XL Catlin profit skyrockets

Xl Group Ltd. on Wednesday reported a nearly sixfold increase in its net income for the second quarter of 2017, driven by lower catastrophe losses and higher net income from affiliates.

The Hamilton, Bermuda-based insurer, which does business as XL Catlin, posted $301.6 million in net income for the quarter, a 588.9% increase from $43.8 million for the comparable period a year ago.

XL Catlin reported $92.1 million in catastrophe pretax losses, net of reinsurance and related reinstatement premiums, compared with $240.1 million for the year-ago period.

Net income from affiliates increased 112.4%, to $73.5 million for the quarter, compared with $34.6 million for the prior-year quarter, driven mainly by the sale of an investment manager affiliate and a strong performance in all categories of its affiliate holdings, the company said.

Operating income increased 139.6%, to $255.1 million from $106.4 million for the comparable period a year ago.

XL Catlin reported $2.65 billion in net premiums written, which was a 2.8% decline from the total for the comparable period a year ago.  The combined ratio for the quarter was 92.3% vs. 96% for 2016’s second quarter.

“We are pleased to report solid overall results,” which reflect a continued focus on executing XL Catlin’s strategy, CEO Michael S. McGavick said during Wednesday’s earnings call.

“Throughout the first half of the year, we like the progress we’ve made and feel good about our ability to execute our strategy,” although significant headwinds remain in the market, including inflationary trends and continuing rate deterioration, although some lines are flattening and there have been slight increases as well, Mr. McGavick said.

He said submission rates were up 5% in the second quarter, although XL Catlin’s “hit rate” remained the same at 36%, consistent with the prior year.  “We continue to see more business, and we continue to select the business we want,” he said. “We continue to push the pace of our ability to introduce new products to the market.”

Mr. McGavick said XL Catlin’s North American construction unit, for example, which was introduced in 2010, has reached $2 billion in gross written premium over its seven years of operation.

Asked about how the insurer manages cyber risk, Mr. McGavick said, “I would emphasize this, we keep it at very low limits,” and manage sector exposures as well as individual risks.  “This is a very broad and diversified book and that makes me very comfortable,” he said.

Gregory S. Hendrick, the insurer’s property/casualty president, said XL Catlin had another strong quarter for “new and expanded capabilities.”

These included an accident and health insurance program in the United Kingdom and a real estate environment protection program in the Asia-Pacific region, he said.

He said XL Catlin’s largest growing portfolios in the quarter included political risk, global risk management international financial lines and U.S. programs.