XL’s Q3 Operating Net Income Down to $70.8M on Integration Costs, Cat Losses

October 27, 2015

Dublin-headquartered XL Group reported third quarter operating net income of $70.8 million, or $0.23 per share, down from $187.1 million, or $0.70 per share, in the prior year quarter.

The current quarter’s results include approximately $55.2 million in integration costs – as a result of XL’s acquisition of Catlin Group. The results also include $30.8 million in natural catastrophe losses, compared to $29.8 million in the prior year quarter, as well as losses net of reinsurance and reinstatement premiums of $95.7 million, related to the mid-August 2015 Tianjin port explosions in China.

Other highlights for the group’s third quarter results include:

  • Net income attributable to ordinary shareholders was $27.3 million, compared to a $72.4 million in the third quarter of 2014;
  • Integration costs related to the combination with Catlin Group Limited totaled $55.2 million;
  • P&C combined ratio of 95.3 percent for the quarter, compared to 90.1 percent in the same quarter of 2014;
  • Earnings from operating and investment fund affiliates were $4.5 million, compared to $44.5 million in the prior year quarter, due primarily to equity market volatility on the hedge fund portfolio;
  • Annualized operating return on average ordinary shareholders’ equity,excluding and including average unrealized gains and losses on investments was 7.0 percent and 6.2 percent, respectively, for the year to date.
  • Net investment income for the quarter was $225.1 million, compared to $226.4 million in the prior year quarter and $223.2 million in the second quarter of 2015.
  • P&C gross premiums written increased 66.1 percent to $2.7 billion following the combination with Catlin, compared to $1.6 billion during the same quarter in 2014.
  • The insurance segment’s GPW increased 66.1 percent from the prior year quarter primarily due to the combination with Catlin. Excluding the impacts of the additional Catlin business and foreign exchange, the segment experienced an increase of 6.0 percent. Rates were under pressure in most lines. However, this was offset by new business, particularly in international financial lines, political risk & trade credit and cyber business lines. The company said that renewals “were reduced where premium rates did not support our target returns.”
  • The reinsurance segment’s GPW increased 66.1 percent from the prior year quarter, primarily due to the combination with Catlin. “This was offset by lower renewals in North America due to a competitive pricing environment with respect to property and casualty treaty business,” XL said.
  • P&C net premiums earned during the quarter of $2.4 billion comprised $1.6 billion from the insurance segment and $772.8 million from the reinsurance segment.

“In its first full quarter of combined operations, XL Catlin produced solid results including a 95.3 percent combined ratio, gross written premiums of $2.7 billion and a P&C underwriting profit of $114.1 million,” according to Chief Executive Officer Mike McGavick.

“At the same time, our bottom-line results in the quarter were particularly impacted by market events and ongoing expenses related to our integration,” he added.

“Our colleagues’ effort to move quickly through our integration continues to be recognized by positive reaction from clients and brokers and the new opportunities we are seeing. We have absolute confidence in the fundamentals of the new company we are building and remain focused on creating value by becoming the most innovative and admired re/insurance company in our industry and feel we are well on our way,” McGavick said.

Source: XL Group

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