HAMILTON, Bermuda,
Oct. 26, 2016 /PRNewswire/ --
- Net income attributable to common shareholders, and net
income attributable to common shareholders excluding the
contribution from the GreyCastle Life Retro
Arrangements,1 of $70.6
million and $170.5 million,
respectively, for the quarter
- Operating net income2 of $122.5 million, or $0.44 per share, for the quarter on a fully
diluted basis
- P&C combined ratio of 93.1% for the quarter compared to
95.3% in the prior year quarter
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $97.4 million (4.1 points to the loss ratio),
compared to $30.8 million (1.3 points
to the loss ratio), in the prior year quarter
- Integration costs related to the combination with Catlin
Group Limited ("Catlin") totaled approximately $54.5 million in the quarter
- Fully diluted book value per common share of $42.37 at September 30, 2016, an
increase of $0.66 or 1.6%, from fully
diluted book value per ordinary share of $41.71 at June 30,
2016
- Fully diluted tangible book value per common
share3 of $34.22 at
September 30, 2016, an increase of $0.43 or 1.3%, from fully diluted tangible book
value per ordinary share at June 30,
2016
- Annualized operating return on average common shareholders'
equity4 on a year-to-date basis excluding and
including average unrealized gains and losses on investments was
4.2% and 3.8%, respectively. Excluding integration costs
these return rates would have been 6.0% and 5.5%,
respectively.
XL Group Ltd ("XL" or the "Company") (NYSE: XL) today
reported its third quarter results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"XL's third quarter 2016 financial results demonstrated steady
progress in our underlying performance. We generated P&C
underwriting profit of $167 million
and our P&C accident-year, ex-catastrophe combined ratio of
91.3% was a full 3.8 points better than the same quarter a year
ago. Our clients, brokers and trading partners continued to show
confidence in us as we maintain our underwriting discipline. This
approach, combined with our recently announced planned realignment
of our P&C operations, have us confident in our ability to
further drive innovation and client service. We are committed to
building on this improvement as the benefits of the combined XL
Catlin platform become more visible."
Highlights
|
Three and Nine
Months Ended September 30
|
(U.S. dollars in
thousands, except per share amounts)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Note
1)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to common shareholders
|
|
$70,601
|
|
|
|
$27,282
|
|
|
|
$136,268
|
|
|
|
$978,602
|
|
Per average common
share outstanding-fully diluted
|
|
$0.25
|
|
|
|
$0.09
|
|
|
|
$0.48
|
|
|
|
$3.40
|
|
|
|
|
|
|
|
|
|
Operating net income
(loss)
|
|
$122,454
|
|
|
|
$70,792
|
|
|
|
$332,289
|
|
|
|
$510,965
|
|
Per average common
share outstanding-fully diluted
|
|
$0.44
|
|
|
|
$0.23
|
|
|
|
$1.16
|
|
|
|
$1.78
|
|
|
|
|
|
|
|
|
|
Note 1:
The Company's results for the nine months ended September 30, 2015
include those of Catlin Group Limited from May 1, 2015.
|
- Net income attributable to common shareholders of $70.6 million for the quarter increased compared
to $27.3 million in the prior year
quarter. The current quarter includes approximately $54.5 million in integration costs as well as
$97.4 million in natural catastrophe
losses compared to $55.2 million in
integration costs and $30.8 million
in natural catastrophe losses in the prior year quarter.
- Operating net income of $122.5
million for the quarter increased compared to operating net
income of $70.8 million in the prior
year quarter.
- Net income from affiliates was $24.6
million for the quarter, compared to net income of
$4.5 million in the prior year
quarter. This increase was driven by positive earnings in all
categories of affiliate holdings.
- Net investment income for the quarter was $209.8 million, compared to $225.1 million in the prior year quarter and
$215.4 million in the second quarter
of 2016. Net investment income excluding the Life Funds Withheld
Assets for the quarter was $170.8
million, compared to $178.6
million in the prior year quarter and $176.2 million in the second quarter of
2016.
- Operating expenses were 10.8% favorable versus the prior year
quarter, reflecting the emergence of operational efficiencies and
realization of synergy savings resulting from the Catlin
transaction as well as benefits from foreign exchange particularly
from the weakening of the British Pound compared to the U.S.
dollar. Excluding Catlin-related transaction and
integration costs, ongoing operating expenses were even more
favorable at 11.6% compared to the prior year quarter.
- Income tax expense for the quarter of $17.7 million represents a year-to-date operating
effective tax rate of approximately 8.5%. The decline in the
effective tax rate is primarily driven by higher catastrophe losses
incurred in higher tax jurisdictions.
- Fully diluted tangible book value per common share increased by
$0.43 from the prior quarter to
$34.22, driven by the increase in our
unrealized gains on investments combined with share buybacks and
net income and partially offset by payment of dividends.
- Share buybacks totaled approximately 6.6 million shares or
$221.8 million during the quarter,
compared to 4.8 million shares or $180.0
million in the prior year quarter. Share buybacks on a
year to date basis at September 30,
2016, totaled approximately 26.2 million shares or
$905.2 million, compared to 7.7
million shares or $290 million during
the same period in the prior year. At
September 30, 2016, $594.1
million of common shares remained available for purchase
under our share buyback program.
