AXIS Capital Reports Third Quarter Net Income of $28 Million, or $0.33 Per Diluted Common Share

For the third quarter of 2019, the Company reports:

  • Ex-PGAAP operating loss of $28 million, or $(0.34) per diluted common share
  • Estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $160 million, or 14.1 points, compared to $92 million or 7.5 points, in the prior year
  • Book value per diluted common share of $56.26, an increase of $0.27, or 0.5% compared to June 30, 2019

PEMBROKE, Bermuda--()--AXIS Capital Holdings Limited ("AXIS Capital" or "the Company") (NYSE: AXS) today reported net income available to common shareholders for the third quarter of 2019 of $28 million, or $0.33 per diluted common share, compared to net income of $43 million, or $0.52 per diluted common share, for the third quarter of 2018. Net income available to common shareholders for the nine months ended September 30, 2019 was $292 million, or $3.46 per diluted common share, compared to net income of $199 million, or $2.37 per diluted common share, for the same period in 2018.

Operating loss1 for the third quarter of 2019 was $33 million, or $(0.39) per diluted common share1, compared to operating income of $79 million, or $0.94 per diluted common share, for the third quarter of 2018. For the nine months ended September 30, 2019, AXIS Capital reported operating income of $209 million, or $2.48 per diluted common share, compared to operating income of $305 million, or $3.62 per diluted common share, for the same period in 2018.

Ex-PGAAP operating loss2 for the third quarter of 2019 was $28 million, or $(0.34) per diluted common share2, compared to ex-PGAAP operating income of $88 million, or $1.04 per diluted common share, for the third quarter of 2018. For the nine months ended September 30, 2019, AXIS Capital reported ex-PGAAP operating income of $227 million, or $2.69 per diluted common share, compared to ex-PGAAP operating income of $343 million, or $4.08 per diluted common share, for the same period in 2018.

Commenting on the third quarter 2019 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:

“This was a disappointing quarter, where our performance was marred by catastrophes that impacted our industry, coupled with mid-size losses in our credit and aviation lines.

“These losses obscure positive underlying trends that reflect our progress in building an organization that will consistently deliver strong results. Specifically, even with higher mid-size loss experience, within our Insurance segment, the current year ex-cat loss ratio is down more than a point this quarter versus the prior year. In our Reinsurance segment, while the ex-cat loss ratio is higher this quarter, this same ratio is down over a point year-to-date, reflecting the continued execution of our strategy to improve risk adjusted returns.

“We remain focused on continuing our progress and are confident that these positive underlying trends can be sustained. AXIS has leading positions in the markets that are experiencing the most significant pricing improvements which, combined with our underwriting actions and investments in digital capabilities, put us on a strong pathway toward long-term profitable growth.”

1Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations of non-GAAP financial measures 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.

2Ex-PGAAP operating income (loss), ex-PGAAP operating income (loss) per diluted common share and annualized ex-PGAAP operating return on average common equity ("ex-PGAAP operating ROACE") 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, earnings (loss) per diluted common share, and annualized return on average common equity ("ROACE"), respectively, and a discussion of the rationale for the presentation of these items are provided later in this press release. Annualized ex-PGAAP operating ROACE for the three months ended September 30, 2019, was calculated using weighted average common shares outstanding due to the ex-PGAAP operating loss recognized in the period.

Third Quarter Highlights3

  • Gross premiums written decreased by $17 million, or 1% ($8 million or 1% on a constant currency basis4), to $1.4 billion with a decrease of $74 million or 8% in the insurance segment, partially offset by an increase of $57 million, or 13% in the reinsurance segment.
  • Net premiums written decreased by $64 million, or 7% ($56 million or 6% on a constant currency basis), to $856 million with a decrease of $85 million or 14% in the insurance segment, partially offset by an increase of $21 million, or 7% in the reinsurance segment.

KEY RATIOS

Q3 2019

 

Q3 2018

 

Change

Current accident year loss ratio excluding catastrophe and weather-related losses

61.7

%

 

61.2

%

 

0.5

pts

Catastrophe and weather-related losses ratio

14.1

%

 

7.5

%

 

6.6

pts

Current accident year loss ratio

75.8

%

 

68.7

%

 

7.1

pts

Prior year reserve development ratio

(2.3

%)

 

(3.8

%)

 

1.5

pts

Net losses and loss expenses ratio

73.5

%

 

64.9

%

 

8.6

pts

Acquisition cost ratio

22.5

%

 

20.3

%

 

2.2

pts

General and administrative expense ratio

13.4

%

 

12.7

%

 

0.7

pts

Combined ratio

109.4

%

 

97.9

%

 

11.5

pts

  • Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums were $160 million, primarily attributable to Hurricane Dorian, the Japanese typhoons, and other weather-related events this quarter, compared to $92 million in 2018.
  • Net favorable prior year reserve development was $27 million (Insurance $15 million; Reinsurance $12 million), compared to $46 million (Insurance $13 million; Reinsurance $32 million) in 2018.
  • Underwriting income (loss) for the third quarter of 2019 and 2018 included the recognition of premiums attributable to the balance sheet of Novae Group plc ("Novae") at October 2, 2017 (the "closing date" or the "acquisition date"), without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $2 million and $29 million of acquisition expenses related to premiums earned in the third quarter of 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.1 points and 2.4 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 0.1 points in the quarter compared to the same period in 2018 due to changes in business mix.
  • Amortization of value of business acquired ("VOBA") of $4 million and $39 million, was recognized in the third quarter of 2019 and 2018, respectively. This expense impacted operating income but was not included in the results of the insurance and reinsurance segments.
  • Adjusted for dividends, book value per diluted common share increased by $0.67, or 1% in the quarter.

