Full Year 2005 Net Loss of $1,292.3 Million, or Net Loss of $9.14
per Ordinary Share HAMILTON, Bermuda, Feb. 7 /PRNewswire-FirstCall/
-- XL Capital Ltd (NYSE: XL) ("XL" or the "Company") today reported
a net loss to ordinary shareholders for the quarter ended December
31, 2005 of $821.9 million, or a net loss of $5.51 per ordinary
share, compared with net income of $288.0 million, or net income of
$2.07 per ordinary share, for the quarter ended December 31, 2004.
Net loss for the quarter ended December 31, 2005 included net
losses of $834.2 million, pre and post tax, associated with the
Winterthur International independent actuarial decision
("Winterthur Decision"). The quarter ended December 31, 2005 also
included pre-tax net losses from Hurricane Wilma of $247.1 million
and additional pre-tax net losses of $210.8 million related to the
2005 third quarter natural catastrophes. These additional net
losses arose from newly reported claims and increased severity on
existing claims. Taking into account net reinstatement premiums and
tax effects, the net income impact of Hurricane Wilma and the third
quarter catastrophes in the fourth quarter 2005 was $225.6 million
and $165.1 million respectively, for a total of $390.7 million. Net
income for the quarter ended December 31, 2004 included net losses
of $138.0 million, net of tax, from catastrophes. The Company's
loss estimates involve the exercise of considerable judgment and
are accordingly subject to revision. See attached table for further
details. "Net loss excluding net realized gains and losses"(1) for
the quarter was $868.2 million, a net loss of $5.82 per ordinary
share, compared with net income of $199.4 million, or net income of
$1.43 per ordinary share, for the quarter a year ago. See below for
a reconciliation of "net income/loss excluding net realized gains
and losses"(1) to net loss to ordinary shareholders. For the twelve
months ended December 31, 2005, net loss to ordinary shareholders
was $1,292.3 million, or a net loss of $9.14 per ordinary share,
compared with net income of $1,126.3 million or net income of $8.13
per ordinary share for the twelve months ended December 31, 2004.
"Net loss excluding net realized gains and losses"(1) for the
twelve months ended December 31, 2005 was $1,535.4 million or a net
loss of $10.86 per ordinary share compared with net income of
$820.7 million or net income of $5.92 per ordinary share for the
twelve months ended December 31, 2004. The twelve months ended
December 31, 2005 included a net loss of $1,865.1 million for the
2005 third and fourth quarter natural catastrophes, after taking
into account net reinstatement premiums and tax effects. In
addition, it also included a net loss of $808.9 million, net of
interest received, associated with the Winterthur Decision. Net
loss for the twelve months ended December 31, 2004 included a net
loss of $558.2 million related to the 2004 third and fourth quarter
natural catastrophes. At December 31, 2005, total net invested
assets were $41.6 billion, up 28.4% from December 31, 2004, and
total assets were $58.4 billion, up 19% from December 31, 2004.
Commenting on these results, President and Chief Executive Officer
Brian M. O'Hara said: "We are extremely disappointed with the
impact the third and fourth quarters events had on our financial
performance. However, the natural catastrophes of 2005 have led to
more attractive markets, and in true XL tradition, we are executing
on these opportunities with a focus on maximizing risk-adjusted
returns. I believe that XL's solid balance sheet, geographic
breadth and diversification of platforms will serve us well in
2006." HIGHLIGHTS (Fourth quarter 2005 versus fourth quarter 2004)
-- Successfully raised a total of $3.2 billion through the issuance
of ordinary shares and equity security units in December 2005 to
replenish capital base -- Contribution from financial operations
was up 54% to $71.2 million -- Cash flow from operations was $1,067
million, or $492 million excluding proceeds of $575 million related
to the Winterthur Decision. Structured and spread businesses
contributed a further $478 million to cash flow during the quarter
-- Net investment income from general operations (excluding
interest received related to the Winterthur Decision) was up 27% --
The combined ratio from general operations was 165.1% or 92.0%
excluding the charge related to the Winterthur Decision and the
2005 third and fourth quarter natural catastrophes -- Cyrus Re
quota share executed for 2006 to support XL's strategy to maximize
risk adjusted returns HIGHLIGHTS (Full year 2005 versus full year
2004) -- Contribution from financial operations was up 66% to
$234.8 million -- Cash flow from operations was $4,249 million, or
$3,674 million excluding proceeds of $575 million related to the
Winterthur Decision. Structured and spread businesses contributed a
further $2,024 million to cash flow during the year -- Net
investment income from general operations (excluding interest
received related to the Winterthur Decision and a structured credit
transaction) was up 21% -- The combined ratio from general
operations was 132.9% or 92.1% excluding the charge related to the
Winterthur Decision and the 2005 third and fourth quarter natural
catastrophes SEGMENT HIGHLIGHTS: Insurance Operations Underwriting
loss for the quarter ended December 31, 2005 was $1,092.8 million
compared with an underwriting profit of $49.1 million in the
quarter ended December 31, 2004. These results included the pre-tax
