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XL Capital Ltd. Reports Fourth Qarter 2005 Net Loss Of $821.9 Million, Or A Net Loss of $5.51 Per Ordinary Share

Hamilton, Bermuda: February 7, 2006 - XL Capital Ltd ("XL" or the "Company") (NYSE: XL) today reported a net loss to ordinary shareholders for the quarter ended December 31, 2005 of $821.9 million, or a net loss of $5.51 per ordinary share, compared with net income of $288.0 million, or net income of $2.07 per ordinary share, for the quarter ended December 31, 2004. Net loss for the quarter ended December 31, 2005 included net losses of $834.2 million, pre and post tax, associated with the Winterthur International independent actuarial decision ("Winterthur Decision"). The quarter ended December 31, 2005 also included pre-tax net losses from Hurricane Wilma of $247.1 million and additional pre-tax net losses of $210.8 million related to the 2005 third quarter natural catastrophes. These additional net losses arose from newly reported claims and increased severity on existing claims. Taking into account net reinstatement premiums and tax effects, the net  income impact of Hurricane Wilma and the third quarter catastrophes in the fourth quarter 2005 was $225.6million and $165.1 million respectively, for a total of $390.7 million. Net income for the quarter ended December 31, 2004 included net losses of $138.0 million, net of tax, from catastrophes. The Company's loss estimates involve the exercise of considerable judgment and are accordingly subject to revision. .

"Net loss excluding net realized gains and losses"1 for the quarter was $868.2 million, a net loss of $5.82 per ordinary share, compared with net income of $199.4 million, or net income of $1.43 per ordinary share, for the quarter a year ago. See below for a reconciliation of "net income/loss excluding net realized gains and losses"1 to net loss to ordinary shareholders.

For the twelve months ended December 31, 2005, net loss to ordinary shareholders was $1,292.3 million, or a net loss of $9.14 per ordinary share, compared with net income of $1,126.3 million or net income of $8.13 per ordinary share for the twelve months ended December 31, 2004. "Net loss excluding net realized gains and losses"1 for the twelve months ended December 31, 2005 was $1,535.4 million or a net loss of $10.86 per ordinary share compared with net income of $820.7 million or net income of $5.92 per ordinary share for the twelve months ended December 31, 2004.

The twelve months ended December 31, 2005 included a net loss of $1,865.1 million for the 2005 third and fourth quarter natural catastrophes, after taking into account net reinstatement premiums and tax effects. In addition, it also included a net loss of $808.9 million, net of interest received, associated with the Winterthur Decision. Net loss for the twelve months ended December 31, 2004 included a net loss of $558.2 million related to the 2004 third and fourth quarter natural catastrophes.

At December 31, 2005, total net invested assets were $41.6 billion, up 28.4% from December 31, 2004, and total assets were $58.4 billion, up 19% from December 31, 2004.

Commenting on these results, President and Chief Executive Officer Brian M. O'Hara said: "We are extremely disappointed with the impact the third and fourth quarters events had on our financial performance. However, the natural catastrophes of 2005 have led to more attractive markets, and in true XL tradition, we are executing on these opportunities with a focus on maximizing risk-adjusted returns. I believe that XL's solid balance sheet, geographic breadth and diversification of platforms will serve us well in 2006."

1 Defined as "net income/loss excluding net realized gains and losses on investments and net realized and unrealized gains and losses on credit, structured financial and investment derivatives, net of tax" herein referred to as "net income/loss excluding net realized gains and losses". Net income/ loss excluding net realized gains and losses is a non-GAAP measure. See the scheduled entitled "Reconciliation" at the end of this release for a reconciliation of net income/loss excluding net realized gains and losses to net income/loss available to ordinary shareholders.

