Fourth-quarter natural catastrophes took a toll on XL Group Ltd.’s bottom line, and the new Trump tax cuts will also cause some temporary pain, based on revised estimates from the Bermuda-based insurer and reinsurer.
XL Group, also known as XL Catlin, is now reporting $315 million in estimated aggregate net losses for its 2017 fourth quarter. This includes $250 million stemming from the October 2017 Northern California wildfires and other events, reported previously in December, along with a $45 million preliminary loss estimate relating to the recent Southern California wildfires. XL places another $20 million in recent estimated catastrophe losses in the “other” category and said the estimated losses are evenly split between its insurance and reinsurance segments.
XL added that the total aggregate loss estimates are pre-tax and net of reinsurance, reinstatement and adjusted premiums, and redeemable non-controlling interest.
While significant, the loss estimates pale compared to a reported $1.48 billion in natural catastrophe pre-tax losses XL Group faced in Q3 from Hurricanes Harvey, Irma and Maria.
It looks like the recent Trump tax cuts passed in December are also poised to cause some short-term pain. XL said that the new law will force it to recognize a one-time tax charge in Q4 of approximately $98 million, based on its net U.S. deferred tax asset as of Sept. 30, 2017.
XL said that the actual tax charge will depend on its Q4 2017 results but added that it will not affect operating net income. What’s more, based on the preliminary assessment, XL said that the U.S. tax reform law won’t have a material impact going forward on its average global effective tax rate.
Source: XL Group