HAMILTON, Bermuda, July 27, 2016 /PRNewswire/ --
- Net income attributable to ordinary shareholders, and net
income attributable to ordinary shareholders excluding the
contribution from the GreyCastle Life Retro
Arrangements,1 of $43.8
million and $156.0 million,
respectively, for the quarter
- Operating net income2 of $106.4 million, or $0.37 per share, for the quarter on a fully
diluted basis
- P&C combined ratio of 96.0% for the quarter compared to
89.9% in the prior year quarter
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $240.1 million (9.8 points to the loss ratio),
compared to $59.9 million (2.9 points
to the loss ratio), in the prior year quarter
- Integration costs related to the combination with Catlin
Group Limited ("Catlin") totaled approximately $52.1 million in the quarter
- Earnings in the quarter from affiliates were $34.6 million, compared to $40.8 million in the prior year quarter, due
primarily to the impact of continuing market volatility on the
investment fund affiliates partially offset by gains in operating
affiliates
- Fully diluted book value per ordinary share of $41.71 at June 30,
2016, an increase of $1.38 or
3.4%, from March 31, 2016
- Fully diluted tangible book value per ordinary
share3 of $33.79 at
June 30, 2016, an increase of
$1.17, or 3.6%, from March 31, 2016
- Share buybacks totaled approximately 9.7 million shares or
$328.3 million during the
quarter
- Annualized operating return on average ordinary
shareholders' equity4 on a year-to-date basis excluding
and including average unrealized gains and losses on investments
was 4.0% and 3.6%, respectively. Excluding integration costs these
return rates would be 5.7% and 5.1%, respectively.
*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 ordinary shares, par value $0.01 per share (the "XL-Ireland ordinary
shares"), (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, par value $0.01 per share (the "XL-Bermuda common
shares"). The results disclosed in this release are for the
quarter ended June 30, 2016, a period
that ended prior to the Redomestication, and therefore this release
discloses the results of XL-Ireland. 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 income is fined as net income (loss)
attributable to ordinary 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) a provision (benefit) for income tax on items excluded from
operating income. "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" and
"Integration costs" 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.
3Fully diluted tangible book value per ordinary share
is a non-GAAP financial measure. See page 7 of this press
release for a reconciliation of fully diluted tangible book value
per ordinary share to fully diluted book value per ordinary
share.
4Ordinary shareholders' equity is defined as total
shareholders' equity less non-controlling interest in equity of
consolidated subsidiaries.
XL Group Ltd ("XL" or the "Company") (NYSE: XL) today
reported the second quarter results for XL Group plc, which as a
result of the Redomestication is now its direct, wholly-owned
subsidiary.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"XL Catlin's second quarter results were significantly impacted
by global catastrophes, reducing operating earnings per share by
84 cents. In the face of these events
and challenging markets, we demonstrated progress in our underlying
performance. We generated gross premiums written of $3.6 billion, P&C underwriting profit of
$102 million, and an accident-year,
ex-catastrophe P&C combined ratio of 90.3%. The benefits of our
integration are emerging and we are committed to the hard work and
execution required to succeed."
Highlights
|
Three and Six
Months Ended June 30
|
|
|
|
|
|
|
|
(U.S. dollars in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Note
1)
|
|
|
|
(Note
1)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to ordinary shareholders
|
$
|
43,782
|
|
|
$
|
915,039
|
|
|
$
|
65,667
|
|
|
$
|
951,320
|
|
Per average ordinary
share outstanding-fully diluted
|
$
|
0.15
|
|
|
$
|
3.11
|
|
|
$
|
0.23
|
|
|
$
|
3.43
|
|
|
|
|
|
|
|
|
|
Operating net income
(loss)
|
$
|
106,447
|
|
|
$
|
245,797
|
|
|
$
|
209,835
|
|
|
$
|
440,173
|
|
Per average ordinary
share outstanding-fully diluted
|
$
|
0.37
|
|
|
$
|
0.84
|
|
|
$
|
0.72
|
|
|
$
|
1.59
|
|
|
|
|
|
|
|
|
|
Note 1:
The Company's results for the three and six months ended June 30,
2015 include those of Catlin from May 1, 2015
|
- Net income attributable to ordinary shareholders of
$43.8 million for the quarter
decreased compared to $915.0 million
in the prior year quarter.