net impact of natural catastrophes of $285.1 million and $110.5
million in 2005 and 2004, respectively. The fourth quarter 2005
also included the charge related to the Winterthur Decision of
$834.2 million pre and post tax. See attached table for further
details. Fourth quarter 2005 compared with fourth quarter 2004
results (excluding the impact of catastrophes and the charge
related to the Winterthur Decision in the fourth quarter of 2005):
-- Net premiums written were flat at $1,028.7 million -- Net
premiums earned increased 3% as a result of business growth and
higher net retention -- The combined ratio increased from 85.1% in
2004 to 97.5% in 2005 due to the favorable reduction in 2004 of the
property loss ratio. Underwriting loss for the year ended December
31, 2005 was $1,486.6 million compared with an underwriting profit
of $159.7 million for the year ended December 31, 2004. These
results included the pre-tax net impact of natural catastrophes of
$1,036.1 million and $310.5 million in 2005 and 2004, respectively,
and the charge related to the Winterthur Decision of $834.2 million
in 2005. Reinsurance Operations General Operations -- Underwriting
loss for the quarter ended December 31, 2005 was $32.3 million
compared with an underwriting profit of $43.7 million in the
quarter ended December 31, 2004. These results included the pre-tax
net impact of catastrophes of $140.9 million and $39.5 million in
2005 and 2004, respectively. Fourth quarter 2005 as compared with
fourth quarter 2004 results (excluding the impact of natural
catastrophes in both quarters): -- Gross and net premiums written
were up 11.3% and 6.6%, respectively, excluding the impact of
timing differences noted last quarter. For the full year 2005 as
compared with 2004, gross and net premiums written were both down
4% -- Net premiums earned were down 3.6%, reflecting the effects of
lower net premiums written over the previous twenty four months --
The combined ratio was 83.6% compared with 90.3% in the prior year
quarter due mainly to a lower loss ratio. The loss ratio improved
due to a lower level of non-catastrophe losses in the fourth
quarter of 2005 Underwriting loss for the year ended December 31,
2005 was $781.6 million compared with an underwriting profit of
$184.3 million in the year ended December 31, 2004. These results
included the pre-tax net impact of natural catastrophes of $943.2
million and $285.4 million in 2005 and 2004, respectively. See
attached table for further details. Life and Annuity Operations --
Gross premiums written decreased 36.3% as a result of $97 million
of long duration annuity premiums assumed in the fourth quarter of
2004 with no similar transaction occurring in the fourth quarter of
2005. Net income was $9.8 million, an increase from $2.6 million in
the fourth quarter of 2004 substantially due to higher net
investment income. For the twelve months ended December 31, 2005 as
compared with 2004, gross premiums written increased 63%
principally due to the $1.8 billion U.K. annuity reinsurance
transaction assumed in the second quarter of 2005. Net loss for the
2005 year was $29.9 million as compared with net income of $28.4
million in 2004 due to the charge of $63.3 million in the second
quarter 2005 for the increase in future policy benefit reserves and
a write off of deferred acquisition costs on certain U.S.-based
term-life mortality reinsurance business. Financial Products and
Services Operations Underwriting profit for the segment rose to
$16.8 million in the fourth quarter of 2005 compared with $10.1
million in the fourth quarter 2004. Total contribution for the
segment was $71.2 million in the fourth quarter of 2005 compared
with $46.3 million in the fourth quarter of 2004. This increase was
driven largely by higher levels of business activity and higher net
investment income due to a special dividend received from our joint
venture with Financial Security Assurance. The year-over-year
increase in net invested assets from municipal GIC and funding
agreement issuances also added to total contribution in fourth
quarter 2005. For the year ended December 31, 2005, underwriting
profit increased to $60.2 million as compared with $28.3 million
for the year ended December 31, 2004 due mainly to lower net
losses. Total contribution for the segment was $234.8 million in
2005 compared with $141.1 million in 2004 mainly due to higher
underwriting profits and an increase in financial guaranty
investment income. Corporate Items Net investment income from
general operations increased 42.3% over the fourth quarter of 2004
to $233.1 million due to a higher investment base, a rise in
average yields, and $25.3 million of interest related to the $575
million payment received in connection with the Winterthur
Decision. Net income from investment affiliates was $38.4 million
in the fourth quarter of 2005 compared with $47.3 million in the
fourth quarter of 2004. For the year ended December 31, 2005, net
investment income from general operations (excluding interest
received related to the Winterthur Decision and a structured credit
transaction) was up 21% compared with 2004. Net income from
investment affiliates was $154.8 million in 2005 compared with
$124.0 million in 2004. Net realized gains on investments were
$37.9 million in the quarter, compared with $65.4 million in the
prior year period. Net unrealized gains on investments, net of tax,
were $396.2 million at December 31, 2005 compared with $551.6
million at September 30, 2005 primarily reflecting a rise in U.S.
