XL profits drop amid nat cat losses

XL Group has reported a net income of $21.9 million for the first quarter of 2016, down from $36.3 million in the first quarter of 2015, affected by natural catastrophe losses and integration costs.  Despite this fall, the company enjoyed solid growth in the quarter. The firm’s gross written premiums (GWP) for the quarter were $4.4 billion, a big increase from the same time period last year, when XL posted GWP of $2.5 billion. Net premiums earned were also up to $2.4 billion from the $1.3 billion it recorded in the first three months of 2015, as was the firm’s underwriting profit at $175.5 million, up from the $146.8 million it earned in the same period of 2015. However, the group’s combined ratio increased to 92.5 percent in the first quarter of 2016, compared to 88.9 percent in the first quarter of 2015.  Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of was also up to $52.8 million, compared with $14.7 million in the prior year quarter. Integration costs related to the combination with Catlin Group totalled approximately $55 million in the quarter and earnings in the quarter from affiliates were $8.1 million, compared with $58 million in the prior year quarter, due primarily to the impact of continuing market volatility on the portfolio and the sale of ARX Holding Corp in Q2 2015. XL’s net investment income for the quarter was also slightly down to $205.9 million, compared with $208.5 million in the prior year quarter. Mike McGavick, chief executive officer, said: “XL Catlin navigated the challenging conditions of the first quarter, producing good underlying results while maintaining our focus on bottom-line underwriting and top-line discipline. This translated to a solid 92.5 percent P&C combined ratio, while we grew our tangible book value per share and increased our share buybacks to approximately 10.0 million shares or $355.1 million.  “While we see difficult market conditions continuing in the near-term, we firmly believe our focus on the bottom-line is the right long-term strategy and that we remain very well positioned. Near the one year anniversary of XL Catlin, we continue to exceed all of our integration targets and are seeing new opportunities aligned with our global reach and market relevance.”