AXIS Capital Reports First Quarter 2017 Results
For the first quarter of 2017, the Company reports:
- Net income available to common shareholders of $5 million, or $0.06 per diluted common
share
- Non-GAAP operating income 1 of $51 million, or $0.59 per diluted
common share
- Annualized return on average common equity of 0.4%
- Annualized non-GAAP operating return on average common equity of 4.0%
- Diluted book value per common share growth of 1% in the quarter and 5% for the last twelve months,
to $58.89
AXIS Capital Holdings Limited (“AXIS Capital” or “the Company”) (NYSE: AXS) today reported net income available to common
shareholders for the first quarter of 2017 of $5 million, or $0.06 per diluted common share, compared to $38 million, or $0.41 per
diluted common share, for the first quarter of 2016.
Non-GAAP operating income for the first quarter of 2017 was $51 million, or $0.59 per diluted common share, compared to $101
million, or $1.07 per diluted common share, for the first quarter of 2016.
1 Non-GAAP operating income and non-GAAP operating return on average common equity are “non-GAAP financial measures”
as defined in Regulation G. A reconciliation of non-GAAP operating income to net income available to common shareholders (the
nearest GAAP financial measure) and the calculation of operating return on average common equity are provided in this release, as
is a discussion of the rationale for the presentation of these items.
Commenting on the first quarter 2017 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:
“Notwithstanding the pressure from a number of unusual and one-time items in the quarter, we are pleased to report that,
adjusted for dividends, diluted book value per common share increased by $1.00, or 2%, per common share for the quarter. The
special items that impacted our operating income for the quarter include the impact of the Ogden rate change in the U.K., executive
severance and retirement costs, and an impairment of an equity-method investment. In addition, we experienced high catastrophe and
weather-related losses for the quarter, which were in line with higher industry losses.”
Mr. Benchimol added: “Even against the backdrop of a challenging global P&C marketplace, we continue to demonstrate
improvements in our insurance accident year loss ratio excluding catastrophe and weather, and benefits from our strategic capital
partnering activities which allow us to do more for clients, lower our cost of capital, and attractively rebalance the risk-reward
equation for our shareholders. Our underlying underwriting results demonstrate the strength of our various underwriting and risk
management initiatives, good progress in our targeted growth initiatives and continued positive momentum in our strategic capital
partnering activities.”
First Quarter Highlights 2
- Gross premiums written decreased by $47 million or 2% to $1.9 billion, with a decrease of $88
million, or 7% (3% on a constant currency basis3) in our reinsurance segment partially offset by an increase of $41
million, or 6% (7% on a constant currency basis3) in our insurance segment;
- Net premiums written decreased 10% (8% on a constant currency basis3) to $1.5
billion;
- Net premiums earned increased by 4% (8% on a constant currency basis3) to $939
million;
- Combined ratio of 102.1%, compared to 91.9%;
- Current year accident loss ratio of 67.3%, compared to 63.1%;
- Pre-tax catastrophe and weather-related net losses of $35 million, or 3.7 points, associated with
estimated industry losses of approximately $10 billion, compared to $14 million, or 1.6 points;
- Pre-tax impact of $59 million, or 6.3 points, reflecting the impact of the recent Ogden rate change,
including the previously announced increase in prior year reserves of $50 million, and an increase in estimated current accident
year losses for our motor lines of $9 million in the quarter;
- Favorable prior year net reserve development of $25 million (benefiting the combined ratio by 2.6
points), compared to $70 million (benefiting the combined ratio by 7.8 points);
- Net investment income increased to $99 million, compared to $49 million;
- Fee income from strategic capital partners4 of $11 million, compared to $4 million;
- Realized losses and unfavorable mark-to-market adjustments on our weather derivatives business of $9
million (included in other insurance related losses);
- Loss on equity method investment of $6 million in the quarter, due to an impairment loss associated
with the exit from an equity method investment, partially offset by income attributable to Harrington Reinsurance Holdings
Limited;
- Expenses of $8 million attributable to senior executive severance costs;
- Net income available to common shareholders of $5 million and an annualized return on average common
equity of 0.4%, compared to $38 million and 2.9%, respectively;
- Non-GAAP operating income of $51 million, representing an annualized non-GAAP operating return on
average common equity of 4.0%, compared to $101 million and 7.7%;
- Net cash flows used in operations of $36 million, compared to $14 million;
- Diluted book value per common share of $58.89, an increase of 1% compared to the prior quarter, and a
5% increase over the last 12 months;
- Dividends declared of $0.38 per common share, with the total common dividends declared of $1.46 per
share over the past twelve months;
- Adjusted for dividends, diluted book value per common share increased by $1.00, or 2%, per common
share for the quarter and $4.31, or 8%, per common share over the past twelve months; and
- Total common shares repurchased during the quarter were 2.2 million for $151 million.
