Insurance and reinsurance service provider XL Capital Ltd (XL), Tuesday reported a narrower loss in the fourth quarter on lower expenses, higher revenues, and the absence of the substantial charge recorded in the year-ago quarter. Results also reflects higher operating income helped by profit from investment affiliates, somewhat offset by after-tax net realized losses on investments.
Net loss attributable to ordinary shareholders of Hamilton, Bermuda-based company was $40.3 million or $0.12 per share, compared to a net loss of $1.43 billion or $4.33 per share in the same quarter a year ago.
Operating income for the quarter was $235.76 million or $0.69 per share, compared to $189.51 million or $0.57 per share in the year-ago quarter. Operating income was offset by total after-tax net realized losses on investments of $254.8 million, which was the principal driver of the net loss attributable to ordinary shareholders.
On average, 14 analysts polled by Thomson Reuters expected earnings of $0.70 per share for the quarter. Analysts' estimate typically exclude one-time items.
Net loss narrowed significantly primarily due the absence of a $990.0 million non-cash charge for partial impairment of goodwill taken in the fourth quarter of 2008.
Results were also helped by an increase in operating income of $46.2 million mainly on an increase of $240.6 million in the net income from investment affiliates, partially offset by a decrease in the underwriting contribution of XL's P&C operations of $116.5 million and a decrease in investment income of $76.8 million compared to the prior-year quarter.
Total revenues increased to $1.45 billion from $1.11 billion in the prior year quarter, comfortably beating Street estimates of $1.16 billion for the quarter.
Commenting on the performance, Mike McGavick Chief Executive Officer said, "Our results for the quarter and the full year clearly illustrate XL re-emergence as a leading P&C company. Our top line in the fourth quarter of 2009 was within 3 points of the same quarter a year ago. Our P&C combined ratio was a healthy 96.4% for the quarter and 93.6% for the full year."
Sequentially, in the third quarter, XL Capital reported a net loss that narrowed substantially from the prior year due to the absence of $1.4 billion charge recorded in the prior year. Net loss available to shareholders was $11.40 million or $0.03 per share and revenues were $1.49 billion.
For the quarter under review, net income from investment affiliates was $26.39 million, compared to net loss of $214.17 million in the year-ago quarter. Net investment income was $316.4 million, down from $393.1 million in the same quarter last year.
Net premiums earned from investment operations decreased to $1.25 billion from $1.40 billion, while that from life operations dropped to $125.48 million from $147.73 million in the prior-year quarter.
Total expenses dropped to $1.46 million from $2.43 million in the comparable quarter last year.
Operating expenses included charges of approximately $21.8 million related to the previously announced cost reduction efforts, compared to $8.7 million for the same period in 2008.
Book value grew for the third straight quarter, with book value per share increasing 3% to $24.60 and an tangible book value per share increase of 4% to $22.13 in the fourth quarter. Total shareholders' equity increased from $9.2 billion to $9.4 billion in the quarter.
Amongst others in the industry, Insurer ACE Ltd. (ACE), in its fourth quarter, reported a profit that surged from last year helped by net realized gains. Net income available to holders of common shares was $953 million or $2.81 per share and net premiums written increased 8% to $3.31 billion.
Another player, Max Capital Group Ltd. (MXGL) reported net income of $62.6 million or $1.08 per share for the fourth quarter, compared to a net loss of $94.1 million or $1.67 per share in the prior year quarter. Total revenues increased to $268.3 million from $259.5 million in the previous year quarter
For the full year 2009, XL Capital recorded net income of $206.6 million or $0.61 per share, compared to a net loss of $2.63 billion or $10.94 per share a year ago. Revenue dropped to $6.19 billion from $7.15 billion in the prior year. The Street expected earnings of $2.72 per share on revenues of $5.18 billion for the year.
On November 19, 2009, brokerage Bernstein upgraded XL Capital shares to 'Outperform' from 'Mkt Perform,' with a mean target range of $21.42.
XL closed Tuesday's regular trading at $17.02, up $0.51 or 3.09%, on a volume of 3.94 million shares. In after-hours, the stock further gained $0.59 or 3.57%, to trade at $17.10. In the last 52-week period, the stock traded in a range of $2.74 to $19.03, with a three-month average volume of 3.94 million shares.
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