Catlin Group boosted its trading thanks to more than doubling its gross premiums written over the past nine months, despite still holding subprime-related securities with a book value of $85 million.

The international specialty property/casualty insurer and reinsurer continued to perform strongly, reflecting a continued broker support for Catlin's enlarged underwriting operations during the same period.

Gross premiums written for the nine-month period ended September 30 amounted to $2.73 billion, compared with $1.24 billion underwritten by Catlin on a stand-alone basis in the corresponding period of 2006 and a six per cent increase from the $2.58 billion written by Catlin and Wellington Underwriting plc. combined during the first nine months of last year.

Business retention continued to be strong during the third quarter, remaining consistent with the favourable experience reported by the group in its interim results announcement.

The increase in gross premiums written was achieved at attractive pricing levels across Catlin's book of business, even though weighted average premium rates across all classes of business decreased by five per cent during the nine-month period.

The group's loss experience through September 30 has been benign, primarily reflecting the relatively low incidence of catastrophe losses. Prior year reserves have developed in line with expectations.

The group has recently completed a comprehensive review of all individual subprime-related securities in Catlin's investment portfolio. It expects to take a total charge during 2007 of $75 million against the value of these securities.

It has sold some subprime-related securities at close to book value and now holds subprime-related securities with a book value of $85 million (prior to the charge), 85 percent of which are collateralised debt obligations. The book value of the subprime-related portfolio after the sales and the charge is $12 million.

The total amount of cash and investments held by the group amounted to $5.85 billion at September 30. The effect of the proposed $75 million charge would reduce the group's investment return to 3.6 percent on an annualised basis as at the end of September.

Based on information currently available, the group does not believe that its insurance and reinsurance portfolio is materially exposed to potential claims arising from subprime-related issues. Although the ultimate level and nature of these potential claims are not known to the market at this time, the group had in the past largely withdrawn from business classes, such as financial institutions E&O and Fortune 500 D&O liability, that appear most likely to be affected.

Stephen Catlin, chief executive of Catlin, said: "Catlin has made real progress during 2007, which is particularly pleasing given that the acquisition of Wellington was not yet complete at this time last year.

"The group is on track to meet its targets in 2007. Whilst we have taken the decision to write down the value of the small portion of the investment portfolio exposed to the subprime sector, we expect the profit impact of the writedown to be offset broadly by the low incidence of catastrophe losses in the second half of 2007.

"We currently expect that weighted average premium rates may decrease by as much as 10 percent during 2008, although rate movements will vary considerably among the more than 30 classes of business that Catlin underwrites. However, we believe that rate adequacy will remain good across most of these business classes.

"We will benefit in 2008 from further embedded growth arising from the Wellington acquisition, as well as continued growth in the classes of business we already write from Catlin US and our network of international offices.