2 All comparisons are with the same period of the prior year, unless otherwise stated.
3Amounts presented on a constant currency basis are “non-GAAP financial measures” as defined in Regulation G. The
constant currency basis is calculated by applying the average foreign exchange rate from the current year to prior year amounts.
4 Fee income from strategic capital partners represents services fees and reimbursement of expenses earned by the AXIS
Reinsurance segment from its strategic capital partners.
Segment Highlights
Insurance Segment
Our insurance segment reported gross premiums written of $694 million in the first quarter of 2017, an increase of $41 million,
or 6% (7% on a constant currency basis), compared to gross premiums written of $653 million in the first quarter of 2016. The
increase in gross premiums written was primarily driven by our accident and health, and professional lines.
Net premiums written increased by 7% in the first quarter of 2017, compared to the same period in 2016 reflecting the increase
in premiums written in the quarter.
Net premiums earned increased by 5% in the three months ended March 31, 2017, compared to the same period in 2016. The
increase was largely due to strong premium growth in our accident and health lines, as well as our property lines in recent
periods, partially offset by an increase in premiums ceded in our professional and liability lines.
Our insurance segment reported underwriting income of $13 million for the current quarter, compared to $17 million in the first
quarter of 2016. The current quarter’s underwriting results reflected a combined ratio of 97.2%, compared to 96.1% in the same
period in 2016. This included an increase in the current accident year loss ratio to 64.5% this quarter from 63.1% in the first
quarter of 2016, an increase of 1.4 points. This increase was driven by 2.1 points attributable to catastrophe and weather-related
losses, partially offset by 0.7 points, attributable to net favorable attritional loss experience, during the first quarter.
During the first quarter of 2017, we incurred pre-tax catastrophe and weather-related losses of $20 million, or 4.4 points,
primarily related to U.S. weather-related events and Cyclone Debbie, compared to $10 million, or 2.3 points of catastrophe and
weather-related losses reported during the same period in 2016. After adjusting for catastrophe and weather-related losses, the
segment’s current accident year loss ratio decreased by 0.7 points, compared to the same period in 2016, principally due to the
recognition of better than expected experience in our professional lines of business, partially offset by the ongoing adverse
impact of rate and trend.
Net favorable prior year loss reserve development was $9 million, or 1.9 points, this quarter compared to $2 million, or 0.5
points, in the first quarter of 2016.
The segment’s acquisition cost ratio increased to 14.9% from 14.0%, primarily related to business mix in our accident and health
lines.
The segment’s general and administrative expense ratio increased slightly in the current quarter, to 19.7% from 19.5%, with
higher personnel expenses, partially offset by an increase net premiums earned.
Reinsurance Segment
Our reinsurance segment reported gross premiums written of $1.2 billion in the first quarter of 2017, a decrease of $88 million,
or 7% (3% on a constant currency basis), compared to gross premiums written of $1.3 billion in the first quarter of 2016. The
decrease was impacted by a lower level of premiums written on a multi-year basis during 2017 compared to 2016, most notably in our
credit and surety, as well as our motor lines, together with the impact of foreign exchange movements as the strengthening of the
U.S. dollar drove comparative premium decreases in treaties denominated in foreign currencies. After adjusting for the impact
of multi-year contracts and foreign exchange movements, our gross premiums written increased by $97 million, or 7%. The increase
was primarily driven by our agriculture lines due to an increased treaty line size.
