Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Contacts | Media Contacts | |
Andrew Cook / Linda Ventresca |
| Laura Accettella |
AXIS Capital Holdings Limited |
| Kekst and Company |
info@axiscapital.com |
| (212) 521-4859 |
(441) 297-9513 |
|
|
AXIS CAPITAL ANNOUNCES 2005 SECOND QUARTER NET INCOME OF $172.8 MILLION
Pembroke, Bermuda, August 2, 2005 – AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE: AXS) today reported net income for the quarter ended June 30, 2005 of $172.8 million, or $1.13 per diluted share, compared with $140.9 million, or $0.84 per diluted share, for the quarter ended June 30, 2004. Net income for the six months ended June 30, 2005 was $324.6 million, or $2.07 per diluted share, compared with $307.6 million, or $1.84 per diluted share, for the corresponding period in 2004. Financial results for the second quarter and first six months of 2005 benefited from increased underwriting profit and investment income.
Net income excluding net realized gains and losses on investments, net of tax, for the second quarter of 2005 was $170.9 million, or $1.12 per diluted share, compared with $144.7 million, or $0.87 per diluted share, for the quarter ended June 30, 2004. This same item excluding foreign exchange losses, net of tax, for the second quarter of 2005 was $197.4 million, or $1.29 per diluted share, compared with $151.0 million, or $0.91 per diluted share, for the quarter ended June 30, 2004.
AXIS Capital Holdings Limited 106 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.296.2600 Fax 441.296.3140
www.axiscapital.com
Net income excluding net realized gains and losses on investments, net of tax, for the six months ended June 30, 2005 was $323.7 million, or $2.07 per diluted share, compared with $302.3 million, or $1.81 per diluted share, for the six months ended June 30, 2004. This same item excluding foreign exchange losses, net of tax, for the six months ended June 30, 2005 was $373.1 million, or $2.38 per diluted share, compared with $309.8 million, or $1.86 per diluted share, for the six months ended June 30, 2004.
Net income excluding net realized gains and losses on investments, net of tax, and net income excluding net realized gains and losses on investments and foreign exchange losses, net of tax, are non-GAAP financial measures. Reconciliations of these measures to net income are presented at the end of this release.
Operating highlights for the second quarter of 2005 are as follows:
• Gross premiums written increased by 21.9% to $767.3 million and net premiums written increased by 26.2% to $615.8 million;
• Combined ratio of 74.5%, which includes solid current accident year results and favorable reserve development of 11.9 percentage points;
• Total pre-tax investment income, including net realized gains and losses, increased by 106.8% to $59.8 million primarily due to a combination of higher investment balances and higher investment yields;
• Cash flows from operations were $860.9 million for the six months, up 9.7% from the comparable period of 2004;
• Annualized return on average shareholders’ equity of 22.6% achieved for the quarter and 20.3% achieved for the six months; and
• Total shareholders’ equity of $3.2 billion and total capitalization of $3.7 billion as of June 30, 2005.
Commenting on the second quarter 2005 results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: “The 22.6% return on equity generated during the quarter demonstrates our ongoing ability to produce real and attractive returns to our shareholders from the diversity of our global platform. We have worked diligently this quarter and found plentiful
opportunity as was evidenced by AXIS Insurance’s targeted entry into attractively rated specialty classes and AXIS Re’s success in accessing new property reinsurance opportunities. However, our strong underwriting discipline has manifested itself in reduced writings in lines of business where senseless competition has driven pricing to unacceptable levels.”
“At this time, I am pleased to report that we have concluded our exhaustive internal investigation led by external counsel. It has uncovered no evidence whatsoever indicating that we engaged in bid rigging, fictitious or inflated quotes or related matters or conditioning direct insurance on the placement of reinsurance. No evidence of any of these types of wrongdoing was found. This investigation was launched in the fourth quarter of 2004, following inquiries stemming from the industry-wide investigations of the insurance industry initiated by the New York Attorney General and other regulators.”
“There continues to be a number of fundamental issues that the industry needs to address over the next couple of years. The powerful combination of Sarbanes-Oxley and the insurance industry investigations led by the New York Attorney General make the resolution of these issues a matter of when, not if. These issues have not deterred us from implementing our strategy of becoming one of the leading and most consistently profitable specialist global insurance and reinsurance businesses. We believe that AXIS will ultimately benefit from these industry changes leading to greater transparency and honesty, and, in the meantime, we grow stronger and become more focused and more determined every day.”
Operating Results
As of January 2005, we are reporting two underwriting segments, insurance and reinsurance, and a corporate segment following the previously announced strategic reorganization of our operations into AXIS Insurance and AXIS Re. The insurance segment is further divided into global insurance and U.S. insurance.
