For the first quarter of 2023, the Company
reports:
- Annualized return on average common equity ("ROACE") of
16.2% and annualized operating ROACE of 18.8%
- Book value per diluted common share of $50.31
AXIS Capital Holdings Limited ("AXIS Capital" or "AXIS" or "the
Company") (NYSE: AXS) today announced financial results for the
first quarter ended March 31, 2023.
Commenting on the first quarter 2023 financial results, Albert
Benchimol, President and CEO of AXIS Capital said:
"AXIS once again delivered strong performance as we continued to
advance our strategy to achieve specialty leadership, demonstrating
resilience despite dynamic market conditions that included
turbulence in the financial markets and heightened weather and cat
activity. In the first quarter, we produced very good results
across our core metrics that included a combined ratio of 91%,
operating income of $200 million, and record operating income per
diluted common share of $2.33.
"As I prepare to complete my tenure as CEO of AXIS, following
nearly 13 years with the Company, it is gratifying to see the
continued progress in our performance following years of hard work
to reposition the business to a more focused specialist
underwriter, well positioned to consistently deliver profitable
results. I have complete confidence that the best is yet to come
for AXIS. In Vince Tizzio, we have the right leader to take the
Company to the next level."
Vince Tizzio, CEO Specialty Insurance and Reinsurance of AXIS
Capital – and future President and CEO, effective May 4, 2023,
added:
"With a clear focus on delivering sustainable value creation to
our shareholders, we continued to drive strong growth in our
priority markets while capitalizing on favorable market conditions
that included a general resurgence in pricing momentum across the
majority of our lines. Our Specialty Insurance business delivered
record first quarter production, generating $1.4 billion in gross
written premiums, a combined ratio of 87% and underwriting profit
of $103 million.
"Our Reinsurance business contributed a combined ratio of 91%
and $36 million of underwriting profit as we further transitioned
the business to a specialist reinsurer with a smaller and less
volatile book of business.
"Looking to the future, I feel confident about the growth
potential for the business and believe that AXIS is on a positive
trajectory toward achieving its place as a specialty leader defined
by the strength of our underwriting and the value that we provide
to our customers and shareholders."
First Quarter Consolidated Results*
- Net income available to common shareholders for the first
quarter of 2023 was $173 million, or $2.01 per diluted common
share, compared to net income available to common shareholders of
$142 million, or $1.65 per diluted common share, for the first
quarter of 2022.
- Operating income1 for the first quarter of 2023 was $200
million, or $2.33 per diluted common share1, compared to
operating income of $180 million, or $2.09 per diluted common
share, for the first quarter of 2022.
- Book value per diluted common share of $50.31, an increase of
$3.36, or 7.2%, compared to December 31, 2022, driven by net income
and net unrealized gains reported in other comprehensive income
(loss), partially offset by common share dividends declared.
- Our fixed income portfolio book yield was 3.7% at March 31,
2023, compared to 2.1% at March 31, 2022. The market yield was 5.4%
at March 31, 2023.
- Net investment income for the first quarter of 2023 was $134
million, compared to $91 million, for the first quarter of 2022,
attributable to an increase in income from fixed maturities due to
increased yields.
- Adjusted for net unrealized investment losses, after-tax,
reported in accumulated other comprehensive income (loss), book
value per diluted common share of $56.64 at March 31, 2023,
compared to $55.49 at December 31, 2022 and $55.78 at March 31,
2022.
- Adjusted for dividends declared, book value per diluted common
share increased by $3.80, or 8.1%, compared to December 31,
2022.
- Adjusted for dividends declared, book value per diluted common
share increased by $0.08, or 0.2%, over the past twelve
months.
* Amounts may not reconcile due to
rounding differences.
1 Operating income (loss) and operating
income (loss) per diluted common share are non-GAAP financial
measures as defined in SEC Regulation G. The reconciliations to the
most comparable GAAP financial measures, net income (loss)
available (attributable) to common shareholders and earnings (loss)
per diluted common share, respectively, and a discussion of the
rationale for the presentation of these items are provided later in
this press release.
First Quarter Consolidated
Underwriting Highlights2
- Gross premiums written decreased by $253 million, or 10% ($211
million, or 8%, on a constant currency basis3), to $2.4
billion with a decrease of $341 million, or 26%, in the reinsurance
segment, partially offset by an increase of $88 million, or 7%, in
the insurance segment.
- Net premiums written decreased by $205 million, or 11% ($164
million, or 9%, on a constant currency basis3), to $1.6
billion with a decrease of $243 million, or 25%, in the reinsurance
segment, partially offset by an increase of $39 million, or 5%, in
the insurance segment.
