EX-99.E 7 xlpress99e.txt PRESS RELEASE DATED AUGUST 6, 2001 August 6, 2001 XL Capital Ltd Reports Second Quarter 2001 Results Contact:Gavin R. Arton Investor Relations (441) 294-7104 Contact: Roger Scotton Media Contact (441) 294-7165 GAAP Operating Earnings per share $1.25 Compared with $1.08 HAMILTON, BERMUDA, August 6, 2001 -- XL Capital Ltd ("XIL" or the "Company") (NYSE: XL) today reported that net income for the second quarter ended June 30, 2001 was $128.6 million, or $1.01 per share, compared with $142.5 million, or $1.13 per share, in 2000's second quarter. Economic operating income was $174.8 million, or $1.37 per share, in the second quarter of 2001 compared with $149.2 million, or $1.1 9 per share, during the same period in 2000. GAAP operating income for the second quarter of 2001 was $160.1 million, or $1.25 per share, compared with $135.5 million, or $1.08 per share, for the quarter ended June 30, 2000. For the six months ended June 30, 2001, net income was $347.5 million, or $2.72 per share, compared with $366.2 million, or $2.91 per share, during the same period in 2000. Economic operating income was $346.0 million, or $2.71 per share, during the first six months of 2001 compared with $314.1 million, or $2.49 per share, for the first six months of 2000. GAAP operating income for the first six months of 2001 was $316.8 million, or $2.48 per share, compared with $286.3 million, or $2.27 per share, for the six months ended June 30, 2000. Summary unaudited consolidated financial data for the three months and six months ended June 30 for each of 2001 and 2000 is set forth below (in millions except per share amounts):
Three months ended Six months ended June 30 June 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 Net Premiums Earned $641.0 $503.4 $1,183.1 $997.9 Net Income 128.6 142.5 347.5 366.2 Economic Operating Income (a) 174.8 149.2 346.0 314.1 Operating Income (b) 160.1 135.5 316.8 286.3 Per Share Results: Net Income $1.01 $1.13 $2.72 $2.91 Economic Operating Income (a) 1.37 1.19 2.71 2.49 Operating Income (b) 1.25 1.08 2.48 2.27 Average shares outstanding (c) 127.8 125.7 127.5 125.9
Notes: (a) Excludes net realized investment gains and losses (net of tax) and amortization of intangible assets. (b) Excludes net realized investment gains, and losses (net of tax). (c) Diluted weighted average number of shares. -2- Total revenues were $791.7 million and $674.0 million for the quarters ended June 30, 2001 and 2000, respectively. For the first six months of 2001 and 2000, revenues were $1.6 billion and $1.4 billion, respectively. Gross premiums written were $1 .0 billion for the second quarter of 2001, compared with $696.6 million for the second quarter of 2000. Net premiums earned were $641.0 million in the second quarter of 2001 versus $503.4 million in 2000. For the six months ended June 30, 2001, gross premiums written were $2.2 billion compared with $1.6 billion in 2000's first six months. Net premiums earned were $1.2 billion in the first six months of 2001 versus $997.9 million in the first six months of 2000. Net investment income, excluding net realized investment gains and losses, was $140.8 million in the second quarter of 2001 compared with $136.4 million in 2000's second quarter. Net realized losses on investments were $31.1 million in the second quarter of 2001 compared with net realized gains of $5.1 million in 2000's second quarter. Net investment income, excluding net realized investment gains and losses, was $270.2 million during the first six months of 2001, compared with $265.0 million in 2000's first six months. Net realized gains on investments were $29.1 million during the first six months of 2001 compared with $73.8 million in 2000's first six months. The Company's equity in the net earnings of its affiliates for the second quarter was $29.5 million in 2001, versus $25.8 million in 2000. The Company's equity in the net earnings of its affiliates during the first six months was $57.9 million in 2001, versus $43.2 million in 2000. Total assets at June 30, 2001 were $18.7 billion compared with $16.9 billion at December 31, 2000. Shareholders' equity at June 30, 2001 was $5.7 billion compared with $5.6 billion at December 31, 2000. Fully diluted book value per share at June 30, 2001 was $45.42 compared with $44.78 at December 31, 2000. In the second quarter of 2001, the combined ratio was 92.6% compared with 99.3% in the second quarter of 2000. The loss ratios were 60.4% and 65.3% in the second quarters of 2001 