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Section 1: 8-K (FORM 8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 2019
 
AXIS CAPITAL HOLDINGS LIMITED
(Exact Name Of Registrant As Specified In Charter)
 
Bermuda
 
001-31721
 
98-0395986
(State of Incorporation)
 
(Commission File No.)
 
(I.R.S. Employer
Identification No.)
92 Pitts Bay Road
Pembroke, Bermuda HM 08
(Address of principal executive offices, including zip code)
(441) 496-2600
(Registrant’s telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e(4)(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐





Item 2.02
Results of Operations and Financial Condition.
On January 30, 2019, AXIS Capital Holdings Limited, a Bermuda company, issued a press release reporting its fourth quarter 2018 results and the availability of its fourth quarter 2018 investor financial supplement. The press release and the investor financial supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively.
Item 9.01
Financial Statements and Exhibits

(d) Exhibits
Press release dated January 30, 2019
Fourth Quarter 2018 Investor Financial Supplement






EXHIBIT INDEX
 
 
 
 
 
 
Exhibit Number
  
Description of Document
 
 
  
Press release dated January 30, 2019
  
Fourth Quarter 2018 Investor Financial Supplement


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: January 30, 2019
 
 
 
 
 
 
AXIS CAPITAL HOLDINGS LIMITED
 
 
 
 
 
 
 
 
 
By:
/s/ Conrad D. Brooks
 
 
 
Conrad D. Brooks
 
 
 
General Counsel
 









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Section 2: EX-99.1 (PRESS RELEASE DATED JANUARY 30, 2019)

Exhibit
396549792_axislogoq42016a20.jpg
Matthew Rohrmann (Investor Contact):
(212) 940-3339;
investorrelations@axiscapital.com
Keith Trivitt (Media Contact):
(212) 715-3557;
keith.trivitt@axiscapital.com

AXIS CAPITAL REPORTS FOURTH QUARTER 2018 RESULTS

For the fourth quarter of 2018, the Company reports:
Net loss of $198 million, or $(2.37) per diluted common share and Ex-PGAAP operating loss of $139 million, or $(1.66) per diluted common share
Estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $269 million, or 22.5 points, compared to $133 million, or 11.2 points, in the prior year
Book value per diluted common share of $49.93

For the year ended 2018, the Company reports:
Net income of $0.4 million, and Ex-PGAAP operating income of $209 million, or $2.49 per diluted common share
Estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $430 million, or 9.0 points, compared to $835 million, or 20.4 points, in the prior year
Pembroke, Bermuda, January 30, 2019 - AXIS Capital Holdings Limited ("AXIS Capital" or the "Company") (NYSE: AXS) today reported net loss attributable to common shareholders for the fourth quarter of 2018 of $198 million, or $(2.37) per diluted common share, compared to net loss of $38 million, or $(0.46) per diluted common share, for the fourth quarter of 2017. Net income available to common shareholders for the year ended December 31, 2018 was $0.4 million, compared to net loss attributable to common shareholders of $416 million, or $(4.94) per diluted common share, for the same period in 2017.
Operating loss1 for the fourth quarter of 2018 was $148 million, or $(1.77) per diluted common share1, compared to operating income of $20 million, or $0.24 per diluted common share, for the fourth quarter of 2017. For the year ended December 31, 2018, AXIS Capital reported operating income of $161 million, or $1.92 per diluted common share, compared to an operating loss of $265 million, or $(3.15) per diluted common share for the same period in 2017.








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 measures to the most comparable GAAP financial measures (net income (loss) available (attributable) to common shareholders and earnings per diluted common share, respectively) and a discussion of the rationale for the presentation of these items is included later in this press release.
2Ex-PGAAP operating income (loss), ex-PGAAP operating income (loss) per diluted common share and ex-PGAAP return on average common equity ("ex-PGAAP operating ROACE") are non-GAAP financial measures as defined in SEC Regulation G. The reconciliation to the most comparable GAAP financial measures, (net income (loss) available (attributable) to common shareholders, earnings per diluted common share, and annualized return on average common equity, respectively) and a discussion of the rationale for the presentation of these items is included later in this press release.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 1 -





Commenting on the fourth quarter 2018 financial results, Albert Benchimol, President and CEO of AXIS Capital, said:

“In 2018, we delivered improved full-year underwriting performance, both with and without cats. Following three quarters in which we achieved tangible progress toward delivering on our financial goals, however, heavy attritional property and catastrophe activity led to unsatisfactory results in the fourth quarter. Throughout the past year, we took a number of significant actions to strengthen our portfolio and, over the past few months, we’ve accelerated these initiatives. Additionally, we anticipate that recent improvements in pricing and market discipline will also have a positive impact on the pace of our improvements.
2018 was a year in which we made significant progress in advancing our strategy and in strengthening our business. We furthered our relevance and positioning in key markets, including transitioning our London operations to a leading position at Lloyd’s with the integration of Novae, and we scaled up a transformation program that is improving our efficiency and our agility in a rapidly evolving market.”









AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 2 -



Fourth Quarter Highlights3 

Gross premiums written increased by $76 million, or 7%, with an increase of $66 million, or 8%, in the insurance segment and an increase of $10 million, or 4%, in the reinsurance segment.
Net premiums written increased by 3% to $753 million.
KEY RATIOS
Q4 2018
 
Q4 2017
 
Change
Current accident year loss ratio excluding catastrophe and weather-related losses
65.4
%
 
62.8
%
 
2.6
 pts
Catastrophe and weather-related losses ratio
22.5
%
 
11.2
%
 
11.3
 pts
Current accident year loss ratio
87.9
%
 
74.0
%
 
13.9
 pts
Prior year reserve development
(3.3
%)
 
(4.7
%)
 
1.4
 pts
Net loss and loss expense ratio
84.6
%
 
69.3
%
 
15.3
 pts
Acquisition cost ratio
21.4
%
 
19.4
%
 
2.0
 pts
General and administrative expense ratio
11.3
%
 
12.0
%
 
(0.7
 pts)
Combined ratio
117.3
%
 
100.7
%
 
16.6
 pts
Net favorable prior year reserve development of $40 million (Insurance $32 million; Reinsurance $7 million), compared to $57 million.
Underwriting loss included the recognition of premium 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 $16 million and $33 million of acquisition expenses related to premiums earned in the fourth quarter of 2018 and 2017, respectively, benefited our acquisition cost ratio by 1.3 points and 2.7 points, respectively.
Amortization of value of business acquired ("VOBA") of $23 million and $50 million, recognized in the fourth quarter of 2018 and 2017, respectively. This expense impacted the Company's operating income, but was not included in the results of the Company's insurance and reinsurance segments.
Pre-tax cost savings of $17 million, $68 million on an annualized basis, related to the Company's transformation initiative and the integration of Novae recognized in the quarter. The Company has incurred cumulative pre-tax reorganization expenses of approximately $94 million since the third quarter of 2017.
Adjusted for dividends, book value per diluted common share decreased by $2.37, or 4%, compared to September 30, 2018.















