Q3 profits up for XL Group as Asia drives growth in reinsurance

XL Group enjoyed a big increase in its profits in the third quarter in 2016 and substantial growth in its reinsurance property/casualty operations thanks to new business in Asia Pacific.

The company made a net profit of $70.6 million for the quarter compared with $27.3 million in the prior year quarter. The current quarter included approximately $54.5 million in integration costs (with Catlin) as well as $97.4 million in natural catastrophe losses compared to $55.2 million in integration costs and $30.8 million in natural catastrophe losses in the prior year quarter.

Excluding the contribution from the GreyCastle life retrocession arrangements, which it put in place in May 2014 when it completed the sale and retrocession of XL Life Reinsurance to GreyCastle Holdings, its profit in the third quarter was $170.5 million.

The company enjoyed solid growth in the quarter. Its property/casualty operations reported gross premiums written (GPW) of $2.7 billion for the third quarter, up 2.2 percent from the same period in the prior year.

Its insurance segment GPW decreased 2.1 percent from the prior year, which XL attributed to unfavourable foreign exchange impact resulting from the weakening of the British Pound against the US dollar.

Excluding the impact of foreign exchange, GPW decreased by 1 percent most notably in Aerospace, Accident & Health and Commercial Errors & Omission business lines. These decreases were partially offset by higher premium in Political Risk & Trade Credit, Property International Open Markets and Cyber business lines.

However, its reinsurance segment GPW increased 23.2 percent from the prior year quarter, which XL attributes to significant new business in the property treaty and credit lines of business in the Asia Pacific region and new business in casualty and property treaty lines of business in the North American region.

The combined ratio for these operations for the three-month period was 93.1 percent, down 2.2 percentage points.

Mike McGavick, CEO of XL Group, said: “XL’s third quarter 2016 financial results demonstrated steady progress in our underlying performance. We generated P&C underwriting profit of $167 million and our P&C accident-year, ex-catastrophe combined ratio of 91.3% was a full 3.8 points better than the same quarter a year ago.

“Our clients, brokers and trading partners continued to show confidence in us as we maintain our underwriting discipline. This approach, combined with our recently announced planned realignment of our P&C operations, have us confident in our ability to further drive innovation and client service.

“We are committed to building on this improvement as the benefits of the combined XL Catlin platform become more visible."

XL Group, Asia Pacific, Results, Bermuda

Intelligent Insurer