AXIS Capital Reports Third Quarter Net Income Available to Common Shareholders of $47 Million, or $0.56 Per Diluted Common Share
AXIS Capital Holdings Limited (AXS) reported its Q3 2021 results, achieving a net income of $47 million ($0.56 per share) compared to a net loss of $73 million in Q3 2020. The current accident year combined ratio improved by 4.8 points to 87.6%, excluding catastrophe losses. Catastrophe and weather-related losses totaled $250 million, affecting the results primarily due to Hurricane Ida. Gross premiums written rose by 24% to $1.6 billion, and the annualized ROACE was 3.9%. Book value per share decreased by 1.2% to $54.86, reflecting competitive market conditions.
- Net income increased to $47 million from a net loss of $73 million year-over-year.
- Gross premiums written rose by 24% to $1.6 billion.
- Improvement in the combined ratio by 4.8 points to 87.6% (ex-cat losses).
- Operating income for Q3 2021 was $1 million compared to an operating loss of $65 million in 2020.
- Book value per diluted common share decreased by $0.64, or 1.2%, from the previous quarter.
- Pre-tax catastrophe losses of $250 million impacted financial results.
- Annualized return on average common equity (ROACE) was relatively low at 3.9%.
For the third quarter of 2021, the Company reports:
-
Improvement of 4.8 points in current accident year combined ratio, excluding catastrophe and weather-related losses to
87.6% , compared to the prior year -
Operating income of
$1 million $0.01 -
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of
$250 million -
Annualized return on average common equity ("ROACE") of
3.9% -
Book value per diluted common share of
$54.86 $0.64 1.2% , compared toJune 30, 2021
PEMBROKE,
Commenting on the third quarter 2021 financial results,
“Once again our industry was challenged by severe weather events and our focus continues to be on supporting our clients and the communities that have been impacted.
"In the face of these challenges, we continued to deliver, accelerating momentum in our progress highlighted by eight consecutive quarters of year-over-year improvement in our combined ratio ex-cat and weather. Notably, AXIS generated net operating income for the quarter, and our lower market share of the events demonstrates the progress that we’ve made in reducing our net exposure to catastrophes. Our results were underscored by strong top line growth, disciplined underwriting, and solid investment income.
"AXIS is well positioned in key specialty markets and we’re increasingly confident that favorable conditions will continue through 2022 and likely beyond, providing us with an attractive path to further profitable growth.”
Third Quarter Consolidated Results*
-
Net income available to common shareholders for the third quarter of 2021 was
$47 million $0.56 $(73) million $(0.87) -
Net income available to common shareholders for the nine months ended
September 30, 2021 was$391 million $4.59 $(146) million $(1.73) -
Operating income1 for the third quarter of 2021 was
$1 million $0.01 $(65) million $(0.77) -
Operating income for the nine months ended
September 30, 2021 was$254 million $2.98 $(158) million $(1.88) -
Adjusted for dividends declared, the book value per diluted common share decreased by
$0.22 0.4% , compared toJune 30, 2021 . -
Adjusted for dividends declared, the book value per diluted common share increased by
$1.79 3.3% , over the past twelve months.
* Amounts may not reconcile due to rounding differences. |
1 Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided later in this press release. Loss per diluted common share and operating loss per diluted common share for the three and nine months ended |
Third Quarter Consolidated Underwriting Highlights2
-
Gross premiums written increased by
$315 million 24% ($299 million 22% , on a constant currency basis3), to$1.6 billion $241 million 26% , in the insurance segment and an increase of$75 million 19% , in the reinsurance segment. -
Net premiums written increased by
$180 million 22% ($166 million 20% , on a constant currency basis), to$1.0 billion $163 million 30% , in the insurance segment and an increase of$18 million 7% , in the reinsurance segment.
|
Three months ended |
|||||||||
KEY RATIOS |
2021 |
|
2020 |
|
Change |
|||||
Current accident year loss ratio excluding catastrophe and weather-related losses4 |
55.4 |
% |
|
58.5 |
% |
|
(3.1 |
pts) |
||
Catastrophe and weather-related losses ratio |
20.7 |
% |
|
22.2 |
% |
|
(1.5 |
pts) |
||
Current accident year loss ratio |
76.1 |
% |
|
80.7 |
% |
|
(4.6 |
pts) |
||
Prior year reserve development ratio |
(0.9 |
%) |
|
(0.1 |
%) |
|
(0.8 |
pts) |
||
Net losses and loss expenses ratio |
75.2 |
% |
|
80.6 |
% |
|
(5.4 |
pts) |
||
Acquisition cost ratio |
19.1 |
% |
|
21.1 |
% |
|
(2.0 |
pts) |
||
General and administrative expense ratio |
13.1 |
% |
|
12.8 |
% |
|
0.3 |
pts |
||
Combined ratio |
107.4 |
% |
|
114.5 |
% |
|
(7.1 |
pts) |
||
|
|
|
|
|
|
|||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
87.6 |
% |
|
92.4 |
% |
|
(4.8 |
pts) |
||
-
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$250 million $105 million $145 million $240 million $132 million $108 million -
No change to the net loss estimate of
$360 million -
Net favorable prior year reserve development was
$11 million $5 million $6 million $0.6 million $0.3 million $0.3 million
2 All comparisons are with the same period of the prior year, unless otherwise stated. |
3 Amounts 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 and a discussion of the rationale for the presentation of these items are provided in this press release. |
4 The current accident year loss ratio excluding catastrophe and weather-related losses was calculated by dividing the current accident year losses less estimated pre-tax catastrophe and weather-related losses, net of reinsurance by net premiums earned less reinstatement premiums. |
Nine Months Consolidated Underwriting Highlights
-
Gross premiums written increased by
$645 million 12% ($575 million 10% , on a constant currency basis), to$6.1 billion $634 million 22% , in the insurance segment and an increase of$11 million -
Net premiums written increased by
$428 million 12% ($363 million 10% , on a constant currency basis), to$4.0 billion $399 million 23% , in the insurance segment and an increase of$29 million 2% , in the reinsurance segment.