- Operating net income of $106.4
million for the quarter decreased compared to operating net
income of $245.8 million in the prior
year quarter. The current quarter includes approximately
$52.1 million in integration costs as
well as $240.1 million in natural
catastrophe losses compared to $39.6
million in integration costs and $59.9 million in natural catastrophe losses in
the prior year quarter.
- Net income from affiliates was $34.6
million for the quarter, compared to net income of
$40.8 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, partially offset by gains in operating affiliates.
- Net investment income for the quarter was $215.4 million, compared to $223.2 million in the prior year quarter and
$205.9 million in the first quarter
of 2016. Net investment income excluding the Life Funds Withheld
Assets for the quarter was $176.2
million, compared to $176.3
million in the prior year quarter and $164.3 million in the first quarter of 2016.
- Excluding Catlin-related transaction and integration costs,
ongoing operating expenses were in line with the prior year
quarter, reflecting the emergence of operational efficiencies and
realization of synergy savings resulting from the Catlin
transaction.
- Income tax expense for the quarter of $2.5 million represents a year-to-date operating
effective tax rate of approximately 10.5% combined with certain
taxes on non-operating marked to market movements.
- Fully diluted tangible book value per ordinary share increased
by $1.17 from the prior quarter to
$33.79, 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 9.7 million shares or
$328.3 million during the quarter,
compared to none in the prior year quarter. At June 30,
2016, $815.8 million of ordinary
shares remained available for purchase under our share buyback
program.
P&C
Operations
|
Three and Six
Months Ended June 30
|
|
|
|
|
|
|
|
(U.S. dollars in
thousands)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Note
1)
|
|
|
|
(Note
1)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Gross premiums
written
|
$
|
3,530,778
|
|
|
$
|
3,001,692
|
|
|
$
|
7,890,093
|
|
|
$
|
5,482,101
|
|
Net premiums
written
|
$
|
2,722,611
|
|
|
$
|
2,100,073
|
|
|
$
|
5,784,206
|
|
|
$
|
3,936,816
|
|
Net premiums
earned
|
$
|
2,528,702
|
|
|
$
|
2,063,795
|
|
|
$
|
4,880,148
|
|
|
$
|
3,383,289
|
|
|
|
|
|
|
|
|
|
Underwriting profit
(loss)
|
$
|
101,891
|
|
|
$
|
208,779
|
|
|
$
|
277,380
|
|
|
$
|
355,615
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
64.6 %
|
|
|
55.8 %
|
|
|
61.8 %
|
|
|
56.8 %
|
|
Underwriting expense
ratio
|
31.4 %
|
|
|
34.1 %
|
|
|
32.5 %
|
|
|
32.7 %
|
|
Combined
ratio
|
96.0 %
|
|
|
89.9 %
|
|
|
94.3 %
|
|
|
89.5 %
|
|
|
|
|
|
|
|
|
|
Note 1:
The Company's results for the three and six months ended June 30,
2015 include those of Catlin from May 1, 2015.
|
- P&C gross premiums written ("GPW") in the second quarter
increased 17.6% compared to the prior year quarter as a result of
the combination with Catlin. The second quarter of 2015 included
only 2 months of Catlin results.
- The Insurance segment GPW increased 13.2% from the prior year
quarter primarily due to the combination with Catlin. More
generally, continued new business growth was partially offset by
adverse foreign exchange impacts, continued rate pressures and
selected discontinued lines.
- The Reinsurance segment GPW increased by 30.2% from the prior
year quarter. The increase was due to the combination with Catlin,
and significant new business across all regions, in particular
Bermuda, EMEA and North America.
- P&C net premiums earned ("NPE") in the second quarter of
$2.5 billion were comprised of
$1.7 billion from the Insurance
segment and $832.0 million from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 8.8
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 $240.1 million, compared to $59.9
million in the prior year quarter. Included in the P&C
loss ratio was favorable development of $98.6 million compared to $108.9 million in the prior year quarter.
Excluding prior year development and natural catastrophe losses,
the second quarter P&C loss ratio was 0.5 percentage points
higher than the prior year quarter due to the impact of harmonized
reserving on the assumptions impacting the current accident year as
well as mix and rate change.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 90.3%,
compared to 92.3% for the prior year quarter. The Insurance segment
combined ratio on this basis was 92.6% for the quarter compared to
95.4% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 85.5% for the quarter compared to
85.3% for the prior year quarter. Overall, improvements in the
expense ratios were partially offset by slight increases in loss
ratios.
