HAMILTON, Bermuda, Feb. 1,
2017 /PRNewswire/ --
- Net income attributable to common shareholders, and net
income attributable to common shareholders excluding the
contribution from the GreyCastle Life Retro
Arrangements,1 of $304.7
million, or $1.12 per share,
and $145.3 million, respectively, for
the quarter and $441.0 million, or
$1.56 per share, and $576.0 million, respectively, for the full
year
- Operating net income2 of $128.4 million, or $0.47 per share, for the quarter and $460.7 million or $1.63 per share for the full year on a fully
diluted basis
- P&C combined ratio of 94.8% for the quarter compared to
92.3% in the prior year quarter, and a full year P&C combined
ratio of 94.2% compared to 92.0% in the prior year
- Natural catastrophe pre-tax losses net of reinsurance and
reinstatement premiums in the quarter of $246.1 million (10.1 points to the loss ratio),
compared to $107.8 million (4.6
points to the loss ratio), in the prior year quarter and
$636.3 million (6.6 points to the
loss ratio) for the full year compared to $213.2 million (2.6 points to the loss ratio) in
the prior year
- Integration costs related to the combination with Catlin
Group Limited ("Catlin") totaled approximately $58.8 million for the quarter and $220.4 million for the full year
- Fully diluted book value per common share of $40.33 at December 31, 2016, a
decrease of $2.04, or 4.8%, from
fully diluted book value per common share of $42.37 at September 30,
2016
- Fully diluted tangible book value per common
share3 of $32.21 at
December 31, 2016, a decrease of $2.01, or 5.9%, from fully diluted tangible book
value per common share at September
30, 2016
- Return on average common shareholders' equity was 3.9% for
the full year
- Operating return on average common shareholders'
equity2,4 for the full year, excluding and
including average unrealized gains and losses on investments was
4.3% and 4.1%. Excluding integration costs these return rates would
have been 6.3% and 5.9%, respectively
XL Group Ltd ("XL" or the "Company") (NYSE: XL) today
reported its fourth quarter and full year 2016 results.
Commenting on the Company's performance, Chief Executive Officer
Mike McGavick said:
"2016 was undoubtedly a challenging year. Our results were
impacted by both a disappointing start as well as a number of
significant catastrophe losses throughout the year and in the 4th
quarter in particular.
At the same time, as the year developed, our underlying
strengths continued to emerge. For example, our grinding focus on
efficiency and underwriting quality produced a lower expense ratio
and an improved loss ratio excluding catastrophes. We were
even able to grow a bit - bolstered by our new market presence our
4th quarter P&C net premium earned, for example, was up 3.3%
over the prior year quarter.
We are enormously proud that our colleagues' hard work and focus
on client service was recognized as we claimed the number one spot
for product innovation from Advisen, topped the London market's Gracechurch survey across
nearly all categories, and earned Highest in Customer Satisfaction
among Large Commercial Insurers by the J.D. Power North America 2016 study.
All in, we feel we took important steps in the year and, despite
challenging market conditions, are very much looking forward to
2017."
Highlights
|
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|
|
|
|
|
|
(U.S. dollars in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
(Note
1)
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to common shareholders
|
|
$
|
304,700
|
|
|
$
|
228,550
|
|
|
$
|
440,968
|
|
|
$
|
1,207,152
|
|
Per average common
share outstanding-fully diluted
|
|
$
|
1.12
|
|
|
$
|
0.76
|
|
|
$
|
1.56
|
|
|
$
|
4.15
|
|
|
|
|
|
|
|
|
|
|
Operating net income
(loss)
|
|
$
|
128,440
|
|
|
$
|
195,029
|
|
|
$
|
460,729
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|
|
$
|
705,994
|
|
Per average common
share outstanding-fully diluted
|
|
$
|
0.47
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|
|
$
|
0.65
|
|
|
$
|
1.63
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|
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$
|
2.43
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Note 1:
The Company's results for full year ended December 31, 2015 include
those of Catlin Group Limited from May 1, 2015.
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- Net income attributable to common shareholders of $304.7 million for the quarter increased compared
to $228.6 million in the prior year
quarter. In addition to a large variance driven from our Life
derivative as a result of interest rate changes, the current
quarter includes approximately $58.8
million in integration costs as well as $246.1 million in natural catastrophe losses
compared to $73.3 million in
integration costs and $107.8 million
in natural catastrophe losses in the prior year quarter.
- Operating net income of $128.4
million for the quarter decreased compared to operating net
income of $195.0 million in the prior
year quarter due largely to greater catastrophe losses incurred in
2016 as compared to 2015, most significantly Hurricane Matthew and
the recent earthquake activity in New
Zealand.
- Net income from affiliates was $47.9
million for the quarter, compared to net income of
$14.7 million in the prior year
quarter. The Company had solid hedge fund performance
compared to the prior year quarter. Also included this
quarter was a net $14.0 million
benefit resulting from the rebalancing of the investment portfolio,
as the Company changed concentrations in certain individual
positions in the normal course of business, partially offset by a
decline in value within our Operating Affiliate portfolio.
- Net investment income for the quarter was $196.1 million, compared to $215.5 million in the prior year quarter and
$209.8 million in the third quarter
of 2016. Net investment income excluding the Life Funds Withheld
Assets for the quarter was $161.0
million, compared to $171.9
million in the prior year quarter and $170.8 million in the third quarter of 2016.
