DUBLIN, Ireland, April 27, 2016 /PRNewswire/ --
- Operating net income1 of $103.4 million, or $0.35 per share, for the quarter on a fully
diluted basis
- Net income attributable to ordinary shareholders, and net
income attributable to ordinary shareholders excluding the impact
of the GreyCastle Life Retro Arrangements,2 of
$21.9 million and $104.3 million, respectively, for the
quarter
- P&C combined ratio of 92.5% for the quarter compared to
88.9% in the prior year quarter
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $52.8 million, compared to $14.7 million in the prior year quarter
- Integration costs related to the combination with Catlin
Group Limited ("Catlin") totaled approximately $55.0 million in the quarter
- Earnings in the quarter from affiliates were $8.1 million, compared to $58.0 million in the prior year quarter, due
primarily to the impact of continuing market volatility on the
portfolio and the sale of ARX Holding Corp. in Q2 2015
- Fully diluted tangible book value per ordinary
share4 of $32.62 at
March 31, 2016, an increase of $1.10, or 3.5%, from December 31, 2015
- Share buybacks totaled approximately 10.0 million shares or
$355.1 million during the
quarter
- Annualized operating return on average ordinary
shareholders' equity3 excluding and including
average unrealized gains and losses on investments was 3.9% and
3.5% respectively. Excluding integration costs these return
rates would be 5.9% and 5.4%,
respectively
XL Group plc ("XL" or the "Company") (NYSE: XL) today
reported its first quarter results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"XL Catlin navigated the challenging conditions of the first
quarter, producing good underlying results while maintaining our
focus on bottom-line underwriting and top-line discipline. This
translated to a solid 92.5% P&C combined ratio while we grew
our tangible book value per share and increased our share buybacks
to approximately 10.0 million shares or $355.1 million. While we see difficult
market conditions continuing in the near-term, we firmly
believe our focus on the bottom-line is the right
long-term strategy and that we remain very well positioned.
Near the one year anniversary of XL Catlin, we continue to exceed
all of our integration targets and are seeing new opportunities
aligned with our global reach and market relevance."
Highlights
|
Three Months Ended
March 31
|
(U.S. dollars in
thousands, except per share amounts)
|
|
Three Months Ended
March 31,
|
|
(Unaudited)
|
|
|
(Note 1)
|
|
2016
|
2015
|
Operating net income
(loss)
|
$ 103,388
|
$ 194,376
|
Per ordinary
share-fully diluted
|
$ 0.35
|
$ 0.75
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
$ 21,885
|
$ 36,281
|
Per ordinary
share-fully diluted
|
$ 0.07
|
$ 0.14
|
|
Note 1: The
Company's results for the three months ended March 31, 2015 do not
include those of Catlin Group Limited, acquired on May 1,
2015
|
- Operating net income of $103.4
million for the quarter decreased compared to operating net
income of $194.4 million in the prior
year quarter. The current quarter includes approximately
$55.0 million in integration costs as
well as $52.8 million in natural
catastrophe losses compared to $14.7
million in natural catastrophe losses in the prior year
quarter.
- Net income from affiliates was $8.1
million for the quarter, compared to net income of
$58.0 million in the prior year
quarter. This decrease was driven primarily by our hedge fund
affiliates where equity and credit market volatility fed through to
returns.
- Net investment income for the quarter was $205.9 million, compared to $208.5 million in the prior year quarter and
$215.5 million in the fourth quarter
of 2015. Net investment income excluding the Life Funds Withheld
Assets for the quarter was $164.3
million, compared to $158.1
million in the prior year quarter and $171.9 million in the fourth quarter of
2015.
- Excluding Catlin related transaction and integration costs,
ongoing operating expenses were 46.1% higher than the prior year
quarter primarily due to our increased scale as a result of the
Catlin acquisition. However, overall run-rate expenses for the
quarter continue to indicate that synergy savings are being
achieved in line with or ahead of expectations.
- Net income (loss) attributable to ordinary shareholders of
$21.9 million for the quarter
decreased compared to $36.3 million
in the prior year quarter.
