Disposal causes XL loss amid otherwise healthy results
XL Group posted a substantial loss in its second quarter results caused by the sale of its life reinsurance subsidiary to GreyCastle Holdings in May this year. But its underlying business performed well and it enjoyed healthy growth in certain lines of business despite what its CEO described as turmoil in the reinsurance markets.
The company posted a net loss of $279.3 million in the second quarter compared with a net profit of $272.7 million in the same period a year earlier. This was largely caused by a $621.3 million after-tax loss on the sale of its life reinsurance subsidiary.
In contrast, its operating profit for the period was $279.6 million compared with $221.6 million in the prior year quarter. It said this was primarily due to a higher underwriting profit in the current quarter. XL’s P&C combined ratio for the quarter of 88.3 percent was 5.5 percentage points lower than in 2013, when it was 93.8 percent.
The company’s gross written premiums for its property/casualty operations in the quarter increased by 8.6 percent to $2.11 billion. It was mainly driven by its insurance business, which enjoyed growth of 9.9 percent as a result of new business in international primary casualty, political risk and crisis management lines and higher renewed premiums in international financial lines and North American excess casualty and construction lines.
Its reinsurance unit grew by 4.5 percent predominantly driven by new aviation business in Europe, growth in agricultural premiums and timing of casualty treaty renewals in North America, XL said.
Its P&C combined ratio for the quarter was 88.3 percent, compared with 93.8 percent for the prior year quarter.
Mike McGavick, chief executive of XL, said: "Through the first half of 2014, XL continued to demonstrate solid financial results and strong positioning. In the second quarter of the year, XL produced a total P&C combined ratio of 88.3 percent, total underwriting profit of $168 million, and a loss ratio of 57.6 percent.
“This performance also included insurance segment underwriting profit of $62.6 million and a combined ratio of 93.8 percent in the quarter. And with the well-publicized turmoil in the reinsurance market, our reinsurance segment's 75.7 percent combined ratio and modest growth demonstrated our deep market relationships and the resiliency of our franchise.
“This quarter also included the completion of our previously announced life transaction, covering the vast majority of our life reinsurance business. All in, we like the way the year is developing and believe we will continue to harvest the benefits of our work."