- Operating expenses were 8.3% favorable versus the prior year
quarter, reflecting the continuing efficiency efforts as well as
benefits from foreign exchange, particularly from the weakening of
the British Pound compared to the U.S. Dollar.
- Income tax benefit of $0.4
million was recognized in the quarter, primarily due to a
greater proportion of total quarterly net income being earned in
low-tax jurisdictions than previously anticipated, and the
recognition of a net tax benefit resulting from the release of tax
risk provisions due to the closure of the applicable statutory
assessment periods and other tax return adjustments.
- Fully diluted book value per common share decreased by
$2.04 from the prior quarter to
$40.33 and fully diluted tangible
book value per common share decreased by $2.01 from the prior quarter to $32.21, driven by the decrease in our accumulated
unrealized gains on investments and payment of dividends, partially
offset by net income.
- Share buybacks totaled approximately 4.0 million shares or
$144.9 million during the quarter,
compared to 4.7 million shares or $176.7
million in the prior year quarter. Share buybacks for
the full year ended December 31,
2016, totaled approximately 30.2 million shares or
$1.1 billion, compared to 12.4
million shares or $466.7 million
during the same period in the prior year. At
December 31, 2016, $449.3 million of common shares remained
available for purchase under our share buyback program.
P&C
Operations
|
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|
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(U.S. dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
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(Note
1)
|
|
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2016
|
|
2015
|
|
2016
|
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2015
|
Gross premiums
written
|
|
$
|
3,016,596
|
|
|
$
|
2,527,766
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|
|
$
|
13,625,609
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|
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$
|
10,669,009
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Net premiums
written
|
|
$
|
2,313,132
|
|
|
$
|
1,878,792
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|
|
$
|
10,230,636
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$
|
7,888,824
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Net premiums
earned
|
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$
|
2,454,060
|
|
|
$
|
2,375,155
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$
|
9,765,887
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$
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8,164,184
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Underwriting profit
(loss)
|
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$
|
126,420
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$
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183,458
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$
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570,653
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$
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653,191
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Loss ratio
|
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63.8%
|
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58.1%
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|
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62.2%
|
|
|
58.4%
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Underwriting expense
ratio
|
|
31.0%
|
|
|
34.2%
|
|
|
32.0%
|
|
|
33.6%
|
|
Combined
ratio
|
|
94.8%
|
|
|
92.3%
|
|
|
94.2%
|
|
|
92.0%
|
|
|
|
|
|
|
|
|
|
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Note 1:
The Company's results for full year ended December 31, 2015 include
those of Catlin Group Limited from May 1, 2015.
|
- P&C gross premiums written ("GPW") in the fourth quarter
increased 19.3% compared to the prior year quarter.
- The Insurance segment GPW increased 6.9% from the prior year
quarter driven primarily by new business in Political Risk and
Trade Credit, Property International Open Market, Professional, US,
Construction North America and North
America programs along with stronger renewals in
International Financial Lines and Casualty Global Risk
Management. Excluding the impact of foreign exchange, GPW
increased 8.7%.
- The Reinsurance segment GPW increased by 159.5% from the prior
year quarter. The increase was primarily due to significant
new proportional business in Bermuda in the Property Treaty line of
business offset by cancellations in Bermuda and London in the Casualty line of business.
- P&C net premiums earned ("NPE") in the fourth quarter of
$2.5 billion were comprised of
$1.71 billion from the Insurance
segment and $746.6 million from the
Reinsurance segment.
- The P&C loss ratio in the current quarter was 5.7
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
$246.1 million, compared to
$107.8 million in the prior year
quarter. Included in the P&C loss ratio was favorable
development of $105.9 million
compared to $121.2 million in the
prior year quarter. Excluding prior year development and natural
catastrophe losses, the fourth quarter P&C loss ratio was 0.6
percentage points favorable versus the prior year quarter.
- The P&C combined ratio excluding prior year development and
the impact of natural catastrophe losses for the quarter was 89.1%,
compared to 92.8% for the prior year quarter. The Insurance segment
combined ratio on this basis was 92.3% for the quarter compared to
95.7% for the prior year quarter, while the Reinsurance segment
combined ratio on this basis was 81.9% for the quarter compared to
86.3% for the prior year quarter. Overall, improvements on
each component of the combined ratio reflect disciplined
underwriting as well as continued emergence of operational
efficiencies.