- Income tax expense for the quarter of $22.3 million represents an operating effective
tax rate of approximately 11% combined with certain taxes on
non-operating marked to market movements.
- Fully diluted tangible book value per ordinary share increased
by $1.10 from the prior quarter to
$32.62, 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 10.0 million shares or
$355.1 million during the quarter,
compared to none in the prior year quarter. At March 31,
2016, $348.2 million of ordinary
shares remained available for purchase under our share buyback
program.
1 Defined as net income
(loss) attributable to ordinary shareholders excluding: (1) our net
investment income - Life Funds Withheld Assets (defined below), net
of tax, (2) our net realized (gains) losses on investments sold -
excluding Life Funds Withheld Assets, net of tax, (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, net of tax, (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 XL Group plc ("XL")'s insurance company
affiliates for the periods presented, (7) our foreign exchange
(gains) losses, net of tax, and (8) our expenses related to the
Catlin acquisition, net of tax. "Operating net income", "annualized
operating return on average ordinary shareholders' equity" and
"annualized operating return on average ordinary shareholders'
equity excluding average unrealized gains and losses on
investments" are non-GAAP financial measures. See the
schedule entitled "Reconciliation" on page 8 of this press release
for a reconciliation of "operating net income" to net income (loss)
attributable to ordinary shareholders and the calculation of
"annualized operating return on average ordinary shareholders'
equity" and "annualized operating return on average ordinary
shareholders' equity excluding average unrealized gains and losses
on investments", both of which are based on operating net
income.
2 On May 1, 2014, our wholly-owned subsidiary, XL
Insurance (Bermuda) Ltd ("XLIB"),
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.
Changes in the fair value of the embedded derivative associated
with these GreyCastle Life Retro Arrangements are grouped within
"Contribution from GreyCastle Life Retro Arrangements" in the
schedule entitled "Reconciliation" on page 8 of this press release.
Net income attributable to ordinary shareholders excluding the
impact of the GreyCastle Life Retro Arrangements is a non-GAAP
financial measure.
3 Ordinary shareholders' equity is defined as total
shareholders' equity less non-controlling interest in equity of
consolidated subsidiaries.
4 Book value per ordinary share, fully diluted book
value per ordinary share and fully diluted tangible book value per
ordinary share are non-GAAP financial measures. Fully diluted book
value per ordinary share represents book value per ordinary share
(total shareholders' equity less 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 issuances at any period end. Fully
diluted tangible book value per ordinary share is calculated in the
same manner as fully diluted book value per ordinary share except
that goodwill and intangible assets are excluded from ordinary
shareholders' equity. XL believes that fully diluted tangible 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.
P&C
Operations
|
Three Months Ended
March 31
|
(U.S. dollars in
thousands)
|
|
Three Months Ended
March 31,
|
|
(Unaudited)
|
|
|
|
(Note
1)
|
|
2016
|
|
2015
|
Gross premiums
written
|
$ 4,359,315
|
|
|
$ 2,480,409
|
|
Net premiums
written
|
$ 3,061,595
|
|
|
$ 1,836,743
|
|
Net premiums
earned
|
$ 2,351,446
|
|
|
$ 1,319,494
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
$ 175,489
|
|
|
$ 146,836
|
|
|
|
|
|
|
|
|
Loss ratio
|
58.8%
|
|
|
|
58.3%
|
|
Underwriting expense
ratio
|
33.7%
|
|
|
|
30.6%
|
|
Combined
ratio
|
92.5%
|
|
|
|
88.9%
|
|
|
Note 1:
The Company's results for the three months ended March 31, 2015 do
not include those of Catlin Group Limited, acquired on May 1,
2015
|
- P&C gross premiums written ("GPW") in the first quarter
increased 75.7% compared to the prior year quarter as a result of
the combination with Catlin.
- The Insurance segment GPW increased 51.3% from the prior year
quarter primarily due to the combination with Catlin. More
generally, continued new business growth was offset by adverse
foreign exchange impacts, continued rate pressures and selected
discontinued lines.