Further details of the results for the quarter may be found in
the Company's Financial Supplement which is dated July 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, July 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.xlgroup.com and will be archived on XL's
website from approximately 9:00 p.m. Eastern
Time on July 27, 2016, through midnight Eastern Time on August 27, 2016. A telephone replay of the
conference call will also be available beginning at approximately
9:00 p.m. Eastern Time on
July 27, 2016, until midnight Eastern
Time on August 27, 2016, by
dialing (203) 369-1837 or (866) 501-5103. The following password
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 the second quarter of 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 an event of default under 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, XL Group plc, 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.
XL Group
plc
|
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
(U.S. dollars in
thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
(Note 1)
|
|
|
|
(Note 1)
|
Revenues:
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
2,532,212
|
|
|
$
|
2,082,053
|
|
|
$
|
4,886,822
|
|
|
$
|
3,416,053
|
|
Net investment
income:
|
|
|
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets
|
176,242
|
|
|
176,340
|
|
|
340,568
|
|
|
334,434
|
|
Net investment income
- Life Funds Withheld Assets
|
39,146
|
|
|
46,864
|
|
|
80,706
|
|
|
97,283
|
|
Total net investment
income
|
$
|
215,388
|
|
|
$
|
223,204
|
|
|
$
|
421,274
|
|
|
$
|
431,717
|
|
Total net realized
gains (losses) on investments, and net unrealized gains
(losses) on investments, trading - Life Funds Withheld
Assets
|
104,617
|
|
|
49,967
|
|
|
197,367
|
|
|
102,858
|
|
Net realized and
unrealized gains (losses) on derivative instruments
|
906
|
|
|
48,509
|
|
|
(2,716)
|
|
|
65,030
|
|
Net realized and
unrealized gains (losses) on life retrocession embedded
derivative and derivative instruments - Life Funds Withheld
Assets
|
(229,742)
|
|
|
239,174
|
|
|
(465,822)
|
|
|
9,807
|
|
Income (loss) from
investment fund affiliates
|
13,179
|
|
|
31,377
|
|
|
8,600
|
|
|
66,706
|
|
Fee income and
other
|
10,862
|
|
|
11,012
|
|
|
19,124
|
|
|
15,740
|
|
Total
revenues
|
$
|
2,647,422
|
|
|
$
|
2,685,296
|
|
|
$
|
5,064,649
|
|
|
$
|
4,107,911
|
|
Expenses:
|
|
|
|
|
|
|
|
Net losses and loss
expenses incurred
|
$
|
1,632,386
|
|
|
$
|
1,151,195
|
|
|
$
|
3,014,871
|
|
|
$
|
1,921,022
|
|
Claims and policy
benefits
|
5,482
|
|
|
22,081
|
|
|
10,419
|
|
|
41,468
|
|
Acquisition
costs
|
420,520
|
|
|
341,617
|
|
|
823,787
|
|
|
495,313
|
|
Operating
expenses
|
522,521
|
|
|
507,354
|
|
|
1,037,902
|
|
|
833,010
|
|
Foreign exchange
(gains) losses
|
(19,100)
|
|
|
10,374
|
|
|
(52,919)
|
|
|
37,764
|
|
Interest
expense
|
55,738
|
|
|
49,667
|
|
|
108,041
|
|
|
101,105
|
|
Total
expenses
|
$
|
2,617,547
|
|
|
$
|
2,082,288
|
|
|
$
|
4,942,101
|
|
|
$
|
3,429,682
|
|
Income (loss) before
income tax and income (loss) from operating affiliates.
|
$
|
29,875
|
|
|
$
|
603,008
|
|
|
$
|
122,548
|
|
|
$
|
678,229
|
|
Income (loss) from
operating affiliates
|
21,418
|
|
|
9,462
|
|
|
34,068
|
|
|
32,130
|
|
Gain on sale of
operating affiliate
|
—
|
|
|
340,407
|
|
|
—
|
|
|
340,407
|
|
Provision (benefit)
for income tax
|
2,467
|
|
|
32,959
|
|
|
24,762
|
|
|
57,177
|
|
Net income
(loss)
|
$
|
48,826
|
|
|
$
|
919,918
|
|
|
$
|
131,854
|
|
|
$
|
993,589
|
|
Non-controlling
interests
|
5,044
|
|
|
4,879
|
|
|
66,187
|
|
|
42,269
|
|
Net income (loss)
attributable to ordinary shareholders
|
$
|
43,782
|
|
|
$
|
915,039
|
|
|
$
|
65,667
|
|
|
$
|
951,320
|
|
|
Note 1. The Company's
results for the three and six months ended June 30, 2015 include
those of Catlin from May 1, 2015.