Three months ended March
31,
KEY RATIOS
2023
2022
Change
Current accident year loss ratio,
excluding catastrophe and weather-related losses4
55.8%
54.2%
1.6 pts
Catastrophe and weather-related losses
ratio
3.1%
4.7%
(1.6 pts)
Current accident year loss ratio
58.9%
58.9%
— pts
Prior year reserve development ratio
(0.3%)
(0.7%)
0.4 pts
Net losses and loss expenses ratio
58.6%
58.2%
0.4 pts
Acquisition cost ratio
18.7%
19.7%
(1.0 pts)
General and administrative expense
ratio
13.6%
13.5%
0.1 pts
Combined ratio
90.9%
91.4%
(0.5 pts)
Current accident year combined ratio,
excluding catastrophe and weather-related losses
88.1%
87.4%
0.7 pts
- The current accident year loss ratio, excluding catastrophe and
weather-related losses, increased by 1.6 points in the first
quarter, compared to the same period in 2022, principally due to
changes in business mix associated with the exit from catastrophe
and property lines of business.
- Pre-tax catastrophe and weather-related losses, net of
reinsurance, were $38 million ($32 million, after-tax), (Insurance:
$24 million; Reinsurance: $13 million), or 3.1 points, primarily
attributable to New Zealand floods, Cyclone Gabrielle, and other
weather-related events. Comparatively, pre-tax catastrophe and
weather-related losses, net of reinsurance, were $60 million,
(Insurance: $33 million; Reinsurance: $27 million), or 4.7 points
in 2022, including $30 million, or 2.3 points attributable to the
Russia-Ukraine war.
- Net favorable prior year reserve development was $4 million
(Insurance: $1 million; Reinsurance: $3 million), compared to $9
million (Insurance: $7 million; Reinsurance: $2 million) in
2022.
2 All comparisons are with the same period
of the prior year, unless otherwise stated.
3 Amounts presented on a constant currency
basis are non-GAAP financial measures as defined in SEC Regulation
G. The constant currency basis is calculated by applying the
average foreign exchange rate from the current year to prior year
amounts. The reconciliations to the most comparable GAAP financial
measures is provided above and a discussion of the rationale for
the presentation of these items is provided later in this press
release.
4 The current accident year loss ratio,
excluding catastrophe and weather-related losses is calculated by
dividing the current accident year losses less pre-tax catastrophe
and weather-related losses, net of reinsurance, by net premiums
earned less reinstatement premiums.
Segment Highlights
Insurance Segment
Three months ended March
31,
($ in thousands)
2023
2022
Change
Gross premiums written
$
1,415,612
$
1,327,264
6.7%
Net premiums written
882,576
843,912
4.6%
Net premiums earned
816,456
752,816
8.5%
Underwriting income
103,355
94,391
9.5%
Underwriting ratios:
Current accident year loss ratio,
excluding catastrophe and weather-related losses
52.2%
50.5%
1.7 pts
Catastrophe and weather-related losses
ratio
3.0%
4.3%
(1.3 pts)
Current accident year loss ratio
55.2%
54.8%
0.4 pts
Prior year reserve development ratio
(0.1%)
(0.9%)
0.8 pts
Net losses and loss expenses ratio
55.1%
53.9%
1.2 pts
Acquisition cost ratio
18.0%
18.4%
(0.4 pts)
Underwriting-related general and
administrative expense ratio
14.2%
15.2%
(1.0 pts)
Combined ratio
87.3%
87.5%
(0.2 pts)
Current accident year combined ratio,
excluding catastrophe and weather-related losses
84.4%
84.1%
0.3 pts
- Gross premiums written increased by $88 million, or 7%,
primarily attributable to increases in property, liability and
cyber lines due to favorable rate changes and new business, and
accident and health lines due to new business, partially offset by
a decrease in professional lines due to changing market
dynamics.
- Net premiums written increased by $39 million, or 5% ($47
million, or 6%, on a constant currency basis), reflecting the
increase in gross premiums written in the quarter, partially offset
by slightly higher ceded ratios associated with changes in business
mix due to increases in property and liability lines of business
written in recent periods.
- The current accident year loss ratio, excluding catastrophe and
weather-related losses, increased by 1.7 points in the first
quarter, compared to the same period in 2022, principally due to
heightened loss trends in liability lines consistent with changes
in loss assumptions reflected in recent periods.
- Pre-tax catastrophe and weather-related losses, net of
reinsurance, were $24 million, or 3.0 points, primarily
attributable to New Zealand floods, Cyclone Gabrielle, and other
weather-related events. Comparatively, pre-tax catastrophe and
weather-related losses, net of reinsurance, were $33 million in
2022.
- The acquisition cost ratio decreased by 0.4 points in the first
quarter, compared to the same period in 2022, primarily related to
a decrease in variable acquisition costs associated with property
lines.
- The underwriting-related general and administrative expense
ratio decreased by 1.0 point in the first quarter, compared to the
same period in 2022, mainly driven by an increase in net premiums
earned.
