(Source: Business Wire)
AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today
reported net loss available to common shareholders for the third quarter
of 2009 of $96 million, or $0.70 per diluted common share, compared with
a net loss of $249 million, or $1.79 per diluted common share, for the
third quarter of 2008. Net income for the nine months ended September
30, 2009 was $179 million, or $1.19 per diluted share, compared with
$220 million, or $1.40 per diluted share, for the corresponding period
in 2008.
Operating income for the third quarter of 2009 was $152 million, or
$1.00 per diluted share, compared with an operating loss of $161
million, or $1.15 per diluted common share, for the third quarter of
2008. This same item excluding foreign exchange gains/losses, net of
tax, for the third quarter of 2009 was $160 million, or $1.05 per common
share, compared with a loss of $171 million, or $1.22 per diluted common
share, for the third quarter of 2008.
Operating income for the first nine months of 2009 was $490 million, or
$3.26 per diluted share, compared with $273 million, or $1.74 per
diluted common share, for the first nine months of 2008. This same item
excluding foreign exchange gains/losses, net of tax, for the first nine
months of 2009 was $522 million, or $3.48 per diluted common share,
compared with $251 million, or $1.59 per diluted common share, for the
first nine months of 2008.
Third Quarter Highlights1
Gross premiums written of $775 million, an increase of 7%;
Net premiums written of $595 million, an increase of 8%;
Net premiums earned of $706 million, an increase of 2%;
Combined ratio of 73.2% compared with 128.0%;
Favorable prior year reserve development of $122 million, benefiting
the combined ratio by 17.3 points, compared with $76 million,
benefiting the combined ratio in the same period last year by 11.0
points;
Total underwriting income, adjusted for the impact of the change in
fair value of a longevity-exposed indemnity derivative contract, of
$207 million compared with a loss of $173 million;
Net investment income of $135 million, an increase of 166% relative to
the prior year quarter and an increase of 20% relative to the second
quarter of 2009;
Cash and invested assets grew to $11.8 billion during the current
quarter, reflective of operating cash flows of $442 million and an
improvement in asset valuations of $354 million;
The total return on our cash and investments portfolio was 4.3% for
the quarter and7.5% for the year-to-date;
Operating income for the third quarter of 2009 of $152 million
represented an annualized operating return on average common equity2
of 13.0% and operating income for the nine months ended September 30,
2009 of $490 million represented an annualized operating return on
average common equity2 of 14.7%;
Diluted book value per common share of $31.58, an increase of 10% from
June 30, 2009 and 22% from December 31, 2008.
1 All comparisons are with the same periods last year unless
stated otherwise.
2 Calculated using operating income divided by average common
shareholders' equity for the period. The presentation of operating
income available to common shareholder is a "non-GAAP financial measure"
as defined in Regulation G. The reconciliation of such measure to net
income available to common shareholders (the most directly comparable
GAAP financial measure) in accordance with Regulation G is included on
page 12 of this release. A discussion of the presentation of operating
income begins on page 13 of this release.
Commenting on the third quarter 2009 financial results, John Charman,
Chief Executive Officer and President of AXIS Capital, stated: "I am
pleased to report that, during this third quarter of 2009, AXIS
benefited from very good P&C underwriting results as well as a strong
recovery in asset valuations throughout our investment portfolio.
Importantly, our underwriting operations produced a combined ratio of
73.2%. While the combined ratio benefited from a low level of
catastrophes, it continues to demonstrate our strong performance for the
year and the consistency of our underwriting performance through what
has been so far a very challenging phase of the underwriting cycle. Our
results are particularly strong given the impact of the global economic
crisis over the last two years.
Our results this quarter were adversely impacted by an increase in the
fair value liability of our only insurance derivative contract. Despite
this adjustment, we were still able to deliver an increase in diluted
book value per share of 10% in the quarter and 22% for the year to date.
For the third quarter, our consolidated net premiums written were up 8%
largely due to the continued success of our reinsurance segment in
accessing underwriting opportunities. At this time, the reinsurance
market continues to remain the most disciplined and attractive area of
the global P&C marketplace.
In our insurance segment, we have maintained a very defensive posture
overall. While rate improved across our insurance portfolio during the
third quarter of 2009, this improvement was somewhat muted relative to
the first half of this year. As we have demonstrated in the past, when
necessary, we will sacrifice top-line growth to preserve underwriting
profit.
