Xl Holdings Bhd · MYX:XL
Xl Holdings Bhd — XL Capital — Investor Presentation (July 2008)
25 slides from Xl Holdings Bhd's investor presentation, Jul 28, 2008
Slide 1: Investor Presentation July 2008
Exhibit 99.4 Investor Presentation July 2008
Slide 2: Cautionary Note on Forward-Looking Statements
Cautionary Note on Forward-Looking Statements This document and the presentations made in connection with this document contain forward-looking statements. Statements that are not historical facts, including statements about XL’s beliefs, plans or expectations, are forward-looking statements. These
Slide 3: Offering Summary
Offering Summary Ticker (listing): XL (NYSE) Common Mandatory $[2,000] million $[500] million Targeted (plus 15% greenshoe) (plus 15% greenshoe) Offering Size: — 3 year unit structure mandatory — Coupon [tbd] — Conversion premium [tbd] Common Dividend: Annual dividend of $1.52 reduced to $0.76 (as o
Slide 4: XL Senior Management Team
XL Senior Management Team (in speaking order) Mike McGavick CEO Dave Duclos Chief Executive of Insurance operations Jamie Veghte Chief Executive of Reinsurance operations Sarah Street Chief Investment Officer Brian Nocco Chief Financial Officer Strictly Private and Confidential 4 © 2008, XL Capital
Slide 5: Priorities for XL Capital
Priorities for XL Capital Resolve SCA issues Institutionalize risk management & simplify the business model: Take enterprise risk management to next level Focus exclusively on P&C businesses Position XL core Review strategic opportunities for Life Reinsurance businesses for Increase accountability &
Slide 6: SCA Agreement
SCA Agreement On Quarter 1 earnings call, committed to investors that we would resolve Agreement now signed Background to exposures: gross notional $66 billion Agreement extinguishes existing reinsurance & service agreements: Commutation of XL’s exposures under all reinsurance agreements; as a resul
Slide 7: Simplify: XL's enterprise risk management will be at a new level
Simplify: XL’s enterprise risk management will be at a new level through the following actions Resolve SCA issues Relentless focus on core franchise: global P&C businesses Review strategic alternatives for Life Reinsurance Increase accountability and a flatter leadership structure Hire Chief Enterpr
Slide 8: XL's Competitive Advantage
XL’s Competitive Advantage Dual Platform • Unique insight in our sector: two businesses each Reinsurance Insurance right-sized yielding breadth & depth Agility, Global • Commercial & Wholesale lines focus Flexibility & specialty foot- Optimal print yields only • Superior technical underwriting and a
Slide 9: XL's underlying results are strong
XL’s underlying results are strong: Underwriting Result 2004 to H1 2008 INSURANCE CR excl KRW & Winterthur KRW Winterthur 140% 20.1% 120% 22.1% 100% 80% 60% TOTAL 96.7% 93.6% 91.7% 91.4% 95.2% 40% CR excl KRW & Winterthur KRW Winterthur 20% 140% 12.0% 0% 120% 2004 2005 2006 2007 H1 2008 27.3% 100% 8
Slide 10: XL is an Industry-Leading Franchise
XL is an Industry-Leading Franchise Leading Global Player Our Business Strategy Q2 2008 Total Assets: $52bn Focus on global P&C Insurance / Reinsurance Pro Forma Equity(1): $9.6bn Insurance: Financial Strength Ratings: A1/A+/A/A+ Global program capabilities in over (Moody’s, S&P, AM Best, Fitch) 100
Slide 11: Insurance Segment
Insurance Segment Premiums Written ($bn) The business Global commercial footprint $5.9 $5.8 Transformed from niche excess player $5.6 $5.4 $5.2 to global commercial company through $1.5 $1.5 $1.4 $1.2 tactical and organic growth $1.5 Approx 60% of premiums from international (non-US) operations $3.0
Slide 12: XL Insurance
XL Insurance 2007 Gross Written Premium by product Premium breakdown (total $5.4bn) Market Position E&S 1% Market leader in global programs, professional lines, aviation and environmental Property 16% Growth areas Specialty 30% Continued build-out of US excess and surplus unit, private commercial Ex
Slide 13: Insurance Market Outlook