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

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 3 -


Full Year Highlights3

Gross premiums written increased by $1,354 million, or 24%, to $6.9 billion, with an increase of 35% in the insurance segment, primarily attributable to the acquisition of Novae, and an increase of 14% in the reinsurance segment.
Adjusting for the impact of the Novae acquisition, gross premiums written increased by $331 million, with an increase of $60 million in the insurance segment, and an increase of $271 million in the reinsurance segment.
Net premiums written increased by 16% to $4.7 billion.
KEY RATIOS
2018
 
2017
 
Change
Current accident year loss ratio excluding catastrophe and weather-related losses
61.7
%
 
63.7
%
 
(2.0
 pts)
Catastrophe and weather-related losses ratio
9.0
%
 
20.4
%
 
(11.4
 pts)
Current accident year loss ratio
70.7
%
 
84.1
%
 
(13.4
 pts)
Prior year reserve development
(4.1
%)
 
(4.9
%)
 
0.8
 pts
Net loss and loss expense ratio
66.6
%
 
79.2
%
 
(12.6
 pts)
Acquisition cost ratio
20.2
%
 
19.9
%
 
0.3
 pts
General and administrative expense ratio
13.1
%
 
14.0
%
 
(0.9
 pts)
Combined ratio
99.9
%
 
113.1
%
 
(13.2
 pts)
Net favorable prior year reserve development of $200 million (Insurance $93 million; Reinsurance $107 million ), compared to $200 million.
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 $125 million and $33 million of acquisition expenses related to premiums earned in the years ended December 31, 2018 and 2017, respectively benefited our acquisition cost ratio by 2.6 and 0.7 points, respectively.
Amortization of VOBA of $172 million and $50 million recognized for the year ended December 31, 2018 and 2017, respectively. This expense impacted the Company's operating income, but was not included in the results of the Company's insurance and reinsurance segments.
Pre-tax cost savings of $58 million related to the Company's transformation initiative and the integration of Novae recognized over the past twelve months.
Adjusted for dividends, book value per diluted common share decreased by $2.38, or 4%, over the past twelve months.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 4 -



Segment Highlights

Insurance Segment
 
Three Months Ended December 31,
($ in thousands)
2018
 
2017
 
Change
Gross premiums written
$
920,736

 
$
854,311

 
7.8
 %
Net premiums written
576,606

 
515,826

 
11.8
 %
Net premiums earned
590,479

 
586,159

 
0.7
 %
Underwriting income (loss)
(36,914
)
 
37,788

 
nm

 
 
 
 
 
 
Underwriting ratios:
 
 
 
 
 
Current accident year loss ratio excluding catastrophe and weather-related losses
62.4
%
 
62.0
%
 
0.4
 pts
Catastrophe and weather-related losses ratio
15.6
%
 
5.7
%
 
9.9
 pts
Current accident year loss ratio
78.0
%
 
67.7
%
 
10.3
 pts
Prior period reserve development
(5.4
%)
 
(4.2
%)
 
(1.2
 pts)
Net loss and loss expense ratio
72.6
%
 
63.5
%
 
9.1
 pts
Acquisition cost ratio
18.5
%
 
15.7
%
 
2.8
 pts
Underwriting-related general and administrative expense ratio
15.2
%
 
14.7
%
 
0.5
 pts
Combined ratio
106.3
%
 
93.9
%
 
12.4
 pts
nm - not meaningful
Gross premiums written increased by $66 million, or 8% (8% increase on a constant currency basis4), attributable to credit and political risk, liability, and professional lines driven by new business.
Net premiums written increased by 12% (11% on a constant currency basis) reflecting the increase in gross premiums written in the quarter, together with a decrease in premiums ceded in professional lines, partially offset by an increase in premiums ceded in liability lines.
The current accident year loss ratio excluding catastrophe and weather-related losses increased in the fourth quarter compared to the same period in 2017 primarily due to an increase in attritional loss experience in property lines.
Pre-tax catastrophe and weather-related losses were $92 million primarily attributable to Hurricane Michael and the California Wildfires this quarter, compared to $34 million in the same period in 2017.
Net favorable prior year loss reserve development was $32 million this quarter, compared to $25 million in the same period in 2017.
The acquisition cost ratio increased in the quarter due to changes in business mix.
Underwriting loss 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 $16 million and $26 million of acquisition costs related to premiums earned in the fourth quarter of 2018 and 2017, respectively, benefited the acquisition cost ratio by 2.7 points and 4.4 points, respectively.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 5 -



 
Year Ended December 31,
($ in thousands)
2018
 
2017
 
Change
Gross premiums written
$
3,797,592

 
$
2,814,918

 
34.9
 %
Net premiums written
2,324,747

 
1,775,825

 
30.9
 %
Net premiums earned
2,362,606

 
1,816,438

 
30.1
 %
Underwriting income (loss)
77,298

 
(241,642
)
 
nm

 
 
 
 
 
 
Underwriting ratios:
 
 
 
 
 
Current accident year loss ratio excluding catastrophe and weather-related losses
58.5
%
 
61.3
%
 
(2.8
 pts)
Catastrophe and weather-related losses ratio
8.7
%
 
22.7
%
 
(14.0
 pts)
Current accident year loss ratio
67.2
%
 
84.0
%
 
(16.8
 pts)
Prior period reserve development
(4.0
%)
 
(3.3
%)
 
(0.7
 pts)
Net loss and loss expense ratio
63.2
%
 
80.7
%
 
(17.5
 pts)
Acquisition cost ratio
16.9
%
 
14.9
%
 
2.0
 pts
Underwriting-related general and administrative expense ratio
16.8
%
 
17.9
%
 
(1.1
 pts)
Combined ratio
96.9
%
 
113.5
%
 
(16.6
 pts)
Gross premiums written increased by $983 million, or 35%, which included an increase of $923 million attributable to property, marine, professional lines, and credit and political risk lines associated with the acquisition of Novae. Excluding the impact of the acquisition of Novae, gross premiums written increased by 2% (2% on a constant currency basis) due to increases in professional lines and liability lines driven by new business, partially offset by a decrease in property, marine, and accident and health lines. The decreases were attributable to property lines due to our exit from onshore energy business in the fourth quarter of 2017, together with non-renewals in marine, and accident and health lines.
Net premiums written increased by $549 million or 31%. Excluding the impact of the acquisition of Novae, net premiums written decreased by 4% (5% on a constant currency basis) due to an increase in premiums ceded in property, liability, and professional lines, partially offset by the increase in gross premiums written in the year.
Underwriting income increased in the twelve months ended December 31, 2018, principally associated with an increase in net premiums earned, a decrease in catastrophe and weather-related losses, a decrease in the current accident year loss ratio excluding catastrophe and weather-related losses, an increase in net favorable prior year development and a decrease in the general and administrative expense ratio, partially offset by an increase in the acquisition cost ratio.
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 $121 million and $26 million of acquisition costs related to premiums earned in the years ended December 31, 2018 and 2017, respectively, benefited the acquisition cost ratio by 5.1 and 1.4 points, respectively.
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.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 6 -



