Catlin Group is priced to go as insurer makes subdued City debut

Catlin Group, the Bermudan insurer, yesterday completed London's second-biggest flotation of the year, raising £166m for the company to expand its underwriting operations.

Catlin Group, the Bermudan insurer, yesterday completed London's second-biggest flotation of the year, raising £166m for the company to expand its underwriting operations.

Increasing market uncertainty and fears that the rapid rise in insurance premiums has reached its peak, however, saw its shares priced at 350p each, at the bottom of the range set between 350p and 420p.

On their first day of trading shares in the group closed at 355.5p, valuing it at about £549m.

"Catlin is a decent business ­ there is no question of that," one analyst said yesterday. "But it is fairly late in the insurance cycle to be raising capital for future growth. There is not as much growth left now. There is also not enough to differentiate it from existing listed insurance companies such as Hiscox and Amlin, which investors know."

After three years of rising insurance rates in the wake of the 11 September attacks, some lines of insurance are now topping out. US property rates, for example, are now starting to slip and most analysts expect rates overall to be flat this year.

The float price was also affected by the bombings in Madrid. Catlin announced its indicative range on the day of the bombings, and since then, investor confidence has understandably received a setback. The insurance sector has fallen as investors fear big claims from terrorist attacks. "We got a decent price in difficult markets," a spokesman for the company said.

Of the £166m raised, Catlin's shareholders ­ mainly Bermuda­based private equity firms ­ received £57m. The company's founder, Stephen Catlin, saw his stake valued at about £12m. He started the company 20 years ago with a £15,000 bank loan and a borrowed typewriter. He has the option to buy a further 6.42 million shares and is barred from selling shares in the business for 12 months. The management own about 5.4 per cent of the business but none have sold shares in the float.

As stock markets recovered throughout last year, insurance companies led the way with successful floats. Benfield, the reinsurance broker, listed last June in a flotation that provided one of the first signs of a pick-up in activity. The Bermuda-based Alea recently raised £165m.

Earlier this month, Catlin announced a swing to profits in 2003 of $127m (£68m) from a loss of $11.7m in 2002. JP Morgan and Goldman Sachs ran the share offer, which was 2.5 times oversubscribed. The shares listed at 1.3 times the company's net assets ­ a reasonably high premium in the sector.

Elsewhere in the new issues market, Dignity, the funeral director whose clients have included the notorious Kray family, lists its shares in London today. The shares will debut at 230p, the low end of indications, valuing the company at £184m.

PKL, a support services company, also priced its shares ahead of flotation in the middle of the month on the Alternative Investment Market. It will list at 110p a share, giving the company a market capitalisation of £39.7m.

But a report published yesterday showed there are increasing concerns about conditions for stock market floats. More than half the stocks that have floated in Europe so far this year are trading below their issue prices, according to the data provider Dealogic.