DUBLIN, Ireland, Aug. 3,
2015 /PRNewswire/ --
- Operating net income1 of $245.8 million, or $0.84 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 Life Retrocession Arrangements2 of $915.0 million and $598.0
million, respectively, for the quarter. As a
result of the Life Retrocession Arrangements, XL's net income
is impacted by the gains or losses on the Life Funds Withheld
Assets2, with an equal and opposite accounting
adjustment in XL's comprehensive income such that there is no
effect on XL's book value
- Gain of $340.4 million related
to the sale of our interest in our operating affiliate ARX
Holding Corp. ("ARX")
- P&C combined ratio of 89.9% for the quarter, compared to
88.3% in the prior year quarter
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $59.9 million, compared to $34.6 million in the prior year quarter
- Annualized operating return on average ordinary
shareholders' equity3 excluding and including average
unrealized gains and losses on investments was 10.0% and 8.7%,
respectively, for the quarter
- Fully diluted tangible book value per ordinary
share4 of $32.53 at
June 30, 2015, a decrease of
$4.26, or 11.6%, from December 31, 2014. The reduction results
from the goodwill and intangible assets acquired from Catlin Group
Limited ("Catlin") in exchange for cash and equity
consideration
- Share buybacks totaled 2.9 million ordinary shares for
$110.0 million during the
quarter
XL Group plc ("XL" or the "Company") (NYSE: XL) today
reported its second quarter results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"I'm pleased to announce the first quarterly financial results
for the combined XL Catlin. We reported 84 cents of operating earnings per share and
delivered an annualized operating ROE excluding unrealized gains
and losses on investments of 10.0%. We are pleased with our
progress in the major areas that we view as key to unlocking the
value created by XL's combination with Catlin notwithstanding
continued market headwinds. First, our top line results
demonstrated the strong support our clients and brokers have shown
for the new XL Catlin. Second, we are on target with respect to
synergies and expenses and will continue to manage those with
discipline; third, we delivered on our capital management
commitment through resumed share buybacks; and finally, XL Catlin's
culture continues to take on the best parts of what each of our
companies brought to the transaction. We were one company for only
two months of the second quarter and in that short time my belief
that we can meet and exceed the expectations we set for this
company has only grown. We are very excited about where we are and
what lies ahead for XL Catlin."
Highlights
|
Three and Six
Months Ended June 30
|
(U.S. dollars in
thousands, except per share amounts)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Operating net income
(loss)
|
$
|
245,797
|
|
|
$
|
279,577
|
|
|
$
|
440,173
|
|
|
$
|
518,226
|
|
Per ordinary
share-fully diluted
|
$
|
0.84
|
|
|
$
|
1.02
|
|
|
$
|
1.59
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ordinary
shareholders
|
$
|
915,039
|
|
|
$
|
(279,260)
|
|
|
$
|
951,320
|
|
|
$
|
(23,543)
|
|
Per ordinary
share-fully diluted
|
$
|
3.11
|
|
|
$
|
(1.03)
|
|
|
$
|
3.43
|
|
|
$
|
(0.09)
|
|
- Operating net income of $245.8
million for the quarter decreased compared to operating net
income of $279.6 million in the prior
year quarter. The current quarter includes approximately
$27.8 million in integration costs as
well as $59.9 million in catastrophe
losses compared to $34.6 million in
catastrophe losses in the prior year quarter. In addition, the
prior year quarter benefited from the recognition of $28.7 million of profit associated with the
commutation of a structured product transaction.
- Net income (loss) attributable to ordinary shareholders of
$915.0 million for the quarter
increased compared to a loss of $279.3
million in the prior year quarter. The current year includes
a $340.4 million gain on the sale of
our interest in an operating affiliate as well as a $239.2 million favorable impact from the life
retrocession derivative, which is offset by a decrease in
accumulated comprehensive income and therefore does not impact book
value. Additionally, the prior year included a $621.3 million after tax loss on the sale of our
life reinsurance subsidiary.