Insurance Market Outlook Profit Focus Optimize ROE over cycle; strategic view Expect further market softening near term; selectively write new business and renew existing profitable business Manage cost structure, leverage platform, invest in technology infrastructure Growth Strategy Product, Geogra
Slide 14: Reinsurance Segment
Reinsurance Segment Premiums Written ($bn) The business Diversified, specialty franchise $3.4 $3.5 $3.4 Agile and flexible model $0.6 $0.6 $3.1 $0.6 $2.7 Non-Life NPW grew 190% $0.7 through hard market 2001–2004 $0.6 $1.9 Disciplined cycle management in current environment $0.3 $1.5 $2.9 $2.9 $2.7 S
Slide 15: Reinsurance Segment Geographic Profile
Reinsurance Segment Geographic Profile In 2007, we wrote roughly $2.7 billion of premium, with 410 staff in 21 locations XLRA (US and Canada) XL Re Europe GWP $1.07b GWP $0.68b No of Locations 10 No of Location 4 Headcount 164 Headcount 133 XL Re Bermuda GWP $0.62b No of Locations 1 Headcount 45 XL
Slide 16: XL Reinsurance
XL Reinsurance 2007 Gross Written Premium by product Premium Breakdown (total $2.7bn) Market position Structured Diversified portfolio by line Other 9% products 1% Focus on low frequency, high severity Marine & markets Energy 4% Our casualty portfolio focuses on specialty lines, e.g. D&O, E&O, Med-M
Slide 17: Fixed Income Portfolio: $34.3 billion
Fixed Income Portfolio: $34.3 billion As of June 30, 2008 A Government, AA 19% Agency & Cash 20% 31% CMBS - 10% BBB Structured Agency - 4% 9% Credit Alt-A - 2% Subprime - 2% BB & Below 32% Prime - 4% 3% ABS Auto - 3% AAA NR Corporates Credit Card - 2% ABS Other - 2% 49% 37% (1) Core CDO - 3% Fixed I
Slide 18: Strategic Realignment of Investment Portfolio Over Time
Strategic Realignment of Investment Portfolio Over Time Reposition P&C portfolio to one that supports a focused P&C operation: Reduce the book value volatility arising from the portfolio Reduce lower rated credit Reduce financials & CMBS Reduce asset classes held for ‘Financial Lines’ activities Rea
Slide 19: Recapitalization plan
Recapitalization plan 1. Enhance Capital Position [$2bn common] [$500m mandatory convertibles] Convert contingent capital facility $500m Redemption of private placement debt $255m Reduce dividend by 50% 2. Fund SCA Payment of $1.775bn & incur Qtr 3 charge of $1.4bn -$1.5bn 3. Maintain Superior Capit
Slide 20: Pro Forma Summary Capitalization
Pro Forma Summary Capitalization Pro Forma ($millions, except per share amounts) 6/30/2008 6/30/2008 Notes Payable and Debt 2,124 1,869 Preferred Equity 1,000 1,500 Equity Security Units (Mandatory) 745 1,240 Common Shareholders’ Equity 7,769 8,391 Total Capitalization 11,638 13,000 Book Value per S
Slide 21: Earnings Impact of SCA & Restructuring Initiatives
Earnings Impact of SCA & Restructuring Initiatives Quarter 2: SCA impacts P&L by $82m: Incur reserve on XLI guarantee of XLFA quota share $56m Unwind of discount on XOL reserves of $4m Charge of $22m in respect of the facultative reinsurance agreements (including the CDS mark) Quarter 3: One-time ch
Slide 22: Quarterly Financial Comparison
Quarterly Financial Comparison ($millions, except per share amounts) Q2 '08 Q2 '07 Q2 '08 YTD Q2 '07 YTD Selected Income Statement Gross Premiums Written 1,948 2,231 4,883 5,504 Net Premiums Earned 1,682 1,930 3,394 3,721 Operating Earnings 266 526 543 1,066 Operating EPS $ 1.50 $ 2.90 $ 3.07 $ 5.91
Slide 23: Outlook
Outlook Market conditions remain soft near term Focus on maintaining strong results through difficult market conditions: Disciplined underwriting Expense management Core business focus Over the cycle continue to target superior ROE’s (>15%) from P&C operations (excluding investment affiliates) Maint
Slide 24: Key Takeaways
Key Takeaways SCA issues resolved Initiatives announced simplify the Company & focus on core strengths — unique dual platform Strengthened balance sheet through capital raise and management action Position XL for Enhanced risk management approach Industry-Leading will help protect stability of earni
Slide 25: PAL CAPITAL
PAL CAPITAL