HAMILTON, Bermuda, Aug. 2, 2011 /PRNewswire/ -- XL Group plc (“XL”
or the “Company”) (NYSE: XL) today reported its second quarter 2011
results.
Commenting on the Company’s performance, Chief Executive Officer
Mike McGavick said:
"XL's strong second quarter performance was built on a broad
foundation, as all of our key value drivers contributed to an
annualized operating ROE of 10.3%. Our risk management discipline
has put XL's catastrophe loss experience, measured as a percentage
of shareholders' equity, among the best of our peers for both the
second quarter and the year to date. XL continued to pursue
profitable underwriting opportunities in both existing and expanded
markets, and added teams and leaders in lines we consider
attractive. Our semi-annual actuarial review of XL's P&C risk
portfolio, which followed our prudent reserving practices, resulted
in continued favorable development. Our operating expense run-rate
was in line with the last two quarters. XL's capital strength
supported our underwriting expansion, strategic initiatives and the
recommencing of our share buyback program, resulting in second
quarter buybacks of 4.3 million shares."
Highlights - Three and six
months ended June 30
|
|
(U.S. Dollars in thousands
except per share amounts)
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June
30
|
|
June
30
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
225,663
|
|
$
191,811
|
|
$
(1,621)
|
|
$
319,807
|
|
Per ordinary share-fully
diluted
|
$
0.69
|
|
$
0.56
|
|
$
(0.01)
|
|
$
0.93
|
|
|
|
|
|
|
|
|
|
|
Operating net income (loss)
(1)
|
$
243,133
|
|
$
242,574
|
|
$
80,144
|
|
$
392,186
|
|
Per ordinary share-fully
diluted
|
$
0.75
|
|
$
0.71
|
|
$
0.25
|
|
$
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Operating net income was consistent with the prior year quarter
as select new business growth combined with an increase in income
from operating affiliates and positive prior year loss development
was largely offset by larger natural catastrophe losses and other
large individual losses incurred during the current quarter.
- Net investment income for the quarter was $296.5 million compared to $302.6 million in the prior year quarter and
$280.3 million for the first quarter
of 2011. The decline against the prior year was primarily due
to lower U.S. interest rates and cash outflows from the P&C
invested portfolio.
- Net income from affiliates contributed $56.5 million in the quarter compared to
$40.1 million in the prior year
quarter as a result of strong performance primarily from investment
manager affiliates.
- Net realized investment losses for the quarter were
$9.5 million compared to $61.4 million in the prior year quarter.
- Fully diluted book value per ordinary share increased by 6.3%
from the prior quarter driven primarily by earnings combined with
the benefit of share buybacks and unrealized gains in
investments.
- During the quarter, the Company purchased 4.3 million shares
for $92.3 million at an average price
of $21.36, which was accretive to
book value per ordinary share by $0.12. Since June 30,
2011, the Company purchased an additional 7.3 million shares
for $157.7 million. $440.4
million of shares remains available for purchase under the
Company’s previously announced $1
billion share buyback program.
P&C
operations - Three and six months ended June 30
|
|
(U.S.
dollars in thousands)
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June
30
|
|
June
30
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Gross premiums
written
|
$ 1,762,443
|
|
$ 1,507,080
|
|
$ 3,861,563
|
|
$ 3,429,393
|
|
Net premiums written
|
1,306,059
|
|
1,114,604
|
|
3,020,341
|
|
2,711,129
|
|
Net premiums earned
|
1,306,125
|
|
1,216,313
|
|
2,577,821
|
|
2,479,914
|
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
67,049
|
|
94,673
|
|
(261,015)
|
|
88,063
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
63.1%
|
|
61.4%
|
|
78.8%
|
|
66.1%
|
|
Underwriting expense
ratio
|
31.8%
|
|
30.8%
|
|
31.3%
|
|
30.3%
|
|
Combined ratio
|
94.9%
|
|
92.2%
|
|
110.1%
|
|
96.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- P&C gross premiums written (“GPW”) increased 16.9% from the
prior year quarter, driven by an increase in the Insurance segment
of 18.8% and in the Reinsurance segment of 12.1%. Insurance
segment growth in GPW included new business initiatives, primarily
in North American Property and Casualty, and the impact of foreign
exchange. The increase in GPW for Reinsurance was attributable to
increased new business and pricing in Property Catastrophe lines, a
new international casualty treaty and increased volume on a U.K.
motor treaty.
- P&C net premiums earned (“NPE”) of $1.3 billion was comprised of $907.4 million from the Insurance segment and
$398.7 million from the Reinsurance
segment. Compared to the prior year quarter, Insurance NPE
increased by 4.5% and Reinsurance NPE increased by 14.7%.
