EX-99.2 3 historicalfinancialinforma.htm EXHIBIT 99.2 Exhibit







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AXIS Capital Holdings Limited


Novae Group plc
Unaudited Historical Financial Information
For the Nine Months ended September 30, 2017


 



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AXIS Capital Holdings Limited
 
 
 
 
 
92 Pitts Bay Road
 
 
 
 
 
Pembroke HM 08 Bermuda
 
 
 
 
 
 
 
 
 
 
 
Contact Information:
 
 
 
 
 
Linda Ventresca
 
 
 
 
 
Investor Relations
 
 
 
 
 
441 405 2727
 
 
 
 
 
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
UNAUDITED HISTORICAL FINANCIAL INFORMATION TABLE OF CONTENTS



 
  
Page(s)
  
i - ii
I. Novae Unaudited Historical Statement of Income

  
iii - iv
II. Novae Unaudited Historical Segment Data - Insurance

  
vii - viii
III. Novae Unaudited Historical Segment Data - Reinsurance

  
ix - x
IV. Use of Non-GAAP Financial Measures
  
xi - xii


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AXIS Capital Holdings Limited
BASIS OF PRESENTATION

DEFINITIONS AND PRESENTATION
Unless otherwise noted, all data is in thousands, except for ratio information.
•
All financial information contained herein is unaudited.
•
Amounts may not reconcile exactly due to rounding differences.
•
NM - Not meaningful; NA - Not applicable
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This historical financial information contains forward-looking statements within the meaning of the U.S. federal securities laws, including statements related to AXIS Capital Holdings Limited ("AXIS Capital" or the "Company") expectations regarding the performance of the business of Novae Group plc ("Novae"), Novae’s financial results, Novae’s liquidity and capital resources and other non-historical statements. In some cases, these statements can be identified by the use of forward-looking words such as “may”, “should”, “could”, “would”, “will”, “anticipate”, “expect”, “potential”, “intend” and similar expressions. These statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from AXIS Capital’s expectations. Important factors that could cause actual events or results to be materially different from AXIS Capital’s expectations include, without limitation:

•
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,
•
the 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,
•
fluctuations in interest rates, credit spreads, equity prices and/or currency values,
•
the failure to successfully integrate the business of Novae and other acquired businesses or realize the expected synergies resulting from such acquisitions and
•
the other factors set forth in AXIS Capital’s most recent report on Form 10-K, Form 10-Q and other documents filed with the Securities and Exchange Commission. AXIS Capital undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.



i
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AXIS Capital Holdings Limited
BASIS OF PRESENTATION
Novae Group plc
Unaudited Historical Financial Information

•
The following unaudited historical financial information is for information purposes only. It should be read in conjunction with documents filed by AXIS Capital with the Securities and Exchange Commission pursuant to the Securities Act 1933 and Securities Exchange Act of 1934.

•
On October 2, 2017 (the "acquisition date"), AXIS Capital Holdings Limited acquired all of the issued and to be issued share capital of Novae. The results of Novae will be included in the results of AXIS Capital from the acquisition date. The following unaudited historical financial information does not consider the impact of synergies that may result from the acquisition of Novae. In addition, the unaudited financial information does not include costs associated with restructuring or integration activities resulting from the acquisition of Novae.

•
Novae is a diversified property and casualty (re)insurance business operating through Syndicate 2007 at Lloyd’s of London. Novae is based in London and was listed on the London Stock Exchange from 1998 until the date of acquisition. UK public companies are required to issue annual and semiannual earnings reports together with financial statements. The following unaudited historical financial information is intended to provide information on the quarterly results of Novae for the period January 1, 2017 to September 30, 2017 and has been prepared and presented in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”).

•
The following unaudited historical financial information is prepared in accordance with Novae's accounting policies which differ from those of AXIS Capital. In our assessment,these differences in accounting policy do not to have a material impact on the following unaudited financial information. However, to facilitate comparison of information, a reclassification adjustment from acquisition costs to general and administrative expenses in the quarterly results of Novae for the period January 1, 2017 to September 30, 2017 has been made to align accounting policies and to conform to AXIS Capital's presentation. These reclassification adjustments did not impact Novae's results of operations, financial condition or liquidity. At the acquisition date, Novae adopted the accounting policies of AXIS Capital.
•

•
Explanation of differences in accounting policies - adjustment made in the following unaudited historical financial information:
◦
Acquisition costs: Novae recorded internal underwriting costs as acquisition costs, and deferred and amortized these costs as the related premium was earned. It is AXIS Capital's policy not to defer and amortize internal underwriting costs.