Reinsurance Segment
Three months ended March
31,
($ in thousands)
2023
2022
Change
Gross premiums written
$
966,364
$
1,307,344
(26.1%)
Net premiums written
725,780
968,960
(25.1%)
Net premiums earned
413,743
505,430
(18.1%)
Underwriting income
36,011
44,401
(18.9%)
Underwriting ratios:
Current accident year loss ratio,
excluding catastrophe and weather-related losses
63.0%
59.7%
3.3 pts
Catastrophe and weather-related losses
ratio
3.3%
5.4%
(2.1 pts)
Current accident year loss ratio
66.3%
65.1 %
1.2 pts
Prior year reserve development ratio
(0.8%)
(0.4%)
(0.4 pts)
Net losses and loss expenses ratio
65.5%
64.7%
0.8 pts
Acquisition cost ratio
20.1%
21.7%
(1.6 pts)
Underwriting-related general and
administrative expense ratio
5.8%
6.1%
(0.3 pts)
Combined ratio
91.4 %
92.5 %
(1.1 pts)
Current accident year combined ratio,
excluding catastrophe and weather-related losses
88.9%
87.5%
1.4 pts
- Gross premiums written decreased by $341 million, or 26% ($309
million, or 24%, on a constant currency basis). The decrease in
catastrophe and property lines was associated with the exit from
these lines of business in June 2022. The decrease in marine and
aviation was due to non-renewals of marine business and the exit
from the aviation business effective January 1, 2023. In our
ongoing specialty lines, decreases in liability, and accident and
health lines were partially offset by an increase in credit and
surety lines. The decrease in liability lines was primarily due to
non-renewals of U.S. regional multi-line business following the
exit from catastrophe and property lines of business. The decrease
in accident and health lines was due to timing differences,
decreased line sizes and premium adjustments. The increase in
credit and surety lines was primarily driven by new business
- Net premiums written decreased by $243 million, or 25% ($211
million, or 22%, on a constant currency basis), reflecting the
decrease in gross premiums written in the quarter.
- The current accident year loss ratio, excluding catastrophe and
weather-related losses, increased by 3.3 points in the first
quarter, compared to the same period in 2022, principally due to
the exit from catastrophe and property lines of business, partially
offset by improved loss experience in marine and aviation lines,
and changes in business mix due to the increase in credit and
surety lines of business written in the period which carry a lower
loss ratio.
- Pre-tax catastrophe and weather-related losses, net of
reinsurance, were $13 million, or 3.3 points, primarily
attributable to New Zealand floods, and other weather-related
events. Comparatively, pre-tax catastrophe and weather-related
losses, net of reinsurance, were $27 million in 2022.
- The acquisition cost ratio decreased by 1.6 points in the first
quarter, compared to the same period in 2022, primarily related to
the impact of retrocessional contracts, and adjustments
attributable to loss-sensitive features mainly in motor lines,
partially offset by changes in business mix associated with the
exit from catastrophe and property lines of business.
- The underwriting-related general and administrative expense
ratio decreased by 0.3 points in the first quarter, compared to the
same period in 2022, mainly driven by a decrease in personnel costs
associated with the exit from catastrophe and property lines of
business, partially offset by a decrease in net premiums earned and
a decrease in fees related to arrangements with strategic capital
partners.
Investments
Net investment income of $134 million increased from $91 million
for the first quarter of 2022, attributable to an increase in
income from fixed maturities due to increased yields.
Net realized and unrealized losses recognized in net income for
the first quarter were $20 million, compared to $95 million for the
first quarter of 2022, and included net unrealized gains of $24
million ($20 million excluding foreign exchange movements), due to
an increase in the market value of our equity securities portfolio
during the quarter.
Pre-tax total return on cash and investments5 was 2.0%,
including foreign exchange movements (1.9% excluding foreign
exchange movements6), compared to the prior year pre-tax total
return of (2.7%), including foreign exchange movements ((2.6%)
excluding foreign exchange movements).
Net unrealized gains, pre-tax of $213 million ($191 million
excluding foreign exchange movements) were recognized in other
comprehensive income (loss) in the quarter due to an increase in
the market value of our fixed maturities portfolio, compared to net
unrealized losses, pre-tax of $455 million ($439 million excluding
foreign exchange movements) recognized during the first quarter of
2022.
Our fixed income portfolio book yield was 3.7% at March 31,
2023, compared to 2.1% at March 31, 2022, and 3.5% at December 31,
2022. The market yield was 5.4% at March 31, 2023.
5 Pre-tax total return on cash and
investments includes net investment income (loss), net investment
gains (losses), interest in income (loss) of equity method
investments and change in unrealized investment gains (losses)
generated by average cash and investment balances. Total cash and
invested assets represents the total cash and cash equivalents,
fixed maturities, equity securities, mortgage loans, other
investments, equity method investments, short-term investments,
accrued interest receivable and net receivable (payable) for
investments sold (purchased).
6 Pre-tax total return on cash and
investments excluding foreign exchange movements is a non-GAAP
financial measure as defined in SEC Regulation G. The
reconciliation to pre-tax total return on cash and investments, the
most comparable GAAP financial measure, also included foreign
exchange (losses) gains of $19 million and $(28) million for the
three months ended March 31, 2023 and 2022, respectively.
