For the third quarter of 2019, the Company reports:

  • Ex-PGAAP operating loss of $28 million, or $(0.34) per diluted common share
  • Estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $160 million, or 14.1 points, compared to $92 million or 7.5 points, in the prior year
  • Book value per diluted common share of $56.26, an increase of $0.27, or 0.5% compared to June 30, 2019

PEMBROKE, Bermuda–(BUSINESS WIRE)–AXIS Capital Holdings Limited (“AXIS Capital” or “the Company”) (NYSE: AXS) today reported net income available to common shareholders for the third quarter of 2019 of $28 million, or $0.33 per diluted common share, compared to net income of $43 million, or $0.52 per diluted common share, for the third quarter of 2018. Net income available to common shareholders for the nine months ended September 30, 2019 was $292 million, or $3.46 per diluted common share, compared to net income of $199 million, or $2.37 per diluted common share, for the same period in 2018.

Operating loss1 for the third quarter of 2019 was $33 million, or $(0.39) per diluted common share1, compared to operating income of $79 million, or $0.94 per diluted common share, for the third quarter of 2018. For the nine months ended September 30, 2019, AXIS Capital reported operating income of $209 million, or $2.48 per diluted common share, compared to operating income of $305 million, or $3.62 per diluted common share, for the same period in 2018.

Ex-PGAAP operating loss2 for the third quarter of 2019 was $28 million, or $(0.34) per diluted common share2, compared to ex-PGAAP operating income of $88 million, or $1.04 per diluted common share, for the third quarter of 2018. For the nine months ended September 30, 2019, AXIS Capital reported ex-PGAAP operating income of $227 million, or $2.69 per diluted common share, compared to ex-PGAAP operating income of $343 million, or $4.08 per diluted common share, for the same period in 2018.

Commenting on the third quarter 2019 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:

“This was a disappointing quarter, where our performance was marred by catastrophes that impacted our industry, coupled with mid-size losses in our credit and aviation lines.

“These losses obscure positive underlying trends that reflect our progress in building an organization that will consistently deliver strong results. Specifically, even with higher mid-size loss experience, within our Insurance segment, the current year ex-cat loss ratio is down more than a point this quarter versus the prior year. In our Reinsurance segment, while the ex-cat loss ratio is higher this quarter, this same ratio is down over a point year-to-date, reflecting the continued execution of our strategy to improve risk adjusted returns.

“We remain focused on continuing our progress and are confident that these positive underlying trends can be sustained. AXIS has leading positions in the markets that are experiencing the most significant pricing improvements which, combined with our underwriting actions and investments in digital capabilities, put us on a strong pathway toward long-term profitable growth.”

1Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided later in this press release.

2Ex-PGAAP operating income (loss), ex-PGAAP operating income (loss) per diluted common share and annualized ex-PGAAP operating return on average common equity (“ex-PGAAP operating ROACE”) are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders, earnings (loss) per diluted common share, and annualized return on average common equity (“ROACE”), respectively, and a discussion of the rationale for the presentation of these items are provided later in this press release. Annualized ex-PGAAP operating ROACE for the three months ended September 30, 2019, was calculated using weighted average common shares outstanding due to the ex-PGAAP operating loss recognized in the period.

Third Quarter Highlights3

  • Gross premiums written decreased by $17 million, or 1% ($8 million or 1% on a constant currency basis4), to $1.4 billion with a decrease of $74 million or 8% in the insurance segment, partially offset by an increase of $57 million, or 13% in the reinsurance segment.
  • Net premiums written decreased by $64 million, or 7% ($56 million or 6% on a constant currency basis), to $856 million with a decrease of $85 million or 14% in the insurance segment, partially offset by an increase of $21 million, or 7% in the reinsurance segment.

