Exhibit 99.1
| | |
| Investor Contact | | Media Contact |
| Linda Ventresca | | Michael Herley |
| AXIS Capital Holdings Limited | | Kekst and Company |
| investorrelations@axiscapital.com | | michael-herley@kekst.com |
| (441) 405-2727 | | (212) 521-4897 |
AXIS CAPITAL REPORTS FOURTH QUARTER OPERATING INCOME OF $67 MILLION
Company reports quarterly diluted operating earnings per common share of $0.53 and annualized operating return on average common equity of 5.5%
Pembroke, Bermuda, February 7, 2012 - AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE: AXS) today reported net income available to common shareholders for the fourth quarter of 2011 of $80 million, or $0.63 per diluted common share, compared with $264 million, or $1.99 per diluted common share, for the fourth quarter of 2010. Net income for the full year 2011 was $9 million, or $0.07 per diluted common share, compared with $820 million, or $6.02 per diluted common share, for 2010.
Operating income1 for the fourth quarter of 2011 was $67 million, or $0.53 per diluted common share, compared with $182 million, or $1.37 per diluted common share, for the fourth quarter of 2010. For the full year 2011, AXIS Capital reported an operating loss of $154 million, or $1.26 per diluted common share, compared with operating income of $611 million, or $4.49 per diluted common share for 2010.
| 1 | Effective April 1, 2011, AXIS Capital amended its definition of operating income (loss) to exclude after-tax foreign exchange losses (gains). Accordingly, all prior period operating income, diluted operating earnings per share and operating return on average common equity amounts herein have been restated to reflect this change. The presentation of operating income (loss) available to common shareholders is a “non-GAAP financial measure” as defined in Regulation G. The reconciliation of operating income (loss) to net income available to common shareholders (the most directly comparable GAAP financial measure) is provided in this release, as is a discussion of the presentation of operating income (loss). |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Fourth Quarter and Full Year Highlights2
| • | | Gross premiums written increased 5% in the quarter to $667 million and 9% for the year to $4.1 billion; |
| • | | Net premiums earned increased 12% in the quarter to $847 million and 12% for the year to $3.3 billion; |
| • | | Combined ratios of 100.5% and 112.3% for the quarter and year, respectively, compared to 85.6% and 88.7% in 2010; |
| • | | Major catastrophe-related losses in the quarter included: |
| | • | | Estimated pre-tax net losses (net of reinstatement premiums) of $64 million in relation to the Thai flooding; and |
| | • | | A $75 million aggregate increase in our pre-tax net loss estimate (net of reinstatement premiums) for catastrophe events that occurred in the first three quarters of 2011, including $32 million in relation to the Japanese earthquake and tsunami and $31 million in relation to the February New Zealand earthquake (“New Zealand II”). |
| • | | Net favorable prior year reserve development of $78 million in the quarter, pre-tax, benefiting the combined ratio by 9.2 points, compared with $81 million in the prior year quarter, benefiting the combined ratio by 10.7 points; |
| • | | Net investment income for the quarter declined 5% to $102 million; |
| • | | Net cash flows from operations were $199 million for the quarter and $1.2 billion for the year; |
| • | | Operating income of $67 million for the quarter, representing an annualized operating return on average common equity of 5.5%; |
| • | | Share repurchases under our authorized repurchase plan totaled $50 million in the quarter; |
| • | | Diluted book value per common share of $38.08 at December 31, 2011, a 3% increase from September 30, 2011; |
| • | | Quarterly common share dividend declared increased 4% to $0.24 per share. |
| 2 | All comparisons are with the same period last year, unless otherwise stated. |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Commenting on the 2011 financial results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: “An extraordinary series of costly natural disasters, which are estimated to have cost our industry over $100 billion, took center stage in 2011. These occurred against the backdrop of a prolonged soft market at perhaps the weakest phase in its business cycle, when adequate pricing remained extremely difficult to obtain. Further, on the asset side, we experienced the persistence of abnormally low interest rates, which made low-risk investment income difficult to achieve.
