Date of Report (Date of earliest event reported): | July 29, 2013 |
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 Second Quarter 2013 Results“), dated July 29, 2013. |
XL Group plc (Registrant) | ||
By: | /s/ Kirstin Gould | |
Name: Kirstin Gould Title: General Counsel and Secretary |
EXHIBIT 99.1 | ||
XL House | ||
8 St. Stephen's Green | ||
Dublin 2, Ireland | ||
xlgroup.com | ||
• | Net income of $272.7 million, or $0.93 per share, and operating net income1 of $221.6 million, or $0.75 per share, for the quarter |
• | P&C combined ratio of 93.8% compared to 90.8% in the prior year quarter |
• | Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums of $134.1 million compared to $60.6 million in the prior year quarter |
• | Annualized operating return on ordinary shareholders' equity2 excluding and including unrealized gains and losses on investments were 9.7% and 8.7%, respectively, for the quarter |
• | Fully diluted tangible book value per ordinary share3 of $32.45 at June 30, 2013, a decrease of $0.90, or 2.7%, from December 31, 2012, including a decrease in unrealized investment gains of $827.0 million |
• | Share buybacks totaled 4.8 million shares for $150.0 million during the quarter |
Highlights | ||||||||||
Three months ended June 30 | ||||||||||
(U.S. dollars in thousands, except per share amounts) | ||||||||||
Three Months Ended | ||||||||||
June 30, | ||||||||||
(Unaudited) | ||||||||||
2013 | 2012 | |||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | ||||||
Per ordinary share - fully diluted | $ | 0.93 | $ | 0.71 | ||||||
Operating net income (loss) | $ | 221,591 | $ | 221,944 | ||||||
Per ordinary share - fully diluted | $ | 0.75 | $ | 0.71 |
• | Operating net income for the quarter of $221.6 million is in line with operating net income of $221.9 million in the prior year quarter as higher levels of catastrophe losses in the current year were largely offset by higher affiliate earnings than in the prior year quarter. |
• | Net income for the quarter of $272.7 million, compared to net income of $221.2 million in the prior year quarter, primarily due to higher net realized gains on investments of $41.0 million compared to losses of $12.4 million in the prior year quarter. |
• | Net investment income for the quarter was $232.5 million, compared to $262.6 million in the prior year quarter and $246.5 million in the first quarter of 2013. The decline against the prior year quarter was primarily due to lower yields as a result of lower reinvestment rates. |
• | Net income from investment fund and investment manager operating affiliates was $73.6 million in the quarter, compared to income of $17.1 million in the prior year quarter. Strong alternative portfolio returns were driven by positive markets over the past six months. |
• | During the quarter, the Company purchased 4.8 million shares for $150.0 million at an average price of $30.97 per share, which was accretive to fully diluted book value per ordinary share by $0.04. At June 30, |
P&C Operations | ||||||||||
Three months ended June 30 | ||||||||||
(U.S. dollars in thousands) | ||||||||||
Three Months Ended | ||||||||||
June 30, | ||||||||||
(Unaudited) | ||||||||||
2013 | 2012 | |||||||||
Gross premiums written | $ | 1,944,170 | $ | 1,763,452 | ||||||
Net premiums written | $ | 1,459,972 | $ | 1,347,277 | ||||||
Net premiums earned | $ | 1,488,497 | $ | 1,400,970 | ||||||
Underwriting profit (loss) | $ | 92,124 | $ | 129,372 | ||||||
Loss ratio | 63.0 | % | 59.0 | % | ||||||
Underwriting expense ratio | 30.8 | % | 31.8 | % | ||||||
Combined ratio | 93.8 | % | 90.8 | % |