|
Nine months ended |
|||||||||
KEY RATIOS |
2021 |
|
2020 |
|
Change |
|||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
55.4 |
% |
|
57.8 |
% |
|
(2.4 |
pts) |
||
Catastrophe and weather-related losses ratio |
11.3 |
% |
|
17.5 |
% |
|
(6.2 |
pts) |
||
Current accident year loss ratio |
66.7 |
% |
|
75.3 |
% |
|
(8.6 |
pts) |
||
Prior year reserve development ratio |
(0.7 |
%) |
|
(0.3 |
%) |
|
(0.4 |
pts) |
||
Net losses and loss expenses ratio |
66.0 |
% |
|
75.0 |
% |
|
(9.0 |
pts) |
||
Acquisition cost ratio |
19.3 |
% |
|
21.2 |
% |
|
(1.9 |
pts) |
||
General and administrative expense ratio |
13.8 |
% |
|
13.4 |
% |
|
0.4 |
pts |
||
Combined ratio |
99.1 |
% |
|
109.6 |
% |
|
(10.5 |
pts) |
||
|
|
|
|
|
|
|||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
88.5 |
% |
|
92.4 |
% |
|
(3.9 |
pts) |
||
-
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$389 million $152 million $237 million Winter Storms Uri and Viola principally related to the state ofTexas , July European floods, and other weather-related events, compared to$576 million $325 million $251 million -
No change to the net loss estimate of
$360 million -
Net favorable prior year reserve development was
$23 million $13 million $10 million $9 million $5 million $5 million
Segment Highlights
Insurance Segment
|
Three months ended |
|||||||||||
($ in thousands) |
2021 |
|
2020 |
|
Change |
|||||||
Gross premiums written |
$ |
1,176,500 |
|
|
$ |
935,817 |
|
|
25.7 |
% |
||
Net premiums written |
707,492 |
|
|
544,857 |
|
|
29.8 |
% |
||||
Net premiums earned |
681,008 |
|
|
570,184 |
|
|
19.4 |
% |
||||
Underwriting income (loss) |
10,361 |
|
|
(81,465 |
) |
|
nm |
|||||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
50.8 |
% |
|
54.7 |
% |
|
(3.9 |
pts) |
||||
Catastrophe and weather-related losses ratio |
15.0 |
% |
|
23.1 |
% |
|
(8.1 |
pts) |
||||
Current accident year loss ratio |
65.8 |
% |
|
77.8 |
% |
|
(12.0 |
pts) |
||||
Prior year reserve development ratio |
(0.8 |
%) |
|
— |
% |
|
(0.8 |
pts) |
||||
Net losses and loss expenses ratio |
65.0 |
% |
|
77.8 |
% |
|
(12.8 |
pts) |
||||
Acquisition cost ratio |
18.1 |
% |
|
20.1 |
% |
|
(2.0 |
pts) |
||||
Underwriting-related general and administrative expense ratio |
15.4 |
% |
|
16.5 |
% |
|
(1.1 |
pts) |
||||
Combined ratio |
98.5 |
% |
|
114.4 |
% |
|
(15.9 |
pts) |
||||
|
|
|
|
|
|
|||||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
84.3 |
% |
|
91.3 |
% |
|
(7.0 |
pts) |
||||
nm - not meaningful is defined as a variance greater than +/- |
||||||||||||
-
Gross premiums written increased by
$241 million 26% ($228 million 24% , on a constant currency basis), primarily attributable to increases in professional lines, liability, and property lines driven by new business and favorable rate changes. -
Net premiums written increased by
$163 million 30% ($152 million 28% , on a constant currency basis), reflecting the increase in gross premiums written in the quarter. -
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$105 million $132 million - The current accident year loss ratio excluding catastrophe and weather-related losses decreased by 3.9 points in the third quarter, compared to the same period in 2020, principally due to the impact of favorable pricing over loss trends, and underwriting actions most notably in liability, aviation, and property lines.
-
Net favorable prior year reserve development was
$5 million $0.3 million - The acquisition cost ratio decreased by 2.0 points in the third quarter, compared to the same period in 2020, primarily due to the decrease in program business in property lines written in recent periods and an increase in ceding commissions.
- The underwriting-related general and administrative expense ratio decreased by 1.1 points in the third quarter, compared to the same period in 2020, mainly driven by an increase in net premiums earned, partially offset by an increase in personnel costs.