Capitalization / Shareholders’
Equity
March 31,
December 31,
($ in thousands)
2023
2022
Change
Total capital7
$
6,272,887
$
5,952,224
$
320,663
- Total capital of $6.3 billion included $1.3 billion of debt and
$550 million of preferred equity, compared to $6.0 billion at
December 31, 2022, with the increase driven by net unrealized gains
reported in other comprehensive income (loss) following an increase
in the market value of our fixed maturities portfolio, and net
income, partially offset by common share dividends declared.
- At March 31, 2023, we had $100 million of remaining
authorization under our Board-authorized share repurchase program
for common share repurchases through December 31, 2023.
Book Value per
diluted common share
March 31,
December 31,
March 31,
2023
2022
2022
Book value per diluted common share8
$
50.31
$
46.95
$
51.97
- Dividends declared were $0.44 per common share in the current
quarter and $1.74 per common share over the past twelve
months.
Three months ended
Twelve months ended
March 31, 2023
March 31, 2023
Change
% Change
Change
% Change
Book value per diluted common share
$
3.36
7.2 %
$
(1.66)
(3.2%)
Book value per diluted common share -
adjusted for dividends declared
$
3.80
8.1 %
$
0.08
0.2 %
- Book value per diluted common share increased by $3.36 in the
quarter, driven by net income and net unrealized gains reported in
other comprehensive income (loss), partially offset by common share
dividends declared.
- Book value per diluted common share decreased by $1.66 over the
past twelve months, driven by net unrealized losses reported in
other comprehensive income (loss), and common share dividends
declared, partially offset by net income.
- Adjusted for net unrealized investment losses, after-tax,
reported in accumulated other comprehensive income (loss), book
value per diluted common share was $56.64.
- Adjusted for dividends declared, the book value per diluted
common share increased by $3.80 for the quarter, and increased by
$0.08 over the past twelve months.
7 Total capital represents the sum of
total shareholders' equity and debt.
8 Calculated on a treasury stock basis
Conference Call
We will host a conference call on Thursday, April 27, 2023 at
9:30 a.m. (EDT) to discuss the first quarter financial results and
related matters. The teleconference can be accessed by dialing
1-877-883-0383 (U.S. callers), or 1-412-902-6506 (international
callers), and entering the passcode 3089941 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
our website at www.axiscapital.com. A
replay of the teleconference will be available for two weeks by
dialing 1-877-344-7529 (U.S. callers), or 1-412-317-0088
(international callers), and entering the passcode 8475853. The
webcast will be archived in the Investor Information section of our
website.
In addition, an investor financial supplement for the quarter
ended March 31, 2023 is available in the Investor Information
section of our website.
About AXIS Capital
AXIS Capital, through its operating subsidiaries, is a global
specialty underwriter and provider of insurance and reinsurance
solutions. The Company has shareholders' equity of $5.0 billion at
March 31, 2023, and locations in Bermuda, the United States,
Europe, Singapore and Canada. Its operating subsidiaries have been
assigned a financial strength rating of "A+" ("Strong") by Standard
& Poor's and "A" ("Excellent") by A.M. Best. For more
information about AXIS Capital, visit our website at www.axiscapital.com.
Website and Social Media Disclosure
We use our website (www.axiscapital.com) and our corporate LinkedIn
(AXIS Capital) and Twitter (@AXIS_Capital) accounts as channels of
distribution of Company information. The information we post
through these channels may be deemed material. Accordingly,
investors should monitor these channels, in addition to following
our press releases, SEC filings and public conference calls and
webcasts. In addition, e-mail alerts and other information about
AXIS Capital may be received by those enrolled in our "E-mail
Alerts" program which can be found in the Investor Information
section of our website (www.axiscapital.com). The contents of our website
and social media channels are not part of this press release.
Follow AXIS Capital on LinkedIn and Twitter.
