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Press Release

AXIS Capital Reports Net Income of $6.3 Million for Third Quarter 2004

Company Release - 11/3/2004 4:40 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--Nov. 3, 2004--AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income for the quarter of $6.3 million, or $0.04 per diluted share, compared to $147.0 million, or $0.90 per diluted share, for the third quarter ended September 30, 2003. Net income for the nine months ended September 30, 2004 was $313.9 million, or $1.89 per diluted share, compared to $371.9 million, or $2.46 per diluted share, for the corresponding period in 2003.

Net income excluding net realized gains and losses on investments, net of tax for the third quarter of 2004 was $2.8 million, or $0.02 per diluted share, compared with income of $152.6 million, or $0.93 per diluted share, for the quarter ended September 30, 2003. Net income excluding net realized gains and losses on investments, net of tax for the nine months ended September 30, 2004 was $305.1 million, or $1.83 per diluted share, compared with $351.0 million, or $2.32 per diluted share, for the nine months ended September 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, "AXIS has weathered the storms by producing a positive net income of $6.3 million for the third quarter of 2004. The investment community and many other parties have waited for major losses such as those that have occurred over the last three months to test the Bermuda class of 2001. I am therefore delighted to be able to report a profit for the quarter in spite of the now estimated $30 - $40 billion of damage caused by this season's unprecedented number of hurricanes and typhoons. One of our founding goals was to create high quality global insurance and reinsurance businesses that were soundly diversified both by product line and geography. We have now achieved substantial market share in both these businesses. To achieve net income, therefore, in the face of these substantial and widespread industry losses is a great credit to all of our staff and their disciplined underwriting."

Mr. Charman continued, "We continue to be satisfied with the underlying fundamentals in each of our segments and that these fundamentals will deliver ongoing strategic shareholder value. We have increased our shareholders' equity in a challenging quarter for the industry. We believe that our loyal clients as well as prospective new ones will rely on the quality of our capital and operations to meet their buying needs. AXIS moves forward strongly."

Gross premiums written for the third quarter of 2004 were $687.7 million compared to $633.9 million for the third quarter of 2003, an increase of 8.5%. Of these premiums written: $214.3 million were derived from global insurance compared to $249.3 million in the corresponding quarter of 2003; $163.8 million from global reinsurance compared to $114.6 million in the corresponding quarter of 2003; $227.4 million from U.S. insurance compared to $188.0 million in the corresponding quarter of 2003; and $82.2 million from U.S. reinsurance compared to $82.0 million in the corresponding quarter of 2003. The decrease in our global insurance gross premiums written reflects a refinement in the method of estimating gross premiums written in a sector of our property line of business that occurred in the last quarter of 2003, which increased gross premiums written in that quarter. The increase in our U.S. insurance gross premiums written was largely driven by greater market penetration.

For the quarter ended September 30, 2004 compared to the quarter ended September 30, 2003, ceded premiums increased to $125.7 million from $99.6 million and our net premiums written rose to $562.0 million from $534.4 million. Net premiums earned increased to $521.8 million from $397.5 million. The increase in net premiums earned reflects the increase in our net premiums written over the last twelve months.

For the quarter ended September 30, 2004, net investment income was $40.0 million and realized gains were $3.7 million, compared with $19.3 million in net investment income and $5.7 million in realized losses for the quarter ended September 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 September 30, 2004 was $478.3 million compared with $374.5 million for the quarter ended September 30, 2003.

During the third quarter of 2004, we generated a combined ratio of 109.7%, a loss ratio of 85.4% and an expense ratio of 24.3% compared to 69.2%, 46.3% and 22.9%, respectively, for the third quarter of 2003. The increase in the loss ratio was primarily a result of net losses and loss expenses of $227.4 million from Hurricanes Charley, Frances, Ivan and Jeanne. These losses are before the impact of reinstatements and tax recoveries. The split of the net losses and loss expenses between our operating segments was: $91.6 million from global reinsurance; $61.1 from global insurance; $47.6 million from U.S. insurance and $27.1 million from U.S. reinsurance. We experienced favorable prior period development of $49.6 million or 9.5 percentage points compared to $31.2 million or 7.8 percentage points for the quarter ended September 30, 2003.