Further details of the results for the quarter may be found in
the Company's Financial Supplement and Earnings Presentation, each
of which is dated February 1, 2017 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, February 1, 2017. 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 February 1, 2017, through midnight Eastern Time on March 1, 2017. A telephone replay of the
conference call will also be available beginning at approximately
9:00 p.m. Eastern Time on
February 1, 2017, until midnight
Eastern Time on March 1, 2017,
by dialing (203) 369-3051 or (866) 566-0478. The following passcode
will be required: 2117
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 natural catastrophe events due to the preliminary
nature of reports and estimates of loss and damage to date; (d)
changes in the amount or type of business that we write, whether
due to our actions, changes in market conditions or other factors,
and the amount of premium attributable to such business; (e) the
availability, cost or quality of ceded reinsurance, and the timely
and full recoverability of such reinsurance, or other amounts due
to us, or changes to our projections related to such
recoverables; (f) actual loss experience from insured or
reinsured events and the timing of claims payments being faster or
the receipt of reinsurance recoverables being slower than we
anticipated; (g) increased competition on the basis of pricing,
capacity, coverage terms or other factors, such as the increased
inflow of third party capital into reinsurance markets, which could
harm our ability to maintain or increase its business volumes or
profitability; (h) greater frequency or severity of claims and loss
activity than our underwriting, reserving or investment practices
anticipate based on historical experience or industry data; (i) the
impact of changes in the global financial markets, such as the
effects of inflation on our business, including on pricing and
reserving, changes in interest rates, credit spreads, foreign
currency exchange rates and future volatility in the world's
credit, financial and capital markets that adversely affect the
performance and valuation of our investments, future financing
activities and access to such markets, our ability to pay claims or
general financial condition; (j) our ability to successfully
implement our business strategy; (k) our ability to successfully
attract and raise additional third party capital for existing or
new investment vehicles; (l) changes in credit ratings and rating
agency policies or practices, which could trigger cancelation
provisions in our assumed reinsurance agreements or impact the
availability of our credit facilities; (m) the potential for
changes to methodologies, estimations and assumptions that underlie
the valuation of our financial instruments that could result in
changes to investment valuations; (n) changes to our assessment as
to whether it is more likely than not that we will be required to
sell, or have the intent to sell, available-for-sale fixed maturity
securities before their anticipated recovery; (o) unanticipated
constraints on our liquidity, including the availability of
borrowings and letters of credit under credit facilities that
inhibit our ability to support our operations, including our
ability to underwrite policies and pay claims; (p) the ability of
our subsidiaries to pay dividends to XL Group Ltd, XLIT Ltd. and
Catlin Insurance Company Ltd; (q) changes in regulators or
regulations applicable to us, including as a result of the
completion of our redomestication from Ireland to Bermuda, such as
changes in regulatory capital balances that our operating
subsidiaries must maintain, or to our brokers or customers;
(r) the effects of business disruption, economic contraction or
economic sanctions due to unpredictable global political and social
conditions such as war, terrorism or other hostilities, or
pandemics; (s) the actual amount of new and renewal business and
acceptance of our products and services, including new products and
services and the materialization of risks related to such products
and services; (t) changes in the distribution or placement of
risks due to increased consolidation of insurance and reinsurance
brokers; (u) bankruptcies or other financial concerns of companies
insofar as they affect P&C insurance and reinsurance coverages
or claims that we may have as a counterparty; (v) the loss of key
personnel; (w) the effects of mergers, acquisitions and
divestitures, including our ability to modify our internal control
over financial reporting, changes to our risk appetite and our
ability to realize the value or benefits expected, in each case, as
a result of such transactions; (x) changes in general economic
conditions, including the political, monetary, economic and
operational impacts of the "Brexit" referendum held on June 23,
2016 in which the UK electorate voted to withdraw from the EU, new
or continued sovereign debt concerns in Euro-Zone countries or
emerging markets such as Brazil or China, or governmental actions
for the purposes of stabilizing financial markets; (y) changes in
applicable tax laws, tax treaties or tax regulations or the
interpretation or enforcement thereof; (z) judicial decisions and
rulings, new theories of liability or emerging claims coverage
issues, legal tactics and settlement terms; (aa) the effects of
climate change (such as changes to weather patterns, sea levels or
temperatures) on our business, which our modeling or risk
management practices may not adequately address due to the
uncertain nature of climate change; and (bb) the other
factors set forth in our reports on Form 10-K and Form 10-Q and
other documents on file with the Securities and Exchange
Commission. XL undertakes no obligation to update publicly any
forward looking statement, whether as a result of new information,
future developments or otherwise.
XL intends to use its website as a means of disclosing
material non-public information and for complying with its
disclosure obligations under Regulation FD. Such disclosures will
be included on the website in the Investor Relations section.
Accordingly, investors should monitor such portions of XL's
website, in addition to following its press releases, SEC filings
and public conference calls and webcasts.
*At 12:30 p.m., Irish
time, on July 25, 2016 (the
"Effective Time"), XL Group plc, an Irish public limited company
("XL-Ireland"), and XL Group Ltd, a Bermuda exempted company ("XL-Bermuda"),
completed the previously disclosed scheme of arrangement under
Irish law (the "Scheme of Arrangement") that effected a transaction
(the "Redomestication") that resulted in the shareholders of
XL-Ireland becoming shareholders of XL-Bermuda and XL-Ireland
becoming a subsidiary of XL-Bermuda. In accordance with the
terms of the Scheme of Arrangement, the following steps occurred
effectively simultaneously at the Effective Time: (i) all of the
existing XL-Ireland ordinary shares, par value $0.01 per share, (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. The results of this release are
for the full year ended December 31,
2016, and therefore include a period that commenced prior to
the Redomestication. As such, this release discloses the
results of XL Bermuda, but includes the results of XL-Ireland
through the Effective Time. For purposes of this release, the
"Company" and "XL" refers to XL-Ireland or XL-Bermuda, as the
context requires.
