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  • • Operating net loss1 of $163.0 million, or a loss of $0.52 per share, for the quarter
  • • Net loss attributable to ordinary shareholders of $227.3 million, or a loss of $0.73 per share
  • • P&C operations combined ratio of 125.8% for the quarter
  • • Current year natural catastrophe losses of $387.4 million, net of reinstatement premiums, recorded for the quarter
  • • Fully diluted book value per ordinary share2 of $29.03 at March 31, 2011, a decrease of 2.5% in the quarter
  • • Gross P&C premiums written increased by 9.2% compared to the prior year quarter as a result of select new business growth and exposure increase in certain lines linked to economic growth

HAMILTON, Bermuda May 3, 2011 XL Group plc ("XL" or the "Company") today reported its first quarter 2011 results.

Commenting on the Company's performance, Chief Executive Officer Mike McGavick said:

"XL's first quarter results demonstrate resilience in the face of global catastrophic events. We are proud of the roles our insurance and reinsurance solutions are playing in the recovery of the devastated economies. Our risk management discipline again resulted in estimated losses from the quarter's three major catastrophes that are well within our expected levels. As markets respond to these events and others, we believe our underwriting excellence, operating efficiency and capital strength put XL in an exceptional position to pursue the opportunities provided by improving market conditions."

Highlights - Three months ended March 31

(US dollars in thousands except per share amounts)

Three months ended

March 31

2011

2010

Net income (loss) attributable to ordinary shareholders

$ (227,284)

$ 127,996

Per ordinary share

$ (0.73)

$ 0.37

Operating net income (loss) (1)

$ (162,989)

$ 149,612

Per ordinary share

$ (0.52)

$ 0.44

  • • The decline in operating net income (loss) compared to the prior year quarter was driven by the increase in P&C net losses incurred due to large current year natural catastrophe losses net of reinstatement premiums of $387.4 million compared to $181.1 million for the prior year quarter. Current year natural catastrophe losses that impacted the Company during the quarter included the March 11, 2011 Japanese earthquake and related tsunami of $242.6 million, the Australian floods of $66.9 million and the Christchurch New Zealand earthquake of $75.3 million.
  • • Net investment income for the quarter was $280.3 million compared to $308.3 million in the prior year quarter. The decline was primarily due to lower US interest rates and cash outflows from the invested portfolio.
  • • Net investment income from investment affiliates contributed $27.2 million in the quarter compared to $8.2 million in the prior year quarter as a result of strong private investment returns.
  • • Net realized investment losses for the quarter were $66.4 million compared to $36.2 million in the prior year quarter. Losses in the quarter relate primarily to losses on sales of European hybrid securities and impairments on below investment grade non-agency residential mortgage-backed securities.
  • • Fully diluted book value per ordinary share decreased by 2.5% from the prior quarter driven primarily by the natural catastrophe losses listed above and increased dilution associated with the Company's equity security units, partially offset by the impact of share buybacks during the quarter. During the quarter, the Company purchased 7.3 million shares for $165.6 million at an average price of $22.83, which was accretive to book value per ordinary share by $0.14.

P&C operations - Three months ended March 31

(US dollars in thousands)

Three months ended

March 31

2011

2010

Gross premiums written

$ 2,099,120

$ 1,922,313

Net premiums written

1,714,282

1,596,525

Net premiums earned

1,271,696

1,263,601

Underwriting (loss)

(328,064)

(6,610)

Loss ratio

95.1%

70.6%

Underwriting expense ratio

30.7%

29.9%

Combined ratio

125.8%

100.5%

  • • P&C gross premiums written ("GWP") increased 9.2% from the prior year quarter, driven by an increase in the Insurance segment of 8.0% and Reinsurance segment of 10.9%. Insurance segment growth in GWP included increased exposures tied to improving economic conditions, the renewal of certain multi–year accounts and select new business initiatives. The increase in GWP for Reinsurance came specifically from opportunities in Europe, principally the UK motor market, marine and some increases in our Continental European catastrophe portfolio.
  • • P&C net premiums earned ("NPE") of $1.3 billion was comprised of $875.9 million from the Insurance segment and $395.8 million from the Reinsurance segment. Compared to the prior year quarter, Insurance NPE decreased by 2.4% and Reinsurance NPE increased by 8.0%.
  • • The loss ratio was 24.5 percentage points worse than the prior year quarter. Included in the loss ratio was favorable prior year development of $71.0 million compared to $86.7 million in the prior year quarter. The loss ratio was also impacted by natural catastrophe losses of $387.4 million, net of reinstatement premiums. In the prior year quarter, natural catastrophe losses were $181.1 million, net of reinstatement premiums. Excluding prior year development and natural catastrophe losses, the first quarter loss ratio was 6.7 percentage points higher than the prior year quarter primarily due to an increased number of large property losses.
  • • Operating expenses were largely consistent with the fourth quarter; however, such expenses increased compared to the prior year quarter from $229.1 million to $260.5 million. Increased expenses related largely to the build out of the Company's previously announced strategic implementation office and other initiatives, combined with the impact of certain redundancy costs.
  • • The P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 100.9%, compared to 93.1% for the prior year quarter. The Insurance segment combined ratio on this basis was 106.6% for the quarter compared to 96.4% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 87.7% compared to 84.8% for the prior year quarter.

