Rating agency A.M. Best has turned negative on the ratings of Bermudian insurance and reinsurance firm AXIS Capital Holdings Limited, citing “unfavorable trends in the group’s operating performance.”
Specifically, A.M. Best said that AXIS’ insurance segment is the main source of its concern, saying that, “Historically AXIS’ operating performance ranks among the top of its peer group; however, in recent years these results have trended toward the middle of its cohort.”
The rating agency said that AXIS’ combined ratio run rate has been trending higher, shrinking the firms cushion to absorb shock-losses. At the same time, growth and expansion of AXIS’ Accident & Health segment has contributed to a higher expense ratio and as yet the benefits are not being fully realised.
A.M. Best continued to explain, “While AXIS has taken measures to address these trends, the current challenging market conditions could impede its effectiveness.”
On the positive side, A.M. Best notes AXIS’ financial strength and balance-sheet, which are in the rating agencies strongest category, even under stress scenarios.
It looks like A.M. Best is seeking a sign that the insurance segment and A&H expansion are going to start to pay dividends for AXIS, which given the recency of some of the actions taken by the firm could take some time.
AXIS though is not the only re/insurer with a troubled insurance arm right now.
A number of players have struggled to keep performance levels high while expanding and diversifying their businesses, often in response to the challenged reinsurance market conditions.
These strategic and line of business adjustments can take time to return benefits that are expected of re/insurers, hence at this time these companies need to work through their growing pains and see their expanded business lines start to pay dividends.
A.M. Best affirmed AXIS Capital Holdings ratings, while revising their outlook to negative from stable.