- The Reinsurance segment GPW also increased by 124.7% from the
prior year quarter. The increase was primarily due to the
combination with Catlin. In addition, the segment wrote significant
new business across all regions, in particular EMEA.
- P&C net premiums earned ("NPE") in the first quarter of
$2.4 billion were comprised of
$1.59 billion from the Insurance
segment and $757.6 million from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 0.5
percentage points higher than in the prior year quarter. Included
in the P&C loss ratio was favorable development of $43.4 million compared to $48.5 million 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 $52.8 million, compared to $14.7
million in the prior year quarter. Excluding prior year
development and natural catastrophe losses, the first quarter
P&C loss ratio was 2.5 percentage points lower than the
prior year quarter driven by the mix of business following the
Catlin acquisition.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 92.1%,
compared to 91.4% for the prior year quarter. The Insurance segment
combined ratio on this basis was 95.0% for the quarter compared to
93.2% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 86.2% for the quarter compared to
86.6% for the prior year quarter. Overall lower loss ratios on this
basis combined with lower operating expenses were offset by higher
net acquisition costs.
Further details of the results for the quarter may be found in
the Company's Financial Supplement, which is dated
April 27, 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, April 27, 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.xlcatlin.com and will be archived on the
website from approximately 9:00 p.m. Eastern
Time on April 27, 2016, until approximately
midnight Eastern Time on May 27, 2016. A telephone replay of the
conference call will also be available beginning at approximately
9:00 p.m. Eastern Time on
April 27, 2016, until approximately midnight Eastern Time on May 27, 2016, by dialing (203) 369-1164 or (866)
448-2568. The following password will be required: 42716.
About XL Group plc
XL Group plc (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.xlcatlin.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 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; (d) 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; (e) 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; (f) 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; (g) greater
frequency or severity of claims and loss activity than our
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; (h) 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;
(i) our ability to successfully implement its business strategy;
(j) our ability to successfully attract and raise additional third
party capital for existing or new investment vehicles; (k) changes
in credit ratings and rating agency policies or practices, which
could trigger cancelation provisions in our assumed reinsurance
agreements or an event of default under our credit facilities; (l)
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;
(m) 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 debt securities before their anticipated
recovery; (n) unanticipated constraints on our liquidity, including
the availability of borrowings and letters of credit under credit
facilities; (o) the ability of our subsidiaries to pay dividends to
XL Group plc, XLIT Ltd. and Catlin Insurance Company Ltd; (p)
changes in regulators or regulation applicable to us, including as
a result of the completion of our proposed redomestication from
Ireland to Bermuda, such as changes in regulatory capital balances
that our operating subsidiaries must maintain, or to our brokers or
customers; (q) the effects of business disruption, economic
contraction or economic sanctions due to global political and
social conditions such as war, terrorism or other hostilities, or
pandemics; (r) 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; (s) changes in the distribution or placement of
risks due to increased consolidation of insurance and reinsurance
brokers; (t) 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; (u) the loss of key
personnel; (v) the effects of mergers, acquisitions and
divestitures, including our ability to modify our internal controls
over financial reporting, changes to our risk appetite and our
ability realize the value or benefits expected, in each case, as a
result of such transactions; (w) changes in general economic
conditions, including the impact of the withdrawal of the UK from
the EU, should it occur, 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; (x) changes in applicable tax laws, tax treaties or tax
regulations or the interpretation or enforcement thereof; (y)
judicial decisions and rulings, new theories of liability or
emerging claims coverage issues, legal tactics and settlement
terms; and (z) 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 or revise any forward looking statement, whether as a
result of new information, future developments or otherwise, except
as required by the federal securities laws.
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.