Gross premiums written for the first nine months of 2004 were $2,361.1 million compared to $1,794.0 million for the first nine months of 2003. Of these premiums written: $730.9 million were derived from global insurance compared to $700.6 million in the corresponding period of 2003; $722.8 million from global reinsurance compared to $446.2 million in the corresponding period of 2003; $595.6 million from U.S. insurance compared to $451.1 million in the corresponding period of 2003; and $311.8 million from U.S. reinsurance compared to $196.1 million in the corresponding period of 2003. The increase in our global reinsurance 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 nine months ended September 30, 2004 compared to the nine months ended September 30, 2003, ceded premiums increased to $412.1 million from $269.6 million and our net premiums rose to $1,949.1 million from $1,524.3 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 volatility in their growing books of business. Net premiums earned increased to $1,479.4 million from $1,035.5 million. The increase in net premiums earned reflects the increase in our net premiums written over the last twelve months.

For the nine months ended September 30, 2004, net investment income, including realized gains of $9.4 million, was $114.0 million compared with $67.8 million, including realized gains of $21.2 million, for the nine months ended September 30, 2003.

During the first nine months of 2004, we generated a combined ratio of 86.4%, a loss ratio of 63.9% and an expense ratio of 22.5% compared to 74.3%, 50.8% and 23.5%, respectively, for the first nine months in 2003. During the nine months ended September 30, 2004, we incurred net losses and loss expenses of $227.4 million for Hurricanes Charley, Frances, Ivan and Jeanne. These losses are before the impact of reinstatements and tax recoveries. During the nine months ended September 30, 2003, there was limited catastrophic loss activity. Our loss ratios benefited by 9.6 percentage points and 5.0 percentage points, respectively, from favorable prior period development.

Our shareholders' equity was $3.1 billion as at September 30, 2004. Diluted book value per share at September 30, 2004 was $19.00 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 shareholders' equity is presented at the end of this release.

Insurance industry investigation

As previously disclosed, on August 26, 2004, our U.S. holding company received a subpoena from the Attorney General of the State of New York seeking information regarding incentive commission agreements between its insurance companies and insurance brokers. On September 20, 2004, our U.S. holding company received two additional subpoenas from the Attorney General of the State of New York seeking information regarding fictitious and inflated quotes submitted by insurance companies to insurance brokers. On October 21, 2004, our U.S. holding company received a further subpoena from the Attorney General of the State of New York seeking information regarding tying, or conditioning direct insurance on the placement of reinsurance. These inquiries are part of an industry-wide investigation and we are cooperating fully in the investigation.

Consistent with long-standing and wide-spread industry practice, we have entered into incentive commission agreements with brokers. As a result of this investigation, we have ceased entering into, and have suspended making payments under, incentive commission agreements.

Mr. Charman stated, "My colleagues and I have worked diligently over a very long period of time - a period pre-dating the establishment of AXIS - to establish ourselves as leaders in our respective markets and have held ourselves to the highest standards of ethics, integrity and professionalism in all of our business with intermediaries and clients. Consistent with this philosophy, we do not believe we have engaged in the improper business practices that are the focus of the Attorney General of the State of New York's investigation. To confirm that our employees have not engaged in any of these improper business practices, we are conducting an internal investigation led by outside counsel to examine the subjects raised by the Attorney General of the State of New York. We believe that this is in the best interests of the Company, our shareholders and our employees."

We understand that some purported shareholder class action lawsuits have been filed against us and some of our executive officers relating to certain of the practices being investigated by the Attorney General of the State of New York. We believe that these lawsuits are without merit and intend to vigorously defend against them.

