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XL Group plc (NYSE:XL)

Q2 2014 Earnings Conference Call

July 28, 2014 5:00 PM ET

Executives

David Radulski – Director, Investor Relations

Michael S. McGavick – Chief Executive Officer

Peter R. Porrino – Chief Financial Officer

Gregory S. Hendrick – Chief Executive, Insurance Operations

Jamie H. Veghte – Chief Executive, Reinsurance Operations

Analysts

Vinay Misquith – Evercore Partners Inc

Joshua D. Shanker – Deutsche Bank Securities Inc.

Kai Pan – Morgan Stanley & Co. LLC

Randy Binner – FBR Capital Markets & Co.

Jay Cohen – Bank of America Merrill Lynch

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Josh Stirling – Sanford C. Bernstein & Co., LLC.

Ian Gutterman – Balyasny Asset Management L.P.

Jay H Gelb – Barclays Capital Inc.

David Small – JPMorgan

Brian R. Meredith – UBS Securities LLC

Operator

Good afternoon. My name is Shirley, and I'll be your conference operator today. At this time, I would like to welcome everyone to the XL Group plc Second Quarter 2014 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Please be advised that this conference is being recorded.

I would now like to turn the call over to Dave Radulski, XL's Director of Investor Relations. Please go ahead.

David Radulski

Thank you, Shirley. And welcome to XL Group's second quarter 2014 earnings conference call. This call is being simultaneously webcast on XL's website at www.xlgroup.com. And we posted to our website several documents, including our press release and quarterly financial supplement.

On the call this evening, Mike McGavick, XL Group's CEO, who will offer opening remarks; Pete Porrino, XL’s Chief Financial Officer will review our financial results, followed by Greg Hendrick our Chief Executive of Insurance Operations and Jamie Veghte, our Chief Executive of Reinsurance Operations who will review their segment results and market conditions. Then we’ll open it up for questions.

Before they begin, I'd like to remind you that certain of the matters we'll discuss today are forward-looking statements. These statements are based on current plans, estimates and expectations. Forward-looking statements involve inherent risks and uncertainties and a number of factors could cause actual results to differ materially from those contained in the forward-looking statements, and therefore, you should not place undue reliance on them

Forward-looking statements are sensitive to many factors, including those identified in our annual report on Form 10-K, our quarterly reports on Form 10-Q and other documents on file with the SEC that could cause actual results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date on which they're made and we undertake no obligation publicly to revise any forward-looking statement response to new information, future developments or otherwise.

With that, I turn it over to Mike McGavick.

Michael S. McGavick

Good evening and thank you for joining the call. XL had a good second quarter and we are pleased to see our broad-based progress continues to the first half of 2014. This is particularly true given the headwinds in the market, some of which will get into little bit later. But overall we believe we are demonstrating that the levers we have our at our disposal can help to offset these market conditions and we can continue to produce solid results, harvesting both our prior and ongoing work.

In the second quarter, our results included – total P&C combined ratio of 88.3%, total underwriting profit of $168 million and a loss ratio of 57.6% all of which were better than the prior year quarter. At the same time, as you we feel our progress is better viewed over longer trends and from a year-to-date point of view nearly all of our core metrics are head of the first half of 2013 as well.

Given the market we like where we are. One contrary metric is our operating expense ratio and we will spend some more time tonight going over our expenses in general. As we want to make sure that we are clearly on our expectations of what we’ll develop for the full year. We also experience the one-off benefit in the quarter of some size and we want to make sure that is clear as well. Pete will get into both of these topics during his comments.

Focusing on the insurance segment, we’re pleased with the way the year is developing, specifically insurance underwriting profit in the quarter was $63 million well ahead of the $5 million reported in Q2 of 2013. Overall, we feel we are demonstrating our ability to absorb large losses, including in unusual number of large losses that have already taken place in the first half of this year, while continuing to expand margins.

We’re not out of our goal yet of course, but we like the trends particularly the calendar quarter loss ratio, which was the best result in 5.5 years. We can see that an increasing majority of our insurance businesses, our demonstrating expected performance inline with the market in their particular books. That’s a much different place than were just a year or two ago.

Looking at reinsurance here as well, nearly all of our core metrics are ahead of the prior year quarter as are the year-to-date figures against the first half of last year. Jamie will spend some more time discussing marketing conditions in his remarks, but I’ll just say that we are really proud of the performance for reinsurance colleagues. We are all seeing nearly daily reports regarding the turmoil in the reinsurance market and a continuing lowering of expectations of rate, while expectations are raised for terms and condition on the part of the plans.

You will note that our gross premium written is right about where we’re at the same time first half of last year. This means that with the tough discussions on rate and renewals firms with the distinctive offerings and historic relationships will continue to be better positioned. At the same time, we do expect to feel the impact of the market it is in escapable and we will continue to manage our book to what we feel is the right level of rate for our business and let the chips fall where they may. But we are awfully proud of the way our book has performed to date in this difficult marketplace.

Before turning to Pete, I just want to make one more comment regarding the life reinsurance business. As planned and without surprises the transaction closed in the second quarter. As you recall because the transaction is a sale and retrocession on a funds withheld basis. There are some complex accounting implications we want to make sure you fully aware off.

While we discuss this to some extent last quarter the details are now in the numbers. We are happy to discuss this during Q&A or as a follow up to this call. But in sum we continued to be very pleased both with the transaction and with our counter-parties and are particularly appreciative of our ability to spend our time on the core businesses in this challenging period. Again, through two quarters it has been a very solid start to the year.

With that, I will turn it over to Pete.

Peter R. Porrino

Thanks Mike and good evening. On net loss attributable to ordinary shareholders was $279 million or loss of a $1.03 per share, including the impact of the life reinsurance transaction. Operating net income for the second quarter was $280 million were $1.02 per share on a fully diluted compared to $222 million in 2013 or $0.75 per share.

Our P&C combined ratio for the quarter was 88.3% or 5.5 points better than the same quarter last year, while our accident year combined ratio was 94.2% better by 7.6 points. This improvement is largely driven by lower levels of catastrophe losses this quarter at $35 million were 2.4 loss ratio points compared to $134 million or 9.3 loss ratio points in the second quarter of 2013.

As we’ve outlined on previous earnings calls the second is a significant reserve valuation quarter for us. And as a result we’ve reacted appropriately to any development indications identified during our in-depth review. Prior year reserve development in the quarter was a net favorable $84 million or 5.8 loss ratio points compared to a $119 million or 8 loss ratio points for the same quarter in 2013.

