AXIS Capital Reports Second Quarter 2017 Results
For the second quarter of 2017, the Company reports:
- Net income available to common shareholders of $85 million, or $1.01 per diluted common
share
- Non-GAAP operating income 1 of $110 million, or $1.31 per diluted
common share
- Annualized return on average common equity of 6.7%
- Annualized non-GAAP operating return on average common equity of 8.6%
- Diluted book value per common share growth of 3% in the quarter and 5% for the last twelve months,
to $60.45
AXIS Capital Holdings Limited ("AXIS Capital" or "the Company") (NYSE: AXS) today reported net income available to common
shareholders for the second quarter of 2017 of $85 million, or $1.01 per diluted common share, compared to $119 million, or $1.29
per diluted common share, for the second quarter of 2016. Net income available to common shareholders for the six months ended June
30, 2017 was $90 million, or $1.05 per diluted common share, compared with $158 million, or $1.69 per diluted common share, for the
corresponding period in 2016.
Non-GAAP operating income for the second quarter of 2017 was $110 million, or $1.31 per diluted common share, compared to $47
million, or $0.51 per diluted common share, for the second quarter of 2016. For the six months ended June 30, 2017, AXIS Capital
reported non-GAAP operating income of $161 million, or $1.89 per diluted common share, compared with non-GAAP operating income of
$149 million, or $1.59 per diluted common share for the first six months 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 second quarter 2017 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:
"This quarter we continued to take tangible actions and make strong progress in advancing our strategy to build long-term
profitable growth for AXIS. We are reporting operating ROE of 8.6% and growth in book value per share, adjusted for dividends, of
3% for the second quarter. Our underwriting results absorbed the impact of a higher frequency of Property losses and the
continuing effect of the Ogden rate change, which reflects the benefits associated with our portfolio construction activities."
"We continue to enhance the AXIS franchise, dedicating more resources to data and analytics, recruiting top talent, and
expanding our activities with strategic capital partners to do more for our clients and brokers and earn attractive fee income, and
furthering our strategy of growing scale and relevance in attractive markets."
"In addition to organic growth in targeted lines of business during the quarter, we closed on the acquisition of Aviabel, a
European specialty aviation (re)insurer and, earlier this month, we announced our offer to acquire Novae Group plc, a diversified
specialty (re)insurer operating through Lloyd’s of London. Our proposed acquisition of Novae would accelerate strategic initiatives
and strengthen our positioning in the important London market for international specialty risks."
Second Quarter Highlights 2
- Gross premiums written increased by $42 million or 3% (4% on a constant currency basis3)
to $1.4 billion, with an increase of $30 million, or 6% in our reinsurance segment and an increase of $12 million, or 2% (3% on a
constant currency basis3) in our insurance segment;
- Net premiums written decreased 5% (4% on a constant currency basis3) to $956 million;
- Net premiums earned increased by 4% (5% on a constant currency basis3) to $981
million;
- Combined ratio of 97.6%, compared to 102.2%;
- Current year accident loss ratio of 68.9%, compared to 75%;
- Pre-tax catastrophe and weather-related net losses, net of reinstatement premiums, of $50 million, or
5.1 points, compared to $109 million, or 11.7 points;
- Favorable prior year net reserve development of $71 million (benefiting the combined ratio by 7.2
points), compared to $78 million (benefiting the combined ratio by 8.2 points);
- Net investment income increased to $106 million, compared to $92 million;
- Pre-tax total return on cash and investments4 of 1.2%, including foreign exchange
movements, or 1%, excluding foreign exchange movements. The comparable prior period pre-tax total return was 1.2% including (or
1.4% excluding) foreign exchange movements;
- Fee income from strategic capital partners5 of $12 million ($5 million included in other
insurance related income and $7 million included as a benefit to general and administrative expenses), compared to $1
million;
- Bargain purchase gain of $15 million associated with the acquisition of Aviabel. This gain is
excluded from non-GAAP operating income;
- Net income available to common shareholders of $85 million and an annualized return on average common
equity of 6.7%, compared to $119 million and 9%, respectively;
- Non-GAAP operating income of $110 million, representing an annualized non-GAAP operating return on
average common equity of 8.6%, compared to $47 million and 3.6%;
- Net cash flows from operations of $185 million, compared to $77 million;
- Diluted book value per common share of $60.45, an increase of 3% 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 $1.49 per
share over the past twelve months;
- Adjusted for dividends, diluted book value per common share increased by $1.94, or 3%, per common
share for the quarter and $4.32, or 7%, per common share over the past twelve months; and
- Total common shares repurchased during the quarter were 2 million for $131 million. Following the
offer to acquire Novae Group plc ("Novae") on July 5th, 2017, the Company has suspended its open market share repurchase program.
