AXIS Capital's Q3 2025: Contradictions Emerge on Reinsurance Strategy, Property Pricing, and Insurance Growth Expectations

Date of Call: October 30, 2025

Financials Results

• Revenue: Gross premiums written $2.1B, up 9.7% YOY (net premiums up 9.5%)
• EPS: Net income available to common shareholders $294M, $3.74 per diluted share; Operating income $255M, $3.25 per diluted share, operating EPS up 20% YOY

Guidance:

• Insurance segment: expect mid- to high single-digit growth in 2026 (excludes sidecars like RAC Re)
• RAC Re / AXIS Capacity Solutions: expect to retain ~1/3 of gross premiums from the facility; could push Insurance growth to double digits depending on underlying platforms
• RAC Re ramp: written premium to accrue 2026-2028 and earned premium to ramp 2026-2029 (slow build)
• G&A: target to get to ~11% G&A ratio (sub-11% target for 2026)
• Capital: $400M repurchase authorization; buybacks opportunistic, not a set run rate
• Investment/income outlook favorable (market yield 4.8% vs 4.6% book yield)

Business Commentary:

* Strong Financial Performance and Growth: - AXIS Capital Holdings Limited reported a 14% year-over-year increase in diluted book value per common share, reaching $73.82 as of September 30, and grew premiums by nearly 10% to $2.1 billion. - The growth was driven by strong underwriting performance, enhanced operating platforms, and efficient use of capital.

• Premium Growth and Product Expansion:
• AXIS's Insurance segment produced stellar results, with record third-quarter premium production of $1.7 billion, up 11% from the prior period.

• Growth was supported by new and expanded product offerings in segments such as North America and Global Markets, led by marine, energy, and construction classes.

• Investment in Technology and Infrastructure:

• The company accelerated investments in technology and data analytics, aiming to improve efficiency and decision-making, particularly in underwriting and claims processes.

• This focus includes implementing a modern application platform and leveraging AI solutions to drive productivity increases.

• Partnership and Capacity Solutions:

• AXIS launched the AXIS Capacity Solutions program, entering into partnerships like the RAC Re deal with Ryan Specialty.

• This initiative aligns economic interests and leverages AXIS's underwriting expertise, aligning with strategic distribution channels and portfolio management.

• Discipline in Underwriting and Profitability:

• AXIS maintained a disciplined approach to underwriting, particularly in liability and professional lines, ensuring alignment with return expectations.
• The company continued to focus on premium adequacy and strategic portfolio management, managing catastrophe losses effectively.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted strong results: "14% year-over-year increase in diluted book value... 20% increase in operating earnings per share... combined ratio of 89.4%" and CFO: "Net income $294M, $3.74 per diluted share; operating income $255M... 17.8% annualized operating ROE," emphasizing accelerated premium growth, disciplined underwriting and continued investment.

Q&A:

• Question from Andrew Kligerman (TD Cowen): On the strong property growth (North American E&S up 12.5%, overall up 8%), how does the combined ratio or loss ratio line up today and how should it trend as you grow the business given pricing pressure?
  Response: Management: Property growth comes from a premium-adequate starting point, diversified/geographic mix and reduced CAT profile; mix into short-tail and lower-middle-market offsets rate pressure so ex‑cat loss ratio has stayed consistent.

• Question from Andrew Kligerman (TD Cowen): On AXIS Capacity Solutions and the first RAC Re deal, is there a pipeline for more third-party capital/deals?
  Response: Management: The RAC Re sidecar is a curated, aligned transaction (AXIS ~1/3 participation) that has generated significant partner interest; there is a pipeline but underwriting discipline and lessons from prior delegated exposure are central to pursuit.

• Question from Elyse Greenspan (Wells Fargo): You said mid- to high single-digit growth excluding sidecars; could RAC Re push insurance growth to double digits next year?
  Response: Management: Yes—RAC Re could result in double-digit growth in 2026 depending on underlying platforms and market activity.

• Question from Elyse Greenspan (Wells Fargo): RAC Re fees are contra to G&A—was that contemplated in your sub-11% G&A guidance and what timing should we expect for the fee impact?
  Response: Management: Fees and ceded earned premiums will ramp slowly; written premium recognized 2026-2028 and earned premium 2026-2029, so RAC Re fee impact to G&A is de minimis in calendar 2026.

• Question from Elyse Greenspan (Wells Fargo): Is the Q3 buyback level (~$110M) a run rate and any color on capital position?
  Response: Management: $110M Q3 buyback is not a run rate; buybacks are opportunistic under a new $400M authorization; priority remains funding profitable growth and investing in the business while evaluating capital opportunistically.

• Question from Joshua Shanker (Bank of America): Paid-to-incurred ratios remain elevated—where are they today and what should we expect as you grow in a soft market?
  Response: Management: Paid-to-incurred is one of many reserve metrics; elevation reflects mix shifts, timing of large payments and claims organization changes—management is comfortable with reserves and expects possible short-term volatility while citing improved claims closing metrics.

• Question from Matthew Carletti (Citizens): The $19M reserve release (Q3) — where did it come from and were there any material items behind it?
  Response: Management: Entire $19M release came from short‑tail lines—$15M in insurance (property, credit & surety, A&H) and $4M in reinsurance (agriculture); broad-based and not material in isolation.

• Question from Charles Lederer (BMO Capital Markets): With accelerating written growth in Insurance, how will that affect the ex‑cat loss ratio as premiums earn in?
  Response: Management: Impact depends on market rate trends and mix; growth into more long‑tail business could raise loss ratio but combined ratio and acquisition cost differences are important—management feels good about the insurance outlook but won’t provide a numeric guide.

