-----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, IL1GOjkAyOX+yBFrptdFsiQDPhE52Rwx27zzHSHlrUgAg+8hOuBvNeN/s3S2qZvI pH+/GSm9h2jY6dK2YRdOTg== 0000950162-03-001073.txt : 20030801 0000950162-03-001073.hdr.sgml : 20030801 20030731182325 ACCESSION NUMBER: 0000950162-03-001073 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030731 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030801 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: 03815850 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 xl8k073103.txt FORM 8K ================================================================================ 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 July 31, 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 (I.R.S. Employer incorporation or organization) file number) 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 Second Quarter 2003 Results") dated July 31, 2003. Item 12. Results of Operations and Financial Condition. The information set forth herein 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 July 31, 2003, XL Capital Ltd issued the press release attached as Exhibit 99.1 and incorporated by reference herein covering the results of the second 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: July 31, 2003 XL CAPITAL LTD By: /s/ Jerry de St. Paer --------------------------------- Name: Jerry de St. Paer Title: Chief Financial Officer EX-99.1 3 xl8k073103latestex.txt PRESS RELEASE EXHIBIT 99.1 XL CAPITAL 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 SECOND QUARTER 2003 RESULTS Record Net Income $347.7 million, or $2.51 per ordinary share HAMILTON, BERMUDA, July 31, 2003 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported net income available to ordinary shareholders for the quarter ended June 30, 2003 of $347.7 million, or $2.51 per ordinary share, compared with a net loss of $91.7 million, or $0.68 per ordinary share, in the second 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 second quarter of 2003 was $268.6 million, or $1.94 per ordinary share, compared with $26.4 million, or $0.19 per ordinary share, for the quarter ended June 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 second quarter 2003 results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated: "We had a strong quarter with net income, total assets and shareholders' equity reaching record levels. Cash flow from operations was a robust $952 million for the second quarter. Adding the $669 million in XL Life and Annuity transactions this quarter increased cash flow to $1.6 billion. Net premiums earned from general operations increased by more than 40% compared with the 1 second quarter a year ago and we achieved satisfactory combined ratios of 92.2% in the second quarter and 89.2% for the six months ended June 30, 2003." "We are strategically positioned in all of the business lines and regions where we want to be and continue to capitalize on the current strong market conditions in our areas of focus," stated Mr. O'Hara. "We are particularly well-placed in those lines of business which are still seeing the largest rate increases, notably professional lines and casualty worldwide which currently comprise nearly half of our general operations' portfolio. The Company's life and annuity businesses and our financial operations also performed well and both areas are gaining momentum." Mr. O'Hara also commented: "We were also pleased with our total investment earnings, comprising both investment income and our equity in the earnings of our investment affiliates, of $224.9 million in the quarter ended June 30, 2003, as compared with $182.7 million in the prior year's quarter." For the six months ended June 30, 2003, net income available to ordinary shareholders was $587.5 million, or $4.25 per ordinary share, compared with a net loss of $2.3 million, or $0.02 per ordinary share, in the six months ended June 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' for the six months ended June 30, 2003 was $518.7 million, or $3.76 per ordinary share, compared with $234.0 million, or $1.70 per ordinary share, for the six months ended June 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 June 30, 2003 were $39.2 billion compared with $35.6 billion as of December 31, 2002. Book value per ordinary share as at June 30, 2003 increased to $51.40 compared with $44.48 as at December 31, 2002. 2 Summary unaudited consolidated financial data for the quarter and six months ended June 30, 2003 and 2002, respectively, are set forth below (in millions, except per share amounts):
Three months ended Six months ended June 30 June 30 (Unaudited) (Unaudited) 2003 2002 2003 2002 ---- ---- ---- ---- Gross premiums written $ 2,037.2 $ 1,538.3 $ 5,184.3 $ 4,342.9 Net premiums written 1,571.9 1,138.7 4,061.0 3,297.5 Net premiums earned 1,575.8 1,057.5 3,127.4 2,122.3 Net income (loss) $ 357.7 $ (91.7) $ 607.7 $ (2.3) Preference dividend (10.0) ( -) (20.2) ( -) -------- --------- -------- -------- Net income available to ordinary shareholders $ 347.7 $ (91.7) $ 587.5 $ (2.3) ======== ========= ======== ======== Per ordinary share results: Net income (loss) available to ordinary shareholders (a) $ 2.51 $ (0.68) $ 4.25 $ (0.02) ======== ========= ======== ======== Weighted average ordinary shares outstanding: Basic 136,791 135,662 136,527 135,431 Diluted 138,634 138,231 138,084 137,743
