Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Contacts | Media Contacts |
Linda Ventresca | Joseph Kuo / Caroline Gentile |
AXIS Capital Holdings Limited | Kekst and Company |
info@axiscapital.com | (212) 521-4800 |
(441) 297-9513 |
|
AXIS CAPITAL ANNOUNCES RECORD SECOND QUARTER NET INCOME OF $223.4
MILLION; AN INCREASE OF 29% OVER PRIOR QUARTER
Pembroke, Bermuda, August 7, 2006 — AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE: AXS) today reported net income available to common shareholders for the quarter ended June 30, 2006 of $223.4 million, or $1.37 per diluted common share, compared with $172.8 million, or $1.13 per diluted common share, for the quarter ended June 30, 2005. Net income for the six months ended June 30, 2006 was $418.6 million, or $2.56 per diluted share, compared with $324.6 million, or $2.07 per diluted share, for the corresponding period in 2005. Financial results for the second quarter and first six months of 2006 benefited from increased investment income.
Operating income for the second quarter of 2006 was $232.2 million, or $1.42 per diluted share, compared with $170.9 million, or $1.12 per diluted common share, for the quarter ended June 30, 2005. This same item excluding foreign exchange gains (losses), net of tax, for the second quarter of 2006 was $214.2 million, or $1.31 per diluted common share, compared with $197.4 million, or $1.29 per diluted common share, for the quarter ended June 30, 2005.
Operating income for the six months ended June 30, 2006 was $437.4 million, or $2.68 per diluted share, compared with $323.7 million, or $2.07 per diluted common share, for the six months ended June 30, 2005. This same item excluding foreign exchange gains (losses), net of
AXIS Capital Holdings Limited 106 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.296.2600 Fax 441.296.3140
www.axiscapital.com
1
tax, for the six months ended June 30, 2006 was $410.4 million, or $2.52 per diluted common share, compared with $373.1 million, or $2.38 per diluted common share, for the six months ended June 30, 2005.
Operating income and operating income excluding foreign exchange gains (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 first half of the year included the following:
· Gross premiums written increased by 9.9% to $2,160.1 million;
· Net premiums written increased by 8.1% to $1,813.1 million;
· Net premiums earned increased by 5.0% to $1,312.7 million;
· Combined ratio of 78.9% included net favorable prior period reserve development of $125.5 million, or 9.6 percentage points;
· Pre-tax net investment income increased by 67.2% to $185.2 million;
· Annualized return on average common shareholders’ equity of 26.4%; and
· Total shareholders’ equity increased from December 31, 2005 by 8.6% to $3.8 billion and diluted book value per common share increased 7.8% to $20.68.
Operating highlights for the second quarter included the following:
· Gross premiums written increased by 29.7% to $995.4 million;
· Net premiums written increased by 33.2% to $820.7 million;
· Net premiums earned increased by 8.8% to $679.1 million;
· Combined ratio of 78.3% included net favorable prior period reserve development of $64.5 million, or 9.5 percentage points;
· Pre-tax net investment income increased by 58.0% to $91.7 million primarily due to a combination of higher investment balances, higher investment yields and increasing contribution from other investments; and
· Annualized return on average common shareholders’ equity of 27.6%.
2
Commenting on the second quarter 2006 results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: “We are pleased to report an annualized return on average common equity in the quarter of 27.6% and an increase in diluted book value per share relative to year-end of 7.8% despite the mark-to-market impact of rising interest rates on book value. Our results in the quarter reflect strong and stable underwriting results, increasing investment income and low large loss activity.
At the end of last year, we positioned ourselves tactically for trading in the first half-year of 2006. Our goal was to substantially reduce catastrophe exposures whilst, at the same time, achieving solid growth in better-rated business. In the non-property areas of our insurance and reinsurance businesses, our specialist focus has allowed us ample access to risks at stable, attractive rating levels. We have achieved all of this without compromising our appropriate risk tolerance levels in both our insurance and reinsurance segments.”
Operating Results
Gross premiums written, during the second quarter of 2006, increased by 29.7%, or $228.1 million to $995.4 million, compared to the second quarter of 2005 and were derived 63.3% from our insurance segment and 36.7% from our reinsurance segment compared to 66.9% and 33.1%, respectively, for the second quarter of 2005. The increase was attributable to significant improvement in price in catastrophe-exposed lines of business in both our insurance and reinsurance segments, increased penetration of the U.S. casualty reinsurance marketplace and new opportunities. Our combined ratio increased to 78.3% from 74.5% in the second quarter of 2005 primarily due to a lower level of favorable reserve development in our reinsurance segment.
