book is invested in higher-yielding assets, such as private equity or special situation stocks. That proportion could rise to 10 per cent, even as the rest of the portfolio remains in cash and high-quality bonds.
Broker Numis Securities expects full-year EPS of 53.1p (from 60.7p in 2013) and net tangible assets (NTA) of 442p.
CATLIN (CGL) | ||||
---|---|---|---|---|
ORD PRICE: | 514p | MARKET VALUE: | £1.9bn | |
TOUCH: | 514-515p | 12-MONTH HIGH: | 591p | LOW: 459p |
DIVIDEND YIELD: | 6.1% | PE RATIO: | 6 | |
NET ASSET VALUE: | 929¢ | COMBINED RATIO: | 85% |
Half-year to 30 Jun | Gross premiums ($bn) | Pre-tax profit ($m) | Investment return ($m) | Dividend per share (p) |
---|---|---|---|---|
2013 | 3.30 | 145 | 9 | 10 |
2014 | 3.66 | 318 | 142 | 10.5 |
% change | +12 | +119 | +1478 | +5 |
Ex-div: 20 Aug Payment: 22 Sep Capacity owned: 100 per cent £1=$1.68 |