AXIS Capital(AXS) - 2025 Q2 - Quarterly Results

Front Matter Cover Page and Contact Information This document is the Investor Financial Supplement for Q2 2025, providing contact details and directing to official company information - Report Title: Investor Financial Supplement, Second Quarter 2025[3] - Investor Contact: Cliff Gallant, investorrelations@axiscapital.com[4] Table of Contents The report is structured into six main sections covering financial highlights, statements, reserve analysis, share analysis, and non-GAAP measures - The report is organized into six primary sections covering key financial areas[6] Basis of Presentation Company Structure and Forward-Looking Statements AXIS Capital operates with Insurance and Reinsurance segments, and the report contains forward-looking statements subject to various risks - The company's underwriting operations are organized into two reportable segments: Insurance and Reinsurance[8] - The document includes a safe harbor statement for forward-looking statements, cautioning that actual results may differ due to various risks[9][11] - Key risks include the cyclical nature of the business, catastrophe losses, emerging claims, competition, and general economic conditions[14][15] Business Descriptions This section details the lines of business for the Insurance and Reinsurance segments, including specialty products and treaty reinsurance, noting recent exits Insurance Segment The Insurance segment offers a diverse portfolio of specialty insurance products globally, including Professional Lines, Property, and Cyber - Offers a diverse portfolio of specialty insurance products worldwide[19] - Key lines of business include Professional Lines, Property, Liability, Cyber, Marine and Aviation, Accident and Health, and Credit and Political Risk[19][20][21] Reinsurance Segment The Reinsurance segment provides treaty reinsurance globally across various lines, having exited Catastrophe, Property, and Aviation reinsurance in recent years - Provides treaty reinsurance to insurers worldwide on both an excess of loss and proportional basis[27] - Key active lines include Liability, Accident and Health, Professional Lines, Credit and Surety, Motor, and Agriculture[27][28][29] - The company has ceased underwriting in several lines, notably Catastrophe and Property reinsurance as of June 2022, as part of its run-off strategy[34][35] I. Financial Highlights AXIS Capital reported strong Q2 2025 growth, with gross premiums up 3.1%, net income up 5.6% to $215.8 million, and an improved combined ratio of 88.9% Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Premiums Written (in thousands) | $2,515,971 | $2,440,236 | 3.1% | | Net Premiums Earned (in thousands) | $1,393,431 | $1,304,478 | 6.8% | | Net Income to Common Shareholders (in thousands) | $215,795 | $204,401 | 5.6% | | Operating Income (in thousands) | $261,304 | $249,989 | 4.5% | | Earnings per Diluted Share | $2.72 | $2.40 | 13.3% | | Operating Income per Diluted Share | $3.29 | $2.93 | 12.3% | | Combined Ratio | 88.9% | 90.4% | (1.5) pts | | Book Value per Diluted Share | $70.34 | $59.29 | 18.6% | Six Months Ended June 30, 2025 vs 2024 Key Financial Metrics | Metric | YTD 2025 | YTD 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Premiums Written (in thousands) | $5,310,622 | $5,094,663 | 4.2% | | Net Income to Common Shareholders (in thousands) | $402,302 | $592,300 | (32.1%) | | Operating Income (in thousands) | $523,118 | $470,154 | 11.3% | | Combined Ratio | 89.5% | 90.8% | (1.3) pts | - The year-to-date net income decrease of 32.1% contrasts with the quarterly increase and 11.3% growth in YTD operating income, suggesting non-operating items influenced prior year's results[38] II. Income Statements a. Consolidated Statement of Operations Q2 2025 total revenues increased to $1.63 billion, with net income to common shareholders growing 5.6% to $215.8 million, despite significant foreign exchange losses Consolidated Statement of Operations Summary (Three Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Premiums Earned | $1,393,431 | $1,304,478 | | Total Revenues | $1,632,858 | $1,450,500 | | Net Losses and Loss Expenses | $801,754 | $765,988 | | Foreign Exchange Losses (Gains) | $94,885 | $(7,384) | | Total Expenses | $1,352,596 | $1,205,889 | | Net Income | $223,358 | $211,964 | | Net Income Available to Common Shareholders | $215,795 | $204,401 | Consolidated Statement of Operations Summary (Six Months Ended June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net Premiums Earned | $2,734,251 | $2,562,519 | | Total Revenues | $3,154,962 | $2,875,057 | | Income Tax (Expense) Benefit | $(100,521) | $84,107 | | Net Income | $417,427 | $607,425 | | Net Income Available to Common Shareholders | $402,302 | $592,300 | - The combined ratio improved to 88.9% in Q2 2025 from 90.4% in Q2 2024, indicating better underwriting profitability[49] b. Consolidated Segment Data In Q2 2025, the Insurance segment led profitability with $151.6 