and 2000, respectively, and the corresponding expense ratios were 32.2% and 34.0%, respectively. The combined ratio for the Company was 93.9% for the first six months of 2001 compared with 96.3% during the first six months of 2000. The loss ratios were 60.6% and 63.3% in 2001 and 2000, respectively, with the corresponding expense ratios being 33.3% and 33.0%, respectively. During the first six months of 2001, the Company repurchased 0.2 million of its shares at an average price of $69.72 per share. XL has approximately $236.3 million remaining in its current share repurchase authorization. Commenting on the second quarter results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated "Our results for the second quarter were satisfactory given the loss activity experienced during the quarter by most companies and were generally in line with expectations. Overall market conditions continue to improve as evidenced by the very strong growth in premiums written during both the second quarter and for the first six months of 2001." "We were also very pleased to announce the completion of our acquisition of Winterthur International in late July. This acquisition gives XIL the platform it needs for significant international expansion," Mr. O'Hara noted. The all-cash transaction, announced by XL on February 16, 2001, is valued at approximately $405 million. This value is based on financial statements for the Winterthur International ("WI") business being acquired as at and for the period ending December 31, 2000 delivered to XL (the "December WI Financial State- -3- ments"), and is subject to adjustment based on the completion of audited financial statements for WI as at and for the period ending June 30, 2001. These June 30, 2001 financial statements are subject to review and agreement by XL and its auditors. The acquisition of WI will be given effect in XL's financial statements from and after July 1. Based upon the December WI Financial Statements, WI recorded gross written premium and net written premium of $1.2 billion and $493 million, respectively, for the year ended December 31, 2000. In addition, WI had total assets, total investment assets and total gross reserves of $4.4 billion, $1.0 billion and $2.4 billion, respectively, at December 31, 2000. Jerry M. de St. Paer, Executive Vice President and Chief Financial Officer of XL stated, "Under current accounting rules, we expect to record at fair value Winterthur International's loss reserves based on the present value of their cash flows. In such estimate, we utilized a blended discount rate based upon the expected pay out patterns of the reserves, resulting in an aggregate adjustment of approximately $55 million (pre-tax) to Winterthur International's reserves, which discount will be charged through the income statement over the period that claims are settled. In addition, we expect to record a special charge of approximately $80 million in our third quarter with respect to the acquisition, of which $61 million relates to our estimate of that portion of adverse loss development for which XL does not have indemnification from the seller." "Including the reserve discount charges, we expect the acquisition to be slightly dilutive to our GAAP operating income per share for fiscal 2001," commented Mr. de St. Paer. "We expect the acquisition to be modestly accretive to both operating income and net income per share for fiscal 2002." XL expects to file the December WI Financial Statements and pro forma financial information giving effect to the WI acquisition with the SEC on a Form 8-K later this week. This filing will contain a description of the assumptions and bases upon which these financial statements and pro forma information were based. The December WI Financial Statements were delivered to XL by Winterthur Swiss Insurance pursuant to the sale and purchase agreement and have not been independently reviewed by XL or its auditors. The December WI Financial Statements and the pro forma financial information are not the basis upon which the final purchase price for WI will be determined and are not indicative of future performance of the WI operations. The December WI Financial Statements and pro forma financial information should be reviewed with caution and undue reliance should not be placed upon them or any of the financial or other information contained in them. A live on-line webcast of a call with analysts and investors will be held at 10:00 a.m. Eastern Time on Tuesday, August 7, 2001 to review the earnings and strategic transaction at www.xlcapital.com. XL Capital Ltd, through its operating subsidiaries, is a leading provider of insurance and reinsurance coverages and financial products to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. Additional unaudited supplemental financial information relating to the Company's 2001, 2000 and 1999 results is available on its web site: www.xIcapital.com. This press release contains forward-looking statements. Statements that are not historical facts, including statements about the Company's beliefs or expectations, are forward-looking statements. These statements are based on current plans, estimates and expectations. