Axis Gustav-Ike Losses $310- $430 Million; Details Investment Exposure

Bermuda-based AXIS Capital Holdings Limited announced that preliminary net loss estimates for Hurricanes Gustav and Ike range from approximately $310 million to $430 million, net of reinstatement premiums.

Axis’ preliminary net loss estimate, net of reinstatement premiums, for Gustav ranges from approximately $25 million to $45 million, with $15 million to $25 million emanating from its reinsurance segment and $10 million to $20 million emanating from its insurance segment.

The Company’s preliminary net loss estimates for Ike are substantially larger. Net of reinstatement premiums, they are approximately $285 million to $385 million, with $220 million to $270 million emanating from its reinsurance segment and $65 million to $115 million emanating from its insurance segment.

Axis said its “preliminary net loss estimates are based on catastrophe modeling analysis, the assessment of individual contracts and treaties and data from clients, brokers and loss adjusters. These net loss estimates will be revised as additional information is received.”

President and CEO John Charman commented: “Our estimated net losses from Hurricanes Gustav and Ike are within our expectations for hurricane-related activity. We expect market losses for these hurricanes to be well in excess of $15 billion. Our rigorous pricing and risk analyses strongly supported our decisions to allocate Texas capacity to coastal areas and to de-emphasize Florida exposure in our portfolio, particularly in smaller events. “Our experience in a storm with Ike’s profile was not different from what our analyses had projected for similar landfall scenarios.”

Charman added that the year has “seen a significant amount of loss activity emanating from large individual risk losses as well as small and medium-sized catastrophes.” He indicated that these types of losses were not unexpected, given the markets Axis participates in, and that the Company’s “underwriting portfolio has performed as expected in a year with estimates of market losses already in excess of $40 billion.”

In Charman’s opinion, “the ongoing global credit crisis combined with increased loss activity this year” is expected to “positively influence the buying decision for insurance and reinsurance. With our strong balance sheet, we will continue to commit strong capacity to our clients in these unprecedented and challenging times.”

AXIS said it has only “modest exposure in its fixed income portfolios to several specific situations that are concerning the market.” Its exposure to Lehman Brothers is “$34 million at amortized cost. Similarly, the Company’s exposure to operating subsidiaries of American International Group is $18 million. Exposure to the preferred equity and common equity of both Lehman and AIG is de minimus.”

However, Axis indicated that it “expects to realize a loss of approximately $60 million associated with Fannie Mae and Freddie Mac preferred equity.”

Source: AXIS Capital – www.axiscapital.com