Our total gross premiums increased 21.9% from the second quarter of 2004 and were derived 66.9% from our insurance segment and 33.1% from our reinsurance segment compared to 69.3% and 30.7%, respectively, for the second quarter of 2004. This increase was largely attributable to greater market penetration in existing lines of business. Our combined ratio
decreased to 74.5% in the quarter from 75.2% in the second quarter of 2004 primarily due to favorable prior period reserve development. Also, we have begun to utilize our own loss experience in establishing our initial expected net loss and loss expense ratios for many short tail lines of business.
Our total gross premiums for the six months ended June 30, 2005 increased 17.5% from the same period of 2004 and were derived 47.9% from our insurance segment and 52.1% from our reinsurance segment compared to 52.9% and 47.1%, respectively, for the same period of 2004. This increase was largely attributable to our reinsurance segment where our Zurich office achieved greater market penetration in Continental Europe and where we capitalized on opportunities within our U.S. property reinsurance book. Our combined ratio increased to 76.4% in the six months ended June 30, 2005 from 73.9% in the same period of 2004 primarily due to a change in the mix of business.
Insurance Segment
Our insurance segment reported gross premiums in the quarter of $513.0 million, up 17.6% from the second quarter of 2004, and net premiums of $365.1 million, up 21.4% from the second quarter of 2004. The growth in our insurance segment was largely driven by growth in our U.S. insurance operation, which generated an increase in gross premiums of 29.8% and an increase in net premiums of 28.5%. This was derived from select expansion of our professional lines products and from greater market penetration in our umbrella liability book. Global insurance experienced moderate growth in gross premiums of 5.2%, mainly generated by the development of our London market-based professional lines book of business. We continue to experience competition in many lines of business in global insurance and, therefore, continue to decline business that does not meet our underwriting criteria.
Our insurance segment reported a combined ratio of 66.8% for the quarter compared to 78.8% for the second quarter of 2004. The insurance segment experienced favorable prior period reserve development from short-tail lines of $44.4 million in the second quarter compared to $24.4 million in the second quarter of 2004. Also, within this segment we have begun to reflect our own loss experience in establishing our initial expected net loss and loss expense ratios for many short tail lines of business.
Reinsurance Segment
Our reinsurance segment reported gross premiums in the quarter of $254.3 million, up 31.6% from the second quarter of 2004, and net premiums of $250.7 million, up 34.0% from the second quarter of 2004. Growth in this segment during the quarter was primarily driven by new opportunities within our U.S. property reinsurance and liability reinsurance lines of business.
Our reinsurance segment reported a combined ratio of 77.7% compared to 65.7% in the second quarter of 2004. Favorable prior period reserve development from short-tail lines of business was $29.6 million in the quarter compared to $18.7 million in the second quarter of 2004. The increase in the combined ratio was primarily generated by a change in the mix of business, with more business generated by reinsurance products other than property catastrophe.
Interest Expense
Interest expense for the quarter was $7.8 million compared to $0.2 million for the second quarter of 2004. Interest expense for the six months ended June 30, 2005 was $15.9 million compared to $0.2 million for the same period of 2004. Interest expense consists of interest due on outstanding debt, the amortization of debt offering expenses and offering discounts and fees relating to our credit facility. Our outstanding debt relates to $500.0 million of senior unsecured notes issued on November 15, 2004.
Investments
Total pre-tax investment income, which included $58.0 million in net investment income and $1.8 million in realized gains, grew 106.8% to $59.8 million in the quarter up from $28.9 million in the second quarter of 2004. The increase primarily reflected the positive impact of higher average yields on higher investment balances. These increased yields were generated by higher short term U.S. interest rates together with our increased allocation to other investments. Total pre-tax investment income for the six months ended June 30, 2005 of $111.2 million included $110.8 million in net investment income and $0.4 million in realized gains. This was an increase of 58.2% from $70.3 million in the same period of 2004.
Capitalization / Shareholders’ Equity
Total capitalization at June 30, 2005 was $3.7 billion, including $499.0 million of long-term debt, which was comparable to December 31, 2004 levels following capital management initiatives undertaken in the first quarter of 2005. In February 2005, we repurchased 12,783,094 shares of common stock from certain of our initial investors at an average price of $27.38 per share for a total of $350 million.
Book value per common share at June 30, 2005 was $22.51 compared to $21.20 per common share at December 31, 2004. Diluted book value per share at June 30, 2005 increased 5.2% to $20.89 compared with $19.85 per share at December 31, 2004. Diluted book value per share is a non-GAAP financial measure. A reconciliation of this measure to shareholders’ equity is presented at the end of this release.