3 All comparisons are with the same period of the prior year, unless otherwise stated.

4Amounts 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 are provided in this release, as is a discussion of the rationale for the presentation of these items.

Segment Highlights

Insurance Segment

 

Three Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

894,902

 

 

$

969,364

 

 

(7.7)%

Net premiums written

517,050

 

 

602,070

 

 

(14.1)%

Net premiums earned

536,451

 

 

614,795

 

 

(12.7)%

Underwriting loss

(17,892

)

 

(11,711

)

 

52.8%

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

58.2

%

 

59.7

%

 

(1.5

pts)

Catastrophe and weather-related losses ratio

7.7

%

 

10.1

%

 

(2.4

pts)

Current accident year loss ratio

65.9

%

 

69.8

%

 

(3.9

pts)

Prior year reserve development ratio

(2.7

%)

 

(2.2

%)

 

(0.5

pts)

Net losses and loss expenses ratio

63.2

%

 

67.6

%

 

(4.4

pts)

Acquisition cost ratio

21.5

%

 

18.2

%

 

3.3

pts

Underwriting-related general and administrative expense ratio

18.8

%

 

16.4

%

 

2.4

pts

Combined ratio

103.5

%

 

102.2

%

 

1.3

pts

  • Gross premiums written decreased by $74 million, or 8% ($63 million or 7% on a constant currency basis), primarily attributable to property lines due to the repositioning of the portfolio, partially offset by an increase in liability lines driven by new business and favorable rate changes.
  • Net premiums written decreased by $85 million, or 14% ($75 million or 12% 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 decreased by 1.5 points in the third quarter compared to the same period in 2018, due to the repositioning of the portfolio and better pricing achieved at recent renewals, partially offset by changes in business mix and an increase in mid-size loss experience in credit and political risk lines.
  • Pre-tax catastrophe and weather-related losses, net of reinsurance were $41 million, primarily attributable to Hurricane Dorian and other weather-related events this quarter, compared to $62 million in 2018.
  • Net favorable prior year reserve development was $15 million this quarter, compared to $13 million in the third quarter of 2018.
  • Underwriting income (loss) for the third quarter of 2019 and 2018 included the recognition of premiums attributable to Novae's balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $2 million and $29 million of acquisition expenses related to premiums earned in the third quarter of 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.3 points and 4.7 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 1.1 points in the quarter compared to the same period in 2018 due to changes in business mix.
  • The underwriting-related general and administrative expense ratio increased by 2.4 points in the quarter attributable to the decrease in net premiums earned due to the repositioning of the portfolio while the underwriting-related general and administrative expenses in the quarter were comparable to the same period in 2018.

 

Nine Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

2,714,322

 

 

$

2,876,856

 

 

(5.6)%

Net premiums written

1,638,197

 

 

1,748,142

 

 

(6.3)%

Net premiums earned

1,630,473

 

 

1,772,126

 

 

(8.0)%

Underwriting income

14,336

 

 

114,210

 

 

nm

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

57.7

%

 

57.3

%

 

0.4

pts

Catastrophe and weather-related losses ratio

3.9

%

 

6.3

%

 

(2.4

pts)

Current accident year loss ratio

61.6

%

 

63.6

%

 

(2.0

pts)

Prior year reserve development ratio

(2.6

%)

 

(3.5

%)

 

0.9

pts

Net losses and loss expenses ratio

59.0

%

 

60.1

%

 

(1.1

pts)

Acquisition cost ratio

21.2

%

 

16.4

%

 

4.8

pts

Underwriting-related general and administrative expense ratio

19.0

%

 

17.2

%

 

1.8

pts

Combined ratio

99.2

%

 

93.7

%

 

5.5

pts

nm - not meaningful
  • Gross premiums written decreased by $163 million, or 6% ($125 million or 4% on a constant currency basis), primarily attributable to property, and accident and health lines due to the repositioning of the portfolio, partially offset by increases in liability, professional lines and marine lines driven by new business and favorable rate changes.
  • Net premiums written decreased by $110 million, or 6% ($78 million or 4% on a constant currency basis), reflecting the decrease in gross premiums written.
  • Underwriting income for the nine months ended September 30, 2019 and 2018 included the recognition of premiums attributable to Novae's balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $11 million and $105 million of acquisition expenses related to premiums earned in the nine months ended September 30, 2019 and 2018, respectively, benefited the acquisition cost ratio by 0.6 points and 5.9 points, respectively. Adjusting the acquisition cost ratio for these amounts, the acquisition cost ratio decreased by 0.5 points for the nine months ended September 30, 2019 compared to the same period in 2018.

