AXIS Capital Holdings Limited — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. AXIS Capital is a global specialty insurance and reinsurance underwriter with Insurance and Reinsurance segments. Dollar amounts below are in U.S. dollars.
Financial results and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $1.425 billion | $1.344 billion; up 6% |
| Net premiums earned | $1.258 billion | $1.230 billion; up 2% |
| Net investment income | $167 million | $134 million; up 25% |
| Net investment gains (losses) | $(9) million | $(20) million |
| Net income | $395 million | $180 million |
| Net income available to common shareholders | $388 million; $4.57 per share, $4.53 diluted | $173 million; $2.03 per share, $2.01 diluted |
| Operating income (non-GAAP) | $220 million; $2.57 per diluted share | $200 million; $2.33 per diluted share |
| Cash from operations | $384 million | $241 million |
| Combined ratio | 91.1% | 90.9% |
Q1 included a $125 million income tax benefit, principally reflecting a $163 million net deferred tax benefit associated with Bermuda’s new 15% corporate income tax regime. The filing excludes this item from operating income. Without treating the tax benefit as recurring, operating income offers a different view of period performance.
Cash and investments totaled $16.8 billion. Cash, cash equivalents and restricted cash were $1.842 billion at quarter-end, including $698 million restricted. Total assets were $31.8 billion; total liabilities were $26.3 billion; shareholders’ equity was $5.5 billion, including $5.0 billion of common equity. Debt was $1.314 billion, and debt to total capital was 19.3%, down from 20.0% at year-end 2023. The loss reserve was $16.6 billion, with $7.0 billion of reinsurance recoverables on paid and unpaid losses.
Book value per diluted common share was $57.13, compared with $50.31 a year earlier. Q1 common dividends declared were $0.44 per share. The company repurchased 1.3 million shares for $76 million, including $62 million under its authorized program.
Material changes and segment performance
- Premium growth: Gross premiums written rose 11% to $2.654 billion; net premiums written rose 7% to $1.722 billion. Insurance net premiums earned increased 12% to $918 million, while Reinsurance net premiums earned fell 18% to $340 million.
- Insurance: Underwriting income increased to $123 million from $103 million; the combined ratio improved to 86.6% from 87.3%. Growth in property, marine and aviation, and accident and health contributed to higher earned premiums.
- Reinsurance: Underwriting income declined to $23 million from $36 million; the combined ratio worsened to 95.8% from 91.4%. Net earned premiums fell, while the current accident-year loss ratio excluding catastrophe losses increased to 68.0% from 63.0%. Management cited elevated marine and aviation losses and business-mix changes.
- Underwriting overall: Underwriting income was $146 million versus $139 million. The loss ratio improved to 57.9% from 58.6%, but the acquisition cost ratio increased to 20.2% from 18.7%, leaving the combined ratio slightly higher.
- Investment and equity marks: Net investment income benefited from higher fixed-maturity yields. However, other comprehensive income was a $46 million loss, including a $37 million after-tax loss on available-for-sale investments. Net unrealized fixed-maturity losses increased to $445 million from $400 million at year-end.
- Reserves and catastrophe losses: There was no net prior-year reserve development in Q1 2024, compared with $4 million favorable development in Q1 2023. Catastrophe and weather-related losses, net of reinsurance, were $20 million versus $38 million.
Outlook, commentary and risks
Management said pricing remains attractive across most business lines, with rate movement expected to remain slightly positive and above loss-cost trends, although pricing momentum may slow. It expects favorable conditions in non-proportional reinsurance and continued opportunities from dislocation in the U.S. admitted market. The company intends to pursue disciplined, targeted growth within its risk and volatility guidelines. No quantitative earnings or premium guidance was provided.
The $12 million of reorganization expenses primarily related to severance under the “How We Work” program to simplify operations. The company expects increased Bermuda taxes beginning in 2025 and expects to use the deferred tax asset mainly over approximately 10 years. Management stated operating cash generation and portfolio liquidity should cover cash outflows and contractual commitments for the foreseeable future.
Principal risks include catastrophe severity and climate-related exposures, social and economic inflation, reserve-estimation uncertainty, reinsurance recoverability and counterparty credit, pricing-cycle changes, investment-market and interest-rate movements, commercial real estate conditions, foreign-exchange exposure, liquidity, and regulatory or tax changes. Management reported no material change in previously disclosed risk factors or market-risk disclosures, other than updated foreign-currency exposure. It reported no material legal proceedings outside the ordinary course and concluded disclosure controls were effective.
Important facts for investors to verify
- How much of reported net income and EPS growth reflects the one-time Bermuda deferred tax benefit, versus underlying operating performance.
- Whether the deterioration in Reinsurance loss and acquisition-cost ratios persists, particularly in casualty, marine and aviation, and after retrocession effects.
- Reserve adequacy and the collectability and credit quality of reinsurance recoverables; the filing notes that actual catastrophe and other claims may differ materially from estimates.
- Exposure to investment valuation and liquidity risk: fixed-maturity unrealized losses, below-investment-grade holdings, commercial mortgage loans, and private funds valued using lagged NAVs.
- Capital deployment, including share repurchases, the remaining authorization, and the impact of the 2025 Bermuda tax regime on future cash taxes and earnings.