Get Cash Back and $0 Commissions
+ The Power of TradeStation
Business Wire 30-Jul-2019 4:15 PM
For the second quarter of 2019, the Company reports:
AXIS Capital Holdings Limited ("AXIS Capital" or "the Company") (NYSE:AXS) today reported net income available to common shareholders for the second quarter of 2019 of $166 million, or $1.97 per diluted common share, compared to net income of $93 million, or $1.11 per diluted common share, for the second quarter of 2018. Net income available to common shareholders for the six months ended June 30, 2019 was $265 million, or $3.14 per diluted common share, compared to net income of $155 million, or $1.85 per diluted common share, for the same period in 2018.
Operating income1 for the second quarter of 2019 was $137 million, or $1.62 per diluted common share1, compared to operating income of $103 million, or $1.23 per diluted common share, for the second quarter of 2018. For the six months ended June 30, 2019, AXIS Capital reported operating income of $242 million, or $2.86 per diluted common share, compared to operating income of $226 million, or $2.69 per diluted common share, for the same period in 2018.
EX-PGAAP operating income2 for the second quarter of 2019 was $143 million, or $1.69 per diluted common share2, compared to ex-PGAAP operating income of $117 million, or $1.39 per diluted common share, for the second quarter of 2018. For the six months ended June 30, 2019, AXIS Capital reported ex-PGAAP operating income of $255 million, or $3.03 per diluted common share, compared to ex-PGAAP operating income of $253 million, or $3.02 per diluted common share, for the same period in 2018.
Commenting on the second quarter 2019 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:
"We are pleased to report strong second quarter results, which were highlighted by continuing improvement in our core underwriting margins, operating ROE of 12.3% ex PGAAP, and 6.0% growth in book value per share.
"Our results speak to the progress made as we continue executing on our strategy to strengthen our market position and improve our underwriting profitability, which includes disciplined corrective actions on under-performing business, and reducing portfolio volatility. Furthermore, the actions we have taken to enhance our franchise in our chosen markets give us excellent opportunities for profitable growth. With our strong presence at Lloyd's, U.S. E&S markets, professional lines and global reinsurance, we believe AXIS is in a superior position to take advantage of the necessary firming in re/insurance markets.
"In addition, we are continuing to invest in technology and data & analytics - all to enhance our ability to deliver differentiated service and value to our clients and partners in distribution.
"While there is more work that needs to be done, we're on the right path and are seeing tangible results as we continue to advance on our strategy and focus on driving long-term profitable growth and increased shareholder value."
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. |
Second Quarter Highlights3
KEY RATIOS |
Q2 2019 |
|
Q2 2018 |
|
Change |
|
Current accident year loss ratio excluding catastrophe and weather-related losses |
59.7% |
|
61.5% |
|
(1.8 |
pts) |
Catastrophe and weather-related losses ratio |
2.3% |
|
3.2% |
|
(0.9 |
pts) |
Current accident year loss ratio |
62.0% |
|
64.7% |
|
(2.7 |
pts) |
Prior year reserve development ratio |
(2.2%) |
|
(5.1%) |
|
2.9 |
pts |
Net losses and loss expenses ratio |
59.8% |
|
59.6% |
|
0.2 |
pts |
Acquisition cost ratio |
21.6% |
|
19.6% |
|
2.0 |
pts |
General and administrative expense ratio |
14.7% |
|
13.9% |
|
0.8 |
pts |
Combined ratio |
96.1% |
|
93.1% |
|
3.0 |
pts |
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 June 30, |
|||||||||
($ in thousands) |
2019 |
|
2018 |
|
Change |
|||||
Gross premiums written |
$ |
968,325 |
|
|
$ |
1,026,644 |
|
|
(5.7)% |
|
Net premiums written |
591,909 |
|
|
598,179 |
|
|
(1.0)% |
|||
Net premiums earned |
537,260 |
|
|
577,271 |
|
|
(6.9)% |
|||
Underwriting income |
11,309 |
|
|
56,479 |
|
|
(80.0)% |
|||
|
|
|
|
|
|
|||||
Underwriting ratios: |
|
|
|
|
|
|||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
58.7 |
% |
|
