Date of Report (Date of earliest event reported): | May 1, 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 |
23.1 | Consent of PricewaterhouseCoopers Ltd., dated June 26, 2015. |
99.2 | Catlin Group Limited Audited Financial Statements as of and for the years ended December 31, 2014 and 2013, incorporated by reference to Exhibit 99.1 to the Company's Form 8-K (No. 1-10804) filed on March 19, 2015. |
99.3 | XL Group plc Unaudited Pro Forma Consolidated Financial Information as of and for the year ended December 31, 2014. |
XL Group plc (Registrant) | ||
By: | /s/ Kirstin Gould | |
Name: Kirstin Gould Title: General Counsel and Secretary |
• | the accompanying notes to the unaudited pro forma consolidated financial information; |
• | XL’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, included in XL’s Annual Report on Form 10-K for the year ended December 31, 2014; and |
• | Catlin’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2014, attached as Exhibit 99.2. |
(U.S. dollars in thousands) | December 31, 2014 | ||||||||||||||||
XL | Catlin | Adjustments | Total | ||||||||||||||
ASSETS | |||||||||||||||||
Fixed maturities, at fair value - Available for sale ("AFS") | $ | 29,359,034 | $ | — | $ | 7,514,000 | (a) (b) | $ | 36,873,034 | ||||||||
Fixed maturities, at fair value - Trading ("Trading") or Fair Value Option ("FVO") | 1,171 | 7,511,000 | (7,511,000 | ) | (a) | 1,171 | |||||||||||
Equity securities, at fair value - AFS | 868,292 | — | 158,000 | (c) | 1,026,292 | ||||||||||||
Short-term investments, at fair value - AFS | 256,727 | — | 203,000 | (d) | 459,727 | ||||||||||||
Short-term investments, at fair value - FVO | — | 203,000 | (203,000 | ) | (d) | — | |||||||||||
Other investments | 2,886,059 | 604,000 | (109,300 | ) | (e) | 3,380,759 | |||||||||||
Total investments | $ | 33,371,283 | $ | 8,318,000 | $ | 51,700 | $ | 41,740,983 | |||||||||
Cash and cash equivalents | $ | 2,521,814 | $ | 772,000 | $ | (1,306,939 | ) | (f)(g) | $ | 1,986,875 | |||||||
Restricted cash and cash equivalents | — | 185,000 | — | 185,000 | |||||||||||||
Accrued investment income | 315,964 | 40,000 | — | 355,964 | |||||||||||||
Deferred acquisition costs and value of business in-force | 354,533 | 526,000 | 163,327 | (h) (l) | 1,043,860 | ||||||||||||
Ceded unearned premiums | 952,525 | 749,000 | (11,710 | ) | (i) | 1,689,815 | |||||||||||
Premiums receivable | 2,473,736 | 2,004,000 | (3,330 | ) | (i) | 4,474,406 | |||||||||||
Reinsurance balances receivable | 131,519 | 254,000 | (618 | ) | (i) | 384,901 | |||||||||||
Unpaid losses and loss expenses recoverable | 3,429,368 | 1,451,000 | (76,774 | ) | (i) (j) | 4,803,594 | |||||||||||
Receivable from investments sold | 92,762 | 13,000 | — | 105,762 | |||||||||||||
Goodwill and other intangible assets | 447,952 | 720,000 | 746,942 | (k) | 1,914,894 | ||||||||||||
Deferred tax asset | 204,491 | — | — | 204,491 | |||||||||||||
Other assets | 750,872 | 315,000 | (15,000 | ) | (m) (n) | 1,050,872 | |||||||||||
Total assets | $ | 45,046,819 | $ | 15,347,000 | $ | (452,402 | ) | $ | 59,941,417 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
Unpaid losses and loss expenses | $ | 19,353,243 | $ | 6,705,000 | $ | 106,855 | (i) (o) | $ | 26,165,098 | ||||||||
Deposit liabilities | 1,245,367 | — | — | 1,245,367 | |||||||||||||
Future policy benefit reserves | 4,707,199 | — | — | 4,707,199 | |||||||||||||
Funds withheld on life retrocession arrangements (net of future policy benefit reserves recoverable) | 1,155,016 | — | — | 1,155,016 | |||||||||||||
Unearned premiums | 3,973,132 | 3,062,000 | (11,710 | ) | (i) | 7,023,422 | |||||||||||
Notes payable and debt | 1,662,580 | 90,000 | 974,666 | (g) (p) | 2,727,246 | ||||||||||||
Reinsurance balances payable | 493,230 | 1,069,000 | (3,947 | ) | (i) | 1,558,283 | |||||||||||
Payable for investments purchased | 42,291 | 37,000 | — | 79,291 | |||||||||||||