Reinsurance Segment

 

Three Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

511,604

 

 

$

454,343

 

 

12.6%

Net premiums written

339,031

 

 

317,868

 

 

6.7%

Net premiums earned

620,856

 

 

609,280

 

 

1.9%

Underwriting income (loss)

(60,826

)

 

70,737

 

 

nm

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

64.8

%

 

62.6

%

 

2.2

pts

Catastrophe and weather-related losses ratio

19.6

%

 

5.0

%

 

14.6

pts

Current accident year loss ratio

84.4

%

 

67.6

%

 

16.8

pts

Prior year reserve development ratio

(1.9

%)

 

(5.3

%)

 

3.4

pts

Net losses and loss expenses ratio

82.5

%

 

62.3

%

 

20.2

pts

Acquisition cost ratio

23.3

%

 

22.4

%

 

0.9

pts

Underwriting-related general and administrative expense ratio

4.1

%

 

4.8

%

 

(0.7

pts)

Combined ratio

109.9

%

 

89.5

%

 

20.4

pts

nm - not meaningful

  • Gross premiums written increased by $57 million, or 13% ($55 million or 12% on a constant currency basis), primarily attributable to catastrophe, liability, and accident and health lines driven by timing differences. In addition, the increase in catastrophe lines was due to new business. These increases were partially offset by a decrease in property lines associated with the repositioning of the portfolio.
  • Net premiums written increased by $21 million, or 7% ($19 million or 6% on a constant currency basis), reflecting the increase in gross premiums written in the quarter, partially offset by an increase in premiums ceded in catastrophe lines.
  • The current accident year loss ratio excluding catastrophe and weather-related losses increased by 2.2 points in the third quarter compared to the same period in 2018, primarily due to an increase in mid-size loss experience in aviation, and credit and surety lines, partially offset by a decrease in mid-size loss experience in property and engineering lines.
  • Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums were $119 million, primarily attributable to Japanese typhoons, Hurricane Dorian and other weather-related events this quarter, compared to $30 million in 2018.
  • Net favorable prior year reserve development was $12 million this quarter which included net favorable prior year reserve development in motor lines attributable to non-proportional treaty business related to recent accident years, partially offset by net adverse prior year reserve development in property lines attributable to the late notification of claims related to recent accident years, compared to $32 million in the third quarter of 2018.
  • The acquisition cost ratio increased by 0.9 points in the quarter, due to adjustments related to loss sensitive features and the impact of retrocessional contracts, partially offset by changes in business mix.
  • The underwriting-related general and administrative expense ratio decreased by 0.7 points in the quarter, largely attributable to benefits related to arrangements with strategic capital partners.

 

Nine Months Ended September 30,

($ in thousands)

2019

 

2018

 

Change

Gross premiums written

$

2,923,169

 

 

$

2,860,471

 

 

2.2%

Net premiums written

2,065,263

 

 

2,158,122

 

 

(4.3)%

Net premiums earned

1,784,653

 

 

1,804,900

 

 

(1.1)%

Underwriting income

63,425

 

 

204,280

 

 

(69.0)%

 

 

 

 

 

 

Underwriting ratios:

 

 

 

 

 

Current accident year loss ratio excluding catastrophe and weather-related losses

62.3

%

 

63.5

%

 

(1.2

pts)

Catastrophe and weather-related losses ratio

7.6

%

 

2.8

%

 

4.8

pts

Current accident year loss ratio

69.9

%

 

66.3

%

 

3.6

pts

Prior period reserve development ratio

(1.2

%)

 

(5.5

%)

 

4.3

pts

Net losses and loss expenses ratio

68.7

%

 

60.8

%

 

7.9

pts

Acquisition cost ratio

23.4

%

 

23.2

%

 

0.2

pts

Underwriting-related general and administrative expense ratio

4.9

%

 

5.5

%

 

(0.6

pts)

Combined ratio

97.0

%

 

89.5

%

 

7.5

pts

  • Gross premiums written increased by $63 million or 2% ($110 million or 4% on a constant currency basis), primarily attributable to catastrophe, liability, and accident and health lines driven by new business. The increase in new business in catastrophe lines was due to improved pricing and growth in Japan at the April 1 renewals. Increased line sizes on a number of treaties and the restructuring of several treaties which impacted the timing of premium recognition also contributed to the increase in catastrophe lines. These increases were partially offset by decreases in motor, credit and surety lines, and property lines associated with the repositioning of the portfolio.
  • Net premiums written decreased by $93 million, or 4% ($46 million or 2% on a constant currency basis), reflecting an increase in premiums ceded in catastrophe and liability lines, together with the increase in gross premiums written in the period.

Investments

Net investment income of $116 million for the quarter represents an increase of $1 million compared to the third quarter of 2018. Net realized and unrealized gains recognized in net income for the quarter were $15 million, compared to net realized and unrealized losses of $18 million in the third quarter of 2018.

Pre-tax total return on cash and investments5 was 1.0% including foreign exchange movements (1.2% excluding foreign exchange movements6), primarily due to net investment income generated in the quarter. The prior year pre-tax total return was 0.6% including foreign exchange movements (0.7% excluding foreign exchange movements). Our fixed income portfolio book yield was 2.9% at September 30, 2019 and 2018. The market yield was 2.5% at September 30, 2019.

Capitalization / Shareholders’ Equity

Total capital7 at September 30, 2019 was $7.0 billion, including $1.4 billion of senior notes and $775 million of preferred equity, compared to $6.4 billion at December 31, 2018. The increase in total capital is attributable to net income generated in the nine months ended September 30, 2019, and net unrealized investment gains reported in other comprehensive income following an increase in the market value of our fixed income portfolio, partially offset by common share dividends declared.

Book value per diluted common share, calculated on a treasury stock basis, increased by $0.27 in the current quarter, and by $3.56 over the past twelve months, to $56.26. The increase in the quarter and over the past twelve months was driven by net income generated and net unrealized investment gains reported in other comprehensive income, partially offset by common share dividends declared. During the third quarter of 2019, the Company declared dividends of $0.40 per common share, with total dividends declared of $1.60 per common share over the past twelve months. Adjusted for dividends declared, the book value per diluted common share increased by $0.67, or 1%, for the quarter and increased by $5.16 or 10%, over the past twelve months.

