Despite strong underwriting results, Hamilton, Bermuda-basedCatlin Group Limited reported an 18 percent decline in itsfirst-half 2008 net income due to poor investment returns.

The company said its first-half net income was $132.2 million,compared to a 2007 first-half net income of $161.7 million.

However, Catlin noted that in the first half of 2008 it paid adividend of $21.8 million to holders of the group's non-cumulativeperpetual preferred shares issued in January 2007, which reducedfirst-half 2008 net income available to stockholders to 110.5million, a 32 percent decline from last year's $161.7 millionfigure.

Catlin said that no dividend was paid on these shares during thefirst half of 2007.

Investment income dropped 59 percent to $53.9 million from 2007first-half investment income of $130.7 million.

Stephen Catlin, chief executive of Catlin, said in a statement,"Our investment returns suffered in the volatile financial markets.Given the current conditions, Catlin is maintaining a defensiveinvestment position with relatively high levels of cash and liquidassets."

Christopher Stooke, Catlin's chief financial officer, said in aconference call that the lower investment income is also a resultof an accounting policy change, in which all unrealized gains andlosses are now being taken to income. This, he added, brings CatlinGroup in line with most of its peers but affects results for thisreporting period.

On the underwriting side, 2008 first-half gross premiums writtenincreased to $2.1 billion from $2 billion last year. Net premiumsearned also rose, to $1.3 billion from $1.2 billion. Mr. Stookepointed out that net underwriting contribution rose 12 percent fromlast year, to $309.9 million from $277.4 million.

The 2008 first-half combined ratio improved to 90.9 from92.2.

Speaking to the underwriting results, Mr. Catlin said, "Thispremium growth was the result of strong performances by CatlinBermuda, Catlin US and our network of international offices, whichmore than offset the expected reduction in volume in our Londonwholesale business.

"Average weighted premium rates declined by 5 percent, which wasless than anticipated and left good profit potential in nearly allareas of the business," he added.