Exhibit 99.1
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 FOURTH QUARTER AND FULL YEAR 2003 RESULTS
Fourth Quarter 2003 Net Loss $314.8 million, or $2.29 per ordinary share
Full year 2003 Net Income $371.7 million, or $2.69 per ordinary share
HAMILTON, BERMUDA, February 10, 2004 -- XL Capital Ltd ("XL" or the "Company")
(NYSE: XL) today reported a net loss available to ordinary shareholders for the
quarter ended December 31, 2003 of $314.8 million, or a loss of $2.29 per
ordinary share. This result includes the impact of the previously announced
$694.1 million pre tax ($647.1 million after tax) fourth quarter charge
summarized in the attached table. Net income for the fourth quarter of 2002 was
$214.1 million, or income of $1.56 per ordinary share.
For the year ended December 31, 2003, net income available to ordinary
shareholders was $371.7 million, or income of $2.69 per ordinary share, compared
with net income of $396.0 million, or income of $2.88 per ordinary share, for
the year ended December 31, 2002.
`Net loss 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 fourth quarter of 2003 was $349.3 million, or a
loss of $2.54 per ordinary share, compared with income of $250.2 million, or
$1.82 per ordinary share, for the quarter ended December 31, 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 year ended December 31, 2003 was $293.6 million
or income of $2.12 per share, compared with income of $700.8 million, or $5.10
per ordinary share, for the year ended December 31, 2002.
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`Net income or loss excluding net realized and unrealized gains and losses on
credit and investment derivative instruments, net of tax' is a non-GAAP measure.
A reconciliation of this measure to net income or loss available to ordinary
shareholders is provided on the attached table entitled "Reconciliation".
Operating Highlights for Full Year 2003 Compared to Full Year 2002:
o Net premiums earned from general operations increased by 24%.
o Total net invested assets increased 26% to $25 billion.
o Investment income increased 6% to $780 million.
o Earnings in investment affiliates increased by 107% to $134 million.
o Cash flow from operations was a record $3.4 billion.
o Total assets increased 14% to $41 billion.
o Book value increased 5% to $46.74 per ordinary share.
Commenting on the fourth quarter 2003 results, Brian M. O'Hara, President and
Chief Executive Officer of XL, stated: "The positive underlying dynamics in our
fourth quarter reflect the continuing favorable underwriting market conditions
and XL's strong position in our chosen markets. We are producing solid growth
and strong underlying profitability. I am confident that the realignment of our
management team in both our insurance and reinsurance operations should enhance
our execution of the encouraging business opportunities at hand."
Total assets as of December 31, 2003 were $40.8 billion compared with $35.6
billion as of December 31, 2002. Book value per ordinary share as at December
31, 2003 increased to $46.74 from $44.48 as at December 31, 2002.
A live on-line web cast of XL's call with analysts and investors to review the
fourth quarter and full year 2003 results will be held at 10:00 a.m. Eastern
Time on February 11, 2004 at www.xlcapital.com. A telephone replay of the
conference call will be available beginning at 1:00 p.m. Eastern Time on
February 11, until 8:00 p.m. Eastern Time on February 18, 2004 by dialing (201)
612-7415 (account
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number: 7716 and conference I.D. number: 91322). An unaudited financial
information supplement relating to the Company's 2003 and 2002 quarterly and
full year results, as well as the slides that will accompany XL's call, are
available on its website: www.xlcapital.com.
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 presentation 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 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 or
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 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 or revise publicly any forward-looking statement, whether
as a result of new information, future developments or otherwise.
XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
Three Months Ended Year Ended
Income Statement Data: December 31 December 31
(Unaudited) (Unaudited)
2003 2002 2003 2002
---------------- --------------- ---------------- --------------
Revenues:
Gross premiums written - general operations $ 1,669,382 $ 1,719,911 $ 8,624,080 $ 7,714,005
- life and annuity operations 491,888 220,678 768,089 1,072,248
- financial operations 71,242 54,912 313,916 199,913
Net premiums written - general operations 1,256,889 1,317,281 6,552,280 5,771,626
- life and annuity operations 494,557 187,604 739,869 1,023,604
- financial operations 61,193 54,493 299,240 177,794
Net premiums earned - general operations 1,515,913 1,507,193 6,081,033 4,899,073
- life and annuity operations 498,814 186,919 748,495 1,022,992
- financial operations 41,535 25,461 139,622 67,745
Net investment income 206,340 201,350 779,558 734,535
Net realized gains (losses) on investments 39,864 24,948 120,195 (214,160)
Net realized and unrealized losses on derivative
Instruments (1,432) (46,635) (27,542) (51,761)
Equity in net income of investment affiliates 46,558 26,522 133,902 64,662
Fee and other income 15,756 16,473 41,745 54,963
---------------- --------------- ---------------- --------------
$ 2,363,348 $ 1,942,231 $ 8,017,008 $ 6,578,049
---------------- --------------- --------------- --------------
Expenses:
Net losses and loss expenses incurred $ 1,614,219 $ 1,028,715 $ 4,610,606 $3,327,315
