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- January 01, 0001
- Operating net income1 of $293.9 million, or $1.12 per share, for the quarter and $999.2 million, or $3.68 per share, for the full year on a fully diluted basis
- P&C combined ratio of 84.5% for the quarter, compared to 93.3% in the prior year quarter, and a full year P&C combined ratio of 88.2% compared to 92.5% in the prior year
- Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of $31.7 million, compared to $94.3 million in the prior year quarter
- Operating return on average ordinary shareholders' equity2 excluding unrealized gains and losses on investments was 13.7% and including unrealized gains and losses on investments was 11.8%, annualized for the quarter, and 11.2% and 10.0%, respectively, for the full year
- Net income attributable to ordinary shareholders and net income attributable to ordinary shareholders excluding the impact of the Life Retrocession Arrangements3 of $139.5 million and $350.6 million, respectively, for the quarter and $188.3 million and $1.2 billion, respectively, for the full year (Note: As a result of the Life Retrocession Arrangements3, XL’s net income is impacted by the gains or losses on the Life Funds Withheld Assets3, with an equal and opposite accounting adjustment in XL’s comprehensive income so that there is no effect on XL’s book value)
- Fully diluted tangible book value per ordinary share4 of $36.79 at December 31, 2014, an increase of $2.93, or 8.7%, from December 31, 2013
- Share buybacks totaled 5.2 million ordinary shares for $175.0 million during the quarter
1 Defined as net income (loss) attributable to ordinary shareholders excluding: (1) our net investment income - Life Funds Withheld Assets, net of tax, (2) our net realized (gains) losses on investments sold, net of tax, (3) our net realized (gains) losses on investments and net unrealized (gains) losses on investments, Trading - Life Funds Withheld Assets, (4) our net realized and unrealized (gains) losses on derivatives, net of tax, (5) our net realized and unrealized (gains) losses on life retrocession embedded derivative and derivative instruments - Life Funds Withheld Assets, (6) our share of items (2) and (4) for XL's insurance company affiliates for the periods presented, (7) our loss on sale of life reinsurance subsidiary, XLLR (as defined below), net of tax, and, (8) our foreign exchange (gains) losses, net of tax. “Operating net income”, “operating return on average ordinary shareholders' equity" and "operating return on average ordinary shareholders equity excluding unrealized gains and losses on investments" are non-GAAP financial measures. See the schedule entitled “Reconciliation” on page 8 of this press release for a reconciliation of “operating net income” to net income (loss) attributable to ordinary shareholders and the calculation of “operating return on average ordinary shareholders' equity" and "operating return on average ordinary shareholders' equity excluding unrealized gains and losses on investments", both of which are based on operating net income.
2Ordinary shareholders' equity is defined as total shareholders' equity less non-controlling interest in equity of consolidated subsidiaries.
3On May 1, 2014, our wholly-owned subsidiary XL Insurance (Bermuda) Ltd (“XLIB”), entered into a sale and purchase agreement with GreyCastle Holdings Ltd. (“GreyCastle”) providing for the sale of 100% of the common shares of XLIB's wholly-owned subsidiary, XL Life Reinsurance (SAC) Ltd ("XLLR"), for $570 million in cash. This transaction was completed on May 30, 2014. As a result of the transaction, we have ceded the majority of our life reinsurance business to XLLR via 100% quota share reinsurance (the "Life Retrocession Arrangements"). The designated investments that support the Life Retrocession Arrangements, which are written on a funds withheld basis ("Life Funds Withheld Assets"), are included within "Total investments available for sale" and "Fixed maturities, trading at fair value" on our balance sheet. Investment results for these assets - including interest income, unrealized gains and losses, and gains and losses from sales - are passed directly to the reinsurer pursuant to a contractual arrangement which is accounted for as a derivative. Changes in the fair value of the embedded derivative associated with these Life Retrocession Arrangements are grouped within "Contribution from Life Retrocession Arrangements" in the schedule entitled "Reconciliation" on page 8 of this press release. Net income attributable to ordinary shareholders excluding the impact of the Life Retrocession Arrangements is a non-GAAP financial measure.
4Book value per ordinary 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 ordinary 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 issuances 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 excluded from ordinary shareholders' equity. XL believes that fully diluted tangible 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.
Dublin, Ireland – February 2, 2015 – XL Group plc (“XL” or the “Company”) (NYSE: XL) today reported its fourth quarter and full year 2014 results.
Commenting on the Company’s performance, Chief Executive Officer Mike McGavick said:
"XL delivered a very strong 2014 including continued progress in Insurance and an extraordinary year in Reinsurance. Many of our results were the best we have achieved in over fifteen years, including our property and casualty combined ratio of 88.2%. Insurance results included a 2014 combined ratio of 94.4%, the best performance since 2007, and a loss ratio of 63.2%. And our Reinsurance segment achieved a stellar 73.3% combined ratio, one of its best performances as well. Of course, these results were helped, in part, by one of the lowest catastrophe years we have seen in years. To build on our success, we intend to continue developing and delivering outstanding products and services to our current and new markets, continuing to move this progress forward."
|Year Ended December 31|
|(U.S. dollars in thousands, except per share amounts)|
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|Operating net income (loss)||$||293,928||$||286,881||$||999,241||$||942,968|
|Per ordinary share-fully diluted||$||1.12||$||1.00||$||3.68||$||3.23|
|Net income (loss) attributable to ordinary shareholders||$||139,500||$||300,780||$||188,340||$||1,059,916|
|Per ordinary share-fully diluted||$||0.53||$||1.05||$||0.69||$||3.63|
- Operating net income of $293.9 million for the quarter increased compared to operating net income of $286.9 million in the prior year quarter primarily due to improved underwriting results partially offset by lower levels of affiliate income. Net income (loss) attributable to ordinary shareholders of $139.5 million for the quarter decreased compared to $300.8 million in the prior year quarter. As highlighted in the reconciliation of net income to operating income on page 8 of this press release, net income for the current quarter was negatively impacted by the life retrocession derivative, which is offset by an increase in accumulated comprehensive income and therefore does not impact overall book value.