1On May 1, 2014, our
wholly-owned subsidiary, XL Insurance (Bermuda) Ltd ("XLIB") (on June 9, 2016, XLIB and XL Re Ltd amalgamated to
form XL Bermuda Ltd), entered into a sale and purchase agreement
with GreyCastle Holdings Ltd. ("GreyCastle") providing for the sale
of 100% of the common shares of XLIB's wholly-owned subsidiary,
XLLR, for $570 million in cash. This
transaction was completed on May 30,
2014. As a result of the transaction, we have ceded the
majority of our life reinsurance business to XLLR via 100% quota
share reinsurance (the "GreyCastle Life Retro Arrangements"). The
designated investments that support the GreyCastle Life Retro
Arrangements, which are written on a funds withheld basis ("Life
Funds Withheld Assets"), are included within "Total investments
available for sale" and "Fixed maturities, trading at fair value"
on our balance sheet. Investment results for these assets -
including interest income, unrealized gains and losses, and gains
and losses from sales - are passed directly to the reinsurer
pursuant to a contractual arrangement that is accounted for as a
derivative. Net income attributable to common shareholders
excluding the contribution from the GreyCastle Life Retro
Arrangements is a non-GAAP measure. See the schedule entitled
"Reconciliation" on page 9 of this press release for a
reconciliation of net income (loss) attributable to common
shareholders to net income (loss) attributable to common
shareholders excluding the Contribution from the GreyCastle Life
Retro Arrangements. During 2015, we entered into another
reinsurance agreement (the "U.S. Term Life Retro Arrangements")
ceding the vast majority of the remaining life reinsurance
business.
2Operating net income is defined as net income (loss)
attributable to common 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 The
Company's insurance company affiliates for the periods presented,
(7) our foreign exchange (gains) losses, (8) our expenses related
to the Catlin acquisition, (9) our gain on the sale of our interest
in our former operating affiliate, ARX Holding Corp., (10) our gain
on the sale of our wholly-owned subsidiary XL Life Insurance and
Annuity Company ("XLLIAC") and the partial sale of our holdings in
New Ocean Capital Management, (11) our loss on the inception of
U.S. Term Life Retro Arrangements, (12) our loss on the early
extinguishment of the notes assumed in conjunction with the Catlin
Acquisition and (13) a provision (benefit) for income tax on items
excluded from operating income. "Operating net income", "annualized
operating return on average common shareholders' equity" and
"annualized operating return on average common shareholders'
equity" excluding "average unrealized gains and losses on
investments" and "integration costs" are non-GAAP financial
measures. See the schedule entitled "Reconciliation" on page
9 of this press release for a reconciliation of "operating net
income" to net income (loss) attributable to common shareholders
and the calculation of "annualized operating return on average
common shareholders' equity" and "annualized operating return on
average common shareholders' equity" excluding "average unrealized
gains and losses on investments" and "integration costs",
which are based on operating net income.
3Fully diluted tangible book value per common share
is a non-GAAP financial measure. See page 8 of this press
release for a reconciliation of fully diluted tangible book value
per common share to fully diluted book value per common share.
4Common shareholders' equity is defined as total
shareholders' equity less non-controlling interest in equity of
consolidated subsidiaries.
XL Group
Ltd
|
UNAUDITED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
(U.S. dollars in
thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
(Note 1)
|
Revenues:
|
|
|
|
|
|
|
|
Net premiums
earned
|
$
|
2,457,075
|
|
|
$
|
2,386,820
|
|
|
$
|
9,777,934
|
|
|
$
|
8,226,425
|
|
Net investment
income:
|
|
|
|
|
|
|
|
Net investment income
- excluding Life Funds Withheld Assets
|
160,980
|
|
|
171,887
|
|
|
672,382
|
|
|
684,881
|
|
Net investment income
- Life Funds Withheld Assets
|
35,108
|
|
|
43,620
|
|
|
154,751
|
|
|
187,489
|
|
Total net investment
income
|
$
|
196,088
|
|
|
$
|
215,507
|
|
|
$
|
827,133
|
|
|
$
|
872,370
|
|
Total net realized
gains (losses) on investments and unrealized gains (losses)
on investments, trading securities
|
31,095
|
|
|
47,913
|
|
|
372,138
|
|
|
202,178
|
|
Net realized and
unrealized gains (losses) on derivative instruments
|
(253)
|
|
|
(4,004)
|
|
|
2,521
|
|
|
53,123
|
|
Net realized and
unrealized gains (losses) on life retrocession embedded
derivative and derivative instruments - Life Funds Withheld