•
Explanation of differences in accounting policies - no adjustment made in the following unaudited historical financial information:
◦
Premium recognition: Earned premium is computed separately for each insurance contract in line with the risk exposure profile. Reinsurance premiums ceded are recognised in line with the related inward business. The provision for unearned premium, both gross and ceded, represents the portion of written premium expected to be earned in future periods. It is AXIS Capital's policy to earn re(insurance) premiums evenly over the period during which it is exposed to the underlying risk. In our assessment, this difference in accounting policy does not have a material impact on the following unaudited financial information.

◦
Investments: Novae classified fixed maturity securities and equity securities as trading which were reported at fair value at the balance sheet date with changes in fair value reported in Net Investment Income in Novae's Consolidated Income Statement. AXIS Capital's fixed maturity securities and equity securities are classified as available-for-sale and are reported at fair value at the balance sheet date. Changes in fair value on available for sale investments, net of tax, is included as a separate component of Accumulated Other Comprehensive Income (Loss) in Shareholders’ Equity. In our assessment, this difference in accounting policy does not have a material impact on the following unaudited financial information.

◦
Acquisition costs: Novae recorded certain reinsurance commissions and profit participations in ceded premiums written and ceded premium earned. It is AXIS Capital's policy to reflect these costs in acquisition costs. In our assessment, this difference in accounting policy does not have a material impact on the following unaudited financial information.

•
AXIS Capital's underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has two reportable segments; insurance and reinsurance. The following unaudited historical financial information is categorized as either insurance or reinsurance. The results of Novae will be presented in this manner from the date of acquisition.


ii
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AXIS Capital Holdings Limited
NOVAE HISTORICAL STATEMENT OF INCOME (UNAUDITED)
 
Nine months ended September 30, 2017
 
Insurance
 
Reinsurance
 
Total
UNDERWRITING REVENUES
(in thousands)
Gross premiums written
$
850,587

 
$
160,402

 
$
1,010,990

Net premiums written
520,549

 
72,346

 
592,895

Gross premium earned
770,920

 
148,794

 
919,714

Ceded premium expensed
(250,017
)
 
(67,192
)
 
(317,209
)
Net premiums earned
520,904

 
81,602

 
602,506

Other insurance related income (loss)
330

 
52

 
382

Total underwriting revenues
521,233

 
81,655

 
602,888

 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
Net losses and loss expenses
343,988

 
75,092

 
419,079

Acquisition costs1
194,551

 
17,165

 
211,717

Underwriting-related general and administrative expenses1&2
63,772

 
11,213

 
74,984

Total underwriting expenses

$
602,311

 
$
103,469

 
$
705,780

 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)3
$
(81,077
)
 
$
(21,815
)
 
$
(102,892
)
 
 
 
 
 
 
Corporate expenses2
 
 
 
 
(13,055
)
Net investment income
 
 
 
 
23,124

Net realized investment gains
 
 
 
 
5,422

Foreign exchange losses
 
 
 
 
(19,050
)
Interest expense and financing costs
 
 
 
 
(6,249
)
Transaction and reorganization expenses4

 
 
 
 
(11,870
)
Income (loss) before income taxes
 
 
 
 
$
(124,571
)
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
Current accident year loss ratio
55.5
 %
 
77.9
%
 
58.6
 %
Catastrophe impact
11.9
 %
 
6.1
%
 
11.1
 %
Prior period reserve development
(1.4
)%
 
8.0
%
 
(0.1
)%
Net loss and loss expense ratio
66.0
 %
 
92.0
%
 
69.6
 %
Acquisition cost ratio
37.3
 %
 
21.0
%
 
35.1
 %
General and administrative expense ratio
12.2
 %
 
13.7
%
 
12.4
 %
Corporate expense ratio
 
 
 