“While we are unhappy with the adverse impact of these extraordinary events on our earnings, we are nonetheless pleased with the ability of our portfolio to absorb these losses without impairing our financial strength. Over the long term, we have compiled an exceptional record and I am pleased that even during such a difficult year we continued to build our Company and deliver franchise value to our shareholders.
“The eagerly awaited cyclical upturn, however, will not occur all at once. It is a cycle change, not an event change. Some business areas will continue to remain under pressure. I estimate the firming process, which has already started in some products, will be gradual, gaining ground risk by risk, product by product, geography by geography, and year by year. The current market turn may require a few years to regain the pricing eroded over the last five or six.
“As a result, AXIS will continue to proceed with steadfast caution. We are well positioned to rapidly scale up in a wide range of business lines and geographic regions as the opportunities fully arrive. We also have the underwriting expertise, the flexibility and the financial capacity to take advantage of these opportunities as positive momentum gathers and markets adjust upward. Importantly, all of us at AXIS recognize the necessity to return to profitability during the coming year. I can assure that our best endeavors will be devoted to that singular cause.”
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Segment Highlights
Insurance Segment
Our insurance segment reported gross premiums written of $521 million in the quarter, up 5% from the fourth quarter of 2010 largely driven by growth in our newer geographies (including Canada and Australia) and business lines. For the full year, gross premiums written were $2,122 million; the 11% increase from the prior year was reflective of growth in newer geographies and businesses, including our accident & health unit. Net premiums earned increased 13% and 18%, respectively, for the quarter and year. Gross premiums written growth drove these increases, with changes in our ceded reinsurance purchasing effected during the second quarter of 2010 also contributing to the year-over-year increase.
Our insurance segment reported underwriting income of $22 million for the quarter, compared to $68 million in the fourth quarter of 2010. The current quarter’s underwriting result reflected a combined ratio of 94.1% compared with 79.5% in the prior year quarter. The segment’s current accident year loss ratio increased from 50.9% in the fourth quarter of 2010 to 68.9% this quarter. Fourth quarter 2011 results included $32 million in pre-tax net losses (net of reinstatement premiums) related to the Thai floods, whereas catastrophe-related losses in 2010 were insignificant. A higher frequency of property and energy losses also contributed to the quarter-over-quarter increase in the current accident year ratio. Net favorable prior period reserve development was $29 million, or 7.8 points, this quarter compared with $34 million, or 10.5 points, in the fourth quarter of 2010. The reduction in general and administrative expenses for the quarter was the result of lower performance-related compensation costs. For the full year, underwriting income was $35 million compared with $210 million in 2010; the difference was largely attributable to a higher level of natural catastrophe activity.
Reinsurance Segment
Our reinsurance segment reported gross premiums written of $145 million for the quarter, comparable to $138 million in the fourth quarter of 2010. For the year, gross premiums written were $1,974 million, with the 8% increase from 2010 primarily driven by our motor and trade credit and bond reinsurance lines. Net premiums earned increased 11% and 8% for the quarter and year, respectively.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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The reinsurance segment reported an underwriting loss of $7 million for the quarter, compared with underwriting income of $65 million in the fourth quarter of 2010. The segment’s combined ratio increased from 84.9% in the fourth quarter of 2010 to 101.5% for the fourth quarter of 2011.
The segment’s fourth quarter 2011 and 2010 current accident year loss ratios of 85.3% and 69.3%, respectively, were both impacted by catastrophe-related losses. Fourth quarter 2011 results included estimated pre-tax net losses (net of reinstatement premiums) of $32 million related to the Thai floods. In addition, the segment’s aggregate estimated pre-tax net losses (net of reinstatement premiums) related to catastrophe events that occurred during the first three quarters of 2011 increased by $80 million; this included increases of $33 million and $31 million, respectively, related to the Japanese earthquake and tsunami and New Zealand II. Comparatively, fourth quarter 2010 results included an aggregate $41 million increase in estimated pre-tax net losses (net of reinstatement premiums) for the Chilean and New Zealand I earthquakes.
Net favorable prior period reserve development was $49 million, or 10.3 points, this quarter compared with $47 million, or 10.9 points, in the fourth quarter of 2010. The reduction in general and administrative expenses for the quarter was driven by lower performance-related compensation costs.