Reinsurance Segment
 
Three Months Ended December 31,
($ in thousands)
2018
 
2017
 
Change
Gross premiums written
$
252,002

 
$
242,190

 
4.1
 %
Net premiums written
176,092

 
213,598

 
(17.6
)%
Net premiums earned
623,990

 
625,336

 
(0.2
)%
Underwriting income (loss)
(157,750
)
 
(11,658
)
 
nm

 
 
 
 
 
 
Underwriting ratios:
 
 
 
 
 
Current accident year loss ratio excluding catastrophe and weather-related losses
68.3
%
 
63.6
%
 
4.7
 pts
Catastrophe and weather-related losses ratio
28.8
%
 
16.3
%
 
12.5
 pts
Current accident year loss ratio
97.1
%
 
79.9
%
 
17.2
 pts
Prior period reserve development
(1.1
%)
 
(5.1
%)
 
4.0
 pts
Net loss and loss expense ratio
96.0
%
 
74.8
%
 
21.2
 pts
Acquisition cost ratio
24.1
%
 
22.8
%
 
1.3
 pts
Underwriting-related general and administrative expense ratio
3.9
%
 
4.4
%
 
(0.5
 pts)
Combined ratio
124.0
%
 
102.0
%
 
22.0
 pts

Gross premiums written increased by $10 million, or 4% (5% on a constant currency basis) attributable to catastrophe, and accident and health lines, partially offset by decreases in professional lines and property lines. The increase in catastrophe lines was largely due to reinstatements premiums and the increase in accident and health lines was due to new business, partially offset by a timing difference. The decrease in property lines was driven by premium adjustments and the decrease in professional lines was driven by the restructuring of a significant treaty.
Net premiums written decreased by $38 million, or 18% (16% on a constant currency basis) due to an increase in premiums ceded in catastrophe, accident and health, credit and surety, and liability lines, partially offset by the increase in gross premiums written in the quarter.
The current accident year loss ratio excluding catastrophe and weather-related losses increased in the fourth quarter compared to the same period in 2017, primarily due to an increase in mid-size and attritional loss experience in property lines, partially offset by favorable impact of rate increases in U.K. non-proportional motor business.
Pre-tax catastrophe and weather-related losses were $177 million primarily attributable to Hurricane Michael and the California Wildfires this quarter, compared to $99 million reported during the same period in 2017.
Net favorable prior year reserve development was $7 million this quarter compared to $32 million in the fourth quarter of 2017.
The acquisition cost ratio increased due the impact of retrocessional contracts, partially offset by favorable changes in business mix.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 7 -



The general administrative expense ratio decreased in the quarter, largely attributable to benefits related to arrangements with strategic capital partners, partially offset by an increase in the allocation of corporate expenses.
Underwriting loss 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 $7 million of acquisition costs related to premiums earned in the fourth quarter of 2017 benefited the acquisition cost ratio by 1.1 points.
 
Year Ended December 31,
($ in thousands)
2018
 
2017
 
Change
Gross premiums written
$
3,112,473

 
$
2,741,355

 
13.5
 %
Net premiums written
2,334,215

 
2,251,318

 
3.7
 %
Net premiums earned
2,428,889

 
2,332,322

 
4.1
 %
Underwriting income (loss)
46,529

 
(171,684
)
 
nm

 
 
 
 
 
 
Underwriting ratios:
 
 
 
 
 
Current accident year loss ratio excluding catastrophe and weather-related losses
64.8
%
 
65.6
%
 
(0.8
 pts)
Catastrophe and weather-related losses ratio
9.4
%
 
18.5
%
 
(9.1
 pts)
Current accident year loss ratio
74.2
%
 
84.1
%
 
(9.9
 pts)
Prior period reserve development
(4.4
%)
 
(6.0
%)
 
1.6
 pts
Net loss and loss expense ratio
69.8
%
 
78.1
%
 
(8.3
 pts)
Acquisition cost ratio
23.5
%
 
23.7
%
 
(0.2
 pts)
Underwriting-related general and administrative expense ratio
5.1
%
 
5.3
%
 
(0.2
 pts)
Combined ratio
98.4
%
 
107.1
%
 
(8.7
 pts)
Gross premiums written increased by $371 million, or 14%, which included an increase of $100 million attributable to catastrophe, and marine and aviation lines associated with the acquisition of Novae. Excluding the impact of the acquisition of Novae, gross premiums written increased by $271 million, or 10% (7% on a constant currency basis), attributable to credit and surety, motor, accident and health, and catastrophe lines. The increase in credit and surety lines was largely due to timing differences, together with the favorable impact of foreign exchange rate movements, favorable premiums adjustments, and new business. The increase in motor was largely due to new business and timing differences, together with the favorable impact of rate increases in U.K. non-proportional motor business following the reduction in the Ogden Rate during the first quarter of 2017. The increase in accident and health was largely due to new business, partially offset by premium adjustments. The increase in catastrophe lines was largely due to new business, increased line sizes on a number of treaties, and favorable rate increases, partially offset by a lower level of premiums written on a multi-year basis.
Net premiums written increased by $83 million, or 4%. Excluding the impact of the acquisition of Novae, net premiums written increased by $11 million or 1% (decreased by 3% on a constant currency basis) reflecting the increase in gross premiums written in the year, partially offset by an increase in premiums ceded in accident and health, catastrophe, credit and surety, and liability lines.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 8 -



Underwriting income increased in the year ended December 31, 2018, principally associated with an increase in net premiums earned, a decrease in catastrophe and weather-related losses, and a decrease in the current accident year loss ratio excluding catastrophe and weather-related losses, partially offset by a decrease in net favorable prior year development.
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 $4 million and $7 million of acquisition costs related to premiums earned in the years ended December 31, 2018 and 2017, respectively, benefited the acquisition cost ratio by 0.1 and 0.3 points, respectively.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 9 -



Investments

Net investment income of $113 million for the quarter represents an increase of $12 million from the fourth quarter of 2017, and a decrease of $1 million from the third quarter of 2018 due to changes in fair values of our alternative investments ("Other investments"). Net realized and unrealized investment losses recognized in net income for the quarter were $73 million, compared to $43 million of net realized investment gains in the fourth quarter of 2017 and $18 million of net realized and unrealized investment losses in the third quarter of 2018.

Pre-tax total return on cash and investments5 was 0.2% including foreign exchange movements (0.3% excluding foreign exchange movements6), as net investment income generated in the quarter was offset by net realized investments losses arising from the sale of fixed maturity securities and the decrease in the fair value of equity securities. The prior year period pre-tax total return was 0.6% including foreign exchange movements (0.5% excluding foreign exchange movements). Our fixed income portfolio book yield at December 31, 2018 was 3.1%, while the market yield was 3.6%.
Capitalization / Shareholders’ Equity

Total capital7 at December 31, 2018 was $6.4 billion, including $1.3 billion of senior notes and notes payable and $775 million of preferred equity, compared to $6.7 billion at December 31, 2017. The decrease in total capital is attributable to an increase in unrealized investment losses reported in other comprehensive income, following a decrease in the market value of our fixed income portfolio, and common share dividends declared.

