$1 billion losses for XL during fourth quarter

by David Masters

Story link: $1 billion losses for XL during fourth quarter

XL capital this week reported a net loss to ordinary shareholders of $1.06 billion for the fourth quarter of 2007. This is compared with a net income of $471.1 million for the same period in the previous year.

“Net income excluding net realised gains and losses” for the quarter totaled $117.1 million. This is compared with a total of $510.4 million for the fourth quarter in 2006.

If previously announced charges of $1.5 billion (net of tax) are excluded from these figures, then net income available to ordinary shareholders increases to $439.9 million for the quarter, and $1.86 billion for the year. These charges were incurred due to credit market conditions.

Brian O’Hara, President, CEO, and acting chairman of XL, said: “I believe that these previously announced fourth quarter charges, while disappointing, have reduced uncertainty and increased investors’ ability to recognise the strength of XL’s diversified and global insurance and reinsurance franchise, which continues to perform very well as evidenced by our full year combined ratio of 88.8%.

“In addition, our investment fund and manager affiliates have had another strong performance in 2007. We remain committed to building shareholder value as we execute our strategy.”

The fourth quarter saw an underwriting profit of $17.4 million, compared with $63 million for the same period in 2006.

There was a 7.4% decrease in gross premiums written, largely due to competitive market conditions and specific exposure initiatives. This decrease was partially offset by an increase in long-term agreements, and by favourable changes in foreign exchange rates.

Net premiums earned saw a decrease of 3.8%, due to the earned impact of lower levels of net premiums written in previous quarters.

The combined ratio for the quarter was 98.3%, compared to 94.6% for the same period in 2006. Reinsurance underwriting profit was $90.4 million, compared to $128.3 million for the quarter in the previous year.

Fewer net premiums were written throughout 2007, causing a 4.3% decrease in net premiums earned.

During 2007, XL repurchased 14.98 million ordinary shares at an average price of $75.05 per share. 1.78 million of these were purchased in the fourth quarter, at an average of $69.81 per share.