For the full year, our reinsurance segment reported an underwriting loss of $362 million, compared with income of $199 million for 2010. The significant increase in the level of natural catastrophe activity during 2011 was the primary driver of this variance.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Investments
Net investment income for the quarter was $102 million compared to $108 million in the prior year quarter. The decrease was primarily due to lower reinvestment yields on our fixed maturities. For the full year, net investment income decreased 11% to $362 million, primarily due to lower returns from our alternative investments and lower reinvestment yields on our fixed maturities.
For the quarter, net realized investment losses were $4 million compared to net realized investment gains of $78 million in the prior year quarter. Net realized investment gains were $121 million for the full year compared to $195 million in 2010.
Capitalization / Shareholders’ Equity
Total capitalization at December 31, 2011 was $6.4 billion, including $1.0 billion of long-term debt and $0.5 billion of preferred equity.
At December 31, 2011, diluted book value per common share on a treasury stock basis was $38.08, a 3% increase from $37.06 at September 30, 2011 but a decline from $39.37 at December 31, 2010.
During the quarter, we repurchased 1.6 million common shares under our authorized repurchase plan at an average price of $31.07 per share, for a total cost of $50 million. As of February 6, 2012 we had approximately $544 million of remaining authorization for common share repurchases through December 31, 2012.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Conference Call
We will host a conference call on Wednesday, February 8, 2012 at 10:00 AM (Eastern) to discuss fourth quarter and year-end financial results and related matters. The teleconference can be accessed by dialing (866) 843-0890 (U.S. callers) or (412) 317-9250 (international callers) approximately ten minutes in advance of the call and entering the code 2-6-7-8-2-8-0. A live, listen-only webcast of the call will also be available via the Investor Information section of the Company’s website atwww.axiscapital.com. A replay of the teleconference will be available for three weeks by dialing (877) 344-7529 (U.S. callers) or (412) 317-0088 (international callers) and entering the code 1-0-0-0-8-3-9-3. The webcast will be archived in the Investor Information section of the Company’s website.
In addition, a financial supplement relating to our financial results for the quarter ended December 31, 2011 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 December 31, 2011 of $5.4 billion and locations in Bermuda, the United States, Europe, Singapore, Canada, Australia and Latin America. Its operating subsidiaries have been assigned a rating of “A+” (“Strong”) by Standard & Poor’s and “A” (“Excellent”) by A.M. Best. AXIS Capital and AXIS Specialty Finance LLC have been assigned senior unsecured debt ratings 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
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2011 (UNAUDITED) AND 2010
| | | | | | | | |
| | | 2011 | | | 2010 | |
| | | (in thousands) | |
Assets | | | | | | | | |
Investments: | | | | |
Fixed maturities, available for sale, at fair value | | $ | 10,940,100 | | | $ | 10,482,897 | |
Equity securities, available for sale, at fair value | | | 677,560 | | | | 349,254 | |
Other investments, at fair value | | | 699,320 | | | | 519,296 | |
Short-term investments, at amortized cost | | | 149,909 | | | | 172,719 | |
| | | | | | | | |
Total investments | | | 12,466,889 | | | | 11,524,166 | |
Cash and cash equivalents | | | 981,849 | | | | 929,515 | |
Restricted cash and cash equivalents | | | 100,989 | | | | 115,840 | |
Accrued interest receivable | | | 98,346 | | | | 96,364 | |
Insurance and reinsurance premium balances receivable | | | 1,413,839 | | | | 1,343,665 | |
Reinsurance recoverable on unpaid and paid losses | | | 1,770,329 | | | | 1,577,547 | |
Deferred acquisition costs | | | 407,527 | | | | 359,300 | |
Prepaid reinsurance premiums | | | 238,623 | | | | 221,396 | |
Net receivable for investments sold | | | 3,006 | | | | — | |
