Solid Performance Driven by Focused Growth and
Lower Expenses
Somewhat Offset by Higher Global
Catastrophes and the Impact of UK Ogden Rate Change
HAMILTON, Bermuda,
April 26, 2017 /PRNewswire/ --
- Net income attributable to common shareholders of
$152.8 million, or $0.57 per share, compared to $21.9 million, or $0.07 per share, in the prior year
quarter
- Operating net income1 of $136.1 million, or $0.50 per share, for the quarter on a fully
diluted basis compared to $103.4
million, or $0.35 per fully
diluted share, in the prior year quarter
- P&C combined ratio of 94.3% for the quarter compared to
92.5% in the prior year quarter
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $96.1 million (3.8 points to the loss ratio),
compared to $52.8 million (2.2 points
to the loss ratio), in the prior year quarter
- Adverse prior year development ("PYD") of $24.0 million, inclusive of previously announced
$75.0 million of adverse development
from the UK Ogden rate table2 change, compared to a
favorable $43.4 million in the prior
year quarter
- Integration costs related to the combination with Catlin
Group Limited ("Catlin") totaled approximately $33.9 million for the quarter compared to
$55.0 million in the prior year
quarter
- Fully diluted book value per common share of $41.10 at March 31, 2017, an increase of
$0.77, or 1.9%, from fully diluted
book value per common share of $40.33
at December 31, 2016
- Fully diluted tangible book value per common
share3 of $32.83 at
March 31, 2017, an increase of $0.62, or 1.9%, from fully diluted tangible book
value per common share of $32.21 at
December 31, 2016
- Annualized return on average common shareholders' equity
("ROE") was 5.6% for the quarter compared with 0.7% for the
prior year quarter
- Annualized operating ROE1,4 excluding and
including average accumulated other comprehensive income ("AOCI")
was 5.4% and 5.0% for the quarter and 3.8% and 3.5% in the prior
year quarter, respectively. Excluding Catlin related
integration costs these return rates would have been 6.5% and 6.1%
in the first quarter of 2017 and 5.7% and 5.3% in the prior year
quarter, respectively
XL Group Ltd ("XL" or the "Company") (NYSE: XL) today
reported its first quarter 2017 results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"We are pleased to start off 2017 with solid performance,
focused growth and the continuation of lower operating expenses. As
we approach the two year anniversary of the Catlin acquisition, we
see the benefits of our increased market presence, our focus on
underwriting discipline, our strong culture of innovation and
continuous improvement, and a more efficient operating platform.
Additionally, our realigned operating model seamlessly went live at
the beginning of the year and with it we remained steadfast on
superior client experience. As a result, our performance included
an accident year combined ratio excluding catastrophes of 89.5%, an
improvement of 2.6 points compared to the first quarter of
2016. 2017 is all about delivering on what we have
built."
Highlights
|
|
|
|
|
(U.S. dollars in
thousands, except per share amounts)
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
|
|
|
(Unaudited)
|
|
|
2017
|
|
2016
|
|
Net income (loss)
attributable to common shareholders
|
|
$152,843
|
|
|
|
$21,885
|
|
|
Per average common
share outstanding-fully diluted
|
|
$0.57
|
|
|
|
$0.07
|
|
|
|
|
|
|
|
Operating net income
(loss)
|
|
$136,143
|
|
|
|
$103,388
|
|
|
Per average common
share outstanding-fully diluted
|
|
$0.50
|
|
|
|
$0.35
|
|
|
|
|
|
|
|
- Net income attributable to common shareholders of $152.8 million and Operating net income of
$136.1 million for the quarter
increased compared to $21.9 million
and $103.4 million in the prior year
quarter, respectively. The improvement was largely attributable to
core premium growth, increased investment income from affiliates
and operating expense reductions partially offset by greater
catastrophe losses and adverse PYD primarily attributable to the UK
Ogden rate table change announced earlier this year. In addition,
net income attributable to common shareholders also improved as a
result of lower Life Retrocession Derivative losses incurred as
compared to the prior year quarter.
- Net income from affiliates was $51.9
million for the quarter, compared to $8.1 million in the prior year quarter.
This increase was driven principally by our hedge fund affiliates.
Also contributing to this increase was strong performance in our
strategic operating affiliates, investments within our value
investing strategy.
- Net investment income for the quarter was $200.5 million, compared to $205.9 million in the prior year quarter. Net
investment income excluding the Life Funds Withheld
Assets5 for the quarter was $167.2 million, compared to $164.3 million in the prior year quarter.
- Operating expenses were 9.2% favorable versus the prior year
quarter, reflecting the continuing efficiency efforts as well as
benefits from foreign exchange, particularly from the weakening of
the British Pound compared to the U.S. Dollar.
- Income tax expense of $13.1
million was recognized during the quarter. The amount of tax
expense recognized during the quarter was less than that recognized
in the prior year quarter primarily due to a greater proportion of
total quarterly net income being earned in lower-tax jurisdictions
than in Q1 of 2016.