• Question from Charles Lederer (BMO Capital Markets): On G&A, should we expect a Q4 reward similar to last year given strong ROEs and light cat activity?
  Response: Management: They remain confident in Q4 and see the potential for a similar reward dynamic to last year given year-to-date performance and strong ROE; still expect progress toward sub‑11% G&A.

• Question from Jane Lee (KBW): On renewal rights (Markel transaction) contributing to precision line growth—how is the acquired book performing versus underwriting expectations?
  Response: Management: ~$6M of premium from the Markel renewal rights this quarter; underwriting is meeting expectations, retention (hit) rate roughly ~50% of opportunities, and pricing is aligned with expectations for the FI portfolio.

• Question from Andrew Andersen (Jefferies): A&H growth has been strong—what's driving it (pricing, distribution, product breadth) and why different from Reinsurance?
  Response: Management: Growth driven primarily by PET program scale (became sole provider after Fetch agreement), strong London/Lloyd's performance and reshaped Group Benefits; PET-driven surge will normalize into double-digit growth by Q4.

• Question from Andrew Andersen (Jefferies): Where are you relative to the $100M Investor Day technology commitment and will spend deliver expense-ratio benefits?
  Response: Management: They’ve accelerated spending (approaching ~$150M over three years) and expect efficiency gains; early proof points: NA quotes +27% YoY and bindings +19%, with anticipated ongoing expense‑ratio improvements.

• Question from Brian Meredith (UBS): Will AXIS qualify for Bermuda substance-based tax credits announced in September and what timing/quantum should we expect?
  Response: Management: Monitoring developments, submitted comments; expect some benefit (timing around mid‑December legislation) potentially affecting late 2025 and into 2026, but quantum uncertain.

• Question from Brian Meredith (UBS): On paid-to-incurred skew—can you quantify large claim payments this quarter to get a normalized run rate?
  Response: Management: A few large FI claims were material—several >$20M; top three claims in the line exceeded $50M in aggregate this quarter; these were pre‑2019 and fully reserved, and improvements in claims handling drove closings.

• Question from Brian Meredith (UBS): For RAC Re, what margin profile and business mix do you expect from the MGUs?
  Response: Management: Mix mirrors AXIS’s broader insurance portfolio with meaningful property participation plus niche specialties (construction, professional, marine); margin profile is expected to be in line with AXIS’s historical insurance profitability.

• Question from Robert Cox (Goldman Sachs): For the mid- to high single-digit growth in 2026, which lines will drive that growth?
  Response: Management: They won’t disclose a detailed playbook but expect continued growth from new and expanded initiatives and leadership positions in marine, energy, professional lines, casualty, property and lower middle market.

• Question from Robert Cox (Goldman Sachs): On net premiums earned mix (sub‑class impacts this quarter), any notable subclass drivers affecting underlying margins?
  Response: Management: Short‑tail proportion was roughly steady quarter-to-quarter; increased surety (lower loss ratio) affects mix; mix shifts will influence loss ratios but combined ratio and acquisition-cost differences support a constructive outlook.

• Question from Charles Lederer (BMO Capital Markets): Was there any deferred gain amortization from the recently fully in-place deal this quarter and should we expect a small benefit next year?
  Response: Management: Yes—a deferred gain (~$1.6M) ran through other income in the quarter; a small similar benefit will appear in 2026.

Contradiction Point 1

Reinsurance Strategy and Cessions

It involves changes in the company's reinsurance strategy and the role of cessions, which are critical for risk management and capital deployment.

Can Insurance growth reach double digits next year through the RAC Re vehicle? - Elyse Greenspan (Wells Fargo)

2025Q3: We have a comprehensive view of our risk profile and flexibility in our ceding strategy which is a critical part of our overall risk management strategy. - Peter Vogt(CFO)

How do you plan for future cessions, given that a third of written premium growth is ceded? - Andrew Kligerman (TD Cowen)

2025Q2: Our reinsurance strategy is agile and remains flexible. We're comfortable with our current strategy, which aligns with our view of risk and capital capabilities. - Vincent Tizzio(CEO)

Contradiction Point 2

Property Line Pricing and Adequacy

It involves differing perspectives on the adequacy of premiums in the property lines, which can impact underwriting profits and risk management.

How does the combined ratio or loss ratio align with property line growth and premium adequacy considering pricing trends? - Andrew Kligerman (TD Cowen)

2025Q3: Our growth in property lines is from a solid starting point of premium adequacy and a well-constructed portfolio. - Vincent Tizzio(CEO)

Is pricing ahead of loss costs in insurance and reinsurance? - Charlie Lederer (BMO Capital Markets)

2025Q2: Pricing is ahead of trend in casualty and liability, while property has driven short-tail line pricing deterioration. - Vincent Tizzio(CEO)

Contradiction Point 3

Growth Expectations in Insurance

It involves differing expectations for growth in the insurance segment, which is crucial for understanding the company's financial outlook and strategic priorities.

Can Insurance growth reach double digits next year with the RAC Re vehicle? - Elyse Greenspan(Wells Fargo)

2025Q3: Yes, with RAC Re, we could see double-digit growth for next year, excluding it, we'd be mid- to high single digits. RAC Re will build up slowly, with contributions fully visible in 2026. - Peter Vogt(CFO)

How do you expect net written premium growth to trend this year, given the 3% (excluding unusual items, ~8%) growth in constant currency? - Andrew Kligerman(TD Securities)

2025Q1: Mid- to high-single-digit net written premium growth is expected for the remainder of 2025. Submissions are robust, with a 29% increase. - Vince Tizzio(CEO)