AXIS Re diversification: remediated book leaves open fields for growth
The lingering reinsurance arm of AXIS Capital has big growth ambitions across newish lines where it remains small as it continues to diversify its way into the AXIS profile of a focused specialty re/insurer, a top official has indicated.
“It is a vibrant market opportunity in the reinsurance space and the industry growth trajectory indicates that will continue,” AXIS Re CEO Ann Haugh told participants in her company's first investor day gathering in eleven years.
“AXIS Re is a small, but very meaningful player, with significant momentum to continue to increase our relevance, our footprint and our market position, particularly in the specialty lines.”
With major lines having been dropped and lower margin lines massively reduced, watch a handful of newer and smaller lines for more explosive growth, Haugh suggested. See agriculture, credit & surety, cyber, marine, structured credit, political risk and more.
But reinsurance doesn't everywhere sound like the group's growth foundation. Haugh led her presentation by calling reinsurance the “global strategic diversifier” for AXIS Capital as the group continues its bent towards specialty lines. And, it could even be an earnings stabiliser, with a vow to achieve a low 90's combined across the cycle amongst Haugh's key messages.
Credit & surety, agriculture and cyber were called out as fast moving lines relatively minor to date or new to AXIS Re where the group can jump on a high growth engine.
The global market for credit and surety has enjoyed 22% per annum growth since AXIS Re began the shake-down on its portfolio and leaves AXIS Re unrestricted growth opportunity vis-a-vis its current 2% market share.
Agriculture has 10% per annum growth globally “and will continue to growth driven by food insecurity and the need to close the protection gap.” AXIS' 1.7% market share likely leaves “ample opportunity to grow,” she said.
Cyber is “growing market opportunity” where AXIS feels it made a quick pivot to go from “very small” levels to nearly $100 million to end-2023 “and we are continuing to grow that portfolio in 2024.”
“We continue to increase our relevance by growing shares with existing cedants, by growing existing products in new geographies, by new products such as structured credit, political risk and our credit and surety team and by investing in new talent,” Haugh said.
A lot of that is growth into a vacuum created by massive portfolio remediation. The book has been through a major revolution, even above and beyond AXIS Capital's much-discussed full-scale evacuation of property cat reinsurance just ahead of the 2023 market reset, Haugh reminded.
Beyond the property cat exit, AXIS has killed off engineering and aviation reinsurance, then reduced what it considered lower margin business, after raising hurdle rates, by over 50%. North American exposures in the casualty book were cut 25-30% by end-Q1 2024, public D&O was hacked down and “very tight limits” became the law of the land.
That left a need for high growth trajectories from new niches. Haugh cited 21% compound annual growth in agriculture from 2021 to 2023, 15% in mortgage and 42% in credit and surety where a fresh team started in 2022 and will have doubled book to end-2024. Marine is under new leadership and suddenly has a nearly 20% increase in submission flow, Haugh claimed.
Casualty, now just over 1/3 of AXIS Re's $2.3 billion book, warrants a “cautious” approach due to much-discussed trends in courtroom trends, ceding commissions and more.
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