Q2 combined ratio up 5.3 points at Axis Capital

Reinsurance provider and commercial specialty carrier Axis Capital Holdings Ltd. reported Tuesday its financial results for the second quarter, reporting a 76% increase in net income but a combined ratio of 102.2%, after large losses including the Alberta wildfires and the earthquake in April in Ecuador.

Pembroke, Bermuda-based Axis Capital has an office in Toronto. It writes both commercial specialty and reinsurance. Primary insurance lines include professional lines, property, marine, liability, terrorism, aviation and credit and political risk. Reinsurance coverages include property, catastrophe, professional lines, credit and surety, motor and agriculture.

Company wide, Axis Capital reported underwriting income of $9.86 million in the three months ending June 30, 2016, down 83% from $56.848 million in Q2 2015.

All figures are in United States dollars.

“During the quarter, we were tested by 20 catastrophe and weather events globally generating estimated insured losses in excess of $19 billion – amongst the highest industry loss quarters in the last decade,” president and chief executive officer Albert Benchimol said in a release.

During the second quarter, Axis Capital estimated its catastrophe and weather-related pre-tax net losses, net of reinstatement premiums, at $104 million. Of that, $41 million was in primary insurance and $63 million was in reinsurance. Those losses included the wildfires that started in May near Fort McMurray, Alberta, as well as “U.S. weather-related events, Japanese and Ecuadorian earthquakes and European floods.”

Loss and loss expenses were $632.2 million in the most recent quarter, up 9% from $580.153 million during the same three months of 2015.

The net loss and loss expense ratio deteriorated 5.2 points, from 61.6% in Q2 2015 to 66.8% in the latest quarter. The combined ratio was up 5.3 points, from 96.9% in Q2 2015 to 102.2% in the Q2  2016.

Axis Capital ranked 16th, on a list compiled by A.M. Best Company Inc., of global reinsurance groups. In its segment review released Sept. 2, 2015, A.M. Best ranked the reinsurance groups by gross written premiums, in 2014, in both life and non-life reinsurance. Axis Capital would have placed 13th if ranked by non-life gross written premiums in reinsurance. A.M. Best counts the Lloyd’s market as one global reinsurance group. Axis Capital ranked behind Mapfre in total reinsurance gross written premiums, though Axis Capital recorded more non-life gross written premiums than Mapfre in 2014. Axis Capital also ranked behind Reinsurance Group of America Inc. and Winnipeg-based Great West Lifeco Inc. neither of which wrote non-life reinsurance in 2014.

In 2015, Axis Capital reached a tentative agreement to merge with PartnerRe Ltd., which also has a Toronto office and is based in Pembroke, Bermuda. However, PartnerRe ended up being acquired instead by Turin, Italy-based EXOR S.p.A., an investment firm whose other holdings include significant minority stakes in Fiat Chrysler Automobile and the CNH Industrial, which makes Case and New Holland heavy equipment as well as power trains.

In the latest quarter, Axis Capital reported Tuesday that net premiums earned were up 0.6%, from $941 million in Q2 2015 to $947 million in Q2 2016.

Net income increased 76%, from $73.37 million in Q2 2015 to $129.46 million in the most recent quarter.

Net premiums earned in the latest quarter were $439 million in insurance and $507.7 million in reinsurance.

In reinsurance, Q2 net premiums earned were up 4% year-over-year (8% on a constant currency basis) “primarily driven by strong growth in business written” in liability, marine and other and catastrophe lines in recent periods, Axis Capital reported. This was “partially offset by a decrease in business written in our property lines as well as an increase in the premiums ceded, reflecting retrocessional covers purchased largely in our catastrophe and property lines.”

In primary insurance, Q2 net premiums earned dropped 3% (1% on a constant currency basis) “largely driven by a reduction in premiums written” in marine and professional lines, “as well as increases in our professional lines’ ceded reinsurance programs, partially offset by growth in premiums written in recent periods, mainly in our accident and health lines,” Axis Capital said in a release.