A.M. Best Revises Outlooks For AXIS Capital

February 20, 2018

A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A+ [Superior] and the Long-Term Issuer Credit Ratings [Long-Term ICR] of “aa-” of the operating subsidiaries of Bermuda-based AXIS Capital Holdings.

Additionally, A.M. Best has revised the outlook to negative from stable and affirmed the Long-Term ICR of “a-” and the existing Long-Term Issue Credit Ratings [Long-Term IR] of AXIS Capital Holdings.

A statement from the ratings agency said, “The ratings reflect AXIS’ balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management [ERM] from the group’s risk profile.

“The revised outlooks are based on unfavorable trends in the group’s operating performance, particularly from AXIS’ insurance segment. Historically, AXIS’ operating performance ranks among the top of its peer group; however, in recent years these results have trended toward the middle of its cohort.

“The group’s combined ratio run rate has trended higher, giving AXIS a smaller cushion to absorb shock-losses. Additionally, AXIS’ Accident & Health segment’s organic build-out has contributed to a higher expense ratio and the group is yet to fully realize the benefit. While AXIS has taken measures to address these trends, the current challenging market conditions could impede its effectiveness.

“AXIS’ levels of risk-adjusted capitalization remain in the strongest category, even under stress scenarios. The group’s balance sheet assessment also benefits from a favorable amount of financial flexibility and fungibility of capital within operating subsidiaries, but also reflects capital management strategies that have involved consistent common and preferred dividends, as well as share repurchases. AXIS’ financial leverage metrics are elevated when compared with prior years, but this is a largely temporary position due to the timing of refinancing maturing senior notes.

“A.M. Best views AXIS’ business profile as favorable and the group consistently ranks in the top half of A.M. Best’s Global Reinsurance Top 50 while also maintaining a well-regarded profile as a specialty writer capable of underwriting complex risks. The group’s ERM is sophisticated and embedded throughout the organization. A.M. Best believes that AXIS’ risk management is appropriate given its complex risk profile.”

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