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 $(31)m and $(10)m for the three months ended September 30, 2019 and 2018, respectively, and foreign exchange (losses) of $(28)m for nine months ended September 30, 2019 and 2018.

7 Total capital represents the sum of total shareholders' equity and senior notes.

Conference Call

We will host a conference call on Wednesday, October 30, 2019 at 10:00 a.m. (Eastern) to discuss the third quarter financial results and related matters. The teleconference can be accessed by dialing (888) 317-6003 (U.S. callers) or (412) 317-6061 (international callers) approximately ten minutes in advance of the call and entering the passcode 2704846. 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 (877) 344-7529 (U.S. callers) or (412) 317-0088 (international callers) and entering the passcode 10135461. The webcast will be archived in the Investor Information section of our website.

In addition, an investor financial supplement relating to our financial results for the quarter ended September 30, 2019 is available in the Investor Information section of our website.

About AXIS Capital

AXIS Capital, through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with shareholders' equity at September 30, 2019 of $5.6 billion and locations in Bermuda, the United States, Europe, Singapore, Canada and the Middle East. Its operating subsidiaries have been assigned a rating of "A+" ("Strong") by Standard & Poor's and "A+" ("Superior") by A.M. Best. For more information about AXIS Capital, visit our website at www.axiscapital.com.

Website and Social Media Disclosure

We use our website (www.axiscapital.com) and our corporate Twitter (@AXIS_Capital) and LinkedIn (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 when 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, however, part of this press release.

Please be sure to follow AXIS Capital on LinkedIn.

LinkedIn: http://bit.ly/2kRYbZ5

 

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

(in thousands)

Assets

 

 

 

Investments:

 

Fixed maturities, available for sale, at fair value

$

12,616,241

 

 

$

11,435,347

 

Equity securities, at fair value

429,903

 

 

381,633

 

Mortgage loans, held for investment, at fair value

407,790

 

 

298,650

 

Other investments, at fair value

779,200

 

 

787,787

 

Equity method investments

113,748

 

 

108,103

 

Short-term investments, at fair value

12,539

 

 

144,040

 

Total investments

14,359,421

 

 

13,155,560

 

Cash and cash equivalents

763,825

 

 

1,232,814

 

Restricted cash and cash equivalents

444,726

 

 

597,206

 

Accrued interest receivable

81,371

 

 

80,335

 

Insurance and reinsurance premium balances receivable

3,322,316

 

 

3,007,296

 

Reinsurance recoverable on unpaid losses and loss expenses

3,705,793

 

 

3,501,669

 

Reinsurance recoverable on paid losses and loss expenses

252,087

 

 

280,233

 

Deferred acquisition costs

586,440

 

 

566,622

 

Prepaid reinsurance premiums

1,243,040

 

 

1,013,573

 

Receivable for investments sold

9,711

 

 

32,627

 

Goodwill

102,003

 

 

102,003

 

Intangible assets

233,305

 

 

241,568

 

Value of business acquired

11,048

 

 

35,714

 

Operating lease right-of-use assets

116,560

 

 

 

Other assets

263,880

 

 

285,346

 

Total assets

$

25,495,526

 

 

$

24,132,566

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Reserve for losses and loss expenses

$

12,498,507

 

 

$

12,280,769

 

Unearned premiums

4,153,003

 

 

3,635,758

 

Insurance and reinsurance balances payable

1,276,123

 

 

1,338,991

 

Senior notes

1,388,135

 

 

1,341,961

 

Payable for investments purchased

89,805

 

 

111,838

 

Operating lease liabilities

115,887

 

 

 

Other liabilities

388,196

 

 

393,178

 

Total liabilities

19,909,656

 

 

19,102,495

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

Preferred shares

775,000

 

 

775,000

 

Common shares

2,206

 

 

2,206

 

Additional paid-in capital

2,309,483

 

 

2,308,583

 

Accumulated other comprehensive income (loss)

176,296

 

 

(177,110

)

Retained earnings

6,101,902

 

 

5,912,812

 

Treasury shares, at cost

(3,779,017

)

 

(3,791,420

)

Total shareholders' equity

5,585,870

 

 

5,030,071

 

Total liabilities and shareholders' equity

$

25,495,526

 

 

$

24,132,566

 

 

 

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

Revenues

 

 

 

 

 

 

 

Net premiums earned

$

1,157,307

 

 

$

1,224,075

 

 

$

3,415,126

 

 

$

3,577,026

 

Net investment income

115,763

 

 

114,421

 

 

361,014

 

 

325,380

 

Net investment gains (losses)

14,527

 

 

(17,628

)

 

48,522

 

 

(77,551

)

Other insurance related income

1,533

 

 

8,475

 

 

11,385

 

 

18,811

 

Total revenues

1,289,130

 

 

1,329,343

 

 

3,836,047

 

 

3,843,666

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Net losses and loss expenses

850,913

 

 

794,959

 

 

2,187,403

 

 

2,162,945

 

Acquisition costs

260,026

 

 

248,314

 

 

762,807

 

 

709,527

 

General and administrative expenses

155,522

 

 

154,894

 

 

496,008

 

 

489,944

 

Foreign exchange losses (gains)

(59,543

)

 

8,305

 

 

(64,868

)

 

2,066

 

Interest expense and financing costs

18,042

 

 

