XL Cuts Q3 Net Income Loss to $11.4 Million; $246 Million 9-Month Profit

October 29, 2009

XL Capital has profited from the old adage that “less is more,” as the Bermuda-based insurer rebounded from a disastrous year in 2008. Although it posted an $11.4 million loss for the third quarter of 2009, that pales to insignificance in comparison to the $1.649 billion loss it suffered in the same period of 2008. XL explained that the Q3 2009 quarterly loss was “primarily due to $310.8 million of after-tax net realized losses on investments.”

For the first nine months of 2009 XL recorded $247 million net income, compared to a $1.2 billion loss in 2008. The earnings bulletin also noted the following:
— Book value per ordinary share increased by 26 percent to $23.84 at September 30, 2009
— P&C operations combined ratio of 93.2 percent
— Total shareholders’ equity of $9.2 billion, up from $7.5 billion
— Operating income of $306.4 million, or $0.89 per ordinary share

After reviewing the figures, CEO Mike McGavick commented: “These are encouraging numbers but clearly there are areas for continued improvement. For instance, gross premiums written for our P&C operations were 16.6 percent lower than the prior year quarter. Although on target with our current guidance for the year, continuing this recovery means we must remain vigilant in the face of challenging pricing conditions.

“Pressures from the current economic environment and where we are in the underwriting cycle have not deterred us from seeking the right price regardless of the impact on top line. We will continue to do so.

He also stresssed that in addition to the decrease in premiums, XL would continue to look for improvement in its investment portfolio.

McGavick also pointed out that XL’s “strong operating performance was offset by our recognition of $310.8 million in after-tax net realized losses related principally to other than temporary impairments.” He explained that, although the charge resulted in producing a net loss in the third quarter, “we remain committed to an investment portfolio more properly suited to a P&C company, and have made significant strides over the past year to de-risk our portfolio in pursuit of that goal.”

Despite the Q3 loss, McGavick stressed that “our portfolio marks improved by $1.4 billion during the third quarter, and 54 percent of the $34.0 billion portfolio was in cash, government, government-related or government-supported securities at the end of the third quarter.

“Given the increased stability in the capital markets, we have selectively redeployed some of our cash and proceeds from sales and maturities into high quality assets, achieving new money yields of 3.9 percent.”

The complete report as well as details on accessing the Company’s web cast conference call presentation, held on October 28, may be obtained on its web site at: www.xlcapital.com.

Source: XL Capital

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