Goodwill and intangible assets | | | 99,590 | | | | 103,231 | |
Other assets | | | 225,072 | | | | 174,707 | |
| | | | | | | | |
Total assets | | $ | 17,806,059 | | | $ | 16,445,731 | |
| | | | | | | | |
| | |
Liabilities | | | | | | | | |
Reserve for losses and loss expenses | | $ | 8,425,045 | | | $ | 7,032,375 | |
Unearned premiums | | | 2,454,462 | | | | 2,333,676 | |
Insurance and reinsurance balances payable | | | 206,539 | | | | 164,927 | |
Senior notes | | | 994,664 | | | | 994,110 | |
Net payable for investments purchased | | | 151,941 | | | | 20,251 | |
Other liabilities | | | 129,329 | | | | 275,422 | |
| | | | | | | | |
Total liabilities | | | 12,361,980 | | | | 10,820,761 | |
| | | | | | | | |
| | |
Shareholders’ equity | | | | | | | | |
Preferred shares - Series A and B | | | 500,000 | | | | 500,000 | |
Common shares | | | 2,125 | | | | 1,934 | |
Additional paid-in capital | | | 2,105,386 | | | | 2,059,708 | |
Accumulated other comprehensive income | | | 128,162 | | | | 176,821 | |
Retained earnings | | | 4,155,392 | | | | 4,267,608 | |
Treasury shares, at cost | | | (1,446,986 | ) | | | (1,381,101 | ) |
| | | | | | | | |
Total shareholders’ equity | | | 5,444,079 | | | | 5,624,970 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 17,806,059 | | | $ | 16,445,731 | |
| | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2011 AND 2010
| | | | | | | | | | | | | | | | |
| | | Three months ended | | | Years ended | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (in thousands, except per share data) | |
Revenues | | | | | | | | | | | | | | | | |
Net premiums earned | | $ | 846,753 | | | $ | 757,318 | | | $ | 3,314,961 | | | $ | 2,947,410 | |
Net investment income | | | 102,362 | | | | 107,889 | | | | 362,430 | | | | 406,892 | |
Other insurance related income | | | 351 | | | | 345 | | | | 2,396 | | | | 2,073 | |
Net realized investment gains (losses) | | | (3,738 | ) | | | 77,772 | | | | 121,439 | | | | 195,098 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 945,728 | | | | 943,324 | | | | 3,801,226 | | | | 3,551,473 | |
| | | | | | | | | | | | | | | | |
| | | | |
Expenses | | | | | | | | | | | | | | | | |
Net losses and loss expenses | | | 583,454 | | | | 383,345 | | | | 2,675,052 | | | | 1,677,132 | |
Acquisition costs | | | 157,372 | | | | 124,098 | | | | 587,469 | | | | 488,712 | |
General and administrative expenses | | | 109,990 | | | | 140,620 | | | | 459,151 | | | | 449,885 | |
Foreign exchange gains | | | (17,328 | ) | | | (5,120 | ) | | | (44,582 | ) | | | (15,535 | ) |
Interest expense and financing costs | | | 15,616 | | | | 15,690 | | | | 62,598 | | | | 55,876 | |
| | | | | | | | | | | | | | | | |
Total expenses | | | 849,104 | | | | 658,633 | | | | 3,739,688 | | | | 2,656,070 | |
| | | | | | | | | | | | | | | | |
| | | | |
Income before income taxes | | | 96,624 | | | | 284,691 | | | | 61,538 | | | | 895,403 | |
Income tax expense | | | 7,341 | | | | 11,129 | | | | 15,233 | | | | 38,680 | |
| | | | | | | | | | | | | | | | |
Net income | | | 89,283 | | | | 273,562 | | | | 46,305 | | | | 856,723 | |
Preferred shares dividends | | | 9,219 | | | | 9,219 | | | | 36,875 | | | | 36,875 | |
| | | | | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 80,064 | | | $ | 264,343 | | | $ | 9,430 | | | $ | 819,848 | |
| | | | | | | | | | | | | | | | |
| | | | |
Per share data | | | | | | | | | | | | | | | | |
Net income per common share: | | | | | | | | | | | | | | | | |
Basic net income | | $ | 0.63 | | | $ | 2.26 | | | $ | 0.08 | | | $ | 6.74 | |
Diluted net income | | $ | 0.63 | | | $ | 1.99 | | | $ | 0.07 | | | $ | 6.02 | |
Weighted average number of common shares outstanding - basic | | | 126,360 | | | | 117,101 | | | | 122,499 | | | | 121,728 | |
Weighted average number of common shares outstanding - diluted | | | 127,686 | | | | 132,799 | | | | 128,122 | | | | 136,199 | |
Cash dividends declared per common share | | $ | 0.24 | | | $ | 0.23 | | | $ | 0.93 | | | $ | 0.86 | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
FOR THE QUARTERS ENDED DECEMBER 31, 2011 AND 2010
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | |
| | | Insurance | | | Reinsurance | | | Total | | | Insurance | | | Reinsurance | | | Total | |
