Brian M. O'Hara, President and Chief Executive Officer of XL stated, "Following a period of extensive merger and acquisition activity over the last two years, it is appropriate that we refine our focus on those areas of the industry where we believe XL can have the greatest impact."
"Our industry has been in a prolonged downturn in pricing and a period of rising expenses. As a specialist insurance, reinsurance and financial services organization, it is critical that we concentrate on those things that we do well and continuously look for ways to improve our productivity and reduce our operating expenses," Mr. O'Hara noted. "The realignment of our operations around our core businesses was the first step towards improving organizational efficiency. The actions announced today will continue this process, particularly our exit from those lines of business that are unprofitable or do not fit strategically. We regret having to take the unprecedented action of reducing headcount at XL but believe that this will make us stronger as we move forward."
The former Intercargo, Lloyd's and NAC Re operations are most affected by these actions. Business lines that will be exited include Schaumberg, Illinois-based transportation and marine cargo and onshore energy at Lloyd's. NAC Re will exit the pooled aviation and medical stop loss reinsurance businesses. More than $200 million of annual gross premium written is associated with all of the exited businesses. In addition, XL is combining the management of its Lloyd's operations to achieve greater operational efficiency. Worldwide, approximately 120 employees, or 7 percent of XL's workforce, will be made redundant as a result of these actions.
"I anticipate that this realignment will be implemented in the fourth quarter of 2000 and expect to see the impact of these operating expense reductions, estimated to be around $35 million annually, phased in during 2001 and fully reflected in our 2002 and beyond results," Mr. O'Hara concluded.
The Company also announced today that it will rename several units as part of its intention to bring most of its business units into a common XL brand identity. The principal reinsurance operations of the Company will operate under a common brand, "XL Re". The Company's insurance operations are being realigned along major product lines (e.g., risk management, environmental, professional liability). The Brockbank Group plc will be branded "XL Brockbank". Brockbank Insurance Services, based in California, will operate as "XL Aerospace".
XL Capital Ltd, through its principal operating subsidiaries is a leading provider of insurance and reinsurance coverages and financial products to industrial, commercial and professional service firms, insurance companies and other enterprises on a worldwide basis. Additional information on XL is available from the Company's web site: www.xl-capital.com.
This press release contains forward-looking statements. Statements that are not historical facts, including statements about the Company's beliefs or expectations, are forward-looking statements. Such statements are based on current plans, estimates and expectations. Accordingly, forward-looking statements involve inherent risks and uncertainties and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In particular, forward-looking statements concerning the estimated amount of the one-time charge to be incurred in connection with the realignment and projected cost reductions or savings are particularly sensitive to factors such as actual charges or costs associated with the realignment being larger than currently anticipated, projected cost reductions or savings not being fully realized or not being realized within the expected time frame, the Company failing to realize other anticipated benefits from the realignment and other factors identified in the Company's most recent annual report on Form 10-K and other documents on file with the Securities and Exchange Commission that could cause actual results to differ materially from those contained in forward-looking statements. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.