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AXIS reports Q3 net loss as combined ratio hits 114.5%

29th October 2020 - Author: Luke Gallin

Bermuda-based insurer and reinsurer, AXIS Capital Holdings Limited, has announced a net loss of $73 million and a combined ratio of 114.5% for the third-quarter of 2020, as pre-tax catastrophe and weather-related losses reached $240 million in the period.

axis-capital-logoA net loss of $73 million compares with net income of $28 million for the same period in 2019, as the re/insurer also reports an operating loss of $65 million for Q3 2020, against an operating loss of $33 million for Q3 2019.

For the nine month period ended September 30th, 2020, AXIS has announced a net loss of $146 million and an operating loss of $158 million, compared with net income of $292 million and operating income of $209 million for the same period in 2019.

In Q3, estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were $240 million ($205mn after-tax). Of this total, $132 million relates to the firm’s insurance business and $108 million to its reinsurance operation. AXIS primarily attributes the losses to Hurricanes Laura and Sally, the Midwest derecho, wildfires across the west coast of U.S., the Beirut port explosion, and other weather-related events in the quarter.

In comparison, AXIS reported catastrophe and weather-related losses of $160 million in the third-quarter of 2019.

Additionally, the Bermudian has reported net favourable prior year reserve development of $0.6 million for Q3 2020, with a 50/50 split across its insurance and reinsurance operations.

As a result of the heightened level of catastrophe activity and subsequent losses in Q3 2020, AXIS has reported a 7.1 percentage point rise in its net losses and loss expense ratio to 80.6%. At the same time, the company’s acquisition cost ratio declined slightly to 21.1% while the expense ratio also fell year-on-year to 12.8%.

Overall, AXIS has reported a combined ratio of 114.5% for the third-quarter of 2020 against 109.4% in the same period in 2019. Excluding cats and weather-related losses, and the firm’s current accident year combined ratio improved from 97.6% in Q3 2019 to 92.4% in Q3 2020.

Staying with underwriting and AXIS has reported that gross premiums written fell by 5% to $1.3 billion in Q3, driven by a 23% decline in the reinsurance segment, partially offset by an increase of 5% in the insurance segment. Net premiums written also fell year-on-year to $0.8 billion, driven by a 20% dip in the reinsurance segment, partially offset by 5% growth in the insurance segment.

Overall, AXIS’ insurance segment fell to an underwriting loss of $81 million in Q3, while the firm’s reinsurance operation also recorded an underwriting loss of $54 million in the period.

For the first nine months of the year, estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, totalled $576 million. Of this, $325 million is within the insurance segment and $251 million in the reinsurance segment.

The re/insurer also reports that there is no change to the net loss associated with first party coverages established for COVID-19 in first quarter of 2020. So, for the first nine months of the year, estimated pre-tax losses, net of reinsurance and reinstatement premiums, associated with first party coverages attributable to the COVID-19 pandemic were $235 million for AXIS.

Additionally, AXIS has reported net favourable prior year reserve development of $9 million for the nine month period, compared with $65 million for the same period in 2019.

Overall, AXIS’ insurance segment fell to an underwriting loss of $170 million for the first nine months of the year, while the firm’s reinsurance operation also recorded an underwriting loss of $75 million in the period.

AXIS has reported a combined ratio of 109.6% for 9M 2020 against 100.9% in the same period in 2019. Excluding cats and weather-related losses, and the firm’s current accident year combined ratio improved from 96.9% in 9M 2019 to 92.4% in 9M 2020.

Albert Benchimol, President and Chief Executive Officer (CEO) of AXIS, commented: “This was a quarter in which the world and our industry were impacted by exceptional levels of cat loss activity. First and foremost, our thoughts are with the people and communities that were directly affected by these events, and we’re committed to providing our customers with top caliber claims service as we help to support their rebuilding efforts.

“The losses that we experienced during the quarter were consistent with our reduced catastrophe exposure, reflecting the changes that we’ve made in recent years to re-position our portfolio. We continue to see positive trends in our underlying performance, highlighted by a year-over-year improvement of 5.2 points to our current accident year combined ratio ex-cat and weather this quarter, bringing the year-to-date reduction to 4.5 points.

“This is encouraging progress and we look to the future with great optimism. AXIS is well positioned in its chosen markets, we have excellent relationships with our producers, and we’re seeing strong pricing momentum, highlighted by a 16% rate increase during the quarter in our Insurance segment. We’re confident that AXIS is on a strong path forward, as we continue to build a world class leader in specialty risks.”

Turning to investments, and the re/insurer has reported income of $102 million for Q3 2020 compared with $116 million a year earlier, driven mostly by the decrease in yields.

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