AXIS Capital Reports Second Quarter Operating Income of $183 Million and Net Income of $159 Million.Diluted Operating Earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before Per Share of $1.22 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. Operating Return on Average Common Equity of 17.4% 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 for the second quarter of 2009 of $159 million, or $1.06 per diluted common share, compared with $231 million, or $1.47 per diluted common share, for the second quarter of 2008. Net income for the six months ended June 30, 2009 was $275 million, or $1.84 per diluted share, compared with $469 million, or $2.95 per diluted share, for the corresponding period in 2008. 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 2009 was $183 million, or $1.22 per diluted share, compared with $229 million, or $1.45 per diluted common share, for the second quarter of 2008. This same item excluding foreign exchange gains/losses, net of tax, for the second quarter of 2009 was $208 million, or $1.39 per diluted common share, compared with $236 million, or $1.50 per diluted common share, for the second quarter of 2008. Operating income for the first six months of 2009 was $338 million, or $2.26 per diluted share, compared with $434 million, or $2.73 per diluted common share, for the first six months of 2008. This same item excluding foreign exchange gains/losses, net of tax, for the first six months of 2009 was $363 million, or $2.43 per diluted common share, compared with $421 million, or $2.65 per diluted common share, for the first six months of 2008. Second Quarter Highlights * Operating income of $183 million; * Annualized operating return on average common equity of 17.4%; * 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. of $915 million, an increase of 5%; * Combined ratio of 80.4%, including net favorable reserve development of 13.7 percentage points; * Underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. of $141 million, an increase of 2%; * A reduction in the net 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 our available for sale investments of $239 million; * Strong operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $207 million; * 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 $4.9 billion, an increase of 10% from December 31, 2008; 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: of $28.72, an increase of 9% from March 31, 2009 and 11% from December 31, 2008. Commenting on the second quarter 2009 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 strong diluted book value growth of 9% and an annualized operating return on average common equity of 17.4% during this second quarter of 2009. Both 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. segments converted the best opportunities they found against the backdrop of a mixed market. The result was an overall increase in gross premiums written and net premiums written of 5% and 2% respectively during the second quarter. I am disappointed that the insurance market has failed to harden more broadly when it is so blindingly obvious that is the path it should and must take. The need for change is obvious, but the courage to change is lacking. The reinsurance market continues to show strong leadership and disciplined pricing overall. A stratification is occurring in this market and we are perfectly positioned to reap the benefits." Segment Highlights Insurance Segment Our insurance segment reported underwriting income for the quarter of $16 million, down $35 million, or 69%, from the second quarter of 2008. The segment's combined ratio was 89.8% compared with 80.3% in the prior year quarter. The increase in the combined ratio was driven by increased claims activity impacting our credit and political risk line of business, partially offset by a lower frequency and severity of property per risk losses. Net favorable prior period development was $47 million, or 15.7 points, this quarter compared with $46 million, or 15.5 points, in the second quarter of 2008. The current quarter's underwriting result also included a reduction of $15 million in the fair value of an insurance derivative contract, which is included in other insurance related income. This compared with a $7 million reduction in the same quarter last year. Our insurance segment reported gross premiums written in the quarter of $527 million, down 5% from the second quarter of 2008, and net premiums written of $313 million, down 14% from the second quarter of 2008. These reductions primarily emanate em·a·nate intr. & tr.v. em·a·nat·ed, em·a·nat·ing, em·a·nates To come or send forth, as from a source: light that emanated from a lamp; a stove that emanated a steady heat. from our credit and political risk line of business, where we continued to see limited underwriting opportunities due to contracting global lending and trading activity. Ceded premiums were 41% of gross premiums written in the current quarter compared with 34% in the second quarter of 2008. The increase reflects the impact of business mix changes, increased costs and the expansion of our reinsurance coverage during the year. Reinsurance Segment Our reinsurance segment reported underwriting income for the quarter of $125 million, a 43% increase compared with the second quarter of 2008. The segment's combined ratio was 69.5% compared with 77.3% in the prior year quarter. The improvement in the combined ratio was driven by a lower level of catastrophe and other large loss activity. Net favorable prior period development was $50 million, or 12.2 points, this quarter compared with $41 million, or 10.6 points, in the second quarter of 2008. Our reinsurance segment reported gross premiums written in the quarter of $388 million, up 22% from the second quarter of 2008, reflecting rate increases, increased participation on certain treaties and new business opportunities. These factors were significant in the growth of our catastrophe, property and professional liability reinsurance lines of business. Investments Net investment income for the quarter of $112 million represented an increase