AXIS Capital Announces Record Second Quarter Net Income of $223.4 Million; An Increase of 29% over Prior Quarter.PEMBROKE Pembroke, town, Canada Pembroke (pĕm`brōk), town (1991 pop. 13,997), SE Ont., Canada, NW of Ottawa, on the Ottawa River. It is a lumbering center and also has steel and electric-products factories. , Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the -- AXIS Capital Holdings Limited ("AXIS
Capital") (NYSE NYSESee: New York Stock Exchange : AXS AXS Access AXS Anomalous X-Ray Scattering AXS Alpha Chi Sigma AXS Alpha X-Ray Spectrometer AXS Activex Script ) today reported net income available to common shareholders for the quarter ended June June: see month. 30, 2006 of $223.4 million, or $1.37 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. common share, compared with $172.8 million, or $1.13 per diluted common share, for the quarter ended June 30, 2005. Net income for the six months ended June 30, 2006 was $418.6 million, or $2.56 per diluted share, compared with $324.6 million, or $2.07 per diluted share, for the corresponding period in 2005. Financial results for the second quarter and first six months of 2006 benefited from increased investment income. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the second quarter of 2006 was $232.2 million, or $1.42 per diluted share, compared with $170.9 million, or $1.12 per diluted common share, for the quarter ended June 30, 2005. This same item excluding foreign exchange gains (losses), net of tax, for the second quarter of 2006 was $214.2 million, or $1.31 per diluted common share, compared with $197.4 million, or $1.29 per diluted common share, for the quarter ended June 30, 2005. Operating income for the six months ended June 30, 2006 was $437.4 million, or $2.68 per diluted share, compared with $323.7 million, or $2.07 per diluted common share, for the six months ended June 30, 2005. This same item excluding foreign exchange gains (losses), net of tax, for the six months ended June 30, 2006 was $ 410.4 million, or $2.52 per diluted common share, compared with $373.1 million, or $2.38 per diluted common share, for the six months ended June 30, 2005. Operating income and operating income excluding foreign exchange gains (losses), net of tax, are non-GAAP financial measures. Reconciliations of these measures to net income are presented at the end of this release. Operating highlights for the first half of the year included the following: --Gross premiums written increased by 9.9% to $2,160.1 million; --Net premiums written increased by 8.1% to $1,813.1 million; --Net premiums earned increased by 5.0% to $1,312.7 million; --Combined ratio of 78.9% included net favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. prior period reserve development of $125.5 million, or 9.6 percentage points; --Pre-tax net investment income increased by 67.2% to $185.2 million; --Annualized return on average common shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. of 26.4%; and --Total shareholders' equity increased from December December: see month. 31, 2005 by 8.6% to $3.8 billion and diluted book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: increased 7.8% to $20.68. Operating highlights for the second quarter included the following: --Gross premiums written increased by 29.7% to $995.4 million; --Net premiums written increased by 33.2% to $820.7 million; --Net premiums earned increased by 8.8% to $679.1 million; --Combined ratio of 78.3% included net favorable prior period reserve development of $64.5 million, or 9.5 percentage points; --Pre-tax net investment income increased by 58.0% to $91.7 million primarily due to a combination of higher investment balances, higher investment yields and increasing contribution from other investments; and --Annualized return on average common shareholders' equity of 27.6%. Commenting on the second quarter 2006 results, John Charman John R Charman (born 1953), is an English businessman, who has made his career in insurance. He is currently CEO/President/Director at Bermuda based Axis Capital Holdings Ltd. , Chief Executive Officer and President of AXIS Capital, stated: "We are pleased to report an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average common equity in the quarter of 27.6% and an increase in diluted book value per share relative to year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. of 7.8% despite the mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. impact of rising interest rates on book value. Our results in the quarter reflect strong and stable underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results, increasing investment income and low large loss activity. At the end of last year, we positioned ourselves tactically tac·ti·cal adj. 1. Of, relating to, or using tactics. 