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Forward-looking statements, including those concerning the potential benefits of the Winterthur International acquisition, the outlook for the insurance and reinsurance markets, prospects for rate or price increases, premium growth, future earnings and reserves, are particularly sensitive to factors such as the levels of competition in the industry, the frequency and severity of claims and losses, conditions in the world's financial and capital markets affecting the Company's investment performance, changes in the economic, regulatory or tax environment in which the Company operates and other factors identified in the Company's most recent annual report on Form 10-K and other documents on file with the Securities and Exchange Commission that could cause actual results to differ materially from those contained in forward-looking statements. Forward looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to publicly update or re- -4- vise 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, except per share amounts) Three Months Ended Six Months Ended June 30 June 30 (Unaudited) (Unaudited) 2001 2000 2001 2000 Income Statement Data: Gross premiums written $1,005,847 $696,553 $2,156,692 $1,615,490 Net premiums written 749,152 499,909 1,561,406 1,152,008 Revenues Net premiums earned 640,984 503,375 1,183,138 997,874 Net investment income 140,800 136,440 270,151 264,967 [?] gains on investments (31,072) 5,075 29,099 73,782 Equity in net income of affiliates 29,514 25,756 57,902 43,235 Fee income and other 11,493 3,340 18,562 8,296 791,719 673,986 1,558,852 1,388,154 Expenses Net losses and loss expenses 386,951 328,540 717,155 631,374 Acquisition costs, operating expenses, and exchange gains and losses 232,708 183,456 430,468 356,426 Interest expense 15,800 7,402 23,312 15,897 Amortization of intangible assets 14,703 13,756 29,171 27,808 650,162 533,154 1,200,106 1,031,505 Income before minority interest and Income tax expense 141,557 140,832 358,746 356,649 Net income $128,606 $142,484 $347,535 $366,243 Weighted average number of ordinary shares and Ordinary share equivalents (diluted) 127,765 125,680 127,546 125,878 Per Share Data: Net Income $1.01 $1.13 $2.72 $2.91 Realized losses (gains) on investments and one time charges (after tax) 0.24 (0.05) (0.24) (0.64) GAAP operating income $1.25 $1.08 $2.48 $2.27 Amortization of intangible assets 0.12 0.11 0.23 0.22 Economic operating income $1.37 $1.19 $2.71 $2.49
-6-
XL CAPITAL LTD SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except per share amounts) (Unaudited) As at As at June 30, 2001 December 31, 2000 Balance Sheet Data: Total investments available for sale $9,408,266 $9,501,548 Net payable for investments purchased 1,068,027 1,372,476 Cash and cash equivalents 1,676,981 930,469 Investments in affiliates 909,000 792,723 Intangible assets 1,575,275 1,591,108 Total assets 18,715,683 16,941,952 Unpaid losses and loss expenses 6,050,013 5,672,062 Deposit liabilities and policy benefit reserves 1,234,317 1,209,926 Notes payable and debt 1,294,673 450,032 Shareholders equity [?] [?] Fully diluted book value per share $45.42 $44.78
-7-
XL CAPITAL LTD SUPPLEMENTARY SEGMENT INFORMATION (In thousands) (Unaudited) FOR THE QUARTER ENDED June 30, 2001 Total Financial Insurance Lloyd's Insurance Reinsurance Services Total Gross premiums written $463,345 $162,242 $625,587 $351,046 $29,214 $1,005,847 Net premiums written 317,516 145,042 462,558 257,600 28,994 749,152 Net premiums earned 221,536 118,387 339,923 292,407 8,654 640,984 Fee income and other 2,624 (2,211) 413 714 10,366 11,493 Net losses and loss expenses 123,162 78,436 201,598 183,339 2,014 386,951 Acquisition costs 31,368 34,551 65,919 76,126 1,157 143,202 Operating expenses 28,621 4,944 33,565 23,069 6,863 63,497 Exchange (gains) losses (639) 3,422 2,783 4,825 -- 7,608 Underwriting profit (loss) $41,648 $(5,177) $36,471 $5,762 $8,986 $51,219 Underwriting profit $51,219 Net investment income 140,800 Equity in net income of affiliates 29,514 Corporate, taxes and other (46,768) Economic operating income $174,765 Loss and loss expense ratio 55.6% 66.2% 59.3% 62.7% 23.3% 60.4% Underwriting expense ratio 27.1% 33.4% 29.3% 33.9% 92.7% 32.2% Combined ratio 82.7% 99.6% 88.6% 96.6% 116.0% 92.6%
