XL delivers best combined ratio in 15 years
Global business insurer XL Group beat analysts’ estimates as it generated operating income of $293.9 million in the fourth quarter of the year.
The Ireland-based company with substantial operations in Bermuda, which last month announced that it had agreed to buy Bermuda rival Catlin Group in a $4.2 billion deal, benefited from a lack of catastrophe claims and improved underwriting profitability.
Operating earnings for the quarter broke down to $1.12 per share, exceeding the 89 cents per share consensus forecast of analysts tracked by Yahoo Finance. For the full year, XL’s operating income totalled $999.2 million, or $3.48 per share.
The company achieved a ten per cent operating return on average equity for the year, including unrealised gains and losses on investments.
XL wrote more business during the fourth quarter, as gross premiums written rose by 11.2 per cent to $1.62 billion. For the year, gross premiums increased by 4.6 per cent to $7.76 billion.
“XL delivered a very strong 2014 including continued progress in insurance and an extraordinary year in reinsurance,” XL chief executive officer Mike McGavick said.
“Many of our results were the best we have achieved in over 15 years, including our property and casualty combined ratio of 88.2 per cent.”
Combined ratio, a measure of underwriting profitability, reflects the proportion of premium dollars spent on claims and expenses.
“Insurance results included a 2014 combined ratio of 94.4 per cent, the best performance since 2007, and a loss ratio of 63.2 per cent,” Mr McGavick added. “And our reinsurance segment achieved a stellar 73.3 per cent combined ratio, one of its best performances as well. Of course, these results were helped, in part, by one of the lowest catastrophe years we have seen in years.
“To build on our success, we intend to continue developing and delivering outstanding products and services to our current and new markets, continuing to move this progress forward.”
Net income for the year was $188.3 million, although this figure was negatively impacted by life retrocession arrangements related to the sale of XL’s life reinsurance operations to GreyCastle Holdings Ltd in May 2014. Excluding the impact of these arrangements, which have no impact on XL’s book value, net income was $1.2 billion for the full year.
During the quarter, XL spent around $175 million buying back 5.2 million of its own shares.
Diluted tangible book value closed the year at $36.79, up by $2.93, or 8.7 per cent on a year earlier. During regular trading yesterday, before results were announced, XL’s shares climbed 72 cents, or 2.1 per cent, to close on $35.21.