2. a. Of, relating to, used in, or involving military or naval operations that are smaller, closer to base, and of less long-term significance than strategic for trading in the first half-year of 2006. Our goal was to substantially reduce catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). exposures whilst, at the same time, achieving solid growth in better-rated business. In the non-property areas of our insurance and reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. businesses, our specialist focus has allowed us ample access to risks at stable, attractive rating levels. We have achieved all of this without compromising our appropriate risk tolerance Risk Tolerance The degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio. Notes: An investor's risk tolerance varies according to age, income requirements, financial goals, etc. levels in both our insurance and reinsurance segments." Operating Results Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. , during the second quarter of 2006, increased by 29.7%, or $228.1 million to $995.4 million, compared to the second quarter of 2005 and were derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. 63.3% from our insurance segment and 36.7% from our reinsurance segment compared to 66.9% and 33.1%, respectively, for the second quarter of 2005. The increase was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to significant improvement in price in catastrophe-exposed lines of business in both our insurance and reinsurance segments, increased penetration The successful unauthorized breach of a security perimeter. See penetration test. of the U.S. casualty reinsurance marketplace and new opportunities. Our combined ratio increased to 78.3% from 74.5% in the second quarter of 2005 primarily due to a lower level of favorable reserve development in our reinsurance segment. Gross premiums for the six months ended June 30, 2006 increased 9.9% from the same period of 2005 and were derived 49.4% from our insurance segment and 50.6% from our reinsurance segment compared to 47.9% and 52.1%, respectively, for the same period of 2005. The increase was largely driven by growth of our professional lines insurance business, growth in our U.S. casualty reinsurance book and significant improvement in price for catastrophe-exposed insurance business. Our combined ratio increased to 78.9% in the six months ended June 30, 2006 from 76.4% in the same period of 2005 primarily due to a lower level of favorable reserve development in our reinsurance segment. Insurance Segment Our insurance segment reported gross premiums written in the quarter of $629.6 million, up 22.7% from the second quarter of 2005, and net premiums written of $455.0 million, up 24.6% from the second quarter of 2005. The growth was largely driven by a significant improvement in pricing in our catastrophe-exposed property and marine lines Coordinates: Marine Lines (Marathi:मरीन लाईन्स) is an area in South Mumbai. It is also the name of a railway station on the Mumbai suburban railway on the Western Railway railway line. and also additional political risk premium written in the quarter. Our insurance segment reported gross premiums written in the six months of $1,066.7 million, up 13.2% from the same period of 2005, and net premiums written of $730.2 million, up 10.7% from the same period of 2005. The growth was largely driven by significant improvement in pricing in our catastrophe-exposed property and marine lines and also additional professional lines business. Our insurance segment reported a combined ratio of 68.5% for the quarter compared to 66.8% for the quarter ended June 30, 2005. The increase was primarily due to a shift in the mix of earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. towards professional lines in the quarter. The insurance segment experienced net favorable prior period reserve development from short tail lines of $58.2 million, or 18.0 percentage points, compared to favorable development of $44.4 million, or 14.2 percentage points, in the quarter ended June 30, 2005. Reinsurance Segment Gross premiums written in our reinsurance segment increased by 43.8%, or $111.5 million to $365.8 million, for the quarter ended June 30, 2006 compared to the same period of 2005. The increase was driven by growth in our U.S. casualty reinsurance lines of business and also significant improvement in pricing in catastrophe-exposed reinsurance business in the U.S. Gross premiums written in our reinsurance segment increased by 6.8%, or $69.7 million to $1,093.5 million, for the six months ended June 30, 2006 compared to the same period of 2005. The increase was driven by growth in our U.S. casualty and professional lines reinsurance business. Our reinsurance segment reported a combined ratio of 84.0% for the quarter compared to 77.7% in the second quarter of 2005. The increase was primarily due to a lower