Date of Report (Date of earliest event reported): | October 30, 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 Third Quarter 2013 Results“), dated October 30, 2013. |
XL Group plc (Registrant) | ||
By: | /s/ Kirstin Gould | |
Name: Kirstin Gould Title: General Counsel and Secretary |
EXHIBIT 99.1 | ||
• | Operating net income1 of $154.6 million, or $0.53 per share, and net income of $135.6 million, or $0.47 per share, for the quarter on a fully diluted basis |
• | Operating net income1 of $656.1 million, or $2.23 per share, and net income of $759.1 million, or $2.57 per share, for the year to date on a fully diluted basis |
• | P&C combined ratio of 95.0% for the quarter, compared to 92.2% in the prior year quarter, and a year to date P&C combined ratio of 92.2% compared to 92.7% in the prior year period |
• | Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums of $85.0 million compared to $32.0 million in the prior year quarter |
• | Annualized operating returns on ordinary shareholders' equity2 excluding and including unrealized gains and losses on investments were 6.8% and 6.2%, respectively, for the quarter, and 9.6% and 8.6%, respectively, for the year to date |
• | Fully diluted tangible book value per ordinary share3 of $32.96 at September 30, 2013, an increase from June 30, 2013 of $0.51 or 1.6%, and a decrease of $0.39, or 1.2%, from December 31, 2012, including a decrease in unrealized investment gains, net of tax, of $665.5 million |
• | Share buybacks totaled 4.8 million ordinary shares for $150.0 million during the quarter |
Highlights | |||||||||||||||
Three and Nine Months Ended September 30 | |||||||||||||||
(U.S. dollars in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 135,648 | $ | 171,902 | $ | 759,136 | $ | 569,684 | |||||||
Per ordinary share-fully diluted | $ | 0.47 | $ | 0.56 | $ | 2.57 | $ | 1.82 | |||||||
Operating net income (loss) | $ | 154,628 | $ | 188,038 | $ | 656,087 | $ | 575,213 | |||||||
Per ordinary share-fully diluted | $ | 0.53 | $ | 0.61 | $ | 2.23 | $ | 1.84 |
• | Net income and operating net income of $135.6 million and $154.6 million, respectively, compared to net income and operating net income of $171.9 million and $188.0 million, respectively, in the prior year quarter decreased, primarily due to natural catastrophe losses, as well as higher levels of medium to large losses in Insurance, in the current quarter as compared to the prior year quarter. For the nine months ended September 30, 2013, however, the P&C combined ratio of 92.2% remains lower than for the same period in 2012 when it was 92.7%. |
• | Net investment income for the quarter was $237.9 million, compared to $239.5 million in the prior year quarter and $232.5 million in the second quarter of 2013. |
• | Net income from investment fund and investment manager operating affiliates was $15.1 million in the quarter, compared to income of $8.6 million in the prior year quarter. The increase was primarily due to a solid quarter from our investment manager affiliates. |
• | Fully diluted tangible book value per ordinary share increased by $0.51 from the prior quarter driven by net income growth combined with the benefit of share buybacks and an increase in net unrealized gains on investments. |
• | During the quarter, the Company purchased 4.8 million ordinary shares for $150.0 million at an average price of $31.03 per share, which was accretive to fully diluted tangible book value per ordinary share by $0.03. At September 30, 2013, $425.0 million of ordinary shares remained available for purchase under the Company’s previously announced $850 million share buyback program. |
P&C Operations | |||||||||||||||
Three and Nine Months Ended September 30 | |||||||||||||||
(U.S. dollars in thousands) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Gross premiums written | $ | 1,609,840 | $ | 1,576,231 | $ | 5,958,926 | $ | 5,656,667 | |||||||
Net premiums written | $ | 1,327,379 | $ | 1,308,265 | $ | 4,829,560 | $ | 4,618,770 | |||||||
Net premiums earned | $ | 1,550,629 | $ | 1,468,554 | $ | 4,503,372 | $ | 4,227,421 | |||||||
Underwriting profit (loss) | $ | 76,900 | $ | 114,203 | $ | 349,612 | $ | 306,813 | |||||||
Loss ratio | 64.9 | % | 60.9 | % | 61.9 | % | 60.9 | % | |||||||
Underwriting expense ratio | 30.1 | % | 31.3 | % | 30.3 | % | 31.8 | % | |||||||
Combined ratio | 95.0 | % | 92.2 | % | 92.2 | % | 92.7 | % |