- Fully diluted book value per common share increased by
$0.77 from the end of the prior
quarter to $41.10, driven by our net
income, the increase in our unrealized gains on investments and
share buybacks, partially offset by the payment of dividends. Fully
diluted tangible book value per common share also increased by
$0.62 from the end of the prior
quarter to $32.83.
- Share buybacks totaled approximately 5.1 million shares at an
average price of $39.33 per share or
$200.5 million during the quarter,
compared to 10.0 million shares or $355.1
million in the prior year quarter. At March 31, 2017,
$900.0 million of common shares
remained available for purchase under our share buyback
program.
P&C
Operations
|
|
|
|
|
(U.S. dollars in
thousands)
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
(Unaudited)
|
|
|
2017
|
|
2016
|
|
Gross premiums
written
|
|
$4,621,606
|
|
|
|
$4,359,315
|
|
|
Net premiums
written
|
|
$2,979,760
|
|
|
|
$3,061,595
|
|
|
Net premiums
earned
|
|
$2,519,481
|
|
|
|
$2,351,446
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$143,977
|
|
|
|
$175,489
|
|
|
|
|
|
|
|
Loss ratio
|
62.8%
|
|
|
58.8%
|
|
|
Underwriting expense
ratio
|
31.5%
|
|
|
33.7%
|
|
|
Combined
ratio
|
94.3%
|
|
|
92.5%
|
|
|
|
|
|
|
|
- P&C gross premiums written ("GPW") in the first quarter
increased 6.0% compared to the prior year quarter, which contains
approximately 2% attributable to premium processing timing and
other adjustments impacting current and prior year quarters.
- The Insurance segment GPW increased 7.6% from the prior year
quarter driven primarily by growth in North America Construction as
well as International Casualty and International Property business
lines. Excluding the impact of foreign exchange, GPW increased
8.4%.
- The Reinsurance segment GPW increased by 3.9% from the prior
year quarter. This growth was largely due to increased global
client management efforts, leading to improved retention of
existing business and increased growth opportunities. Excluding the
impact of foreign exchange, GPW increased 7.0%.
- P&C net premiums earned ("NPE") in the first quarter of
$2.5 billion were comprised of
$1.6 billion from the Insurance
segment and $0.9 billion from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 4.0
percentage points higher than in the prior year quarter. The
P&C loss ratio variance was impacted by natural catastrophe
pre-tax losses net of reinsurance and related reinstatement
premiums of $96.1 million, compared to $52.8 million in the prior year quarter. Included
in the P&C loss ratio was adverse development of $24.0 million including $75.0 million of adverse development attributable
to UK Ogden rate table changes partially offset by other favorable
development predominantly from our Reinsurance segment. This
adverse development compares to favorable development of
$43.4 million in the prior year
quarter. Excluding prior year development and natural catastrophe
losses, the first quarter P&C loss ratio was 0.3 percentage
points favorable versus the prior year quarter.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 89.5%,
compared to 92.1% for the prior year quarter. The Insurance segment
combined ratio on this basis was 91.2% for the quarter compared to
95.0% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 86.5% for the quarter compared to
86.2% for the prior year quarter. Overall, improvements in
the P&C combined ratio reflect disciplined underwriting as well
as continued emergence of operational efficiencies.
Further details of the results for the quarter may be found in
the Company's Financial Supplement and Earnings Presentation, each
of which is dated April 26, 2017 and is available on the
Investor Relations section of XL's website.
A conference call to discuss the Company's results will be held
at 5:00 p.m. Eastern Time on
Wednesday, April 26, 2017. The conference call can be
accessed through a listen-only dial-in number or through a live
webcast. To listen to the conference call, please dial (210)
795-0624 or (866) 617-1526: Passcode: "XL GLOBAL". The
webcast will be available at www.xlgroup.com and will be archived
on XL's website from approximately 9:00 p.m.
Eastern Time on April 26, 2017, through midnight Eastern Time on May 26, 2017. A
telephone replay of the conference call will also be available
beginning at approximately 9:00 p.m. Eastern
Time on April 26, 2017, until midnight Eastern Time on May 26, 2017, by
dialing (203) 369-0434 or (866) 393-0867. The following passcode
will be required: 42617
About XL Group Ltd
XL Group Ltd (NYSE: XL), through its subsidiaries and under the
"XL Catlin" brand, is a global insurance and reinsurance company
providing property, casualty and specialty products to industrial,
commercial and professional firms, insurance companies and other
enterprises throughout the world. Clients look to XL Catlin
for answers to their most complex risks and to help move their
world forward. To learn more, visit www.xlgroup.com.
This press release contains forward-looking statements.
Statements that are not historical facts, including statements
about XL's beliefs, plans or expectations, are forward-looking
statements. These statements are based on current plans, estimates
and expectations, all of which involve risk and uncertainty.