- Net investment income for the quarter was $223.2 million, compared to $232.8 million in the prior year quarter and
$208.5 million in the first quarter
of 2015. The overall year over year decline is primarily due
to the Life Funds Withheld Assets, along with the impact of
lower reinvestment yields, partially offset by the addition
of two months of investment income on the legacy Catlin
portfolio.
- Net income from investment fund and investment manager
operating affiliates was $39.9
million for the quarter, compared to net income of
$30.8 million in the prior year
quarter. The increase was driven primarily by higher earnings from
our private investment fund affiliates.
- Fully diluted tangible book value per ordinary share decreased
by $5.07 from the prior quarter to
$32.53, driven by the increase
in goodwill and intangibles acquired from the combination with
Catlin in exchange for cash and equity, our unrealized losses on
investments and our payment of dividends, partially offset by
net income. Excluding the impact of the Catlin transaction,
fully diluted tangible book value per ordinary share increased by
$0.66 or 1.7%.
- At June 30, 2015, $157.6
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's
insurance company affiliates for the periods presented, (7) our
foreign exchange (gains) losses, net of tax, (8) our expenses
related to the Catlin acquisition, net of tax. (9) our gain on the
sale of our interest in our operating affiliate, ARX, and
(10) our loss on sale of life reinsurance subsidiary, XLLR, 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
9 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,
XL Life Reinsurance (SAC) Ltd ("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 "Life
Retrocession Arrangements"). The designated investments that
support the Life Retrocession 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 Life
Retrocession Arrangements are grouped within "Contribution from
Life Retrocession Arrangements" in the schedule entitled
"Reconciliation" on page 8 of this press release. Net
income attributable to ordinary shareholders excluding the impact
of the Life Retrocession 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 and Six
Months Ended June 30
|
(U.S. dollars in
thousands)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Gross premiums
written
|
$
|
3,001,692
|
|
|
$
|
2,111,529
|
|
|
$
|
5,482,101
|
|
|
$
|
4,540,168
|
|
Net premiums
written
|
$
|
2,100,073
|
|
|
$
|
1,433,326
|
|
|
$
|
3,936,816
|
|
|
$
|
3,352,866
|
|
Net premiums
earned
|
$
|
2,063,795
|
|
|
$
|
1,438,076
|
|
|
$
|
3,383,289
|
|
|
$
|
2,850,604
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
$
|
208,779
|
|
|
$
|
167,947
|
|
|
$
|
355,615
|
|
|
$
|
312,821
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
55.8 %
|
|
|
57.6 %
|
|
|
56.8 %
|
|
|
58.2 %
|
|
Underwriting expense
ratio
|
34.1 %
|
|
|
30.7 %
|
|
|
32.7 %
|
|
|
30.8 %
|
|
Combined
ratio
|
89.9 %
|
|
|
88.3 %
|
|
|
89.5 %
|
|
|
89.0 %
|
|
- P&C gross premiums written ("GPW") in the second quarter
increased 42.2% compared to the prior year quarter following the
combination with Catlin.
- The Insurance segment GPW increased 37.1% from the prior year
quarter primarily due to the combination with Catlin.
Excluding the impacts of the additional Catlin business and foreign
exchange, the segment experienced an increase of 1.1%. Rates
were under pressure in most lines, however, this was offset
by new business, particularly in our Marine, Political Risk &
Trade Credit and North American Construction. Renewals were reduced
where premium rates did not support our target returns. Relative to
the prior year quarter, the Catlin portfolio experienced similar
impacts.
- The Reinsurance segment GPW increased 58.6% from the prior year
quarter, primarily due to the combination with Catlin.
Excluding the impact of the acquired Catlin business, the segment
experienced a decrease of 2.9% due to a competitive pricing
environment with respect to property treaty business.