HIGHLIGHTS (Fourth quarter 2005 versus fourth quarter 2004)

· Successfully raised a total of $3.2 billion through the issuance of ordinary shares and equity security units in December 2005 to replenish capital base

· Contribution from financial operations was up 54% to $71.2 million

· Cash flow from operations was $1,067 million, or $492 million excluding proceeds of $575 million related to the Winterthur Decision. Structured and spread businesses contributed a further $478 million to cash flow during the quarter

· Net investment income from general operations (excluding interest received related to the Winterthur Decision) was up 27%

· The combined ratio from general operations was 165.1% or 92.0% excluding the charge related to the Winterthur Decision and the 2005 third and fourth quarter natural catastrophes

· Cyrus Re quota share executed for 2006 to support XL's strategy to maximize risk adjusted returns

HIGHLIGHTS (Full year 2005 versus full year 2004)

· Contribution from financial operations was up 66% to $234.8 million

· Cash flow from operations was $4,249 million, or $3,674 million excluding proceeds of $575 million related to the Winterthur Decision. Structured and spread businesses contributed a further $2,024 million to cash flow during the year

· Net investment income from general operations (excluding interest received related to the Winterthur Decision and a structured credit transaction) was up 21%

· The combined ratio from general operations was 132.9% or 92.1% excluding the charge related to the Winterthur Decision and the 2005 third and fourth quarter natural catastrophes

SEGMENT HIGHLIGHTS:

Insurance Operations

Underwriting loss for the quarter ended December 31, 2005 was $1,092.8 million compared with an underwriting profit of $49.1 million in the quarter ended December 31, 2004. These results included the pre-tax net impact of natural catastrophes of $285.1 million and $110.5 million in 2005 and 2004, respectively. The fourth quarter 2005 also included the charge related to the Winterthur Decision of $834.2 million pre and post tax.

Fourth quarter 2005 compared with fourth quarter 2004 results (excluding the impact of catastrophes and the charge related to the Winterthur Decision in the fourth quarter of 2005):

· Net premiums written were flat at $1,028.7 million

· Net premiums earned increased 3% as a result of business growth and higher net retention

· The combined ratio increased from 85.1% in 2004 to 97.5% in 2005 due to the favorable reduction in 2004 of the property loss ratio.

Underwriting loss for the year ended December 31, 2005 was $1,486.6 million compared with an underwriting profit of $159.7 million for the year ended December 31, 2004. These results included the pre-tax net impact of natural catastrophes of $1,036.1 million and $310.5 million in 2005 and 2004, respectively, and the charge related to the Winterthur Decision of $834.2 million in 2005.

Reinsurance Operations

General Operations - Underwriting loss for the quarter ended December 31, 2005 was $32.3 million compared with an underwriting profit of $43.7 million in the quarter ended December 31, 2004. These results included the pre-tax net impact of catastrophes of $140.9 million and $39.5 million in 2005 and 2004, respectively.

Fourth quarter 2005 as compared with fourth quarter 2004 results (excluding the impact of natural catastrophes in both quarters):

· Gross and net premiums written were up 11.3% and 6.6% respectively, excluding the impact of timing differences noted last quarter. For the full year 2005 as compared with 2004, gross and net premiums written were both down 4%

· Net premiums earned were down 3.6% reflecting the effects of lower net premiums written over the previous twenty four months

· The combined ratio was 83.6% compared with 90.3% in the prior year quarter due mainly to a lower loss ratio. The loss ratio improved due to a lower level of non-catastrophe losses in the fourth quarter of 2005

Underwriting loss for the year ended December 31, 2005 was $781.6 million compared with an underwriting profit of $184.3 million in the year ended December 31, 2004. These results included the pre-tax net impact of natural catastrophes of $943.2 million and $285.4 million in 2005 and 2004, respectively.

Life and Annuity Operations - Gross premiums written decreased 36.3% as a result of $97 million of long duration annuity premiums assumed in the fourth quarter of 2004 with no similar transaction occurring in the fourth quarter of 2005. Net income was $9.8 million, an increase from $2.6 million in the fourth quarter of 2004 substantially due to higher net investment income.