Insurance Industry Investigation and Conclusion of Internal Investigation
As previously disclosed, our U.S. holding company has received subpoenas from the Office of the Attorney General of the State of New York seeking information regarding incentive commission agreements, fictitious and inflated quotes and related matters and conditioning direct insurance on the placement of reinsurance. In addition, our U.S. insurance companies have received subpoenas and requests for information from various state insurance regulators regarding these same matters. These inquiries are part of industry-wide investigations in these jurisdictions and we understand that officials from other jurisdictions in which we do business have also initiated investigations into similar matters. Accordingly, we may in the future receive additional subpoenas and requests for information. We are cooperating fully with the Attorney General of the State of New York and the other state regulators in their investigations and intend to cooperate fully with any future investigations.
In connection with these inquiries, we have conducted an internal investigation, led by outside counsel, to determine whether we have engaged in any of the improper business practices that are the focus of the inquiries. This investigation is complete and uncovered no evidence indicating that we engaged in bid rigging, fictitious or inflated quotes or related matters or conditioning direct insurance on the placement of reinsurance. Consistent with long-standing
and wide-spread industry practice, we have in the past entered into incentive commission arrangements with brokers; however, we have not entered into any of these arrangements with respect to 2005.
Two purported shareholders class action lawsuits have been filed against us and some of our executive officers relating to the practices being investigated by the Attorney General of the State of New York and other state regulators. On April 13, 2005, these lawsuits were consolidated into one lawsuit. On May 13, 2005, the plaintiffs filed an amended, consolidated complaint and added as defendants the managing underwriters and one of the selling shareholders in our secondary offering completed in March 2004. As we have previously stated, we believe that the lawsuit is completely without merit and intend to vigorously defend against it.
Conference Call
We will host a conference call on Wednesday August 3, 2005 at 8:30 AM (Eastern) to discuss the second quarter financial results and related matters. This presentation will be available through an audio webcast accessible through the Investor Information section of our website at www.axiscapital.com.
In addition, a financial supplement relating to our financial results for the second quarter and six months 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 June 30, 2005 in excess of $3.1 billion and locations in Bermuda, the United States, Europe and Singapore. Its operating subsidiaries have been assigned a rating of “A” (“Excellent”) by A.M. Best and a rating of “A” (“Strong”) by Standard & Poor’s. AXIS Capital has been assigned a senior unsecured debt rating of Baa1 (stable) by Moody’s Investors Service and BBB+ (stable) by Standard & Poor’s. For more information about AXIS Capital, visit our website at www.axiscapital.com.
AXIS CAPITAL HOLDINGS LIMITED
UNAUDITED CONSOLIDATED BALANCE SHEETS
As at June 30, 2005 and December 31, 2004
(Expressed in thousands of U.S. dollars, except share and per share amounts)
|
| June 30, 2005 |
| December 31, 2004 |
| ||||||
Assets |
|
|
|
|
| ||||||
Cash and cash equivalents |
| $ | 793,304 |
| $ | 632,329 |
| ||||
Investments at fair market value |
| 5,298,519 |
| 5,128,345 |
| ||||||
Other investments |
| 441,650 |
| 271,344 |
| ||||||
Accrued interest receivable |
| 54,571 |
| 47,487 |
| ||||||
Securities lending collateral |
| 998,196 |
| 865,311 |
| ||||||
Insurance and reinsurance premium balances receivable |
| 1,230,321 |
| 914,562 |
| ||||||
Deferred acquisition costs |
| 263,491 |
| 211,082 |
| ||||||
Prepaid reinsurance premiums |
| 269,625 |
| 271,187 |
| ||||||
Reinsurance recoverable |
| 648,025 |
