View this article online: https://www.insurancejournal.com/news/international/2004/11/04/47433.htm
Bermuda-based AXIS Capital Holdings Limited reported net income for the third quarter of $6.3 million, or 4 cents per diluted share, compared to $147 million, or 90 cents per diluted share, for the third quarter ended September 30, 2003.
Net income for the nine months ended September 30, 2004 was $313.9 million, or $1.89 per diluted share, compared to $371.9 million, or $2.46 per diluted share, for the corresponding period in 2003.
Excluding capital gains/losses the company still managed to make a $2.8 million net profit for the quarter, which, given the impact of the Florida hurricanes, is an accomplishment. AXIS posted a $2.6 million operating profit in the third quarter of 2003.
For the first nine-months net income excluding net realized gains and losses on investments, net of tax for the nine months ended September 30, 2004 was $305.1 million, or $1.83 per diluted share, compared with $351.0 million, or $2.32 per diluted share, for the nine months ended September 30, 2003.
President and CEO John Charman commented: “AXIS has weathered the storms by producing a positive net income of $6.3 million for the third quarter of 2004. The investment community and many other parties have waited for major losses such as those that have occurred over the last three months to test the Bermuda class of 2001. I am therefore delighted to be able to report a profit for the quarter in spite of the now estimated $30 – $40 billion of damage caused by this season’s unprecedented number of hurricanes and typhoons.
“One of our founding goals was to create high quality global insurance and reinsurance businesses that were soundly diversified both by product line and geography. We have now achieved substantial market share in both these businesses. To achieve net income, therefore, in the face of these substantial and widespread industry losses is a great credit to all of our staff and their disciplined underwriting.”
He also noted that AXIS continues “to be satisfied with the underlying fundamentals in each of our segments and that these fundamentals will deliver ongoing strategic shareholder value. We have increased our shareholders’ equity in a challenging quarter for the industry. We believe that our loyal clients as well as prospective new ones will rely on the quality of our capital and operations to meet their buying needs. AXIS moves forward strongly.”
AXIS also addressed the ongoing investigation by New York Attorney General Eliot Spitzer. The company, which was formed by Marsh & McLennan’s Trident II fund, JP Morgan Partners, Thomas H . Lee Partners, The Blackstone Group and others in the wake of Sept. 11, had received two subpoenas in connection with the ongoing investigations in August.
AXIS addressed the NY AG’s office request for information regarding incentive commission agreements between insurance companies and insurance brokers first. “On September 20, 2004, our [AXIS’] U.S. holding company received two additional subpoenas from the Attorney General of the State of New York seeking information regarding fictitious and inflated quotes submitted by insurance companies to insurance brokers,” the bulletin stated.
It then noted: “On October 21, 2004, our U.S. holding company received a further subpoena from the Attorney General of the State of New York seeking information regarding tying, or conditioning direct insurance on the placement of reinsurance. These inquiries are part of an industry-wide investigation and we are cooperating fully in the investigation.”
Concerning the incentive commissions, AXIS stated: “Consistent with long-standing and wide-spread industry practice, we have entered into incentive commission agreements with brokers. As a result of this investigation, we have ceased entering into, and have suspended making payments under, incentive commission agreements.”
Commenting on the charges, Charman stressed: “My colleagues and I have worked diligently over a very long period of time – a period pre-dating the establishment of AXIS – to establish ourselves as leaders in our respective markets and have held ourselves to the highest standards of ethics, integrity and professionalism in all of our business with intermediaries and clients. Consistent with this philosophy, we do not believe we have engaged in the improper business practices that are the focus of the Attorney General of the State of New York’s investigation. To confirm that our employees have not engaged in any of these improper business practices, we are conducting an internal investigation led by outside counsel to examine the subjects raised by the Attorney General of the State of New York. We believe that this is in the best interests of the Company, our shareholders and our employees.”
The company also responded to “some purported shareholder class action lawsuits have been filed against us and some of our executive officers relating to certain of the practices being investigated by the Attorney General of the State of New York.” The bulletin stated: “We believe that these lawsuits are without merit and intend to vigorously defend against them.”
Other earnings highlights include the following – in summary form:
— Gross premiums written for the third quarter of 2004 were $687.7 million compared to $633.9 million for the third quarter of 2003, an increase of 8.5 percent.
— For the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003, ceded premiums increased to $125.7 million from $99.6 million and our net premiums written rose to $562.0 million from $534.4 million.
— For the quarter ended September 30, 2004, net investment income was $40.0 million and realized gains were $3.7 million, compared with $19.3 million in net investment income and $5.7 million in realized losses for the quarter ended September 30, 2003.
— During the third quarter of 2004, we generated a combined ratio of 109.7 percent, a loss ratio of 85.4 percent and an expense ratio of 24.3 percent compared to 69.2 percent, 46.3 percent and 22.9 percent, respectively, for the third quarter of 2003. The increase in the loss ratio was primarily a result of net losses and loss expenses of $227.4 million from Hurricanes Charley, Frances, Ivan and Jeanne.
— Gross premiums written for the first nine months of 2004 were $2.3611 billion compared to $1.794 billion for the first nine months of 2003.
— For the nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, ceded premiums increased to $412.1 million from $269.6 million and our net premiums rose to $1.9491 billion from $1.5243 billion.
— For the nine months ended September 30, 2004, net investment income, including realized gains of $9.4 million, was $114.0 million compared with $67.8 million, including realized gains of $21.2 million, for the nine months ended September 30, 2003.
— During the first nine months of 2004, we generated a combined ratio of 86.4 percent, a loss ratio of 63.9 percent and an expense ratio of 22.5 percent compared to 74.3 percent, 50.8 percent and 23.5 percent, respectively, for the first nine months in 2003.
— Our shareholders’ equity was $3.1 billion as at September 30, 2004. Diluted book value per share at September 30, 2004 was $19.00 compared to $17.48 at December 31, 2003. 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.
The complete report is available on the company’s Web site at: www.axiscapital.com. AXIS will host a conference call on Thursday November 4, 2004 at 8:30 AM (Eastern) to discuss the third quarter and nine months financial results and related matters. The presentation will also be available through an audio webcast accessible through the Investor Information section of the Web site.