AXIS Capital Wachovia Nantucket Equity Conference 2008 David Greenfield, CFO June 25, 2008 Exhibit 99.1 |
2 Safe Harbor Disclosure Statements in this presentation that are not historical facts, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections, may be “forward-looking statements” within the meaning of the U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States securities laws. In some cases, these statements can be identified by the use of forward-looking words such as “may,” “should,” “could,” “anticipate,” “estimate,” “expect,” “plan,” “believe,” “predict,” “potential,” “intend” or similar expressions. Our expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. Forward-looking statements contained in this presentation may include, but are not limited to, information regarding our estimates of losses related to hurricanes and other catastrophes, our expectations regarding pricing and other market conditions, our growth prospects, the amount of our acquisition costs, the amount of our net losses and loss reserves, the projected amount of our capital expenditures, management of interest rate and foreign currency risks, valuations of potential interest rate shifts and foreign currency rate changes and measurements of potential losses in fair market values of our investment portfolio. Forward-looking statements only reflect our expectations and are not guarantees of performance. 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) the failure of any of the loss limitation methods we employ, (4) the effects of emerging claims and coverage issues, (5) the failure of our cedants to adequately evaluate risks, (6) the loss of one or more key executives, (7) a decline in our ratings with rating agencies, (8) loss of business provided to us by our major brokers, (9) changes in accounting policies or practices, (10) changes in governmental regulations, (11) increased competition, (12) changes in the political environment of certain countries in which we operate or underwrite business, (13) interest rate and/or currency value fluctuations, (14) general economic conditions and (15) other matters that can be found in our filings with the Securities and Exchange Commission. Forward-looking statements are only as of the date they are made, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Cautionary Statement Regarding Forward-looking Statements |
3 Well-diversified leader in the global wholesale P&C markets Established global insurance and reinsurance platforms Well-diversified mix of specialty and niche businesses Geographic diversification globally Disciplined and proven underwriter Proven steward of capital (generated profitability in every year since inception in 2001) Conservative reserving practices Well-managed exposure Platform built to execute in all phases of (re)insurance cycle Strong balance sheet with solid financial performance Conservative balance sheet with total assets of $15.6 billion and total capitalization of $5.9 billion High-quality, conservative investment portfolio Ratings of A (S&P - positive), A2 (Moody’s - stable) and A (AM Best - stable) 18% compound annual growth in diluted book value and accumulated dividends since 2002 Experienced management team with significant stock ownership Investment Highlights |
4 GPW by Segment 2007 GPW = $3,590 M AXIS Re 43% AXIS Insurance 57% $0 $1,000 $2,000 $3,000 $4,000 2002 2003 2004 2005 2006 2007 AXIS Insurance AXIS Re $1,108 $2,274 $3,012 $3,394 $3,609 ($ in millions) Gross Premiums Written 2002 - 2007 Global Specialty Insurer and Reinsurer $3,590 Well-positioned to navigate all phases of (re)insurance cycle with established presence in both insurance and reinsurance markets globally |
5 Diversified Strategic Footprint 2002 $1.1Bn 2003 $2.3Bn 2004 $3.0Bn 2005 $3.4Bn 2006 $3.6Bn Bermuda London- market Worldwide specialty lines portfolio U.S. excess & surplus lines U.S. professional lines renewal rights (D&O) Bermuda professional lines (D&O) E&O team European professional lines Media Pro relationship established Entry into media liability and small/middle- market professional lines business through acquisition of Media Pro AXIS Re Property catastrophe reinsurance portfolio Establishment of U.S. casualty reinsurance portfolio Establishment of Continental European reinsurance presence in Zurich AXIS Insurance Representative office in Singapore Selective diversification by product and geography with well-timed entry Continued diversification at many levels within portfolio Entry into global engineering and construction reinsurance 2007 $3.6Bn 2008 Australia branch Singapore branch pending Canada branch pending Singapore branch pending |
