KPIs
The following Key Performance Indicators (KPIs) have been set by Catlin to measure the Group’s performance against its strategic objectives.
Book value per share plus dividends (US$)
This graph shows the book value per share plus the dividend paid to shareholders during the calendar year. This is a measure of shareholder value creation.
The company aligns its Employee Performance Share Plan with the interests of shareholders by setting vesting conditions based on growth in book value per share plus dividends paid during rolling three-and four-year periods.
Tangible book value per share plus dividends (US$)
We also measure creation of shareholder value by the increase in tangible book value per share plus the dividend paid to shareholders during a calendar year.
This more accurately assesses our performance against our underwriting capital.
Return on equity / Return on net tangible assets (%)
Our aim is to achieve attractive returns for shareholders, with a target after-tax return on equity of 10 percentage points above the risk-free rate over an underwriting cycle.
Employees’ profit-related bonuses are determined as an increasing percentage of income before tax as RoE exceeds a minimum amount, subject to a cap.
Income before income tax (US$)
Our aim is to increase our profits over time and our pre-tax profitability is an effective measure of underwriting performance, expense control and investment return.
Net premiums earned (US$)
Net premiums earned are an indicator of underwriting volume during an accounting period.
Total investment return (%)
Total investment return measures investment income plus realised and unrealised gains and losses in the asset portfolio. The Group’s total investment return of 2.7 per cent during 2010 was a marked decrease from the record performance during 2009 and reflects the low interest rate environment as well as Catlin’s conservative and liquid investment strategy.
Loss ratio (%)
The loss ratio measures claims and reserve movements as a percentage of net premiums earned and is a measure of underwriting performance.
Our loss ratio is inevitably linked to the level of catastrophe losses in a year, so we also show our attritional loss ratio (which excludes catastrophe and large single risk losses) as a measure of longer term, sustainable underwriting profitability.
Expense ratio (%)
This graph measures our acquisition costs and operating expenses as a percentage of net premiums earned.
Our expense ratio excludes performance-related pay and certain Group expenses.
Employee turnover (%)
We aim to attract and retain high-calibre people, and the annual turnover rate measures our success in retaining staff.
Since the acquisition of Wellington in 2006, we have returned to maintaining our traditionally low turnover rate.
Claims performance (%)
We measure our claims performance using the outcome of an annual survey from Gracechurch Consulting.
In the survey brokers are asked which London market insurer they would highly recommend to clients on the basis of the quality of claims service. With a focus on service and on listening to our clients’ needs, Catlin has been the top-ranked London market insurer for several years consecutively.