Book value per diluted common share, calculated on a treasury stock basis, declined by $2.77 in the current quarter, and by $3.95 over the past twelve months, to $49.93. The decrease in the quarter was primarily driven by the net loss generated in the quarter and common share dividends declared. The decrease over the past twelve months was driven by unrealized investment losses reported in other comprehensive income, and common share dividends declared.

During the fourth quarter of 2018, the Company declared dividends of $0.40 per common share, with total dividends declared of $1.57 per common share over the past twelve months. Adjusted for dividends declared, the book value per diluted common share decreased by $2.37, or 4%, for the quarter and decreased by $2.38, or 4%, 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, fixed maturity securities, 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 gains (losses) of $(20)m and $18m for the three months ended December 31, 2018 and 2017, respectively.
7Total capital represents the sum of total shareholders' equity and our senior notes payable and debt.




AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 10 -



Conference Call

We will host a conference call on Thursday, January 31, 2019 at 9:30 AM (EST) to discuss the fourth quarter and year-end 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 1263927. 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 10127972. The webcast will be archived in the Investor Information section of our website.

In addition, a financial supplement relating to our financial results for the quarter ended December 31, 2018 is available in the Investor Information section of the Company's website.

About AXIS Capital
AXIS Capital is a global provider of specialty lines insurance and treaty reinsurance with shareholders’ equity at December 31, 2018 of $5.0 billion and locations in Bermuda, the United States, Europe, Singapore, Middle East, Canada, and Latin America. 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, you may automatically receive e-mail alerts and other information about AXIS Capital when you enroll your e-mail address by visiting the “E-mail Alerts” in the Investor Information section of our website (www.axiscapital.com). The contents of our website and social media channels are not, however, a part of this press release.

Please be sure to follow AXIS Capital on LinkedIn.

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


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 11 -



AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 (UNAUDITED) AND DECEMBER 31, 2017
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
(in thousands)
Assets
 
 
 
Investments:
 
Fixed maturities, available for sale, at fair value
$
11,435,347

 
$
12,622,006

Equity securities, at fair value
381,633

 
635,511

Mortgage loans, held for investment, at amortized cost and fair value
298,650

 
325,062

Other investments, at fair value
787,787

 
1,009,373

Equity method investments
108,103

 
108,597

Short-term investments, at amortized cost and fair value
144,040

 
83,661

Total investments
13,155,560

 
14,784,210

Cash and cash equivalents
1,232,814

 
948,626

Restricted cash and cash equivalents
597,206

 
415,160

Accrued interest receivable
80,335

 
81,223

Insurance and reinsurance premium balances receivable
3,007,296

 
3,012,419

Reinsurance recoverable on unpaid losses
3,501,669

 
3,159,514

Reinsurance recoverable on paid losses
280,233

 
179,326

Deferred acquisition costs
566,622

 
474,061

Prepaid reinsurance premiums
1,013,573

 
809,274

Receivable for investments sold
32,627

 
11,621

Goodwill
102,003

 
102,003

Intangible assets
241,568

 
257,987

Value of business acquired
35,714

 
206,838

Other assets
285,346

 
317,915

 
Total assets
 
 
$
24,132,566

 
$
24,760,177

 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
Reserve for losses and loss expenses
$
12,280,769

 
$
12,997,553

Unearned premiums
3,635,758

 
3,641,399

Insurance and reinsurance balances payable
1,338,991

 
899,064

Senior notes and notes payable
1,341,961

 
1,376,529

Payable for investments purchased
111,838

 
100,589

Other liabilities
393,178

 
403,779

 
Total liabilities
 
 
19,102,495

 
19,418,913

 
 
 
 
 
 
 
Shareholders' equity
 
 
 
 
Preferred shares
775,000

 
775,000

Common shares
2,206

 
2,206

Additional paid-in capital
2,308,583

 
2,299,166

Accumulated other comprehensive income (loss)
(177,110
)
 
92,382

Retained earnings
5,912,812

 
5,979,666

Treasury shares, at cost
(3,791,420
)
 
(3,807,156
)
 
Total shareholders' equity
5,030,071

 
5,341,264

 
 
 
 
 
 
Total liabilities and shareholders' equity
$
24,132,566

 
$
24,760,177


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 12 -



AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
 
Years ended
 

 
2018
 
2017
 
2018
 
2017
 
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Revenues
 
 
 
 
 
 
 
 
Net premiums earned
$
1,214,469

 
$
1,211,495

 
$
4,791,495

 
$
4,148,760

 
Net investment income
113,128

 
100,908

 
438,507

 
400,805

 
Net investment gains (losses)
(72,667
)
 
43,038

 
(150,218
)
 
28,226

 
Other insurance related income (losses)
(8,189
)
 
3,180

 
10,622

 
(1,240
)
 
Bargain purchase gain

 

 

 
15,044

 
 
Total revenues
1,246,741

 
1,358,621

 
5,090,406

 
4,591,595

 
 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
Net losses and loss expenses
1,027,343

 
840,132

 
3,190,287

 
3,287,772

 
Acquisition costs
259,308

 
234,713

 
968,835

 
823,591

 
General and administrative expenses
137,445

 
145,723

 
627,389

 
579,428

 
Foreign exchange losses (gains)
(31,232
)
 
44,644

 
(29,165
)
 
134,737

 
Interest expense and financing costs
16,675

 
16,434

 
67,432

 
54,811

 
Transaction and reorganization expenses
18,815

 
20,748

 
66,940

 
26,718

 
Amortization of value of business acquired
22,797

 
50,104

 
172,332

 
50,104

 
Amortization of intangible assets
5,251

 
2,543

 
13,814

 
2,543

 
 
Total expenses
1,456,402

 
1,355,041

 
5,077,864

 
4,959,704

 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes and interest in income (loss) of equity method investments
(209,661
)
 
3,580

 
12,542

 
(368,109
)
 
Income tax (expense) benefit
25,921

 
(31,005
)
 
29,486

 
7,542

 
Interest in income (loss) of equity method investments
(4,052
)
 

 
993

 
(8,402
)
Net income (loss)
(187,792
)
 
(27,425
)
 
43,021

 
(368,969
)
Preferred share dividends
10,656

 
10,656

 
42,625

 
46,810

Net income (loss) available (attributable) to common shareholders
$
(198,448
)
 
$
(38,081
)
 
$
396

 
$
(415,779
)
 
 
 
 
 
 
 
 
 
 
Per share data
 
 
 
 
 
 
 
Earnings (loss) per common share:
 
 
 
 
 
 
 
Earnings (loss) common share
$
(2.37
)
 
