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AC

AXIS CAPITAL HOLDINGS LTD (AXS)·Q1 2025 Earnings Summary

Executive Summary

  • Operating EPS beat but top-line missed: Operating EPS was $3.17 vs S&P Global consensus $2.69 (beat ~$0.48), while total revenues were $1.52B vs $1.83B consensus (miss ~$0.31B). The quarter delivered a 90.2% combined ratio and 19.2% operating ROACE, driven by 24% growth in net investment income and expense leverage, despite California wildfire losses adding 2.4 pts of CAT to the loss ratio . Estimates marked with * are from S&P Global.
  • Mix/quality trended favorable: Gross premiums written rose 5% to $2.79B and net premiums earned rose 6.6% to $1.34B; CAT/wx losses were 3.7 pts (vs 1.5 pts LY) and prior-year development released 1.4 pts, yielding a 90.2% combined ratio (↓0.9 pts YoY) .
  • Insurance strong; reinsurance steady: Insurance combined ratio was 86.7% on record Q1 production ($1.66B GWP), while Reinsurance ran 92.3% on $1.14B GWP; management highlighted selective property growth amid rate competition and sustained double-digit liability pricing momentum .
  • Capital actions and reserve de-risking: AXIS completed a 75% loss portfolio transfer of ~$3.1B reinsurance reserves with Enstar (finished Apr 24), and repurchased $440M in shares in Q1 with $160M authorization remaining at 3/31; dividends held at $0.44 .
  • Potential stock catalysts: Sustained operating EPS outperformance and expense ratio trajectory (target ≤11% by 2026), execution on selective property/short-tail growth, and clarity on tax rate (high-teens) and LPT capital redeployment may drive estimate revisions and narrative momentum .

What Went Well and What Went Wrong

  • What Went Well

    • Operating earnings quality and book value compounding: Operating EPS hit a company-high $3.17 with 19.2% operating ROACE; diluted BVPS reached a record $66.48, up 16.4% YoY .
    • Expense leverage and investment income: G&A ratio fell 1.1 pts YoY to 11.9% on “How We Work” gains; net investment income rose 24% to $208M on higher yields/alternatives and cash balances ahead of the LPT .
    • Segment execution: Insurance posted an 86.7% combined ratio and all-time high Q1 underwriting income ($135M), with E&S and new offerings (surety/environmental/Ocean Marine) contributing; Reinsurance remained disciplined with 92.3% CR and ~5% GWP growth .

  • What Went Wrong

    • Revenue miss: Total revenues of $1.52B missed S&P consensus $1.83B, reflecting net investment losses (-$30M) and FX losses ($57M) overshadowing underwriting/investment income strength .
    • CAT intensity YoY: CAT/wx ratio rose to 3.7 pts (vs 1.5 pts LY), including ~$32M tied to California wildfires; CAT load lifted the current accident year loss ratio by 2.1 pts YoY .
    • Property rate pressure and cautious reinsurance loss picks: Property pricing fell ~7% in the quarter, especially in Global Markets/London; management raised reinsurance short‑tail loss picks out of caution, signaling prudence amid uncertainty .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$1,424.6 $1,610.8 $1,471.8 (computed from components) $1,522.1
Operating EPS ($)$2.57 $2.71 $2.97 $3.17
Diluted EPS ($)$4.53 $2.04 $3.38 $2.26
Combined Ratio (%)91.1% 93.1% 94.2% 90.2%
Net Premiums Earned ($USD Millions)$1,258.0 $1,366.7 $1,377.0 $1,340.8
Net Investment Income ($USD Millions)$167.4 $205.1 $195.8 $207.7

Segment performance (selected):

  • Insurance (CR, Underwriting Income, NPE):
    • Q1 2024: 86.6%, $123.0M, $917.9M
    • Q4 2024: 91.2%, $90.4M, $1,026.0M
    • Q1 2025: 86.7%, $134.5M, $1,010.1M
  • Reinsurance (CR, Underwriting Income, NPE):
    • Q1 2024: 95.8%, $22.7M, $340.1M
    • Q4 2024: 90.9%, $39.1M, $351.0M
    • Q1 2025: 92.3%, $28.9M, $330.7M

KPIs and drivers:

  • CAT & weather losses: $49.1M (3.7 pts), including ~$32M from California wildfires .
  • Prior-year reserve development: +$17.9M (1.4 pts) .
  • Current accident-year loss ratio ex-CAT: 56.3% .
  • G&A ratio: 11.9% (↓1.1 pts YoY) .
  • Operating ROACE: 19.2% .
  • Book value per diluted common share: $66.48 (↑16.4% YoY) .

