AXIS Capital Holdings won an outlook upgrade from Standard & Poor’s Global Ratings as well as an affirmation of its other ratings, thanks to growing confidence in its various strategic initiatives.

Standard & Poor’s revised its AXIS outlook to stable from negative. The ratings agency also affirmed the “A-” long-term issuer credit and senior debt ratings for the Bermuda-based specialty insurer and reinsurer. As well, S&P affirmed its “A+” long-term issuer credit and financial strength ratings for AXIS’ core operating subsidiaries.

Standard & Poor’s, in its update, said the outlook change and ratings affirmation resulted from positive AXIS strategic initiatives.

“Axis’ capital management and implementation of its various strategic initiatives are bearing fruit and will help rebuild the company’s capital redundancy at the ‘AAA’ level by year-end 2019, based on S&P Global Ratings’ risk-adjusted capital model,” S&P said.

Standard & Poor’s pointed out that AXIS’ capitalization declined due to its $611.5 million acquisition of Novae Group plc in late 2017, though the situation was made worse by late-2017 catastrophe losses that were well above normal levels.

Standard & Poor’s gave credit to AXIS for taking a number of steps after that to rebalance its finances.

“AXIS stopped its share buybacks; is lowering its net aggregate property-catastrophe probable maximum losses through reinsurance/retrocession usage and alternative capital; and has exited underperforming lines of business such as on-shore energy, U.S. retail property and excess casualty lines,” S&P wrote.

S&P also gives AXIS additional kudos for reducing its exposure to Novae’s legacy liabilities. The ratings agency pointed out AXIS will realize about $100 million in expense savings per year due to the Novae integration and “additional corporate cost synergies.”

All of that said, S&P added that it isn’t likely to upgrade AXIS during the next two years. That’s because it sees AXIS in a highly competitive environment as the industry faces “ongoing heightened competitive pressures in the global property/casualty reinsurance sector and U.S. specialty insurance lines of business,” as well as possible earnings volatility due to severity risks with property-catastrophe exposures.

Source: Standard & Poor’s