HAMILTON, Bermuda, May 3, 2011 /PRNewswire/ -- XL Group plc ("XL" or
the "Company") (NYSE: XL) today reported its first quarter 2011
results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"XL's first quarter results demonstrate resilience in the face
of global catastrophic events. We are proud of the roles our
insurance and reinsurance solutions are playing in the recovery of
the devastated economies. Our risk management discipline
again resulted in estimated losses from the quarter's three major
catastrophes that are well within our expected levels. As
markets respond to these events and others, we believe our
underwriting excellence, operating efficiency and capital strength
put XL in an exceptional position to pursue the opportunities
provided by improving market conditions."
Highlights - Three months ended March
31
(US dollars in thousands except per share amounts)
|
Three months
ended
|
|
|
March
31
|
|
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$ (227,284)
|
$
127,996
|
|
Per ordinary share
|
$
(0.73)
|
$
0.37
|
|
|
|
|
|
Operating net income (loss)
(1)
|
$ (162,989)
|
$
149,612
|
|
Per ordinary share
|
$
(0.52)
|
$
0.44
|
|
|
|
|
|
|
|
|
|
|
|
|
- The decline in operating net income (loss) compared to the
prior year quarter was driven by the increase in P&C net losses
incurred due to large current year natural catastrophe losses net
of reinstatement premiums of $387.4
million compared to $181.1
million for the prior year quarter. Current year
natural catastrophe losses that impacted the Company during the
quarter included the March 11, 2011
Japanese earthquake and related tsunami of $242.6 million, the Australian floods of
$66.9 million and the Christchurch New Zealand earthquake of
$75.3 million.
- Net investment income for the quarter was $280.3 million compared to $308.3 million in the prior year quarter.
The decline was primarily due to lower US interest rates and
cash outflows from the invested portfolio.
- Net investment income from investment affiliates contributed
$27.2 million in the quarter compared
to $8.2 million in the prior year
quarter as a result of strong private investment returns.
- Net realized investment losses for the quarter were
$66.4 million compared to
$36.2 million in the prior year
quarter. Losses in the quarter relate primarily to losses on
sales of European hybrid securities and impairments on below
investment grade non-agency residential mortgage-backed
securities.
- Fully diluted book value per ordinary share decreased by 2.5%
from the prior quarter driven primarily by the natural catastrophe
losses listed above and increased dilution associated with the
Company's equity security units, partially offset by the impact of
share buybacks during the quarter. During the quarter, the
Company purchased 7.3 million shares for $165.6 million at an average price of
$22.83, which was accretive to book
value per ordinary share by $0.14.
P&C operations - Three months ended March 31
(US dollars in thousands)
|
|
|
|
|
Three months
ended
|
|
|
March
31
|
|
|
|
|
|
|
2011
|
2010
|
|
|
|
|
|
Gross premiums
written
|
$ 2,099,120
|
$ 1,922,313
|
|
Net premiums written
|
1,714,282
|
1,596,525
|
|
Net premiums earned
|
1,271,696
|
1,263,601
|
|
|
|
|
|
Underwriting (loss)
|
(328,064)
|
(6,610)
|
|
|
|
|
|
Loss ratio
|
95.1%
|
70.6%
|
|
Underwriting expense
ratio
|
30.7%
|
29.9%
|
|
Combined ratio
|
125.8%
|
100.5%
|
|
|
|
|
- P&C gross premiums written ("GWP") increased 9.2% from the
prior year quarter, driven by an increase in the Insurance segment
of 8.0% and Reinsurance segment of 10.9%. Insurance segment
growth in GWP included increased exposures tied to improving
economic conditions, the renewal of certain multi–year accounts and
select new business initiatives. The increase in GWP for
Reinsurance came specifically from opportunities in Europe, principally the UK motor market,
marine and some increases in our Continental European catastrophe
portfolio.
- P&C net premiums earned ("NPE") of $1.3 billion was comprised of $875.9 million from the Insurance segment and
$395.8 million from the Reinsurance
segment. Compared to the prior year quarter, Insurance NPE
decreased by 2.4% and Reinsurance NPE increased by 8.0%.