interest rates during the quarter. Total operating expenses
decreased to $224 million in the fourth quarter of 2005 from $288
million in the fourth quarter of 2004. Total operating expenses
decreased to $982 million in the 2005 year from $1,053 million in
the 2004 year. This was primarily due to continued productivity and
expense management efforts and adjustments in certain 2005
compensation costs associated with XL's pay-for-performance focus.
The Company will host a conference call to discuss its fourth
quarter and year end 2005 results on February 8, 2006 at 10:00 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 (201) 689-8320 password XL208. The
webcast will be available on XL's website located at
http://www.xlcapital.com/ and will be archived on XL's website from
approximately 1:00 p.m. Eastern time on February 8, 2006 through
midnight Eastern time on March 8, 2006. A slide presentation
accompanying the Company's discussion of its fourth quarter and
year end 2005 results will also be available on the Company's
website located at http://www.xlcapital.com/ beginning
approximately 15 minutes before the commencement of the conference
call. A telephone replay of the conference call will be available
beginning at approximately 1:00 p.m. Eastern time February 8, 2006
until approximately 8:00 p.m. Eastern time on February 15, 2006 by
dialing (201) 612-7415 (account number: 290 and conference I.D.
number: 188545). An unaudited financial supplement relating to the
Company's fourth quarter and year end 2005 results is available on
its website located at http://www.xlcapital.com/. XL Capital Ltd,
through its operating subsidiaries, is a leading provider of
insurance and reinsurance coverages and financial products and
services to industrial, commercial and professional service firms,
insurance companies and other enterprises on a worldwide basis. As
of December 31, 2005, XL Capital Ltd had consolidated assets of
approximately $58.4 billion and consolidated shareholders' equity
of approximately $8.5 billion. More information about XL Capital
Ltd is available at http://www.xlcapital.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. 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 the following: (a) changes in
the size of XL's claims relating to the hurricane losses described
above due to the preliminary nature of some of the reports and
estimates of loss and damage to date; (b) 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; (c) trends in rates for property and
casualty insurance and reinsurance; (d) developments in the world's
financial and capital markets that adversely affect the performance
of XL's investments or access to such markets; (e) changes in
general economic conditions, including foreign currency exchange
rates, inflation and other factors; and (f) the other factors set
forth in XL's most recent reports on Form 10-K, Form 10-Q, and
other documents on file with the Securities and Exchange
Commission, as well as management's response to any of the
aforementioned factors. XL undertakes no obligation to update or
revise publicly any forward-looking statement, whether as a result
of new information, future developments or otherwise. (1) Defined
as "net income/loss excluding net realized gains and losses on
investments and net realized and unrealized gains and losses on
credit, structured financial and investment derivatives, net of
tax" herein referred to as "net income/loss excluding net realized
gains and losses". Net income/ loss excluding net realized gains
and losses is a non-GAAP measure. See the scheduled entitled