| | | (in thousands) | |
Gross premiums written | | $ | 521,281 | | | $ | 145,223 | | | $ | 666,504 | | | $ | 496,744 | | | $ | 138,030 | | | $ | 634,774 | |
Net premiums written | | | 349,912 | | | | 145,151 | | | | 495,063 | | | | 349,250 | | | | 139,394 | | | | 488,644 | |
Net premiums earned | | | 371,645 | | | | 475,108 | | | | 846,753 | | | | 328,375 | | | | 428,943 | | | | 757,318 | |
Other insurance related income | | | 351 | | | | — | | | | 351 | | | | 345 | | | | — | | | | 345 | |
Net losses and loss expenses | | | (227,064 | ) | | | (356,390 | ) | | | (583,454 | ) | | | (132,811 | ) | | | (250,534 | ) | | | (383,345 | ) |
Acquisition costs | | | (54,508 | ) | | | (102,864 | ) | | | (157,372 | ) | | | (41,553 | ) | | | (82,545 | ) | | | (124,098 | ) |
General and administrative expenses | | | (68,187 | ) | | | (23,015 | ) | | | (91,202 | ) | | | (86,633 | ) | | | (31,041 | ) | | | (117,674 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underwriting income (loss) | | $ | 22,237 | | | $ | (7,161 | ) | | | 15,076 | | | $ | 67,723 | | | $ | 64,823 | | | | 132,546 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Corporate expenses | | | | | | | | | | | (18,788 | ) | | | | | | | | | | | (22,946 | ) |
Net investment income | | | | | | | | | | | 102,362 | | | | | | | | | | | | 107,889 | |
Net realized investment gains (losses) | | | | | | | | | | | (3,738 | ) | | | | | | | | | | | 77,772 | |
Foreign exchange gains | | | | | | | | | | | 17,328 | | | | | | | | | | | | 5,120 | |
Interest expense and financing costs | | | | | | | | | | | (15,616 | ) | | | | | | | | | | | (15,690 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | $ | 96,624 | | | | | | | | | | | $ | 284,691 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net loss and loss expense ratio | | | 61.1 | % | | | 75.0 | % | | | 68.9 | % | | | 40.4 | % | | | 58.4 | % | | | 50.6 | % |
Acquisition cost ratio | | | 14.7 | % | | | 21.7 | % | | | 18.6 | % | | | 12.7 | % | | | 19.2 | % | | | 16.4 | % |
General and administrative expense ratio | | | 18.3 | % | | | 4.8 | % | | | 13.0 | % | | | 26.4 | % | | | 7.3 | % | | | 18.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 94.1 | % | | | 101.5 | % | | | 100.5 | % | | | 79.5 | % | | | 84.9 | % | | | 85.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | |
| | | Insurance | | | Reinsurance | | | Total | | | Insurance | | | Reinsurance | | | Total | |
| | | (in thousands) | |
Gross premiums written | | $ | 2,121,829 | | | $ | 1,974,324 | | | $ | 4,096,153 | | | $ | 1,916,116 | | | $ | 1,834,420 | | | $ | 3,750,536 | |
Net premiums written | | | 1,466,134 | | | | 1,953,300 | | | | 3,419,434 | | | | 1,332,220 | | | | 1,815,320 | | | | 3,147,540 | |
Net premiums earned | | | 1,429,687 | | | | 1,885,274 | | | | 3,314,961 | | | | 1,206,493 | | | | 1,740,917 | | | | 2,947,410 | |
Other insurance related income | | | 2,396 | | | | — | | | | 2,396 | | | | 2,073 | | | | — | | | | 2,073 | |
Net losses and loss expenses | | | (919,319 | ) | | | (1,755,733 | ) | | | (2,675,052 | ) | | | (569,869 | ) | | | (1,107,263 | ) | | | (1,677,132 | ) |
Acquisition costs | | | (199,583 | ) | | | (387,886 | ) | | | (587,469 | ) | | | (152,223 | ) | | | (336,489 | ) | | | (488,712 | ) |
General and administrative expenses | | | (278,147 | ) | | | (103,915 | ) | | | (382,062 | ) | | | (276,435 | ) | | | (98,001 | ) | | | (374,436 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Underwriting income (loss) | | $ | 35,034 | | | $ | (362,260 | ) | | | (327,226 | ) | | $ | 210,039 | | | $ | 199,164 | | | | 409,203 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Corporate expenses | | | | | | | | | | | (77,089 | ) | | | | | | | | | | | (75,449 | ) |
Net investment income | | | | | | | | | | | 362,430 | | | | | | | | | | | | 406,892 | |
Net realized investment gains | | | | | | | | | | | 121,439 | | | | | | | | | | | | 195,098 | |
Foreign exchange gains | | | | | | | | | | | 44,582 | | | | | | | | | | | | 15,535 | |
Interest expense and financing costs | | | | | | | | | | | (62,598 | ) | | | | | | | | | | | (55,876 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | $ | 61,538 | | | | | | | | | | | $ | 895,403 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Net loss and loss expense ratio | | | 64.3 | % | | | 93.1 | % | | | 80.7 | % | | | 47.2 | % | | | 63.6 | % | | | 56.9 | % |