of $13 million, or 13%, relative to the first quarter of this year and a decrease of $25 million, or 18%, relative to the second quarter of 2008. Net investment income from fixed maturities and cash and cash equivalents was $103 million this quarter compared with $95 million in the first quarter of this year and $116 million in the second quarter of 2008. The increase relative to the first quarter of 2009 reflects the impact of higher average invested balances as well as redeployment re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. of cash and cash equivalents into higher yielding high-grade fixed income investments. Net investment income from cash and cash equivalents decreased over the prior year period however as a result of lower short-term and intermediate interest rates. Net investment income from our alternative investment portfolio ("other investments") was $12 million. This represented an increase of $5 million relative to the first quarter of this year and a decrease of $8 million relative to the same period last year. Effective April 1, 2009, we adopted the new FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). guidance for the recognition of other-than-temporary impairments (OTTI OTTI Office of Travel and Tourism Industries OTTI Other Than Temporarily Impaired OTTI Ostbayrisches Technologie Transfer Institut ) of fixed maturity securities, resulting in a $38 million net after-tax increase to our April 1, 2009 retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. and accumulated other comprehensive loss. This adjustment reflects the non-credit portion of $86 million in previously recognized OTTI for fixed maturity securities held at March 31, 2009. The adoption of this new guidance had no impact to our book value per share. For the current quarter, we recorded a further $1 million in net after-tax OTTI charges through other comprehensive income. During the quarter, we incurred net realized investment losses of $24 million compared to net realized investment gains of $2 million in the prior year quarter. Net realized investment losses for the quarter included $21 million of OTTI charges on certain mortgage-backed, corporate debt and equity securities. At June 30, 2009, net unrealized losses within our available for sale investment portfolio were $529 million, a reduction of $239 million in the quarter. The improvement in asset valuation experienced during the quarter was primarily due to credit spread tightening on corporate debt and structured credit securities. During the quarter, we reduced U.S. agency residential mortgage-backed securities Residential mortgage-backed securities (RMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on residential rather than commercial real estate. and invested the proceeds primarily in U.S. agency debt securities and high-grade corporate debt. This shift has resulted in reduced extension risk while maintaining our investment portfolio yield levels. At June 30, 2009, we held cash and cash equivalent balances of $1.4 billion, or 13%, of total cash and investments. Our fixed maturity investment portfolio, which represents 81% of total cash and investments, is well diversified, has a weighted average credit quality of AA+, and has an average duration of approximately 3.13 years. Our other investments represent 5% of our cash and investments portfolio at June 30, 2009. Supplementary information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc our investment portfolio at June 30, 2009 is available in the Investor Information section of our website. 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 June 30, 2009 was $5.4 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 $5.0 billion at December 31, 2008. At June 30, 2009, diluted book value per common share, on a treasury stock basis, was $28.72 and book value per common share was $32.02, compared to $25.79 and $29.08 respectively, as of December 31, 2008. Conference Call We will host a conference call on Tuesday, August 4, 2009 at 8:00 AM (Eastern) to discuss the second quarter financial results and related matters. The teleconference can be accessed by dialing (866) 843-0890 (U.S. callers) or (412) 317-9250 (international callers) and entering the pass-code 9677789 approximately ten minutes in advance of the call. A live, listen-only webcast of the call will also be available via the Investor Information section of the Company's website at www.axiscapital.com. In addition, a financial supplement relating to our financial results for the quarter ended June 30, 2009 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 June 30, 2009 of $4.9 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, Singapore, Canada and Australia. Its operating subsidiaries have been assigned a rating of "A+" ("Strong") by Standard & Poor's and "A" ("Excellent") by A.M. Best. 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 A- (stable) by Standard & Poor's and 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. . For more information about AXIS Capital, visit our website at www.axiscapital.com. [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) 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 , (2) actual claims exceeding our loss reserves, (3) the failure of any of the loss limitation methods we employ, (4) the effects of emerging claims and coverage issues, (5) the failure of our cedants to adequately evaluate risks, (6) the loss of one or more key executives, (7) a decline in our ratings with rating agencies, (8) the loss of business provided to us by our major brokers, (9) changes in governmental regulations, (10) increased competition, (11) interest rate and/or currency value fluctuations, (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 this release, we have presented the following non-GAAP financial measures: 1. Operating income. This 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; 2. Operating income, excluding the after tax impact of foreign exchange gains and losses. We have included these 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. |
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