16,897

 

 

49,545

 

 

50,758

 

Transaction and reorganization expenses

11,215

 

 

16,300

 

 

29,310

 

 

48,125

 

Amortization of value of business acquired

4,368

 

 

39,018

 

 

24,666

 

 

149,535

 

Amortization of intangible assets

2,831

 

 

1,753

 

 

8,744

 

 

8,564

 

Total expenses

1,243,374

 

 

1,280,440

 

 

3,493,615

 

 

3,621,464

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes and interest in income of equity method investments

45,756

 

 

48,903

 

 

342,432

 

 

222,202

 

Income tax (expense) benefit

(8,147

)

 

3,525

 

 

(23,850

)

 

3,565

 

Interest in income of equity method investments

792

 

 

1,667

 

 

5,645

 

 

5,045

 

Net income

38,401

 

 

54,095

 

 

324,227

 

 

230,812

 

Preferred share dividends

10,656

 

 

10,656

 

 

31,969

 

 

31,969

 

Net income available to common shareholders

$

27,745

 

 

$

43,439

 

 

$

292,258

 

 

$

198,843

 

 

 

 

 

 

 

 

 

 

 

Per share data

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

Earnings per common share

$

0.33

 

 

$

0.52

 

 

$

3.48

 

 

$

2.38

 

Earnings per diluted common share

$

0.33

 

 

$

0.52

 

 

$

3.46

 

 

$

2.37

 

Weighted average common shares outstanding

83,947

 

 

83,558

 

 

83,872

 

 

83,474

 

Weighted average diluted common shares outstanding

84,582

 

 

84,107

 

 

84,420

 

 

83,939

 

Cash dividends declared per common share

$

0.40

 

 

$

0.39

 

 

$

1.20

 

 

$

1.17

 

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED SEGMENTAL DATA (UNAUDITED)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

Insurance

 

Reinsurance

 

Total

 

Insurance

 

Reinsurance

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Gross premiums written

$

894,902

 

 

$

511,604

 

 

$

1,406,506

 

 

$

969,364

 

 

$

454,343

 

 

$

1,423,707

 

Net premiums written

517,050

 

 

339,031

 

 

856,081

 

 

602,070

 

 

317,868

 

 

919,938

 

Net premiums earned

536,451

 

 

620,856

 

 

1,157,307

 

 

614,795

 

 

609,280

 

 

1,224,075

 

Other insurance related income

733

 

 

800

 

 

1,533

 

 

1,526

 

 

6,949

 

 

8,475

 

Net losses and loss expenses

(338,966

)

 

(511,947

)

 

(850,913

)

 

(415,488

)

 

(379,471

)

 

(794,959

)

Acquisition costs

(115,551

)

 

(144,475

)

 

(260,026

)

 

(111,888

)

 

(136,426

)

 

(248,314

)

Underwriting-related general and

 

 

 

 

 

 

 

 

 

 

 

administrative expenses(8)

(100,559

)

 

(26,060

)

 

(126,619

)

 

(100,656

)

 

(29,595

)

 

(130,251

)

Underwriting income (loss) (9)

$

(17,892

)

 

$

(60,826

)

 

(78,718

)

 

$

(11,711

)

 

$

70,737

 

 

59,026

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

115,763

 

 

 

 

 

 

114,421

 

Net investment gains (losses)

 

 

 

 

14,527

 

 

 

 

 

 

(17,628

)

Corporate expenses(8)

 

 

 

 

(28,903

)

 

 

 

 

 

(24,643

)

Foreign exchange (losses) gains

 

 

 

 

59,543

 

 

 

 

 

 

(8,305

)

Interest expense and financing costs

 

 

 

 

(18,042

)

 

 

 

 

 

(16,897

)

Transaction and reorganization expenses

 

 

 

 

(11,215

)

 

 

 

 

 

(16,300

)

Amortization of value of business acquired

 

 

 

 

(4,368

)

 

 

 

 

 

(39,018

)

Amortization of intangible assets

 

 

 

 

(2,831

)

 

 

 

 

 

(1,753

)

Income before income taxes and interest in income of equity method investments

 

 

 

 

$

45,756

 

 

 

 

 

 

$

48,903

 

 

 

 

 

 

 

 

 

 

 

 

 

Net losses and loss expenses ratio

63.2

%

 

82.5

%

 

73.5

%

 

67.6

%

 

62.3

%

 

64.9

%

Acquisition cost ratio

21.5

%

 

23.3

%

 

22.5

%

 

18.2

%

 

22.4

%

 

20.3

%

General and administrative

 

 

 

 

 

 

 

 

 

 

 

expense ratio

18.8

%

 

4.1

%

 

13.4

%

 

16.4

%

 

4.8

%

 

12.7

%

Combined ratio

103.5

%

 

109.9

%

 

109.4

%

 

102.2

%

 

89.5

%

 

97.9

%

8Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to total general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $29 million and $25 million for the three months ended September 30, 2019 and 2018, respectively. Underwriting-related general and administrative expenses and corporate expenses are included in the general and administrative expense ratio.

9Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to income (loss) before income taxes and interest in income (loss) of equity method investments, the most comparable GAAP financial measure, is presented above.

