Mike McGavick, XL Catlin
Mike McGavick, XL Catlin

XL Group, corporate parent of the newly merged XL Catlin, saw some real benefits from consolidation in the 2015 second quarter – its first as a combined company.

Net income for Q2 reached $915 million, compared to a loss of $279 million in the 2014 second quarter. That result comes with other good news: Property/casualty gross premiums written in the second quarter increased 42.2 percent compared to the prior year quarter, according to the earnings disclosure. Put another way, XL booked $3 billion in gross premiums written during Q2, compared to $2.1 billion in Q2 2014, thanks to the $4 billion XL/Catlin merger that closed on May 1.

P/C net premiums written hit $2.1 billion during Q2, up from more than $1.4 billion in the 2014 second quarter. Net premiums earned came in at $2 billion, compared to more than $1.4 billion over the same period a year ago.

Other gains of consolidation: XL’s insurance segment saw a 37.1 percent increase in gross premiums written in Q2 versus the prior year. Taking away the impact of added Catlin business and foreign exchange, the segment would have grown just 1.1 percent.

At the same time, the insurer/reinsurer said that rates remained under pressure in most lines, though that was offset somewhat by new business in areas including marine, political risk & trade credit, and North American construction. Renewals were also down where premium rates didn’t support target returns.

Meanwhile, XL Group’s reinsurance segment saw a 58.6 percent increase in Q2 from the prior year quarter, again, mostly due to XL’s merger with Catlin. Without the Catlin business boosting the numbers, the segment experienced a decrease of 2.9 percent due to a competitive pricing environment in the property treaty business.

Here are other earnings highlights for Q2:

Net income attributable to ordinary shareholders of $915.0 million, for the quarter, versus a $279.3 million loss in the 2014 second quarter. That amounts to $3.11 per fully diluted ordinary share, compared to a loss of $1.03 per fully diluted ordinary share over the same period last year.
A P/C combined ratio of 89.9, compared to 88.3 in the prior year quarter
Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of $59.9 million, compared to $34.6 million in the prior year quarter
Annualized operating return on average ordinary shareholders’ equity excluding and including average unrealized gains and losses on investments of 10 percent and 8.7 percent, respectively, for the quarter.
2.9 million in share buybacks worth $110 million during Q2.
CEO Mike McGavick said in prepared remarks that the company is “pleased with our progress in the major areas that we view as key to unlocking the value created by XL’s combination with Catlin notwithstanding continued market headwinds.”

He added that the combined company is “on target with respect to synergies and expenses.” McGavick added that during two months of Q2 that XL Catlin existed as a single company, “my belief that we can meet and exceed the expectations we set for this company has only grown.”

Source: XL Group