XL Group
plc
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
(U.S. dollars in
thousands)
|
|
|
Three Months
Ended
|
Adjusted Income
statement and other data (Note 1):
|
March
31,
|
|
(Unaudited)
|
|
|
|
(Note
2)
|
|
2016
|
|
2015
|
Adjusted Revenues
(Note 1):
|
|
|
|
Net premiums
written
|
$ 3,064,759
|
|
$ 1,851,249
|
|
|
|
|
Net premiums
earned
|
$ 2,354,610
|
|
$ 1,334,000
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets (Note 1)
|
164,326
|
|
158,094
|
Net realized gains
(losses) on investments sold - excluding Life Funds Withheld Assets
(Note 1)
|
(8,416)
|
|
4,602
|
Net realized and
unrealized (losses) gains on derivative instruments
|
(3,622)
|
|
16,521
|
Income (loss) from
investment fund affiliates
|
(4,579)
|
|
35,329
|
Fee income and
other
|
8,262
|
|
4,728
|
Total adjusted
revenues
|
$ 2,510,581
|
|
$ 1,553,274
|
|
|
|
|
Adjusted Expenses
(Note 1):
|
|
|
|
Net losses and loss
expenses incurred - P&C operations
|
$ 1,382,485
|
|
$ 769,827
|
Claims and policy
benefits - run-off Life operations
|
4,937
|
|
19,387
|
Acquisition
costs
|
403,267
|
|
153,696
|
Operating
expenses
|
515,235
|
|
324,358
|
Exchange (gains)
losses
|
(22,700)
|
|
31,074
|
Interest
expense
|
52,303
|
|
51,438
|
Total adjusted
expenses
|
$ 2,335,527
|
|
$ 1,349,780
|
|
|
|
|
Income (loss)
before income tax, income (loss) from operating affiliates,
and GreyCastle Life Retro
Arrangements (Note 1)
|
$ 175,054
|
|
$ 203,494
|
|
|
|
|
Net income (loss)
from operating affiliates
|
12,650
|
|
22,668
|
|
|
|
|
Provision (benefit)
for income tax (Note 1)
|
22,295
|
|
24,218
|
|
|
|
|
Net income (loss)
before GreyCastle Life Retro Arrangements (Notes 1 and
3)
|
165,409
|
|
201,944
|
|
|
|
|
Contribution from
GreyCastle Life Retro Arrangements (Note 1)
|
(82,381)
|
|
(128,273)
|
|
|
|
|
Net income
(loss)
|
83,028
|
|
73,671
|
|
|
|
|
Non-controlling
interests
|
61,143
|
|
37,390
|
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
21,885
|
|
36,281
|
|
|
|
|
Other comprehensive
income - Contribution from GreyCastle Life Retro Arrangements (Note
1)
|
82,381
|
|
128,273
|
Other comprehensive
income - P&C, Corporate and Other
|
325,560
|
|
92,439
|
|
|
|
|
Comprehensive
Income
|
$ 429,826
|
|
$ 256,993
|
|
|
|
|
Note 1: This
presentation includes non-GAAP financial measures, as income and
expense items related to the GreyCastle Life Retro Arrangements are
excluded from revenues and expenses and shown above in
"Contribution from GreyCastle Life Retro Arrangements". 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 which is accounted for as a derivative.
Changes in the fair value of the embedded derivative associated
with these GreyCastle Life Retro Arrangements are also grouped
above within "Contribution from GreyCastle Life Retro
Arrangements".
|
|
Note 2: The
Company's results for the three months ended March 31, 2015 do not
include those of Catlin Group Limited, acquired on May 1,
2015.
|
|
Note 3: "Net income
(loss) before GreyCastle Life Retro Arrangements" less
"Non-controlling interests" is equal to "Net income (loss)
attributable to ordinary shareholders excluding Contribution from
GreyCastle Life Retro Arrangements" reported on page 8.
