AXIS Capital Reports Record Fourth Quarter Net Income of $281.0 Million and Record Full Year Net Income of $925.8 Million.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 $925.8 million, or $5.63 per diluted common share for the year ended December 31, 2006, compared with net income of $90.1 million, or $0.57 per diluted common share, for the year ended December 31, 2005. Net income available to common shareholders for the fourth quarter of 2006 was $281.0 million, or $1.69 per diluted share, compared with net income of $233.5 million, or $1.47 per diluted share, for the corresponding period in 2005. Prior year results were significantly impacted by losses incurred from Hurricanes Katrina, Rita and Wilma ("KRW KRW In currencies, this is the abbreviation for the Korean Won. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. "). 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 2006 was $949.8 million, or $5.78 per diluted share, compared with $105.2 million, or $0.67 per diluted common share for 2005. This same item excluding foreign exchange gains (losses), net of tax, for 2006 was $919.0 million, or $5.59 per diluted common share, compared with $157.6 million, or $1.00 per diluted common share, for 2005. Operating income for the fourth quarter of 2006 was $284.3 million, or $1.71 per diluted share, compared with $243.6 million, or $1.54 per diluted common share, for the same period in 2005. This same item excluding foreign exchange gains (losses), net of tax, for the fourth quarter of 2006 was $277.7 million, or $1.67 per diluted common share, compared with $245.2 million, or $1.54 per diluted common share, for the same period in 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 year ended December 31, 2006 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 6.3% to $3,609.0 million; * Net premiums written increased by 12.4% to $2,989.2 million; * Net premiums earned increased by 5.5% to $2,694.3 million; * Combined ratio of 77.3% included strong accident year results and net favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. prior period reserve development of 8.0 percentage points; * Pre-tax net investment income increased by 58.6% to $407.1 million; * 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 26.7%; 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 25.2% to $24.02. Commenting on the 2006 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: "I am pleased to announce record earnings for AXIS Capital for 2006 resulting in an increase in diluted book value per common share of 25%. All of us at AXIS are committed to producing market-leading profitability and we will continue to develop our high-quality diverse global 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. portfolio through 2007. Absent major catastrophic events, we expect 2007 results to be very positive and to continue to produce meaningful book value growth in line with our overall performance since inception." Operating Results Gross premiums written for 2006 increased by $215.2 million, or 6.3%, from 2005 and were derived 57.4% from our insurance segment and 42.6% 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 55.2% and 44.8%, respectively, for 2005. The increase was largely due to additional premiums written in our insurance segment. Our combined ratio decreased to 77.3% in 2006 from 101.8% in 2005. The combined ratio in 2005 included net losses incurred from KRW of 39.9 percentage points. We experienced favorable prior period reserve development from short tail lines of business of 8.0 percentage points in 2006 compared to 15.0 percentage points in 2005. In the fourth quarter of 2006, gross premiums written increased by 12.7% compared to the same period in 2005 and were derived 77.1% from our insurance segment and 22.9% from our reinsurance segment compared to 74.6% and 25.4%, respectively, for the same period in 2005. The increase was largely attributable to new political risk business written in our global insurance operations. Our combined ratio was 73.7% for the fourth quarter of 2006 compared to 73.2% in the same period of 2005. The combined ratio in the fourth quarter of 2005 included net losses incurred from Hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth of 25.1 percentage points. We experienced favorable prior period reserve development from short tail lines of business of 5.0 percentage points in the fourth quarter of 2006 compared to 21.3 percentage points in the same period of 2005. Insurance Segment For 2006, our insurance segment reported gross premiums written of $2,070.5 million and net premiums written of $1,460.4 million, up 10.4% and 25.1%, respectively from 2005. The growth was largely driven by significant improvement in pricing of 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 professional lines and political risk business. In addition, the percentage of premiums ceded decreased to 29.5% from 37.7% in 2005. Prior year ceded premiums included significant reinstatement Reinstatement The restoration of an insurance policy after it has lapsed for nonpayment of premiums. premiums incurred following our utilization of reinsurance protections on KRW. Excluding the impact of these reinstatement premiums our net premiums written increased by 14.8%. For the fourth quarter of 2006, our insurance segment reported gross premiums written of $550.7 million and net premiums written of $406.6 million, up 16.6% and 27.0%, respectively from the same period in 2005. The growth was largely driven by new political risk business in our global insurance operations. Our insurance segment reported a combined ratio of 72.3% for 2006 compared to 93.2% for 2005. The prior year's combined ratio included net losses incurred from KRW of 33.8 percentage points. We experienced favorable prior period reserve development from short tail lines of business of 12.8 percentage points compared to 22.3 percentage points in 2005. For the fourth quarter of 2006, our insurance segment reported a combined ratio of 71.4% compared to 71.9% in the same period of 2005. The combined ratio in the fourth quarter of 2005 included net losses incurred from Hurricane Wilma of 22.3 percentage points. In the fourth quarter of 2006, we experienced favorable reserve development of 4.7 percentage points compared to 30.4 percentage points in the fourth quarter of 2005. Reinsurance Segment Our reinsurance segment reported gross premiums written for 2006 of $1,538.6 million, up 1.3% from 2005, and $163.3 million for the fourth quarter of 2006, up 1.4% from the same period in 2005. The fourth quarter is not a significant renewal period for our reinsurance segment. Gross premiums written in 2005 included significant reinstatement premiums following KRW. Excluding these reinstatement premiums, gross premiums written in our reinsurance segment increased by 7.5% in 2006 as compared to 2005. The increase was driven by growth in our U.S casualty and professional liability reinsurance lines as well as new engineering business in Europe. Our reinsurance segment reported a combined ratio of 77.6% for 2006 compared to 106.2% for 2005. The prior year's combined ratio included net losses incurred from KRW of 45.4 percentage points. We experienced favorable prior period reserve development from short tail lines of business of 3.5 percentage points in 2006 compared to 8.4 percentage points in 2005. For the fourth quarter of 2006, our reinsurance segment reported a combined ratio of 71.4% compared to 69.5% in the same period of 2005. The combined ratio in the fourth quarter of 2005 included net losses incurred from Hurricane Wilma of 27.4 percentage points. We experienced favorable prior period reserve development from short tail lines of business of 5.3 percentage points in the fourth quarter of 2006 compared to 13.6 percentage points in the same period of 2005. Investments Pre-tax net investment income for the year ended December 31, 2006 was $407.1 million, an increase of 58.6%, or $150.4 million, from the year ended December 31, 2005. This increase principally reflects the impact of higher investment balances and average investment yields, and includes an additional $29.3 million in net investment income from our alternative investment portfolio ("other investments"). We experienced $25.7 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 $16.9 million for the year ended December 31, 2005. Pre-tax net investment income for the fourth quarter of 2006 was $123.1 million, an increase of 55.9%, or $44.1 million, from the same period in 2005. This increase principally reflects the impact of higher investment balances and average investment yields, and includes an additional $17.6 million in net investment income from our other investments. We experienced $3.3 million of net realized losses, compared to $10.9 million in the fourth quarter of 2005. 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 December 31, 2006 was $4.9 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. At December 31, 2006, diluted book value per common share was $24.02 and book value per common share was $26.09, compared to $19.19 and $20.24 respectively, at December 31, 2005. Diluted book value per share 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 February 6th, 2007 at 8:00 AM (Eastern) to discuss the fourth quarter, year end financial results and related matters. The teleconference can be accessed by dialing (866) 314-5050 (U.S callers) or (617) 213-8051 (international callers) and entering pass code 18187561 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 December 31, 2006 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 December 31, 2006 of $4.4 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 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 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] [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 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. 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. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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