AXIS Capital Holdings Limited has reported higher net income for the second-quarter of 2019 when compared with the prior year, while its underwriting income fell to $78.7 million, resulting in a combined ratio of 96.1%.
Bermudian insurer and reinsurer AXIS Capital’s combined ratio improved by 3% in Q2 2019 when compared with Q2 2018, which includes a decline in its insurance segment underwriting result which was somewhat offset by an improved reinsurance performance.
Overall, net income for the quarter reached $166 million compared with $93 million a year earlier, while operating income of $137 million increased from the $103 million recorded in Q2 2018. The re/insurer’s gross premiums written in the second-quarter of 2019 fell to $1.6 billion, with a 6% decrease in the insurance segment and a 9% increase in the reinsurance segment.
AXIS notes that the growth in premiums is primarily a result of the company’s expansion in the Japanese market, which increased the reinsurance segment’s written premiums, although this was in part offset by a decline in premiums in the insurance segment which relates to the repositioning of the property book. At $1.1 billion, net premiums written increased by $70 million, or 7% in Q2.
The firm benefited less from favourable prior year reserve development in Q2 2019, recording $24 million net, which includes $21 million in insurance and $2 million in reinsurance. This compares with $60 million of net favourable prior year reserve development in Q2 2018, $24 million insurance and $36 million reinsurance. AXIS explains that the decrease is mostly a result of catastrophe and weather events largely in the reinsurance unit. As a result, the firm’s prior year reserve development ratio fell from 5.1% to 2.2%.
By segment, and it’s clear that an improved reinsurance performance somewhat offset a decline in the insurance segment, with the latter recording underwriting income of $11.3 million in Q2 2019, which is down 80% on the same period in 2018. The insurance unit posted a Q2 combined ratio of 97.8%, which is weaker than the 90.4% recorded in Q2 2018.
AXIS notes that in the insurance segment, “underwriting income for the second quarter of 2019 and 2018 included the recognition of premium attributable to Novae’s balance sheet at October 2, 2017, without the recognition of the associated acquisition costs, which were written off at the closing date.”
In the reinsurance segment, underwriting income increased by 13.7% to $67.4 million, with the segment recording an improved combined ratio of 89.1%, compared with 90.7% in the second-quarter of 2018.
Within the reinsurance segment, AXIS explains that the decrease in favorable prior year reserve development was primarily driven by additional losses attributable to Typhoon Jebi and the late notification of property claims related to recent accident years.
Pre-tax cat and weather-related losses totalled $11 million in Q2 2019 in the reinsurance segment, compared with $15 million in Q2 2018.
Albert Benchimol, the firm’s President and Chief Executive Officer (CEO), commented: “We are pleased to report strong second quarter results, which were highlighted by continuing improvement in our core underwriting margins, operating ROE of 12.3% ex PGAAP, and 6.0% growth in book value per share.
“Our results speak to the progress made as we continue executing on our strategy to strengthen our market position and improve our underwriting profitability, which includes disciplined corrective actions on under-performing business, and reducing portfolio volatility. Furthermore, the actions we have taken to enhance our franchise in our chosen markets give us excellent opportunities for profitable growth. With our strong presence at Lloyd’s, U.S. E&S markets, professional lines and global reinsurance, we believe AXIS is in a superior position to take advantage of the necessary firming in re/insurance markets.
“In addition, we are continuing to invest in technology and data & analytics – all to enhance our ability to deliver differentiated service and value to our clients and partners in distribution. While there is more work that needs to be done, we’re on the right path and are seeing tangible results as we continue to advance on our strategy and focus on driving long-term profitable growth and increased shareholder value.”
The firm’s net investment income increased $28 million in the second-quarter of 2019 to $138 million, and included a realised gain of $13 million related with the sale of an alternative investment.