Gross premiums for the six months ended June 30, 2006 increased 9.9% from the same period of 2005 and were derived 49.4% from our insurance segment and 50.6% from our reinsurance segment compared to 47.9% and 52.1%, respectively, for the same period of 2005. The increase was largely driven by growth of our professional lines insurance business, growth in our U.S. casualty reinsurance book and significant improvement in price for catastrophe-exposed insurance business. Our combined ratio increased to 78.9% in the six months ended
3
June 30, 2006 from 76.4% in the same period of 2005 primarily due to a lower level of favorable reserve development in our reinsurance segment.
Insurance Segment
Our insurance segment reported gross premiums written in the quarter of $629.6 million, up 22.7% from the second quarter of 2005, and net premiums written of $455.0 million, up 24.6% from the second quarter of 2005. The growth was largely driven by a significant improvement in pricing in our catastrophe-exposed property and marine lines and also additional political risk premium written in the quarter.
Our insurance segment reported gross premiums written in the six months of $1,066.7 million, up 13.2% from the same period of 2005, and net premiums written of $730.2 million, up 10.7% from the same period of 2005. The growth was largely driven by significant improvement in pricing in our catastrophe-exposed property and marine lines and also additional professional lines business.
Our insurance segment reported a combined ratio of 68.5% for the quarter compared to 66.8% for the quarter ended June 30, 2005. The increase was primarily due to a shift in the mix of earned premium towards professional lines in the quarter. The insurance segment experienced net favorable prior period reserve development from short tail lines of $58.2 million, or 18.0 percentage points, compared to favorable development of $44.4 million, or 14.2 percentage points, in the quarter ended June 30, 2005.
Reinsurance Segment
Gross premiums written in our reinsurance segment increased by 43.8%, or $111.5 million to $365.8 million, for the quarter ended June 30, 2006 compared to the same period of 2005. The increase was driven by growth in our U.S. casualty reinsurance lines of business and also significant improvement in pricing in catastrophe-exposed reinsurance business in the U.S.
4
Gross premiums written in our reinsurance segment increased by 6.8%, or $69.7 million to $1,093.5 million, for the six months ended June 30, 2006 compared to the same period of 2005. The increase was driven by growth in our U.S. casualty and professional lines reinsurance business.
Our reinsurance segment reported a combined ratio of 84.0% for the quarter compared to 77.7% in the second quarter of 2005. The increase was primarily due to a lower level of favorable reserve development. We experienced net favorable development of $6.3 million, or 1.8 percentage points, in the current quarter compared to favorable development of $29.6 million, or 9.5 percentage points, for the quarter ended June 30, 2005.
Interest Expense
Interest expense for the quarter and six months ended June 30, 2006 was $8.3 million and $16.4 million respectively, consistent with the comparable periods of 2005. 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 debt issued on November 15, 2004.
Preferred Dividends
Preferred dividends were $9.2 million and $18.9 million in the quarter and six months ended June 30, 2006 respectively, and related to dividends declared on our Series A and B preferred shares which were issued in September and November 2005, respectively.
Investments
Pre-tax net investment income was $91.7 million an increase of 58.0%, or $33.7 million, from the second quarter of 2005. Included in net investment income for the second quarter of 2006 was $5.5 million in income from other investments, compared to $3.1 million in the second quarter of 2005. Income from other investments is generated from holdings in multiple hedge
5
funds of funds, senior secured loan funds and a high yield fund. We experienced $9.7 million of net realized losses, compared to $1.9 million of net realized gains in the second quarter of 2005.
Pre-tax net investment income for the six months ended June 30, 2006 was $185.2 million an increase of 67.2%, or $74.5 million, from the six months ended June 30, 2005. Included in net investment income for the six months ended June 30, 2006 was $18.9 million in income from other investments, compared to $4.2 million in the same period of 2005. We experienced $20.7 million of net realized losses, compared to $0.4 million of net realized gains for the six months ended June 30, 2005.
This increased investment income generated in the second quarter and first six months of 2006 principally reflects the positive impact of higher investment yields, higher investment balances and an increase in investment income from our other investments.
