Axis Capital Holdings Ltd. returned profits of $205 million for the second quarter of 2010, despite facing an environment of low investment yields and tough property and casualty market conditions.

The Bermuda re/insurer's net income was up from the $159 million posted in the same period last year, while net income for the first half of 2010 was $317 million compared to $275 million for the first half of 2009.

But operating income for the second quarter of 2010 was down at $180 million, or $1.33 per share, from $183 million, or $1.22 per share, for the second quarter of last year.

Operating income for the six months ended June 30, 2010 was $276 million, or $1.99 per share, versus $338 million, or $2.26 per share, for the first six months of 2009.

Meanwhile gross premiums written rose three percent to $940 million, however total underwriting income fell 14 percent to $121 million and the company's combined ratio increased 5.8 percentage points to 86.2 percent.

Axis Capital also reported net favourable prior year reserve development of $79 million, pre-tax, benefiting the combined ratio by 10.7 points, compared with $97 million, benefiting the combined ratio in the same period last year by 13.7 points.

Net investment income declined 26 percent to $83 million, with a total return on cash and investments of 1.3 percent (pre-tax); a shareholders' equity of $5.5 billion; share repurchases in the open market of $121 million in the quarter; and a diluted book value per common share of $36.57, an increase of six percent in the quarter.

John Charman, CEO and president of Axis Capital, said: "Given the historically low investment yield environment coupled with challenging property and casualty market conditions, we are pleased with our performance during the second quarter.

"For the quarter, we reported annualised operating return on average common equity of 14.6 percent, an increase in diluted book value per share of six percent and a combined ratio of 86.2 percent.

"During the second quarter, we also took advantage of depressed valuations to buy back $121 million worth of common shares in the open market."

The company's insurance segment reported underwriting income of $42 million for the quarter, up 168 percent, from the second quarter of 2009.

The second quarter of 2010 benefited primarily from a lower level of claims activity in its credit and political risk and aviation lines of business. Partially offsetting this was increased acquisition costs reflecting changes in its ceded reinsurance purchasing, as well as prior year commission adjustments.

Axis Capital's insurance segment posted gross premiums written of $613 million, an increase of 16 percent from the prior year quarter, mainly driven by the company's property and marine lines of business. Rate increases on offshore energy business resulting from the Deepwater Horizon event, as well as increases in its share of certain policies and select new business opportunities, drove the increase in marine premiums.

The company booked a $26 million increase in its estimate of pre-tax net losses from February's earthquake in Chile.

During the quarter, Axis Capital repurchased four million shares in the open market at an average price of $30.59 per share, for a total cost of $121 million. Subsequent to June 30, 2010 and through July 30, 2010, the company bought back a further 300,000 shares at an average price of $29.56 per share, for a total cost of $10 million.

Net income: $204.9 million compared to $159.2 million in 2009

Combined ratio: 86.2 percent compared to 80.4 percent in 2009

Gross premiums written: $939.9 million compared to $914.6 million in 2009