XL Group Ltd. sees net income soar in 2017 Q2 over prior-year quarter, focus on executing strategy continues

Both net income attributable to common shareholders and operating net income for Bermuda-based XL Group Ltd. skyrocketed in 2017 Q2 compared to 2016 Q2, with the former increasing six-fold to US$301.6 million.

Specifically, net income attributable to common shareholders amounted to US$301.6 million in 2017 Q2 compared to US$43.8 million in 2016 Q2, notes a statement issued Wednesday by XL Group.

Operating net income, for its part, rose to US$255.1 million in the second quarter of 2017 compared to US$106.4 million for the corresponding period of 2016.

Both results were “primarily driven by lower catastrophe losses and by favourable net income from affiliates,” as well as lower realized losses related to the Life Funds Withheld Assets, the company statement explains.

Looking at Cat losses, XL Group reports that catastrophe pre-tax losses net of reinsurance and reinstatement premiums for 2017 Q2 amounted to US$92.1 million compared to US$240.1 million in 2016 Q2.

With regard to affiliate net income, this was US$73.5 million for the second quarter of 2017 compared to US$34.6 million for the same quarter of 2016. “This increase was driven mainly by the sale of one of our investment manager affiliates as well as strong performance in all categories of our affiliate holdings,” the company notes.

XL Group’s P&C combined ratio and P&C loss ratio proved equally impressive in the second quarter of 2017. The combined ratio fell to 92.3% in 2017 Q2 compared to 96.0% in 2016 Q2, while the loss ratio decreased to 60.8% compared to 64.6%.

Again, lower catastrophe losses played a role in the improvement. With catastrophe pre-tax losses net of reinsurance and reinstatement premiums of US$92.1 million for the second quarter of 2017, that equated to 3.7 points to the loss ratio. This compared to US$240.1 million in the prior-year quarter, representing 9.8 points to the loss ratio.

Results for the six months ended June 30, 2017 showed similar increase, XL Group figures indicate. For example, net income attributable to common shareholders was up 592.1% to approximately US$454.5 million in 2017 Q2 compared to about US$65.7 million in 2016 Q2, while operating net income was up 86.4% to US$391.2 million compared to US$209.8 million.

Related: XL Group reports P&C combined ratio of 94.8% for Q4 2016

Again, the trend in 2017 Q2 compared to 2016 Q2 was generally up with regard to P&C premiums. Gross premiums written (GPW) increased 0.7% to about US$8.2 billion compared to about US$7.9 billion. “Excluding the impact of foreign exchange, GPW increased by 2.1%,” the statement notes.

Of the 2017 Q2 total, XL Group reports that GPW for the Insurance segment grew 2.6% to about US$5.3 billion (up from about US$5.0 billion), driven primarily by growth in political risk, international financial lines and global risk management. Excluding the foreign exchange impact, it would have been a 4.5% hike.

The Reinsurance segment, for its part, saw GPW at slightly more than approximately US$2.9 billion compared to slightly less than US$2.9 billion, “due to a non-recurring treaty in Q2 2016,” the statement notes.

On the underwriting side, related profit for the second quarter of 2017 amounted to about US$338.6 million compared to about US$277.4 million for the same period in 2016. The Insurance segment accounted for US$133.4 million (US$117.5 million), while the Reinsurance segment accounted for US$205.2 million (US$159.9 million).

As for the combined ratio, this improved to 93.3% from 94.3%, while the P&C loss ratio remained stable at 61.8% for the second quarters of both 2017 and 2016.

“The P&C loss ratio variance was impacted by catastrophe pre-tax losses net of reinsurance and related reinstatement premiums of US$92.1 million or 3.7 loss ratio points for the quarter, compared to US$240.1million, or 9.8 loss ratio points, in the prior-year quarter, which was significantly impacted by the Fort McMurray Wildfire loss of nearly US$130.0 million,” the statement explains.

Other 2017 Q2 results include the following:

• integration costs related to the previously completed acquisition of Catlin Group Ltd. totalled approximately US$39.1 million for 2017 Q2 compared to US$52.1 million for 2016 Q2;
• net investment income was US$208.7 million compared to US$215.4 million;
• annualized return on average common shareholders’ equity was 10.9% compared to 1.5%; and
• operating expenses were 9.5% or US$49.7 million favourable compared to the prior-year quarter, “reflecting our continuing focus on operating efficiency and leveraging our underwriting platform.”

Saying the company remained focused on disciplined underwriting, XL Group CEO Mike McGavick called the overall results pleasing.

“We generated positive investment returns, continued to capture efficiencies as an organization and actively managed our capital. We remain committed to fully delivering the value of the franchise we have built,” McGavick continues.