Statements that include the words "expect," "estimate," "intend,"
"plan," "believe," "project," "anticipate," "may," "could," or
"would" and similar statements of a future or forward-looking
nature identify forward-looking statements. Actual results may
differ materially from those included in such forward-looking
statements and therefore you should not place undue reliance on
them. A non-exclusive list of the important factors that could
cause actual results to differ materially from those in such
forward-looking statements includes (a) the continuation of
downward trends in rates for property and casualty insurance and
reinsurance; (b) changes in the size of our claims relating to
unpredictable natural or man-made catastrophe losses due to the
preliminary nature of some reports and estimates of loss and damage
to date; (c) changes in the number of insureds and ceding companies
impacted or the ultimate number and value of individual claims
relating to natural catastrophe events due to the preliminary
nature of reports and estimates of loss and damage to date; (d)
changes in the amount or type of business that we write, whether
due to our actions, changes in market conditions or other factors,
and the amount of premium attributable to such business; (e) the
availability, cost or quality of ceded reinsurance, and the timely
and full recoverability of such reinsurance, or other amounts due
to us, or changes to our projections related to such recoverables;
(f) actual loss experience from insured or reinsured events and the
timing of claims payments being faster or the receipt of
reinsurance recoverables being slower than we anticipated; (g)
increased competition on the basis of pricing, capacity, coverage
terms or other factors, such as the increased inflow of third party
capital into reinsurance markets, which could harm our ability to
maintain or increase its business volumes or profitability; (h)
greater frequency or severity of claims and loss activity than our
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; (i) the impact of changes
in the global financial markets, such as the effects of inflation
on our business, including on pricing and reserving, changes in
interest rates, credit spreads, foreign currency exchange rates and
future volatility in the world's credit, financial and capital
markets that adversely affect the performance and valuation of our
investments, future financing activities and access to such
markets, our ability to pay claims or general financial condition;
(j) our ability to successfully implement our business strategy;
(k) our ability to successfully attract and raise additional third
party capital for existing or new investment vehicles; (l) changes
in credit ratings and rating agency policies or practices, which
could trigger cancelation provisions in our assumed reinsurance
agreements or impact the availability of our credit facilities; (m)
the potential for changes to methodologies, estimations and
assumptions that underlie the valuation of our financial
instruments that could result in changes to investment valuations;
(n) changes to our assessment as to whether it is more likely than
not that we will be required to sell, or have the intent to sell,
available-for-sale fixed maturity securities before their
anticipated recovery; (o) unanticipated constraints on our
liquidity, including the availability of borrowings and letters of
credit under credit facilities that inhibit our ability to support
our operations, including our ability to underwrite policies and
pay claims; (p) the ability of our subsidiaries to pay dividends to
XL Group Ltd, XLIT Ltd. and Catlin Insurance Company Ltd; (q)
changes in regulators or regulations applicable to us, including as
a result of the completion of our redomestication from Ireland to
Bermuda, such as changes in regulatory capital balances that our
operating subsidiaries must maintain, or to our brokers or
customers; (r) the effects of business disruption, economic
contraction or economic sanctions due to unpredictable global
political and social conditions such as war, terrorism or other
hostilities, or pandemics; (s) the actual amount of new and renewal
business and acceptance of our products and services, including new
products and services and the materialization of risks related to
such products and services; (t) changes in the distribution or
placement of risks due to increased consolidation of insurance and
reinsurance brokers; (u) bankruptcies or other financial concerns
of companies insofar as they affect P&C insurance and
reinsurance coverages or claims that we may have as a counterparty;
(v) the loss of key personnel; (w) the effects of mergers,
acquisitions and divestitures, including our ability to modify our
internal control over financial reporting, changes to our risk
appetite and our ability to realize the value or benefits expected,
in each case, as a result of such transactions; (x) changes in
general economic conditions, including the political, monetary,
economic and operational impacts of the "Brexit" referendum held on
June 23, 2016 in which the UK electorate voted to withdraw from the
EU, new or continued sovereign debt concerns in Euro-Zone countries
or emerging markets such as Brazil or China, or governmental
actions for the purposes of stabilizing financial markets; (y)
changes in applicable tax laws, tax treaties or tax regulations or
the interpretation or enforcement thereof; (z) judicial decisions
and rulings, new theories of liability or emerging claims coverage
issues, legal tactics and settlement terms; (aa) the effects of
climate change (such as changes to weather patterns, sea levels or
temperatures) on our business, which our modeling or risk
management practices may not adequately address due to the
uncertain nature of climate change; and (bb) the other factors set
forth in our reports on Form 10-K and Form 10-Q and other documents
on file with the Securities and Exchange Commission. XL undertakes
no obligation to update publicly any forward looking statement,
whether as a result of new information, future developments or
otherwise.
XL intends to use its website as a means of disclosing
material non-public information and for complying with its
disclosure obligations under Regulation FD. Such disclosures will
be included on the website in the Investor Relations section.
Accordingly, investors should monitor such portions of XL's
website, in addition to following its press releases, SEC filings
and public conference calls and webcasts.
