Axis chief vows to win back A+ rating after downgrade

Albert Benchimol said Axis Capital was “committed to doing all we can” to earn back its A+ (superior) rating from AM Best after seeing its financial strength rating downgraded to A (excellent).

Benchimol, Axis’s president and chief executive, said he was “very disappointed” with the rating agency’s decision, adding the company had already “taken all the actions necessary to curtail the business that hurt our results”. 

“There is nothing left in our book we believe needs to be addressed,” he said. “We are very confident and optimistic about our outlook. We are very disappointed by AM Best's action, which speaks on a backward-looking basis rather than forward.

“I believe we are taking all the right actions and Axis is well positioned to manage through the Covid-19 pandemic and come out stronger on the other side,” he said.

AM Best said the rating downgrade had reflected a deterioration in Axis’s operating performance, with the group’s five-year average return on equity and combined ratios no longer in line with companies with a strong operating performance.

However, Benchimol said the company was now delivering a combined ratio, excluding catastrophe impacts, at a level it has not delivered since 2013.

“While I am first to agree our progress has been slower than desired, it is disappointing to see this rating action. We are committed to doing all we can to earn back that superior rating,” he said.

While the headline first-quarter result saw Axis report a loss of $185m, the group saw an improvement of 1.8 percentage points in its underlying accident-year combined ratio.

“We believe we have turned the corner and are showing tangible results,” Benchimol said.

While the company saw a 14% reduction in reinsurance premiums during the first quarter, reflecting areas where it believed rate was still not satisfactory, the insurance book grew 11% during the quarter.

“In the insurance segment, we have now seen pricing improvement for 10 consecutive quarters. The momentum in market firming has accelerated and is now spreading to almost every line in the market,” he said.

“While I am first to agree our progress has been slower than desired, it is disappointing to see this rating action. We are committed to doing all we can to earn back that superior rating”
_{Albert Benchimol
Axis Capital}

In the group’s London-based international division, average rate increases of 8% included double-digit increases in property, professional and casualty lines.

Rate momentum grew throughout the quarter, with average increases of 15% across the portfolio in March.

Benchimol said 95% of the group’s insurance business renewed flat to up during the quarter, with almost one-fifth of its renewing business up 20% or more.

“These are by far the best numbers we have seen in a decade,” he said.

In reinsurance, Benchimol said the company had reduced its premium base at January 1 amid a still difficult rating environment but said April 1 had been a different story, with “meaningful improvement across all lines”.

Japanese wind covers saw average increases of 50%, with Benchimol reporting the company reduced its exposure on low-attaching treaties as part of a strategy to rebalance the portfolio. Casualty business renewing at April 1 saw double-digit increases, Benchimol said, with a small aviation book renewing with a 40% increase.

At forthcoming renewals, Benchimol said demand is likely to increase and supply contract, driving stronger reinsurance conditions.

Axis’s first-quarter earnings were hit by $235m of Covid-19 related losses, most of which was property-related incurred but not reported (INBR) losses based on the shutdown in the US remaining in effect until July 31.