- The P&C loss ratio was 1.7 percentage points higher than
the prior year quarter. Included in the loss ratio was
favorable prior year development of $127.6
million compared to $82.3
million in the prior year quarter. The loss ratio was
also impacted by natural catastrophe losses of $68.3 million, net of reinstatement premiums.
In the prior year quarter, natural catastrophe losses were
$16.8 million, net of reinstatement
premiums. Excluding prior year development and natural
catastrophe losses, the second quarter loss ratio was 0.7
percentage points higher than the prior year quarter primarily due
to an increased number of large marine and aerospace specialty
losses.
- Operating expenses were largely in-line with the fourth quarter
of 2010 and first quarter of 2011. Increased expenses versus the
prior year quarter related largely to the build-out of the
Company’s previously announced initiatives including the office of
strategic growth.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 99.4%,
compared to 97.6% for the prior year quarter. The Insurance segment
combined ratio on this basis was 103.5% for the quarter compared to
99.6% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 90.0% compared to 92.7% for the
prior year quarter. Combined ratios in both segments were impacted
by increased acquisition expenses due to profit commissions and
other adjustments.
Further details of the results for the quarter may be found in
the Company’s Financial Supplement, which is dated August 2, 2011 and is available from the Investor
Relations section of the XL Group website.
The Company will host a conference call to discuss its second
quarter results on Tuesday, August 2,
2011 at 5:00 p.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 (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 August 2, 2011, until 12
noon Eastern Time on September 2, 2011. A telephone replay of the
conference call will also be available beginning at approximately
9:00 p.m. Eastern Time on
August 2, 2011, until 12 noon Eastern Time on September 2, 2011, by dialing (203) 369-3232 or
(800) 294-5428.
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 impact of a possible
downgrade of U.S. securities by credit rating agencies, and the
resulting effect on the value of securities [x] in our investment
portfolio and [y] posted as collateral by and to us; (k) 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; (l) 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; (m) the ability of XL’s subsidiaries to pay dividends to
XL Group plc; (n) 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; (o) changes in applicable tax laws,
tax treaties or tax regulations or the interpretation or
enforcement thereof; and (p) 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 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 dilutive impact of the
Company’s equity security units has been included within fully
diluted book value per ordinary share under the “treasury stock”
method. Had this dilution been calculated under the “if-converted”
method, the result would have been $30.19 per ordinary share at
June 30, 2011. 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
|
|
Six months
ended
|
|
Income statement
data:
|
|
June
30
|
|
June
30
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Gross premiums
written:
|
|
|
|
|
|
|
|
|
|
- P&C operations
|
|
$
1,762,443
|
|
$
1,507,080
|
|
$
3,861,563
|
|
$
3,429,393
|
|
-
Life operations
|
|
100,281
|
|
92,838
|
|
197,940
|
|
205,739
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums written:
|
|
|
|
|
|
|
|
|
|
- P&C operations
|
|
1,306,059
|
|
1,114,604
|
|
3,020,341
|
|
2,711,129
|
|
- Life operations
|
|
92,194
|
|
86,094
|
|
181,866
|
|
190,760
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
|
|
- P&C operations
|
|
1,306,125
|
|
1,216,313
|
|
2,577,821
|
|
2,479,914
|
|
- Life operations
|
|
92,214
|
|
86,448
|
|
181,901
|
|
191,332
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
296,505
|
|
302,594
|
|
576,768
|
|
610,918
|
|
Net realized (losses) gains on
investments
|
|
(9,544)
|
|
(61,386)
|
|
(75,981)
|
|
(97,562)
|
|
Net realized and unrealized
(losses) gains on derivative instruments
|
|
(10,950)
|
|
(19,896)
|
|
(7,383)
|
|
(40,376)
