AXIS Capital Reports Record First Quarter Net Income of $228 Million.Earnings Per Share of $1.37 and 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 of 22.6% PEMBROKE, Bermuda -- AXIS Capital Holdings Limited ("AXIS Capital") (NYSE NYSE See: 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 of $228 million, or $1.37 per diluted common share for the quarter ended March 31, 2007, compared with net income of $195 million, or $1.19 per diluted common share, for the quarter ended March 31, 2006. 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 first quarter of 2007 was $227 million, or $1.37 per diluted share, compared with $205 million, or $1.25 per diluted common share, for the quarter ended March 31, 2006. This same item excluding foreign exchange gains, net of tax, for the first quarter of 2007 was $225 million, or $1.36 per diluted common share, compared with $196 million, or $1.20 per diluted common share, for the quarter ended March 31, 2006. Operating income and operating income excluding foreign exchange gains, 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 quarter of 2007 included the following: * 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. increased by 12% to $1,303 million; * Net premiums written increased by 15% to $1,139 million; * Net premiums earned increased by 8% to $685 million; * Combined ratio of 80.7% included net favorable prior period reserve development of 9.6 percentage points; * Pre-tax net investment income increased by 34% to $125 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. was 22.6%; 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 by 27% from March 31, 2006, and by 5% from December 31, 2006, to $25.11. Commenting on the first quarter 2007 financial 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 that we have delivered an annualized return on average common equity of 22.6% for the quarter. In the quarter, we continued to aggressively reduce premium writings in areas where competition has been excessive but to grow appropriately when opportunities meet or exceed our underwriting profitability goals. Our execution strategy remains strong. We expect that our current underwriting portfolio will continue to generate healthy returns across the diverse product lines and geographies in which we have a presence. These returns, combined with our significant cash flow and investment earnings power, position us well to continue to produce meaningful book value growth in line with our excellent performance since inception." Operating Results Gross premiums written increased by 12%, or $138 million, and were derived 34% from our insurance segment and 66% from our 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. segment compared to 38% and 62%, respectively, for the first quarter of 2006. The increase was driven by additional property and liability business written in our reinsurance segment. Approximately one-third of the increase was due to the favorable impact of exchange rate movements. Our combined ratio of 80.7% was comparable with 79.5% for the first quarter of 2006. We experienced favorable prior period reserve development from short tail lines of business of 9.6 percentage points in both quarters. Insurance Segment Our insurance segment reported gross premiums written of $436 million and net premiums written of $282 million, respectively, compared to $437 million and $275 million in the first quarter of 2006. Lines of business addressed in our insurance segment were generally characterized by pricing deterioration associated with normal market competition. This led to a reduction in our casualty premium. We also continued our withdrawal from the aviation and terrorism markets. This was offset by growth in our property account driven by an improvement in pricing of catastrophe-exposed business relative to the first quarter of 2006 when we declined business that was inadequately priced. We also wrote additional political risk business this quarter. Our insurance segment reported a combined ratio of 81.5% compared to 70.2% for the first quarter of 2006. The increase was primarily due to a lower level of favorable reserve development, which was 9.1 percentage points in the current quarter compared to 20.4 percentage points in the first quarter of 2006. Favorable development in both periods continues to be related to short-tail lines only. Reinsurance Segment Our reinsurance segment reported an increase in gross premiums written of $138 million, or 19%, driven by our continued penetration of targeted business in the U.S and European reinsurance markets. Approximately one-third of the increase was due to the favorable impact of exchange rate movements. Our reinsurance segment reported a combined ratio of 76.8% compared to 85.3% for the first quarter of 2006. This was primarily due to favorable prior period reserve development of 10.1 percentage points compared to adverse development of 1.6 percentage points in the first quarter of 2006. Our current pre-tax loss estimate from Windstorm wind·storm n. A storm with high winds or violent gusts but little or no rain. windstorm A storm with high winds or violent gusts but little or no rain. Kyrill of $29 million included in our reinsurance segment results for the quarter is within our annual expectations for catastrophe losses. Investments Pre-tax net investment income increased 34% from the first quarter of 2006 to $125 million. Reflecting the impact of higher investment balances and average investment yields, net investment income from cash and fixed maturity investments increased 25% to $100 million, while net investment income from our alternative investment portfolio increased 89% to $25 million. We experienced $0.3 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. , compared to 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. of $11 million in the first three months of 2006. Interest Expense Our interest expense for the quarter was $15 million compared to $8 million in the first quarter of 2006. The increase was primarily due to interest costs incurred on the $400 million repurchase agreement Repurchase agreement An agreement with a commitment by the seller (dealer) to buy a security back from the purchaser (customer) at a specified price at a designated future date. we entered into in December 2006 to fund our investment in a life settlement contracts portfolio. Capitalization / 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 March 31, 2007 was $5.1 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 $4.9 billion at December 31, 2006. At March 31, 2007, diluted book value per common share was $25.11 and book value per common share was $27.54, compared to $24.02 and $26.09 respectively, at December 31, 2006. The diluted book value per common share was calculated using the "if-converted" method which is a non-GAAP financial measure. A reconciliation of this measure to book value per share is presented at the end of this release. Conference Call We will host a conference call on Tuesday May 1st, 2007 at 8:00 AM (Eastern) to discuss the first quarter financial results and related matters. The teleconference can be accessed by dialing (800) 659-1966 (U.S. callers) or (617) 614-2711 (international callers) and entering the pass code 33693955 approximately ten minutes in advance of the call. A live, listen-only webcast of the call will be available via the Investor Information section of our website at www.axiscapital.com. In addition, a financial supplement relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our financial results for the quarter ended March 31, 2007 is available in the Investor Information section of our website. AXIS Capital is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders' equity at March 31, 2007 of $4.6 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 and Singapore. Its operating subsidiaries have been assigned 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 Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] 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 and information regarding our estimates of losses related to natural disasters. 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 factors set forth in our most recent 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. , Form 10-Q Form 10-Q See 10-Q. and other documents 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. 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 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. [TABLE OMITTED] [TABLE OMITTED] |
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