REG-XL Group plc Final Results <Origin Href="QuoteRef">CGL.L</Origin> - Part 1

CastelnauAnnouncement

03/02/2015 07:00

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DUBLIN--(Business Wire)--


XL Group plc Announces Fourth Quarter and Full Year 2014 Results 
 
* 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 anequal
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. 

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 - February 2, 2015 - XL Groupplc ("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." 
 
 Highlights                                                                                                                                   
 Year Ended December 31                                                                                                                       
 (U.S. dollars in thousands, except per share amounts)                                                                                        
                                                              Three Months Ended                        Year Ended                            
                                                              December 31,                              December 31,                          
                                                              (Unaudited)                               (Unaudited)                           
                                                              2014                 2013                 2014                  2013            
 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 millionin 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. 
 
 P&C Operations                                                                                                                   
 Year Ended December 31                                                                                                           
 (U.S. dollars in thousands)                                                                                                      
                                  Three Months Ended                               Year Ended                                     
                                  December 31,                                     December 31,                                   
                                  (Unaudited)                                      (Unaudited)                                    
                                  2014                      2013                   2014                       2013                
 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        
                                                                                                                                  
 Loss ratio                       52.3            %         62.5            %      57.0             %         62.0            %   
 Underwriting expense ratio       32.2            %         30.8            %      31.2             %         30.5            %   
 Combined ratio                   84.5            %         93.3            %      88.2             %         92.5            %   
                                                                                                                                  
 
 
* 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 results may differ materially from those included 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 (a) changes in the size of XL`s claims relating to natural or man-made
catastrophe losses due to the preliminary nature of some reports and estimates
of loss and damage to date; (b) trends i