NOTES: 1. Ratios are based upon net premiums earned, excluding fee income and other. 2. The underwriting expense ratio excludes exchange gains and losses. 3. The combined ratio for the financial services segment would have been 65.4% if fee income was included with net premiums earned for purposes of calculating the expense ratio. 4. The Company's Lloyd's syndicates are included in the insurance segment but are disclosed separately since the nature of the business written and the market in which the syndicates underwrite are significantly different from the Company's other insurance subsidiaries. -8-
XL CAPITAL LTD SUPPLEMENTARY SEGMENT INFORMATION (In thousands) (Unaudited) FOR THE QUARTER ENDED June 30, 2000 Total Financial Insurance Lloyd's Insurance Reinsurance Services Total Gross premiums written $281,473 $131,867 $413,340 $270,142 $13,071 $696,553 Net premiums written 190,816 110,304 301,120 185,728 13,061 499,909 Net premiums earned 151,279 95,158 246,437 250,110 6,828 503,375 Fee income and other 3,934 (2,565) 1,369 3 1,968 3,340 Net losses and loss expenses 92,058 63,003 155,061 171,671 1,808 328,540 Acquisition costs 22,726 31,883 54,609 60,678 371 115,658 Operating expenses 19,724 3,072 22,726 26,220 6,414 55,430 Exchange (gains) losses 480 (2,090) (1,610) (95) -- (1,705) Underwriting profit (loss) $20,225 $(3,275) $16,950 $(8,361) $203 $8,792 Underwriting profit $8,792 Net investment income 136,440 Equity in net income of affiliates 25,756 Corporate, taxes and other (21,741) Economic operating income $149,247 Loss and loss expense ratio 60.8% 66.2% 62.9% 68.6% 26.5% 65.3% Underwriting expense ratio 28.1% 36.7% 31.4% 34.8% 99.4% 34.0% Combined ratio 88.9% 102.9% 94.3% 103.4% 125.9% 99.3%
NOTES: 1. Ratios are based upon net premiums earned, excluding fee income and other. 2. The underwriting expense ratio excludes exchange gains and losses. 3. The combined ratio for the financial services segment would have been 103.6% if credit default swap fee income was included with net premiums earned for purposes of calculating the expense ratio. 4. The Company's Lloyd's syndicates are included in the insurance segment but are disclosed separately since the nature of the business written and the market in which the syndicates underwrite are significantly different from the Company's other insurance subsidiaries. 5. Net losses incurred for the insurance segment include, and the reinsurance segment exclude, $11.2 million relating to an intercompany stop loss agreement. Consolidated results are not affected. The loss and loss expense ratio would have been 53.4% and 73.1% and the $(19.6) million in the insurance and reinsurance segments, respectively, had this stop loss agreement not been in place. -9-
XL CAPITAL LTD SUPPLEMENTARY SEGMENT INFORMATION (In thousands) (Unaudited) FOR THE SIX MONTHS ENDED June 30, 2001 Total Financial Insurance Lloyd's Insurance Reinsurance Services Total Gross premiums written $817,587 $379,238 $1,196,825 $918,664 $41,203 $2,156,692 Net premiums written 525,203 279,582 804,785 715,694 40,927 1,561,406 Net premiums earned 398,850 210,546 609,396 559,267 14,475 1,183,138 Fee income and other 4,647 (1,609) 3,038 151 15,373 18,562 Net losses and loss expenses 217,367 144,362 361,729 351,797 3,629 717,155 Acquisition costs 56,171 65,699 121,870 145,726 1,478 269,074 Operating expenses 54,596 11,756 66,352 39,775 18,220 124,347 Exchange (gains) losses (1,166) 2,587 1,401 5,037 -- 6,438 Underwriting profit (loss) $76,549 $(15,467) $61,082 $17,083 $6,521 $84,686 Underwriting profit $84,686 Net investment income 270,151 Equity in net income of affiliates 57,902 Corporate, taxes and other (66,772) Economic operating income $345,967 Loss and loss expense ratio 54.5% 68.6% 59.3% 62.9% 25.1% 60.6% Underwriting expense ratio 27.8% 36.8% 30.9% 33.2% 136.1% 33.3% Combined ratio 82.3% 105.4% 90.2% 96.1% 161.2% 93.9%
