Also in attendance are Susan Cross, our Global Chief Actuary; Sarah Street, our Chief Investment Officer; and Steve Robb, our Controller.Before they begin, I’d like to remind you that certain 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 of which they are made, and we undertake no obligation publicly to revise any forward-looking statement in response to new information, future developments or otherwise. With that, I'd turn it over to Mike McGavick. Michael S. McGavick As you can see from our release, XL's first quarter results were solid across the board. We returned to profitability in the first quarter with fully diluted operating earnings of $0.52 per ordinary share and an operating ROE of 6.9%. Following a difficult 2011, where much of our progress was obscured by the high level of catastrophes and large losses, this is a gratifying announcement to make and further supports our confidence in XL's days and years ahead. In my year-end letter to shareholders, I outlined several reasons for our confidence. I'll go through some of these again, updating them with our first quarter results. First, our underwriting is improving. And look, we're not confused, we are not at the level of underwriting results that we are expecting to show in every business, but we are improving. The insurance segment combined ratio improved to 101.2%, obviously higher than it should be, but significantly better than the 121% in the first quarter of last year. And even when one removes the extreme cat events of last year, we saw margin expansion in the insurance results in first quarter last year over this year, and we expect that expansion to accelerate. At the same time, Reinsurance continued their record of achievement. The Reinsurance segment's combined ratio for the quarter was 82.4%, a great performance. Jamie will give further details momentarily. It's a good sign that these improvements were especially noticeable among the 7 challenged businesses and insurance that we've discussed in detail on prior calls. In fact, the combined ratio of these 7 businesses was, in this quarter, 104.3%, getting closer in line with the rest of our insurance book in this first quarter. Again, nowhere near good enough, but as we expected, moving in the right direction.
Now in the P&C industry, we all know better than to expect an immediate turnaround in underwriting results. But as our actions take hold, improvements will accelerate, we believe. Everyday, these businesses are decreasingly affected by prior decisions and increasingly improving as a result of our corrections. As we've shared with you, some of these 7 businesses are already on their way to reaching appropriate margins. And at the same time, as we have emphasized, we are watching all of our businesses with intense focus, always on the lookout for anything that warrants special attention or greater opportunity to expand our profit.Turning to another source of confidence. Pricing improved in each month of the first quarter. To use the metric that many of our peers report, North American Property & Casualty rate growth was 5% in the first quarter and rate achievement was accelerating throughout the quarter. I'll ask Greg and Jamie to elaborate, but we feel very comfortable that our positive rate change will continue. We are a long way from regaining the ground lost over the past 10 years, but as the momentum moves in the right direction, we believe XL is well positioned to benefit from this rate movement. Another source of our confidence is our focus on smart profitable growth. Our P&C gross premiums written increased over 10% from the first quarter of last year. Insurance segment gross premiums written were up 9.3% as a result of new business initiatives in North American Projerty & Casualty lines, higher retention levels in our profitable professional lines, and improved pricing. Gross premiums written by our Reinsurance segment grew by 11.8%, primarily in International Casualty. We like what we are seeing, remixing our businesses towards premiums written in the lines we think provide the greatest opportunity for profit. Another source of confidence is our ERM. Our enterprise risk management record continues to show results. While the entire industry did benefit from a relatively quiet cat quarter, where losses were reported, XL again fared in line with our expectations and performed well relative to peers as a percentage of shareholders' equity. Now in the first quarter, this was illustrated by Costa Concordia, an awful human tragedy obviously, and one of the true marine catastrophes that we have experienced. In fact, for the sector, this resulted in a loss approaching $1 billion. Now we're a leader in insurance and reinsurance marine coverages for both haul damage and liability. And for us to have a net loss from this event, currently estimated about $45 million, is a sound underwriting achievement given the catastrophe to the market. In the first quarter, we continue to invest favorable reserve development. And we believe you should find more evidence of our reserving prudence when we relieve our -- when we release our Global Loss Triangles later this week. Recall that the first quarter is an actual versus expected quarter. And as usual, we will again perform a complete review of our reserves in the second and fourth quarter, and look forward to discuss reserving in greater detail with you next quarter. Susan Cross, our Global Chief Actuary, will join us then. Read the rest of this transcript for free on seekingalpha.com