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AC

AXIS CAPITAL HOLDINGS LTD (AXS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered strong profitability: net income to common shareholders of $286.1M ($3.38 diluted EPS), operating income of $252.0M ($2.97 diluted operating EPS), and a 94.2% combined ratio; book value per diluted share rose to $65.27 .
  • Insurance segment combined ratio was 91.2% with $1.70B GWP (+7% YoY) and $90.4M underwriting income; Reinsurance posted a 90.9% combined ratio with $275.0M GWP (+37% YoY) and $39.1M underwriting income, reflecting consistent execution across both segments .
  • Catastrophe losses were manageable (5.9 pts; $81M pre-tax, $64M after-tax) despite Hurricane Milton; prior-year development favorable at $16M vs large adverse development in Q4’23, highlighting reserve normalization and reduced volatility .
  • Management reaffirmed the 11% G&A ratio target by 2026 and indicated a 2025 effective tax rate in the high teens; capital return remains active with $200M remaining repurchase authorization and quarterly dividend of $0.44 per share .
  • Wall Street consensus (S&P Global) estimates for Q4 2024 EPS and revenue were unavailable during this session; comparison to estimates could not be made.

What Went Well and What Went Wrong

What Went Well

  • Insurance underwriting: 91.2% combined ratio with $90.4M underwriting income; GWP up 7% YoY driven by property, A&H, and credit/political risk, supported by disciplined risk selection and premium adequacy .
  • Reinsurance profitability and growth: 90.9% combined ratio; GWP up 37% YoY with growth in A&H and professional lines and improved ceding commissions; segment delivered consistent quarterly profits across 2024 .
  • Management execution and operating model: Reinforced “How We Work” transformation, investing in technology/data/AI and talent to enhance productivity and underwriting; CEO emphasized “excellent year” and specialty underwriting leadership .

What Went Wrong

  • Higher cat load: Cat & weather losses rose to 5.9 pts (vs 2.1 pts in Q4’23), largely from Hurricane Milton; pressured current accident year combined ratio (95.4%) vs prior year .
  • Reinsurance core loss ratio: Accident year ex-cat remains elevated in reinsurance (66.0%), reflecting cautious stance in liability lines and competitive dynamics; management stayed selective and non-renewed certain cedents .
  • G&A ratio ticked up sequentially to 13.7% (from 12.1% in Q3), driven by variable compensation accruals; management reiterated trajectory to 11% by 2026 .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Premiums Earned ($USD Millions)$1,265.3 $1,366.7 $1,377.0
Total Revenues ($USD Millions)$1,481.3 $1,610.8 $1,471.8
Net Income to Common ($USD Millions)$(150.1) $173.2 $286.1
Diluted EPS ($)$(1.76) $2.04 $3.38
Operating EPS ($)$(1.25) $2.71 $2.97
Combined Ratio (%)124.6% 93.1% 94.2%
Accident Year Combined Ratio ex-cat (%)88.9% 87.9% 89.5%
Cat & Weather Loss Ratio (%)2.1% 5.8% 5.9%
Net Investment Income ($USD Millions)$186.9 $205.1 $195.8
Book Value per Diluted Share ($)$54.06 $64.65 $65.27

Segment breakdown:

Segment MetricQ4 2023Q3 2024Q4 2024
Insurance GWP ($USD Millions)$1,583.4 $1,526.7 $1,700.3
Insurance NPE ($USD Millions)$916.8 $1,023.9 $1,026.0
Insurance Underwriting Income ($USD Millions)$(61.7) $98.8 $90.4
Insurance Combined Ratio (%)106.7% 90.4% 91.2%
Reinsurance GWP ($USD Millions)$200.9 $409.2 $275.0
Reinsurance NPE ($USD Millions)$348.5 $342.9 $351.0
Reinsurance Underwriting Income ($USD Millions)$(212.4) $36.4 $39.1
Reinsurance Combined Ratio (%)162.8% 91.4% 90.9%

KPIs:

KPIQ4 2023Q3 2024Q4 2024
Net Losses & Loss Expenses Ratio (%)91.1% 60.9% 60.4%
Acquisition Cost Ratio (%)20.1% 20.1% 20.1%
G&A Expense Ratio (%)13.4% 12.1% 13.7%
Prior-Year Reserve Development Ratio (%)33.6% (0.6%) (1.2%)
Annualized ROACE (%)(13.1%) 13.0% 20.7%
Annualized Operating ROACE (%)(9.3%) 17.3% 18.2%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
G&A Ratio TargetFY 202611% target (Investor Day) 11% target reaffirmed; on track Maintained
Effective Tax RateFY 2025~14% excl. Bermuda DTA (FY’24 reference) “High teens” expected in 2025 Raised
Share Repurchase AuthorizationOngoing$260M remaining at 9/30/24 $200M remaining at 12/31/24 Reduced (due to repurchases)
LPT with Enstar (closing timeline)H1 2025Announced 12/16/24; closing expected H1’25 “Middle of Q2” best guess pending regulators Timing clarified
Quarterly DividendOngoing$0.44 per share $0.44 per share Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q4 2024)Trend
AI/technology initiatives“How We Work” program advancing productivity; operations simplified Investing in technology, AI, data; building capabilities and talent; recognized as a top workplace Strengthening execution; positive momentum
Liability/social inflation & pricingPortfolio repositioning in liability; selective growth Primary casualty rates +29% in Q4; double-digit expected in 2025; cautious stance in reinsurance liability Pricing strengthening; disciplined underwriting
Property market dynamicsProperty growth with premium adequacy; rate momentum Competition rising but portfolio premium-adequate; Milton impact; stable PMLs <5% equity at 1-in-250 events Adequate, competitive; risk managed
Cyber portfolio reshapeDeclines in program business; refocus Continued reshape; improved cedes and tail cover; assumed extra 4% at renewal; growth in large NA cyber Shift to higher-quality segments; prudent capacity
Regulatory/taxRecognition of Bermuda DTA in 2024; FY tax rate ex-one-offs ~13.8% OECD guidance implies adjustments post-2026; 2025 reported tax rate high teens; DTA likely adjusted before end-2026 Increasing clarity; higher tax headwind

Management Commentary

  • CEO: “2024 was an excellent year for AXIS… operating ROE of 18.6% and 20.7% growth in diluted book value per share… poised to build on its positive momentum, while leveraging our specialty expertise” .
  • CFO: “Our quarterly combined ratio was an excellent 94.2%, despite Hurricane Milton… accident year loss ratio ex-cat and weather was a superb 55.7%… we remain on track to achieve the 11% G&A goal in 2026” .
  • CEO on liability: “We do expect double-digit rates to persist in ’25 in liability… we did not grow Liability Re… we non-renewed a number of cedents that did not meet our underwriting standards” .
  • CFO on tax: “Looking ahead to 2025… we would expect a reported tax rate in the high teens” .

Q&A Highlights

  • Casualty rates and underwriting stance: AXIS saw +29% in primary casualty rates in Q4 and expects double-digit in 2025; stayed selective in reinsurance liability, restructuring/non-renewing cedents as needed .
  • California wildfires exposure: Management expects immaterial impact; commercial underwriting focus; specie exposures within tolerances; Marine treaty deductible considerations discussed .
  • Tax and Bermuda DTA: OECD guidance may require adjustments post-2026; reported 2025 tax rate expected in high teens; DTA currently at $177M and likely adjusted before end-2026 once laws finalized .
  • Ceded reinsurance changes (cyber): Successful 1/1 outcome with more tail cover, improved cede by ~4 points, and AXIS assumed an additional ~4% participation; supports growth in large-account cyber .
  • Premium growth outlook and capital use: Insurance expected mid- to high single-digit growth in 2025; LPT capital to back growth, digital/analytics investments; active buybacks (shares deemed undervalued) .

Estimates Context

  • Wall Street consensus (S&P Global) estimates for Q4 2024 EPS and revenue were unavailable during this session due to system limits; therefore, beat/miss versus consensus cannot be assessed at this time.
  • Future comparison should anchor to S&P Global consensus when accessible.

Key Takeaways for Investors

  • Profitability trajectory intact: Q4 combined ratio of 94.2% and accident-year ex-cat metrics remain mid-50s, reinforcing underwriting discipline and reduced volatility; favorable prior-year development underscores reserve stability .
  • Insurance segment momentum: Strong underwriting income and 7% GWP growth with premium adequacy in property, A&H, and credit/political risk; continued mix shift toward short-tail lines .
  • Reinsurance consistency: Sustainable profitability in 2024 with 90.9% combined ratio, improved ceding commissions, and specialization in short-tail lines; cautious stance in liability persists .
  • Cat risk managed: Milton impact absorbed with 5.9 pts cat ratio; PMLs remain <5% of equity at 1-in-250 for major U.S. events, supporting capital resilience .
  • Operating leverage from transformation: “How We Work” and AI/data investments drive productivity gains; G&A target of 11% by 2026 reaffirmed, providing a medium-term margin tailwind .
  • Tax headwind emerging: 2025 reported tax rate expected to be in the high teens; investors should adjust forward EPS and ROE assumptions accordingly as Bermuda DTA normalizes post-OECD guidance .
  • Capital deployment: Ongoing buybacks ($200M authorization remaining) and steady dividend ($0.44/qtr) plus LPT with Enstar expected closing by mid-Q2’25 provide catalysts for BVPS growth and potential multiple support .