This reflects favorable development of $37 million in the insurance segment and $47 million in the reinsurance segment. Our operating expenses were higher than the prior year quarter due to the normal underlying expense growth as well as the impact of improved underwriting results on our variable compensation metrics and foreign exchange.

As we’ve indicated in the past we continue to expect that overall operating expense levels for 2014 will be modestly higher than 2013 approximately a mid single-digit increase excluding foreign exchange in variable compensation. As a reminder, the increased use of reinsurance will impact the reported operating expense ratio. As noted by Mike we completed the sale & retrocession of our European life reinsurance operations on May 30, to GreyCastle Holdings for $570 million in cash which resulted in an after tax U.S. GAAP net loss of approximately $620 million.

The change in the reported loss from the estimate provided as of March 31, relates to the mark-to-market and FX impacts on the underlying asset portfolio and exposures between the time of signing and closing, which we indicated would be the case at the time we announced the transaction. The prospected accounting and disclosure requirements will add some complexity to our financial statements. Now we hope the example we provided last quarter as well as our summary consolidated financial data included in our press release will help in understanding those impacts.

The way we think about this is that following the May 30, closing of the transaction and reflect no net underwriting results related to the retroceded business. The investment income and change in market value of the asset portfolio backing the seated liabilities is offset by an embedded derivative expense passing those economics onto GreyCastle with the resulting net impact on operating income and comprehensive income being zero.

In the summarize income statement data included in the earnings release we have combined the various components further to show the net income contribution from the life retrocession agreements of $6.5 million for the month of June and it related will offsetting change in accumulated other comprehensive income of $6.5 million to try and make this point clear. It will across before the details to rather Form 10-Q explaining how the results of this business no longer impact the underlying performance of the company.

Turning to the investment portfolio, the life retrocession transaction restricted on the funds withheld basis with the risks and rewards of the $5.7 billion of related funds withheld assets having been transfer to GreyCastle. Investment performance and net investment income generated by the life funds withheld assets since May 30, peaks with the derivative instrument created as part of the life retrocession agreement.

Given that GreyCastle is now direct trading on those assets presumably to investment guidelines we’ve agreed with them and all of the related economics exploded them. And we’ll be excluding these assets from our investment commentary in this and future quarters. To clarify the XL managed assets now include P&C operations. The assets related to the outstanding structured product transactions and the remaining life assets.

However, with that point made these funds withheld assets due continue to sit on our books, so we added new schedule throughout the financial supplement will be disclose a high level summary of the life funds withheld assets by sector, credit rating, currency and duration. Because we’re 11 of the financial supplement details net investment income generated during the quarter and separates the life funds withheld assets for informational purposes. The asset details on schedules 2 through 10 now exclude the life funds withheld assets.

Further to be above and focusing solely on the assets and which we do return the economics, I’m sorry we do retain the economics. The investment portfolio return 1.9% for the quarter driven primarily by decreasing government rates in our major jurisdictions coupled with spread narrowing.

Unrealized net gains in the portfolio were $1.2 billion at the end of the second quarter. The duration of our fixed income portfolio excluding the funds withheld assets, but including the remaining life assets was 3.6 years. To give you a basis for comparison the P&C component of the XL fixed income portfolio is essentially unchanged at 3.4 years. We still remain short duration relative to our benchmark.

At $214 million net investment income on a portfolio excluding life funds withheld assets was $19 million below the same quarter last year. This variance was due to the life transaction with the investment income life funds withheld assets for the month of June it’s now being separately reported. The gross book yield for the portfolio excluding the life funds withheld assets at the end of June was 2.7%.

We still other GAAP between the yields on maturing assets and where we are reinvesting, which will keep downward pressure on net investment income. We estimate that approximately $3.1 billion of XL assets, excluding any funds withheld assets with an average gross book yield of 2.9% well mature in pay down over the next 12 months compared to the average new money rate in Q2 on the portfolio of 1.7%.

Our investment in operating affiliates continued to produce strong results. Net income from investment affiliates was $18 million driven by structured credit strategies and emerging market funds down $29 million from an exceptional prior year quarter.

The overall second quarter return on our alternative portfolio including the non-equity portion of 1.5%. We also had good earnings from our investment manager affiliates of $13 million. Net realized gains were $92 million in the quarter driven primarily by sales of equities this compared to net realized gains of $36 million in the second quarter of 2013.

Our tax rate on net income is distorted somewhat due to the Life transaction on which we recorded a tax benefit of 6.7% of the pre-tax loss on sale. Taxes on operating income, an income for the quarter were approximately 12%. As Mike mentioned in his opening remarks an additional contributor to income in the quarter was a one of commutation of one of our remaining structured product transactions that resulted in a $28 million reduction in interest expense.

And with respect to capital management we continue to execute on our share buyback program and during the second quarter we purchased $5.5 million shares for $175 million at an average price of $31.96 per share leaving approximately $718 million remaining available for purchase, under our previously announced share buyback program.

As we noted in our first quarter call our intention as a result of the elimination of the risks associated with the transferred life business, is that our share buybacks for the year will be increased by as much as $300 million. We continue to view these buybacks as good use of capital for our shareholders and an efficient overall capital management tool.

I will now turn it over to Greg to discuss our Insurance segment results.

Gregory S. Hendrick

Thanks, Pete, and good evening. Tonight, I'll cover the results for the segment provide some comments on our semi-annual reserve review. Give a brief update on talent and finished remarks on current market conditions.

Beginning with the results, the Insurance segment produced a second quarter calendar year combined ratio of 93.8% or 5.8% bearing the same quarter last year driven largely by lower cat activity. This marks our sixth consecutive quarter of profitability. On an accident quarter basis excluding cat, our combined ratio of 96% improved by one full point. This year-over-year improvement was driven primarily by the accident quarter ex-cat loss ratio to 64.7% which was 0.8 points better than prior year.

As we have previously discussed, our underlying portfolio continues to improve through our focus on expanding underwriting margins and reducing volatility, we believe this is evident in the fact that we have been better able to absorb large loss activity this quarter without adversely impacting results. Quite simply our underwriting actions and improved reinsurance volume are yielding results. The underwriting expense ratio was 31.3% in the second quarter, reflecting a 0.2 point improvement in the second quarter of last year. As mentioned last quarter, the shift towards quarter share treaties in certain business will distort the comparison of our acquisition ratio which improved by 3.1 points over the second quarter of last year in our operating expense ratio was deteriorated by 2.9 points.

