XL Capital reported a significant loss in its second quarter results inflicted by the sale of its life reinsurance subsidiary to GreyCastle Holdings in May this year.
Yet, its primary business performed well and it experienced healthy growth in specific business lines in spite of what its CEO recently described as turmoil in the reinsurance markets.
The company reported a net loss of $279.3 million in the second quarter compared with a net profit of $272.7 million in the prior year quarter, largely caused by a $621.3 million after-tax loss on the sale of its life reinsurance subsidiary.
In comparison, XL’s operating profit for the period was $279.6 million compared with $221.6 million in the same period in 2013. It said this was primarily due to a higher underwriting profit in the current quarter. The firm’s P&C combined ratio for the quarter of 88.3 percent however was 5.5 percentage points lower than in 2013, when it was 93.8 percent.
Gross written premiums for XL’s property/casualty operations in the quarter increased by 8.6 percent to $2.11 billion. This was primarily driven by its insurance business, which enjoyed growth of 9.9 percent owing to new business in international primary casualty, political risk and crisis management lines, as well as higher renewed premiums in international financial lines and North American excess casualty and construction lines.
New aviation business in Europe, growth in agricultural premiums and timing of casualty treaty renewals in North America also lead to 4.5 percent growth in the company’s reinsurance unit. Its P&C combined ratio for the quarter was 88.3 percent, compared with 93.8 percent for the prior year quarter.
Mike McGavick, chief executive of XL, says: "Through the first half of 2014, XL continued to demonstrate solid financial results and strong positioning. In the second quarter of the year, XL produced a total P&C combined ratio of 88.3 percent, total underwriting profit of $168 million, and a loss ratio of 57.6 percent.
“This performance also included insurance segment underwriting profit of $62.6 million and a combined ratio of 93.8 percent in the quarter. And with the well-publicized turmoil in the reinsurance market, our reinsurance segment's 75.7 percent combined ratio and modest growth demonstrated our deep market relationships and the resiliency of our franchise.”
McGavick concludes: “This quarter also included the completion of our previously announced life transaction, covering the vast majority of our life reinsurance business. All in, we like the way the year is developing and believe we will continue to harvest the benefits of our work."
XL, XL Capital, Q2, results, Mike McGavick, reinsurance