"Reconciliation" at the end of this release for a reconciliation of
net income/loss excluding net realized gains and losses to net
income/loss available to ordinary shareholders. XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA (U.S. dollars in thousands)
Three Months Ended Twelve Months Ended Income Statement Data:
December 31 December 31 (Unaudited) (Unaudited) 2005 2004 2005 2004
Revenues: (Note 1) (Note 1) Gross premiums written: - general
operations $1,719,650 $1,811,336 $9,196,837 $9,381,462 - life and
annuity operations 143,893 226,007 2,274,520 1,397,516 - financial
operations 115,306 97,331 378,140 345,235 Net premiums written: -
general operations 1,304,905 1,332,701 7,024,111 7,269,734 - life
and annuity operations 134,877 193,146 2,236,903 1,363,131 -
financial operations 107,873 91,474 356,445 325,662 Net premiums
earned: - general operations 1,724,479 1,705,732 6,873,638
6,987,940 - life and annuity operations 135,071 193,326 2,237,721
1,365,176 - financial operations 93,688 53,797 254,136 228,898 Net
investment income 432,741 287,474 1,475,039 1,035,012 Net realized
gains on investments 37,933 65,432 241,882 246,547 Net realized and
unrealized gains on derivatives 13,639 38,679 28,858 73,493 Net
income from investment affiliates 38,371 47,328 154,844 124,008 Fee
income and other 3,564 9,447 19,297 35,317 Total revenues
$2,479,486 $2,401,215 $11,285,415 $10,096,391 Expenses: Net losses
and loss expenses incurred $2,469,264 $1,197,452 $7,465,001
$4,911,488 Claims and policy benefits 190,116 227,124 2,479,364
1,480,535 Acquisition costs 293,944 299,176 1,195,344 1,264,864
Operating expenses 223,638 288,267 982,059 1,053,135 Exchange
losses (gains) 5,566 (18,030) 10,954 (40,678) Interest expense
128,049 99,816 403,849 292,234 Amortization of intangible assets
2,248 6,057 10,752 15,827 Total expenses $3,312,825 $2,099,862
$12,547,323 $8,977,405 Net (loss) income before minority interest,
income tax and net income from operating affiliates $(833,339)
$301,353 $(1,261,908) $1,118,986 Minority interest in net income of
subsidiary 1,445 346 8,210 8,387 Income tax 1,972 9,217 49,284
91,343 Net (income) from operating affiliates (24,901) (6,338)
(67,426) (147,357) Net (loss) income $(811,855) $298,128
$(1,251,976) $1,166,613 Preference share dividends (10,082)
(10,080) (40,322) (40,321) Net (loss) income available to ordinary
shareholders $(821,937) $288,048 $(1,292,298) $1,126,292 Note 1:
Certain amounts in prior periods have been reclassified to conform
with the current year presentation. XL CAPITAL LTD SUMMARY
CONSOLIDATED FINANCIAL DATA (Shares in thousands, except per share
amounts) Twelve Months Three Months Ended Ended Income Statement
Data (continued): December 31 December 31 (Unaudited) (Unaudited)
2005 2004 2005 2004 (Note 1) (Note 1) Weighted average number of
ordinary shares and ordinary share equivalents: Basic : 149,177
138,195 141,406 137,903 Diluted : 149,177 139,230 141,406 138,582
Per Share Data: Net (loss) income available to ordinary
shareholders ($5.51) $2.07 ($9.14) $8.13 Ratios ? General insurance
and reinsurance operations Loss ratio 140.3% 69.2% 107.1% 68.6%
Expense ratio 24.8% 26.8% 25.8% 27.3% Combined ratio 165.1% 96.0%
132.9% 95.9% Note 1: Certain amounts in prior periods have been
reclassified to conform with the current year presentation. XL
CAPITAL LTD SUMMARY CONSOLIDATED FINANCIAL DATA (U.S. dollars in
thousands, except per share amounts) Balance Sheet Data: As at As
at December 31, 2005 December 31, 2004 (Unaudited) (Note 1) Total