P&C
Operations
|
Three and Nine
Months Ended September 30
|
(U.S. dollars in
thousands)
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
(Note
1)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross premiums
written
|
|
$2,718,920
|
|
|
|
$2,659,142
|
|
|
|
$10,609,013
|
|
|
|
$8,141,243
|
|
Net premiums
written
|
|
$2,133,298
|
|
|
|
$2,073,216
|
|
|
|
$7,917,504
|
|
|
|
$6,010,032
|
|
Net premiums
earned
|
|
$2,431,677
|
|
|
|
$2,405,740
|
|
|
|
$7,311,827
|
|
|
|
$5,789,029
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
|
$166,851
|
|
|
|
$114,118
|
|
|
|
$444,233
|
|
|
|
$469,733
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
61.3%
|
|
|
60.9%
|
|
|
61.6%
|
|
|
58.5%
|
|
Underwriting expense
ratio
|
31.8%
|
|
|
34.4%
|
|
|
32.3%
|
|
|
33.4%
|
|
Combined
ratio
|
93.1%
|
|
|
95.3%
|
|
|
93.9%
|
|
|
91.9%
|
|
|
|
|
|
|
|
|
|
Note 1: The
Company's results for the nine months ended September 30, 2015
include those of Catlin Group Limited from May 1, 2015.
|
- P&C gross premiums written ("GPW") in the third quarter
increased 2.2% compared to the prior year quarter.
- The Insurance segment GPW decreased 2.1% from the prior year
quarter partly due to unfavorable foreign exchange impact resulting
from the weakening of the British Pound against the U.S.
dollar. Excluding the impact of foreign exchange, GPW
decreased by 1.0% most notably in Aerospace, Accident & Health
and Commercial Errors & Omission business lines. These
decreases were partially offset by higher premium in Political Risk
& Trade Credit, Property International Open Markets and Cyber
business lines.
- The Reinsurance segment GPW increased by 23.2% from the prior
year quarter. The increase was primarily due to significant new
business in the Property Treaty and Credit lines of business in
the Asia Pacific region and
new business in Casualty and Property Treaty lines of business in
the North American region.
- P&C net premiums earned ("NPE") in the third quarter of
$2.4 billion were comprised of
$1.65 billion from the Insurance
segment and $778.2 million from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 0.4
percentage points higher than in the prior year quarter. The
P&C loss ratio variance was impacted by natural catastrophe
pre-tax losses net of reinsurance and reinstatement premiums
of $97.4 million, compared to $30.8
million in the prior year quarter. Included in the P&C
loss ratio was favorable development of $53.6 million compared to $28.1 million in the prior year quarter.
Excluding prior year development and natural catastrophe losses,
the third quarter P&C loss ratio was 1.2 percentage points
favorable versus the prior year quarter due largely to the
Tianjin, China port explosion loss
in the third quarter of 2015.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 91.3%,
compared to 95.1% for the prior year quarter. The Insurance segment
combined ratio on this basis was 93.3% for the quarter compared to
96.3% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 87.1% for the quarter compared to
92.7% for the prior year quarter. Overall, improvements on
each component of the combined ratio reflect disciplined
underwriting as well as continued emergence of operational
synergies.
Further details of the results for the quarter may be found in
the Company's Financial Supplement and Earnings Presentation, each
of which is dated October 26, 2016 and is available on the
Investor Relations section of XL's website.
A conference call to discuss the Company's results will be held
at 5:00 p.m. Eastern Time on
Wednesday, October 26, 2016. 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 October 26, 2016, through midnight Eastern Time on November 26, 2016. A telephone replay of the
conference call will also be available beginning at approximately
9:00 p.m. Eastern Time on
October 26, 2016, until midnight
Eastern Time on November 26,
2016, by dialing (203) 369-1085 or (866) 442-2153. The
following passcode will be required: 9251.
About XL Group Ltd
XL Group Ltd (NYSE: XL), through its subsidiaries and under the
"XL Catlin" brand, is a global insurance and reinsurance company
providing property, casualty and specialty products to industrial,
commercial and professional firms, insurance companies and other
enterprises throughout the world. Clients look to XL Catlin
for answers to their most complex risks and to help move their
world forward. To learn more, visit www.xlgroup.com.
This press release contains forward-looking statements.
Statements that are not historical facts, including statements
about XL's beliefs, plans or expectations, are forward-looking
statements. These statements are based on current plans, estimates
and expectations, all of which involve risk and uncertainty.