LinkedIn: http://bit.ly/2kRYbZ5
AXIS CAPITAL HOLDINGS
LIMITED
CONSOLIDATED BALANCE
SHEETS
MARCH 31, 2023 (UNAUDITED) AND
DECEMBER 31, 2022
2023
2022
(in thousands)
Assets
Investments:
Fixed maturities, available for sale, at
fair value
$
11,627,555
$
11,326,894
Fixed maturities, held to maturity, at
amortized cost
716,768
698,351
Equity securities, at fair value
573,916
485,253
Mortgage loans, held for investment, at
fair value
634,470
627,437
Other investments, at fair value
1,008,887
996,751
Equity method investments
146,083
148,288
Short-term investments, at fair value
70,416
70,310
Total investments
14,778,095
14,353,284
Cash and cash equivalents
816,917
751,415
Restricted cash and cash equivalents
362,378
423,238
Accrued interest receivable
97,983
94,418
Insurance and reinsurance premium balances
receivable
3,119,158
2,733,464
Reinsurance recoverable on unpaid losses
and loss expenses
5,823,417
5,831,172
Reinsurance recoverable on paid losses and
loss expenses
593,013
539,676
Deferred acquisition costs
560,173
473,569
Prepaid reinsurance premiums
1,632,513
1,550,370
Receivable for investments sold
7,079
16,052
Goodwill
100,801
100,801
Intangible assets
195,071
197,800
Operating lease right-of-use assets
88,155
92,214
Other assets
390,224
438,338
Total assets
$
28,564,977
$
27,595,811
Liabilities
Reserve for losses and loss expenses
$
15,314,644
$
15,168,863
Unearned premiums
4,821,775
4,361,447
Insurance and reinsurance balances
payable
1,574,608
1,522,764
Debt
1,312,658
1,312,314
Federal Home Loan Bank advances
85,790
81,388
Payable for investments purchased
78,711
19,693
Operating lease liabilities
99,130
102,577
Other liabilities
317,432
386,855
Total liabilities
23,604,748
22,955,901
Shareholders' equity
Preferred shares
550,000
550,000
Common shares
2,206
2,206
Additional paid-in capital
2,347,637
2,366,253
Accumulated other comprehensive income
(loss)
(571,896)
(760,300)
Retained earnings
6,381,201
6,247,022
Treasury shares, at cost
(3,748,919)
(3,765,271)
Total shareholders' equity
4,960,229
4,639,910
Total liabilities and shareholders'
equity
$
28,564,977
$
27,595,811
AXIS CAPITAL HOLDINGS
LIMITED
CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31, 2023 AND 2022
Three months ended March
31,
2023
2022
(in thousands, except per
share amounts)
Revenues
Net premiums earned
$
1,230,199
$
1,258,246
Net investment income
133,771
91,355
Net investment losses
(20,190)
(94,508)
Other insurance related income
577
6,693
Total revenues
1,344,357
1,261,786
Expenses
Net losses and loss expenses
720,642
732,699
Acquisition costs
230,373
248,352
General and administrative expenses
166,811
169,041
Foreign exchange losses (gains)
8,710
(44,273)
Interest expense and financing costs
16,894
15,564
Amortization of intangible assets
2,729
2,729
Total expenses
1,146,159
1,124,112
Income before income taxes and interest
in income (loss) of equity method investments
198,198
137,674
Income tax expense
(15,896)
(24)
Interest in income (loss) of equity method
investments
(2,205)
11,550
Net income
180,097
149,200
Preferred share dividends
7,563
7,563
Net income available to common
shareholders
$
172,534
$
141,637
Per share data
Earnings per common share:
Earnings per common share
$
2.03
$
1.67
Earnings per diluted common share
$
2.01
$
1.65
Weighted average common shares
outstanding
84,864
84,961
Weighted average diluted common shares
outstanding
85,853
85,808
Cash dividends declared per common
share
$
0.44
$
0.43
AXIS CAPITAL HOLDINGS
LIMITED
CONSOLIDATED SEGMENTAL DATA
(UNAUDITED)
FOR THE THREE MONTHS ENDED
MARCH 31, 2023 AND 2022
2023
2022
Insurance
Reinsurance
Total
Insurance
Reinsurance
Total
(in thousands)
Gross premiums written
$
1,415,612
$
966,364
$
2,381,976
$
1,327,264
$
1,307,344
$
2,634,608
Net premiums written
882,576
725,780
1,608,356
843,912
968,960
1,812,872
Net premiums earned
816,456
413,743
1,230,199
752,816
505,430
1,258,246
Other insurance related income
54
523
577
82
6,611
6,693
Net losses and loss expenses
(449,467)
(271,175)
(720,642)
(405,745)
(326,954)
(732,699)
Acquisition costs
(147,058)
(83,315)
(230,373)
(138,812)
(109,540)
(248,352)
Underwriting-related general and
administrative expenses(9)
(116,630)
(23,765)
(140,395)
(113,950)
(31,146)
(145,096)
Underwriting income(10)
$
103,355
$
36,011
139,366
$
94,391
$
44,401
138,792
Net investment income
133,771
91,355
Net investment losses
(20,190)
(94,508)
Corporate expenses(9)
(26,416)
(23,945)
Foreign exchange (losses) gains
(8,710)
44,273
Interest expense and financing costs
(16,894)
(15,564)
Amortization of intangible assets
(2,729)
(2,729)
Income before income taxes and interest
in income (loss) of equity method investments
198,198
137,674
Income tax expense
(15,896)
(24)
Interest in income (loss) of equity method
investments
(2,205)
11,550
Net income
180,097
149,200
Preferred share dividends
7,563
7,563
Net income available to common
shareholders
$
172,534
$
141,637
Net losses and loss expenses ratio
55.1 %
65.5 %
58.6 %
53.9 %
64.7 %
58.2 %
Acquisition cost ratio
18.0 %
20.1 %
18.7 %
18.4 %
21.7 %
19.7 %
General and administrative expense
ratio
14.2 %
5.8 %
13.6 %
15.2 %
6.1 %
13.5 %
Combined ratio
87.3 %
91.4 %
90.9 %
87.5 %
92.5 %
91.4 %
9 Underwriting-related general and
administrative expenses is a non-GAAP financial measure as defined
in SEC Regulation G. The reconciliation to general and
administrative expenses, the most comparable GAAP financial
measure, also included corporate expenses of $26 million and $24
million for the three months ended March 31, 2023 and 2022,
respectively. Underwriting-related general and administrative
expenses and corporate expenses are included in the general and
administrative expense ratio.