investments available for sale $35,724,439 $27,823,828 Net payable
for investments purchased 639,034 273,535 Cash and cash equivalents
3,693,475 2,203,726 Investments in affiliates 2,046,721 1,936,852
Unpaid losses and loss expenses recoverable 6,441,522 6,971,356
Total assets 58,454,901 49,245,469 Unpaid losses and loss expenses
23,767,672 19,837,669 Deposit liabilities and policy benefit
reserves 13,847,448 10,309,782 Unearned premiums 5,388,996
5,191,368 Notes payable and debt 3,412,698 2,721,431 Total
shareholders' equity 8,471,811 7,738,695 Book value per ordinary
share $44.31 $51.98 Note 1: Certain amounts in prior periods have
been reclassified to conform with the current year presentation. XL
CAPITAL LTD SUMMARY OF FINANCIAL IMPACT OF THIRD AND FOURTH QUARTER
2005 NATURAL CATASTROPHES AND CHARGE RELATED TO THE WINTERTHUR
INDEPENDENT ACTUARIAL DECISION (U.S. dollars in millions) Qtr end
December 31, 2005 Gross Reinsurance Net Reinstatement Net impact
Loss recoveries loss premium pre tax Insurance Hurricane Katrina
$243.7 $149.6 $94.1 $(4.3) $98.4 Hurricane Rita 236.8 161.8 75.0
(2.1) 77.1 Hurricane Wilma 172.7 64.3 108.4 (1.2) 109.6 Winterthur
charge - (834.2) 834.2 - 834.2 $653.2 $(458.5) $1,111.7 $(7.6)
$1,119.3 Reinsurance Hurricane Katrina $48.0 $55.5 $(7.5) $4.8
$(12.3) Hurricane Rita 33.9 14.6 19.3 4.9 14.4 Hurricane Wilma
214.4 75.7 138.7 6.2 132.5 Other catastrophes (Note 1) 6.3 - 6.3 -
6.3 $302.6 $145.8 $156.8 $15.9 $140.9 Financial products and
services Hurricane Katrina $23.6 $- $23.6 $23.6 $- TOTAL - Pre tax
Hurricane Katrina $315.3 $205.1 $110.2 $24.1 $86.1 Hurricane Rita
270.7 176.4 94.3 2.8 91.5 Hurricane Wilma 387.1 140.0 247.1 5.0
242.1 Wintherthur charge - (834.2) 834.2 - 834.2 Other catastrophes
(Note 1) 6.3 - 6.3 - 6.3 $979.4 $(312.7) $1,292.1 $31.9 $1,260.2
Net investment income $25.3 Tax impact 35.3 TOTAL - Post tax
$1,199.6 Qtr end December 31, 2004 Insurance (Note 2) $150.3 $40.0
$110.3 $(0.2) $110.5 Reinsurance (Note 2) $145.1 $111.0 $34.1
$(5.4) $39.5 TOTAL - Pre tax $295.4 $151.0 $144.4 $(5.6) $150.0 Tax
impact $12.0 TOTAL - Post tax $138.0 Notes 1. Includes European
floods. 2. Includes Hurricanes Charley, Frances, Ivan and Jeanne
and the Indian Ocean Tsunami. XL CAPITAL LTD SUMMARY OF FINANCIAL
IMPACT OF THIRD AND FOURTH QUARTER 2005 NATURAL CATASTROPHES AND
CHARGE RELATED TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION
(U.S. dollars in millions) Year end December 31, 2005 Gross
Reinsurance Net Reinstatement Net impact Loss recoveries loss
premium pre tax Insurance Hurricane Katrina $1,339.7 $748.6 $591.1
$(74.6) $665.7 Hurricane Rita 521.9 312.9 209.0 (13.3) 222.3
Hurricane Wilma 172.7 64.3 108.4 (1.2) 109.6 Winterthur charge -
(834.2) 834.2 - 834.2 Other catastrophes (Note 1) 40.2 1.7 38.5 -
38.5 $2,074.5 $293.3 $1,781.2 $(89.1) $1,870.3 Reinsurance
Hurricane Katrina $1,128.0 $495.2 $632.8 $16.3 $616.5 Hurricane
Rita 232.4 83.5 148.9 8.8 140.1 Hurricane Wilma 214.4 75.7 138.7
6.2 132.5 Other catastrophes (Note 1) 57.5 - 57.5 3.4 54.1 $1,632.3
$654.4 $977.9 $34.7 $943.2 Financial products and services
Hurricane Katrina $45.0 $- $45.0 $23.6 $21.4 TOTAL - Pre tax
Hurricane Katrina $2,512.7 $1,243.8 $1,268.9 $(34.7) $1,303.6
Hurricane Rita 754.3 396.4 357.9 (4.5) 362.4 Hurricane Wilma 387.1
140.0 247.1 5.0 242.1 Wintherthur charge - (834.2) 834.2 - 834.2
Other catastrophes (Note 1) 97.7 1.7 96.0 3.4 92.6 $3,751.8 $947.7
$2,804.1 $(30.8) $2,834.9 Net investment income $25.3 Tax impact
135.6 TOTAL - Post tax $2,674.0 Year end December 31, 2004
Insurance (Note 2) $422.3 $124.0 $298.3 $(12.2) $310.5 Reinsurance