*At 12:30 p.m., Irish
time, on July 25, 2016 (the
"Effective Time"), XL Group plc, an Irish public limited company
("XL-Ireland"), and XL Group Ltd, a Bermuda exempted company ("XL-Bermuda"),
completed the previously disclosed scheme of arrangement under
Irish law (the "Scheme of Arrangement") that effected a transaction
(the "Redomestication") that resulted in the shareholders of
XL-Ireland becoming shareholders of XL-Bermuda and XL-Ireland
becoming a subsidiary of XL-Bermuda. In accordance with the
terms of the Scheme of Arrangement, the following steps occurred
effectively simultaneously at the Effective Time: (i) all of the
existing XL-Ireland ordinary shares, par value $0.01 per share, (other than XL-Ireland ordinary
shares held by XL-Bermuda) were canceled; (ii) the reserves created
on cancellation of the XL-Ireland ordinary shares were used to
issue XL-Ireland ordinary shares to XL-Bermuda; and (iii) in return
for such issuance of new XL-Ireland ordinary shares to XL-Bermuda,
XL-Bermuda issued common shares. The results in this release
include results from the March 31,
2016 comparative period that commenced prior to the
Redomestication, as well as certain results for the year ended
December 31, 2016. As such,
this release discloses the results of XL Bermuda, but includes the
results of XL-Ireland through the Effective Time. For
purposes of this release, the "Company" and "XL" refers to
XL-Ireland or XL-Bermuda, as the context requires.
1Operating net income is defined as net income (loss)
attributable to common shareholders excluding: (1) our net
investment income - Life Funds Withheld Assets, (2) our net
realized (gains) losses on investments sold - excluding Life Funds
Withheld Assets, (3) our net realized (gains) losses on investments
sold (including OTTI) and net unrealized (gains) losses on
investments, Trading - Life Funds Withheld Assets, (4) our net
realized and unrealized (gains) losses on derivatives, (5) our net
realized and unrealized (gains) losses on life retrocession
embedded derivative and derivative instruments - Life Funds
Withheld Assets, (6) our share of items (2) and (4) for The
Company's insurance company affiliates for the periods presented,
(7) our foreign exchange (gains) losses, (8) our expenses related
to the Catlin Acquisition, (9) our gain on the sale of our interest
in our former operating affiliate,, (10) our gain on the sale of
our wholly-owned subsidiary XL Life Insurance and Annuity Company
and the partial sale of our holdings in New Ocean Capital
Management, (11) our loss on the inception of the U.S. Term Life
Retro Arrangements, (12) our loss on the early extinguishment of
the notes assumed in conjunction with the Catlin Acquisition, and
(13) a provision (benefit) for income tax on items excluded from
operating income. "Operating net income", "annualized operating
return on average common shareholders' equity including and
excluding average AOCI, both inclusive and exclusive of integration
costs" are non-GAAP financial measures. See the schedule
entitled "Reconciliation" on pages 9 and 10 of this press
release for a reconciliation of "operating net income" to net
income (loss) attributable to common shareholders and the
calculation of "annualized operating return on average common
shareholders' equity including and excluding average AOCI, both
inclusive and exclusive of integration costs," which are based on
operating net income.
2The U.K. Ministry of Justice announced a significant
decrease of the discount rate used to calculate lump sum awards in
U.K. bodily injury cases from +2.5% to -0.75%, a decrease of 325
basis points and the first rate change since 2001. This
decrease of discount rate, which is effective on March 20th, 2017, is referred to as the UK
Ogden rate table change in this press release.
3Fully diluted tangible book value per common share
is a non-GAAP financial measure. See page 8 of this
press release for a reconciliation of fully diluted tangible book
value per common share to fully diluted book value per common
share.
4Common shareholders' equity is defined as total
shareholders' equity less non-controlling interest in equity of
consolidated subsidiaries.
5On May 1, 2014, our
wholly-owned subsidiary, XL Insurance (Bermuda) Ltd ("XLIB") (on June 9, 2016, XLIB and XL Re Ltd amalgamated to
form XL Bermuda Ltd), entered into a sale and purchase agreement
with GreyCastle Holdings Ltd. ("GreyCastle") providing for the sale
of 100% of the common shares of XLIB's wholly-owned subsidiary,
XLLR, for $570 million in cash. This
transaction was completed on May 30,
2014. As a result of the transaction, we have ceded the
majority of our life reinsurance business to XLLR via 100% quota
share reinsurance (the "GreyCastle Life Retro Arrangements"). The
designated investments that support the GreyCastle Life Retro
Arrangements, which are written on a funds withheld basis ("Life
Funds Withheld Assets"), are included within "Total investments
available for sale" and "Fixed maturities, trading at fair value"
on our balance sheet. Investment results for these assets -
including interest income, unrealized gains and losses, and gains
and losses from sales - are passed directly to the reinsurer
pursuant to a contractual arrangement that is accounted for as a
derivative. Net income attributable to common shareholders
excluding the contribution from the GreyCastle Life Retro
Arrangements is a non-GAAP measure. See the schedule entitled
"Reconciliation" on pages 9 and 10 of this press release
for a reconciliation of net income (loss) attributable to common
shareholders to net income (loss) attributable to common
shareholders excluding the Contribution from the GreyCastle Life
Retro Arrangements. During 2015, we entered into another
reinsurance agreement (the "U.S. Term Life Retro Arrangements")
ceding the vast majority of the remaining life reinsurance
business.
