Date of Report (Date of earliest event reported): | February 2, 2015 |
Ireland | 1-10804 | 98-0665416 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
XL House, 8 St. Stephen's Green, Dublin, Ireland | 2 | |
(Address of principal executive offices) | (Zip Code) |
Not Applicable |
(Former name or former address, if changed since last report) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description |
99.1 | Press Release ("XL Group plc Announces Fourth Quarter and Full Year 2014 Results"), dated February 2, 2015 |
XL Group plc (Registrant) | ||
By: | /s/ Kirstin Gould | |
Name: Kirstin Gould Title: General Counsel and Secretary |
![]() | EXHIBIT 99.1 | |
• | Operating net income1 of $293.9 million, or $1.12 per share, for the quarter and $999.2 million, or $3.68 per share, for the full year on a fully diluted basis |
• | P&C combined ratio of 84.5% for the quarter, compared to 93.3% in the prior year quarter, and a full year P&C combined ratio of 88.2% compared to 92.5% in the prior year |
• | Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of $31.7 million, compared to $94.3 million in the prior year quarter |
• | Operating return on average ordinary shareholders' equity2 excluding unrealized gains and losses on investments was 13.7% and including unrealized gains and losses on investments was 11.8%, annualized for the quarter, and 11.2% and 10.0%, respectively, for the full year |
• | Net income attributable to ordinary shareholders and net income attributable to ordinary shareholders excluding the impact of the Life Retrocession Arrangements3 of $139.5 million and $350.6 million, respectively, for the quarter and $188.3 million and $1.2 billion, respectively, for the full year (Note: As a result of the Life Retrocession Arrangements3, XL’s net income is impacted by the gains or losses on the Life Funds Withheld Assets3, with an equal and opposite accounting adjustment in XL’s comprehensive income so that there is no effect on XL’s book value) |
• | Fully diluted tangible book value per ordinary share4 of $36.79 at December 31, 2014, an increase of $2.93, or 8.7%, from December 31, 2013 |
• | Share buybacks totaled 5.2 million ordinary shares for $175.0 million during the quarter |
![]() | EXHIBIT 99.1 | |
Highlights | |||||||||||||||
Year Ended December 31 | |||||||||||||||
(U.S. dollars in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Operating net income (loss) | $ | 293,928 | $ | 286,881 | $ | 999,241 | $ | 942,968 | |||||||
Per ordinary share-fully diluted | $ | 1.12 | $ | 1.00 | $ | 3.68 | $ | 3.23 | |||||||
Net income (loss) attributable to ordinary shareholders | $ | 139,500 | $ | 300,780 | $ | 188,340 | $ | 1,059,916 | |||||||
Per ordinary share-fully diluted | $ | 0.53 | $ | 1.05 | $ | 0.69 | $ | 3.63 |
• | Operating net income of $293.9 million for the quarter increased compared to operating net income of $286.9 million in the prior year quarter primarily due to improved underwriting results partially offset by lower levels of affiliate income. Net income (loss) attributable to ordinary shareholders of $139.5 million for the quarter decreased compared to $300.8 million in the prior year quarter. As highlighted in the reconciliation of net income to operating income on page 8 of this press release, net income for the current quarter was negatively impacted by the life retrocession derivative, which is offset by an increase in accumulated comprehensive income and therefore does not impact overall book value. |
• | The P&C combined ratio for the quarter of 84.5% was 8.8 percentage points lower than in the prior year quarter, when it was 93.3%. |
• | Net investment income for the quarter was $226.2 million, compared to $240.8 million in the prior year quarter and $226.4 million in the third quarter of 2014. Included in investment income in the current quarter is $53.9 million of income related to designated investments that support the Life Retrocession Arrangements written on a funds withheld basis. |
• | Net income from investment fund and investment manager operating affiliates was $21.4 million for the quarter, compared to net income of $77.7 million in the prior year quarter. The decrease was primarily driven by lower returns from our alternative fund and investment manager affiliates. |
• | Fully diluted tangible book value per ordinary share increased by $1.39 from the prior quarter to $36.79, driven by our net income, the benefit of share buyback activity, and an increase in unrealized gain on investments net of deferred tax, reduced by the payment of dividends. |
