Axis Capital Holdings Limited Q1 2010 Earnings Call Transcript

Axis Capital Holdings Limited Q1 2010 Earnings Call Transcript
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Axis Capital Holdings Limited (AXS)

Q1 2010 Earnings Call Transcript

April 27, 2010 8:00 am ET

Executives

Linda Ventresca – EVP, Corporate Development Officer

John Charman – President and CEO

David Greenfield – CFO

Analysts

Vinay Misquith – Credit Suisse

Terry Shu – Pioneer Investment

Matthew Heimermann – J.P. Morgan

Ian Gutterman – Adage Capital

Beth Malone – Wunderlich Securities

Shobha Frey – Putnam Investments

Dan Theriault – Portales Partners

Sam Hoffman – Lincoln Square Capital

Presentation

Operator

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Good morning, and welcome to the Q1 2010 Axis Capital Holdings Limited conference call and webcast. All participants will be in a listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded. I would now like to turn over the conference to Linda Ventresca. Ms. Ventresca, the floor is yours ma'am.

Linda Ventresca

Thank you, Mike. Good morning, ladies and gentlemen. I'm happy to welcome you our conference call to discuss the financial results for Axis Capital for the quarter ended March 31st, 2010.

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 industrial information section of our Web site, www.axiscapital.com. We set aside an hour for today's call, which is also available on audio webcast through the Investor Information section of our Web site. A replay of this teleconference will be available by dialing 877-344-7529 in the US. The international number is 412-317-0088. The conference code for both replay dial-in numbers is 439424. 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 the call, including the question-and-answer session, which are not historical facts, may be forward-looking statements within the meaning of US 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, derivative contracts, 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, 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 risk, 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 factor 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 US Federal Securities Laws. For reconciliation of these items to the most directly comparable GAAP financial measure, please refer to our press release, which can be found on our Web site. With that, I would like to turn over the call to John.

John Charman

Thank you, Linda, and good morning, everyone. And thank you for joining us. By now, you will have seen our first quarter results, which we view as strong. For the quarter, we reported net income available to common shareholders of $112 million or $0.79 per share as well as operating income of $96 million or $0.67 per share. Our diluted book value per common share increased by 31% over the last 12 months, and by nearly 3% from year-end to $34.56. These results were achieved despite the challenges presented by a remarkably high level of worldwide cat [ph] losses for the first quarter of this calendar year. The annualized return on average common equity for the first quarter of 2010 was just over 9%. And the annualized operating return on average common equity was 7.7%.

Our gross written premiums for the quarter were up approximately 8%, although this was not evenly distributed across the company. The insurance raised approximately 10% within a comparatively stable reinsurance market, whereas prime insurance was up about 2%. As we have always maintained, we will turn away from business that does not meet our high standards for underwriting profitability. And we will write business, which is capable of producing an appropriate balance of risks and rewards. We will continue to take full advantage of good opportunities where we can find them.

Our consolidated combined ratio for the quarter, an important measure of profitability in that core property and cash re-underwriting operations, was 98 % and included estimated net losses of approximately $153 million in the Chilean earthquake, European windstorm Xynthia, the Australian storms, and the severest case of US winter storms.

We are a major participant in the wholesale commercial PNC markets. And as such, we expect to have exposure to catastrophes like these. We do view these events as normal events. However, the less normal part of the cat loss activity is the frequency that has occurred within this first quarter.

Our prudent risk management efforts have served as well as we have produced good quarterly profitability despite the accumulated impact to these catastrophes on consolidated underwriting profitability for the quarter. This is a strong result for our business with an overall bias towards short term lives. Further, our underwriting results for the quarter reflected a favorable impact of recovering from the global financial crisis as we have returned to stability and more normal expectations for loss and credit rated – credit related lines of business.

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