Executive Summary / Key Takeaways

• Strategic Transformation Driving Profitability: AXIS Capital is successfully executing a multi-year transformation, re-balancing its portfolio towards less volatile, specialty lines and leveraging significant technology investments to drive sustained profitable growth and record financial performance.
• Record Q3 2025 Performance: The company reported a robust third quarter 2025, achieving a 14% year-over-year increase in diluted book value per common share to $73.82, an 18% annualized operating return on equity, and a 20% rise in operating earnings per share to $3.25. Gross premiums written reached a record $2.1 billion, up nearly 10% year-over-year, with a strong combined ratio of 89.4%.
• Technological Moat and Efficiency Gains: AXIS is investing heavily in its "How We Work" program, deploying AI-powered underwriting platforms and advanced analytics. These initiatives are already yielding tangible benefits, including improved speed to market, enhanced accuracy, and increased North American quotes and bind rates by 27% and 19% year-over-year, respectively.
• Targeted Growth and Capital Allocation: Management projects mid-to-high single-digit net written premium growth for its insurance segment in 2025, potentially reaching double digits in 2026 with new partnerships like RAC Re. Capital is prioritized for organic growth and technology investments, complemented by opportunistic share repurchases.
• Disciplined Risk Management Amidst Headwinds: Despite geopolitical uncertainties, softening property rates, and intense competition in cyber, AXIS maintains a disciplined underwriting approach, particularly in its reinsurance liability lines, and is confident in its reserve strength and ability to manage evolving market dynamics.

A Specialty Underwriter Forging a New Path

AXIS Capital Holdings Limited (NYSE:AXS) stands as a global specialty underwriter and provider of insurance and reinsurance solutions, strategically repositioning itself to thrive in an increasingly complex and dynamic risk landscape. Founded in 2001, AXIS has evolved from its origins to become a leader in niche markets, focusing on tailored risk management solutions rather than commoditized offerings. The company's overarching strategy centers on a multi-year transformation, driven by a disciplined approach to portfolio construction, significant investments in operational efficiency through its "How We Work" program, and a clear commitment to profitable growth.

The broader industry landscape is characterized by several powerful trends. Geopolitical tensions and trade disruptions introduce economic uncertainty, potentially impacting loss costs and growth across various lines. Social inflation continues to exert pressure, particularly on liability lines, as claims awards drive severity. The D&O market faces an imbalance between pricing and loss cost trends, while the cyber risk landscape is rapidly evolving with increased ransomware attacks and sophisticated AI-driven threats. Concurrently, the energy marketplace is undergoing shifts, with renewed focus on traditional energy alongside growing global demand for clean energy. AXIS leverages its dual underwriting platforms, AXIS Insurance and AXIS Re, to address these challenges and capitalize on emerging opportunities, aiming to construct an optimal portfolio of risks consistent with its appetite and diversification criteria.

Technological Edge: Fueling Efficiency and Growth

A cornerstone of AXIS's strategic transformation is its "How We Work" program, a comprehensive initiative designed to strengthen all aspects of its operations and market approach. This program is not merely about cost reduction; it is a fundamental investment in the company's future, enhancing underwriting and claims capabilities through advanced technology and artificial intelligence.

AXIS has implemented a highly modern application platform across all business units, significantly reducing reliance on legacy technology. This platform is improving speed to market, heightening accuracy, and reducing manual effort and cost. The company is actively applying AI solutions in various forms—custom, package, and on user desktops—to drive productivity increases. For instance, the first release of a next-generation underwriting platform in North America has been deployed, streamlining the ingestion, routing, and review of submissions and enhancing overall efficiency. These technological advancements are yielding tangible, quantifiable benefits, with early insights in North America showing improved quotes up approximately 27% year-over-year and bind rates up about 19%. AXIS initially pledged to invest $100 million into its operational infrastructure, a commitment that has since been accelerated and expanded, with projected technology spend reaching $150 million over three years. These investments are viewed as critical to advancing AXIS's profitable growth ambition, contributing to its competitive moat by enabling better risk selection, improved profitability, and scalable growth.