Further details of the results for the quarter may be found in the Company's Financial Supplement, which is dated May 3, 2011 and is available from the Investor Relations section of the XL Group website.

The Company will host a conference call to discuss its first quarter results on Wednesday, May 4, 2011 at 8:30 a.m. Eastern Time. The conference call can be accessed through a listen-only dial-in number or through a live webcast. To listen to the conference call, please dial (866) 617-1526 or (210) 795-0624, passcode: 'XL GLOBAL'. The webcast will be available at www.xlgroup.com and will be archived on XL's website from approximately 11:00 a.m. Eastern Time on May 4, 2011, through midnight Eastern Time on June 4, 2011. A telephone replay of the conference call will also be available beginning at 11:00 a.m. Eastern Time on May 4, 2011, until midnight Eastern Time on June 4, 2011 by dialing (201) 369-0759 or (866) 419-2678.

This press release contains forward-looking statements. 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, all of which involve risk and uncertainty. Statements that include the words "expect," "intend," "plan," "believe," "project," "anticipate," "will," "may" or similar statements of a future or forward-looking nature identify forward-looking statements. Actual results may differ materially from those included 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 (a) changes in the size of XL's claims relating to natural or man-made catastrophe losses due to the preliminary nature of some reports and estimates of loss and damage to date; (b) trends in rates for property and casualty insurance and reinsurance; (c) the timely and full recoverability of reinsurance placed by XL with third parties, or other amounts due to XL; (d) changes in ratings, rating agency policies or practices; (e) changes in the projected amount of ceded reinsurance recoverables; (f) XL's ability to successfully implement its business strategy especially during the "soft" market cycle; (g) greater frequency or severity of claims and loss activity than XL's underwriting, reserving or investment practices anticipate based on historical experience or industry data; (h) changes in general economic conditions, including the effects of inflation and changes in interest rates, credit spreads, foreign currency exchange rates and other factors; (i) developments, including uncertainties related to the depth and duration of the recession and to the financial condition of counterparties, reinsurers and other companies that are at risk of bankruptcy and affect XL's business, and future volatility in the world's credit, financial and capital markets that adversely affect the performance and valuation of XL's investments or access to such markets; (j) the potential for changes to methodologies, estimations and assumptions that underlie the valuation of XL's financial instruments that could result in changes to investment valuations; (k) changes to XL's assessment as to whether it is more likely than not that it will be required to sell, or has the intent to sell, available-for-sale debt securities before their anticipated recovery; (l) the ability of XL's subsidiaries to pay dividends to XL Group plc; (m) the potential effect of regulatory developments in the jurisdictions in which XL operates, including those that could impact the financial markets or increase XL's business costs and required capital levels; (n) changes in applicable tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof; and (o) the other factors set forth in XL's reports on Form 10-K, Form 10-Q and 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.

XL intends to use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the website in the Investor Relations section. Accordingly, investors should monitor such portions of XL's website, in addition to following its press releases, SEC filings and public conference calls and webcasts.

(1) Defined as net income (loss) attributable to ordinary shareholders excluding net realized gains and losses on investments, net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax, for the Company and its share of these items for the Company's insurance company affiliates for the periods presented, the gains recognized on the repurchase of the Company's preference ordinary shares, as well as foreign exchange gains or losses, net of tax. "Operating net income" and "annualized return on ordinary shareholders' equity" based on operating net income are "non-GAAP financial measures." The results from prior periods have been reclassified to conform to the current period presentation. See the schedule entitled "Reconciliation" at the end of this release for a reconciliation of "operating net income" to net income (loss) attributable to ordinary shareholders and of "annualized return on ordinary shareholders' equity" based on operating net income to average ordinary shareholders' equity.

(2) Book value per share and fully diluted book value per ordinary share are non-GAAP financial measures and represent book value per ordinary share (total shareholders' equity less preference shareholders' equity and 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. The Company believes that fully diluted book value per ordinary share is a financial measure important to investors and other interested parties who benefit from having a consistent basis for comparison with other companies within the industry. However, this measure may not be comparable to similarly titled measures used by companies either outside or inside of the insurance industry.

XL Group plc

SUMMARY CONSOLIDATED FINANCIAL DATA

(U.S. dollars in thousands)

Three months ended