Q1 profits dip at XL; reinsurance unit shrinks
XL Group posted solid results for the first quarter of 2014 although its profits dipped compared with the same period last year primarily due to lower underwriting profits.
The company made a net profit of $255.7 million for the quarter, a 27 percent decline on the $350.8 million it made a year earlier. It made an operating profit of $238.6 million for the quarter compared with $279.9 million the year before – a 14.7 percent decrease.
It said the fall in profits was primarily due to lower underwriting profits in the current quarter, partially offset by higher net income from investment funds and investment manager operating affiliates as compared to the prior year quarter.
The company’s P&C combined ratio for the quarter of 89.7 percent was 2 percentage points higher than in 2013, when it was 87.7 percent. Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter was $17.2 million compared with $4 million in the prior year quarter.
The company’s gross premiums written remained stable at $2.42 billion compared with $2.4 billion in the same period a year before.
Underlying these figures, its P&C gross premiums written increased by 1 percent and its insurance segment grew by 4.9 percent as a result of higher renewed premiums in international professional and North American Casualty and Construction lines. But this was offset by a 5.4 percent decline in its reinsurance business predominantly driven by the non-renewal of a large UK Motor treaty and competitive trading conditions in property.
Mike McGavick, XL’s chief executive, said: “In the first quarter of 2014, XL produced one of the best quarters since the end of 2008. These results included a total P&C combined ratio of 89.7 percent, total underwriting profit of $145 million, and a loss ratio of 58.9 percent – all of which demonstrate our continued broad-based improvement.
“This performance also included insurance segment underwriting profit of $45 million and an Insurance accident year ex-cat combined ratio of 94.6 percent in the quarter. And the 76.3 percent combined ratio for reinsurance is particularly satisfying given the difficult market conditions. All in, we like the way these results position us for 2014.”
The company has also increased its share buyback programme. In February 2014, the company authorised the buy back up to $1 billion of its ordinary shares. This included approximately $200 million of ordinary shares that remained available for purchase under the programme prior to the increase.
During the quarter, the company purchased 5.8 million ordinary shares for $175 million at an average price of $30.19 per share, which was accretive to fully diluted tangible book value per ordinary share by $0.14. At March 31, 2014, $892.6 million of ordinary shares remained available for purchase under share buyback program.