XL posts steady profits as it readies for AXA deal

As it prepares to be  taken over by AXA, Bermuda-based XL Group posted stable profits in the first quarter of 2018 while also enjoying solid growth in gross written premiums driven by rate increases.

The company made a net profit of $152.6 million in the quarter, almost identical to the $152.8 million it made in the same period a year earlier. At the same time, operating income increased to $214.4 million from $136.1 million over the period.

The increase in its operating income was primarily driven by improved investment returns and lower financing costs associated with its preferred shares, partially offset by marginally lower overall underwriting profit.

Its P&C book posted a combined ratio of 95.3 percent compared to 94.3 percent in the prior year quarter.

It said it enjoyed rate increases across the portfolio including 3.3 percent in insurance and 4.3 percent in reinsurance. This helped it increase its overall gross written premiums to $4.9 billion in the P&C segment an increase of 6.6 percent compared to the prior year quarter.

The Insurance segment GPW increased 6.4 percent from the prior year quarter, driven primarily by favorable rate changes across business groups as well as stronger renewals. Excluding the impact of foreign exchange, Insurance GPW increased 4.1 percent.

Its reinsurance segment GPW increased by 6.9 percent from the prior year quarter primarily due to rate improvements. Excluding the impact of foreign exchange, GPW increased 3.5 percent. New business written in the quarter from its Bermuda and London businesses was largely offset by cancelled business, something gut said was a reflection of disciplined underwriting.

Mike McGavick, chief executive, said: "We are pleased with our solid start to 2018, in-line with our expectations. During the first quarter our performance reflected benefits of our market leadership, focus on underwriting discipline, strong culture of innovation, continuous improvement, and efficiency.

“In the quarter we grew gross premiums written more than 6 percent compared with the first quarter of 2017 and we continued to improve the Insurance loss ratio excluding PYD and the impact of catastrophe losses.

“We did see a lower Reinsurance margin in the quarter, largely driven by our strategic initiatives including a shift in portfolio mix towards lower volatility and an increase in outward reinsurance protections.

“With respect to pricing, we are pleased to have achieved broad rate increases throughout our Insurance and Reinsurance portfolio, which will earn into our results over the rest of the year. Also during the quarter we had strong contributions from the investment portfolio, and we continued managing our expenses. As we look forward to the next phase in XL’s journey, with the proposed combination with AXA, we believe there is substantial opportunity to continue realizing the potential of what we have built."

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