(Note 2) $429.3 $136.4 $292.9 $7.5 $285.4 TOTAL - Pre tax $851.6
$260.4 $591.2 $(4.7) $595.9 Tax impact $37.7 TOTAL - Post tax
$558.2 Notes 1. Includes Hurricanes Dennis, Emily, Ophelia,
European and Mumbai Floods and Typhoon Mawar. 2. Includes
Hurricanes Charley, Frances, Ivan and Jeanne and the Indian Ocean
Tsunami. XL CAPITAL LTD SUMMARY OF FINANCIAL IMPACT OF THIRD AND
FOURTH QUARTER 2005 NATURAL CATASTROPHES AND THE CHARGE RELATED TO
THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION (U.S. dollars in
millions) GENERAL OPERATIONS Quarter end December 31, 2005
Excluding Catastrophes Catastrophes and and Winterthur Winterthur
As reported charge charge INSURANCE Gross premiums written $1,364.3
$1.2 $1,363.1 Net premiums written 1,021.1 (7.6) 1,028.7 Net
premiums earned 1,032.8 (7.6) 1,040.4 Fee and other income 2.9 -
2.9 Net losses and loss expenses 1,879.3 1,111.7 767.6 Acquisition
costs 128.7 - 128.7 Operating expenses 118.1 - 118.1 Exchange
(gains) losses 2.4 - 2.4 Underwriting (loss) profit $(1,092.8)
$(1,119.3) $26.5 Loss ratio 182.0% 73.8% Combined ratio 205.9%
97.5% REINSURANCE Gross premiums written $355.3 $23.0 $332.3 Net
premiums written 283.8 15.9 267.9 Net premiums earned 691.7 15.9
675.8 Fee and other income - - - Net losses and loss expenses 539.6
156.8 382.8 Acquisition costs 148.0 - 148.0 Operating expenses 34.0
- 34.0 Exchange (gains) losses 2.4 - 2.4 Underwriting (loss) profit
$(32.3) $(140.9) $108.6 Loss ratio 78.0% 56.6% Combined ratio
104.3% 83.6% TOTAL Gross premiums written $1,719.6 $24.2 $1,695.4
Net premiums written 1,304.9 8.3 1,296.6 Net premiums earned
1,724.5 8.3 1,716.2 Fee and other income 2.9 - 2.9 Net losses and
loss expenses 2,418.9 1,268.5 1,150.4 Acquisition costs 276.7 -
276.7 Operating expenses 152.1 - 152.1 Exchange (gains) losses 4.8
- 4.8 Underwriting (loss) profit $(1,125.1) $(1,260.2) $135.1 Loss
ratio 140.3% 67.0% Combined ratio 165.1% 92.0% GENERAL OPERATIONS
Quarter end December 31, 2004 (Note 1) Catastrophes Excluding As
reported Catastrophes INSURANCE Gross premiums written $1,358.6 $-
$1,358.6 Net premiums written 1,025.3 (0.2) 1,025.5 Net premiums
earned 1,009.8 (0.2) 1,010.0 Fee and other income 6.8 - 6.8 Net
losses and loss expenses 723.4 110.3 613.1 Acquisition costs 118.7
- 118.7 Operating expenses 127.9 - 127.9 Exchange (gains) losses
(2.5) - (2.5) Underwriting (loss) profit $49.1 $(110.5) $159.6 Loss
ratio 71.6% 60.7% Combined ratio 96.1% 85.1% REINSURANCE Gross
premiums written $452.7 $26.9 $425.8 Net premiums written 307.4
(5.4) 312.8 Net premiums earned 695.9 (5.4) 701.3 Fee and other
income 0.1 - 0.1 Net losses and loss expenses 457.4 34.1 423.3
Acquisition costs 153.6 - 153.6 Operating expenses 56.2 - 56.2
Exchange (gains) losses (14.9) - (14.9) Underwriting (loss) profit
$43.7 $(39.5) $83.2 Loss ratio 65.7% 60.4% Combined ratio 95.9%
90.3% TOTAL Gross premiums written $1,811.3 $26.9 $1,784.4 Net
premiums written 1,332.7 (5.6) 1,338.3 Net premiums earned 1,705.7
(5.6) 1,711.3 Fee and other income 6.9 - 6.9 Net losses and loss
expenses 1,180.8 144.4 1,036.4 Acquisition costs 272.3 - 272.3
Operating expenses 184.1 - 184.1 Exchange (gains) losses (17.4) -
(17.4) Underwriting (loss) profit $92.8 $(150.0) $242.8 Loss ratio
69.2% 60.6% Combined ratio 96.0% 87.2% Note 1: Certain amounts in
prior periods have been reclassified to conform with the current
year presentation. XL CAPITAL LTD SUMMARY OF FINANCIAL IMPACT OF
THIRD AND FOURTH QUARTER 2005 NATURAL CATASTROPHES AND THE CHARGE
RELATED TO THE WINTERTHUR INDEPENDENT ACTUARIAL DECISION (U.S.