level of favorable reserve development. We experienced net favorable development of $6.3 million, or 1.8 percentage points, in the current quarter compared to favorable development of $29.6 million, or 9.5 percentage points, for the quarter ended June 30, 2005. Interest Expense Interest expense for the quarter and six months ended June 30, 2006 was $8.3 million and $16.4 million respectively, consistent with the comparable periods of 2005. Interest expense consists of interest due on outstanding debt, the amortization of debt offering expenses and offering discounts and fees relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our credit facility. Our outstanding debt relates to $500.0 million of senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. issued on November November: see month. 15, 2004. Preferred Dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) Preferred dividends were $9.2 million and $18.9 million in the quarter and six months ended June 30, 2006 respectively, and related to dividends declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. on our Series A and B preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. which were issued in September September: see month. and November 2005, respectively. Investments Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta net investment income was $91.7 million an increase of 58.0%, or $33.7 million, from the second quarter of 2005. Included in net investment income for the second quarter of 2006 was $5.5 million in income from other investments, compared to $3.1 million in the second quarter of 2005. Income from other investments is generated from holdings in multiple hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" of funds, senior secured loan funds and a high yield fund. We experienced $9.7 million of net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. , compared to $1.9 million of net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. in the second quarter of 2005. Pre-tax net investment income for the six months ended June 30, 2006 was $185.2 million an increase of 67.2%, or $74.5 million, from the six months ended June 30, 2005. Included in net investment income for the six months ended June 30, 2006 was $18.9 million in income from other investments, compared to $4.2 million in the same period of 2005. We experienced $20.7 million of net realized losses, compared to $0.4 million of net realized gains for the six months ended June 30, 2005. This increased investment income generated in the second quarter and first six months of 2006 principally reflects the positive impact of higher investment yields, higher investment balances and an increase in investment income from our other investments. Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. / Shareholders' Equity Total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. at June 30, 2006 was $4.3 billion, including $0.5 billion of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and $0.5 billion of preferred equity, compared to $4.0 billion at December 31, 2005. The increase was primarily due to net income in 2006 that was partially offset by unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on investments. At June 30, 2006, diluted book value per common share was $20.68 and book value per common share was $22.15, compared to $19.19 and $20.23 respectively, from December 31, 2005. Diluted book value per share is a non-GAAP financial measure. A reconciliation of this measure to shareholders' equity is presented at the end of this release. Conference Call We will host a conference call on Tuesday Tuesday: see week. August 8, 2006 at 8:00 AM (Eastern) to discuss the second quarter financial results and related matters. This presentation will be available through an audio webcast accessible through the Investor Information section of our website at www.axiscapital.com. In addition, a financial supplement relating to our financial results for the quarter ended June 30, 2006 is available in the Investor Information section of our website. AXIS Capital is a Bermuda-based global provider of specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. lines insurance and treaty reinsurance with shareholders' equity at June 30, 2006 of $3.8 billion and locations in Bermuda, the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Singapore Singapore (sĭng`gəpôr, sĭng`ə–, sĭng'gəpôr`), officially Republic of Singapore, republic (2005 est. pop. 4,426,000), 240 sq mi (625 sq km). . Its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. have been assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a rating of "A" ("Excellent") by A.M. Best and a rating of "A" ("Strong") by Standard & Poor's. AXIS Capital has been assigned a senior unsecured debt rating of Baa1 (stable) by Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. and BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. + (stable) by Standard & Poor's. For more information about AXIS Capital, visit our website at www.axiscapital.com.
