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XL Catlin impacted by cat, integration expenses

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XL Catlin reported a 12.7% increase in net income for the first quarter, but said its operating income was negatively affected by higher catastrophe losses and integration costs.

Dublin-based XL Catlin on Wednesday reported $83.0 million in net income for the first quarter of the year versus $73.7 million for the comparable period last year, numbers that do not reflect the $4.2 billion merger of XL Group P.L.C. and Catlin Group Ltd. in May 2015.

The company's operating net income, however, decreased 46.8%, to $103.4 million. The insurer said this reflects $55 million in integration costs; it also includes $52.8 million in first-quarter natural catastrophe losses compared with $14.7 million during the first quarter of 2015.

Catastrophe losses also lead the company to report a 92.5% combined ratio for its property/casualty operations for the quarter versus 88.9% for the comparable quarter a year ago.

Net premiums written increased 65.6% to $3.06 billion, while total revenue increased 61.6% to $2.51 billion.

“XL Catlin navigated challenging conditions and produced good underlying results, while maintaining our focus on bottom-line underwriting and top-line discipline, CEO Mike McGavick said during Wednesday's analyst call.

“The headwinds which strengthened throughout 2015 have continued, with pricing being negative across most lines of business as the overall rate change for the segment was down 2% in the quarter,” Paul Brand, XL Catlin's chief underwriting officer and chair of the insurance leadership team, said in discussing the company's insurance segment during the conference call. “Overall, our casualty lines were flat and professional businesses were down 1%.”

He said specialty business was down 2%, reflecting continued competitive conditions in the aviation and crisis management lines, while energy, property and construction businesses were down 5%.

Challenges that other insurers are facing have not benefitted XL Catlin so far, Mr. Brand said.

“While we consider that the dislocation experienced by some competitors should have a positive impact on rates and terms, we saw little evidence of this in the first quarter,” he said.