The offer is subject to regulatory approval and other customary closing conditions and is expected to close in the fourth quarter
of this year.
| |
|
2 All comparisons are with the same period of the prior year, unless otherwise
stated.
|
|
3 Amounts 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 Pre-tax total return on cash and investments includes net investment
income (loss), net realized investment gains (losses), interest in income (loss) of equity method investments and the change in
unrealized gains (losses) generated by our average cash and investment balances. Total cash and invested assets represents the
total cash, available for sale investments, mortgage loans, other investments, equity method investments, short-term
investments, accrued interest receivable and net receivable (payable) for investments sold (purchased). |
| 5 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 $796 million in the second quarter of 2017, an increase of $12 million,
or 2% (3% on a constant currency basis), compared to gross premiums written of $784 million in the second quarter of 2016. The
increase in gross premiums written was attributable to our liability lines driven by new business, and our aviation lines
associated with our recent acquisition of Aviabel. These increases were partially offset by a decrease in premiums written in our
property lines due to the impact of our exit from some retail insurance operations in the U.S. last year, and a decrease in our
marine lines largely due to timing differences.
For the six months ended June 30, 2017, gross premiums written were $1.5 billion, an increase of $53 million, or 4%,
compared to the same period in 2016. The increase in gross premiums written was attributable to our accident and health lines and
our liability lines primarily driven by new business. These increases were partially offset by a decrease in premiums written in
our marine lines largely due to timing differences, and a decrease in our property lines due to the impact of our exit from some
retail insurance operations in the U.S. last year.
Net premiums written were comparable (2% increase on a constant currency basis) and increased by 3% (4% on a constant currency
basis) in the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016 reflecting the
increase in gross premiums written, and a decrease in premiums ceded in our professional lines attributable to the impact of our
exit from retail insurance operations in Australia, partially offset by an increase in premiums ceded in our liability and marine
lines.
Net premiums earned increased by 12% (14% on a constant currency basis) and 8% (10% on a constant currency basis) in the three
and six months ended June 30, 2017, respectively, compared to the same periods in 2016. The increases were largely due to
strong premiums growth in our accident and health lines as well as our property lines in recent periods, together with a decrease
in ceded premiums earned in our property lines.
Our insurance segment reported an underwriting loss of $0.5 million for the current quarter, compared to an underwriting loss of
$11 million in the second quarter of 2016. The current quarter’s underwriting results reflected a combined ratio of 100.2%,
compared to 102.5% in the same period in 2016. This included a decrease in the current accident year loss ratio to 69.9% this
quarter from 74.3% in the second quarter of 2016. During the second quarter of 2017, we incurred pre-tax catastrophe and
weather-related losses of $41 million, or 8.4 points, primarily attributable to U.S. weather-related events, compared to $49
million, or 11.1 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 in the second quarter decreased by 1.7
points, compared to the same period in 2016, primarily due to a decrease in mid-size loss experience in our marine lines and
changes in business mix, partially offset by an increase in attritional loss experience in our property lines, and the ongoing
adverse impact of rate and trend.
Net favorable prior year loss reserve development was $20 million, or 3.9 points, this quarter compared to $20 million, or 4.6
points, in the second quarter of 2016.
The segment's acquisition cost ratio increased in the quarter to 16.5% from 14.1%, primarily related to changes in business mix
in our accident and health lines.
The segment's general and administrative expense ratio decreased in the quarter to 17.7% from 18.7%, driven by an increase in
net premiums earned.
For the six months ended June 30, 2017, our insurance segment reported underwriting income of $12 million, compared to $6
million for the same period in 2016. The increase in underwriting income was principally associated with a decrease in the current
accident year loss ratio excluding catastrophe and weather-related losses and an increase in net favorable prior year reserve
development.
