XL Group Plc- Highlights (Q4 & Full Year Ended December 2013)

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Information about XL Group Plc- Highlights (Q4 & Full Year Ended December 2013)
Investor Relations

Published on March 13, 2014

Author: XL_Group

Source: slideshare.net

Description

Q4 and Full Year Presentation (ended December 2013)
Highlights of XL Group Quarterly Earnings

Also See (on this channel):
XL Group Plc: About Insurance
General Information About the XL Group Insurance Segment

XL Group Plc: About Reinsurance
General Information About the XL Group Reinsurance Segment

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO XL GROUP PLC FOURTH QUARTER & FULL YEAR ENDED DECEMBER 31, 2013 HIGHLIGHTS 1

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO “2013 was another year of solid progress, strengthened results and improvement for XL. As we have always taken a long term view as we work toward our goals, we are pleased with what we have achieved and feel very good about our positioning for the future.” Mike McGavick, CEO XL Group 2 Key Takeaway

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO XL Group plc Summary Results Fourth Quarter and Full Year 2013 • Operating income of $286.9 million, or $1.00 per share, and net income of $300.8 million or $1.05 per share, for the quarter on a fully diluted basis • Operating net income* of $943.0 million, or $3.23 per share, and net income of $1.1 billion, or $3.63 per share, for the full year on a fully diluted basis • P&C combined ratio of 93.3% for the quarter, compared to 105.9% in the prior year quarter, and a full year P&C combined ratio of 92.5% compared to 96.3% in the prior year • Natural Catastrophe pre-tax losses net of reinsurance and reinstatement premiums in the quarter of $94.3 million compared to $351.8 million in the prior year quarter • Operating return on ordinary shareholders’ equity*, excluding and including unrealized gains and losses on investments were 12.5% and 11.5%, respectively, annualized for the quarter and 10.3% and 9.2% respectively, for the full year • Fully diluted tangible book value per ordinary share* of $33.86 at December 31, 2013, an increase from September 30, 2013 of $0.90, or 2.7%, and an increase of $0.51, or 1.5%, from December 31, 2012, including a decrease in unrealized investment gains, net of tax, of $695.4 million for the full year • Share buybacks totaled 4.9 million ordinary shares for $150.0 million during the quarter 3 * Operating net income, annualized return on ordinary shareholders’ equity based on operating net income, annualized operating return on ordinary shareholders’ equity excluding unrealized gains and losses and fully diluted tangible book value per ordinary share are non-GAAP financial measures. Please see the reconciliation and note on Regulation G at the end of this document.

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO XL Operations Highlights Underwriting Performance Data Year ended December 31, 2013 Gross premiums written P&C $7.4 billion Net premium earned P&C $6.0 billion Combined ratio P&C 92.5% Gross premiums written Life Operations $324.3 million Net premiums earned Life Operations $295.4 million Insurance 71% Reinsurance 25% Life 4% Distribution of Gross Premiums Written by Segment

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO XL Operations Highlights Fourth Quarter and Full Year 2013 Insurance Segment  For the full year, the combined ratio improved from 100.6% to 97.1%, or 3.5 points on a calendar year basis, 4.8 points on an accident year basis and 1.8 points on an accident year ex-catastrophe basis  Finished in the #2 position in Advisen’s Innovation Index for the full year 2013  Retentions remain healthy with most business groups running in low to mid 80%, with most lines performing better than prior year  Innovations and New Products in fourth quarter included: o North America P&C’s Property team extended its Up+Running equipment breakdown coverage with new enhancements to boost protection against food processing and cold storage risks. o North America Construction teamed up with American Contractor’s Insurance Group (ACIG), a thought leader in quality management, to help construction clients enhance the quality of their work, deliver projects on time and prevent costly mistakes using data and analytics o International Construction introduced new “Construction Protection Intégrale” product which goes beyond the usual “Dommages ouvrage” (DO) coverage offered in the French market o Bermuda Insurance Excess Casualty Unit introduced a stand-alone, integrated occurrence product called Catastrophic Integrated Occurrence to provide catastrophe coverage for the healthcare industry 5

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO XL Operations Highlights Fourth Quarter and Full Year 2013 Reinsurance Segment 6 • Solid underwriting results included a combined ratio of 85.1% for the quarter and 81.4% for the year ended December 31, 2013, the latter representing 5.5 points better than the prior year. This resulted in an underwriting profit of $66.2 million and $325.3 million, respectively. • Gross premiums written for the quarter were $164.8 million, an increase of 4.4% from the prior year quarter, predominantly driven by new casualty business in the International business group and additional crop premium from our North American facility, partially offset by higher catastrophe related reinstatement premiums in the prior year quarter associated with Storm Sandy. • Net premiums earned for the quarter were $445.0 million, down by 9.8%, driven by re-underwriting activities in the International business group and competitive market conditions. • The Reinsurance segment remained focused on expanding its pool of talent and providing innovative solutions: A few examples included: o Launching New Ocean Capital Management Limited, a Bermuda-based venture with funds managed by private equity firm Stone Point Capital, to act as an asset manager in reinsurance capital market products o Growing its Property Facultative presence in the US, Europe and Asia with the opening of offices in Dallas and Philadelphia and the appointment of Christian Daniele as Senior Property Underwriter in Zurich and Pamela Ross as Vice President, Property Facultative in Singapore