57.2 |
% |
|
1.5 |
pts |
||
Catastrophe and weather-related losses ratio |
2.7 |
% |
|
4.0 |
% |
|
(1.3 |
pts) |
||
Current accident year loss ratio |
61.4 |
% |
|
61.2 |
% |
|
0.2 |
pts |
||
Prior year reserve development ratio |
(3.9%) |
|
(4.2%) |
|
0.3 |
pts |
||||
Net losses and loss expenses ratio |
57.5 |
% |
|
57.0 |
% |
|
0.5 |
pts |
||
Acquisition cost ratio |
20.8 |
% |
|
15.7 |
% |
|
5.1 |
pts |
||
Underwriting-related general and administrative expense ratio |
19.5 |
% |
|
17.7 |
% |
|
1.8 |
pts |
||
Combined ratio |
97.8 |
% |
|
90.4 |
% |
|
7.4 |
pts |
|
Six Months Ended June 30, |
|||||||||||
($ in thousands) |
2019 |
|
2018 |
|
Change |
|||||||
Gross premiums written |
$ |
|
1,819,421 |
|
|
$ |
|
1,907,492 |
|
|
(4.6 |
)% |
Net premiums written |
|
1,121,149 |
|
|
|
1,146,071 |
|
|
(2.2 |
)% |
||
Net premiums earned |
|
1,094,022 |
|
|
|
1,157,330 |
|
|
(5.5 |
)% |
||
Underwriting income |
|
32,227 |
|
|
|
125,920 |
|
|
(74 |
)% |
||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
|
57.4 |
% |
|
|
55.8 |
% |
|
1.6 |
|
||
Catastrophe and weather-related losses ratio |
|
2.1 |
% |
|
|
4.5 |
% |
|
(2.4 |
) |
||
Current accident year loss ratio |
|
59.5 |
% |
|
|
60.3 |
% |
|
(0.8 |
) |
||
Prior year reserve development ratio |
|
(2.6%) |
|
|
(4.1%) |
|
1.5 |
|
||||
Net losses and loss expenses ratio |
|
56.9 |
% |
|
|
56.2 |
% |
|
0.7 |
|
||
Acquisition cost ratio |
|
21.0 |
% |
|
|
15.4 |
% |
|
5.6 |
|
||
Underwriting-related general and administrative expense ratio |
|
19.2 |
% |
|
|
17.7 |
% |
|
1.5 |
|
||
Combined ratio |
|
97.1 |
% |
|
|
89.3 |
% |
|
7.8 |
|
Reinsurance Segment
|
Three Months Ended June 30, |
||||||||||||||
($ in thousands) |
2019 |
|
2018 |
|
Change |
||||||||||
Gross premiums written |
$ |
|
679,435 |
|
|
$ |
|
624,181 |
|
|
8.9 |
% |
|||
Net premiums written |
|
478,412 |
|
|
|
402,276 |
|
|
18.9 |
% |
|||||
Net premiums earned |
|
586,347 |
|
|
|
608,277 |
|
|
(3.6 |
)% |
|||||
Underwriting income |
|
67,350 |
|
|
|
59,247 |
|
|
13.7 |
% |
|||||
|
|
|
|
|
|
||||||||||
Underwriting ratios: |
|
|
|
|
|
||||||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
|
60.5 |
% |
|
|
65.5 |
% |
|
(5.0 |
pts) |
|||||
Catastrophe and weather-related losses ratio |
|
1.9 |
% |
|
|
2.5 |
% |
|
(0.6 |
pts) |
|||||
Current accident year loss ratio |
|
62.4 |
% |
|
|
68.0 |
% |
|
(5.6 |
pts) |
|||||
Prior year reserve development ratio |
(0.4%) |
|
(5.9%) |
|
5.5 |
pts |
|||||||||
Net losses and loss expenses ratio |
|
62.0 |
% |
|
|
62.1 |
% |
|
(0.1 |
pts) |
|||||
Acquisition cost ratio |
|
22.3 |
% |
|
|
23.2 |
% |
|
(0.9 |
pts) |
|||||
Underwriting-related general and administrative expense ratio |
|
4.8 |
% |
|
|
5.4 |
% |
|
(0.6 |
pts) |
|||||
Combined ratio |
|
89.1 |
% |
|
|
90.7 |
% |
|
(1.6 |
pts) |
|
Six Months Ended June 30, |
|||||||||||
($ in thousands) |
2019 |
|
2018 |
|
Change |
|||||||
Gross premiums written |
$ |
|
2,411,565 |
|
|
$ |
|
2,406,128 |
|
|
0.2 |
% |
Net premiums written |
|
1,726,232 |
|
|
|
1,840,255 |
|
|
(6.2 |
)% |
||
Net premiums earned |
|
1,163,797 |
|
|
|
1,195,620 |
|
|
(2.7 |
)% |
||
Underwriting income |
|
124,252 |
|
|
|
133,543 |
|
|
(7 |
)% |
||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
|
61.0 |
% |
|
|
63.8 |
% |
|
(2.8 |
) |
||
Catastrophe and weather-related losses ratio |
|
1.2 |
% |
|
|
1.9 |
% |
|
(0.7 |
) |
||
Current accident year loss ratio |
|
62.2 |
% |
|
|
65.7 |
% |
|
(3.5 |
) |
||
Prior period reserve development |
|
(0.8%) |
|
|
(5.7%) |
|
4.9 |
|
||||
Net losses and loss expenses ratio |
|
61.4 |
% |
|
|
60.0 |
% |
|
1.4 |
|
||
Acquisition cost ratio |
|
23.5 |
% |
|
|
23.7 |
% |
|
(0.2 |
) |
||
Underwriting-related general and administrative expense ratio |
|
5.2 |
% |
|
|
5.8 |
% |
|
(0.6 |
) |
||
Combined ratio |
|
90.1 |
% |
|
|
89.5 |
% |
|
0.6 |
|
Investments
Net investment income of $138 million for the quarter included a realized gain of $13 million associated with the sale of an alternative investment and represents an increase of $28 million from the second quarter of 2018. Net realized and unrealized gains recognized in net income for the quarter were $21 million, compared to net realized and unrealized losses of $45 million in the second quarter of 2018.