|
|
|
|
|
|
|
|
|
|
XL Group
Ltd
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
(U.S. dollars in
thousands)
|
2017
|
|
2016
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
Net premiums
earned
|
|
$2,522,791
|
|
|
|
$2,354,610
|
|
|
Net investment
income:
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets
|
167,168
|
|
|
164,326
|
|
|
Net investment income
- Life Funds Withheld Assets
|
33,364
|
|
|
41,560
|
|
|
Total net investment
income
|
|
$200,532
|
|
|
|
$205,886
|
|
|
Total net realized
gains (losses) on investments and unrealized gains (losses) on
investments, trading securities
|
37,286
|
|
|
92,750
|
|
|
Net realized and
unrealized gains (losses) on derivative instruments
|
(7,069)
|
|
|
(3,622)
|
|
|
Net realized and
unrealized gains (losses) on life retrocession embedded derivative
and derivative instruments - Life Funds Withheld Assets
|
(50,101)
|
|
|
(236,080)
|
|
|
Income (loss) from
investment fund affiliates
|
38,261
|
|
|
(4,579)
|
|
|
Fee income and
other
|
13,661
|
|
|
8,262
|
|
|
Total
revenues
|
|
$2,755,361
|
|
|
|
$2,417,227
|
|
|
Expenses:
|
|
|
|
|
Net losses and loss
expenses incurred
|
|
$1,583,456
|
|
|
|
$1,382,485
|
|
|
Claims and policy
benefits
|
7,291
|
|
|
4,937
|
|
|
Acquisition
costs
|
435,869
|
|
|
403,267
|
|
|
Operating
expenses
|
468,038
|
|
|
515,381
|
|
|
Exchange (gains)
losses
|
(3,336)
|
|
|
(33,819)
|
|
|
Interest
expense
|
50,711
|
|
|
52,303
|
|
|
Total
expenses
|
|
$2,542,029
|
|
|
|
$2,324,554
|
|
|
Income (loss) before
income tax and income (loss) from operating affiliates
|
|
$213,332
|
|
|
|
$92,673
|
|
|
Income (loss) from
operating affiliates
|
13,609
|
|
|
12,650
|
|
|
Provision (benefit)
for income tax
|
13,092
|
|
|
22,295
|
|
|
Net income
(loss)
|
|
$213,849
|
|
|
|
$83,028
|
|
|
Non-controlling
interests
|
61,006
|
|
|
61,143
|
|
|
Net income (loss)
attributable to common shareholders
|
|
$152,843
|
|
|
|
$21,885
|
|
|
|
|
XL Group
Ltd
|
KEY FINANCIAL
DATA
|
|
|
|
|
|
Selected balance
sheet and other data:
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
|
$32,006,452
|
|
|
|
$31,919,126
|
|
Cash and cash
equivalents
|
3,352,651
|
|
|
3,426,988
|
|
Investments in
affiliates
|
2,172,611
|
|
|
2,177,645
|
|
Unpaid losses and
loss expenses recoverable
|
5,685,623
|
|
|
5,491,297
|
|
Goodwill and other
intangible assets
|
2,208,612
|
|
|
2,203,653
|
|
Total
assets
|
61,024,619
|
|
|
58,434,102
|
|
|
|
|
|
Unpaid losses and
loss expenses
|
26,445,124
|
|
|
25,939,571
|
|
Deposit
liabilities
|
1,121,194
|
|
|
1,116,233
|
|
Future policy benefit
reserves
|
3,520,069
|
|
|
3,506,047
|
|
Funds withheld
liability on GreyCastle Life Retro Arrangements, net of future
policy benefit reserves recoverable
|
954,327
|
|
|
998,968
|
|
Unearned
premiums
|
8,581,973
|
|
|
7,293,028
|
|
Notes payable and
debt
|
2,648,353
|
|
|
2,647,677
|
|
|
|
|
|
Total shareholders'
equity
|
13,000,626
|
|
|
12,960,679
|
|
Common shareholders'
equity
|
10,974,884
|
|
|
10,938,512
|
|
Common shares
outstanding (Note 2)
|
263,773,739
|
|
|
266,927,220
|
|
|
|
|
|
Basic book value per
common share
|
|
$41.61
|
|
|
|
$40.98
|
|
Fully diluted book
value per common share
|
|
$41.10
|
|
|
|
$40.33
|
|
Fully diluted
tangible book value per common share (Note 3)
|
|
$32.83
|
|
|
|
$32.21
|
|
|
|
|
|
Note 1: Certain items
have been reclassified to conform to the current period
presentation.
|
|
|
|
|
Note 2: Common shares
outstanding include all common shares issued and outstanding (as
disclosed on the face of the balance sheet) as well as all director
share units outstanding.
