AXIS Capital Holdings Limited — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Although the request metadata references 2023 Q4, this filing reports full-year results and year-end financial condition. AXIS is a global specialty insurance and reinsurance underwriter with Insurance and Reinsurance reportable segments.
Financial performance and condition
| Metric | FY 2023 / Dec. 31, 2023 | Prior comparable |
|---|---|---|
| Net premiums earned | $5.084 billion | $5.160 billion in 2022 |
| Total revenues | $5.643 billion | $5.135 billion in 2022 |
| Net income available to common shareholders | $346 million; diluted EPS $4.02 | $193 million; diluted EPS $2.25 |
| Operating income, non-GAAP | $486 million; diluted operating EPS $5.65 | $498 million; $5.81 in 2022 |
| Underwriting income and combined ratio | $161 million; 99.9% | $359 million; 95.8% in 2022 |
| Net investment income / net investment gains (losses) | $612 million / $(75) million | $419 million / $(457) million in 2022 |
| Cash from operating activities | $1.256 billion | $798 million in 2022 |
| Cash and investments | $16.7 billion | $15.5 billion in 2022 |
| Debt / debt-to-total-capital ratio | $1.314 billion / 20.0% | $1.312 billion / 22.0% in 2022 |
| Common shareholders’ equity / diluted book value per share | $4.7 billion / $54.06 | $4.1 billion / $46.95 in 2022 |
- Gross premiums written rose 2% to $8.36 billion, while net premiums written fell 3% to $5.10 billion. Insurance gross premiums grew 10% to $6.14 billion; Reinsurance declined 16% to $2.22 billion.
- Operating ROACE, a non-GAAP measure, was 11.0% versus 11.1% in 2022; GAAP ROACE increased to 7.9% from 4.3%. Common book value per diluted share increased 15% year over year.
- Net cash used in investing activities was $856 million and net cash used in financing activities was $202 million. Year-end cash, cash equivalents and restricted cash were $1.384 billion. Management estimated about $13.6 billion of cash and invested assets could be available within one to three business days under normal markets; $5.3 billion was restricted.
- Loss reserves were $16.43 billion, with $6.90 billion of reinsurance recoverables on paid and unpaid losses. Reinsurance recoverables on unpaid losses were 83.1% collectible from reinsurers rated A- or better by A.M. Best.
Material changes versus 2022
- Common net income improved to $346 million from $193 million, chiefly as investment losses narrowed substantially and net investment income rose 46%. Operating income edged down, however, and underwriting income fell by more than half.
- The combined ratio deteriorated 4.1 points to 99.9%. Net adverse prior-year reserve development was $412 million, versus $26 million of favorable development in 2022; U.S. casualty and liability reserve strengthening was a major driver, with management citing inflation trends, emerging development patterns and new industry data.
- Net catastrophe and weather-related losses were $138 million, compared with $403 million in 2022. The 2023 amount was primarily attributed to Cyclone Gabrielle and other weather events.
- Insurance underwriting income declined to $261 million from $327 million, though its combined ratio remained profitable at 92.5%. Reinsurance recorded a $100 million underwriting loss versus $31 million of income; its combined ratio rose to 107.6% from 99.1%.
- AXIS continued running off catastrophe and property reinsurance exited in June 2022 and exited reinsurance aviation effective January 1, 2023. The reduction in reinsurance premiums also reflects portfolio repositioning and increased ceded reinsurance, including the Monarch Point Re arrangement.
- Fixed-maturity unrealized losses declined to $481 million from $857 million; accumulated other comprehensive loss improved to $366 million from $760 million. These valuation movements contributed to higher equity and book value.
Outlook, commentary, risks and unusual items
- Management expects positive rate movement to continue in traditional property and casualty classes, generally exceeding loss-cost trends, while professional-lines pricing remains challenging. It sees 2024 growth opportunities mainly in specialty and excess-and-surplus lines, and expects strong non-proportional reinsurance pricing to persist near term. Growth remains subject to underwriting discipline, risk limits and return requirements. The filing provides no specific numerical earnings or premium guidance.
- AXIS entered a casualty reinsurance retrocession agreement with Monarch Point Re, effective January 1, 2023 and signed September 22, 2023. It includes prospective and retroactive coverage. AXIS advanced Monarch Point Re $297 million during 2023; $225 million remained receivable at year-end, with a further $16 million commitment. The relationship includes related-party considerations because Stone Point, a co-sponsor, is connected to a Company director.
- Reorganization expenses were $29 million, mainly software impairments and severance for the “How We Work” program. The filing also reports $58 million of foreign-exchange losses, versus $158 million of gains in 2022.
- Bermuda enacted a corporate income tax effective for accounting periods beginning January 1, 2025. Management expects it likely to materially affect the future effective tax rate; the amount of the impact is not specified clearly in the filing.
- Principal risks include reserve uncertainty and social/economic inflation, catastrophe and climate exposure, cyber and geopolitical events, reinsurance counterparty credit, investment-market and interest-rate volatility, broker concentration, and regulatory or tax changes. Three brokers accounted for 38% of 2023 gross premiums written.
- Management stated that it expects comparable cash dividends in the foreseeable future, but future declarations remain subject to Board discretion, subsidiary capital needs, regulations and contractual restrictions. A $100 million share-repurchase authorization was renewed for 2024.
- The auditor issued an unqualified opinion on the financial statements and internal controls; the critical audit matter was loss and loss-expense reserves. No material legal proceedings outside the ordinary course were reported.
Important facts for investors to verify
- Reserve adequacy and further development in casualty, liability and professional-lines books, particularly given the $412 million adverse prior-year development and sensitivity of long-tail estimates.
- Monarch Point Re’s ability to meet obligations and repay the $225 million year-end loan, along with the terms and exposure under the retrocession agreement and remaining commitment.
- Whether the shift away from catastrophe and property reinsurance improves underwriting volatility without weakening profitable growth or leaving material run-off exposure.
- Liquidity available after restricted assets, subsidiary distribution limits and potential large claims; also review debt maturities and letter-of-credit capacity.
- The eventual effective-tax-rate impact of Bermuda’s 2025 corporate income tax and related international minimum-tax rules.