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO BB & Below 3% AAA 1% BBB, 21% AA, 20% A 55% BB & Below 5% BBB 4% A 3% AA 8% AAA, 80% Financial Strength Fourth Quarter 2013 $45.7 billion Shareholders’ equity Assets Liabilities $34.3 billion $11.4 billion Includes • $1.8 billion cash and cash equivalents • $31.8 billion investments available for sale/held-to- maturity • $1.4 billion investments in affiliates * Fully diluted book value per ordinary share is a non-GAAP financial measure. Please see the reconciliation and note on Regulation G at the end of this document. 7 Investment Portfolio Security Rating Breakdown (At December 31, 2013) $12.8 billion Corporate Credit Portfolio (average A rated) $7.5 billion Structured Credit Portfolio (average AA+ rated) Fully diluted book value per ordinary share: $35.32* (At December 31, 2013) BBB 8% A 6% AA, 31% AAA, 55% $10.8 billion Government Related and Supported (average AA+ rated)

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 40%33% 4% 11% 12% Corporate Credit Government & Gov't Related Cash & Cash Equivalents Structured Credit - Agency MBS Structured Credit - Other $32.4 $1.0 $0.6 $1.4 $1.2 Fixed Income Portfolio (average AA- rated) Equity Securities Operating Cash & Cash Equivalents Investments in Affiliates (equity accounted) Other investments (non-equity accounted) XL Investment Portfolio: Fourth Quarter 2013 Fixed Income Portfolio Make-up Composition: $32.4 billion (excludes operating cash) 8 Total Investment Portfolio $36.6 billion 48% (or $16 billion) of XL’s fixed income portfolio is in cash, government, government-related & government-supported securities

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Ratings (As of October 30, 2013) A.M. Best A (Excellent) Outlook: Stable S&P A+ (Strong) Outlook: Stable Fitch A (Strong) Outlook: Positive Moody’s A2 (Good) Outlook: Stable 9 XL has strong ratings, including an “A” (Excellent) financial strength rating from A.M. Best and an “A+” (Strong) financial strength rating from Standard & Poor’s (S&P)

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Reconciliation – Three Months and Year Ended December 31, 2013 ($MM) 10 Please see slide 11 for applicable footnotes The following is a reconciliation of XL’s net income (loss) attributable to ordinary shareholders to operating net income (loss) (Note 2) and also includes the calculation of annualized return on ordinary shareholders’ equity (based on operating net income (loss)) and annualized return on ordinary shareholders’ equity (based on operating net income (loss)) excluding unrealized gains and losses on investments for the three and nine months ended December 31, 2013 and 2012. (U.S. Dollars in thousands except per share amounts) Three Months Ended Twelve Months Ended December 31 December 31 (Unaudited) (Unaudited) 2013 2012 2013 2012 (Note 1) (Note 1) Net income (loss) attributable to ordinary shareholders $ 300,780 $ 81,444 $ 1,059,916 $ 651,128 Impairment of goodwill, net of tax - - - - Net realized (gains) losses on investments, net of tax (7,143) (34,926) (82,605) (38,234) Net realized and unrealized (gains) losses on derivatives, net of tax (4,138) (2,565) (7,798) (5,216) Net realized and unrealized (gains) losses on investments and derivatives related to the Company's insurance company affiliates, net of tax 6,919 (259) 6,556 (301) Exchange (gains) losses, net of tax (9,537) (4,811) (33,101) 6,719 Operating net income (loss) (Note 2) $ 286,881 $ 38,883 $ 942,968 $ 614,096 Per ordinary share results: (Note 3) Net income (loss) attributable to ordinary shareholders $ 1.05 $ 0.27 $ 3.63 $ 2.10 Operating net income (loss) (Note 2) $ 1.00 $ 0.13 $ 3.23 $ 1.98 Weighted average ordinary shares outstanding: Basic 281,403,151 300,512,874 287,801,125 307,371,726 Diluted - Net income 286,007,396 304,490,554 292,069,296 310,282,466 Diluted - Operating net income 286,007,396 304,490,554 292,069,296 310,282,466 Return on ordinary shareholders' equity: ORDINARY SHAREHOLDERS EQUITY Closing ordinary shareholders' equity (Note 4) 9,997,633 10,510,077 9,997,633 10,510,077 Unrealized (gain) loss on investments, net of tax (781,007) (1,476,453) (781,007) (1,476,453) Average ordinary shareholders' equity excluding unrealized gains and losses on investments (Note 4) 9,156,787 9,030,614 9,125,125 8,961,743 Average ordinary shareholders' equity (Note 4) 9,952,767 10,460,564 10,253,855 9,960,868 Operating net income (loss) (Note 2) 286,881 38,883 942,968 614,096 Annualized operating net income (loss) (Note 2) 1,147,524 155,532 942,968 614,096 Annualized return on ordinary shareholders' equity - operating net income (loss) (Notes 2 and 4) 11.5% 1.5% 9.2% 6.2% Annualized return on ordinary shareholders' equity excluding unrealized gains and losses on investments - operating net income (loss) (Notes 2 and 4) 12.5% 1.7% 10.3% 6.9%