Pre-tax total return on cash and investments5 was 2.0% including foreign exchange movements (2.1% excluding foreign exchange movements6), primarily due to net unrealized gains following an increase in market value of our fixed income portfolio and net investment income generated in the quarter. The prior year period pre-tax total return was 0% including foreign exchange movements (0.3% excluding foreign exchange movements). Our fixed income portfolio book yield at June 30, 2019 was 3.0% compared to 2.8% June 30, 2018. The market yield was 2.7% at June 30, 2019.
Capitalization / Shareholders' Equity
Total capital7 at June 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 six months ended June 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.
On April 1, 2019, we repaid the $250 million aggregate principal amount of 2.65% senior unsecured notes. On June 19, 2019, we issued $300 million aggregate principal amount of 3.90% senior unsecured notes. We intend to use the proceeds from the issuance of these notes to partially repay or redeem our 5.875% senior unsecured notes due on June 1, 2020.
Book value per diluted common share, calculated on a treasury stock basis, increased by $3.15 in the current quarter, and by $3.52 over the past twelve months, to $55.99. 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 second quarter of 2019, the Company declared dividends of $0.40 per common share, with total dividends declared of $1.59 per common share over the past twelve months. Adjusted for dividends declared, the book value per diluted common share increased by $3.55, or 7%, for the quarter and increased by $5.11 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 $(8)m and $(59)m for the three months ended June 30, 2019 and 2018, respectively, and foreign exchange (losses) gains of $2m and $(19)m for six months ended June 30, 2019 and 2018, respectively. |
7 Total capital represents the sum of total shareholders' equity and senior notes. |
Conference Call
We will host a conference call on Wednesday, July 31, 2019 at 10:00 a.m. (Eastern) to discuss the second 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 7666282. 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 10133136. 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 June 30, 2019 is available in the Investor Information section of the 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 June 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 JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 |
||||||||||||
|
|
|
|
|
|
|
||||||
|
|
|
|
2019 |
|
2018 |
||||||
|
|
|
(in thousands) |
|||||||||
Assets |
|
|
|
|||||||||
Investments: |
|
|||||||||||
Fixed maturities, available for sale, at fair value |
$ |
|
12,522,955 |
|
|
$ |
|
11,435,347 |
|
|||
Equity securities, at fair value |
|
433,407 |
|
|
|
381,633 |
|
|||||
Mortgage loans, held for investment, at fair value |
|
394,179 |
|
|
|
298,650 |
|
|||||
Other investments, at fair value |
|
802,064 |
|
|
|
787,787 |
|
|||||
Equity method investments |
|
112,956 |
|
|
|
108,103 |
|
|||||
Short-term investments, at fair value |
|
32,421 |
|
|
|
144,040 |
|
|||||
Total investments |
|
14,297,982 |
|
|
|
13,155,560 |
|
|||||
Cash and cash equivalents |
|
712,463 |
|
|
|
1,232,814 |
|
|||||
Restricted cash and cash equivalents |
|
382,251 |
|
|
|
597,206 |
|
|||||
Accrued interest receivable |
|
82,567 |
|
|
|
80,335 |
|
|||||
Insurance and reinsurance premium balances receivable |
|
3,732,529 |
|
|
|
3,007,296 |
|
|||||
Reinsurance recoverable on unpaid losses and loss expenses |
|
3,564,812 |
|
|
|
3,501,669 |
|
|||||
Reinsurance recoverable on paid losses and loss expenses |
|
364,536 |
|
|
|
280,233 |
|
|||||