KEY RATIOS

Q3 2019

 

Q3 2018

 

Change

Current accident year loss ratio excluding catastrophe and weather-related losses

61.7

%

 

61.2

%

 

0.5

pts

Catastrophe and weather-related losses ratio

14.1

%

 

7.5

%

 

6.6

pts

Current accident year loss ratio

75.8

%

 

68.7

%

 

7.1

pts

Prior year reserve development ratio

(2.3

%)

 

(3.8

%)

 

1.5

pts

Net losses and loss expenses ratio

73.5

%

 

64.9

%

 

8.6

pts

Acquisition cost ratio

22.5

%

 

20.3

%

 

2.2

pts

General and administrative expense ratio

13.4

%

 

12.7

%

 

0.7

pts

Combined ratio

109.4

%

 

97.9

%

 

11.5

pts

  • Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums were $160 million, primarily attributable to Hurricane Dorian, the Japanese typhoons, and other weather-related events this quarter, compared to $92 million in 2018.
  • Net favorable prior year reserve development was $27 million (Insurance $15 million; Reinsurance $12 million), compared to $46 million (Insurance $13 million; Reinsurance $32 million) in 2018.
  • Underwriting income (loss) for the third quarter of 2019 and 2018 included the recognition of premiums attributable to the balance sheet of Novae Group plc (“Novae”) at October 2, 2017 (the “closing date” or the “acquisition date”), without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $2 million and $29 million of acquisition expenses related to premiums earned in the third quarter of 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.1 points and 2.4 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 0.1 points in the quarter compared to the same period in 2018 due to changes in business mix.
  • Amortization of value of business acquired (“VOBA”) of $4 million and $39 million, was recognized in the third quarter of 2019 and 2018, respectively. This expense impacted operating income but was not included in the results of the insurance and reinsurance segments.
  • Adjusted for dividends, book value per diluted common share increased by $0.67, or 1% in the quarter.

3 All comparisons are with the same period of the prior year, unless otherwise stated.

4Amounts presented on a constant currency basis are non-GAAP financial measures as defined in SEC Regulation G. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to prior year amounts. The reconciliations to the most comparable GAAP financial measures are provided in this release, as is a discussion of the rationale for the presentation of these items.

Segment Highlights

Insurance Segment

 

Three Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

894,902

 

 

$

969,364

 

 

(7.7)%

Net premiums written

517,050

 

 

602,070

 

 

(14.1)%

Net premiums earned

536,451

 

 

614,795

 

 

(12.7)%

Underwriting loss

(17,892

)

 

(11,711

)

 

52.8%

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

58.2

%

 

59.7

%

 

(1.5

pts)

Catastrophe and weather-related losses ratio

7.7

%

 

10.1

%

 

(2.4

pts)

Current accident year loss ratio

65.9

%

 

69.8

%

 

(3.9

pts)

Prior year reserve development ratio

(2.7

%)

 

(2.2

%)

 

(0.5

pts)

Net losses and loss expenses ratio

63.2

%

 

67.6

%

 

(4.4

pts)

Acquisition cost ratio

21.5

%

 

18.2

%

 

3.3

pts

Underwriting-related general and administrative expense ratio

18.8

%

 

16.4

%

 

2.4

pts

Combined ratio

103.5

%

 

102.2

%

 

1.3

pts

  • Gross premiums written decreased by $74 million, or 8% ($63 million or 7% on a constant currency basis), primarily attributable to property lines due to the repositioning of the portfolio, partially offset by an increase in liability lines driven by new business and favorable rate changes.
  • Net premiums written decreased by $85 million, or 14% ($75 million or 12% on a constant currency basis), reflecting the decrease in gross premiums written in the quarter.
  • The current accident year loss ratio excluding catastrophe and weather-related losses decreased by 1.5 points in the third quarter compared to the same period in 2018, due to the repositioning of the portfolio and better pricing achieved at recent renewals, partially offset by changes in business mix and an increase in mid-size loss experience in credit and political risk lines.
  • Pre-tax catastrophe and weather-related losses, net of reinsurance were $41 million, primarily attributable to Hurricane Dorian and other weather-related events this quarter, compared to $62 million in 2018.
  • Net favorable prior year reserve development was $15 million this quarter, compared to $13 million in the third quarter of 2018.
  • Underwriting income (loss) for the third quarter of 2019 and 2018 included the recognition of premiums attributable to Novae’s balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $2 million and $29 million of acquisition expenses related to premiums earned in the third quarter of 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.3 points and 4.7 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 1.1 points in the quarter compared to the same period in 2018 due to changes in business mix.
  • The underwriting-related general and administrative expense ratio increased by 2.4 points in the quarter attributable to the decrease in net premiums earned due to the repositioning of the portfolio while the underwriting-related general and administrative expenses in the quarter were comparable to the same period in 2018.