- The P&C combined ratio for the quarter of 84.5% was 8.8 percentage points lower than in the prior year quarter, when it was 93.3%.
- Net investment income for the quarter was $226.2 million, compared to $240.8 million in the prior year quarter and $226.4 million in the third quarter of 2014. Included in investment income in the current quarter is $53.9 million of income related to designated investments that support the Life Retrocession Arrangements written on a funds withheld basis.
- Net income from investment fund and investment manager operating affiliates was $21.4 million for the quarter, compared to net income of $77.7 million in the prior year quarter. The decrease was primarily driven by lower returns from our alternative fund and investment manager affiliates.
- Fully diluted tangible book value per ordinary share increased by $1.39 from the prior quarter to $36.79, driven by our net income, the benefit of share buyback activity, and an increase in unrealized gain on investments net of deferred tax, reduced by the payment of dividends.
- During the quarter, the Company purchased 5.2 million ordinary shares for $175.0 million in the aggregate at an average price of $33.82 per share, which was accretive to fully diluted tangible book value per ordinary share by $0.09. At December 31, 2014, $267.6 million of ordinary shares remained available for purchase under our share buyback program.
|Year Ended December 31|
|(U.S. dollars in thousands)|
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|Gross premiums written||$||1,620,620||$||1,457,866||$||7,761,490||$||7,416,792|
|Net premiums written||$||1,200,097||$||1,074,422||$||5,767,209||$||5,903,982|
|Net premiums earned||$||1,413,161||$||1,510,727||$||5,717,438||$||6,014,099|
|Underwriting profit (loss)||$||218,851||$||101,450||$||676,046||$||451,062|
|Underwriting expense ratio||32.2%||30.8%||31.2%||30.5%|
- P&C gross premiums written (“GPW”) in the fourth quarter increased 11.2% compared to the prior year quarter. The Insurance segment GPW increased 13.1% from the prior year quarter as a result of strong new business particularly in International Financial Lines, Construction, North America Primary Casualty, Marine, and Political Risk and solid premium retention across most of the portfolio. The Reinsurance segment GPW decreased 3.9% from the prior year quarter, primarily driven by non-renewal activity in our US Casualty Treaty book and foreign exchange impacts partially offset by growth in International Casualty Treaty, Property Facultative, US Property Treaty and Crop.
- P&C net premiums written in the fourth quarter increased 11.7% compared to the prior year quarter, consistent with GPW.
- P&C net premiums earned (“NPE”) in the fourth quarter of $1.4 billion were comprised of $1.0 billion from the Insurance segment and $401.3 million from the Reinsurance segment. Compared to the prior year quarter, Insurance NPE decreased by 5.1%, primarily due to the earn through of increased proportional reinsurance in our Professional business. Reinsurance NPE decreased by 9.8%, driven by the earn through of lower net written premiums over the past year in International Property Treaty and Casualty Treaty. NPE for Reinsurance segment’s International operations was also impacted by the strengthening of the US dollar during the quarter.
- The P&C loss ratio in the current quarter was 10.2 percentage points lower than in the prior year quarter. Included in the P&C loss ratio was favorable development of $96.7 million compared to $60.9 million in the prior year quarter. The P&C loss ratio variance was impacted by natural catastrophe pre-tax losses of $31.7 million net of reinsurance and reinstatement premiums, with $17.7 million related to our Insurance segment and $14.0 million related to our Reinsurance segment, as compared to $94.3 million in the prior year quarter, with $23.7 million related to our Insurance segment and $70.6 million related to our Reinsurance segment. Excluding prior year development and natural catastrophe losses net of reinsurance and reinstatement premiums, the fourth quarter P&C loss ratio was 3.3 percentage points lower than the prior year quarter.
- The P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 89.1%, compared to 91.0% for the prior year quarter. The Insurance segment combined ratio on this basis was 95.4% for the quarter compared to 98.2% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 73.0% for the quarter compared to 73.6% for the prior year quarter.
- Operating expenses in the quarter were 13.3% higher than in the prior year quarter primarily due to the impact of improved underwriting and overall performance on variable compensation.
Further details of the results for the quarter may be found in the Company’s Financial Supplement, which is dated February 2, 2015 and is available on the Investor Relations section of XL's website.
A conference call to discuss the Company’s results will be held at 5 p.m. Eastern Time on Monday, February 2, 2015. 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 (210) 795-0624 or (866) 617-1526: Passcode: “XL GLOBAL”. The webcast will be available at www.xlgroup.com and will be archived on XL’s website from approximately 9:00 p.m. Eastern Time on February 2, 2015, through midnight Eastern Time on March 2, 2015. A telephone replay of the conference call will also be available beginning at approximately 9:00 p.m. Eastern Time on February 2, 2015, until midnight Eastern Time on March 2, 2015, by dialing (203) 369-1899 or (866) 507-3594.
About XL Group plc
XL Group plc (NYSE: XL), through its subsidiaries, is a global insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises throughout the world. XL is the company clients look to for answers to their most complex risks and to help move their world forward. To learn more, visit www.xlgroup.com.
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,” “may” , "could", or "would" and similar statements of a future or forward-looking nature identify forward-looking statements. Actual res