Deferred acquisition costs |
|
657,275 |
|
|
|
566,622 |
|
|||||
Prepaid reinsurance premiums |
|
1,291,979 |
|
|
|
1,013,573 |
|
|||||
Receivable for investments sold |
|
25,850 |
|
|
|
32,627 |
|
|||||
Goodwill |
|
102,003 |
|
|
|
102,003 |
|
|||||
Intangible assets |
|
236,009 |
|
|
|
241,568 |
|
|||||
Value of business acquired |
|
15,416 |
|
|
|
35,714 |
|
|||||
Operating lease right-of-use assets |
|
132,940 |
|
|
— |
|
||||||
Other assets |
|
271,562 |
|
|
|
285,346 |
|
|||||
|
Total assets |
|
|
$ |
|
25,870,174 |
|
|
$ |
|
24,132,566 |
|
|
|
|
|
|
|
|
||||||
Liabilities |
|
|
|
|
|
|||||||
Reserve for losses and loss expenses |
$ |
|
12,254,711 |
|
|
$ |
|
12,280,769 |
|
|||
Unearned premiums |
|
4,503,132 |
|
|
|
3,635,758 |
|
|||||
Insurance and reinsurance balances payable |
|
1,484,285 |
|
|
|
1,338,991 |
|
|||||
Senior notes |
|
1,387,748 |
|
|
|
1,341,961 |
|
|||||
Payable for investments purchased |
|
181,274 |
|
|
|
111,838 |
|
|||||
Operating lease liabilities |
|
133,257 |
|
|
— |
|
||||||
Other liabilities |
|
359,290 |
|
|
|
393,178 |
|
|||||
|
Total liabilities |
|
|
|
20,303,697 |
|
|
|
19,102,495 |
|
||
|
|
|
|
|
|
|
||||||
Shareholders' equity |
|
|
|
|
||||||||
Preferred shares |
|
775,000 |
|
|
|
775,000 |
|
|||||
Common shares |
|
2,206 |
|
|
|
2,206 |
|
|||||
Additional paid-in capital |
|
2,303,592 |
|
|
|
2,308,583 |
|
|||||
Accumulated other comprehensive income (loss) |
|
156,145 |
|
|
|
(177,110 |
) |
|||||
Retained earnings |
|
6,108,577 |
|
|
|
5,912,812 |
|
|||||
Treasury shares, at cost |
|
(3,779,043 |
) |
|
|
(3,791,420 |
) |
|||||
|
Total shareholders' equity |
|
5,566,477 |
|
|
|
5,030,071 |
|
||||
Total liabilities and shareholders' equity |
$ |
|
25,870,174 |
|
|
$ |
|
24,132,566 |
|
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018 |
||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three months ended |
|
Six months ended |
||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
|
(in thousands, except per share amounts) |
||||||||||||||
Revenues |
|
|
|
|
|
|
|
|||||||||
Net premiums earned |
$ |
1,123,607 |
|
|
$ |
1,185,548 |
|
|
$ |
2,257,819 |
|
|
$ |
2,352,950 |
|
|
Net investment income |
137,949 |
|
|
109,960 |
|
|
245,254 |
|
|
210,961 |
|
|||||
Net investment gains (losses) |
21,225 |
|
|
(45,093 |
) |
|
33,996 |
|
|
(59,923 |
) |
|||||
Other insurance related income |
2,925 |
|
|
3,730 |
|
|
9,852 |
|
|
10,335 |
|
|||||
Total revenues |
|
1,285,706 |
|
|
1,254,145 |
|
|
2,546,921 |
|
|
2,514,323 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Expenses |
|
|
|
|
|
|
|
|||||||||
Net losses and loss expenses |
672,463 |
|
|
706,641 |
|
|
1,336,491 |
|
|
1,367,986 |
|
|||||
Acquisition costs |
242,363 |
|
|
231,952 |
|
|
502,781 |
|
|
461,212 |
|
|||||
General and administrative expenses |
165,395 |
|
|
165,213 |
|
|
340,486 |
|
|
335,049 |
|
|||||
Foreign exchange gains |
(12,381 |
) |
|
(44,099 |
) |
|
(5,325 |
) |
|
(6,239 |
) |
|||||
Interest expense and financing costs |
15,607 |
|
|
17,098 |
|
|
31,502 |
|
|
33,861 |
|
|||||
Transaction and reorganization expenses |
3,276 |
|
|
18,772 |
|
|
18,096 |
|
|
31,825 |
|
|||||
Amortization of value of business acquired |
7,194 |
|
|
53,407 |
|
|
20,298 |
|
|
110,517 |
|
|||||
Amortization of intangible assets |
2,912 |
|
|
4,029 |
|
|
5,914 |
|
|
6,811 |
|
|||||
Total expenses |
|
1,096,829 |
|
|
1,153,013 |
|
|
2,250,243 |
|
|
2,341,022 |
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Income before income taxes and interest in income of equity method investments |
188,877 |
|
|
101,132 |
|
|
296,678 |
|
|
173,301 |
|
|||||
Income tax (expense) benefit |
(14,469 |
) |
|
(996 |
) |
|
(15,703 |
) |
|
40 |
|
|||||
