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.
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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-
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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-
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vise any forward-looking statement, whether as a result of new information,
future developments or otherwise.
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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
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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
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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.
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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.
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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.
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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.
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[?] 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
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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