|
XL Group
plc
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
|
|
Selected balance
sheet data:
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
March 31,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
$ 33,843,284
|
|
$ 33,753,898
|
Cash and cash
equivalents
|
2,820,897
|
|
3,256,236
|
Investments in
affiliates
|
1,953,711
|
|
1,708,899
|
Unpaid losses and
loss expenses recoverable
|
5,374,602
|
|
5,262,706
|
Goodwill and other
intangible assets
|
2,233,597
|
|
2,210,266
|
Total
assets
|
60,645,691
|
|
58,682,938
|
|
|
|
|
Unpaid losses and
loss expenses
|
25,913,485
|
|
25,439,744
|
Deposit
liabilities
|
1,170,595
|
|
1,168,376
|
Future policy benefit
reserves
|
4,020,602
|
|
4,163,500
|
Funds withheld
liability on GreyCastle Life Retro Arrangements, net of future
policy benefit reserves
recoverable
|
998,391
|
|
914,629
|
Unearned
premiums
|
8,217,540
|
|
7,043,358
|
Notes payable and
debt
|
2,653,895
|
|
2,644,970
|
|
|
|
|
Total shareholders'
equity
|
13,667,718
|
|
13,654,463
|
Ordinary
shareholders' equity
|
11,688,744
|
|
11,677,079
|
Ordinary shares
outstanding (Note 2)
|
286,312,517
|
|
294,783,992
|
|
|
|
|
Basic book value per
ordinary share (Note 3)
|
$ 40.83
|
|
$ 39.61
|
Fully diluted book
value per ordinary share (Note 3)
|
$ 40.33
|
|
$ 38.87
|
Fully diluted
tangible book value per ordinary share (Note 3)
|
$ 32.62
|
|
$ 31.52
|
|
Note 1: Certain items
have been reclassified to conform to the current period
presentation
|
|
Note 2: Ordinary
shares outstanding include all ordinary shares issued and
outstanding (as disclosed on the face of the balance sheet) as well
as all director share units outstanding
|
|
Note 3: Book value
per ordinary share, fully diluted book value per ordinary share and
fully diluted tangible book value per ordinary share are non-GAAP
financial measures. Fully diluted book value per ordinary share
represents book value per ordinary share (total shareholders'
equity less 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 issuances at any period end. Fully diluted tangible
book value per ordinary share is calculated in the same manner as
fully diluted book value per ordinary share except that goodwill
and intangible assets are excluded from ordinary shareholders'
equity
|
XL Group plc
RECONCILIATION
The
following is a reconciliation of XL's net income (loss)
attributable to ordinary shareholders to operating net income
(loss) (Note 4) and also includes the calculation of annualized
return on average ordinary shareholders' equity and annualized
return on average ordinary shareholders' equity excluding average
unrealized gains and losses on investments, in each case based on
operating net income (loss) for the three months ended March 31, 2016 and 2015.
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
March
31,
|
|
(Unaudited)
|
|
|
|
|
(Notes 1 and
2)
|
|
2016
|
|
2015
|
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
$ 21,885
|
|
$ 36,281
|
Net realized and
unrealized (gains) losses on life retrocession embedded derivative
and derivative instruments - Life
Funds Withheld Assets
|
236,080
|
|
229,367
|
Net realized (gains)
losses on investments and net unrealized (gains) losses on
investments, Trading - Life Funds
Withheld Assets
|
(101,166)
|
|
(48,289)
|
Net investment income
- Life Funds Withheld Assets
|
(41,560)
|
|
(50,419)
|
Foreign exchange
revaluation (gains) losses on and other income and expense items
related to Life Funds Withheld
Assets
|
(10,973)
|
|
(2,386)
|
Net income (loss)
attributable to ordinary shareholders excluding Contribution from
GreyCastle Life Retro
Arrangements (Note 3)
|
$ 104,266
|
|
$ 164,554
|
Net realized (gains)
losses on investments sold - excluding Life Funds Withheld Assets,
net of tax
|
9,949
|
|
(4,518)
|
Net realized and
unrealized (gains) losses on derivatives, net of tax
|
3,679
|
|
(16,521)
|
Net realized and
unrealized (gains) losses on investments and derivatives related to
the Company's insurance
company affiliates, net of tax
|
413
|
|
658
|
Exchange (gains)
losses, net of tax
|
(14,919)
|
|
24,739
|
Expenses related to
Catlin acquisition
|
—
|
|
25,464
|
Operating net income
(loss) (Note 4)
|
$ 103,388
|
|
$ 194,376
|
Per ordinary share
results: (Note 5)
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
$ 0.07
|
|
$ 0.14
|
Operating net income
(loss) (Note 4)
|
$ 0.35
|
|
$ 0.75
|
Weighted average
ordinary shares outstanding:
|
|
|
|
Basic
|
291,968,575
|
|
255,723,731
|
Diluted - Net
income
|
296,665,595
|
|
260,703,815
|
Diluted - Operating
net income
|
296,665,595
|
|
260,703,815
|
Return on ordinary
shareholders' equity:
|
|
|
|
Closing ordinary
shareholders' equity (Note 6)
