Axis Capital Holdings Limited · NYSE:AXS
Axis Capital — Investor Day (June 2007)
158 slides from Axis Capital's investor day presentation, Jun 7, 2007
Slide 1: AXIS Capital Investor Day 2007
AXIS Capital Investor Day 2007 Quality, Sustainability and Profitability June 7, 2007
Slide 2: Safe Harbor Disclosure
Safe Harbor Disclosure Statements in this presentation that are not historical facts, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections, may be “forward-looking statements” within the meaning of the U.S. federal securities laws, including the
Slide 3: Non-GAAP Disclosure
Non-GAAP Disclosure We have presented diluted book value per common share calculated using the “if converted” method, which is a non-GAAP financial measure. This measure takes into account the effect of the full conversion of our outstanding stock options, warrants, restricted stock and phantom stoc
Slide 4: Investor Day Overview
Investor Day Overview Presenter Michael Butt, Chairman Opening Remarks Agenda Item Overview and Strategy John Charman, Chief Executive Officer & President Risk Management and Operating Approach Dennis Reding, Chief Operating Officer AXIS Insurance Jack Gressier, Chairman of AXIS Insurance Marshall T
Slide 5: Investor Day Objectives
Investor Day Objectives Demonstrate the strength and depth of our management team Demonstrate our differentiation and competitive positioning Demonstrate the high quality of our earnings Provide a strategic update
Slide 6: Overview and Strategy
Overview and Strategy
Slide 7: AXIS at a Glance
Approximately $6 billion market capitalization (June 1, 2007) $4.1 billion common equity and $5.1 billion total capital 690 employees in Bermuda, Europe, U.S. and Australasia Ratings of A (S&P - positive), A2 (Moody’s - stable) and A (AM Best - stable) $3.6 billion in gross premiums written (GPW) in
Slide 8: AXIS Offers Differentiation and Focus
AXIS Offers Differentiation and Focus Highly experienced management and team of specialists in knowledge-based business High-quality risk-adjusted returns Global platform in both insurance and reinsurance already built for longevity and value creation through all product cycles Strategic initiatives
Slide 9: Coordinated and Nimble Specialist Teams
Coordinated and Nimble Specialist Teams John Charman, CEO & President Michael Butt, Chairman Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Finance, Operations, Information Technology, Claims, Human Resources, Legal, Corporate Dennis Reding Chief Op
Slide 10: Quality, Sustainability and Profitability
Quality, Sustainability and Profitability ($ in millions) 70.4% 73.6% 84.4% 101.8% 77.3% Total Expense Ratio Loss Ratio Average: 81.5% Average: 16.6% Well-balanced portfolio preserved capital in ‘05 despite unprecedented Atlantic wind activity Overview and Strategy Return on Average Common Equity Ne
Slide 11: 2002–2006 Risk/Return Comparison
2002 – 2006 Risk/Return Comparison Montpelier XL Platinum Aspen AWAC Max Re Endurance ACE Everest Partner Re Arch Capital White Mountains Renaissance Re 2% 4% 6% 8% 10% 12% 14% 16% 18% 5 10 15 20 25 30 35 40 Source: Benfield Quarterly FY 2006 Capital Returns, March 2007 Overview and Strategy IPC Sta
Slide 12: Diversified Strategic Footprint
Diversified Strategic Footprint 2002 $1.1Bn 2003 $2.3Bn 2004 $3.0Bn 2005 $3.4Bn 2006 $3.6Bn 2007 + Bermuda London-market Worldwide specialty lines portfolio U.S. excess & surplus lines U.S. professional lines renewal rights (D&O) Bermuda professional lines (D&O) E&O team European professional lines
Slide 13: Drive for Earnings Quality and Growth
Drive for Earnings Quality and Growth Overview and Strategy Specialist business in small-to-medium enterprise segment New Products Further Enhancements of Risk Management We continue to reduce premium writings where pricing is inadequate and to strive for growth when opportunities meet or exceed our
Slide 14: Risk Management and Operating Approach
Risk Management and Operating Approach
Slide 15: Key Drivers for Superior Profitability
Key Drivers for Superior Profitability Portfolio Management and Risk Selection Industry Profits Specialist Focus – Insurance & Reinsurance Operating Efficiency – G&A and Acquisition Costs Risk Management and Operating Approach
Slide 16: What Makes AXIS a Specialist?
What Makes AXIS a Specialist? Specialized skills for different markets and complex lines of business Risk Management and Operating Approach Reinsurance Insurance Examples Evaluating risk-reward profile in more volatile specialty classes (e.g. terrorism, aviation, etc) Managing MGA business Understan
Slide 17: What Makes AXIS an Underwriting Company? Disciplined Approach
What Makes AXIS an Underwriting Company? Disciplined Underwriting and Pricing Approach Knowledge-based Business requiring Deep Expertise High Efficiency Level Risk Management and Operating Approach Organizational focus on maintaining a low-cost platform provides a strong competitive advantage Applic
Slide 18: What Makes AXIS an Underwriting Company? Opportunistic Approach
What Makes AXIS an Underwriting Company? Opportunistic Approach Focus on Underwriting Profitability Risk Management and Operating Approach Decisions based on maintaining and improving profitability Recognition that every account and actions in every business unit impact the bottom line Preserve capi
Slide 19: Risk Management Strategies
Risk Management Strategies Selective Diversification Strict Control Environment Defined Tolerance Levels Risk Management and Operating Approach Maximum limits and risk tolerances for potential shock losses Limit overall exposure to long-tail business Robust management of overlap between insurance an
Slide 20: The Pillars of AXIS Risk Management
The Pillars of AXIS Risk Management Business units responsible for identifying, assessing, taking and mitigating risk Business leaders ensure appropriate limits, policies, procedures, and measures in place (with input from Risk Management Committee) Audit function independently tests and verifies co
Slide 21: AXIS Has an Expense Advantage
AXIS Has an Expense Advantage Acquisition Cost Ratio G&A Expense Ratio(2) Source: Company Reports (1) P&C operations only. (2) Includes corporate expenses. 18.1% 19.8% 24.3% 26.5% 26.9% 27.1% 28.4% 28.5% 29.3% 30.6% 30.7% 31.0% 31.5% 39.8% Risk Management and Operating Approach We are focused on mai
Slide 22: AXIS Insurance
AXIS Insurance
Slide 23: AXIS Insurance