Statements that include the words "expect," "estimate," "intend,"
"plan," "believe," "project," "anticipate," "may," "could," or
"would" and similar statements of a future or forward-looking
nature identify forward-looking statements. Actual results may
differ materially from those included in such forward-looking
statements and therefore you should not place undue reliance on
them. A non-exclusive list of the important factors that could
cause actual results to differ materially from those in such
forward-looking statements includes (a) the continuation of
downward trends in rates for property and casualty insurance and
reinsurance; (b) changes in the size of our claims relating
to unpredictable natural or man-made catastrophe losses due to the
preliminary nature of some reports and estimates of loss and damage
to date; (c) changes in the number of insureds and ceding companies
impacted or the ultimate number and value of individual claims
relating to 2016 natural catastrophe events due to the preliminary
nature of reports and estimates of loss and damage to date; (d)
changes in the amount or type of business that we write, whether
due to our actions, changes in market conditions or other factors,
and the amount of premium attributable to such business; (e) the
availability, cost or quality of ceded reinsurance, and the timely
and full recoverability of such reinsurance, or other amounts due
to us, or changes to our projections related to such
recoverables; (f) actual loss experience from insured or
reinsured events and the timing of claims payments being faster or
the receipt of reinsurance recoverables being slower than we
anticipated; (g) increased competition on the basis of pricing,
capacity, coverage terms or other factors, such as the increased
inflow of third party capital into reinsurance markets, which could
harm our ability to maintain or increase its business volumes or
profitability; (h) greater frequency or severity of claims and loss
activity than our underwriting, reserving or investment practices
anticipate based on historical experience or industry data; (i) the
impact of changes in the global financial markets, such as the
effects of inflation on our business, including on pricing and
reserving, changes in interest rates, credit spreads, foreign
currency exchange rates and future volatility in the world's
credit, financial and capital markets that adversely affect the
performance and valuation of our investments, future financing
activities and access to such markets, our ability to pay claims or
general financial condition; (j) our ability to successfully
implement our business strategy; (k) our ability to successfully
attract and raise additional third party capital for existing or
new investment vehicles; (l) changes in credit ratings and rating
agency policies or practices, which could trigger cancelation
provisions in our assumed reinsurance agreements or impact the
availability of our credit facilities; (m) the potential for
changes to methodologies, estimations and assumptions that underlie
the valuation of our financial instruments that could result in
changes to investment valuations; (n) changes to our assessment as
to whether it is more likely than not that we will be required to
sell, or have the intent to sell, available-for-sale fixed maturity
securities before their anticipated recovery; (o) unanticipated
constraints on our liquidity, including the availability of
borrowings and letters of credit under credit facilities that
inhibit our ability to support our operations, including our
ability to underwrite policies and pay claims; (p) the ability of
our subsidiaries to pay dividends to XL Group Ltd, XLIT Ltd. and
Catlin Insurance Company Ltd; (q) changes in regulators or
regulations applicable to us, including as a result of the
completion of our redomestication from Ireland to Bermuda, such as
changes in regulatory capital balances that our operating
subsidiaries must maintain, or to our brokers or customers;
(r) the effects of business disruption, economic contraction or
economic sanctions due to unpredictable global political and social
conditions such as war, terrorism or other hostilities, or
pandemics; (s) the actual amount of new and renewal business and
acceptance of our products and services, including new products and
services and the materialization of risks related to such products
and services; (t) changes in the distribution or placement of
risks due to increased consolidation of insurance and reinsurance
brokers; (u) bankruptcies or other financial concerns of companies
insofar as they affect P&C insurance and reinsurance coverages
or claims that we may have as a counterparty; (v) the loss of key
personnel; (w) the effects of mergers, acquisitions and
divestitures, including our ability to modify our internal control
over financial reporting, changes to our risk appetite and our
ability to realize the value or benefits expected, in each case, as
a result of such transactions; (x) changes in general economic
conditions, including the political, monetary, economic and
operational impacts of the "Brexit" referendum held on June 23,
2016 in which the UK electorate voted to withdraw from the EU, new
or continued sovereign debt concerns in Euro-Zone countries or
emerging markets such as Brazil or China, or governmental actions
for the purposes of stabilizing financial markets; (y) changes in
applicable tax laws, tax treaties or tax regulations or the
interpretation or enforcement thereof; (z) judicial decisions and
rulings, new theories of liability or emerging claims coverage
issues, legal tactics and settlement terms; (aa) the effects of
climate change (such as changes to weather patterns, sea levels or
temperatures) on our business, which our modeling or risk
management practices may not adequately address due to the
uncertain nature of climate change; and (bb) the other
factors set forth in our reports on Form 10-K and Form 10-Q and
other documents on file with the Securities and Exchange
Commission. XL undertakes no obligation to update publicly any
forward looking statement, whether as a result of new information,
future developments or otherwise.
XL intends to use its website as a means of disclosing
material non-public information and for complying with its
disclosure obligations under Regulation FD. Such disclosures will
be included on the website in the Investor Relations section.
Accordingly, investors should monitor such portions of XL's
website, in addition to following its press releases, SEC filings
and public conference calls and webcasts.
*At 12:30 p.m., Irish
time, on July 25, 2016 (the
"Effective Time"), XL Group plc, an Irish public limited company
("XL-Ireland"), and XL Group Ltd, a Bermuda exempted company ("XL-Bermuda"),
completed the previously disclosed scheme of arrangement under
Irish law (the "Scheme of Arrangement") that effected a transaction
(the "Redomestication") that resulted in the shareholders of
XL-Ireland becoming shareholders of XL-Bermuda and XL-Ireland
becoming a subsidiary of XL-Bermuda. In accordance with the
terms of the Scheme of Arrangement, the following steps occurred
effectively simultaneously at the Effective Time: (i) all of the
existing XL-Ireland commons, par value $0.01 per share (the "XL-Ireland commons"),
(other than XL-Ireland ordinary shares held by XL-Bermuda) were
canceled; (ii) the reserves created on cancellation of the
XL-Ireland ordinary shares were used to issue XL-Ireland ordinary
shares to XL-Bermuda; and (iii) in return for such issuance of new
XL-Ireland ordinary shares to XL-Bermuda, XL-Bermuda issued common
shares, September 30, 2016, a period
that commenced prior to the Redomestication, and therefore this
release discloses the results of XL Bermuda, but includes the
results of XL-Ireland through the Effective Time. For
purposes of this release, the "Company" and "XL" refers to
XL-Ireland or XL-Bermuda, as the context requires.