| 596,299 |
| ||||||
Intangible assets |
| 29,947 |
| 31,734 |
| ||||||
Other assets |
| 89,307 |
| 68,605 |
| ||||||
Total Assets |
| $ | 10,116,956 |
| $ | 9,038,285 |
| ||||
|
|
|
|
|
| ||||||
Liabilities |
|
|
|
|
| ||||||
Reserve for losses and loss expenses |
| $ | 2,929,699 |
| $ | 2,404,560 |
| ||||
Unearned premiums |
| 2,071,073 |
| 1,644,771 |
| ||||||
Insurance and reinsurance balances payable |
| 251,753 |
| 247,940 |
| ||||||
Accounts payable and accrued expenses |
| 91,982 |
| 89,804 |
| ||||||
Securities lending payable |
| 994,346 |
| 864,354 |
| ||||||
Net payable for investments purchased |
| 112,515 |
| 49,854 |
| ||||||
Debt |
| 498,992 |
| 498,938 |
| ||||||
Total Liabilities |
| 6,950,360 |
| 5,800,221 |
| ||||||
|
|
|
|
|
| ||||||
Shareholders’ Equity |
|
|
|
|
| ||||||
Share capital |
| 1,758 |
| 1,910 |
| ||||||
Additional paid-in capital |
| 1,680,148 |
| 2,017,144 |
| ||||||
Accumulated other comprehensive (loss) income |
| (255 | ) | 12,915 |
| ||||||
Retained earnings |
| 1,484,945 |
| 1,206,095 |
| ||||||
Total Shareholders’ Equity |
| 3,166,596 |
| 3,238,064 |
| ||||||
|
|
|
|
|
| ||||||
Total Liabilities & Shareholders’ Equity |
| $ | 10,116,956 |
| $ | 9,038,285 |
| ||||
AXIS CAPITAL HOLDINGS LIMITED
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters and Six Months ended June 30, 2005 and 2004
(Expressed in thousands of U.S. dollars, except share and per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2005 |
| June 30, 2004 |
| June 30, 2005 |
| June 30, 2004 |
| ||||
|
| (see Note 1) |
| (see Note 1) |
| (see Note 1) |
| (see Note 1) |
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
| $ | 767,293 |
| $ | 629,319 |
| $ | 1,965,992 |
| $ | 1,673,442 |
|
Premiums ceded |
| (151,497 | ) | (141,442 | ) | (288,125 | ) | (286,375 | ) | ||||
Change in unearned premiums |
| 8,617 |
| (1,474 | ) | (427,864 | ) | (429,416 | ) | ||||
Net premiums earned |
| 624,413 |
| 486,403 |
| 1,250,003 |
| 957,651 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net investment income |
| 58,001 |
| 33,345 |
| 110,759 |
| 64,604 |
| ||||
Net realized gains (losses) |
| 1,831 |
| (4,411 | ) | 438 |
| 5,686 |
| ||||
Other insurance related (loss) income |
| (5,451 | ) | 156 |
| (5,519 | ) | 444 |
| ||||
Total revenues |
| 678,794 |
| 515,493 |
| 1,355,681 |
| 1,028,385 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Net losses and loss expenses |
| 322,853 |
| 257,850 |
| 667,143 |
| 500,450 |
| ||||
Acquisition costs |
| 85,471 |
| 65,491 |
| 176,772 |
| 122,454 |
| ||||
General and administrative expenses |
| 56,796 |
| 42,442 |
| 111,098 |
| 84,292 |
| ||||
Foreign exchange losses |
| 27,226 |
| 6,413 |
| 50,644 |
| 7,558 |
| ||||
Interest expense |
| 7,818 |
| 181 |
| 15,897 |
| 219 |
| ||||
Total expenses |
| 500,164 |
| 372,377 |
| 1,021,554 |
| 714,973 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
| 178,630 |
| 143,116 |
| 334,127 |
| 313,412 |
| ||||
Income tax expense |
| (5,785 | ) | (2,260 | ) | (9,483 | ) | (5,770 | ) | ||||
Net Income |
| $ | 172,845 |
| $ | 140,856 |
| $ | 324,644 |
| $ | 307,642 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - basic |
| 140,566,523 |
| 152,487,082 |
| 143,584,354 |
| 152,484,015 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - diluted |
| 153,637,750 |
| 166,842,606 |
| 157,013,504 |
| 166,785,604 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - basic |
| $ | 1.23 |
| $ | 0.92 |
| $ | 2.26 |
| $ | 2.02 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - diluted |
| $ | 1.13 |
| $ | 0.84 |
| $ | 2.07 |
| $ | 1.84 |
|
|
|
|
|
|
|
|
|
|
| ||||
Insurance Ratios |
|
|
|
|
|
|
|
|
| ||||
Loss ratio |
| 51.7 | % | 53.0 | % | 53.4 | % | 52.3 | % | ||||
Expense ratio |
| 22.8 | % | 22.2 | % | 23.0 | % | 21.6 | % | ||||
Combined ratio |
| 74.5 | % | 75.2 | % | 76.4 | % | 73.9 | % | ||||
Note 1: Interest expense has been reclassifed from general administrative expenses for 2004 to conform to current year classifications. Interest expense consists of interest due on outstanding debt, the amortization of debt offering expenses and offering discounts and fees relating to our credit facility.
