AXIS Capital CEO Discusses Q3 2010 Results - Earnings Call Transcript

AXIS Capital Holdings Ltd. (

AXS

)

Q3 2010 Earnings Call

November 2, 2010 8:00 am ET

Executives

Linda Ventresca - IR

John Charman - CEO and President

David Greenfield - CFO

Analysts

Vinay Misquith - Credit Suisse

Matthew Heimermann - JPMorgan

Greg Locraft - Morgan Stanley

Brian Meredith - UBS

Beth Malone - Wunderlich Securities

Ian Gutterman - Adage Capital

Presentation

Operator

Good day, and welcome to the third quarter 2010 AXIS Capital Holdings earnings conference call and webcast. (Operator Instructions)

I would now like to turn the conference over to Ms. Linda Ventresca, Investor Relations.

Linda Ventresca

I am happy to welcome you to our conference call to discuss the financial results for AXIS Capital for the quarter ended September 30, 2010.

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Our earnings press release, financial supplement and quarterly investment supplement were issued yesterday evening after the market closed. If you would like copies, please visit the Investor Information section of our website, www.axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast through the Investor Information section of our website.

A replay of the teleconference will be available by dialing 877-344-7529 in the U.S. The international number is 412-317-0088. The conference code for both replay dial-in numbers is 444604.

With me on today's call are John Charman, our CEO and President; and David Greenfield, our CFO. Before I turn the call over to John, I will remind everyone that statements made during this call, including the question-and-answer session, which are not historical facts, may be forward-looking statements within the meaning of the U.S. federal securities laws.

Forward-looking statements contained in this presentation include but are not necessarily limited to information regarding our estimate of losses related to catastrophes, policies, and other loss events, general economic capital and credit market conditions, future growth prospects and financial results, evaluation of losses and loss reserves, investment strategies, investment portfolio and market performance, impact to the marketplace with respect to changes in pricing models and our expectations regarding pricing and other market conditions. These statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from our expectations.

For a discussion of these matters, please refer to the Risk Factors section in our most recent Form 10-K 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.

In addition, this presentation contains information regarding operating income, which is a non-GAAP financial measure within the meaning of the U.S. federal securities laws. For a reconciliation of this item to the most directly comparable GAAP financial measure, please refer to our press release which can be found on our website.

With that, I'd like to turn the call over to John.

John Charman

Good morning everyone, and thank you for joining us. After providing an overview of the results for the quarter, I will ask David to discuss those results in more detail. Then I will address underwriting activity and market outlook.

For the quarter, operating earnings per share were up 22% to $1.22. Annualized operating return on equity for the quarter was 12.6%, which we view as healthy, given current end market conditions and the low investment view of the environment.

The combined ratio was 85.6% and included $85 million in net losses from the New Zealand earthquake. Operating earnings per share for the year-to-date were $3.20, and we produced an attractive annualized operating ROE for the first nine months of the year of 11.3%, even taking into account the catastrophe activity this year.

We ended the first nine months of the year with a combined ratio of 89.8%. Our progress in accreting diluted book value per share is a primary measure in assessing our shareholder value creation. Our operating and investment results reduced the diluted book value per share of $39.1 at September 30. That's a 6.7% increase since June 30, a 15.9% increase since year-end 2009 and a 23.5% increase compared to a year ago.

Our capital position is strong, and David will talk more about capital management activities later.

As previously indicated, David Greenfield's last day as our Chief Financial Officer will be November the 30. This is David's last conference call, and I know we will all miss David's insightful commentary regarding our financial results. David has been a valued member of our executive management group for the past four years.

During this time, he has successfully directed financial strategy of the company, and led the further development of our accounting control, financial reporting, financial planning, tax and treasury functions. We thank David for his many contributions to AXIS Capital during the last four years and wish him well in his future endeavors.

And we announced late last week, Albert Benchimol who currently serves as Chief Financial Officer of PartnerRe will be joining us on January the 17 as Executive Vice President and Chief Financial Officer. We expect that Albert will continue to build on the great work David has done with AXIS, and I am confident that we will continue to have one of the strongest management teams in the industry equipped to lead AXIS to even greater successes in the years ahead.

I will now turn the call over to David to discuss our financial results for the third quarter of 2010 in more detail.

David Greenfield

Good morning, everyone. Before I begin, I'd like to just take a minute to thank you, John, for those kind words and to extend my thanks to all of my colleagues at AXIS and those in the financial community for your support and assistance over the past 4 years. We've accomplished quite a lot together and worked through some challenging financial markets. Thank you all.

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