AXIS Narrows Q3 Loss to $96 Million; Conference Call Today

Bermuda-based AXIS Capital Holdings Limited reported a net loss available to common shareholders for the third quarter of 2009 of $96 million, or $0.70 per diluted common share, compared with a net loss of $249 million, or $1.79 per diluted common share, for the third quarter of 2008.

Net income for the nine months ended September 30, 2009 was $179 million, or $1.19 per diluted share, compared with $220 million, or $1.40 per diluted share, for the corresponding period in 2008.

Operating income, which excludes capital gains/losses, for the third quarter of 2009 was $152 million, or $1.00 per diluted share, compared with an operating loss of $161 million, or $1.15 per diluted common share, for the third quarter of 2008. “This same item excluding foreign exchange gains/losses, net of tax, for the third quarter of 2009 was $160 million, or $1.05 per common share, compared with a loss of $171 million, or $1.22 per diluted common share, for the third quarter of 2008,” the bulletin explained.

Operating income for the first nine months of 2009 was $490 million, or $3.26 per diluted share, compared with $273 million, or $1.74 per diluted common share, for the first nine months of 2008. “This same item excluding foreign exchange gains/losses, net of tax, for the first nine months of 2009 was $522 million, or $3.48 per diluted common share, compared with $251 million, or $1.59 per diluted common share, for the first nine months of 2008,” said the bulletin.

AXIS listed the following highlights for the third quarter:
Gross premiums written of $775 million, an increase of 7 percent;
— Net premiums written of $595 million, an increase of 8 percent;
— Net premiums earned of $706 million, an increase of 2 percent;
— Combined ratio of 73.2 percent compared with 128.0 percent;
— Favorable prior year reserve development of $122 million, benefiting the combined ratio by 17.3 points, compared with $76 million, benefiting the combined ratio in the same period last year by 11.0 points;
— Total underwriting income, adjusted for the impact of the change in fair value of a longevity-exposed indemnity derivative contract, of $207 million compared with a loss of $173 million;
— Net investment income of $135 million, an increase of 166 percent relative to the prior year quarter and an increase of 20 percent relative to the second quarter of 2009;
— Cash and invested assets grew to $11.8 billion during the current quarter, reflective of operating cash flows of $442 million and an improvement in asset valuations of $354 million;
— The total return on our cash and investments portfolio was 4.3 percent for the quarter and 7.5 percent for the year-to-date;
— Operating income for the third quarter of 2009 of $152 million represented an annualized operating return on average common equity of 13.0 percent and operating income for the nine months ended September 30, 2009 of $490 million represented an annualized operating return on average common equity of 14.7 percent;
— Diluted book value per common share of $31.58, an increase of 10 percent from June 30, 2009 and 22 percent from December 31, 2008.

CEO and President John Charman commented: “I am pleased to report that, during this third quarter of 2009, AXIS benefited from very good P&C underwriting results as well as a strong recovery in asset valuations throughout our investment portfolio. Importantly, our underwriting operations produced a combined ratio of 73.2 percent. While the combined ratio benefited from a low level of catastrophes, it continues to demonstrate our strong performance for the year and the consistency of our underwriting performance through what has been so far a very challenging phase of the underwriting cycle. Our results are particularly strong given the impact of the global economic crisis over the last two years.

“Our results this quarter were adversely impacted by an increase in the fair value liability of our only insurance derivative contract. Despite this adjustment, we were still able to deliver an increase in diluted book value per share of 10 percent in the quarter and 22 percent for the year to date,” he added.

Standard & Poor’s more or less agreed with Charman’s description of the derivative loss. The rating agency indicated that it considers “AXIS’ losses in the indemnity derivative contract modest relative to the group’s capital base.” See IJ web site – https://www.insurancejournal.com/news/international/2009/10/19/104622.htm.

“For the third quarter, our consolidated net premiums written were up 8 percent largely due to the continued success of our reinsurance segment in accessing underwriting opportunities,” Charman continued. “At this time, the reinsurance market continues to remain the most disciplined and attractive area of the global P&C marketplace.

“In our insurance segment, we have maintained a very defensive posture overall. While rate improved across our insurance portfolio during the third quarter of 2009, this improvement was somewhat muted relative to the first half of this year. As we have demonstrated in the past, when necessary, we will sacrifice top-line growth to preserve underwriting profit.”

AXIS will host a conference call today November 3, 2009 at 8:00 AM (Eastern) to discuss the third 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 5501909 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.

The full earnings report and additional information may also be accessed on the Company’s web site.

Source: AXIS Capital