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AXIS returns to profit in Q3 despite reinsurance underwriting loss

28th October 2021 - Author: Luke Gallin

Bermuda-based AXIS Capital Holdings Limited has reported net income of $47 million for the third quarter of 2021, despite its re/insurance operations falling to an underwriting loss in the period.

axis-capital-logoAXIS has returned to profit in both the third quarter and first nine months of 2021, when compared with a net loss of $73 million and $146 million, respectively, for the same periods in 2020.

For Q3 2021, operating income totalled $1 million compared with a loss of $65 million a year earlier. AXIS’ 9M 2021 operating income improved from a loss of $158 million in 2020 to a gain of $254 million.

Across the business, gross premiums written (GPW) increased by 24% year-on-year to $1.6 billion, driven by growth of 26% in the insurance segment and growth of 19% in the reinsurance segment.

Net premiums written also increased for AXIS in Q3, by 22% to $1 billion with an increase of 30% in the insurance segment, and growth of 7% in the reinsurance segment.

For the first nine months of 2021, AXIS has recorded GPW growth of 12% to $6.1 billion, which includes an increase of $634 million in the insurance unit, and growth of $11 million in reinsurance.

NPW also increased overall for the period, by 12% to $4 billion, with an increase of 23% in the insurance segment and of 2% in the reinsurance segment.

The higher net premiums across AXIS’ business reflects the growth in GPW primarily in liability, accident and health, and catastrophe lines, partially offset by a decrease in property lines, and also increases in premium ceded in catastrophe, credit and surety, and liability lines.

During Q3, AXIS experienced pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $250 million. Cat losses in the period contributed 20.7% to the combined ratio, were split $105 million insurance and $145 million reinsurance, and were primarily attributable to hurricane Ida, July flooding in Europe, and other weather-related events.

While cat losses increased year-on-year in Q3 by $10 million, AXIS has reported no change to its net loss estimate of $360 million established for the COVID-19 pandemic.

But despite this, a net losses and loss expense ratio of 20.7%, combined with an acquisition ratio of 19.1% and a general and administrative expense ratio of 13.1% in Q3 2021, means that AXIS has fallen to an underwriting loss in the period with a combined ratio across its operations of 107.4%, driven by the performance of its reinsurance unit.

While the combined ratio for the quarter remains in unprofitable territory, it is still an improvement on the 114.5% reported for the same period last year. Furthermore, when you exclude the catastrophe and weather-related losses, AXIS has again improved its current accident combined ratio to 87.6%.

A closer look at the company’s financials for the quarter shows that its underwriting result was dragged down by its reinsurance business, which more than offset gains in the primary segment.

Within the insurance unit, AXIS reported underwriting income of more than $10 million compared with a loss of $81 million a year earlier, as the segment’s combined ratio improved by 7 points to 98.5%, aided by a year-on-year reduction in the net losses and loss expense ratio.

In reinsurance, however, AXIS has reported an underwriting loss of more than $69 million, which represents a deterioration from the loss of $54 million reported for the prior year period, as the segment’s combined ratio weakened from 110.5% to 114.4%, driven by elevated losses.

It’s a similar story for the nine month period, with underwriting income of $142.7 million and a combined ratio of 92.7% in the insurance segment, partially offset by an underwriting loss of more than $13 million and a combined ratio of 101.8% in the reinsurance segment during the period.

In fact, for the first nine months of 2021 AXIS has returned to underwriting profitability thanks to the improved performance of its insurance segment, as the company reports a combined ratio of 99.1%, compared with 109.6% a year earlier.

Net income for the nine month period reached $391 million compared with a net loss of $146 million a year earlier.

On the asset side of the balance sheet, AXIS has announced higher net investment income of $107 million for Q3 2021.

Albert Benchimol, President and Chief Executive Officer (CEO) of AXIS Capital, commented: “Once again our industry was challenged by severe weather events and our focus continues to be on supporting our clients and the communities that have been impacted.

“In the face of these challenges, we continued to deliver, accelerating momentum in our progress highlighted by eight consecutive quarters of year-over-year improvement in our combined ratio ex-cat and weather. Notably, AXIS generated net operating income for the quarter, and our lower market share of the events demonstrates the progress that we’ve made in reducing our net exposure to catastrophes. Our results were underscored by strong top line growth, disciplined underwriting, and solid investment income.

“AXIS is well positioned in key specialty markets and we’re increasingly confident that favorable conditions will continue through 2022 and likely beyond, providing us with an attractive path to further profitable growth.”

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