 
2.2
 %
Combined ratio
115.5
 %
 
126.7
%
 
119.3
 %

iii
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1To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the nine months ended September 30, 2017, a reclassification adjustment of $31,637 and $4,950 was included in Insurance and Reinsurance, respectively.
2Underwriting-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 $13,055 for the nine months ended September 30, 2017. Corporate expenses included costs necessary to support worldwide insurance and reinsurance operations as well as share based compensation expenses and performance-related compensation expenses which were not allocated to Insurance and Reinsurance. AXIS Capital's 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.
3Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in SEC Regulation G. The reconciliation to income (loss) before income taxes, the most comparable GAAP measure, is presented above.
4Transaction and reorganization expenses include transaction costs associated with AXIS Capital’s acquisition of Novae and costs associated with the exit from certain lines of business affected by Novae prior to its acquisition by AXIS Capital. Reorganization expenses were incurred in the fourth quarter of 2016 and in the first quarter of 2017 by Novae

iv
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AXIS Capital Holdings Limited
NOVAE HISTORICAL STATEMENT OF INCOME - QUARTERLY (UNAUDITED)
 
Novae Total
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
Gross premiums written
$
439,433

 
$
311,853

 
$
259,704

 
$
1,010,990

Net premiums written
234,626

 
206,680

 
151,588

 
592,895

Gross premiums earned
299,894

 
288,046

 
331,774

 
919,714

Ceded premiums expensed
(78,008
)
 
(89,303
)
 
(149,897
)
 
(317,209
)
Net premiums earned
221,886

 
198,743

 
181,877

 
602,506

Other insurance related income (loss)
(65
)
 
421

 
26

 
382

Total underwriting revenues
221,821

 
199,164

 
181,903

 
602,888

 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
Net losses and loss expenses
159,016

 
89,642

 
170,422

 
419,079

Acquisition costs1
69,974

 
68,399

 
73,344

 
211,717

Underwriting-related general and administrative expenses1
23,944

 
26,329

 
24,712

 
74,984

Total underwriting expenses
252,934

 
184,369

 
268,477

 
705,780

 
 
 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)
$
(31,113
)
 
$
14,795

 
$
(86,574
)
 
$
(102,892
)
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
Current accident year loss ratio
61.5
%
 
54.8
%
 
58.9
%
 
58.6
%
Catastrophe impact
0.8
%
 
0.1
%
 
36.5
%
 
11.1
%
Prior period reserve development
9.4
%
 
(9.8
%)
 
(1.7
%)
 
(0.1
%)
Net loss and loss expense ratio
71.7
%
 
45.1
%
 
93.7
%
 
69.6
%
Acquisition cost ratio
31.5
%
 
34.4
%
 
40.3
%
 
35.1
%
Underwriting-related general and administrative expense ratio
10.8
%
 
13.2
%
 
13.6
%
 
12.4
%
Corporate expense ratio
1.9
%
 
(0.6
)%
 
5.6
%
 
2.2
%
Combined ratio
115.9
%
 
92.1
%
 
153.2
%
 
119.3
%
1 To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, the reclassification adjustment was $11,887, $12,528 and $12,172, respectively.


v
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AXIS Capital Holdings Limited
NOVAE HISTORICAL STATEMENT OF INCOME - QUARTERLY (UNAUDITED)
 
Novae Continued Lines
 
Novae Discontinued Lines
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
374,169

 
$
295,586

 
$
242,697

 
$
912,453

 
$
65,264

 
$
16,267

 
$
17,006

 
$
98,537

Net premiums written
189,640

 
197,683

 
137,961

 
525,284

 
44,987

 
8,998

 
13,627

 
67,611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums earned
245,385

 
249,092

 
292,217

 
786,694

 
54,509

 
38,954

 
39,557

 
133,020

Ceded premiums expensed
(66,015
)
 
(78,145
)
 
(139,766
)
 
(283,926
)
 
(11,993
)
 
(11,158
)
 
(10,132
)
 
(33,282
)
Net premiums earned
179,370

 
170,947

 
152,451

 
502,768

 
42,516

 
27,796

 
29,426

 
99,738

Other insurance related income (loss)
(65
)
 
421

 
26

 
382

 
—

 
—

 
—

 
—

Total underwriting revenues
179,305

 
171,368

 
152,478

 
503,150

 
42,516

 
27,796

 
29,426

 
99,738

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net losses and loss expenses
102,111

 
80,019

 
142,472

 
324,602

 
56,905

 
9,622

 
27,950

 
94,477

Acquisition costs1
56,164

 
58,206

 
63,649

 
178,020

 
13,810

 
10,193

 
9,695

 
33,697

Underwriting-related general and administrative expenses1
22,420

 
24,846

 
23,208

 
70,473

 
1,524

 
1,483

 
1,504

 
4,511

Total underwriting expenses
180,696

 
163,072

 
229,328

 
573,095

 
72,238

 
21,298

 
39,149

 
132,685

UNDERWRITING INCOME (LOSS)
$
(1,391
)
 