Net premiums written decreased by 17% (13% on a constant currency basis) in the first quarter of 2017 compared to the same
period in 2016, reflecting the decrease in premiums written, and an increase in premiums ceded to our strategic capital partners in
the quarter. The increase in premiums ceded was attributable to our catastrophe, as well as our credit and surety lines, together
with the impact of the retrocessional cover entered into with Harrington Re Ltd., which increased premiums ceded in our liability
and professional lines.
Net premiums earned increased by 4% (11% on a constant currency basis) in the three months ended March 31, 2017, compared
to the same period in 2016. The increase was largely due to premium growth in our agriculture, liability, motor, and catastrophe
lines in recent periods. The growth was partially offset by the impact of the retrocession to Harrington Re Ltd., which increased
premiums ceded in our liability and professional lines, and increased premiums ceded in our catastrophe lines.
Our reinsurance segment reported underwriting income of $3 million for the current quarter, compared to $82 million in the first
quarter of 2016. The current quarter’s underwriting results reflected a combined ratio of 98.5%, compared to 82.3% in the same
period in 2016. This included an increase in the current accident year loss ratio to 70.0% this quarter from 63.1% in the first
quarter of 2016, an increase of 6.9 points, including 2.2 points attributable to catastrophe and weather-related losses, and 4.7
points attributable to a combination of factors, including changes in business mix, rate deterioration and the impact of the Ogden
rate change (1.8 points) on our motor lines.
During the first quarter of 2017, we incurred pre-tax catastrophe and weather-related losses of $15 million, or
3.1 points, primarily attributable to U.S. weather-related events and Cyclone Debbie, compared to $4 million, or 0.9 points of
catastrophe and weather-related losses reported during the same period in 2016. After adjusting for the catastrophe and
weather-related losses, the segment’s current accident year loss ratio increased by 4.7 points, compared to the same period in
2016, for the reasons noted above.
Net favorable prior year reserve development was $16 million, or 3.4 points, this quarter compared to $68 million, or 14.7
points, in the first quarter of 2016.
Our reinsurance underwriting income for the three months ended March 31, 2017, included other insurance related losses of $4
million attributable to realized losses and unfavorable mark-to-market adjustments on our weather derivatives business, partially
offset by fees from strategic capital partners.
The segment’s acquisition cost ratio decreased slightly in the current quarter, to 25.3% from 25.7%, principally driven by
changes in business mix, and a decrease in adjustments related to loss-sensitive features, partially offset by the impact of
retrocessional contracts. In addition, the 2016 ratio included the benefits of fees from strategic capital partners (0.9 points),
which are now included in other income and offset against general and administrative expenses.
The segment’s general and administrative expense ratio decreased in the current quarter, to 6.6% from 8.2%, reflecting the
benefits of fees from strategic capital partner arrangements.
Investments
Net investment income of $99 million for the quarter represents a $50 million increase from the first quarter of 2016, and a $3
million increase from the fourth quarter of 2016, primarily due to changes in the fair value of our alternative investments (“other
investments”). These investments generated a gain of $19 million in the current quarter, compared to a loss of $27 million in the
first quarter of 2016, and a gain of $17 million in the fourth quarter of 2016.
Net realized investment losses for the quarter were $25 million, compared to net realized investment losses of $67 million in
the first quarter of 2016, and net realized investment losses of $20 million in the fourth quarter of 2016.
Capitalization / Shareholders’ Equity
Our total capital5 at March 31, 2017 was $7.2 billion, including $1.0 billion of senior notes and $1.1 billion
of preferred equity, compared to $7.3 billion at December 31, 2016. The decrease in total capital is attributable to the
repurchases of $151 million of our common shares during the quarter, partially offset by an increase in unrealized investment gains
reported in other comprehensive income, following an increase in the market value of our fixed income and equity investment
portfolios in the three months ended March 31, 2017.
On April 17, 2017, the Company redeemed the remaining $351 million of its 6.875% Series C preferred shares.
At April 26, 2017, the Company had $836 million of remaining authorization under our Board-authorized share repurchase program
for common share repurchases through December 31, 2017.
