AXIS cuts the cats: Reinsurance cat loss down 7.7 pps, premium down 17%

Re/insurer  AXIS Capital managed moderate 4% GWP gain in the third quarter even as reinsurance segment premium fell a hefty 17% on the group's move away from property cat.

While the demise of property cat in the group pushed down overall loss ratios, attritional losses were up, investment earnings fell well short of the prior year mark, including on FX, and the group ended up swinging to Q3 attributable net loss of $17 million.

For the group as a whole, Q3 gross written premiums grew by 4% or $61 million to $1.7 billion, balancing gains in primary insurance against reduced reinsurance premium where AXIS is evacuating from property cat.

"For AXIS, the third quarter provides further validation of our strategic evolution to focus our portfolio on specialty, as well as reduce our exposure to catastrophes and strengthen our underlying operations," CEO Albert Benchimol said.

"Our reinsurance business has demonstrated the benefits of its lower property cat exposure with a manageable loss for the quarter and an improved underwriting result for the nine-month period," he said.

A 17% decline in reinsurance segment premium (16% in constant currency) followed that June 2022 decision to drop property cat, partially offset by the agricultural business on both new business and skewed timing against the prior year.

But the strategy was also visible in reduced claims. Current-year catastrophe and weather-related loss ratio of 20.3% was 7.7 percentage points (pps) below the prior year period reading. The $99 million in Q3 pre-tax cat losses, was down from $135 million in Q3 2021, and attributed primarily to Hurricane Ian and a $23 million increase in the estimate on June convective storms.

Attritional losses were higher by 2.8 pps of premium on the change in business mix and prior year adjustments proved less than half as supportive than the prior year period. In sum, 4.3 pps came out of the net loss and loss adjustment ratio.

For the reinsurance bottom line, mark the combined ratio down 2.7 percentage points to a fractional technical profit at 99.1%.

Primary insurance enjoyed a 12% or $141 million increase in gross written premium primarily as rising rate drove increases in liability, professional lines and marine lines while new business was garnered in accident and health, and credit and political risk.

Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, were $113 million, above the prior year but still mild enough to get a fractional 0.9 pps decline in the current year cat loss ratio.

The primary segment combined ratio ended down a milder 0.5 pps to 98% after a rise in attritional loss. Management called out elevated experience in marine and property lines and the impact of a business mix shifting into professional lines and liability.

Combine the segment performance, and the group cut 3.1 percentage points from its combined ratio to 104.3% on a 4.1 pps decline in the current year cat loss ratio, a 1.7 pps on current year ex-cats and a halving of the favourable prior period development.

The Q3 attributable net loss pares the 9M tally to $151.9 million, some 61% below the prior year period take.

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