Catlin Group’s $339 Million 2012 Profit Less than Forecast as Sandy Loss Widens

February 8, 2013

Bermuda-based insurer Catlin said its profit fell short of analysts’ forecasts because of a bigger than expected claims bill from Superstorm Sandy and the Costa Concordia shipwreck.

Catlin, operator of the biggest syndicate at Lloyd’s of London, made a pretax profit of $339 million in 2012, missing the $384 million penciled in by analysts in a company poll.

The shortfall reflected a widening of Catlin’s projected Sandy loss to $225 million, from an initial estimate of $200 million published in December.

The insurer also said that the grounding of the Costa Concordia cruise liner off the Italian coast in January last year would cost it $51 million, up from previous guidance of $35 million.

Catlin shares were down 2.2 percent by 0847 GMT, the second-biggest faller in the mid-cap FTSE 250 index, which was 0.3 percent higher.

“We expect the upgrade to Sandy loss estimates and a more surprising 45 percent increase on Costa Concordia will raise some questions,” Espirito Santo analyst Joy Ferneyhough wrote in a note to clients.

Catlin’s 2012 profit was still up almost fivefold from the $71 million it made in 2011, with natural disaster-related payouts falling to $225 million from $678 million.

Last year was a relatively quiet one for natural disasters, the biggest of which was Sandy, a 1,000-mile wide storm that struck the north east of the United States in October and is expected to cost the insurance industry up to $25 billion.

Insurers paid out a total of $65 billion in catastrophe claims last year, according to reinsurer Swiss Re, down sharply from $120 billion in 2011, when they had to foot the bill for Japan’s Tohoku earthquake.

Catlin blamed the bigger Costa Concordia loss on an Italian government order that the vessel be removed whole to limit potential pollution, a more costly process than cutting it up.

The insurer is paying a 2012 dividend of 29.5 pence per share, an increase of 5.4 percent.

IJ Ed. Note: The Catlin Group’s earnings report highlighted the following:
— US$339 million profit before tax (2011: $71 million); US$305 million net income to common stockholders (2011: $38 million)
— 14.6 per cent return on net tangible assets (2011: 1.7 per cent); 11.3 per cent return on equity (2011: 1.3 per cent)
— 10 per cent increase in gross premiums written to US$4.97 billion (2011: US$4.51 billion)
— 13 per cent increase in gross premiums written for non-London/UK hubs
— 49 per cent of total GPW produced by non-London/UK hubs
— 50.6 per cent attritional loss ratio (2011: 50.0 per cent)
— 90.0 per cent combined ratio (2011: 102.6 per cent)
— 143 per cent increase in underwriting contribution to US$788 million (2011: US$324 million)
— Total investment return of 2.0 per cent (2011: 3.1 per cent)
— 5.4 per cent increase in annual dividend to 29.5 UK pence per share (46.0 US cents) (31 December 2011: 28.0 UK pence; 44.9 US cents)
Source: Catlin Group

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