XL’s ‘toughest year in history’

Bermuda insurer XL Capital announced dire results turning a $206m (£143m) profit in 2007 into a $2.6bn (£1.8bn) loss for 2008 and slashed its dividend.

• Net loss was $2.6bn, compared with net income of $206.4m in 2007.
• Operating Income was $840.3m compared with $1.73bn in 2007.

Chief executive Michael McGavick said” "No one is happier to see 2008 behind us or more excited to have 2009 before us than we are at XL. 2008 has been the toughest year in XL's history.

“Not only are we happy to say 'goodbye' to 2008, we are excited at the prospects for 2009. We have ample capital for our ratings, we have market leading talent and as evidenced by our January 1 renewals, a quality book of business. We have completed one cost reduction initiative on time and on budget and have identified further ways to deliver cost effective support to our underwriters that we will implement in 2009. Even at what we expect to be the lowest point of the insurance cycle we expect to report an ROE in the low to mid teens for 2009. We have reached this position by maintaining our steadfast commitment to disciplined underwriting and by reducing uncertainty in many elements of our business. We are becoming again an XL with the simple and defining mission of being a global provider of specialty property and casualty insurance and reinsurance through superior, technical underwriting."

P&C Operations

• GWP for the quarter ended December 31, 2008 included $1,077.8m from insurance and $104.5m from the reinsurance compared with $1,267.6m and $138.0m, in the fourth quarter of 2007.
• The loss ratio for the fourth quarter of 2008 was 58.0% with a combined ratio of 89.4% as compared to 62.0% and 93.3%, in the fourth quarter of 2007.

Insurance

• Retentions at historical levels; 83% for 2008 versus 2007's exceptional 86%, while at the same time pushing rate.
• Gross and net premiums written decreased by 15.0% and 13.9%, during the three months ended December 31, 2008 compared with the three months ended December 31, 2007.
• For the year gross and net written premiums decreased 2.3% and 4.8% to $5.3bn and $4.0bn, respectively.
• Net premiums earned decreased by 7.2% in the three months ended December 31, 2008 compared with the three months ended December 31, 2007. For the year ended December 31, 2008, net premiums earned decreased 2.9%. The decrease was mainly due to lower net premiums written in prior periods.
• The loss ratio was 60.7% and the combined ratio was 94.4% in the fourth quarter of 2008 compared to 65.3% and 98.4%, respectively, in the fourth quarter of 2007.
• The full year 2008 loss ratio was 68.4% and the combined ratio was 98.4% compared to 63.0% and 91.4% for the same period in 2007.

Reinsurance

• Combined ratio of 79.6% in the quarter and 90.4% for the full year.
• January 2009 renewal, XL lost 11% of renewable premium to security decisions made by clients following rating agency actions.
• Overall premium written at January 1, 2009 also impacted due to selective cancellations by us and to industry wide trends, such as increased retentions by clients.
• Gross and net premiums written during the three months ended December 31, 2008 decreased by 24.3% and 10.9%, compared with the fourth quarter in 2007.
• For the year gross and net written premiums decreased 15.1% and 16.9% to $2.3bn and $1.8bn.
• Net premiums in the fourth quarter decreased by 18.9% compared with the fourth quarter of 2007.
• For the year net premiums decreased 13.4%.
• The loss ratio was 52.6% and the combined ratio was 79.6% in the three months ended December 31, 2008 compared to 56.4% and 84.7% in the fourth quarter of 2007.
• The full year 2008 loss ratio was 61.7% and the combined ratio was 90.4% compared to 54.1% and 84.0% for the same period in 2007.