• | During the quarter, the Company purchased 5.2 million ordinary shares for $175.0 million in the aggregate at an average price of $33.82 per share, which was accretive to fully diluted tangible book value per ordinary share by $0.09. At December 31, 2014, $267.6 million of ordinary shares remained available for purchase under our share buyback program. |
P&C Operations | |||||||||||||||
Year Ended December 31 | |||||||||||||||
(U.S. dollars in thousands) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Gross premiums written | $ | 1,620,620 | $ | 1,457,866 | $ | 7,761,490 | $ | 7,416,792 | |||||||
Net premiums written | $ | 1,200,097 | $ | 1,074,422 | $ | 5,767,209 | $ | 5,903,982 | |||||||
Net premiums earned | $ | 1,413,161 | $ | 1,510,727 | $ | 5,717,438 | $ | 6,014,099 | |||||||
Underwriting profit (loss) | $ | 218,851 | $ | 101,450 | $ | 676,046 | $ | 451,062 | |||||||
Loss ratio | 52.3 | % | 62.5 | % | 57.0 | % | 62.0 | % | |||||||
Underwriting expense ratio | 32.2 | % | 30.8 | % | 31.2 | % | 30.5 | % | |||||||
Combined ratio | 84.5 | % | 93.3 | % | 88.2 | % | 92.5 | % |
• | P&C gross premiums written (“GPW”) in the fourth quarter increased 11.2% compared to the prior year quarter. The Insurance segment GPW increased 13.1% from the prior year quarter as a result of strong new business particularly in International Financial Lines, Construction, North America Primary Casualty, Marine, and Political Risk and solid premium retention across most of the portfolio. The Reinsurance segment GPW decreased 3.9% from the prior year quarter, primarily driven by non-renewal activity in our US Casualty Treaty book and foreign exchange impacts partially offset by growth in International Casualty Treaty, Property Facultative, US Property Treaty and Crop. |
• | P&C net premiums written in the fourth quarter increased 11.7% compared to the prior year quarter, consistent with GPW. |
• | P&C net premiums earned (“NPE”) in the fourth quarter of $1.4 billion were comprised of $1.0 billion from the Insurance segment and $401.3 million from the Reinsurance segment. Compared to the prior year quarter, Insurance NPE decreased by 5.1%, primarily due to the earn through of increased proportional reinsurance in our Professional business. Reinsurance NPE decreased by 9.8%, driven by the earn through of lower net written premiums over the past year in International Property Treaty and Casualty Treaty. NPE for Reinsurance segment’s International operations was also impacted by the strengthening of the US dollar during the quarter. |
• | The P&C loss ratio in the current quarter was 10.2 percentage points lower than in the prior year quarter. Included in the P&C loss ratio was favorable development of $96.7 million compared to $60.9 million in the prior year quarter. The P&C loss ratio variance was impacted by natural catastrophe pre-tax losses of $31.7 million net of reinsurance and reinstatement premiums, with $17.7 million related to our Insurance segment and $14.0 million related to our Reinsurance segment, as compared to $94.3 million in the prior year quarter, with $23.7 million related to our Insurance segment and $70.6 million related to our Reinsurance segment. Excluding prior year development and natural catastrophe losses net of reinsurance and reinstatement premiums, the fourth quarter P&C loss ratio was 3.3 percentage points lower than 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 91.0% for the prior year quarter. The Insurance segment combined ratio on this basis was 95.4% for the quarter compared to 98.2% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 73.0% for the quarter compared to 73.6% for the prior year quarter. |
• | Operating expenses in the quarter were 13.3% higher than in the prior year quarter primarily due to the impact of improved underwriting and overall performance on variable compensation. |
XL Group plc | ||||||||||||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | ||||||||||||||||
(U.S. Dollars in thousands) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
Adjusted Income statement and other data (Note 1): | December 31, | December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Adjusted Revenues (Note 1): | ||||||||||||||||
Net premiums written | $ | 1,223,161 | $ | 1,155,820 | $ | 5,944,841 | $ | 6,199,404 | ||||||||
Net premiums earned | $ | 1,436,225 | $ | 1,592,125 | $ | 5,895,070 | $ | 6,309,521 | ||||||||
