-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L4FJkDBVM0OsLVq0Q8nRdlJC1PqVZUlOTgc8uhLb9dF/wSbzaBQFPTM7XIu5dQDS WfNEmqdIvGidURN/eCnByQ== 0000930413-03-003158.txt : 20031030 0000930413-03-003158.hdr.sgml : 20031030 20031030090826 ACCESSION NUMBER: 0000930413-03-003158 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031029 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XL CAPITAL LTD CENTRAL INDEX KEY: 0000875159 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 980191089 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10804 FILM NUMBER: 03965208 BUSINESS ADDRESS: STREET 1: XL HOUSE STREET 2: ONE BERMUDIANA ROAD CITY: HAMILTON HM11 BERMUD STATE: D2 BUSINESS PHONE: 4412928515 MAIL ADDRESS: STREET 1: CAHILL GORDON & REINDEL(IMMANUEL KOHN) STREET 2: 80 PINE STREET CITY: NEW YORKI STATE: NY ZIP: 10005 FORMER COMPANY: FORMER CONFORMED NAME: EXEL LTD DATE OF NAME CHANGE: 19950720 8-K 1 c29725_8k.txt ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ================================================================================ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OCTOBER 29, 2003 Date of Report (Date of earliest event reported) XL CAPITAL LTD (Exact name of registrant as specified in its charter) CAYMAN ISLANDS 1-10809 98-0191089 (State or other jurisdiction of (Commission file number) (I.R.S. Employer incorporation or organization) Identification No.) XL HOUSE, ONE BERMUDIANA ROAD, HAMILTON, BERMUDA HM11 (Address of principal executive offices) (441) 292-8515 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) ================================================================================ ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) EXHIBITS. The following exhibit is filed herewith: EXHIBIT NO. DESCRIPTION ----------- ---------------------------------------------- 99.1 Press Release ("XL Capital Ltd Reports Third Quarter 2003 Results Net Income $99.0 Million, or $0.71 per Ordinary Share") dated October 29, 2003. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. The following information is being furnished under Item 12, "Results of Operations and Financial Condition." This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. On October 29, 2003, XL Capital Ltd issued the press release attached as Exhibit 99.1 and incorporated by reference announcing the results for the third quarter of 2003. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: October 29, 2003 XL CAPITAL LTD By: /s/ Jerry de St. Paer -------------------------------- Name: Jerry de St. Paer Title: Chief Financial Officer EX-99.1 3 c29725_ex99-1.txt [GRAPHIC OMITTED] XL CAPITAL LTD XL House One Bermudiana Road P. O. Box HM 2245 Hamilton HM JX Bermuda Phone: (441) 292-8515 Fax: (441) 292-5280 NEWS RELEASE Contact: Gavin R. Arton Roger R. Scotton Investor Relations Media Contact (441) 294-7104 (441) 294-7165 XL CAPITAL LTD REPORTS THIRD QUARTER 2003 RESULTS NET INCOME $99.0 MILLION, OR $0.71 PER ORDINARY SHARE HAMILTON, BERMUDA, October 29, 2003 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported net income available to ordinary shareholders for the quarter ended September 30, 2003 of $99.0 million, or $0.71 per ordinary share. This result includes the impact of a previously announced $184 million pre-tax ($160 million after-tax) charge for adverse development primarily due to newly reported casualty reinsurance claims for the 1997 to 2000 underwriting years. Net income for the prior year was $184.1 million, or $1.34 per ordinary share, in the third quarter of 2002. `Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax' for the third quarter of 2003 was $124.1 million, or $0.90 per ordinary share, compared with $216.6 million, or $1.58 per ordinary share, for the quarter ended September 30, 2002. `Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax' is a non-GAAP measure. See below for a reconciliation of this measure to net income available to ordinary shareholders. Commenting on the third quarter 2003 results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated, "We had strong current underwriting year results in all three of our business segments, despite the previously announced $184 million pre tax charge we took in our North American casualty reinsurance operations in the quarter. Absent this charge, our combined ratio was 87%, which demonstrates the quality underwriting currently being carried out in today's favorable market environment." For the nine months ended September 30, 2003, net income available to ordinary shareholders was $686.5 million, or $4.97 per ordinary share, compared with $181.8 million, or $1.32 per ordinary share, in the nine months ended September 30, 2002 which included $200 million related to the development of September 11th event and $239.1 million in net realized losses on investments. `Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax' for the nine months ended September 30, 2003 was $642.9 million, or $4.65 per ordinary share, compared with $450.6 million, or $3.28 per ordinary share, for the nine months ended September 30, 2002. See below for the reconciliation of `net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax' to net income available to ordinary shareholders. Total assets as of September 30, 2003 were $39.6 billion compared with $35.6 billion as of December 31, 2002. Book value per ordinary share as at September 30, 2003 was $50.15 compared with $44.48 as at December 31, 2002. 