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COVID-19 impacts push AXIS Capital to first-quarter net loss

5th May 2020 - Author: Luke Gallin

Bermuda-based insurer and reinsurer AXIS Capital Holdings Limited has reported a net loss of $185 million and a combined ratio of 119.8% in Q1 2020, as pre-tax catastrophe and weather-related losses reached $300 million, the majority of which are related to the COVID-19 pandemic.

axis-capital-logoThe re/insurer’s $185 million Q1 net loss compares with net income of $98 million in Q1 2019, while the combined ratio deteriorated from the 96.9% recorded a year earlier.

At a loss of $164 million, the firm’s Q1 2020 operating result declined from a gain of $105 million in Q1 2019, reports AXIS.

The company experienced an elevated level of estimated pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $300 million, which is up significantly on the $11 million posted last year.

The large majority of this, or $235 million, net of reinsurance and reinstatement premiums, is attributable to the COVID-19 pandemic and were primarily associated with property related coverages, but also included event cancellation and accident & health coverages, and considered a global shelter in place order that remains effective until July 31st, 2020.

As a result, AXIS Capital’s net losses and loss expenses ratio increased from 58.5% in Q1 2019 to 83.4% in Q1 2020.

The insurer and reinsurer also recorded $6 million of net favourable prior year reserve development ($4mn insurance and $2mn reinsurance) in the quarter, compared with $15 million in the prior year quarter.

Overall, gross premiums written declined by 6% year-on-year to $2.4 billion, with a decline of 14% in the company’s reinsurance segment, somewhat offset by an increase of 11% in the insurance segment. At the same time, net premiums written fell by 6% to $1.7 billion in Q1 2020, with a 12% decline in reinsurance, partially offset by an increase of 10% in the insurance segment.

By segment, and AXIS reveals that both its insurance and reinsurance operations fell to underwriting losses in the quarter. The insurance division reported an underwriting loss of $122.6 million in the quarter and a combined ratio of 121.9%, as cat losses reached $178 million, of which $135 million relates to COVID-19.

In reinsurance, AXIS has reported an underwriting loss of $74.2 million and a combined ratio of 112.3%, as cat losses totalled $122 million, of which $100 million relates to the COVID-19 pandemic.

Turning to investments, and AXIS recorded $93 million of net investment income in Q1 2020, which represents a decline of $14 million on the same period last year. Net realised and unrealised losses recognised in net income for Q1 were $63 million, including net unrealised losses of $61 million following a decrease in the market value of the firm’s equity securities portfolio in Q1 2020.

Albert Benchimol, President and Chief Executive Officer (CEO) of AXIS Capital, commented: “As our industry and society continue to navigate the challenges brought on by COVID-19, our primary thoughts are with the people, families and communities that have been directly impacted by the pandemic, and with the health and safety of our staff.

“Like all (re)insurers, our financial results have been impacted by COVID-19. The losses from the pandemic overshadowed what otherwise would have been an excellent quarter for AXIS. The first quarter was highlighted by a more than 4 point improvement in our ex-PGAAP current accident year ex-cat combined ratio with better results across our losses, acquisition costs and general and administrative expenses. This continued improvement is driven by our efforts over the past few years to enhance profitability within our portfolio, enhance operating efficiency, and deliver growth across our most attractive lines.

“We have a well-balanced book of business, great relationships with our producers, and – despite the remote work environment – we are continuing to deliver the same high level of service to our customers.

“Our actions are grounded in our corporate purpose, a belief that we exist to help people, organizations and communities during their time of need. We proudly stand by our clients and partners in distribution as we together navigate this transformed environment.”

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