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As at June 30, 2006 and December 31, 2005
(Expressed in thousands of U.S. dollars)
June 30, December 31,
2006 2005
------------ ------------
Assets
Cash and cash equivalents $1,615,448 $1,280,990
Fixed maturity investments at fair market
value 6,009,431 6,012,425
Other investments 627,721 409,504
Accrued interest receivable 68,381 59,784
Securities lending collateral 909,807 998,349
Insurance and reinsurance balances
receivable 1,409,988 1,026,975
Deferred acquisition costs 290,627 196,388
Prepaid reinsurance premiums 309,881 281,579
Reinsurance recoverable 1,392,543 1,518,110
Intangible assets 35,500 37,013
Other assets 129,723 104,859
------------ ------------
Total Assets $12,799,050 $11,925,976
============ ============
Liabilities
Reserve for losses and loss expenses $4,835,161 $4,743,338
Unearned premiums 2,289,140 1,760,467
Insurance and reinsurance balances payable 333,547 314,232
Accounts payable and accrued expenses 75,393 101,179
Securities lending payable 904,974 995,287
Net payable for investments purchased 43,012 76
Debt 499,100 499,046
------------ ------------
Total Liabilities 8,980,327 8,413,625
------------ ------------
Shareholders' Equity
Series A preferred shares 125 125
Series B preferred shares 31 31
Common shares 1,873 1,861
Additional paid-in capital 2,413,410 2,386,200
Accumulated other comprehensive loss (166,580) (77,798)
Retained earnings 1,569,864 1,201,932
------------ ------------
Total Shareholders' Equity 3,818,723 3,512,351
------------ ------------
Total Liabilities & Shareholders'
Equity $12,799,050 $11,925,976
============ ============
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the quarters and six months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except share and per share
amounts)
Quarters ended Six Months ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Revenues
Gross premiums
written $995,380 $767,293 $2,160,120 $1,965,992
Premiums ceded (174,648) (151,497) (347,060) (288,125)
Change in
unearned
premiums (141,633) 8,617 (500,367) (427,864)
------------ ------------ ------------ ------------
Net premiums
earned 679,099 624,413 1,312,693 1,250,003
Net investment
income 91,663 58,001 185,231 110,759
Net realized
(losses) gains (9,777) 1,831 (20,706) 438
Other insurance
related income
(loss) 438 (5,451) 1,062 (5,519)
------------ ------------ ------------ ------------
Total
revenues 761,423 678,794 1,478,280 1,355,681
------------ ------------ ------------ ------------
Expenses
Net losses and
loss expenses 371,982 322,853 730,640 667,143
Acquisition
costs 101,832 85,471 191,536 176,772
General and
administrative
expenses 57,657 56,796 113,068 111,098
Foreign
exchange
(gains) losses (18,901) 27,226 (28,165) 50,644
Interest
expense 8,315 7,818 16,400 15,897
------------ ------------ ------------ ------------
Total
expenses 520,885 500,164 1,023,479 1,021,554
------------ ------------ ------------ ------------
Income before
income taxes 240,538 178,630 454,801 334,127
Income tax
expense 7,912 5,785 17,359 9,483
------------ ------------ ------------ ------------
Net Income 232,626 172,845 437,442 324,644
Preferred share
dividends (9,226) - (18,857) -
------------ ------------ ------------ ------------
Net income
available to
common
shareholders $223,400 $172,845 $418,585 $324,644
============ ============ ============ ============
Weighted average
common shares and
common share
equivalents -
basic 149,765,181 140,566,523 149,541,163 143,584,354
============ ============ ============ ============
Weighted average
common shares and
common share
equivalents -
diluted 163,325,459 153,637,750 163,441,641 157,013,504
============ ============ ============ ============
Net income per
share - basic $1.49 $1.23 $2.80 $2.26
============ ============ ============ ============
Net income per
share - diluted $1.37 $1.13 $2.56 $2.07
============ ============ ============ ============
Insurance Ratios
Loss ratio 54.8% 51.7% 55.7% 53.4%
Expense ratio 23.5% 22.8% 23.2% 23.0%
------------ ------------ ------------ ------------
Combined ratio 78.3% 74.5% 78.9% 76.4%
============ ============ ============ ============
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Quarter ended June 30, 2006
Global U.S. Total Reinsurance
Insurance Insurance Insurance
---------- --------- ---------- -----------
Revenues:
Gross premiums
written $313,235 $316,370 $629,605 $365,775
Net premiums
written 278,370 176,656 455,026 365,706
Net premiums
earned 180,568 143,003 323,571 355,528
Other insurance
related
income - 438 438 -
Expenses:
Net losses and
loss expenses (68,883) (78,902) (147,785) (224,197)
Acquisition
costs (23,753) (15,001) (38,754) (63,078)
