10-Q: AXIS Capital Posts Strong Underwriting Gains and Investment Rebound in Q2 2025

AXIS Capital reported improved underwriting profitability and a significant swing to net investment gains in the second quarter of 2025, despite higher foreign exchange losses and the impact of new Bermuda corporate income tax.

Summary

• Net income available to common shareholders increased to $216 million in Q2 2025 from $204 million in Q2 2024, though it decreased to $402 million for the six months ended June 30, 2025, from $592 million in the prior year, primarily due to a non-recurring tax benefit recognized in 2024.
• Operating income rose to $261 million in Q2 2025 from $250 million in Q2 2024, and to $523 million for the six months ended June 30, 2025, from $470 million in the prior year.
• Gross premiums written grew 3% to $2.5 billion in Q2 2025 and 4% to $5.3 billion for the six months, while net premiums earned increased 7% to $1.4 billion in Q2 and 7% to $2.7 billion for the six months.
• Underwriting income improved to $189 million in Q2 2025 from $161 million in Q2 2024, with the combined ratio decreasing to 88.9% from 90.4%. For the six months, underwriting income was $353 million (up from $307 million) and the combined ratio was 89.5% (down from 90.8%).
• Net investment gains were $43 million in Q2 2025, a significant improvement from a $53 million loss in Q2 2024. For the six months, net investment gains were $13 million, up from a $63 million loss.
• Catastrophe and weather-related losses, net of reinsurance, were $37 million in Q2 2025 (2.6 points of combined ratio), down from $46 million (3.6 points) in Q2 2024. For the six months, these losses increased to $86 million (3.2 points) from $67 million (2.6 points).
• Net favorable prior year reserve development was $20 million in Q2 2025 and $38 million for the six months, compared to nil in the prior year periods.
• Foreign exchange losses were $95 million in Q2 2025 and $152 million for the six months, a significant negative swing from gains in the prior year periods.
• Book value per diluted common share increased to $70.34 at June 30, 2025, from $59.29 at December 31, 2024.
• The company repurchased 0.5 million common shares for $51 million in Q2 2025 and 5.6 million shares for $516 million for the six months. A new $400 million share repurchase program was approved in February 2025, with $110 million remaining authorization.
• A loss portfolio transfer reinsurance agreement with Cavello Bay Reinsurance Limited, a wholly-owned subsidiary of Enstar Group Limited, was completed on April 24, 2025, retroceding approximately $2 billion in net reserves for losses and loss expenses predominantly from 2021 and prior underwriting years.

Sentiment

Score: 8

Explanation: The company demonstrated strong operational improvements with increased underwriting income, a lower combined ratio, and a positive swing in investment results. While reported net income for the six-month period was lower due to a non-recurring prior-year tax benefit and significant foreign exchange losses, the underlying business fundamentals and profitability are clearly improving. The active share repurchase program further signals management's confidence and commitment to shareholder value.

Positives

• Net income available to common shareholders increased to $216 million in Q2 2025 from $204 million in Q2 2024.
• Operating income showed strong growth, increasing to $261 million in Q2 2025 from $250 million in Q2 2024, and to $523 million for the six months ended June 30, 2025, from $470 million in the prior year.
• Gross premiums written grew 3% in Q2 2025 and 4% for the six months, while net premiums earned increased 7% for both periods, indicating robust business expansion.
• Underwriting income significantly improved to $189 million in Q2 2025 from $161 million in Q2 2024, and to $353 million for the six months from $307 million, reflecting enhanced underwriting profitability.
• The combined ratio improved to 88.9% in Q2 2025 from 90.4% in Q2 2024, and to 89.5% for the six months from 90.8%, indicating greater efficiency in underwriting operations.
• Net investment performance swung from a $53 million loss in Q2 2024 to a $43 million gain in Q2 2025, and from a $63 million loss to a $13 million gain for the six months, significantly boosting overall financial results.
• Net favorable prior year reserve development of $20 million in Q2 2025 and $38 million for the six months indicates better-than-expected claims experience from past periods.
• Catastrophe and weather-related losses, net of reinsurance, were lower in Q2 2025 ($37 million) compared to Q2 2024 ($46 million).
• Book value per diluted common share increased to $70.34 at June 30, 2025, from $59.29 at December 31, 2024, demonstrating value creation for shareholders.
• The company actively returned capital to shareholders through share repurchases, buying back 0.5 million common shares for $51 million in Q2 2025 and 5.6 million shares for $516 million for the six months.
• A new $400 million share repurchase program was approved in February 2025, with $110 million remaining authorization at June 30, 2025.
• The completion of a loss portfolio transfer reinsurance agreement with Enstar provides significant protection from prior year reserve development on the subject business.