Reinsurance Segment
Our reinsurance segment reported gross premiums written of $566 million in the second quarter of 2017, an increase of $30
million, or 6%, compared to gross premiums written of $536 million in the second quarter of 2016. The increase in gross premiums
written was primarily driven by our motor, catastrophe and property lines, partially offset by a decrease in our agriculture lines.
The increase in our motor lines was largely due to timing differences and favorable premium adjustments. The increase in our
catastrophe and property lines was primarily driven by new business spread across several cedants. Favorable treaty restructuring
and increased line sizes on a number of treaties also contributed to the increase in our property lines. The decrease in our
agriculture lines was due to the non-renewal of a significant treaty.
For the six months ended June 30, 2017, gross premiums written were $1.8 billion, a decrease of $58 million, or 3% (1% on a
constant currency basis), compared to the same period in 2016. The decrease in gross premiums written was primarily driven by a
lower level of premiums written on a multi-year basis, notably in our credit and surety lines and our liability lines. These
decreases were partially offset by an increase in our agriculture, catastrophe, and property lines. The increase in agriculture is
due to increased participation on a renewing treaty, which more than offset the cancellation of a large treaty. The increase in our
catastrophe and property lines was driven by new business spread across several cedants.
Net premiums written decreased by 11% (10% on a constant currency basis) in the second quarter of 2017 compared to the same
period in 2016, reflecting an increase in premiums ceded to our strategic capital partners, partially offset by the increase in
gross premiums written in the quarter. The increase in premiums ceded was attributable to our agriculture lines, together with the
impact of the retrocessional cover entered into with Harrington Re Ltd., which increased premiums ceded in our professional and
liability lines.
On a year-to-date basis, net premiums written decreased by 15% (13% on a constant currency basis) compared to 2016, reflecting
the impact of the retrocessional cover entered into with Harrington Re Ltd., as well as an increase in premiums ceded in our
catastrophe, credit and surety lines, and our agriculture lines, together with a decrease in gross premiums written.
Net premiums earned decreased by 4% (2% on a constant currency basis) and were comparable (4% increase on a constant currency
basis) in the three and six months ended June 30, 2017, respectively, compared to the same periods in 2016. The decrease in
net premiums earned was driven by an increase in ceded premiums earned in our catastrophe and agriculture lines, together with the
impact of the retrocession to Harrington Re Ltd., which increased ceded premiums earned in our professional lines, as well as a
decrease in gross premiums earned in our professional lines. These decreases were partially offset by strong premium growth in our
motor and catastrophe lines. On a year-to-date basis, net premiums earned were also impacted by strong premium growth in our
agriculture lines.
Our reinsurance segment reported underwriting income of $57 million for the current quarter, compared to $21 million in the
second quarter of 2016. The current quarter’s underwriting results reflected a combined ratio of 88.6%, compared to 95.7% in the
same period in 2016. This included a decrease in the current accident year loss ratio to 67.9% this quarter from 75.6% in the
second quarter of 2016. During the second quarter of 2017, we incurred pre-tax catastrophe and weather-related
losses of $9 million, or 1.8 points, primarily attributable to U.S. weather-related events, compared to $61 million, or 12.2
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 in the second quarter increased by 2.7 points, compared to
the same period in 2016, primarily due to a large risk loss in our property lines, the impact of the Ogden rate change on our motor
lines, and the ongoing adverse impact of rate and trend.
Net favorable prior year reserve development was $51 million, or 10.6 points, this quarter compared to $58 million, or 11.4
points, in the second quarter of 2016.
The segment's acquisition cost ratio was comparable to the same period in 2016 attributable to the impact of retrocessional
contracts, largely offset by changes in the business mix.
The segment's general and administrative expenses in the second quarter of 2017 were comparable to the same period in 2016
reflecting the benefits from strategic capital partner arrangements.
For the six months ended June 30, 2017, our reinsurance segment reported underwriting income of $61 million compared to
$103 million for the same period of 2016, principally associated with lower net favorable prior year reserve development relating
to the Ogden rate change recognized in the first quarter.