• | P&C gross premiums written (“GPW”) in the third quarter increased 2.1% compared to the prior year quarter. The Insurance segment GPW increased 8.7% from the prior year quarter, as a result of strong new business in the North American operation including the Construction and Property businesses, and favorable pricing and renewals across most businesses. The Reinsurance segment GPW decreased 16.2% from the prior year quarter, predominantly driven by the non-renewal of a North America crop quota share treaty, reductions in volume and shares on certain North America property exposures, and a decrease in Latin America property treaty business. |
• | P&C net premiums earned (“NPE”) in the third quarter of $1.6 billion were comprised of $1.1 billion from the Insurance segment and $446.6 million from the Reinsurance segment. Compared to the prior year quarter, Insurance NPE increased by 12.0%, which is a reflection of the overall growth in GPW primarily across North American lines over recent quarters, driven in part by new business as well as improved pricing. Reinsurance NPE decreased by 7.5%, driven by our re-underwriting activities in the International business group on marine lines and in Latin America throughout the year, and from the non-renewal in North America property of a crop quota share treaty. |
• | 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 $79.2 million compared to $36.5 million in the prior year quarter. The P&C loss ratio variance was also impacted by natural catastrophe pre-tax losses of $85.0 million net of reinsurance and reinstatement premiums, compared to $32.0 million in the prior year quarter, with approximately $69.5 million related to our Reinsurance segment. Consistent with our previously released estimate, $59.0 million of such losses, pre-tax and net of reinsurance and reinstatement premiums, relates to the series of hailstorms in Germany and France in late July 2013. Excluding prior year development and natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums, the third quarter P&C loss ratio was 3.5 percentage points higher than the prior year quarter due to a higher level of individual medium to large losses. |
• | The P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 94.7%, compared to 92.5% for the prior year quarter. The Insurance segment combined ratio on this basis was 97.8% for the quarter, compared to 94.7% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 86.8%, compared to 88.0% for the prior year quarter. |
• | Operating expenses were marginally higher than the prior year quarter. An increase in professional costs and investments in technology were offset in part by lower overall compensation costs. |
XL Group plc | ||||||||||||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | ||||||||||||||||
Income statement data: | ||||||||||||||||
(U.S. Dollars in thousands) | Three Months Ended | Nine Months Ended | ||||||||||||||
September 30 | September 30 | |||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written: | ||||||||||||||||
- P&C operations | $ | 1,609,840 | $ | 1,576,231 | $ | 5,958,926 | $ | 5,656,667 | ||||||||
- Life operations | 82,291 | 87,413 | 236,563 | 266,999 | ||||||||||||
Net premiums written: | ||||||||||||||||
- P&C operations | $ | 1,327,379 | $ | 1,308,265 | $ | 4,829,560 | $ | 4,618,770 | ||||||||
- Life operations | 74,683 | 79,487 | 214,024 | 243,606 | ||||||||||||
Net premiums earned: | ||||||||||||||||
- P&C operations | $ | 1,550,629 | $ | 1,468,554 | $ | 4,503,372 | $ | 4,227,421 | ||||||||
- Life operations | 74,683 | 79,487 | 214,024 | 243,630 | ||||||||||||
Net investment income | $ | 237,921 | $ | 239,481 | $ | 716,935 | $ | 767,354 | ||||||||
Net realized gains (losses) on investments | (1,958 | ) | (5,493 | ) | 75,519 | 2,916 | ||||||||||
Net realized and unrealized gains (losses) on derivative instruments | 880 | 6,254 | 3,660 | 2,656 | ||||||||||||
Income (loss) from investment fund affiliates | 5,079 | 16,049 | 83,843 | 38,555 | ||||||||||||
Fee income and other | 10,875 | 13,306 | 31,378 | 36,378 | ||||||||||||
Total revenues | $ | 1,878,109 | $ | 1,817,638 | $ | 5,628,731 | $ | 5,318,910 | ||||||||
Expenses: | ||||||||||||||||
Net losses and loss expenses incurred - P&C operations | $ | 1,006,520 | $ | 894,077 | $ | 2,787,210 | $ | 2,574,497 | ||||||||
Claims and policy benefits - Life operations | 116,549 | 119,438 | 344,269 | 371,893 | ||||||||||||
Acquisition costs | 238,328 | 236,347 | 690,473 | 679,434 | ||||||||||||
Operating expenses | 311,506 | 305,745 | 898,497 | 887,210 | ||||||||||||
Exchange (gains) losses | 20,303 | 18,690 | (24,463 | ) | 13,432 | |||||||||||
Interest expense | 37,926 | 37,907 | 114,830 | 134,564 | ||||||||||||
Total expenses | $ | 1,731,132 | $ | 1,612,204 | $ | 4,810,816 | $ | 4,661,030 | ||||||||
Income (loss) before income tax and (income) loss from operating affiliates | $ | 146,977 | $ | 205,434 | $ | 817,915 | $ | 657,880 | ||||||||
Net (income) loss from operating affiliates | 24,590 | 2,763 | 88,413 | 39,473 | ||||||||||||
