AXS
Axis Capital Holdings LTD
NYSE
8-K: AXIS Capital Announces Preliminary 2023 Full-Year Results and Reserve Review Conclusion
Sentiment:
Preliminary Earnings Release
23 January 2024 4:11 PM
AXIS Capital reports preliminary full-year 2023 results, including a significant reserve strengthening, alongside strong underlying performance and premium growth.
Worse than expected
The company had to strengthen its reserves by a significant $425 million pre-tax ($361 million post-tax), indicating worse than expected prior year loss development.
Summary
- AXIS Capital announced preliminary financial results for the year ended December 31, 2023.
- The company anticipates net income available to common shareholders of $346 million, or $4.02 per diluted common share.
- Operating income is expected to be $486 million, or $5.65 per diluted common share.
- Gross premiums written increased by $142 million, or 2%.
- The current accident year combined ratio is 91.8%, compared to 96.3% for the prior year.
- Book value per diluted common share increased by 15.1% over the past twelve months to $54.06.
- The company strengthened its prior year reserves by $425 million pre-tax ($361 million post-tax) in the fourth quarter, primarily related to 2019 and older accident years in liability and professional lines.
- This reserve strengthening represents 4.5% of net loss reserves at September 30, 2023.
Sentiment
Score: 6
Explanation: The document presents a mixed picture. While there are positives like strong underlying performance and premium growth, the significant reserve strengthening and its impact on net income temper the overall sentiment. The company is taking decisive action to address issues, but the need for such action is a concern.
Positives
- The company experienced strong underlying performance in 2023.
- There was consistent premium growth with double-digit increases across most specialty insurance lines.
- The company improved and streamlined its operating model.
- The current accident year combined ratio improved significantly year-over-year.
- Book value per diluted common share saw a substantial increase.
- The company has a strong capital position.
Negatives
- A significant $425 million pre-tax ($361 million post-tax) reserve strengthening was required in the fourth quarter.
- The reserve strengthening was primarily related to 2019 and older accident years, indicating potential issues with prior underwriting or reserving practices.
- The reserve strengthening was driven by current economic and social inflation trends impacting the U.S. Casualty market.
Risks
- The company faces risks related to the cyclical nature of the insurance and reinsurance business.
- Natural and man-made disasters, including climate change and cyber-attacks, pose significant risks.
- Emerging claims, systemic risks, and coverage and regulatory issues could impact the company.
- Inflation could adversely affect the company's performance.
- There are risks associated with the banking sector and commercial real estate instability.
- The company is exposed to fluctuations in interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates.
Future Outlook
AXIS Capital believes it is on a clear trajectory to becoming a specialty underwriting leader and approaches the future with confidence, committed to achieving its specialty leadership ambition.
Management Comments
- Vince Tizzio, President and CEO of AXIS Capital, stated that AXIS delivered strong underlying performance in 2023 and is on a clear trajectory to becoming a specialty underwriting leader.
- Tizzio noted that the company drove consistent premium growth with double-digit increases across the vast majority of its specialty insurance lines.
- He also mentioned that the company continued to cultivate a diversified and resilient portfolio, improved its operating model, and grew tailored products and capabilities.
- Tizzio stated that the decisive actions taken this quarter address reserve development predominantly related to 2019 and older accident years due to current economic and social inflation trends.
- He concluded that AXIS has a well-positioned portfolio and a strong capital position.
Industry Context
The announcement reflects the broader challenges in the insurance industry, particularly in the U.S. casualty market, due to economic and social inflation trends. The reserve strengthening highlights the need for insurers to carefully assess and adjust their reserves in response to these trends.
Comparison to Industry Standards
- The current accident year combined ratio of 91.8% is a strong result, indicating efficient underwriting compared to many of its peers.
- The 15.1% increase in book value per diluted common share is a positive sign of financial health and growth, which is above average for the industry.
- The $425 million reserve strengthening is significant and suggests that AXIS is taking a proactive approach to address potential liabilities, which is a common practice in the industry when facing adverse development.
- Companies like Chubb, Travelers, and Hartford Financial Services Group are also facing similar challenges with reserve development due to inflation and social trends, making AXIS's actions comparable to industry peers.
Stakeholder Impact
- Shareholders will be impacted by the lower net income due to the reserve strengthening.
- Employees may be affected by the company's ongoing efforts to streamline its operating model.
- Customers will benefit from the company's focus on specialty underwriting and tailored products.
- Creditors will be reassured by the company's strong capital position.
Next Steps
- The company will release full financial results on January 31, 2024.
- A conference call was held on January 23, 2024, to discuss the preliminary results.
Key Dates
- January 23, 2024: Date of the press release announcing preliminary 2023 full-year financial results and conclusion of reserve review.
- January 23, 2024: Conference call to discuss preliminary 2023 financial results at 5:00 p.m. (EST).
- January 31, 2024: Expected date for the release of full financial results for the year ended December 31, 2023, after the close of financial markets.
Keywords
insurance, reinsurance, financial results, reserve review, underwriting, premiums, combined ratio, operating income, net income, book value
AXS
Axis Capital Holdings LTD
NYSE
Sector: Financial Services
Filings with Classifications
Better than expected
13 May 2025 4:30 PM
Investor Presentation
- The company reported record first quarter operating EPS.
- The company reported record diluted book value per share.
- The company reported the highest first quarter gross premiums written for the insurance segment.