Negatives

• Net income available to common shareholders for the six months ended June 30, 2025, decreased significantly to $402 million from $592 million in the prior year, primarily due to the non-recurring Bermuda economic transition adjustment tax benefit recognized in 2024.
• Foreign exchange losses were substantial, totaling $95 million in Q2 2025 and $152 million for the six months, representing a significant negative swing from gains in the prior year periods due to the weakening of the U.S. dollar.
• Income tax expense increased to $56 million in Q2 2025 and $101 million for the six months, largely due to the new 15% Bermuda corporate income tax effective January 1, 2025.
• Catastrophe and weather-related losses, net of reinsurance, for the six months ended June 30, 2025, increased to $86 million from $67 million in the prior year.
• Net investment income slightly decreased in Q2 2025 to $187 million from $191 million in Q2 2024.
• Pricing has moderated and is softening in some property sectors, and loss trends are outpacing pricing in most insurance lines, which could impact future profitability.

Risks

• The cyclical nature of the insurance and reinsurance business can lead to periods with excess underwriting capacity and unfavorable premium rates.
• The occurrence and magnitude of natural and man-made disasters, including potential increases in exposure to natural catastrophe losses due to climate change and unpredictable losses from man-made catastrophes such as cyber-attacks.
• The effects of emerging claims, systemic risks, and coverage and regulatory issues, including increasing litigation and uncertainty related to coverage definitions, limits, terms and conditions.
• Actual claims may exceed established reserves for losses and loss expenses.
• Potential losses related to geopolitical conflicts (e.g., Middle East, Russian invasion of Ukraine), terrorism, political unrest, or other unanticipated events.
• The adverse impact of social and economic inflation on claims costs and profitability.
• The failure of any of the loss limitation methods employed by the company.
• The failure of cedants to adequately evaluate risks.
• The use of industry models and changes to these models may impact risk assessment and pricing.
• Increased competition and consolidation within the insurance and reinsurance industry.
• General economic, capital, and credit market conditions, including banking and commercial real estate sector instability, financial market illiquidity, and fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency exchange rates.
• The evolving impacts from tariffs, sanctions, or other trade tensions between the U.S. and other countries.
• Changes in the political environment of certain countries where the company operates or underwrites business.
• The potential loss of business provided by major brokers.
• A decline in the company's ratings with rating agencies could adversely affect its business.
• The loss of one or more key executives could disrupt operations and strategy.
• Increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers, and other stakeholders regarding environmental, social, and governance (ESG) matters.
• The adverse impact of contagious diseases on the business, results of operations, financial condition, and liquidity.
• The inability to purchase reinsurance or collect amounts due from reinsurance purchased.
• The failure of policyholders or intermediaries to pay premiums.
• Breaches by third parties in program business of their obligations to the company.
• The inability to access sufficient cash to meet obligations when they are due (liquidity risk).
• Changes in accounting policies or practices.
• Difficulties with technology and/or data security.
• The failure of the processes, people, or systems that the company relies on to maintain operations and manage inherent operational risks, including those outsourced to third parties.
• Changes in governmental regulations and potential government intervention in the industry.
• Inadvertent failure to comply with certain laws and regulations relating to sanctions, foreign corrupt practices, data protection, and privacy.
• Changes in tax laws, including the new Bermuda corporate income tax, could adversely affect financial results.

Future Outlook

The company is committed to advancing as a specialty underwriting leader, aiming for consistent, profitable growth by leveraging its market positioning, diversified business, underwriting acumen, global platform, claims management, and investment portfolio. While overall pricing has moderated and is softening in some property sectors, casualty lines continue to see positive rate achievement. The wholesale channel in North America is experiencing substantial submission growth, creating opportunities for disciplined underwriting. Pricing momentum in non-proportional reinsurance persists, and proportional reinsurance benefits from underlying rate increases. The company will continue to pursue attractive opportunities with a focused underwriting strategy and selective appetite, growing within risk and volatility guidelines where price delivers adequate profitability, positioning it to drive profitable growth in 2025 and beyond.

Management Comments

• "We are executing on our commitment to advance AXIS as a specialty underwriting leader that delivers consistent, profitable growth."
• "Our market positioning, diversified book of business, specialty underwriting acumen, global platform, claims management capabilities, and deep distribution relationships, supported by a conservative and well performing investment portfolio, provide the foundation for additional profitable growth in our targeted specialty markets."
• "The overall outlook for the property and casualty market remains favorable for specialty insurance and reinsurance carriers."
• "We continue to lean into sectors where premium adequacy metrics are strong, where market dislocations arise and where organic profitable growth opportunities exist."
• "We continue to focus on underwriting discipline and targeted profitable growth."
• "With a strengthened book of business, and an expanding footprint in our chosen specialty markets, AXIS remains positioned to drive profitable growth in 2025 and beyond."

