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AXIS Capital Reports Second Quarter Net Income of $231 Million

Diluted Earnings Per Share of $1.47 and Annualized Return on Average Common Equity of 19.2%

Company Release - 8/4/2008 4:42 PM ET

PEMBROKE, Bermuda--(BUSINESS WIRE)--

AXIS Capital Holdings Limited ("AXIS Capital") (NYSE: AXS) today reported net income available to common shareholders for the second quarter of 2008 of $231 million, or $1.47 per diluted common share, compared with $252 million, or $1.51 per diluted common share, for the second quarter of 2007. Net income for the six months ended June 30, 2008 was $469 million, or $2.95 per diluted share, compared with $479 million, or $2.88 per diluted share, for the corresponding period in 2007.

Operating income for the second quarter of 2008 was $229 million, or $1.45 per diluted share, compared with $256 million, or $1.54 per diluted common share, for the second quarter of 2007. This same item excluding foreign exchange gains, net of tax, for the second quarter of 2008 was $236 million, or $1.50 per diluted common share, compared with $249 million, or $1.50 per diluted common share, for the second quarter of 2007.

Operating income for the first six months of 2008 was $434 million, or $2.73 per diluted share, compared with $483 million, or $2.91 per diluted common share, for the first six months of 2007. This same item excluding foreign exchange gains, net of tax, for the first six months of 2008 was $421 million, or $2.65 per diluted common share, compared with $474 million, or $2.85 per diluted common share, for the first six months of 2007.

Operating Highlights

AXIS Capital delivered another strong performance this quarter, which included the following highlights:

    --  Net income available to common shareholders of $231 million;

    --  A combined ratio of 81.2%, including net favorable reserve
        development of 12.8 percentage points;

    --  Record net investment income of $137 million, an increase of
        21%;

    --  Annualized return on average common shareholders equity of
        19.2%;

    --  Diluted book value per common share(1) of $30.30, an increase
        of 21% from June 30, 2007, and 5% from December 31, 2007;

    --  Shareholders' equity of $5.3 billion, an increase of 12% from
        June 30, 2007 and 2% from December 31, 2007;

    --  Share repurchases during the quarter of $175 million.

Commenting on the second quarter 2008 financial results, John Charman, Chief Executive Officer and President of AXIS Capital, stated: "I am pleased that we have been able to deliver growth in diluted book value per share of an excellent 21% over the last twelve months. Despite the extremely competitive market conditions, our underwriting results were good and our reserves from prior accident years continued to develop favorably. We also posted record quarterly net investment income. Our business is still generating very strong underwriting profitability even against the backdrop of increased market loss activity during this first half of the year in the property lines."

(1) To conform with our current period presentation, we have recalculated the diluted book value per common share for the comparative periods using the "treasury stock" method.

    Segment Highlights

    Insurance Segment

Our insurance segment reported underwriting income for the quarter of $51 million, down $47 million, or 48%, from the second quarter of 2007. The segment's combined ratio was 80.3% compared with 67.1% in the prior year quarter. The increase was driven by three factors: first, our current accident year loss ratio increased 5.7 ratio points, reflecting a higher frequency and severity of large property losses this quarter; second, net favorable development decreased from 18.7 ratio points in the second quarter of 2007 to 15.5 ratio points in the current quarter; and third, our general and administrative ratio increased 3.1 ratio points, primarily due to increased staffing costs this year.

Our insurance segment reported gross premiums written in the quarter of $555 million, down 9% from the second quarter of 2007, and net premiums written of $366 million, down 10% from the second quarter of 2007. We reduced our gross premiums written for many of our property and casualty lines of business this quarter as a result of competitive market conditions. Partially offsetting this, we wrote additional political risk business, and our professional lines book benefited from the renewal rights acquired in conjunction with our purchase of the assets and operations of Media Pro at the end of the second quarter of 2007.