Provision (benefit) for income tax | 897 | 451 | 73,248 | 51,813 | ||||||||||||
Net income (loss) | 170,670 | 207,746 | 833,080 | 645,540 | ||||||||||||
Non-controlling interests | (35,022 | ) | (35,844 | ) | (73,944 | ) | (75,856 | ) | ||||||||
Net income (loss) attributable to ordinary shareholders | $ | 135,648 | $ | 171,902 | $ | 759,136 | $ | 569,684 |
XL Group plc | |||||||
SUMMARY CONSOLIDATED FINANCIAL DATA | |||||||
Selected balance sheet data: | |||||||
(U.S. Dollars in thousands except share and per share amounts) | As at | As at | |||||
September 30, 2013 | December 31, 2012 | ||||||
(Unaudited) | (Note 1) | ||||||
Total investments available for sale | $ | 28,529,880 | $ | 28,818,982 | |||
Fixed maturities, held to maturity | 2,802,111 | 2,814,447 | |||||
Cash and cash equivalents | 2,130,893 | 2,618,378 | |||||
Investments in affiliates | 1,362,484 | 1,126,875 | |||||
Unpaid losses and loss expenses recoverable | 3,352,667 | 3,382,102 | |||||
Goodwill and other intangible assets | 410,933 | 408,527 | |||||
Total assets (Note 2) | 45,626,383 | 45,386,895 | |||||
Unpaid losses and loss expenses | 20,407,428 | 20,484,121 | |||||
Deposit liabilities | 1,505,180 | 1,551,398 | |||||
Future policy benefit reserves | 4,762,044 | 4,812,046 | |||||
Unearned premiums | 4,254,939 | 3,755,086 | |||||
Notes payable and debt | 1,671,062 | 1,672,778 | |||||
Total shareholders’ equity (Note 2) | 11,252,514 | 11,856,402 | |||||
Ordinary shareholders' equity (Note 2) | 9,907,896 | 10,510,077 | |||||
Ordinary shares outstanding (Note 3) | 282,854,768 | 298,732,832 | |||||
Basic book value per ordinary share (Notes 2 and 4) | $ | 35.03 | $ | 35.18 | |||
Fully diluted book value per ordinary share (Notes 2 and 4) | $ | 34.39 | $ | 34.70 | |||
Fully diluted tangible book value per ordinary share (Notes 2 and 4) | $ | 32.96 | $ | 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. |
(U.S. Dollars in thousands except share and per share amounts) | Three Months Ended | Nine Months Ended | |||||||||||||
September 30 | September 30 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
(Note 1) | (Note 1) | ||||||||||||||
Net income (loss) attributable to ordinary shareholders | $ | 135,648 | $ | 171,902 | $ | 759,136 | $ | 569,684 | |||||||
Net realized (gains) losses on investments, net of tax | 5,306 | 5,733 | (75,462 | ) | (3,308 | ) | |||||||||
Net realized and unrealized (gains) losses on derivatives, net of tax | (880 | ) | (6,253 | ) | (3,660 | ) | (2,651 | ) | |||||||
Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates | (108 | ) | (6 | ) | (363 | ) | (42 | ) | |||||||
Exchange (gains) losses, net of tax | 14,662 | 16,662 | (23,564 | ) | 11,530 | ||||||||||
Operating net income (loss) (Note 2) | $ | 154,628 | $ | 188,038 | $ | 656,087 | $ | 575,213 | |||||||
Per ordinary share results: (Note 3) | |||||||||||||||
Net income (loss) attributable to ordinary shareholders - diluted | $ | 0.47 | $ | 0.56 | $ | 2.57 | $ | 1.82 | |||||||
Operating net income (loss) - diluted (Note 2) | $ | 0.53 | $ | 0.61 | $ | 2.23 | $ | 1.84 | |||||||
Weighted average ordinary shares outstanding: | |||||||||||||||
Basic | 285,392,500 | 304,198,602 | 289,957,218 | 309,674,698 | |||||||||||
Diluted - Net income | 290,489,613 | 307,764,352 | 294,827,974 | 312,601,640 | |||||||||||
Diluted - Operating net income | 290,489,613 | 307,764,352 | 294,827,974 | 312,601,640 | |||||||||||
Return on ordinary shareholders' equity: | |||||||||||||||
Closing ordinary shareholders' equity (Notes 4 and 5) | $ | 9,907,896 | $ | 10,411,049 | $ | 9,907,896 | $ | 10,411,049 | |||||||
Unrealized (gain) loss on investments, net of tax | $ | (810,953 | ) | $ | (1,383,446 | ) | $ | (810,953 | ) | $ | (1,383,446 | ) | |||
Average ordinary shareholders' equity excluding unrealized gains (losses) on investments, net of tax (Notes 4 and 5) | $ | 9,131,199 | $ | 9,004,583 | $ | 9,065,284 | $ | 8,958,733 | |||||||
Average ordinary shareholders' equity (Notes 4 and 5) | $ | 9,900,233 | $ | 10,139,433 | $ | 10,208,987 | $ | 9,911,354 | |||||||
Operating net income (loss) (Note 2) | $ | 154,628 | $ | 188,038 | $ | 656,087 | $ | 575,213 | |||||||
Annualized operating net income (loss) (Note 2) | $ | 618,512 | $ | 752,152 | $ | 874,783 | $ | 766,951 | |||||||
Annualized return on ordinary shareholders' equity - operating net income (loss) (Notes 2, 4 and 5) | 6.2 | % | 7.4 | % | 8.6 | % | 7.7 | % | |||||||
Annualized return on ordinary shareholders' equity excluding unrealized gains and losses on investments - operating net income (loss) (Notes 2, 4 and 5) | 6.8 | % | 8.4 | % | 9.6 | % | 8.6 | % | |||||||
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. |