Bermuda-based insurer Axis Capital Holdings Ltd. yesterday announced net income for the fourth quarter of $131 million — a fall of 57 percent compared to the previous year.

But despite losses of around $408 million attributed to claims from hurricanes Ike and Gustav, Axis managed to achieve a combined ratio of less than 90 percent.

Combined ratio — the percentage of premium dollars spent on claims and expenses — is a measure of underwriting profitability, the lower, the better.

Full-year profit was down by two thirds to $351 million compared to $1.055 million in 2007. Diluted book value at year end was $25.79 per share, which represented a fall over the 12 months of 10 percent, attributed by Axis chief executive officer John Charman to the "unprecedented decline in asset values globally".

Mr. Charman said the result reflected the diversity and strength of the company's global underwriting operations. Although the company's saw a reduction of $142 million in net investment income from alternative investments hit by extreme market volatility, Mr. Charman said "the overall conservative nature of our investment portfolio and liquidity position has held us in good stead".

Fourth quarter net income broke down to 88 cents per share, compared with $1.89 per share, for the corresponding period in 2007. Net income for the full year of 2008 was $351 million, or $2.26 per diluted share, compared with $1.055 billion, or $6.41 per diluted share, for the prior year.

Our operating income for the fourth quarter of 2008 was $163 million, or $1.09 per diluted share, compared with $296 million, or $1.83 per diluted common share, for the fourth quarter of 2007. The same item excluding foreign exchange gains, net of tax, for the fourth quarter of 2008 was $141 million, or $0.94 per diluted common share, compared with $296 million, or $1.83 per diluted common share, for the same period of 2007.

Return on average common shareholders' equity was 13.0 percent for the quarter (annualised) and 8.1 percent for the full year.

The quarter saw a four-percent increase in underwriting income and a combined ratio for the three months of 67.6 percent — an improvement of 3.2 points from the prior-year quarter.

"In 2008, we estimate that our industry will digest over $60 billion in insured property and energy losses worldwide, Axis' market share of these losses is less than one percent," Mr. Charman said. "The year also presented some of the most challenging and previously uncorrelated market conditions we have experienced since the formation of Axis and which prevailed throughout 2008.

"Importantly we successfully maintained our overall defensive underwriting posture against a market backdrop of often irrational and excessive pricing competition. We are comfortable that any expected loss activity related to the credit crisis and deteriorating global economic environment is manageable and well within acceptable loss parameters for us."

Mr. Charman added that the reinsurance-led hard market that he had anticipated was coming to fruition.

"As we anticipated, the insurance markets are lagging the reinsurance market," he added. "We continue to believe the insurance markets will begin to respond positively from the middle of this year onwards."

And he also mentioned last week's upgrading of Axis' financial strength rating to A+ by Standard & Poor's, something he believed would bolster the company's competitive position.

"Against the backdrop of a world which is increasingly more discerning with respect to counterparty financial strength, we are even more strongly positioned to capitalise on opportunities which will crystallise as this industry-changing transitional period progresses," Mr. Charman said.

"We expect the coming year will continue to present challenges, but our global, diversified and strongly capitalised company is more than prepared to meet these challenges and to positively reposition our global franchise as market conditions and changes unfold over the next couple of years."