For 2014, this necessary look at the total underwriting expense ratio when comparing results to prior year. Let me give some contexts to increased sessions. For the quarter our exceeded premiums written increased from $423 million to $622 million. This was driven predominately by an increased use of quarter share reinsurance. Given as increased utilization as our reinsurance the first half of 2014 saw a ratio of exceeded premium to gross premium increase from 25% to 33%, with our July 1 renewals complete we expect roughly distortion rate for the remainder of 2014.

Insurance gross premiums written grew by $125 million rate or 8.5 % in the quarter when adjusted for foreign exchange movement. All of our business groups had solid growth in the quarter. North American Property and Casualty premiums grew by over 7% with construction and excess casualty contributing the largest growth.

On new leadership of Louise Dennerstahl our International Financial Lines of business contributed the growth of more than 8% in our global professional group. Our international property and casualty business grew by nearly 10% after adjusting for foreign exchange partially due to a new, large single limit multi-year account in our primary casualty book. And our specialty group was up over 9% reflecting strong growth in both of our political risk and crisis management businesses.

While markets are increasingly competitive for many of our business, we continue to see, increased commission flow will remain a market of choice when clients are looking for help in solving their risk management needs. Shifting to loss reserves as Pete noted we completed our semi-annual reserve review in the quarter. Overall this resolved in a prior year reserve release of $37 million compared to $48 million in the second quarter last year.

Releases in our aero space and marine books along with the favorable settlement in our discontinued pharmaceutical book were partially offset by straightening in our environmental and Lloyd’s middle market portfolios. Our professional reserves, which experiences some strengthening in the fourth quarter of 2014, were unchanged as continued favorable class action loss activity was offset by unfavorable development of regulatory and M&A related claims.

Moving on to talent we continue to enhance our teams throughout the segment. We recruited Kelly Lyles who will be joining as Chief Executive Global Professional replacing Bernard Horovitz will move into a new business development role. We added John Goodloe as President of our Excess and Surplus Lines of Business. And we promoted Michele Sansone as President of North American Property. We also established a separate North American property.

We will also establish a separate North American Cyber & Technology Risk Business that would be led by John Coletti and realigned our Select Professional business under Alex Blanco, who also leads our design professional business. For the quarter we increased underwriting force by another 12 position as we continue to build out new and existing businesses.

On market conditions, we saw slowing in rate across more lines of business as the overall rate increases for the segment was 1% in the second quarter and 1.5% on a year-to-date basis. I’ve see this now slipped below loss trend several lines as markets particularly the shorter tail lines continue to deteriorate. That said, half of our premium volume did achieve pricing in excess of loss trend in the second quarter. For the year 16 of our 23 businesses are still showing positive rate increase.

North American business is delivered 2% increase in the second quarter driven by a 4% reduction in property, but nearly all other businesses have positive rate into 3% to 7% range that by excess casualty and environmental. Our international property and casualty in global professional businesses achieved rate in 1% to 2% range. Adversely impacted by property and high excess D&O business, respectively.

Our Specialty business were most severally impacted with an overall rate increase of nearly two points, reflecting the competitive aviation market which we expect to move upward given recent loss activity.

In closing, we had a strong calendar year quarter in the first half of 2014, was almost profitable since 2007. And we benefit from another relatively quite catastrophe quarter our accident year results excluding cat reinforce the need for further improvement as we continue to grow our higher margin business and take necessary underwriting actions to achieve our desired level profitability.

And now to Jamie to discuss Reinsurance.

Jamie H. Veghte

Thanks, Gregg and good evening, the reinsurance segment had an excellent quarter of underwriting results for the combined ratio of 75.7% producing underwriting profit of $105 million. These results were impacted by prior reserve release of $47 million and catastrophe losses from the quarter of $20 million net of reinstatement premiums, principally from the European hailstorms Ela in June, excluding the impact of cat losses and prior year releases our combined ratio was 82% exactly the same as our 2013 Q2 result on this basis, as respects the reserve releases XL Re-America went through their normal semi annual reserve review in the second quarter and contributed $21 million of the releases. We leased $17 million of casualty reserves this quarter from the U.S. and international business groups, but continue to be very cautious on recent underwriting years.

Finally, we had $18 million of deterioration on 2013 cat losses, the hailstorms in Germany and windstorm Christian, which dampened the overall release. On a year-to-date basis the segment has produced a combined ratio of 76% compared to the 77.3% in 2013. Excluding the impact of cat losses in prior year releases the six month combined of 82.8% compared to the 80.9% in 2013.

For the year we’ve had the benefit of $78 million of reserve releases down slightly from the $91 million achieved in 2013. With respect to top line gross written premiums of the quarter were $493 million a 4.5% increase from the second quarter of 2013. The increases came from our North America and international business groups and resulted from timing differences additional crop premium in the U.S. increased Aviation premiums based on one new treaty and increased premium estimates on treaties written in prior years in Latin America. On a year-to-date basis gross written premiums of $1.35 billion, down 2% from 2013 levels and reflective of competitive headwinds across the market.

Turning to market conditions you have no doubt heard considerable commentary on the mid-year cat renewals in the U.S. and a very competitive environment across the reinsurance market. There is no question there is enormous appetite out there for virtually all classes of business. The mid-year renewals were indeed competitive with risk adjusted pricing down 15% to 20% on U.S. cat renewals.

In addition, terms and conditions continue to come under pressure including increased multiyear placements, expansion of terrorism coverage and broadened hourly causes, we were pleased to see the market resists some of the more aggressive coverage and placing placement strategies with several programs being repriced and remarketed to enable full placement.

While not necessarily clear proof that the market has hit bottom there are number of markets showing encouraging results in this environment. On the international side we also saw a downward pricing pressure at mid-year renewals. Our Australian and U.K. business showed price reductions up 10% to 20%.

Overall the cat market well under pressure remains on an actual and modeled basis a very profitable component of our global portfolio. We did increase our spend on retrocessional protections at mid-year. A significant capacity and attractive product options were available. While we remain in a market that does not depend on retrocessions for its gross capacity needs we have increased our average capacity on European win and bought down our retention for U.S. win in quake to attach at lower industry loss levels. These hedges included both straight and indemnity and indexed products.