|
| Global |
| U.S. |
| Total |
| Reinsurance |
| Corporate |
| Total |
| ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written |
| $ | 227,512 |
| $ | 285,470 |
| $ | 512,982 |
| $ | 254,311 |
| $ | — |
| $ | 767,293 |
|
Net premiums written |
| 214,005 |
| 151,098 |
| 365,103 |
| 250,693 |
| — |
| 615,796 |
| ||||||
Net premiums earned |
| 204,717 |
| 108,321 |
| 313,038 |
| 311,375 |
| — |
| 624,413 |
| ||||||
Other insurance related (loss) income |
| (5,627 | ) | 326 |
| (5,301 | ) | (150 | ) | — |
| (5,451 | ) | ||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net losses and loss expenses |
| (78,039 | ) | (70,658 | ) | (148,697 | ) | (174,156 | ) | — |
| (322,853 | ) | ||||||
Acquisition costs |
| (26,455 | ) | (3,695 | ) | (30,150 | ) | (55,321 | ) | — |
| (85,471 | ) | ||||||
General and administrative expenses |
| (9,632 | ) | (20,777 | ) | (30,409 | ) | (12,330 | ) | — |
| (42,739 | ) | ||||||
Underwriting income (a) |
| 84,964 |
| 13,517 |
| 98,481 |
| 69,418 |
| — |
| 167,899 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (14,057 | ) | (14,057 | ) | ||||||
Net investment income |
|
|
|
|
|
|
|
|
| 58,001 |
| 58,001 |
| ||||||
Realized gains on investments |
|
|
|
|
|
|
|
|
| 1,831 |
| 1,831 |
| ||||||
Foreign exchange losses |
|
|
|
|
|
|
|
|
| (27,226 | ) | (27,226 | ) | ||||||
Interest expense |
|
|
|
|
|
|
|
|
| (7,818 | ) | (7,818 | ) | ||||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 178,630 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss and loss expense ratio |
| 38.1 | % | 65.2 | % | 47.5 | % | 55.9 | % |
|
| 51.7 | % | ||||||
Acquisition cost ratio |
| 12.9 | % | 3.4 | % | 9.6 | % | 17.8 | % |
|
| 13.7 | % | ||||||
General and administrative expense ratio |
| 4.7 | % | 19.2 | % | 9.7 | % | 4.0 | % | 2.2 | % | 9.1 | % | ||||||
Combined ratio |
| 55.7 | % | 87.8 | % | 66.8 | % | 77.7 | % |
|
| 74.5 | % | ||||||
(a) The Company utilizes underwriting income as a measure of underwriting profitability as it evaluates profitability solely on underwriting related revenues and costs. Items not considered to be part of underwriting include corporate expenses, investment income, realized losses and gains on the sale of investments, foreign exchange and interest expense. These items are evaluated separately from our underwriting results. Underwriting income takes into account net premiums earned and other insurance related income as revenue and net losses and loss expenses, acquisition costs and underwriting related general and administrative expenses as expenses. Underwriting income is the difference between the revenue and expense items.
|
| Global |
| U.S. |
| Total |
| Reinsurance |
| Corporate |
| Total |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross premiums written |
| $ | 216,188 |
| $ | 219,915 |
| $ | 436,103 |
| $ | 193,216 |
| — |
| $ | 629,319 |
|
Net premiums written |
| 183,240 |
| 117,605 |
| 300,845 |
| 187,032 |
| — |
| 487,877 |
| |||||
Net premiums earned |
| 196,568 |
| 83,667 |
| 280,235 |
| 206,168 |
| — |
| 486,403 |
| |||||
Other insurance related income (loss) |
| (399 | ) | — |
| (399 | ) | 555 |
| — |
| 156 |
| |||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net losses and loss expenses |
| (117,616 | ) | (47,124 | ) | (164,740 | ) | (93,110 | ) | — |
| (257,850 | ) | |||||
Acquisition costs |
| (30,422 | ) | (2,363 | ) | (32,785 | ) | (32,706 | ) | — |
| (65,491 | ) | |||||
General and administrative expenses |
| (7,265 | ) | (16,112 | ) | (23,377 | ) | (9,426 | ) | — |
| (32,803 | ) | |||||
Underwriting income (a) |
| 40,866 |
| 18,068 |
| 58,934 |
| 71,481 |
| — |
| 130,415 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (9,639 | ) | (9,639 | ) | |||||
Net investment income |
|
|
|
|
|
|
|
|
| 33,345 |
| 33,345 |
| |||||
Realized losses on investments |
|
|
|
|
|
|
|
|
| (4,411 | ) | (4,411 | ) | |||||
Foreign exchange losses |
|
|
|
|
|
|
|
|
| (6,413 | ) | (6,413 | ) | |||||