|
|
Net income (loss) from
investment affiliates
|
|
10,250
|
|
19,084
|
|
37,400
|
|
27,262
|
|
Fee income and other
|
|
10,582
|
|
9,535
|
|
19,514
|
|
17,953
|
|
Total
revenues
|
|
$
1,695,182
|
|
$
1,552,692
|
|
$
3,310,040
|
|
$
3,189,441
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Net losses and loss expenses
incurred - P&C operations
|
|
$
823,584
|
|
$
747,165
|
|
$
2,032,449
|
|
$
1,639,365
|
|
Claims and policy benefits -
Life operations
|
|
137,416
|
|
123,375
|
|
270,647
|
|
247,118
|
|
Acquisition costs
|
|
215,099
|
|
180,560
|
|
403,589
|
|
381,697
|
|
Operating expenses
|
|
266,098
|
|
244,867
|
|
526,625
|
|
473,975
|
|
Foreign exchange (gains)
losses
|
|
(8,498)
|
|
(32,276)
|
|
1,016
|
|
(53,359)
|
|
Interest expense
|
|
55,099
|
|
49,149
|
|
109,246
|
|
98,219
|
|
Loss on settlement of
guarantee
|
|
|
|
23,500
|
|
-
|
|
23,500
|
|
Amortization of intangible
assets
|
|
44
|
|
464
|
|
509
|
|
929
|
|
Total expenses
|
|
$
1,488,842
|
|
$
1,336,804
|
|
$
3,344,081
|
|
$
2,811,444
|
|
Net income (loss) before
non-controlling interest, income tax and net income from operating
affiliates
|
|
$
206,340
|
|
$
215,888
|
|
$
(34,041)
|
|
$
377,997
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
|
24,826
|
|
42,976
|
|
(7,971)
|
|
72,812
|
|
Net (income) loss from operating
affiliates
|
|
(46,251)
|
|
(21,013)
|
|
(59,887)
|
|
(32,619)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
227,765
|
|
$
193,925
|
|
$
33,817
|
|
$
337,804
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests (Note
1)
|
|
(2,102)
|
|
80
|
|
(35,438)
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to XL Group plc
|
|
$
225,663
|
|
$
194,005
|
|
$
(1,621)
|
|
$
337,885
|
|
|
|
|
|
|
|
|
|
|
|
Preference share
dividends
|
|
-
|
|
(2,194)
|
|
-
|
|
(34,694)
|
|
Gain on repurchase of preference
ordinary shares (Note 1)
|
|
-
|
|
-
|
|
-
|
|
16,616
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
|
$
225,663
|
|
$
191,811
|
|
$
(1,621)
|
|
$
319,807
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: During the first quarter
of 2011, 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 interests 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected balance sheet
data:
|
|
As
at
|
|
As
at
|
|
|
|
June 30,
2011
|
|
December 31,
2010
|
|
|
|
(Unaudited)
|
(Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
available for sale
|
|
$
28,322,204
|
|
$
27,677,553
|
|
|
|
|
|
|
|
Total fixed maturities,
held to maturity
|
|
2,843,371
|
|
2,728,335
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
2,859,342
|
|
3,022,868
|
|
|
|
|
|
|
|
Investments in
affiliates
|
|
1,120,890
|
|
1,081,281
|
|
|
|
|
|
|
|
Unpaid losses and loss
expenses recoverable
|
|
3,685,046
|
|
3,671,887
|
|
|
|
|
|
|
|
Total assets
|
|
46,621,512
|
|
45,023,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid losses and loss
expenses
|
|
20,954,317
|
|
20,531,607
|
|
|
|
|
|
|
|
Deposit
liabilities
|
|
1,666,275
|
|
1,684,606
|
|
|
|
|
|
|
|
Future policy benefit
reserves
|
|
5,215,549
|
|
5,075,127
|
|
|
|
|
|
|
|
Unearned
premiums
|
|
4,205,084
|
|
3,484,830
|
|
|
|
|
|
|
|
Notes payable and
debt
|
|
2,461,426
|
|
2,464,410
|
|
|
|
|
|
|
|
Non-controlling interest -
Redeemable series C preference ordinary shares
|
|
71,150
|
|
71,900
|
|
|
|
|
|
|
|
Total shareholders'
equity
|
|
10,627,731
|
|
10,613,049
|
|
|
|
|
|
|
|
Diluted book value per
ordinary share (Note 2)
|
|
$
30.87
|
|
$
29.78
|
|
|
|
|
|
|
|
Basic book value per
ordinary share (Note 2)
|
|
$
31.54
|
|
$
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. The dilutive impact of the Company's
equity security units has been included within fully diluted book
value per ordinary share under the "treasury stock" method. Had
this dilution been calculated under the "if-converted" method, the
result would have been $30.19 per ordinary share at June 30,
2011.
|
|
|
|
|
|
|
|
|
XL Group
plc
RECONCILIATION
|
|
The following is a
reconciliation of the Company’s net income (loss) attributable to
ordinary shareholders to operating net income (loss) (Note 1) and
also includes the calculation of annualized return on ordinary
shareholders’ equity (based on operating net income (loss)) for the
three and six months ended June 30, 2011 and
2010.