Worse than expected
30 April 2025 4:23 PM
Quarterly Report
- Net income available to common shareholders decreased from $387.9 million to $186.5 million year over year.
- The effective tax rate increased from (46.0%) to 18.6% year over year.
Worse than expected
30 April 2025 4:20 PM
Earnings Release
- Net income available to common shareholders decreased compared to the same period last year.
Better than expected
3 April 2025 8:00 AM
Proxy Statement
- The company delivered a return on average common equity (ROACE) of 20.5% and an operating return on average common equity (OROACE) of 18.6%.
- Year-end diluted book value per share (DBVPS) grew by 20.7% to $65.27.
- Record operating earnings per diluted common share reached $11.18, a 98% increase over the prior year.
- The group combined ratio improved to 92.3%, a 7.6 point improvement.
- Total gross written premiums were a record $9 billion, up 7.8% over the prior year.
- Net investment income reached a record $759 million for the year.
Capital raise
26 February 2025 4:17 PM
Annual Results
- The company may require additional capital in the future, which may not be available or may only be available on unfavorable terms.
- Any equity or debt financing, if available at all, may be on terms that are not favorable to us.
- As economic and market uncertainty continues, it is possible that access to the capital markets may become more constrained and cost of capital may increase.
Better than expected
10 February 2025 4:43 PM
Investor Presentation
- The company reported record operating EPS for Q4 and full year 2024.
- The company's diluted book value per share excluding AOCI increased by 17.5% year-over-year.
- Gross premiums written for the group was up 11% year over year to $2.0B for the quarter, the highest production fourth quarter ever.
Better than expected
29 January 2025 4:25 PM
Quarterly Report
- Net income available to common shareholders significantly increased compared to the previous year.
- Operating return on equity improved substantially.
- Diluted book value per share showed strong growth.
Better than expected
12 November 2024 8:00 AM
Investor Presentation
- The company reported record third-quarter insurance premium production.
- Net investment income reached a record high for the third quarter.
- The diluted book value per common share increased significantly.
Better than expected
30 October 2024 4:23 PM
Quarterly Report
- The company's operating income of $230 million and 17.3% annualized operating ROACE exceeded expectations.
- The 9% increase in book value per diluted common share was better than anticipated.
- The 33% increase in net investment income was a positive surprise.
Worse than expected
30 October 2024 4:23 PM
Quarterly Report
- The company's combined ratio of 93.1% indicates an underwriting loss, which is worse than expected.
- The company experienced significant foreign exchange losses of $92 million, which negatively impacted the results.
Better than expected
4 September 2024 6:56 AM
Investor Presentation
- The company reported record gross premiums written for the second quarter.
- The insurance segment achieved its highest ever production of gross premiums written.
- The company's annualized operating ROACE was 19.1%, indicating strong profitability.
- Net investment income increased by 40% compared to the same quarter last year.
- Diluted book value per share grew by 16.3% over the last 12 months.
Better than expected
30 July 2024 4:27 PM
Quarterly Report
- The company's net income available to common shareholders of $204 million, or $2.42 per common share, exceeded expectations.
- The company's operating income of $250 million, or $2.93 per diluted common share, was better than anticipated.
- The company's underwriting income of $161 million was a strong result.
Better than expected
30 July 2024 4:22 PM
Quarterly Report
- The company's net income, operating income, and operating ROACE all exceeded prior year results.
- The combined ratio improved, indicating better underwriting performance.
- Net investment income increased significantly, contributing to better overall results.
Better than expected
30 May 2024 8:45 AM
Investor Day Presentation
- The company's current accident year combined ratio has improved from 100% in 2021 to 96% in Q1 2024, indicating better underwriting performance.
- The company is targeting mid-teen diluted book value per share growth, which is an ambitious goal.
- The company has rebalanced its portfolio towards insurance, which is a higher margin business.
Better than expected
1 May 2024 4:23 PM
Quarterly Report
- The company's net income available to common shareholders significantly increased compared to the same period last year.
- The company's operating income showed a strong performance, indicating solid core business operations.
- The company's net investment income grew by 25%, contributing to overall profitability.
Better than expected
1 May 2024 4:19 PM
Quarterly Report
- The company's net income and operating income significantly exceeded the prior year's first quarter results.
- The annualized return on average common equity (ROACE) of 32.1% and operating ROACE of 18.2% are strong indicators of improved profitability.
- The specialty insurance business achieved a combined ratio of 86.6% and record premium production, demonstrating better than expected performance.
Better than expected
4 April 2024 8:29 AM
Proxy Statement
- The company achieved record premium production, strong operating income, meaningful growth in diluted book value per share, and significant improvement in the current accident year combined ratio.
Worse than expected
28 March 2024 5:11 PM
Credit Facility Amendment
- The reduction in the committed facility from $500 million to $300 million indicates a reduction in guaranteed credit availability, which is worse than the previous arrangement.
Worse than expected
26 February 2024 8:35 AM
Investor Presentation
- The reinsurance segment's combined ratio of 107.6% indicates underwriting losses, which is worse than expected.
Worse than expected
31 January 2024 4:28 PM
Quarterly Report
- The company reported a net loss for the quarter, primarily due to a significant adverse prior year reserve development, which was worse than expected.
Worse than expected
23 January 2024 4:11 PM
Preliminary Earnings Release
- The company had to strengthen its reserves by a significant $425 million pre-tax ($361 million post-tax), indicating worse than expected prior year loss development.
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