Interest expense |
|
|
|
|
|
|
|
|
| (181 | ) | (181 | ) | |||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 143,116 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and loss expense ratio |
| 59.8 | % | 56.3 | % | 58.8 | % | 45.2 | % |
|
| 53.0 | % | |||||
Acquisition cost ratio |
| 15.5 | % | 2.8 | % | 11.7 | % | 15.9 | % |
|
| 13.5 | % | |||||
General and administrative expense ratio |
| 3.7 | % | 19.3 | % | 8.3 | % | 4.6 | % | 1.9 | % | 8.7 | % | |||||
Combined ratio |
| 79.0 | % | 78.4 | % | 78.8 | % | 65.7 | % |
|
| 75.2 | % | |||||
(a) The Company utilizes underwriting income as a measure of underwriting profitability as it evaluates profitability solely on underwriting related revenues and costs. Items not considered to be part of underwriting include corporate expenses, investment income, realized losses and gains on the sale of investments, foreign exchange and interest expense. These items are evaluated separately from our underwriting results. Underwriting income takes into account net premiums earned and other insurance related income as revenue and net losses and loss expenses, acquisition costs and underwriting related general and administrative expenses as expenses. Underwriting income is the difference between the revenue and expense items.
|
| Global Insurance |
| U.S. |
| Total |
| Reinsurance |
| Corporate |
| Total |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross premiums written |
| $ | 479,835 |
| $ | 462,396 |
| $ | 942,231 |
| $ | 1,023,761 |
| — |
| $ | 1,965,992 |
|
Net premiums written |
| 417,435 |
| 242,330 |
| 659,765 |
| 1,018,102 |
| — |
| 1,677,867 |
| |||||
Net premiums earned |
| 421,575 |
| 214,822 |
| 636,397 |
| 613,606 |
| — |
| 1,250,003 |
| |||||
Other insurance related (loss) income |
| (5,865 | ) | 346 |
| (5,519 | ) | — |
| — |
| (5,519 | ) | |||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net losses and loss expenses |
| (143,934 | ) | (142,376 | ) | (286,310 | ) | (380,833 | ) | — |
| (667,143 | ) | |||||
Acquisition costs |
| (59,537 | ) | (6,739 | ) | (66,276 | ) | (110,496 | ) | — |
| (176,772 | ) | |||||
General and administrative expenses |
| (19,484 | ) | (41,088 | ) | (60,572 | ) | (24,631 | ) | — |
| (85,203 | ) | |||||
Underwriting income (a) |
| 192,755 |
| 24,965 |
| 217,720 |
| 97,646 |
| — |
| 315,366 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (25,895 | ) | (25,895 | ) | |||||
Net investment income |
|
|
|
|
|
|
|
|
| 110,759 |
| 110,759 |
| |||||
Realized gains on investments |
|
|
|
|
|
|
|
|
| 438 |
| 438 |
| |||||
Foreign exchange losses |
|
|
|
|
|
|
|
|
| (50,644 | ) | (50,644 | ) | |||||
Interest expense |
|
|
|
|
|
|
|
|
| (15,897 | ) | (15,897 | ) | |||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 334,127 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and loss expense ratio |
| 34.1 | % | 66.3 | % | 45.0 | % | 62.1 | % |
|
| 53.4 | % | |||||
Acquisition cost ratio |
| 14.1 | % | 3.1 | % | 10.4 | % | 18.0 | % |
|
| 14.1 | % | |||||
General and administrative expense ratio |
| 4.6 | % | 19.1 | % | 9.5 | % | 4.0 | % | 2.1 | % | 8.9 | % | |||||
Combined ratio |
| 52.8 | % | 88.5 | % | 64.9 | % | 84.1 | % |
|
| 76.4 | % | |||||
(a) The Company utilizes underwriting income as a measure of underwriting profitability as it evaluates profitability solely on underwriting related revenues and costs. Items not considered to be part of underwriting include corporate expenses, investment income, realized losses and gains on the sale of investments, foreign exchange and interest expense. These items are evaluated separately from our underwriting results. Underwriting income takes into account net premiums earned and other insurance related income as revenue and net losses and loss expenses, acquisition costs and underwriting related general and administrative expenses as expenses. Underwriting income is the difference between the revenue and expense items.
