AXIS Capital Holdings Limited (AXS-PE): A Specialty Insurer Delivering Consistent Value Creation

Published on September 24, 2024 | Ticker: AXS-PE

AXIS Capital Holdings Limited (AXS-PE) is a global specialty underwriter and provider of insurance and reinsurance solutions with operations in Bermuda, the U.S., Europe, Singapore, and Canada. The company operates through two reportable segments: Insurance and Reinsurance.

In the first quarter of 2024, AXIS Capital delivered strong financial results, demonstrating its ability to capitalize on favorable market conditions while maintaining disciplined underwriting and prudent risk management. The company reported net income available to common shareholders of $388 million, or $4.53 per diluted common share, and operating income of $220 million, or $2.57 per diluted common share. This translated to an annualized return on average common equity (ROACE) of 32.1% and an annualized operating ROACE of 18.2%.

Business Overview

AXIS Capital's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The company provides a broad range of risk transfer products and services, with a focus on specialty insurance and reinsurance solutions. AXIS Capital's strategy is centered on operating in attractive markets, improving operational efficiency, and investing in capabilities to drive profitable growth.

In the Insurance segment, AXIS Capital generated gross premiums written of $1.6 billion in the first quarter of 2024, an 11% increase compared to the prior-year period. This growth was fueled by double-digit premium increases across both the North America and Global Markets Specialty Insurance divisions. The Insurance segment achieved a combined ratio of 86.6%, including 2.1 percentage points of catastrophe and weather-related losses. The current accident year loss ratio, excluding catastrophe and weather-related losses, was 52.0%, consistent with recent quarters.

The Reinsurance segment reported gross premiums written of $1.1 billion in the first quarter of 2024, a 12% increase compared to the prior-year period. This growth was driven by increases in specialty lines such as credit and surety, liability, agriculture, and marine and aviation. The Reinsurance segment's combined ratio was 95.8%, with the current accident year loss ratio, excluding catastrophe and weather-related losses, increasing to 68.0% due to the impact of exiting the catastrophe and property lines of business and the Francis Scott Key Bridge tragedy.

Financials

AXIS Capital maintains a strong balance sheet and capital position, which provides financial flexibility to support its strategic initiatives and growth opportunities. As of March 31, 2024, the company's total assets stood at $31.8 billion, and shareholders' equity was $5.5 billion. The debt-to-total capital ratio was 19.3%, reflecting the company's prudent approach to leverage.

During the first quarter of 2024, AXIS Capital returned $100 million to shareholders through $38 million in common dividends and $62 million in share repurchases. The company's priority for capital deployment remains funding profitable growth in its specialty insurance and reinsurance businesses, as well as investing in people, products, and operational infrastructure to support its strategic initiatives.

Outlook

AXIS Capital is well-positioned to capitalize on the favorable market conditions in its specialty insurance and reinsurance businesses. The company expects to continue generating double-digit premium growth in its Insurance segment, with a range of 7% to 12% for the full year 2024. In the Reinsurance segment, the company anticipates mid-single-digit growth for the full year, as it maintains a disciplined approach in the competitive casualty market.

The company's focus on underwriting discipline, cycle management, and operational efficiency is expected to drive continued strong financial performance. AXIS Capital is committed to delivering consistent value creation for its shareholders through profitable growth, prudent capital management, and strategic investments in its business.

Risks and Challenges

As with any insurance and reinsurance company, AXIS Capital is exposed to various risks, including underwriting risk, catastrophe risk, credit risk, and operational risk. The company's exposure to natural and man-made catastrophes, as well as the potential impact of social and economic inflation, could adversely affect its financial results. Additionally, the highly competitive nature of the insurance and reinsurance industry, as well as changes in regulations and the political environment, pose risks to the company's operations and profitability.

Conclusion

AXIS Capital's strong first-quarter 2024 results, with double-digit premium growth, disciplined underwriting, and improved operational efficiency, demonstrate the company's ability to navigate the current market environment and deliver consistent value creation for its shareholders. The company's focus on specialty insurance and reinsurance solutions, coupled with its prudent capital management and strategic investments, position AXIS Capital as a leading player in the global specialty risk market.

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