- P&C net premiums earned ("NPE") in the second quarter of
$2.1 billion were comprised of
$1.4 billion from the Insurance
segment and $650.9 million from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 1.8
percentage points lower than in the prior year quarter. Included in
the P&C loss ratio was favorable development of $108.9 million compared to $84.4 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 $59.9 million, compared to $34.6
million in the prior year quarter. Excluding prior year
development and natural catastrophe losses net of reinsurance and
reinstatement premiums, the second quarter P&C loss ratio was
2.8% lower than the prior year quarter, driven primarily by the
Catlin combination.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 92.3%,
compared to 91.8% for the prior year quarter. The Insurance
segment combined ratio on this basis was 95.4% for the quarter
compared to 96.0% for the prior year quarter, while the Reinsurance
segment combined ratio on this basis was 85.3% for the quarter
compared to 82.0% for the prior year quarter with the increase
driven by higher acquisition costs resulting from purchase
accounting adjustments and a change in business mix from the
combination with Catlin.
- Operating expenses in the quarter were 52.3% higher than in the
prior year quarter primarily due to the impact of the combination
with Catlin. Excluding deal related transaction and
integration costs operating expenses were up 32.9%. However,
overall run rate expenses for the quarter were less than the
combined operating expenses of XL and Catlin in the prior year
quarter, indicating that savings are already beginning to be
achieved. The operating expense ratio decreased 0.5% to 17.6%
in the quarter.
Further details of the results for the quarter may be found in
the Company's Financial Supplement, which is dated
August 3, 2015 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 10:00 a.m. Eastern Time on
Tuesday, August 4, 2015. 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 1:00 p.m. Eastern
Time on August 4, 2015, until approximately
midnight Eastern Time on
September 4, 2015. A telephone replay of the
conference call will also be available beginning at approximately
1:00 p.m. Eastern Time on
August 4, 2015, until approximately midnight Eastern Time on September 4, 2015, by dialing (203) 369-3784 or
(888) 568-0892. The following password will be required: 4636.
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," "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) changes in the size of XL's claims relating
to natural or man-made catastrophe losses due to the preliminary
nature of some reports and estimates of loss and damage to date;
(b) trends in rates for property and casualty insurance and
reinsurance; (c) the timely and full recoverability of
reinsurance placed by XL with third parties, or other amounts due
to XL; (d) changes in the projected amount of ceded reinsurance
recoverables and the credit ratings and credit worthiness of
reinsurers; (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 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 XL's
ability to maintain or increase its business volumes or
profitability; (g) greater frequency or severity of claims and loss
activity than XL's underwriting, reserving or investment practices
anticipate based on historical experience or industry data; (h) the
impact of changes in the global financial markets, such as the
effects of inflation on XL's business, including on pricing and
reserving, increased government involvement or intervention in the
financial services industry and 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 XL's
investments, future financing activities and access to such markets
