XL Capital Posts 1st Quarter Gain, But Sees Annualized Decline

May 11, 2000

Bermuda based XL Capital Ltd announced increases in 1st quarter revenues from $209.8 million in 1999 to $223.8 million this year.”GAAP operating income for the first quarter of 2000 was $150.8 million, or $1.19 per share, compared with $144.1 million, or $1.09 per share, for the first quarter ended march 31,1999,” said the report.

Total gross premiums, revenues and assets also rose, from $732 million to $918.9 million, from $593.2 million to $714.2 million and from $15.1 billion to $16.2 billion respectively.

Commenting on the results, Brian M. O’Hara, president and CEO of XL stated, “The Company is experiencing strong overall premium growth, reflecting our acquisitions, new business formations and cross selling initiatives over the last two years. In addition, we are seeing rate increases in property and other short tail lines of business.”

However, it was O’Hara’s caveat that caused the shares of XL to drop over $6 when the report appeared. He pointed out that rates for insurance and reinsurance, especially those underwritten through XL’s Lloyd’s operations, while not declining, “have yet to improve significantly.”

“Our original expectations were for more immediate increases in all lines, however in the absence of such liability rate increases, our results this year are now anticipated to be approximately 5 percent below the annualized first quarter earnings,” stated O’Hara.

While expressing optimism for the future, it appears that XL, like the majority of global reinsurers, is still waiting for the long predicted “market turn,” which would see rates increase.

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