|
XL Group
plc
|
KEY FINANCIAL
DATA
|
|
|
|
|
|
Selected balance
sheet and other data:
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
June 30,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
$
33,342,818
|
|
|
$
33,753,898
|
|
Cash and cash
equivalents
|
3,316,749
|
|
|
3,256,236
|
|
Investments in
affiliates
|
1,968,801
|
|
|
1,708,899
|
|
Unpaid losses and
loss expenses recoverable
|
5,426,773
|
|
|
5,262,706
|
|
Goodwill and other
intangible assets
|
2,217,973
|
|
|
2,210,266
|
|
Total
assets
|
61,198,240
|
|
|
58,682,938
|
|
|
|
|
|
Unpaid losses and
loss expenses
|
26,020,564
|
|
|
25,439,744
|
|
Deposit
liabilities
|
1,178,113
|
|
|
1,168,376
|
|
Future policy benefit
reserves
|
3,798,278
|
|
|
4,163,500
|
|
Funds withheld
liability on GreyCastle Life Retro Arrangements, net of future
policy benefit reserves
recoverable
|
1,145,314
|
|
|
914,629
|
|
Unearned
premiums
|
8,274,300
|
|
|
7,043,358
|
|
Notes payable and
debt
|
2,646,324
|
|
|
2,644,970
|
|
|
|
|
|
Total shareholders'
equity
|
13,663,932
|
|
|
13,654,463
|
|
Ordinary
shareholders' equity
|
11,685,188
|
|
|
11,677,079
|
|
Ordinary shares
outstanding (Note 2)
|
276,772,053
|
|
|
294,783,992
|
|
|
|
|
|
Basic book value per
ordinary share (Note 3)
|
$ 42.22
|
|
|
$ 39.61
|
|
Fully diluted book
value per ordinary share (Note 3)
|
$ 41.71
|
|
|
$ 38.87
|
|
Fully diluted
tangible book value per ordinary share (Note 3)
|
$ 33.79
|
|
|
$ 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: Fully diluted
tangible book value per ordinary share is a non-GAAP
financial measure. 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 of
$2.218 million for June 30, 2016 and 2.210 million for June 30,
2015 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 and six months ended June 30, 2016 and
2015.
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
June
30,
|
|
June
30,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Note1 and
2)
|
|
|
|
(Note1 and
2)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to ordinary shareholders
|
$
|
43,782
|
|
$
|
915,039
|
|
$
|
65,667
|
|
$
|
951,320
|
Net realized and
unrealized (gains) losses on life retrocession embedded
derivative
and derivative instruments - Life Funds Withheld Assets
|
229,742
|
|
(239,174)
|
|
465,822
|
|
(9,807)
|
Net realized (gains)
losses on inv estments and net
unrealized (gains) losses on
investments, Trading - Life Funds Withheld Assets
|
(85,149)
|
|
(45,616)
|
|
(186,315)
|
|
(93,905)
|
Net investment income
- Life Funds Withheld Assets
|
(39,146)
|
|
(46,864)
|
|
(80,706)
|
|
(97,283)
|
Foreign exchange
revaluation (gains) losses on and other income and expense
items
related to Life Funds Withheld Assets
|
6,779
|
|
14,633
|
|
(4,193)
|
|
7,054
|
Net income (loss)
attributable to ordinary shareholders excluding Contribution
from
GreyCastle Life Retro Arrangements (Note 3)
|
$
|
156,008
|
|
$
|
598,018
|
|
$
|
260,275
|
|
$
|
757,379
|
Net realized (gains)
losses on investments sold - excluding Life Funds Withheld
Assets
|
(19,468)
|
|
(4,351)
|
|
(11,052)
|
|
(8,953)
|
Net realized and
unrealized (gains) losses on derivatives
|
(906)
|
|
(48,509)
|
|
2,716
|
|
(65,030)
|
Net realized and
unrealized (gains) losses on investments and derivatives related
to
the Company's insurance company affiliates
|
1,818
|
|
595
|
|
2,231
|
|
1,253
|
Exchange (gains)
losses
|
(25,879)
|
|
(4,259)
|
|
(48,726)
|
|
30,710
|
Expenses related to
Catlin acquisition
|
—
|
|
36,339
|
|
—
|
|
61,803
|
Gain on sale of
operating affiliate
|
—
|
|
(340,407)
|
|
—
|
|
(340,407)
|
Provision (benefit)
for income tax on items excluded from operating
income
|
(5,126)
|
|
8,371
|
|
4,391
|
|
3,418
