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  • Operating net income1 of $70.8 million, or $0.23 per share, for the quarter on a fully diluted basis
  • Net income attributable to ordinary shareholders and net income attributable to ordinary shareholders excluding the impact of the Life Retrocession Arrangements2 of $27.3 million and $46.6 million, respectively, for the quarter.
  • Losses net of reinsurance and reinstatement premiums related to the mid-August 2015 Tianjin, China port explosion totaled $95.7 million
  • Integration costs related to the combination with Catlin Group Limited ("Catlin") totaled $55.2 million  in the quarter
  • P&C combined ratio of 95.3% for the quarter, compared to 90.1% in the prior year quarter
  • Natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of $30.8 million, compared to $29.8 million in the prior year quarter
  • Earnings from operating and investment fund affiliates were $4.5 million, compared to $44.5 million in the prior year quarter, due primarily to equity market volatility on the hedge fund portfolio
  • Annualized operating return on average ordinary shareholders' equity3 excluding and including average unrealized gains and losses on investments was 7.0% and 6.2%, respectively,  for the year to date
  • Fully diluted tangible book value per ordinary share4 of $31.95 at September 30, 2015, a decrease of $0.58, or 1.8%, from June 30, 2015

_________________________

1Defined as net income (loss) attributable to ordinary shareholders excluding: (1) our net investment income - Life Funds Withheld Assets (defined below), net of tax, (2) our net realized (gains) losses on investments sold - excluding Life Funds Withheld Assets, net of tax, (3) our net realized (gains) losses on investments sold (including OTTI) 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 Group plc ("XL")'s insurance company affiliates for the periods presented, (7) our foreign exchange (gains) losses, net of tax,  (8) our expenses related to the Catlin acquisition, net of tax,  (9) our gain on the sale of our interest in our former operating affiliate, ARX Holding Corp. ("ARX"), and (10) our loss on sale of life reinsurance subsidiary, XL Life Reinsurance (SAC) Ltd ("XLLR"),, net of tax  “Operating net income”, “annualized operating return on average ordinary shareholders' equity" and "annualized operating return on average ordinary shareholders' equity excluding average unrealized gains and losses on investments" are non-GAAP financial measures.  See the schedule entitled “Reconciliation” on page 9 of this press release for a reconciliation of “operating net income” to net income (loss) attributable to ordinary shareholders and the calculation of “annualized operating return on average ordinary shareholders' equity" and "annualized operating return on average ordinary shareholders' equity excluding average unrealized gains and losses on investments", both of which are based on operating net income.

2On 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, 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 that 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.

3Ordinary shareholders' equity is defined as total shareholders' equity less non-controlling interest in equity of consolidated subsidiaries.

4 Book 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 – October 26, 2015 – XL Group plc (“XL” or the “Company”) (NYSE: XL) today reported its third quarter results.

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

“In its first full quarter of combined operations, XL Catlin produced solid results including a 95.3% combined ratio, gross written premiums of $2.7 billion and a P & C underwriting profit of $114.1 million. At the same time, our bottom-line results in the quarter were particularly impacted by market events and ongoing expenses related to our integration.  Our colleagues’ effort to move quickly through our integration continues to be recognized by positive reaction from clients and brokers and the new opportunities we are seeing. We have absolute confidence in the fundamentals of the new company we are building and remain focused on creating value by becoming the most innovative and admired (re)insurance company in our industry and feel we are well on our way."

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) (Note 1)
  2015   2014   2015   2014
Operating net income (loss) $ 70,792     $ 187,088     $ 510,965     $ 705,314  
Per ordinary share-fully diluted $ 0.23     $ 0.70     $ 1.78     $ 2.57  
               
Net income (loss) attributable to ordinary shareholders $ 27,282     $ 72,384     $ 978,602     $ 48,841  
Per ordinary share-fully diluted $ 0.09     $ 0.27     $ 3.40     $ 0.18  
               