Interest in income of equity method investments |
2,635 |
|
|
3,378 |
|
|
4,853 |
|
|
3,378 |
|
|||||
Net income |
177,043 |
|
|
103,514 |
|
|
285,828 |
|
|
176,719 |
|
|||||
Preferred share dividends |
10,656 |
|
|
10,656 |
|
|
21,313 |
|
|
21,313 |
|
|||||
Net income available to common shareholders |
$ |
166,387 |
|
|
$ |
92,858 |
|
|
$ |
264,515 |
|
|
$ |
155,406 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Per share data |
|
|
|
|
|
|
|
|||||||||
Earnings per common share: |
|
|
|
|
|
|
|
|||||||||
Earnings per common share |
$ |
1.98 |
|
|
$ |
1.11 |
|
|
$ |
3.16 |
|
|
$ |
1.86 |
|
|
Earnings per diluted common share |
$ |
1.97 |
|
|
$ |
1.11 |
|
|
$ |
3.14 |
|
|
$ |
1.85 |
|
|
Weighted average common shares outstanding |
83,941 |
|
|
83,539 |
|
|
83,834 |
|
|
83,431 |
|
|||||
Weighted average diluted common shares outstanding |
84,401 |
|
|
83,984 |
|
|
84,338 |
|
|
83,853 |
|
|||||
Cash dividends declared per common share |
$ |
0.40 |
|
|
$ |
0.39 |
|
|
$ |
0.80 |
|
|
$ |
0.78 |
|
AXIS CAPITAL HOLDINGS LIMITED CONSOLIDATED SEGMENTAL DATA (UNAUDITED) FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018 |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2019 |
|
2018 |
||||||||||||||||||||
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
||||||||||||
|
(in thousands) |
||||||||||||||||||||||
Gross premiums written |
$ |
968,325 |
|
|
$ |
679,435 |
|
|
$ |
1,647,760 |
|
|
$ |
1,026,644 |
|
|
$ |
624,181 |
|
|
$ |
1,650,825 |
|
Net premiums written |
591,909 |
|
|
478,412 |
|
|
1,070,321 |
|
|
598,179 |
|
|
402,276 |
|
|
1,000,455 |
|
||||||
Net premiums earned |
537,260 |
|
|
586,347 |
|
|
1,123,607 |
|
|
577,271 |
|
|
608,277 |
|
|
1,185,548 |
|
||||||
Other insurance related income (losses) |
(695 |
) |
|
3,620 |
|
|
2,925 |
|
|
1,214 |
|
|
2,516 |
|
|
3,730 |
|
||||||
Net losses and loss expenses |
(308,703 |
) |
|
(363,760 |
) |
|
(672,463 |
) |
|
(328,773 |
) |
|
(377,868 |
) |
|
(706,641 |
) |
||||||
Acquisition costs |
(111,655 |
) |
|
(130,708 |
) |
|
(242,363 |
) |
|
(90,864 |
) |
|
(141,088 |
) |
|
(231,952 |
) |
||||||
Underwriting-related general and |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
administrative expenses(8) |
(104,898 |
) |
|
(28,149 |
) |
|
(133,047 |
) |
|
(102,369 |
) |
|
(32,590 |
) |
|
(134,959 |
) |
||||||
Underwriting income (9) |
$ |
11,309 |
|
|
$ |
67,350 |
|
|
78,659 |
|
|
$ |
56,479 |
|
|
$ |
59,247 |
|
|
115,726 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income |
|
|
|
|
137,949 |
|
|
|
|
|
|
109,960 |
|
||||||||||
Net investment gains (losses) |
|
|
|
|
21,225 |
|
|
|
|
|
|
(45,093 |
) |
||||||||||
Corporate expenses(8) |
|
|
|
|
(32,348 |
) |
|
|
|
|
|
(30,254 |
) |
||||||||||
Foreign exchange gains |
|
|
|
|
12,381 |
|
|
|
|
|
|
44,099 |
|
||||||||||
Interest expense and financing costs |
|
|
|
|
(15,607 |
) |
|
|
|
|
|
(17,098 |
) |
||||||||||
Transaction and reorganization expenses |
|
|
|
|
(3,276 |
) |
|
|
|
|
|
(18,772 |
) |
||||||||||
Amortization of value of business acquired |
|
|
|
|
(7,194 |
) |
|
|
|
|
|
(53,407 |
) |
||||||||||
Amortization of intangible assets |
|
|
|
|
(2,912 |
) |
|
|
|
|
|
(4,029 |
) |
||||||||||
Income before income taxes and interest in income of equity method investments |
|
|
|
|
$ |
188,877 |
|
|
|
|
|
|
$ |
101,132 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses and loss expenses ratio |
57.5 |
% |
|
62.0 |
% |
|
59.8 |
% |
|
57.0 |
% |
|
62.1 |
% |
|
59.6 |
% |
||||||
Acquisition cost ratio |
20.8 |
% |
|
22.3 |
% |
|
21.6 |
% |
|
15.7 |
% |
|
23.2 |
% |
|
19.6 |
% |
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
expense ratio |
19.5 |
% |
|
4.8 |
% |
|
14.7 |
% |
|
17.7 |
% |
|
5.4 |
% |
|
13.9 |