5 Total capital represents the sum of total shareholders’ equity and our senior notes.
Diluted book value per common share, calculated on a treasury stock basis, increased by $0.62 in the current quarter and by
$2.85 over the past twelve months, to $58.89. The increase in the quarter was primarily driven by the increase in unrealized
investment gains reported in other comprehensive income, while the increase over the past twelve months was driven by net income
generated during the period.
During the first quarter of 2017, the Company declared common dividends of $0.38 per share, with total common dividends declared
of $1.46 per share over the past twelve months. Adjusted for dividends declared, the diluted book value per common share increased
by $1.00, or 2%, for the quarter and $4.31, or 8%, over the past twelve months.
Conference Call
We will host a conference call on Thursday, April 27, 2017, at 9:00 AM (Eastern) to discuss the first 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 2233381. 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 . 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 10103952. The
webcast will be archived in the Investor Information section of the Company’s website.
In addition, a financial supplement relating to our financial results for the quarter ended March 31, 2017 is available in the
Investor Information section of our website.
AXIS Capital is a Bermuda-based global provider of specialty lines insurance and treaty reinsurance with shareholders’ equity at
March 31, 2017 of $6.2 billion and locations in Bermuda, the United States, Europe, Singapore, Middle East, Canada and Latin
America. 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 .
Please be sure to follow AXIS Capital on LinkedIn.
LinkedIn: http://bit.ly/2kRYbZ5
AXIS CAPITAL HOLDINGS LIMITED
|
CONSOLIDATED BALANCE SHEETS
|
MARCH 31, 2017 (UNAUDITED) AND DECEMBER 31, 2016
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
(in thousands) |
Assets |
|
|
|
|
Investments: |
|
|
|
|
Fixed maturities, available for sale, at fair value |
|
|
|
$ |
11,191,529 |
|
|
|
$ |
11,397,114 |
|
Equity securities, available for sale, at fair value |
|
|
|
653,419 |
|
|
|
638,744 |
|
Mortgage loans, held for investment, at amortized cost and fair value |
|
|
|
339,855 |
|
|
|
349,969 |
|
Other investments, at fair value |
|
|
|
780,395 |
|
|
|
830,219 |
|
Equity method investments |
|
|
|
111,233 |
|
|
|
116,000 |
|
Short-term investments, at amortized cost and fair value |
|
|
|
13,338 |
|
|
|
127,461 |
|
Total investments |
|
|
|
13,089,769 |
|
|
|
13,459,507 |
|
Cash and cash equivalents |
|
|
|
1,165,263 |
|
|
|
1,039,494 |
|
Restricted cash and cash equivalents |
|
|
|
286,307 |
|
|
|
202,013 |
|
Accrued interest receivable |
|
|
|
69,649 |
|
|
|
74,971 |
|
Insurance and reinsurance premium balances receivable |
|
|
|
2,891,811 |
|
|
|
2,313,512 |
|
Reinsurance recoverable on unpaid and paid losses |
|
|
|
2,070,341 |
|
|
|
2,334,922 |
|
Deferred acquisition costs |
|
|
|
609,773 |
|
|
|
438,636 |
|
Prepaid reinsurance premiums |
|
|
|
645,663 |
|
|
|
556,344 |
|
Receivable for investments sold |