Claims and policy benefit reserves 516,157 199,136 818,894 1,069,456
Acquisition costs 304,411 322,829 1,167,186 955,331
Operating expenses 200,088 179,933 797,826 674,403
Exchange gains (8,489) (33,342) (38,619) (80,294)
Interest expense 57,314 34,510 199,407 168,086
Amortization of intangible assets 3,512 4,687 4,637 6,187
---------------- --------------- --------------- --------------
$ 2,687,212 $ 1,736,468 $ 7,559,937 $ 6,120,484
---------------- --------------- --------------- --------------
(Loss) income before minority interest, income tax
expense and equity in net (income) loss of insurance and
financial affiliates $ (323,864) $ 205,763 $ 457,071 $ 457,565
Minority interest 3,473 6,843 9,264 13,371
Income tax (benefit) expense (15,880) (38,493) 30,049 22,647
Equity in net (income) loss of insurance and financial
affiliates (6,708) 16,023 5,779 15,976
---------------- --------------- --------------- --------------
Net (loss) income $ (304,749) $ 221,390 $ 411,979 $ 405,571
Preference dividend (10,080) (7,251) (40,321) (9,620)
---------------- --------------- --------------- --------------
Net (loss) income available to ordinary shareholders $ (314,829) $ 214,139 $ 371,658 $ 395,951
---------------- --------------- --------------- --------------
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XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
Three Months Ended Year Ended
Income Statement Data (continued): December 31 December 31
(Unaudited) (Unaudited)
2003 2002 2003 2002
------ ------ ------ ------
Weighted average number of ordinary shares and
ordinary share equivalents : Basic 137,275 135,887 136,906 135,636
: Diluted 138,594 137,582 138,187 137,388
Per Share Data: (b)
Net (loss) income available to ordinary shareholders $ (2.29) $ 1.56 $2.69 $ 2.88
Ratios - General insurance and reinsurance operations
Loss ratio 106.0% 69.0% 75.3% 68.0%
Expense ratio 27.2% 28.3% 27.3% 29.0%
---------------- ---------------- -------------- --------------
Combined ratio 133.2% 97.3% 102.6% 97.0%
---------------- ---------------- -------------- --------------
Note:
a) Certain reclassifications, which have no effect on net income, have
been made in the presentation of 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 are used to
calculate net loss per share.
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XL CAPITAL LTD
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)
As at December 31, As at December 31,
2003 2002
(Unaudited) (Unaudited)
----------------------- -----------------------
Balance Sheet Data:
Total investments available for sale $ 20,775,256 $ 16,059,733
Net payable for investments purchased 96,571 1,546,276
Cash and cash equivalents 2,403,121 3,557,815
Investments in affiliates 1,903,341 1,750,005
Total assets 40,764,215 35,647,369
Unpaid losses and loss expenses 16,558,788 13,202,736
Deposit liabilities and policy benefit reserves 7,284,179 4,889,996
Notes payable and debt 1,905,483 1,877,957
Total shareholders' equity 6,936,915 6,569,589
Book value per ordinary share $ 46.74 $ 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 (loss) 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' (which is a non-GAAP measure) for the three and twelve
months ended December 31, 2003 and 2002 (in millions, except per share amounts):
Three months ended Year ended
December 31 December 31
(Unaudited) (Unaudited)
2003 2002 2003 2002
Net (loss) income available to ordinary shareholders ($314.8) $214.1 $371.7 $396.0
Net realized (gains) losses on
investments, net of tax (30.3) (9.2) (105.2) 236.5
Net realized and unrealized (gains) losses on investment
derivatives, net of tax (7.1) 9.7 0.5 22.2
Net realized and unrealized losses on credit derivatives,
net of tax 2.9 35.6 26.6 46.1
Net income (loss) 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 ($349.3) $250.2 $293.6 $700.8
Per ordinary share results:
Net income (loss) available to ordinary shareholders (a) ($2.29) $1.56 $2.69 $2.88
Net income (loss) 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 (a) ($2.54) $1.82 $2.12 $5.10
Weighted average ordinary shares
outstanding:
Basic 137.3 135.9 136.9 135.6
Diluted 138.6 137.6 138.2 137.4
Note:
(a) 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 are used
to calculate net loss per share.
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XL CAPITAL LTD
SUMMARY OF 2003 PREVIOUSLY ANNOUNCED RESERVE CHARGES
(In millions)
Three months ended Year ended
Dec 31, 2003 Dec 31, 2003
(Unaudited) (Unaudited)
---------------- ----------------
XL Reinsurance America Inc (XLRA)
North American casualty reinsurance losses:
Additional claim reserves $ 124 $ 308
Incurred but not reported reserves 539 569
---------------- ----------------
Total $ 663 $ 877
2003 Year End Reserve Review (excluding XLRA):
Reinsurance - excluding September 11 event $ 62 $ 62
Insurance 150 150
Reinsurance - September 11 event (181) (181)
---------------- ----------------
Total $ 31 $ 31
---------------- ----------------
Total Reserve Charge - Pre-tax $ 694 $ 908
---------------- ----------------
Total Reserve Charge - After-tax $ 647 $ 837
---------------- ----------------
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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, the timing of the realization of capital
gains is 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 default
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 (loss), XL believes
that showing net income (loss) 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
(loss) 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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