Bermuda-based XL Capital reported fourth-quarter net income of $471 million, compared with a loss of $822 million for the catastrophe-scarred comparable period in 2005.
Gross premium written for the quarter decreased 1.1 percent, the company said, as a result of corporate risk management initiatives and fewer long-term agreements.
Bear Stearns & Co. Inc. analyst David Small found that the better than expected results were driven by a number of special factors including a lower than expected tax rate.
Mr. Small said that excluding those items, and taking into account foreign exchange and unrealized investment losses, the company missed the analyst estimate due to greater than expected expenses driven by an increase in performance-based compensation costs.
“Top line production was essentially in line with our expectations,” he noted. “While gross premiums written were lighter than estimated, the company appears to be retaining more of its insurance business.”
The analyst expects reserve release to continue through 2007. “On an accident-year basis we anticipate the eventual erosion of profitability as competition continues to increase,” according to Mr. Small.
“Finally, it remains unclear how XL will put its capital to work and whether the company will join the fray of share repurchases,” he said.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