- The loss ratio was 24.5 percentage points worse than the prior
year quarter. Included in the loss ratio was favorable prior
year development of $71.0 million
compared to $86.7 million in the
prior year quarter. The loss ratio was also impacted by
natural catastrophe losses of $387.4
million, net of reinstatement premiums. In the prior
year quarter, natural catastrophe losses were $181.1 million, net of reinstatement premiums.
Excluding prior year development and natural catastrophe
losses, the first quarter loss ratio was 6.7 percentage points
higher than the prior year quarter primarily due to an increased
number of large property losses.
- Operating expenses were largely consistent with the fourth
quarter; however, such expenses increased compared to the prior
year quarter from $229.1 million to $260.5
million. Increased expenses related largely to the
build out of the Company's previously announced strategic
implementation office and other initiatives, combined with the
impact of certain redundancy costs.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was
100.9%, compared to 93.1% for the prior year quarter. The Insurance
segment combined ratio on this basis was 106.6% for the quarter
compared to 96.4% for the prior year quarter, while the Reinsurance
segment combined ratio on this basis was 87.7% compared to 84.8%
for the prior year quarter.
Further details of the results for the quarter may be found in
the Company's Financial Supplement, which is dated May 3, 2011 and is available from the Investor
Relations section of the XL Group website.
The Company will host a conference call to discuss its first
quarter results on Wednesday, May 4,
2011 at 8:30 a.m. Eastern
Time. 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 (866) 617-1526 or (210)
795-0624, passcode: 'XL GLOBAL'. The webcast will be available at
www.xlgroup.com and will be archived on XL's website from
approximately 11:00 a.m. Eastern Time
on May 4, 2011, through midnight Eastern Time on June 4, 2011. A telephone replay of the
conference call will also be available beginning at 11:00 a.m. Eastern Time on May 4, 2011, until midnight Eastern Time on June 4, 2011 by dialing (201) 369-0759 or (866)
419-2678.
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," "intend," "plan,"
"believe," "project," "anticipate," "will," "may" or 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) changes in the size of XL's claims relating
to natural or man-made catastrophe losses due to the preliminary
nature of some reports and estimates of loss and damage to date;
(b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of reinsurance
placed by XL with third parties, or other amounts due to XL; (d)
changes in ratings, rating agency policies or practices; (e)
changes in the projected amount of ceded reinsurance recoverables;
(f) XL's ability to successfully implement its business strategy
especially during the "soft" market cycle; (g) greater frequency or
severity of claims and loss activity than XL's underwriting,
reserving or investment practices anticipate based on historical
experience or industry data; (h) changes in general economic
conditions, including the effects of inflation and changes in
interest rates, credit spreads, foreign currency exchange rates and
other factors; (i) developments, including uncertainties related to
the depth and duration of the recession and to the financial
condition of counterparties, reinsurers and other companies that
are at risk of bankruptcy and affect XL's business, and future
volatility in the world's credit, financial and capital markets
that adversely affect the performance and valuation of XL's
investments or access to such markets; (j) the potential for
changes to methodologies, estimations and assumptions that underlie
the valuation of XL's financial instruments that could result in
changes to investment valuations; (k) changes to XL's assessment as
to whether it is more likely than not that it will be required to
sell, or has the intent to sell, available-for-sale debt securities
before their anticipated recovery; (l) the ability of XL's
subsidiaries to pay dividends to XL Group plc; (m) the potential
effect of regulatory developments in the jurisdictions in which XL
operates, including those that could impact the financial markets
or increase XL's business costs and required capital levels; (n)
changes in applicable tax laws, tax treaties or tax regulations or
the interpretation or enforcement thereof; and (o) the other
factors set forth in XL's reports on Form 10-K, Form 10-Q and other
documents on file with the Securities and Exchange Commission. XL
undertakes no obligation to update publicly or revise 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.
