Despite strong underwriting results, Hamilton, Bermuda-based Catlin Group Limited reported an 18 percent decline in its first-half 2008 net income due to poor investment returns.

The company said its first-half net income was $132.2 million, compared to a 2007 first-half net income of $161.7 million.

However, Catlin noted that in the first half of 2008 it paid a dividend of $21.8 million to holders of the group's non-cumulative perpetual preferred shares issued in January 2007, which reduced first-half 2008 net income available to stockholders to 110.5 million, a 32 percent decline from last year's $161.7 million figure.

Catlin said that no dividend was paid on these shares during the first half of 2007.

Investment income dropped 59 percent to $53.9 million from 2007 first-half investment income of $130.7 million.

Stephen Catlin, chief executive of Catlin, said in a statement, "Our investment returns suffered in the volatile financial markets. Given the current conditions, Catlin is maintaining a defensive investment position with relatively high levels of cash and liquid assets."

Christopher Stooke, Catlin's chief financial officer, said in a conference call that the lower investment income is also a result of an accounting policy change, in which all unrealized gains and losses are now being taken to income. This, he added, brings Catlin Group in line with most of its peers but affects results for this reporting period.

On the underwriting side, 2008 first-half gross premiums written increased to $2.1 billion from $2 billion last year. Net premiums earned also rose, to $1.3 billion from $1.2 billion. Mr. Stooke pointed out that net underwriting contribution rose 12 percent from last year, to $309.9 million from $277.4 million.

The 2008 first-half combined ratio improved to 90.9 from 92.2.

Speaking to the underwriting results, Mr. Catlin said, "This premium growth was the result of strong performances by Catlin Bermuda, Catlin US and our network of international offices, which more than offset the expected reduction in volume in our London wholesale business.

"Average weighted premium rates declined by 5 percent, which was less than anticipated and left good profit potential in nearly all areas of the business," he added.

Special Reports /

Catlin First-Half Net Income Down On Investment Returns

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