AXIS Insurance John Charman, CEO & President Michael Butt, Chairman Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Finance, Operations, Information Technology, Claims, Human Resources, Legal, Corporate Dennis Reding Chief Operating O
Slide 24: Global Product Management Approach
Global Product Management Approach Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Dennis Reding Chief Operating Officer Select Markets Gregg Springer AXIS Insurance Senior Management Capital Risk Solutions Richard Bullen Global Insur
Slide 25: AXIS Insurance at a Glance
AXIS Insurance at a Glance Specialty Lines 46.3% Professional Lines 17.0% Capital Risk Solutions 19.6% Select Markets 17.1% 2006 GPW by Division Total GPW = $2,070 M Property 32.4% Political Risk 10.1% Professional Lines 23.8% Casualty 13.5% Accident & Health 1.6% 2006 GPW by Line of Business Total
Slide 26: Gross Premiums Written 2002–2006
Gross Premiums Written 2002 – 2006 ($ in millions) $794 $1,607 $1,920 Property Marine Terrorism Aviation & Aerospace $1,875 $2,071 Political Risk Professional Lines Casualty Accident & Health AXIS Insurance 0 300 600 900 1,200 1,500 1,800 2,100 2002 2003 2004 2005 2006
Slide 27: Strategic Global Presence
Strategic Global Presence North America Toronto office Nationwide network of 10 offices in U.S. 209 employees Flexibility to write on admitted and non-admitted basis in all 50 states Bermuda 12 employees Global capability with few exceptions Ability to transact with both Bermuda and London wholesale
Slide 28: Broadened Distribution
Broadened Distribution 2004 2005 2006 (1) (1) Includes Marsh & McLennan, Aon and Willis. (2) Includes Media Pro in all years. AXIS Insurance AXIS Insurance U.S. Distribution 2004-2006 (2) 53.5% 4.0% 47.0% 10.7% 13.4% 42.5% 42.3% 38.6% 48.0% 0% 25% 50% 75% Big 3 Other MGA
Slide 29: AXIS Insurance – Specialty Lines
AXIS Insurance – Specialty Lines
Slide 30: Specialty Lines at a Glance
Specialty Lines at a Glance Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Dennis Reding Chief Operating Officer Select Markets Gregg Springer Capital Risk Solutions Richard Bullen Professional Lines Jack Kuhn AXIS Insurance Marine 1
Slide 31: Specialty Lines Overview
Specialty Lines Overview Property Casualty Marine ($ in millions) $191 $443 $501 $453 $518 $141 $158 $201 $229 $190 $270 $171 $253 $188 -- AXIS Insurance $0 $200 $400 $600 2002 2003 2004 2005 2006
Slide 32: Positioned to Select Best Property Opportunities
AXIS Insurance Positioned to Select Best Property Opportunities Bermuda Market London Wholesale Market U.S. Wholesale/ Retail Market Global product management supports selection of best opportunities Global Coordination
Slide 33: Catastrophe Exposure Management
Cat exposures are modelled and managed by centralized catastrophe management unit Managed within allocated PML limits Includes allocations for non-modelled exposures Reinsurance purchased to maximize our gross and net premium / return potential within net PML constraints Emphasis on Insurance to Val
Slide 34: Cat Exposure Reduction Post-Katrina
Reduction of maximum Wind and California EQ exposed limits Further reduction of limits on business with Florida exposure Restriction of layer shares Reduction or elimination of Building Ordinance coverage Reduction of flood / zone A flood sublimits and increasing exclusion of flood coverage AXIS Ins
Slide 35: Overview of AXIS Insurance Net Cat Exposure
Overview of AXIS Insurance Net Cat Exposure EQ California 18% U.S. Wind 57% EQ East 2% EQ Central 1% AXIS Insurance Net Average Annual Loss AXIS Insurance Net 250-year TVAR AXIS Insurance EQ California 14% U.S. Wind 55% EQ East 18% EQ Central 13% All Other U.S. 6% All Non-U.S. 16%
Slide 36: Case Study: Risk/Reward in Property
($ in millions) GPW Incepted: North America(1) GPW Incepted : Rest of World (1) Includes Caribbean exposure. Policy Count: North America(1) Policy Count: Rest of World AXIS Insurance Non-U.S. Sourced Property Case Study: Risk/Reward in Property $4 $71 $19 $33 $39 $28 $18 $73 $65 $78 $82 $2 0 20 40 6
Slide 37: Offshore Energy Risk/Reward Improved
Offshore Energy Risk/Reward Improved Africa 8% Asia & Far East 10% Australia & New Zealand 3% Canada 1% Europe 27% Gulf of Mexico 35% Middle East 7% South America 9% Africa 8% Asia & Far East 11% Australia & New Zealand 4% Canada 1% Caribbean 1% Europe 42% Former Soviet Union <1% Former Soviet Union
Slide 38: Marine Lines Disciplined Approach
AXIS Insurance War 7.3% Cargo & Specie 18.4% Hull 33.1% Liability 29.4% Marine Lines (ex. Offshore Energy) 2006 GPW = $81.7 M Disciplined application of cat exposure management Low catastrophe exposure in portfolio Recreational Marine 11.8% and Disciplined Approach to Other Marine Lines
Slide 39: Highly Controlled Approach to U.S. Casualty
AXIS Insurance Highly Controlled Approach to U.S. Casualty Excess & Surplus Casualty GPW and NPW (1) ($ in millions) Excess & Surplus Umbrella GPW and NPW (2) ($ in millions) NPW GPW NPW GPW (1) 1% of premium ceded on facultative basis. For purposes here, net and gross are treated as equivalent. (2)
Slide 40: Specialty Lines – Market Conditions Commentary
Specialty Lines – Market Conditions Commentary Marine Offshore energy pricing, terms and conditions strong Stable marine liability market (AXIS participation dominated by a few contracts with favorable renewal conditions) Marine Cargo/Specie and Hull competitive (AXIS focus on niche areas) Pricing p
Slide 41: AXIS Insurance – Professional Lines
AXIS Insurance – Professional Lines
Slide 42: Professional Lines at a Glance
Professional Lines at a Glance Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Dennis Reding Chief Operating Officer Capital Risk Solutions Select Markets Gregg Springer Richard Bullen Professional Lines Jack Kuhn AXIS Insurance Finan
Slide 43: Global Reach with Centralized Control
Global Reach with Centralized Control Bermuda London/Dublin Australia U.S. Regional approach Excess public D&O Specialty Products for Non-Public FI centralized in NYC Centralized underwriting control Global Excess business Complements U.S. and London Fortune 500 Focus International hub Capital marke
Slide 44: Professional Lines Gross Premiums 2003–2006
Professional Lines Gross Premiums 2003 – 2006 Commercial Financial Institutions ($ in millions) $248.8 $298.1 $332.6 $351.4 Growth over time has emanated from global build-out, expanded product offerings and new customer segments. AXIS Insurance Note: AXIS Pro and Media Pro GPW in Select Markets div
Slide 45: U.S. Professional Lines Overview