Capitalization / Shareholders’ Equity
Total capitalization at June 30, 2006 was $4.3 billion, including $0.5 billion of long-term debt and $0.5 billion of preferred equity, compared to $4.0 billion at December 31, 2005. The increase was primarily due to net income in 2006 that was partially offset by unrealized losses on investments.
At June 30, 2006, diluted book value per common share was $20.68 and book value per common share was $22.15, compared to $19.19 and $20.23 respectively, from December 31, 2005. 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.
Conference Call
We will host a conference call on Tuesday August 8, 2006 at 8:00 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.
6
In addition, a financial supplement relating to our financial results for the quarter ended June 30, 2006 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, 2006 of $3.8 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.
7
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As at June 30, 2006 and December 31, 2005
(Expressed in thousands of U.S. dollars)
|
| June 30, 2006 |
| December 31, 2005 |
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,615,448 |
| $ | 1,280,990 |
|
Fixed maturity investments at fair market value |
| 6,009,431 |
| 6,012,425 |
| ||
Other investments |
| 627,721 |
| 409,504 |
| ||
Accrued interest receivable |
| 68,381 |
| 59,784 |
| ||
Securities lending collateral |
| 909,807 |
| 998,349 |
| ||
Insurance and reinsurance balances receivable |
| 1,409,988 |
| 1,026,975 |
| ||
Deferred acquisition costs |
| 290,627 |
| 196,388 |
| ||
Prepaid reinsurance premiums |
| 309,881 |
| 281,579 |
| ||
Reinsurance recoverable |
| 1,392,543 |
| 1,518,110 |
| ||
Intangible assets |
| 35,500 |
| 37,013 |
| ||
Other assets |
| 129,723 |
| 104,859 |
| ||
Total Assets |
| $ | 12,799,050 |
| $ | 11,925,976 |
|
Liabilities |
|
|
|
|
| ||
Reserve for losses and loss expenses |
| $ | 4,835,161 |
| $ | 4,743,338 |
|
Unearned premiums |
| 2,289,140 |
| 1,760,467 |
| ||
Insurance and reinsurance balances payable |
| 333,547 |
| 314,232 |
| ||
Accounts payable and accrued expenses |
| 75,393 |
| 101,179 |
| ||
Securities lending payable |
| 904,974 |
| 995,287 |
| ||
Net payable for investments purchased |
| 43,012 |
| 76 |
| ||
Debt |
| 499,100 |
| 499,046 |
| ||
Total Liabilities |
| 8,980,327 |
| 8,413,625 |
| ||
|
|
|
|
|
| ||
Shareholders’ Equity |
|
|
|
|
| ||
Series A preferred shares |
| 125 |
| 125 |
| ||
Series B preferred shares |
| 31 |
| 31 |
| ||
Common shares |
| 1,873 |
| 1,861 |
| ||
Additional paid-in capital |
| 2,413,410 |
| 2,386,200 |
| ||
Accumulated other comprehensive loss |
| (166,580 | ) | (77,798 | ) | ||
Retained earnings |
| 1,569,864 |
| 1,201,932 |
| ||
Total Shareholders’ Equity |
| 3,818,723 |
| 3,512,351 |
| ||
Total Liabilities & Shareholders’ Equity |
| $ | 12,799,050 |
| $ | 11,925,976 |
|
8
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the quarters and six months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except share and per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2006 |
| June 30, 2005 |
| June 30, 2006 |
| June 30, 2005 |
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
| $ | 995,380 |
| $ | 767,293 |
| $ | 2,160,120 |
| $ | 1,965,992 |
|
Premiums ceded |
| (174,648 | ) | (151,497 | ) | (347,060 | ) | (288,125 | ) | ||||
Change in unearned premiums |
| (141,633 | ) | 8,617 |
| (500,367 | ) | (427,864 | ) | ||||
Net premiums earned |
| 679,099 |
| 624,413 |
| 1,312,693 |
| 1,250,003 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net investment income |
| 91,663 |
| 58,001 |
| 185,231 |