|
|
|
|
|
Note 3: Fully diluted
tangible book value per common share is a non-GAAP financial
measure. Fully diluted tangible book value per common share is
calculated in the same manner as fully diluted book value per
common share except that goodwill and intangible assets of $2.209
billion for March 31, 2017 and $2.204 billion at December 31, 2016
are excluded from common shareholders' equity.
|
XL Group Ltd
RECONCILIATION
The following is a reconciliation of XL's net income (loss)
attributable to common shareholders to operating net income (loss)
and also includes the calculation of annualized return on average
common shareholders' equity including and excluding AOCI, both
inclusive and exclusive of integration costs and based on
operating net income (loss) for the three months and three months
ended March 31, 2017 and 2016 (Notes
3 and 5).
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
|
March
31,
|
|
|
(Unaudited)
|
|
|
|
|
(Note 1)
|
|
|
2017
|
|
2016
|
|
Net income (loss)
attributable to common shareholders
|
|
$152,843
|
|
|
|
$21,885
|
|
|
Net realized and
unrealized (gains) losses on life retrocession embedded derivative
and derivative instruments - Life Funds Withheld Assets
|
50,101
|
|
|
236,080
|
|
|
Net realized (gains)
losses on investments and net unrealized (gains) losses on
investments, Trading - Life Funds Withheld Assets
|
(33,068)
|
|
|
(101,166)
|
|
|
Net investment income
- Life Funds Withheld Assets
|
(33,364)
|
|
|
(41,560)
|
|
|
Foreign exchange
revaluation (gains) losses on and other income and expense items
related to Life Funds Withheld Assets
|
(3,224)
|
|
|
(10,973)
|
|
|
Net income (loss)
attributable to common shareholders excluding Contribution from
GreyCastle Life Retro Arrangements (Note 2)
|
|
$133,288
|
|
|
|
$104,266
|
|
|
Net realized (gains)
losses and OTTI on investments - excluding Life Funds Withheld
Assets
|
(4,218)
|
|
|
8,416
|
|
|
Net realized and
unrealized (gains) losses on derivatives
|
7,069
|
|
|
3,622
|
|
|
Net realized and
unrealized (gains) losses on investments and derivatives related to
the Company's insurance company affiliates
|
(2,051)
|
|
|
413
|
|
|
Exchange (gains)
losses excluding Life Funds Withheld Assets
|
(112)
|
|
|
(22,846)
|
|
|
Provision (benefit)
for income tax on items excluded from operating income
|
2,167
|
|
|
9,517
|
|
|
Operating net income
(loss) (Note 3)
|
|
$136,143
|
|
|
|
$103,388
|
|
|
Integration
costs
|
33,949
|
|
|
54,987
|
|
|
Provision (benefit)
for income tax on integration costs
|
(3,768)
|
|
|
(4,662)
|
|
|
Operating net income
(loss) (excluding integration costs)
|
|
$166,324
|
|
|
|
$153,713
|
|
|
Per common share
results - diluted:
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
|
$0.57
|
|
|
|
$0.07
|
|
|
Operating net income
(loss) (Note 3)
|
|
$0.50
|
|
|
|
$0.35
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
265,690,364
|
|
|
291,968,575
|
|
|
Diluted (Note
4)
|
269,766,805
|
|
|
296,665,595
|
|
|
Return on common
shareholders' equity:
|
|
|
|
|
Opening common
shareholders' equity attributable to XL Group Ltd
|
|
$10,938,512
|
|
|
|
$11,677,079
|
|
|
Closing common
shareholders' equity attributable to XL Group Ltd
|
|
$10,974,884
|
|
|
|
$11,688,744
|
|
|
Average common
shareholders' equity attributable to XL Group Ltd for the
period
|
|
$10,956,698
|
|
|
|
$11,682,912
|
|
|
Opening
AOCI
|
|
$715,546
|
|
|
|
$686,616
|
|
|
Closing
AOCI
|
|
$844,974
|
|
|
|
$1,094,557
|
|
|
Average AOCI for the
period
|
|
$780,260
|
|
|
|
$890,587
|
|
|
Average common
shareholders' equity attributable to XL Group Ltd excluding average
AOCI
|
|
$10,176,438
|
|
|
|
$10,792,325
|
|
|
Annualized operating
net income (loss) (Note 3)
|
|
$544,572
|
|
|
|
$413,552
|
|
|
Annualized operating
net income (loss) (excluding integration costs) (Note 3 and
5)
|
|
$665,295
|
|
|
|
$614,852
|
|
|
Annualized operating
return on average common shareholders' equity (Note 3)
|
5.0%
|
|
|
3.5%
|
|
|
Annualized operating
return on average common shareholders' equity excluding average
AOCI (Note 3)
|
5.4%
|
|
|
3.8%
|
|
|
Annualized operating
return on average common shareholders' equity excluding integration
costs (Notes 3 and 5)
|
6.1%
|
|
|
5.3%
|
|
|
Annualized operating
return on average common shareholders' equity excluding integration
costs and AOCI (Notes 3 and 5)
|
6.5%
|
|
|
5.7%
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Book value per
common share:
|
|
|
|
|
Closing common shares
outstanding - basic
|
263,773,739
|
|
|
266,927,220
|
|
|
Closing common shares
outstanding - diluted
|
267,007,606
|
|
|
271,224,790
|
|
|
Book value per common
share
|
|
$41.61
|
|
|
|
$40.98
|
|
|
Fully diluted book
value per common share
|
|
$41.10
|
|
|
|
$40.33
|
|
|
Goodwill and other
intangible assets
|
|
$2,208,612
|
|
|
|
$2,203,653
|
|
|
Tangible book
value
|
|
$8,766,272
|
|
|
|
$8,734,859
|
|
|
Fully diluted
tangible book value per common share
|
|
$32.83
|
|
|
|
$32.21
|
|
|
Note 1: Certain amounts have been reclassified to conform
to the current period presentation.