In addition, we remain concerned at the level of competition on proportional placements in both short and long-term markets. We continue to see intense pressure on terms and conditions particularly with ceding commissions were buyers are routinely seeking multiple points of improvement in their placements. Of these instances we have reduced or withdrawn our capacity particularly on long-tail business for our top line has reduced by 10% on a year-to-date basis.

So overall, we had excellent quarter on a calendar year and accident year basis. Our reserve position remains strong we are stead fast in our disciplined approach to very challenging market conditions and are confident our team of deeply experienced underwriters will continue to deliver solid results to our shareholders.

With that, I’ll turn the things back to David for Q&A.

David Radulski

And surely, can you please open the lines for questions.

Question-and-Answer Session

Operator

Thank you, we will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Vinay Misquith with Evercore. You may ask your question.

Vinay Misquith – Evercore Partners Inc

Hi, good evening. The first question is on the primary insurance. And looking at the accident year loss ratio and combined ratio ex-cat for the first six months of this year versus first six months of last year, and those numbers seem to be relatively flat. I would've thought that there would have been some improvement, given the re-underwriting of the business mix. So, if you could help us understand the future trajectory and why it hasn't happened a little sooner, that would be helpful. Thank you.

Gregory S. Hendrick

Sure, Vinay, its Greg. I think the biggest explanation for us to drill hole a bit down some of the large losses that I referred to in my opening remarks. On the property line of business we look at large losses has been losses larger than $10 million and so I am thrilled that you’re using a longer data points in just the quarter. And so the first half of the year in this year, we’ve observed $62 million of those losses in the six months.

In the first half of last year that number was just actually was zero. And so there is about three points of large loss in the first half of this year relative to the zero, it’s masking the underlying improvement. In fact, if I look when I just give you a little more color. If you look back in the second half of last year, we observed 4.7% of large losses in that half six month period.

So, we go 1.6% better on large losses just first six months to the last six months. In our loss ratio is improved 3.3% from 67.4% to 64.1%. To trying to give you even a little more context went back to the first half of 2011, which was the last six months it looks exactly closing dollars to this six months. We had 4.2% of large losses and our accident year ex-cat loss ratio net six month period was 74%.

So, we’re full 10 points better with only half of point of that coming from improved, half of that by a large loss activity. So, we think there is a lot of good things to go underneath with built a book its better able to observe this loss activity. So, we don’t see has been anything other than reinforcing point they were on the right path.

Vinay Misquith – Evercore Partners Inc

So was this quarter's loss higher than average? Or was it plus the average?

Gregory S. Hendrick

Yes, on the property counted this quarter’s loss was higher. In the last 18 quarters we’ve had three that have been $50 million of greater in this $10 million and above then we’ve had nine would have been zero. So, it’s a quite a wide – we have quite a wide distribution there and this was much higher than our normal expectation.

Vinay Misquith – Evercore Partners Inc

Sure. And for this quarter, how many points in the combined ratio do you think it was? Higher than average?

Gregory S. Hendrick

Excuse me a second Vinay.

Vinay Misquith – Evercore Partners Inc

Sure. While you look for that number, can we just go on to the reinsurance side? So I was pleasantly surprised that the combined ratio was flat year-over-year, product accident year, ex-cat basis. So if you could explain that to us, given what we are hearing about pricing on the reinsurance?

Michael S. McGavick

Well, we don’t have a consistent portfolio of business today. As you know we’ve been pretty adjusted at remixing the business and selecting risk. So, we’re confident we are going to able to perform well year-over-year.

Gregory S. Hendrick

Yes, Vinay it’s Greg again, roughly speaking about three points to four points above average.

Vinay Misquith – Evercore Partners Inc

Sure. Thank you.

Operator

Thank you. Your next question comes from Josh Shanker with Deutsche Bank.

Joshua D. Shanker – Deutsche Bank Securities Inc.

I'll give you some comfort that you're not alone. Everyone's having these large losses. And so I always certainly respect that. But the question I have sort of relates to it. It may just be serendipity, but if I go back five or 10 years ago, we were never talking about one-off quarters with large losses. Has the XL book or the industry's underwriting or the amount – or wave of people buying reinsurance, do you think anything's changed in the last decade that's giving us this problem? I mean, it's not just you guys. Everybody has it. And we've been listening about it for about three years now, with some quarters that are blessed that we don't have them, but many of them do. Do you have any thoughts on this?

Michael S. McGavick

Josh this is Mike, I’ll start off and ask Greg or Jamie to add in, I would start with – and so certainly in my time in XL this has been a regular conversation. So I can’t give you the 10 year perspective, I can tell you when they have happened as Greg mentioned those three in the last ten, five years as recorded that really had really excessive large losses we have commented on them.

What was so pleasing to me about this quarter is that we were able to produce an overall loss ratio for the first half of the year that, we think is really a solid result and that we could do that well experiencing one of those quarters as a testament to the improved overall behavior of the XL book of that said I do note that many companies out there and we noticed this from a reinsurance perspective or holding more of their, increasing their attentions and holding more of their risk in that.

And so I think that introduces additional volatility into their book and I notice several of my peers commented in their calls, as that they still think that the economic trade of the greater volatility is better than the cost of reinsurance, that maybe their view, but certainly we find that is always we managed our attritional book well then we are, we should be better able to absorb of these we’re still producing good result which was exactly the effect we had this growth.

So I am feeling pretty good about what this quarter demonstrates about the performance of our book so I do note that industry wide we have seen a lot of commentary around large losses in this particular quarter. Greg?

Gregory S. Hendrick

Joshua, I would say if XL specific 10 years ago we were not as big property player as we’re today. So that’s part of the reason you wouldn’t have heard it from within the XL story. And to Mike’s point we’re actually heading the opposite direction, we’re working hard to buy the right reinsurance to make sure reduce our volatility, we lowered our risk retention at this prior past renewal May 1, and we also bought a risk aggregate cover that will stop the pain of losses in kind of mid-range loss than if we encourage many of them over 12 month period. So, we’re actually taking the opposite approach of taking more of that risk we’re going to try and for at least the foreseeable future by down a little lower.

Joshua D. Shanker – Deutsche Bank Securities Inc.

Okay. And on – you gave some color on the operating expense numbers. Can we get some numbers to that so we can sort of forecast forward on the moving parts? And in terms of how much, I guess, dollar volume or percentage volume these reinsurance buys were affecting a buy, and except they're one-off in nature?