or general financial condition; (i) XL's ability to successfully
implement its business strategy, including the integration of
Catlin; (j) XL's ability to successfully attract and raise
additional third party capital for existing or new investment
vehicles; (k) the potential impact on XL of government-mandated
insurance coverage for acts of terrorism; (l) changes in ratings
and rating agency policies or practices; (m) the potential for
changes to methodologies, estimations and assumptions that underlie
the valuation of XL's financial instruments that could result in
changes to investment valuations; (n) changes to XL's assessment as
to whether it is more likely than not that it will be required to
sell, or has the intent to sell, available-for-sale debt securities
before their anticipated recovery; (o) the availability of
borrowings and letters of credit under credit facilities; (p) the
ability of XL's subsidiaries to pay dividends to XL Group plc and
XLIT Ltd.; (q) the potential effect of legislative or regulatory
developments in the jurisdictions in which XL operates, such as
those that could impact the financial markets or increase XL's
business costs and required capital levels, including but not
limited to changes in regulatory capital balances that must be
maintained by our operating subsidiaries and governmental actions
for the purpose of stabilizing the financial markets; (r) 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; (s) changes in
regulators or laws applicable to us or our subsidiaries, brokers or
customers; (t) the actual amount of new and renewal business and
acceptance of XL's products and services, including new products
and services and the materialization of risks related to such
products and services; (u) changes in the availability, cost or
quality of reinsurance; (v) changes in the distribution or
placement of risks due to increased consolidation of insurance and
reinsurance brokers; (w) the loss of key personnel and changes in
accounting standards, policies or practices or the application
thereof; (x) changes in applicable tax laws, tax treaties or tax
regulations or the interpretation or enforcement thereof; (y) the
effects of mergers, acquisitions and divestitures, including XL's
ability to modify its internal controls over financial reporting,
changes to its risk appetite and its ability realize the value or
benefits expected, in each case, as a result of such transactions,
including the Life Retrocession Arrangements and XL's recent
acquisition of Catlin; (z) changes in general economic conditions,
including new or continued sovereign debt concerns in Euro-Zone
countries or downgrades of US securities by credit rating agencies,
which could affect XL's financial condition, results of operations,
liquidity or cash flows; (aa) developments related to bankruptcies
or other financial concerns of companies insofar as they affect
property and casualty insurance and reinsurance coverage or claims
that XL may have as a counterparty; (bb) judicial decisions and
rulings, new theories of liability or emerging claims coverage
issues, legal tactics and settlement terms; and (cc) the other
factors set forth in XL's 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
|
|
Six Months
Ended
|
Adjusted Income
statement and other data (Note 1):
|
June
30,
|
|
June
30,
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Adjusted Revenues
(Note 1):
|
|
|
|
|
|
|
|
Net premiums
written
|
$
|
2,118,331
|
|
|
$
|
1,491,844
|
|
|
$
|
3,969,580
|
|
|
$
|
3,487,695
|
|
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
2,082,053
|
|
|
$
|
1,496,594
|
|
|
$
|
3,416,053
|
|
|
$
|
2,985,433
|
|
|
|
|
|