Deferred tax liability | 66,246 | 59,000 | 25,133 | (q) | 150,379 | ||||||||||||
Other liabilities | 912,748 | 313,000 | 93,846 | (r) | 1,319,594 | ||||||||||||
Income taxes payable | — | 20,000 | — | 20,000 | |||||||||||||
Total liabilities | $ | 33,611,052 | $ | 11,355,000 | $ | 1,184,843 | $ | 46,150,895 | |||||||||
Commitments and contingencies | |||||||||||||||||
Shareholders equity: | |||||||||||||||||
Ordinary shares | $ | 2,552 | $ | 4,000 | $ | (3,501 | ) | (s) (t) | $ | 3,051 | |||||||
Additional paid-in capital | 7,359,102 | 1,998,000 | (146,898 | ) | (u) (v) | 9,210,204 | |||||||||||
Accumulated other comprehensive income (loss) | 1,484,458 | (243,000 | ) | 243,000 | (w) | 1,484,458 | |||||||||||
Retained earnings | 1,187,640 | 1,682,000 | (1,775,846 | ) | (x) (r) | 1,093,794 | |||||||||||
Treasury Stock | — | (39,000 | ) | 39,000 | (y) | — | |||||||||||
Shareholders’ equity attributable to XL Group plc/Catlin | $ | 10,033,752 | $ | 3,402,000 | $ | (1,644,245 | ) | $ | 11,791,507 | ||||||||
Non-controlling interest in equity of consolidated subsidiaries | 1,402,015 | 590,000 | 7,000 | (z) | 1,999,015 | ||||||||||||
Total shareholders’ equity | $ | 11,435,767 | $ | 3,992,000 | $ | (1,637,245 | ) | $ | 13,790,522 | ||||||||
Total liabilities and shareholders’ equity | $ | 45,046,819 | $ | 15,347,000 | $ | (452,402 | ) | $ | 59,941,417 |
(U.S. dollars in thousands, except per share amounts) | Year Ended December 31, 2014 | ||||||||||||||||
XL | Catlin | Adjustments | Total | ||||||||||||||
Revenues: | |||||||||||||||||
Net premiums earned | $ | 5,895,070 | $ | 4,160,000 | $ | — | $ | 10,055,070 | |||||||||
Net investment income: | |||||||||||||||||
Net investment income - excluding Life Funds Withheld Assets | 789,050 | 226,000 | (112,823 | ) | (aa) | 902,227 | |||||||||||
Net investment income - Life Funds Withheld Assets | 129,575 | — | — | 129,575 | |||||||||||||
Total net investment income | $ | 918,625 | $ | 226,000 | $ | (112,823 | ) | $ | 1,031,802 | ||||||||
Realized investment gains (losses): | |||||||||||||||||
Net realized gains (losses) on investments sold - excluding Life Funds Withheld Assets | $ | 158,733 | $ | — | $ | 98,619 | (bb) | $ | 257,352 | ||||||||
Other-than-temporary impairments ("OTTI") on investments - excluding Life Funds Withheld Assets | (33,508 | ) | — | — | (33,508 | ) | |||||||||||
OTTI on investments transferred to (from) other comprehensive income - excluding Life Funds Withheld Assets | (2,234 | ) | — | — | (2,234 | ) | |||||||||||
Net realized gains (losses) on investments sold - Life Funds Withheld Assets | 5,067 | — | — | 5,067 | |||||||||||||
OTTI on investments - Life Funds Withheld Assets | (20,587 | ) | — | — | (20,587 | ) | |||||||||||
Net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets | (9 | ) | — | — | (9 | ) | |||||||||||
Total net realized gains (losses) on investments, and net unrealized gains (losses) on investments, Trading - Life Funds Withheld Assets | $ | 107,462 | $ | — | $ | 98,619 | $ | 206,081 | |||||||||
Net realized and unrealized gains (losses) on derivative instruments | 29,886 | — | (48,674 | ) | (cc) | (18,788 | ) | ||||||||||
Net realized and unrealized gains (losses) on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets | (488,222 | ) | — | — | (488,222 | ) | |||||||||||
Income (loss) from investment fund affiliates | 95,816 | — | (1,173 | ) | (dd) | 94,643 | |||||||||||
Fee income and other | 43,630 | 14,000 | — | 57,630 | |||||||||||||
Total revenues | $ | 6,602,267 | $ | 4,400,000 | $ | (64,051 | ) | $ | 10,938,216 | ||||||||
Expenses: | |||||||||||||||||
Net losses and loss expenses incurred | $ | 3,258,393 | $ | 2,183,000 | $ | (101,000 | ) | (ee) | $ | 5,340,393 | |||||||
Claims and policy benefits | 242,963 | — | — | 242,963 | |||||||||||||
Acquisition costs | 738,118 | 986,000 | 101,000 | (ff) | 1,825,118 | ||||||||||||
Operating expenses | 1,341,315 | 717,000 | 18,600 | (gg) | 2,076,915 | ||||||||||||