A History of Strategic Evolution

AXIS Capital's journey began in 2001, establishing itself as a global specialty insurer and reinsurer. Early milestones included the acquisition of Novae Group plc in 2017, expanding its footprint. A pivotal strategic shift commenced in 2020 with the decision to place engineering lines of business into run-off, followed by catastrophe and property lines in 2022. This marked a deliberate move towards less volatile segments of the market.

The company faced a significant challenge in December 2203, undergoing a "painful re-underwriting" and strengthening of reserves related to its delegated book. This experience led to a renewed, highly disciplined underwriting strategy for managing general agents (MGAs). In 2024, AXIS continued its strategic evolution, executing a loss portfolio transfer (LPT) reinsurance agreement with Enstar (ESGR). This LPT, completed on April 24, 2025, retroceded a portfolio of reinsurance business predominantly from 2021 and prior underwriting years, providing significant protection from prior year reserve development and further aligning the balance sheet with the front-end business. Recent initiatives include the launch of AXIS Capacity Solutions in August 2025, a new business unit focused on structured and multi-line portfolio capacity deals. This unit quickly secured its first partnership with Ryan Specialty (RYAN) (RAC Re), a collaboration designed to align economic interests and potentially drive double-digit growth in the insurance segment.

Robust Performance Across Segments

AXIS Capital's strategic transformation is clearly reflected in its recent financial performance. For the third quarter ended September 30, 2025, the company reported net income available to common shareholders of $294 million, a substantial increase from $173.2 million in Q3 2024. Operating income reached $255 million, or $3.25 per diluted common share, surpassing analyst expectations. This strong performance contributed to an annualized operating return on equity of 17.8% and a diluted book value per common share of $73.82, marking a 14% year-over-year increase. The consolidated combined ratio improved to 89.4% in Q3 2025, indicating efficient operations and effective risk management.

The Insurance segment delivered an outstanding quarter, with gross premiums written reaching a record $1.69 billion, an 11% increase over Q3 2024. Net premiums earned also grew by 6% to $1.09 billion. Underwriting income for the segment was a record $153.30 million, up significantly from $98.79 million in the prior year quarter, contributing to an improved combined ratio of 85.9%. Growth was broad-based, driven by new and expanded initiatives that contributed nearly 70% of the segment's growth. North America saw premiums rise 12% with submission volume up 18%, notably in the lower middle market strategy. Professional lines grew 18%, primarily from transactional liability and E&O, while property lines expanded by 8%. The company completed the reshaping of its delegated cyber book, maintaining underwriting discipline amidst competitive pressures.

The Reinsurance segment continued its track record of stable, consistent, and strong profitability, marking its seventh consecutive quarter of positive results. Gross premiums written increased by 6% to $432.30 million in Q3 2025, with specialty short-tail lines contributing 91% of new business premiums. The segment reported a combined ratio of 92.2% and underwriting income of $35.01 million. Management maintains a cautious stance on booking its reinsurance loss ratio, reflecting a higher level of uncertainty in the environment.

Financial Strength and Capital Discipline

AXIS Capital maintains a robust financial position, with total cash and invested assets reaching $16.80 billion as of September 30, 2025. The company's investment portfolio benefits from a favorable outlook, with a market yield of 4.8% exceeding its book yield of 4.6% as of September 30, 2025. Net investment income for the nine months ended September 30, 2025, was $579.91 million.

The company's liquidity remains strong, with cash flows generated from operations and its investment portfolio expected to cover future obligations. AXIS actively manages its capital, prioritizing funding profitable growth and investing in its business. For the nine months ended September 30, 2025, AXIS repurchased 6.70 million common shares for a total of $625.6 million, demonstrating an opportunistic approach to shareholder returns. A new $400 million share repurchase authorization was approved in September 2025, with $400 million remaining as of September 30, 2025. The debt to total capital ratio stood at 17.10% at September 30, 2025, down from 17.80% at December 31, 2024, reflecting a healthy capital structure. The effective tax rate for the nine months ended September 30, 2025, was 19.20%, influenced by the 15% corporate income tax applied to Bermuda pre-tax income in 2025.

Competitive Positioning in a Dynamic Market

AXIS Capital operates in a highly competitive global specialty insurance and reinsurance market, contending with major players such as Chubb Limited (CB), American International Group (AIG), and Berkshire Hathaway's (BRK.B) insurance subsidiaries. AXIS differentiates itself through its focused expertise in specialty lines, its global presence across 19 offices worldwide, and its agility in developing tailored risk management solutions.

