AM Best affirms rating of Axis Capital Holdings Ltd

AM Best has affirmed the financial strength rating and the long-term issuer credit ratings of Axis Capital Holdings Ltd’s operating subsidiaries, which was A (Excellent) and “a+” (Excellent) respectively.

The credit rating agency also affirmed its long-term ICR, which was “bbb+” (Good) as well as the indicative long-term issue credit ratings of the parent company. These ratings were affirmed for Axis Specialty Ltd, Axis Re SE, Axis Reinsurance Company, Axis Specialty Europe SE, Axis Surplus Insurance Company, and Axis Insurance Company.

“The group’s balance sheet strength assessment is supported by financial flexibility at the holding company level and within the operating subsidiaries, while also reflecting capital management strategies that have included consistent common and preferred dividends, as well as share repurchases,” the ratings agency stated.

It further said that in late 2023, the firm had strengthened the reserves on its casualty book following an evaluation and review of claims for accident years of 2017 to 2022, which were impacted by the higher social and economic inflation that was not anticipated.

“However, prior to 2023, Axis had reported favourable reserve development for about nine of the past ten years, testament to the company’s reserving controls efficiency. Financial leverage is elevated when compared with its peers but remains largely in line with the company’s expectations,” said AM Best.

AM Best rated the firm’s operating performance as adequate because its underwriting results over the last five years were volatile. However, it also said that the corrective measures that were implemented in the last two years in order to mitigate volatility like leaving the property-catastrophe reinsurance business led to more stable earnings.

“These changes have favourably impacted profitably measures with the group’s loss and combined ratios improving significantly,” said AM Best.

Axis’ business profile was also assessed as favourable because of how the group was consistently part of the credit rating agency’s Global Reinsurance 50 largest reinsurance enterprises as well as its excess and surplus ranking.

“The group’s ERM is sophisticated and embedded throughout the organisation. AM Best believes that Axis’ risk management is appropriate given its complex risk profile,” said the credit rating agency.

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