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets (Note 1)
|
176,340
|
|
|
213,608
|
|
|
334,434
|
|
|
446,797
|
|
Net realized gains
(losses) on investments sold - excluding Life Funds Withheld Assets
(Note 1)
|
4,351
|
|
|
80,844
|
|
|
8,953
|
|
|
100,073
|
|
Net realized and
unrealized (losses) gains on derivative instruments
|
48,509
|
|
|
11,599
|
|
|
65,030
|
|
|
13,409
|
|
Income (loss) from
investment fund affiliates
|
31,377
|
|
|
17,683
|
|
|
66,706
|
|
|
50,986
|
|
Fee income and
other
|
11,012
|
|
|
9,706
|
|
|
15,740
|
|
|
21,160
|
|
Total adjusted
revenues
|
$
|
2,353,642
|
|
|
$
|
1,830,034
|
|
|
$
|
3,906,916
|
|
|
$
|
3,617,858
|
|
|
|
|
|
|
|
|
|
Adjusted Expenses
(Note 1):
|
|
|
|
|
|
|
|
Net losses and loss
expenses incurred - P&C operations
|
$
|
1,151,195
|
|
|
$
|
827,880
|
|
|
$
|
1,921,022
|
|
|
$
|
1,659,385
|
|
Claims and policy
benefits - run-off Life operations
|
22,081
|
|
|
85,299
|
|
|
41,468
|
|
|
198,886
|
|
Acquisition
costs
|
341,617
|
|
|
184,619
|
|
|
495,313
|
|
|
384,033
|
|
Operating
expenses
|
511,127
|
|
|
333,010
|
|
|
835,485
|
|
|
643,434
|
|
Exchange (gains)
losses
|
(7,996)
|
|
|
21,141
|
|
|
23,077
|
|
|
31,582
|
|
Interest
expense
|
49,667
|
|
|
14,085
|
|
|
101,105
|
|
|
57,026
|
|
Total adjusted
expenses
|
$
|
2,067,691
|
|
|
$
|
1,466,034
|
|
|
$
|
3,417,470
|
|
|
$
|
2,974,346
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income tax, income (loss) from operating affiliates,
and Life Retrocession Arrangements (Note 1)
|
$
|
285,951
|
|
|
$
|
364,000
|
|
|
$
|
489,446
|
|
|
$
|
643,512
|
|
|
|
|
|
|
|
|
|
Net income (loss)
from operating affiliates
|
9,462
|
|
|
27,738
|
|
|
32,130
|
|
|
74,023
|
|
Provision (benefit)
for income tax, excluding amount related to loss on sale of life
reinsurance subsidiary (Note 1)
|
32,959
|
|
|
39,446
|
|
|
57,177
|
|
|
73,767
|
|
Gain on sale of
operating affiliate
|
340,407
|
|
|
—
|
|
|
340,407
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net income (loss)
before Life Retrocession Arrangements (Notes 1 and
2)
|
602,861
|
|
|
352,292
|
|
|
804,806
|
|
|
643,768
|
|
|
|
|
|
|
|
|
|
Contribution from
Life Retrocession Arrangements (Note 1)
|
317,057
|
|
|
(6,547)
|
|
|
188,783
|
|
|
(6,547)
|
|
Loss on sale of life
reinsurance subsidiary, net of tax (Note 1)
|
—
|
|
|
621,323
|
|
|
—
|
|
|
621,323
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
919,918
|
|
|
(275,578)
|
|
|
993,589
|
|
|
15,898
|
|
|
|
|
|
|
|
|
|
Non-controlling
interests
|
4,879
|
|
|
3,682
|
|
|
42,269
|
|
|
39,441
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
915,039
|
|
|
(279,260)
|
|
|
951,320
|
|
|
(23,543)
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income - Contribution from Life Retrocession Arrangements (Note
1)
|
(317,057)
|
|
|
6,547
|
|
|
(188,784)
|
|
|
6,547
|
|
Other comprehensive
income - P&C, Corporate and Other
|
(311,939)
|
|
|
253,826
|
|
|
(219,500)
|
|
|
463,830
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
Income
|
$
|
286,043
|
|
|
$
|
(18,887)
|
|
|
$
|
543,036
|
|
|
$
|
446,834
|
|
|
|
|
|
|
|
|
|
|
Note 1: This
presentation includes non-GAAP financial measures, as income and
expense items related to the Life Retrocession Arrangements are
excluded from revenues and expenses and shown above in
"Contribution from Life Retrocession 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 Life Retrocession Arrangements are also grouped above
within "Contribution from Life Retrocession
Arrangements".
|
|
Note 2: "Net income
(loss) before Life Retrocession Arrangements" less "Non-controlling
interests" is equal to "Net income (loss) attributable to ordinary
shareholders excluding Contribution from Life Retrocession
Arrangements" reported on page 9.