Note 1:  The Company's results for the nine months ended September 30, 2015 include those of Catlin from May 1, 2015.
  • Operating net income of $70.8 million for the quarter decreased compared to operating net income of $187.1 million in the prior year quarter. The current quarter includes approximately $55.2 million in integration costs as well as $30.8 million in natural catastrophe losses compared to $29.8 million in natural catastrophe losses in the prior year quarter.  
  • Net income (loss) attributable to ordinary shareholders of $27.3 million for the quarter decreased compared to a  $72.4 million in the prior year quarter.
  • Net investment income for the quarter was $225.1 million, compared to $226.4 million in the prior year quarter and $223.2 million in the second quarter of 2015.
  • Net income from investment fund and investment manager affiliates was $2.2 million for the quarter, compared to net income of $40.4 million in the prior year quarter. The decrease was driven primarily by the impact of market volatility on our Investment Fund Affiliates with a number of event driven and emerging markets focused funds.
  • Fully diluted tangible book value per ordinary share decreased by $0.58 from the prior quarter to $31.95, driven by  the increase in our unrealized losses on investments and our payment of dividends, partially offset by net income.
  • Share buybacks totaled 4.8 million ordinary shares for $180.0 million during the quarter.  At September 30, 2015, $880.0 million of ordinary shares remained available for purchase under our 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) (Note 1)
  2015   2014   2015   2014
Gross premiums written $ 2,659,142     $ 1,600,702     $ 8,141,243     $ 6,140,870  
Net premiums written $ 2,073,216     $ 1,214,246     $ 6,010,032     $ 4,567,112  
Net premiums earned $ 2,405,740     $ 1,453,673     $ 5,789,029     $ 4,304,277  
               
Underwriting profit (loss) $ 114,118     $ 144,375     $ 469,733     $ 457,196  
               
Loss ratio 60.9%   59.1%   58.5%   58.5%
Underwriting expense ratio 34.4%   31.0%   33.4%   30.9%
Combined ratio 95.3%   90.1%   91.9%   89.4%
               
Note 1:  The Company's results for the nine months ended September 30, 2015 include those of Catlin from May 1, 2015.

 

  • P&C gross premiums written (“GPW”) in the third quarter increased 66.1% compared to the prior year quarter following the combination with Catlin.
  • The Insurance segment GPW increased 66.1% from the prior year quarter primarily due to the combination with Catlin.    Excluding the impacts of the additional Catlin business and foreign exchange,  the segment experienced an increase of 6.0%. Rates were under pressure in most lines. However, this was offset by new business, particularly in our International Financial Lines, Political Risk & Trade Credit and Cyber business lines. Renewals were reduced where premium rates did not support our target returns.
  • The Reinsurance segment GPW also increased 66.1% from the prior year quarter, primarily due to the combination with Catlin. This was offset by lower renewals in North America due to a competitive pricing environment with respect to property and casualty treaty business. In addition, the prior year included favorable premium adjustments which did not repeat in the current year.
  • P&C net premiums earned (“NPE”) in the third quarter of $2.4 billion were comprised of $1.6 billion from the Insurance segment and $772.8 million from the Reinsurance segment.
  • The P&C loss ratio in the current quarter was 1.8 percentage points higher than in the prior year quarter. Included in the P&C loss ratio was favorable development of $28.1 million compared to $35.1 million in the prior year quarter. The P&C loss ratio variance was impacted by natural catastrophe pre-tax losses net of reinsurance and reinstatement premiums of $30.8 million, compared to $29.8 million in the prior year quarter. Excluding prior year development and natural catastrophe losses the third quarter P&C loss ratio was 1.2% higher than the prior year quarter, driven significantly by the Tianjin, China port explosion loss.
  • The P&C combined ratio excluding prior year development and the impact of natural catastrophe losses for the quarter was 95.1%, compared to 90.4% for the prior year quarter.  The Insurance segment combined ratio on this basis was 96.3% for the quarter compared to 94.8% for the prior year quarter, while the Reinsurance segment combined ratio on this basis was 92.7% for the quarter compared to 80.1% for the prior year quarter,  with the increases in both segments, driven by the Tianjin loss and the impact of a change in business mix from the combination with Catlin.
  • Excluding Catlin related transaction and integration costs, operating expenses were 50.5% higher than the prior year quarter primarily due to the impact of the combination with Catlin. However, overall run rate expenses for the quarter continue to be less than the combined operating expenses of XL and legacy Catlin in the prior year quarter, indicating that synergy savings are already being achieved. The operating expense ratio decreased 1.0% to 17.6% in the quarter, compared to 18.6% in the prior year quarter.

Further details of the results for the quarter may be found in the Company’s Financial Supplement, which is dated October 26, 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 5:00 p.m. Eastern Time on Monday, October 26, 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.xlcatlin.com and will be archived on the website from approximately 9:00 p.m. Eastern Time on October 26, 2015, until approximately midnight Eastern Time on November 26, 2015. A telephone replay of the conference call will also be available beginning at approximately 9:00 p.m. Eastern Time on October 26, 2015, until approximately midnight