(Bloomberg) — Catlin Group Ltd, the insurer paying for twoMalaysian Airline disasters, rose the most in more than a year inLondon trading after reporting record earnings even asdeteriorating rates plague the industry.

Pretax profit more than doubled to $318 million in the firsthalf compared with a year earlier, the Bermuda-based insurer saidtoday in a statement. That beat the $226 million average estimateof four analysts surveyed by Bloomberg.

International expansion over 15 years has given the Lloyd's ofLondon insurer scope to boost earnings amid investor concern thatdeclining rates are pushing the insurance market into its worstposition in years, Catlin said. The insurer's average weightedpremium rates fell 3.2% in the period, with conditions morefavorable in North America and Asia than in London and Bermuda.

“There's a lot of screaming headlines out there about how thismarket is awful, how pricing has no profit potential in it,” ChiefOperating Officer Paul Jardine said in an interview. “And yet wehave a business model that allows us to perform not just infantastic market conditions but also when it gets reallytough.”

Catlin shares rose as much as 5.5%, the biggest intraday gainsince May 2013, and were up 4.8% at 509.5 pence at 12:45 p.m. inLondon. That pared the stock's decline this year to 12%.

Airline rates

Jardine said he expects the recent spate of airline disasters to“significantly increase premium rates.” According to Fitch Ratings,that will probably occur in the fourth quarter, when most airlinesrenew policies.

“We expect airline insurers to begin material reviews of rates,policy terms and conditions, and underwriting risk factors,” Fitchanalysts said yesterday in a report.

Catlin insured the Malaysian Airline plane that disappeared inMarch and the jet shot down over Ukraine last month.

The insurer's losses from the first incident, along with a bargecollision in the U.S. and a fire at an offshore drilling rig,amounted to $31 million in the first half, Catlin said today. Thedowning of Flight MH17 in Ukraine and attacks on airplanes bymilitia in Tripoli will probably cost the insurer less than $50million, it said. Losses from catastrophes and large single risksare running less than the historic average, according to theinsurer.

Global risk

While the conflict in Ukraine didn't significantly affect Catlinin the first half, the dispute and Russian sanctions are adding toglobal risk that can change underwriting parameters, Jardinesaid.

“Geopolitical uncertainty is higher today than it was at thestart of the year and I think that means you are operating withmore caution when it comes to parts of the business like politicalrisk, like terrorism, like war,” Jardine said.

Net income surged 129% in the first half to $273 million, thecompany said. Gross written premiums rose 11 percent to $3.66billion.

“The rate reductions are still relatively modest overall,” andunderwriting outside London is contributing more to profit. JoannaParsons, an analyst at Westhouse Securities, said in a note toinvestors.

The company isn't averse to entering other major emergingmarkets such as Turkey and Mexico that have “vibrant, growingeconomies with large insurance sectors,” according to the COO. Evenso, most growth will come from expanding product lines in marketsthe company already serves, he said.

“We spent 15 years investing in our international footprint,”Jardine said. “That build-out is probably largely done.”

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