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AXIS Capital Reports Third Quarter Operating Income Of $201 Million

Stocks in this article: AXS

AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE: AXS) today reported net income available to common shareholders for the third quarter of 2012 of $223 million, or $1.82 per diluted common share, compared with $212 million, or $1.66 per diluted common share, for the third quarter of 2011. For the nine months ended September 30, 2012, AXIS Capital reported net income available to common shareholders of $514 million, or $4.11 per diluted common share. During the first nine months of 2011, we recognized a net loss to common shareholders of $71 million, or $0.58 per diluted common share. Our results for the first nine months of 2011 were adversely impacted by $775 million of net-after tax losses from numerous natural catastrophe and weather events.

Operating income 1 for the third quarter of 2012 was $201 million, or $1.63 per diluted common share, compared with $95 million, or $0.74 per diluted common share, for the third quarter of 2011. For the nine months ended September 30, 2012, AXIS Capital reported operating income of $449 million, or $3.60 per diluted common share, compared with an operating loss of $221 million, or $1.82 per diluted common share, for the first nine months of 2011.

1 Operating income (loss) and operating return on average common equity are “non-GAAP financial measures” as defined in Regulation G. A reconciliation of operating income (loss) to net income (loss) available to common shareholders (the nearest GAAP financial measure) and the calculation of operating return on average common equity are provided in this release, as is a discussion of the rationale for the presentation of these items.

Third Quarter Highlights 2

  • Gross premiums written increased 2% to $848 million;
  • Net premiums written decreased 3% to $651 million;
  • Net premiums earned increased 3% to $862 million;
  • Combined ratio of 85.3%, compared to 91.5% for the same period last year;
  • Notable catastrophe and weather-related losses in the quarter included:
    • Estimated pre-tax net losses (net of reinstatement premiums) of $40 million resulting from the impact of severe drought conditions on U.S. crops and $20 million for Hurricane Isaac; and
    • An aggregate $27 million reduction in our estimate of pre-tax net losses (net of reinstatement premiums) for first and second quarter 2012 U.S. weather events.
  • No material change in our aggregate estimate for losses related to 2011 and 2010 calendar year natural catastrophe events during 2012;
  • Net favorable prior year reserve development of $60 million, pre-tax, benefiting the combined ratio by 7.0 points, compared with $78 million in the prior year quarter, benefiting the combined ratio by 9.4 points;
  • Net investment income of $104 million, with our alternative investments driving a $54 million increase;
  • Total return on cash and investments of 2.1% (pre-tax), compared to (0.4%) for the same period last year;
  • Net cash flows from operations of $424 million;
  • Operating income of $201 million, representing an annualized operating return on average common equity of 15.2%;
  • Share repurchases in the quarter totaling $179 million; and
  • Diluted book value per common share of $43.57 at September 30, 2012, an increase of 7% during the quarter, 14% from December 31, 2011 and 18% over the last 12 months.

2 All comparisons are with the same period last year unless otherwise stated.

Commenting on the third quarter 2012 financial results, Albert Benchimol, President and CEO of AXIS said “AXIS delivered a strong third quarter, with an annualized operating return on average common equity of 15.2%, and 7.4% growth in diluted book value per share. This built upon the strong performance in earlier quarters to achieve a 17.6% increase in diluted book value per share over the last twelve months, reaching a new all-time high of $43.57 per share. We benefited in the quarter from the low level of catastrophe and large loss activity and the favorable impact of strong equity markets on our overall investment returns. Generally, pricing conditions continued to improve across almost all of our lines of business, underwriting results across all of our units showed good fundamentals and shifts in our mix of business favored lines showing ongoing improvement. We also continued to show good progress in a number of business initiatives we've been cultivating for some time.”

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