Assets
|
151,342
|
|
|
(35,358)
|
|
|
(540,090)
|
|
|
(151,691)
|
|
Income (loss) from
investment fund affiliates
|
50,002
|
|
|
10,329
|
|
|
70,758
|
|
|
73,320
|
|
Fee income and
other
|
7,968
|
|
|
10,106
|
|
|
35,692
|
|
|
33,201
|
|
Total
revenues
|
$
|
2,893,317
|
|
|
$
|
2,631,313
|
|
|
$
|
10,546,086
|
|
|
$
|
9,308,926
|
|
Expenses:
|
|
|
|
|
|
|
|
Net losses and loss
expenses incurred
|
$
|
1,566,161
|
|
|
$
|
1,380,893
|
|
|
$
|
6,072,835
|
|
|
$
|
4,766,200
|
|
Claims and policy
benefits
|
11,950
|
|
|
51,950
|
|
|
28,244
|
|
|
115,997
|
|
Acquisition
costs
|
392,996
|
|
|
412,962
|
|
|
1,620,671
|
|
|
1,317,448
|
|
Operating
expenses
|
517,002
|
|
|
563,787
|
|
|
2,063,362
|
|
|
1,966,939
|
|
Exchange (gains)
losses
|
45,036
|
|
|
(26,921)
|
|
|
(9,578)
|
|
|
22,504
|
|
Loss (gain) on sale
of subsidiary
|
(3,418)
|
|
|
—
|
|
|
(7,088)
|
|
|
—
|
|
Extinguishment of
debt
|
—
|
|
|
5,592
|
|
|
—
|
|
|
5,592
|
|
Interest
expense
|
52,277
|
|
|
52,181
|
|
|
209,763
|
|
|
205,215
|
|
Total
expenses
|
$
|
2,582,004
|
|
|
$
|
2,440,444
|
|
|
$
|
9,978,209
|
|
|
$
|
8,399,895
|
|
Income (loss) before
income tax and income (loss) from operating affiliates
|
$
|
311,313
|
|
|
$
|
190,869
|
|
|
$
|
567,877
|
|
|
$
|
909,031
|
|
Income (loss) from
operating affiliates
|
(2,081)
|
|
|
4,414
|
|
|
44,397
|
|
|
44,740
|
|
Gain on sale of
operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
340,407
|
|
Provision (benefit)
for income tax
|
(382)
|
|
|
(39,296)
|
|
|
42,129
|
|
|
(19,161)
|
|
Net income
(loss)
|
$
|
309,614
|
|
|
$
|
234,579
|
|
|
$
|
570,145
|
|
|
$
|
1,313,339
|
|
Non-controlling
interests
|
4,914
|
|
|
6,029
|
|
|
129,177
|
|
|
106,187
|
|
Net income (loss)
attributable to common shareholders
|
$
|
304,700
|
|
|
$
|
228,550
|
|
|
$
|
440,968
|
|
|
$
|
1,207,152
|
|
|
Note 1:
The Company's results for full year ended December 31, 2015 include
those of Catlin Group Limited from May 1, 2015
|
XL Group
Ltd
|
KEY FINANCIAL
DATA
|
|
|
|
|
|
Selected balance
sheet and other data:
|
|
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
At
|
|
At
|
|
December 31,
2016
|
|
December 31,
2015
|
|
(Unaudited)
|
|
(Note
1)
|
Total investments
available for sale
|
$
|
31,919,126
|
|
|
$
|
33,753,898
|
|
Cash and cash
equivalents
|
3,426,988
|
|
|
3,256,236
|
|
Investments in
affiliates
|
2,177,645
|
|
|
1,708,899
|
|
Unpaid losses and
loss expenses recoverable
|
5,491,297
|
|
|
5,262,706
|
|
Goodwill and other
intangible assets
|
2,203,653
|
|
|
2,210,266
|
|
Total
assets
|
58,434,102
|
|
|
58,682,938
|
|
|
|
|
|
Unpaid losses and
loss expenses
|
25,939,571
|
|
|
25,439,744
|
|
Deposit
liabilities
|
1,116,233
|
|
|
1,168,376
|
|
Future policy benefit
reserves
|
3,506,047
|
|
|
4,163,500
|
|
Funds withheld
liability on GreyCastle Life Retro Arrangements, net of future
policy benefit reserves
recoverable
|
998,968
|
|
|
914,629
|
|
Unearned
premiums
|
7,293,028
|
|
|
7,043,358
|
|
Notes payable and
debt
|
2,647,677
|
|
|
2,644,970
|
|
|
|
|
|
Total shareholders'
equity
|
12,960,679
|
|
|
13,654,463
|
|
Common shareholders'
equity
|
10,938,512
|
|
|
11,677,079
|
|
Common shares
outstanding (Note 2)
|
266,927,220
|
|
|
294,783,992
|
|
|
|
|
|
Basic book value per
common share
|
$
|
40.98
|
|
|
$
|
39.61
|
|
Fully diluted book
value per common share
|
$
|
40.33
|
|
|
$
|
38.87
|
|
Fully diluted
tangible book value per common share (Note 3)
|
$
|
32.21
|
|
|
$
|
31.52
|
|
|
|
|
|
Note 1: Certain items
have been reclassified to conform to the current period
presentation.
|
|
|
|
|
Note 2: Common shares
outstanding include all common shares issued and outstanding (as
disclosed on the face of the balance sheet) as well as all director
share units outstanding.
|
|
|
|
|
Note 3: Fully diluted
tangible book value per common share is a non-GAAP financial
measure. Fully diluted tangible book value per common share is
calculated in the same manner as fully diluted book value per
common share except that goodwill and intangible assets of $2.204
billion for December 31, 2016 and $2.210 billion for December 31,
2015 are excluded from common shareholders' equity.
|
XL Group
Ltd
|
RECONCILIATION
|
|
The following is a
reconciliation of XL's net income (loss) attributable to common
shareholders to operating net income (loss) (Note 5) and also
includes the calculation of annualized return on average common
shareholders' equity and annualized return on average common
shareholders' equity excluding average unrealized gains and losses
on investments, in each case, both including and excluding
integration costs and based on operating net income (loss) for the
three months and twelve months ended December 31, 2016 and
2015.
