Bermuda-based AXIS Capital Holdings Limited has reported an improved combined ratio of 91.4% for the first quarter of 2022, as both its insurance and reinsurance segments recorded a better underwriting result in the period.
Across the group, underwriting income spiked from $40.3 million in Q1 2021 to $138.8 million in Q1 2022, as the combined ratio strengthened by 7.5 percentage points on the back of a lower loss ratio, acquisition ratio, and expense ratio.
In Q1 2022, the underwriting result includes pre-tax catastrophe and weather-related losses, net of reinsurance, of $60 million, split $33 million in insurance and $27 million in reinsurance. Of this total, $30 million of losses relate to the war in Ukraine, with the remaining $30 million primarily related to Eastern Australia floods, and other weather-related events.
This year, the firm also recorded $9 million in net favourable reserve development, compared with $5 million a year earlier.
Overall, gross premiums written (GPW) spiked by 4% to $2.6 billion in Q1 2022, driven by 20% growth in the insurance segment, somewhat offset by a decrease of 9% in the reinsurance segment as AXIS continues to de-risk its book.
Similarly, net premiums written (NPW) increased by 2% to $1.8 billion across the business, with 19% growth in insurance and a decrease of 10% in the reinsurance segment.
All in all, AXIS has reported net income of $142 million in the first quarter of 2022, compared with net income of $116 million in the prior year period. Operating income also increased, year-on-year, from $83 million to $180 million.
Examining the carrier’s Q1 2022 results by segments, reveals that while both the firm’s insurance and reinsurance operations performed well in the quarter, AXIS is continuing to pull-back from the catastrophe reinsurance space.
Starting with the reinsurance segment, GPW fell by 8.7% to $1.3 billion, NPW declined by 9.5% to $969 million, as net earned premiums increased slightly to $505 million.
According to its Q1 2022 statement, AXIS’ reinsurance GPW reflects decreases in catastrophe, motor, and property lines due to non-renewals and lower line sizes, somewhat offset by growth in accident and health, and credit and surety lines.
“Within our Reinsurance segment, the team continued to make good progress in strengthening our portfolio while reducing our footprint in Catastrophe, highlighted by a 45% reduction in catastrophe lines premium,” explains Albert Benchimol, President and Chief Executive Officer (CEO) of AXIS Capital.
As the re/insurer continues to retreat from the catastrophe space, the impact of such events on its reinsurance segment in Q1 2022 fell, year-on-year, from $74 million to $27 million, of which $14 million relates to the Russia-Ukraine war.
Within reinsurance, AXIS has reported underwriting income of $44.4 million compared with just over $1 million a year earlier. The segment’s combined ratio improved from 100.2% in Q1 2021 to 92.5% in Q1 2022.
Yesterday, it was reported by the Insurance Insider that AXIS is exploring the sale of its roughly $3 billion reinsurance arm, AXIS Re. A number of analysts have now commented on this, and while AXIS is yet to comment on the report, it does continue to adjust its book, shrinking in reinsurance and growing in the primary space.
In its insurance operation, AXIS has announced GWP growth of more than 20% to $1.3 billion, as NWP increased by over 19% to $844 million, and net premiums earned increased by 22% to $753 million. AXIS attributes the GWP growth to increases in professional lines, liability, and property lines driven by new business and favorable rate changes.
The insurance segment’s underwriting income for the quarter amounted to $94 million, compared with $39 million in Q1 2021. The unit’s combined ratio improved by 6.3 percentage points to 87.5%.
On the asset side of the balance sheet, AXIS has produced net investment income of $91 million in Q1 2022, against $114 million a year earlier, as net realized and unrealized losses recognized in net income for the quarter hit $95 million.
“This quarter we continued to deliver strong progress along virtually all key metrics to deliver a combined ratio of 91.4%. We continued to grow the most profitable areas of our business, improve the overall quality of our book, and lower our net cat exposure – all while providing great service to our customers,” said Benchimol.
“Our Insurance segment again recorded 20% premium growth on the back of double-digit rate increases, and record first quarter new business as we continued to expand our presence in attractive markets, with a focus on delivering value to our partners in the E&S, Wholesale and Specialty channels.”
“We’re excited by the positive momentum that we continue to see throughout our business. Our focus is to build on it – and drive sustained profitable growth, further enhance our efficiency, and ultimately achieve our goal of becoming a top quintile performer,” he added.