AXS
Axis Capital Holdings LTD
NYSE
8-K: AXIS Capital Reports Mixed Q4 Results Amidst Reserve Development and Strategic Repositioning
Sentiment:
Quarterly Report
31 January 2024 4:28 PM
AXIS Capital reported a net loss for the fourth quarter of 2023, primarily due to significant prior year reserve development, while also showing improvements in its current accident year combined ratio.
Worse than expected
The company reported a net loss for the quarter, primarily due to a significant adverse prior year reserve development, which was worse than expected.
Summary
- AXIS Capital reported a net loss attributable to common shareholders of $(150) million, or $(1.76) per diluted common share, for the fourth quarter of 2023.
- The company's operating loss for the quarter was $(107) million, or $(1.25) per diluted common share.
- A significant factor was a net adverse prior year reserve development of $425 million, pre-tax, or 33.6 points.
- Underlying operating income for the quarter was $254 million, or $2.94 per diluted common share.
- The current accident year combined ratio improved by 3.7 points to 91.0%.
- For the full year 2023, AXIS Capital reported net income available to common shareholders of $346 million, or $4.02 per diluted common share.
- Full year operating income was $486 million, or $5.65 per diluted common share.
- The company experienced a net adverse prior year reserve development of $412 million, pre-tax, or 8.1 points for the year.
- Underlying operating income for the year was $847 million, or $9.85 per diluted common share.
- The current accident year combined ratio improved by 4.5 points to 91.8% for the year.
- Return on average common equity (ROACE) was 7.9%, and operating ROACE was 11.0% for the year.
- Book value per diluted common share increased to $54.06, a 15.1% increase compared to December 31, 2022.
Sentiment
Score: 5
Explanation: The sentiment is neutral to slightly negative. While there are positive aspects like improved combined ratios and premium growth in the insurance segment, the significant net loss and adverse reserve development in Q4 weigh heavily on the overall sentiment. The strategic repositioning and operational improvements are positive, but the financial results are mixed.
Positives
- The current accident year combined ratio showed significant improvement both in the fourth quarter and for the full year.
- The insurance segment experienced strong premium growth, particularly in new business.
- Net investment income increased due to higher yields on fixed maturities.
- Book value per diluted common share saw a substantial increase over the year.
- The company is capitalizing on favorable conditions in its chosen specialty markets.
- AXIS Re has been repositioned as a focused specialist reinsurer with increased profitability and reduced volatility.
- The company has made significant improvements to its operational infrastructure through the 'How We Work' program.
Negatives
- The company reported a net loss for the fourth quarter of 2023.
- A significant adverse prior year reserve development negatively impacted the results.
- The reinsurance segment experienced a decrease in gross and net premiums written.
- The combined ratio for the fourth quarter was 124.6%, significantly impacted by the prior year reserve development.
- Underwriting income for the insurance segment decreased for the year.
Risks
- The cyclical nature of the insurance and reinsurance business could lead to unfavorable premium rates.
- Natural and man-made disasters, including climate change and cyber-attacks, pose a risk to the company's financial performance.
- Emerging claims, systemic risks, and coverage and regulatory issues could impact the company.
- Inflation could have an adverse impact on the company's business.
- Disruptions in the banking sector could affect underwriting and investment exposure.
- The company faces risks related to credit and market conditions, including fluctuations in interest rates and foreign currency exchange rates.
- Operational risks, including technology and data security issues, could impact the company.
- Changes in governmental regulations and tax laws could affect the company's operations.
Future Outlook
The company looks ahead to 2024 with excitement, having a robust global platform, strong customer relationships, and a commitment to taking the company to the next level.
Management Comments
- Vince Tizzio, President and CEO of AXIS Capital, stated that 2023 was a transformative year for AXIS, and the company is on a clear path to becoming a specialty underwriting leader.
- He highlighted the company's capitalization on favorable conditions in chosen specialty markets, exhibiting underwriting discipline and strong cycle management.
- Tizzio also noted the continued profitable growth within the core specialty insurance business and the repositioning of AXIS Re as a focused specialist reinsurer.
- He mentioned significant improvements to the operational infrastructure through the 'How We Work' program.
Industry Context
This announcement comes as the insurance and reinsurance industry faces challenges from increased catastrophe losses, economic uncertainty, and evolving regulatory landscapes. AXIS Capital's strategic repositioning and focus on specialty markets reflect a broader trend in the industry towards more targeted and disciplined underwriting.
Comparison to Industry Standards
- The reported combined ratio of 124.6% for Q4 2023 is significantly worse than the industry average, primarily due to the large prior year reserve development. Companies like Chubb and Travelers typically aim for combined ratios below 95%.
- The current accident year combined ratio of 91.0% is more in line with industry standards for well-performing specialty insurers, indicating that the underlying business is healthy.
- The full year ROACE of 7.9% is below the average for top-tier insurers, which often achieve double-digit returns. However, the operating ROACE of 11.0% is more competitive.
- The book value per diluted common share growth of 15.1% is a positive sign, indicating strong asset growth compared to peers like The Hartford and Allstate, which have seen more modest growth.
- The increase in net investment income is a positive trend, reflecting the benefit of higher interest rates, which is a common theme across the industry.
Stakeholder Impact
- Shareholders will be impacted by the net loss in Q4, but the increase in book value per share is a positive sign.
- Employees may be affected by the ongoing operational changes and the 'How We Work' program.
- Customers may benefit from the company's focus on specialty markets and improved underwriting discipline.
- Suppliers and creditors will be impacted by the company's overall financial performance.
Next Steps
- The company will host a conference call on February 1, 2024, to discuss the fourth quarter and year-end financial results.
- The company will continue to execute its strategic initiatives, including the 'How We Work' program.
- The company will implement the share repurchase program authorized by the board.
Key Dates
- January 31, 2024: Date of the press release and investor financial supplement reporting fourth quarter 2023 results.
- February 1, 2024: Date of the conference call to discuss the fourth quarter and year-end financial results.
- December 31, 2024: End date of the share repurchase program authorized by the board.
Keywords
reinsurance, insurance, underwriting, combined ratio, reserve development, net income, premiums, investment income, ROACE, 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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