|
|
|
40,448 |
|
|
|
14,123 |
|
Goodwill and intangible assets |
|
|
|
84,613 |
|
|
|
85,049 |
|
Other assets |
|
|
|
293,330 |
|
|
|
295,120 |
|
Total assets |
|
|
|
$ |
21,246,967 |
|
|
|
$ |
20,813,691 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
Reserve for losses and loss expenses |
|
|
|
$ |
9,541,963 |
|
|
|
$ |
9,697,827 |
|
Unearned premiums |
|
|
|
3,629,354 |
|
|
|
2,969,498 |
|
Insurance and reinsurance balances payable |
|
|
|
514,356 |
|
|
|
493,183 |
|
Senior notes |
|
|
|
993,229 |
|
|
|
992,950 |
|
Payable for investments purchased |
|
|
|
83,783 |
|
|
|
62,550 |
|
Other liabilities |
|
|
|
253,917 |
|
|
|
325,313 |
|
Total liabilities |
|
|
|
15,016,602 |
|
|
|
14,541,321 |
|
|
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
Preferred shares |
|
|
|
1,126,074 |
|
|
|
1,126,074 |
|
Common shares |
|
|
|
2,206 |
|
|
|
2,206 |
|
Additional paid-in capital |
|
|
|
2,276,671 |
|
|
|
2,299,857 |
|
Accumulated other comprehensive income (loss) |
|
|
|
699 |
|
|
|
(121,841 |
) |
Retained earnings |
|
|
|
6,499,262 |
|
|
|
6,527,627 |
|
Treasury shares, at cost |
|
|
|
(3,674,547 |
) |
|
|
(3,561,553 |
) |
Total shareholders' equity |
|
|
|
6,230,365 |
|
|
|
6,272,370 |
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
|
|
$ |
21,246,967 |
|
|
|
$ |
20,813,691 |
|
|
|
AXIS CAPITAL HOLDINGS LIMITED
|
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
|
|
|
|
|
|
Three months ended |
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share amounts)
|
Revenues |
|
|
|
|
|
|
|
Net premiums earned |
|
|
|
$ |
938,703 |
|
|
|
$ |
902,340 |
|
Net investment income |
|
|
|
98,664 |
|
|
|
49,164 |
|
Net realized investment losses |
|
|
|
(25,050 |
) |
|
|
(66,508 |
) |
Other insurance related losses |
|
|
|
(3,783 |
) |
|
|
(203 |
) |
Total revenues |
|
|
|
1,008,534 |
|
|
|
884,793 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Net losses and loss expenses |
|
|
|
606,942 |
|
|
|
498,962 |
|
Acquisition costs |
|
|
|
189,792 |
|
|
|
180,635 |
|
General and administrative expenses |
|
|
|
161,260 |
|
|
|
149,901 |
|
Foreign exchange losses |
|
|
|
21,465 |
|
|
|
616 |
|
Interest expense and financing costs |
|
|
|
12,791 |
|
|
|
12,833 |
|
Total expenses |
|
|
|
992,250 |
|
|
|
842,947 |
|
|
|
|
|
|
|
|
|
Income before income taxes and interest in income (loss) of equity method
investments |
|
|
|
16,284 |
|
|
|
41,846 |
|
Income tax benefit |
|
|
|
9,337 |
|
|
|
6,540 |
|
Interest in loss of equity method investments |
|
|
|
(5,766 |
) |
|
|
— |
|
Net income |
|
|
|
19,855 |
|
|
|
48,386 |
|
Preferred shares dividends |
|
|
|
14,841 |
|
|
|
9,969 |
|
Net income available to common shareholders |
|
|
|
$ |
5,014 |
|
|
|
$ |
38,417 |
|
|
|
|
|
|
|
|
|
Per share data |
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
Basic net income |
|
|
|
$ |
0.06 |
|
|
|
$ |
0.41 |
|
Diluted net income |
|
|
|
$ |
0.06 |
|
|
|
$ |
0.41 |
|
Weighted average number of common shares outstanding - basic |
|
|
|
86,022 |
|
|
|
94,035 |
|
Weighted average number of common shares outstanding - diluted |
|
|
|
86,793 |
|
|
|
94,853 |
|
Cash dividends declared per common share |
