AXIS Capital(US:AXS)2024-05-01 20:23PART I Financial Information Item 1. Consolidated Financial Statements Presents unaudited consolidated financial statements for Q1 2024 and 2023, including balance sheets, operations, and cash flows Consolidated Balance Sheet Highlights (at March 31, 2024 vs. Dec 31, 2023) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Assets | $31,758,690 | $30,250,672 | | Total Liabilities | $26,253,535 | $24,987,476 | | Total Shareholders' Equity | $5,505,155 | $5,263,196 | Consolidated Statement of Operations Highlights (Three months ended March 31) | Metric | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $1,424,557 | $1,344,357 | | Net Premiums Earned | $1,258,041 | $1,230,199 | | Net Income | $395,459 | $180,097 | | Net Income available to common shareholders | $387,896 | $172,534 | | Earnings per diluted common share | $4.53 | $2.01 | Note 2 - Segment Information Details Q1 2024 segment performance, with Insurance generating $123.0 million underwriting income and Reinsurance $22.7 million Segment Underwriting Results (Q1 2024 vs Q1 2023) | Segment | Gross Premiums Written (Q1 2024, in millions) | Underwriting Income (Q1 2024, in millions) | Combined Ratio (Q1 2024) | Underwriting Income (Q1 2023, in millions) | Combined Ratio (Q1 2023) | | :--- | :--- | :--- | :--- | :--- | :--- | | Insurance | $1,574.5M | $123.0M | 86.6% | $103.4M | 87.3% | | Reinsurance | $1,079.9M | $22.7M | 95.8% | $36.0M | 91.4% | | Total | $2,654.4M | $145.7M | 91.1% | $139.4M | 90.9% | - The Insurance segment's combined ratio improved to 86.6% from 87.3% year-over-year, while the Reinsurance segment's combined ratio deteriorated to 95.8% from 91.4%50 Note 3 - Investments Total investments reached $15.3 billion in Q1 2024, with net investment income significantly increasing to $167.4 million Investment Portfolio Composition (at March 31, 2024) | Asset Class | Fair Value (in thousands) | | :--- | :--- | | Fixed maturities, available for sale | $12,269,310 | | Fixed maturities, held to maturity | $693,042 (Amortized Cost) | | Equity securities | $582,178 | | Mortgage loans | $609,704 | | Other investments | $934,724 | | Total Investments | $15,347,431 | Net Investment Income (Three months ended March 31) | Source | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Fixed maturities | $139,396 | $118,262 | | Cash and cash equivalents | $13,661 | $10,012 | | Other | $14,326 | $11,327 | | Total Net Investment Income | $167,383 | $133,771 | Note 6 - Reserve for Losses and Loss Expenses Gross reserve for losses was $16.63 billion at March 31, 2024, with reduced catastrophe losses in Q1 2024 Reserve Roll-Forward (Three months ended March 31, 2024) | Item | Amount (in thousands) | | :--- | :--- | | Net reserve, beginning of period | $10,110,935 | | Net incurred losses and loss expenses | $728,671 | | Net paid losses and loss expenses | ($663,295) | | Net reserve, end of period | $10,127,709 | - Catastrophe and weather-related losses, net of reinsurance, were $20 million in Q1 2024, down from $38 million in Q1 2023162 - The company recognized $0 of net favorable prior year reserve development in Q1 2024, compared to $4.0 million in Q1 2023166 Note 9 - Shareholders' Equity The company repurchased 1.281 million common shares for $75.7 million and paid a $0.44 quarterly dividend Share Repurchases (Q1 2024) | Repurchase Type | Total Shares | Total Cost (in thousands) | Average Price per Share | | :--- | :--- | :--- | :--- | | In the open market | 1,048 | $61,607 | $58.79 | | From employees (for tax) | 233 | $14,121 | $60.70 | | Total | 1,281 | $75,728 | $59.13 | - A quarterly dividend of $0.44 per common share was declared for Q1 2024, consistent with the prior year's quarter202 Note 15 - Reorganization Expenses Reorganization expenses of $12 million were incurred in Q1 2024, primarily for severance under the 'How We Work' program - Reorganization expenses of $12 million were recorded in Q1 2024, mainly for severance costs under the 'How We Work' program214 Note 16 - Income Taxes Bermuda's new tax act led to a $163 million deferred tax asset and a $124.7 million income tax benefit in Q1 2024 - Due to Bermuda's new Corporate Income Tax Act 2023, the company recorded a net deferred tax asset of $163 million in Q1 2024215 Income Tax (Expense) Benefit (Three months ended March 31) | Jurisdiction | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Current