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XL Group combined ratio up 3.6 points in Q1 2016


April 28, 2016   by Canadian Underwriter


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XL Group plc has reported a P&C combined ratio of 92.5% for the first quarter of 2016 ending March 31, up from 88.9% in the prior-year quarter.

Dublin, Ireland-based XL Group released its financial results on Wednesday, noting that the P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 92.1%, compared to 91.4% in Q1 2015. The Insurance segment combined ratio on this basis was 95% for the quarter compared to 93.2% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 86.2% for the quarter compared to 86.6% for the prior year quarter.

P&C gross premiums written (GPW) in the first quarter of this increased 75.7% compared to the prior-year quarter as a result of the combination with Catlin, XL Group said in a statement. The Insurance segment GPW increased 51.3% from the prior year quarter primarily due to the combination with Catlin. More generally, continued new business growth was offset by adverse foreign exchange impacts, continued rate pressures and selected discontinued lines, XL Group reported. The Reinsurance segment GPW also increased by 124.7% from the prior year quarter, primarily due to the combination with Catlin. In addition, the Reinsurance segment wrote significant new business across all regions, in particular Europe, Middle East and Africa.

P&C net premiums earned in the first quarter of US$2.4 billion were comprised of US$1.59 billion from the Insurance segment and US$757.6 million from the Reinsurance segment.

The P&C loss ratio in the current quarter was 0.5 percentage points higher than in the prior year quarter. Included in the P&C loss ratio was favourable development of US$43.4 million compared to US$48.5 million in the prior year quarter. The P&C loss ratio variance was impacted by natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums of US$52.8 million, compared to US$14.7 million in the prior year quarter. Excluding prior year development and natural catastrophe losses, the first quarter P&C loss ratio was 2.5 percentage points lower than the prior year quarter driven by the mix of business following the Catlin acquisition, the statement said. [click image below to enlarge]

In general, XL Group reported, net written premiums for Q1 2016 were US$3,064,759, compared to $1,851,249 in Q1 2015. Operating net income of US$104.3 million for Q1 2016 decreased compared to operating net income of US$194.4 million in Q1 2015. The current quarter includes approximately US$55.0 million in integration costs as well as US$52.8 million in natural catastrophe losses compared to US$14.7 million in natural catastrophe losses in the prior year quarter.

“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,” said chief executive officer Mike McGavick in the statement. “This translated to a solid 92.5% P&C combined ratio. 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.”

XL Group plc, through its subsidiaries and under the XL Catlin brand, is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world.