|
XL Group
plc
|
SUMMARY
CONSOLIDATED FINANCIAL DATA
|
|
|
|
|
|
Selected balance
sheet data:
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
June 30,
2015
|
|
December 31,
2014
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
$
|
35,648,947
|
|
|
$
|
30,484,053
|
|
Cash and cash
equivalents
|
2,976,479
|
|
|
2,521,814
|
|
Investments in
affiliates
|
1,663,852
|
|
|
1,637,620
|
|
Unpaid losses and
loss expenses recoverable
|
5,155,612
|
|
|
3,429,368
|
|
Goodwill and other
intangible assets
|
2,205,911
|
|
|
447,952
|
|
Total
assets
|
61,750,706
|
|
|
45,046,819
|
|
|
|
|
|
Unpaid losses and
loss expenses
|
25,840,381
|
|
|
19,353,243
|
|
Deposit
liabilities
|
1,212,206
|
|
|
1,245,367
|
|
Future policy benefit
reserves
|
4,494,886
|
|
|
4,707,199
|
|
Funds withheld
liability on Life Retrocession Arrangements, net of future policy
benefit
reserves recoverable
|
915,116
|
|
|
1,155,016
|
|
Unearned
premiums
|
8,548,841
|
|
|
3,973,132
|
|
Notes payable and
debt
|
2,726,455
|
|
|
1,662,580
|
|
|
|
|
|
Total shareholders'
equity
|
14,205,105
|
|
|
11,435,766
|
|
Ordinary
shareholders' equity
|
12,247,298
|
|
|
10,033,751
|
|
Ordinary shares
outstanding (Note 2)
|
303,932,111
|
|
|
255,222,835
|
|
|
|
|
|
Basic book value per
ordinary share (Note 3)
|
$
|
40.30
|
|
|
$
|
39.31
|
|
Fully diluted book
value per ordinary share (Note 3)
|
$
|
39.68
|
|
|
$
|
38.51
|
|
Fully diluted
tangible book value per ordinary share (Note 3)
|
$
|
32.53
|
|
|
$
|
36.79
|
|
|
|
|
|
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 3) 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 and six months ended
June 30, 2015 and 2014.
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
(Note 1)
|
|
|
|
(Note 1)
|
Net income (loss)
attributable to ordinary
shareholders
|
$
|
915,039
|
|
|
$
|
(279,260)
|
|
|
$
|
951,320
|
|
|
$
|
(23,543)
|
|
Net realized and
unrealized (gains) losses on life retrocession embedded
derivative
and derivative instruments - Life Funds Withheld
Assets
|
(239,174)
|
|
|
17,546
|
|
|
(9,807)
|
|
|
17,546
|
|
Net realized (gains)
losses on investments and net unrealized (gains) losses on
investments, Trading - Life Funds Withheld
Assets
|
(45,616)
|
|
|
8,147
|
|
|
(93,905)
|
|
|
8,147
|
|
Net investment income
- Life Funds Withheld Assets, net of
tax
|
(46,864)
|
|
|
(19,165)
|
|
|
(97,283)
|
|
|
(19,165)
|
|
Foreign exchange
revaluation (gains) losses on and other income and expense items
related to Life Funds Withheld
Assets
|
14,597
|
|
|
19
|
|
|
12,212
|
|
|
19
|
|
Loss on sale of life
reinsurance subsidiary, net of
tax
|
—
|
|
|
621,323
|
|
|
—
|
|
|
621,323
|
|
Net income (loss)
attributable to ordinary shareholders excluding Contribution from
Life Retrocession Arrangements (Note 2)
|
$
|
597,982
|
|
|
$
|
348,610
|
|
|
$
|
762,537
|
|
|
$
|
604,327
|
|
Net realized (gains)
losses on investments sold - excluding Life Funds Withheld Assets,
net of tax
|
(669)
|
|
|
(77,149)
|
|
|
(5,187)
|
|
|
(96,038)
|
|
Net realized and
unrealized (gains) losses on derivatives, net of tax
|
(48,667)
|
|
|
(11,596)
|
|
|
(65,188)
|
|
|
(13,406)
|
|
Net realized and
unrealized (gains) losses on investments and derivatives related to
the Company's insurance company affiliates, net of tax
|
595
|
|
|
1,222
|
|
|
1,253
|
|
|
(2,736)
|
|
Exchange (gains)
losses, net of tax
|
624
|
|
|
18,490
|
|
|
25,362
|
|
|
26,079
|
|
Expenses related to
Catlin acquisition
|
36,339
|
|
|
—
|
|
|
61,803
|
|
|
—
|
|
Gain on sale of
operating affiliate
|
(340,407)
|
|
|
—
|
|
|
(340,407)
|
|
|
—
|
|
Operating net income
(loss) (Note 3)
|
$
|
245,797
|
|
|
$
|
279,577
|
|
|
$
|
440,173
|
|