|
|
(U.S. dollars in
thousands except share and per share amounts)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
(Note 1)
|
|
|
|
(Notes 1 and
2)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net income (loss)
attributable to common shareholders
|
$
|
304,700
|
|
|
$
|
228,550
|
|
|
$
|
440,968
|
|
|
$
|
1,207,152
|
|
Net realized and
unrealized (gains) losses on life retrocession embedded
derivative and derivative instruments - Life Funds Withheld
Assets
|
(151,342)
|
|
|
35,358
|
|
|
540,090
|
|
|
151,691
|
|
Net realized (gains)
losses on investments and net unrealized (gains) losses on
investments, Trading - Life Funds Withheld Assets
|
12,147
|
|
|
(36,668)
|
|
|
(259,449)
|
|
|
(182,181)
|
|
Net investment income
- Life Funds Withheld Assets
|
(35,108)
|
|
|
(43,620)
|
|
|
(154,751)
|
|
|
(187,489)
|
|
Foreign exchange
revaluation (gains) losses on and other income and expense
items related to Life Funds Withheld Assets
|
14,872
|
|
|
(10,645)
|
|
|
9,142
|
|
|
(7,068)
|
|
Net income (loss)
attributable to common shareholders excluding Contribution from
GreyCastle Life Retro Arrangements (Note 3)
|
$
|
145,269
|
|
|
$
|
172,975
|
|
|
$
|
576,000
|
|
|
$
|
982,105
|
|
Net realized (gains)
losses and OTTI on investments - excluding Life Funds
Withheld Assets
|
(43,242)
|
|
|
(11,245)
|
|
|
(112,689)
|
|
|
(19,997)
|
|
Net realized and
unrealized (gains) losses on derivatives
|
253
|
|
|
4,004
|
|
|
(2,521)
|
|
|
(53,123)
|
|
Net realized and
unrealized (gains) losses on investments and derivatives
related
to the Company's insurance company affiliates
|
700
|
|
|
1,493
|
|
|
2,931
|
|
|
2,732
|
|
Exchange (gains)
losses excluding Life Funds Withheld Assets
|
30,164
|
|
|
(16,276)
|
|
|
(18,720)
|
|
|
29,572
|
|
Expenses related to
Catlin acquisition
|
—
|
|
|
1,700
|
|
|
—
|
|
|
64,748
|
|
Loss (gain) on sale
of subsidiary (Note 4)
|
(3,418)
|
|
|
—
|
|
|
(7,088)
|
|
|
—
|
|
Loss on U.S.Term Life
Retro Arrangements
|
—
|
|
|
34,986
|
|
|
—
|
|
|
34,986
|
|
Extinguishment of
debt
|
—
|
|
|
5,592
|
|
|
—
|
|
|
5,592
|
|
Gain on sale of
operating affiliate
|
—
|
|
|
—
|
|
|
—
|
|
|
(340,407)
|
|
Provision (benefit)
for income tax on items excluded from operating income
|
(1,286)
|
|
|
1,800
|
|
|
22,816
|
|
|
(214)
|
|
Operating net income
(loss) (Note 5)
|
$
|
128,440
|
|
|
$
|
195,029
|
|
|
$
|
460,729
|
|
|
$
|
705,994
|
|
Per common share
results: (Note 6)
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders
|
$
|
1.12
|
|
|
$
|
0.76
|
|
|
$
|
1.56
|
|
|
$
|
4.15
|
|
Operating net income
(loss) (Note 5)
|
$
|
0.47
|
|
|
$
|
0.65
|
|
|
$
|
1.63
|
|
|
$
|
2.43
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
268,573,636
|
|
|
297,138,797
|
|
|
278,957,444
|
|
|
286,194,248
|
|
Diluted - Net
income
|
272,681,106
|
|
|
302,298,268
|
|
|
282,757,804
|
|
|
290,998,857
|
|
Diluted - Operating
net income
|
272,681,106
|
|
|
302,298,268
|
|
|
282,757,804
|
|
|
290,998,857
|
|
Return on common
shareholders' equity:
|
|
|
|
|
|
|
|
Closing shareholders'
equity
|
12,960,679
|
|
|
13,654,463
|
|
|
12,960,679
|
|
|
13,654,463
|
|
Minority
interest
|
2,022,167
|
|
|
1,977,384
|
|
|
2,022,167
|
|
|
1,977,384
|
|
Closing common
shareholders' equity (Note 7)
|
$
|
10,938,512
|
|
|
$
|
11,677,079
|
|
|
$
|
10,938,512
|
|
|
$
|
11,677,079
|
|
Closing unrealized
(gain) loss on investments (Note 8)
|
$
|
(679,477)
|
|
|
$
|
(745,592)
|
|
|
$
|
(679,477)
|
|
|
$
|
(745,592)
|
|
Average common
shareholders' equity excluding average unrealized gains
(losses)
on investments (Note 7)
|
$
|
10,193,238
|
|
|
$
|
10,932,084
|
|
|
$
|
10,595,261
|
|
|
$
|
9,725,585
|
|
Average common
shareholders' equity (Note 7)
|
$
|
11,275,339
|
|
|
$
|
11,807,654
|
|
|
$
|
11,307,796
|
|
|
$
|
10,855,415
|
|
Operating net income
(loss) (Note 5)
|
$
|
128,440
|
|
|
$
|
195,029
|
|
|
$
|
460,729
|
|
|
$
|
705,994
|
|
Annualized operating
net income (loss) (Note 5)
|
$
|
513,760
|
|
|
$
|
780,116
|
|
|
$
|
460,729
|
|
|
$
|
705,994
|
|
Annualized operating
net income (loss) (excluding integration costs) (Note
5)
|
$
|
728,969
|
|
|
$
|
1,048,394
|
|
|
$
|
662,359
|
|
|
$
|
849,100
|
|
Annualized operating
return on average common shareholders' equity (Notes 5
and 7)
|
4.6%
|
|
|
6.6%
|
|
|
4.1%
|
|
|
6.5%
|
|
Annualized operating
return on average common shareholders' equity excluding
average unrealized gains and losses on investments (Notes 5 and
7)
|
5.0%
|
|
|
7.1%
|
|
|
4.3%
|
|
|
7.3%
|
|
Annualized operating
return on average common shareholders' equity excluding
integration costs (Notes 5 and 7)
|
6.5%
|
|
|
8.9%
|
|
|
5.9%
|
|
|
7.8%
|
|
Annualized operating
return on average common shareholders' equity excluding
integration costs and unrealized gains and losses on
investments (Notes 5 and 7)
|
7.2%
|
|
|
9.6%
|
|
|
6.3%
|
|
|
8.7%
|
|
|
Note 1: Certain
amounts have been reclassified to conform to the current period
presentation.