| 110,759 |
| ||||
Net realized (losses) gains |
| (9,777 | ) | 1,831 |
| (20,706 | ) | 438 |
| ||||
Other insurance related income (loss) |
| 438 |
| (5,451 | ) | 1,062 |
| (5,519 | ) | ||||
Total revenues |
| 761,423 |
| 678,794 |
| 1,478,280 |
| 1,355,681 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Net losses and loss expenses |
| 371,982 |
| 322,853 |
| 730,640 |
| 667,143 |
| ||||
Acquisition costs |
| 101,832 |
| 85,471 |
| 191,536 |
| 176,772 |
| ||||
General and administrative expenses |
| 57,657 |
| 56,796 |
| 113,068 |
| 111,098 |
| ||||
Foreign exchange (gains) losses |
| (18,901 | ) | 27,226 |
| (28,165 | ) | 50,644 |
| ||||
Interest expense |
| 8,315 |
| 7,818 |
| 16,400 |
| 15,897 |
| ||||
Total expenses |
| 520,885 |
| 500,164 |
| 1,023,479 |
| 1,021,554 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
| 240,538 |
| 178,630 |
| 454,801 |
| 334,127 |
| ||||
Income tax expense |
| 7,912 |
| 5,785 |
| 17,359 |
| 9,483 |
| ||||
Net Income |
| 232,626 |
| 172,845 |
| 437,442 |
| 324,644 |
| ||||
Preferred share dividends |
| (9,226 | ) | — |
| (18,857 | ) | — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income available to common shareholders |
| $ | 223,400 |
| $ | 172,845 |
| $ | 418,585 |
| $ | 324,644 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents — basic |
| 149,765,181 |
| 140,566,523 |
| 149,541,163 |
| 143,584,354 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents — diluted |
| 163,325,459 |
| 153,637,750 |
| 163,441,641 |
| 157,013,504 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income per share — basic |
| $ | 1.49 |
| $ | 1.23 |
| $ | 2.80 |
| $ | 2.26 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share — diluted |
| $ | 1.37 |
| $ | 1.13 |
| $ | 2.56 |
| $ | 2.07 |
|
|
|
|
|
|
|
|
|
|
| ||||
Insurance Ratios |
|
|
|
|
|
|
|
|
| ||||
Loss ratio |
| 54.8 | % | 51.7 | % | 55.7 | % | 53.4 |
| ||||
Expense ratio |
| 23.5 | % | 22.8 | % | 23.2 | % | 23.0 |
| ||||
Combined ratio |
| 78.3 | % | 74.5 | % | 78.9 | % | 76.4 |
|
9
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Quarter ended June 30, 2006
|
| Global |
| U.S. |
| Total |
| Reinsurance |
|
|
| Total |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross premiums written |
| $ | 313,235 |
| $ | 316,370 |
| $ | 629,605 |
| $ | 365,775 |
| $ | — |
| $ | 995,380 |
|
Net premiums written |
| 278,370 |
| 176,656 |
| 455,026 |
| 365,706 |
| — |
| 820,732 |
| ||||||
Net premiums earned |
| 180,568 |
| 143,003 |
| 323,571 |
| 355,528 |
| — |
| 679,099 |
| ||||||
Other insurance related income |
| — |
| 438 |
| 438 |
| — |
| — |
| 438 |
| ||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net losses and loss expenses |
| (68,883 | ) | (78,902 | ) | (147,785 | ) | (224,197 | ) | — |
| (371,982 | ) | ||||||
Acquisition costs |
| (23,753 | ) | (15,001 | ) | (38,754 | ) | (63,078 | ) | — |
| (101,832 | ) | ||||||
General and administrative expenses |
| (11,304 | ) | (23,569 | ) | (34,873 | ) | (11,501 | ) | — |
| (46,374 | ) | ||||||
Underwriting income |
| 76,628 |
| 25,969 |
| 102,597 |
| 56,752 |
| — |
| 159,349 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (11,283 | ) | (11,283 | ) | ||||||
Net investment income |
|
|
|
|
|
|
|
|
| 91,663 |
| 91,663 |
| ||||||
Realized losses on investments |
|
|
|
|
|
|
|
|
| (9,777 | ) | (9,777 | ) | ||||||
Foreign exchange gains |
|
|
|
|
|
|
|
|
| 18,901 |
| 18,901 |
| ||||||
Interest expense |
|
|
|
|
|
|
|
|
| (8,315 | ) | (8,315 | ) | ||||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 240,538 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss and loss expense ratio |