As we work diligently through this challenging phase of the underwriting
cycle, we have continued to invest in broadening our franchise's
capabilities. This includes the expansion of distribution capabilities
and new target markets including global accident and health. We expect
these efforts to generate significant returns to shareholders over time."
Segment Highlights
Insurance Segment
Our insurance segment reported an underwriting loss for the quarter of
$54 million compared with a loss of $22 million in the third quarter of
2008. The current quarter's underwriting result also included an
increase of $136 million in the fair value liability of a
longevity-exposed insurance derivative contract, which is included in
other insurance related income. The segment's combined ratio was 70.5%
compared with 102.8% in the prior year quarter. The improvement in the
combined ratio primarily reflects a lower level of catastrophe activity
this quarter, compared to the third quarter of 2008, which included
significant losses from Hurricanes Ike and Gustav. Net favorable prior
period reserve development was $55 million, or 19.9 points, this quarter
compared with $42 million, or 14.2 points, in the prior year quarter.
Our insurance segment reported gross premiums written in the quarter of
$414 million, up 3% from the third quarter of 2008, and net premiums
written of $240 million, up 2% from the third quarter of 2008. These
increases primarily reflect attractive new business opportunities in our
professional lines business. Ceded premiums were 42% of gross premiums
written in the current quarter, which was comparable with the third
quarter of 2008.
Reinsurance Segment
Our reinsurance segment reported underwriting income for the quarter of
$125 million, compared with an underwriting loss of $164 million in the
third quarter of 2008. The segment's combined ratio was 70.8% compared
with 141.4% in the prior year quarter. The improvement in the combined
ratio primarily reflects a lower level of catastrophe activity this
quarter, compared to the third quarter of 2008, which included
significant losses from Hurricanes Ike and Gustav. Net favorable prior
period reserve development was $67 million, or 15.6 points, this quarter
compared with $35 million, or 8.7 points, in the prior year quarter.
Our reinsurance segment reported gross premiums written in the quarter
of $361 million, up 12% from the third quarter of 2008, reflecting a
combination of rate increases, increased participation on certain
renewals and new business opportunities across several of our lines of
business.
Investments
Net investment income for the quarter of $135 million represented an
increase of $23 million, or 20%, relative to the second quarter of this
year and an increase of $84 million, or 166%, relative to the third
quarter of 2008, primarily due in both cases to improved investment
market conditions for our alternative investment portfolio ("other
investments"). Income from our other investments was $39 million this
quarter. This represented an increase of $27 million relative to the
second quarter of this year and an increase of $105 million relative to
the same period last year. The return on our other investments was 7.1%
this quarter, reflecting a strong performance from our investments in
hedge funds and credit funds. For the year-to-date, our return on other
investments was 11.3% and is the primary driver of the increase of 27%
in net investment income relative to the same period last year.
During the quarter, we incurred net realized investment losses of $253
million compared to net realized investment losses of $89 million in the
prior year quarter. Net realized investment losses for the quarter
included $263 million in OTTI losses from medium-term note investments
in our fixed maturity portfolio, for which we no longer expect full
recovery. The recognition of these OTTI losses does not indicate that
sales will occur, that sales are imminent or that sales are planned.
At September 30, 2009, net unrealized gains within our available for
sale investment portfolio were $103 million, an improvement of $354
million in the quarter excluding the impact of the OTTI losses
recognized in earnings. The improvement in asset valuations experienced
during the quarter was primarily due to credit spread tightening on
corporate debt and structured credit securities.
At September 30, 2009, we held cash and cash equivalent balances of $1.2
billion, or 10%, of total cash and investments. Our fixed maturity
investment portfolio, which represents 82% of total cash and
investments, is well diversified, has a weighted average credit quality
of AA+, and has an average duration of approximately 2.8 years. Our
other investments represent 5% of our total cash and investments at
September 30, 2009.
Supplementary information relating to our investment portfolio at
September 30, 2009 is available in the Investor Information section of
our website.
Capitalization / Shareholders' Equity
Total capitalization at September 30, 2009 was $5.9 billion, including
$0.5 billion of long-term debt and $0.5 billion of preferred equity,
compared to $5.0 billion at December 31, 2008. At September 30, 2009,
diluted book value per common share, on a treasury stock basis, was
$31.58 and book value per common share was $35.54, compared to $25.79
and $29.08 respectively, as of December 31, 2008.