Compared to larger, more diversified competitors like Chubb, AXIS's niche innovation and adaptability enable it to compete effectively in specialized segments, particularly in emerging risks like cyber and energy transition. While Chubb benefits from greater scale and a broader distribution network, AXIS's specialized reinsurance products may offer greater flexibility for clients in volatile markets. Against AIG, AXIS's targeted approach to specialty insurance and Bermuda-based headquarters may provide regulatory advantages and more precise offerings in high-risk areas. However, AIG's broader scope and improving efficiency could lead to better cost structures. Berkshire Hathaway, with its dominant presence and investment-driven model, possesses unmatched scale and financial resilience, areas where AXIS, as a smaller player, may face inherent disadvantages in terms of cost and market share capture.

AXIS's "How We Work" program and its substantial investments in AI-driven underwriting and operational efficiency are crucial competitive advantages. These technological enhancements, leading to improved risk selection and profitability, allow AXIS to offer a more responsive and efficient value proposition. This technological edge helps AXIS counter the scale advantages of its larger rivals by optimizing its underwriting processes and enhancing customer service. The company's disciplined strategy for MGAs and its focus on aligning economic interests in partnerships like RAC Re further underscore its commitment to profitable growth over volume, a key differentiator in a competitive landscape.

Outlook and Growth Trajectory

AXIS Capital's outlook is anchored in its commitment to sustained profitable growth, driven by its strategic initiatives and disciplined underwriting. Management anticipates that the insurance segment will achieve a mid-to-high single-digit growth rate in 2026, excluding the impact of new sidecars. The partnership with Ryan Specialty through RAC Re, however, could potentially propel insurance growth into double digits for next year. For the reinsurance segment, the company expects flat to low single-digit premium growth for the full year 2025, reflecting its cautious and selective approach in certain lines.

The "How We Work" program is central to the company's operational targets, with a firm goal of achieving an 11% G&A ratio by 2026. This target is supported by ongoing investments in technology and AI, which are expected to yield further efficiency gains. The investment income outlook remains favorable, bolstered by strong operating cash flow and a market yield that exceeds the book yield. AXIS expects its full-year effective tax rate to be in the high teens, reflecting the new Bermuda corporate income tax.

Key Risks and Vigilance

Despite a strong performance, AXIS Capital operates in an environment fraught with risks. Geopolitical and economic uncertainties, including potential impacts on economic growth and loss costs, remain a concern. The property market is experiencing moderating and softening rates due to an influx of capital, while casualty lines continue to see positive rate achievement. The cyber market faces "unwarranted downward pressure in pricing dynamics" from increased competition by MGAs and surplus capacity, even as ransomware attacks rise.

AXIS maintains vigilance in its reinsurance segment, particularly in liability and professional lines, where ceding commissions and the rate environment are not consistently meeting return expectations. The company has also noted an increase in the allowance for expected credit losses on mortgage loans, primarily related to commercial properties exposed to the office sector. While AXIS has reported elevated paid-to-incurred ratios, management attributes this to shifts in business mix, large losses, timing differences, and improvements in the claims organization, emphasizing confidence in its reserve strength. Foreign currency fluctuations also pose a risk to international operations.

Conclusion

AXIS Capital's journey to becoming a leading specialty underwriter is marked by a clear strategic vision, disciplined execution, and a proactive embrace of technological innovation. The company's robust financial performance in the third quarter of 2025, characterized by record premiums, strong underwriting income, and improved profitability metrics, underscores the success of its ongoing transformation. By strategically re-balancing its portfolio, investing heavily in AI-driven operational efficiencies, and fostering a culture of disciplined underwriting, AXIS is building a resilient and adaptable business model.

The outlook for AXIS Capital remains compelling, with clear pathways for profitable growth in its insurance segment, supported by new initiatives and strategic partnerships. While the company operates in a dynamic and competitive landscape, its focused expertise, technological advantages, and prudent capital management position it favorably to address emerging risks and capitalize on market opportunities. For discerning investors, AXIS Capital represents a compelling investment thesis, offering sustained profitable growth and enhanced shareholder value driven by its strategic evolution and commitment to specialty leadership.