|
|
Note 2: The Company's
results for the year ended December 31, 2015 include those of
Catlin Group Limited from May 1, 2015.
|
|
Note 3: Investment
results for the Life Funds Withheld Assets - including interest
income, unrealized gains and losses, and gains and losses from
sales - are passed directly to the reinsurer pursuant to a
contractual arrangement that is accounted for as a derivative.
Changes in the fair value of the embedded derivative associated
with these GreyCastle Life Retro Arrangements are reflected within
"Net realized and unrealized (gains) losses on life retrocession
embedded derivative and derivative instruments - Life Funds
Withheld Assets" in the reconciliation above.
|
|
Note 4: On September
30, 2016, the Company completed the sale of its wholly-owned
subsidiary, XL Life Insurance and Annuity Company ("XLLIAC") and as
a result, recorded a $3.7 million gain. On October 11, 2016,
the company completed a partial sale of its holdings in New
Ocean Capital Management, and as a result, recorded a $3.4 million
gain.
|
|
Note 5: Defined as
net income (loss) attributable to common shareholders excluding:
(1) our net investment income - Life Funds Withheld Assets,
(defined below) (2) our net realized (gains) losses on investments
sold - excluding Life Funds Withheld Assets, (3) our net realized
(gains) losses on investments sold (including OTTI) and net
unrealized (gains) losses on investments, Trading - Life Funds
Withheld Assets, (4) our net realized and unrealized (gains) losses
on derivatives, (5) our net realized and unrealized (gains) losses
on life retrocession embedded derivative and derivative instruments
- Life Funds Withheld Assets, (6) our share of items (2) and (4)
for The Company's insurance company affiliates for the periods
presented, (7) our foreign exchange (gains) losses, (8) our
expenses related to the Catlin acquisition, (9) our gain on the
sale of our interest in our former operating affiliate, ARX Holding
Corp., (10) our gain on the sale of our wholly-owned subsidiary XL
Life Insurance and Annuity Company ("XLLIAC") and the partial sale
of our holdings in New Ocean Capital Management, (11) our loss on
the inception of U.S. Term Life Retro Arrangements, (12) our loss
on the early extinguishment of the notes assumed in conjunction
with the Catlin Acquisition and (13) a provision (benefit) for
income tax on items excluded from operating income. We believe that
showing "operating net income (loss)", "annualized operating return
on average common shareholders' equity" and "annualized operating
return on average common shareholders' equity excluding average
unrealized gains and losses on investments and integration costs"
enables investors and other users of our financial information to
analyze our performance in a manner similar to how we analyze our
performance. In this regard, we believe that providing only a GAAP
presentation of net income (loss) would make it more difficult for
users of our financial information to evaluate our underlying
business. We also believe that equity analysts and certain rating
agencies that follow us (and the insurance industry as a whole)
exclude these items from their analyses for the same reasons, and
they request that we provide this non-GAAP financial information on
a regular basis. A reconciliation of our net income (loss)
attributable to common shareholders to operating net income (loss)
is provided above.
|
|
Note 6: Diluted
weighted average number of common shares outstanding is used to
calculate per share data except where it is anti-dilutive to
earnings per share or where there is a net loss. When it is
anti-dilutive or when a net loss occurs, basic weighted average
common shares outstanding is utilized in the calculation of net
loss per share and net operating loss per share.
|
|
Note 7: Common
shareholders' equity is defined as total shareholders' equity less
non-controlling interest in equity of consolidated
subsidiaries.
|
|
Note 8: Unrealized
(gain) loss on investments, net of tax is the cumulative impact of
mark to market fluctuations on our investment portfolio that have
not been realized through sales.