|
Nine months ended |
|||||||||||
($ in thousands) |
2021 |
|
2020 |
|
Change |
|||||||
Gross premiums written |
$ |
3,548,169 |
|
|
$ |
2,914,100 |
|
|
21.8 |
% |
||
Net premiums written |
2,128,190 |
|
|
1,729,268 |
|
|
23.1 |
% |
||||
Net premiums earned |
1,928,970 |
|
|
1,709,268 |
|
|
12.9 |
% |
||||
Underwriting income (loss) |
142,703 |
|
|
(169,698 |
) |
|
nm |
|||||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
51.6 |
% |
|
54.8 |
% |
|
(3.2 |
pts) |
||||
Catastrophe and weather-related losses ratio |
7.8 |
% |
|
18.7 |
% |
|
(10.9 |
pts) |
||||
Current accident year loss ratio |
59.4 |
% |
|
73.5 |
% |
|
(14.1 |
pts) |
||||
Prior year reserve development ratio |
(0.7 |
%) |
|
(0.2 |
%) |
|
(0.5 |
pts) |
||||
Net losses and loss expenses ratio |
58.7 |
% |
|
73.3 |
% |
|
(14.6 |
pts) |
||||
Acquisition cost ratio |
18.0 |
% |
|
20.1 |
% |
|
(2.1 |
pts) |
||||
Underwriting-related general and administrative expense ratio |
16.0 |
% |
|
16.7 |
% |
|
(0.7 |
pts) |
||||
Combined ratio |
92.7 |
% |
|
110.1 |
% |
|
(17.4 |
pts) |
||||
|
|
|
|
|
|
|||||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
85.6 |
% |
|
91.6 |
% |
|
(6.0 |
pts) |
||||
nm - not meaningful |
||||||||||||
-
Gross premiums written increased by
$634 million 22% ($596 million 20% , on a constant currency basis), primarily attributable to increases in professional lines, liability, property, and marine lines driven by new business and favorable rate changes. -
Net premiums written increased by
$399 million 23% ($365 million 21% , on a constant currency basis), reflecting the increase in gross premiums written, partially offset by increases in premiums ceded in professional lines, liability, and property lines. -
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$152 million Winter Storms Uri and Viola, and other weather-related events, compared to$325 million
Reinsurance Segment
|
Three months ended |
|||||||||||
($ in thousands) |
2021 |
|
2020 |
|
Change |
|||||||
Gross premiums written |
$ |
469,989 |
|
|
$ |
395,361 |
|
|
18.9 |
% |
||
Net premiums written |
288,979 |
|
|
271,125 |
|
|
6.6 |
% |
||||
Net premiums earned |
530,419 |
|
|
521,128 |
|
|
1.8 |
% |
||||
Underwriting income (loss) |
(69,176 |
) |
|
(53,859 |
) |
|
28.4 |
% |
||||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
61.4 |
% |
|
62.7 |
% |
|
(1.3 |
pts) |
||||
Catastrophe and weather-related losses ratio |
28.0 |
% |
|
21.1 |
% |
|
6.9 |
pts |
||||
Current accident year loss ratio |
89.4 |
% |
|
83.8 |
% |
|
5.6 |
pts |
||||
Prior year reserve development ratio |
(1.0 |
%) |
|
(0.1 |
%) |
|
(0.9 |
pts) |
||||
Net losses and loss expenses ratio |
88.4 |
% |
|
83.7 |
% |
|
4.7 |
pts |
||||
Acquisition cost ratio |
20.4 |
% |
|
22.3 |
% |
|
(1.9 |
pts) |
||||
Underwriting-related general and administrative expense ratio |
5.6 |
% |
|
4.5 |
% |
|
1.1 |
pts |
||||
Combined ratio |
114.4 |
% |
|
110.5 |
% |
|
3.9 |
pts |
||||
|
|
|
|
|
|
|||||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
87.4 |
% |
|
89.5 |
% |
|
(2.1 |
pts) |
||||
-
Gross premiums written increased by
$75 million 19% ($71 million 18% , on a constant currency basis), primarily attributable to increases in liability, accident and health, and catastrophe lines, partially offset by a decrease in property lines. The increases in liability and accident and health lines were largely driven by favorable market conditions. The increase in catastrophe lines was attributable to reinstatement premiums. The decrease in property lines was driven by non-renewals and decreased line sizes associated with repositioning the portfolio. -
Net premiums written increased by
$18 million 7% ($14 million 5% , on a constant currency basis), reflecting the increase in gross premiums written in the quarter, partially offset by increases in premium ceded in catastrophe, credit and surety, and liability lines. -
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$145 million $108 million - The current accident year loss ratio excluding catastrophe and weather-related losses decreased by 1.3 points in the third quarter, compared to the same period in 2020, principally due to improved loss experience in credit and surety, and accident and health lines, and the impact of favorable pricing over loss trends, partially offset by the impact of changes in retrocessional arrangements and changes in business mix.
-
Net favorable prior year reserve development was
$6 million $0.3 million - The acquisition cost ratio decreased by 1.9 points in the third quarter, compared to the same period in 2020, primarily due to the impact of retrocessional contracts.
- The underwriting-related general and administrative expense ratio increased by 1.1 points in the third quarter, compared to the same period in 2020, mainly driven by an increase in personnel costs.
