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Press Release

AXIS Capital Reports Net Income of $140.9 Million for Second Quarter 2004

Company Release - 8/4/2004 5:00 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--Aug. 4, 2004--AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income for the second quarter of 2004 of $140.9 million, or $0.84 per diluted share, compared to $117.8 million, or $0.81 per diluted share, for the second quarter ended June 30, 2003, an increase of $23.1 million, or $0.03 per diluted share. Net income for the six months ended June 30, 2004 rose 37% to $307.6 million, or $1.84 per diluted share, from $224.9 million, or $1.55 per diluted share, for the corresponding period in 2003.

Net income excluding net realized gains and losses on investments, net of tax for the second quarter of 2004 was $144.7 million, or $0.87 per diluted share, compared with $102.4 million, or $0.70 per diluted share, for the second quarter of 2003. Net income excluding net realized gains and losses on investments, net of tax for the six months ended June 30, 2004 was $302.3 million, or $1.81 per diluted share, compared with $198.4 million, or $1.36 per diluted share, for the six months ended June 30, 2003. Net income excluding net realized gains and losses on investments, net of tax is a non-GAAP financial measure. A reconciliation of this measure to net income is presented at the end of this release.

John Charman, President and CEO, commented: "Our results across all segments were once again very strong in the quarter, reflecting our continuing penetration of our targeted markets coupled with our low loss activity. While the market continues to struggle against the senseless price cutting practiced by a limited number of major carriers, we remain optimistic with respect to the opportunities afforded to an entrepreneurial, diverse and financially strong carrier like AXIS where risk selection remains paramount."

Gross premiums written for the quarter ended June 30, 2004 were $629.3 million compared to $551.5 million for the quarter ended June 30, 2003, an increase of 14%. Of these premiums written: $216.2 million were derived from global insurance compared to $207.7 million in the corresponding quarter of 2003, an increase of 4%; $129.9 million from global reinsurance compared to $120.1 million in the corresponding quarter of 2003, an increase of 8%; $219.9 million from U.S. insurance compared to $171.1 million in the corresponding quarter of 2003, an increase of 29%; and $63.3 million from U.S. reinsurance compared to $52.6 million in the corresponding quarter of 2003, an increase of 21%. The increase in our U.S. insurance and U.S. reinsurance gross premiums written was largely driven by greater market penetration.

For the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003, ceded premiums increased to $141.4 million from $101.6 million and our net premiums written rose to $487.9 million from $449.8 million. Net premiums earned increased to $486.4 million from $335.6 million. The increase in net premiums earned reflects the increase in our gross premiums written over the last twelve months.

For the quarter ended June 30, 2004, net investment income was $33.3 million and realized losses were $4.4 million, compared with $15.9 million in net investment income and $15.7 million in realized gains for the quarter ended June 30, 2003. The increase in net investment income was due to increased invested assets on which we obtained improved investment yields. Cash flow generated from operations for the quarter ended June 30, 2004 was $419.0 million compared with $345.9 million for the quarter ended June 30, 2003.

For the quarter ended June 30, 2004, the Company generated a combined ratio of 75.3%, a loss ratio of 53.0% and an expense ratio of 22.3% compared to 81.5%, 58.3% and 23.2%, respectively, for the quarter ended June 30, 2003. In both of these quarters, there was limited catastrophic loss activity. In addition, our loss ratios benefited by 8.9 percentage points and 3.1 percentage points, respectively, from favorable prior period loss reserve development. Our expense ratio continues to improve as our earned premium base increases.

Gross premiums written for the six months ended June 30, 2004 were $1,673.4 million compared to $1,160.0 million for the six months ended June 30, 2003, an increase of 44%. Of these premiums written: $516.6 million were derived from global insurance compared to $451.3 million in the corresponding six months of 2003, an increase of 14%; $558.9 million from global reinsurance compared to $331.6 million in the corresponding six months of 2003, an increase of 68.5%, $368.3 million from U.S. insurance compared to $263.0 million in the corresponding six months of 2003, an increase of 40%; and $229.6 million from U.S. reinsurance compared to $114.1 million in the corresponding six months of 2003, an increase of 101%. The increase in our global reinsurance gross premiums written was largely driven by our strategic expansion into continental Europe. The increase in our U.S. insurance and U.S. reinsurance gross premiums written was largely driven by greater market penetration.

