Bermuda’s AXIS Capital Holdings Limited reported net income for the quarter ended March 31, 2005 of $151.8 million, or $0.95 per diluted share, compared with $166.8 million, or $1.00 per diluted share, for the quarter ended March 31, 2004.
Operating net income, which excludes net realized gains/losses on investments, net of tax, for the first quarter of 2005 was $152.7 million, or $0.95 per diluted share, compared with $157.6 million, or $0.94 per diluted share, for the quarter ended March 31, 2004. AXIS noted that this same item “excluding foreign exchange losses, net of tax, for the first quarter of 2005 was $175.7 million, or $1.10 per diluted share, compared with $158.8 million, or $0.95 per diluted share, for the quarter ended March 31, 2004.”
AXIS listed the following “Operating Highlights” for the period:
— Gross premiums written increased by 14.8 percent to $1.2 billion and net premiums written increased by 18.1percent to $1.1 billion;
— Combined ratio of 78.3 percent, which includes good current accident year results, catastrophe losses from windstorm Erwin in Northern Europe, representing 4.9 percentage points, and favorable reserve development of 10.7 percentage points;
— Total pre-tax investment income, including net realized losses, increased by 24.2 percent to $51.4 million due to higher investment yields and strong cash flow from operations;
— Cash flows from operations were $445.3 million for the quarter, up 21.8 percent from the first quarter of 2004;
— Annualized return on average shareholders’ equity of 19.6 percent achieved during the quarter;
— Significant capital management activity in the form of a $350 million repurchase of common shares from certain initial investors, representing 9.4 percent of our year-end total capital; and
— Total shareholders’ equity of $3.0 billion and total capitalization of $3.5 billion as of March 31, 2005.
Commenting on the first quarter 2005 results, CEO and President John Charman stated: “We continue to purposefully build a strong global specialty insurance and reinsurance business while at the same time creating healthy shareholder returns. We expect that the numerous fundamental issues facing the market will not deflect us from reaching that goal. Profitability, diversity of products and location, efficiency of operations, expertise — these are the foundations of AXIS.”
In a discussion of the ongoing investigations of the insurance industry, in which the company has been implicated, AXIS acknowledged that its “U.S. holding company has received subpoenas from the Office of the Attorney General of the State of New York seeking information regarding incentive commission agreements, fictitious and inflated quotes and related matters and conditioning direct insurance on the placement of reinsurance. In addition, our U.S. insurance companies have received subpoenas and requests for information from various state insurance regulators regarding these same matters.
“These inquiries are part of industry-wide investigations in these jurisdictions and we understand that officials from other jurisdictions in which we do business have also initiated investigations into similar matters. Accordingly, we may in the future receive additional subpoenas and requests for information. We are cooperating fully with the Attorney General of the State of New York and the other state regulators in their investigations and intend to cooperate fully with any future investigations.”
AXIS stressed that the company has “conducted an internal investigation, led by outside counsel, to determine whether we have engaged in any of the improper business practices that are the focus of the inquiries. Our internal investigation is nearing completion and has uncovered no evidence indicating that we engaged in bid rigging, fictitious or inflated quotes or related matters or conditioning direct insurance on the placement of reinsurance.”
It did acknowledged that “consistent with long-standing and wide-spread industry practice, we have in the past entered into incentive commission arrangements with brokers; however, we have not entered into any of these arrangements with respect to 2005. We are aware that two purported shareholders class action lawsuits have been filed against us and some of our executive officers relating to the practices being investigated by the Attorney General of the State of New York and other state regulators. On April 13, 2005, these lawsuits were consolidated into one lawsuit. As we have previously stated, we believe that the lawsuit is completely without merit and intend to vigorously defend against it.”
AXIS will host a conference call today, Tuesday May 3, 2005, at 8:30 AM (Eastern) to discuss the first quarter financial results and related matters. This presentation will be available through an audio webcast accessible through the Investor Information section of our website at www.axiscapital.com.
The full financial report and supplementary materials may also be obtained on the company’s Website.
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