|
Nine months ended |
|||||||||||
($ in thousands) |
2021 |
|
2020 |
|
Change |
|||||||
Gross premiums written |
$ |
2,574,987 |
|
|
$ |
2,564,419 |
|
|
0.4 |
% |
||
Net premiums written |
1,851,025 |
|
|
1,821,692 |
|
|
1.6 |
% |
||||
Net premiums earned |
1,543,120 |
|
|
1,574,673 |
|
|
(2.0 |
%) |
||||
Underwriting income (loss) |
(13,019 |
) |
|
(74,982 |
) |
|
(82.6 |
%) |
||||
|
|
|
|
|
|
|||||||
Underwriting ratios: |
|
|
|
|
|
|||||||
Current accident year loss ratio excluding catastrophe and weather-related losses |
60.2 |
% |
|
61.1 |
% |
|
(0.9 |
pts) |
||||
Catastrophe and weather-related losses ratio |
15.7 |
% |
|
16.1 |
% |
|
(0.4 |
pts) |
||||
Current accident year loss ratio |
75.9 |
% |
|
77.2 |
% |
|
(1.3 |
pts) |
||||
Prior year reserve development ratio |
(0.7 |
%) |
|
(0.3 |
%) |
|
(0.4 |
pts) |
||||
Net losses and loss expenses ratio |
75.2 |
% |
|
76.9 |
% |
|
(1.7 |
pts) |
||||
Acquisition cost ratio |
20.8 |
% |
|
22.5 |
% |
|
(1.7 |
pts) |
||||
Underwriting-related general and administrative expense ratio |
5.8 |
% |
|
4.9 |
% |
|
0.9 |
pts |
||||
Combined ratio |
101.8 |
% |
|
104.3 |
% |
|
(2.5 |
pts) |
||||
|
|
|
|
|
|
|||||||
Current accident year combined ratio excluding catastrophe and weather-related losses |
86.8 |
% |
|
88.5 |
% |
|
(1.7 |
pts) |
||||
-
Gross premiums written increased by
$11 million $21 million 1% , on a constant currency basis), primarily attributable to increases in liability, professional lines, and accident and health lines, largely due to favorable rate changes. These increases were partially offset by decreases in catastrophe, motor, property, engineering, and credit and surety lines due to non-renewals and decreased line sizes. -
Net premiums written increased by
$29 million 2% (decreased by$2 million -
Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were
$237 million Winter Storms Uri and Viola, July European floods, and other weather-related events, compared to$251 million
Investments
Net investment income of
Pre-tax total return on cash and investments5 was
For the nine months ended
Our fixed income portfolio book yield was
5 Pre-tax total return on cash and investments includes net investment income (loss), net investment gains (losses), interest in income (loss) of equity method investments and change in unrealized investment gains (losses) generated by average cash and investment balances. Total cash and invested assets represents the total cash and cash equivalents, fixed maturities, equity securities, mortgage loans, other investments, equity method investments, short-term investments, accrued interest receivable and net receivable (payable) for investments sold (purchased). |
6 Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, also included foreign exchange (losses) gains of |
Capitalization / Shareholders’ Equity
Total capital7 at
Book value per diluted common share, calculated on a treasury stock basis, decreased by
During the third quarter of 2021, the Company declared dividends of
7 Total capital represents the sum of total shareholders' equity and debt. |
Conference Call
We will host a conference call on
In addition, an investor financial supplement for the quarter ended
About
Website and Social Media Disclosure
We use our website (www.axiscapital.com) and our corporate LinkedIn (
Follow
LinkedIn: http://bit.ly/2kRYbZ5
|
|||||||||||
|
|
|
|
||||||||
|
2021 |
|
2020 |
||||||||
|
(in thousands) |
||||||||||
Assets |
|
||||||||||
Investments: |
|
||||||||||
Fixed maturities, available for sale, at fair value |
$ |
12,380,959 |
|
|
$ |
12,041,799 |
|
||||
Fixed maturities, held to maturity, at amortized cost |
416,879 |
|
|
— |
|
||||||
Equity securities, at fair value |
618,822 |
|
|
518,445 |
|
||||||
Mortgage loans, held for investment, at fair value |
623,487 |
|
|
593,290 |
|
||||||
Other investments, at fair value |
892,664 |
|
|
829,156 |
|
||||||
Equity method investments |
145,080 |
|
|
114,209 |
|
||||||
Short-term investments, at fair value |
68,267 |
|
|
161,897 |
|
||||||
Total investments |
15,146,158 |
|
|
14,258,796 |
|
||||||
Cash and cash equivalents |
947,542 |
|
|
902,831 |
|
||||||
Restricted cash and cash equivalents |
551,662 |
|
|
600,401 |
|
||||||
Accrued interest receivable |
62,423 |
|
|
65,020 |
|
||||||
Insurance and reinsurance premium balances receivable |
2,978,996 |
|
|
2,738,342 |
|
||||||
Reinsurance recoverable on unpaid losses and loss expenses |
4,989,645 |
|
|
4,496,641 |
|
||||||
Reinsurance recoverable on paid losses and loss expenses |
506,503 |
|
|
434,201 |
|
||||||
Deferred acquisition costs |
544,384 |
|
|
431,439 |
|
||||||
Prepaid reinsurance premiums |
1,460,723 |
|
|
1,194,455 |
|
||||||
Receivable for investments sold |
2,028 |
|
|
2,150 |
|
||||||
|
100,801 |
|
|
100,801 |
|
||||||
Intangible assets |
211,557 |
|
|
219,633 |
|
||||||
Value of business acquired |
770 |
|
|
3,854 |
|
||||||
Operating lease right-of-use assets |
107,791 |
|
|
123,579 |
|
||||||
Other assets |
324,154 |
|
|
305,544 |
|
||||||
Total assets |
$ |
27,935,137 |
|
|
$ |
25,877,687 |
|
||||
Liabilities |
|
|
|
||||||||
Reserve for losses and loss expenses |
$ |
14,658,996 |
|
|
$ |
13,926,766 |
|
||||
Unearned premiums |
4,464,282 |
|
|
3,685,886 |
|
||||||
Insurance and reinsurance balances payable |
