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XL Group Ltd (“XL” or the “Company”) (NYSE: XL) today reported its second quarter 2018 results.

Commenting on the Company’s performance, XL’s Chief Executive Officer Mike McGavick said:

"In the second quarter we have continued our progress toward a strong and diversified book, particularly as rate conditions improved across most lines. We grew top line by 10.6%, maintained underwriting discipline and  continued our shift of our book toward lower volatility business. Partially offsetting these positive trends was non-catastrophe large loss activity from the current quarter as well as prior year development from short tail lines in Insurance. Our investment results continue to improve as active portfolio rotation allows us to take advantage of rising interest rates. Overall, we are pleased with the results and look forward to continuing to realize the full potential of what we have built when we become part of AXA Group."

Return on Common Shareholder's Equity and Book Value
(U.S. dollars in thousands except per share amounts) Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
Return on Common Shareholder's Equity: 2018 2017 2018 2017
Annualized Return on average common shareholder's equity ("ROE")3 13.2% 10.9% 9.7% 8.3%
Annualized Operating ROE1,3 9.1% 9.3% 8.9% 7.1%
Annualized Operating ROE ex-Accumulated other comprehensive income ("AOCI")1 9.3% 10.1% 9.4% 7.7%
Annualized Operating ROE ex-Catlin-related integration cost1,4 9.1% 10.5% 8.9% 8.3%
Annualized Operating ROE ex-AOCI and ex-Catlin-related integration cost1,4 9.3% 11.4% 9.4% 9.0%
Book value per common share: June 30, 2018 March 31, 2018 June 30, 2018 December 31, 2017
Fully diluted book value per common share $36.56 $36.53 $36.56 $38.04
Fully diluted tangible book value per common share2 $28.23 $28.06 $28.23 $29.44
Second Quarter Summary
(U.S. dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
2018 2017 $ Change % Change 2018 2017 $ Change % Change
Net income (loss) attributable to common shareholders $318,996 $301,620 $17,376 5.8% $471,644 $454,463 $17,181 3.8%
Per average common share outstanding-basic $1.23 $1.16 $0.07 6.0% $1.83 $1.73 $0.10 5.8%
Per average common share outstanding-fully diluted $1.21 $1.14 $0.07 6.1% $1.80 $1.70 $0.10 5.9%
Operating net income (loss) $220,341 $255,080 $(34,739) (13.6)% $434,700 $391,223 $43,477 11.1%
Per average common share outstanding-fully diluted $0.84 $0.96 $(0.12) (12.5)% $1.66 $1.46 $0.20 13.7%
  • Net income attributable to common shareholders of $319.0 million, or $1.21 per fully diluted share, for the quarter,compared to $301.6 million, or $1.14 per fully diluted share, in the prior year quarter.
  • Operating net income of $220.3 million, or $0.84 per fully diluted share, for the quarter, compared to $255.1 million, or $0.96per fully diluted share, in the prior year quarter, primarily driven by lower favorable PYD, partially offset by improved investment returns.
  • Net investment income for the current quarter was $231.8 million, compared to $208.7 million in the prior year quarter. Net investment income for the current quarter, excluding the Life Funds Withheld Assets, was $201.5 million, compared to $177.2 million in the prior year quarter . This increase was primarily due to active sector rotation and portfolio management activities, and an increase in new money rates, all of which resulted in an increase in investment yields.
  • Income from investment affiliates was $67.7 million for the current quarter, compared to $73.5 million in the prior year quarter.Lower income from investment affiliates driven by private investments while hedge funds performed in line with prior year quarter. Investment manager affiliates results were lower due to the gain on sale of one of our investment manager affiliates recorded in the prior year quarter. Strategic operating affiliates benefited from a realized gain of $43.0 million on the sale of one affiliate in the current quarter.
Income from Investment and Operating affiliates
(U.S. dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
Net Income/(loss) from: 2018 2017 $ Change % Change 2018 2017 $ Change % Change
Investment affiliates (hedge funds/private investments) $16,548 $30,818 $(14,270) (46.3)% $62,217 $69,079 $(6,862) (9.9)%
Investment manager affiliates $1,975 $36,108 $(34,133) (94.5)% $12,086 $39,405 $(27,319) (69.3)%
Strategic operating affiliates $49,212 $6,596 $42,616 N/M $49,383 $16,908 $32,475 N/M
Income from Investment and Operating affiliates $67,735 $73,522 $(5,787) (7.9)% $123,686 $125,392 $(1,706) (1.4)%

N/M = not meaningful

  • Operating expenses during the current quarter of $470.5 million were $2.3 million or 0.5% favorable compared to the prior year quarter. After excluding $8.3 million of AXA-related transaction costs in the current quarter, $39.1 million of Catlin-related integration costs in the prior year quarter and unfavorable impact of foreign exchange of $21.6 million, expenses increased by $7.0 million, or 1.6%, reflecting further investment to support growth in our business while staying in line with our commitment to create operating expense leverage.
  • Income tax expense of $27.0 million is lower as compared to $29.0 million recognized during the prior year quarter. The decrease in current quarter income tax expense is primarily attributable to the mix of profit by jurisdiction.
  • Fully diluted book value per common share increased by $0.03 from the end of the prior quarter to $36.56, driven primarily by Operating net income of $220.3 million during the current quarter, partially offset by unrealized losses on mark to market investments, and the payment of dividends. Fully diluted tangible book value per common share increased by $0.17 from the end of the prior quarter to $28.23.
  • There were no share buybacks5 during the current quarter. At June 30, 2018, $529.1 million of common shares remained available for purchase under the current share buyback authorization.
P&C Operations
(U.S. dollars in thousands)
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