10 Consolidated underwriting income (loss)
is a non-GAAP financial measure as defined in SEC Regulation G. The
reconciliation to net income (loss), the most comparable GAAP
financial measure, is presented in the table above.
AXIS CAPITAL HOLDINGS
LIMITED
NON-GAAP FINANCIAL MEASURES
RECONCILIATION (UNAUDITED)
OPERATING INCOME AND OPERATING
RETURN ON AVERAGE COMMON EQUITY
FOR THE THREE MONTHS ENDED
MARCH 31, 2023 AND 2022
Three months ended March
31,
2023
2022
(in thousands, except per
share amounts)
Net income available to common
shareholders
$
172,534
$
141,637
Net investment (gains) losses (11)
20,190
94,508
Foreign exchange losses (gains)(12)
8,710
(44,273)
Interest in (income) loss of equity method
investments(13)
2,205
(11,550)
Income tax benefit
(3,585)
(497)
Operating income
$
200,054
$
179,825
Earnings per diluted common share
$
2.01
$
1.65
Net investment (gains) losses
0.24
1.10
Foreign exchange losses (gains)
0.10
(0.52)
Interest in (income) loss of equity method
investments
0.03
(0.13)
Income tax benefit
(0.05)
(0.01)
Operating income per diluted common
share
$
2.33
$
2.09
Weighted average diluted common shares
outstanding
85,853
85,808
Average common shareholders' equity
$
4,250,070
$
4,715,599
Annualized return on average common
equity
16.2%
12.0%
Annualized operating return on average
common equity(14)
18.8%
15.3%
11 Tax expense (benefit) of ($1,528) and
($13,313) for the three months ended March 31, 2023 and 2022,
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.
12 Tax expense (benefit) of ($2,057) and
$12,816 for the three months ended March 31, 2023 and 2022,
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.
13 Tax expense (benefit) of $nil for the
three months ended March 31, 2023 and 2022, respectively. Tax
impact is estimated by applying the statutory rates of applicable
jurisdictions.
14 Annualized operating return on average
common equity ("operating ROACE") is a non-GAAP financial measure
as defined in SEC Regulation G. The reconciliation to annualized
ROACE, the most comparable GAAP financial measure, is presented in
the table above, and a discussion of the rationale for its
presentation is provided later in this press release.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of section 27A of the Securities Act of 1933 and
section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts included in this press
release, including statements regarding our estimates, beliefs,
expectations, intentions, strategies or projections are
forward-looking statements. We intend these forward-looking
statements to be covered by the safe harbor provisions for
forward-looking statements in the United States federal securities
laws. In some cases, these statements can be identified by the use
of forward-looking words such as "may", "should", "could",
"anticipate", "estimate", "expect", "plan", "believe", "predict",
"potential", "intend" or similar expressions. These forward-looking
statements are not historical facts, and are based on current
expectations, estimates and projections, and various assumptions,
many of which, by their nature, are inherently uncertain and beyond
management's control.
Forward-looking statements contained in this press release may
include, but are not limited to, information regarding our
estimates for catastrophes and other weather-related losses
including losses related to the COVID-19 pandemic, measurements of
potential losses in the fair market value of our investment
portfolio and derivative contracts, our expectations regarding the
performance of our business, our financial results, our liquidity
and capital resources, the outcome of our strategic initiatives
including our exit from catastrophe and property reinsurance lines
of business, our expectations regarding pricing and other market
and economic conditions including the liquidity of financial
markets, inflation, our growth prospects, and valuations of the
potential impact of movements in interest rates, credit spreads,
equity securities' prices, and foreign currency exchange rates.