6 Quality, Sustainability and Profitability 27.7% 22.5% 23.0% 21.5% 24.4% 25.2% 42.7% 51.1% 61.4% 80.3% 52.9% 50.1% 0% 25% 50% 75% 100% 2002 2003 2004 2005 2006 2007 24.6% 26.7% 2.9% 16.3% 22.3% 14.7% 0% 10% 20% 30% 2002 2003 2004 2005 2006 2007 $1,055.2 $925.8 $90.1 $495.0 $532.4 $265.1 $0 $250 $500 $750 $1,000 $1,250 2002 2003 2004 2005 2006 2007 ($ in millions) 70.4% 73.6% 84.4% 101.8% 77.3% Total Expense Ratio Loss Ratio AVERAGE= 80.5% AVERAGE = 17.9% Return on Average Common Equity Net Income Combined Ratio 75.3% |
7 Q1 2008 Results $1,303 $1,264 $1,100.0 $1,200.0 $1,300.0 $1,400.0 $1,500.0 Q1 2007 Q1 2008 Consolidated Gross Premiums Written (3.0%) $866 $829 $0.0 $250.0 $500.0 $750.0 $1,000.0 Q1 2007 Q1 2008 AXIS Re Gross Premiums Written (4.3%) $436 $435 $0.0 $250.0 $500.0 Q1 2007 Q1 2008 AXIS Insurance Gross Premiums Written (0.0%) 80.7% 81.2% 0.0% 25.0% 50.0% 75.0% 100.0% Q1 2007 Q1 2008 Consolidated Combined Ratio = 0.5% $125 $86 $0.0 $50.0 $100.0 $150.0 $200.0 Q1 2007 Q1 2008 (31.6%) $228 $238 $0.0 $125.0 $250.0 Q1 2007 Q1 2008 Consolidated Net Income Consolidated Net Investment Income 4.5% ($ in millions) GPW decreased due to higher cedant retentions in AXIS Re and underwriting discipline against backdrop of competitive market conditions. Strong underwriting results and FX gains offset negative impact of financial markets turmoil on net investment income. |
8 AXIS Insurance – Strategic Global Presence Bermuda • Global capability with few exceptions • Ability to transact with both Bermuda and London wholesale markets Europe • London and Dublin • Surplus-lines eligible in 43 states • Freedom of Services permissions in all 27 EU countries • Business written in 188 countries since inception Australasia • Singapore branch (pending) • Australia branch North America • Nationwide network of 10 offices in U.S. • Office in Toronto • Flexibility to write on admitted and non-admitted basis in all 50 states • Top 15 E&S carrier in the U.S. • Canada branch (pending) |
9 AXIS Insurance Overview 2007 GPW by Line of Business Total GPW = $2,039 M Property 32% Marine 11% Terrorism 3% Aviation 3% Political Risk 11% Professional Lines 26% Liability 12% Other 1% Net Premiums Earned Underwriting Profit Combined Ratio $1,208 M 374 M 69.2% 2007 Financial Highlights Product lines coordinated on a global basis Specialty Lines division – both traditional P&C and specialty insurance products Professional Lines division – D&O, E&O and other professional lines products Capital Risk Solutions division– political risk, emerging market credit, aviation and terrorism products Select Markets division – specialty insurance products largely targeting small and middle market commercial clients |
10 AXIS Insurance Premium Since Inception 0 300 600 900 1,200 1,500 1,800 2,100 2002 2003 2004 2005 2006 2007 ($ in millions) $794 $1,607 $1,920 Property Marine Terrorism Aviation & Aerospace $1,875 $2,070 Political Risk Professional Lines Casualty Accident & Health $2,039 Focus on underwriting profitability 69% 72% 93% 81% 68% 62% Combined Ratio |
11 AXIS Re Overview 2007 GPW by Line of Business Total GPW = $1,551 M Catastrophe 30% Property 18% Professional Lines 15% Credit and Bond 8% Motor 6% Other 7% Liability 16% Net Premiums Earned Underwriting Profit Combined Ratio $1,526 M 364 M 76.3% 2007 Financial Highlights Established presence in New York, Bermuda, Zurich and Singapore Global catastrophe reinsurance portfolio complemented by: Targeted activity in specialist U.S. casualty reinsurance and Balance of both traditional and specialist reinsurance in Continental Europe Primarily non-proportional business Sought-after lead market offering technical expertise and meaningful capacity Focus on targeted clients in specific market segments to limit capacity provided to a given segment |
12 AXIS Re Premium Since Inception 0 300 600 900 1,200 1,500 1,800 2002 2003 2004 2005 2006 2007 ($ in millions) $667 $1,093 $1,519 (1) $1,539 Catastrophe Property Professional Lines Credit & Bond Motor Liability Other $314 (1) Includes KRW reinstatement premiums of $88 million. $1,551 Focus on underwriting profitability 76% 78% 106% 85% 66% 62% Combined Ratio |
13 Risk Management Strategies • Properly considered and controlled medium and long-term strategy • Minimizes reliance on external protection (e.g. securitization of risks or reinsurance purchase) • Diversification credit applied only within portfolios and portfolio risk-adequate pricing is mandated by business unit Strict Control Environment Defined Tolerance Levels • Rigorous, centralized peer review • Controls designed to identify, assess and manage risk • Limits expressed in ways that can be measured, monitored and peer-reviewed • Strict budgeting and accumulation control • Maximum limits and risk tolerances for potential shock losses • Limit overall exposure to long-tail business • Robust management of overlap between insurance and reinsurance businesses Selective Diversification |
