For the six months ended June 30, 2001, net income was $347.5 million, or $2.72 per share, compared with $366.2 million, or $2.91 per share, during the same period in 2000. Economic operating income was $346.0 million, or $2.71 per share, during the first six months of 2001 compared with $314.1 million, or $2.49 per share, for the first six months of 2000. GAAP operating income for the first six months of 2001 was $316.8 million, or $2.48 per share, compared with $286.3 million, or $2.27 per share, for the six months ended June 30, 2000.
Summary unaudited consolidated financial data for the three months and six months ended June 30 for each of 2001 and 2000 is set forth below (in millions except per share amounts):
3 months ended June 30 - 6 months ended June 30
(Unaudited)
2001 2000 2001 2000
Net Premiums Earned
$ 641.0 $ 503.4 $ 1,183.1 $ 997.9
Net Income
128.6 142.5 347.5 366.2
Economic Operating Income (a)
174.8 149.2 346.0 314.1
Operating Income (b)
160.1 135.5 316.8 286.3
Per Share Results:
Net Income
$ 1.01 $ 1.13 $ 2.72 $ 2.91
Economic Operating Income (a)
1.37 1.19 2.71 2.49
Operating Income (b)
1.25 1.08 2.48 2.27
Average shares outstanding (c)
127.8 125.7 127.5 125.9
Notes: (a) Excludes net realized investment gains and losses (net of tax) and amortization of intangible assets.
(b) Excludes net realized investment gains, and losses (net of tax).
(c) Diluted weighted average number of shares.
Total revenues were $791.7 million and $674.0 million for the quarters ended June 30, 2001 and 2000, respectively. For the first six months of 2001 and 2000, revenues were $1.6 billion and $1.4 billion, respectively.
Gross premiums written were $1.0 billion for the second quarter of 2001, compared with $696.6 million for the second quarter of 2000. Net premiums earned were $641.0 million in the second quarter of 2001 versus $503.4 million in 2000.
For the six months ended June 30, 2001, gross premiums written were $2.2 billion compared with $1.6 billion in 2000's first six months. Net premiums earned were $1.2 billion in the first six months of 2001 versus $997.9 million in the first six months of 2000.
Net investment income, excluding net realized investment gains and losses, was $140.8 million in the second quarter of 2001 compared with $136.4 million in 2000's second quarter. Net realized losses on investments were $31.1 million in the second quarter of 2001 compared with net realized gains of $5.1 million in 2000's second quarter.
Net investment income, excluding net realized investment gains and losses, was $270.2 million during the first six months of 2001, compared with $265.0 million in 2000's first six months. Net realized gains on investments were $29.1 million during the first six months of 2001 compared with $73.8 million in 2000's first six months.
The Company's equity in the net earnings of its affiliates for the second quarter was $29.5 million in 2001, versus $25.8 million in 2000. The Company's equity in the net earnings of its affiliates during the first six months was $57.9 million in 2001, versus $43.2 million in 2000.
Total assets at June 30, 2001 were $18.7 billion compared with $16.9 billion at December 31, 2000. Shareholders' equity at June 30, 2001 was $5.7 billion compared with $5.6 billion at December 31, 2000. Fully diluted book value per share at June 30, 2001 was $45.42 compared with $44.78 at December 31, 2000.
In the second quarter of 2001, the combined ratio was 92.6% compared with 99.3% in the second quarter of 2000. The loss ratios were 60.4% and 65.3% in the second quarters of 2001 and 2000, respectively, and the corresponding expense ratios were 32.2% and 34.0%, respectively.
The combined ratio for the Company was 93.9% for the first six months of 2001 compared with 96.3% during the first six months of 2000. The loss ratios were 60.6% and 63.3% in 2001 and 2000, respectively, with the corresponding expense ratios being 33.3% and 33.0%, respectively.
During the first six months of 2001, the Company repurchased 0.2 million of its shares at an average price of $69.72 per share. XL has approximately $236.3 million remaining in its current share repurchase authorization.
Commenting on the second quarter results, Brian M. O'Hara, President and Chief Executive Officer of XL, stated "Our results for the second quarter were satisfactory given the loss activity experienced during the quarter by most companies and were generally in line with expectations. Overall market conditions continue to improve as evidenced by the very strong growth in premiums written during both the second quarter and for the first six months of 2001."
"We were also very pleased to announce the completion of our acquisition of Winterthur International in late July. This acquisition gives XL the platform it needs for significant international expansion," Mr. O'Hara noted.
The all-cash transaction, announced by XL on February 16, 2001, is valued at approximately $405 million. This value is based on financial statements for the Winterthur International ("WI") business being acquired as at and for the period ending December 31, 2000 delivered to XL (the "December WI Financial Statements"), and is subject to adjustment based on the completion of audited financial statements for WI as at and for the period ending June 30, 2001. These June 30, 2001 financial statements are subject to review and agreement by XL and its auditors.
The acquisition of WI will be given effect in XL's financial statements from and after July 1. Based upon the December WI Financial Statements, WI recorded gross written premium and net written premium of $1.2 billion and $493 million, respectively, for the year ended December 31, 2000. In addition, WI had total assets, total investment assets and total gross reserves of $4.4 billion, $1.0 billion and $2.4 billion, respectively, at December 31, 2000.
Jerry M. de St. Paer, Executive Vice President and Chief Financial Officer of XL stated, "Under current accounting rules, we expect to record at fair value Winterthur International's loss reserves based on the present value of their cash flows. In such estimate, we utilized a blended discount rate based upon the expected pay out patterns of the reserves, resulting in an aggregate adjustment of approximately $55 million (pre-tax) to Winterthur International's reserves, which discount will be charged through the income statement over the period that claims are settled. In addition, we expect to record a special charge of approximately $80 million in our third quarter with respect to the acquisition, of which $61 million relates to our estimate of that portion of adverse loss development for which XL does not have indemnification from the seller."
"Including the reserve discount charges, we expect the acquisition to be slightly dilutive to our GAAP operating income per share for fiscal 2001," commented Mr. de St. Paer. "We expect the acquisition to be modestly accretive to both operating income and net income per share for fiscal 2002."
XL expects to file the December WI Financial Statements and pro forma financial information giving effect to the WI acquisition with the SEC on a Form 8-K later this week. This filing will contain a description of the assumptions and bases upon which these financial statements and pro forma information were based. The December WI Financial Statements were delivered to XL by Winterthur Swiss Insurance pursuant to the sale and purchase agreement and have not been independently reviewed by XL or its auditors. The December WI Financial Statements and the pro forma financial information are not the basis upon which the final purchase price for WI will be determined and are not indicative of future performance of the WI operations. The December WI Financial Statements and pro forma financial information should be reviewed with caution and undue reliance should not be placed upon them or any of the financial or other information contained in them.
A live on-line webcast of a call with analysts and investors will be held at 10:00 a.m. Eastern Time on Tuesday, August 7, 2001 to review the earnings and strategic transaction at www.xlcapital.com. XL Capital Ltd, through its 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 unaudited supplemental financial information relating to the Company's 2001, 2000 and 1999 results is available on its web site: www.xlcapital.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. These statements are based on current plans, estimates and expectations. 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. Forward-looking statements, including those concerning the potential benefits of the Winterthur International acquisition, the outlook for the insurance and reinsurance markets, prospects for rate or price increases, premium growth, future earnings and reserves, are particularly sensitive to factors such as the levels of competition in the industry, the frequency and severity of claims and losses, conditions in the world's financial and capital markets affecting the Company's investment performance, changes in the economic, regulatory or tax environment in which the Company operates 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.