Investments
Net investment income of $106 million for the quarter represents a $14 million increase from the second quarter of 2016, and a
$7 million increase from the first quarter of 2017, primarily due to changes in the fair value of our alternative investments
("other investments"). These investments generated a gain of $24 million in the current quarter, compared to a gain of $14 million
in the second quarter of 2016, and a gain of $19 million in the first quarter of 2017.
Net realized investment losses for the quarter were $4 million, compared to net realized investment gains of $21 million in the
second quarter of 2016, and net realized investment losses of $25 million in the first quarter of 2017.
Capitalization / Shareholders’ Equity
Our total capital6 at June 30, 2017 was $6.9 billion, including $1 billion of senior notes and $0.8 billion of
preferred equity, compared to $7.3 billion at December 31, 2016. The decrease in total capital is attributable to the
redemption of the remaining $351 million of 6.875% Series C preferred shares, as well as the repurchase of $282 million of our
common shares during the first six months of 2017. These decreases were partially offset by net income generated in the period as
well as 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 six months ended June 30, 2017.
At July 26, 2017, the Company had $739 million of remaining authorization under our Board-authorized share repurchase program
for common share repurchases through December 31, 2017. Following the offer to acquire Novae on July 5th, 2017, the Company has
suspended its open market share repurchase program. The offer is subject to regulatory approval and other customary closing
conditions and is expected to close in the fourth quarter of this year.
Diluted book value per common share, calculated on a treasury stock basis, increased by $1.56 in the current quarter and by
$2.83 over the past twelve months, to $60.45. The increase in the quarter was primarily driven by net income generated as well as
an 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, partially offset by common share dividend declared and unrealized investment
losses.
During the second quarter of 2017, the Company declared common dividends of $0.38 per share, with total common dividends
declared of $1.49 per share over the past twelve months. Adjusted for dividends declared, the diluted book value per common share
increased by $1.94, or 3%, for the quarter and $4.32, or 7%, over the past twelve months.
| |
| 6 Total capital represents the sum of total shareholders' equity and our
senior notes. |
| |
Conference Call
We will host a conference call on Thursday, July 27, 2017, at 9:00 AM (Eastern) to discuss the second 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 9599509. 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 10109593. 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 June 30, 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
June 30, 2017 of $5.9 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
|
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|
| AXIS CAPITAL HOLDINGS LIMITED |
| CONSOLIDATED BALANCE SHEETS |
| JUNE 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016 |
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
(in thousands) |
| Assets |
|
|
| Investments: |
|
|
| Fixed maturities, available for sale, at fair value |
|
$ |
11,424,295 |
|
|
$ |
11,397,114 |
|
| Equity securities, available for sale, at fair value |