|
|
|
$ |
0.38 |
|
|
|
$ |
0.35 |
|
|
|
AXIS CAPITAL HOLDINGS LIMITED
|
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
|
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
Insurance |
|
|
Reinsurance |
|
|
Total |
|
|
Insurance |
|
|
Reinsurance |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
Gross premiums written |
|
|
|
$ |
694,006 |
|
|
|
$ |
1,217,865 |
|
|
|
$ |
1,911,871 |
|
|
|
$ |
653,349 |
|
|
|
$ |
1,305,812 |
|
|
|
$ |
1,959,161 |
|
Net premiums written |
|
|
|
505,329 |
|
|
|
1,003,630 |
|
|
|
1,508,959 |
|
|
|
473,163 |
|
|
|
1,212,643 |
|
|
|
1,685,806 |
|
Net premiums earned |
|
|
|
458,430 |
|
|
|
480,273 |
|
|
|
938,703 |
|
|
|
438,678 |
|
|
|
463,662 |
|
|
|
902,340 |
|
Other insurance related income (losses) |
|
|
|
42 |
|
|
|
(3,825 |
) |
|
|
(3,783 |
) |
|
|
137 |
|
|
|
(340 |
) |
|
|
(203 |
) |
Net losses and loss expenses |
|
|
|
(286,903 |
) |
|
|
(320,039 |
) |
|
|
(606,942 |
) |
|
|
(274,405 |
) |
|
|
(224,557 |
) |
|
|
(498,962 |
) |
Acquisition costs |
|
|
|
(68,157 |
) |
|
|
(121,635 |
) |
|
|
(189,792 |
) |
|
|
(61,398 |
) |
|
|
(119,237 |
) |
|
|
(180,635 |
) |
Underwriting-related general and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative expenses(6) |
|
|
|
(90,448 |
) |
|
|
(31,353 |
) |
|
|
(121,801 |
) |
|
|
(85,576 |
) |
|
|
(38,013 |
) |
|
|
(123,589 |
) |
Underwriting income (6) |
|
|
|
$ |
12,964 |
|
|
|
$ |
3,421 |
|
|
|
16,385 |
|
|
|
$ |
17,436 |
|
|
|
$ |
81,515 |
|
|
|
98,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses |
|
|
|
|
|
|
|
|
|
(39,459 |
) |
|
|
|
|
|
|
|
|
(26,312 |
) |
Net investment income |
|
|
|
|
|
|
|
|
|
98,664 |
|
|
|
|
|
|
|
|
|
49,164 |
|
Net realized investment losses |
|
|
|
|
|
|
|
|
|
(25,050 |
) |
|
|
|
|
|
|
|
|
(66,508 |
) |
Foreign exchange losses |
|
|
|
|
|
|
|
|
|
(21,465 |
) |
|
|
|
|
|
|
|
|
(616 |
) |
Interest expense and financing costs |
|
|
|
|
|
|
|
|
|
(12,791 |
) |
|
|
|
|
|
|
|
|
(12,833 |
) |
Income before income taxes and
interest in income (loss) of equity
method investments
|
|
|
|
|
|
|
|
|
|
$ |
16,284 |
|
|
|
|
|
|
|
|
|
$ |
41,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss and loss expense ratio |
|
|
|
62.6 |
% |
|
|
66.6 |
% |
|
|
64.7 |
% |
|
|
62.6 |
% |
|
|
48.4 |
% |
|
|
55.3 |
% |
Acquisition cost ratio |
|
|
|
14.9 |
% |
|
|
25.3 |
% |
|
|
20.2 |
% |
|
|
14.0 |
% |
|
|
25.7 |
% |
|
|
20.0 |
% |
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense ratio |
|
|
|
19.7 |
% |
|
|
6.6 |
% |
|
|
17.2 |
% |
|
|
19.5 |
% |
|
|
8.2 |
% |
|
|
16.6 |
% |
Combined ratio |
|
|
|
97.2 |
% |
|
|
98.5 |
% |
|
|
102.1 |
% |
|
|
96.1 |
% |
|
|
82.3 |
% |
|
|
91.9 |
% |
|
6 Underwriting-related general and administrative expenses and consolidated underwriting income are "non-GAAP
financial measures", as defined in SEC Regulation G. Reconciliations of these amounts to the nearest GAAP financial measures (total
general and administrative expenses and income before income taxes and interest in income (loss) of equity method investments,
respectively) are provided in this release, as are discussions of the rationale for the presentation of these items.
