Tuesday, insurer XL Capital Ltd. (XL), reported a 66% plunge in second-quarter profit, reflecting unfavorable foreign currency translations, lower premium income, and a drop in net investment income amid the difficult economic conditions.
Michael McGavick, Chief Executive Officer, XL Capital said, "Finally! We are pleased to report a quarter in which the strength of the XL franchise shines through clearly, despite challenging market conditions in the sector."
The Hamilton, Bermuda-based company's net income available to ordinary shareholders for the second quarter plunged 66% to $80.00 million from $237.85 million in the prior-year quarter. On a per share basis, earnings plummeted 83% to $0.23 from $1.33 last year.
Results for the second quarter included a foreign exchange loss of $145.22 million, resulting from the weakening of the US dollar against other major currencies, primarily Sterling.
Income, excluding net realized gains and losses on investments for the quarter dropped 39% to $162.65 million from $266.21 million in the year-ago quarter. On a per share basis, earnings decreased 68% to $0.47 from $1.49 in the same quarter last year.
On average, 15 analysts polled by Thomson Reuters expected the company to earn $0.62 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.
In the first quarter, XL Capital had reported a net income available to ordinary shareholders of $178.4 million or $0.53 per share, compared to $211.9 million or $1.19 per share in the prior year quarter.
Total revenues for the second quarter dropped to $1.73 billion from $2.12 billion in the same quarter last year. Analysts had a consensus revenue estimate of $1.71 billion for the second quarter.
For the sequentially preceding quarter, total revenues dropped 30% to $1.53 billion from $2.17 billion in the same quarter last year.
Net investment income for the second quarter decreased to $328.3 million from $440.4 million in the prior year quarter. Gross premiums written for the company's property and casualty operations for the quarter decreased to $1.50 billion from $1.79 billion a year ago, while net premiums written slid to $1.08 billion from $1.36 billion last year.
Net premium earned from the company's property and casualty operations for the quarter dropped to $1.30 billion from $1.51 billion in the year-ago quarter. Underwriting income for the quarter decreased to $89.44 million from $126.36 million in the corresponding quarter last year.
The property and casualty combined ratio for the quarter was 93.0%, compared to 91.6% for the prior year. Excluding the charges for the cost reduction measures, the current quarter combined ratio would have been 92.4%.
Net realized losses on investments for the quarter was $80.43 million, compared to net realized gains on investments of $2.04 million in the previous-year quarter.
XL's annualized return on ordinary shareholders' equity, based on operating income for the quarter was 11.2% compared to 13.3% in the prior year quarter.
Amongst others in the sector, Zurich, Switzerland-based insurer ACE Ltd. (ACE) on July 27, reported a 28% decline in second-quarter profit, hurt by lower premium income and a drop in net investment income. The company posted net income available to common shareholders of $535 million or $1.58 per share for the second quarter, down from $746 million or $2.18 per share in the prior year quarter. Income excluding net realized gains and losses dropped to $706 million or $2.09 per share from $738 million or $2.16 per share in the year-ago quarter.
For the six-month period, net income available to ordinary shareholders decreased to $258.33 million or $0.76 per share from $449.72 million or $2.52 per share in the same period last year. Income, excluding net realized gains and losses on investments declined to $375.10 million or $1.11 per share from $543.10 million or $3.04 per share in the year-ago period. Total revenues for six-month period dropped to $3.26 billion from $4.30 billion last year.
XL closed Tuesday's regular trading at $13.59, down $0.23 or 1.66%, on a volume of 5.27 million shares on the NYSE. In after hours, XL traded at $13.84, up $0.25 or 1.84%. In the past 52 weeks, the stock trended in a broad range of $2.56- $21.20, with a three-month average volume of 7.52 million shares.
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