% |
||||||
Combined ratio |
97.8 |
% |
|
89.1 |
% |
|
96.1 |
% |
|
90.4 |
% |
|
90.7 |
% |
|
93.1 |
% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
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 $32 million and $30 million for the three months ended June 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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018 |
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2019 |
|
2018 |
||||||||||||||||||||
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
||||||||||||
|
(in thousands) |
||||||||||||||||||||||
Gross premiums written |
$ |
1,819,421 |
|
|
$ |
2,411,565 |
|
|
$ |
4,230,986 |
|
|
$ |
1,907,492 |
|
|
$ |
2,406,128 |
|
|
$ |
4,313,620 |
|
Net premiums written |
1,121,149 |
|
|
1,726,232 |
|
|
2,847,381 |
|
|
1,146,071 |
|
|
1,840,255 |
|
|
2,986,326 |
|
||||||
Net premiums earned |
1,094,022 |
|
|
1,163,797 |
|
|
2,257,819 |
|
|
1,157,330 |
|
|
1,195,620 |
|
|
2,352,950 |
|
||||||
Other insurance related income |
1,046 |
|
|
8,806 |
|
|
9,852 |
|
|
1,833 |
|
|
8,502 |
|
|
10,335 |
|
||||||
Net losses and loss expenses |
(622,479 |
) |
|
(714,012 |
) |
|
(1,336,491 |
) |
|
(650,312 |
) |
|
(717,674 |
) |
|
(1,367,986 |
) |
||||||
Acquisition costs |
(229,430 |
) |
|
(273,351 |
) |
|
(502,781 |
) |
|
(178,193 |
) |
|
(283,019 |
) |
|
(461,212 |
) |
||||||
Underwriting-related general and administrative expenses(10) |
(210,932 |
) |
|
(60,988 |
) |
|
(271,920 |
) |
|
(204,738 |
) |
|
(69,886 |
) |
|
(274,624 |
) |
||||||
Underwriting income(11) |
$ |
32,227 |
|
|
$ |
124,252 |
|
|
156,479 |
|
|
$ |
125,920 |
|
|
$ |
133,543 |
|
|
259,463 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income |
|
|
|
|
245,254 |
|
|
|
|
|
|
210,961 |
|
||||||||||
Net investment gains (losses) |
|
|
|
|
33,996 |
|
|
|
|
|
|
(59,923 |
) |
||||||||||
Corporate expenses(10) |
|
|
|
|
(68,566 |
) |
|
|
|
|
|
(60,425 |
) |
||||||||||
Foreign exchange gains |
|
|
|
|
5,325 |
|
|
|
|
|
|
6,239 |
|
||||||||||
Interest expense and financing costs |
|
|
|
|
(31,502 |
) |
|
|
|
|
|
(33,861 |
) |
||||||||||
Transaction and reorganization expenses |
|
|
|
|
(18,096 |
) |
|
|
|
|
|
(31,825 |
) |
||||||||||
Amortization of value of business acquired |
|
|
|
|
(20,298 |
) |
|
|
|
|
|
(110,517 |
) |
||||||||||
Amortization of intangible assets |
|
|
|
|
(5,914 |
) |
|
|
|
|
|
(6,811 |
) |
||||||||||
Income before income taxes and interest in income of equity method investments |
|
|
|
|
$ |
296,678 |
|
|
|
|
|
|
$ |
173,301 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses and loss expenses ratio |
56.9 |
% |
|
61.4 |
% |
|
59.2 |
% |
|
56.2 |
% |
|
60.0 |
% |
|
58.1 |
% |
||||||
Acquisition cost ratio |
21.0 |
% |
|
23.5 |
% |
|
22.3 |
% |
|
15.4 |
% |
|
23.7 |
% |
|
19.6 |
% |
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
expense ratio |
19.2 |
% |
|
5.2 |
% |
|
15.0 |
% |
|
17.7 |
% |
|
5.8 |
% |
|
14.3 |
% |
||||||
Combined ratio |
97.1 |
% |
|
90.1 |
% |
|
96.5 |
% |
|
89.3 |
% |
|
89.5 |
% |
|
92.0 |
% |
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 $69 million and $60 million for the six months ended June 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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018 |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three months ended |
|
Six months ended |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
(in thousands, except per share amounts) |
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Net income available to common shareholders |
$ |
166,387 |
|
|
$ |
92,858 |
|
|
$ |
264,515 |
|
|
$ |
155,406 |
|
Net investment (gains) losses(12) |
(21,225 |
) |
|
45,093 |
|
|
(33,996 |
) |
|
59,923 |
|
||||
