Catastrophe Losses Impact XL Group Results

February 2, 2017

XL Group Ltd reported its fourth quarter and full year 2016 results, with Chief Executive Officer Mike McGavick saying that “2016 was undoubtedly a challenging year.”

“Our results were impacted by both a disappointing start as well as a number of significant catastrophe losses throughout the year and in the 4th quarter in particular,” Mr McGavick said.

“At the same time, as the year developed, our underlying strengths continued to emerge. For example, our grinding focus on efficiency and underwriting quality produced a lower expense ratio and an improved loss ratio excluding catastrophes.

“We were even able to grow a bit – bolstered by our new market presence our 4th quarter P&C net premium earned, for example, was up 3.3% over the prior year quarter.

“We are enormously proud that our colleagues’ hard work and focus on client service was recognized as we claimed the number one spot for product innovation from Advisen, topped the London market’s Gracechurch survey across nearly all categories, and earned Highest in Customer Satisfaction among Large Commercial Insurers by the J.D. Power North America 2016 study.

“All in, we feel we took important steps in the year and, despite challenging market conditions, are very much looking forward to 2017.”

XL Financial Results Highlights:

  • Net income attributable to common shareholders, and net income attributable to common shareholders excluding the contribution from the GreyCastle Life Retro Arrangements,1 of $304.7 million, or $1.12 per share, and $145.3 million, respectively, for the quarter and $441.0 million, or $1.56 per share, and $576.0 million, respectively, for the full year
  • Operating net income2 of $128.4 million, or $0.47 per share, for the quarter and $460.7 million or $1.63 per share for the full year on a fully diluted basis
  • P&C combined ratio of 94.8% for the quarter compared to 92.3% in the prior year quarter, and a full year P&C combined ratio of 94.2% compared to 92.0% in the prior year
  • Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of$246.1 million [10.1 points to the loss ratio], compared to $107.8 million [4.6 points to the loss ratio], in the prior year quarter and $636.3 million [6.6 points to the loss ratio] for the full year compared to $213.2 million [2.6 points to the loss ratio] in the prior year
  • Integration costs related to the combination with Catlin Group Limited ["Catlin"] totaled approximately $58.8 million for the quarter and $220.4 million for the full year
  • Fully diluted book value per common share of $40.33 atDecember 31, 2016, a decrease of $2.04, or 4.8%, from fully diluted book value per common share of $42.37 at September 30, 2016
  • Fully diluted tangible book value per common share3 of $32.21 at December 31, 2016, a decrease of $2.01, or 5.9%, from fully diluted tangible book value per common share at September 30, 2016
  • Return on average common shareholders’ equity was 3.9% for the full year
  • Operating return on average common shareholders’ equity2,4for the full year, excluding and including average unrealized gains and losses on investments was 4.3% and 4.1%. Excluding integration costs these return rates would have been 6.3% and 5.9%, respectively
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