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Catlin reports profit increase ahead of XL merger

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Catlin Group Ltd. Tuesday reported pre-tax profit to $488 million for 2014, a 13% increase over2013 as the Hamilton, Bermuda-based insurer and reinsurer reported improved investment income.

Catlin, which in January announced that it will merge with Dublin-based XL Group P.L.C., said that gross written premiums in 2014 totalled $5.97 billion, up 12% compared with2013.

The insurer and reinsurer, which manages the largest syndicate at Lloyd's of London, said more than half of its gross written premium was sourced from international offices.

Catlin said its investment return for 2014 was $241 million, a 79% increase over 2013. That investment income was boosted by a $31 million gain on a loan made to Box Innovation Group Ltd., a personalized auto insurance service it sold in January.

Catlin's combined ratio for 2014 was 86.8%, a slight deterioration from 85.6% in 2013.

The insurer and reinsurer said that large losses, including the loss of two Malaysian Airlines planes and losses after an attack at Tripoli airport, totalled $107 million in 2014, compared with $79 million in 2013.

Reserve releases in 2014 were $120 million, Catlin said, down from $167 million in 2013.

Catlin said that on average, rates fell by 3% during 2014 — an average 5% for reinsurance business and 2% for primary insurance business.

Eamonn Flanagan, head of the Liverpool, England, office of investment advisor Shore Capital Group Ltd, said in a note to investors that Catlin “has finished the year in a robust financial state.”

The merger of XL and Catlin is expected to be completed by the middle of the year.

In a statement accompanying the results, Stephen Catlin, founder and CEO of Catlin, said that he believed “the combination of XL and Catlin would result in a broader, better balanced and more efficient underwriting organization that would be able to compete more effectively in the evolving marketplace.”

Mr. Catlin, who will join the merged company, to be known as XL Catlin, as executive deputy chairman, said that “while the future that awaits XL Catlin is indeed exciting, I have to admit that I do feel a degree of sadness as the company which I established in 1984 enters what are likely to be its last months as an independent organization.”