$
8,296

 
$
(76,850
)
 
$
(69,945
)
 
$
(29,722
)
 
$
6,498

 
$
(9,723
)
 
$
(32,947
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year loss ratio
55.2
%
 
50.1
%
 
53.2
%
 
53.2
%
 
87.4
%
 
84.1
%
 
88.0
%
 
86.2
%
Catastrophe impact

1.0
%
 
(0.4
%)
 
37.8
%
 
11.4
%
 
—
%
 
3.3
%
 
30.2
%
 
9.5
%
Prior period reserve development

0.7
%
 
(2.9
%)
 
2.5
%
 
—
%
 
46.4
%
 
(52.8
%)
 
(23.2
%)
 
(1.0
%)
Net loss and loss expense ratio
56.9
%
 
46.8
%
 
93.5
%
 
64.6
%
 
133.8
%
 
34.6
%
 
95.0
%
 
94.7
%
Acquisition cost ratio
31.3
%
 
34.0
%
 
41.8
%
 
35.4
%
 
32.5
%
 
36.7
%
 
32.9
%
 
33.8
%
Underwriting-related general and administrative expense ratio
12.5
%
 
14.5
%
 
15.2
%
 
14.0
%
 
3.6
%
 
5.3
%
 
5.1
%
 
4.5
%
Combined ratio
100.7
%
 
95.4
%
 
150.4
%
 
114.0
%
 
169.9
%
 
76.6
%
 
133.0
%
 
133.0
%
1To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, a reclassification adjustment of $11,887, $12,528 and $12,172 was included in Novae Continued Lines, respectively.

Lines of Business:
Continued Lines are those lines of business not exited or placed into run-off by Novae at the acquisition date. Continued Insurance Lines include Property, Marine, Terrorism, Aviation, Political Risk & Specialty, Professional Lines including Medical Malpractice, Liability including UK General Liability and Cyber Liability and Accident & Health. Continued Reinsurance Lines include Catastrophe and Marine.

Discontinued Lines are those lines of business that Novae has exited or placed into run-off in the fourth quarter of 2016 and in the first quarter of 2017. Discontinued Insurance Lines include Financial Institutions, Professional Indemnity, International Liability and International Direct & Facultative Property. Discontinued Reinsurance Lines include Motor and General Liability.



vi
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AXIS Capital Holdings Limited
NOVAE HISTORICAL SEGMENT DATA - INSURANCE (UNAUDITED)
 
Novae Insurance
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
Gross premiums written
$
337,517

 
$
269,959

 
$
243,112

 
$
850,587

Net premiums written
190,928

 
180,975

 
148,646

 
520,549

 
 
 
 
 
 
 
 
Gross premiums earned
250,985

 
248,821

 
271,115

 
770,920

Ceded premiums expensed
(65,503
)
 
(74,985
)
 
(109,530
)
 
(250,017
)
Net premiums earned
185,482

 
173,836

 
161,585

 
520,904

Other insurance related income (loss)
(50
)
 
364

 
15

 
330

Total underwriting revenues
185,433

 
174,200

 
161,600

 
521,233

 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
Net losses and loss expenses
116,073

 
81,068

 
146,847

 
343,988

Acquisition costs1
62,459

 
62,969

 
69,123

 
194,551

Underwriting-related general and administrative expenses1
20,122

 
22,561

 
21,088

 
63,772

Total underwriting expenses
198,655

 
166,598

 
237,057

 
602,311

 
 
 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)
$
(13,222
)
 
$
7,602

 
$
(75,457
)
 
$
(81,077
)
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
Current accident year loss ratio
58.1
%
 
55.1
%
 
52.3
%
 
55.5
%
Catastrophe impact
0.6
%
 
(0.2
%)
 
38.9
%
 
11.9
%
Prior period reserve development
3.9
%
 
(8.3
%)
 
(0.3
%)
 
(1.4
%)
Net loss and loss expense ratio
62.6
%
 
46.6
%
 
90.9
%
 
66.0
%
Acquisition cost ratio
33.7
%
 
36.2
%
 
42.8
%
 
37.3
%
Underwriting-related general and administrative expense ratio
10.8
%
 
13.0
%
 
13.1
%
 
12.2
%
Combined ratio
107.1
%
 
95.8
%
 
146.8
%
 
115.5
%
1 To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, a reclassification adjustment of $10,279, $10,833 and $10,526 was included in Novae Insurance Segment, respectively.