1On May 1, 2014, our
wholly-owned subsidiary, XL Insurance (Bermuda) Ltd ("XLIB") (on June 9, 2016, XLIB and XL Re Ltd amalgamated to
form XL Bermuda Ltd), entered into a sale and purchase agreement
with GreyCastle Holdings Ltd. ("GreyCastle") providing for the sale
of 100% of the common shares of XLIB's wholly-owned subsidiary,
XLLR, for $570 million in cash. This
transaction was completed on May 30,
2014. As a result of the transaction, we have ceded the
majority of our life reinsurance business to XLLR via 100% quota
share reinsurance (the "GreyCastle Life Retro Arrangements"). The
designated investments that support the GreyCastle Life Retro
Arrangements, which are written on a funds withheld basis ("Life
Funds Withheld Assets"), are included within "Total investments
available for sale" and "Fixed maturities, trading at fair value"
on our balance sheet. Investment results for these assets -
including interest income, unrealized gains and losses, and gains
and losses from sales - are passed directly to the reinsurer
pursuant to a contractual arrangement that is accounted for as a
derivative.
2Operating net income is defined as net income (loss)
attributable to common shareholders excluding: (1) our net
investment income - Life Funds Withheld Assets, (defined below) (2)
our net realized (gains) losses on investments sold - excluding
Life Funds Withheld Assets, (3) our net realized (gains) losses on
investments sold (including OTTI) and net unrealized (gains) losses
on investments, Trading - Life Funds Withheld Assets, (4) our net
realized and unrealized (gains) losses on derivatives, (5) our net
realized and unrealized (gains) losses on life retrocession
embedded derivative and derivative instruments - Life Funds
Withheld Assets, (6) our share of items (2) and (4) for The
Company's insurance company affiliates for the periods presented,
(7) our foreign exchange (gains) losses, (8) our expenses related
to the Catlin acquisition, (9) our gain on the sale of our interest
in our former operating affiliate, ARX Holding Corp., (10) our gain
on the sale of our wholly-owned subsidiary XL Life Insurance and
Annuity Company ("XLLIAC"), and (11) a provision (benefit) for
income tax on items excluded from operating income. "Operating net
income", "annualized operating return on average common
shareholders' equity" and "annualized operating return on average
common shareholders' equity excluding average unrealized gains and
losses on investments" and "Integration costs" are non-GAAP
financial measures. See the schedule entitled
"Reconciliation" on page 9 of this press release for a
reconciliation of "operating net income" to net income (loss)
attributable to common shareholders and the calculation of
"annualized operating return on average common shareholders'
equity" and "annualized operating return on average common
shareholders' equity excluding average unrealized gains and losses
on investments", both of which are based on operating net
income.
3Fully diluted tangible book value per common share
is a non-GAAP financial measure. See page 8 of this press
release for a reconciliation of fully diluted tangible book value
per common share to fully diluted book value per common share.
4Common shareholders' equity is defined as total
shareholders' equity less non-controlling interest in equity of
consolidated subsidiaries.