For the six months ended June 30, 2004 compared to the six months ended June 30, 2003, ceded premiums increased to $286.4 million from $170.1 million and our net premiums written rose to $1,387.1 million from $990.0 million. The increase in ceded premiums was primarily due to the purchase of additional reinsurance protections by our global insurance and U.S insurance segments to mitigate the volatility in their growing books of businesses. Net premiums earned increased to $957.7 million from $638.0 million. The increase in net premiums earned reflects the increase in our gross premiums written over the last twelve months.

For the six months ended June 30, 2004, net investment income was $64.6 million and realized gains were $5.7 million, compared with $27.3 million in net investment income and $26.9 million in realized gains for the six months ended June 30, 2003. The increase in net investment income was due to increased invested assets on which we obtained improved investment yields. Cash flow generated from operations was $784.5 million compared with $610.4 million for the six months ended June 30, 2003.

For the six months ended June 30, 2004, the Company generated a combined ratio of 73.9%, a loss ratio of 52.3% and an expense ratio of 21.6% compared to 77.5%, 53.6% and 23.9%, respectively, for the six months ended June 30, 2003. In both of these six month periods, there was limited catastrophic loss activity. In addition, our loss ratios benefited by 9.6 percentage points and 3.2 percentage points, respectively, from favorable prior period loss reserve development. Our expense ratio continues to improve as our earned premium base increases.

Our shareholders' equity was in excess of $3.0 billion at June 30, 2004. Diluted book value per share at June 30, 2004 was $18.76, compared to $17.48 at December 31, 2003. Diluted book value per share is a non-GAAP financial measure. A reconciliation of this measure to book value per share is presented at the end of this release.

AXIS Capital will host a conference call on Thursday, August 5, 2004 at 8:30 AM (Eastern) to discuss the second quarter and six months financial results and related matters. This presentation will be available through an audio webcast accessible through the Investor Information section of the Company's website at www.axiscapital.com.

In addition, a financial supplement relating to the Company's financial results for the second quarter and six months 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 in excess of $3.0 billion and locations in Bermuda, the United States and Europe. Its operating subsidiaries have been assigned a rating of "A" ("Excellent") by A.M. Best and a rating of "A" ("Strong") by Standard & Poor's. For more information about AXIS Capital, visit the Company's website at www.axiscapital.com.

                     AXIS CAPITAL HOLDINGS LIMITED

                 UNAUDITED CONSOLIDATED BALANCE SHEETS
               As at June 30, 2004 and December 31, 2003
               (Expressed in thousands of U.S. dollars,
                  except share and per share amounts)

                                                June 30,  December 31,
                                                   2004       2003
Assets
Cash and cash equivalents                        $721,215    $605,175
Investments at fair market value                3,993,883   3,385,576
   (Amortized cost 2004:$4,029,834;
    2003:$3,359,102)
Other investments                                  34,403           -
Accrued interest receivable                        36,612      29,530
Net receivable for investments sold                     -       3,371
Securities lending collateral                     755,968           -
Insurance and reinsurance premium balances
 receivable                                       994,819     660,530
Deferred acquisition costs                        222,288     136,281
Prepaid reinsurance premiums                      240,199     164,999
Reinsurance recoverable                           245,909     124,899
Intangible assets                                  23,919      24,579
Other assets                                       50,974      37,333
                                               -----------------------
            Total Assets                       $7,320,189  $5,172,273
                                               =======================

Liabilities
Reserve for losses and loss expenses           $1,541,193    $992,846
Unearned premiums                               1,648,062   1,143,447
Insurance and reinsurance balances payable        208,141     151,381
Accounts payable and accrued expenses              44,072      67,451
Securities lending payable                        755,618           -
Net payable for investments purchased              80,589           -
                                               -----------------------
            Total Liabilities                   4,277,675   2,355,125
                                               -----------------------