Conference Call
We will host a conference call on Tuesday, November 3, 2009 at 8:00 AM
(Eastern) to discuss the third quarter financial results and related
matters. The teleconference can be accessed by dialing (866) 843-0890
(U.S. callers) or (412) 317-9250 (international callers) and entering
the pass-code 5501909 approximately ten minutes in advance of the call.
A live, listen-only webcast of the call will also be available via the
Investor Information section of the Company's website at www.axiscapital.com.
In addition, a financial supplement relating to our financial results
for the quarter ended September30, 2009 is available in the Investor
Information section of our website.
AXIS Capital is a Bermuda-based global provider of specialty lines
insurance and treaty reinsurance with shareholders' equity at September
30, 2009 of $5.4 billion and locations in Bermuda, the United States,
Europe, Singapore, Canada and Australia. Its operating subsidiaries have
been assigned a rating of "A+" ("Strong") by Standard & Poor's and "A"
("Excellent") by A.M. Best. AXIS Capital has been assigned a senior
unsecured debt rating of A- (stable) by Standard & Poor's and Baa1
(stable) by Moody's Investors Service. For more information about AXIS
Capital, visit our website at www.axiscapital.com.
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008
2009 2008
Assets (in thousands)
Investments:
Fixed maturities, available for sale, at fair value $ 9,682,932 $ 7,750,654
Equity securities, available for sale, at fair value 137,544 107,283
Other investments, at fair value 541,447 492,082
Short-term investments 282,737 261,879
Total investments 10,644,660 8,611,898
Cash and cash equivalents 1,239,471 1,820,673
Accrued interest receivable 82,169 79,232
Insurance and reinsurance premium balances receivable 1,497,639 1,185,785
Reinsurance recoverable balances 1,369,824 1,304,551
Reinsurance recoverable balances on paid losses 36,625 74,079
Deferred acquisition costs 363,739 273,096
Prepaid reinsurance premiums 284,922 279,553
Securities lending collateral 135,122 412,823
Goodwill and intangible assets 93,049 60,417
Other assets 172,248 180,727
Total assets $ 15,919,468 $ 14,282,834
Liabilities
Reserve for losses and loss expenses $ 6,579,914 $ 6,244,783
Unearned premiums 2,548,072 2,162,401
Insurance and reinsurance balances payable 170,664 202,145
Securities lending payable 138,092 415,197
Senior notes 499,449 499,368
Other liabilities 426,068 233,082
Net payable for investments purchased 159,102 64,817
Total liabilities 10,521,361 9,821,793
Shareholders' Equity
Preferred shares - Series A and B 500,000 500,000
Common shares 1,901 1,878
Additional paid-in capital 2,003,417 1,962,779
Accumulated other comprehensive income (loss) 74,974 (706,499 )
Retained earnings 3,319,467 3,198,492
Treasury shares, at cost (501,652 ) (495,609 )
Total shareholders' equity 5,398,107 4,461,041
Total liabilities and shareholders' equity $ 15,919,468 $ 14,282,834
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AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
Three months ended Nine months ended
2009 2008 2009 2008
(in thousands, except per share amounts)
Revenues
Net premiums earned $ 706,025 $ 689,970 $ 2,078,154 $ 2,028,895
Net investment income 134,788 50,583 346,300 273,249
Other insurance related loss (135,738 ) (13,806 ) (159,394 ) (19,073 )
Net realized investment loss:
Other-than-temporary impairment losses (283,418 ) (49,663 ) (336,214 ) (65,804 )
Portion of impairment losses transferred to
other comprehensive income 4,080 - 5,523 -
Other realized investment gains (losses) 25,973 (39,416 ) 13,051 13,962
Total net realized investment losses (253,365 ) (89,079 ) (317,640 ) (51,842 )
Total revenues 451,710 637,668 1,947,420 2,231,229
Expenses
Net losses and loss expenses 311,109 705,531 1,077,360 1,438,929
Acquisition costs 113,423 90,333 318,708 282,593
General and administrative expenses 92,009 86,722 265,515 248,425
Foreign exchange losses (gains) 6,784 (7,627 ) 30,579 (21,360 )
Interest expense and financing costs 7,977 7,941 23,869 23,789