|
738,489 |
|
|
638,744 |
|
| Mortgage loans, held for investment, at amortized cost and fair value |
|
349,916 |
|
|
349,969 |
|
| Other investments, at fair value |
|
813,617 |
|
|
830,219 |
|
| Equity method investments |
|
109,258 |
|
|
116,000 |
|
| Short-term investments, at amortized cost and fair value |
|
10,146 |
|
|
127,461 |
|
| Total investments |
|
13,445,721 |
|
|
13,459,507 |
|
| Cash and cash equivalents |
|
728,519 |
|
|
1,039,494 |
|
| Restricted cash and cash equivalents |
|
286,751 |
|
|
202,013 |
|
| Accrued interest receivable |
|
72,626 |
|
|
74,971 |
|
| Insurance and reinsurance premium balances receivable |
|
3,050,222 |
|
|
2,313,512 |
|
| Reinsurance recoverable on unpaid and paid losses |
|
2,184,934 |
|
|
2,334,922 |
|
| Deferred acquisition costs |
|
591,397 |
|
|
438,636 |
|
| Prepaid reinsurance premiums |
|
733,836 |
|
|
556,344 |
|
| Receivable for investments sold |
|
18,754 |
|
|
14,123 |
|
| Goodwill and intangible assets |
|
86,220 |
|
|
85,049 |
|
| Other assets |
|
300,658 |
|
|
295,120 |
|
| Total assets |
|
$ |
21,499,638 |
|
|
$ |
20,813,691 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Reserve for losses and loss expenses |
|
$ |
9,878,662 |
|
|
$ |
9,697,827 |
|
| Unearned premiums |
|
3,704,003 |
|
|
2,969,498 |
|
| Insurance and reinsurance balances payable |
|
677,204 |
|
|
493,183 |
|
| Senior notes |
|
993,511 |
|
|
992,950 |
|
| Payable for investments purchased |
|
95,865 |
|
|
62,550 |
|
| Other liabilities |
|
257,698 |
|
|
325,313 |
|
| Total liabilities |
|
15,606,943 |
|
|
14,541,321 |
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
| Preferred shares |
|
775,000 |
|
|
1,126,074 |
|
| Common shares |
|
2,206 |
|
|
2,206 |
|
| Additional paid-in capital |
|
2,283,523 |
|
|
2,299,857 |
|
| Accumulated other comprehensive income (loss) |
|
84,306 |
|
|
(121,841 |
) |
| Retained earnings |
|
6,551,801 |
|
|
6,527,627 |
|
| Treasury shares, at cost |
|
(3,804,141 |
) |
|
(3,561,553 |
) |
| Total shareholders' equity |
|
5,892,695 |
|
|
6,272,370 |
|
|
|
|
|
|
| Total liabilities and shareholders' equity |
|
$ |
21,499,638 |
|
|
$ |
20,813,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AXIS CAPITAL HOLDINGS LIMITED |
| CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
| FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
| Revenues |
|
|
|
|
|
|
|
|
| Net premiums earned |
|
$ |
981,431 |
|
|
$ |
946,990 |
|
|
$ |
1,920,133 |
|
|
$ |
1,849,331 |
|
| Net investment income |
|
106,063 |
|
|
91,730 |
|
|
204,728 |
|
|
140,896 |
|
| Net realized investment gains (losses) |
|
(4,392 |
) |
|
21,010 |
|
|
(29,443 |
) |
|
(45,500 |
) |
| Other insurance related income (losses) |
|
2,560 |
|
|
(892 |
) |
|
(1,222 |
) |
|
(1,094 |
) |
| Bargain purchase gain |
|
15,044 |
|
|
— |
|
|
15,044 |
|
|
— |
|
|
Total revenues
|
|
1,100,706 |
|
|
1,058,838 |
|
|
2,109,240 |
|
|
1,943,633 |
|
|
|
|
|
|
|
|
|
|
| Expenses |
|
|
|
|
|
|
|
|
| Net losses and loss expenses |
|
605,332 |
|
|
632,294 |
|
|
1,212,273 |
|
|
1,131,256 |
|
| Acquisition costs |
|
204,361 |
|
|
189,125 |
|
|
394,153 |
|
|
369,761 |
|
| General and administrative expenses |
|
147,816 |
|
|
146,746 |
|
|
309,075 |
|
|
296,648 |
|
| Foreign exchange losses (gains) |
|
36,118 |
|
|
(56,602 |
) |
|
57,583 |
|
|
(55,986 |
) |
| Interest expense and financing costs |
|
12,751 |
|
|
12,914 |
|
|
25,543 |
|
|
25,747 |
|
| Total expenses |
|
1,006,378 |
|
|
924,477 |
|
|
1,998,627 |
|
|
1,767,426 |
|
|
|
|
|
|
|