|
| Global |
| U.S. |
| Total |
| Reinsurance |
| Corporate |
| Total |
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross premiums written |
| $ | 516,596 |
| $ | 368,257 |
| $ | 884,853 |
| $ | 788,589 |
| — |
| $ | 1,673,442 |
|
Net premiums written |
| 415,779 |
| 198,429 |
| 614,208 |
| 772,859 |
| — |
| 1,387,067 |
| |||||
Net premiums earned |
| 396,284 |
| 157,571 |
| 553,855 |
| 403,796 |
| — |
| 957,651 |
| |||||
Other insurance related (loss) income |
| (219 | ) | — |
| (219 | ) | 663 |
| — |
| 444 |
| |||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net losses and loss expenses |
| (216,143 | ) | (96,740 | ) | (312,883 | ) | (187,567 | ) | — |
| (500,450 | ) | |||||
Acquisition costs |
| (56,463 | ) | (2,537 | ) | (59,000 | ) | (63,454 | ) | — |
| (122,454 | ) | |||||
General and administrative expenses |
| (15,455 | ) | (31,705 | ) | (47,160 | ) | (18,528 | ) | — |
| (65,688 | ) | |||||
Underwriting income (a) |
| 108,004 |
| 26,589 |
| 134,593 |
| 134,910 |
| — |
| 269,503 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (18,604 | ) | (18,604 | ) | |||||
Net investment income |
|
|
|
|
|
|
|
|
| 64,604 |
| 64,604 |
| |||||
Realized gains on investments |
|
|
|
|
|
|
|
|
| 5,686 |
| 5,686 |
| |||||
Foreign exchange losses |
|
|
|
|
|
|
|
|
| (7,558 | ) | (7,558 | ) | |||||
Interest expense |
|
|
|
|
|
|
|
|
| (219 | ) | (219 | ) | |||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 313,412 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and loss expense ratio |
| 54.5 | % | 61.4 | % | 56.5 | % | 46.5 | % |
|
| 52.3 | % | |||||
Acquisition cost ratio |
| 14.2 | % | 1.6 | % | 10.6 | % | 15.7 | % |
|
| 12.8 | % | |||||
General and administrative expense ratio |
| 3.9 | % | 20.1 | % | 8.5 | % | 4.6 | % | 1.9 | % | 8.8 | % | |||||
Combined ratio |
| 72.6 | % | 83.1 | % | 75.6 | % | 66.8 | % |
|
| 73.9 | % | |||||
(a) The Company utilizes underwriting income as a measure of underwriting profitability as it evaluates profitability solely on underwriting related revenues and costs. Items not considered to be part of underwriting include corporate expenses, investment income, realized losses and gains on the sale of investments, foreign exchange and interest expense. These items are evaluated separately from our underwriting results. Underwriting income takes into account net premiums earned and other insurance related income as revenue and net losses and loss expenses, acquisition costs and underwriting related general and administrative expenses as expenses. Underwriting income is the difference between the revenue and expense items.
Cautionary Note Regarding Forward-Looking Statements
This release may include forward-looking statements within the meaning of the U.S. federal securities laws. 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) our limited operating history, (2) the occurrence of natural and man-made disasters, (3) actual claims exceeding our loss reserves, (4), failure of any of the loss limitation methods we employ, (5) 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) loss of business provided to us by our major brokers, (10) changes in governmental regulations, (11) increased competition and (12) general economic conditions. 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 addition to the GAAP financial measures included within this release, we have presented “net income excluding net realized gains and losses on investments, net of tax”, “net income excluding net realized gains and losses on investments and foreign exchange, net of tax” and “diluted book value per share,” which are non-GAAP financial measures. We have included the first and second measures as we believe that security analysts, rating agencies and investors believe that realized gains and losses and foreign exchange, where an actively managed foreign exchange program is not in place, are largely opportunistic and are a function of economic and interest rate conditions. As a result, we believe that they evaluate earnings before realized gains and losses and foreign exchange, adjusted for tax, to make performance comparisons with our industry peers. We have included the third measure because it takes into account the effect of dilutive securities and, therefore, we believe that this is a better measure of calculating shareholder returns than book value per share.