Reinsurance Segment

Our reinsurance segment reported underwriting income for the quarter of $87 million, which was comparable with the second quarter of 2007. The segment's combined ratio was 77.3% compared with 78.0% in the prior year quarter. There were several named U.S. catastrophes this quarter, which are estimated by PCS to exceed $6 billion. Our estimated net losses from these events were $19 million and primarily emanate from our Midwest regional treaty reinsurance business. Reinsurance segment results for the quarter also included the impact of estimated losses from individual property risk losses and an earthquake in China. The second quarter of 2007 included estimated losses of $47 million from storms and flooding in the U.K. and Australia. Net favorable development in the quarter of 10.6 ratio points compared with 10.4 ratio points in the second quarter of 2007.

Our reinsurance segment reported gross premiums written in the quarter of $319 million, down 8% from the second quarter of 2007. The reduction was mostly related to our catastrophe and professional lines business, driven by exposure reductions in the face of deteriorating market conditions.

Investments

Net investment income increased $23 million, or 21%, from the second quarter of 2007 to $137 million. Investment income from our alternative investment portfolio ("other investments") increased by $17 million to $20 million for the quarter. Net investment income from cash and fixed maturity investments increased 3% to $117 million, primarily reflecting the impact of higher investment balances. As part of the ongoing strategic diversification of our investment portfolio, we began funding an allocation to global equities during the quarter. We experienced $2 million of net realized gains in the quarter, compared to net realized losses of $5 million in the second quarter of 2007.

Interest Expense

Interest expense for the three and six months ended June 30, 2008 was $8 million and $16 million, respectively, compared to $14 million and $29 million, respectively, in the comparative periods of 2007. The reduction in 2008 interest expense relates to the termination of our $400 million repurchase agreement in September 2007.

Capitalization / Shareholders' Equity

Total capitalization at June 30, 2008 was $5.8 billion, including $0.5 billion of long-term debt and $0.5 billion of preferred equity, compared to $5.7 billion at December 31, 2007. At June 30, 2008, diluted book value per common share, on a treasury stock basis, was $30.30 and book value per common share was $34.11, compared to $28.79 and $32.69, respectively, as of December 31, 2007. During the quarter, we repurchased 5 million shares at an average price of $34.96 per share, for a total cost of $175 million. We have approximately $320 million remaining under our current repurchase authorization.

Conference Call

We will host a conference call on Tuesday August 5, 2008 at 8:00 AM (Eastern) to discuss the second quarter financial results and related matters. The teleconference can be accessed by dialing (866) 510-0712 (U.S. callers) or (617) 597-5380 (international callers) and entering the pass code 41534364 approximately ten minutes in advance of the call. 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.

In addition, a financial supplement relating to our financial results for the quarter ended June 30, 2008 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, 2008 of $5.3 billion and locations in Bermuda, the United States, Europe, Singapore, Canada and Australia. 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. AXIS Capital has been assigned a senior unsecured debt rating of Baa1 (stable) by Moody's Investors Service and BBB+ (stable) by Standard & Poor's. For more information about AXIS Capital, visit our website at www.axiscapital.com.

                    AXIS CAPITAL HOLDINGS LIMITED
                     CONSOLIDATED BALANCE SHEETS
           JUNE 30, 2008 (UNAUDITED) AND DECEMBER 31, 2007

                                                 2008         2007
                                             ------------ ------------
Assets                                       (in thousands, except per
                                                   share amounts)
Investments:
     Fixed maturities, available for sale,
      at fair value                          $ 8,703,346  $ 8,331,666
     Equity securities, available for sale,
      at fair value                              247,845        7,746
     Other investments, at fair value            724,239      638,241
                                             ------------ ------------
Total investments                              9,675,430    8,977,653
Cash and cash equivalents                      1,094,429    1,332,921
Accrued interest receivable                       89,261       87,338
Insurance and reinsurance premium balances
 receivable                                    1,652,295    1,231,494
Reinsurance recoverable balances               1,340,452    1,280,295
Reinsurance recoverable balances on paid
 losses                                           82,677       76,598
Deferred acquisition costs                       355,587      276,801
Prepaid reinsurance premiums                     263,461      242,940
Securities lending collateral                    813,737      865,256
Net receivable for investments sold                    -       86,356
Goodwill and intangible assets                    61,035       61,653
Other assets                                     178,025      156,004
                                             ------------ ------------
 Total assets                                $15,606,389  $14,675,309
                                             ============ ============

