XL Group’s operating net income US$245.8 million in 2015 Q2

XL Group plc posted operating net income of US$245.8 million in 2015 Q2, down US$33.8 million from 2014 Q2, but company CEO Mike McGavick reports that he is pleased with progress made to date for combined XL Catlin.

XL Group’s operating net income – net income (loss) attributable to ordinary shareholders, excluding net investment income, net of tax – was US$245.8 million in the second quarter of 2015 compared to US$279.6 million in the same quarter of 2014, notes a statement Monday from XL Group, a global insurance and reinsurance company operating through its subsidiaries and under the XL Catlin brand. “The current quarter includes approximately US$27.8 million in integration costs as well as US$59.9 million catastrophe losses compared to US$34.6 million in catastrophe losses in the prior-year quarter,” it states.

For the six months ended June 30, 2015, operating net income was US$440.2 million compared to US$518.2 million in the first half of 2014.

The net income attributable to ordinary shareholders showed a different story, at US$915.0 million in 2015 Q2 compared to a loss of US$279.3 million in 2014 Q2. With regard to the company’s half-year results for 2015 and 2014, it was US$951.3 million and a loss of US$23.5 million, respectively.

Looking at Property and Casualty Operations, both premiums written and underwriting profits were up in Q2 and the first half over comparable periods in 2014. Following the combination with Catlin, P&C gross premiums written (GPW) in 2015 Q2 were 42% higher than in 2014 Q2, measuring US$3.0 billion compared to US$2.1 billion. Underwriting profit, for its part, was US$208.8 million in the second quarter of 2015 compared to US$167.9 million in the same quarter of 2014.

Results for the first half of the year were also improved, with GPW of US$5.5 billion in 2015 compared to US$4.5 billion in 2014, and underwriting profit of US$355.6 million compared to US$312.8 million.

XL reports that GPW for the Insurance segment in 2015 Q2 increased 37.1% from the prior-year quarter, primarily due to the combination with Catlin.

In January, XL Group announced it was seeking to acquire all capital stock of Catlin Group Limited for about US$4.1 billion. The move was expected to create a combined business that would have a leading presence in the global specialty insurance and reinsurance markets. The transaction was completed in May, followed by the launch of a new brand, XL Catlin.

“Excluding the impacts of the additional Catlin business and foreign exchange, the segment experienced an increase of 1.1%,” the statement notes. “Renewals were reduced where premium rates did not support our target returns. Relative to the prior-year quarter, the Catlin portfolio experienced similar results.”

For the Reinsurance segment, GPW in 2015 Q2 increased 58.6% from the prior-year quarter, again primarily due to the combination with Catlin. [click image below to enlarge]

With regard to net premiums earned (NPE), these were US$2.1 billion in 2015 Q2 compared to US$1.4 billion in 2014 Q2, and US$3.4 billion in the first six months of 2015 compared to US$2.9 billion in the first half of 2014.

For 2015, P&C NPE was comprised of US$1.4 billion from the Insurance segment and US$650.9 million from the Reinsurance segment.

The combined ratio for P&C operations worsened slightly for both 2015 Q2 and the first half of the year. Figures show combined ratio was 89.9% in the second quarter of 2015 compared to 88.3% in the same quarter of 2014; for the first half, it was 89.5% and 89.0%, respectively.

“The P&C combined ratio excluding prior-year development and the impact of natural catastrophe losses for the quarter was 92.3% compared to 91.8% for the prior-year quarter,” notes the company statement.

Other company results include the following:

• natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in 2015 Q2 of US$59.9 million compared to US$34.6 million in 2014 Q2;

• fully diluted tangible book value per ordinary share of US$32.53 at June 30, 2015, a decrease of US$4.26 from December 31, 2014; and

• net investment income for 2015 Q2 was US$223.2 million compared to US$232.8 million in the prior-year quarter, and US$208.5 million in the first quarter of 2015.

“We are pleased with our progress in the major areas that we view as key to unlocking the value created by XL’s combination with Catlin notwithstanding continued market headwinds,” McGavick says. Among other things, top line results demonstrated the strong support clients and brokers have shown for the new XL Catlin, and the company is “on target with respect to synergies and expenses and will continue to manage those with discipline,” he reports.

“We were one company for only two months of the second quarter and in that short time, my belief that we can meet and exceed the expectations we set for this company has only grown,” McGavick says.