|
Comment on Regulation G
XL presents its operations in ways it believes will be most
meaningful and useful to investors, analysts, rating agencies and
others who use XL's financial information in evaluating XL's
performance. This press release contains the presentation of
(i) operating net income (loss) ("Operating Net Income"), which is
defined as net income (loss) attributable to common shareholders
excluding: (1) our net investment income - Life Funds Withheld
Assets, (defined below) (2) our net realized (gains) losses on
investments sold - excluding Life Funds Withheld Assets, (3) our
net realized (gains) losses on investments sold (including OTTI)
and net unrealized (gains) losses on investments, Trading - Life
Funds Withheld Assets, (4) our net realized and unrealized (gains)
losses on derivatives, (5) our net realized and unrealized (gains)
losses on life retrocession embedded derivative and derivative
instruments - Life Funds Withheld Assets, (6) our share of items
(2) and (4) for The Company's insurance company affiliates for the
periods presented, (7) our foreign exchange (gains) losses, (8) our
expenses related to the Catlin acquisition, (9) our gain on the
sale of our interest in our former operating affiliate, ARX Holding
Corp., (10) our gain on the sale of our wholly-owned subsidiary XL
Life Insurance and Annuity Company ("XLLIAC") and the partial sale
of our holdings in New Ocean Capital Management, (11) our loss on
the inception of U.S. Term Life Retro Arrangements, (12) our loss
on the early extinguishment of the notes assumed in conjunction
with the Catlin Acquisition and (13) a provision (benefit) for
income tax on items excluded from operating income.; (ii)
annualized return on average common shareholders' equity ("ROE")
based on operating net income (loss) ("Operating ROE"); (iii)
Operating ROE excluding average unrealized gains and losses on
investments and integration costs; (iv) annualized net income
(loss) attributable to common shareholders excluding the
Contribution from the GreyCastle Life Retro Arrangements and (v)
Fully diluted tangible book value per common share (common
shareholders' equity excluding goodwill and intangible assets
divided by the number of shares outstanding at the period end date
combined with the dilutive impact of potential future share issues
at any period end). These items are "non-GAAP financial measures"
as defined in Regulation G. The reconciliation of such measures to
the most directly comparable GAAP financial measures in accordance
with Regulation G is included in this press release on pages 8 and
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
include all derivatives entered into by XL other than certain
credit derivatives and the life retrocession embedded derivative.
With respect to credit derivatives, because XL and its insurance
company operating affiliates generally hold financial guaranty
contracts written in credit default derivative form to maturity,
the net effects of the changes in fair value of these credit
derivatives are excluded (similar with other companies' treatment
of such contracts), as the changes in fair value each quarter are
not indicative of underlying business performance.
Net investment income - Life Funds Withheld Assets, and net
realized (gains) losses on the life retrocession embedded
derivative and derivative instruments - Life Funds Withheld
Assets, have been excluded because, as a result of the
GreyCastle Life Retro Arrangement, XL no longer shares in the risks
and rewards of the underlying performance of the Life Funds
Withheld Assets that support these retrocession arrangements.
The returns on the Life Funds Withheld Assets are passed directly
to the reinsurer pursuant to a contractual arrangement that is
accounted for as a derivative. Therefore, net investment
income from the Life Funds Withheld Assets and changes in the fair
value of the embedded derivative associated with these GreyCastle
Life Retro Arrangements are not relevant to XL's underlying
business performance.
Foreign exchange (gains) losses in the income statement are only
one element of the overall impact of foreign exchange fluctuations
on XL's financial position and are not representative of any
economic gain or loss made by XL. Accordingly, it is not a
relevant indicator of financial performance and it is excluded.
In summary, XL evaluates the performance of and manages its
business to produce an underwriting profit. In addition to
presenting net income (loss), XL believes that showing operating
net income (loss) enables investors and other users of XL's
financial information to analyze XL's performance in a manner
similar to how management of XL analyzes performance. In this
regard, XL believes that providing only a GAAP presentation of net
income (loss) would make it much more difficult for users of XL's
financial information to evaluate XL's underlying business. Also,
as stated above, XL believes that the equity analysts and certain
rating agencies that follow XL (and the insurance industry as a
whole) exclude these items from their analyses for the same reasons
and they request that XL provide this non-GAAP financial
information on a regular basis.
Operating ROE is a widely used measure of any company's
profitability that is calculated by dividing annualized operating
net income for any period other than a fiscal year when actual
operating income is used by the average of the opening and closing
common shareholders' equity. XL establishes target Operating ROEs
for its total operations, segments and lines of business. If XL's
Operating ROE targets are not met with respect to any line of
business over time, XL seeks to re-evaluate these lines. Operating
ROE excluding and including net unrealized gains and losses on
investments, both inclusive of and exclusive of integration costs,
are additional measures of Company profitability that eliminate, as
applicable, the impacts of mark to market fluctuations on XL's
investment portfolio that have not been realized through sales,
and/or distortions to XL's performance from temporary integration
costs related to the combination with Catlin. By providing
these additional measures, users of our financial statements have
the ability to include or exclude these items when considering our
performance either on a standalone basis or for purposes of peer
performance comparison.
XL believes that fully diluted tangible book value per common
share is a financial measure important to investors and other
interested parties who benefit from having a consistent basis for
comparison with other companies within the industry. However,
this measure may not be comparable to similarly titled measures
used by companies either outside or inside of the insurance
industry.
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SOURCE XL Group Ltd