Liabilities
Reserve for losses and loss expenses         $ 5,995,731  $ 5,587,311
Unearned premiums                              2,603,676    2,146,087
Insurance and reinsurance balances payable       249,710      244,988
Securities lending payable                       812,833      863,906
Senior notes                                     499,315      499,261
Other liabilities                                144,689      175,134
Net payable for investments purchased             37,273            -
                                             ------------ ------------
 Total liabilities                            10,343,227    9,516,687
                                             ------------ ------------

Shareholders' Equity
Preferred shares - Series A and B                500,000      500,000
Common shares                                      1,877        1,850
Additional paid-in capital                     1,922,356    1,869,810
Accumulated other comprehensive (loss)
 income                                         (150,721)      22,668
Retained earnings                              3,377,051    2,968,900
Treasury shares, at cost                        (387,401)    (204,606)
                                             ------------ ------------
 Total shareholders' equity                    5,263,162    5,158,622
                                             ------------ ------------
 Total liabilities and shareholders' equity  $15,606,389  $14,675,309
                                             ============ ============
                    AXIS CAPITAL HOLDINGS LIMITED
          CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
      FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

                           Three months ended     Six months ended
                           ------------------- -----------------------
                             2008      2007       2008        2007
                           --------- --------- ----------- -----------
                            (in thousands, except per share amounts)
Revenues
 Net premiums earned       $680,291  $693,941  $1,338,925  $1,379,245
 Net investment income      137,015   113,685     222,666     238,965
 Net realized investment
  gains (losses)              1,552    (4,656)     37,237      (4,356)
 Other insurance related
  (loss) income              (7,269)      693      (5,267)      2,633
                           --------- --------- ----------- -----------
  Total revenues            811,589   803,663   1,593,561   1,616,487
                           --------- --------- ----------- -----------
Expenses
 Net losses and loss
  expenses                  371,717   358,723     733,398     751,521
 Acquisition costs           97,780    95,745     192,260     193,884
 General and
  administrative expenses    82,953    68,574     161,703     131,180
 Foreign exchange losses
  (gains)                     6,564    (6,883)    (13,733)     (9,274)
 Interest expense and
  financing costs             7,890    14,169      15,848      29,312
                           --------- --------- ----------- -----------
  Total expenses            566,904   530,328   1,089,476   1,096,623
                           --------- --------- ----------- -----------

Income before income
 taxes                      244,685   273,335     504,085     519,864
 Income tax expense           4,199    12,519      16,658      22,266
                           --------- --------- ----------- -----------
Net income                  240,486   260,816     487,427     497,598
      Preferred shares
       dividends              9,219     9,226      18,438      18,430
                           --------- --------- ----------- -----------
Net income available to
 common shareholders       $231,267  $251,590  $  468,989  $  479,168
                           ========= ========= =========== ===========

Weighted average common
 shares and common
share equivalents:
 Basic                      142,333   149,027     142,786     149,727
                           ========= ========= =========== ===========
 Diluted                    157,602   166,320     158,893     166,175
                           ========= ========= =========== ===========

Earnings per common
 share:
 Basic                     $   1.62  $   1.69  $     3.28  $     3.20
                           ========= ========= =========== ===========
 Diluted                   $   1.47  $   1.51  $     2.95  $     2.88
                           ========= ========= =========== ===========

Cash dividends declared
 per common share          $  0.185  $  0.165  $     0.37  $     0.33
                           ========= ========= =========== ===========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
          FOR THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007


                                                   2008
                                     ---------------------------------
                                     Insurance  Reinsurance   Total
                                     ---------------------------------
Gross premiums written               $ 555,464   $ 318,705  $ 874,169
Net premiums written                   365,511     318,705    684,216
Net premiums earned                    297,429     382,862    680,291
Other insurance related (loss)
 income                                 (7,509)        240     (7,269)
Net losses and loss expenses          (159,696)   (212,021)  (371,717)
Acquisition costs                      (31,120)    (66,660)   (97,780)
General and administrative expenses    (48,141)    (17,077)   (65,218)
                                     ---------------------- ----------
   Underwriting income               $  50,963   $  87,344    138,307
                                     ======================

