AXIS Capital Notes Profitable Year; Reports Net Income of $90.1M

Bermuda-based AXIS Capital Holdings Limited reported net income available to common shareholders of $90.1 million for the year ended Dec. 31, 2005, or $0.57 per diluted common share, compared with net income of $495.0 million, or $2.98 per diluted common share, for the year ended Dec. 31, 2004.

Net income available to common shareholders for the quarter ended Dec. 31, 2005 was $233.5 million, or $1.47 per diluted common share, compared with net income of $181.1 million, or $1.09 per diluted common share, for the quarter ended Dec. 31, 2004.

The decrease in the 2005 net income available to common shareholders was principally caused by pre-tax net losses from Hurricanes Katrina, Rita and Wilma of $1,019.1 million. These net losses include $846.9 million for Hurricanes Katrina and Rita, an increase of 5.3% over previously reported net loss estimates for these two events of $804.5 million, and $172.2 million for Hurricane Wilma.

These net losses compared to net losses from Hurricanes Charley, Frances, Ivan and Jeanne of $266.3 million for 2004. The net loss estimate for Hurricane Katrina remained stable at $723.4 million and the net loss estimate for Hurricane Rita increased to $123.5 million from the company’s previous estimate of $80.9 million. The initial range of net loss estimates for Hurricane Wilma was determined immediately following the event and the company’s updated estimate reflects its analysis of the latest loss information.

Commenting on the 2005 financial year results, John Charman, chief executive officer and president of AXIS Capital, stated: “In a year of unprecedented catastrophe losses, AXIS has clearly demonstrated that its experienced, realistic risk management practice, coupled with its strongly diversified business portfolio, is able to withstand extraordinary losses. Having been consistently involved in business subject to volatility, my 34-year career goal has been to accrete capital meaningfully over the long-term and, at the very least, to be in a position to do so by preserving capital regardless of market circumstances. It’s always disappointing to report major loss events; however, I am very proud that AXIS was able to produce net income for 2005 of $90.1 million. We finished the year with $4 billion in total capital. This is capital that was preserved by our focused core underwriting discipline and further strengthened by our capital raisings during the last half of 2005.

“Our diversified global franchise and underwriting machine is well-positioned to maximize any benefit wherever and whenever it may appear in this firming market environment. Our underwriters have a proven track record of bringing opportunities to fruition quickly and decisively in an intelligent peer review environment and, in the aftermath of Hurricane Katrina, have been rigorously applying remedial action. AXIS is truly well positioned for 2006 and beyond.”

The company’s insurance segment reported a combined ratio of 93.2% for 2005 compared to 81.0% for 2004. The increase was driven by net losses of $405.6 million, or 33.8 percentage points, relating to Hurricanes Katrina, Rita and Wilma compared to net losses of $97.1 million, or 8.5 percentage points, relating to Hurricanes Charley, Frances, Ivan and Jeanne in 2004. The insurance segment experienced favorable prior period reserve development of $268.7 million, or 22.4 percentage points, on short-tail lines of business from accident years 2004 and prior, compared to $106.8 million, or 9.3 percentage points, in 2004.

During the fourth quarter of 2005, the insurance segment generated a combined ratio of 71.9% compared to 68.5% in the same period in 2004. The increase was primarily due to net losses of $70.7 million from Hurricane Wilma, which added 22.4 percentage points to the loss ratio. The insurance segment experienced favorable prior period development of $96.1 million, or 30.4 percentage points, in the quarter on short-tail lines of business from accident years 2004 and prior, compared to $27.4 million, or 9.1 percentage points, in the same period in 2004.

The reinsurance segment reported gross premiums written in 2005 of $1,518.9 million, an increase of 39.0% from 2004, and net premiums written in 2005 of $1,491.2 million, an increase of 40.6% from 2004. The increase in gross premiums written was primarily driven by the company’s property, catastrophe and liability lines of business.

The fourth quarter is not a significant renewal date for the company’s reinsurance segment. Gross premiums written were $161.1 million for the fourth quarter of 2005 compared to $58.1 million for the same period in 2004. The increase was primarily due to additional premiums written in the property and liability lines of business.

The company’s reinsurance segment reported a combined ratio of 106.2% for 2005 compared to 84.5% in 2004, which was largely driven by an increase in the loss ratio from 63.4% to 86.4%. The segment incurred net losses of $613.5 million, or 45.4 percentage points, relating to Hurricanes Katrina, Rita and Wilma compared to net losses of $169.2 million, or 19.2 percentage points, relating to Hurricanes Charley, Frances, Ivan and Jeanne in 2004. Favorable prior period reserve development was from short-tail lines of business and was $114.3 million, or 8.5 percentage points, in 2005 compared to $74.9 million, or 8.5 percentage points for 2004.

The combined ratio in the reinsurance segment for the fourth quarter of 2005 was 69.5% compared to 88.1% for the same period in 2004. The decrease was largely due to a decrease in the loss ratio from 66.7% to 51.5%, which was primarily the result of prior period favorable development from short-tail lines of business of $50.4 million, or 13.6 percentage points, in the quarter compared to $13.0 million, or 5.3 percentage points, in the same period in 2004.