XL Posts $238 Million Q2 Net Income

July 29, 2008

Despite its problems with Security Capital and the charges it expects to incur (See related article), Bermuda’s XL Capital managed to post net income available to ordinary shareholders of $237.9 million for the second quarter of 2008, compared to $544.5 million for the quarter ended June 30, 2007. Operating net, which excludes realized gains and losses, was $266.2 million as compared to $526.3 million in the prior year quarter.

For the first six months of 2008 XL reported net income before minority interest, income tax and net income from operating affiliates of $612.479 million,compared to $1.176 billion for the first six months of 2007.

The report also cited the following “key elements:”
— A solid underwriting performance with gross written premiums for the quarter of $1,947.5 million, a reduction of 12.7 percent from the prior year quarter which included gross written premiums of $52.0 million from SCA.
— Gross written premiums for the current quarter included $1,388.8 million from the Insurance segment and $397.5 million from the Reinsurance segment compared with $1,417.9 million and $526.3 million, respectively, in the prior year quarter.
— The loss ratio for the quarter was 62.2 percent with a combined ratio of 92.3 percent as compared to 56.9 percent and 86.3 percent, respectively, in the prior year quarter.
— The results for the current quarter benefited from favorable prior year development of $182.6 million but were adversely affected by $98.1 million of natural catastrophe losses. In the prior year quarter there was favorable prior year development of $124.1 million offset in part by $30.0 million of natural property catastrophe losses.
— A charge of $82.4 million arising from guarantee and reinsurance agreements with SCA. This was comprised of $22.7 million in respect of the XLRA Master Facultative Agreement, $3.7 million for the unwinding of the discounted loss reserves in respect of the Excess of Loss Agreement and $56.0 million in respect of the XLFA.

In a separate bulletin XL described plans to “offer approximately $2.5 billion of securities in a combination of ordinary shares and equity security units pursuant to the Company’s existing shelf registration statement.”

XL said: “Each Equity Security Unit will consist of (i) a forward purchase contract requiring the holder to purchase, and XL to issue, a variable number of ordinary shares of XL and (ii) an ownership interest in a debt security of XL. The Company has not yet determined the exact breakdown between Ordinary Shares and Equity Security Units, but currently expects that the Ordinary Shares will constitute approximately $1.75 to $2.0 billion of the total.”

The full earnings report, additional information on the share offering, as well as a replay of the earnings conference call are available on the Company’s web site at: www.xlcapital.com.

Source: XL Capital

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