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Footnotes 11 1 Certain amounts have been reclassified to conform to the current period presentation. 2 Defined as net income (loss) attributable to ordinary shareholders excluding (1) net realized gains and losses on investments, net of tax, (2) net realized and unrealized gains and losses on derivatives, net of tax, (3) XL's share of items (1) and (2) for XL's insurance company affiliates for the periods presented, (4) goodwill impairment charges, net of tax and (5) foreign exchange gains or losses, net of tax. “Operating net income”, “return on ordinary shareholders’ equity” based on operating net income and “return on ordinary shareholders’ equity” based on operating net income excluding unrealized gains and losses on investments are non-GAAP financial measures. 3 Diluted weighted average number of ordinary shares outstanding is used to calculate per share data except where it is anti-dilutive to earnings per share or where there is a net loss. When it is anti-dilutive or when a net loss occurs, basic weighted average ordinary shares outstanding is utilized in the calculation of net loss per share and net operating loss per share. 4 Ordinary shareholders’ equity is defined as total shareholders’ equity less non-controlling interest in equity of consolidated subsidiaries.

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 contains the presentation of: (i) operating net income (loss) (“Operating Net Income”), which is defined as net income (loss) attributable to ordinary shareholders excluding: (1) net realized gains and losses on investments , net of tax, (2) net realized and unrealized gains and losses on derivatives, net of tax ,(3) XL’s share of items (1) and (2) for XL’s insurance company affiliates for the periods presented, (4) goodwill impairment charges, net of tax and (5) foreign exchange gains or losses, net of tax; (ii) return on ordinary shareholders’ equity (“ROE”) based on operating net income (loss) (“Operating ROE”); (iii) Operating ROE excluding unrealized gains and losses on investments; and (iv) book value per ordinary share (ordinary shareholders’ equity divided by the number of shares outstanding at the period end date), fully diluted book value per ordinary share (book value per share combined with the dilutive impact of potential future share issues at any period end), and fully diluted tangible book value per ordinary share (calculated in the same manner as fully diluted book value per ordinary share except that goodwill and intangible assets are removed from ordinary shareholders’ equity). These items are “non-GAAP financial measures” as defined in Regulation G. The reconciliation of such measures to the most directly comparable GAAP financial measures in accordance with Regulation G is included herein. 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 and from goodwill impairment charges 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 and the recognition of goodwill impairment charges are largely a function of economic and interest rate conditions. Net realized and unrealized (gains) losses on derivatives, net of tax include all derivatives entered into by XL other than certain credit derivatives. With respect to credit derivatives, because XL and its insurance company operating affiliates generally hold financial guaranty 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’ treatment of such contracts) as the changes in fair value each quarter are not indicative of underlying business performance. Foreign exchange gains and losses in the income statement are only one element of the overall impact of foreign exchange fluctuations on XL’s financial position and are not representative of any economic gain or loss made by XL. Accordingly, it is not a relevant indicator of financial performance and it is excluded. 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 operating net income (loss) 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 that 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. Operating ROE is a widely used measure of any company’s profitability that is calculated by dividing annualized Operating net income for any period by the average of the opening and closing ordinary shareholders’ equity. XL establishes target Operating ROEs for its total operations, segments and lines of business. If XL’s Operating ROE targets are not met with respect to any line of business over time, XL seeks to re-evaluate these lines. Operating ROE excluding unrealized gains and losses on investments is an additional measure of a company’s profitability that eliminates the impacts of mark to market fluctuations on a company’s investment portfolio that have not been realized through sales, which XL believes provides a more consistent measure of company performance. 12 Comment on Regulation G

© 2014, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Group plc’s insurance companies offer property, casualty, professional and specialty insurance products globally. Businesses that are moving the world forward choose us as their partner. To learn more, visit xlgroup.com/insurance XL Group plc’s reinsurance companies are among the world’s leading reinsurers. They offer products that include aerospace, property, casualty, marine and specialty. The world’s top insurers choose us to help move their businesses forward. To learn more, visit xlgroup.com/reinsurance We are the organization clients look to for answers to their most complex risks and to help move their world forward. To learn more, visit xlgroup.com 13 About XL Group plc

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