Analysts from Keefe, Bruyette & Woods (KBW) have warned that shareholders in AXIS Capital could find themselves disappointed next year over growth in reinsurance premiums.
The firm said in a new, eleven-page note that it had downgraded shares in the firm to ‘market perform’ from ‘outperform’, while adjusting downwards its target price to $60 from $63. The reduction in price, it said, reflected likely limited core Insurance combined ratio improvement and likely pressured Reinsurance premium growth in 2023.
KBW wrote: “We expect Reinsurance premium growth during the upcoming January 1 reinsurance renewals and quarterly core underwriting margins to disappoint investors over the course of 2023, likely limiting book value growth and multiple expansion relative to reinsurers still writing catastrophe reinsurance.”
It added: “We think [the company] faces a competitive disadvantage, as several competitors leverage their still-available catastrophe capacity (which is in very short supply) to obtain bigger shares of other reinsurance lines at better terms.”
The firm also said that it expected to see limited core insurance combined ratio improvement next year, which it said would reflect rising reinsurance rates and falling ceding commissions. It also observed that AXIS Capital’s withdrawal from property and catastrophe reinsurance implied smaller reserve releases, given that such reserves had been relatively consistent source of favourable development.
Earlier this year, AXIS Re said it was shifting its focus to become a a specialist reinsurer with a commitment to casualty, specialty, A&H, and credit lines.
The firm also announced that Steve Arora, current CEO, is to leave and be succeeded by Ann Haugh. The current moves form part of a multi-year plan from the company to increase profitability, lower volatility, and strengthen its portfolio.
Other actions taken by the firm include the appointments of Vince Tizzio as CEO of specialty insurance and reinsurance, and Linda Ventresca as head of digital, exiting the property reinsurance business, reducing exposure to catastrophe risk, and employing a new global CUO.