14 Strong Risk Management 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 4% 6% 8% 10% 12% 14% 16% 18% 20% Company A Company B Company C Company D Company E Company L AXIS Company K Six year standard deviation (2002-2007 RoACE) Company I Company G Company J Company H Company F 2.06 2.17 0.97 1.89 1.49 1.33 2.02 0.44 0.98 0.94 0.97 0.72 1.31 Note: Peer universe comprises Bermuda-based (re)insurers and U.S. reinsurers. Data label calculated as RoACE (2002-2007 average) / six year standard deviation Source: Company filings Strong risk management has driven outstanding risk-return profile |
15 Strong Balance Sheet Total Cash and Invested Assets Premiums Receivable Reinsurance Recoverable Other Assets Total Assets Loss & Loss Adjustment Expense Reserves Unearned Premium Long-Term Debt Other Liabilities Total Liabilities Total Shareholders’ Equity Gross Reserves / Equity Capital Gross Reserves / Total Capital Net Reserves / Equity Capital Net Reserves/ Total Capital Reinsurance Recoverables / Equity Capital Reinsurance Recoverables / Total Capital $10,311 1,231 1,357 1,776 $14,675 $5,587 2,146 499 1,284 $9,516 $5,159 108% 99% 82% 75% 26% 24% ($ millions) $7,703 1,027 1,518 1,678 $11,926 $4,743 1,760 499 1,411 $8,414 $3,512 135% 118% 92% 80% 43% 38% $9,653 1,126 1,359 1,528 $13,665 $5,015 2,016 499 1,723 $9,253 $4,412 114% 102% 83% 74% 31% 28% 2007 December 31, 2006 2005 March 31, 2008 $10,655 1,608 1,426 1,952 $15,640 $5,814 2,575 499 1,381 $10,269 $5,371 108% 99% 82% 75% 26% 24% |
16 Favorable Reserve Development since Inception 27.7 106.8 268.7 168.3 214.0 54.6 28.1 74.9 114.3 49.0 123.0 33.4 $0 $100 $200 $300 $400 2003 2004 2005 2006 2007 Q1 08 ($ in millions) Reinsurance Insurance $55.8 $181.7 $383.0 $216.5 $322 excluding adverse KRW development of $105 $337.0 We mitigate reserve risk by limiting overall exposure to long-tail business, integrating third-party actuarial input into our prudent reserving practices and by utilizing institutional knowledge from participation in both insurance and reinsurance markets $88.1 |
17 Strong Net Reserve Position $454 $59 $63 $361 $271 $73 $574 $316 $599 $443 $556 $538 $0 $400 $800 $1,200 Property and Other Liability Professional Lines Cat, Property & other Credit & Bond, Motor & Liability Professional Lines Net Case Reserves Net IBNR Reserve ($ in millions) AXIS Insurance Net IBNR Reserves = $1,489 Net Reserves = $2,065 AXIS Re Net IBNR Reserves = $1,537 Net Reserves = $2,243 $1,028 $375 $662 $804 $827 $611 Note: Information as of December 31, 2007 |
18 Conservative Investment Portfolio Mortgage Backed Securities 34% Corporate Debt 21% U.S. Treasury/Agency 12% Asset Backed Securities 4% Cash & Equivalents 15% Municipals/Non- U.S. Government 8% Total Cash and Fixed Income (ex. Other) $10.0 Bn Duration (years) Average Credit Quality Book Yield (Mar 31) Total Return (TTM) 2.61 AA+ 5.06% 6.30% Managers have a total return mandate Emphasis on capital preservation Short duration customized fixed income benchmarks No non-investment grade holdings in fixed income portfolio No exposure to lower-rated tranches of sub prime ABS 81.5% of investments are AA- or better Other Investments 6% Total Cash & Investments $10.7 Bn |
19 $152.1 $256.7 $407.1 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 1Q 04 2Q 04 3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08 $0.0 $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 Other Investments Fixed Income Cash LTM Net Investment Income Investment Income Momentum $4 4.9% ($36) 4.9% $3 4.8% $24 4.8% $25 4.9% $2 5.0% $3 5.0% $5 $13 $6 $6 $3 $1 $1 $1 - - Investment Income Other Investments (in millions) 4.8% 5.1% 4.6% 4.3% 4.0% 3.8% 3.7% 3.5% 3.2% 3.3% Earned Yield for Cash and Fixed Maturities $ $482.9 $443.2 Growth in investment income driven by strong operating cash flows and growth in invested assets $ |
20 Modest Financial Leverage = Financial Flexibility 1,961 2,817 3,238 3,012 3,913 4,659 4,871 250 250 250 250 250 250 250 250 499 499 499 499 499 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2002 2003 2004 2005 2006 2007 3/31/2008 ($ in millions) $2,817 $3,737 $4,011 $4,912 Common Equity Series A Preferred Equity Series B Preferred Equity Debt $1,961 $5,658 Capitalization Ratios Debt / Total Capital 8.5% Debt + Preferred / Total Capital 17.0% $5,871 |
21 Driving Shareholder Value Creation Diluted Book Value Per Share (1) (1) Calculated using the treasury stock method. Accumulated Dividends Paid Diluted book value per share + Accumulated dividends 2002 – Q1 08 Average ROACE = 18.0% Diluted book value per share plus accumulated dividends have grown at an annualized rate of 17.7% from 2002 through March 31, 2008 $13.90 $16.81 $19.81 $19.43 $25.14 $31.14 ’02-Q1 08 CAGR = 17.7% $32.68 $29.96 $28.79 $23.45 $18.34 $19.29 $16.74 $13.90 $0.00 $7.00 $14.00 $21.00 $28.00 $35.00 2002 2003 2004 2005 2006 2007 Q1 08 |