Net investment income - excluding Life Funds Withheld Assets (Note 1) | 172,297 | 240,781 | 789,050 | 957,716 | ||||||||||||
Net realized gains (losses) on investments sold - excluding Life Funds Withheld Assets (Note 1) | 13,105 | 12,258 | 122,991 | 87,777 | ||||||||||||
Net realized and unrealized (losses) gains on derivative instruments | 11,346 | 4,138 | 29,886 | 7,798 | ||||||||||||
Income (loss) from investment fund affiliates | 20,330 | 54,548 | 95,816 | 138,391 | ||||||||||||
Fee income and other | 11,688 | 8,653 | 43,630 | 40,031 | ||||||||||||
Total adjusted revenues | $ | 1,664,991 | $ | 1,912,503 | $ | 6,976,443 | $ | 7,541,234 | ||||||||
Adjusted Expenses (Note 1): | ||||||||||||||||
Net losses and loss expenses incurred - P&C operations | $ | 739,420 | $ | 944,254 | $ | 3,258,393 | $ | 3,731,464 | ||||||||
Claims and policy benefits - run-off Life operations | 23,976 | 121,433 | 242,963 | 465,702 | ||||||||||||
Acquisition costs | 171,203 | 218,850 | 738,118 | 909,323 | ||||||||||||
Operating expenses | 354,891 | 314,681 | 1,339,705 | 1,213,178 | ||||||||||||
Exchange (gains) losses | (37,765 | ) | (3,780 | ) | (27,469 | ) | (28,243 | ) | ||||||||
Interest expense | 34,229 | 40,632 | 134,106 | 155,462 | ||||||||||||
Total adjusted expenses | $ | 1,285,954 | $ | 1,636,070 | $ | 5,685,816 | $ | 6,446,886 | ||||||||
Income (loss) before income tax, income (loss) from operating affiliates, and Life Retrocession Arrangements (Note 1) | $ | 379,037 | $ | 276,433 | $ | 1,290,627 | $ | 1,094,348 | ||||||||
Net income (loss) from operating affiliates | 13,174 | 31,391 | 107,218 | 119,804 | ||||||||||||
Provision (benefit) for income tax, excluding amount related to loss on sale of life reinsurance subsidiary (Note 1) | 38,173 | 4,257 | 141,997 | 77,505 | ||||||||||||
Net income (loss) before Life Retrocession Arrangements (Notes 1 and 2) | 354,038 | 303,567 | 1,255,848 | 1,136,647 | ||||||||||||
Contribution from Life Retrocession Arrangements (Note 1) | (211,064 | ) | — | (365,687 | ) | — | ||||||||||
Loss on sale of life reinsurance subsidiary, net of tax (Note 1) | — | — | (621,323 | ) | — | |||||||||||
Net income (loss) | 142,974 | 303,567 | 268,838 | 1,136,647 | ||||||||||||
Non-controlling interests | 3,474 | 2,787 | 80,498 | 76,731 | ||||||||||||
Net income (loss) attributable to ordinary shareholders | 139,500 | 300,780 | 188,340 | 1,059,916 | ||||||||||||
Other comprehensive income - Life Retrocession Arrangements (Note 1) | 211,064 | — | 365,687 | — | ||||||||||||
Other comprehensive income - P&C, Corporate and Other | 41,465 | (25,659 | ) | 382,114 | (783,363 | ) | ||||||||||
Comprehensive Income | $ | 392,029 | $ | 275,121 | $ | 936,141 | $ | 276,553 | ||||||||
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" is equal to "Net income (loss) attributable to ordinary shareholders excluding Contribution from Life Retrocession Arrangements" reported on page 8 plus "Non-controlling interests". |
XL Group plc | |||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | |||||||
Selected balance sheet data: | |||||||
(U.S. Dollars in thousands except share and per share amounts) | At | At | |||||
December 31, 2014 | December 31, 2013 | ||||||
(Unaudited) | (Note 1) | ||||||
Total investments available for sale | $ | 30,484,053 | $ | 28,996,661 | |||
Fixed maturities, held to maturity | — | 2,858,695 | |||||
Cash and cash equivalents | 2,521,814 | 1,800,832 | |||||
Investments in affiliates | 1,637,620 | 1,370,943 | |||||
Unpaid losses and loss expenses recoverable | 3,429,368 | 3,435,230 | |||||
Goodwill and other intangible assets | 447,952 | 411,611 | |||||
Total assets | 45,046,819 | 45,652,887 | |||||
Unpaid losses and loss expenses | 19,353,243 | 20,481,065 | |||||
Deposit liabilities | 1,245,367 | 1,509,243 | |||||
Future policy benefit reserves | 4,707,199 | 4,803,816 | |||||
Funds withheld liability on Life Retrocession Arrangements, net of future policy benefit reserves recoverable | 1,155,016 | — | |||||
Unearned premiums | 3,973,132 | 3,846,526 | |||||
Notes payable and debt | 1,662,580 | 2,263,203 | |||||
Total shareholders’ equity | 11,435,767 | 11,349,298 | |||||
Ordinary shareholders' equity | 10,033,752 | 9,997,633 | |||||
Ordinary shares outstanding (Note 2) | 255,222,835 | 278,297,762 | |||||
Basic book value per ordinary share (Note 3) | $ | 39.31 | $ | 35.92 | |||
Fully diluted book value per ordinary share (Note 3) | $ | 38.51 | $ | 35.32 | |||
Fully diluted tangible book value per ordinary share (Note 3) | $ | 36.79 | $ | 33.86 | |||
