$CGL - Catlin Group - H1 Results - No catastrophe here

Are you prepared to ride the insurance cycle?

I have written about various insurance stocks in the past see the highlighted link above or the Insurance category to the right of the blog. Briefly we have had results from Catlin Group the Bermuda based international specialty property/casualty insurer and reinsurer which operates on the Lloyds and Bermuda Insurance market but also more widely globally in the US, Europe, Asia-Pacific and Canada hubs.

These results look very good (see the link above for full details) but be aware they probably reflect top of the cycle returns for insurers such as Catlin as premium rates are now declining. However, they mention this and say theat their global coverage helps them to pick and choose and offset some of the worst effects of these premium reduction.

As with other insurance stocks I have highlighted in the past this one comes with a great yield of 6% based on the historic dividend and they have just announced a 5% increase in the interim dividend. They are quite shareholder friendly and they note that they have increased their dividend by 176% since listing in 2004. In addition they are trading a little below their book value of 547 pence which given their current ROE of 17% in these figures and the 13.2% they have acheived on average on this measure since they listed in 2004 (source: company website and todays announcement) this seems on the low side.

This discount to book has occured given a recent sell of in the stock which left it looking oversold ahead of these numbers. I think this has therefore thrown up a possible buying opportunity for a short term trade for a possible return to 550 pence plus 2% from the interim dividend of 10.5 pence. Or you could buy it for a longer term holding if you are prepared to ride the insurance cycle, although it is probably never going to set the world on fire. I know Neil Woodford has also been a holder of this one in the past and he also seems to have it in his new fund - which you can see the holdings for on this Citywire article.

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