Bermuda-based AXIS Capital Holdings Limited announced that its indirect, wholly-owned subsidiary, AXIS Specialty Finance LLC, has priced an offering of $500 million aggregate principal amount of its 5.875 percent Senior Notes due 2020, fully and unconditionally guaranteed by AXIS Capital, pursuant to an effective shelf registration statement.
AXIS added that the “net proceeds from this offering will be used for general corporate purposes.”
Standard & Poor’s Ratings assigned its ‘A-‘ senior debt rating to the AXIS notes. S&P said the “rating on the notes is based on the explicit support in the form of an unconditional and irrevocable guarantee provided by the ultimate Bermuda-based parent company, AXIS Capital Holdings Ltd. (NYSE:AXS; A-/Stable/–) to the benefit of the senior note holders. Therefore, the rating on ASF’s notes is the same as the counterparty credit rating on AXS. As a result, we expect both of these ratings to move in tandem.”
S&P acknowledged AXIS’ pledge to “use the proceeds from the $500 million issuance for general and corporate purposes,” which would include “share repurchases, a potential small acquisition if an opportunity arises, and to improve capital flexibility. The group will also use the proceeds to enhance its capital structure and increase its tax efficiency.”
S&P indicated that “after issuing the $500 million senior notes, AXIS’ year-end 2009 pro forma debt plus preferred-to-capital ratio will be 23.1 percent, and its fixed-charge coverage ratio will be strong at 8.0x. Both of these are within our expectations for debt plus preferred leverage of less than 25 percent and fixed-charge coverage of at least 5x.
“In 2009, operating results were strong. AXIS generated EBITDA of $946 million and a combined ratio of 79.3 percent, compared with $517 million and 89.9 percent, respectively, in 2008. The company’s initial assessment of its pretax loss from the Chilean earthquake is $60 million-$125 million, and its estimated loss from the European Windstorm Xynthia is $10 million-$20 million (both figures are net of reinstatement premiums). We expect these losses to be contained primarily within the reinsurance segment.”
S&P concluded that despite the magnitude of these losses, “we expect AXIS to report a profit in first-quarter 2010, assuming no additional major catastrophes in the remainder of the period. AXS’ results are within our expectations given the company’s property and catastrophe reinsurance book of business, which constituted about 22 percent of total gross premiums written in 2009.
“Catastrophe losses early on in 2010 have put a dent in AXIS’ catastrophe budget for the year, similar to its peers. However, a large revenue base that includes a diverse book of business should alleviate the impact of these losses.”
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