Axis bullish on specialty lines despite reserve hit

Bermuda-based specialty insurer and reinsurer Axis Capital assured shareholders and policyholders that its underlying business is firmly on track despite posting a net loss of $150m and operating loss of $107m for the fourth quarter. The problem was caused by a prior-year reserves analysis that led to $425m reserve strengthening. This was attributed to both its insurance and reinsurance segments in liability and professional lines, predominantly related to 2019 and older accident years, which is before the recent global market hardening really got underway. The results of the reserve analysis were announced on 23 January and, at the time, actually boosted the share price to a 12-month high. Vince Tizzio, president and CEO of Axis Capital, said when the announcement was made: “The decisive actions we are taking this quarter address reserve development that is predominantly related to 2019 and older accident years, as current economic and social inflation trends impact the overall US casualty market. We undertook a rigorous review that included an examination of trend assumptions, emerging development patterns, new industry data, and current legal trends.” As Tizzio further stressed, as fourth quarter and full year results were published, the reserve addition aside, Axis’s underlying business is healthy as the group continues its expansion of specialty insurance and retreats from more volatile reinsurance business. Despite the fourth quarter hit, Axis posted net income available to common shareholders for the year of $346m, compared to $193m in 2022. Reinsurance premiums fell and the group retreated from US D&O business because of competitive market conditions. But insurance premiums were up, leading to a record year in terms of premiums written, reaching $8.4bn in total. During an analyst conference call, Tizzio stressed that the group continues to “lean into” its insurance book, which, as of the year end, now makes up close to 75% of its gross premiums written. “In 2023, our insurance business generated record production every quarter and a calendar year combined ratio of 92.5% on a current accident year basis that’s 87.4%. Insurance premiums were up 17% year-over-year excluding professional lines. And, as we've discussed over the past several quarters, this is a class that we have been reducing given the pricing environment particularly in public D&O, we remain well positioned to capitalise on favourable conditions and growing market segments,” he explained. For example, Axis is one of the leading players in the US wholesale marketplace, which contributed five consecutive years of double-digit growth, while yielding a 76-accident-year combined ratio in 2023, said Tizzio. The group is also now a “global leader” in renewable energy, where it sees opportunity for further profitable growth as the world transitions to cleaner energy forms, he added. “Indeed, we've committed ourselves to the energy resilience and transaction, transition space through the creation of the first-ever Lloyd’s syndicate to exclusively underwrite these risks. We're acting with agility and capitalising on smart growth opportunities, including adjacent markets where we have not previously played by example, and the latter part of 2023,” he said. “Also, in the past year, we’ve made strides in scaling our dedicated wholesale lower middle market unit, generating 48% growth year-over-year. In London, we were recognised by Lloyd’s as a top ten leader and outperforming syndicate; we’re leveraging our global platform to introduce our London specialty products to North America,” continued Tizzio. “This includes launching to date US marine cargo and construction, and we will continue to make more investments and product launches. As respects our reinsurance business, we have effectively reshaped…as a targeted specialist reinsurer focused on delivering more consistent profitability, and reduced volatility,” he added.

Axis bullish on specialty lines despite reserve hit

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