EXHIBIT 99.1
XL CAPITAL
XL Capital Ltd
XL House
One Bermudiana Road
P. O. Box HM 2245
Hamilton HM JX
Bermuda
Phone: (441) 292-8515
Fax: (441) 292-5280
NEWS RELEASE
Contact: Gavin R. Arton Roger R. Scotton
Investor Relations Media Contact
(441) 294-7104 (441) 294-7165
XL CAPITAL LTD REPORTS SECOND QUARTER 2003 RESULTS
Record Net Income $347.7 million, or $2.51 per ordinary share
HAMILTON, BERMUDA, July 31, 2003 -- XL Capital Ltd ("XL" or the "Company")
(NYSE: XL) today reported net income available to ordinary shareholders for the
quarter ended June 30, 2003 of $347.7 million, or $2.51 per ordinary share,
compared with a net loss of $91.7 million, or $0.68 per ordinary share, in the
second quarter of 2002. `Net income excluding net realized gains and losses on
investments and net realized and unrealized gains and losses on credit and
investment derivative instruments, net of tax' for the second quarter of 2003
was $268.6 million, or $1.94 per ordinary share, compared with $26.4 million, or
$0.19 per ordinary share, for the quarter ended June 30, 2002. `Net income
excluding net realized gains and losses on investments and net realized and
unrealized gains and losses on credit and investment derivative instruments, net
of tax' is a non-GAAP measure. See below for a reconciliation of this measure
to net income available to ordinary shareholders.
Commenting on the second quarter 2003 results, Brian M. O'Hara, President and
Chief Executive Officer of XL, stated: "We had a strong quarter with net income,
total assets and shareholders' equity reaching record levels. Cash flow from
operations was a robust $952 million for the second quarter. Adding the $669
million in XL Life and Annuity transactions this quarter increased cash flow to
$1.6 billion. Net premiums earned from general operations increased by more than
40% compared with the
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second quarter a year ago and we achieved satisfactory combined ratios of 92.2%
in the second quarter and 89.2% for the six months ended June 30, 2003."
"We are strategically positioned in all of the business lines and regions where
we want to be and continue to capitalize on the current strong market conditions
in our areas of focus," stated Mr. O'Hara. "We are particularly well-placed in
those lines of business which are still seeing the largest rate increases,
notably professional lines and casualty worldwide which currently comprise
nearly half of our general operations' portfolio. The Company's life and annuity
businesses and our financial operations also performed well and both areas are
gaining momentum."
Mr. O'Hara also commented: "We were also pleased with our total investment
earnings, comprising both investment income and our equity in the earnings of
our investment affiliates, of $224.9 million in the quarter ended June 30, 2003,
as compared with $182.7 million in the prior year's quarter."
For the six months ended June 30, 2003, net income available to ordinary
shareholders was $587.5 million, or $4.25 per ordinary share, compared with a
net loss of $2.3 million, or $0.02 per ordinary share, in the six months ended
June 30, 2002. `Net income excluding net realized gains and losses on
investments and net realized and unrealized gains and losses on credit and
investment derivative instruments, net of tax' for the six months ended June
30, 2003 was $518.7 million, or $3.76 per ordinary share, compared with $234.0
million, or $1.70 per ordinary share, for the six months ended June 30, 2002.
See below for the reconciliation of `net income excluding net realized gains and
losses on investments and net realized and unrealized gains and losses on credit
and investment derivative instruments, net of tax' to net income available to
ordinary shareholders.
Total assets as of June 30, 2003 were $39.2 billion compared with $35.6 billion
as of December 31, 2002. Book value per ordinary share as at June 30, 2003
increased to $51.40 compared with $44.48 as at December 31, 2002.
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Summary unaudited consolidated financial data for the quarter and six months
ended June 30, 2003 and 2002, respectively, are set forth below (in millions,
except per share amounts):
Three months ended Six months ended
June 30 June 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---- ---- ---- ----
Gross premiums written $ 2,037.2 $ 1,538.3 $ 5,184.3 $ 4,342.9
Net premiums written 1,571.9 1,138.7 4,061.0 3,297.5
Net premiums earned 1,575.8 1,057.5 3,127.4 2,122.3
Net income (loss) $ 357.7 $ (91.7) $ 607.7 $ (2.3)
Preference dividend (10.0) ( -) (20.2) ( -)
-------- --------- -------- --------
Net income available to ordinary shareholders $ 347.7 $ (91.7) $ 587.5 $ (2.3)
======== ========= ======== ========
Per ordinary share results:
Net income (loss) available to ordinary shareholders (a) $ 2.51 $ (0.68) $ 4.25 $ (0.02)
======== ========= ======== ========
Weighted average ordinary shares outstanding:
Basic 136,791 135,662 136,527 135,431
Diluted 138,634 138,231 138,084 137,743
Note:
(a) Average stock options outstanding have been excluded where
anti-dilutive to earnings per ordinary share. Consequently, where there
is a net loss, basic weighted average ordinary shares outstanding is
used to calculate net loss per ordinary share.