1,442,729 |
|
|
1,092,042 |
|
||||||
Debt |
1,310,650 |
|
|
1,309,695 |
|
||||||
Payable for investments purchased |
239,073 |
|
|
104,777 |
|
||||||
Operating lease liabilities |
123,874 |
|
|
140,263 |
|
||||||
Other liabilities |
360,478 |
|
|
322,564 |
|
||||||
Total liabilities |
22,600,082 |
|
|
20,581,993 |
|
||||||
Shareholders' equity |
|
|
|
||||||||
Preferred shares |
550,000 |
|
|
550,000 |
|
||||||
Common shares |
2,206 |
|
|
2,206 |
|
||||||
Additional paid-in capital |
2,336,895 |
|
|
2,330,054 |
|
||||||
Accumulated other comprehensive income |
150,122 |
|
|
414,395 |
|
||||||
Retained earnings |
6,044,843 |
|
|
5,763,607 |
|
||||||
|
(3,749,011 |
) |
|
(3,764,568 |
) |
||||||
Total shareholders' equity |
5,335,055 |
|
|
5,295,694 |
|
||||||
Total liabilities and shareholders' equity |
$ |
27,935,137 |
|
|
$ |
25,877,687 |
|
||||
|
|||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
Three months ended |
|
Nine months ended |
||||||||||||||
|
2021 |
2020 |
2021 |
2020 |
|||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
(in thousands, except per share amounts) |
||||||||||||||||
Revenues |
|
|
|
|
|
|
|
||||||||||
Net premiums earned |
$ |
1,211,427 |
|
|
$ |
1,091,312 |
|
|
$ |
3,472,090 |
|
|
$ |
3,283,941 |
|
||
Net investment income |
107,339 |
|
|
101,956 |
|
|
326,174 |
|
|
240,098 |
|
||||||
Net investment gains |
10,932 |
|
|
55,609 |
|
|
113,868 |
|
|
45,777 |
|
||||||
Other insurance related income (loss) |
7,665 |
|
|
1,440 |
|
|
16,262 |
|
|
(5,270 |
) |
||||||
Total revenues |
1,337,363 |
|
|
1,250,317 |
|
|
3,928,394 |
|
|
3,564,546 |
|
||||||
|
|
|
|
|
|
|
|
||||||||||
Expenses |
|
|
|
|
|
|
|
||||||||||
Net losses and loss expenses |
911,369 |
|
|
879,677 |
|
|
2,292,559 |
|
|
2,464,012 |
|
||||||
Acquisition costs |
231,712 |
|
|
230,564 |
|
|
669,654 |
|
|
697,716 |
|
||||||
General and administrative expenses |
157,960 |
|
|
138,823 |
|
|
478,820 |
|
|
436,538 |
|
||||||
Foreign exchange losses (gains) |
(28,032 |
) |
|
60,734 |
|
|
(4,316 |
) |
|
8,760 |
|
||||||
Interest expense and financing costs |
15,954 |
|
|
15,574 |
|
|
46,759 |
|
|
59,641 |
|
||||||
Reorganization expenses |
— |
|
|
1,413 |
|
|
— |
|
|
822 |
|
||||||
Amortization of value of business acquired |
1,028 |
|
|
1,028 |
|
|
3,083 |
|
|
4,111 |
|
||||||
Amortization of intangible assets |
3,149 |
|
|
2,838 |
|
|
9,163 |
|
|
8,564 |
|
||||||
Total expenses |
1,293,140 |
|
|
1,330,651 |
|
|
3,495,722 |
|
|
3,680,164 |
|
||||||
|
|
|
|
|
|
|
|
||||||||||
Income (loss) before income taxes and interest in income (loss) of equity method investments |
44,223 |
|
|
(80,334 |
) |
|
432,672 |
|
|
(115,618 |
) |
||||||
Income tax (expense) benefit |
(1,186 |
) |
|
12,056 |
|
|
(49,827 |
) |
|
6,030 |
|
||||||
Interest in income (loss) of equity method investments |
11,911 |
|
|
2,896 |
|
|
30,871 |
|
|
(13,579 |
) |
||||||
Net income (loss) |
54,948 |
|
|
(65,382 |
) |
|
413,716 |
|
|
(123,167 |
) |
||||||
Preferred share dividends |
7,563 |
|
|
7,563 |
|
|
22,688 |
|
|
22,688 |
|
||||||
Net income (loss) available (attributable) to common shareholders |
$ |
47,385 |
|
|
$ |
(72,945 |
) |
|
$ |
391,028 |
|
|
$ |
(145,855 |
) |
||
|
|
|
|
|
|
|
|
||||||||||
Per share data |
|
|
|
|
|
|
|
||||||||||
Earnings (loss) per common share: |
|
|
|
|
|
|
|
||||||||||
Earnings (loss) per common share |
$ |
0.56 |
|
|
$ |
(0.87 |
) |
|
$ |
4.62 |
|
|
$ |
(1.73 |
) |
||
Earnings (loss) per diluted common share |
$ |
0.56 |
|
|
$ |
(0.87 |
) |
|
$ |
4.59 |
|
|
$ |
(1.73 |
) |
||
Weighted average common shares outstanding |
84,771 |
|
|
84,308 |
|
|
84,684 |
|
|
84,235 |
|
||||||
Weighted average diluted common shares outstanding |
85,336 |
|
|
84,308 |
|
|
85,191 |
|
|
84,235 |
|
||||||
Cash dividends declared per common share |
$ |
0.42 |
|
|
$ |
0.41 |
|
|
$ |
1.26 |
|
|
$ |
1.23 |
|
||
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
2021 |
|
2020 |
||||||||||||||||||||||
|
Insurance |
Reinsurance |
Total |
Insurance |
Reinsurance |
Total |
|||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
(in thousands) |
||||||||||||||||||||||||
Gross premiums written |
$ |
1,176,500 |
|
|
$ |
469,989 |
|
|
$ |
1,646,489 |
|
|
$ |
935,817 |
|
|
$ |
395,361 |
|
|
$ |
1,331,178 |
|
||
Net premiums written |
707,492 |
|
|
288,979 |
|
|
996,471 |
|
|
544,857 |
|
|
271,125 |
|
|
815,982 |
|
||||||||
Net premiums earned |
681,008 |
|
|
530,419 |
|
|
1,211,427 |
|
|
570,184 |
|
|
521,128 |
|
|
1,091,312 |
|
||||||||
Other insurance related income |
468 |
|
|
7,197 |
|
|
7,665 |
|
|
688 |
|
|
752 |
|
|
1,440 |
|
||||||||
Net losses and loss expenses |
(442,681 |
) |
|
(468,688 |
) |
|
(911,369 |
) |
|
(443,389 |
) |
|
(436,288 |
) |
|
(879,677 |
) |
||||||||
Acquisition costs |
(123,529 |
) |
|
(108,183 |
) |
|
(231,712 |
) |
|
(114,569 |
) |
|
(115,995 |
) |
|
(230,564 |
) |
||||||||
Underwriting-related general and |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
administrative expenses(8) |
(104,905 |
) |
|
(29,921 |
) |
|
(134,826 |
) |
|
(94,379 |
) |
|
(23,456 |
) |
|
(117,835 |
) |
||||||||
Underwriting income (loss)(9) |
$ |
10,361 |
|
|
$ |
(69,176 |
) |
|
(58,815 |
) |
|
$ |
(81,465 |
) |
|
$ |
(53,859 |
) |
|
(135,324 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net investment income |
|
|
|
|