XL Group
Ltd
|
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
(U.S. dollars in
thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
(Note 1)
|
|
|
|
(Note 1)
|
Revenues:
|
|
|
|
|
|
|
|
Net premiums
earned
|
|
$2,434,037
|
|
|
|
$2,423,552
|
|
|
|
$7,320,859
|
|
|
|
$5,839,605
|
|
Net investment
income:
|
|
|
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets
|
170,834
|
|
|
178,560
|
|
|
511,402
|
|
|
512,994
|
|
Net investment income
- Life Funds Withheld Assets
|
38,937
|
|
|
46,586
|
|
|
119,643
|
|
|
143,869
|
|
Total net investment
income
|
|
$209,771
|
|
|
|
$225,146
|
|
|
|
$631,045
|
|
|
|
$656,863
|
|
Total net realized
gains (losses) on investments
|
143,676
|
|
|
51,407
|
|
|
341,043
|
|
|
154,265
|
|
Net realized and
unrealized gains (losses) on derivative instruments
|
5,490
|
|
|
(7,903)
|
|
|
2,774
|
|
|
57,127
|
|
Net realized and
unrealized gains (losses) on life retrocession embedded derivative
and derivative instruments - Life Funds Withheld Assets
|
(225,610)
|
|
|
(126,140)
|
|
|
(691,432)
|
|
|
(116,333)
|
|
Income (loss) from
investment fund affiliates
|
12,156
|
|
|
(3,715)
|
|
|
20,756
|
|
|
62,991
|
|
Fee income and
other
|
8,600
|
|
|
7,355
|
|
|
27,724
|
|
|
23,095
|
|
Total
revenues
|
|
$2,588,120
|
|
|
|
$2,569,702
|
|
|
|
$7,652,769
|
|
|
|
$6,677,613
|
|
Expenses:
|
|
|
|
|
|
|
|
Net losses and loss
expenses incurred
|
|
$1,491,803
|
|
|
|
$1,464,285
|
|
|
|
$4,506,674
|
|
|
|
$3,385,307
|
|
Claims and policy
benefits
|
5,875
|
|
|
22,579
|
|
|
16,294
|
|
|
64,047
|
|
Acquisition
costs
|
403,888
|
|
|
409,173
|
|
|
1,227,675
|
|
|
904,486
|
|
Operating
expenses
|
508,458
|
|
|
570,142
|
|
|
1,546,360
|
|
|
1,403,152
|
|
Exchange (gains)
losses
|
(1,695)
|
|
|
11,661
|
|
|
(54,614)
|
|
|
49,425
|
|
Loss (Gain) on sale
of subsidiary
|
(3,670)
|
|
|
—
|
|
|
(3,670)
|
|
|
—
|
|
Interest
expense
|
49,445
|
|
|
51,929
|
|
|
157,486
|
|
|
153,034
|
|
Total
expenses
|
|
$2,454,104
|
|
|
|
$2,529,769
|
|
|
|
$7,396,205
|
|
|
|
$5,959,451
|
|
Income (loss) before
income tax and income (loss) from operating affiliates
|
|
$134,016
|
|
|
|
$39,933
|
|
|
|
$256,564
|
|
|
|
$718,162
|
|
Income (loss) from
operating affiliates
|
12,410
|
|
|
8,196
|
|
|
46,478
|
|
|
40,326
|
|
Gain on sale of
operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
340,407
|
|
Provision (benefit)
for income tax
|
17,749
|
|
|
(37,042)
|
|
|
42,511
|
|
|
20,135
|
|
Net income
(loss)
|
|
$128,677
|
|
|
|
$85,171
|
|
|
|
$260,531
|
|
|
|
$1,078,760
|
|
Non-controlling
interests
|
58,076
|
|
|
57,889
|
|
|
124,263
|
|
|
100,158
|
|
Net income (loss)
attributable to common shareholders
|
|
$70,601
|
|
|
|
$27,282
|
|
|
|
$136,268
|
|
|
|
$978,602
|
|
Note 1: The
Company's results for the nine months ended September 30, 2015
include those of Catlin Group Limited from May 1, 2015.
|
XL Group
Ltd
|
KEY FINANCIAL
DATA
|
|
|
|
|
|
Selected balance
sheet and other data:
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
September 30,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
|
$33,625,072
|
|
|
|
$33,753,898
|
|
Cash and cash
equivalents
|
3,393,277
|
|
|
3,256,236
|
|
Investments in
affiliates
|
2,118,489
|
|
|
1,708,899
|
|
Unpaid losses and
loss expenses recoverable
|
5,481,882
|
|
|
5,262,706
|
|
Goodwill and other
intangible assets
|
2,234,071
|
|
|
2,210,266
|
|
Total
assets
|
60,772,050
|
|
|
58,682,938
|
|
|
|
|
|
Unpaid losses and
loss expenses
|
26,170,383
|
|
|
25,439,744
|
|
Deposit
liabilities
|
1,138,789
|
|
|
1,168,376
|
|
Future policy benefit
reserves
|
3,721,451
|
|
|
4,163,500
|
|
Funds withheld
liability on GreyCastle Life Retro Arrangements, net of future
policy benefit reserves recoverable
|
1,283,055
|
|
|
914,629
|
|
Unearned
premiums
|
7,724,957
|
|
|
7,043,358
|
|
Notes payable and
debt
|
2,647,000
|
|
|
2,644,970
|
|
|
|
|
|
Total shareholders'
equity
|
13,592,880
|
|
|
13,654,463
|
|
Common shareholders'
equity
|
11,612,166
|
|
|
11,677,079
|
|
Common shares
outstanding (Note 2)
|
270,409,084
|
|
|
294,783,992
|
|
|
|
|
|
Basic book value per
common share
|
|
$42.94
|
|
|
|
$39.61
|
|
Fully diluted book
value per common share
|
|
$42.37
|
|
|
|
$38.87
|
|
Fully diluted
tangible book value per common share (Note 3)
|
|
$34.22
|
|
|
|
$31.52
|
|
|
|
|
|
Note 1: Certain items
have been reclassified to conform to the current period
presentation.
|
|
|
|
|
Note 2: Common shares
outstanding include all common shares issued and outstanding (as
disclosed on the face of the balance sheet) as well as all director
share units outstanding.
|
|
|
|
|
Note 3: Fully diluted
tangible book value per common share is a non-GAAP financial
measure. Fully diluted tangible book value per common share is
calculated in the same manner as fully diluted book value per
common share except that goodwill and intangible assets of $2.234
million for September 30, 2016 and $2.210 million for December 31,
2015 are excluded from common shareholders' equity.