U.S. Professional Lines Overview Private D&O 3.7% NFP D&O 2.3% Public D&O Side A 11.3% Fiduciary 15.8% Fidelity 0.7% Public D&O 51.4% EPL 7.3% Privatus 7.6% AXIS Insurance FIS (Commercial) U.S. 2006 GPW: $178 M Excess 82% Primary 18% Primary Average Gross Limit = $3.5 M Excess Average Gross Limit =
Slide 46: Bermuda Professional Lines Overview
Bermuda Professional Lines Overview U.S. 74% Europe 20% Australia 0.5% Canada 5.5% AXIS Insurance Europe 18% U.S. 76% Canada 5.5% Australia 0.5% Insured Domicile by 2006 GPW Insured Domicile by 2006 Policy Count
Slide 47: Bermuda Professional Lines Overview
Bermuda Professional Lines Overview Blended 28% Punitive Damage Wraps <1% Stand Alone D&O 25% EPL 6% Stand Alone E&O 4% Stand Alone Crime 4% Stand Alone D&O 41% Blended 6% Law Firms 52% Accountants 41% AXIS Insurance Commercial 2006 GPW = $15.0 M Financial Institutions 2006 GPW = $16.2 M E&O 2006 GP
Slide 48: Europe Professional Lines Overview
Europe Professional Lines Overview IPO 4% Side A 2% Stand Alone PI 10% Stand Alone Crime 5% Fiduciary 1% Stand Alone D&O 54% Blended PI/Crime 16% Blended PI/Crime /D&O 7% Product Breakdown 2006 GWP = $55.8 M Blended PI/D&O 1% AXIS Insurance FI 65% Commercial 35% Primary 40% Excess 60% UK 54% Europe
Slide 49: Professional Lines – Market Conditions Commentary
Professional Lines – Market Conditions Commentary Stable financial markets maintaining lower loss frequency & severity Increased capacity creating rate pressure New and profitable business opportunities in a bouyant capital market mitigates rate pressure General premium levels remain significantly a
Slide 50: AXIS Insurance – Select Markets
AXIS Insurance – Select Markets
Slide 51: Select Markets at a Glance
Select Markets at a Glance Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Select Markets Gregg Springer Capital Risk Solutions Richard Bullen Professional Lines Jack Kuhn AXIS Insurance Professional Lines 40.1% Property 34.7% Select
Slide 52: Characteristics of Targeted Business
Characteristics of Targeted Business Premium per policy up to $50k Less complex business Higher item count required to leverage expense base Focused on small end of commercial market Key to profitability and success is leading expense ratio Non-subscription / 100% business AXIS Insurance
Slide 53: Targeted Global Growth
Initiate Expansion in U.S. Targeted Global Growth AXIS Insurance Canada U.K. / Europe Australasia Navigating the Select Markets Global Landscape E&O D&O A&H
Slide 54: Origins of Select Markets
Origins of Select Markets ($ in millions) Property Other Specialty Professional Lines Casualty $94 $249 $355 Very select approach to MGA business since inception = currently 16 MGA relationships AXIS Insurance Marine Note: Media Pro GPW is included in professional lines in above chart. $22 $1 $0 $50
Slide 55: Conservative MGA Strategy
Conservative MGA Strategy Access to high margin business we would not otherwise attract Access to business that previously has not fit our operating model Controlled incubator for potential expansion into product lines or geographic regions new to AXIS Enhancement of our expertise with skills of the
Slide 56: Disciplined MGA Implementation Strategy
Disciplined MGA Implementation Strategy Comprehensive and continual due diligence in-line with AXIS group parameters Centralized senior management decision-making process Transparent environment – centralized records of both corporate profile and business planning Measurable underwriting performance
Slide 57: Media Pro Acquisition
Media Pro Acquisition AXIS Pro / Media Pro 2006 GPW (1) By Class of Business Acquisition of assets and operations represents a critical step in Select Markets expansion strategy MGU specializing in professional liability lines (media liability, cyber-technology and MPL) Operations in U.K., U.S. and
Slide 58: Select Markets Global Expansion Strategy
Select Markets Global Expansion Strategy Business already addressed in very select fashion largely through MGA distribution Some MGA business will not fit “auto-written” model and will continue on MGA basis Significant opportunity exists to transact the balance more efficiently without sacrificing o
Slide 59: AXIS Insurance – Capital Risk Solutions
AXIS Insurance – Capital Risk Solutions
Slide 60: Capital Risk Solutions at a Glance
Capital Risk Solutions at a Glance Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Richard Housley Dennis Reding Chief Operating Officer Capital Risk Solutions Select Markets Gregg Springer Capital Risk Solutions Richard Bullen Professional Lines Jac
Slide 61: Capital Risk Solutions Overview
Capital Risk Solutions Overview Terrorism Political Risk Aviation & Aerospace ($ in millions) $158 $111 $106 $87 $82 $244 $91 $331 $126 $377 $129 $182 253 $113 $210 $58 AXIS Insurance $0 $100 $200 $300 $400 2002 2003 2004 2005 2006
Slide 62: Capital Risk Solutions Overview
Capital Risk Solutions Aviation/War Aviation All Risks Aviation War AV 52’s Terrorism U.S. Terrorism International Terrorism Political violence Capital Market Risks Emerging Market Structured Credit MT-100 trades Traditional Political Risk Equity Lenders Sovereign Default Strategic Initiatives in Pr
Slide 63: Case Study: Aviation Market 1996–2006
Case Study: Aviation Market 1996 – 2006 Gross Premiums Written Total Claims(2) ($ in millions) Source: Aon Market Data (1) Excluding WTC losses. (2) Claims figures are all losses with a hull and liability reserve over $1 million, excluding war losses. (1) AXIS Insurance Total global aviation market
Slide 64: Cycle Management: AXIS Airline-Related Portfolio
AXIS Insurance $84 $178 $364 $328 $233 ($ in millions) All Risk AV52 War Airline-related GPW In-force by Underwriting Year AXIS airline-related GPW reduced 77% since 2004 Cycle Management: AXIS Airline-Related Portfolio $0 $100 $200 $300 $400 2002 2003 2004 2005 2006
Slide 65: Terrorism Opportunity and Appetite
Terrorism opportunity in early years was well-suited to AXIS appetite and was defined by: Supply/demand imbalance Reinsurers slow to participate Inconsistent pricing within programs allowing significant leverage for lead markets with critical capacity Highly restricted form Ability to exclude NCBR e
Slide 66: Capital Risk Solutions Expansion Strategy
Capital Risk Solutions Expansion Strategy Centerpiece is political risk and associated lines of emerging market risk High levels of embedded underwriting expertise Strategic partnerships built on high level of trust and transparency in place Scale of market and opportunity dwarfs that of the global
Slide 67: What is Political Risk?