|
AXIS CAPITAL HOLDINGS LIMITED
|
NON-GAAP FINANCIAL MEASURES RECONCILIATION (UNAUDITED)
|
NON-GAAP OPERATING INCOME, NON-GAAP OPERATING RETURN ON AVERAGE COMMON EQUITY
|
AND UNDERWRITING-RELATED GENERAL AND ADMINISTRATIVE EXPENSES
|
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
2017 |
|
2016 |
|
|
|
|
|
|
(in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
Net income available to common shareholders |
|
|
|
$ |
5,014 |
|
$ |
38,417 |
|
Net realized investment losses, net of tax(7) |
|
|
|
24,227 |
|
61,810 |
|
Foreign exchange losses, net of tax(8) |
|
|
|
21,723 |
|
1,047 |
|
Non-GAAP operating income |
|
|
|
$ |
50,964 |
|
$ |
101,274 |
|
|
|
|
|
|
|
|
|
Earnings per common share - diluted |
|
|
|
$ |
0.06 |
|
$ |
0.41 |
|
Net realized investment losses, net of tax |
|
|
|
0.28 |
|
0.65 |
|
Foreign exchange losses, net of tax |
|
|
|
0.25 |
|
0.01 |
|
Non-GAAP operating income per common share - diluted |
|
|
|
$ |
0.59 |
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
Weighted average common shares and common share equivalents - diluted |
|
|
|
86,793 |
|
94,853 |
|
|
|
|
|
|
|
|
|
Average common shareholders' equity |
|
|
|
5,125,294 |
|
5,282,149 |
|
|
|
|
|
|
|
|
|
Annualized return on average common equity |
|
|
|
0.4 |
%
|
2.9 |
% |
|
|
|
|
|
|
|
|
Annualized non-GAAP operating return on average common equity |
|
|
|
4.0 |
%
|
7.7 |
% |
|
7 Tax benefit of ($823) and ($4,698) for the three months ended March 31, 2017 and 2016, respectively. Tax
impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors
including the ability to utilize capital losses.
8Tax cost of $258 and $431 for the three months ended March 31, 2017 and 2016, respectively. Tax impact is
estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the
tax status of specific foreign exchange transactions.
In addition to underwriting-related general and administrative expenses, our total general and administrative expenses of
$161,260 and $149,901 for the three months ended March 31, 2017 and 2016, respectively, include corporate expenses.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking
statements contained in this release include our expectations regarding market conditions and information regarding our estimates
of losses related to natural disasters. These statements involve risks, uncertainties and assumptions. Actual events or results may
differ materially from our expectations. Important factors that could cause actual events or results to be materially different
from our expectations include (1) the cyclical nature of the re(insurance) business leading to periods with excess underwriting
capacity and unfavorable premium rates, (2) the occurrence and magnitude of natural and man-made disasters, (3) losses from war,
terrorism and political unrest or other unanticipated losses, (4) actual claims exceeding our loss reserves, (5) general economic,
capital and credit market conditions, (6) the failure of any of the loss limitation methods we employ, (7) the effects of emerging
claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions, (8)
our inability to purchase reinsurance or collect amounts due to us, (9) the breach by third parties in our program business of
their obligations to us, (10) difficulties with technology and/or data security, (11) the failure of our policyholders and
intermediaries to pay premiums, (12) the failure of our cedants to adequately evaluate risks, (13) inability to obtain additional
capital on favorable terms, or at all, (14) the loss of one or more key executives, (15) a decline in our ratings with rating
agencies, (16) the loss of business provided to us by our major brokers and credit risk due to our reliance on brokers, (17)
changes in accounting policies or practices, (18) the use of industry catastrophe models and changes to these models, (19) changes
in governmental regulations and potential government intervention in our industry, (20) failure to comply with certain laws and
regulations relating to sanctions and foreign corrupt practices, (21) increased competition, (22) changes in the political
environment of certain countries in which we operate or underwrite business including the United Kingdom's expected withdrawal from
the European Union, (23) fluctuations in interest rates, credit spreads, equity prices and/or currency values, and (24) the other
factors set forth in our most recent report on Form 10-K, Form 10-Q and other documents on file with the Securities and Exchange
Commission. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
Non-GAAP Financial Measures
In this release, we present non-GAAP operating income, consolidated underwriting income, underwriting-related general and
administrative expenses and amounts presented on a constant currency basis, which are "non-GAAP financial measures" as defined in
Regulation G.
Non-GAAP operating income represents after-tax operational results without consideration of after-tax net realized investment
gains (losses) and foreign exchange losses (gains). We also present diluted non-GAAP operating income per share and non-GAAP
operating return on average common equity ("non-GAAP operating ROACE"), which are derived from the non-GAAP operating income
measure. Reconciliations of non-GAAP operating income, diluted non-GAAP operating earnings per share and non-GAAP operating ROACE
to the nearest GAAP financial measures (based on net income available to common shareholders) are included above.