Total expenses 531,302 882,900 1,716,031 1,972,376
Income (loss) before income taxes (79,592 ) (245,232 ) 231,389 258,853
Income tax expense (recovery) 7,082 (5,104 ) 24,785 11,554
Net income (loss) (86,674 ) (240,128 ) 206,604 247,299
Preferred shares dividends 9,218 9,218 27,656 27,656
Net income (loss) available to common shareholders $ (95,892 ) $ (249,346 ) $ 178,948 $ 219,643
Weighted average common shares and common
share equivalents:
Basic 137,904 139,335 137,693 141,628
Diluted 137,904 139,335 150,258 157,315
Earnings per common share:
Basic $ (0.70 ) $ (1.79 ) $ 1.30 $ 1.55
Diluted $ (0.70 ) $ (1.79 ) $ 1.19 $ 1.40
Cash dividends declared per common share $ 0.20 $ 0.185 $ 0.60 $ 0.555
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AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED SEGMENTAL DATA (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
2009 2008
Insurance Reinsurance Total Insurance Reinsurance Total
Gross premiums written $ 413,922 $ 361,392 $ 775,314 $ 402,672 $ 322,611 $ 725,283
Net premiums written 239,781 355,363 595,144 235,666 315,750 551,416
Net premiums earned 278,637 427,388 706,025 293,572 396,398 689,970
Other insurance related income (loss) (135,898 ) 160 (135,738 ) (13,751 ) (55 ) (13,806 )
Net losses and loss expenses (111,228 ) (199,881 ) (311,109 ) (230,577 ) (474,954 ) (705,531 )
Acquisition costs (29,613 ) (83,810 ) (113,423 ) (21,964 ) (68,369 ) (90,333 )
General and administrative expenses (55,685 ) (18,719 ) (74,404 ) (49,361 ) (17,366 ) (66,727 )
Underwriting income (loss) $ (53,787 ) $ 125,138 71,351 $ (22,081 ) $ (164,346 ) (186,427 )
Corporate expenses (17,605 ) (19,995 )
Net investment income 134,788 50,583
Net realized investment losses (253,365 ) (89,079 )
Foreign exchange (losses) gains (6,784 ) 7,627
Interest expense and financing costs (7,977 ) (7,941 )
Loss before income taxes $ (79,592 ) $ (245,232 )
Net loss and loss expense ratio 39.9 % 46.8 % 44.1 % 78.5 % 119.8 % 102.3 %
Acquisition cost ratio 10.6 % 19.6 % 16.1 % 7.5 % 17.2 % 13.1 %
General and administrative
expense ratio 20.0 % 4.4 % 13.0 % 16.8 % 4.4 % 12.6 %
Combined ratio 70.5 % 70.8 % 73.2 % 102.8 % 141.4 % 128.0 %
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AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED SEGMENTAL DATA (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
2009 2008
Insurance Reinsurance Total Insurance Reinsurance Total
Gross premiums written $ 1,304,844 $ 1,708,606 $ 3,013,450 $ 1,392,993 $ 1,470,640 $ 2,863,633
Net premiums written 764,932 1,693,526 2,458,458 872,909 1,454,498 2,327,407
Net premiums earned 853,235 1,224,919 2,078,154 890,558 1,138,337 2,028,895
Other insurance related income (loss) (160,659 ) 1,265 (159,394 ) (20,073 ) 1,000 (19,073 )
Net losses and loss expenses (451,143 ) (626,217 ) (1,077,360 ) (549,723 ) (889,206 ) (1,438,929 )
Acquisition costs (84,122 ) (234,586 ) (318,708 ) (84,798 ) (197,795 ) (282,593 )
General and administrative expenses (159,059 ) (54,515 ) (213,574 ) (145,321 ) (51,813 ) (197,134 )
Underwriting income (loss) $ (1,748 ) $ 310,866 309,118 $ 90,643 $ 523 91,166
Corporate expenses (51,941 ) (51,291 )
Net investment income 346,300 273,249
Net realized investment losses (317,640 ) (51,842 )
Foreign exchange (losses) gains (30,579 ) 21,360
Interest expense and financing costs (23,869 ) (23,789 )
Income before income taxes $ 231,389 $ 258,853
Net loss and loss expense ratio 52.9 % 51.1 % 51.8 % 61.7 % 78.1 % 70.9 %
Acquisition cost ratio 9.9 % 19.2 % 15.4 % 9.6 % 17.4 % 13.9 %
General and administrative
expense ratio 18.6 % 4.4 % 12.8 % 16.3 % 4.5 % 12.2 %
Combined ratio 81.4 % 74.7 % 80.0 % 87.6 % 100.0 % 97.0 %
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AXIS CAPITAL HOLDINGS LIMITED NON-GAAP FINANCIAL MEASURE RECONCILIATION OPERATING INCOME AND OPERATING INCOME EXCLUDING FOREIGN EXCHANGE GAINS, NET OF TAX FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
Three months ended Nine months ended
2009 2008 2009 2008