million underwriting income and an 85.3% combined ratio, outperforming Reinsurance Segment Performance (Three Months Ended June 30, 2025) | Segment | Gross Premiums Written (in thousands) | Net Premiums Earned (in thousands) | Underwriting Income (in thousands) | Combined Ratio | | :--- | :--- | :--- | :--- | :--- | | Insurance | $1,932,435 | $1,032,961 | $151,639 | 85.3% | | Reinsurance | $583,536 | $360,470 | $37,562 | 92.0% | | Total | $2,515,971 | $1,393,431 | $189,201 | 88.9% | - Both segments reported net favorable prior year reserve development, totaling $20.2 million for the quarter[59] c. Gross Premiums Written by Segment by Line of Business YTD June 2025 GPW for Insurance was led by Property and Liability, while Reinsurance was driven by Liability and Professional Lines, with continued management of run-off lines Top 3 Insurance Lines by GPW (Six Months Ended June 30, 2025) | Line of Business | Gross Premiums Written (in thousands) | | :--- | :--- | | Property | $1,140,894 | | Liability | $669,300 | | Professional Lines | $600,529 | Top 3 Reinsurance Lines by GPW (Six Months Ended June 30, 2025) | Line of Business | Gross Premiums Written (in thousands) | | :--- | :--- | | Liability | $421,637 | | Professional Lines | $360,296 | | Credit and Surety | $320,956 | d. Consolidated Data Consolidated underwriting performance shows a Q2 2025 combined ratio of 88.9%, an improvement driven by a lower net losses ratio and favorable prior year reserve development Consolidated Ratio Trends (Quarterly) | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Losses and Loss Expenses Ratio | 57.5% | 58.6% | 58.7% | | Acquisition Cost Ratio | 19.8% | 19.7% | 20.3% | | General and Administrative Expenses Ratio | 11.6% | 11.9% | 11.4% | | Combined Ratio | 88.9% | 90.2% | 90.4% | - The company reported net favorable prior year reserve development of $20.2 million in Q2 2025, contributing to the improved loss ratio[62] e. Segment Data Quarterly segment data shows the Insurance segment's strong performance with an 85.3% combined ratio, while Reinsurance deteriorated to 92.0% due to a higher loss ratio Insurance Segment Data The Insurance segment's Q2 2025 underwriting income rose to $151.6 million, with the combined ratio improving to 85.3% due to lower loss and acquisition costs Insurance Segment Key Ratios (Q2 2025 vs Q2 2024) | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Losses and Loss Expenses Ratio | 54.4% | 56.6% | | Acquisition Cost Ratio | 18.9% | 19.6% | | Combined Ratio | 85.3% | 87.9% | - The segment recorded $36.4 million in catastrophe and weather-related losses and $15.2 million in net favorable prior year reserve development in Q2 2025[65] Reinsurance Segment Data The Reinsurance segment's Q2 2025 underwriting income decreased to $37.6 million, with the combined ratio deteriorating to 92.0% due to a higher net losses ratio Reinsurance Segment Key Ratios (Q2 2025 vs Q2 2024) | Ratio | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Losses and Loss Expenses Ratio | 66.6% | 64.5% | | Acquisition Cost Ratio | 22.5% | 22.3% | | Combined Ratio | 92.0% | 89.3% | - The segment recorded minimal catastrophe losses ($0.2 million) and $5.0 million in net favorable prior year reserve development in Q2 2025[67] f. Net Investment Income Q2 2025 net investment income was $187.3 million, slightly down from Q2 2024, primarily from fixed maturities, but YTD income grew 10.2% to $395.0 million Components of Net Investment Income (Q2 2025) | Source | Income (in thousands) | | :--- | :--- | | Fixed maturities | $149,861 | | Other investments | $18,479 | | Cash and cash equivalents | $16,649 | | Mortgage loans | $5,956 | | Equity securities | $3,155 | | Total Net Investment Income | $187,297 | - Year-to-date net investment income grew to $395.0 million in 2025 from $358.4 million in 2024, reflecting a stronger investment environment[69] III. Balance Sheets a. Consolidated Balance Sheets As of June 30, 2025, total assets reached $34.2 billion, shareholders' equity grew to $6.2 billion, and the debt-to-total-capital ratio improved to 17.6% Key Balance Sheet Items (as of June 30) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Total Investments | $14,806,930 | $15,545,508 | | Total Assets | $34,151,036 | $32,078,882 | | Reserve for Losses and Loss Expenses | $17,879,023 | $16,738,871 | | Total Liabilities | $27,976,638 | $26,419,411 | | Total Shareholders' Equity | $6,174,398 | $5,659,471 | - The debt-to-total capital ratio improved to 17.6% at the end of Q2 2025, down from 18.8% a year ago, indicating a stronger leverage profile[71] b. Cash and Invested Assets As of June 30, 2025, cash and invested assets totaled $16.3 billion, with 80.9% in fixed maturities and equity securities, and an average credit quality of A+ Cash and Invested Assets Portfolio As of June 30, 2025, total cash and invested assets were $16.3 billion, dominated by fixed maturities available for sale at $12.1 billion Invested Asset Portfolio Composition (June 30, 2025) | Asset Class | Fair Value (in thousands) | Percentage | | :--- | :--- | :--- | | Fixed Maturities, available for sale | $12,137,475 | 74.6% | | Cash and cash equivalents | $1,409,201 | 8.7% | | Other investments | $938,922 | 5.8% | | Equity securities | $619,275 | 3.8% | | Total Cash and Invested Assets | $16,274,059 | 100.0% | Cash and Invested Assets Composition The investment portfolio is highly allocated to investment-grade fixed maturities with an average credit quality of A+ and a book yield of 4.6% - The average credit quality of the fixed maturities portfolio is A+[77] - The book yield of fixed maturities has risen to 4.6% in Q2 2025, compared to 4.4% in Q2 2024[77] - The average duration of the fixed maturities portfolio is 3.1 years[77] Mortgage-Backed and Asset-Backed Securities Composition The $4.1 billion MBS and ABS portfolio is primarily high-quality, with 93.3% in Agency or AAA-rated securities and minimal non-investment grade holdings - The MBS and ABS portfolio is heavily weighted towards high credit quality, with 93.3% in Agency or AAA-rated securities[79] IV. Losses Reserve Analysis a. Paid to Incurred Analysis Q2 2025 net loss reserve was $8.8 billion, with a $2.0 billion LPT reinsurance agreement reducing exposure to prior-year development - On April 24, 2025, the company completed a loss portfolio transfer (LPT) with Cavello Bay Reinsurance Limited (Enstar)[81] - The LPT transaction increased reinsurance recoverable on unpaid losses by $2.0 billion, covering business predominantly from 2021 and prior underwriting years[81] - At June 30, 2025, reserves for losses incurred but not reported (IBNR) were $12.2 billion, representing 68% of the total gross reserve[82] b. Paid to Incurred Analysis by Segment Q2 2025 saw $20.2 million in total net favorable prior year reserve development, with Insurance at $15.2 million and Reinsurance at $5.0 million Net Favorable Prior Year Reserve Development (Q2 2025) | Segment | Development (in thousands) | | :--- | :--- | | Insurance | $15,216 | | Reinsurance | $5,013 | | Total | $20,229 | Net Paid to Incurred Loss Ratio (Q2 2025) | Segment | Ratio | | :--- | :--- | | Insurance | 89.3% | | Reinsurance | 121.7% | | Total | 99.0% | V. Share Analysis a. Earnings Per Common Share Information Q2 2025 diluted EPS increased 13.3% to $2.72, driven by a 7.0% reduction in weighted average diluted common shares outstanding due to repurchases Earnings Per Share (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income Available to Common Shareholders (in thousands) | $215,795 | $204,401 | | Weighted Average Diluted Shares (in thousands) | 79,329 | 85,326 | | Earnings per Diluted Common Share | $2.72 | $2.40 | - The company repurchased 510,000 common shares in Q2 2025, contributing to the reduction in share count and the increase in EPS[87] b. Book Value Per Diluted Common Share and Tangible Book Value Per Diluted Common Share - Treasury Stock Method As of June 30, 2025, book value per diluted common share grew 18.6% to $70.34, and tangible book value increased 20.1% to $67.95 Book Value Growth (as of June 30) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Book Value per Diluted Common Share | $70.34 | $59.29 | +18.6% | | Tangible Book Value per Diluted Common Share | $67.95 | $56.59 | +20.1% | - The calculation for book value per diluted common share includes 1.78 million dilutive restricted stock units as of Q2 2025[89] VI. Non-GAAP Financial Measures a. Operating Income and Operating Return on Average Common Equity Q2 2025 operating income was $261.3 million, reconciled from GAAP net income by excluding investment gains and foreign exchange losses, yielding $3.29 operating EPS and 19.0% annualized operating ROACE Reconciliation of Net Income to Operating Income (Q2 2025) | (in thousands) | Amount | | :--- | :--- | | Net income available to common shareholders | $215,795 | | Net investment (gains) losses | $(43,468) | | Foreign exchange losses (gains) | $94,885 | | Other adjustments | $(5,905) | | Operating income | $261,304 | GAAP vs. Non-GAAP Performance Metrics (Q2 2025) | Metric | GAAP | Non-GAAP (Operating) | | :--- | :--- | :--- | | Income per Diluted Share | $2.72 | $3.29 | | Annualized ROACE | 15.7% | 19.0% | b. Rationale for the Use of Non-GAAP Financial Measures AXIS Capital uses non-GAAP measures like operating income and tangible book value to provide a clearer understanding of core operational performance by excluding volatile, non-recurring items - The company presents non-GAAP measures to enhance the understanding of its results of operations by focusing on core underwriting profitability[95] - Operating Income excludes items like net investment gains/losses and foreign exchange movements, which management believes are not representative of recurring operational performance[112][113][114] - Tangible Book Value is presented to help assess the value generated for shareholders, exclusive of goodwill and intangible assets from acquisitions[121]