Share tip of the week a sound insurance investment – MoneyWeek

SohowmuchisCatlinworth?

TheCityexpects2010earningspershare(EPS),dividendandnettangibleassets(NTA)of42。

9,25。

7pand400pashare,risingto57。

5p,27。

0pand440pin2011。

Assumingthesetargetsaremet,thefirmisonattractivep/e,yieldandNTAmultiplesof8。

2,7。

3%and88%。

Thislooksgoodvalueforbothincomeseekersandgrowthinvestorsalike–deliveringatotalshareholderreturnof17。

6%。

Andthatsnotall。

TheexistingpriceattachesnovaluetoCatlinsstrongfranchise(worthanother120pashareofintangibles),whichisexpanding。

SoIwouldratethefirmonatleastone-timestangiblebook,offeringmorethan15%upsidefromtodayslevels。

Sowhythepoorperformance?

Thebearsareconcernedthat(evenafterthe£200mrightsissueat205pinMarch2009)Catlinmaystillbeundercapitalised,leavingitvulnerabletoanothercatastrophe。

Butwhilethisispossible,theboardcarefullymonitorsitspositionstoensurethatoverallexposureismanageable。

Andthereseemstobeplentyofsparecapacity。

Atthelastcount,thebufferoveritseconomiccapitalrequirementfor2010wasarobust19%,wellinsidethefirmstargetrangeof10%-20%。

So,giventhatnaturaldisastersareparforthecourse,Catlinlooksasoundplacetoparkonesfundsinanincreasinglyuncertainworld。

Thereisalsoachancethatthegroupcouldbecomeatarget;rivalBritInsurancerecentlysuccumbedtoApollo,theprivate-equityhouse。

HSBChasatargetof450pashare。

Thirdquarterresultsareouton2November。

Recommendation:BUYat350p



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