Effective this quarter the presentation of the Company's results have been
reported in general operations, life and annuity operations and financial
operations in order to provide additional information relating to XL's financial
products and services segment. Prior periods have been reclassified to reflect
this expanded presentation.
Gross premiums written for general operations in the second quarter of 2003 were
$1.9 billion compared with $1.4 billion in the second quarter of 2002. Net
premiums written increased to $1.4 billion from $1.0 billion and net premiums
earned rose to $1.5 billion from $1.0 billion in the respective quarters of 2003
and 2002. For the six months ended June 30, 2003, gross premiums written for
general operations were $4.8 billion compared with $4.2 billion in the year ago
period. Net premiums written for the first six months of 2002 were $3.8 billion
compared with $3.2 billion a year- ago. Net premiums earned were $2.9 billion
for the first six months of 2003 as compared with $2.0 billion for the first six
months of 2002.
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Gross premiums written for life and annuity operations in the second quarter of
2003 were $75.9 million compared with $20.0 million in the second quarter of
2002. Net premiums written for life and annuity operations in the second quarter
of 2003 were $63.7 million compared with $11.5 million in the second quarter of
2002 and net premiums earned were $70.5 million in the second quarter of 2003
compared with $10.5 million in the second quarter of 2002. For the six months
ended June 30, 2003, gross premiums written for life operations were $187.2
million compared with $58.5 million in the year ago period. Net premiums written
were $161.0 million in the first six months of 2003 compared with $48.5 million
in the first six months of 2002. Net premiums earned were $163.3 million and
$49.7 million in the respective six month periods of 2003 and 2002.
Gross premiums written for financial operations in the second quarter of 2003
were $106.3 million compared with $75.8 million in the second quarter of 2002.
Net premiums written for financial operations in the second quarter of 2003 were
$104.5 million compared with $73.4 million in the second quarter of 2002 and net
premiums earned were $35.8 million in the second quarter of 2003 compared with
$10.8 million in the second quarter of 2002. For the first six months of 2003
gross premiums written for financial operations were $151.0 million compared
with $102.1 million in the year ago period. Net premiums written for financial
operations were $148.5 million in the first six months of 2003 compared with
$97.1 million in 2002 and net premiums earned were $62.8 million and $25.4
million in the respective six month periods of 2003 and 2002.
Net investment income from general operations was $145.1 million in the second
quarter of 2003, compared with $151.6 million in 2002's second quarter. Net
investment income from life and annuity and financial operations was $45.5
million in the second quarter of 2003 compared with $23.2 million for the
quarter ended June 30, 2002. For the first six months of 2003 net investment
income from general operations was $294.1 million in compared with $300.9
million in the year ago period. Net investment income from life and annuity and
financial operations was $88.4 million in the first six months of 2003 compared
with $45.0 million for the first six months of 2002.
The Company's equity in the net income of its investment affiliates for the
second quarter of 2003 was $34.3 million versus $7.9 million in the second
quarter of 2002. The Company's equity in net income of its insurance and
financial affiliates was $16.5 million in the second quarter of 2003 versus net
income of $0.4 million in the second quarter of 2002. The Company's equity in
the net income of its investment affiliates for the first six months of 2003 was
$61.1 million versus $40.1 million in the first six months of 2002. The
Company's equity in net loss of its insurance and financial affiliates was
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$24.6 million in the first six months of 2003 versus net income of $0.4 million
in the first six months of 2002.
The combined ratio for the Company's general insurance and reinsurance
operations was 92.2% in the second quarter of 2003, versus 109.2% in the second
quarter of 2002. The loss ratios were 63.2% and 79.3% in the quarters ended June
30, 2003 and 2002, with corresponding expense ratios of 29.0% and 29.9% for the
same quarters, respectively. The combined ratio for the Company's general
insurance and reinsurance operations was 89.2% in the first six months of 2003,
versus 100.8% in the first six months of 2002. The loss ratios were 62.1% and
71.4% in the six months ended June 30, 2003 and 2002, with corresponding expense
ratios of 27.1% and 29.4% for the same periods, respectively. In the second
quarter and six months ended June 30, 2002, the Company's results were impacted
by increased reserves for the September 11 event.
A live on-line web cast of XL's call with analysts and investors to review the
second quarter 2003 results will be held at 10 a.m. Eastern Time on August 1,
2003 at www.xlcapital.com. An unaudited financial information supplement
relating to the Company's 2003 and 2002 quarterly and full year results is
available on its website: www.xlcapital.com (under "Investor Relations -
Financial Information").