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
NET INCOME EXCLUDING REALIZED GAINS AND LOSSES ON INVESTMENTS, NET OF TAX
For the Quarters and Six Months ended June 30, 2005 and 2004
(Expressed in thousands of U.S. dollars, except per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2005 |
| June 30, 2004 |
| June 30, 2005 |
| June 30, 2004 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 172,845 |
| $ | 140,856 |
| 324,644 |
| $ | 307,642 |
| |
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| (1,831 | ) | 4,411 |
| (438 | ) | (5,686 | ) | ||||
Adjustment for associated tax impact of net realized (losses) gains on investments |
| (65 | ) | (595 | ) | (521 | ) | 358 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income excluding realized (losses) gains on investments, net of tax |
| $ | 170,949 |
| $ | 144,672 |
| $ | 323,685 |
| $ | 302,314 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - diluted |
| $ | 1.13 |
| $ | 0.84 |
| $ | 2.07 |
| $ | 1.84 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized (losses) gains on investments |
| (0.01 | ) | 0.03 |
| — |
| (0.03 | ) | ||||
Adjustment for associated tax impact of net realized (losses) gains on investments |
| — |
| — |
| — |
| — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income excluding realized (losses) gains on investments, net of tax per diluted share |
| $ | 1.12 |
| $ | 0.87 |
| $ | 2.07 |
| $ | 1.81 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - diluted |
| 153,637,750 |
| 166,842,606 |
| 157,013,504 |
| 166,785,604 |
| ||||
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
NET INCOME EXCLUDING REALIZED GAINS AND LOSSES ON INVESTMENTS
AND FOREIGN EXCHANGE LOSSES, NET OF TAX
For the Quarters and Six Months ended June 30, 2005 and 2004
(Expressed in thousands of U.S. dollars, except per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2005 |
| June 30, 2004 |
| June 30, 2005 |
| June 30, 2004 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 172,845 |
| $ | 140,856 |
| 324,644 |
| $ | 307,642 |
| |
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| (1,831 | ) | 4,411 |
| (438 | ) | (5,686 | ) | ||||
Adjustment for foreign exchange losses |
| 27,226 |
| 6,413 |
| 50,644 |
| 7,558 |
| ||||
Adjustment for associated tax impact |
| (812 | ) | (636 | ) | (1,725 | ) | 308 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income excluding realized (losses) gains on investments and foreign exchange losses, net of tax |
| $ | 197,428 |
| $ | 151,044 |
| $ | 373,125 |
| $ | 309,822 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - diluted |
| $ | 1.13 |
| $ | 0.84 |
| $ | 2.07 |
| $ | 1.84 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| (0.01 | ) | 0.03 |
| — |
| (0.03 | ) | ||||
Adjustment for foreign exchange losses |
| 0.18 |
| 0.04 |
| 0.32 |
| 0.05 |
| ||||
Adjustment for associated tax impact |
| (0.01 | ) | — |
| (0.01 | ) | — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income excluding realized (losses) gains on investments and foreign exchange losses, net of tax per diluted share |
| $ | 1.29 |
| $ | 0.91 |
| $ | 2.38 |
| $ | 1.86 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - diluted |
| 153,637,750 |
| 166,842,606 |
| 157,013,504 |
| 166,785,604 |
| ||||
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
DILUTED BOOK VALUE PER SHARE
As at June 30, 2005 and December 31, 2004
(Expressed in thousands of U.S. dollars, except share and per share amounts)
|
| June 30, 2005 |
| December 31, 2004 |
| ||
|
|
|
|
|
| ||
Shareholders’ equity |
| $ | 3,166,596 |
| $ | 3,238,064 |
|
|
|
|
|
|
| ||
Shares outstanding |
| 140,668,032 |
| 152,764,917 |
| ||
|
|
|
|
|
| ||
Book value per share |
| $ | 22.51 |
| $ | 21.20 |
|
|
|
|
|
|
| ||
Diluted book value on an “as if converted basis” |
|
|
|
|
| ||
|
|
|
|
|
| ||
Shareholders’ equity add in: |
| $ | 3,166,596 |
| $ | 3,238,064 |
|
proceeds on exercise of options |
| 125,094 |
| 94,724 |
| ||
proceeds on exercise of warrants |
| 244,812 |
| 244,812 |
| ||
|
|
|
|
|
| ||
Adjusted shareholders’ equity |
| 3,536,502 |
| 3,577,600 |
| ||
|
|
|
|
|
| ||
As if converted diluted shares outstanding |
|
|
|
|
| ||
Shares outstanding add in: |
| 140,668,032 |
| 152,764,917 |
| ||
vesting of restricted stock |
| 2,288,218 |
| 2,182,700 |
| ||
exercise of options |
| 6,686,681 |
| 5,694,181 |
| ||
exercise of warrants |
| 19,633,839 |
| 19,619,152 |
| ||
|
|
|
|
|
| ||
Diluted shares outstanding |
| 169,276,770 |
| 180,260,950 |
| ||
|
|
|
|
|
| ||
Diluted book value per share |
| $ | 20.89 |
| $ | 19.85 |
|
