Natural catastrophes hammer XL Group’s 2017 results

XL Group has revealed its fourth quarter and full year 2017 results, both of which saw substantial losses from natural catastrophes.

Fourth quarter 2017 net income came to $28.8 million, down 90.5 percent from the $304.7 million it made in the same period of 2016. The company made a net income loss of $560.4 million over 2017, a substantial fall from the $440.9 profit it made in 2016.

XL said that it had been significantly impacted by catastrophe losses during the fourth quarter, as well as by lower prior year development (PYD) and lower operating expenses, but that despite the losses it has demonstrated underlying progress despite significant catastrophe impact and that it is poised to benefit from an improving market environment.

Net income attributable to common shareholders was also impacted by a non-recurring tax charge of $100.5 million related to the revaluation of the net deferred tax asset as a result of the reduced US corporate income tax rate enacted under the US Tax Cuts and Jobs Act.

Operating net income for the fourth quarter came to $116.1 million, down 9.6 percent from the $128.4 it reported for the fourth quarter of 2016. The company reported a net loss of $521.6 million, for the 2017 full year, down again from the $460.7 million it reported for 2016.

The company reported a P&C combined ratio of 108.3 percent, or 90.2 percent, excluding PYD and natural catastrophe losses, for the full year compared to 94.2 percent, or 90.7 percent, respectively, for the prior year.

"XL’s fourth quarter and full year 2017 results were impacted by the severe natural catastrophes in the year,” said XL’s chief executive officer Mike McGavick. “At the same time, we feel positive about where we are going due to some important factors including: our solid capital position, our progress made in our 2017 ex-catastrophe underlying results, the strength of our market relevance as demonstrated by our 8 percent growth in gross written premiums year-over-year, and that we are seeing early signs of a return to realistic and sustainable rate. Additionally, with the benefit of learnings from our 2017 catastrophe experience and seeing the early way in which the rate environment is reacting following the 2017 events, we have already made a series of adjustments to optimise the balance of risk and return, meaningfully enhancing our catastrophe exposure profile while keeping us a leading player in these businesses. We expect to make further adjustments as the market environment unfolds.

“Throughout 2017 and clearly into 2018 we have shown that XL Catlin continues to be a market leader in customer satisfaction and innovation, earning, for the second straight year, Highest in Customer Satisfaction among large commercial insurers from JD Power, the top spot in the Gracechurch survey of the London Market, and first place in Advisen’s innovation index, among numerous other external recognitions. All of this taken together, as we look at our industry, we feel well positioned for what comes next.”