AXIS Capital will host a conference call on Thursday November 4, 2004 at 8:30 AM (Eastern) to discuss the third quarter and nine months financial results and related matters. This presentation will be available through an audio webcast accessible through the Investor Information section of our website at www.axiscapital.com.

In addition, a financial supplement relating to our financial results for the third quarter and nine 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 our website at www.axiscapital.com.


                     AXIS CAPITAL HOLDINGS LIMITED

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



                                                September   December
                                                   30,         31,
                                                  2004        2003

Assets
Cash and cash equivalents                      $  935,331  $  605,175
Fixed maturity investments at fair market value 4,360,522   3,385,576
 (Amortized cost 2004:$4,335,707;
  2003:$3,359,102)
Other investments                                  83,143           -
Accrued interest receivable                        33,588      29,530
Net receivable for investments sold                     -       3,371
Securities lending collateral                     765,273           -
Insurance and reinsurance premium balances
 receivable                                       924,575     660,530
Deferred acquisition costs                        229,102     136,281
Prepaid reinsurance premiums                      234,182     164,999
Reinsurance recoverable                           551,164     124,899
Intangible assets                                  23,536      24,579
Other assets                                       62,716      37,333
                                               ----------- -----------
     Total Assets                              $8,203,132  $5,172,273
                                               =========== ===========

Liabilities
Reserve for losses and loss expenses           $2,223,234  $  992,846
Unearned premiums                               1,682,119   1,143,447
Insurance and reinsurance balances payable        190,195     151,381
Accounts payable and accrued expenses              59,957      67,451
Securities lending payable                        765,333           -
Net payable for investments purchased             197,302           -
                                               ----------- -----------
     Total Liabilities                          5,118,140   2,355,125
                                               ----------- -----------

Shareholders' Equity
Share capital
 (Authorized 800,000,000 common shares, par
  value $0.0125; issued and outstanding 2004;
  152,539,621: 2003; 152,474,011)                   1,906       1,906
Additional paid-in capital                      2,013,325   2,000,731
Accumulated other comprehensive income             22,997      25,164
Retained earnings                               1,046,764     789,347
                                               ----------- -----------
     Total Shareholders' Equity                 3,084,992   2,817,148
                                               ----------- -----------

                                               ----------- -----------
     Total Liabilities & Shareholders' Equity  $8,203,132  $5,172,273
                                               =========== ===========
                     AXIS CAPITAL HOLDINGS LIMITED

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



                     Quarters ended             Nine months ended
                      September 30,               September 30,
                    2004          2003          2004          2003
                              (see note 1)               (see note 1)
Revenues
 Gross
  premiums
  written      $    687,700  $    633,942  $  2,361,142  $  1,793,979
 Premiums
  ceded            (125,688)      (99,567)     (412,063)     (269,636)
 Change in
  unearned
  premiums          (40,214)     (136,909)     (469,630)     (488,858)
               ------------- ------------- ------------- -------------
 Net premiums
  earned            521,798       397,466     1,479,449     1,035,485

 Net
  investment
  income             40,017        19,342       104,621        46,598
 Net realized
  (losses)
  gains               3,732        (5,713)        9,418        21,190
 Other
  insurance
  related
  income              7,206         8,548         7,650        19,756
               ------------- ------------- ------------- -------------
    Total
     revenues  $    572,753       419,643  $  1,601,138     1,123,029
               ------------- ------------- ------------- -------------

Expenses
 Net losses
  and loss
  expenses     $    445,575       184,180  $    946,025       526,135
 Acquisition
  costs              79,222        56,101       201,674       146,770
 General and
  administrative
  expenses           47,537        34,843       132,048        96,451
 Foreign
  exchange           (3,459)       (4,574)        4,099       (19,316)
               ------------- ------------- ------------- -------------
    Total
     expenses       568,875       270,550     1,283,846       750,040
               ------------- ------------- ------------- -------------