Foreign exchange (gains) losses | (37,568 | ) | 9,000 | — | (28,568 | ) | |||||||||||
Loss on sale of life reinsurance subsidiary | 666,423 | — | — | 666,423 | |||||||||||||
Interest expense | 134,106 | 17,000 | 50,647 | (hh) (ii) (jj) | 201,753 | ||||||||||||
Total expenses | $ | 6,343,750 | $ | 3,912,000 | $ | 69,247 | $ | 10,324,997 | |||||||||
Income (loss) before income tax and income (loss) from operating affiliates | 258,517 | 488,000 | (133,298 | ) | 613,219 | ||||||||||||
Income (loss) from operating affiliates | 107,218 | — | 1,435 | (kk) | 108,653 | ||||||||||||
Provision (benefit) for income tax | 96,897 | 26,000 | (1,437 | ) | (ll) | 121,460 | |||||||||||
Net income (loss) | $ | 268,838 | $ | 462,000 | $ | (130,426 | ) | $ | 600,412 | ||||||||
Non-controlling interests | 80,498 | 44,000 | — | 124,498 | |||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 188,340 | $ | 418,000 | $ | (130,426 | ) | $ | 475,914 | ||||||||
Weighted average ordinary shares and ordinary shares equivalents outstanding, in thousands - basic | 267,103 | 358,488 | N/M | 317,038 | |||||||||||||
Weighted average ordinary shares and ordinary shares equivalents outstanding, in thousands - diluted | 271,527 | 376,141 | N/M | 321,462 | |||||||||||||
Earnings (loss) per ordinary share and ordinary share equivalent – basic | $ | 0.71 | $ | 1.17 | N/M | $ | 1.50 | ||||||||||
Earnings (loss) per ordinary share and ordinary share equivalent – diluted | $ | 0.69 | $ | 1.11 | N/M | $ | 1.48 |
* | N/M - Not Meaningful |
(In thousands, except per share data) | |||
Estimated shares of Catlin common stock outstanding as of April 30, 2015, in thousands (including the dilutive effect of warrants) | 384,118 | ||
Exchange ratio per the merger agreement | 0.13 | ||
XL share issuance to Catlin shareholders | 49,935 | ||
Multiplied by XL’s closing price per share on April 30, 2015 | $ | 37.08 | |
XL share issuance consideration | $ | 1,851,601 | |
Estimated shares of Catlin common stock outstanding as of April 30, 2015, in thousands, that will receive cash consideration (including the dilutive effect of warrants) | 384,118 | ||
Multiplied by XL’s cash price component, per share in GBP | £ | 3.88 | |
Cash consideration, in GBP | £ | 1,490,377 | |
Foreign exchange rate: GBP/USD at April 30, 2015 | $ | 1.5349 | |
Cash consideration, in USD | $ | 2,287,579 | |
Total acquisition consideration | $ | 4,139,180 |
(U.S. dollars in thousands) | December 31, 2014 | ||
Acquisition Consideration | $ | 4,139,180 | |
ASSETS | |||
Fixed maturities, at fair value | $ | 7,511,000 | |
Short-term investments, at fair value | 203,000 | ||
Other invested assets | 654,700 | ||
Total Investments | $ | 8,368,700 | |
Cash and cash equivalents | $ | 772,000 | |
Restricted cash and cash equivalents | 185,000 | ||
Accrued investment income | 40,000 | ||
Premiums and other receivables | 2,004,000 | ||
Reinsurance recoverable on unpaid losses (net of bad debts) | 1,393,628 | ||
Reinsurance recoverable on paid losses (net of bad debts) | 254,000 | ||
Reinsurers’ share of unearned premiums | 749,000 | ||
Intangible assets | 997,000 | ||
Value of business in-force | 689,327 | ||
Receivable from investments sold | 13,000 | ||
Other assets | 301,000 | ||
Total Assets | $ | 15,766,655 | |
LIABILITIES | |||
Reserves for losses and loss expenses | $ | 6,831,257 | |
Unearned premiums | 3,062,000 | ||
Reinsurance payable | 1,069,000 | ||
Accounts payable and other liabilities | 313,000 | ||
Subordinated debt | 84,027 | ||
Payable for investments purchased | 37,000 | ||
Deferred tax liability (net) | 84,133 | ||
Income taxes payable | 20,000 | ||
Total Liabilities | $ | 11,500,417 | |
Net assets acquired before non-controlling interest | $ | 4,266,238 | |
Non-controlling interest in equity of consolidated subsidiaries | 597,000 | ||
Net assets acquired | $ | 3,669,238 | |
Goodwill | $ | 469,942 |
