Fitch Rates AXIS’s Preferred Securities
Fitch Ratings has assigned a BBB rating to the $200 million of Series D Preferred Shares expected to be issued by Bermuda-based AXIS Capital Holdings, Limited.
On May 13, 2013, AXIS Capital announced that it had priced an offering for $200 million of 5.5 percent Series D Preferred Shares.
The company has also granted the underwriters a 30-day option to purchase up to an additional $30 million of Series D Preferred Shares solely to cover over-allotments, if any.
The offering is expected to close on May 20, 2013.
A portion of the proceeds from the Series D Preferred Shares will be used to redeem all outstanding Series A Preferred Shares, which have a liquidation value of $100 million.
The remaining proceeds will be used for general corporate purposes, which may include common stock repurchases.
Fitch said its ratings reflect AXIS Capital’s “solid history of underwriting results, strong capitalization, and conservative investment profile and reserving practices. Offsetting factors include the company’s significant catastrophe exposure.”
The ratings agency’s analysts said AXIS Capital’s financial leverage was “moderate” at 14.8 percent as of March 31, 2013. Given that its preferred shares receive 100 percent equity credit, financial leverage remains unchanged assuming the remaining proceeds are used for share repurchases.
Fixed charge coverage was strong at 11.9x during the first quarter of 2013, up from 4.8x for the full year 2012.
Fitch said: “This issuance also has a negligible impact on the company’s fixed charge coverage since a portion of the proceeds will be used to redeem higher coupon preferred shares.”
Key rating triggers that may lead to a downgrade include a significant loss of capital resulting from a major catastrophic event that is worse than expectations or industry and peer company results; an inability to raise capital following a loss event; a deterioration in underwriting results that underperform peers; GAAP fixed charge coverage [including preferred dividends] below 7.0x for a sustained period; an increase in operating leverage above a 1.0x net written premiums-to-equity ratio; significant reserve deficiencies; or financial leverage above 25 percent.
Fitch said key rating triggers that may lead to an upgrade include a significant increase in surplus and reduced exposure to catastrophe losses. However, given publicly traded companies’ sensitivity around managing capital, Fitch views this level of overcapitalization as unlikely.
AXIS Capital is the Bermuda-based holding company of the AXIS group of companies. AXIS Capital provides specialty insurance and reinsurance on a worldwide basis through operating subsidiaries and branch networks based in Bermuda, the United States, Europe, Singapore, Canada and Australia, as well as a representative office in Brazil.
Fitch has assigned the following rating:
- AXIS Capital Holdings, Ltd. –Series D 5.5 percent preferred securities BBB.
Fitch took no action on the following ratings:
- AXIS Capital Holdings, Ltd. –IDR A;
- 5.75 percent senior debt rating A-;
- Series A 7.25 percent preferred securities rating BBB;
- Series B 7.5 percent preferred securities rating BBB;
- Series C 6.875 percent preferred securities rating BBB;
- AXIS Specialty Finance LLC –5.875 percent senior debt rating A-
- AXIS Specialty Limited [Bermuda], AXIS Reinsurance Company, AXIS Insurance Company, AXIS Surplus Insurance Company AXIS Specialty Insurance Company –Insurer Financial Strength ratings A+