|
|
|
| Income before income taxes and interest in income (loss) of equity method
investments |
|
94,328 |
|
|
134,361 |
|
|
110,613 |
|
|
176,207 |
|
| Income tax (expense) benefit |
|
3,333 |
|
|
(4,901 |
) |
|
12,670 |
|
|
1,639 |
|
| Interest in loss of equity method investments |
|
(1,975 |
) |
|
— |
|
|
(7,741 |
) |
|
— |
|
| Net income |
|
95,686 |
|
|
129,460 |
|
|
115,542 |
|
|
177,846 |
|
| Preferred shares dividends |
|
10,656 |
|
|
9,969 |
|
|
25,497 |
|
|
19,938 |
|
| Net income available to common shareholders |
|
$ |
85,030 |
|
|
$ |
119,491 |
|
|
$ |
90,045 |
|
|
$ |
157,908 |
|
|
|
|
|
|
|
|
|
|
| Per share data |
|
|
|
|
|
|
|
|
| Net income per common share: |
|
|
|
|
|
|
|
|
| Basic net income |
|
$ |
1.01 |
|
|
$ |
1.30 |
|
|
$ |
1.06 |
|
|
$ |
1.70 |
|
| Diluted net income |
|
$ |
1.01 |
|
|
$ |
1.29 |
|
|
$ |
1.05 |
|
|
$ |
1.69 |
|
| Weighted average number of common shares outstanding - basic |
|
84,141 |
|
|
91,926 |
|
|
85,076 |
|
|
92,980 |
|
| Weighted average number of common shares outstanding - diluted |
|
84,511 |
|
|
92,558 |
|
|
85,647 |
|
|
93,705 |
|
| Cash dividends declared per common share |
|
$ |
0.38 |
|
|
$ |
0.35 |
|
|
$ |
0.76 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AXIS CAPITAL HOLDINGS LIMITED |
| CONSOLIDATED SEGMENTAL DATA (UNAUDITED) |
| FOR THE THREE MONTHS ENDED JUNE 30, 2017 AND 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Gross premiums written |
|
$ |
796,023 |
|
|
$ |
566,304 |
|
|
$ |
1,362,327 |
|
|
$ |
784,017 |
|
|
$ |
536,417 |
|
|
$ |
1,320,434 |
|
| Net premiums written |
|
527,678 |
|
|
428,339 |
|
|
956,017 |
|
|
526,764 |
|
|
480,586 |
|
|
1,007,350 |
|
| Net premiums earned |
|
493,836 |
|
|
487,595 |
|
|
981,431 |
|
|
439,279 |
|
|
507,711 |
|
|
946,990 |
|
| Other insurance related income (losses) |
|
508 |
|
|
2,052 |
|
|
2,560 |
|
|
(234 |
) |
|
(658 |
) |
|
(892 |
) |
| Net losses and loss expenses |
|
(325,728 |
) |
|
(279,604 |
) |
|
(605,332 |
) |
|
(306,141 |
) |
|
(326,153 |
) |
|
(632,294 |
) |
| Acquisition costs |
|
(81,276 |
) |
|
(123,085 |
) |
|
(204,361 |
) |
|
(61,829 |
) |
|
(127,296 |
) |
|
(189,125 |
) |
|
Underwriting-related general and administrative expenses(7)
|
|
(87,822 |
) |
|
(29,464 |
) |
|
(117,286 |
) |
|
(82,487 |
) |
|
(32,332 |
) |
|
(114,819 |
) |
| Underwriting income (loss) (7) |
|
$ |
(482 |
) |
|
$ |
57,494 |
|
|
57,012 |
|
|
$ |
(11,412 |
) |
|
$ |
21,272 |
|
|
9,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate expenses |
|
|
|
|
|
(30,530 |
) |
|
|
|
|
|
(31,927 |
) |
| Net investment income |
|
|
|
|
|
106,063 |
|
|
|
|
|
|
91,730 |
|
| Net realized investment gains (losses) |
|
|
|
|
|
(4,392 |
) |
|
|
|
|
|
21,010 |
|
| Foreign exchange (losses) gains |
|
|
|
|
|
(36,118 |
) |
|
|
|
|
|
56,602 |
|
| Interest expense and financing costs |
|
|
|
|
|
(12,751 |
) |
|
|
|
|
|
(12,914 |
) |
| Bargain purchase gain |
|
|
|
|
|
15,044 |
|
|
|
|
|
|
— |
|
| Income before income taxes and interest in income (loss) of equity method
investments |
|
|
|
|
|
$ |
94,328 |
|
|
|
|
|
|
$ |
134,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss and loss expense ratio |
|
66.0 |
% |
|
57.3 |
% |
|
61.7 |
% |
|
69.7 |
% |
|
64.2 |
% |
|
66.8 |
% |
| Acquisition cost ratio |
|
16.5 |
% |
|
25.2 |
% |
|
20.8 |
% |
|
14.1 |
% |
|
25.1 |
% |
|
20.0 |
% |
|
General and administrative expense ratio
|
|
17.7 |
% |
|
6.1 |
% |
|
15.1 |
% |
|
18.7 |
% |
|
6.4 |
% |
|
15.4 |
% |
| Combined ratio |
|
100.2 |
% |
|
88.6 |
% |
|