(U.S. dollars in thousands) | December 31, 2014 | Estimated Useful Life (Years) | |||
Syndicate Capacity | $ | 660,000 | Indefinite | ||
Insurance Licenses | 22,000 | Indefinite | |||
Total identified indefinite life intangible assets | $ | 682,000 | |||
Lloyds – Managing Agent Contracts | $ | 15,000 | 13-17 | ||
Distribution network | 290,000 | 18-25 | |||
Trademarks / Trade Names | 10,000 | 2-3 | |||
Total identified definite life intangible assets | $ | 315,000 | |||
Total Identified Intangible Assets | $ | 997,000 |
(U.S. dollars in thousands) | Increase (decrease) as of December 31, 2014 | ||||
(a) | Adjustment to reclassify fixed maturity securities on which fair value option was elected by Catlin to AFS to conform with XL's accounting policies | 7,511,000 | |||
(b) | Adjustment to reclassify certain Catlin's derivative contracts to conform with XL's presentation | 3,000 | |||
(c) | Adjustment to reclassify equities carried at fair value to AFS | 158,000 | |||
(d) | Adjustment to reclassify short-term investments on which fair value option was elected by Catlin to AFS to conform with XL's accounting policies | 203,000 | |||
(e) | Adjustments to other investments | (109,300 | ) | ||
To reclassify equities carried at fair value to AFS | (158,000 | ) | |||
To reflect certain investment at fair value | 50,700 | ||||
To reclassify certain derivative contracts to conform presentation | (2,000 | ) | |||
(f) | Adjustment to reflect cash paid by XL to Catlin’s shareholders | (2,287,579 | ) | ||
(g) | Adjustment to reflect the issuance of subordinated notes by XL, net of issuance costs | 980,640 | |||
(h) | Adjustment to reflect elimination of Catlin's deferred acquisition cost asset | (526,000 | ) | ||
(i) | Adjustments to eliminate intercompany balances between XL and Catlin | ||||
To eliminate intercompany ceded unearned premiums | (11,710 | ) | |||
To eliminate premiums receivable | (3,330 | ) | |||
To eliminate reinsurance balances receivables | (618 | ) | |||
To eliminate unpaid loss and loss expense recoverable | (19,402 | ) | |||
To eliminate unpaid losses and loss expense | (19,402 | ) | |||
To eliminate unearned premium | (11,710 | ) | |||
To eliminate reinsurance balances payable | (3,947 | ) | |||
(j) | Adjustment to reflect the difference between the estimated fair value and the historical carrying value of Catlin’s reinsurance recoverable on unpaid losses (net of bad debts). The estimated fair value consists of the present value of reinsurance recoverable on unpaid losses (net of bad debts) | (57,372 | ) | ||
(k) | Adjustment to reflect goodwill and intangible assets at fair value | 746,942 | |||
To eliminate Catlin’s carried goodwill and intangible assets | (720,000 | ) | |||
To establish goodwill arising from the Acquisition | 469,942 | ||||
To establish the separately identifiable intangible assets at fair value | 997,000 | ||||
(l) | Adjustment to establish intangible asset resulting from the adjustment of unearned premiums to the estimated fair value of profit within Catlin’s unearned premiums, adjusted for a risk premium | 689,327 | |||
(m) | Adjustments to reclassify certain Catlin's derivative contracts to conform with XL's presentation | (1,000 | ) | ||
(n) | Adjustment to reflect the fair value of certain other assets | (14,000 | ) | ||
(o) | Adjustment to reflect the difference between the estimated fair value and the historical carrying value of Catlin’s reserve for losses and loss expenses. The estimated fair value consists of the present value of the loss reserves plus a risk premium | 126,257 | |||
(p) | Adjustment to reflect Catlin’s subordinated debt at fair value | (5,974 | ) | ||
(q) | Adjustment to reflect the income tax effect for unaudited pro forma consolidated balance sheet adjustments related to the Acquisition using the statutory tax rates of the jurisdictions, where the respective tax effects apply | 25,133 | |||
