Axis Capital Holdings' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Axis Capital Holdings Limited (AXS)

Q2 2012 Earnings Call

August 01, 2012 08:00 a.m. ET

Executives

Linda Ventresca – Investor Relations

Albert A. Benchimol – President and Chief Executive Officer

Joseph Henry – Chief Financial Officer

Analysts

Keith Walsh – Citi

Dan Farrell – Sterne Agee

Vinay Misquith – Evercore Partners

Greg Locraft – Morgan Stanley

Joshua Shanker – Deutsche Bank Securities

Brian Meredith – UBS

Sam Hoffman – Nomura

Presentation

Operator

Good morning, and welcome to the second quarter 2012 AXIS Capital Earnings Conference Call. All participants will be in listen-only mode. (Operator instructions) Please note this event is being recorded.

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

Linda Ventresca

Thank you Laura and good morning, ladies and gentlemen. I am happy to welcome you to our conference call to discuss the financial results for AXIS Capital for the second quarter ended June 30, 2012. Our earnings press release and financial 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 10015750.

With me on today’s call are Albert Benchimol, our President and CEO; and Joseph Henry our CFO. Before I turn the call over to Albert, I will remind everyone that statements made during this call, including the question-and-answer sessions, 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, financial results, and capital management initiatives; 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 Albert.

Albert Benchimol

Thank you Linda, and before I forget happy birthday. Good morning to everyone. AXIS has had a very good second quarter. On an operating basis we earned $0.90 per share which on annualized basis represents an 8.7% operating return on equity. Our underwriting performance was excellent with a reported combined ratio of 92.3.

Excluding the onetime expenses related to senior leadership transitions in the quarter, our run rate results which I believe are more relevant for the purposes of our discussion are even stronger with an adjusted combined ratio of 88.4, and an adjusted annualized operating return on equity of 11.3%.

In addition to the senior leadership transition charges our results were also affected by the investment markets with lower interest rates and negative equity returns. Our investment portfolio delivered a total return of 0.5% for the quarter. Nevertheless our diluted book value per share grew almost 3% in the quarter to a record $40.55.

Our diluted book value per share growth including dividends paid was a strong 12.8% over the last 12 months. The market environment for our business is showing ongoing improvement and we are taking advantage of marketing conditions and our position in the market to improve the balance and risk adjusted returns of our global portfolio.

Our growth is strong in markets that have shown improvements in pricing, and in the lines were investments and products for geographic expansion in recent years is gaining traction. In other areas, which are for the most part stable or showing modest improvement in risk adjusted returns, we have been actively optimizing portfolio composition to expand margin.

In some cases this has come with net premium reductions. But the resulting portfolio provides a more powerful base on which to grow in an improved market. We are confident that we’ve strategically and tactically positioned ourselves to deliver continued significant value growth to shareholders. At this point I will pass the call to Joe Henry our new CFO.

Joe came to us from XL where he was a chief financial officer of the $4 billion insurance business. In addition, Joe was previously CFO at two public insurance companies. Joe brings to Axis 37 years of experience in finance and operations and we are very pleased to have him on our team. Joe?

Joe Henry

Thank you very much Albert, and good morning everyone. I’m very happy to be here at Axis and look forward to helping this company achieve its strategic goals. In six weeks it has been very easy to see why Axis has been so successful in the past and why we feel good about our future. We produced solid results for this quarter, increasing diluted book value per common share by 3% to another record high of $40.55. Our return on average common equity was 13% for the quarter, with operating ROE at 8.7%.

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