107,339 |
|
|
|
|
|
|
101,956 |
|
||||||||||||
Net investment gains |
|
|
|
|
10,932 |
|
|
|
|
|
|
55,609 |
|
||||||||||||
Corporate expenses(8) |
|
|
|
|
(23,134 |
) |
|
|
|
|
|
(20,988 |
) |
||||||||||||
Foreign exchange (losses) gains |
|
|
|
|
28,032 |
|
|
|
|
|
|
(60,734 |
) |
||||||||||||
Interest expense and financing costs |
|
|
|
|
(15,954 |
) |
|
|
|
|
|
(15,574 |
) |
||||||||||||
Reorganization expenses |
|
|
|
|
— |
|
|
|
|
|
|
(1,413 |
) |
||||||||||||
Amortization of value of business acquired |
|
|
|
|
(1,028 |
) |
|
|
|
|
|
(1,028 |
) |
||||||||||||
Amortization of intangible assets |
|
|
|
|
(3,149 |
) |
|
|
|
|
|
(2,838 |
) |
||||||||||||
Income (loss) before income taxes and interest in income of equity method investments |
|
|
|
|
44,223 |
|
|
|
|
|
|
(80,334 |
) |
||||||||||||
Income tax (expense) benefit |
|
|
|
|
(1,186 |
) |
|
|
|
|
|
12,056 |
|
||||||||||||
Interest in income of equity method investments |
|
|
|
|
11,911 |
|
|
|
|
|
|
2,896 |
|
||||||||||||
Net income (loss) |
|
|
|
|
54,948 |
|
|
|
|
|
|
(65,382 |
) |
||||||||||||
Preferred share dividends |
|
|
|
|
7,563 |
|
|
|
|
|
|
7,563 |
|
||||||||||||
Net income (loss) available (attributable) to common shareholders |
|
|
|
|
$ |
47,385 |
|
|
|
|
|
|
$ |
(72,945 |
) |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net losses and loss expenses ratio |
65.0 |
% |
|
88.4 |
% |
|
75.2 |
% |
|
77.8 |
% |
|
83.7 |
% |
|
80.6 |
% |
||||||||
Acquisition cost ratio |
18.1 |
% |
|
20.4 |
% |
|
19.1 |
% |
|
20.1 |
% |
|
22.3 |
% |
|
21.1 |
% |
||||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
expense ratio |
15.4 |
% |
|
5.6 |
% |
|
13.1 |
% |
|
16.5 |
% |
|
4.5 |
% |
|
12.8 |
% |
||||||||
Combined ratio |
98.5 |
% |
|
114.4 |
% |
|
107.4 |
% |
|
114.4 |
% |
|
110.5 |
% |
|
114.5 |
% |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
8 Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of |
9 Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented in the table above. |
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
2021 |
|
2020 |
||||||||||||||||||||
|
Insurance |
|
Reinsurance |
|
Total |
|
Insurance |
|
Reinsurance |
|
Total |
||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||
|
(in thousands) |
||||||||||||||||||||||
Gross premiums written |
$ |
3,548,169 |
|
|
$ |
2,574,987 |
|
|
$ |
6,123,156 |
|
|
$ |
2,914,100 |
|
|
$ |
2,564,419 |
|
|
$ |
5,478,519 |
|
Net premiums written |
2,128,190 |
|
|
1,851,025 |
|
|
3,979,215 |
|
|
1,729,268 |
|
|
1,821,692 |
|
|
3,550,960 |
|
||||||
Net premiums earned |
1,928,970 |
|
|
1,543,120 |
|
|
3,472,090 |
|
|
1,709,268 |
|
|
1,574,673 |
|
|
3,283,941 |
|
||||||
Other insurance related income (loss) |
1,435 |
|
|
14,827 |
|
|
16,262 |
|
|
2,091 |
|
|
(7,361 |
) |
|
(5,270 |
) |
||||||
Net losses and loss expenses |
(1,131,753 |
) |
|
(1,160,806 |
) |
|
(2,292,559 |
) |
|
(1,252,569 |
) |
|
(1,211,443 |
) |
|
(2,464,012 |
) |
||||||
Acquisition costs |
(348,172 |
) |
|
(321,482 |
) |
|
(669,654 |
) |
|
(343,579 |
) |
|
(354,137 |
) |
|
(697,716 |
) |
||||||
Underwriting-related general and |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
administrative expenses(10) |
(307,777 |
) |
|
(88,678 |
) |
|
(396,455 |
) |
|
(284,909 |
) |
|
(76,714 |
) |
|
(361,623 |
) |
||||||
Underwriting income (loss)(11) |
$ |
142,703 |
|
|
$ |
(13,019 |
) |
|
129,684 |
|
|
$ |
(169,698 |
) |
|
$ |
(74,982 |
) |
|
(244,680 |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net investment income |
|
|
|
|
326,174 |
|
|
|
|
|
|
240,098 |
|
||||||||||
Net investment gains |
|
|
|
|
113,868 |
|
|
|
|
|
|
45,777 |
|
||||||||||
Corporate expenses(10) |
|
|
|
|
(82,365 |
) |
|
|
|
|
|
(74,915 |
) |
||||||||||
Foreign exchange (losses) gains |
|
|
|
|
4,316 |
|
|
|
|
|
|
(8,760 |
) |
||||||||||
Interest expense and financing costs |
|
|
|
|
(46,759 |
) |
|
|
|
|
|
(59,641 |
) |
||||||||||
Reorganization expenses |
|
|
|
|
— |
|
|
|
|
|
|
(822 |
) |
||||||||||
Amortization of value of business acquired |
|
|
|
|
(3,083 |
) |
|
|
|
|
|
(4,111 |
) |
||||||||||
Amortization of intangible assets |
|
|
|
|
(9,163 |
) |
|
|
|
|
|
(8,564 |
) |
||||||||||
Income (loss) before income taxes and interest in income (loss) of equity method investments |
|
|
|
|
432,672 |
|
|
|
|
|
|
(115,618 |
) |
||||||||||
Income tax (expense) benefit |
|
|
|
|
(49,827 |
) |
|
|
|
|
|
6,030 |
|
||||||||||
Interest in income (loss) of equity method investments |
|
|
|
|
30,871 |
|
|
|
|
|
|
(13,579 |
) |
||||||||||
Net income (loss) |
|
|
|
|
413,716 |
|
|
|
|
|
|
(123,167 |
) |
||||||||||
Preferred share dividends |
|
|
|
|
22,688 |
|
|
|
|
|
|
22,688 |
|
||||||||||
Net income (loss) available (attributable) to common shareholders |
|
|
|
|
$ |
391,028 |
|
|
|
|
|
|
$ |
(145,855 |
) |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net losses and loss expenses ratio |
58.7 |
% |
|
75.2 |
% |
|
66.0 |
% |
|
73.3 |
% |
|
76.9 |
% |
|
75.0 |
% |
||||||
Acquisition cost ratio |
18.0 |
% |
|
20.8 |
% |
|
19.3 |
% |
|
20.1 |
% |
|
22.5 |
% |
|
21.2 |
% |
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
expense ratio |
16.0 |
% |
|
5.8 |
% |
|
13.8 |
% |
|
16.7 |
% |
|
4.9 |
% |
|
13.4 |
% |
||||||
Combined ratio |
92.7 |
% |
|
101.8 |
% |
|
99.1 |
% |
|
110.1 |
% |
|
104.3 |
% |
|
109.6 |
% |
||||||
