Catlin Group Ltd.'s 2012 net income rose nearly tenfold as the specialty nonlife insurer and reinsurer reported strong underwriting improvement and higher premium income.
Net income for the year rose to US$305 million from $38 million the previous year. Gross premiums written rose 10% to $4.97 billion, while net underwriting income improved to $788 million from $324 million. The combined ratio improved to 90 from 102.6.
Coming off a rough catastrophe year in 2011, Catlin said 2012 was relatively mild, with only one significant loss event for the group a $225 million loss related to Hurricane Sandy. One other notable loss event was the grounding of the Costa Concordia cruise ship last January, which cost the group $51 million.
Catlin noted that regarding the Costa Concordia, "the decision by government authorities in Italy to demand that the ship be refloated, rather than scrapped on-site, has significantly increased insurers' costs."
Total investment return fell to $173 million from $256 million. In its financial report, the group cited the low interest-rate environment and continued global economic uncertainty as creating "a tough investment environment for all insurers, including Catlin. We believe that our conservative investment strategy is appropriate in the light of the current market conditions, but we must be aware that investment return over the coming years will likely remain low," the report said.
"Our diversification strategy is contributing to our underwriting success," said Chairman John Barton in a statement. "The non-London/U.K. underwriting hubs continue to grow and now account for 50% of overall gross premiums written. More importantly, all of our underwriting hubs produced underwriting contributions in 2012."
"Market conditions for many classes of business are currently good," said Chief Executive Stephen Catlin in a statement. "Pricing for catastrophe-exposed business is at a high level, following rate increases in 2011 and 2012, as well as further rate improvements for U.S. property reinsurance at 1 January 2013 renewals in the aftermath of Windstorm Sandy. There is also an improving environment for certain lines of non-catastrophe business, such as U.S. casualty classes."
Catlin added the group expects to further extend its growth through the six operating hubs it operates worldwide, covering the London market, Bermuda, the United States, the Asia-Pacific region, Europe and Canada.
The group said in its financial statement that the hubs outside London/United Kingdom contributed 33% of the total net underwriting result last year, up from 26% in 2011. Net underwriting contribution by the non-London hubs rose to $263 million from $83 million.
"A major driver of growth in the non-London/U.K. hubs has been the development of Catlin Re Switzerland, which began writing business in 2011. Catlin Re Switzerland significantly expanded its client base and product offerings during 2012, exceeding volume targets whilst maintaining profitability," the statement said.