|
XL Group
Ltd
|
RECONCILIATION
|
|
The following is a
reconciliation of XL's net income (loss) attributable to common
shareholders to operating net income (loss) (Note 5) and also
includes the calculation of annualized return on average common
shareholders' equity and annualized return on average common
shareholders' equity excluding average unrealized gains and losses
on investments, in each case based on operating net income (loss)
for the three and nine months ended September 30, 2016 and
2015.
|
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Notes 1 and
2)
|
|
|
|
(Notes 1 and
2)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to common shareholders
|
|
$70,601
|
|
|
|
$27,282
|
|
|
|
$136,268
|
|
|
|
$978,602
|
|
Net realized and
unrealized (gains) losses on life retrocession embedded derivative
and derivative instruments - Life Funds Withheld Assets
|
225,610
|
|
|
126,140
|
|
|
691,432
|
|
|
116,333
|
|
Net realized (gains)
losses on investments and net unrealized (gains) losses on
investments, Trading - Life Funds Withheld Assets
|
(85,281)
|
|
|
(51,608)
|
|
|
(271,596)
|
|
|
(145,513)
|
|
Net investment income
- Life Funds Withheld Assets
|
(38,937)
|
|
|
(46,586)
|
|
|
(119,643)
|
|
|
(143,869)
|
|
Foreign exchange
revaluation (gains) losses on and other income and expense items
related to Life Funds Withheld Assets
|
(1,535)
|
|
|
(8,633)
|
|
|
(5,729)
|
|
|
3,578
|
|
Net income (loss)
attributable to common shareholders excluding Contribution from
GreyCastle Life Retro Arrangements (Note 3)
|
|
$170,458
|
|
|
|
$46,595
|
|
|
|
$430,732
|
|
|
|
$809,131
|
|
Net realized (gains)
losses and OTTI on investments - excluding Life Funds Withheld
Assets
|
(58,395)
|
|
|
201
|
|
|
(69,447)
|
|
|
(8,752)
|
|
Net realized and
unrealized (gains) losses on derivatives
|
(5,490)
|
|
|
7,903
|
|
|
(2,774)
|
|
|
(57,127)
|
|
Net realized and
unrealized (gains) losses on investments and derivatives related to
the Company's insurance company affiliates
|
—
|
|
|
(14)
|
|
|
2,231
|
|
|
1,239
|
|
Exchange (gains)
losses
|
(160)
|
|
|
20,294
|
|
|
(48,885)
|
|
|
45,847
|
|
Expenses related to
Catlin acquisition
|
—
|
|
|
1,245
|
|
|
—
|
|
|
63,048
|
|
Loss (Gain) on sale
of subsidiary (Note 4)
|
(3,670)
|
|
|
—
|
|
|
(3,670)
|
|
|
—
|
|
Gain on sale of
operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
(340,407)
|
|
Provision (benefit)
for income tax on items excluded from operating income
|
19,711
|
|
|
(5,432)
|
|
|
24,102
|
|
|
(2,014)
|
|
Operating net income
(loss) (Note 5)
|
|
$122,454
|
|
|
|
$70,792
|
|
|
|
$332,289
|
|
|
|
$510,965
|
|
Per common share
results: (Note 6)
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
|
$0.25
|
|
|
|
$0.09
|
|
|
|
$0.48
|
|
|
|
$3.40
|
|
Operating net income
(loss) (Note 5)
|
|
$0.44
|
|
|
|
$0.23
|
|
|
|
$1.16
|
|
|
|
$1.78
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
273,659,957
|
|
|
301,867,208
|
|
|
282,441,805
|
|
|
282,505,975
|
|
Diluted - Net
income
|
277,094,453
|
|
|
306,954,345
|
|
|
286,125,400
|
|
|
287,473,059
|
|
Diluted - Operating
net income
|
277,094,453
|
|
|
306,954,345
|
|
|
286,125,400
|
|
|
287,473,059
|
|
Return on common
shareholders' equity:
|
|
|
|
|
|
|
|
Closing common
shareholders' equity (Note 7)
|
|
$11,612,166
|
|
|
|
$11,938,229
|
|
|
|
$11,612,166
|
|
|
|
$11,938,229
|
|
Closing unrealized
(gain) loss on investments (Note 8)
|
|
$(1,484,725)
|
|
|
|
$(1,005,547)
|
|
|
|
$(1,484,725)
|
|
|
|
$(1,005,547)
|
|
Average common
shareholders' equity excluding average unrealized gains (losses) on
investments (Note 7)
|
|
$10,195,467
|
|
|
|
$11,037,815
|
|
|
|
$10,529,464
|
|
|
|
$9,726,183
|
|
Average common
shareholders' equity (Note 7)
|
|
$11,648,677
|
|
|
|
$12,092,764
|
|
|
|
$11,644,623
|
|
|
|
$10,985,990
|
|
Operating net income
(loss) (Note 5)
|
|
$122,454
|
|
|
|
$70,792
|
|
|
|
$332,289
|
|
|
|
$510,965
|
|
Annualized operating
net income (loss) (Note 5)
|
|
$489,816
|
|
|
|
$283,168
|
|
|
|
$443,052
|
|
|
|
$681,287
|
|
Annualized operating
net income (loss) (excluding integration costs) (Note
5)
|
|
$689,143
|
|
|
|
$385,638
|
|
|
|
$640,156
|
|
|
|
$783,155
|
|
Annualized operating
return on average common shareholders' equity (Notes 5 and
7)
|
4.2%
|
|
|
2.3%
|
|
|
3.8%
|
|
|
6.2%
|
|
Annualized operating
return on average common shareholders' equity excluding average
unrealized gains and losses on investments (Notes 5 and
7)
|
4.8%
|
|
|
2.6%
|
|
|
4.2%
|
|
|
7.0%
|
|
Annualized operating
return on average common shareholders' equity excluding integration
costs (Notes 5 and 7)
|
5.8%
|
|
|
3.9%
|
|
|
5.5%
|
|
|
7.1%
|
|
Annualized operating
return on average common shareholders' equity excluding integration
costs and unrealized gains and losses on investments (Notes 5
and 7)
|
6.6%
|
|
|
4.3%
|
|
|
6.0%
|
|
|
8.0%
|
|
|
|
|
|
|
|
|
|
Note 1: Certain
amounts have been reclassified to conform to the current period
presentation.