|
|
(U.S. Dollars in
thousands)
|
Three months
ended
|
|
|
June
30
|
|
|
(Unaudited)
|
|
|
2011
|
|
2010
|
|
|
|
|
(Note
4)
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
225,663
|
|
$
191,811
|
|
|
|
|
|
|
Net realized losses on
investments, net of tax
|
9,398
|
|
57,927
|
|
|
|
|
|
|
Net realized and unrealized
losses (gains) on derivatives, net of tax
|
12,592
|
|
19,899
|
|
|
|
|
|
|
Net realized and unrealized
(gains) losses on investments and derivatives related to the
Company's insurance company affiliates
|
938
|
|
62
|
|
|
|
|
|
|
Foreign exchange (gains) losses,
net of tax
|
(5,458)
|
|
(27,125)
|
|
|
|
|
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
243,133
|
|
$
242,574
|
|
|
|
|
|
|
Per ordinary share
results: (Note 2)
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
0.69
|
|
$
0.56
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
0.75
|
|
$
0.71
|
|
|
|
|
|
|
Weighted average ordinary shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
309,184,346
|
|
342,056,331
|
|
Diluted - Net income
|
341,988,940
|
|
342,877,695
|
|
Diluted - Operating net
income
|
341,988,940
|
|
342,877,695
|
|
|
|
|
|
|
|
|
|
|
|
Return on ordinary shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
Closing ordinary shareholders
equity (Note 3)
|
$
9,625,950
|
|
$
9,505,004
|
|
Average ordinary shareholders'
equity (Note 3)
|
$
9,446,574
|
|
$
9,272,131
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
243,133
|
|
$
242,574
|
|
|
|
|
|
|
Annualized operating net income
(loss) (Note 1)
|
972,532
|
|
970,296
|
|
|
|
|
|
|
Annualized return on ordinary
shareholders' equity - operating net income (loss) (Notes 1 and
3)
|
10.3%
|
|
10.5%
|
|
|
|
|
|
|
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 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 presentation.
|
|
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.
|
|
|
|
|
|
|
|
|
|
XL Group
plc
|
|
RECONCILIATION
(Continued)
|
|
|
|
(U.S. Dollars in
thousands)
|
Six months
ended
|
|
|
June
30
|
|
|
(Unaudited)
|
|
|
2011
|
|
2010
|
|
|
|
|
(Note
4)
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
(1,621)
|
|
$
319,807
|
|
|
|
|
|
|
Net realized losses on
investments, net of tax
|
72,713
|
|
94,169
|
|
|
|
|
|
|
Net realized and unrealized
losses (gains) on derivatives, net of tax
|
7,383
|
|
40,116
|
|
|
|
|
|
|
Net realized and unrealized
(gains) losses on investments and derivatives related to the
Company's insurance company affiliates
|
64
|
|
(1,059)
|
|
|
|
|
|
|
Foreign exchange (gains) losses,
net of tax
|
1,739
|
|
(44,231)
|
|
|
|
|
|
|
Gain on repurchase of
non-controlling interest preference ordinary shares
|
(134)
|
|
(16,616)
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
80,144
|
|
$
392,186
|
|
|
|
|
|
|
Per ordinary share
results: (Note 2)
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable
to ordinary shareholders
|
$
(0.01)
|
|
$
0.93
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
0.25
|
|
$
1.14
|
|
|
|
|
|
|
Weighted average ordinary shares
outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
310,325,037
|
|
342,049,240
|
|
Diluted - Net income
|
310,325,037
|
|
342,780,550
|
|
Diluted - Operating net
income
|
315,279,299
|
|
342,780,550
|
|
|
|
|
|
|
Return on ordinary shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
Closing ordinary shareholders
equity (Note 3)
|
$
9,625,950
|
|
$
9,505,004
|
|
|
|
|
|
|
Average ordinary shareholders'
equity (Note 3)
|
$
9,618,351
|
|
$
8,967,558
|
|
|
|
|
|
|
Operating net income (loss)
(Note 1)
|
$
80,144
|
|
$
392,186
|
|
|
|
|
|
|
Annualized Operating Net Income
(Note 1)
|
$
160,288
|
|
$
784,372
|
|
|
|
|
|
|
Annualized Return on ordinary
shareholders' equity - operating net income (loss) (Notes 1 and
3)
|
1.7%
|
|
8.7%
|
|
|
|
|
|
|
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 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." During the
year, the Company amended its definition of operating net income to
exclude after-tax foreign exchange gains and losses. The
results from prior periods have been reclassified to conform to the
current period's presentation.
|
|
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 are 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 with 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 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.
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:
|
David R. Radulski
|
Carol A. Parker Trott
|
|
|
Investor Relations
|
Media Relations
|
|
|
(441) 294-7460
|
(441) 294-7290
|
|
|
|
|
SOURCE XL Group plc