Political Risk = insured’s exposure to the risk of a political event that would diminish the value of an investment or loan Wrongful Calling of Guarantee (WCG) Breach of Contract, Contract Frustration (CF), Contract Repudiation (CR) Political Violence (PV) or War (including revolution, insurrection,
Slide 68: Political Risk Profitable Since Inception
Political Risk Profitable Since Inception Our targeted business has been highly profitable during last 5 years More U.S. corporate downgrades than Emerging Market sovereign and corporate downgrades over same period Volume of issuances has declined over the same period due to market liquidity / ease
Slide 69: Well-Balanced and Managed Portfolio
Well-Balanced and Managed Portfolio Total Exposure by Region Portfolio by Risk Type Exposure by Industry AXIS Insurance 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% MIDDLE-EAST CIS SOUTHEAST ASIA SUB-SAHARAN AFRICA SOUTH AMERICA SOUTH ASIA WESTERN EUROPE NORTH AFRICA EASTERN EUROPE NORTH ASIA
Slide 70: Evolving Political Risk
Evolving Political Risk AXIS Insurance Coverage sought for risks placed in the capital markets: Protection of the issuance either through Political Risk/ Credit-enhanced policies offered for bond holders at large Specific entities seeking protection for their own book Ability to write transactions w
Slide 71: What is the Opportunity?
What is the Opportunity? Despite tightened spreads due to positive performance in the sector, we can access deals with our desired risk-return profile through strong banking partnerships Foreign Direct Investment (“FDI”) continues to increase providing opportunity without chasing spread or moving do
Slide 72: Strategically Positioned for the Opportunity
Access to distribution without the cost Access to expertise without the cost Profitable returns Limited market space Leverage minimal set up costs for AXIS Low overhead relative to returns Mitigate moral hazard through transparency and financial alignment AXIS Insurance Strategically Positioned for
Slide 73: AXIS Insurance Questions?
AXIS Insurance Questions?
Slide 74: AXIS Re
AXIS Re
Slide 75: AXIS Re Organizational Structure
AXIS Re Organizational Structure John Charman, CEO & President Michael Butt, Chairman Jack Gressier, Chairman, AXIS Insurance Marshall Turner President, AXIS Insurance Specialty Lines Finance, Operations, Information Technology, Claims, Human Resources, Legal, Corporate Jack Gressier Chairman, AXIS
Slide 76: AXIS Re at a Glance
AXIS Re at a Glance AXIS Re Bermuda 42.8% AXIS Re U.S. 29.7% AXIS Re Europe 27.5% 2006 GPW by Unit Total GPW= $1.5 B Catastrophe 30.2% Motor 5.5% Liability 13.3% Other 4.9% 2006 GPW by Line of Business Total GPW= $1.5 B Property 22.0% Professional Lines 17.8% Credit & Bond 6.3% AXIS Re (1) S&P Globa
Slide 77: AXIS Re is a Global Specialist Reinsurer
AXIS Re is a Global Specialist Reinsurer Worldwide property catastrophe reinsurance portfolio U.S. Casualty reinsurance Traditional Continental European reinsurance Specialist / Relationship-oriented Commodity-like AXIS Re Coordination of Aggregate Exposure Management and Client Strategy Different s
Slide 78: Diversification, Global Reach & Local Presence
Diversification, Global Reach & Local Presence New York Bermuda Zurich AXIS Re Multi-line capability coupled with cat franchise Broad portfolio spread on many dimensions Sought-after lead market (technical expertise and significant capacity) Strong balance sheet attracts clients Focus on core group
Slide 79: Gross Premiums Written 2002–2006
Gross Premiums Written 2002 – 2006 ($ in millions) $667 $1,093 $1,519 (1) $1,539 Catastrophe Property Professional Lines Credit & Bond Motor Liability Other $314 (1) Includes KRW reinstatement premiums of $88 million. AXIS Re 0 300 600 900 1,200 1,500 1,800 2002 2003 2004 2005 2006
Slide 80: Worldwide Property Reinsurance
Worldwide Property Reinsurance Europe 21.0% U.S. 28.6% Worldwide 37.4% Rest of World Specific 13.1% AXIS Re Current In-force Property Reinsurance Premium by Geography AXIS Re With its origins in property treaty reinsurance, AXIS Re has a worldwide property portfolio with centralized catastrophe port
Slide 81: Overview of AXIS Re Cat Exposure
Overview of AXIS Re Cat Exposure U.S. Wind 21% All Non-U.S. 18% Other U.S. EQ 3% AXIS Re Net Average Annual Loss AXIS Re Net 250-year TVAR U.S. Wind 50% Eurowind 50% CA EQ 9% Eurowind 17% Other U.S. 32% AXIS Re
Slide 82: AXIS Re Bermuda
AXIS Re Bermuda
Slide 83: AXIS Re Bermuda at a Glance
AXIS Re Bermuda at a Glance John Charman, Chairman, AXIS Re Bill Fischer, CEO AXIS Re Bermuda Michael Morrill, CEO AXIS Re U.S. Karl Mayr, CEO AXIS Re Europe AXIS Re Bermuda Gross Premiums Written 2006 GPW = $658 M AXIS Re AXIS Re Bermuda Property Cat 50.7% Property Pro Rata 21.1% Property Per Risk
Slide 84: AXIS Re Bermuda Business Profile
AXIS Re Bermuda Business Profile Property Cat US 27.7% WC Cat 7.2% Pure Terrorism 6.5% Property Per Risk 15.3% All Other 5.7% Premiums In-force as of 1/1/07 by Class of Business Property Cat Non-US 21.1% Property Pro Rata 16.5% Property Cat US 31.1% WC Cat 10.2% Pure Terrorism 4.6% Property Per Risk
Slide 85: AXIS Re Catastrophe Modeling Process
AXIS Re Catastrophe Modeling Process Capture and Documentation of all Reinsurance Treaties Technical Rate per Layer (Estimate Loss Costs, Risk Loads and Capital Consumption) Expense Loading & Underwriter Judgement (Pricing for Profit) Commercial Pricing & Underwriting Decision Exposure Analysis Mode