|
|
|
|
|
Note 2: The Company's
results for the nine months ended September 30, 2015 include those
of Catlin Group Limited from May 1, 2015.
|
Note 3: Investment
results for the Life Funds Withheld Assets - including interest
income, unrealized gains and losses, and gains and losses from
sales - are passed directly to the reinsurer pursuant to a
contractual arrangement that is accounted for as a derivative.
Changes in the fair value of the embedded derivative associated
with these GreyCastle Life Retro Arrangements are reflected within
"Net realized and unrealized (gains) losses on life retrocession
embedded derivative and derivative instruments - Life Funds
Withheld Assets" in the reconciliation above.
|
Note 4: On September
30, 2016, the Company completed the sale of its wholly-owned
subsidiary, XL Life Insurance and Annuity Company ("XLLIAC") and as
a result, recorded a $3.7 million gain.
|
Note 5: Defined as
net income (loss) attributable to common shareholders excluding:
(1) our net investment income - Life Funds Withheld Assets,
(defined below) (2) our net realized (gains) losses on investments
sold - excluding Life Funds Withheld Assets, (3) our net realized
(gains) losses on investments sold (including OTTI) and net
unrealized (gains) losses on investments, Trading - Life Funds
Withheld Assets, (4) our net realized and unrealized (gains) losses
on derivatives, (5) our net realized and unrealized (gains) losses
on life retrocession embedded derivative and derivative instruments
- Life Funds Withheld Assets, (6) our share of items (2) and (4)
for The Company's insurance company affiliates for the periods
presented, (7) our foreign exchange (gains) losses, (8) our
expenses related to the Catlin acquisition, (9) our gain on the
sale of our interest in our former operating affiliate, ARX Holding
Corp. and (10) our gain on the sale of our wholly-owned
subsidiary XL Life Insurance and Annuity Company ("XLLIAC"), and
(11) a provision (benefit) for income tax on items excluded from
operating income. We believe that showing "operating net income
(loss)", "annualized operating return on average common
shareholders' equity" and "annualized operating return on average
common shareholders' equity excluding average unrealized gains and
losses on investments and integration costs" enables investors and
other users of our financial information to analyze our performance
in a manner similar to how we analyze our performance. In this
regard, we believe that providing only a GAAP presentation of net
income (loss) would make it more difficult for users of our
financial information to evaluate our underlying business. We also
believe that equity analysts and certain rating agencies that
follow us (and the insurance industry as a whole) exclude these
items from their analyses for the same reasons, and they request
that we provide this non-GAAP financial information on a regular
basis. A reconciliation of our net income (loss) attributable to
common shareholders to operating net income (loss) is provided
above.
|
Note 6: Diluted
weighted average number of common shares outstanding is used to
calculate per share data except where it is anti-dilutive to
earnings per share or where there is a net loss. When it is
anti-dilutive or when a net loss occurs, basic weighted average
common shares outstanding is utilized in the calculation of net
loss per share and net operating loss per share.
|
Note 7: Common
shareholders' equity is defined as total shareholders' equity less
non-controlling interest in equity of consolidated
subsidiaries.
|
Note 8: Unrealized
(gain) loss on investments, net of tax is the cumulative impact of
mark to market fluctuations on our investment portfolio that have
not been realized through sales.