vii
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AXIS Capital Holdings Limited
NOVAE HISTORICAL SEGMENT DATA - INSURANCE (UNAUDITED)
 
Novae Insurance - Continued Lines
 
Novae Insurance - Discontinued Lines
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
311,382

 
$
254,127

 
$
226,579

 
$
792,088

 
$
26,134

 
$
15,832

 
$
16,534

 
$
58,500

Net premiums written
179,160

 
172,750

 
135,263

 
487,173

 
11,768

 
8,225

 
13,384

 
33,376

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums earned
218,966

 
222,219

 
243,474

 
684,658

 
32,020

 
26,602

 
27,641

 
86,262

Ceded premiums expensed
(55,789
)
 
(65,399
)
 
(101,198
)
 
(222,386
)
 
(9,713
)
 
(9,586
)
 
(8,331
)
 
(27,630
)
Net premiums earned
163,176

 
156,820

 
142,275

 
462,271

 
22,306

 
17,016

 
19,310

 
58,632

Other insurance related income (loss)
(50
)
 
364

 
15

 
330

 
—

 
—

 
—

 
—

Total underwriting revenues
163,126

 
157,184

 
142,291

 
462,601

 
22,306

 
17,016

 
19,310

 
58,632

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net losses and loss expenses
86,401

 
72,336

 
132,184

 
290,920

 
29,672

 
8,732

 
14,663

 
53,068

Acquisition costs1
53,719

 
55,447

 
60,772

 
169,939

 
8,740

 
7,523

 
8,351

 
24,613

Underwriting-related general and administrative expenses1
19,002

 
21,364

 
19,843

 
60,209

 
1,120

 
1,197

 
1,244

 
3,562

Total underwriting expenses
159,123

 
149,146

 
212,799

 
521,068

 
39,532

 
17,452

 
24,258

 
81,242

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)
$
4,003

 
$
8,038

 
$
(70,508
)
 
$
(58,467
)
 
$
(17,226
)
 
$
(436
)
 
$
(4,949
)
 
$
(22,610
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year loss ratio
54.3
%
 
53.5
%
 
53.5
%
 
54.2
%
 
85.3
%
 
70.3
%
 
43.5
%
 
66.9
%
Catastrophe impact
0.7
%
 
(0.2
%)
 
37.7
%
 
11.4
%
 
—
%
 
—
%
 
47.7
%
 
15.3
%
Prior period reserve development
(2.1
%)
 
(7.2
%)
 
1.7
%
 
(2.7
%)
 
47.7
%
 
(19.0
%)
 
(15.3
%)
 
8.3
%
Net loss and loss expense ratio
52.9
%
 
46.1
%
 
92.9
%
 
62.9
%
 
133.0
%
 
51.3
%
 
75.9
%
 
90.5
%
Acquisition cost ratio
32.9
%
 
35.4
%
 
42.7
%
 
36.8
%
 
39.2
%
 
44.2
%
 
43.2
%
 
42.0
%
Underwriting-related general and administrative expense ratio
11.6
%
 
13.6
%
 
13.9
%
 
13.0
%
 
5.0
%
 
7.0
%
 
6.4
%
 
6.1
%
Combined ratio
97.4
%
 
95.1
%
 
149.5
%
 
112.7
%
 
177.2
%
 
102.5
%
 
125.5
%
 
138.6
%
1To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, a reclassification adjustment of $10,279, $10,833 and $10,526 was included in Insurance - Continued Lines, respectively.

Lines of Business:
Continued Insurance Lines are those lines of business not exited or placed into run-off by Novae at the acquisition date. Continued Insurance Lines include Property, Marine, Terrorism, Aviation, Political Risk & Specialty, Professional Lines including Medical Malpractice, Liability including UK General Liability and Cyber liability and Accident & Health.

Discontinued Insurance Lines are 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. Discontinued Insurance Lines include Financial Institutions, Professional Indemnity, International Liability and International Direct & Facultative Property.