|
Operating net income
(loss) (Note 4)
|
$
|
106,447
|
|
$
|
245,797
|
|
$
|
209,835
|
|
$
|
440,173
|
Per ordinary share
results: (Note 5)
|
|
|
|
|
|
|
|
Net income (loss)
attributable to ordinary shareholders
|
$
|
0.15
|
|
$
|
3.11
|
|
$
|
0.23
|
|
$
|
3.43
|
Operating net income
(loss) (Note 4)
|
$
|
0.37
|
|
$
|
0.84
|
|
$
|
0.72
|
|
$
|
1.59
|
Weighted average
ordinary shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
281,793,386
|
|
289,419,914
|
|
286,880,981
|
|
272,664,906
|
Diluted - Net
income
|
285,081,908
|
|
293,983,082
|
|
290,929,362
|
|
277,473,300
|
Diluted - Operating
net income
|
285,081,908
|
|
293,983,082
|
|
290,929,362
|
|
277,473,300
|
Return on ordinary
shareholders' equity:
|
|
|
|
|
|
|
|
Closing ordinary
shareholders' equity (Note 6)
|
$
|
11,685,188
|
|
$
|
12,247,298
|
|
$
|
11,685,188
|
|
$
|
12,247,298
|
Closing unrealized
(gain) loss on investments (Note 7)
|
$
|
(1,421,697)
|
|
$
|
(1,104,350)
|
|
$
|
(1,421,697)
|
|
$
|
(1,104,350)
|
Average ordinary
shareholders' equity excluding average unrealized gains (losses)
on
investments (Note 5)
|
$
|
10,390,587
|
|
$
|
9,844,700
|
|
$
|
10,597,489
|
|
$
|
9,831,316
|
Average ordinary
shareholders' equity (Note 6)
|
$
|
11,686,966
|
|
$
|
11,245,678
|
|
$
|
11,681,134
|
|
$
|
11,140,525
|
Operating net income
(loss) (Note 4)
|
$
|
106,447
|
|
$
|
245,797
|
|
$
|
209,835
|
|
$
|
440,173
|
Annualized operating
net income (loss) (Note 4)
|
$
|
425,788
|
|
$
|
983,188
|
|
$
|
419,670
|
|
$
|
880,346
|
Annualized operating
return on average ordinary shareholders' equity (Notes 4 and
6)
|
3.6%
|
|
8.7%
|
|
3.6%
|
|
7.9%
|
Annualized operating
return on average ordinary shareholders' equity excluding
average unrealized gains and losses on investments (Notes 4 and
6)
|
4.1%
|
|
10.0%
|
|
4.0%
|
|
9.0%
|
Note 1: Certain
amounts have been reclassified to conform to the current period
presentation.
|
|
Note 2: The
Company's results for the three and six months ended June 30, 2015
include those of Catlin 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 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, (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 XL's
insurance company affiliates for the periods presented, (7) our
foreign exchange (gains) losses, (8) our expenses related to the
Catlin acquisition. In addition to presenting net income (loss),
(9) our gain on the sale of our interest in our operating
affiliate, ARX, and (10) 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 ordinary shareholders' equity" and "annualized operating
return on average ordinary 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 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 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 ordinary 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) 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, and (10) a provision (benefit) for income
tax on items excluded from operating income; (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 and integration
costs; (iv) annualized net income (loss) attributable to ordinary
shareholders excluding the Contribution from the GreyCastle Life
Retro Arrangements and (v) Fully diluted tangible book value per
ordinary share (ordinary 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 7 and 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
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
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.
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.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/xl-group-ltd-announces-second-quarter-2016-results-300305041.html
SOURCE XL Group Ltd