There was no-one hit worse by the catastrophes of 2017, such as Hurricanes Harvey, Irma and Maria, the Mexican earthquakes and Australia and New Zealand’s Cyclone Debbie, than those directly impacted many of whom are still struggling to piece their lives back together. Still, insurers and reinsurers are certainly feeling the effects too – as indicated by XL Group’s latest round of results.
The reinsurance giant reported natural catastrophe pre-tax losses net of reinsurance, reinstatement and premium adjustments at US$315.2 million for the fourth quarter of the year – comparing to US$246.1 million in the prior quarter. This pushed the firm to an operating net loss for the full year of US$521.6 million. It also took a non-recurring tax charge of US$100.5 million related to the revaluation of the net deferred tax asset as a result of the reduced US corporate income tax rate from the US Tax Cuts and Jobs Act.
The company did enjoy a neat jump in its gross written premiums year-on-year – climbing from US$9,650,503 in insurance and US$3,975,106 in reinsurance for 2016 to US$10,070,463 and US$4,682,110 respectively for the full year 2017. However, all of this left the group with a P&C combined ratio of 108.3% for the full year – compared to 94.2% for the prior year.
A difficult period, then.
Still, XL’s chief executive officer Mike McGavick remained optimistic.
“XL’s fourth quarter and full year 2017 results were impacted by the severe natural catastrophes in the year,” he said. “At the same time, we feel positive about where we are going due to some important factors including: our solid capital position, our progress made in our 2017 ex-catastrophe underlying results, the strength of our market relevance as demonstrated by our 8% growth in gross written premiums year-over-year, and that we are seeing early signs of a return to realistic and sustainable rate.
“Additionally, with the benefit of learnings from our 2017 catastrophe experience and seeing the early way in which the rate environment is reacting following the 2017 events, we have already made a series of adjustments to optimize the balance of risk and return, meaningfully enhancing our catastrophe exposure profile while keeping us a leading player in these businesses. We expect to make further adjustments as the market environment unfolds.”
McGavick added that the firm remained a “market leader in customer satisfaction and innovation,” highlighting its position finishing highest among large commercial insurers in a J.D. Power survey and its top spot in the Gracechurch survey of the London market.
“All of this taken together, as we look at our industry, we feel well positioned for what comes next,” he said.
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