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AXIS Capital Holdings Limited
NOVAE HISTORICAL SEGMENT DATA - REINSURANCE (UNAUDITED)
 
Novae Reinsurance
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
Gross premiums written
$
101,916

 
$
41,895

 
$
16,592

 
$
160,402

Net premiums written
43,698

 
25,706

 
2,942

 
72,346

 
 
 
 
 
 
 
 
Gross premiums earned
48,909

 
39,225

 
60,660

 
148,794

Ceded premiums expensed
(12,506
)
 
(14,318
)
 
(40,368
)
 
(67,192
)
Net premiums earned
36,403

 
24,907

 
20,292

 
81,602

Other insurance related income (loss)
(15
)
 
57

 
11

 
52

Total underwriting revenues
36,388

 
24,964

 
20,303

 
81,655

 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
Net losses and loss expenses
42,943

 
8,574

 
23,575

 
75,092

Acquisition costs1
7,515

 
5,430

 
4,221

 
17,165

Underwriting-related general and administrative expenses1
3,821

 
3,767

 
3,624

 
11,213

Total underwriting expenses
54,279

 
17,771

 
31,420

 
103,469

 
 
 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)
$
(17,890
)
 
$
7,193

 
$
(11,117
)
 
$
(21,815
)
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
Current accident year loss ratio
78.2
%
 
52.1
%
 
110.7
%
 
77.9
%
Catastrophe impact
2.0
%
 
2.7
%
 
18.1
%
 
6.1
%
Prior period reserve development
37.8
%
 
(20.4
%)
 
(12.6
%)
 
8.0
%
Net loss and loss expense ratio
118.0
%
 
34.4
%
 
116.2
%
 
92.0
%
Acquisition cost ratio
20.6
%
 
21.8
%
 
20.8
%
 
21.0
%
Underwriting-related general and administrative expense ratio
10.5
%
 
15.1
%
 
17.9
%
 
13.7
%
Combined ratio
149.1
%
 
71.3
%
 
154.9
%
 
126.7
%
1 To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, a reclassification adjustment of $1,608, $1,695 and $1,647 was included in Novae Reinsurance Segment, respectively.



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AXIS Capital Holdings Limited
NOVAE HISTORICAL SEGMENT DATA - REINSURANCE (UNAUDITED)
 
Novae Reinsurance - Continued Lines
 
Novae Reinsurance - Discontinued Lines
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
 
Q1 2017
 
Q2 2017
 
Q3 2017
 
Total
UNDERWRITING REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
62,787

 
$
41,460

 
$
16,120

 
$
120,366

 
$
39,130

 
$
435

 
$
472

 
$
40,036

Net premiums written
10,479

 
24,933

 
2,696

 
38,108

 
33,219

 
773

 
246

 
34,238

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums earned
26,419

 
26,874

 
48,531

 
101,824

 
22,490

 
12,351

 
12,129

 
46,970

Ceded premiums expensed
(10,226
)
 
(12,747
)
 
(38,508
)
 
(61,480
)
 
(2,280
)
 
(1,572
)
 
(1,860
)
 
(5,711
)
Net premiums earned
16,193

 
14,127

 
10,023

 
40,344

 
20,210

 
10,780

 
10,269

 
41,259

Other insurance related income (loss)
(15
)
 
57

 
11

 
52

 
—

 
—

 
—

 
—

Total underwriting revenues
16,178

 
14,184

 
10,034

 
40,396

 
20,210

 
10,780

 
10,269

 
41,259

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDERWRITING EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net losses and loss expenses
15,710

 
7,684

 
10,232

 
33,626

 
27,232

 
890

 
13,343

 
41,466

Acquisition costs1
2,445

 
2,759

 
2,798

 
8,003

 
5,070

 
2,670

 
1,422

 
9,162

Underwriting-related general and administrative expenses
3,418

 
3,482

 
3,364

 
10,264

 
404

 
285

 
260

 
949

Total underwriting expenses
21,573

 
13,925

 
16,394

 
51,892

 
32,706

 
3,846

 
15,026

 
51,577

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
UNDERWRITING INCOME (LOSS)
$
(5,394
)
 
$
259

 
$
(6,360
)
 
$
(11,496
)
 
$
(12,496
)
 
$
6,934

 
$
(4,757
)
 
$
(10,319
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
KEY RATIOS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year loss ratio
63.6
%
 
11.1
%
 
49.1
%
 
41.8
%
 
89.9
%
 
105.9
%
 
170.8
%
 
113.2
%
Catastrophe impact
4.4
%
 
(1.7
%)
 
