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XL Group posts $915 million profit on Catlin addition

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XL Group P.L.C. executives on Tuesday touted the company's first quarterly results under the XL Catlin banner — following its $4.28 billion acquisition of rival insurer Catlin Group Ltd. in January — as an early indicator of improved resilience against uncertain market conditions.

XL Group tallied a $915 million profit through the three months ending June 30 compared with the $297 million loss it recorded in the second quarter of 2014 after selling its life reinsurance subsidiary, XL Life Reinsurance Ltd., in May of last year.

The Dublin-based insurer and reinsurer's second-quarter net premiums written rose 42.0% in 2015 over results from the previous year, to $2.19 billion, aided in large part by the addition of Catlin's operations beginning in May.

“Although the quarter includes only two months of joint operation, in that short time we're already seeing the many positive indicators supporting the rationale for our joining forces and for the quality of our integration work,” XL Group CEO Mike McGavick said Tuesday during a conference call with investment analysts.

Mr. McGavick said the combined company's earnings for the quarter were negatively affected by $59.9 million in natural catastrophe losses, including those resulting from severe windstorms in parts of western Europe and tornadoes in the Southeast and Midwest United States, as well as $27.8 million in integration costs associated with the Catlin merger.

“Overall, these are solid results, and we like our positions,” Mr. McGavick said. “We're particularly pleased that these results were delivered during a quarter that was messy for the industry and when we are fully into our integration.”

Mr. McGavick added that the results spoke to the company's progress toward “increased ability to absorb volatility.”

“This is something we've been striving to deliver for a long time, and we believed that the combination with Catlin would create an even more resilient and better-spread book of business,” he said. “This could also be a result of that progress. We'll see.”

Absent the addition of Catlin's operations through May and June, XL Group's second-quarter gross premiums written in its insurance and reinsurance segments would have increased by 1.1% and decreased by 2.9%, respectively, hampered mainly by downward pressure on rates across most lines of business, the company said in a statement.

XL Group executives said they were pleased overall with the pace of its integration with Catlin, particularly given the companies' combined size and global footprint, as well as the recent rate of consolidation among its competitors in the commercial insurance and reinsurance markets.

“Integration work by its nature is very hard, and there are many changes that our people around the world are adapting to, but they're anticipating and solving issues as they arise, and the market's reaction remains well beyond our hopes,” Mr. McGavick said. “We're not claiming victory, and we're not done by any means, but our focus on speed to close the deal and on bringing these two companies together as quickly as possible has put us in a fantastic position, especially in a market that is experiencing high level of subsequent M&A activity and turmoil.”