Slide 86: Proprietary Exposure Management System
AXIS has invested substantially in its proprietary Exposure Management System (EMS) EMS produces various standard summaries of incoming exposure data and allows for the creation of custom report Analysis is mandated on all property catastrophe treaties In 2007, AXIS is conducting data audits to vali
Slide 87: Modeling – Value Added
Modeling – Value Added Vulnerabiliy Frequency Find the “right“ ground-up curves for AXIS cat pricing and accumulation control Find and eliminate inconsistencies in each model (Lines of Business, coverages, construction types, occupancy types, regional vulnerabilities relative to each other) Compare
Slide 88: Case Study: Leader in Exposure Management
Case Study: Leader in Exposure Management ($ in billions) 1/1/2004 1/1/2005 1/1/2006 9/1/2007 (Projected) Example1 : Texas-Specific Cover Including assessment exposure to TWIA, Wind expected loss to layer up 39% Example 2: Carolinas-Specific Cover Including assessment exposure to NC and SC pools, Wi
Slide 89: June 1, 2007 Property Reinsurance Renewals
June 1, 2007 Property Reinsurance Renewals Florida renewal pricing was firm Declines minor on a technical basis (-5%) Some margin erosion ( -10%) New purchases materially made up for the shortfalls created by the FHCF expansion Average rate-on-line lower due to higher attachment points PML commitmen
Slide 90: AXIS Re Bermuda – Market Conditions Commentary
AXIS Re Bermuda – Market Conditions Commentary Property Cat – Rest of World Property Catastrophe Property Cat –Non-FL U.S. Property Per Risk AXIS Re Bermuda Workers’ Comp Cat Property Proportional Terms and commissions improving for reinsurers, but this is offset by original rate decline New placeme
Slide 91: AXIS Re U.S.
AXIS Re U.S.
Slide 92: AXIS Re U.S. at a Glance
AXIS Re U.S. at a Glance John Charman, Chairman, AXIS Re Bill Fischer, CEO AXIS Re Bermuda Michael Morrill, CEO AXIS Re U.S. Karl Mayr, CEO AXIS Re Europe AXIS Re U.S. Gross Premiums Written 2006 GPW = $457 M AXIS Re AXIS Re U.S. Property Per Risk 2.0% Casualty Clash 1.8% Professional Liability 55.3
Slide 93: The Window of Opportunity
The Window of Opportunity AXIS Re U.S. Incumbents with significant adverse development Recognition of loss convergence Clients demanding better security Brokers seek underwriting expertise from specialty reinsurers Capital requirements (and losses) reduce number of participants in specialty reinsura
Slide 94: U.S. Clients – The Buying Decision
U.S. Clients – The Buying Decision AXIS Re U.S. Stability and Consistency Security Service Transparency Group capital structure easily understood Risk appetite clearly articulated Provide timely lead market quotes Constructive renewal suggestions and negotiations Pay all proper claims in a timely fa
Slide 95: Lines of Business – Do's and Don'ts
Lines of Business – Do’s and Don’ts Professional Liability D&O / EPLI E &O Medical Environmental General Casualty Umbrella (Supported/Non Supported) Excess Liability General Liability Workers’ Compensation Property Per Risk Proportional Marine / General Aviation Surety Stand Alone Automobile Liabili
Slide 96: Primarily Excess-of-Loss Portfolio
Primarily Excess-of-Loss Portfolio Proportional 1st Dollar Proportional Excess Attachment Non-Proportional $223 M $317 M $411 M $457 M $288 M AXIS Re U.S. Underwriting Year Gross Premiums Written 14% 16% 16% 13% 14% 16% 7% 27% 27% 19% 70% 76% 57% 60% 68% 0% 25% 50% 75% 100% 2003 2004 2005 2006 2007
Slide 97: AXIS Re U.S. Broker Channel
Guy Carpenter 35% Carvill 8% Towers Perrin 5% AXIS Re U.S. Premium by Broker AON 21% Benfield 14% Other 8% Willis Re 5% Holborn Corp 4% AXIS Re U.S. Broker Channel Facilitates Operating Approach
Slide 98: AXIS Re U.S. – Diverse Client Base
AXIS Re U.S. – Diverse Client Base Global 14.6 14.6 Global 9.2 23.7 Global 5.9 29.7 Specialty Regional 5.5 35.1 Specialty Regional 4.6 39.8 Specialty 4.3 44.1 Global 3.9 48.0 Specialty Regional 3.8 51.8 Reciprocal 3.6 55.4 Global 3.0 58.4 National 2.9 61.3 Specialty Regional 2.9 64.1 Mutual 2.3 66.4
Slide 99: Expanding Business with Stable Buyers
Client Profile Stock vs. Mutual Stock Mutual Total Clients 47 66 78 89 72 Contracts Profile Stock vs. Mutual Total Contracts 159 229 264 300 226 Stock Mutual Expanding Business with Stable Buyers AXIS Re U.S. 72% 67% 62% 64% 65% 28% 33% 38% 36% 35% 0% 25% 50% 75% 100% 2003 2004 2005 2006 YTD 2007 86
Slide 100: Q1 2007 Renewal Overview
Q1 2007 Renewal Overview $187 6.8% 10.6% 1.3% 10.6% 23.0% Q1 2006 GPW Expiring Cancelled Share decrease Growth and structure Share increase New Q1 2007 GWP ($ in millions) 17.4% decline due to cancellation and share decrease 33.6% growth from new business and increased shares Overall Growth = 17% AX
Slide 101: Pricing Levels Remain Strong
Pricing Levels Remain Strong ($ in millions) Professional Liability Casualty (ex. Clash) AXIS Re U.S. AXIS Re U.S. established YTD Note: Rate index reflects loss trends. 1998 - 2003 client data used as proxy for reinsurance rate change. 2004 - present utilizes AXIS Re U.S. price monitor for both rat
Slide 102: Case Study: Aggregate Management – Casualty
Case Study: Aggregate Management – Casualty AXIS Re U.S. Example: Errors & Omissions – Mutual Funds/ Financial Institutions Company In-force at 12.31.06 In-force at 06.30.07 Large Specialty Insurer A 7,075,000 7,075,000 Small Specialty Insurer A 4,000,000 4,000,000 Large National Insurer A 2,500,000
Slide 103: Case Studies: Reserving and Claims