Note: (a) Average stock options outstanding have been excluded where anti-dilutive to earnings per ordinary share. Consequently, where there is a net loss, basic weighted average ordinary shares outstanding is used to calculate net loss per ordinary share. Effective this quarter the presentation of the Company's results have been reported in general operations, life and annuity operations and financial operations in order to provide additional information relating to XL's financial products and services segment. Prior periods have been reclassified to reflect this expanded presentation. Gross premiums written for general operations in the second quarter of 2003 were $1.9 billion compared with $1.4 billion in the second quarter of 2002. Net premiums written increased to $1.4 billion from $1.0 billion and net premiums earned rose to $1.5 billion from $1.0 billion in the respective quarters of 2003 and 2002. For the six months ended June 30, 2003, gross premiums written for general operations were $4.8 billion compared with $4.2 billion in the year ago period. Net premiums written for the first six months of 2002 were $3.8 billion compared with $3.2 billion a year- ago. Net premiums earned were $2.9 billion for the first six months of 2003 as compared with $2.0 billion for the first six months of 2002. 3 Gross premiums written for life and annuity operations in the second quarter of 2003 were $75.9 million compared with $20.0 million in the second quarter of 2002. Net premiums written for life and annuity operations in the second quarter of 2003 were $63.7 million compared with $11.5 million in the second quarter of 2002 and net premiums earned were $70.5 million in the second quarter of 2003 compared with $10.5 million in the second quarter of 2002. For the six months ended June 30, 2003, gross premiums written for life operations were $187.2 million compared with $58.5 million in the year ago period. Net premiums written were $161.0 million in the first six months of 2003 compared with $48.5 million in the first six months of 2002. Net premiums earned were $163.3 million and $49.7 million in the respective six month periods of 2003 and 2002. Gross premiums written for financial operations in the second quarter of 2003 were $106.3 million compared with $75.8 million in the second quarter of 2002. Net premiums written for financial operations in the second quarter of 2003 were $104.5 million compared with $73.4 million in the second quarter of 2002 and net premiums earned were $35.8 million in the second quarter of 2003 compared with $10.8 million in the second quarter of 2002. For the first six months of 2003 gross premiums written for financial operations were $151.0 million compared with $102.1 million in the year ago period. Net premiums written for financial operations were $148.5 million in the first six months of 2003 compared with $97.1 million in 2002 and net premiums earned were $62.8 million and $25.4 million in the respective six month periods of 2003 and 2002. Net investment income from general operations was $145.1 million in the second quarter of 2003, compared with $151.6 million in 2002's second quarter. Net investment income from life and annuity and financial operations was $45.5 million in the second quarter of 2003 compared with $23.2 million for the quarter ended June 30, 2002. For the first six months of 2003 net investment income from general operations was $294.1 million in compared with $300.9 million in the year ago period. Net investment income from life and annuity and financial operations was $88.4 million in the first six months of 2003 compared with $45.0 million for the first six months of 2002. The Company's equity in the net income of its investment affiliates for the second quarter of 2003 was $34.3 million versus $7.9 million in the second quarter of 2002. The Company's equity in net income of its insurance and financial affiliates was $16.5 million in the second quarter of 2003 versus net income of $0.4 million in the second quarter of 2002. The Company's equity in the net income of its investment affiliates for the first six months of 2003 was $61.1 million versus $40.1 million in the first six months of 2002. The Company's equity in net loss of its insurance and financial affiliates was 4 $24.6 million in the first six months of 2003 versus net income of $0.4 million in the first six months of 2002. The combined ratio for the Company's general insurance and reinsurance operations was 92.2% in the second quarter of 2003, versus 109.2% in the second quarter of 2002. The loss ratios were 63.2% and 79.3% in the quarters ended June 30, 2003 and 2002, with corresponding expense ratios of 29.0% and 29.9% for the same quarters, respectively. The combined ratio for the Company's general insurance and reinsurance operations was 89.2% in the first six months of 2003, versus 100.8% in the first six months of 2002. The loss ratios were 62.1% and 71.4% in the six months ended June 30, 2003 and 2002, with corresponding expense ratios of 27.1% and 29.4% for the same periods, respectively. In the second quarter and six months ended June 30, 2002, the Company's results were impacted by increased reserves for the September 11 event. A live on-line web cast of XL's call with analysts and investors to review the second quarter 2003 results will be held at 10 a.m. Eastern Time on August 1, 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) rate increases and improvements in terms and conditions may not be as large or sustainable as XL is currently projecting; (b) 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; (c) 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; (d) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; and (e) the other factors set forth in XL's most recent report on Form 10-K, Form 10-Q/A 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 Six Months Ended June 30 June 30 (Unaudited) (Unaudited) 2003 2002 (a) 2003 2002 (a) ---- -------- ---- -------- Income