Note 2: Investment results for the Life Funds Withheld
Assets - including interest income, unrealized gains and losses,
and gains and losses from sales - are passed directly to the
reinsurer pursuant to a contractual arrangement that is accounted
for as a derivative. Changes in the fair value of the embedded
derivative associated with these GreyCastle Life Retro Arrangements
are reflected within "Net realized and unrealized (gains) losses on
life retrocession embedded derivative and derivative instruments -
Life Funds Withheld Assets" in the reconciliation above.
Note 3: Defined as net income (loss) attributable to
common shareholders excluding: (1) our net investment income - Life
Funds Withheld Assets, (defined below) (2) our net realized (gains)
losses on investments sold - excluding Life Funds Withheld Assets,
(3) our net realized (gains) losses on investments sold (including
OTTI) and net unrealized (gains) losses on investments, Trading -
Life Funds Withheld Assets, (4) our net realized and unrealized
(gains) losses on derivatives, (5) our net realized and unrealized
(gains) losses on life retrocession embedded derivative and
derivative instruments - Life Funds Withheld Assets, (6) our share
of items (2) and (4) for The Company's insurance company affiliates
for the periods presented, (7) our foreign exchange (gains) losses,
(8) our expenses related to the Catlin Acquisition, (9) our gain on
the sale of our interest in our former operating affiliate, (10)
our gain on the sale of our wholly-owned subsidiary XL Life
Insurance and Annuity Company and the partial sale of our holdings
in New Ocean Capital Management, (11) our loss on the inception of
the U.S. Term Life Retro Arrangements, (12) our loss on the early
extinguishment of the notes assumed in conjunction with the Catlin
Acquisition, and (13) a provision (benefit) for income tax on items
excluded from operating income. We believe that showing "operating
net income (loss)", "annualized operating return on average common
shareholders' equity including and excluding average
AOCI, both inclusive and exclusive of integration costs"
enables investors and other users of our financial information to
analyze our performance in a manner similar to how we analyze our
performance. In this regard, we believe that providing only a GAAP
presentation of net income (loss) would make it more difficult for
users of our financial information to evaluate our underlying
business. We also believe that equity analysts and certain rating
agencies that follow us (and the insurance industry as a whole)
exclude these items from their analyses for the same reasons, and
they request that we provide this non-GAAP financial information on
a regular basis. A reconciliation of our net income (loss)
attributable to common shareholders to operating net income (loss)
is provided above.
Note 4: Diluted weighted average number of common shares
outstanding is used to calculate per share data except where it is
anti-dilutive to earnings per share or where there is a net loss.
When it is anti-dilutive or when a net loss occurs, basic weighted
average common shares outstanding is utilized in the calculation of
net loss per share and net operating loss per share.
Note 5: Integration costs are the temporary expenses
related to the Catlin acquisition that are not expected to be
significant beyond the second quarter of 2017.
Comment on Regulation G
XL presents its operations in ways it believes will be most
meaningful and useful to investors, analysts, rating agencies and
others who use XL's financial information in evaluating XL's
performance. This press release contains the presentation of
(i) operating net income (loss) ("Operating Net Income"), which is
defined as net income (loss) attributable to common shareholders
excluding: (1) our net investment income - Life Funds Withheld
Assets, (defined below) (2) our net realized (gains) losses on
investments sold - excluding Life Funds Withheld Assets, (3) our
net realized (gains) losses on investments sold (including OTTI)
and net unrealized (gains) losses on investments, Trading - Life
Funds Withheld Assets, (4) our net realized and unrealized (gains)
losses on derivatives, (5) our net realized and unrealized (gains)
losses on life retrocession embedded derivative and derivative
instruments - Life Funds Withheld Assets, (6) our share of items
(2) and (4) for The Company's insurance company affiliates for the
periods presented, (7) our foreign exchange (gains) losses, (8) our
expenses related to the Catlin Acquisition, (9) our gain on the
sale of our interest in our former operating affiliate, (10) our
gain on the sale of our wholly-owned subsidiary XL Life Insurance
and Annuity Company and the partial sale of our holdings in New
Ocean Capital Management, (11) our loss on the inception of the
U.S. Term Life Retro Arrangements, (12) our loss on the early
extinguishment of the notes assumed in conjunction with the Catlin
Acquisition, and (13) a provision (benefit) for income tax on items
excluded from operating income.; (ii) annualized return on average
common shareholders' equity ("ROE") based on operating net income
(loss) ("Operating ROE"); (iii) Operating ROE excluding average
AOCI, both inclusive and exclusive of integration costs; and (iv)
Fully diluted tangible book value per common share (common
shareholders' equity excluding goodwill and intangible assets
divided by the number of shares outstanding at the period end date
combined with the dilutive impact of potential future share issues
at any period end). These items are "non-GAAP financial measures"
as defined in Regulation G. The reconciliation of such measures to
the most directly comparable GAAP financial measures in accordance
with Regulation G is included in this press release on pages 9 and
10.
