Insurance reveals it has secured £137m to back three new special-purpose vehicles
Catlin’s new third-party capital arrangements will help the company win back investor confidence as well as giving it flexibility to write more business.
The Lloyd’s insurer revealed at its investor day on Thursday that as well as the £50m third-party capital it had secured from Chinese government-owned reinsurer China Re, it had obtained £60m from a group of Lloyd’s names, and £26.9m from Bermuda-based insurer Everest Re.
Like China Re’s capital injection, the money from these two new sources will back special-purpose syndicates, which will in turn reinsure Syndicate 2003 - Catlin’s main Lloyd’s operation. This means Catlin will be backed by three new special-purpose syndicates from 1 January.
Full details are expected soon.
The reinsurance provided will in turn allow Syndicate 2003 to write more business, and take advantage of hardening rates in 2012 without having to raise extra capital by issuing new shares, diluting existing shareholders’ ownership of the company.
Jefferies analyst Jonathan Urwin says the company has surplus capital of 5%, and so is not desperate for new funds. But he believes the positive news will help win back investors after the company’s equity raising exercises in 2006 and 2009.
“Catlin is the most unloved stock in the London market because they have raised equity at two very bad times in the past five years and lost investor confidence,” Urwin said. “What they needed to do was lay out a strategy, communicate it clearly and deliver on that and keep delivering.”
He added that Catlin looks cheap, as its shares are trading in line with net tangible asset value. But any positive news can help boost valuation. “They don’t need to set the world on fire to drive price-to-book-value expansion. They just need to portray that they are improving the business and managing it sensibly to regain investor trust and confidence.”