|
$
|
518,226
|
|
Per ordinary share
results: (Note 4)
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
$
|
3.11
|
|
|
$
|
(1.03)
|
|
|
$
|
3.43
|
|
|
$
|
(0.9)
|
|
Operating net income
(loss) (Note 3)
|
$
|
0.84
|
|
|
$
|
1.02
|
|
|
$
|
1.59
|
|
|
$
|
1.86
|
|
Weighted average
ordinary shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
289,419,914
|
|
|
270,923,986
|
|
|
272,664,906
|
|
|
273,615,535
|
|
Diluted - Net
income
|
293,983,082
|
|
|
270,923,986
|
|
|
277,473,300
|
|
|
273,615,535
|
|
Diluted - Operating
net income
|
293,983,082
|
|
|
275,199,604
|
|
|
277,473,300
|
|
|
277,917,607
|
|
Return on ordinary
shareholders' equity:
|
|
|
|
|
|
|
|
Closing ordinary
shareholders' equity (Note 5)
|
12,247,298
|
|
|
10,034,289
|
|
|
12,247,298
|
|
|
10,034,289
|
|
Closing unrealized
(gain) loss on investments, net of tax (Note 6)
|
$
|
(1,104,350)
|
|
|
$
|
(1,216,920)
|
|
|
$
|
(1,104,350)
|
|
|
$
|
(1,216,920)
|
|
Average ordinary
shareholders' equity excluding average unrealized gains (losses) on
investments, net of tax (Note 4)
|
$
|
9,844,700
|
|
|
$
|
9,057,642
|
|
|
$
|
9,831,361
|
|
|
$
|
9,040,880
|
|
Average ordinary
shareholders' equity (Note 5)
|
$
|
11,245,678
|
|
|
$
|
10,139,626
|
|
|
$
|
11,140,525
|
|
|
$
|
10,015,961
|
|
Operating net income
(loss) (Note 3)
|
$
|
245,797
|
|
|
$
|
279,577
|
|
|
$
|
440,173
|
|
|
$
|
518,226
|
|
Annualized operating
net income (loss) (Note 3)
|
$
|
983,188
|
|
|
$
|
1,118,308
|
|
|
$
|
880,346
|
|
|
$
|
1,036,452
|
|
Annualized operating
return on average ordinary shareholders' equity (Notes 3 and
5)
|
8.7
|
%
|
|
11.0
|
%
|
|
7.9
|
%
|
|
10.3
|
%
|
Annualized operating
return on average ordinary shareholders' equity excluding average
unrealized gains and losses on investments (Notes 3 and
5)
|
10.0
|
%
|
|
12.3
|
%
|
|
9.0
|
%
|
|
11.5
|
%
|
|
|
|
|
|
|
|
|
Note 1: Certain
amounts have been reclassified to conform to the current period
presentation.
|
|
|
|
|
|
Note 2: 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 Life Retrocession 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 3: 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, (7) our foreign exchange (gains) losses, net of
tax, (8) our expenses related to the Catlin acquisition, net of
tax, and (9) our gain on sale of our interest in our operating
affiliate, ARX. 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 4: 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 5: Ordinary
shareholders' equity is defined as total shareholders' equity less
non-controlling interest in equity of consolidated
subsidiaries.
|
|
Note 6: 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, (7) foreign exchange (gains) losses, net of tax,
(8) expenses related to the Catlin acquisition, net of tax, (9)
gain on the sale of our interest in our operating affiliate, ARX,
and (10) the loss on the sale of life reinsurance subsidiary, XLLR,
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 Life Retrocession 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 9.
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 Life
Retrocession 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 life
retrocession arrangements are not relevant to XL's underlying
business performance. In addition, the loss on the sale of life
reinsurance subsidiary, net of tax, has been excluded due to the
one-time, non-operating nature of this loss.
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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visit:http://www.prnewswire.com/news-releases/xl-group-plc-announces-second-quarter-2015-results-300122681.html
SOURCE XL Group plc