 

Nine Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

2,714,322

 

 

$

2,876,856

 

 

(5.6)%

Net premiums written

1,638,197

 

 

1,748,142

 

 

(6.3)%

Net premiums earned

1,630,473

 

 

1,772,126

 

 

(8.0)%

Underwriting income

14,336

 

 

114,210

 

 

nm

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

57.7

%

 

57.3

%

 

0.4

pts

Catastrophe and weather-related losses ratio

3.9

%

 

6.3

%

 

(2.4

pts)

Current accident year loss ratio

61.6

%

 

63.6

%

 

(2.0

pts)

Prior year reserve development ratio

(2.6

%)

 

(3.5

%)

 

0.9

pts

Net losses and loss expenses ratio

59.0

%

 

60.1

%

 

(1.1

pts)

Acquisition cost ratio

21.2

%

 

16.4

%

 

4.8

pts

Underwriting-related general and administrative expense ratio

19.0

%

 

17.2

%

 

1.8

pts

Combined ratio

99.2

%

 

93.7

%

 

5.5

pts

nm – not meaningful
  • Gross premiums written decreased by $163 million, or 6% ($125 million or 4% on a constant currency basis), primarily attributable to property, and accident and health lines due to the repositioning of the portfolio, partially offset by increases in liability, professional lines and marine lines driven by new business and favorable rate changes.
  • Net premiums written decreased by $110 million, or 6% ($78 million or 4% on a constant currency basis), reflecting the decrease in gross premiums written.
  • Underwriting income for the nine months ended September 30, 2019 and 2018 included the recognition of premiums attributable to Novae’s balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $11 million and $105 million of acquisition expenses related to premiums earned in the nine months ended September 30, 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.6 points and 5.9 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 0.5 points for the nine months ended September 30, 2019 compared to the same period in 2018.

Reinsurance Segment

 

Three Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

511,604

 

 

$

454,343

 

 

12.6%

Net premiums written

339,031

 

 

317,868

 

 

6.7%

Net premiums earned

620,856

 

 

609,280

 

 

1.9%

Underwriting income (loss)

(60,826

)

 

70,737

 

 

nm

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

64.8

%

 

62.6

%

 

2.2

pts

Catastrophe and weather-related losses ratio

19.6

%

 

5.0

%

 

14.6

pts

Current accident year loss ratio

84.4

%

 

67.6

%

 

16.8

pts

Prior year reserve development ratio

(1.9

%)

 

(5.3

%)

 

3.4

pts

Net losses and loss expenses ratio

82.5

%

 

62.3

%

 

20.2

pts

Acquisition cost ratio

23.3

%

 

22.4

%

 

0.9

pts

Underwriting-related general and administrative expense ratio

4.1

%

 

4.8

%

 

(0.7

pts)

Combined ratio

109.9

%

 

89.5

%

 

20.4

pts

nm – not meaningful

  • Gross premiums written increased by $57 million, or 13% ($55 million or 12% on a constant currency basis), primarily attributable to catastrophe, liability, and accident and health lines driven by timing differences. In addition, the increase in catastrophe lines was due to new business. These increases were partially offset by a decrease in property lines associated with the repositioning of the portfolio.
  • Net premiums written increased by $21 million, or 7% ($19 million or 6% on a constant currency basis), reflecting the increase in gross premiums written in the quarter, partially offset by an increase in premiums ceded in catastrophe lines.
  • The current accident year loss ratio excluding catastrophe and weather-related losses increased by 2.2 points in the third quarter compared to the same period in 2018, primarily due to an increase in mid-size loss experience in aviation, and credit and surety lines, partially offset by a decrease in mid-size loss experience in property and engineering lines.
  • Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums were $119 million, primarily attributable to Japanese typhoons, Hurricane Dorian and other weather-related events this quarter, compared to $30 million in 2018.
  • Net favorable prior year reserve development was $12 million this quarter which included net favorable prior year reserve development in motor lines attributable to non-proportional treaty business related to recent accident years, partially offset by net adverse prior year reserve development in property lines attributable to the late notification of claims related to recent accident years, compared to $32 million in the third quarter of 2018.
  • The acquisition cost ratio increased by 0.9 points in the quarter, due to adjustments related to loss sensitive features and the impact of retrocessional contracts, partially offset by changes in business mix.
  • The underwriting-related general and administrative expense ratio decreased by 0.7 points in the quarter, largely attributable to benefits related to arrangements with strategic capital partners.