|
11,688,744
|
|
10,244,057
|
Closing unrealized
(gain) loss on investments, net of tax (Note 7)
|
$ (1,171,060)
|
|
$ (1,697,606)
|
Average ordinary
shareholders' equity excluding average unrealized gains (losses) on
investments, net of tax (Note 5)
|
$ 10,724,586
|
|
$ 8,533,067
|
Average ordinary
shareholders' equity (Note 6)
|
$ 11,682,912
|
|
$ 10,138,904
|
Operating net income
(loss) (Note 4)
|
$ 103,388
|
|
$ 194,376
|
Annualized operating
net income (loss) (Note 4)
|
$ 413,552
|
|
$ 777,504
|
Annualized operating
return on average ordinary shareholders' equity (Notes 4 and
6)
|
3.5%
|
|
7.7%
|
Annualized operating
return on average ordinary shareholders' equity excluding average
unrealized gains and losses
on investments (Notes 4 and 6)
|
3.9%
|
|
9.1%
|
|
Note 1: Certain
amounts have been reclassified to conform to the current period
presentation
|
|
Note 2: The
Company's results for the three months ended March 31, 2015 do not
include those of Catlin Group Limited, acquired on 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 which is accounted for as a derivative.
Changes in the fair value of the embedded derivative associated
with these GreyCastle Life Retro Arrangements are grouped 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: Defined as
net income (loss) attributable to ordinary shareholders excluding:
(1) our net investment income - Life Funds Withheld Assets, net of
tax, (2) our net realized (gains) losses on investments sold -
excluding Life Funds Withheld Assets, net of tax, (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, net of tax, (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 XL's insurance company affiliates for the
periods presented and (7) our foreign exchange (gains) losses, net
of tax, and (8) our expenses related to the Catlin acquisition, net
of tax. In addition to presenting net income (loss), we believe
that showing "operating net income (loss)", "annualized operating
return on average ordinary shareholders' equity" and "annualized
operating return on average ordinary shareholders' equity excluding
average unrealized gains and losses on investments" 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 ordinary shareholders to operating net income
(loss) is provided above
|
|
Note 5: 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 6: Ordinary
shareholders' equity is defined as total shareholders' equity less
non-controlling interest in equity of consolidated
subsidiaries
|
|
Note 7: 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 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: (1) net investment income - Life Funds Withheld Assets,
net of tax, (2) net realized (gains) losses on investments sold -
excluding Life Funds Withheld Assets, net of tax,(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, net of tax, (5) net realized and unrealized (gains)
losses on life retrocession embedded derivative and derivative
instruments - Life Funds Withheld Assets, (6) share of items (2)
and (4) for XL's insurance company affiliates for the periods
presented and (7) foreign exchange (gains) losses, net of tax, and
(8) our expenses related to the Catlin acquisition, net of
tax; (ii) annualized return on average ordinary shareholders'
equity ("ROE") based on operating net income (loss) ("Operating
ROE"); (iii) Operating ROE excluding average unrealized gains and
losses on investments; (iv) annualized net income (loss)
attributable to ordinary shareholders excluding the Contribution
from the GreyCastle Life Retro Arrangements and (v) book value per
ordinary share (ordinary shareholders' equity divided by the
number of shares outstanding at the period end date), 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), and fully diluted tangible book value per ordinary share
(calculated in the same manner as fully diluted book value per
ordinary share except that goodwill and intangible assets are
excluded from 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
in this press release on page 8.
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, net
of tax, 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, net of tax,
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
ordinary 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 net unrealized gains and losses on investments is an
additional measure of a company's profitability that eliminates the
impacts of mark to market fluctuations on a company's investment
portfolio that have not been realized through sales, which XL
believes provides a more consistent measure of company
performance.
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SOURCE XL Group plc