|
|
|
|
|
|
|
|
|
Comment on Regulation G
XL presents its operations in ways it believes will be most
meaningful and useful to investors, analysts, rating agencies and
others who use XL's financial information in evaluating XL's
performance. This press release contains the presentation of
(i) operating net income (loss) ("Operating Net Income"), which is
defined as net income (loss) attributable to common shareholders
excluding: (1) net investment income - Life Funds Withheld Assets,
(2) net realized (gains) losses on investments sold - excluding
Life Funds Withheld Assets,(3) net realized (gains) losses on
investments sold (including OTTI) and net unrealized (gains) losses
on investments, Trading - Life Funds Withheld Assets, (4) net
realized and unrealized (gains) losses on derivatives, (5) net
realized and unrealized (gains) losses on life retrocession
embedded derivative and derivative instruments - Life Funds
Withheld Assets, (6) our share of items (2) and (4) for XL's
insurance company affiliates for the periods presented, (7)
foreign exchange (gains) losses, (8) our expenses related to the
Catlin acquisition, (9) our gain on the sale of our interest in our
operating affiliate, ARX, (10) our gain on the sale of our
wholly-owned subsidiary XL Life Insurance and Annuity Company
("XLLIAC"), and (11) a provision (benefit) for income tax on items
excluded from operating income.; (ii) annualized return on average
common shareholders' equity ("ROE") based on operating net income
(loss) ("Operating ROE"); (iii) Operating ROE excluding average
unrealized gains and losses on investments and integration costs;
(iv) annualized net income (loss) attributable to common
shareholders excluding the Contribution from the GreyCastle Life
Retro Arrangements and (v) Fully diluted tangible book value per
common share (common shareholders' equity excluding goodwill
and intangible assets divided by the number of shares outstanding
at the period end date combined with the dilutive impact of
potential future share issues at any period end). These items are
"non-GAAP financial measures" as defined in Regulation G. The
reconciliation of such measures to the most directly comparable
GAAP financial measures in accordance with Regulation G is included
in this press release on pages 9 and 10.
Although the investment of premiums to generate income (or loss)
and realize capital gains (or losses) is an integral part of XL's
operations, the determination to realize capital gains (or losses)
is independent of the underwriting process. In addition,
under applicable GAAP accounting requirements, losses can be
created as the result of other than temporary declines in value and
from goodwill impairment charges without actual realization.
In this regard, certain users of XL's financial information,
including certain rating agencies, evaluate earnings before tax and
capital gains to understand the profitability of the operational
sources of income without the effects of these two variables.
Furthermore, these users believe that, for many companies, the
timing of the realization of capital gains and the recognition of
goodwill impairment charges are largely a function of economic and
interest rate conditions.
Net realized and unrealized (gains) losses on derivatives
include all derivatives entered into by XL other than certain
credit derivatives and the life retrocession embedded derivative.
With respect to credit derivatives, because XL and its insurance
company operating affiliates generally hold financial guaranty
contracts written in credit default derivative form to maturity,
the net effects of the changes in fair value of these credit
derivatives are excluded (similar with other companies' treatment
of such contracts), as the changes in fair value each quarter are
not indicative of underlying business performance.
Net investment income - Life Funds Withheld Assets, and net
realized (gains) losses on the life retrocession embedded
derivative and derivative instruments - Life Funds Withheld
Assets, have been excluded because, as a result of the
GreyCastle Life Retro Arrangement, XL no longer shares in the risks
and rewards of the underlying performance of the Life Funds
Withheld Assets that support these retrocession arrangements.
The returns on the Life Funds Withheld Assets are passed directly
to the reinsurer pursuant to a contractual arrangement that is
accounted for as a derivative. Therefore, net investment
income from the Life Funds Withheld Assets and changes in the fair
value of the embedded derivative associated with these GreyCastle
Life Retro Arrangements are not relevant to XL's underlying
business performance.
Foreign exchange (gains) losses in the income statement are only
one element of the overall impact of foreign exchange fluctuations
on XL's financial position and are not representative of any
economic gain or loss made by XL. Accordingly, it is not a
relevant indicator of financial performance and it is excluded.
In summary, XL evaluates the performance of and manages its
business to produce an underwriting profit. In addition to
presenting net income (loss), XL believes that showing operating
net income (loss) enables investors and other users of XL's
financial information to analyze XL's performance in a manner
similar to how management of XL analyzes performance. In this
regard, XL believes that providing only a GAAP presentation of net
income (loss) would make it much more difficult for users of XL's
financial information to evaluate XL's underlying business. Also,
as stated above, XL believes that the equity analysts and certain
rating agencies that follow XL (and the insurance industry as a
whole) exclude these items from their analyses for the same reasons
and they request that XL provide this non-GAAP financial
information on a regular basis.
Operating ROE is a widely used measure of any company's
profitability that is calculated by dividing annualized operating
net income for any period other than a fiscal year when actual
operating income is used by the average of the opening and closing
common shareholders' equity. XL establishes target Operating ROEs
for its total operations, segments and lines of business. If XL's
Operating ROE targets are not met with respect to any line of
business over time, XL seeks to re-evaluate these lines. Operating
ROE excluding and including net unrealized gains and losses on
investments, both inclusive of and exclusive of integration costs,
are additional measures of Company profitability that eliminate, as
applicable, the impacts of mark to market fluctuations on XL's
investment portfolio that have not been realized through sales,
and/or distortions to XL's performance from temporary integration
costs related to the combination with Catlin. By providing
these additional measures, users of our financial statements have
the ability to include or exclude these items when considering our
performance either on a standalone basis or for purposes of peer
performance comparison.
XL believes that fully diluted tangible book value per common
share is a financial measure important to investors and other
interested parties who benefit from having a consistent basis for
comparison with other companies within the industry. However,
this measure may not be comparable to similarly titled measures
used by companies either outside or inside of the insurance
industry.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/xl-group-ltd-announces-third-quarter-2016-results-300351938.html
SOURCE XL Group Ltd