Shareholders' Equity
Share capital
  (Authorized 800,000,000 common shares, par value
   $0.0125; issued and outstanding 2004;
   152,491,550: 2003; 152,474,011)                  1,906       1,906
Additional paid-in capital                      2,009,716   2,000,731
Accumulated other comprehensive (loss)
 income,net of tax                                (31,193)     25,164
Retained earnings                               1,062,085     789,347
                                               -----------------------
            Total Shareholders' Equity          3,042,514   2,817,148
                                               -----------------------

            Total Liabilities & Shareholders'
             Equity                            $7,320,189  $5,172,273
                                               =======================

                     AXIS CAPITAL HOLDINGS LIMITED

            UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
      For the quarter and six months ended June 30, 2004 and 2003
               (Expressed in thousands of U.S. dollars,
                  except share and per share amounts)

                            Quarters ended         Six months ended
                          June 30,    June 30,    June 30,   June 30,
                          2004         2003        2004       2003
                                   (see note 1)           (see note 1)
Revenues
 Gross premiums
  written                $629,319    $551,450  $1,673,442  $1,160,037
 Premiums ceded          (141,442)   (101,626)   (286,375)   (170,069)
 Change in unearned
  premiums                 (1,474)   (114,232)   (429,416)   (351,949)
                      ------------------------------------------------
 Net premiums earned      486,403     335,592     957,651     638,019

 Net investment income     33,345      15,904      64,604      27,256
 Net realized (losses)
  gains                    (4,411)     15,705       5,686      26,903
 Other insurance
  related income              156      10,102         444      11,208
                      ------------------------------------------------
    Total revenues        515,493     377,303   1,028,385     703,386
                      ------------------------------------------------

Expenses
 Net losses and loss
  expenses                257,850     195,620     500,450     341,955
 Acquisition costs         65,491      46,418     122,454      90,669
 General and
  administrative
  expenses                 42,623      31,246      84,511      61,608
 Foreign exchange           6,413     (12,855)      7,558     (14,742)
                      ------------------------------------------------
    Total expenses        372,377     260,429     714,973     479,490
                      ------------------------------------------------

Income before income
 taxes                    143,116     116,874     313,412     223,896
 Income tax recovery
  (expense)                (2,260)        880      (5,770)        976
                      ------------------------------------------------
Net Income               $140,856    $117,754    $307,642    $224,872
                      ================================================

Weighted average
 common shares and
 common share
 equivalents
 - basic           152,487,082  136,509,891  152,484,015  136,440,383
                   ===================================================

Weighted average
 common shares and
 common share
 equivalents -
 diluted           166,842,606  145,701,443  166,785,604  145,045,136
                   ===================================================

Net income per share -
 basic                      $0.92       $0.86       $2.02       $1.65
                      ================================================

Net income per share -
 diluted                    $0.84       $0.81       $1.84       $1.55
                      ================================================

Insurance Ratios
Loss ratio                   53.0%       58.3%       52.3%       53.6%
Expense ratio                22.3%       23.2%       21.6%       23.9%
                      ------------------------------------------------
Combined ratio               75.3%       81.5%       73.9%       77.5%
                      ================================================

Note 1: Acquisition costs and general and administrative expenses
for 2003 have been reclassified to conform to current year
classifications.

Cautionary Note Regarding Forward-Looking Statements

This release may include forward-looking statements within the meaning of the U.S. federal securities laws. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from the Company's expectations. Important factors that could cause actual events or results to be materially different from the Company's expectations include (1) our limited operating history, (2) the occurrence of natural and man-made disasters, (3) actual claims exceeding our loss reserves, (4), failure of any of the loss limitation methods we employ, (5) effects of emerging claims and coverage issues, (6) the failure of our cedants to adequately evaluate risks, (7) the loss of one or more key executives (8) a decline in our ratings with Standard & Poor's and A.M. Best, (9) loss of business provided to us by our major brokers, (10) changes in governmental regulations, (11) increased competition and (12) general economic conditions. The Company undertakes 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 addition to the GAAP financial measures included within this release, the Company has presented "net income excluding net realized gains and losses on investments, net of tax" and "diluted book value per share," which are non-GAAP financial measures. The Company has included the first measure as it believes that security analysts, rating agencies and investors believe that realized gains and losses are largely opportunistic and are a function of economic and interest rate conditions. As a result, the Company believes that they evaluate earnings before realized gains and losses, adjusted for tax, to make performance comparisons with the Company's industry peers. The Company has included the second measure because it takes into account the effect of dilutive securities and, therefore, the Company believes that this is a better measure of calculating shareholder returns than book value per share.