97.6 |
% |
|
102.5 |
% |
|
95.7 |
% |
|
102.2 |
% |
| 7 |
|
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 |
| CONSOLIDATED SEGMENTAL DATA (UNAUDITED) |
| FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Gross premiums written |
|
$ |
1,490,030 |
|
|
$ |
1,784,169 |
|
|
$ |
3,274,199 |
|
|
$ |
1,437,365 |
|
|
$ |
1,842,230 |
|
|
$ |
3,279,595 |
|
| Net premiums written |
|
1,033,008 |
|
|
1,431,968 |
|
|
2,464,976 |
|
|
999,926 |
|
|
1,693,230 |
|
|
2,693,156 |
|
| Net premiums earned |
|
952,265 |
|
|
967,868 |
|
|
1,920,133 |
|
|
877,958 |
|
|
971,373 |
|
|
1,849,331 |
|
| Other insurance related income (losses) |
|
551 |
|
|
(1,773 |
) |
|
(1,222 |
) |
|
(96 |
) |
|
(998 |
) |
|
(1,094 |
) |
| Net losses and loss expenses |
|
(612,630 |
) |
|
(599,643 |
) |
|
(1,212,273 |
) |
|
(580,546 |
) |
|
(550,710 |
) |
|
(1,131,256 |
) |
| Acquisition costs |
|
(149,433 |
) |
|
(244,720 |
) |
|
(394,153 |
) |
|
(123,227 |
) |
|
(246,534 |
) |
|
(369,761 |
) |
|
Underwriting-related general and administrative expenses
|
|
(178,270 |
) |
|
(60,816 |
) |
|
(239,086 |
) |
|
(168,064 |
) |
|
(70,345 |
) |
|
(238,409 |
) |
| Underwriting income |
|
$ |
12,483 |
|
|
$ |
60,916 |
|
|
73,399 |
|
|
$ |
6,025 |
|
|
$ |
102,786 |
|
|
108,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate expenses |
|
|
|
|
|
(69,989 |
) |
|
|
|
|
|
(58,239 |
) |
| Net investment income |
|
|
|
|
|
204,728 |
|
|
|
|
|
|
140,896 |
|
| Net realized investment losses |
|
|
|
|
|
(29,443 |
) |
|
|
|
|
|
(45,500 |
) |
| Foreign exchange (losses) gains |
|
|
|
|
|
(57,583 |
) |
|
|
|
|
|
55,986 |
|
| Interest expense and financing costs |
|
|
|
|
|
(25,543 |
) |
|
|
|
|
|
(25,747 |
) |
| Bargain purchase gain |
|
|
|
|
|
15,044 |
|
|
|
|
|
|
— |
|
| Income before income taxes and interest in income (loss) of equity method
investments |
|
|
|
|
|
$ |
110,613 |
|
|
|
|
|
|
$ |
176,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss and loss expense ratio |
|
64.3 |
% |
|
62.0 |
% |
|
63.1 |
% |
|
66.1 |
% |
|
56.7 |
% |
|
61.2 |
% |
| Acquisition cost ratio |
|
15.7 |
% |
|
25.3 |
% |
|
20.5 |
% |
|
14.0 |
% |
|
25.4 |
% |
|
20.0 |
% |
|
General and administrative expense ratio
|
|
18.7 |
% |
|
6.2 |
% |
|
16.2 |
% |
|
19.2 |
% |
|
7.2 |
% |
|
16.0 |
% |
| Combined ratio |
|
98.7 |
% |
|
93.5 |
% |
|
99.8 |
% |
|
99.3 |
% |
|
89.3 |
% |
|
97.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016 |
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
| Net income available to common shareholders |
|
$ |
85,030 |
|
|
$ |
119,491 |
|
|
$ |
90,045 |
|
|
$ |
157,908 |
|
| Net realized investment (gains) losses, net of tax(8) |
|
4,450 |
|
|
(16,419 |
) |
|
28,679 |
|
|
45,393 |
|
| Foreign exchange losses (gains), net of tax(9) |
|
36,057 |
|
|
(55,589 |
) |
|
57,780 |
|
|
(54,542 |
) |
| Bargain purchase gain(10) |
|
(15,044 |
) |
|
— |
|
|
(15,044 |
) |
|
— |
|
| Non-GAAP operating income |
|
$ |
110,493 |
|
|
$ |
47,483 |
|
|
$ |
161,460 |
|
|
$ |
148,759 |
|
|
|
|
|
|
|
|
|
|
| Earnings per common share - diluted |
|
$ |
1.01 |
|
|
$ |
1.29 |
|
|
$ |
1.05 |
|
|
$ |
1.69 |
|
| Net realized investment (gains) losses, net of tax |
|
0.05 |
|
|
(0.18 |
) |
|
0.34 |
|
|
0.48 |
|
| Foreign exchange losses (gains), net of tax |
|
0.43 |
|
|
(0.60 |
) |
|
0.68 |
|
|
(0.58 |
) |
| Bargain purchase gain |
|
(0.18 |
) |
|
— |
|
|
(0.18 |
) |
|
— |
|
| Non-GAAP operating income per common share - diluted |
|
$ |
1.31 |
|
|
$ |
0.51 |
|
|
$ |