AXIS CAPITAL HOLDINGS LIMITED

CONSOLIDATED SEGMENTAL DATA (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

2019

 

2018

 

Insurance

 

Reinsurance

 

Total

 

Insurance

 

Reinsurance

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

Gross premiums written

$

2,714,322

 

 

$

2,923,169

 

 

$

5,637,491

 

 

$

2,876,856

 

 

$

2,860,471

 

 

$

5,737,327

 

Net premiums written

1,638,197

 

 

2,065,263

 

 

3,703,460

 

 

1,748,142

 

 

2,158,122

 

 

3,906,264

 

Net premiums earned

1,630,473

 

 

1,784,653

 

 

3,415,126

 

 

1,772,126

 

 

1,804,900

 

 

3,577,026

 

Other insurance related income

1,779

 

 

9,606

 

 

11,385

 

 

3,359

 

 

15,452

 

 

18,811

 

Net losses and loss expenses

(961,444

)

 

(1,225,959

)

 

(2,187,403

)

 

(1,065,799

)

 

(1,097,146

)

 

(2,162,945

)

Acquisition costs

(344,981

)

 

(417,826

)

 

(762,807

)

 

(290,082

)

 

(419,445

)

 

(709,527

)

Underwriting-related general and

 

 

 

 

 

 

 

 

 

 

 

administrative expenses(10)

(311,491

)

 

(87,049

)

 

(398,540

)

 

(305,394

)

 

(99,481

)

 

(404,875

)

Underwriting income(11)

$

14,336

 

 

$

63,425

 

 

77,761

 

 

$

114,210

 

 

$

204,280

 

 

318,490

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

 

 

361,014

 

 

 

 

 

 

325,380

 

Net investment gains (losses)

 

 

 

 

48,522

 

 

 

 

 

 

(77,551

)

Corporate expenses(10)

 

 

 

 

(97,468

)

 

 

 

 

 

(85,069

)

Foreign exchange (losses) gains

 

 

 

 

64,868

 

 

 

 

 

 

(2,066

)

Interest expense and financing costs

 

 

 

 

(49,545

)

 

 

 

 

 

(50,758

)

Transaction and reorganization expenses

 

 

 

 

(29,310

)

 

 

 

 

 

(48,125

)

Amortization of value of business acquired

 

 

 

 

(24,666

)

 

 

 

 

 

(149,535

)

Amortization of intangible assets

 

 

 

 

(8,744

)

 

 

 

 

 

(8,564

)

Income before income taxes and interest in income of equity method investments

 

 

 

 

$

342,432

 

 

 

 

 

 

$

222,202

 

 

 

 

 

 

 

 

 

 

 

 

 

Net losses and loss expenses ratio

59.0

%

 

68.7

%

 

64.1

%

 

60.1

%

 

60.8

%

 

60.5

%

Acquisition cost ratio

21.2

%

 

23.4

%

 

22.3

%

 

16.4

%

 

23.2

%

 

19.8

%

General and administrative

 

 

 

 

 

 

 

 

 

 

 

expense ratio

19.0

%

 

4.9

%

 

14.5

%

 

17.2

%

 

5.5

%

 

13.7

%

Combined ratio

99.2

%

 

97.0

%

 

100.9

%

 

93.7

%

 

89.5

%

 

94.0

%

10Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to total general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $97 million and $85 million for the nine months ended September 30, 2019 and 2018, respectively. Underwriting-related general and administrative expenses and corporate expenses are included in the general and administrative expense ratio.

11Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to income (loss) before income taxes and interest in income (loss) of equity method investments, the most comparable GAAP financial measure, is presented above.

AXIS CAPITAL HOLDINGS LIMITED

NON-GAAP FINANCIAL MEASURES RECONCILIATION (UNAUDITED)

OPERATING INCOME AND OPERATING RETURN ON AVERAGE COMMON EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

27,745

 

 

$

43,439

 

 

$

292,258

 

 

$

198,843

 

Net investment (gains) losses(12)

(14,527

)

 

17,628

 

 

(48,522

)

 

77,551

 

Foreign exchange losses (gains)(13)

(59,543

)

 

8,305

 

 

(64,868

)

 

2,066

 

Transaction and reorganization expenses(14)

11,215

 

 

16,300

 

 

29,310

 

 

48,125

 

Interest in (income) of equity method investments (15)

(792

)

 

(1,667

)

 

(5,645

)

 

(5,045

)

Income tax expense (benefit)

3,361

 

 

(4,882

)

 

6,524

 

 

(16,539

)

Operating income (loss)

$

(32,541

)

 

$

79,123

 

 

$

209,057

 

 

$

305,001

 

 

 

 

 

 

 

 

 

Earnings per diluted common share

$

0.33

 

 

$

0.52

 

 

$

3.46

 

 

$

2.37

 

Net investment (gains) losses

(0.17

)

 

0.21

 

 

(0.57

)

 

0.92

 

Foreign exchange losses (gains)

(0.71

)

 

0.10

 

 

(0.77

)

 

0.02

 

Transaction and reorganization expenses

0.13

 

 

0.19

 

 

0.35

 

 

0.57

 

Interest in (income) of equity method investments

(0.01

)

 

(0.02

)

 

(0.07

)

 

(0.06

)

Income tax expense (benefit)

0.04

 

 

(0.06

)

 

0.08

 

 

(0.20

)

Operating income (loss) per diluted common share

$

(0.39

)

 

$

0.94

 

 

$

2.48

 

 

$

3.62

 

 

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

83,947

 

 

84,107

 

 

84,420

 

 

83,939

 

 

 

 

 

 

 

 

 

Average common shareholders' equity

4,801,174

 

 

4,487,639

 

 

4,532,971

 

 

4,531,768

 

 

 

 

 

 

 

 

 

Annualized return on average common equity

2.3

%

 

3.9

%

 

8.6

%

 

5.9

%

 

 

 

 

 

 

 

 

Annualized operating return on average common equity(16)

(2.7

)%

 

7.1

%

 

6.1

%

 

9.0

%

12Tax cost (benefit) of $897 and ($623) for the three months ended September 30, 2019 and 2018, respectively and $6,667 and $(4,011) for the nine months ended September 30, 2019 and 2018, 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.

