Lack of hurricane activity helps reinsurance arm surge

Speciality lines Bermuda insurer and treaty reinsurer AXIS Capital cut its Q3 net loss to $96m from $249m on an operating income of $152m turning around an operating loss of $161m for Q3 2008

Axis cut its combined ratio from 128% to just 73% but improved most in reinsurance where it its combined ratio fell from 141.4% to 70.8% turning an underwriting income from a $168m loss to a £125m profit.

Q3 Financial highlights (2008 in brackets where given)

  • Gross premiums written $775m, up 7%
  • Net premiums written $595m, up 8%
  • Net premiums earned $706m, up 2%
  • Total underwriting income, $207m (-$173m)
  • Net investment income $135m, up 166%
  • Operating income $152m (-$161m)
  • Combined ratio 73.2% (128.0%)

Insurance segment

  • Q3 underwriting loss $54m ($22m)
  • Combined ratio 70.5% (102.8%)
  • Lower level of catastrophe activity
  • Gross premiums written $414m, up 3%
  • Net premiums written of $240m, up 2%
  • New business opportunities in professional lines business
  • Ceded premiums 42%

Reinsurance Segment

  • Underwriting income $125m (-$164m)
  • Combined ratio 70.8% (141.4%)
  • Lower level of catastrophe activity
  • Gross premiums written $361m, up 12%
  • Rate increases, increased participation on certain renewals and new business opportunities across several lines of business

John Charman, chief executive officer and president said: “I am pleased to report that, during this third quarter of 2009, AXIS benefited from very good P&C underwriting results as well as a strong recovery in asset valuations throughout our investment portfolio.

“Importantly, our underwriting operations produced a combined ratio of 73.2%. While the combined ratio benefited from a low level of catastrophes, it continues to demonstrate our strong performance for the year and the consistency of our underwriting performance through what has been so far a very challenging phase of the underwriting cycle.

“Our results are particularly strong given the impact of the global economic crisis over the last two years.

Derivative hit

“Our results this quarter were adversely impacted by an increase in the fair value liability of our only insurance derivative contract. Despite this adjustment, we were still able to deliver an increase in diluted book value per share of 10% in the quarter and 22% for the year to date.

“For the third quarter, our consolidated net premiums written were up 8% largely due to the continued success of our reinsurance segment in accessing underwriting opportunities. At this time, the reinsurance market continues to remain the most disciplined and attractive area of the global P&C marketplace.

“In our insurance segment, we have maintained a very defensive posture overall. While rate improved across our insurance portfolio during the third quarter of 2009, this improvement was somewhat muted relative to the first half of this year. As we have demonstrated in the past, when necessary, we will sacrifice top-line growth to preserve underwriting profit.

Broaden capabilities

“As we work diligently through this challenging phase of the underwriting cycle, we have continued to invest in broadening our franchise’s capabilities. This includes the expansion of distribution capabilities and new target markets including global accident and health. We expect these efforts to generate significant returns to shareholders over time.”