Foreign exchange (gains)(13) |
(12,381 |
) |
|
(44,099 |
) |
|
(5,325 |
) |
|
(6,239 |
) |
||||
Transaction and reorganization expenses(14) |
3,276 |
|
|
18,772 |
|
|
18,096 |
|
|
31,825 |
|
||||
Interest in (income) of equity method investments (15) |
(2,635 |
) |
|
(3,378 |
) |
|
(4,853 |
) |
|
(3,378 |
) |
||||
Income tax expense (benefit) |
3,569 |
|
|
(5,996 |
) |
|
3,164 |
|
|
(11,658 |
) |
||||
Operating income |
$ |
136,991 |
|
|
$ |
103,250 |
|
|
$ |
241,601 |
|
|
$ |
225,879 |
|
|
|
|
|
|
|
|
|
||||||||
Earnings per diluted common share |
$ |
1.97 |
|
|
$ |
1.11 |
|
|
$ |
3.14 |
|
|
$ |
1.85 |
|
Net investment (gains) losses |
(0.25 |
) |
|
0.54 |
|
|
(0.40 |
) |
|
0.71 |
|
||||
Foreign exchange (gains) |
(0.15 |
) |
|
(0.53 |
) |
|
(0.06 |
) |
|
(0.07 |
) |
||||
Transaction and reorganization expenses |
0.04 |
|
|
0.22 |
|
|
0.21 |
|
|
0.38 |
|
||||
Interest in (income) of equity method investments |
(0.03 |
) |
|
(0.04 |
) |
|
(0.06 |
) |
|
(0.04 |
) |
||||
Income tax expense (benefit) |
0.04 |
|
|
(0.07 |
) |
|
0.03 |
|
|
(0.14 |
) |
||||
Operating income per diluted common share |
$ |
1.62 |
|
|
$ |
1.23 |
|
|
$ |
2.86 |
|
|
$ |
2.69 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares outstanding |
84,401 |
|
|
83,984 |
|
|
84,338 |
|
|
83,853 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Average common shareholders' equity |
4,658,317 |
|
|
4,483,700 |
|
|
4,523,274 |
|
|
4,522,135 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Annualized return on average common equity |
14.3 |
% |
|
8.3 |
% |
|
11.7 |
% |
|
6.9 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
Annualized operating return on average common equity(16) |
11.8 |
% |
|
9.2 |
% |
|
10.7 |
% |
|
10.0 |
% |
||||
|
|
|
|
|
|
|
|
12Tax cost (benefit) of $2,936 and ($4,531) for the three months ended June 30, 2019 and 2018, respectively and $5,771 and $(3,388) for the six months ended June 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 $1,170 and $779 for the three months ended June 30, 2019 and 2018, respectively and $588 and $(3,555) for the six months ended June 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 $(537) and $(2,556) for the three months ended June 30, 2019 and 2018, respectively and ($3,195) and ($5,027) for the six months ended June 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions. |
15Tax cost (benefit) of $nil and $312 for the three months ended June 30, 2019 and 2018, respectively, and $nil and $312 for the six months ended June 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. |
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 SIX MONTHS ENDED JUNE 30, 2019 AND 2018 |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three months ended |
|
Six months ended |
||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
||||||||
|
(in thousands, except per share amounts) |
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
Net income available to common shareholders |
$ |
166,387 |
|
|
$ |
92,858 |
|
|
$ |
264,515 |
|
|
$ |
155,406 |
|
Net investment (gains) losses(12) |
(21,225 |
) |
|
45,093 |
|
|
(33,996 |
) |
|
59,923 |
|
||||
Foreign exchange (gains)(13) |
(12,381 |
) |
|
(44,099 |
) |
|
(5,325 |
) |
|
(6,239 |
) |
||||
Transaction and reorganization expenses(14) |
3,276 |
|
|
18,772 |
|
|
18,096 |
|
|
31,825 |
|
||||
Interest in (income) of equity method investments (15) |
(2,635 |
) |
|
(3,378 |
) |
|
(4,853 |
) |
|
(3,378 |
) |
||||
Income tax expense (benefit) |
3,569 |
|
|
(5,996 |
) |
|
3,164 |
|
|
(11,658 |
) |
||||
Operating income |
$ |
136,991 |
|
|
$ |
103,250 |
|
|
$ |
241,601 |
|
|
$ |
225,879 |
|
Amortization of VOBA and intangible assets(17) |
10,093 |
|
|
56,328 |
|
|