10 Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of |
11 Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented in the table above. |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
Three months ended |
|
Nine months ended |
||||||||||||||
|
2021 |
2020 |
2021 |
2020 |
|||||||||||||
|
(in thousands, except per share amounts) |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
Net income (loss) available (attributable) to common shareholders |
$ |
47,385 |
|
|
$ |
(72,945 |
) |
|
$ |
391,028 |
|
|
$ |
(145,855 |
) |
||
Net investment gains(12) |
(10,932 |
) |
|
(55,609 |
) |
|
(113,868 |
) |
|
(45,777 |
) |
||||||
Foreign exchange losses (gains)(13) |
(28,032 |
) |
|
60,734 |
|
|
(4,316 |
) |
|
8,760 |
|
||||||
Reorganization expenses(14) |
— |
|
|
1,413 |
|
|
— |
|
|
822 |
|
||||||
Interest in (income) loss of equity method investments(15) |
(11,911 |
) |
|
(2,896 |
) |
|
(30,871 |
) |
|
13,579 |
|
||||||
Income tax expense |
4,534 |
|
|
4,235 |
|
|
12,316 |
|
|
10,494 |
|
||||||
Operating income (loss) |
$ |
1,044 |
|
|
$ |
(65,068 |
) |
|
$ |
254,289 |
|
|
$ |
(157,977 |
) |
||
|
|
|
|
|
|
|
|
||||||||||
Earnings (loss) per diluted common share |
$ |
0.56 |
|
|
$ |
(0.87 |
) |
|
$ |
4.59 |
|
|
$ |
(1.73 |
) |
||
Net investment gains |
(0.13 |
) |
|
(0.66 |
) |
|
(1.34 |
) |
|
(0.54 |
) |
||||||
Foreign exchange losses (gains) |
(0.33 |
) |
|
0.72 |
|
|
(0.05 |
) |
|
0.10 |
|
||||||
Reorganization expenses |
— |
|
|
0.02 |
|
|
— |
|
|
0.01 |
|
||||||
Interest in (income) loss of equity method investments |
(0.14 |
) |
|
(0.03 |
) |
|
(0.36 |
) |
|
0.16 |
|
||||||
Income tax expense |
0.05 |
|
|
0.05 |
|
|
0.14 |
|
|
0.12 |
|
||||||
Operating income (loss) per diluted common share |
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
2.98 |
|
|
$ |
(1.88 |
) |
||
|
|
|
|
|
|
|
|
||||||||||
Weighted average diluted common shares outstanding |
85,336 |
|
|
84,308 |
|
|
85,191 |
|
|
84,235 |
|
||||||
|
|
|
|
|
|
|
|
||||||||||
Average common shareholders' equity |
4,812,408 |
|
|
4,731,858 |
|
|
4,765,375 |
|
|
4,742,452 |
|
||||||
|
|
|
|
|
|
|
|
||||||||||
Annualized return on average common equity |
3.9 |
% |
|
(6.2 |
%) |
|
10.9 |
% |
|
(4.1 |
%) |
||||||
|
|
|
|
|
|
|
|
||||||||||
Annualized operating return on average common equity(16) |
0.1 |
% |
|
(5.5 |
%) |
|
7.1 |
% |
|
(4.4 |
%) |
||||||
|
|
|
|
|
|
|
|
||||||||||
12 Tax expense (benefit) of |
13 Tax expense (benefit) of |
14 Tax expense (benefit) of |
15 Tax expense (benefit) of $nil for the three and nine months ended |
16 Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to annualized ROACE, the most comparable GAAP financial measure is presented in the table above, and a discussion of the rationale for its presentation is provided later in this press release. |
Risk and Uncertainties Related to the COVID-19 pandemic
The determination of the net loss estimate for the COVID-19 pandemic was based on our ground-up assessment of coverage from individual contracts and treaties across all lines of business, and included a review of modeling analyses and market information, where appropriate. In addition, we considered preliminary information received from clients, brokers, and loss adjusters together with global shelter-in-place orders and the outcomes of recent court judgments, including the
The net loss estimate related to the COVID-19 pandemic is subject to significant uncertainty. This uncertainty is driven by the inherent difficulty in making assumptions around the impact of the COVID-19 pandemic due to the lack of comparable events, the ongoing nature of the event, and its far-reaching impacts on world-wide economies and the health of the population. These assumptions include:
- the nature and the duration of the pandemic;
- the effects on health, the economy, and our customers;
- the response of government bodies including legislative, regulatory or judicial actions, and social influences that could alter the interpretation of our contracts;
- the coverage provided under our contracts;
- the coverage provided by our ceded reinsurance; and
- the evaluation of the net loss estimate and impact of claim mitigation actions.
The actual net loss for this event may ultimately differ materially from the current net loss estimate.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this press release, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in
Forward-looking statements contained in this press release may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses, including losses related to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency rates.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties, and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements. We believe that these factors include, but are not limited to, the following:
- the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition, and liquidity;
- the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;
- the occurrence and magnitude of natural and man-made disasters;
- the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;
- losses from war, terrorism and political unrest, or other unanticipated losses;
- actual claims exceeding loss reserves;
- general economic, capital and credit market conditions, including fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency rates;