Peter R. Porrino

Sure, George this is Pete. The FX impact was approximately $6 million an impact on variable compensation was approximately $12 million when you renewal those two and then do the math on the year-to-year or the quarter-to-quarter change it comes about 5%.

Joshua D. Shanker – Deutsche Bank Securities Inc.

Okay. Thank you very much appreciate it.

Michael S. McGavick

Hey Josh, before moving on it just thought one of the thing back when the interest rates permitted a number of us including excel worked hard to shift our books to more short tail participation because we were very edgy about casualty rates, that could be another reason that you are seeing more spikiness and because more folks are trying to do write short-tail alliance. The same time in more recent as you know on the last year so we have actually seen some positive rate in the casualty lines making them better performer. So this is a shift back going on, but I just want I’m sure that one of the thing I remembered a lot of the conference calls focused on that back three years or four years ago.

Joshua D. Shanker – Deutsche Bank Securities Inc.

I appreciate all the wisdom. Thank you.

Operator

Thank you. The next question comes from Kai Pan with Morgan Stanly. You may ask your question.

Kai Pan – Morgan Stanley & Co. LLC

Yes, good evening. Thank you for taking my call. And first question is again, it's on the insurance side for the combined ratio. Hello, can you hear me? Hello?

Michael S. McGavick

Shirley next in the queue

Operator

Thanks. The next question comes from Kai Pan with Morgan Stanly. Since your line is open. One moment please.

Kai Pan – Morgan Stanley & Co. LLC

Hello, can you hear me?

Michael S. McGavick

One moment please when we clear this with Shirley.

Operator

Our next question comes from Kai Pan. Your line is open. One moment please.

Kai Pan – Morgan Stanley & Co. LLC

Hello.

Operator

Go ahead Kai.

Kai Pan – Morgan Stanley & Co. LLC

This is Kai with Morgan Stanley. Can you hear me?

Michael S. McGavick

Yes, we can.

Kai Pan – Morgan Stanley & Co. LLC

Oh, thank you so much. I'm sorry; I was already asking my question. And so my first question is really on the insurance combined ratio. And if you look back, you're making some – a lot of improvements. But if you look at the average for the first half, that's still the full load – fully loaded combined ratio is still around 95%. If you want to achieve your 10% ROE, I believe you've got to get this segment into the low 90%, probably in the 90% to 92%. I just wonder how could you do that in a now more competitively pricing environment? Could you – I mean, Greg, talk about the business mix? Could you give a little more context to that?

Michael S. McGavick

Sure, I mean as we’ve said before there a number of areas that we’ve been working to improve that we think can keep us able to continue to improve the book even as these headwinds increased.

First I would note that well rate has been deteriorating element it doesn’t mean its across the board we’re seeing pockets of solid rate still and as Greg said more than half of our premium and more and even more than half of our businesses are still in a positive rate relative to trend environment. So that’s good for the – for that right at the same time between remixing into more profitable businesses between the new businesses that are now up and running and contributing our ability to lower some of our operating expenses over time through investments that we’re harvesting.

And we believe we can continue to expand our operating margins and continuing to nor they combine. And well – when you think about the explanation Greg just gave about the degree of large losses that we experienced well at the same time improving our last ratio by a point nearly eight tenths of a point in the period over the prior period. I feel really good about that I think that demonstrates for getting the job done and as these large losses normalize it will even more apparent. Greg?

Gregory S. Hendrick

Mike touched on mix – it’s our relentless search for underwriting actions as well we’ve been delivering on that quarter-after-quarter and there is meaningful impact and therein – we’ve talked about in the past but or pushing the better analytics in particularly around some of the kind edge predictive model. We’ll also yield further improvements there is all of the things that Mike touched on plus it’s kind of core things you have been talking about for a while.

Kai Pan – Morgan Stanley & Co. LLC

Okay. That's great. Then on the expense side, you forecasted this year the operating expense that's going to be mid-single-digits. I just wonder is that – do you expect that one the dollar amount to flatten out in coming years, that your expense ratio could trend lower to leverage on growing top line, or these ratio will maintain the same going forward?

Michael S. McGavick

This is Mike that really depends on were the top line goes our objective is to improve the ratio overtime to that end we’ve been investing in new business, new ways of operating our business more lower cost mainly through harvesting investments and technology but we’re determined to try and keep that ratio either inline or improving and whether the top line goes will guidance us to what our objectives will be I do think though it is wise for us to continue to investment both in the technology that can yield improvements overtime and in the new teams and new businesses that are enabling us to grow and change our mix of business that’s been at the heart of why we’re continuing to see improvements in our core metrics and I think we should continue to try and make such investments.

Kai Pan – Morgan Stanley & Co. LLC

That’s great. And just last quick question is, do you have any exposure to recent airline losses? And what's your outlook for the pricing in the aviation markets?

Gregory S. Hendrick

Sure, Kai its Greg. As you know we don’t speak specifically about individual clients given some of the confidentially issues. So, let me speak about what wee see in the aggregate since the beginning of the year. So it’s not just for the recent post into the early third quarter activity there’s been five big incidents that we know, we think best guess since very early days, so this is all uncertain.

But, we expect the market loss to be somewhere between $1 billion and $1.5 billion of insured loss. We looked across all those pieces none of them are going to reach $10 million on an individual basis and we’re going to looking at roughly 1.5% market share of loss, which is well below our premium market share. So, we’re pleased with our book has performed very early day basis with some of these losses literally continue to emerge as we speak.

Jamie H. Veghte

Yes, on the reinsurance side March 8 as when we can be specific about loss information on the March 8 loss based on the market reserve of $100 million for the whole and 350 for the liability would expect about $5 million gross and $4 million net for the reinsurance segment.

On the most recent mask, a market reserve, I don’t believe has been said yet, but it’s been talked between 450 and 500, we would expect anywhere between 3.5 million to 5 million XL-Re with the lower end achieved gets the whole loss goes into the aviation war market, which is what we would expect.

Gregory S. Hendrick

Kai its Greg again. As far as with the aviation insurance market will do there’s been some other commentary and clearly I agreed the war the specialist war market will move up dramatically and pricing, we would expect to see that by clearly in the more general airline market, but this has been our market that’s been very competitive for a while. So, it’s a little too early without any renewals right in front of me to look out to point out which right it’s going to move.

Kai Pan – Morgan Stanley & Co. LLC

Thank you so much for all the answers.

Operator

Thank you. Your next question comes from Randy Binner with FBR. You may ask your question.

