A Now-Familiar Refrain: Hurricanes, Earthquakes Hammer Q3 AXIS Results

AXIS Capital Holdings said its 2017 third quarter would have been a good one if not for Hurricanes Harvey, Irma and Maria, and two Mexico earthquakes.

With the three massive natural catastrophe events factored in, however, the Bermuda-based insurer and reinsurer lost $468 million, or $5.61 per diluted common share. This compares to $177 million in net income, or $1.96 per diluted common share from the 2016 third quarter.

And then there’s this: AXIS said its insurance segment combined ratio climbed to nearly 156.9, compared to 94.4 in the same period a year ago. Its reinsurance segment combined ratio reached 143.7, versus 85.1 in the 2016 third quarter.

Albert Benchimol, AXIS Capital’s president and CEO, said in prepared remarks that the industry-wide natural catastrophe loss activity in September was comparable to full-year levels in 2005 and 2011, which he said “were the highest catastrophe loss years on record.”

That said, Benchimol added that the financial impact of Harvey, Irma and Maria and the two Mexico earthquakes “was consistent with our expectations, reflecting lessons learned from prior large cat experience and recent changes to our portfolio.”

Beyond fielding those catastrophe events, AXIS also used Q3 to close its $611.5 million cash acquisition of Novae Group plc, creating a $2 billion specialty insurer in London and a top ten insurer/reinsurer at Lloyd’s, with $6 billion in combined 2016 global gross written premiums. Benchimol said efforts to weave together both company’s operations continue, and he also noted AXIS is “encouraged by the positive market reaction to the combination.”

Here are some result highlights:

• The insurance segment booked $744 million in gross premiums written during the 2017 third quarter, 10 percent higher than the $675 million figure produced in Q3 2016. AXIS said its liability lines, and credit political risk lines and the new business they attracted contributed to the increase, as well as AXIS’s recent acquisition of Aviabel, which boosted its aviation lines. Offsetting this: AXIS exited some U.S. retail insurance operations a year ago.
• AXIS said its insurance segment produced a $282 million underwriting loss for Q3, compared to $25 million in underwriting income a year ago. The change stems largely from hurricane and earthquake losses. AXIS said it incurred pre-tax catastrophe and weather-related losses that hit $317 million for Q3, adding 64 points to its combined ratio.
• The reinsurance segment reported $441 million in gross premiums written in Q3, 55 percent higher than the $285 million booked during the 2016 third quarter. AXIS said the jump came from its liability, catastrophe, property and motor lines. Liability lines saw more premium due to timing differences and the catastrophe lines jump stemmed from reinstatement premiums. New business helped increase property and motor lines premiums, though timing differences also contributed to increases in motor lines.
• Reinsurance booked a $231 million underwriting loss in Q3, compared to $79 million in underwriting income in the 2016 third quarter. Driving this: aa combined ratio of 143.7, versus 85.1 during Q3 2016. Hurricane and earthquake losses, plus other U.S. weather events contributed to the results.
• Net investment income came in at $95 million for the quarter, $22 million less than in the 2016 third quarter, and $11 million lower than in Q2 2017. AXIS said changes in the fair value of its alternative investments led to the decrease.

Source: AXIS Capital Holdings