- 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;
- the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;
- the loss of business provided to us by major brokers;
- breaches by third parties in our program business of their obligations to us;
- difficulties with technology and/or data security;
- the failure of our policyholders or intermediaries to pay premiums;
- the failure of our cedants to adequately evaluate risks;
- the inability to obtain additional capital on favorable terms, or at all;
- the loss of one or more of our key executives;
- a decline in our ratings with rating agencies;
- changes in accounting policies or practices;
- the use of industry models and changes to these models;
- changes in governmental regulations and potential government intervention in our industry;
- inadvertent failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;
-
changes in the political environment of certain countries in which we operate or underwrite business, including the
United Kingdom's withdrawal from theEuropean Union ; - changes in tax laws; and
-
other factors including but not limited to those described under Item 1A, ‘Risk Factors’ 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 theSEC which are accessible on theSEC's website at www.sec.gov. Readers are urged to carefully consider all such factors as the COVID-19 pandemic may have the effect of heightening many of the other risks and uncertainties described.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Rationale for the Use of Non-GAAP Financial Measures
We present our results of operations in a way we believe will be 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
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 underwriting operations. While this measure is presented in the 'Segment Information' note to our Consolidated Financial Statements, it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.
Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.
The reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in the 'Consolidated Segmental Data' section of this press release.
Consolidated Underwriting Income (Loss)
Consolidated underwriting income (loss) is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) 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 a result, 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 statements 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 debt. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).
Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of
Amortization of intangible assets including value of business acquired ("VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from consolidated underwriting income (loss).
We believe that the 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 net income (loss), the most comparable GAAP financial measure, is presented in the 'Consolidated Segmental Data' section of this press release.
Operating Income (Loss)
Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.
Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.
Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities in net investment gains (losses). We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss), thereby minimizing the impact of foreign exchange rate movements on total shareholders’ equity. As a result, foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business
Reorganization expenses are related to the transformation program which was launched in 2017. This program encompasses the integration of Novae, which commenced in the fourth quarter of 2017, the realignment of our accident and health business, together with other initiatives designed to increase efficiency and enhance profitability, while delivering a customer-centric operating model. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are excluded from operating income (loss).
Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, this income (loss) is excluded from operating income (loss).
Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments to understand the profitability of recurring sources of income.
We believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented in the 'Non-GAAP Financial Measures Reconciliation' section of this press release.
We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively, in the 'Non-GAAP Financial Measures Reconciliation' section of this press release.
Constant Currency Basis
We present gross premiums written and net premiums written on a constant currency basis in this press release. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written and net premiums written on a constant basis. The reconciliation to gross premiums written and net premiums written on a GAAP basis is presented in the 'Insurance Segment' and 'Reinsurance Segment' sections of this press release.
Pre-Tax Total Return on Cash and Investments excluding
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 gains (losses) generated by average cash and investment balances. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. 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 of this press release.
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FAQ
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