Corporate expenses                                            (17,735)
Net investment income                                         137,015
Net realized investment gains
 (losses)                                                       1,552
Foreign exchange (losses) gains                                (6,564)
Interest expense and financing costs                           (7,890)
                                                            ----------
  Income before income taxes                                $ 244,685
                                                            ==========

Net loss and loss expense ratio           53.7%       55.4%      54.6%
Acquisition cost ratio                    10.4%       17.4%      14.4%
General and administrative
   expense ratio                          16.2%        4.5%      12.2%
                                     ---------- ----------- ----------
   Combined ratio                         80.3%       77.3%      81.2%
                                     ========== =========== ==========

                                                   2007
                                     ---------------------------------
                                     Insurance  Reinsurance   Total
                                    ----------------------------------
Gross premiums written               $ 612,671   $ 346,707  $ 959,378
Net premiums written                   406,885     348,457    755,342
Net premiums earned                    298,245     395,696    693,941
Other insurance related (loss)
 income                                    360         333        693
Net losses and loss expenses          (133,568)   (225,155)  (358,723)
Acquisition costs                      (27,442)    (68,303)   (95,745)
General and administrative expenses    (39,167)    (15,223)   (54,390)
                                     ---------------------- ----------
   Underwriting income               $  98,428   $  87,348    185,776
                                     ======================

Corporate expenses                                            (14,184)
Net investment income                                         113,685
Net realized investment gains
 (losses)                                                      (4,656)
Foreign exchange (losses) gains                                 6,883
Interest expense and financing costs                          (14,169)
                                                            ----------
  Income before income taxes                                $ 273,335
                                                            ==========

Net loss and loss expense ratio           44.8%       56.9%      51.7%
Acquisition cost ratio                     9.2%       17.3%      13.8%
General and administrative
   expense ratio                          13.1%        3.8%       9.9%
                                     ---------- ----------- ----------
   Combined ratio                         67.1%       78.0%      75.4%
                                     ========== =========== ==========
                    AXIS CAPITAL HOLDINGS LIMITED
               CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
            FOR THE SIX MONTHS ENDED JUNE 30 2008 AND 2007


                                                  2008
                                   -----------------------------------
                                    Insurance  Reinsurance    Total
                                   -----------------------------------
Gross premiums written             $  990,321  $1,148,029  $2,138,350
Net premiums written                  637,243   1,138,748   1,775,991
Net premiums earned                   596,986     741,939   1,338,925
Other insurance related (loss)
 income                                (6,322)      1,055      (5,267)
Net losses and loss expenses         (319,146)   (414,252)   (733,398)
Acquisition costs                     (62,834)   (129,426)   (192,260)
General and administrative
 expenses                             (95,960)    (34,447)   (130,407)
                                   ----------------------- -----------
   Underwriting income             $  112,724  $  164,869     277,593
                                   =======================

Corporate expenses                                            (31,296)
Net investment income                                         222,666
Net realized investment gains
 (losses)                                                      37,237
Foreign exchange gains                                         13,733
Interest expense and financing
 costs                                                        (15,848)
                                                           -----------
  Income before income taxes                               $  504,085
                                                           ===========

Net loss and loss expense ratio          53.5%       55.8%       54.8%
Acquisition cost ratio                   10.5%       17.5%       14.3%
General and administrative
   expense ratio                         16.1%        4.6%       12.1%
                                   ----------- ----------- -----------
   Combined ratio                        80.1%       77.9%       81.2%
                                   =========== =========== ===========

                                                  2007
                                   -----------------------------------
                                    Insurance  Reinsurance    Total
                                  ------------------------------------
Gross premiums written             $1,049,159  $1,212,842  $2,262,001
Net premiums written                  688,931   1,205,769   1,894,700
Net premiums earned                   613,177     766,068   1,379,245
Other insurance related (loss)
 income                                 1,127       1,506       2,633
Net losses and loss expenses         (319,520)   (432,001)   (751,521)
Acquisition costs                     (62,791)   (131,093)   (193,884)
General and administrative
 expenses                             (74,690)    (29,966)   (104,656)
                                   ----------------------- -----------
   Underwriting income             $  157,303  $  174,514     331,817
                                   =======================