XL Capital Ltd, through its operating subsidiaries, is a leading provider of
insurance and reinsurance coverages and financial products and services to
industrial, commercial and professional service firms, insurance companies and
other enterprises on a worldwide basis.
# # #
This press release contains forward-looking statements that involve inherent
risks and uncertainties. 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. Actual results may differ materially from those projected 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 the following: (a) rate increases and improvements in terms and
conditions may not be as large or sustainable as XL is currently projecting; (b)
greater frequency or severity of claims and loss activity, including as a result
of natural or man-made catastrophic events, than XL's underwriting, reserving or
investment practices anticipate based on historical experience or industry data;
(c) developments in the world's financial and capital markets which adversely
affect the performance of XL's investments and XL's access to such markets; (d)
changes in general economic conditions, including foreign currency exchange
rates, inflation and other factors; and (e) the other factors set forth in XL's
most recent report on Form 10-K, Form 10-Q/A and XL's 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.
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XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands of U.S. dollars, except share and per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
(Unaudited) (Unaudited)
2003 2002 (a) 2003 2002 (a)
---- -------- ---- --------
Income Statement Data:
Revenues:
Gross premiums written - general, life and $2,037,193 $1,538,257 $5,184,332 $4,342,933
annuity and financial operations
Net premiums written - general, life and 1,571,882 1,138,660 4,060,966 3,297,513
annuity and financial operations
Net premiums earned - general operations $1,469,520 $1,036,231 $2,901,407 $2,047,199
Net premiums earned - life and annuity operations 70,482 10,497 163,253 49,690
Net premiums earned - financial operations 35,807 10,813 62,780 25,367
Net investment income - general operations 145,088 151,553 294,089 300,907
Net investment income - life and annuity operations 40,234 16,825 77,693 32,343
Net investment income - financial operations 5,229 6,365 10,673 12,620
Net realized gains (losses) on investments 93,687 (110,002) 89,024 (216,022)
Net realized and unrealized (losses) gains on
derivative instruments (12,257) (5,134) 2,236 (14,610)
Equity in net income of investment affiliates 34,306 7,931 61,104 40,116
Fee and other income 9,792 20,459 22,069 28,408
------------- ---------------- --------------- -------------
$1,891,888 $1,145,538 $3,684,328 $2,306,018
------------- ---------------- --------------- -------------
Expenses:
Net losses and loss expenses incurred -
general operations $ 928,755 $822,151 $1,800,546 $1,461,369
Claims and policy benefit reserves -
life and annuity operations 83,225 18,816 202,783 66,579
Net losses and loss expenses incurred -
financial operations 8,820 (54) 22,283 3,026
Acquisition costs and operating expenses 492,458 355,166 923,289 686,043
Exchange gains (23,352) (23,206) (26,054) (31,570)
Interest expense 46,282 40,139 92,422 81,761
Amortization of intangible assets 375 11 750 625
------------- ---------------- --------------- -------------
$1,536,563 $1,213,023 $3,016,019 $2,267,833
------------- ---------------- --------------- -------------
Income (loss) before minority interest, income
tax expense and equity in net loss of insurance
and financial affiliates $ 355,325 $ (67,485) $ 668,309 $ 38,185
Minority interest 3,166 1,779 5,028 4,034
Income tax charge 11,009 22,900 31,039 36,854
Equity in net (income) loss of insurance and
financial affiliates (16,522) (416) 24,565 (448)
------------- ---------------- --------------- -------------
Net income (loss) $ 357,672 $ (91,748) $ 607,677 $ (2,255)
Preference dividend (10,013) -- (20,161) --
------------- ---------------- --------------- -------------
Net income (loss) available to ordinary
shareholders $347,659 $ (91,748) $ 587,516 $ (2,255)
------------- ---------------- --------------- -------------
Weighted average number of ordinary shares and
ordinary share equivalents : Basic 136,791 135,662 136,527 135,431
: Diluted 138,634 138,231 138,084 137,743
Per Share Data: (b)
Net income (loss) available to ordinary
shareholders $ 2.51 $ (0.68) $ 4.25 $ (0.02)
======== ========= ======= =========
Note:
a) Certain reclassifications, which have no effect on net income, have
been made to prior period results to conform to current presentation.
b) Average stock options outstanding have been excluded where
anti-dilutive to earnings per share. Consequently, where there is a
net loss, basic weighted average ordinary shares outstanding is used
to calculate net loss per share.
