Axis Capital Holdings Ltd. swung to a third-quarter profit of $239 million despite suffering an estimated loss of $85 million related to September's New Zealand earthquake.

The net income broke down to $1.78 per share, compared with a net loss of $96 million, or 70 cents per share, for the third quarter of 2009, when results were impacted by permanent impairment of some investment assets and a fall in the value of an insurance contract tied to mortality rates.

Operating income for the third quarter of 2010 was $164 million, or $1.22 per share, compared with $152 million, or $1 per share, for the third quarter of 2009.

Gross premiums written fell three percent to $751 million, while the combined ratio — a measure of underwriting profitability that indicates the proportion of premium dollars spent on claims and expenses — was 85.6 percent, an increase of 12.4 percentage points from last year.

Net favourable prior year reserve development of was $72 million, pre-tax, benefiting the combined ratio by 9.5 points, compared with $122 million, benefiting the combined ratio in the same period last year by 17.3 points.

Net investment income for the quarter was $112 million, down 17 percent from the same period in 2009.

Axis pointed out that this figure was $29 million better than that achieved in the second quarter of this year, due to strong performance from its investments in hedge and credit funds. Income from alternative investments was $25 million for the quarter.

Net income for the first nine months of the year was $556 million, or $4.04 per share, compared to $179 million, or $1.19 per share for the same period last year.

John Charman, chief executive officer of Axis, said: "For the first nine months of 2010, we produced an annualised operating return on average common equity of 11.3 percent, which we view as healthy given current property and casualty insurance and reinsurance market conditions, the low investment yield environment and the global catastrophe activity this year.

"Our underwriting and investment results, coupled with prudent capital management activity, have resulted in a 23.5 percent increase in our diluted book value per share compared to a year ago. We remain committed to maximising value creation for our shareholders without compromising our conservative, quality-based approach to the markets."

Diluted book value per share rose seven percent during the July through September period to $39.01. Yesterday, before earnings were released, Axis's share price closed at $34.16 in New York trading, up 11 cents.

Axis said share repurchases in the open market were $13 million in the quarter and the company Increased authorisation for further buybacks by $750 million.