| 38.1 | % | 55.2 | % | 45.7 | % | 63.1 | % |
|
| 54.8 | % | ||||||
Acquisition cost ratio |
| 13.2 | % | 10.5 | % | 12.0 | % | 17.7 | % |
|
| 15.0 | % | ||||||
General and administrative expense ratio |
| 6.3 | % | 16.5 | % | 10.8 | % | 3.2 | % | 1.7 | % | 8.5 | % | ||||||
Combined ratio |
| 57.6 | % | 82.2 | % | 68.5 | % | 84.0 | % |
|
| 78.3 | % | ||||||
10
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Quarter ended June 30, 2005
|
| 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 |
| 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 | % | ||||||
11
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Six Months ended June 30, 2006
|
| Global |
| U.S. |
| Total |
| Reinsurance |
| Corporate |
| Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gross premiums written |
| $ | 523,033 |
| $ | 543,622 |
| $ | 1,066,655 |
| $ | 1,093,465 |
| — |
| $ | 2,160,120 |
|
Net premiums written |
| 435,556 |
| 294,620 |
| 730,176 |
| 1,082,884 |
| — |
| 1,813,060 |
| |||||
Net premiums earned |
| 365,767 |
| 280,517 |
| 646,284 |
| 666,409 |
| — |
| 1,312,693 |
| |||||
Other insurance related income |
| — |
| 1,062 |
| 1,062 |
| — |
| — |
| 1,062 |
| |||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net losses and loss expenses |
| (149,322 | ) | (154,633 | ) | (303,955 | ) | (426,685 | ) | — |
| (730,640 | ) | |||||
Acquisition costs |
| (51,142 | ) | (25,068 | ) | (76,210 | ) | (115,326 | ) | — |
| (191,536 | ) | |||||
General and administrative expenses |
| (21,172 | ) | (46,756 | ) | (67,928 | ) | (22,215 | ) | — |
| (90,143 | ) | |||||
Underwriting income |
| 144,131 |
| 55,122 |
| 199,253 |
| 102,183 |
| — |
| 301,436 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Corporate expenses |
|
|
|
|
|
|
|
|
| (22,925 | ) | (22,925 | ) | |||||
Net investment income |
|
|
|
|
|
|
|
|
| 185,231 |
| 185,231 |
| |||||
Realized losses on investments |
|
|
|
|
|
|
|
|
| (20,706 | ) | (20,706 | ) | |||||
Foreign exchange gains |
|
|
|
|
|
|
|
|
| 28,165 |
| 28,165 |
| |||||
Interest expense |
|
|
|
|
|
|
|
|
| (16,400 | ) | (16,400 | ) | |||||
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
| $ | 454,801 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss and loss expense ratio |
| 40.8 | % | 55.1 | % | 47.0 | % | 64.0 | % |
|
| 55.7 | % | |||||
Acquisition cost ratio |
| 14.0 | % | 8.9 | % | 11.8 | % | 17.3 | % |
|
| 14.6 | % | |||||
General and administrative expense ratio |
| 5.8 | % | 16.7 | % | 10.5 | % | 3.3 | % | 1.7 | % | 8.6 | % | |||||
Combined ratio |
| 60.6 | % | 80.7 | % | 69.3 | % | 84.6.% |
|
|
| 78.9 | % | |||||
12
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Six Months ended June 30, 2005
|
| Global |
| 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 |
| 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 | % | |||||
13
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. 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) 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 governmental regulations, (11) increased competition, (12) general economic conditions and (13) the other matters set forth under Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2005 filed with the SEC on March 9, 2006. 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 ‘operating income’ which represents net income available to common shareholders, before the after tax impact of net realized gains and losses on investments, “operating income, excluding the after tax impact of foreign exchange gains/losses” and “diluted book value per common 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
14
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.