General and
administrative
expenses (11,304) (23,569) (34,873) (11,501)
Underwriting
income 76,628 25,969 102,597 56,752
Corporate
expenses
Net investment
income
Realized losses
on investments
Foreign exchange
gains
Interest expense
Income before
income taxes
Net loss and
loss expense
ratio 38.1% 55.2% 45.7% 63.1%
Acquisition cost
ratio 13.2% 10.5% 12.0% 17.7%
General and
administrative
expense ratio 6.3% 16.5% 10.8% 3.2%
---------------- ---------- --------- ---------- -----------
Combined ratio 57.6 % 82.2% 68.5% 84.0%
================ ========== ========= ========== ===========
Corporate Total
--------- ---------
Revenues:
Gross premiums
written $- $995,380
Net premiums
written - 820,732
Net premiums
earned - 679,099
Other insurance
related
income - 438
Expenses:
Net losses and
loss expenses - (371,982)
Acquisition
costs - (101,832)
General and
administrative
expenses - (46,374)
Underwriting
income - 159,349
Corporate
expenses (11,283) (11,283)
Net investment
income 91,663 91,663
Realized losses
on investments (9,777) (9,777)
Foreign exchange
gains 18,901 18,901
Interest expense (8,315) (8,315)
---------
Income before
income taxes $240,538
=========
Net loss and
loss expense
ratio 54.8%
Acquisition cost
ratio 15.0%
General and
administrative
expense ratio 1.7% 8.5%
---------------- --------- ---------
Combined ratio 78.3%
================ =========
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Quarter ended June 30, 2005
Global U.S. Total Reinsurance
Insurance Insurance Insurance
---------- --------- ---------- -----------
Revenues:
===============
Gross premiums
written $227,512 $285,470 $512,982 $254,311
Net premiums
written 214,005 151,098 365,103 250,693
Net premiums
earned 204,717 108,321 313,038 311,375
Other insurance
related (loss)
income (5,627) 326 (5,301) (150)
Expenses:
Net losses and
loss expenses (78,039) (70,658) (148,697) (174,156)
Acquisition
costs (26,455) (3,695) (30,150) (55,321)
General and
administrative
expenses (9,632) (20,777) (30,409) (12,330)
Underwriting
income 84,964 13,517 98,481 69,418
Corporate
expenses
Net investment
income
Realized gains
on investments
Foreign
exchange
losses
Interest
expense
Income before
income taxes
Net loss and
loss expense
ratio 38.1% 65.2% 47.5% 55.9%
Acquisition
cost ratio 12.9% 3.4% 9.6% 17.8%
General and
administrative
expense ratio 4.7% 19.2% 9.7% 4.0%
--------------- ---------- --------- ---------- -----------
Combined ratio 55.7% 87.8% 66.8% 77.7%
=============== ========== ========= ========== ===========
Corporate Total
--------- ---------
Revenues:
Gross premiums
written $- $767,293
Net premiums
written - 615,796
Net premiums
earned - 624,413
Other insurance
related (loss)
income - (5,451)
Expenses:
Net losses and
loss expenses - (322,853)
Acquisition
costs - (85,471)
General and
administrative
expenses - (42,739)
Underwriting
income - 167,899
Corporate
expenses (14,057) (14,057)
Net investment
income 58,001 58,001
Realized gains
on investments 1,831 1,831
Foreign
exchange
losses (27,226) (27,226)
Interest
expense (7,818) (7,818)
Income before
income taxes $178,630
Net loss and
loss expense
ratio 51.7%
Acquisition
cost ratio 13.7%
General and
administrative
expense ratio 2.2% 9.1%
--------------- --------- ---------
Combined ratio 74.5%
=============== =========
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Six Months ended June 30, 2006
Global U.S. Total Reinsurance
Insurance Insurance Insurance
---------- ---------- ----------- -----------
Revenues:
Gross premiums
written $523,033 $543,622 $1,066,655 $1,093,465
Net premiums
written 435,556 294,620 730,176 1,082,884
Net premiums
earned 365,767 280,517 646,284 666,409
Other insurance
related income - 1,062 1,062 -
Expenses:
Net losses and
loss expenses (149,322) (154,633) (303,955) (426,685)
Acquisition
costs (51,142) (25,068 ) (76,210) (115,326)
General and
administrative
expenses (21,172) (46,756) (67,928) (22,215)
Underwriting
income 144,131 55,122 199,253 102,183
Corporate
expenses
Net investment
income
Realized losses
on investments
Foreign
exchange gains
Interest
expense
Income before
income taxes
Net loss and
loss expense
ratio 40.8% 55.1% 47.0% 64.0%
Acquisition
cost ratio 14.0% 8.9% 11.8% 17.3%
General and
administrative
expense ratio 5.8% 16.7% 10.5% 3.3%
--------------- ---------- ---------- ----------- -----------
Combined ratio 60.6% 80.7% 69.3% 84.6.%
=============== ========== ========== =========== ===========
Corporate Total
--------- -----------
Revenues:
Gross premiums
written - $2,160,120
Net premiums
written - 1,813,060
Net premiums
earned - 1,312,693
Other insurance
related income - 1,062
Expenses:
Net losses and
loss expenses - (730,640)
Acquisition
costs - (191,536)
General and
administrative
expenses - (90,143)
Underwriting
income - 301,436
Corporate
expenses (22,925) (22,925)
Net investment
income 185,231 185,231