2 Summary unaudited consolidated financial data for the quarter and nine months ended September 30, 2003 and 2002, respectively, are set forth below (in millions, except per share amounts):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ---------------------------- -------------------------- (Unaudited) (Unaudited) 2003 2002 2003 2002 ---- ---- ---- ---- Gross premiums written $2,289.2 $2,647.7 $7,473.6 $6,990.7 Net premiums written 1,717.8 2,116.1 5,778.8 5,413.6 Net premiums earned - General operations 1,663.7 1,344.7 4,565.1 3,391.9 Net premiums earned - Life and annuity operations 86.4 786.4 249.7 836.1 Net premiums earned - Financial operations 35.3 16.9 98.1 42.3 Net income $109.1 $186.5 $716.7 $184.2 Preference dividend (10.1) (2.4) (30.2) (2.4) ------------------------------------------------------------- Net income available to ordinary shareholders $99.0 $184.1 $686.5 $181.8 ============================================================= PER ORDINARY SHARE RESULTS: Net income available to ordinary shareholders $0.71 $1.34 $4.97 $1.32 =============================================================
Gross premiums written for general operations in the third quarter of 2003 were $2.1 billion compared with $1.8 billion in the third quarter of 2002. Net premiums written increased to $1.5 billion from $1.3 billion and net premiums earned rose to $1.7 billion from $1.3 billion in the respective quarters of 2003 and 2002. For the nine months ended September 30, 2003, gross premiums written for general operations were $7.0 billion compared with $6.0 billion in the year ago period. Net premiums written for the first nine months of 2003 were $5.3 billion compared with $4.5 billion a year ago. Net premiums earned were $4.6 billion for the first nine months of 2003 as compared with $3.4 billion for the first nine months of 2002. Gross premiums written for life and annuity operations in the third quarter of 2003 were $89.0 million compared with $793.1 million in the third quarter of 2002, which included a large life reinsurance contract that contributed approximately $760 million in premiums. Net premiums written for life and annuity operations in the third quarter of 2003 were $84.3 million compared with $787.5 million in the third quarter of 2002 and net premiums earned were $86.4 million in the third quarter of 2003 compared with $786.4 million in the third quarter of 2002. For the nine months ended September 30, 2003, gross premiums written for life operations were $276.2 million compared with $851.6 million in 3 the year ago period. Net premiums written were $245.3 million in the first nine months of 2003 compared with $836.0 million in the first nine months of 2002. Net premiums earned were $249.7 million and $836.1 million in the respective nine month periods of 2003 and 2002. Gross premiums written for financial operations in the third quarter of 2003 were $91.6 million compared with $42.9 million in the third quarter of 2002. Net premiums written for financial operations in the third quarter of 2003 were $89.6 million compared with $26.2 million in the third quarter of 2002 and net premiums earned were $35.3 million in the third quarter of 2003 compared with $16.9 million in the third quarter of 2002. For the first nine months of 2003 gross premiums written for financial operations were $242.7 million compared with $145.0 million in the year ago period. Net premiums written for financial operations were $238.0 million in the first nine months of 2003 compared with $123.3 million in 2002 and net premiums earned were $98.1 million and $42.3 million in the respective nine month periods of 2003 and 2002. Net investment income from general operations was $142.2 million in the third quarter of 2003, compared with $153.3 million in 2002's third quarter. Net investment income from life and annuity and financial operations was $48.6 million in the third quarter of 2003 compared with $34.1 million for the quarter ended September 30, 2002. For the first nine months of 2003 net investment income from general operations was $436.3 million compared with $454.2 million in the year ago period. Net investment income from life and annuity and financial operations was $137.0 million in the first nine months of 2003 compared with $79.0 million for the first nine months of 2002. The Company's equity in the net income of its investment affiliates for the third quarter of 2003 was $26.2 million versus a loss of $2.0 million in the third quarter of 2002. The Company's equity in net income of its insurance and financial affiliates was $12.1 million in the third quarter of 2003 versus a loss of $0.4 million in the third quarter of 2002. The Company's equity in the net income of its investment affiliates for the first nine months of 2003 was $87.3 million versus $38.1 million in the first nine months of 2002. The Company's equity in net loss of its insurance and financial affiliates was $12.5 million in the first nine months of 2003 versus net income of $0.1 million in the first nine months of 2002. The combined ratio for the Company's general insurance and reinsurance operations