26,095 |
|
|
113,438 |
|
||||
Amortization of acquisition costs(18) |
(2,854 |
) |
|
(39,641 |
) |
|
(9,121 |
) |
|
(80,090 |
) |
||||
Income tax expense (benefit) |
(1,376 |
) |
|
(3,170 |
) |
|
(3,225 |
) |
|
(6,336 |
) |
||||
Ex-PGAAP operating income(2) |
$ |
142,854 |
|
|
$ |
116,767 |
|
|
$ |
255,350 |
|
|
$ |
252,891 |
|
|
|
|
|
|
|
|
|
||||||||
Earnings per diluted common share |
$ |
1.97 |
|
|
$ |
1.11 |
|
|
$ |
3.14 |
|
|
$ |
1.85 |
|
Net investment (gains) losses |
(0.25 |
) |
|
0.54 |
|
|
(0.40 |
) |
|
0.71 |
|
||||
Foreign exchange (gains) |
(0.15 |
) |
|
(0.53 |
) |
|
(0.06 |
) |
|
(0.07 |
) |
||||
Transaction and reorganization expenses |
0.04 |
|
|
0.22 |
|
|
0.21 |
|
|
0.38 |
|
||||
Interest in (income) of equity method investments |
(0.03 |
) |
|
(0.04 |
) |
|
(0.06 |
) |
|
(0.04 |
) |
||||
Income tax expense (benefit) |
0.04 |
|
|
(0.07 |
) |
|
0.03 |
|
|
(0.14 |
) |
||||
Operating income per diluted common share |
$ |
1.62 |
|
|
$ |
1.23 |
|
|
$ |
2.86 |
|
|
$ |
2.69 |
|
Amortization of VOBA and intangible assets(17) |
0.12 |
|
|
0.67 |
|
|
0.31 |
|
|
1.35 |
|
||||
Amortization of acquisition costs(18) |
(0.03 |
) |
|
(0.47 |
) |
|
(0.11 |
) |
|
(0.94 |
) |
||||
Income tax expense (benefit) |
(0.02 |
) |
|
(0.04 |
) |
|
(0.03 |
) |
|
(0.08 |
) |
||||
Ex-PGAAP operating income per diluted common share(2) |
$ |
1.69 |
|
|
$ |
1.39 |
|
|
$ |
3.03 |
|
|
$ |
3.02 |
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares outstanding |
84,401 |
|
|
83,984 |
|
|
84,338 |
|
|
83,853 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Average common shareholders' equity |
4,658,317 |
|
|
4,483,700 |
|
|
4,523,274 |
|
|
4,522,135 |
|
||||
|
|
|
|
|
|
|
|
||||||||
Annualized return on average common equity |
14.3 |
% |
|
8.3 |
% |
|
11.7 |
% |
|
6.9 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
Annualized operating return on average common equity(16) |
11.8 |
% |
|
9.2 |
% |
|
10.7 |
% |
|
10.0 |
% |
||||
|
|
|
|
|
|
|
|
||||||||
Annualized ex-PGAAP operating return on average common equity(2) |
12.3 |
% |
|
10.4 |
% |
|
11.3 |
% |
|
11.2 |
% |
||||
|
|
|
|
|
|
|
|
17Tax cost (benefit) of $(1,918) and $(10,702) for the three months ended June 30, 2019 and 2018, respectively, and $(4,958) and $(21,553) for the six months ended June 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions. |
18Tax cost (benefit) of $542 and $7,532 for the three months ended June 30, 2019 and 2018, respectively, and $1,733 and $15,217 for the six months ended June 30, 2019 and 2018, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions. |
For the six months ended June 30, 2019, underwriting income included the recognition of premium 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 $9 million and $80 million of acquisition expense related to premiums earned in the six months ended June 30, 2019 and 2018, respectively, benefited our acquisition cost ratio by 0.4 points and 3.4 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:
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 and realized 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 investments.
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 also 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 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. 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 of Novae 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 six months ended June 30, 2019 and 2018 included the recognition of premium attributable to Novae's balance sheet at the acquisition date without the recognition of the associated acquisition costs.
View source version on businesswire.com: https://www.businesswire.com/news/home/20190730005979/en/