Niche insurer Calliden has returned to profitability, driven by a new business model and fewer claims from natural disasters.

Following a $10.2 million loss in 2011, Calliden has posted a $1.1 million profit for calendar 2012 – in line with previous guidance.

After announcing a strategic alliance with Munich Re subsidiary Great Lakes in December 2011 Calliden has restructured its business to be part insurer, part managing general agent – to remove the volatility of its earnings.

Since 2004 the company has not posted more than two years of consecutive profits, but CEO Nick Kirk believes the new model will reduce the impact of disaster claims.

“Calliden has achieved its 2012 aim of implementing the managing general agency strategy,” he said. “We have rebuilt the capital strength of the insurer, while returning the group to profitability.”

The general insurance division posted a $5.5 million profit, compared with a $15.5 million loss in 2011. The agency business made a $1.1 million profit – down $400,000 on costs associated with moving the business pack and farm portfolios to Great Lakes.

Calliden forecasts a $10 million profit for 2013, driven by lower exposure to natural disasters and more stable earnings from its agency business.

Gross written premium fell 43.9% to $224.5 million last year, as Calliden shifted its insurance business to the agency model.

The combined operating ratio decreased 20 percentage points to 99, while the insurance margin also improved to 9%, a 24 percentage point turnaround from 2011.

About 50% of the group’s premium is now written on behalf of partner insurers Great Lakes, Calliden subsidiary Mansions of Australia and the NSW Self Insurance Corporation, up from 30% in February last year.

The business pack portfolio is now completely underwritten by Great Lakes, while the strata portfolio was transferred to WR Berkley in January.

Calliden estimates its natural catastrophe exposure so far this year at $2-$3 million following ex-Tropical Cyclone Oswald and bushfires in Tasmania and NSW.

Last year the group paid $1.7 million in catastrophe claims.