(1) Defined as net income (loss) attributable to ordinary
shareholders excluding net realized gains and losses on
investments, net realized and unrealized gains and losses on
credit, structured financial and investment derivatives, net of
tax, for the Company and its share of these items for the Company's
insurance company affiliates for the periods presented, the gains
recognized on the repurchase of the Company's preference ordinary
shares, as well as foreign exchange gains or losses, net of tax.
"Operating net income" and "annualized return on ordinary
shareholders' equity" based on operating net income are "non-GAAP
financial measures." The results from prior periods have been
reclassified to conform to the current period presentation. See the
schedule entitled "Reconciliation" at the end of this release for a
reconciliation of "operating net income" to net income (loss)
attributable to ordinary shareholders and of "annualized return on
ordinary shareholders' equity" based on operating net income to
average ordinary shareholders' equity.
(2) Book value per share and fully diluted book value per
ordinary share are non-GAAP financial measures and represent book
value per ordinary share (total shareholders' equity less
preference shareholders' equity and non-controlling interest in
equity of consolidated subsidiaries, divided by the number of
outstanding ordinary shares at any period end) combined with the
dilutive impact of potential future share issues at any period end.
The Company believes that fully diluted book value per
ordinary 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.
XL Group
plc
|
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
|
(U.S.
dollars in thousands)
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
March
31
|
|
Income statement
data:
|
|
(Unaudited)
|
|
|
|
2011
|
2010
|
|
Revenues:
|
|
|
|
|
Gross premiums
written:
|
|
|
|
|
|
- P&C operations
|
$
2,099,120
|
$1,922,313
|
|
|
- Life operations
|
97,659
|
112,901
|
|
|
|
|
|
|
Net premiums written:
|
|
|
|
|
|
- P&C operations
|
1,714,282
|
1,596,525
|
|
|
- Life operations
|
89,672
|
104,666
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
- P&C operations
|
1,271,696
|
1,263,601
|
|
|
- Life operations
|
89,687
|
104,884
|
|
|
|
|
|
|
Net investment income
|
|
280,263
|
308,324
|
|
Net realized (losses) gains on
investments
|
|
(66,437)
|
(36,176)
|
|
Net realized and unrealized
(losses) gains on derivative instruments
|
|
3,567
|
(20,480)
|
|
Net income (loss) from
investment affiliates
|
|
27,150
|
8,178
|
|
Fee income and other
|
|
8,932
|
8,418
|
|
Total
revenues
|
|
$
1,614,858
|
$1,636,749
|
|
Expenses:
|
|
|
|
|
Net losses and loss expenses
incurred - P&C operations
|
|
$
1,208,865
|
$ 892,200
|
|
Claims and policy benefits
- Life operations
|
|
133,231
|
123,743
|
|
Acquisition costs
|
|
188,490
|
201,137
|
|
Operating expenses
|
|
260,527
|
229,108
|
|
Foreign exchange (gains)
losses
|
|
9,514
|
(21,083)
|
|
Interest expense
|
|
54,147
|
49,070
|
|
Amortization of intangible
assets
|
|
465
|
465
|
|
Total
expenses
|
|
$
1,855,239
|
$1,474,640
|
|
Net income (loss) before
non-controlling interest, income tax and net income from operating
affiliates
|
|
$
(240,381)
|
$ 162,109
|
|
|
|
|
|
|
Income tax
|
|
(32,797)
|
29,836
|
|
Net (income) loss from operating
affiliates
|
|
(13,636)
|
(11,606)
|
|
|
|
|
|
|
Net income (loss)
|
|
$
(193,948)
|
$ 143,879
|
|
|
|
|
|
|
Non-controlling interests (Note
1)
|
|
(33,336)
|
1
|
|
|
|
|
|
|
Net income (loss) attributable
to XL Group plc
|
|
$
(227,284)
|
$ 143,880
|
|
|
|
|
|
|
Preference share
dividends
|
|
-
|
(32,500)
|
|
Gain on repurchase of preference
ordinary shares (Note 1)
|
|
-
|
16,616
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
|
$
(227,284)
|
$ 127,996
|
|
Note 1: During the current
quarter, the Redeemable Series C preference ordinary shares were
reclassified as Non-controlling interest – Redeemable Series C
preference ordinary shares and Series E preference ordinary shares
were reclassified as Non-controlling interest in equity of
consolidated subsidiaries on the Company's consolidated balance
sheet as a result of changes in ownership structure arising as part
of the Company's redomestication of the ultimate parent holding
company to Ireland as of July 1, 2010. Accordingly, preference
share dividends declared are recorded as Non-controlling interest
in net (income) loss of subsidiary rather than as Preference share
dividends within the consolidated statements of income from July 1,
2010 onwards.