                     AXIS CAPITAL HOLDINGS LIMITED

               NON-GAAP FINANCIAL MEASURE RECONCILIATION
            NET INCOME EXCLUDING REALIZED GAINS AND LOSSES
                      ON INVESTMENTS, NET OF TAX
      For the quarter and six months ended June 30, 2004 and 2003
   (Expressed in thousands of U.S.dollars, except per share amounts)

                            Quarters ended         Six months ended
                         June 30,     June 30,    June 30,   June 30,
                          2004         2003        2004        2003

Net income                140,856     117,754     307,642     224,872

Adjustment for net
 realized (losses)
 gains                      4,411     (15,705)     (5,686)    (26,903)
 on investments
Adjustment for
 associated tax impact
 of net realized gains
 (losses) on
 investments                 (595)        325         358         403
                      ------------------------------------------------
Net income excluding
 realized gains
 (losses) on investments,
 net of tax              $144,672    $102,374    $302,314    $198,372
                      ================================================

Net income per share -
 diluted                    $0.84       $0.81       $1.84       $1.55
                      ================================================

Adjustment for net
 realized (losses)
 gains                       0.03       (0.11)      (0.03)      (0.19)
   on investments
Adjustment for
 associated tax impact
 of net realized gains
 (losses) on
 investments                    0           0           0           0
                      ------------------------------------------------
Net income excluding
 realized gains (losses)
 on investments, net
 of tax per diluted
 share                      $0.87       $0.70       $1.81       $1.36
                      ================================================


                     AXIS CAPITAL HOLDINGS LIMITED

               NON-GAAP FINANCIAL MEASURE RECONCILIATION
                     DILUTED BOOK VALUE PER SHARE
               As at June 30, 2004 and December 31, 2003
       (Expressed in thousands of U.S. dollars, except share and
                          per share amounts)

                                              June 30,    December 31,
                                                 2004         2003

Shareholders' equity                          $3,042,514   $2,817,148

Shares outstanding                           152,491,550  152,474,011

                                             ------------ ------------
Book value per share                              $19.95       $18.48
                                             ============ ============

Diluted book value on an "as if converted
 basis"

Shareholders' equity                          $3,042,514   $2,817,148
add in:
proceeds on exercise of options                   95,349       62,630
proceeds on exercise of warrants                 244,812      244,811

                                             ------------ ------------
Adjusted shareholders' equity                 $3,382,675   $3,124,589
                                             ------------ ------------

As if converted diluted shares outstanding
Shares outstanding                           152,491,550  152,474,011
add in:
vesting of restricted stock                    2,432,675    1,884,696
exercise of options                            5,761,846    4,695,512
exercise of warrants                          19,609,199   19,690,692

                                             ------------ ------------
Diluted shares outstanding                   180,295,270  178,744,911
                                             ------------ ------------

                                             ------------ ------------
Diluted book value per share                      $18.76       $17.48
                                             ============ ============

During the first quarter of 2004, the Company adopted, prospectively, the fair value recognition provisions of SFAS 123 "Accounting for Stock-Based Compensation" for all stock-based employee compensation granted, modified or settled after January 1, 2004.

As a result, with respect to unvested restricted stock awards, the amount of deferred compensation is eliminated from share capital and additional paid-in-capital. This charge impacts the calculation of "Book value per share" but has no impact on the calculation of "Diluted book value per share".


    CONTACT: AXIS Capital Holdings Limited

             Investors:
             Andrew Cook / Linda Ventresca, 441-297-9513
             info@axiscapital.com
             or
             Kekst and Company
             Media:
             Laura Accettella / Caroline Gentile, 212-521-4859

    SOURCE: AXIS Capital Holdings Limited