Realized losses
on investments (20,706) (20,706)
Foreign
exchange gains 28,165 28,165
Interest
expense (16,400) (16,400)
Income before
income taxes $454,801
Net loss and
loss expense
ratio 55.7%
Acquisition
cost ratio 14.6%
General and
administrative
expense ratio 1.7% 8.6%
--------------- --------- -----------
Combined ratio 78.9%
=============== ===========
AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
Six Months ended June 30, 2005
Global U.S. Total Reinsurance
Insurance Insurance Insurance
---------- ---------- ---------- -----------
Revenues:
Gross premiums
written $479,835 $462,396 $942,231 $1,023,761
Net premiums
written 417,435 242,330 659,765 1,018,102
Net premiums
earned 421,575 214,822 636,397 613,606
Other insurance
related (loss)
income (5,865) 346 (5,519) -
Expenses:
Net losses and
loss expenses (143,934) (142,376) (286,310) (380,833)
Acquisition
costs (59,537) (6,739) (66,276) (110,496)
General and
administrative
expenses (19,484) (41,088) (60,572) (24,631)
Underwriting
income 192,755 24,965 217,720 97,646
Corporate
expenses
Net investment
income
Realized gains
on investments
Foreign
exchange
losses
Interest
expense
Income before
income taxes
Net loss and
loss expense
ratio 34.1% 66.3% 45.0% 62.1%
Acquisition
cost ratio 14.1% 3.1% 10.4% 18.0%
General and
administrative
expense ratio 4.6% 19.1% 9.5% 4.0%
--------------- ---------- ---------- ---------- -----------
Combined ratio 52.8% 88.5% 64.9% 84.1%
=============== ========== ========== ========== ===========
Corporate Total
--------- -----------
Revenues:
Gross premiums
written - $1,965,992
Net premiums
written - 1,677,867
Net premiums
earned - 1,250,003
Other insurance
related (loss)
income - (5,519)
Expenses:
Net losses and
loss expenses - (667,143)
Acquisition
costs - (176,772)
General and
administrative
expenses - (85,203)
Underwriting
income - 315,366
Corporate
expenses (25,895) (25,895)
Net investment
income 110,759 110,759
Realized gains
on investments 438 438
Foreign
exchange
losses (50,644) (50,644)
Interest
expense (15,897) (15,897)
Income before
income taxes $334,127
Net loss and
loss expense
ratio 53.4%
Acquisition
cost ratio 14.1%
General and
administrative
expense ratio 2.1% 8.9%
--------------- --------- -----------
Combined ratio 76.4%
=============== ===========
Cautionary Note Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this release include our expectations regarding market conditions. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual events or results to be materially different from our expectations include (1) our limited operating history, (2) the occurrence of natural and man-made disasters man-made disaster Technological disaster Public health An event in which a significant number of people are injured or die as a result of human devices or activities, unrelated to conflicts, and attributed to operator error–eg, Exxon Valdez , (3) actual claims exceeding our loss reserves, (4) the failure of any of the loss limitation methods we employ, (5) the effects of emerging claims and coverage issues, (6) the failure of our cedants to adequately evaluate risks, (7) the loss of one or more key executives, (8) a decline in our ratings with rating agencies, (9) the loss of business provided to us by our major brokers, (10) changes in governmental regulations, (11) increased competition, (12) general economic conditions and (13) the other matters set forth under Item 1A, "Risk Factors" included in our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2005 filed with the SEC on March 9, 2006. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Non-GAAP Financial Measures In addition to the GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). financial measures included within this release, we have presented `operating income' which represents net income available to common shareholders, before the after tax impact of net realized gains and losses on investments, "operating income, excluding the after tax impact of foreign exchange gains/losses" and "diluted book value per common share," which are non-GAAP financial measures. We have included the first and second measures as we believe that security analysts, rating agencies and investors believe that realized gains and losses and foreign exchange, where an actively managed foreign exchange program is not in place, are largely opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. and are a function of economic and interest rate conditions. As a result, we believe that they evaluate earnings before realized gains and losses and foreign exchange, adjusted for tax, to make performance comparisons with our industry peers. We have included the third measure because it takes into account the effect of dilutive securities and, therefore, we believe that this is a better measure of calculating shareholder returns than book value per share.