• | P&C gross premiums written (“GPW”) in the second quarter increased 10.2% compared to the prior year quarter. The Insurance segment GPW increased 12.3% from the prior year quarter, as a result of new business in North American Primary Casualty and Construction, as well as new business in International Property lines combined with pricing improvements across most lines. The increase in GPW for the Reinsurance segment of 4.3% was driven by new business in the whole account book in the Bermuda operation. |
• | P&C net premiums earned (“NPE”) in the second quarter of $1.5 billion were comprised of $1.1 billion from the Insurance segment and $430.0 million from the Reinsurance segment. Compared to the prior year quarter, Insurance NPE increased by 10.3% primarily due to increased premiums in most North American and selected International lines over the last twelve months driven in part by improved pricing. Reinsurance NPE decreased by 2.7% driven by our International business, reflecting the non-renewal of certain Marine exposures and the decrease in proportional treaties over recent quarters in Latin America. |
• | The P&C loss ratio in the current quarter was 4.0 percentage points higher than in the prior year quarter. Included in the P&C loss ratio was favorable prior year development of $118.6 million compared to $101.3 million in the prior year quarter. The P&C loss ratio variance was also impacted by natural catastrophe pre-tax losses of $134.1 million net of reinsurance and reinstatement premiums, with approximately half related to the floods in Europe, compared to $60.6 million in the prior year quarter. Excluding prior year development and natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums, the second quarter P&C loss ratio was 0.3 percentage points lower than the prior year quarter. The improvements were driven by the favorable impact of changes in business mix and moderately improved pricing. |
• | Operating expenses were slightly higher than the prior year quarter. An increase in compensation costs as a result of Insurance business expansion plans combined with investments in technology and the impact of foreign exchange were partially offset by lower professional costs associated with the Company's strategic initiatives as these initiatives enter their mature stage of development. |
• | The P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 92.7%, compared to 93.7% for the prior year quarter. The Insurance segment combined ratio on this basis was 97.0% for the quarter, compared to 98.5% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 82.0%, compared to 83.2% for the prior year quarter. |
XL Group plc | ||||||||||||||||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | ||||||||||||||||||||
Income statement data: | ||||||||||||||||||||
(U.S. dollars in thousands) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Gross premiums written: | ||||||||||||||||||||
- P&C operations | $ | 1,944,170 | $ | 1,763,452 | $ | 4,349,086 | $ | 4,080,436 | ||||||||||||
- Life operations | 81,302 | 92,903 | 154,272 | 179,586 | ||||||||||||||||
Net premiums written: | ||||||||||||||||||||
- P&C operations | $ | 1,459,972 | $ | 1,347,277 | $ | 3,502,181 | $ | 3,310,505 | ||||||||||||
- Life operations | 73,896 | 85,623 | 139,341 | 164,119 | ||||||||||||||||
Net premiums earned: | ||||||||||||||||||||
- P&C operations | $ | 1,488,497 | $ | 1,400,970 | $ | 2,952,743 | $ | 2,758,867 | ||||||||||||
- Life operations | 73,896 | 85,623 | 139,341 | 164,143 | ||||||||||||||||
Net investment income | $ | 232,546 | $ | 262,631 | $ | 479,014 | $ | 527,873 | ||||||||||||
Net realized gains (losses) on investments | 40,968 | (12,393) | 77,477 | 8,409 | ||||||||||||||||
Net realized and unrealized gains (losses) on derivative instruments | (5,105) | (4,301) | 2,780 | (3,598) | ||||||||||||||||
Income (loss) from investment fund affiliates | 46,543 | 3,097 | 78,764 | 22,506 | ||||||||||||||||
Fee income and other | 10,871 | 13,213 | 20,503 | 23,072 | ||||||||||||||||