Note 1: Certain items have been reclassified to conform to the current period presentation. | |||||||
Note 2: Ordinary shares outstanding include all ordinary shares legally 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. |
(U.S. Dollars in thousands except share and per share amounts) | Three Months Ended | Year Ended | |||||||||||||
December 31, | December 31, | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
(Note 1) | (Note 1) | ||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 139,500 | $ | 300,780 | $ | 188,340 | $ | 1,059,916 | |||||||
Net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets | 269,412 | — | 488,222 | — | |||||||||||
Net realized (gains) losses on investments and net unrealized (gains) losses on investments, Trading - Life Funds Withheld Assets | 1,910 | — | 15,529 | — | |||||||||||
Net investment income - Life Funds Withheld Assets, net of tax | (53,936 | ) | — | (129,575 | ) | — | |||||||||
Foreign exchange revaluation (gains) losses on and other income and expense items related to Life Funds Withheld Assets | (6,322 | ) | (8,489 | ) | |||||||||||
Loss on sale of life reinsurance subsidiary, net of tax | — | — | 621,323 | — | |||||||||||
Net income (loss) attributable to ordinary shareholders excluding Contribution from Life Retrocession Arrangements (Note 2) | $ | 350,564 | $ | 300,780 | $ | 1,175,350 | $ | 1,059,916 | |||||||
Net realized (gains) losses on investments sold - excluding Life Funds Withheld Assets, net of tax | (19,861 | ) | (7,143 | ) | (124,759 | ) | (82,605 | ) | |||||||
Net realized and unrealized (gains) losses on derivatives, net of tax | (11,347 | ) | (4,138 | ) | (29,884 | ) | (7,798 | ) | |||||||
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates, net of tax | 1,743 | 6,919 | (985 | ) | 6,556 | ||||||||||
Exchange (gains) losses, net of tax | (27,171 | ) | (9,537 | ) | (20,481 | ) | (33,101 | ) | |||||||
Operating net income (loss) (Note 3) | $ | 293,928 | $ | 286,881 | $ | 999,241 | $ | 942,968 | |||||||
Per ordinary share results: (Note 4) | |||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 0.53 | $ | 1.05 | $ | 0.69 | $ | 3.63 | |||||||
Operating net income (loss) (Note 2) | $ | 1.12 | $ | 1.00 | $ | 3.68 | $ | 3.23 | |||||||
Weighted average ordinary shares outstanding: | |||||||||||||||
Basic | 257,040,133 | 281,403,151 | 267,103,032 | 287,801,125 | |||||||||||
Diluted - Net income | 262,146,892 | 286,007,396 | 271,526,525 | 292,069,296 | |||||||||||
Diluted - Operating net income | 262,146,892 | 286,007,396 | 271,526,525 | 292,069,296 | |||||||||||
Return on ordinary shareholders' equity: | |||||||||||||||
Closing ordinary shareholders' equity (Note 5) | 10,033,752 | 9,997,633 | 10,033,752 | 9,997,633 | |||||||||||
Unrealized (gain) loss on investments, net of tax | $ | (1,514,067 | ) | $ | (733,242 | ) | $ | (1,514,067 | ) | $ | (733,242 | ) | |||
Average ordinary shareholders' equity excluding unrealized gains (losses) on investments, net of tax (Note 4) | $ | 8,553,806 | $ | 9,219,127 | $ | 8,892,038 | $ | 9,152,315 | |||||||
Average ordinary shareholders' equity (Note 5) | $ | 9,937,403 | $ | 9,952,765 | $ | 10,015,693 | $ | 10,253,856 | |||||||
Operating net income (loss) (Note 3) | $ | 293,928 | $ | 286,881 | $ | 999,241 | $ | 942,968 | |||||||
Annualized operating net income (loss) (Note 3) | $ | 1,175,712 | $ | 1,147,524 | $ | 999,241 | $ | 942,968 | |||||||
Annualized return on average ordinary shareholders' equity based on operating net income (loss) (Notes 3 and 5) | 11.8 | % | 11.5 | % | 10.0 | % | 9.2 | % | |||||||
Annualized return on average ordinary shareholders' equity excluding unrealized gains and losses on investments based on operating net income (loss) (Notes 3 and 5) | 13.7 | % | 12.4 | % | 11.2 | % | 10.3 | % | |||||||
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, net of tax, (3) our net realized (gains) losses on investments 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 loss on sale of life reinsurance subsidiary, XLLR, net of tax, and, (8) our foreign exchange (gains) losses, net of tax. In addition to presenting net income (loss), we believe that showing "operating net income (loss)", "return on average ordinary shareholders' equity based on operating net income (loss)" and "return on average ordinary shareholders' equity excluding unrealized gains and losses on investments based on operating net income (loss)" 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. |