(r) | Adjustment to reflect the transaction costs incurred by XL and Catlin that are directly related to the acquisition as a reduction of retained earnings | (93,846 | ) | ||
(s) | Adjustment to reflect the elimination of Catlin’s common stock | (4,000 | ) | ||
(t) | Adjustment to reflect the issuance of XL ordinary shares - par value | 499 | |||
(u) | Adjustment to reflect the issuance of XL ordinary shares - additional paid-in capital | 1,851,102 | |||
(v) | Adjustment to reflect the elimination of Catlin’s additional paid-in capital | (1,998,000 | ) | ||
(w) | Adjustment to reflect the elimination of Catlin’s accumulated other comprehensive income | 243,000 | |||
(x) | Adjustment to reflect the elimination of Catlin’s retained earnings | (1,682,000 | ) | ||
(y) | Adjustment to reflect the elimination of Catlin’s treasury stock | 39,000 | |||
(z) | Adjustment to reflect Catlin's non-controlling interest at fair value | 7,000 |
(U.S. dollars in thousands) | Increase (decrease) for Year Ended December 31, 2014 | ||||
(aa) | Adjustments to conform presentation of net investment income | (112,823 | ) | ||
To reclassify Catlin's realized and unrealized gains in conjunction with the reclassification of fixed maturities and equities at fair value to fixed maturities, AFS, to conform with XL's presentation | (126,204 | ) | |||
To reclassify Catlin's derivative losses to conform with XL's presentation | 48,674 | ||||
To reclassify gains related to equity funds and certain loans | (22,945 | ) | |||
To amortize the fair value adjustment of fixed maturity securities, AFS and certain loans | (10,353 | ) | |||
To reclassify income from operating affiliates to conform with XL's presentation | (1,995 | ) | |||
(bb) | Adjustment to conform presentation of net realized gains (losses) on investments sold | 98,619 | |||
(cc) | Adjustment to reclassify derivative losses from net investment income to conform presentation | (48,674 | ) | ||
(dd) | Adjustment to conform presentation of income (loss) from investment fund affiliates | (1,173 | ) | ||
(ee) | Amortization of the adjustment resulting from the difference between estimated fair value and the historical carrying value of Catlin's net loss and LAE reserves | (101,000 | ) | ||
(ff) | Adjustment to acquisition costs | 101,000 | |||
Adjustment to eliminate amortization of Catlin’s DAC | (526,000 | ) | |||
Amortization of intangible asset resulting from the adjustment of unearned premiums to the estimated fair value of profit within Catlin’s unearned premiums | 627,000 | ||||
(gg) | Adjustment to amortize the fair value adjustment of intangible and certain other assets | 18,600 | |||
(hh) | Adjustment to amortize the fair value adjustment of Catlin’s subordinated debt | (268 | ) | ||
(ii) | Adjustment to amortize the deferred issuance costs for the subordinated notes | 834 | |||
(jj) | Adjustment to record interest expense related to the subordinated notes issued to finance the acquisition | 50,081 | |||
(kk) | Adjustment to conform presentation of income (loss) from operating affiliates | 1,435 | |||
(ll) | Adjustment to reflect income tax effect for unaudited pro forma consolidated statement of income adjustments related to the Acquisition using the statutory tax rates of the jurisdictions, where the respective tax effects apply | (1,437 | ) |
Year Ended December 31, 2014 | |||||||
(In thousands, except per share amounts) | Basic | Diluted | |||||
Preliminary pro forma net income | $ | 475,914 | $ | 475,914 | |||
Weighted average ordinary shares outstanding: | |||||||
Historic XL | 267,103 | 267,103 | |||||
Historic XL dilutive potential ordinary shares | — | 4,424 | |||||
Adjusted weighted average ordinary shares outstanding | 267,103 | 271,527 | |||||
XL share issuance to Catlin shareholders | 49,935 | 49,935 | |||||
Preliminary pro forma adjusted weighted average common shares outstanding | 317,038 | 321,462 | |||||
Preliminary pro forma net income per share | $ | 1.50 | $ | 1.48 |