15
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
OPERATING INCOME
For the Quarters and Six Months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2006 |
| June 30, 2005 |
| June 30, 2006 |
| June 30, 2005 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 223,400 |
| $ | 172,845 |
| 418,585 |
| 324,644 |
| ||
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| 9,777 |
| (1,831 | ) | 20,706 |
| (438 | ) | ||||
Adjustment for associated tax impact of net realized (losses) gains on investments |
| (929 | ) | (65 | ) | (1,872 | ) | (521 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income |
| $ | 232,248 |
| $ | 170,949 |
| $ | 437,419 |
| $ | 323,685 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - diluted |
| $ | 1.37 |
| $ | 1.13 |
| $ | 2.56 |
| $ | 2.07 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| 0.06 |
| (0.01 | ) | 0.13 |
| — |
| ||||
Adjustment for associated tax impact of net realized (losses) gains on investments |
| (0.01 | ) | — |
| (0.01 | ) | — |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income per share - diluted |
| $ | 1.42 |
| $ | 1.12 |
| $ | 2.68 |
| $ | 2.07 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - diluted |
| 163,325,459 |
| 153,637,750 |
| 163,441,641 |
| 157,013,504 |
|
16
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
OPERATING INCOME EXCLUDING FOREIGN EXCHANGE (GAINS) LOSSES, NET OF TAX
For the Quarters and Six Months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except per share amounts)
|
| Quarters ended |
| Six Months ended |
| ||||||||
|
| June 30, 2006 |
| June 30, 2005 |
| June 30, 2006 |
| June 30, 2005 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 223,400 |
| $ | 172,845 |
| 418,585 |
| 324,644 |
| ||
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| 9,777 |
| (1,831 | ) | 20,706 |
| (438 | ) | ||||
Adjustment for foreign exchange losses (gains) |
| (18,901 | ) | 27,226 |
| (28,165 | ) | 50,644 |
| ||||
Adjustment for associated tax impact |
| (39 | ) | (812 | ) | (689 | ) | (1,725 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income excluding foreign exchange (losses) gains, net of tax |
| $ | 214,237 |
| $ | 197,428 |
| $ | 410,437 |
| $ | 373,125 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share - diluted |
| $ | 1.37 |
| $ | 1.13 |
| $ | 2.56 |
| $ | 2.07 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjustment for net realized losses (gains) on investments |
| 0.06 |
| (0.01 | ) | 0.13 | ) | — |
| ||||
Adjustment for foreign exchange losses (gains) |
| (0.12 | ) | 0.18 |
| (0.17 | ) | 0.32 |
| ||||
Adjustment for associated tax impact |
| — |
| (0.01 | ) | — |
| (0.01 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Operating income excluding foreign exchange (losses) gains, net of tax, per share - diluted |
| $ | 1.31 |
| $ | 1.29 |
| $ | 2.52 |
| $ | 2.38 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares and common share equivalents - diluted |
| 163,325,459 |
| 153,637,750 |
| 163,441,641 |
| 157,013,504 |
| ||||
|
|
|
|
|
|
|
|
|
|
17
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
DILUTED BOOK VALUE PER SHARE
As at June 30, 2006 and December 31, 2005
(Expressed in thousands of U.S. dollars, except share and per share amounts)
|
| June 30, 2006 |
| December 31, 2005 |
| ||
|
|
|
|
|
| ||
Total shareholders’ equity |
| $ | 3,818,723 |
| $ | 3,512,351 |
|
less preferred equity |
| (500,000 | ) | (500,000 | ) | ||
Common shareholders’ equity |
| $ | 3,318,723 |
| $ | 3,012,351 |
|
|
|
|
|
|
| ||
Common shares outstanding |
| 149,809,873 |
| 148,868,759 |
| ||
|
|
|
|
|
| ||
Book value per common share |
| $ | 22.15 |
| $ | 20.23 |
|
|
|
|
|
|
| ||
Diluted book value on an “as if converted basis” |
|
|
|
|
| ||
|
|
|
|
|
| ||
Common shareholders’ equity |
| $ | 3,318,723 |
| $ | 3,012,351 |
|
add in: |
|
|
|
|
| ||
proceeds on exercise of options |
| 101,050 |
| 117,808 |
| ||
proceeds on exercise of warrants |
| 244,812 |
| 244,812 |
| ||
Adjusted shareholders’ equity |
| 3,664,585 |
| 3,374,971 |
| ||
|
|
|
|
|
| ||
As if converted diluted shares outstanding |
|
|
|
|
| ||
|
|
|
|
|
| ||
Common shares outstanding |
| 149,809,873 |
| 148,868,759 |
| ||
add in: |
|
|
|
|
| ||
vesting of restricted stock |
| 2,291,590 |
| 1,172,550 |
| ||
exercise of options |
| 5,398,517 |
| 6,174,464 |
| ||
exercise of warrants |
| 19,665,963 |
| 19,650,509 |
| ||
|
|
|
|
|
| ||
Diluted common shares outstanding |
| 177,165,943 |
| 175,866,282 |
| ||
|
|
|
|
|
| ||
Diluted book value per common share |
| $ | 20.68 |
| $ | 19.19 |
|
18