was 98.0% in the third quarter of 2003, versus 90.9% in the third quarter of 2002. The loss ratios were 70.3% and 61.6% in the quarters ended September 30, 2003 and 2002, with corresponding expense ratios of 27.7% and 4 29.3% for the same quarters, respectively. The combined ratio for the Company's general insurance and reinsurance operations was 92.4% in the first nine months of 2003, versus 96.9% in the first nine months of 2002. The loss ratios were 65.1% and 67.5% in the nine months ended September 30, 2003 and 2002, with corresponding expense ratios of 27.3% and 29.4% for the same periods, respectively. In the quarter and nine months ended September 30, 2003, the Company's results were impacted by adverse development for North American casualty reinsurance losses. In the nine months ended September 30, 2002, the Company's results were impacted by adverse development for the September 11 event. The combined ratio excluding the third quarter 2003 casualty losses for the quarter was 86.9% and for the nine months ending September 2003 was 87.7%. For the nine months ending September 2002 excluding the September 11th event loss the combined ratio was 91%. A live on-line web cast of XL's call with analysts and investors to review the third quarter 2003 results will be held at 10 a.m. Eastern Time on October 30, 2003 at WWW.XLCAPITAL.COM. An unaudited financial information supplement relating to the Company's 2003 and 2002 quarterly and full year results is available on its website: WWW.XLCAPITAL.COM (under "Investor Relations - Financial Information"). XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products and services to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. # # # THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE INHERENT RISKS AND UNCERTAINTIES. 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. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED 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 THE FOLLOWING: (A) THE RESULTS OF THE RESERVE REVIEW AND CLAIMS AUDITS PREVIOUSLY ANNOUNCED BY XL AND SCHEDULED TO BE COMPLETED IN THE FOURTH QUARTER OF 2003 (B) RATE INCREASES AND IMPROVEMENTS IN TERMS AND CONDITIONS MAY NOT BE AS LARGE OR SUSTAINABLE AS XL IS CURRENTLY PROJECTING; (C) GREATER FREQUENCY OR SEVERITY OF CLAIMS AND LOSS ACTIVITY, INCLUDING AS A RESULT OF NATURAL OR MAN-MADE CATASTROPHIC EVENTS, THAN XL'S UNDERWRITING, RESERVING OR INVESTMENT PRACTICES ANTICIPATE BASED ON HISTORICAL EXPERIENCE OR INDUSTRY DATA; (D) DEVELOPMENTS IN THE WORLD'S FINANCIAL AND CAPITAL MARKETS WHICH ADVERSELY AFFECT THE PERFORMANCE OF XL'S INVESTMENTS AND XL'S ACCESS TO SUCH MARKETS; (E) CHANGES IN GENERAL ECONOMIC CONDITIONS, INCLUDING FOREIGN CURRENCY EXCHANGE RATES, INFLATION AND OTHER FACTORS; AND (F) THE OTHER FACTORS SET FORTH IN XL'S MOST RECENT REPORT ON FORM 10-K, FORM 10-Q AND XL'S OTHER DOCUMENTS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION. XL UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY OR REVISE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE DEVELOPMENTS OR OTHERWISE. 5 XL CAPITAL LTD SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands of U.S. dollars, except share and per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 (Unaudited) (Unaudited) 2003 2002 (a) 2003 2002 (a) ---- -------- ---- -------- INCOME STATEMENT DATA: REVENUES: Gross premiums written - general, life and annuity and financial operations $2,289,241 $2,647,732 $7,473,573 $6,990,665 Net premiums written - general, life and annuity and financial operations 1,717,784 2,116,133 5,778,750 5,413,646 Net premiums earned - general operations $1,663,713 $1,344,681 $4,565,120 $3,391,880 Net premiums earned - life and annuity operations 86,428 786,383 249,681 836,073 Net premiums earned - financial operations 35,307 16,917 98,087 42,284 Net investment income - general operations 142,166 153,270 436,255 454,177 Net investment income - life and annuity operations 43,136 26,263 120,829 58,606 Net investment income - financial operations 5,461 7,782 16,134 20,402 Net realized (losses) gains on investments (8,693) (23,086) 80,331 (239,108) Net realized and unrealized (losses) gains on derivative instruments (28,346) 9,484 (26,110) (5,126) Equity in net income (loss) of investment affiliates 26,240 (1,976) 87,344 38,140 Fee and other income 3,920 10,082 25,989 38,490 ----------- ----------- ----------- ----------- $1,969,332 $2,329,800 $5,653,660 $4,635,818 ----------- ----------- ----------- ----------- EXPENSES: Net losses and loss expenses incurred - general operations $1,169,664 $828,199 $2,970,210 $2,289,568 Claims and policy benefit reserves - life and annuity operations 99,954 803,741 302,737 870,320 Net losses and loss expenses incurred - financial operations 3,894 6,006 26,177 9,032 Acquisition costs and operating expenses 537,224 440,929 1,460,513 1,126,972 Exchange gains (4,076) (15,382) (30,130) (46,952) Interest expense 49,671 51,815 142,093 133,576 Amortization of intangible assets 375 875 1,125 1,500 ----------- ----------- ----------- ----------- $1,856,706 $2,116,183 $4,872,725 $4,384,016 ----------- ----------- ----------- ----------- Income before minority interest, income tax expense and equity in net (income) loss of insurance and financial affiliates $112,626 $213,617 $780,935 $251,802 Minority interest 763 2,494 5,791 6,528 Income tax expense 14,890 24,286 45,929 61,140 Equity in net (income) loss of insurance and financial affiliates (12,078) 401 12,487 (47) ----------- ----------- ----------- ----------- Net income $109,051 $186,436 $716,728 $184,181 Preference dividend (10,080) (2,369) (30,241) (2,369) ----------- ----------- ----------- ----------- NET INCOME AVAILABLE TO ORDINARY SHAREHOLDERS $98,971 $184,067 $686,487 $181,812 ----------- ----------- ----------- ----------- Weighted average number of ordinary shares and ordinary share equivalents: Basic 136,826 135,790 136,744 135,551 : Diluted 138,423 137,349 138,170 137,291 PER SHARE DATA: Net income available to ordinary shareholders $0.71 $1.34 $4.97 $1.32 =========== =========== =========== ===========
NOTE: a) Certain reclassifications, which have no effect on net income, have been made to prior period results to conform to current presentation. 6 XL CAPITAL LTD SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
AS AT SEPTEMBER 30, AS AT DECEMBER 31, 2003 2002 ------------------- ------------------ BALANCE SHEET DATA: Total investments available for sale $19,410,426 $16,059,733 Net payable for investments purchased 112,219 1,546,276 Cash and cash equivalents 2,059,609 3,557,815 Investments in affiliates 1,855,989 1,750,005 Intangible assets 1,677,726 1,653,700 Total assets 39,586,850 35,647,369 Unpaid losses and loss expenses 15,161,820 13,202,736 Deposit liabilities and policy benefit reserves 6,160,554 4,889,996 Notes payable and debt 1,898,959 1,877,957 Total shareholders' equity 7,401,210 6,569,589 Book value per ordinary share $50.15 $44.48
7 XL CAPITAL LTD RECONCILIATION The following is a reconciliation of the Company's net income to `net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax' for the three and nine months ended September 30, 2003 and 2002 (in millions except per share amounts):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 (Unaudited) (Unaudited) 2003 2002 2003 2002 ---- ---- ---- ---- Net income available to ordinary shareholders $99.0 $184.1 $686.5 $181.8 Net realized losses (gains) on investments, net of tax 7.3 28.0 (74.8) 245.8 Net realized and unrealized losses on investment derivatives, net of tax 16.1 2.7 7.5 12.5 Net realized and unrealized losses on credit derivatives, net of tax 1.7 1.8 23.7 10.5 ------------------------------------------------------------ Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax $124.1 $216.6 $642.9 $450.6 ------------------------------------------------------------ PER ORDINARY SHARE RESULTS: Net income available to ordinary shareholders $0.71 $1.34 $4.97 $1.32 ============================================================ Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivative instruments, net of tax $0.90 $1.58 $4.65 $3.28 ============================================================ WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING: Basic 136.8 135.8 136.7 135.6 Diluted 138.4 137.3 138.2 137.3
8 COMMENT ON REGULATION G This press release contains the presentation of `net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivatives, net of tax'. This presentation is a "non-GAAP financial measure" as defined in Regulation G. The reconciliation of such measure to net income (the most directly comparable GAAP financial measure) in accordance with Regulation G is included above. XL presents its operations in the way it believes will be most meaningful and useful to investors, analysts, rating agencies and others who use XL's financial information in evaluating XL's performance. This presentation includes the use of `net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and investment derivatives, net of tax'. Investment derivatives include all derivatives entered into by XL other than weather and energy and credit derivatives (discussed further below). Although the investment of premiums to generate income (or loss) and realized 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 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 recurring 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 is largely opportunistic and are a function of economic and interest rate conditions. In addition, with respect to credit derivatives, because XL generally holds its financial guarantee 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 in the financial guarantee business) as the changes in fair value each quarter are not indicative of underlying business performance of XL's financial guarantee operations. Unlike these credit derivatives, XL's weather and energy derivatives are actively traded (i.e, they are not held to maturity) and are, therefore, not excluded from net income as any gains or losses from this business are considered by management when evaluating and managing the underlying business. In summary, XL evaluates the performance of and manages its business to produce an underwriting profit. In addition to presenting net income, XL believes that showing net income exclusive of the items mentioned above 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 makes 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 who 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. 9 -----END PRIVACY-ENHANCED MESSAGE-----