Exhibit 99.1
| | |
| Investor Contacts | | Media Contacts |
| |
| Linda Ventresca | | Joseph Kuo |
| AXIS Capital Holdings Limited | | Kekst and Company |
| investorrelations@axiscapital.com | | (212) 521-4800 |
| (441) 405-2727 | | |
AXIS CAPITAL REPORTS THIRD QUARTER OPERATING INCOME OF $152 MILLION
DILUTED OPERATING EARNINGS PER SHARE OF $1.00 AND
ANNUALIZED OPERATING RETURN ON AVERAGE COMMON EQUITY OF 13.0%
Pembroke, Bermuda, November 2, 2009 - 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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 1 -
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 and 7.5% 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. |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 2 -
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.”
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 3 -
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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 4 -
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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 5 -
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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 6 -
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 September 30, 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 atwww.axiscapital.com.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 7 -
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31, 2008
| | | | | | | | |
| | | 2009 | | | 2008 | |
| | | (in thousands) | |
Assets | | | | |
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 | |
| | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 8 -
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 | |
| | | | | | | | | | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 9 -
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 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 10 -
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 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 11 -
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. |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 12 -
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,
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 13 -
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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
- 14 -