Case Studies: Reserving and Claims Case 1: Small Medical Mutual Insurance Company Specialist law firm retained by AXIS to evaluate client’s claims practices Attorneys identified process problems relating to claims reserving AXIS Actuaries revised pricing to reflect reserve uncertainty Appropriate re
Slide 104: Non-Proportional Assumed Liability Paids and Case IBNR
Non-Proportional Assumed Liability Paids and Case IBNR 2003-2006 Gross Accident Year Paids/Case & IBNR Loss and LAE Ratios 62.5% 66.5% 66.5% 76.6% Mature Direct: Swiss Re America, General Re, Employers Re and American Re. Mature Broker: Berkley, Everest Re, Transatlantic Re, Odyssey Re US, GE Re, Fo
Slide 105: Opportunity is Not Constrained
Opportunity is Not Constrained Direct Broker AXIS Re U.S. RAA U.S. Reinsurer GPW by Distribution Type Underwriting Year AXIS Re U.S. Submission Count 2003 2004 2005 2006 48% 41% 36% 33% 29% 52% 59% 64% 67% 71% 0% 25% 50% 75% 100% 2002 2003 2004 2005 2006 965 1,031 1,183 1,230
Slide 106: Market Conditions Commentary
Market Conditions Commentary [Line of Business] AXIS Re U.S. D&O - All Other Public D&O Large Cap E&O/Non Medical Medical Standard Casualty Reinsurance terms stable, with increasing competition expected for the remainder of 2007 (0 to -10%) Pressure on primary casualty pricing continues to increase
Slide 107: Market Conditions Commentary
Market Conditions Commentary Surety AXIS Re U.S. Marine / Aviation Reinsurance market capacity remains disciplined with renewal pricing static but offset by increased cedant retentions. Ample capacity in the primary market for marine and general aviation combined with shortage of underwriting talent
Slide 108: Continue to Leverage Differentiated Approach
Continue to Leverage Differentiated Approach AXIS Re U.S. Global Reinsurance Diversification Emphasis on Non-proportional Business Conservative Reserving including Third-Party External Resources Employed in Claims Audits Focus on Statutory Underwriting Profit Peer Review Underwriting No single under
Slide 109: AXIS Re Europe
AXIS Re Europe
Slide 110: AXIS Re Europe at a Glance
AXIS Re Europe at a Glance John Charman, Chairman, AXIS Re Bill Fischer, CEO AXIS Re Bermuda Michael Morrill, CEO AXIS Re U.S. Karl Mayr, CEO AXIS Re Europe AXIS Re Europe Gross Premiums Written 2006 GPW = $423 M AXIS Re AXIS Re Europe Property Per Risk 9.9% Credit & Bond 23.1% Motor 21.2% Liability
Slide 111: AXIS Re Europe's Raison d'être
AXIS Re Europe’s Raison d’être Market Dislocation Identity Crisis Brokers Lacking alternatives Less Concentrated Placements Window was wide open for a new and credible player in 2003 AXIS Re Europe Reinsurance buyers seeking wider spread on placements as security became a dominant selection criteria
Slide 112: AXIS Re Europe Gross Premiums 2004–2006
AXIS Re Europe Gross Premiums 2004 – 2006 ($ in millions) Property Cat Property XS Credit & Bond Per Risk Property Pro Rata $423.3 $357.7 $202.4 Bond Pro Rata Liability Credit Pro Rata Motor & PA Pro Rata Motor & PA Per Risk Engineering Pro Rata Engineering Per Risk AXIS Re Europe Window of opportun
Slide 113: Continental Europe – The Buying Decision
Continental Europe – The Buying Decision Predictability Regional or local presence with deep understanding of European business culture essential Regional and local companies prefer to deal with native speakers Property Catastrophe and Motor Liability are predominant lines of business Liability not
Slide 114: Lines of Business – Do's and Don'ts
Lines of Business – Do’s and Don’ts Property Catastrophe Property Non-Catastrophe Motor Personal Accident Liability and Specialty Lines Credit & Bond Engineering Life & Health Marine, Energy, Aviation & Space Financial Guarantees Crop Hail / Agricultural AXIS Re Europe We offer what our clients real
Slide 115: Portfolio Diversified by Geography
Portfolio Diversified by Geography AXIS Re Europe France 27% UK 16% Germany 13% Switzerland 9% Ireland 7% USA 4% Benelux 4% Italy 3% Israel 2.4% Scandinavia 2.4% Bermuda 2.1% CEE 1.9% Spain 1.9% Greece 1.5% Others 5% AXIS Re Europe Current Inforce Premiums by Geography
Slide 116: Portfolio Overview by Broker and Product
Portfolio Overview by Broker and Product AXIS Re Europe AON 28% Guy Carpenter 20% Willis 17% Benfield 13% Direct 12% Captive Broker 6% Others 4% Property Non CAT 20% Property CAT 13% Motor & PA 22% Credit & Bond 21% Engineering 12% Liability 12% AXIS Re Europe Current Inforce Premium by Broker AXIS
Slide 117: Non-Proportional vs. Proportional
Non-Proportional vs. Proportional 78% 20% AXIS Re Europe Excess of Loss Pro Rata AXIS Re Europe ALL LINES Current Inforce Premium Property & Casualty Current Inforce Premium Specialty Lines (Credit & Bond and Engineering) Current Inforce Premium 55% 45% 91% 9% 22% 78%
Slide 118: AXIS Re Europe Top Clients
AXIS Re Europe Top Clients Credit & Bond Global Player 6.8 6.8 Regional Commercial Lines Company 6.6 13.4 French Mutuals 6.4 19.8 Global Player 6.0 25.8 Global Player 5.5 31.3 Global Player 5.5 36.8 Credit & Bond Global Player 3.3 40.1 Global Player 2.2 42.3 Pan-European Player 2.1 44.4 Global Playe
Slide 119: Market Conditions Commentary
Market Conditions AXIS Re Europe Commentary Property Cat Property Non-Cat Engineering Credit & Bond Slight price deterioration in the underlying credit business with firm terms and conditions Despite increased commissions, margins still attractive Bond business unchanged and still looking promising
Slide 120: Market Conditions Commentary
