S&P rewards AXIS for strategic changes post Novae deal

S&P Global Ratings has rewarded strategic changes made by AXIS Capital, which include reducing its exposure to legacy liabilities generated by the Novae Group, by revising its outlook on the company’s ratings to stable from negative.

The rating agency affirmed its 'A-' long-term issuer credit and senior debt ratings on Bermuda-based AXIS Capital. In addition, it affirmed its 'A+' long-term issuer credit and financial strength ratings on AXIS' core operating subsidiaries.

S&P said its outlook revision and ratings affirmation reflect S&P Global Ratings' view that AXIS' capital management and implementation of its various strategic initiatives are bearing fruit and will help rebuild the company's capital adequacy redundancy at the 'AAA' confidence level by year-end 2019, based on S&P Global Ratings' risk-adjusted capital model.

In 2017, AXIS' capitalization deteriorated due to the Novae Group acquisition and the deficiency at the 'AAA' level was exacerbated by catastrophe losses in the second half of the year. As a result, AXIS stopped its share buybacks, and 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, US retail property, and excess casualty lines.

In addition, AXIS has materially reduced its exposure to Novae's legacy liabilities by ceding $819 million of reserves associated with 2015 and prior underwriting years to Enstar Group, a Bermuda-based runoff specialist.

“Furthermore, we expect AXIS to realize about $100 million in expense savings per year prospectively, because of the Novae integration and additional corporate cost synergies,” S&P said.

“We continue to view AXIS' business risk profile as strong, supported by a strong competitive position underpinned by a broad product offering, diverse geographic footprint, and a focus on specialty coverage, through its dual platform including insurance and reinsurance.”

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