Thursday 9 February 2012

Portfolio Review: Catlin Group (LSE:CGL)

Catlin Group is my biggest high-yield shareholding - so I need to keep a 'weather' eye on it.

Should I be happy? Or is it a disaster waiting to happen.
Catlin Group is a Bermuda-based insurance underwriter that is the operator of the biggest syndicate on Lloyd's of London. To quote their website blurb: "Catlin Group Limited is a global speciality property / casualty insurer and reinsurer, writing more than 30 lines of business. Our six underwriting hubs in London/UK, Bermuda, the United States, Asia Pacific, Europe, and Canada place us at the heart of every major insurance market."

So, big. And diversified. With a dividend yield of around 7%. Forecast yield is 6.7% with a dividend coverage of 2.

They deal in disasters. Last year saw quite a lot of them but it was not necessarily a disastrous year for  Catlin Group as customers accepted a hefty increase in premia as a result.

As Sharecast noted, The stayed in profit in 2011, albeit only just, despite swallowing $961m in gross losses ($678m net) from natural catastrophes. Earnings per share plunged to 11 cents from 98 cents in 2010 but the company still raised its dividend; the US full year pay-out rose to 44.8 cents from 42.5 cents while the sterling pay-out improved to 28.0p from 26.5p.

Rates have been improving, especially for catastrophe-exposed business classes for which rates increased by 9% at January 1st 2012 renewals. Nothing prepares customers for a thumping increase in premia like a series of catastrophes.

So, barring The End of the World, so far, so good.

As I already have lots, for me that's a HOLD.

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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