Market Conditions AXIS Re Europe Commentary Liability Motor Original rates soft in our main markets France and UK Reinsurance competition at reasonable levels In France, following +50% and +35% reinsurance price increases in 2005 and 2006 respectively, rates up by +20% in 2007 Large loss frequency d
Slide 121: January 1, 2007 Renewal Overview
January 1, 2007 Renewal Overview $343 9.1% 16.9% 8.1% 2.8% 11.5% 29.0% $437 GPW expiring at 12/31/06 FX impact Cancelled Share decrease Growth and structure Share increase New GPW at 1/1/07 AXIS Re Europe ($ in millions) 25% decline due to cancellation 40% growth from new business and increased shar
Slide 122: Technical Ratio Walk: Q1 2006 to Q1 2007
Technical Ratio Walk: Q1 2006 to Q1 2007 AXIS Re Europe +2.3%
Slide 123: Case Study: Admiral
Case Study: Admiral Fall 2004 Mid 2004 Fall 2006 AXIS Re Europe AXIS was early and quick on an attractive, prestigious account and withdrew upon dramatic reduction in margin (1) Deposit method of accounting. Large reinsurer offers Admiral a five-year deal at better terms to client than AXIS is willi
Slide 124: Case Study: Conflagration and Terrorism
Case Study: Conflagration and Terrorism Fall 2004 Fall 2005 Fall 2006 AXIS Re Europe AXIS fulfills customer needs by deploying strong capacity when traditional markets balked Strategic impact: AXIS gains market recognition and becomes reinsurance partner of market segment seeking protection Main rei
Slide 125: Differentiation can Drive Profitable Growth
Differentiation can Drive Profitable Growth Broker Market Driven Clear Strategy Willingness to Take Risk AXIS Re Europe One Location Predictability Responsiveness Diversity Ten nationalities and ten languages Fast turnaround of business through centralized underwriting All functions involved in unde
Slide 126: Responsiveness
Responsiveness AXIS Re Europe Combining Bermudian underwriting focus and entrepreneurial spirit with Continental European market knowledge and culture = The Eurobermudian European or Bermudian?
Slide 127: AXIS Re Questions?
AXIS Re Questions?
Slide 128: Investments
Investments
Slide 129: Investment Portfolio and Investment Income
Investment Portfolio and Investment Income $25 $24 $3 $5 $13 $6 $6 $3 $1 $1 $1 - - Investment Income Other Investments (in millions) 4.9% 4.8% 4.8% 4.8% 5.1% 4.6% 4.3% 4.0% 3.8% 3.7% 3.5% 3.2% 3.3% Earned Yield for Cash and Fixed Maturities Cash & Investments CAGR 31% Investments $152.1 $256.7 $407.
Slide 130: Conservative Investment Portfolio
Conservative Investment Portfolio Mortgage Backed Securities 31% Corporate Debt 15% U.S. Treasury/Agency 12% Asset Backed Securities 6% Cash & Equivalents 20% Municipals/Non- U.S. Government 5% Cash and Fixed Income Duration (years) Average Credit Quality Book Yield (Mar 31) Total Return (LTM) 2.73
Slide 131: Fixed Income Portfolio – Controls
Fixed Income Portfolio – Controls Conservative investment guidelines Weighted average rating minimum of AA-; 10% limit on BBB category Diversification by sector and issuer Duration targets Clear guidelines following downgrade Statutory concerns are taken into consideration No derivative positions ot
Slide 132: Controlled Diversification – Other Investments
Controlled Diversification – Other Investments Short Duration High Yield 7% Collateralized Loan Obligations 21% Hedge Funds 22% Credit Funds 15% Life Settlement Contracts 35% Other Investments Amount (in $ millions) Total Return (LTM) $1,095 7.09% As of March 31, 2007 Other investments are part of “
Slide 133: Strategic Asset Allocation
Strategic Asset Allocation Aggregate portfolio supports both liabilities and capital That which supports liabilities - currency and duration matched, and consists of cash and high-grade fixed income That which supports capital - at defined risk tolerance level and consists of cash, high grade fixed
Slide 134: Portfolio Risk – Value at Risk
Portfolio Risk – Value at Risk 7.20% 4.00% % of Shareholders Equity 3.38% 1.88% Amount VaR (in $ millions) $334.1 Expected Standard Deviations $185.8 Historical Standard Deviations Cash, Fixed Income and Other Investments Investments Note: VaR calculated using historical covariance matrix with histo
Slide 135: Finance and Capital
Finance and Capital
Slide 136: Strong Q1 2007 Results
Strong Q1 2007 Results Consolidated Gross Premiums Written 11.8% AXIS Re Gross Premiums Written 19.0% AXIS Insurance Gross Premiums Written (0.1%) Consolidated Combined Ratio = 1.2% 33.9% Consolidated Net Income Consolidated Net Investment Income 16.6% ($ in millions) GPW increased due to successful
Slide 137: Financial Objectives to Drive Shareholder Value
Financial Objectives to Drive Shareholder Value Achieve minimum 15% ROE and outperform in value creation (book value per share + dividend growth) over long-term for shareholders Sufficient potential profit to absorb major events (capital preservation) Strong balance sheet supported by disciplined re
Slide 138: Shareholder Value Creation
Shareholder Value Creation Diluted Book Value Per Share (1) (1) Calculated using the “if converted” method. Accumulated Dividends Paid Finance and Capital Diluted book value per share + Accumulated dividends Return on Average Common Equity Average: 16.6% 2002 – 2006 ROACE = 16.6% Diluted book value
Slide 139: Disciplined Management of Cat Exposure
Disciplined Management of Cat Exposure Rigorous risk-return analysis embedded in both our insurance and reinsurance segments Cat exposure appropriately sized relative to our capital base and diversified earnings Occurrence-based PML in 1-in-250 year event by zone limited to 25% of total capital and
