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AXIS Capital Holdings Limited (“AXIS Capital”) (NYSE: AXS) today reported a net loss to common shareholders for the fourth quarter of 2012 of $19 million, or $0.16 per diluted common share, compared with net income of $80 million, or $0.63 per diluted common share, for the fourth quarter of 2011. Net income available to common shareholders for the full year 2012 was $495 million, or $4.00 per diluted common share, compared with $9 million, or $0.07 per diluted common share, for 2011. The improvement in our annual results was largely due to a reduction in net-after tax losses from natural catastrophe and weather events, which totaled $398 million in 2012 and $910 million in 2011.
Our operating loss
1 for the fourth quarter of 2012 was $28 million, or $0.23 per diluted common share, compared with operating income of $67 million, or $0.53 per diluted common share, for the fourth quarter of 2011. For the full year 2012, AXIS Capital reported operating income of $422 million, or $3.41 per diluted common share, compared with an operating loss of $154 million, or $1.26 per diluted common share, for 2011.
Full Year Highlights2
Gross premiums written increased 1% to $4.1 billion, with growth of $188 million, or 9%, in our insurance segment offset by a reduction of $144 million, or 7% in our reinsurance segment;
Net premiums written decreased 2% to $3.3 billion and net premiums earned increased 3% to $3.4 billion;
Combined ratio of 96.2% (including 12.7 points related to 2012 natural catastrophe and weather losses and 1.0 point for senior leadership transition costs), compared with 112.3% (including 28.2 points related to numerous 2011 catastrophe and 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 $245 million (benefiting the combined ratio by 7.1 points), compared to $257 million (benefiting the combined ratio by 7.8 points);
Net investment income increased 5% to $381 million;
Pre-tax total return on cash and investments of 5.4%, compared to 3.4%;
Net income available to common shareholders of $495 million and return on average common equity of 9.7%, compared to $9 million and 0.2%;
Operating income of $422 million, representing an operating return on average common equity of 8.2%, compared to an operating loss of $154 million;
Net cash flows from operations of $1.1 billion, compared to $1.2 billion; and
Diluted book value per common share of $42.97, a 13% increase from December 31, 2011.
Fourth Quarter Highlights2
Gross premiums written increased 13% to $752 million;
Net premiums written increased 5% to $518 million and net premiums earned increased 1% to $856 million;
Significant catastrophe and weather-related losses impacting the fourth quarter's results included:
Estimated pre-tax net losses (net of reinstatement premiums) of $331 million in relation to Storm Sandy; and
An aggregate $28 million reduction in our estimate of pre-tax net losses (net of reinstatement premiums) for events of the first three quarters of 2012, including Hurricane Isaac, U.S. weather events in the first and second quarters, and the impact of severe drought conditions on U.S. crops;
Net financial impact of Storm Sandy of $301 million, after consideration of reinstatement premiums, ceding commissions and the associated income tax benefit;
Net favorable prior year reserve development of $64 million (benefiting the combined ratio by 7.5 points) compared to $78 million (benefiting the combined ratio by 9.2 points);
Net investment income declined 15% to $87 million;
Net cash flows from operations of $233 million, compared to $199 million; and
Quarterly common share dividend declared increased 4% to $0.25 per share.
Commenting on the fourth quarter 2012 financial results, Albert Benchimol, President and CEO of AXIS Capital said "We experienced strong results across most parts of our Company in the fourth quarter, but our performance was clearly offset by the impact of Storm Sandy, which led to a small loss for the period. Given 2012 included one of the largest U.S. storm events in history, we believe our operating income of $422 million for the year, representing an operating ROE of 8.2%, was an acceptable result. We returned nearly all of our earnings to shareholders, increased our dividend for the 9th year in a row, and ended 2012 with diluted book value per share of $42.97, which represents a 13% increase over the prior year.