13Tax cost (benefit) of $4,784 and ($1,870) for the three months ended September 30, 2019 and 2018, respectively and $5,372 and $(5,424) for the nine months ended September 30, 2019 and 2018, 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.

14Tax cost (benefit) of $(2,320) and $(2,389) for the three months ended September 30, 2019 and 2018, respectively and ($5,515) and ($7,416) for the nine months ended September 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

15Tax cost (benefit) of $nil for the three months ended September 30, 2019 and 2018, and $nil and $312 for the nine months ended September 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

16Annualized 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 release. Annualized operating ROACE for the three months ended September 30, 2019, was calculated using weighted average common shares outstanding due to the operating loss recognized in the period.

AXIS CAPITAL HOLDINGS LIMITED

NON-GAAP FINANCIAL MEASURES RECONCILIATION (UNAUDITED)

EX-PGAAP OPERATING INCOME AND EX-PGAAP OPERATING RETURN ON AVERAGE COMMON EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

 

 

 

 

 

 

 

 

Net income available to common shareholders

$

27,745

 

 

$

43,439

 

 

$

292,258

 

 

$

198,843

 

Net investment (gains) losses(12)

(14,527

)

 

17,628

 

 

(48,522

)

 

77,551

 

Foreign exchange losses (gains)(13)

(59,543

)

 

8,305

 

 

(64,868

)

 

2,066

 

Transaction and reorganization expenses(14)

11,215

 

 

16,300

 

 

29,310

 

 

48,125

 

Interest in (income) of equity method investments (15)

(792

)

 

(1,667

)

 

(5,645

)

 

(5,045

)

Income tax expense (benefit)

3,361

 

 

(4,882

)

 

6,524

 

 

(16,539

)

Operating income (loss)

$

(32,541

)

 

$

79,123

 

 

$

209,057

 

 

$

305,001

 

Amortization of VOBA and intangible assets(17)

6,891

 

 

40,664

 

 

32,985

 

 

156,882

 

Amortization of acquisition costs(18)

(1,568

)

 

(29,344

)

 

(10,689

)

 

(109,434

)

Income tax expense (benefit)

(1,011

)

 

(2,151

)

 

(4,236

)

 

(9,015

)

Ex-PGAAP operating income (loss)(2)

$

(28,229

)

 

$

88,292

 

 

$

227,117

 

 

$

343,434

 

 

 

 

 

 

 

 

 

Earnings per diluted common share

$

0.33

 

 

$

0.52

 

 

$

3.46

 

 

$

2.37

 

Net investment (gains) losses

(0.17

)

 

0.21

 

 

(0.57

)

 

0.92

 

Foreign exchange losses (gains)

(0.71

)

 

0.10

 

 

(0.77

)

 

0.02

 

Transaction and reorganization expenses

0.13

 

 

0.19

 

 

0.35

 

 

0.57

 

Interest in (income) of equity method investments

(0.01

)

 

(0.02

)

 

(0.07

)

 

(0.06

)

Income tax expense (benefit)

0.04

 

 

(0.06

)

 

0.08

 

 

(0.20

)

Operating income (loss) per diluted common share

$

(0.39

)

 

$

0.94

 

 

$

2.48

 

 

$

3.62

 

Amortization of VOBA and intangible assets

0.08

 

 

0.48

 

 

0.39

 

 

1.87

 

Amortization of acquisition costs

(0.02

)

 

(0.35

)

 

(0.13

)

 

(1.30

)

Income tax expense (benefit)

(0.01

)

 

(0.03

)

 

(0.05

)

 

(0.11

)

Ex-PGAAP operating income (loss) per diluted common share(2)

$

(0.34

)

 

$

1.04

 

 

$

2.69

 

 

$

4.08

 

 

 

 

 

 

 

 

 

Weighted average diluted common shares outstanding

83,947

 

 

84,107

 

 

84,420

 

 

83,939

 

 

 

 

 

 

 

 

 

Average common shareholders' equity

4,801,174

 

 

4,487,639

 

 

4,532,971

 

 

4,531,768

 

 

 

 

 

 

 

 

 

Annualized return on average common equity

2.3

%

 

3.9

%

 

8.6

%

 

5.9

%

 

 

 

 

 

 

 

 

Annualized operating return on average common equity(16)

(2.7

)%

 

7.1

%

 

6.1

%

 

9.0

%

 

 

 

 

 

 

 

 

Annualized ex-PGAAP operating return on average common equity(2)

(2.4

)%

 

7.9

%

 

6.7

%

 

10.1

%

17Tax cost (benefit) of $(1,309) and $(7,726) for the three months ended September 30, 2019 and 2018, respectively, and $(6,267) and $(29,808) for the nine months ended September 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

18Tax cost (benefit) of $298 and $5,575 for the three months ended September 30, 2019 and 2018, respectively, and $2,031 and $20,792 for the nine months ended September 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

For the nine months ended September 30, 2019, underwriting income included the recognition of premiums attributable to Novae's balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date. The absence of $11 million and $109 million of acquisition expenses related to premiums earned in the nine months ended September 30, 2019 and 2018, respectively, benefited our acquisition cost ratio by 0.3 points and 3.1 points, respectively.