Note: Q4 2024 total revenues computed as net premiums earned + net investment income + net investment gains (losses) + other insurance related income from .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective tax rateFY2025N/A for 2025 (2024 ex-items ~13.8%) High-teens effective tax rate; Bermuda now 15% CIT New (higher vs 2024)
G&A ratio targetFY2026≤11% by 2026 On track; Q1’25 ratio 11.9% normalized Maintained
Share repurchase authorizationOngoingPrior $300M program exhausted New $400M program (Feb 19); $160M remaining at Mar 31 Raised
Common dividendQuarterly$0.44 per share $0.44 per share declared (Apr 17 payable) Maintained
Reinsurance loss picks2025N/AMore cautious short‑tail assumptions; expect stability with prudence Tightened
Investment income outlook2025Positive/stable Favorable outlook; market yield 5.2% > 4.5% book yield Maintained positive

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24, Q4’24)Current Period (Q1’25)Trend
AI/technology and operating model“How We Work” drove 90 bps GA ratio improvement in 2024 Investing in data, technology and AI; lower middle market growth propelled by tech/AI Improving
Property pricing/competitionIncreasing competition in global property; selective growth Property rate -7% q/q; competition strongest in London/Global Markets; selective growth Pressured
Liability pricing momentumDouble-digit liability rate increases persisted in 2024 Liability +13.5%; US excess casualty +16%; primary casualty +21% Strong
Cyber strategyRemediating delegated portfolio; Elpha Secure partnership Remediation continuing through Q3; reinsurance cyber +29%; Elpha Secure driving LMM Executing
Reinsurance underwriting stanceProfitable/low-volatility focus; cautious on liability 92.3% CR; more cautious short‑tail loss picks; steady profit expected Steady, cautious
Macro/tariffsNoted market uncertainties Q4 Tariffs could lift loss costs (property/cargo) and affect growth; monitoring Watchful
Capital actionsBuybacks and ILS fees supporting results $440M repurchases (two block trades); $160M remaining auth; LPT completed Active

Management Commentary

  • CEO Vince Tizzio: “Operating return-on-equity of 19.2% and record-level book value per diluted common share of $66.48… 90.2% combined ratio during an active quarter for natural catastrophes including wildfires. In the quarter, AXIS’ share of industry catastrophe losses was 0.09%.”
  • CEO Vince Tizzio: “Property competition is increasing… we evidenced a negative 7% rate change… in liability, pricing momentum is being sustained at elevated levels, achieving a 13.5% rate increase… excess casualty +16%; primary casualty +21%.”
  • CFO Pete Vogt: “Consolidated G&A expense ratio, including corporate, was 11.9%, down from 13% a year ago… we remain on track to achieve our better than 11% target for 2026.”
  • CFO Pete Vogt: “We had a very good quarter for investment income at $208 million, up 24%… market yield of 5.2% is above the 4.5% book yield… outlook remains favorable.”

Q&A Highlights

  • Property pricing trajectory: Management cited a -7.1% rate change, with pressures concentrated in Global Markets/London; terms/limits unchanged; US E&S moderation less severe .
  • Growth outlook: Net written premium growth for 2025 viewed as mid- to high-single-digit excluding one-offs (cyber/Pet ceded treaty shifts); submission growth >20% in North America .
  • Expense run-rate: 11.9% G&A in Q1 seen as normalized; first quarter typically highest; pathway to ≤11% 2026 reiterated .
  • Reinsurance loss picks: Short‑tail picks moved up “in an abundance of caution”; 68.4% underlying LR a reasonable run-rate; no notable aviation losses .
  • Buybacks: $440M repurchases included $400M via two negotiated block trades; $160M authorization remaining; opportunistic approach maintained .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
Operating EPS – Actual ($)2.712.973.17
Operating EPS – Consensus Mean ($)*2.542.582.69
EPS SurpriseBeatBeatBeat
Revenue – Actual ($USD Billions)1.611.471.52
Revenue – Consensus Mean ($USD Billions)*1.141.191.83
Revenue SurpriseBeatBeatMiss

Asterisk (*) denotes values retrieved from S&P Global.
Sources for actuals: Q3’24 PR ; Q4’24 components ; Q1’25 8‑K . EPS actuals reflect operating EPS as reported .

Key Takeaways for Investors

  • Quality beat on operating EPS with resilient underwriting and expense leverage; revenue miss was driven by market-sensitive items (investment/FX), not core underwriting deterioration .
  • Property rate pressure warrants watch, but AXIS is pivoting selectively and leaning into lines with sustained pricing power (liability, short-tail specialty) .
  • Expense ratio trajectory and technology/AI investments support multi‑year margin expansion and capital‑light growth (notably in wholesale lower middle market) .
  • Reinsurance remains steady yet conservative—more cautious loss picks should reduce downside dispersion while preserving profitability .
  • Capital deployment is shareholder-friendly (LPT de-risking, sizeable repurchases, steady dividend), with $160M buyback capacity at quarter-end and scope to redeploy LPT-related capital prudently .
  • Near-term trading: Positive on estimate revisions for operating EPS; monitor street revenue frameworks given investment and FX volatility.
  • Medium-term thesis: Specialty underwriting focus, disciplined risk selection, and operating efficiency create a path for sustained ROE > mid-teens through the cycle .