 

Nine Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

2,923,169

 

 

$

2,860,471

 

 

2.2%

Net premiums written

2,065,263

 

 

2,158,122

 

 

(4.3)%

Net premiums earned

1,784,653

 

 

1,804,900

 

 

(1.1)%

Underwriting income

63,425

 

 

204,280

 

 

(69.0)%

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

62.3

%

 

63.5

%

 

(1.2

pts)

Catastrophe and weather-related losses ratio

7.6

%

 

2.8

%

 

4.8

pts

Current accident year loss ratio

69.9

%

 

66.3

%

 

3.6

pts

Prior period reserve development ratio

(1.2

%)

 

(5.5

%)

 

4.3

pts

Net losses and loss expenses ratio

68.7

%

 

60.8

%

 

7.9

pts

Acquisition cost ratio

23.4

%

 

23.2

%

 

0.2

pts

Underwriting-related general and administrative expense ratio

4.9

%

 

5.5

%

 

(0.6

pts)

Combined ratio

97.0

%

 

89.5

%

 

7.5

pts

  • Gross premiums written increased by $63 million or 2% ($110 million or 4% on a constant currency basis), primarily attributable to catastrophe, liability, and accident and health lines driven by new business. The increase in new business in catastrophe lines was due to improved pricing and growth in Japan at the April 1 renewals. Increased line sizes on a number of treaties and the restructuring of several treaties which impacted the timing of premium recognition also contributed to the increase in catastrophe lines. These increases were partially offset by decreases in motor, credit and surety lines, and property lines associated with the repositioning of the portfolio.
  • Net premiums written decreased by $93 million, or 4% ($46 million or 2% on a constant currency basis), reflecting an increase in premiums ceded in catastrophe and liability lines, together with the increase in gross premiums written in the period.

Investments

Net investment income of $116 million for the quarter represents an increase of $1 million compared to the third quarter of 2018. Net realized and unrealized gains recognized in net income for the quarter were $15 million, compared to net realized and unrealized losses of $18 million in the third quarter of 2018.

Pre-tax total return on cash and investments5 was 1.0% including foreign exchange movements (1.2% excluding foreign exchange movements6), primarily due to net investment income generated in the quarter. The prior year pre-tax total return was 0.6% including foreign exchange movements (0.7% excluding foreign exchange movements). Our fixed income portfolio book yield was 2.9% at September 30, 2019 and 2018. The market yield was 2.5% at September 30, 2019.

Capitalization / Shareholders’ Equity

Total capital7 at September 30, 2019 was $7.0 billion, including $1.4 billion of senior notes and $775 million of preferred equity, compared to $6.4 billion at December 31, 2018. The increase in total capital is attributable to net income generated in the nine months ended September 30, 2019, and net unrealized investment gains reported in other comprehensive income following an increase in the market value of our fixed income portfolio, partially offset by common share dividends declared.

Book value per diluted common share, calculated on a treasury stock basis, increased by $0.27 in the current quarter, and by $3.56 over the past twelve months, to $56.26. The increase in the quarter and over the past twelve months was driven by net income generated and net unrealized investment gains reported in other comprehensive income, partially offset by common share dividends declared. During the third quarter of 2019, the Company declared dividends of $0.40 per common share, with total dividends declared of $1.60 per common share over the past twelve months. Adjusted for dividends declared, the book value per diluted common share increased by $0.67, or 1%, for the quarter and increased by $5.16 or 10%, over the past twelve months.

5 Pre-tax total return on cash and investments includes net investment income (loss), net investment gains (losses), interest in income (loss) of equity method investments and change in unrealized investment gains (losses) generated by average cash and investment balances. Total cash and invested assets represents the total cash and cash equivalents, fixed maturities, equity securities, mortgage loans, other investments, equity method investments, short-term investments, accrued interest receivable and net receivable (payable) for investments sold (purchased).

6 Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, also included foreign exchange (losses) gains of $(31)m and $(10)m for the three months ended September 30, 2019 and 2018, respectively, and foreign exchange (losses) of $(28)m for nine months ended September 30, 2019 and 2018.

