AXIS CAPITAL HOLDINGS LIMITED The following is a discussion and analysis of our results of operations for the
three and nine months ended
Page
Third Quarter 2022 Financial Highlights 53
Overview 54
Consolidated Results of Operations 57
Results by Segment:
i) Insurance Segment 59
ii) Reinsurance Segment 63
Net Investment Income and Net Investment Gains (Losses) 68 Other Expenses (Revenues), Net
70
Financial Measures 72
Non-GAAP Financial Measures Reconciliation 74
Cash and Investments 77
Liquidity and Capital Resources 80
Critical Accounting Estimates 81
Recent Accounting Pronouncements 82
52
--------------------------------------------------------------------------------
Table of Contents
THIRD QUARTER 2022 FINANCIAL HIGHLIGHTS
Third Quarter 2022 Consolidated Results of Operations
•Net loss attributable to common shareholders of
•Operating income(1) of
•Gross premiums written of
•Net premiums written of
•Net premiums earned of
•Pre-tax catastrophe and weather-related losses, net of reinsurance and
reinstatement premiums, of
•Net favorable prior year reserve development of
•Underwriting loss(2) of
•Net investment income of
•Net investment losses of
•Foreign exchange gains of
Third Quarter 2022 Consolidated Financial Condition
•Total cash and investments of
•Total assets of
•Reserve for losses and loss expenses of
•Debt of
•Common shareholders' equity of
(1)Operating income (loss) and operating income (loss) per diluted common share
are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K.
The reconciliations to the most comparable GAAP financial measures, net income
(loss) available (attributable) to common shareholders and earnings (loss) per
diluted common share, respectively, and a discussion of the rationale for the
presentation of these items are provided in 'Management's Discussion and
Analysis of Financial Condition and Results of Operations - Non-GAAP Financial
Measures Reconciliation'.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as
defined in Item 10(e) of SEC Regulation S-K. The reconciliation to, the most
comparable GAAP financial measure, net income (loss), is presented in
'Management's Discussion and Analysis of Financial Condition and Results of
Operations - Consolidated Results of Operations', and a discussion of the
rationale for its presentation is provided in 'Management's Discussion and
Analysis of Financial Condition and Results of Operations - Non-GAAP Financial
Measures Reconciliation'.
(3)The debt to total capital ratio is calculated by dividing debt by total
capital. Total capital represents the sum of total shareholders' equity and
debt.
53
--------------------------------------------------------------------------------
Table of Contents OVERVIEW Business Overview
We provide our clients and distribution partners with a broad range of risk transfer products and services, and meaningful capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service, intelligent risk taking and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first nine months of 2022 included the following:
•increasing our relevance in a select number of attractive specialty lines
insurance and treaty reinsurance markets including
•re-balancing our portfolio towards less volatile lines of business that carry attractive returns while deploying capital with risk limits, diversification and risk management;
•continuing the implementation of a focused distribution strategy while building mutually beneficial relationships with clients and partners;
•improving the effectiveness and efficiency of our operating platforms and processes;
•investing in data and technology capabilities, and tools to empower our underwriters and enhance the service that we provide to our customers;
•utilizing reinsurance markets and third party capital relationships;
•fostering a positive workplace environment that enables us to attract, retain and develop top talent; and
•growing our corporate citizenship program to give back to our communities and help contribute to a more sustainable future.
54--------------------------------------------------------------------------------
Table of Contents
Outlook
We are committed to leadership in specialty insurance and reinsurance, where we have a depth of talent and expertise. We believe our market positioning, underwriting expertise, best-in-class claims management capabilities and strong relationships with our distributors and clients will provide opportunities for increased profitability, with differences among our lines of business driven by our tactical response to market conditions.
Rates, terms and conditions across virtually all insurance lines continued to be favorable as pricing generally continues to rise, albeit at moderated levels. The industry has observed rising loss cost trends and we expect rate improvement to continue as carriers assess the impact of heightened catastrophe loss activity, financial and social inflation, and geopolitical uncertainty, among other factors. In this market environment, we continue to focus on growth in lines of business and market segments that are adequately priced.
The reinsurance market is experiencing improvements in rates, and terms and conditions. In light of 2022 marking the sixth consecutive year of challenging market loss events, reinsurance carriers are aiming to reduce net volatility and increase profitability, and we expect the hardest market opportunities to be catastrophe and property lines, with improving conditions in specialty and casualty reinsurance lines. While we anticipate pricing to be higher for our own reinsurance purchases, we also expect to see opportunity to drive profitable growth among the specialty and casualty reinsurance lines that we offer.
We are encouraged by the pricing improvements we are seeing across most markets, which we expect will carry through 2023. Where prices deliver adequate profitability, we will look to grow within our risk and volatility guidelines. We believe AXIS is well positioned to drive profitable growth within the current environment with a strengthened book of business, and growing footprint in attractive specialty markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.
Response to Russia-Ukraine War
Following the Russian invasion of
The
Our team is tracking the situation closely, including stress and scenario testing on existing underwriting exposures. A range of economic impacts and external pressures across individual product lines are being considered.
Underwriting
We are monitoring international sanctions which impact our global operations and
were effective
We are also closely monitoring cash due from our customers and reinsurers,
giving due consideration to the
Reserving
At
The estimate of net reserves for losses and loss expenses related to the
55
--------------------------------------------------------------------------------
Table of Contents
While we believe the overall estimate of net reserves for losses and loss
expenses is adequate for losses and loss adjustment expenses that have been
incurred at
Actual losses for this event may ultimately differ materially from current estimates.
Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations - Results by Segment' for further information
Investments
At
Refer to Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K for further information.
Recent Developments
On
56--------------------------------------------------------------------------------
Table of Contents
© Edgar Online, source