Randy Binner – FBR Capital Markets & Co.

Thank you. I have a couple of questions as it relates to the life runoff sale and potential impacts to ROE. So the first is, with the proceeds of $570 million, I think that's showing up in cash on the balance sheet. Is the plan to get that deployed near-term into the investment portfolio?

Peter R. Porrino

Hi, Randy it’s Peter. So, the $570 million approximately $300 million will be targeted as we talked about for share repurchases or the reminder of that would enter into the general investment portfolio. As I mentioned on the last quarter call, we would expect that to be basically the same risk and interest rates as we’re seeing on total portfolio with the one caveat that’s since we’ll be back in specific liabilities you could see some more risk weighted assets in that, but not enough that would materially move the needle.

Randy Binner – FBR Capital Markets & Co.

Okay. And then I guess the follow-up then is, so we see $175 million in buyback in each of the first two quarters, and so the $300 million you mentioned was on top of whatever the plan was before. So I guess it feels like that run rate needs to go higher to get to that $300 million higher buyback goal for the back half of the year. I mean, are we thinking – am I thinking of that right, that that's going to be a number kind of up in the 200's each quarter in the back part of the year?

Peter R. Porrino

Right, so Randy, this is Pete again. Your observation is perfectly accurate as we talked about on the last quarter, we were under 10b5-1 plan for the second quarter of the year and so that was all put emotion before the sale of the life business and so. To do the extra $300 million, we know that we would have to do more than the run rate of 175 per quarter for the rest of the year.

Randy Binner – FBR Capital Markets & Co.

Okay, that's perfect. And the last one then is, I'll try in the buffer to the buffer topic, but I believe that that was in place to defend against an externality from having the life runoff, which is now gone. So, what's the latest there? When would that potentially narrow to further facilitate capital return?

Michael S. McGavick

This is Mike, Randy. The 300 that is in addition these impart an effort to narrow that as a result of what we viewed as the life component of the risk. It is certainly not our goal to grow that buffer reduced to that repurchase action is desire to less net. I don’t think we would very often run the company without any buffer to the buffer. But I do think that, that your observation if you wouldn’t want to grow and that we should take out this related portion is correct.

Randy Binner – FBR Capital Markets & Co.

All right. Thank you.

Peter R. Porrino

Randy, this is Pete. Just one other thing on when you’re looking at the cash. Don’t forget that we have a maturity of $600 million of debt coming due on September 15 in this year and so. So that might be the answering the question you’re asking as well.

Randy Binner – FBR Capital Markets & Co.

I understood. Thank you.

Operator

Thank you. Your next question comes from Jay Cohen with Bank of America Merrill Lynch. You may ask your question.

Jay Cohen – Bank of America Merrill Lynch

Yes. Thank you. You had mentioned that the overhead expenses within both insurance and reinsurance were partly inflated due to compensation issues. Should we expect that essentially to continue? We look at kind of the Q2 run rate – is that a reasonable number to look at going forward for that line?

Michael S. McGavick

Yeah, this is Mike, that is probably reasonable it really depends and how the rough sheet points plays out we have worked hard to create shareholder alliance compensation systems that reflect our results as we have been delivering that these solid results of those programs we will have, as we did in this quarter some increase because our people will share in the benefits our shareholders enjoy from this kind of performance.

Jay Cohen – Bank of America Merrill Lynch

Got it. Thank you.

Operator

Thank you. Our next question come from Mike Nannizzi with Goldman Sachs. You may ask your question.

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Yes, hi Just had a couple ones. First, Pete, can you confirm, is it 28.7 – profit associated with the structured product, is that in both net and operating or just in net income?

Peter R. Porrino

It’s in both operating and net.

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Okay. Great. Thanks. Appreciate that. And then on the professional liability reinsurance business, I just noticed that you seem to have ceded a bit more this quarter than a year ago. I was just trying to understand kind of what gave rise to that?

Jamie H. Veghte

I think you mean the reinsurance seeded out the insurance segment?

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Well, I imagine you are paying ceding commissions out of the reinsurance? Oh, I'm sorry, yes, yes.

Michael S. McGavick

Yes, we saw this is to be insurance, the professional insurance yeah.

Gregory S. Hendrick

Yeah, Mike its Greg that’s the continuing impact of core share we talked about in the fourth quarter of last year with a large seeding commission relative to our cost. So we are able to benefit from that over-ride. It’s just the play through we book quarter-by-quarter we don’t book the whole written premium when we incept that quarter share – on quarter share reinsurance purchase we book it as we write it in each quarter. So it just the flow out of that, previously discussed transaction.

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Got it, got it. Thanks. And then I guess on the underlying in the Reinsurance business, at which point should we expect to see, or should we expect to see, the underlying follow sort of – or be impacted by pricing on a property cat side? Because it looks like premiums there declined a bit. The commentary about pricing that we've had already. At what point should we expect to see the underlying loss ratio in that business sort of follow those trends?

Gregory S. Hendrick

I mean that will be depend on whether we have cat of answer not, but I can tell you based on the price movements across the portfolio over the last 12 months our modeled loss ratio would have gone up about 4 to 4.5 points.

Michael S. Nannizzi – Goldman Sachs & Company, Inc.

Got it. Great. Thank you.

Operator

Thank you. Our next question comes from Meyer Shields with KBW. You may ask your question.

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Thanks. One quick numbers question and then the bigger picture. Were there any impacts associated with the life reinsurance transaction on corporate expenses in the quarter?

Peter R. Porrino

Hey, Meyer, this is Pete now. There were no impact.

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Okay. And then this is a bigger question, probably for Greg; I'm not sure. We are seeing interest rates sort of drain down pretty steadily over the course of the year. Why isn't that having more of an impact on overall pricing?

Gregory S. Hendrick

So Meyer, just – I would say in some way that is when you look at which lines of business are getting rate over trend it tends to be in our longer tail lines of business I referred to at my opening remarks in North America, Texas casualty environmental. So whether that’s a direct influence of investment low investment yields coming into our lines of business. I can’t speak for every competitor but certainly we do see that longer tail rates holding up better than shorter tail lines.

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Okay.

Michael S. McGavick

Meyer, this is Mike McGavick I would add I think that’s a great question. We had this kind of smoothly raising rate environment for a fairly brief period of time if I know means under the pricing decreases of the prior handful of years and if you step back and think about the business model the fact that those prices have not remained more resilient it’s somewhat surprising even with the additional capital that’s been focused on narrow places, in the reinsurance marketplace. So we its still relatively logical but we mean to be able to compete effectively in all cycles and this is just another hard one.