Tax Expense | $27,026 | $14,278 | | Deferred Tax (Benefit) Expense | ($151,680) | $1,618 | | Total Income Tax (Benefit) Expense | ($124,654) | $15,896 | - The actual tax rate for Q1 2024 was -46.0%, primarily due to the Bermuda Economic Transition Adjustment, compared to 8.1% in Q1 2023219 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, highlighting $388 million net income and 11% gross premiums growth - Net income available to common shareholders was $388 million, or $4.53 per diluted share, for Q1 2024224 - Operating income (a non-GAAP measure) was $220 million, or $2.57 per diluted common share224225 - The results include a significant one-time net deferred tax benefit of $163 million related to Bermuda's Corporate Income Tax Act 2023224232 Consolidated Results of Operations Q1 2024 gross premiums grew 11% to $2.65 billion, with underwriting income rising to $145.7 million Consolidated Performance Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | | :--- | :--- | :--- | | Gross Premiums Written | $2,654.4M | $2,382.0M | | Net Premiums Earned | $1,258.0M | $1,230.2M | | Underwriting Income | $145.7M | $139.4M | | Combined Ratio | 91.1% | 90.9% | Results by Segment Insurance segment gross premiums grew 11% with improved combined ratio, Reinsurance grew 12% with higher combined ratio - Insurance Segment: Gross premiums written increased 11% to $1.6 billion, driven by property (+26%) and marine & aviation (+12%). The combined ratio improved by 0.7 points to 86.6%240242 - Reinsurance Segment: Gross premiums written increased 12% to $1.1 billion, led by credit and surety (+42%) and agriculture (+76%). The combined ratio deteriorated by 4.4 points to 95.8%253256 Net Investment Income and Net Investment Gains (Losses) Net investment income increased 25% to $167.4 million in Q1 2024, with a reduced net investment loss - Net investment income rose 25% year-over-year to $167.4 million, with income from fixed maturities increasing 18% to $139.4 million275276 - The company reported a net investment loss of $9.2 million, mainly from realized losses on fixed income sales and unrealized losses on equity securities281282 Liquidity and Capital Resources Total capital reached $6.8 billion with a 19.3% debt-to-total capital ratio, and $76 million in share repurchases Capital Structure | Component | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--- | :--- | :--- | | Debt | $1,314,074 | $1,313,714 | | Shareholders' Equity | $5,505,155 | $5,263,196 | | Total Capital | $6,819,229 | $6,576,910 | | Ratio of debt to total capital | 19.3% | 20.0% | - In Q1 2024, 1.3 million common shares were repurchased for $76 million338 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures, with a $89 million net foreign currency liability at Q1 2024 - Total net foreign currency exposure was a liability of $88.7 million at March 31, 2024, equivalent to (1.6)% of total shareholders' equity345 - The largest net foreign currency exposure is a liability of $82.4 million to the British Pound (GBP)345 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2024348 - No material changes to internal control over financial reporting were identified during the first quarter of 2024349 PART II Other Information Item 1. Legal Proceedings The company is subject to routine legal proceedings but no material legal proceedings outside ordinary business - The company is not a party to any material legal proceedings outside the ordinary course of business350 Item 1A. Risk Factors No material changes to the risk factors disclosed in the 2023 Annual Report on Form 10-K - No material changes from the risk factors disclosed in the 2023 Form 10-K were reported351 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details Q1 2024 equity repurchases, with 1.048 million shares bought back and $38 million remaining authorization Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased (as part of programs, in thousands) | Average Price Paid per Share | Approx. Dollar Value Remaining under Program (in millions) | | :--- | :--- | :--- | :--- | | Jan 2024 | 48 | $55.37 | $97 million | | Feb 2024 | 848 | $57.16 | $48 million | | Mar 2024 | 152 | $60.86 | $38 million | | Total | 1,048 | - | $38 million | - The Board of Directors authorized a share repurchase program for up to $100 million, effective from January 1, 2024, to December 31, 2024354