$
(0.46
)
 
$

 
$
(4.94
)
Earnings (loss) per diluted common share
$
(2.37
)
 
$
(0.46
)
 
$

 
$
(4.94
)
Weighted average common shares outstanding
83,582

 
83,160

 
83,501

 
84,108

Weighted average diluted common shares outstanding
83,582

 
83,160

 
84,007

 
84,108

Cash dividends declared per common share
$
0.40

 
$
0.39

 
$
1.57

 
$
1.53


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 13 -



AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA (UNAUDITED)
FOR THE QUARTERS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Insurance
 
Reinsurance
 
Total
 
Insurance
 
Reinsurance
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Gross premiums written
$
920,736

 
$
252,002

 
$
1,172,738

 
$
854,311

 
$
242,190

 
$
1,096,501

Net premiums written
576,606

 
176,092

 
752,698

 
515,826

 
213,598

 
729,424

Net premiums earned
590,479

 
623,990

 
1,214,469

 
586,159

 
625,336

 
1,211,495

Other insurance related income (losses)
101

 
(8,290
)
 
(8,189
)
 
2,091

 
1,089

 
3,180

Net losses and loss expenses
(428,525
)
 
(598,818
)
 
(1,027,343
)
 
(372,191
)
 
(467,941
)
 
(840,132
)
Acquisition costs
(109,111
)
 
(150,197
)
 
(259,308
)
 
(92,293
)
 
(142,420
)
 
(234,713
)
Underwriting-related general and
 
 
 
 
 
 
 
 
 
 
 
administrative expenses(8)
(89,858
)
 
(24,435
)
 
(114,293
)
 
(85,978
)
 
(27,722
)
 
(113,700
)
Underwriting income (loss)(9)
$
(36,914
)
 
$
(157,750
)
 
(194,664
)
 
$
37,788

 
$
(11,658
)
 
26,130

 
 
 
 
 
 
 
 
 
 
 
 
Corporate expenses(8)
 
 
 
 
(23,152
)
 
 
 
 
 
(32,023
)
Net investment income
 
 
 
 
113,128

 
 
 
 
 
100,908

Net investment gains (losses)
 
 
 
 
(72,667
)
 
 
 
 
 
43,038

Foreign exchange (losses) gains
 
 
 
 
31,232

 
 
 
 
 
(44,644
)
Interest expense and financing costs
 
 
 
 
(16,675
)
 
 
 
 
 
(16,434
)
Transaction and reorganization expenses
 
 
 
 
(18,815
)
 
 
 
 
 
(20,748
)
Amortization of value of business acquired
 
 
 
 
(22,797
)
 
 
 
 
 
(50,104
)
Amortization of intangible assets
 
 
 
 
(5,251
)
 
 
 
 
 
(2,543
)
Income (loss) before income taxes and interest in income (loss) of equity method investments
 
 
 
 
$
(209,661
)
 
 
 
 
 
$
3,580

 
 
 
 
 
 
 
 
 
 
 
 
Net loss and loss expense ratio
72.6
%
 
96.0
%
 
84.6
%
 
63.5
%
 
74.8
%
 
69.3
%
Acquisition cost ratio
18.5
%
 
24.1
%
 
21.4
%
 
15.7
%
 
22.8
%
 
19.4
%
General and administrative
 
 
 
 
 
 
 
 
 
 
 
expense ratio
15.2
%
 
3.9
%
 
11.3
%
 
14.7
%
 
4.4
%
 
12.0
%
Combined ratio
106.3
%
 
124.0
%
 
117.3
%
 
93.9
%
 
102.0
%
 
100.7
%
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 $23 million and $32 million for the three months ended December 31, 2018 and 2017, 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 measure, is presented above.



During the three months ended March 31, 2018, the Company realigned its accident and health business by integrating this business and its operations into the Company's insurance and reinsurance operations. Financial results relating to this business were previously included in the results of the insurance segment. As a result of the realignment accident and health results are included in the results of both the insurance and reinsurance segments of the Company, with effect from January 1, 2018. The results are inclusive of underwriting-related general and administrative expenses attributable to the Company’s accident and health business. In addition, to facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year's presentation. These reclassifications did not impact results of operations, financial condition or liquidity.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 14 -


AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED SEGMENTAL DATA
FOR THE YEARS ENDED DECEMBER 31, 2018 (UNAUDITED) AND 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
Insurance
 
Reinsurance
 
Total
 
Insurance
 
Reinsurance
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
(in thousands)
Gross premiums written
$
3,797,592

 
$
3,112,473

 
$
6,910,065

 
$
2,814,918

 
$
2,741,355

 
$
5,556,273

Net premiums written
2,324,747

 
2,334,215

 
4,658,962

 
1,775,825

 
2,251,318

 
4,027,143

Net premiums earned
2,362,606

 
2,428,889

 
4,791,495

 
1,816,438

 
2,332,322

 
4,148,760

Other insurance related income (losses)
3,460

 
7,162

 
10,622

 
2,944

 
(4,184
)
 
(1,240
)
Net losses and loss expenses
(1,494,323
)
 
(1,695,964
)
 
(3,190,287
)
 
(1,465,427
)
 
(1,822,345
)
 
(3,287,772
)
Acquisition costs
(399,193
)
 
(569,642
)
 
(968,835
)
 
(270,229
)
 
(553,362
)
 
(823,591
)
Underwriting-related general and
 
 
 
 
 
 
 
 
 
 
 
administrative expenses(10)
(395,252
)
 
(123,916
)
 
(519,168
)
 
(325,368
)
 
(124,115
)
 
(449,483
)
Underwriting income (loss)(11)
$
77,298

 
$
46,529

 
123,827

 
$
(241,642
)
 
$
(171,684
)
 
(413,326
)
 
 
 
 
 
 
 
 
 
 
 
 
Corporate expenses(10)
 
 
 
 
(108,221
)
 
 
 
 
 
(129,945
)
Net investment income
 
 
 
 
438,507

 
 
 
 
 
400,805

Net investment gains (losses)
 
 
 
 
(150,218
)
 
 
 
 
 
28,226

Bargain purchase gain
 
 
 
 

 
 
 
 
 
15,044

Foreign exchange (losses) gains
 
 
 
 
29,165

 
 
 
 
 
(134,737
)
Interest expense and financing costs
 
 
 
 
(67,432
)
 
 
 
 
 
(54,811
)
Transaction and reorganization expenses
 
 
 
 
(66,940
)
 
 
 
 
 
(26,718
)
Amortization of value of business acquired
 
 
 
 
(172,332
)
 
 
 
 
 
(50,104
)
Amortization of intangible assets
 
 
 
 
(13,814
)
 
 
 
 
 
(2,543
)
Income (loss) before income taxes and interest in income (loss) of equity method investments
 
 
 
 
$
12,542

 
 
 
 
 
$
(368,109
)
 
 
 
 
 
 
 
 
 
 
 
 
Net loss and loss expense ratio
63.2
%
 
69.8
%
 
66.6
%
 
80.7
%
 
78.1
%
 
79.2
%
Acquisition cost ratio
16.9
%
 
23.5
%
 
20.2
%
 
14.9
%
 
23.7
%
 
19.9
%
General and administrative
 
 
 
 
 
 
 
 
 
 
 
expense ratio
16.8
%
 
5.1
%
 
13.1
%
 
17.9
%
 
5.3
%
 
14.0
%
Combined ratio
96.9
%
 
98.4
%
 
99.9
%
 
113.5
%
 
107.1
%
 
113.1
%
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 $108 million and $130 million for the years ended December 31, 2018 and 2017, 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 measure, is presented above.



AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 15 -



AXIS CAPITAL HOLDINGS LIMITED
NON-GAAP FINANCIAL MEASURES RECONCILIATION (UNAUDITED)
OPERATING INCOME AND OPERATING RETURN ON AVERAGE COMMON EQUITY
FOR THE QUARTERS AND YEARS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarters ended
 
Years ended
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
Net income (loss) available (attributable) to common shareholders
$
(198,448
)
 
$
(38,081
)
 
$
396

 
$
(415,779
)
Net investment (gains) losses, net of tax(12)
65,036

 
(42,908
)
 
138,576

 
(26,204
)
Foreign exchange losses (gains), net of tax(13)
(30,138
)
 
41,109

 
(33,496
)
 
126,960

Transaction and reorganization expenses, net of tax(14)
15,195

 
18,130

 
55,904

 
23,879

Revaluation of net deferred tax asset(15)

 
41,629

 

 
41,629

Bargain purchase gain(15)

 

 

 
(15,044
)
Operating income (loss)
$
(148,355
)
 
$
19,879

 
$
161,380

 
$
(264,559
)

 
 
 
 
 
 
 
Earnings (loss) per diluted common share
$
(2.37
)
 
$
(0.46
)
 
$

 
$
(4.94
)
Net investment (gains) losses, net of tax
0.78

 
(0.52
)
 
1.65

 
(0.31
)
Foreign exchange losses (gains), net of tax
(0.36
)
 
0.50

 
(0.40
)
 
1.51

Transaction and reorganization expenses, net of tax
0.18

 
0.22

 
0.67

 
0.28

Revaluation of net deferred tax asset

 
0.50

 

 
0.49

Bargain purchase gain

 

 

 
(0.18
)
Operating income (loss) per diluted common share
$
(1.77
)
 
$
0.24

 
$
1.92

 
$
(3.15
)
 
 
 
 
 
 
 
 
Weighted average diluted common shares outstanding
83,582

 
83,160

 
84,007

 
84,108

 
 
 
 
 
 
 
 
Average common shareholders' equity
$
4,376,172

 
$
4,622,982

 
$
4,410,668

 
$
4,856,280

 
 
 
 
 
 
 
 
Annualized return on average common equity
(18.1
%)
 
(3.3
)%
 
%
 
(8.6
%)
 
 
 
 
 
 
 
 
Annualized operating return on average common equity(16)
(13.6
%)
 
1.7
 %
 
3.7
%
 
(5.4
%)
 
 
 
 
 
 
 
 
12Tax cost (benefit) of $(8) million and $nil for the three months ended December 31, 2018 and 2017, respectively, and $(12) million and $2 million for the years ended 2018 and 2017, 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 million and $(4) million for the three months ended December 31, 2018 and 2017, respectively, and $(4) million and $(8) million for the years ended 2018 and 2017, 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 $(4) million and $(3) million for the three months ended December 31, 2018 and 2017, respectively, and $(11) million and $(3) million for the years ended 2018 and 2017. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
15Tax impact is nil.
16Annualized operating return on average common equity is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to the most comparable GAAP financial measure annualized return on average common equity is provided in the table above, and a discussion of the rationale for the presentation of these items is included later in this release.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 16 -



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 QUARTERS AND YEARS ENDED DECEMBER 31, 2018 AND 2017
 
 
 
 
 
 
 
 
 
Quarters ended
 
Years ended
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
 
 
 
 
 
 
 
 
Net loss attributable to common shareholders
$
(198,448
)
 
$
(38,081
)
 
$
396

 
$
(415,779
)
Net investment (gains) losses, net of tax(12)
65,036

 
(42,908
)
 
138,576

 
(26,204
)
Foreign exchange losses (gains), net of tax(13)
(30,138
)
 
41,109

 
(33,496
)
 
126,960

Transaction and reorganization expenses, net of tax(14)
15,195

 
18,130

 
55,904

 
23,879

Revaluation of net deferred tax asset(15)

 
41,629

 

 
41,629

Bargain purchase gain(15)

 

 

 
(15,044
)
Operating income (loss)
$
(148,355
)
 
$
19,879

 
$
161,380

 
$
(264,559
)
Amortization of VOBA and intangible assets, net of tax(17)
22,395

 
42,644

 
149,470

 
42,644

Amortization of acquisition costs, net of tax(18)
(12,986
)
 
(26,443
)
 
(101,628
)
 
(26,443
)
Ex-PGAAP operating income (loss) (2)
$
(138,946
)
 
$
36,080

 
$
209,222

 
$
(248,358
)
 
 
 
 
 
 
 
 
Loss per diluted common share
$
(2.37
)
 
$
(0.46
)
 
$

 
$
(4.94
)
Net investment (gains) losses, net of tax
0.78

 
(0.52
)
 
1.65

 
(0.31
)
Foreign exchange losses (gains), net of tax
(0.36
)
 
0.50

 
(0.40
)
 
1.51

Transaction and reorganization expenses, net of tax
0.18

 
0.22

 
0.67

 
0.28

Revaluation of net deferred tax asset

 
0.50

 

 
0.49

Bargain purchase gain

 

 

 
(0.18
)
Operating income (loss) per diluted common share
$
(1.77
)
 
$
0.24

 
$
1.92

 
$
(3.15
)
Amortization of VOBA and intangible assets, net of tax(17)
0.27

 
0.51

 
1.78

 
0.51

Amortization of acquisition cost, net of tax(18)
(0.16
)
 
(0.32
)
 
(1.21
)
 
(0.31
)
Ex-PGAAP operating income (loss) per diluted common share(2)
$
(1.66
)
 
$
0.43

 
$
2.49

 
$
(2.95
)
 
 
 
 
 
 
 
 
Weighted average diluted common shares outstanding
83,582

 
83,160

 
84,007

 
84,108

 
 
 
 
 
 
 
 
Average common shareholders' equity
4,376,172

 
4,622,982

 
4,410,668

 
4,856,280

 
 
 
 
 
 
 
 
Annualized return on average common equity
(18.1
)%
 
(3.3
)%
 
%
 
(8.6
)%
 
 
 
 
 
 
 
 
Annualized operating return on average common equity(16)
(13.6
)%
 
1.7
 %
 
3.7
%
 
(5.4
)%
 
 
 
 
 
 
 