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XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands of U.S. dollars, except per share amounts)
(Unaudited)
As at June 30, As at December 31,
2003 2002
----------------------- -----------------------
Balance Sheet Data:
Total investments available for sale $17,946,914 $16,022,522
Segregated assets 341,645 37,211
Net payable for investments purchased 710,120 1,546,276
Cash and cash equivalents 3,007,127 3,557,815
Investments in affiliates 1,809,643 1,750,005
Intangible assets 1,655,352 1,653,700
Total assets 39,167,529 35,647,369
Unpaid losses and loss expenses 14,748,208 13,202,736
Deposit liabilities and policy benefit reserves 5,438,842 4,852,785
Segregated liabilities 341,645 37,211
Notes payable and debt 1,890,398 1,877,957
Total Shareholders' equity 7,565,320 6,569,589
Book value per ordinary share $51.40 $44.48
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XL CAPITAL LTD
RECONCILIATION
The following is a reconciliation of the Company's net income (loss) to `net
income excluding net realized gains and losses on investments and net realized
and unrealized gains and losses on credit and investment derivative instruments,
net of tax' for the three and six months ended June 30, 2003 and 2002 (in
millions except per share amounts):
Three months ended Six Months ended
June 30 June 30
(Unaudited) (Unaudited)
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) available to
ordinary shareholders $347.7 $ (91.7) $ 587.5 $ (2.3)
Net realized (gains) and losses on
investments, net of tax (96.5) 110.0 (82.2) 217.8
Net realized and unrealized (gains) losses on
investment derivatives, net of tax (3.9) (2.0) (8.5) 9.7
Net realized and unrealized losses (gains) on
credit derivatives, net of tax 21.3 10.1 21.9 8.8
---------------------------------------------------------------------
Net income excluding net realized gains and
losses on investments and net realized and
unrealized gains and losses on credit and $ 268.6 $26.4 $ 518.7 $234.0
investment derivative instruments, net of tax
---------------------------------------------------------------------
Per ordinary share results:
Net income (loss) available to ordinary
shareholders $ 2.51 $(0.68) $ 4.25 $(0.02)
====== ======= ====== =======
Net income excluding net realized gains and
losses on investments and net realized and
unrealized gains and losses on credit and $ 1.94 $0.19 $ 3.76 $1.70
investment derivative instruments, net of tax ====== ======= ====== =======
Weighted average ordinary shares
outstanding:
Basic 136.8 135.7 136.5 135.4
Diluted 138.6 138.2 138.1 137.4
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Comment on Regulation G
This press release contains the presentation of `net income excluding net
realized gains and losses on investments and net realized and unrealized gains
and losses on credit and investment derivatives, net of tax'. This presentation
is a "non-GAAP financial measure" as defined in Regulation G. The reconciliation
of such measure to net income (the most directly comparable GAAP financial
measure) in accordance with Regulation G is included above.
XL presents its operations in the way it believes will be most meaningful and
useful to investors, analysts, rating agencies and others who use XL's financial
information in evaluating XL's performance. This presentation includes the use
of `net income excluding net realized gains and losses on investments and net
realized and unrealized gains and losses on credit and investment derivatives,
net of tax'. Investment derivatives include all derivatives entered into by XL
other than weather and energy and credit derivatives (discussed further below).
Although the investment of premiums to generate income (or loss) and realized
capital gains (or losses) is an integral part of XL's operations, the
determination to realize capital gains (or losses) is independent of the
underwriting process. In addition, under applicable GAAP accounting
requirements, losses can be created as the result of other than temporary
declines in value without actual realization. In this regard, certain users of
XL's financial information, including certain rating agencies, evaluate earnings
before tax and capital gains to understand the profitability of the recurring
sources of income without the effects of these two variables. Furthermore, these
users believe that, for many companies, capital gains are largely opportunistic
and are a function of economic and interest rate conditions. In addition, with
respect to credit derivatives, because XL generally holds its financial
guarantee contracts written in credit derivative form to maturity, the net
effects of the changes in fair value of these credit derivatives are excluded
(similar with other companies in the financial guarantee business) as the
changes in fair value each quarter are not indicative of underlying business
performance of XL's financial guarantee operations. Unlike these credit
derivatives, XL's weather and energy derivatives are actively traded (i.e, they
are not held to maturity) and are, therefore, not excluded from net income as
any gains or losses from this business are considered by management when
evaluating and managing the underlying business.
In summary, XL evaluates the performance of and manages its business to produce
an underwriting profit. In addition to presenting net income, XL believes that
showing net income exclusive of the items mentioned above enables investors and
other users of XL's financial information to analyze XL's performance in a
manner similar to how management of XL analyzes performance. In this regard, XL
believes that providing only a GAAP presentation of net income makes it much
more difficult for users of XL's financial information to evaluate XL's
underlying business. Also, as stated above, XL believes that the equity analysts
and certain rating agencies who follow XL (and the insurance industry as a
whole) exclude these items from their analyses for the same reasons and they
request that XL provide this non-GAAP financial information on a regular basis.
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