NOTES: 1. Ratios are based upon net premiums earned, excluding fee income and other. 2. The underwriting expense ratio excludes exchange gains and losses. 3. The combined ratio for the financial services segment would have been 91.1% if fee income was included with net premiums earned for purposes of calculating the expense ratio. 4. The Company's Lloyd's syndicates are included in the insurance segment but are disclosed separately since the nature of the business written and the market in which the syndicates underwrite are significantly different from the Company's other insurance subsidiaries. -10-
XL CAPITAL LTD SUPPLEMENTARY SEGMENT INFORMATION (In thousands) (Unaudited) FOR THE SIX MONTHS ENDED June 30, 2000 Total Financial Insurance Lloyd's Insurance Reinsurance Services Total Gross premiums written $493,101 $295,606 $788,707 $806,020 $20,763 $1,615,490 Net premiums written 336,331 169,981 506,312 624,943 20,753 1,152,008 Net premiums earned 297,580 198,220 495,800 489,150 12,924 997,874 Fee income and other 5,206 (3,733) 1,473 232 6,591 8,296 Net losses and loss expenses 177,592 143,690 321,282 306,849 3,243 631,374 Acquisition costs 42,712 59,054 101,766 116,873 713 219,352 Operating expenses 38,162 7,943 46,105 52,652 11,648 110,405 Exchange (gains) losses 470 (2,394) (1,924) 1,641 -- (283) Underwriting profit (loss) $43,850 $(13,806) $30,044 $11,367 $3,911 $45,322 Underwriting profit $45,322 Net investment income 264,967 Equity in net income of affiliates 43,235 Corporate, taxes and other (39,424) Economic operating income $314,100 Loss and loss expense ratio 59.7% 72.5% 64.8% 62.7% 25.1% 63.3% Underwriting expense ratio 27.2% 33.8% 29.8% 34.7% 95.6% 33.0% Combined ratio 86.9% 106.3% 94.6% 97.4% 120.7% 96.3%
NOTES: 1. Ratios are based upon net premiums earned, excluding fee income and other. 2. The underwriting expense ratio excludes exchange gains and losses. 3. The combined ratio for the financial services segment would have been 94.4% if credit default swap fee income was included with net premiums earned for purposes of calculating the expense ratio. 4. The Company's Lloyd's syndicates are included in the insurance segment but are disclosed separately since the nature of the business written and the market in which the syndicates underwrite are significantly different from the Company's other insurance subsidiaries. -11- [?] reinsurance segment exclude, $11.2 million relating to an intercompany stop loss agreement. Consolidated results are not affected. The loss and loss expense ratio would have been 55.9% and 65.0% and the underwriting profit would have been $55.1 million and $0.2 million in the insurance and reinsurance segments, respectively, had this stop loss agreement not been in place.
XL CAPITAL LTD SUPPLEMENTARY PREMIUM INFORMATION BY LINE OF BUSINESS (In thousands) (Unaudited) FOR THE QUARTER ENDED June 30, 2001 Gross Premiums Net Premiums Net Premiums Written Written Earned Casualty insurance $250,039 $170,261 $113,502 Casualty reinsurance 118,932 81,271 92,391 Property catastrophe 50,892 44,726 41,035 Other property 175,535 128,075 124,787 Marine, energy, aviation and satellite 77,088 36,959 49,606 Lloyd's syndicates 162,242 145,042 118,387 Other 171,119 142,818 101,276 Total $1,005,847 $749,152 $640,984 FOR THE QUARTER ENDED June 30, 2000 Gross Premiums Net Premiums Net Premiums Written Written Earned Casualty insurance $137,041 $96,029 $79,674 Casualty reinsurance 102,627 65,362 104,289 Property catastrophe 46,995 41,397 36,358 Other property 121,385 94,841 91,577 Marine, energy, aviation and satellite 78,810 35,565 41,100 Lloyd's syndicates 131,867 110,304 95,158 Other 77,828 56,411 55,219 Total $696,553 $499,909 $503,375
-12-
XL CAPITAL LTD SUPPLEMENTARY PREMIUM INFORMATION BY LINE OF BUSINESS (In thousands) (Unaudited) FOR THE SIX MONTHS ENDED June 30, 2001 Gross Premiums Net Premiums Net Premiums Written Written Earned Casualty insurance $439,226 $281,970 $198,510 Casualty reinsurance 290,322 204,316 163,780 Property catastrophe 153,050 142,568 77,857 Other property 353,081 254,968 219,118 Marine, energy, aviation and satellite 254,665 152,367 111,428 Lloyd's syndicates 379,238 279,582 210,546 Other 287,110 245,635 201,899 Total $2,156,692 $1,561,406 $1,183,138 [?] June 30, 2000 Gross Premiums Net Premiums Net Premiums Written Written Earned Casualty insurance $234,538 $169,566 $157,902 Casualty reinsurance 257,793 179,116 192,226 Property catastrophe 124,831 118,617 65,636 Other property 286,686 216,856 174,183 Marine, energy, aviation and satellite 234,451 155,475 85,616 Lloyd's syndicates 295,606 169,981 198,220 Other 181,585 142,397 124,091 Total $1,615,490 $1,152,008 $997,874