Net Operating Income $221.0 million, per share $1.61 Net Income $184.0 million, per share $1.34
HAMILTON, BERMUDA, October 30, 2002 -- XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported net income available to ordinary shareholders for the quarter ended September 30, 2002 of $184.0 million, or income of $1.34 per share, compared with a net loss of $840.0 million, or a loss of $6.70 per share, in the third quarter of 2001. Net operating income for the third quarter of 2002 was $221.0 million, or $1.61 per share, compared with a net operating loss of $761.8 million, or a loss of $6.07 per share, for the quarter ended September 30, 2001. The Company's results in 2001 were severely impacted by losses related to the events of September 11, 2001.
Commenting on the third quarter 2002 results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated: "Our insurance and reinsurance businesses have enjoyed a robust third quarter, with significant rate increases and new business contributing to strong underwriting results in the quarter. I am particularly pleased with our general operations combined ratio of 91.0% in the quarter."
"However, while the managers of our investment affiliates generally outperformed their benchmarks and the overall investment markets in the third quarter, their absolute performance resulted in a small loss when compared to their strong performance a year ago," Mr. O'Hara added.
Mr. O'Hara further stated: "As we look ahead, I am confident that the property and casualty markets will remain hard for some time. XL is well positioned to capitalize on the long overdue price increases and improvements in terms and conditions currently being achieved in virtually all lines of business."
For the nine months ended September 30, 2002, net income available to ordinary shareholders was $181.8 million, or income of $1.32 per share, compared with a net loss of $492.5 million, or a loss of $3.93 per share, during the same period in 2001. Net operating income for the first nine months of 2002 was $456.4 million, or $3.32 per share, compared with a net operating loss of $445.0 million, or $3.55 per share, for the nine months ended September 30, 2001.
Summary unaudited consolidated financial data for the three and nine months ended September 30, for each of 2002 and 2001, respectively, is set forth below (in millions except per share amounts): Three months ended Nine months ended September 30 September 30 (Unaudited) (Unaudited) 2002 2001 2002 2001 Gross premiums written $2,655.5 $1,193.3 $7,052.6 $3,350.0 Net premiums written 2,123.9 537.0 5,475.6 2,098.4 Net premiums earned 2,162.3 751.5 4,313.1 1,934.7 Net income (loss) 186.4 (840.0) 184.2 (492.5) Preference dividend 2.4 -- 2.4 -- Net income (loss) available to ordinary shareholders. 184.0 (840.0) 181.8 (492.5) Net operating income (loss) (a) 221.0 (761.8) 456.4 (445.0) Per share results: Net income (loss) available to ordinary shareholders (b). $1.34 $ (6.70) $1.32 $(3.93) Net operating income (loss) (a) (b) 1.61 (6.07) 3.32 (3.55) Weighted average ordinary shares outstanding : Basic 135.8 125.4 135.6 125.4 Diluted 137.3 127.8 137.3 127.4 Notes: (a) Net operating income is net income available to ordinary shareholders, excluding net realized gains and losses on investments, net realized and unrealized gains and losses on derivatives, net of tax, and one-time charges related to the integration of Winterthur International in 2001. (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 represents diluted weighted average ordinary shares outstanding.
Results for all periods subsequent to July 1, 2001 include the results of Winterthur International, which was acquired with effect from July 1, 2001. The results also include the consolidation of Le Mans Ré, which is accounted for as a subsidiary with effect from January 1, 2002. In the quarter and nine months ended September 30, 2001, the Company's share of the net income of Le Mans Ré was included in equity in net income of insurance and operating affiliates.
Total assets as of September 30, 2002 were $34.1 billion compared with $28.0 billion as of December 31, 2001. Fully diluted book value per ordinary share as at September 30, 2002 increased to $42.10 compared with $40.35 as at December 31, 2001.
Gross premiums written for general and life operations in the third quarter of 2002 were $2.7 billion compared with $1.2 billion in the third quarter of 2001. Net premiums written increased to $2.1 billion from $537.0 million and net earned premiums rose to $2.2 billion from $751.5 million in the respective quarters of 2002 and 2001.
For the nine months ended September 30, 2002, gross premiums written were $7.1 billion compared with $3.4 billion in the year ago period. Net premiums written for the first nine months of 2002 were $5.5 billion compared with $2.1 billion a year ago. Net earned premiums were $4.3 billion for the first nine months of 2002 compared with $1.9 billion in the first nine months of 2001.
Net investment income from general operations was $161.1 million in the third quarter of 2002, compared with $152.2 million in 2001's third quarter. Net investment income from general operations was $474.6 million in the first nine months of 2002, compared with $446.5 million in 2001's first nine months.
Net investment income from life operations was $26.2 million in the third quarter of 2002 and $58.6 million for the nine months of 2002. In 2001, there was no investment income from life operations.