Meyer Shields – Keefe, Bruyette & Woods, Inc.

Okay. Thanks very much.

Operator

Thank you. Your next question comes from Josh Stirling with Sanford Bernstein. You may ask your question.

Josh Stirling - Sanford C. Bernstein & Co., LLC.

Hi, good evening. Congratulations on the quarter and thanks for fitting me in. So, I had a couple of sort of big picture questions. First for Jamie. So, 15%, 20% down broadly in property cat. And you guys mentioned specific pressure on ceding commissions and other reinsurance lines. I was sort of wondering, I've never heard anybody calculate a number, but it would be really great to get some form of – or some view of like an all-in measure of changing per pricing per unit of risk for your other reinsurance lines, so we could kind of all have a yardstick to know what the pressure is that – it sort of sounds like it's still more focused on property cat. But as it broadens, and figure out how material that really is?

Jamie H. Veghte

So I would spend a little bit of time on that one Josh, but if you are asking what the impact on expected margins are on the proportional business that I mentioned, the pressure on commissions that would really depend on what line of business you’re talking about right. Because even with interest rates low the investment income component of casually proportional business is a lot different than property. And that we are also largely also depend on how much capital to supporting the various costs of business. So, I would need to spend a little bit of time and may perhaps need some more specific guidance from you on which classes of business.

Josh Stirling – Sanford C. Bernstein & Co., LLC.

Oh, I'm not trying to be difficult. I guess I just – I'm just assuming you guys must have some internal way of talking about pricing pressure across other lines, where there just isn't the same approach. And you might – you can train us to ask the right questions so we can get the useful answer. But if you need to reflect on that, that's fine.

Gregory S. Hendrick

Well, I can tell you that we use pricing methodology on cat and non-cat that is called rate adequacy level. And the denominator in that calculation is rating agency capital and 100% rate adequacy depends on the line of business, but broadly 100% rate adequacy is about 20% on that. The overall rate adequacy in the portfolio is in the low-90s right now.

Josh Stirling – Sanford C. Bernstein & Co., LLC.

So if you were to just, from a really big picture simplistic way of saying, how much deterioration are you seeing in the broader lines outside of property cat? Or is this still really a property cat phenomenon?

Gregory S. Hendrick

It’s more on property that the impact on the property tax portfolio is more profound but frankly the rate adequacy level before we saw pricing pressure on property cat was much higher than our non-cat portfolio. The U.S. cat portfolio before we saw a lot of pricing pressure was well over 100%.

Josh Stirling – Sanford C. Bernstein & Co., LLC.

Right, okay. Great. Well, thank you guys for the time.

Operator

Thank you. Your next question comes from Ian Gutterman with Balyasny. You may ask your question.

Ian Gutterman – Balyasny Asset Management L.P.

Hi, thanks. Most of my questions have been asked. I guess I want to maybe re-ask one from earlier just because I'm still a little unclear. On the trend in ceding, Greg, in your business, I think you said in your comments that the cession rate for this Q would be reflective of the second half?

And I guess I just wanted to dive into that a little bit more. Because when I look at Q4 of last year and Q1 of this year, with the professionalized treaty, in effect, you see that close to 30% of your business, and this quarter, went up to 40%. And I guess I'm wondering why it should stay at 40%? Sort of what changed versus last two quarters. I thought we already had those treaties in place.

Peter R. Porrino

Yes, So Ian, so I quoted the six months number which was 25% to 33%, all right there is a lot of individual moving parts in some time in the converted one quarter share and that is a loss. So in this quarter we drag out, we recorded our excess of loss reinsurance as return and seeded return all on the quarter when is incense. But I think that 30% to 33% rate that you just is the right way to look at it for our run rate. And in the quarter for last year it was just a professional fees that we incepted to spend some other changes along the way here that make that Q1, Q2 more reflective of the overall run rate.

Ian Gutterman – Balyasny Asset Management L.P.

Got it, got it. Okay. Because it looked like – just flipping back between this quarter supplement and last quarter is that it wasn't just professional, let's say, cessions picked up significantly in both casualty and property versus Q1?

Peter R. Porrino

That’s correct. Yes, on the property piece that’s more of – some of our ability to reduced volatility on our global business particularly where were at lead and then what shows up as faculty of our capital reinsurance seeded to our common shares. We decide in some risks we like, we like the client, we love the engineer and we’re able to provider than the other risk services, but we don’t like the net pricing end of the day. And so we’ve reduced our net share nearby having a bigger growth share being see it out. Another casualty piece we think we were able to achieve some more efficiency by combining three programs in one and seeding more business into that one single quarter share North America.

Ian Gutterman – Balyasny Asset Management L.P.

Got it. And within that casualties piece specifically, would a run rate for that also be sort of blended in the first two quarters? Or was Q2 more of the run rate now that there is these new – you've combined those treaties?

Peter R. Porrino

On specifically casualty I want to get back to you, because I haven’t done the math on that piece of it. So, let me come back to you.

Ian Gutterman – Balyasny Asset Management L.P.

Fair enough. And then my last part on that topic is, should we expect benefit to the expense ratio going forward? I'm assuming you've probably got positive overrides on the nonprofessional things you reengineered?

Michael S. McGavick

But, as I said in the top right we’ve got that benefit on the acquisition ratio side and it’s the operating expense ratio side. We’re hopeful to achieving gains there, but as Mike noted and I would reiterate our investment in talent and technology has been the meaningful impact of why we turn things around and we’re continue to invest in that so, it won’t be straight linear, I guess with the over-riders and apply that, but we are still continue to invest in our people and our technology.

Ian Gutterman – Balyasny Asset Management L.P.

Fair enough, fair enough. And if I can just ask one quick one on pricing. Just – is there any – obviously, you gave a lot of color on sort of my type of business. But is there any sort of difference in competitive pressures, whether it's large account versus midmarket account? Whether it's London versus Bermuda versus US?

Peter R. Porrino

Sure, absolutely. So that the one if you just start with this International versus U.S., international is just more competitive than the U.S. marketplace. And certainly as I talked about in the past, we see a very big difference between in any given risks that’s syndicated whether the primary layer and then excess structure above it. We see rate being achieved on the primary layer and then being back on the excess layer. In terms of and in that excess basis it just a lot of compensation right now with a lot of capital path. There isn’t anything I see Bermuda London instead of the where your capital source of set that they are equally competitive.

