AXIS Capital(AXS) - 2025 Q4 - Annual Report

Premiums and Revenue - Gross premiums written in the insurance segment for 2025 reached $7,179,206, an increase of 8.5% from $6,615,584 in 2024 and 17% from $6,140,764 in 2023[38] - Gross premiums written in the reinsurance segment for 2025 totaled $2,465,308, reflecting an increase of 3.1% from $2,390,304 in 2024 and 11.3% from $2,215,761 in 2023[48] - Total gross premiums written across both segments for 2025 amounted to $9,644,514, up 7.1% from $9,005,888 in 2024 and 15.4% from $8,356,525 in 2023[38] Business Segments - The insurance segment's primary lines of business include Professional Lines, Property, Liability, Cyber, Marine and Aviation, and Accident and Health, catering to various niche markets globally[39][40] - The reinsurance segment provides coverage primarily through liability, professional lines, motor, accident and health, credit and surety, agriculture, and marine and aviation, with a focus on excess of loss and proportional business[44][45] Strategic Goals and Differentiation - The company aims to achieve positive differentiation in the insurance segment through underwriting expertise and customized solutions, enhancing competitive positioning[43] Investment Strategy - The investment portfolio is structured to balance increasing book value with stable investment income, focusing on liquidity to meet claims obligations[50] - A significant portion of the investment portfolio is allocated to investment-grade fixed maturities, while also diversifying into equities and alternative investments for higher potential returns[51] - The company utilizes third-party investment managers for active portfolio management, ensuring adherence to guidelines and objectives for each asset class[52] - The Finance Committee of the Board of Directors oversees the overall asset allocation and investment policy to align with the company's strategic goals[52] Regulatory Compliance and Licensing - AXIS Specialty Bermuda is a Class 4 general business insurer licensed under the Insurance Act 1978 and has reinsurance permissions in China and the Netherlands[55] - AXIS Capital's U.S. Insurance Subsidiaries are required to file detailed quarterly statutory financial statements with state insurance regulators[67] - AXIS Specialty Europe is authorized to conduct business in 16 non-life insurance classes throughout the EU and EEA[76] - AXIS Re SE is authorized to transact reinsurance throughout the EU and EEA and is subject to Solvency II[81] - AXIS Specialty Bermuda obtained reciprocal jurisdiction reinsurer status with Missouri, allowing it to avoid posting reinsurance collateral in reciprocal jurisdictions[73] - The Bermuda Monetary Authority (BMA) has granted full "equivalence" under Solvency II for Bermuda's commercial insurance sector, including Class 4 insurers[58] - AXIS Group Benefits LLC is an authorized insurance producer in all U.S. states except Hawaii, providing affordable health plans for hourly and part-time workers[70] - AXIS Specialty Europe has local regulatory permission to carry on insurance business in Jersey and has permission to write surplus lines business in all 50 U.S. states[79] - The U.S. Insurance Subsidiaries are subject to various state statutory and regulatory restrictions that limit the amount of dividends that may be paid from earned surplus without prior approval[68] - AXIS Specialty Europe operates under Freedom of Establishment in Belgium through its branch established in this jurisdiction[78] - AXIS Managing Agency Ltd. is authorized to manage Syndicate 1686 and Syndicate 2050, which commenced underwriting on April 1, 2024[88] - AXIS Corporate Capital UK II Limited provides 100% capital support to Syndicate 1686 starting January 1, 2025, up from 30% previously[93] Workforce and Talent Management - The number of employees at AXIS increased by approximately 5% in 2025, totaling 1,966 employees, with a voluntary turnover rate of 9.6% compared to 11.9% in 2024[114] - The company has a robust talent and succession planning process, conducting annual talent reviews focusing on high-performing and diverse talent[113] - AXIS offers a total rewards program designed to attract and retain top talent, including market competitive salaries and long-term incentives such as equity grants[111] Risk Management - The estimated net probable maximum loss (PML) for a Southeast U.S. hurricane event, net of reinsurance, is approximately $225 million, indicating a 1% chance of exceeding this loss annually[162] - The company has established a risk limit framework to manage natural catastrophe risks, aiming to limit capital loss from single and multiple events within a year[159] - The company employs a peer review process for underwriting risk governance, ensuring alignment with established guidelines and risk appetite[148] - The company utilizes both proportional and non-proportional reinsurance to mitigate insurance risk, with a centralized Risk Funding team overseeing treaty placements[155] - The company has a comprehensive risk governance structure, including a Risk Committee that reviews and approves the annual Own Risk and Solvency Assessment (ORSA) report[132] - The company’s risk landscape includes