Broker snap: Catlin underpriced versus net assets

Broker finnCap retains a 'buy' rating for Catlin after the underwriter saw gross premiums rise by 9% in the third quarter.Gross premiums were ahead with Bermuda, the US and international markets picking up the slack as London business stagnated. The setting up of the Catlin Re Switzerland unit in January 2011 will give the group access to business it would not have seen otherwise, the broker said."With London not growing there was 29% growth in gross premiums from Bermuda, US and International", said analyst Charles Coyne.The broker said the year to date investment return of 2.9% achieved by Catlin was reasonable, with little risk element to Catlin's assets. "This is a major turnaround from 2008 when there was a surfeit of esoteric assets", says the broker. "There was a small FX [foreign exchange] gain in the period after a $49m loss last year." With the group trading at 360.6p as of Friday afternoon and at a discount to net assets of around 17%, the broker reiterates a 'buy' and a target price of 420p, with a dividend yield of 7.8% highlighted as a major attraction. Castelnau Group