Ian Gutterman – Balyasny Asset Management L.P.

Got it. I think that’s all I have. Thanks for the answers.

Operator

And our next question comes from Jay Gelb with Barclays. You can ask your question.

Jay H Gelb – Barclays Capital Inc.

Thank you. I want to discuss the concept of operating net income. That's new, I believe, for XL. And one thing that I believe you are backing out is the $19 million of investment income to support the life retrocession agreement. That was about $0.09 a share, correct?

Peter R. Porrino

That be about right it was $19 million so just this to be clarify the $19 million was one month’s work of net investment income for the life funds with hell block of business. And since the deal closed on May 31, that would be what was separately in there.

Jay H Gelb – Barclays Capital Inc.

Right. So you are backing that out of operating net income. Correct?

Peter R. Porrino

Yes.

Jay H Gelb – Barclays Capital Inc.

Now – so that was one month's worth of investment income. That would be expected to persist, right?

Peter R. Porrino

Yes absolutely.

Jay H Gelb – Barclays Capital Inc.

Okay. So it's in net income. It's a recurring net investment income item but you are backing it out of operating? Do I have that right?

Peter R. Porrino

It’s being backed out through AOCI so it’s yes it’s out of operating income, right because it is no longer part of the ongoing economics to excel. Right so its in the top line but it get taken out but that derivative the promise I talked about that last time it’s the derivative is in a different place and geographies and things like unrealized game are loss.

Jay H Gelb – Barclays Capital Inc.

Okay. So, just from a modeling standpoint, that's helpful. So, can you talk about the recurring investment income from the P&C business? Was there anything else in there that was unusual or one-time? Or should we use that – I believe it was $213 million as a run rate?

Peter R. Porrino

Yes, I think Jay the consistent what I just said I would probably referred you to that $214 million that you mention that and this is in the schedule 11 that I mentioned earlier and then was – and there would be two quarters growth of the net investment income on the life funds with all the assets.

So for and got a little careful broad numbers like this, but the $214 million the takeaway two months work at the 19, so takeaway 38 that sort of from reward stroke will give some reasonable run rate now you need to change that for maturities coming out of the portfolio what I talked about the $3.1 billion coming out over the next year. Then really wasn’t anything material in this quarter that would have move that net investment income versus an expected one now.

Jay H Gelb – Barclays Capital Inc.

Okay. So the starting point is essentially $176 million, and there is the benefit of new cash flow but the offsetting – partially offsetting impact of reinvesting existing casual lower rates?

Peter R. Porrino

Exactly.

Jay H Gelb – Barclays Capital Inc.

Thanks very much.

Operator

Thank you. Your next question comes from David Small with JPMorgan. You may ask your question.

David Small – JPMorgan

Yes. Thanks for taking the question. I have a question on the expense ratio. You mentioned earlier that you continue – you plan to continue investing. And I guess I'm just trying to figure out how much more investing do you have? And when do you think we should start to see the positive operating leverage coming out of the expense ratio? And I guess at this point, what are you still investing in? Is it more talent? Is it technology? Because I would have thought by this point, the level of investment spending might be coming down. Thanks.

Peter R. Porrino

Hey, David, it’s Pete. So let’s split it most of the new what we call it investment dollars or the new spend is on the – I am trying to remix the book of business. So it is mostly on the people side and entirely on the underwriting side of the business. The investments that we made in technology those are not going up. As a matter of fact they’re flat but over the next couple of years we would expect that those would start to go down, a little bit so that we talk the investments and the reason why the underlying is even mid single digit is because we are still investing in the business.

David Small – JPMorgan

Okay, thank you.

Operator

Thank you. Our final question comes from Brian Meredith. You may ask your question.

Brian R. Meredith – UBS Securities LLC

Yes, thanks. So, Mike, this one's for you. You talk about uses of excess capital as far as growing your business I guess organically and through share buyback. Where does M&A fit into that, particularly given that we are heading into this softening market? And I guess if you're going to do any M&A, you probably want to do it fairly soon?

Michael S. McGavick

I’ve always discussed the how we approach capital management as the several part exercise and the first thing we do of course, we look to what we are required the hold by meeting our rating agency and increasingly our regulatory requirements. Then we talk about a buffer that’s appropriate to the risk profile the firm, the risk profile of firm have been declining.

So I think our effective management and as a result we have been talking about decreasing the buffer to some degree, but we then say if there money is in excess of that. First could we put it to work in a way that would improve our shareholders position, that’s the first thing we think about, that includes the opportunities for growth as we’ve been talking about, where we can find profitable opportunities to which to grow the business. And that would include examination of opportunities to buy as well as our daily effort to add teams into increase the underwriting potential to firm.

So, we consider that along the journey and when we are done with that if we can put it into work in a way that we think is better for the shareholders, we attempt to return into the shareholders that’s how we think about the process. So, we’ve always said that identifying opportunities to create a better firm is one of our first thought process is after we determined how much capital is required for the firm.

And we continue to do so as you know in the six now plus years, but this management team has been assembled, we’ve only made one very small acquisition in the reinsurance the ag space, but that doesn’t mean we haven’t continue to examine opportunities and if ever see anything where, we think it will really improve the firm we would act on that.

Brian R. Meredith – UBS Securities LLC

Great, thank you.

Peter R. Porrino

You bet.

Operator

Thank you. At this time I’ll turn the call back over to the speakers for closing remarks.

Michael S. McGavick

This is Mike, I just want to thank everybody for the time and attention. I know there is a number of companies that are come up tonight and you have very busy – be very busy long into the evening. So we appreciate there with spend sometime with us. I reiterate where I started we’re very pleased with the way the year as started out.

We feel like the things we’ve been doing to improving the book are showing themselves and in particularly in the period where we’ve had unusual number of large losses to still produce the kind of quality of result we did for the first half of the year it’s truly heartening. And I think it reflects on the efforts we’ve made de-risk the book and to be better able to observe our volatility.

We don’t think the job is done well, we think we can continue to build the better firm and we are driven produced to everyday. Thank you for your attention. I hope you have a good evening.

Operator

Thank you. And this does conclude today's call. We thank you for your participation. At this time you may disconnect your lines.

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Source: XL Group's (XL) CEO Michael McGavick on Q2 2014 Results - Earnings Call Transcript
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