AXIS Capital’s Q4 Is a Money-Loser; CEO Benchimol Blames Catastrophes, Ogden Rate Change

AXIS Capital Holdings rounded out 2017 with a money-losing quarter, but the Bermuda-based insurer and reinsurer blamed more than just “significant” catastrophe losses.

AXIS reported a 2017 fourth quarter net loss of $38 million, or $0.46 per diluted common share. That compares with $131 million, or $1.48 per diluted common share, in net income generated by AXIS in its 2016 fourth quarter.

AXIS President and CEO Albert Benchimol said that higher attritional property losses, the cumulative impact of several years of intense competition and ongoing effects of the Ogden rate change in the UK also adversely affected the company’s bottom line. The Ogden rate is used to calculate lump sum awards in UK bodily injury cases, and the country cut the rate last year from 2.5 percent to -0.75 percent. Insurers must pay much more to claimants as a result of the change.

Benchimol added that despite the challenges, AXIS has done what it can to manage its risks.

“The actions we have taken over recent quarters to reduce earnings volatility have helped to temper the impact to our financial results in a period where industry catastrophe losses were in excess of $100 billion,” Benchimol noted in prepared remarks.

One such action was AXIS’ $611.5 million cash acquisition of Novae Group plc., creating a $2 billion insurer in London and a top ten insurer/reinsurer at Lloyd’s. AXIS framed the deal as a move that significantly advances its strategy to be a leader in each of the specialty risk markets in which it competes.

Here are highlights of AXIS’s 2017 fourth quarter results, shaped in part by the Novae acquisition:

A combined ratio of 100.7, compared to 96.7 over the same period in the 2016 fourth quarter.

• Gross premiums written of just over $1 billion, featuring a 65 percent increase in the reinsurance segment and a 47 percent jump in the reinsurance unit. The insurance segment jump comes mostly from the Novae acquisition. Remove the Novae acquisition from the equation and gross premiums written jumped 17 percent overall: 72 percent in reinsurance and 7 percent in insurance.

• Net premiums written are at $729 million, 57 percent higher than over the same period a year ago.

• Net premiums earned are at $1.2 billion, up 31 percent year-over-year.

• Pre-tax catastrophe and weather-related losses came in at $133 million, net of reinsurance and reinstatement premiums. That compares to $59 million in Q4 2016.

• Net investment income was at $101 million, versus $96 million in the 2016 fourth quarter.

• For the year, AXIS reported a combined ratio of 113.1, compared to just under 96 for 2016. AXIS said it lost $416 million in 2017, or $4.94 per diluted common share, compared to $465 million in net income, or $5.08 per diluted common share, for 2016.

Source: Axis Capital Holdings