insurance, strategic, market, liquidity, credit, and operational risks, with ongoing assessments captured in a Risk Register[144] - The company’s Investment & Finance Committee monitors market risks and oversees the Group's investment activities, including strategic asset allocation[139] - The company has established tiered appetites for underwriting capacity based on loss scenarios and subject exposure, ensuring effective risk management[148] - The company’s operational risk framework is overseen by the Operational Risk Committee, which facilitates effective risk management practices throughout the organization[157] - The company has developed its PML estimates by combining judgment and experience with outputs from a commercially available catastrophe model, covering major peril regions with potential exposure[164] - Estimated net losses from peak zone catastrophes may change due to updates to vendor catastrophe models, changes in internal risk views, and foreign currency exchange rates[166] - The company employs a mixture of qualitative and quantitative data to assess terrorism risk, using both commercially available and bespoke modeling tools[168] - The estimation of loss reserves is subject to uncertainty, and the company follows actuarial best practices to determine these reserves[170] - The company maintains a strong claims handling process, with claims teams dedicated to main lines of business and regular reporting to senior management[172] Market and Liquidity Risks - Market risk is influenced by fluctuations in financial market prices, affecting the investment portfolio, and the company employs asset-liability management to mitigate these risks[180] - The company stress tests its investment portfolios to analyze the impact of unusual market conditions, ensuring potential losses remain within risk appetite[183] - Liquidity risk is managed through a range of policies, with liquidity generated primarily from premiums and investment income[186] - The company provides credit insurance primarily for lenders and commodity traders, requiring an evaluation of creditworthiness as part of the underwriting process[190] - Operational risk is managed through a group-wide framework, with processes in place to identify and mitigate key operational risks[196] - The capital management strategy includes early warning indicators to raise capital or amend business plans before reaching minimum requirements[199] - The company targets to hold an adequate buffer above the minimum capital required to comply with local solvency requirements[201] - Fixed maturities represent 85% of total investments and 78% of total cash and investments as of December 31, 2025, which may be adversely impacted by interest rate changes[259] - The company maintains cash and cash equivalents and high-quality liquid securities to meet expected outflows from potential extreme loss events[263] - Liquidity risk arises from the need to pay claims on extreme loss events and regulatory constraints limiting fund flow within the Group[262] - The company has access to diverse funding sources, including asset sales and external debt issuances, to cover contingencies[264] - Credit risk is heightened due to potential insolvency of third-party counterparties, impacting financial loss[265] - The company faces operational risks from inadequate processes, system failures, and human error, which could lead to financial losses[270] Cybersecurity and Regulatory Risks - Cybersecurity threats are increasing in sophistication, potentially impacting operations and data security[276] - Non-compliance with strict data protection laws could result in monetary fines and penalties that may be material[279] - The company relies on third-party service providers for technology and business process functions, which may lead to operational difficulties and increased costs if not managed effectively[280] - Regulatory risk arises from the company's failure to comply with legal, statutory, or regulatory obligations, potentially resulting in fines and penalties[281] - Non-compliance with data protection and privacy laws could lead to significant costs and adverse effects on the company's reputation and financial condition[282] - The company must navigate varying data protection laws across jurisdictions, which are increasingly scrutinized and evolving, impacting operational practices[283] - In Europe, compliance with data protection laws requires adherence regardless of the company's location, imposing obligations on processing personal data[284] - The company faces an increasing compliance burden in the U.S. as states enhance data protection regulations[285] - Investment in technical and organizational measures for data protection may incur significant costs and necessitate modifications to business practices[287] - Regulatory changes in the insurance sector, particularly in the U.K. and Bermuda, could impose higher capital requirements and governance standards[289] - The Bermuda Monetary Authority plans to change its supervisory approach, potentially increasing governance requirements for the company[290] - Regulatory authorities have broad powers to impose fines and penalties for non-compliance, which could lead to reputational damage and operational restrictions[291]