Bermuda-based Catlin Group Ltd. reported a 21-percent fall in net income for the first half of 2008 to $150 million, blaming the volatile market for falling investment returns.

Net income fell to $110.5 million, or 42 cents a share, from $161.7 million, or 61 cents, a year earlier, the Hamilton, Bermuda-based company said today in a statement. Net investment income dropped 52 percent to $54 million.

Investment income in the first six months of 2008 totalled $103 million, a 26 percent decrease from the comparable period in 2007.

Stephen Catlin, chief executive of Catlin Group Limited, said: "I am pleased with Catlin's performance during the first six months of 2008. We are continuing to realise the benefits arising from the Wellington acquisition and our diversified underwriting portfolio.

"Our underwriting operations performed well, with net underwriting contribution increasing by 12 percent whilst both written and earned premiums grew. This premium growth was the result of strong performances by Catlin Bermuda, Catlin US and our network of international offices, which more than offset the expected reduction in volume in our London wholesale business.

"Average weighted premium rates declined by five percent, which was less than anticipated and left good profit potential in nearly all areas of the business.

"Our investment returns suffered in the volatile financial markets. Given the current conditions, Catlin is maintaining a defensive investment position with relatively high levels of cash and liquid assets." Analysts at JP Morgan Cazenove, Catlin's joint house broker, wrote in a note: "Catlin has reported a good set of results. The core insurance operations are performing strongly," .

Mr. Catlin told Reuters the decline in rates, driven by increased competition, was less steep than feared.

"I said that we might see a 10-percent decrease in premiums by year-end. It's extremely unlikely now to be as bad as that. It hasn't been as difficult as we anticipated," he said.

He also said a defensive investment strategy, with cash and bonds accounting for 56 percent of total assets, should improve returns in the second half of the year.

"On a balance of probabilities we'd expect to do better in the second half," he said.

The Catlin board declared an interim dividend of 16.8 cents per share, an increase of six perent from the prior year.