NU Online News Service, Feb. 10, 11:37 a.m. EST
XL Group says it took a 2011 fourth-quarter net loss of $515.5 million on a large impairment charge and catastrophe losses.
Catastrophe losses during the last quarter of 2011, net of reinsurance and reinstatement premiums, were $194.9 million, but the company's results were mainly driven by a non-cash goodwill impairment charge of $429 million, says XL.
Explained during the company's earnings conference call, the impairment charge was due to continued low-market valuations and underperformance in the company's insurance segment.
Michael S. McGavick, chief executive officer, says actions the company has taken in underwriting in order to improve results has yet to show up on the bottom line, but XL expects the results "will show up to an increasing degree on the bottom line throughout 2012."
He adds, "While we are frustrated, as we are sure investors are, with the time it takes for an insurance book to respond to medicine, we are unwavering in our faith that the right actions have been and are being taken."
Results furthermore included a tax phenomenon that added $59 million to XL's quarterly operating loss of $79.6 million.
Losses were in low-tax jurisdictions while income was in higher-tax jurisdictions, explains Peter R. Porrino, chief financial officer.
Net income for the 2010 fourth quarter was $188.1 million.
For the year, XL reports a net income loss of $474.8 million compared to net income of $585.5 million in 2010.
Gregory S. Hendrick, chief executive of the insurance segment, says XL has "empowered [new leaders] to re-underwrite the sectors of their books that are underperforming."
In the company's excess and surplus book, for example, XL'sNew Yorkcontractors' liability line, specifically subcontractor risk, is underperforming. Hendrick says this this line is being re-underwritten and exposure is being shifted to general contractors.
The company's directors and officers business is also undergoing a complete revamp, he adds, and XL is growing with the addition of inland marine, political risk and surety teams.
Hendrick says XL has seen "positive rate trends across most of our businesses," particularly in North American P&C, specialty. And rate decreases slowed in D&O. Early 2012 renewals are showing rate increases, he adds.
"We believe that the positive pricing momentum we see is real and sustainable, and will continue in 2012," Hendrick says.
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