Net income (loss) available to common shareholders $ (95,892 ) $ (249,346 ) $ 178,948 $ 219,643
Adjustment for net realized investment losses 253,365 89,079 317,640 51,842
Adjustment for associated tax impact (5,915 ) (556 ) (6,585 ) 1,623
Operating income (loss) 151,558 (160,823 ) 490,003 273,108
Adjustment for foreign exchange losses (gains) 6,784 (7,627 ) 30,579 (21,360 )
Adjustment for associated tax impact 1,242 (2,144 ) 1,715 (989 )
Operating income (loss) excluding foreign exchange
gains, net of tax $ 159,584 $ (170,594 ) $ 522,297 $ 250,759
Net income (loss) per share - diluted $ (0.70 ) $ (1.79 ) $ 1.19 $ 1.40
Adjustment for net realized investment losses 1.67 0.64 2.11 0.33
Adjustment for associated tax impact (0.04 ) - (0.04 ) 0.01
Adjustment for dilutive securities((1)) 0.07 - - -
Operating income (loss) per share - diluted $ 1.00 $ (1.15 ) $ 3.26 $ 1.74
Adjustment for foreign exchange (losses) gains 0.04 (0.05 ) 0.20 (0.14 )
Adjustment for associated tax impact 0.01 (0.02 ) 0.02 (0.01 )
Operating income (loss) excluding foreign exchange
gains, net of tax $ 1.05 $ (1.22 ) $ 3.48 $ 1.59
Weighted average common shares and
common share equivalents - for net income (loss) 137,904 139,335 150,258 157,315
Weighted average common shares and
common share equivalents - for operating income (loss) 151,882 139,335 150,258 157,315
(1) For operating income per share purposes we have included the impact of otherwise anti-dilutive securities.
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Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of
the U.S. federal securities laws. Forward-looking statements contained
in this release include our expectations regarding market conditions and
information regarding our estimates of losses related to natural
disasters. These statements involve risks, uncertainties and
assumptions. Actual events or results may differ materially from our
expectations. Important factors that could cause actual events or
results to be materially different from our expectations include (1) the
occurrence of natural and man-made disasters, (2) actual claims
exceeding our loss reserves, (3) general economic, capital, and credit
market conditions, (4) the failure of any of the loss limitation methods
we employ, (5) the effects of emerging claims and coverage issues, (6)
the failure of our cedants to adequately evaluate risks, (7) the loss of
one or more key executives, (8) a decline in our ratings with rating
agencies, (9) the loss of business provided to us by our major brokers,
(10) changes in accounting policies or practices, (11) changes in
governmental regulations, (12) increased competition, (13) changes in
the political environment of certain countries in which we operate or
underwrite business, (14) fluctuations in interest rates, credit
spreads, equity prices and/or currency values, and (15) the other
factors set forth in our most recent report on Form 10-K, Form 10-Q and
other documents on file with the Securities and Exchange Commission. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Non-GAAP Financial Measures
In this release, we have presented the following non-GAAP financial
measures:
1. Operating income (loss). This represents net income (loss) available
to common shareholders, before the after tax impact of net realized
gains and losses on investments;
2. Operating income (loss), excluding the after tax impact of foreign
exchange gains and losses.
We have included these measures as we believe that security analysts,
rating agencies and investors believe that realized gains and losses
and/or foreign exchange, where an actively managed foreign exchange
program is not in place, are not indicative of the performance of, or
trends in, the Company's business performance and result, in large part,
from general economic and financial market conditions. As a result, we
believe that they evaluate earnings before realized gains and losses
and/or foreign exchange, adjusted for tax, to make performance
comparisons with our industry peers.
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