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 upon 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 of losses related to catastrophes and other large losses, 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, our expectations regarding estimated synergies and the success of the integration of acquired entities, our expectations regarding the estimated benefits and synergies related to our transformation program, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, equity securities' prices, credit spreads and foreign currency 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:

  • 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;
  • the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;
  • losses from war, terrorism and political unrest or other unanticipated losses;
  • actual claims exceeding our loss reserves;
  • general economic, capital and credit market conditions;
  • the failure of any of the loss limitation methods we employ;
  • the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions;
  • our inability to purchase reinsurance or collect amounts due to us;
  • the breach by third parties in our program business of their obligations to us;
  • difficulties with technology and/or data security;
  • the failure of our policyholders and intermediaries to pay premiums;
  • the failure of our cedants to adequately evaluate risks;
  • inability to obtain additional capital on favorable terms, or at all;
  • the loss of one or more key executives;
  • a decline in our ratings with rating agencies;
  • the loss of business provided to us by our major brokers and credit risk due to our reliance on brokers;
  • changes in accounting policies or practices;
  • the use of industry catastrophe models and changes to these models;
  • changes in governmental regulations and potential government intervention in our industry;
  • failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;
  • increased competition;
  • changes in the political environment of certain countries in which we operate or underwrite business including the United Kingdom's expected withdrawal from the European Union;
  • fluctuations in interest rates, credit spreads, equity securities' prices and/or currency values;
  • the failure to successfully integrate acquired businesses or to realize the expected synergies resulting from such acquisitions;
  • the failure to realize the expected benefits or synergies relating to our transformation initiative;
  • changes in tax laws; and
  • other factors including but not limited to those described under Item 1A, 'Risk Factors' and Item 7, 'Management's Discussion and Analysis of Financial Condition and Results of Operations' 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.

Non-GAAP Financial Measures

We present our results of operations in the way we believe will be most meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. 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 ROACE, amounts presented on a constant currency basis, pre-tax total return on cash and investments excluding foreign exchange movements, ex-PGAAP operating income (loss) (in total and on a per share basis) and annualized ex-PGAAP operating ROACE 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, better 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 individual 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 individual 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 (losses) 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 such, 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 statement 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 generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio. As a result, we believe that foreign exchange losses (gains) are not a meaningful contributor to our underwriting performance, therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).

Interest expense and financing costs primarily relate to interest payable on our senior notes. As these expenses are not incremental and/or directly attributable to our individual underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).

Transaction and reorganization expenses are primarily driven by 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).

Amortization of intangible assets including VOBA 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 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 income (loss) before income taxes and interest in income (loss) of equity method investments, 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), transaction and reorganization expenses, 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. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized upon the sale of our available for sale investments and equity securities in net investment gains (losses). However, these movements are only one element of the overall impact of foreign exchange rate fluctuations on our financial position. We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss) available (attributable) to common shareholders, thereby minimizing the impact of foreign exchange rate movements on total shareholders’ equity. As a result, the foreign exchange losses (gains) in our consolidated statement of operations in isolation are not a fair representation of the performance of our business.

Transaction and reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses 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), transaction and reorganization expenses, and interest in income (loss) of equity method investments 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), transaction and reorganization expenses, 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 ROACE, respectively, in the 'Non-GAAP Financial Measures Reconciliation' 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 Movement

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 investment gains (losses) generated by average cash and investment balances. 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 in this release. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio.

Ex-PGAAP Operating Income (Loss)

Ex-PGAAP operating income (loss) represents operating income (loss) exclusive of amortization of VOBA and intangible assets, net of tax and amortization of acquisition costs, net of tax associated with Novae's balance sheet at October 2, 2017 (the "closing date" or "acquisition date"). The reconciliation of ex-PGAAP 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' of this press release.

We also present ex-PGAAP operating income (loss) per diluted common share and annualized ex-PGAAP operating ROACE, which are derived from the ex-PGAAP operating income (loss) measure and are reconciled to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized ROACE, respectively, in the 'Non-GAAP Financial Measures Reconciliation' of this press release.

We believe the presentation of ex-PGAAP operating income (loss), ex-PGAAP operating income (loss) per diluted common share and annualized ex-PGAAP operating ROACE enables investors and other users of our financial information to better analyze the performance of our business.

Acquisition of Novae

On October 2, 2017, AXIS Capital acquired Novae. At the acquisition date, we identified VOBA which represents the present value of the expected underwriting profit within policies that were in-force at the closing date of the transaction. In addition, the allocation of the acquisition price to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, resulted in the write-off of the deferred acquisition cost asset on Novae's balance sheet at the acquisition date as the value of policies in-force on that date are considered within VOBA. Consequently, underwriting income (loss) in the three and nine months ended September 30, 2019 and 2018 included the recognition of premiums attributable to Novae's balance sheet at the acquisition date without the recognition of the associated acquisition costs.

Contacts

Matt Rohrmann (Investor Contact): (212) 940-3339; investorrelations@axiscapital.com
Anna Kukowski (Media Contact): (212) 715-3574; anna.kukowski@axiscapital.com

Contacts

Matt Rohrmann (Investor Contact): (212) 940-3339; investorrelations@axiscapital.com
Anna Kukowski (Media Contact): (212) 715-3574; anna.kukowski@axiscapital.com