Acquisition cost ratio | | | 14.0 | % | | | 20.6 | % | | | 17.7 | % | | | 12.6 | % | | | 19.3 | % | | | 16.6 | % |
General and administrative expense ratio | | | 19.4 | % | | | 5.5 | % | | | 13.9 | % | | | 23.0 | % | | | 5.7 | % | | | 15.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
Combined ratio | | | 97.7 | % | | | 119.2 | % | | | 112.3 | % | | | 82.8 | % | | | 88.6 | % | | | 88.7 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION (UNAUDITED)
OPERATING INCOME (LOSS) AND OPERATING RETURN ON AVERAGE COMMON EQUITY
FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2011 AND 2010
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| | | Quarters ended | | | Years ended | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (in thousands, except per share amounts) | |
| | | | |
Net income available to common shareholders | | $ | 80,064 | | | $ | 264,343 | | | $ | 9,430 | | | $ | 819,848 | |
Net realized investment (gains) losses, net of tax(1) | | | 3,599 | | | | (76,998 | ) | | | (119,736 | ) | | | (193,124 | ) |
Foreign exchange gains, net of tax(2) | | | (16,494 | ) | | | (4,886 | ) | | | (43,606 | ) | | | (15,382 | ) |
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Operating income (loss) | | | 67,169 | | | | 182,459 | | | | (153,912 | ) | | | 611,342 | |
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Net income per share - diluted | | $ | 0.63 | | | $ | 1.99 | | | $ | 0.07 | | | $ | 6.02 | |
Net realized investment (gains) losses, net of tax | | | 0.03 | | | | (0.58 | ) | | | (0.93 | ) | | | (1.42 | ) |
Foreign exchange gains, net of tax | | | (0.13 | ) | | | (0.04 | ) | | | (0.34 | ) | | | (0.11 | ) |
Adjustment for anti-dilutive securities(3) | | | — | | | | — | | | | (0.06 | ) | | | — | |
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Operating income (loss) per share - diluted | | $ | 0.53 | | | $ | 1.37 | | | $ | (1.26 | ) | | $ | 4.49 | |
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Weighted average common shares and common share equivalents - diluted, for net income | | | 127,686 | | | | 132,799 | | | | 128,122 | | | | 136,199 | |
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Weighted average common shares and common share equivalents - diluted, for operating income (loss) | | | 127,686 | | | | 132,799 | | | | 122,499 | | | | 136,199 | |
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Average common shareholders’ equity | | | 4,900,592 | | | | 5,236,954 | | | | 5,034,525 | | | | 5,062,607 | |
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Annualized return on average common equity | | | 6.5 | % | | | 20.2 | % | | | 0.2 | % | | | 16.2 | % |
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Annualized operating return on average common equity | | | 5.5 | % | | | 13.9 | % | | | (3.1 | %) | | | 12.1 | % |
| (1) | Tax (cost) benefit of $140 and ($774) for the quarters ended December, 31 2011 and 2010, respectively, and ($1,703) and ($1,974) for 2011 and 2010, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses. |
| (2) | Tax cost of $834 and $234 for the quarters ended December, 31 2011 and 2010, respectively, and $976 and $153 for 2011 and 2010, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions. |
| (3) | For operating loss per share purposes, we have excluded 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
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Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this release include our expectations regarding market conditions and information regarding our estimates of losses related to natural disasters. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual events or results to be materially different from our expectations include (1) the occurrence of natural and man-made disasters, (2) actual claims exceeding our loss reserves, (3) general economic, capital, and credit market conditions, (4) the failure of any of the loss limitation methods we employ, (5) the effects of emerging claims, coverage and regulatory issues, (6) the failure of our cedants to adequately evaluate risks, (7) inability to obtain additional capital on favorable terms, or at all, (8) the loss of one or more key executives, (9) a decline in our ratings with rating agencies, (10) the loss of business provided to us by our major brokers, (11) changes in accounting policies or practices, (12) the use of industry catastrophe models and changes to these models, (13) changes in governmental regulations, (14) increased competition, (15) changes in the political environment of certain countries in which we operate or underwrite business, (16) fluctuations in interest rates, credit spreads, equity prices and/or currency values, and (17) 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.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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Non-GAAP Financial Measures
In this release, we have presented operating income (loss), which is a “non-GAAP financial measure” as defined in Regulation G. Operating income (loss) represents after-tax operational results without consideration of after-tax net realized investment gains (losses) and foreign exchange losses (gains). A reconciliation of operating income (loss) to the most directly comparable GAAP financial measure, net income available to common shareholders, is included above.
In addition, this press release presents the following measures which are derived from the non-GAAP operating income measure:
| | 1. | Diluted operating earnings (loss) per share - represents operating income (loss) divided by diluted weighted average common shares and share equivalents; and |
| | 2. | Annualized operating return on average common equity - represents operating income (loss) for the period, projected for a full year, as a percentage of average common equity for the period. |
We present our results of operations in the way we believe will be most meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. This includes the presentation of “operating income (loss)”, in total and on a per share basis, and “annualized operating return on average common equity” which is based on the “operating income (loss)” measure.
Although the investment of premiums to generate income and realized investment gains (or losses) is an integral part of our operations, the determination to realize investment gains (or losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (or losses) is somewhat opportunistic for many companies.
Foreign exchange losses (gains) in our Consolidated Statements of Operations are primarily driven by the impact of foreign exchange rate movements on net insurance-related liabilities. However, this movement is only one element of the overall impact of foreign exchange rate fluctuations on our financial position. In addition, we recognize unrealized foreign exchange losses (gains) on our available-for-sale investments in other comprehensive income and foreign exchange losses (gains) realized upon the sale of these investments in net realized investment gains (losses). These unrealized and realized foreign exchange movements generally offset a large portion of the foreign exchange losses (gains) reported separately in earnings, thereby minimizing the impact of foreign exchange rate movements on total shareholders’ equity. As such, the Statement of Operations foreign exchange losses (gains) in isolation are not a fair representation of the performance of our business.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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In this regard, certain users of our financial statements evaluate earnings excluding after-tax net realized investment gains (losses) and foreign exchange losses (gains) to understand the profitability of recurring sources of income.
We believe that showing net income available to common shareholders exclusive of net realized gains (losses) and foreign exchange losses (gains) reflects the underlying fundamentals of our business.
In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude realized gains (losses) and foreign exchange losses (gains) from their analyses for the same reasons.
AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.296.3140
www.axiscapital.com
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