Industry Context

The property and casualty market outlook remains favorable for specialty insurance and reinsurance carriers. While overall pricing has moderated and is softening in some property sectors due to capital influx, casualty lines continue to see positive rate achievement. The wholesale channel in North America is experiencing substantial submission growth due to dislocations in standard lines markets, creating opportunities for specialty carriers. Pricing momentum in non-proportional reinsurance persists, and proportional reinsurance benefits from underlying rate increases. The company is adapting to these trends by focusing on underwriting discipline and selective growth in profitable areas.

Corporate Governance

Legal Proceedings

• Subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business, generally related to claims asserted by or against the company in its insurance or reinsurance operations.
• Estimated amounts payable related to these proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.
• Not party to any material legal proceedings arising outside the ordinary course of business.

Related Party Transactions

• Invested $386.7 million in separately managed accounts (SMAs) managed by Eagle Point, which is majority-owned by Trident IX, an investment vehicle managed by Stone Point Capital, LLC.
• Invested $5.5 million in a SMA managed by Stone Point Credit LLC.
• Entered into stock repurchase agreements with T-VIII PubOpps LP (an investment vehicle managed by Stone Point) on February 3, 2025, and March 5, 2025, to repurchase a total of 4,373,673 shares for approximately $400 million.
• Completed a loss portfolio transfer reinsurance agreement on April 24, 2025, with Cavello Bay Reinsurance Limited, a wholly-owned subsidiary of Enstar Group Limited.
• Invested an additional $7 million in Monarch Point Re (a collateralized reinsurer jointly sponsored by the company and Stone Point) in 2025.
• Advanced $144 million in loans to Monarch Point Re in 2025, with a total loan balance receivable of $260 million at June 30, 2025.
• Committed to advance a further $84 million to Monarch Point Re.

Stakeholder Impact

• Shareholders are positively impacted by increased book value per diluted common share, active share repurchase programs, and consistent dividend payments, reflecting enhanced long-term value.
• Employees benefit from the company's focus on fostering a positive workplace environment and developing talent, although past reorganization expenses indicate some prior workforce adjustments.
• Customers and clients benefit from the company's disciplined underwriting, strong capacity, broad range of risk transfer products, and enhanced service through technology investments.
• Reinsurers and strategic capital partners maintain ongoing collaboration, evidenced by the significant loss portfolio transfer with Enstar and continued investments in Monarch Point Re.
• Regulatory authorities are impacted by the company's compliance with SEC filing requirements and the new Bermuda corporate income tax, which affects financial reporting.

Next Steps

• Continue to execute on the commitment to advance as a specialty underwriting leader.
• Focus on underwriting discipline and targeted profitable growth, leaning into sectors with strong premium adequacy and market dislocations.
• Further invest in attractive growth markets and advance capabilities for transactional specialist business.
• Leverage global platform for new regions and expand North America product capabilities.
• Continue implementation of a focused distribution strategy and build client/partner relationships.
• Improve effectiveness and efficiency of operating platforms and processes through the "How We Work" program.
• Invest in data and technology, exploring AI capabilities and tools.
• Utilize reinsurance markets and third-party capital relationships.
• Foster a positive workplace environment to attract, retain, and develop top talent.
• Grow the sustainability program to support communities and make a positive impact.
• Reassess reserves for losses and loss expenses subject to the loss portfolio transfer reinsurance agreement in subsequent periods.

Key Dates

Recommendation

The company demonstrates strong operational momentum with improved underwriting income and a lower combined ratio, indicating core business profitability. The significant positive swing in net investment gains further bolsters financial performance. While the reported net income for the six-month period is lower due to a non-recurring prior-year tax benefit and foreign exchange volatility, these factors do not reflect a deterioration in underlying business health. The active share repurchase program and consistent dividends highlight a commitment to returning capital to shareholders. The strategic initiatives, including the loss portfolio transfer, enhance risk management. Given the robust operational performance and shareholder-friendly capital allocation, the stock appears attractive for long-term investors.

Keywords

Insurance, Reinsurance, Specialty Underwriting, Financial Results, SEC Filing, 10-Q, AXIS Capital, Underwriting Income, Combined Ratio, Investment Gains, Catastrophe Losses, Reserve Development, Share Repurchase, Bermuda Tax, Corporate Governance, Risk Management, Property Insurance, Casualty Insurance, Professional Lines, Cyber Insurance, Marine Aviation, Accident Health, Credit Political Risk