Income before
 income taxes         3,878       149,093       317,292       372,989
 Income tax
  recovery
  (expense)           2,401        (2,111)       (3,369)       (1,135)
               ------------- ------------- ------------- -------------
Net Income     $      6,279  $    146,982  $    313,923  $    371,854
               ============= ============= ============= =============

Weighted
 average
 common shares
 and
  common share
   equivalents
   - basic      152,534,495   151,453,213   152,523,144   141,499,081
               ============= ============= ============= =============

Weighted
 average
 common shares
 and
 common share
  equivalents
  - diluted     166,128,928   163,232,232   166,401,498   151,322,233
               ============= ============= ============= =============

Net income per
 share - basic $       0.04  $       0.97  $       2.06  $       2.63
               ============= ============= ============= =============

Net income per
 share -
 diluted       $       0.04  $       0.90  $       1.89  $       2.46
               ============= ============= ============= =============

Insurance
 Ratios
Loss ratio             85.4%         46.3%         63.9%         50.8%
Expense ratio          24.3%         22.9%         22.5%         23.5%
               ------------- ------------- ------------- -------------
Combined ratio        109.7%         69.2%         86.4%         74.3%
               ============= ============= ============= =============

Note 1:
Acquisition costs and general 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 internationally recognized rating agencies, (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 nine months ended September 30, 2004 and 2003
  (Expressed in thousands of U.S. dollars, except per share amounts)


                              Quarters ended       Nine months ended
                               September 30,         September 30,
                              2004       2003       2004       2003

Net income                     6,279    146,982    313,923    371,854

Adjustment for net realized
 gains (losses) on
 investments                  (3,732)     5,713     (9,418)   (21,190)
Adjustment for associated
 tax impact of net realized
 gains (losses) on
 investments                     286        (53)       645        350

                           ---------- ---------- ---------- ----------
Net income excluding
 realized gains (losses) on
 investments, net of tax   $   2,833  $ 152,642  $ 305,150  $ 351,014
                           ========== ========== ========== ==========

Net income per share -
 diluted                   $    0.04  $    0.90  $    1.89  $    2.46
                           ========== ========== ========== ==========

Adjustment for net realized
 gains (losses) on
 investments                   (0.02)      0.03      (0.06)     (0.14)
Adjustment for associated
 tax impact of net realized
 gains (losses) on
 investments                    0.00       0.00       0.00       0.00


Net income excluding
 realized gains (losses) on
 investments, net of tax
 per diluted share         $    0.02  $    0.93  $    1.83  $    2.32
                           ========== ========== ========== ==========
                     AXIS CAPITAL HOLDINGS LIMITED

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


                                             September     December
                                                30,           31,
                                               2004          2003

Shareholders' equity                       $  3,084,992  $  2,817,148

Shares outstanding                          152,539,621   152,474,011

                                           ------------- -------------
Book value per share                       $      20.22  $      18.48
                                           ============= =============

Diluted book value on an "as if converted
 basis"

Shareholders' equity                       $  3,084,992  $  2,817,148
add in:
  proceeds on exercise of options                94,862        62,630
  proceeds on exercise of warrants              244,812       244,811

                                           ------------- -------------
Adjusted shareholders' equity                 3,424,666     3,124,589
                                           ------------- -------------

As if converted diluted shares outstanding
Shares outstanding                          152,539,621   152,474,011
add in:
  vesting of restricted stock                 2,389,700     1,884,696
  exercise of options                         5,733,847     4,695,512
  exercise of warrants                       19,612,278    19,690,692

                                           ------------- -------------
Diluted shares outstanding                  180,275,446   178,744,911
                                           ------------- -------------

                                           ------------- -------------
Diluted book value per share               $      19.00  $      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

             Investor Contacts
             Andrew Cook / Linda Ventresca
             441-297-9513
             info@axiscapital.com
             or
             Kekst and Company
             Media Contacts
             Laura Accettella / Caroline Gentile
             212-521-4800

    SOURCE: AXIS Capital Holdings Limited