7 Total capital represents the sum of total shareholders’ equity and senior notes.

Conference Call

We will host a conference call on Wednesday, October 30, 2019 at 10:00 a.m. (Eastern) to discuss the third quarter financial results and related matters. The teleconference can be accessed by dialing (888) 317-6003 (U.S. callers) or (412) 317-6061 (international callers) approximately ten minutes in advance of the call and entering the passcode 2704846. A live, listen-only webcast of the call will also be available via the Investor Information section of our website at www.axiscapital.com. A replay of the teleconference will be available for two weeks by dialing (877) 344-7529 (U.S. callers) or (412) 317-0088 (international callers) and entering the passcode 10135461. The webcast will be archived in the Investor Information section of our website.

In addition, an investor financial supplement relating to our financial results for the quarter ended September 30, 2019 is available in the Investor Information section of our website.

About AXIS Capital

AXIS Capital, through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with shareholders’ equity at September 30, 2019 of $5.6 billion and locations in Bermuda, the United States, Europe, Singapore, Canada and the Middle East. Its operating subsidiaries have been assigned a rating of “A+” (“Strong”) by Standard & Poor’s and “A+” (“Superior”) by A.M. Best. For more information about AXIS Capital, visit our website at www.axiscapital.com.

Website and Social Media Disclosure

We use our website (www.axiscapital.com) and our corporate Twitter (@AXIS_Capital) and LinkedIn (AXIS Capital) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received when enrolled in our “E-mail Alerts” program, which can be found in the Investor Information section of our website (www.axiscapital.com). The contents of our website and social media channels are not, however, part of this press release.

Please be sure to follow AXIS Capital on LinkedIn.

LinkedIn: http://bit.ly/2kRYbZ5

 

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

(in thousands)

Assets

 

 

 

Investments:

 

Fixed maturities, available for sale, at fair value

$

12,616,241

 

 

$

11,435,347

 

Equity securities, at fair value

429,903

 

 

381,633

 

Mortgage loans, held for investment, at fair value

407,790

 

 

298,650

 

Other investments, at fair value

779,200

 

 

787,787

 

Equity method investments

113,748

 

 

108,103

 

Short-term investments, at fair value

12,539

 

 

144,040

 

Total investments

14,359,421

 

 

13,155,560

 

Cash and cash equivalents

763,825

 

 

1,232,814

 

Restricted cash and cash equivalents

444,726

 

 

597,206

 

Accrued interest receivable

81,371

 

 

80,335

 

Insurance and reinsurance premium balances receivable

3,322,316

 

 

3,007,296

 

Reinsurance recoverable on unpaid losses and loss expenses

3,705,793

 

 

3,501,669

 

Reinsurance recoverable on paid losses and loss expenses

252,087

 

 

280,233

 

Deferred acquisition costs

586,440

 

 

566,622

 

Prepaid reinsurance premiums

1,243,040

 

 

1,013,573

 

Receivable for investments sold

9,711

 

 

32,627

 

Goodwill

102,003

 

 

102,003

 

Intangible assets

233,305

 

 

241,568

 

Value of business acquired

11,048

 

 

35,714

 

Operating lease right-of-use assets

116,560

 

 

 

Other assets

263,880

 

 

285,346

 

Total assets

$

25,495,526

 

 

$

24,132,566

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Reserve for losses and loss expenses

$

12,498,507

 

 

$

12,280,769

 

Unearned premiums

4,153,003

 

 

3,635,758

 

Insurance and reinsurance balances payable

1,276,123

 

 

1,338,991

 

Senior notes

1,388,135

 

 

1,341,961

 

Payable for investments purchased

89,805

 

 

111,838

 

Operating lease liabilities

115,887

 

 

 

Other liabilities

388,196

 

 

393,178

 

Total liabilities

19,909,656

 

 

19,102,495

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

Preferred shares

775,000

 

 

775,000

 

Common shares

2,206

 

 

2,206

 

Additional paid-in capital

2,309,483

 

 

2,308,583

 

Accumulated other comprehensive income (loss)

176,296

 

 

(177,110

)

Retained earnings

6,101,902

 

 

5,912,812

 

Treasury shares, at cost

(3,779,017

)

 

(3,791,420

)

Total shareholders’ equity

5,585,870

 

 

5,030,071

 

Total liabilities and shareholders’ equity

$

25,495,526

 

 

$

24,132,566

 

 

 

Contacts

Matt Rohrmann (Investor Contact): (212) 940-3339; [email protected]
Anna Kukowski (Media Contact): (212) 715-3574; [email protected]

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