Total revenues | $ | 1,888,216 | $ | 1,748,840 | $ | 3,750,622 | $ | 3,501,272 | ||||||||||||
Expenses: | ||||||||||||||||||||
Net losses and loss expenses incurred - P&C operations | $ | 937,606 | $ | 826,354 | $ | 1,780,690 | $ | 1,680,420 | ||||||||||||
Claims and policy benefits - Life operations | 116,767 | 131,149 | 227,720 | 252,455 | ||||||||||||||||
Acquisition costs | 231,886 | 218,937 | 452,145 | 443,087 | ||||||||||||||||
Operating expenses | 303,159 | 299,053 | 586,992 | 581,465 | ||||||||||||||||
Exchange (gains) losses | (11,331) | (17,976) | (44,766) | (5,258) | ||||||||||||||||
Interest expense | 38,204 | 57,359 | 76,904 | 96,657 | ||||||||||||||||
Total expenses | $ | 1,616,291 | $ | 1,514,876 | $ | 3,079,685 | $ | 3,048,826 | ||||||||||||
Income (loss) before income tax and income (loss) from operating affiliates | $ | 271,925 | $ | 233,964 | $ | 670,937 | $ | 452,446 | ||||||||||||
Income (loss) from operating affiliates | 32,825 | 20,457 | 63,823 | 36,710 | ||||||||||||||||
Provision (benefit) for income tax | 28,872 | 29,812 | 72,351 | 51,362 | ||||||||||||||||
Net income (loss) | 275,878 | 224,609 | 662,409 | 437,794 | ||||||||||||||||
Non-controlling interests | (3,180 | ) | (3,455 | ) | (38,922 | ) | (40,012 | ) | ||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 |
XL Group plc | ||||||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | ||||||||||
Selected balance sheet data: | ||||||||||
(U.S. dollars in thousands, except per share amounts) | At | At | ||||||||
June 30, | December 31, | |||||||||
2013 | 2012 | |||||||||
(Unaudited) | (Note 1) | |||||||||
Total investments available for sale | $ | 27,605,563 | $ | 28,818,982 | ||||||
Fixed maturities, held to maturity | 2,686,994 | 2,814,447 | ||||||||
Cash and cash equivalents | 2,420,082 | 2,618,378 | ||||||||
Investments in affiliates | 1,367,581 | 1,126,875 | ||||||||
Unpaid losses and loss expenses recoverable | 3,250,248 | 3,382,102 | ||||||||
Goodwill and other intangible assets | 407,379 | 408,527 | ||||||||
Total assets (Note 2) | 45,105,137 | 45,386,895 | ||||||||
Unpaid losses and loss expenses | 19,990,710 | 20,484,121 | ||||||||
Deposit liabilities | 1,534,896 | 1,551,398 | ||||||||
Future policy benefit reserves | 4,584,029 | 4,812,046 | ||||||||
Unearned premiums | 4,472,108 | 3,755,086 | ||||||||
Notes payable and debt | 1,671,634 | 1,672,778 | ||||||||
Total shareholders’ equity (Note 2) | 11,237,070 | 11,856,402 | ||||||||
Ordinary shareholders' equity (Note 2) | 9,892,570 | 10,510,077 | ||||||||
Ordinary shares outstanding (Note 3) | 287,491,830 | 298,732,832 | ||||||||
Basic book value per ordinary share (Notes 2 and 4) | $ | 34.41 | $ | 35.18 | ||||||
Fully diluted book value per ordinary share (Notes 2 and 4) | $ | 33.84 | $ | 34.70 | ||||||
Fully diluted tangible book value per ordinary share (Notes 2 and 4) | $ | 32.45 | $ | 33.35 | ||||||
Note 1: Certain items have been reclassified to conform to the current period presentation. | ||||||||||
Note 2: On January 1, 2012, for all fiscal years and interim periods presented, XL adopted a FASB accounting standards update to address disparities in practice regarding the interpretation of which costs relating to the acquisition of new and renewal insurance contracts qualify for deferral. The adoption of this guidance did not have an impact on XL's consolidated statements of income or comprehensive income. | ||||||||||
Note 3: 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 4: Book value per 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 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 issues 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 removed from ordinary shareholders’ equity. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
2013 | 2012 (Note 1) | 2013 | 2012 (Note 1) | |||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 272,698 | $ | 221,154 | $ | 623,487 | $ | 397,782 | ||||||||