The Company's equity in the net losses of its investment affiliates for the third quarter of 2002 was $2.0 million versus income of $20.8 million in the third quarter of 2001. The Company's equity in the net income of its investment affiliates for the first nine months of 2002 was $38.1 million versus $64.3 million in the first nine months of 2001.
The Company's equity in net losses of its insurance and operating affiliates was $0.4 million in the third quarter of 2002 versus net losses of $13.5 million in the third quarter of 2001. The Company's equity in the net income of its insurance and other operating affiliates was $0.04 million for the first nine months of 2002 versus $0.8 million in the first nine months of 2001.
The combined ratio for the Company's general operations was 91.0% in the third quarter of 2002 compared with 233.3% in the third quarter of 2001. The loss ratios were 61.8% and 195.4% in the third quarters of 2002 and 2001, respectively, with corresponding expense ratios of 29.2% and 37.9% for the same quarters, respectively. The combined ratio for the Company's general operations was 97.1% in the first nine months of 2002 compared with 145.2% in the first nine months of 2001. The loss ratios were 67.9% and 111.0% in the first nine months of 2002 and 2001, respectively, with corresponding expense ratios of 29.2% and 34.2% for the same periods.
A live on-line webcast of XL's call with analysts and investors to review the third quarter 2002 results will be held at 10:00 a.m. Eastern Time on Thursday, October 31, 2002 at www.xlgroup.com. An unaudited financial information supplement relating to the Company's 2002 and 2001 quarterly and year-to-date results is available on its website: www.xlgroup.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 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 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.
XL Capital Ltd SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 (Unaudited) (Unaudited) 2002 2001 2002 2001 Income Statement Data: Revenues: Gross premiums written $ 2,655,474 $ 1,193,317 $ 7,052,621 $ 3,350,009 Net premiums written 2,123,875 536,972 5,475,602 2,098,378 Net premiums earned - general operations $ 1,375,935 $ 705,277 $ 3,477,048 $ 1,888,415 Net premiums earned - life operations 786,383 46,247 836,073 46,247 Net investment income - general operations 161,052 152,231 474,579 446,495 Net investment income - life operations 26,263 -- 58,606 -- Net realized (losses) gains on investments (23,086) (56,081) (239,108) (29,644) Net realized and unrealized losses on derivative instruments (8,898) (8,554) (28,811) (5,892) Equity in net (loss) income of investment affiliates (1,976) 20,776 38,140 64,346 Fee and other income 24,104 7,990 56,424 26,552 $ 2,339,777 $ 867,886 $ 4,672,951 $ 2,436,519 Expenses: Net losses and loss expenses incurred - general operations $ 844,182 $ 1,356,572 $ 2,335,733 $ 2,073,727 Claims and policy benefit reserves - life operations 803,741 46,473 870,320 46,473 Acquisition costs, operating expenses, and exchange gains and losses 425,547 316,268 1,080,020 746,736 Interest expense 51,815 28,339 133,576 75,764 Amortization of intangible assets 875 15,045 1,500 44,216 $ 2,126,160 $ 1,762,697 $ 4,421,149 $ 2,986,916 Income (loss) before minority interest, income tax expense and equity in net income of insurance and operating affiliates $ 213,617 $ (894,811) $ 251,802 $ (550,397) Net income $ 186,436 $ (840,032) $ 184,181 $ (492,497) Preference dividend 2,369 -- 2,369 -- Net income (loss) available to ordinary shareholders $ 184,067 $ (840,032) $ 181,812 $ (492,497) Weighted average number of ordinary shares and ordinary share equivalents: : Basic 135,790 125,431 135,551 125,358 : Diluted 137,349 127,845 137,291 127,418 Per Share Data: Net income (loss) available to ordinary shareholders $ 1.34 $ (6.70) $ 1.32 $ (3.93) Net losses on investments, derivative instruments and one time charges, after tax 0.27 0.63 2.00 0.38 Net operating income (loss) $ 1.61 $ (6.07) $ 3.32 $ (3.55) Note: Certain reclassifications, which have no effect on net income, have been made to prior year results to conform to current presentation. XL Capital Ltd SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands of U.S. dollars, except per share amounts) (Unaudited) As at September 30, As at December 31, 2002 2001 Balance Sheet Data: Total investments available for sale $15,208,627 $12,429,845 Net payable for investments purchased 1,778,303 1,247,027 Cash and cash equivalents 2,737,445 1,863,861 Investments in insurance and operating affiliates 1,684,713 1,037,344 Intangible assets 1,646,333 1,616,943 Total assets 34,090,827 27,963,075 Unpaid losses and loss expenses 12,690,974 11,825,680 Deposit liabilities and policy benefit reserves 3,946,471 2,374,164 Notes payable and debt 1,870,210 1,604,877 Shareholders' equity 5,948,676 5,437,184 Fully diluted book value per ordinary share $42.10 $40.35