|
|
|
|
|
|
XL Group
plc
|
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
|
(U.S.
dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
As
at
|
|
As
at
|
|
|
March 31,
2011
|
|
December 31,
2010
|
|
Selected
balance sheet data:
|
(Unaudited)
|
|
(Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments available for
sale
|
$
27,518,390
|
|
$
27,677,553
|
|
|
|
|
|
|
Total fixed maturities, held to
maturity
|
2,828,108
|
|
2,728,335
|
|
|
|
|
|
|
Cash and cash
equivalents
|
3,385,805
|
|
3,022,868
|
|
|
|
|
|
|
Investments in
affiliates
|
1,028,259
|
|
1,069,028
|
|
|
|
|
|
|
Unpaid losses and loss expenses
recoverable
|
3,588,935
|
|
3,671,887
|
|
|
|
|
|
|
Total assets
|
45,882,141
|
|
45,023,351
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid losses and loss
expenses
|
20,776,958
|
|
20,531,607
|
|
|
|
|
|
|
Deposit liabilities
|
1,670,609
|
|
1,684,606
|
|
|
|
|
|
|
Future policy benefit
reserves
|
5,224,984
|
|
5,075,127
|
|
|
|
|
|
|
Unearned premiums
|
4,074,090
|
|
3,484,830
|
|
|
|
|
|
|
Notes payable and
debt
|
2,462,917
|
|
2,464,410
|
|
|
|
|
|
|
Non-controlling interest -
Redeemable series C preference ordinary shares
|
71,150
|
|
71,900
|
|
|
|
|
|
|
Total shareholders'
equity
|
10,268,996
|
|
10,613,049
|
|
|
|
|
|
|
Diluted book value per ordinary
share (Note 2)
|
$
29.03
|
|
$
29.78
|
|
|
|
|
|
|
Basic book value per ordinary
share (Note 2)
|
$
29.95
|
|
$
30.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: Certain items have been
reclassified to conform to the current period
presentation.
Note 2: Book value per share and
fully diluted book value per ordinary share are non-GAAP financial
measures and represent book value per ordinary share (total
shareholders' equity less preference shareholders' equity and
non-controlling interest in equity of consolidated subsidiaries,
divided by the number of outstanding ordinary shares at any period
end) combined with the dilutive impact of potential future share
issues at any period end.
|
|
|
|
|
|
XL GROUP
plc
RECONCILIATION
The
following is a reconciliation of the Company's (i) net income
(loss) attributable to ordinary shareholders to operating net
income (loss) (Note 1) and (ii) annualized return on ordinary
shareholders' equity (based on operating net income (loss)) to
average ordinary shareholders' equity for the three months ended
March 31, 2011 and 2010.