Net realized (gains) losses on investments, net of tax | (44,530 | ) | 11,420 | (80,768) | (9,041 | ) | ||||||||||
Net realized and unrealized (gains) losses on derivatives, net of tax | 5,105 | 4,300 | (2,780) | 3,602 | ||||||||||||
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates | (75 | ) | 4 | (255) | (36 | ) | ||||||||||
Exchange (gains) losses, net of tax | (11,607 | ) | (14,934 | ) | (38,226 | ) | (5,132 | ) | ||||||||
Operating net income (loss): (Note 2) | $ | 221,591 | $ | 221,944 | $ | 501,458 | $ | 387,175 | ||||||||
Per ordinary share results: (Note 3) | ||||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 0.93 | $ | 0.71 | $ | 2.10 | $ | 1.26 | ||||||||
Operating net income (loss) (Note 2) | $ | 0.75 | $ | 0.71 | $ | 1.69 | $ | 1.23 | ||||||||
Weighted average ordinary shares outstanding: | ||||||||||||||||
Basic | 289,513,239 | 309,765,458 | 292,277,406 | 312,441,759 | ||||||||||||
Diluted - Net income | 294,332,781 | 312,434,531 | 297,044,192 | 315,009,636 | ||||||||||||
Diluted - Operating net income | 294,332,781 | 312,434,531 | 297,044,192 | 315,009,636 | ||||||||||||
Return on ordinary shareholders' equity: | ||||||||||||||||
Closing ordinary shareholders' equity (Notes 4 and 5) | $ | 9,892,570 | $ | 9,867,816 | $ | 9,892,570 | $ | 9,867,816 | ||||||||
Unrealized (gain) loss on investments, net of tax | $ | (727,116 | ) | $ | (886,254 | ) | $ | (727,116 | ) | $ | (886,254 | ) | ||||
Average ordinary shareholders' equity excluding unrealized gains and losses on investments (Notes 4 and 5) | $ | 9,143,915 | $ | 8,965,003 | $ | 9,099,539 | $ | 8,935,713 | ||||||||
Average ordinary shareholders' equity (Notes 4 and 5) | $ | 10,189,962 | $ | 9,788,925 | $ | 10,201,324 | $ | 9,639,738 | ||||||||
Operating net income (loss) (Note 2) | $ | 221,591 | $ | 221,944 | $ | 501,458 | $ | 387,175 | ||||||||
Annualized operating net income (Note 2) | $ | 886,364 | $ | 887,776 | $ | 1,002,916 | $ | 774,350 | ||||||||
Annualized return on ordinary shareholders' equity - operating net income (loss) (Notes 2, 4 and 5) | 8.7 | % | 9.1 | % | 9.8 | % | 8.0 | % | ||||||||
Annualized return on ordinary shareholders' equity excluding unrealized gains and losses on investments - operating net income (loss) (Notes 2, 4 and 5) | 9.7 | % | 9.9 | % | 11.0 | % | 8.7 | % | ||||||||
Note 1: Certain amounts have been reclassified to conform to the current period presentation. | ||||||||||||||||
Note 2: Defined as net income (loss) attributable to ordinary shareholders excluding (1) net realized gains and losses on investments, net of tax, (2) net realized and unrealized gains and losses on derivatives, net of tax, (3) XL's share of items (1) and (2) for XL's insurance company affiliates for the periods presented, (4) goodwill impairment charges, net of tax and (5) foreign exchange gains or losses, net of tax. “Operating net income”, “return on ordinary shareholders' equity” based on operating net income and “return on ordinary shareholders' equity” based on operating net income excluding unrealized gains and losses on investments are non-GAAP financial measures. | ||||||||||||||||
Note 3: 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 4: Ordinary shareholders' equity is defined as total shareholders' equity less non-controlling interest in equity of consolidated subsidiaries. | ||||||||||||||||
Note 5: On January 1, 2012, for all fiscal years and interim periods presented, XL adopted a FASB accounting standards update to address disparities in practice regarding the interpretation of which costs relating to the acquisition of new and renewal insurance contracts qualify for deferral. The adoption of this guidance did not have an impact on XL's consolidated statements of income or comprehensive income. |