dollars in millions) GENERAL OPERATIONS Year end December 31, 2005
Excluding Catastrophes Catastrophes and and Winterthur Winterthur
As reported charge charge INSURANCE Gross premiums written $5,785.8
$- $5,785.8 Net premiums written 4,248.1 (89.1) 4,337.2 Net
premiums earned 4,102.7 (89.1) 4,191.8 Fee and other income 4.2 -
4.2 Net losses and loss expenses 4,595.6 1,781.2 2,814.4
Acquisition costs 505.6 - 505.6 Operating expenses 517.8 - 517.8
Exchange (gains) losses (25.5) - (25.5) Underwriting (loss) profit
$(1,486.6) $(1,870.3) $383.7 Loss ratio 112.0% 67.1% Combined ratio
137.0% 91.6% REINSURANCE Gross premiums written $3,411.1 $135.3
$3,275.8 Net premiums written 2,776.0 34.7 2,741.3 Net premiums
earned 2,770.9 34.7 2,736.2 Fee and other income (0.3) - (0.3) Net
losses and loss expenses 2,763.4 977.9 1,785.5 Acquisition costs
600.6 - 600.6 Operating expenses 155.1 - 155.1 Exchange (gains)
losses 33.1 - 33.1 Underwriting (loss) profit $(781.6) $(943.2)
$161.6 Loss ratio 99.7% 65.3% Combined ratio 127.0% 92.9% TOTAL
Gross premiums written $9,196.9 $135.3 $9,061.6 Net premiums
written 7,024.1 (54.4) 7,078.5 Net premiums earned 6,873.6 (54.4)
6,928.0 Fee and other income 3.9 - 3.9 Net losses and loss expenses
7,359.0 2,759.1 4,599.9 Acquisition costs 1,106.2 - 1,106.2
Operating expenses 672.9 - 672.9 Exchange (gains) losses 7.6 - 7.6
Underwriting (loss) profit $(2,268.2) $(2,813.5) $545.3 Loss ratio
107.1% 66.4% Combined ratio 132.9% 92.1% GENERAL OPERATIONS Year
end December 31, 2004 (Note 1) Catastrophes Excluding As reported
Catastrophes INSURANCE Gross premiums written $5,925.0 $- $5,925.0
Net premiums written 4,395.6 (12.2) 4,407.8 Net premiums earned
4,054.8 (12.2) 4,067.0 Fee and other income 23.5 - 23.5 Net losses
and loss expenses 2,859.9 298.3 2,561.6 Acquisition costs 537.1 -
537.1 Operating expenses 531.5 - 531.5 Exchange (gains) losses
(9.9) - (9.9) Underwriting (loss) profit $159.7 $(310.5) $470.2
Loss ratio 70.5% 63.0% Combined ratio 96.9% 89.3% REINSURANCE Gross
premiums written $3,456.5 $41.4 $3,415.1 Net premiums written
2,874.1 7.5 2,866.6 Net premiums earned 2,933.2 7.5 2,925.7 Fee and
other income 0.2 - 0.2 Net losses and loss expenses 1,937.0 292.9
1,644.1 Acquisition costs 648.4 - 648.4 Operating expenses 190.8 -
190.8 Exchange (gains) losses (27.1) - (27.1) Underwriting (loss)
profit $184.3 $(285.4) $469.7 Loss ratio 66.0% 56.2% Combined ratio
94.6% 84.9% TOTAL Gross premiums written $9,381.5 $41.4 $9,340.1
Net premiums written 7,269.7 (4.7) 7,274.4 Net premiums earned
6,988.0 (4.7) 6,992.7 Fee and other income 23.7 - 23.7 Net losses
and loss expenses 4,796.9 591.2 4,205.7 Acquisition costs 1,185.5 -
1,185.5 Operating expenses 722.3 - 722.3 Exchange (gains) losses
(37.0) - (37.0) Underwriting (loss) profit $344.0 $(595.9) $939.9
Loss ratio 68.6% 60.1% Combined ratio 95.9% 87.4% Note 1: Certain
amounts in prior periods have been reclassified to conform with the
current year presentation. XL CAPITAL LTD RECONCILIATION The
following is a reconciliation of the Company's (i) net income
(loss) available to ordinary shareholders to 'net income (loss)
excluding net realized gains and losses on investments and net
realized and unrealized gains and losses on credit, structured
financial and investment derivatives, net of tax' (which is a
non-GAAP measure, the "Exclusions") and (ii) annualized return on
shareholders' equity (based on net income (loss) minus the
Exclusions) to average ordinary shareholders' equity for the three
and twelve months ended December 31, 2005 and 2004 ($ in millions,
except per share amounts): Three Months Ended Twelve Months Ended
December 31 December 31 (Unaudited) (Unaudited) 2005 2004 2005 2004
(Note 1) (Note 1) Net (loss) income available to ordinary
shareholders $(821.9) $288.0 $(1,292.3) $1,126.3 Net realized
(gains) on investments, net of tax (34.9) (63.0) (232.7) (240.8)
Net realized and unrealized losses (gains) on investment
derivatives, net of tax (4.7) (21.9) 17.3 (22.9) Net realized and
unrealized losses (gains) on credit and structured financial
derivatives, net of tax (6.7) (3.7) (27.7) (41.9) Net (loss) income
excluding net realized gains and losses (Note 2) $(868.2) $199.4
$(1,535.4) $820.7 Per ordinary share results: Net (loss) income
available to ordinary shareholders $(5.51) $2.07 $(9.14) $8.13 Net
(loss) income excluding net realized gains and losses (Note 2)