|
|
(U.S. dollars in
thousands)
|
Three months
ended
|
|
|
March
31
|
|
|
(Unaudited)
|
|
|
2011
|
2010
|
|
|
|
(Note
4)
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
(227,284)
|
$
127,996
|
|
|
|
|
|
Net realized losses on
investments, net of tax
|
63,315
|
36,242
|
|
|
|
|
|
Net realized and unrealized
losses (gains) on derivatives, net of tax
|
(5,209)
|
20,217
|
|
|
|
|
|
Net realized and unrealized
(gains) losses on investments and derivatives related to the
Company's insurance company affiliates
|
(874)
|
(1,121)
|
|
|
|
|
|
Foreign exchange (gains) losses,
net of tax
|
7,197
|
(17,106)
|
|
|
|
|
|
Gain on repurchase of preference
ordinary shares
|
(134)
|
(16,616)
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
(162,989)
|
$
149,612
|
|
|
|
|
|
Per ordinary share
results: (Note 2)
|
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
(0.73)
|
$
0.37
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
(0.52)
|
$
0.44
|
|
|
|
|
|
Weighted average ordinary shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
311,478,402
|
342,148,365
|
|
Diluted - Net income
|
311,478,402
|
342,759,685
|
|
Diluted - Operating net
income
|
311,478,402
|
342,759,685
|
|
|
|
|
|
|
|
|
|
Return on ordinary shareholders'
equity:
|
|
|
|
|
|
|
|
Average ordinary shareholders'
equity
|
$ 9,438,975
|
$ 8,734,685
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
(162,989)
|
$
149,612
|
|
|
|
|
|
Annualized operating net income
(loss) (Note 1)
|
N/A
|
$
598,448
|
|
|
|
|
|
Annualized return on ordinary
shareholders' equity - operating net income (loss) (Notes 1 and
3)
|
N/A
|
6.9%
|
|
|
|
|
|
Note 1: Defined as net income
(loss) attributable to ordinary shareholders excluding net realized
gains and losses on investments, net realized and unrealized gains
and losses on credit, structured financial and investment
derivatives, net of tax, for the Company and its share of these
items for the Company's insurance company affiliates for the
periods presented, the gains recognized on the repurchase of the
Company's preference ordinary shares, as well as foreign
exchange gains or losses, net of tax. Operating net income
and annualized return on ordinary shareholders' equity based on
operating net income are "non-GAAP financial measures." The
results from prior periods have been reclassified to conform to the
current period's press release.
|
|
Note 2: Diluted weighted
average number of ordinary 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 ordinary shares
outstanding is utilized in the calculation of net loss per share
and net operating loss per share.
|
|
Note 3: Ordinary shareholders'
equity is defined as total shareholders' equity less preference
ordinary shares and less non-controlling interest in equity of
consolidated subsidiaries.
|
|
Note 4: Certain amounts have
been reclassified to conform to the current period
presentation.
|
|
|
|
|
Comment on Regulation G
XL presents its operations in the way 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 ordinary shareholders
excluding net realized gains and losses on investments, net
realized and unrealized gains and losses on credit, structured
financial and investment derivatives, net of tax, for the Company
and its share of these items for the Company's insurance company
affiliates for the periods presented, the gains recognized on the
repurchase of the Company's preference ordinary shares, as well as
foreign exchange gains or losses, net of tax (ii) annualized return
on ordinary shareholders' equity ("ROE") based on operating
net income (loss) ("Operating ROE") and (iii) book
value per ordinary share (ordinary shareholders' equity
divided by the number of shares outstanding at the period end date)
and fully diluted book value per ordinary share (book value per
share adjusted for the impact of share based compensation and
certain conversion features where dilutive). 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.
Although the investment of premiums to generate income (or loss)
and realized capital gains (or losses) is an integral part of XL's
operations and the Company's insurance company operating
affiliates, 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
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 recurring sources of income without the
effects of this variable. Furthermore, these users believe that,
for many companies, the timing of the realization of capital gains
is largely a function of economic and interest rate conditions.
Investment derivatives include all derivatives entered into by
XL other than credit derivatives. 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.
The gains recognized on the repurchase of the Company's
preference ordinary shares, are excluded as these transactions were
capital in nature and outside the scope of the Company's underlying
business.
Foreign exchange gains and losses in the income statement are
only one element of the overall impact of foreign exchange
fluctuations on the Company's financial position and are not
representative of any economic gain or loss made by the Company.
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) makes 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 by the average of the opening and closing
ordinary shareholders' equity. The Company establishes target
Operating ROEs for its total operations, segments and lines of
business. If the Company's Operating ROE targets are not met with
respect to any line of business over time, the Company seeks to
re-evaluate these lines.
Contact:
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David R. Radulski
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Carol A. Parker Trott
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Investor Relations
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Media Relations
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(441) 294-7460
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(441) 294-7290
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SOURCE XL Group plc