AXIS Q3, 9 Month Earnings Hit by Investments, Loss Events

October 28, 2015

AXIS Capital Holdings Limited has reported net income available to common shareholders for the third quarter of 2015 of $248 million, or $2.50 per diluted common share, compared with $279 million, or $2.68 per diluted common share, for the third quarter of 2014.

Net income available to common shareholders for the nine months ended September 30, 2015, was $467 million or $4.65 per diluted common share, compared with $607 million, or $5.68 per diluted common share, for the corresponding period of 2014.

Operating income, which excludes capital gains/losses, for the third quarter of 2015 were $51 million, or $0.51 per diluted common share, compared to $133 million, or $1.27 per diluted common share, for the third quarter of 2014. For the nine months ended September 30, 2015, AXIS Capital reported operating income of $281 million, or $2.79 per diluted common share, compared with $443 million, or $4.14 per diluted common share, for the first nine months of 2014.

Third Quarter Highlights listed in the report, were as follows:
• Gross premiums written increased 4 percent (6 percent on a constant currency basis) to $937 million, growth in our insurance segment of 9 percent (11 percent on a constant currency basis) was partially offset by a decrease of 3 percent (2 percent on a constant currency basis) in our reinsurance segment;
• Net premiums written decreased 1 percent (flat on a constant currency basis) to $677 million;
• Net premiums earned decreased 5 percent (3 percent on a constant currency basis) to $919 million;
• Combined ratio of 96.6 percent, compared to 92.2 percent;
• Current accident year loss ratio of 65.9 percent, compared to 63.8 percent;
• Estimated catastrophe and weather-related pre-tax net losses of $43 million, including the Tianjin port explosion loss of $30 million and losses related to U.S. weather events, compared to $22 million incurred during the third quarter of 2014;
• Net favorable prior year reserve development of $45 million (benefiting the combined ratio by 4.9 points), compared to $65 million (benefiting the combined ratio by 6.7 points);
• Total fee of $315 million received following the termination of the amalgamation agreement with PartnerRe Ltd., comprising a $280 million termination fee and $35 million received as reimbursement for merger related expenses;
• Included in our corporate expenses, pre-tax merger costs of $27 million incurred prior to the termination of the amalgamation agreement with PartnerRe Ltd;
• Pre-tax charges of $51 million relating to profitability enhancement initiatives including reorganization and related expenses of $46 million and corporate expenses of $5 million;
• Net investment income of $46 million, compared to $67 million;
• Pre-tax total return on cash and investments was (0.3 percent), including foreign exchange movements, or (0.1 percent), excluding foreign exchange movements, compared to (0.7 percent) (or (0.1 percent) excluding foreign exchange movements);
• Net income available to common shareholders of $248 million and annualized return on average common equity of 18.8 percent, compared to $279 million and 21.2 percent;
• Operating income of $51 million, representing an annualized operating return on average common equity of 3.9 percent, compared to $133 million and 10.1 percent;
• Net cash flows from operations of $587 million, compared to $343 million;
• Diluted book value per common share of $53.68, an increase of 4 percent compared to the prior quarter and representing an 8 percent increase over the last 12 months;
• Dividends declared of $0.29 per common share, with the total common dividends declared of $1.16 per share over the past twelve months;
• Growth in diluted book value per common share adjusted for dividends of $2.16, or 4 percent, per common share for the quarter and $4.96, or 10 percent, per common share over the past twelve months;

The report also notes that on August 17, 2015, “the Company entered into an Accelerated Share Repurchase (“ASR”) agreement to repurchase an aggregate of $300 million of the Company’s ordinary shares. On August 20, 2015, under the terms of this agreement the Company initially acquired 4.1 million ordinary shares.

“The scheduled termination date of the ASR agreement is February 18, 2016 but the program may be accelerated at any time on, or after, November 18, 2015. The final number of shares to be delivered will be based on the Company’s volume-weighted average price for the period from August 18, 2015 to the termination date less a discount.”

President and CEO Albert Benchimol commented: “Over the last year, AXIS Capital has delivered growth of 10 percent in diluted book value per share adjusted for dividends. We are confident that our actions to accelerate attractive new initiatives, optimize our portfolio, prune business challenged over the long-term, and enhance the efficiency of our platform, position us to continue to deliver shareholder value against the backdrop of an increasingly competitive market.

“Our results in the quarter include the benefits of targeted portfolio enhancements, particularly in the insurance property and professional lines, which were commenced prior to this year. However, these improvements were overshadowed by the adverse impact of volatility in our investment portfolio and unusually high offshore energy losses. These impacts are well understood and not unexpected given the performance of the equity markets and the high level of marine market losses this year.”

Source: AXIS Capital

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