Consolidated underwriting income is a pre-tax measure of underwriting profitability that takes into account net premiums earned
and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related
general and administrative costs as expenses. Underwriting-related general and administrative expenses include those general and
administrative expenses that are incremental and/or directly attributable to our individual underwriting operations. While these
measures are presented in the Segment Information footnote to our Consolidated Financial Statements, they are considered non-GAAP
financial measures when presented elsewhere on a consolidated basis. A reconciliation of consolidated underwriting income to income
before income taxes and interest in income (loss) of equity method investments (the nearest GAAP financial measure) is included in
the 'Consolidated Segmental Data' section of this press release. Our total general and administrative expenses (the nearest GAAP
financial measure to underwriting-related general and administrative expenses) also includes corporate expenses. The two components
of total general and administrative expenses are separately presented in the 'Consolidated Segmental Data' section of this press
release.
Amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current
year to the prior year amounts.
We present our results of operations in the way we believe will be most meaningful and useful to investors, analysts, rating
agencies and others who use our financial information to evaluate our performance. This includes the presentation of "non-GAAP
operating income" (in total and on a per share basis), "annualized non-GAAP operating ROACE" (which is based on the "non-GAAP
operating income" measure) and "consolidated underwriting income", which incorporates "underwriting-related general and
administrative expenses".
Non-GAAP Operating Income
Although the investment of premiums to generate income and realized investment gains (losses) is an integral part of our
operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily
influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of
investment gains (losses) is somewhat opportunistic for many companies.
Foreign exchange losses (gains) in our Consolidated Statements of Operations are primarily driven by the impact of foreign
exchange rate movements on net insurance-related liabilities. However, this movement is only one element of the overall impact of
foreign exchange rate fluctuations on our financial position. In addition, we recognize unrealized foreign exchange losses (gains)
on our available-for-sale investments in other comprehensive income and foreign exchange losses (gains) realized upon the sale of
these investments in net realized investment gains (losses). These unrealized and realized foreign exchange movements generally
offset a large portion of the foreign exchange losses (gains) reported separately in earnings, thereby minimizing the impact of
foreign exchange rate movements on total shareholders’ equity. As such, the Statement of Operations foreign exchange losses (gains)
in isolation are not a fair representation of the performance of our business.
In this regard, certain users of our financial statements evaluate earnings excluding after-tax net realized investment gains
(losses) and foreign exchange losses (gains) to understand the profitability of recurring sources of income.
We believe that showing net income available to common shareholders exclusive of net realized gains (losses) and foreign
exchange losses (gains) reflects the underlying fundamentals of our business. In addition, we believe that this presentation
enables investors and other users of our financial information to analyze performance in a manner similar to how our management
analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates
comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and
the insurance industry as a whole, generally exclude these items from their analyses for the same reasons.
Consolidated Underwriting Income/Underwriting-Related General and Administrative Expenses
Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and
costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to
our individual underwriting operations, we exclude them from underwriting-related general and administrative expenses and,
therefore, consolidated underwriting income. Interest expense and financing costs primarily relate to interest payable on our
senior notes and are excluded from consolidated underwriting income for the same reason.
We evaluate our underwriting results separately from the performance of our investment portfolio. As such, we believe it
appropriate to exclude net investment income and net realized investment gains (losses) from our underwriting profitability
measure.
As noted above, foreign exchange losses (gains) in our Consolidated Statement of Operations primarily relate to our net
insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign
exchange rate losses (gains) on our investment portfolio generally offset a large portion of the foreign exchange losses (gains)
arising from our underwriting portfolio. As a result, we believe that foreign exchange losses (gains) are not a meaningful
contributor to our underwriting performance and, therefore, exclude them from consolidated underwriting income.
We believe that presentation of underwriting-related general and administrative expenses and consolidated underwriting income
provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax
profitability of our underwriting activities.
Investors
AXIS Capital Holdings Limited
Linda Ventresca, 441-405-2727
investorrelations@axiscapital.com
or
Media
Kekst
Michael Herley, 212-521-4897
michael.herley@kekst.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170426006749/en/