For the twelve months ended December 31, 2005 as compared with 2004, gross premiums written increased 63% principally due to the $1.8 billion U.K. annuity reinsurance transaction assumed in the second quarter of 2005. Net loss for the 2005 year was $29.9 million as compared with net income of $28.4 million in 2004 due to the charge of $63.3 million in the second quarter 2005 for the increase in future policy benefit reserves and a write off of deferred acquisition costs on certain U.S.-based term-life mortality reinsurance business.

Financial Products and Services Operations

Underwriting profit for the segment rose to $16.8 million in the fourth quarter of 2005 compared with $10.1 million in the fourth quarter 2004. Total contribution for the segment was $71.2 million in the fourth quarter of 2005 compared with $46.3 million in the fourth quarter of 2004. This increase was driven largely by higher levels of business activity and higher net investment income due to a special dividend received from our joint venture with Financial Security Assurance. The year-over-year increase in net invested assets from municipal GIC and funding agreement issuances also added to total contribution in fourth quarter 2005.

For the year ended December 31, 2005, underwriting profit increased to $60.2 million as compared with $28.3 million for the year ended December 31, 2004 due mainly to lower net losses. Total contribution for the segment was $234.8 million in 2005 compared with $141.1 million in 2004 mainly due to higher underwriting profits and an increase in financial guaranty investment income.

Corporate Items

Net investment income from general operations increased 42.3% over the fourth quarter of 2004 to $233.1 million due to a higher investment base, a rise in average yields, and $25.3 million of interest related to the $575 million payment received in connection with the Winterthur Decision. Net income from investment affiliates was $38.4 million in the fourth quarter of 2005 compared with $47.3 million in the fourth quarter of 2004.

For the year ended December 31, 2005, net investment income from general operations (excluding interest received related to the Winterthur Decision and a structured credit transaction) was up 21% compared with 2004. Net income from investment affiliates was $154.8 million in 2005 compared with $124.0 million in 2004.

Net realized gains on investments were $37.9 million in the quarter, compared with $65.4 million in the prior year period. Net unrealized gains on investments, net of tax, were $396.2 million at December 31, 2005 compared with $551.6 million at September 30, 2005 primarily reflecting a rise in U.S. interest rates during the quarter.

Total operating expenses decreased to $224 million in the fourth quarter of 2005 from $288 million in the fourth quarter of 2004. Total operating expenses decreased to $982 million in the 2005 year from $1,053 million in the 2004 year. This was primarily due to continued productivity and expense management efforts and adjustments in certain 2005 compensation costs associated with XL's pay-for-performance focus.

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The Company will host a conference call to discuss its fourth quarter and year end 2005 results on February 8, 2006 at 10:00 a.m. Eastern time. 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 (201) 689-8320 password XL208. The webcast will be available on XL's website located at www.xlcapital.com and will be archived on XL's website from approximately 1:00 p.m. Eastern time on February 8, 2006 through midnight Eastern time on March 8, 2006. A slide presentation accompanying the Company's discussion of its fourth quarter and year end 2005 results will also be available on the Company's website located at www.xlcapital.com beginning approximately 15 minutes before the commencement of the conference call.

A telephone replay of the conference call will be available beginning at approximately 1:00 p.m. Eastern time February 8, 2006 until approximately 8:00 p.m. Eastern time on February 15, 2006 by dialing (201) 612-7415 (account number: 290 and conference I.D. number: 188545). An unaudited financial supplement relating to the Company's fourth quarter and year end 2005 results is available on its website located at 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. As of December 31, 2005, XL Capital Ltd had consolidated assets of approximately $58.4 billion and consolidated shareholders' equity of approximately $8.5 billion. More information about XL Capital Ltd is available at www.xlcapital.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. 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 the following: (a) changes in the size of XL's claims relating to the hurricane losses described above due to the preliminary nature of some of the reports and estimates of loss and damage to date; (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) trends in rates for property and casualty insurance and reinsurance; (d) developments in the world's financial and capital markets that adversely affect the performance of XL's investments or access to such markets; (e) changes in general economic conditions, including foreign currency exchange rates, inflation and other factors; and (f) 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, as well as management's response to any of the aforementioned factors.  XL undertakes no obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future developments or otherwise.