Forward-looking statements only reflect our expectations and are
not guarantees of performance. These statements involve risks,
uncertainties, and assumptions. Accordingly, there are or will be
important factors that could cause actual events or results to
differ materially from those indicated in such statements. We
believe that these factors include, but are not limited to, the
following:
Insurance Risk
- the cyclical nature of the insurance and reinsurance business
leading to periods with excess underwriting capacity and
unfavorable premium rates;
- the occurrence and magnitude of natural and man-made disasters,
including the potential increase of our exposure to natural
catastrophe losses due to climate change and the potential for
inherently unpredictable losses from man-made catastrophes, such as
cyber-attacks;
- the effects of emerging claims, systemic risks, and coverage
and regulatory issues, including increasing litigation and
uncertainty related to coverage definitions, limits, terms and
conditions;
- actual claims exceeding reserves for losses and loss
expenses;
- the adverse impact of inflation;
- the failure of any of the loss limitation methods we
employ;
- the failure of our cedants to adequately evaluate risks;
Strategic Risk
- losses from war including losses related to the Russian
invasion of Ukraine, terrorism and political unrest, or other
unanticipated losses;
- changes in the political environment of certain countries in
which we operate or underwrite business, including the United
Kingdom's withdrawal from the European Union;
- the loss of business provided to us by major brokers;
- a decline in our ratings with rating agencies;
- the loss of one or more of our key executives;
- difficulties with technology and/or data security;
- increasing scrutiny and evolving expectations from investors,
customers, regulators, policymakers and other stakeholders
regarding environmental, social and governance matters;
COVID-19
- the adverse impact of the ongoing COVID-19 pandemic on our
business, results of operations, financial condition, and
liquidity;
Credit and Market Risk
- the inability to purchase reinsurance or collect amounts due to
us from reinsurance we have purchased;
- the failure of our policyholders or intermediaries to pay
premiums;
- general economic, capital and credit market conditions,
including banking sector instability, financial market illiquidity
and fluctuations in interest rates, credit spreads, equity
securities' prices, and/or foreign currency exchange rates;
- breaches by third parties in our program business of their
obligations to us;
Liquidity Risk
- the inability to access sufficient cash to meet our obligations
when they are due;
Operational Risk
- changes in accounting policies or practices;
- the use of industry models and changes to these models;
- difficulties with technology and/or data security;
Regulatory Risk
- changes in governmental regulations and potential government
intervention in our industry;
- inadvertent failure to comply with certain laws and regulations
relating to sanctions, foreign corrupt practices, data protection
and privacy; and
Risks Related to Taxation
Readers should carefully consider the risks noted above together
with other factors including but not limited to those described
under Item 1A, 'Risk Factors' in our most recent Annual Report on
Form 10-K filed with the Securities and Exchange Commission
("SEC"), as those factors may be updated from time to time in our
periodic and other filings with the SEC, which are accessible on
the SEC's website at www.sec.gov.
We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events, or otherwise.
Rationale for the Use of Non-GAAP Financial
Measures
We present our results of operations in a way we believe will be
meaningful and useful to investors, analysts, rating agencies and
others who use our financial information to evaluate our
performance. Some of the measurements we use are considered
non-GAAP financial measures under SEC rules and regulations. In
this press release, we present underwriting-related general and
administrative expenses, consolidated underwriting income (loss),
operating income (loss) (in total and on a per share basis),
annualized operating return on average common equity ("operating
ROACE"), amounts presented on a constant currency basis and pre-tax
total return on cash and investments excluding foreign exchange
movements which are non-GAAP financial measures as defined in SEC
Regulation G. We believe that these non-GAAP financial measures,
which may be defined and calculated differently by other companies,
help explain and enhance the understanding of our results of
operations. However, these measures should not be viewed as a
substitute for those determined in accordance with accounting
principles generally accepted in the United States of America
("U.S. GAAP").
Underwriting-Related General and
Administrative Expenses
Underwriting-related general and administrative expenses include
those general and administrative expenses that are incremental
and/or directly attributable to our underwriting operations. While
this measure is presented in the 'Segment Information' note to our
Consolidated Financial Statements, it is considered a non-GAAP
financial measure when presented elsewhere on a consolidated
basis.
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
underwriting operations, these costs are excluded from
underwriting-related general and administrative expenses, and
therefore, consolidated underwriting income (loss). General and
administrative expenses, the most comparable GAAP financial measure
to underwriting-related general and administrative expenses, also
includes corporate expenses.
The reconciliation of underwriting-related general and
administrative expenses to general and administrative expenses, the
most comparable GAAP financial measure, is presented in the
'Consolidated Segmental Data' section of this press release.
Consolidated Underwriting Income
(Loss)
Consolidated underwriting income (loss) is a pre-tax measure of
underwriting profitability that takes into account net premiums
earned and other insurance related income (loss) as revenues and
net losses and loss expenses, acquisition costs and
underwriting-related general and administrative expenses as
expenses. While this measure is presented in the 'Segment
Information' note to our Consolidated Financial Statements, it is
considered a non-GAAP financial measure when presented elsewhere on
a consolidated basis.
We evaluate our underwriting results separately from the
performance of our investment portfolio. As a result, we believe it
is appropriate to exclude net investment income and net investment
gains (losses) from our underwriting profitability measure.