$(5.82) $1.43 $(10.86) $5.92 Weighted average ordinary shares
outstanding: Basic 149,177 138,195 141,406 137,903 Diluted 149,177
139,230 141,406 138,582 Return on Ordinary Shareholders' Equity:
Average ordinary shareholders' equity $7,238.1 $7,037.7 $7,587.8
$6,820.3 Net (loss) income excluding net realized gains and losses
(Note 2) $(868.2) $199.4 $(1,535.4) $820.7 Annualized net (loss)
income excluding net realized gains and losses (Note 1) NM $797.6
NM $820.7 Annualized Return on Ordinary Shareholders' Equity - Net
income excluding net realized gains and losses (Note 2) NM 11.3% NM
12.0% Note 1: Certain amounts in prior periods have been
reclassified to conform with the current year presentation. Note 2:
Defined as "net income (loss) excluding net realized gains and
losses on investments and net realized and unrealized gains and
losses on credit, structured financial and investment derivatives,
net of tax". Comment on Regulation G This press release contains
the presentation of (i) 'net (loss) income excluding net realized
gains and losses on investments and net realized and unrealized
gains and losses on credit, structured financial and investment
derivatives, net of tax' and (ii) annualized return on ordinary
shareholders' equity (based on net income minus the Exclusions) to
average ordinary shareholders' equity. 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 above. 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 presentation includes the use of 'net income
excluding net realized gains and losses on investments and net
realized and unrealized gains and losses on credit and investment
derivatives, net of tax'. Investment derivatives include all
derivatives entered into by XL other than weather and energy and
credit derivatives (discussed further below). Although the
investment of premiums to generate income (or loss) and realized
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 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 these two
variables. Furthermore, these users believe that, for many
companies, the timing of the realization of capital gains is
largely opportunistic and are a function of economic and interest
rate conditions. In addition, with respect to credit derivatives,
because XL generally holds its financial guarantee 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 in the financial
guarantee business) as the changes in fair value each quarter are
not indicative of underlying business performance of XL's financial
guarantee operations. Unlike these credit derivatives, XL's weather
and energy derivatives are actively traded (i.e., they are not held
to maturity) and are, therefore, not excluded from net income as
any gains or losses from this business are considered by management
when evaluating and managing the underlying business. 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 net income (loss) exclusive of the
items mentioned above enables investors and other users of XL's
financial information to analyze XL's performance in a manner
similar 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 who 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. Return on average ordinary shareholder's equity
("ROE"), excluding net realized gains and losses on investments and
net realized and unrealized gains and losses on credit and
investment derivative instruments, net of tax (the "Exclusions"),
is a widely used measure of any company's profitability. Annualized
return on average ordinary shareholders' equity (minus the
Exclusions) is calculated by dividing annualized net income minus
the Exclusions for any period by the average of the opening and
closing ordinary shareholder's equity. The Company establishes
target ROE's for its total operations, segments and lines of
business. If the Company's ROE return targets are not met with
respect to any line of business over time, the Company seeks to
re-evaluate these lines. In addition, the Company's compensation of
its senior officers is significantly dependant on the achievement
of the Company's performance goals to enhance shareholder value
which include ROE. DATASOURCE: XL Capital Ltd CONTACT: David
Radulski, Investor Relations, +1-441-294-7460, or Roger R. Scotton,
Media Contact, +1-44294-7165 Web site: http://www.xlcapital.com/
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