1.89 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares and common share equivalents - diluted |
|
84,511 |
|
|
92,558 |
|
|
85,647 |
|
|
93,705 |
|
|
|
|
|
|
|
|
|
|
| Average common shareholders' equity |
|
5,110,993 |
|
|
5,332,221 |
|
|
5,131,996 |
|
|
5,289,111 |
|
|
|
|
|
|
|
|
|
|
| Annualized return on average common equity |
|
6.7 |
% |
|
9.0 |
% |
|
3.5 |
% |
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
| Annualized non-GAAP operating return on average common equity |
|
8.6 |
% |
|
3.6 |
% |
|
6.3 |
% |
|
5.6 |
% |
| 8 |
|
Tax cost (benefit) of $58 and $4,591 for the three months ended June 30, 2017 and
2016, respectively, and $(764) and $(107) for the six months ended June 30, 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. |
| 9 |
|
Tax cost (benefit) of ($61) and $1,013 for the three months ended June 30, 2017 and
2016, respectively, and $197 and $1,444 for the six months ended June 30, 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. |
| 10 |
|
Tax impact is nil. |
|
|
|
In addition to underwriting-related general and administrative expenses, our total general and administrative expenses of
$147,816 and $146,746 for the three months ended June 30, 2017 and 2016, respectively, and $309,075 and $296,648 for the six months
ended June 30, 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, (24) with respect to
the offer to acquire Novae Group plc, (i) the effect of the announcement of the offer on our business relationships, operating
results, share price or business generally, (ii) the occurrence of any event or other circumstances that could give rise to the
termination or lapsing of the offer, (iii) the outcome of any legal proceedings that may be instituted against us relating to the
offer and/or the acquisition, (iv) the failure to satisfy any of the conditions to completion of the acquisition, including the
receipt of all required regulatory approvals and antitrust consents and (v) the failure to realize the expected synergies resulting
from the acquisition and (25) 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 (loss), 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), foreign exchange losses (gains) and bargain purchase gain. 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 (losses) 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.
The bargain purchase gain, recognized upon the acquisition of Aviabel, reflects the amount by which the fair value of the net
identifiable assets acquired exceeds the fair value of consideration transferred and is not indicative of future revenues of the
company.
In this regard, certain users of our financial statements evaluate earnings excluding after-tax net realized investment gains
(losses), foreign exchange losses (gains) and bargain purchase gain 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), foreign exchange
losses (gains) and bargain purchase gain 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.
The bargain purchase gain, recognized upon the acquisition of Aviabel, reflects the amount by which the fair value of the net
identifiable assets acquired exceeds the fair value of consideration transferred and should be excluded from consolidated
underwriting income since it is not related to underwriting operations.
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, +1-441-405-2727
investorrelations@axiscapital.com
or
Media
Kekst
Michael Herley, +1-212-521-4897
michael.herley@kekst.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20170726006293/en/