Although the investment of premiums to generate income (or loss)
and realize capital gains (or losses) is an integral part of XL's
operations, the determination to realize capital gains (or losses)
is independent of the underwriting process. In addition,
under applicable GAAP accounting requirements, losses can be
created as the result of other than temporary declines in value and
from goodwill impairment charges without actual realization.
In this regard, certain users of XL's financial information,
including certain rating agencies, evaluate earnings before tax and
capital gains to understand the profitability of the operational
sources of income without the effects of these two variables.
Furthermore, these users believe that, for many companies, the
timing of the realization of capital gains and the recognition of
goodwill impairment charges are largely a function of economic and
interest rate conditions.
Net realized and unrealized (gains) losses on derivatives
include all derivatives entered into by XL other than certain
credit derivatives and the life retrocession embedded derivative.
With respect to credit derivatives, because XL and its insurance
company operating affiliates generally hold financial guaranty
contracts written in credit default derivative form to maturity,
the net effects of the changes in fair value of these credit
derivatives are excluded (similar with other companies' treatment
of such contracts), as the changes in fair value each quarter are
not indicative of underlying business performance.
Net investment income - Life Funds Withheld Assets, and net
realized (gains) losses on the life retrocession embedded
derivative and derivative instruments - Life Funds Withheld Assets,
have been excluded because, as a result of the GreyCastle Life
Retro Arrangement, XL no longer shares in the risks and rewards of
the underlying performance of the Life Funds Withheld Assets that
support these retrocession arrangements. The returns on the
Life Funds Withheld Assets are passed directly to the reinsurer
pursuant to a contractual arrangement that is accounted for as a
derivative. Therefore, net investment income from the Life
Funds Withheld Assets and changes in the fair value of the embedded
derivative associated with these GreyCastle Life Retro Arrangements
are not relevant to XL's underlying business performance.
Foreign exchange (gains) losses in the income statement are only
one element of the overall impact of foreign exchange fluctuations
on XL's financial position and are not representative of any
economic gain or loss made by XL. Accordingly, it is not a
relevant indicator of financial performance and it is excluded.
In summary, XL evaluates the performance of and manages its
business to produce an underwriting profit. In addition to
presenting net income (loss), XL believes that showing operating
net income (loss) enables investors and other users of XL's
financial information to analyze XL's performance in a manner
similar to how management of XL analyzes performance. In this
regard, XL believes that providing only a GAAP presentation of net
income (loss) would make it much more difficult for users of XL's
financial information to evaluate XL's underlying business. Also,
as stated above, XL believes that the equity analysts and certain
rating agencies that follow XL (and the insurance industry as a
whole) exclude these items from their analyses for the same reasons
and they request that XL provide this non-GAAP financial
information on a regular basis.
Operating ROE is a widely used measure of any company's
profitability that is calculated by dividing annualized operating
net income for any period other than a fiscal year when actual
operating income is used by the average of the opening and closing
common shareholders' equity. XL establishes target Operating ROEs
for its total operations, segments and lines of business. If XL's
Operating ROE targets are not met with respect to any line of
business over time, XL seeks to re-evaluate these lines. Operating
ROE including and excluding average AOCI, both inclusive and
exclusive of integration costs, are additional measures of Company
profitability. The most significant component of this
exclusion is the mark to market fluctuations on XL's investment
portfolio that have not been realized through sales, and/or
distortions to XL's performance from temporary integration costs
related to the combination with Catlin. By providing these
additional measures, users of our financial statements have the
ability to include or exclude these items when considering our
performance either on a standalone basis or for purposes of peer
performance comparison.
XL believes that fully diluted tangible book value per common
share is a financial measure important to investors and other
interested parties who benefit from having a consistent basis for
comparison with other companies within the industry. However,
this measure may not be comparable to similarly titled measures
used by companies either outside or inside of the insurance
industry.
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visit:http://www.prnewswire.com/news-releases/xl-group-ltd-announces-first-quarter-2017-results-300446530.html
SOURCE XL Group Ltd