Catlin Says It Is Financially Strong, Reports $200M Hurricane Loss

Catlin Group Ltd. in Bermuda announced that losses from recent hurricanes will total $200 million, it has lost $118 million on fixed income investments, and its holdings in bankrupt Lehman Brothers totaled $11 million.

Stephen Catlin, chief executive officer of the firm, said the unparalleled financial events of this year will prove to be a market-turning experience and he believes ratings will begin to improve as capital leaves the insurance marketplace.

"The unprecedented events of this year, including the instability in international financial markets, have presented the group with both challenges and opportunities," said the CEO of the Bermuda-based international specialty property-casualty insurer and reinsurer.

"We believe that these are market turning events. We expect an improved rating environment created by the removal of significant capital from the marketplace," he commented.

The company said losses arising from the hurricanes are estimated at approximately $200 million, net of reinsurance protections and reinstatement premiums. The estimate is based on the assumption that marketwide insured losses from Hurricane Ike will amount to approximately $15 billion, Catlin said.

Total net investment return for the nine-month period ending Sept. 30 was less than 1 percent. This return was calculated after valuing all investments on a mark-to-market basis. This includes an unrealized loss of $118 million on fixed income investments as of the end of the period.

Catlin said it held $11 million of Lehman Brothers debt, which has been written down to $1 million. The investment, insurance and reinsurance exposures relating to American International Group Inc. are not material, the company said.

Catlin's cash and investments amount to approximately $6.2 billion. Asset allocation has not materially changed since June 30, the company continued, and it said it remains defensively positioned.

Catlin said cash and investments comprise approximately 40 percent cash, 20 percent government and government agency securities, 27 percent other fixed income securities, 11 percent hedge funds/funds of funds, and 2 percent equities.

The company noted that current capital levels are sufficient to support the embedded growth arising from the acquisition of Wellington Underwriting plc, including the expiration at the end of 2008 of the quota share reinsurance provided to the Catlin Syndicate by former Wellington third-party capital providers.

Current capital levels are also sufficient to support expected increases in premiums arising from improved insurance and reinsurance market conditions in 2009, the company said.

"Catlin's balance sheet remains strong," said Mr. Catlin. "Our investment in the business over the past few years leaves us well positioned to take advantage of the new opportunities."

Catlin said it will issue its third-quarter interim management statement on Nov. 13.