Statement Data: Revenues: Gross premiums written - general, life and $2,037,193 $1,538,257 $5,184,332 $4,342,933 annuity and financial operations Net premiums written - general, life and 1,571,882 1,138,660 4,060,966 3,297,513 annuity and financial operations Net premiums earned - general operations $1,469,520 $1,036,231 $2,901,407 $2,047,199 Net premiums earned - life and annuity operations 70,482 10,497 163,253 49,690 Net premiums earned - financial operations 35,807 10,813 62,780 25,367 Net investment income - general operations 145,088 151,553 294,089 300,907 Net investment income - life and annuity operations 40,234 16,825 77,693 32,343 Net investment income - financial operations 5,229 6,365 10,673 12,620 Net realized gains (losses) on investments 93,687 (110,002) 89,024 (216,022) Net realized and unrealized (losses) gains on derivative instruments (12,257) (5,134) 2,236 (14,610) Equity in net income of investment affiliates 34,306 7,931 61,104 40,116 Fee and other income 9,792 20,459 22,069 28,408 ------------- ---------------- --------------- ------------- $1,891,888 $1,145,538 $3,684,328 $2,306,018 ------------- ---------------- --------------- ------------- Expenses: Net losses and loss expenses incurred - general operations $ 928,755 $822,151 $1,800,546 $1,461,369 Claims and policy benefit reserves - life and annuity operations 83,225 18,816 202,783 66,579 Net losses and loss expenses incurred - financial operations 8,820 (54) 22,283 3,026 Acquisition costs and operating expenses 492,458 355,166 923,289 686,043 Exchange gains (23,352) (23,206) (26,054) (31,570) Interest expense 46,282 40,139 92,422 81,761 Amortization of intangible assets 375 11 750 625 ------------- ---------------- --------------- ------------- $1,536,563 $1,213,023 $3,016,019 $2,267,833 ------------- ---------------- --------------- ------------- Income (loss) before minority interest, income tax expense and equity in net loss of insurance and financial affiliates $ 355,325 $ (67,485) $ 668,309 $ 38,185 Minority interest 3,166 1,779 5,028 4,034 Income tax charge 11,009 22,900 31,039 36,854 Equity in net (income) loss of insurance and financial affiliates (16,522) (416) 24,565 (448) ------------- ---------------- --------------- ------------- Net income (loss) $ 357,672 $ (91,748) $ 607,677 $ (2,255) Preference dividend (10,013) -- (20,161) -- ------------- ---------------- --------------- ------------- Net income (loss) available to ordinary shareholders $347,659 $ (91,748) $ 587,516 $ (2,255) ------------- ---------------- --------------- ------------- Weighted average number of ordinary shares and ordinary share equivalents : Basic 136,791 135,662 136,527 135,431 : Diluted 138,634 138,231 138,084 137,743 Per Share Data: (b) Net income (loss) available to ordinary shareholders $ 2.51 $ (0.68) $ 4.25 $ (0.02) ======== ========= ======= =========
Note: a) Certain reclassifications, which have no effect on net income, have been made to prior period results to conform to current presentation. b) Average stock options outstanding have been excluded where anti-dilutive to earnings per share. Consequently, where there is a net loss, basic weighted average ordinary shares outstanding is used to calculate net loss per share. 6
XL CAPITAL LTD SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands of U.S. dollars, except per share amounts) (Unaudited) As at June 30, As at December 31, 2003 2002 ----------------------- ----------------------- Balance Sheet Data: Total investments available for sale $17,946,914 $16,022,522 Segregated assets 341,645 37,211 Net payable for investments purchased 710,120 1,546,276 Cash and cash equivalents 3,007,127 3,557,815 Investments in affiliates 1,809,643 1,750,005 Intangible assets 1,655,352 1,653,700 Total assets 39,167,529 35,647,369 Unpaid losses and loss expenses 14,748,208 13,202,736 Deposit liabilities and policy benefit reserves 5,438,842 4,852,785 Segregated liabilities 341,645 37,211 Notes payable and debt 1,890,398 1,877,957 Total Shareholders' equity 7,565,320 6,569,589 Book value per ordinary share $51.40 $44.48
7 XL CAPITAL LTD RECONCILIATION The following is a reconciliation of the Company's net income (loss) 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 six months ended June 30, 2003 and 2002 (in millions except per share amounts):
Three months ended Six Months ended June 30 June 30 (Unaudited) (Unaudited) 2003 2002 2003 2002 ---- ---- ---- ---- Net income (loss) available to ordinary shareholders $347.7 $ (91.7) $ 587.5 $ (2.3) Net realized (gains) and losses on investments, net of tax (96.5) 110.0 (82.2) 217.8 Net realized and unrealized (gains) losses on investment derivatives, net of tax (3.9) (2.0) (8.5) 9.7 Net realized and unrealized losses (gains) on credit derivatives, net of tax 21.3 10.1 21.9 8.8 --------------------------------------------------------------------- Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and $ 268.6 $26.4 $ 518.7 $234.0 investment derivative instruments, net of tax --------------------------------------------------------------------- Per ordinary share results: Net income (loss) available to ordinary shareholders $ 2.51 $(0.68) $ 4.25 $(0.02) ====== ======= ====== ======= Net income excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit and $ 1.94 $0.19 $ 3.76 $1.70 investment derivative instruments, net of tax ====== ======= ====== ======= Weighted average ordinary shares outstanding: Basic 136.8 135.7 136.5 135.4 Diluted 138.6 138.2 138.1 137.4
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, capital gains are 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 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-----