39.9
%
 
10.8
%
 
—
%
 
8.5
%
 
(3.3
%)
 
1.4
%
Prior period reserve development
29.0
%
 
45.0
%
 
13.1
%
 
30.7
%
 
44.8
%
 
(106.1
%)
 
(37.6
%)
 
(14.1
%)
Net loss and loss expense ratio
97.0
%
 
54.4
%
 
102.1
%
 
83.3
%
 
134.7
%
 
8.3
%
 
129.9
%
 
100.5
%
Acquisition cost ratio
15.1
%
 
19.5
%
 
27.9
%
 
19.8
%
 
25.1
%
 
24.8
%
 
13.9
%
 
22.2
%
Underwriting-related general and administrative expense ratio
21.1
%
 
24.6
%
 
33.6
%
 
25.4
%
 
2.0
%
 
2.6
%
 
2.5
%
 
2.3
%
Combined ratio
133.2
%
 
98.5
%
 
163.6
%
 
128.5
%
 
161.8
%
 
35.7
%
 
146.3
%
 
125.0
%
1 To be consistent with AXIS Capital's accounting policies, this historical financial information includes a reclassification adjustment from acquisition costs to underwriting-related general and administrative expenses with respect to underwriting costs included by Novae as acquisition costs. For the three, six and nine months ended September 30, 2017, a reclassification adjustment of $1,608, $1,692 and $1,647 was included in Reinsurance - Continued Lines, respectively.

Lines of Business:
Continued Reinsurance Lines are those lines of business not exited or placed into run-off by Novae at the acquisition date. Continued Reinsurance Lines include Catastrophe and Marine.

Discontinued Reinsurance Lines are 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. Discontinued Reinsurance Lines include Motor and General Liability.


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AXIS Capital Holdings Limited
USE OF NON-GAAP FINANCIAL MEASURES


Novae's results of operations are presented in the way that 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 that are used are non-GAAP financial measures under Securities and Exchange Commission ("SEC") rules and regulations. In this document, underwriting-related general and administrative expenses and consolidated underwriting income are presented, which are non-GAAP financial measures as defined in SEC Regulation G. These non-GAAP financial measures, which may be defined and calculated differently by other companies, better explain and enhance the understanding of Novae's results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with 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 individual underwriting operations. When these measures are presented in the Segment Information footnote in Consolidated Financial Statements, they are considered non-GAAP financial measures when presented elsewhere on a consolidated basis.

Corporate expenses include holding company costs necessary to support 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 individual underwriting operations, they are excluded from underwriting-related general and administrative expenses and, therefore, consolidated underwriting income. General and administrative expenses (the nearest GAAP financial measure to underwriting-related general and administrative expenses) also includes corporate expenses.

A reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP measure, is included in the Historical Statement of Income (Unaudited) section of this document.

Consolidated Underwriting Income
Consolidated underwriting income 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 costs as expenses. When this measure is presented in the Segment Information footnote to Consolidated Financial Statements, it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

Novae's underwriting results are evaluated separately from the performance of its investment portfolio in this presentation. As such, it appropriate to exclude net investment income and net realized investment gains (losses) from underwriting profitability measure. Interest expense and financing costs primarily relate to interest payable on loan notes and are excluded from consolidated underwriting income for the same reason.


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AXIS Capital Holdings Limited
USE OF NON-GAAP FINANCIAL MEASURES (Continued)

Foreign exchange losses (gains) in the Historical Statement of Income (Unaudited) primarily relate to net insurance-related liabilities. However, Novae's investment portfolio is managed in such a way that unrealized and realized foreign exchange rate losses (gains) on its investment portfolio generally offset a large portion of the foreign exchange losses (gains) arising from its underwriting portfolio. As a result, foreign exchange losses (gains) are not a meaningful contributor to underwriting performance and, therefore, exclude them from consolidated underwriting income.

Transaction and reorganization expenses are driven by business decisions, the nature and timing of which are unrelated to the underwriting process and for this reason they are excluded from consolidated underwriting income.

We believe that presentation of underwriting-related general and administrative expenses and consolidated underwriting income in Novae's unaudited historical financial information provides investors with an enhanced understanding of its results of operations, by highlighting the underlying pre-tax profitability of its underwriting activities. The reconciliation of consolidated underwriting income to income (loss) before income taxes (the most comparable GAAP financial measure) is included in the Historical Statement of Income (Unaudited) section of this document.



xii