 
Annualized ex-PGAAP operating return on average common equity(2)
(12.7
)%
 
3.1
 %
 
4.7
%
 
(5.1
)%
 
 
 
 
 
 
 
 

17Tax cost (benefit) of $(5) million and $(10) million for the three months ended December 31, 2018, and 2017, respectively and $(35) million and $(10) million for the years ended December 31, 2018, and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
18Tax cost (benefit) of $3 million and $6 million for the three months ended December 31, 2018, and 2017, respectively and $24 million and $6 million for the years ended December 31, 2018, and 2017, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 17 -



Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements contained in this release include our expectations regarding market conditions and information regarding our estimates of losses related to natural disasters on our results of operations. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from our expectations. Important factors that could cause actual events or results to be materially different from our expectations include (1) the cyclical nature of the re(insurance) business leading to periods with excess underwriting capacity and unfavorable premium rates, (2) the occurrence and magnitude of natural and man-made disasters, (3) losses from war, terrorism and political unrest or other unanticipated losses, (4) actual claims exceeding our loss reserves, (5) general economic, capital and credit market conditions, (6) the failure of any of the loss limitation methods we employ, (7) the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions, (8) our inability to purchase reinsurance or collect amounts due to us, (9) the breach by third parties in our program business of their obligations to us, (10) difficulties with technology and/or data security, (11) the failure of our policyholders and intermediaries to pay premiums, (12) the failure of our cedants to adequately evaluate risks, (13) inability to obtain additional capital on favorable terms, or at all, (14) the loss of one or more key executives, (15) a decline in our ratings with rating agencies, (16) the loss of business provided to us by our major brokers and credit risk due to our reliance on brokers, (17) changes in accounting policies or practices, (18) the use of industry catastrophe models and changes to these models, (19) changes in governmental regulations and potential government intervention in our industry, (20) failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices, (21) increased competition, (22) 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, (23) fluctuations in interest rates, credit spreads, equity securities' prices and/or currency values, (24) the failure to successfully integrate acquired businesses or realize the expected synergies resulting from such acquisitions, (25) the failure to realize the expected benefits or synergies relating to the Company's transformation program (26) changes in tax laws, and (27) the other factors including but not limited to those set forth in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as such 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.


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 18 -



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 return on average common equity ("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 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). 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 measure, is presented in the Consolidated Segmental Data section of this press release.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 19 -



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 and notes payable. 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).

Bargain purchase gain, recognized upon the acquisition of Compagnie Belge d'Assurances Aviation NV/SA ("Aviabel"), reflects the excess of the fair value of the net identifiable assets acquired over the fair value of consideration transferred and is not indicative of future revenues of the company, therefore, this revenue is excluded from 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).


AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 20 -



The revaluation of net deferred tax asset ("DTA") resulted in a tax expense recognized in the fourth quarter of 2017 related to the revaluation of our net DTA, following the reduction in the U.S. corporate income tax rate from 35% to 21% enacted as part of the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). The nature and timing of the tax expense associated with the U.S. Tax Reform is not related to the underwriting process, therefore, this expense is 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 after-tax net investment gains (losses), foreign exchange losses (gains), transaction and reorganization expenses, revaluation of net deferred tax asset and bargain purchase gain.

Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.

Foreign exchange losses (gains) in our Consolidated Statements of Operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. However, this movement is only one element of the overall impact of foreign exchange rate fluctuations on our financial position. In addition, we recognize unrealized foreign exchange losses (gains) on our available-for-sale investments in other comprehensive income (loss) and foreign exchange losses (gains) realized upon the sale of these investments in net investment gains (losses). These unrealized and realized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported separately 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).

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 21 -




The revaluation of net deferred tax asset ("DTA") resulted in a tax expense recognized in the fourth quarter of 2017 related to the revaluation of our net DTA, following the reduction in the U.S. corporate income tax rate from 35% to 21% enacted as part of the Tax Cuts and Jobs Act of 2017 ("U.S. Tax Reform"). The nature and timing of the tax expense associated with the U.S. Tax Reform is not related to the underwriting process therefore, this expense is excluded it from operating income (loss).

Bargain purchase gain, recognized upon the acquisition of Aviabel, reflects the excess of the fair value of the net identifiable assets acquired over the fair value of consideration transferred and is not indicative of future revenues of the company, therefore, this revenue is excluded from operating income (loss).

Certain users of our financial statements evaluate performance excluding after-tax net investment gains (losses), foreign exchange losses (gains), transaction and reorganization expenses, revaluation of net deferred tax asset and bargain purchase gain 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, revaluation of net deferred tax asset and bargain purchase gain 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 per diluted common share and annualized return on average common equity ("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.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 22 -



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"). We 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. 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.

The reconciliation of ex-PGAAP operating income (loss) per diluted common share and annualized ex-PGAAP operating ROACE to the most comparable GAAP financial measures, earnings per diluted common share and annualized ROACE, respectively, are also presented 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. The Company 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

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 23 -



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 months and year ended December 31, 2018 included the recognition of premium attributable to Novae's balance sheet at the acquisition date without the recognition of the associated acquisition costs.

AXIS Capital Holdings Limited 92 Pitts Bay Road Pembroke, Bermuda HM08
Tel. 441.496.2600 Fax 441.405.2600
www.axiscapital.com
- 24 -

(Back To Top)

Section 3: EX-99.2 (FOURTH QUARTER 2018 INVESTOR FINANCIAL SUPPLEMENT)

Exhibit







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AXIS Capital Holdings Limited








INVESTOR FINANCIAL SUPPLEMENT

FOURTH QUARTER 2018




396549792_axislogoq42016a20.jpg






 
 
 
 
 
 
 
 
 
 
 
 
 
 
AXIS Capital Holdings Limited
 
 
 
 
 
92 Pitts Bay Road
 
 
 
 
 
Pembroke HM 08 Bermuda
 
 
 
 
 
 
 
 
 
 
 
Contact Information:
 
 
 
 
 
Matthew Rohrmann
 
 
 
 
 
Investor Contact
 
 
 
 
 
(212) 940-3339
 
 
 
 
 
investorrelations@axiscapital.com
 
 
 
 
 
 
 
 
 
 
 
Website Information:
 
 
 
 
 
www.axiscapital.com
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This report is for informational purposes only. It should be read in conjunction with the documents that we file with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.
 
 




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AXIS Capital Holdings Limited
FINANCIAL SUPPLEMENT TABLE OF CONTENTS
 
  
Page(s)
  
i - iv
  
II. Income Statements
  
 
 
  
  
  
  
  
 
  
III. Balance Sheets
  
 
  
b. Cash and Invested Assets:
  
 
  
  
  
  
  
  
IV. Loss Reserve Analysis
  
 
  
  
  
  
 
 
 
V. Share Analysis
  
 
  
  
  
VI. Non-GAAP Financial Measures
  
 
  
 
 
 
 


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AXIS Capital Holdings Limited
BASIS OF PRESENTATION

AXIS Capital Holdings Limited's ("AXIS Capital" or the "Company") underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has two reportable segments; insurance and reinsurance.

