XL CEO Sees Hard Market Into 2005

XL CEO Sees Hard Market Into 2005

NU Online News Service, Aug. 4, 3:50 p.m. EDT?Brian O'Hara, chief executive officer at Bermuda-based XL Capital Ltd., told analysts that the high-priced hard market would continue well into 2005.

"As a frequent visitor to Bermuda, Mark Twain might have said 'the demise of the hard market has been greatly exaggerated,'" Mr. O'Hara said of recent reports that suggested that the strong marketplace condition is coming to a close. His comments on the industry came during a conference call to discuss XL Capital's second-quarter financial results.

"We expect to enjoy strong market conditions into 2005," Mr. O'Hara predicted. He observed that there is still "considerable dislocation" in the global insurance and reinsurance market, with a number of overhanging issues. One problem is the lack of resolution on asbestos claims, "which to us are insignificant but to many are not. And the rating agencies are still very concerned about the industry's capital adequacy."

Mr. O'Hara added, "For us, our position in the market continues to be very strong because of our diversification and the relevant strength in our chosen lines."

Late last week, XL Capital reported $357.7 million for its second-quarter profit, in contrast to a loss of $91.7 million it posted one year ago. Net premiums earned from its general operations were $1.5 billion--a jump of more than 40 percent compared with the 2002 second quarter--with a combined ratio of 92.2 percent.

Its net investment income from general operations, however, dropped slightly to $145.1 million, compared with $151.6 million posted during the year-ago period.

"We had a strong quarter with net income, total assets and shareholders' equity reaching record levels," Mr. O'Hara said.

He noted that the company's general insurance operations enjoyed double-digit price increases across all lines on renewals during the past quarter.

He added that for property lines, the market continues to be well priced, while casualty and professional liability lines--including directors and officers coverage--remain particularly strong.

"We are particularly well placed in those lines of business which are still seeing the largest rate increases, notably professional lines and casualty worldwide, which currently comprise nearly half of our general operations' portfolio," Mr. O'Hara said.