Corporate expenses                                            (26,524)
Net investment income                                         238,965
Net realized investment gains
 (losses)                                                      (4,356)
Foreign exchange gains                                          9,274
Interest expense and financing
 costs                                                        (29,312)
                                                           -----------
  Income before income taxes                               $  519,864
                                                           ===========

Net loss and loss expense ratio          52.1%       56.4%       54.5%
Acquisition cost ratio                   10.2%       17.1%       14.1%
General and administrative
   expense ratio                         12.2%        3.9%        9.5%
                                   ----------- ----------- -----------
   Combined ratio                        74.5%       77.4%       78.1%
                                   =========== =========== ===========
                    AXIS CAPITAL HOLDINGS LIMITED
              NON-GAAP FINANCIAL MEASURE RECONCILIATION
           OPERATING INCOME AND OPERATING INCOME EXCLUDING
                  FOREIGN EXCHANGE GAINS, NET OF TAX
      FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007

                               Three months ended   Six months ended
                               ------------------- -------------------
                                 2008      2007      2008      2007
                               --------- --------- --------- ---------

Net income available to common
 shareholders                  $231,267  $251,590  $468,989  $479,168

Adjustment for net realized
 investment (gains) losses       (1,552)    4,656   (37,237)    4,356
Adjustment for associated tax
 impact                            (563)     (419)    2,179      (559)
                               --------- --------- --------- ---------
Operating income                229,152   255,827   433,931   482,965

Adjustment for foreign
 exchange losses (gains)          6,564    (6,883)  (13,733)   (9,274)
Adjustment for associated tax
 impact                             (53)      511     1,155       677
Operating income excluding
 foreign exchange
                               --------- --------- --------- ---------
gains, net of tax              $235,663  $249,455  $421,353  $474,368
                               ========= ========= ========= =========

Net income per share - diluted $   1.47  $   1.51  $   2.95  $   2.88
Adjustment for net realized
 investment (gains) losses        (0.01)     0.03     (0.23)     0.03
Adjustment for associated tax
 impact                           (0.01)        -      0.01         -
                               --------- --------- --------- ---------
Operating income per share -
 diluted                       $   1.45  $   1.54  $   2.73  $   2.91

Adjustment for foreign
 exchange losses (gains)           0.05     (0.04)    (0.09)    (0.06)
Adjustment for associated tax
 impact                               -         -      0.01         -
Operating income excluding
 foreign exchange
                               --------- --------- --------- ---------
gains, net of tax              $   1.50  $   1.50  $   2.65  $   2.85
                               ========= ========= ========= =========

Weighted average common shares
 and
 common share equivalents -
  diluted                       157,602   166,320   158,893   166,175
                               ========= ========= ========= =========

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 occurrence of natural and man-made disasters, (2) actual claims exceeding our loss reserves, (3) the failure of any of the loss limitation methods we employ, (4) the effects of emerging claims and coverage issues, (5) the failure of our cedants to adequately evaluate risks, (6) the loss of one or more key executives, (7) a decline in our ratings with rating agencies, (8) the loss of business provided to us by our major brokers, (9) changes in governmental regulations, (10) increased competition, (11), interest rate and/or currency value fluctuations, (12) general economic conditions and (13) 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 have presented the following non-GAAP financial measures:

1. Operating income. This represents net income available to common
    shareholders, before the after tax impact of net realized gains
    and losses on investments;
2. Operating income, excluding the after tax impact of foreign
    exchange gains and losses.

We have included these measures as we believe that security analysts, rating agencies and investors believe that realized gains and losses and foreign exchange, where an actively managed foreign exchange program is not in place, are largely opportunistic and are a function of economic and interest rate conditions. As a result, we believe that they evaluate earnings before realized gains and losses and foreign exchange, adjusted for tax, to make performance comparisons with our industry peers.

Source: AXIS Capital Holdings Limited

Contact: Investors AXIS Capital Holdings Limited Linda Ventresca, 441-405-2727 investorrelations@axiscapital.com or Media Kekst and Company Joseph Kuo, 212-521-4800