During the three months ended March 31, 2018, the Company realigned its accident and health business by integrating this business and its operations into the Company's insurance and reinsurance segments. Financial results relating to this business were previously included in the results of the insurance segment of the Company. As a result of the realignment accident and health results are included in the results of both the insurance and reinsurance segments of the Company with effect from January 1, 2018. The results are inclusive of underwriting-related general and administrative expenses attributable to the Company’s accident and health business. In addition, to facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year's presentation. These reclassifications did not impact results of operations, financial condition or liquidity.

DEFINITIONS AND PRESENTATION
All financial information contained herein is unaudited, except for the consolidated balance sheets at December 31, 2017 and December 31, 2016 and consolidated statements of operations for the years then ended.
Amounts may not reconcile exactly due to rounding differences.
Unless otherwise noted, all data is in thousands, except for ratio information.
NM - Not meaningful; NA - Not applicable
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This document contains “forward-looking statements” within the meaning of the U.S. federal securities laws. All statements, other than statements of historical facts included in this document, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections, are "forward-looking statements". 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. Our expectations are not guarantees and are based on currently available competitive, financial and economic data along with our operating plans. Forward-looking statements contained in this document 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, 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. Accordingly, there are or will be important factors that could cause actual 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 re(insurance) business leading to periods with excess underwriting capacity and unfavorable premium rates,
the occurrence and magnitude of natural and man-made disasters,
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,
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,


i

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fluctuations in interest rates, credit spreads, equity securities' prices and/or currency values,
the failure to successfully integrate acquired businesses or realize the expected synergies resulting from such acquisitions,
the failure to realize the expected benefits or synergies relating to the Company's transformation initiative,
changes in tax laws, and
the other factors including but not limited to those set forth 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.

ii

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AXIS Capital Holdings Limited
BASIS OF PRESENTATION
BUSINESS DESCRIPTIONS

INSURANCE SEGMENT

Our insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The following are the lines of business in our insurance segment:
Property: provides physical loss or damage, business interruption and machinery breakdown cover for virtually all types of property, including commercial buildings, residential premises, construction projects and onshore energy installations. This line of business includes both primary and excess risks, some of which are catastrophe-exposed.
Marine: provides cover for traditional marine classes, including offshore energy, cargo, liability, recreational marine, fine art, specie, hull and war. Offshore energy coverage includes physical damage, business interruption, operators extra expense and liability coverage for all aspects of offshore upstream energy, from exploration and construction through the operation and distribution phases.
Terrorism: provides cover for physical damage and business interruption of an insured following an act of terrorism and includes kidnap and ransom, and crisis management insurance.
Aviation: provides hull and liability as well as specific war cover primarily for passenger airlines but also for cargo operations, general aviation operations, airports, aviation authorities, security firms and product manufacturers.
Credit and Political Risk: provides credit and political risk insurance products for banks, commodity traders, corporations and multilateral and export credit agencies. Cover is provided for a range of risks including sovereign default, credit default, political violence, currency inconvertibility and non-transfer, expropriation, aircraft non-repossession and contract frustration due to political events.
Professional Lines: provides directors’ and officers’ liability, errors and omissions liability, employment practices liability, fiduciary liability, crime, professional indemnity, cyber and privacy insurance, medical malpractice and other financial insurance related covers for commercial enterprises, financial institutions and not-for-profit organizations. This business is predominantly written on a claims-made basis.
Liability: primarily targets primary and low/mid-level excess and umbrella commercial liability risks in the U.S. wholesale markets in addition to primary and excess of loss employers, public and products liability predominately in the UK. Target industry sectors include construction, manufacturing, transportation and trucking and other services.
Accident and Health: includes accidental death, travel insurance and specialty health products for employer and affinity groups.
Discontinued Lines - Novae: includes those lines of business that Novae exited or placed into run-off in the fourth quarter of 2016 and in the first quarter of 2017. These discontinued insurance lines include Financial Institutions, Professional Indemnity, International Liability, International Direct property.



iii

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AXIS Capital Holdings Limited
BASIS OF PRESENTATION
 
BUSINESS DESCRIPTIONS (CONTINUED)

REINSURANCE SEGMENT

Our reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The following are the lines of business in our reinsurance segment:

Catastrophe: provides protection for most catastrophic losses that are covered in the underlying insurance policies written by our cedants. The exposure in the underlying policies is principally property-related but other exposures including workers compensation and personal accident are also covered. The principal perils in this portfolio include hurricane and windstorm, earthquake, flood, tornado, hail and fire. In some instances, terrorism may be a covered peril or the only peril. This business is principally written on an excess of loss basis.
Property: provides protection for property damage and related losses resulting from natural and man-made perils that are covered in underlying personal and commercial policies lines insurance policies written by our cedants. The predominant exposure is to property damage, but other risks, including business interruption and other non-property losses, may also be covered when arising from a covered peril. The most significant perils in this portfolio include windstorm, tornado and earthquake, but other perils such as freezes, riots, floods, industrial explosions, fires, hail and a number of other loss events are also included. This business is written on both a proportional and excess of loss basis.
Professional Lines: provides cover for directors’ and officers’ liability, employment practices liability, medical malpractice, professional indemnity, environmental liability and miscellaneous errors and omissions insurance risks. The underlying business is predominantly written on a claims-made basis. This business is written on both a proportional and excess of loss basis.
Credit and Surety: provides reinsurance of trade credit insurance products and includes both proportional and excess of loss structures. The underlying insurance indemnifies sellers of goods and services in the event of a payment default by the buyer of those goods and services. Credit insurance cover is provided to mortgage guaranty insurers and government sponsored entities. Cover for losses arising from a broad array of surety bonds issued by insurers to satisfy regulatory demands or contract obligations in a variety of jurisdictions around the world is also offered.
Motor: provides cover to insurers for motor liability and property damage losses arising out of any one occurrence. A loss occurrence can involve one or many claimants where the ceding insurer aggregates the claims from the occurrence. Traditional proportional and non-proportional reinsurance as well as structured solutions are offered.
Liability: provides cover to insurers of standard casualty business, excess and surplus casualty business and specialty casualty programs. The primary focus of the underlying business is general liability, although workers' compensation and auto liability covers are also written.
Agriculture: provides protection for risks associated with the production of food and fiber on a global basis for primary insurance companies writing multi-peril crop insurance, crop hail, and named peril covers, as well as custom risk transfer mechanisms for agricultural dependent industries with exposures to crop yield and/or price deviations. The business is provided on both a proportional and aggregate stop loss reinsurance basis.
Engineering: provides coverage for all types of construction risks and risks associated with erection, testing and commissioning of machinery and plants during the construction stage. This line of business also includes coverage for losses arising from operational failures of machinery, plant and equipment and electronic equipment as well as business interruption.
Marine and Other: includes marine, aviation and personal accident reinsurance.