Foreign exchange losses (gains) in our consolidated statements
of operations primarily relate to the impact of foreign exchange
rate movements on our net insurance-related liabilities. However,
we manage our investment portfolio in such a way that unrealized
and realized foreign exchange losses (gains) on our investment
portfolio, including unrealized foreign exchange losses (gains) on
our equity securities, and foreign exchange losses (gains) realized
on the sale of our available for sale investments and equity
securities recognized in net investment gains (losses), and
unrealized foreign exchange losses (gains) on our available for
sale investments recognized in other comprehensive income (loss),
generally offset a large portion of the foreign exchange losses
(gains) arising from our underwriting portfolio, thereby minimizing
the impact of foreign exchange rate movements on total
shareholders' equity. As a result, we believe that foreign exchange
losses (gains) in our consolidated statements of operations in
isolation are not a meaningful contributor to our underwriting
performance. Therefore, foreign exchange losses (gains) are
excluded from consolidated underwriting income (loss).
Interest expense and financing costs primarily relate to
interest payable on our debt. As these expenses are not incremental
and/or directly attributable to our underwriting operations, these
expenses are excluded from underwriting-related general and
administrative expenses and, therefore, consolidated underwriting
income (loss).
Amortization of intangible assets arose from business decisions,
the nature and timing of which are not related to the underwriting
process. Therefore, these expenses are excluded from consolidated
underwriting income (loss).
We believe that the presentation of underwriting-related general
and administrative expenses and consolidated underwriting income
(loss) provides investors with an enhanced understanding of our
results of operations by highlighting the underlying pre-tax
profitability of our underwriting activities. The reconciliation of
consolidated underwriting income (loss) to net income (loss), the
most comparable GAAP financial measure, is presented in the
'Consolidated Segmental Data' section of this press release.
Operating Income (Loss)
Operating income (loss) represents after-tax operational results
exclusive of net investment gains (losses), foreign exchange losses
(gains) and interest in income (loss) of equity method
investments.
Although the investment of premiums to generate income and
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 primarily relate to the impact of foreign exchange
rate movements on net insurance-related liabilities. However, we
manage our investment portfolio in such a way that unrealized and
realized foreign exchange losses (gains) on our investment
portfolio, including unrealized foreign exchange losses (gains) on
our equity securities and foreign exchange losses (gains) realized
on the sale of our available for sale investments and equity
securities recognized in net investment gains (losses) and
unrealized foreign exchange losses (gains) on our available for
sale investments recognized in other comprehensive income (loss),
generally offset a large portion of the foreign exchange losses
(gains) arising from our underwriting portfolio, thereby minimizing
the impact of foreign exchange rate movements on total
shareholders' equity. As a result, we believe that foreign exchange
losses (gains) in our consolidated statements of operations in
isolation are not a meaningful contributor to the performance of
our business. Therefore, foreign exchange losses (gains) are
excluded from operating income (loss).
Interest in income (loss) of equity method investments is
primarily driven by business decisions, the nature and timing of
which are not related to the underwriting process. Therefore, this
income (loss) is excluded from operating income (loss).
Certain users of our financial statements evaluate performance
exclusive of after-tax net investment gains (losses), foreign
exchange losses (gains) and interest in income (loss) of equity
method investments in order to understand the profitability of
recurring sources of income.
We believe that showing net income (loss) available
(attributable) to common shareholders exclusive of after-tax net
investment gains (losses), foreign exchange losses (gains) and
interest in income (loss) of equity method investments 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. The
reconciliation of operating income (loss) to net income (loss)
available (attributable) to common shareholders, the most
comparable GAAP financial measure, is presented in the 'Non-GAAP
Financial Measures Reconciliation' section of this press
release.
We also present operating income (loss) per diluted common share
and annualized operating ROACE, which are derived from the
operating income (loss) measure and are reconciled to the most
comparable GAAP financial measures, earnings (loss) per diluted
common share and annualized return on average common equity
("ROACE"), respectively, in the 'Non-GAAP Financial Measures
Reconciliation' section of this press release.
Constant Currency Basis
We present gross premiums written and net premiums written on a
constant currency basis in this press release. The 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 believe this presentation enables investors
and other users of our financial information to analyze growth in
gross premiums written and net premiums written on a constant
basis. The reconciliation to gross premiums written and net
premiums written on a GAAP basis is presented in the 'Insurance
Segment' and 'Reinsurance Segment' sections of this press
release.
Pre-Tax Total Return on Cash and
Investments excluding Foreign Exchange Movements
Pre-tax total return on cash and investments excluding foreign
exchange movements measures net investment income (loss), net
investments gains (losses), interest in income (loss) of equity
method investments, and change in unrealized gains (losses)
generated by average cash and investment balances. We believe this
presentation enables investors and other users of our financial
information to analyze the performance of our investment portfolio.
The reconciliation of pre-tax total return on cash and investments
excluding foreign exchange movements to pre-tax total return on
cash and investments, the most comparable GAAP financial measure,
is presented in the 'Investments' section of this press
release.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005946/en/
Miranda Hunter (Investor Contact): (441) 205-2635;
investorrelations@axiscapital.com
Joe Cohen (Media Contact): (212) 715-3524;
joseph.cohen@axiscapital.com
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