Moody's affirms Axis Capital's ratings with negative outlook
Dec 10, 2020
New York [US], December 10 : Moody's Investors Service has affirmed the ratings of Axis Capital Holdings and its subsidiaries, including the Baa1 guaranteed senior debt of its financing subsidiaries and the A2 insurance financial strength ratings of its principal operating subsidiaries.
The outlook for the ratings remains negative. According to Moody's, Axis Capital's ratings reflect its diversified mix of specialty insurance and re-insurance business, good historical operating returns, solid reserve position and high-quality investment portfolio.
These strengths are tempered by the company's low and volatile profitability, meaningful catastrophe exposures, higher financial leverage relative to some of its peers and the potential for reserve volatility arising from claims inflation in the firm's long-tail casualty lines.
The negative rating outlook reflects Moody's view that Axis Capital's profitability has been weak relative to its peers, reflecting elevated catastrophe losses (including coronavirus-related losses this year), as well as the underperformance of certain business lines, including its Lloyd's of London business.
While Axis Capital has taken steps to reduce catastrophe exposures, the company's earnings have been uneven and volatile. Axis Capital's financial leverage while lower also remains higher than Moody's expectations at the current rating level.
For the first nine months of 2020, Axis Capital reported a net loss attributable to common shareholders of USD 146 million and a combined ratio of 109.6 per cent, reflecting 17.5 points of catastrophe and coronavirus-related losses.
Although Axis Capital will likely report additional catastrophe losses during the fourth quarter, Moody's expects the firm's core profitability to benefit from the re-underwriting of its business over the past couple of years as well as higher pricing in both insurance and re-insurance.
Axis Capital has reported that pricing through the first nine months of 2020 has increased by 13 per cent in insurance and 8 per cent in re-insurance.