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
OPERATING INCOME
For the Quarters and Six Months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except per share amounts)
Quarters ended Six Months ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Net income $223,400 $172,845 418,585 324,644
Adjustment for net
realized losses
(gains) 9,777 (1,831) 20,706 (438)
on investments
Adjustment for
associated tax
impact of net
realized (losses)
gains on investments (929) (65) (1,872) (521)
------------ ------------ ------------ ------------
Operating income $232,248 $170,949 $437,419 $323,685
============ ============ ============ ============
Net income per
share - diluted $1.37 $1.13 $2.56 $2.07
============ ============ ============ ============
Adjustment for net
realized losses
(gains) on 0.06 (0.01) 0.13 -
investments
Adjustment for
associated tax
impact of net
realized (losses)
gains on investments (0.01) - (0.01) -
------------ ------------ ------------ ------------
Operating income
per share -
diluted $1.42 $1.12 $2.68 $2.07
============ ============ ============ ============
Weighted average
common shares and
common share
equivalents -
diluted 163,325,459 153,637,750 163,441,641 157,013,504
============ ============ ============ ============
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
OPERATING INCOME EXCLUDING FOREIGN EXCHANGE (GAINS) LOSSES, NET OF TAX
For the Quarters and Six Months ended June 30, 2006 and 2005
(Expressed in thousands of U.S. dollars, except per share amounts)
Quarters ended Six Months ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Net income $223,400 $172,845 418,585 324,644
Adjustment for net
realized losses
(gains) on
investments 9,777 (1,831) 20,706 (438)
Adjustment for
foreign exchange
losses (gains) (18,901) 27,226 (28,165) 50,644
Adjustment for
associated tax
impact (39) (812) (689) (1,725)
------------ ------------ ------------ ------------
Operating income
excluding foreign
exchange (losses)
gains, net of tax $214,237 $197,428 $410,437 $373,125
============ ============ ============ ============
Net income per
share - diluted $1.37 $1.13 $2.56 $2.07
============ ============ ============ ============
Adjustment for net
realized losses
(gains) on
investments 0.06 (0.01) 0.13 -
Adjustment for
foreign exchange
losses (gains) (0.12) 0.18 (0.17) 0.32
Adjustment for
associated tax
impact - (0.01) - (0.01)
------------ ------------ ------------ ------------
Operating income
excluding foreign
exchange (losses)
gains, net of tax,
per share -
diluted $1.31 $1.29 $2.52 $2.38
============ ============ ============ ============
Weighted average
common shares and
common share
equivalents -
diluted 163,325,459 153,637,750 163,441,641 157,013,504
============ ============ ============ ============
AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURE RECONCILIATION
DILUTED BOOK VALUE PER SHARE
As at June 30, 2006 and December 31, 2005
(Expressed in thousands of U.S. dollars, except share and per share
amounts)
June 30, December 31,
2006 2005
Total shareholders' equity $3,818,723 $3,512,351
less preferred equity (500,000) (500,000)
------------ ------------
Common shareholders' equity $3,318,723 $3,012,351
Common shares outstanding 149,809,873 148,868,759
------------ ------------
Book value per common share $22.15 $20.23
============ ============
Diluted book value on an "as if converted
basis"
Common shareholders' equity $3,318,723 $3,012,351
add in:
proceeds on exercise of options 101,050 117,808
proceeds on exercise of warrants 244,812 244,812
------------ ------------
Adjusted shareholders' equity 3,664,585 3,374,971
------------ ------------
As if converted diluted shares outstanding
Common shares outstanding 149,809,873 148,868,759
add in:
vesting of restricted stock 2,291,590 1,172,550
exercise of options 5,398,517 6,174,464
exercise of warrants 19,665,963 19,650,509
------------ ------------
Diluted common shares outstanding 177,165,943 175,866,282
------------ ------------
------------ ------------
Diluted book value per common share $20.68 $19.19
============ ============
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