Slide 140: Strong Reserving Practices are Critical
Strong Reserving Practices are Critical Conservative and consistent reserving philosophy and practices applied in line with formal Reserving Charter Strong reserving practices are a competitive advantage Recognizes potential delays in reporting or uncertainty about losses attaching in higher layers
Slide 141: Robust Quarterly Reserve Process
Robust Quarterly Reserve Process Quarterly reserve process is extensive and addresses all short-tail and long-tail lines Over 40 individuals currently participate in quarterly reserving process from all parts of AXIS (underwriting, actuarial, claims, and finance) More than 70 product lines/sub-lines
Slide 142: Reserve Process Oversight
Reserve Process Oversight Reserve committees improve transparency and reach best estimates by evaluating reserve issues in totality Three-tiered committee hierarchy with 10 total committee meetings each quarter Review actuarial results and evaluate AXIS uncertainties Finance and Capital Group Reserv
Slide 143: Talking Tail – AXIS Insurance
Talking Tail – AXIS Insurance Property Marine Terrorism Aviation & Aerospace Political Risk Professional Lines Casualty Finance and Capital Commercial general liability primarily written predominantly on an occurrence basis in the U.S. Tail is long Specializes in financial lines D&O, EPL, and E&O li
Slide 144: Talking Tail – AXIS Reinsurance
Talking Tail – AXIS Reinsurance Catastrophe Property Professional Lines Credit & Bond Motor Liability Other Finance and Capital Workers Compensation Catastrophe, Crop, Aviation and Marine business Mixture of short and medium tailed classes Comprises U.S. and European exposures Business is written on
Slide 145: Consolidated Net Reserves
Consolidated Net Reserves ($ in millions) IBNR Reserves (excluding KRW) Case Reserves (excluding KRW) Net KRW Reserves $214.2 $867.9 $1,808.3 $3,225.2 $3,656.0 Net IBNR Reserves ex. KRW = 76% Finance and Capital $0 $1,000 $2,000 $3,000 $4,000 2002 2003 2004 2005 2006
Slide 146: Favorable Reserve Development since Inception
Favorable Reserve Development since Inception ($ in millions) Reinsurance Insurance $55.8 $181.7 $383.0 $217.3 $322 excluding adverse KRW development of $105 Finance and Capital 27.7 106.8 268.7 168.3 28.1 74.9 114.3 49.0 $0 $100 $200 $300 $400 2003 2004 2005 2006
Slide 147: Modest Financial Leverage = Financial Flexibility
Modest Financial Leverage = Financial Flexibility Finance and Capital ($ in millions) $2,817 $3,737 $4,011 $4,912 Common Equity Series A Preferred Equity Series B Preferred Equity Debt $1,961 $5,141 Capitalization Ratios as of March 31, 2007 Debt /Total Capital 9.7% Debt + Preferred / Total Capital
Slide 148: Capital in the Right Places
Capital in the Right Places Bermuda = $3,501 M 68% U.S. = $905 M 18% Europe = $717 M 14% Statutory Surplus by Geography Total Adjusted Statutory Surplus as of 3/31/07 = $5.1 B Finance and Capital
Slide 149: Consistently Strong Ratings
Consistently Strong Ratings Finance and Capital A- A- A A A A A Standard & Poor’s A.M. Best 2001 2002 2003 2004 2005 2006 2007 Moody’s A A A A A A Positive Outlook KRW Ratings Stable A2 A2 A2 A2
Slide 150: Focused Capital Management
Focused Capital Management (1) Excludes dividend declared but not yet paid for Q2 ’07. Total Common Equity Raised: $539 Dividends $335 Share Repurchases 451 Total Capital Returned $786 Finance and Capital ($ in millions, except per share amounts) Common Equity Raised Dividends & Share Repurchases Co
Slide 151: Capital Management
Capital Management Capital management to date has balanced competing forces of clients/regulators/rating agencies and shareholders and has recognized the development of the Company: Rating agencies moving the bar Reputational risk in start-up years Critical mass in jurisdictions where capital has be
Slide 152: Conclusion
Conclusion
Slide 153: Current State of the Cycle
Current State of the Cycle Peak reached, but price declines vary by line Majority of business, aside from the more volatile lines (e.g. aviation and terrorism), at or above adequate level Continued focus on accessing more business for review Risk selection critical at this point in the cycle Targete
Slide 154: Achieving Our Targeted Returns
Achieving Our Targeted Returns Conclusion Continue to optimize risk-return in underwriting, investments and strategic risk areas Capital management in 2007 and beyond Recognition of strategic initiatives in place for the medium-term Capital we choose to hold for strategic reasons and not utilized in
Slide 155: AXIS = An Investment in Outperformance
AXIS = An Investment in Outperformance Highly experienced management and team of specialists in knowledge-based business High-quality risk-adjusted returns Global platform in both insurance and reinsurance already built for longevity and value creation through all product cycles Strategic initiative
Slide 156: AXIS Capital Final Questions?
AXIS Capital Final Questions?
Slide 157: Non-GAAP Disclosure Reconciliation
Non-GAAP Disclosure Reconciliation of Diluted Book Value per Share to Basic Book Value per Share At March 31 ( in thousands, except per share) 2007 2006 2005 2004 2003 2002 Common shareholders' equity 4,141,747 $ 3,912,647 $ 3,012,351 $ 3,238,064 $ 2,817,148 $ 1,961,033 $ Shares outstanding 150,417
Slide 158: AXIS Capital Investor Day 2007
AXIS Capital Investor Day 2007 Quality, Sustainability and Profitability June 7, 2007