Axis’s Tizzio: Casualty pricing “strong and accelerating”, with US primary up 29% in Q4

By Michael Loney

Jan 30 - Axis Capital CEO Vince Tizzio has commented that liability rates remain “strong” and “accelerating” with primary casualty up 29 percent and excess up 18 percent in Q4, and noted that the Los Angeles wildfires will not be a “material event” for the (re)insurer.

On an investor call on Thursday, Tizzio said that Axis’s portfolio “remains premium-adequate and is meeting our risk-adjusted return expectations”, despite “signs of continued moderation in rate achievement”.

“We anticipate our profitable growth will continue in part by price increases, but more importantly, we will continue to leverage our diversified portfolio and further monetise the expansion of new customer segments, geographies and a rich and broadening arsenal of product capabilities,” he said.

Tizzio said that Axis continues to shift its business mix toward premium-adequate short-tail lines, which currently comprise 52 percent of total gross premiums written, up 4 percent from the prior year.

Tizzio highlighted that pricing momentum in liability “remains strong and is accelerating”.

Axis in its US excess casualty book generated rate increases of 14 percent for the year and 18 percent in the fourth quarter, growing its US casualty business 18 percent year-over-year.

In primary casualty, rates were up 20 percent for the year and 29 percent in the fourth quarter.

Discussing casualty, Tizzio said: “We believe they have to remain in excess of double-digit rate change in that business. Our team has reshaped that portfolio in a very substantial manner.”

For reinsurance liability, Tizzio highlighted a “resurgence of rate”, with double-digit increases in the fourth quarter and about 9.7 percent for the full year.

“We'll maintain a cautious underwriting appetite in that line until circumstances change,” Tizzio said, noting Axis purposely did not grow liability reinsurance in the year.

“We took strengthening actions on a number of cedants in a variety of ways, but mostly relating to either the structure of the programs, ceding commissions we were tolerating or, in fact, we non-renewed a number of cedents that did not meet our underwriting standards,” he said.

When asked about exposure to the Los Angeles wildfires, Tizzio said it “will not be a material event”, noting that Axis is a commercial underwriter in California and not in the high net worth residential space in the state.

“I would approximate today some 10 to 12 basis points on a market share for us at the end of the day,” he said.

New and expanded products add $560mn in premiums in ’24

Axis reported $2.97 in operating income per share after markets on Wednesday, comfortably beating analysts’ $2.57 consensus estimate and marking a turnaround from the $1.25 operating loss in Q4 2023.

The Q4 consolidated reported combined ratio improved to 94.2 percent from 124.6 percent in Q4 2023, when the results were hit by a reserve charge.

Consolidated gross premiums written grew by 10.7 percent to $1.98bn from $1.78bn, driven by 7.4 percent insurance growth to $1.7bn, while reinsurance increased by 36.9 percent to $275mn.

New York-listed Axis’s share price was up around 2.8 percent as of 11:05 ET on Thursday, compared to a $90.00 closing price the day before.

On the investor call, Tizzio noted that Axis produced an 89.1 percent combined ratio for the full year 2024 and generated $6.6bn in premium, up 7.7 percent over the prior year.

“With respect to new and expanded products that we had mentioned at our investor day [in May], we generated $560mn in new premiums, and we are very encouraged that the seeds that we planted are showing growth potential,” he said.

Tizzio continued that Axis’s core insurance divisions in North America had strong growth of 8 percent for the year even while reshaping its primary casualty book and eliminating $140mn of written premiums.

“Across North America, submission flow was up 25 percent year-over-year with our wholesale channel generating a 27 percent improvement in submissions led by E&S property and Axis casualty,” Tizzio said.

The global markets business generated 7.6 percent growth over the prior year, including the nonrenewal of $60mn in written premiums from the delegated cyber portfolio.

“As I've commented previously, we are evidencing increasing competition in global markets, particularly within our property, marine and aviation units. Our underwriters continue to maintain discipline as we drive selective growth, particularly in A&H, property, renewable energy and certain of our credit products,” Tizzio said.

The executive also noted that Axis’s dedicated energy transition syndicate launched eight months ago at Lloyd's produced more than $30mn of business in 2024.

Discussing the cyber market, Tizzio said that the risk landscape was evolving in a variety of ways, including the resurgence of ransomware, third-party privacy regulations, the impact of AI in driving more sophisticated cyber attacks, and rising geopolitical tensions.

“In cyber, we remain focused on growing our large account segment, and we grew North America large cyber by 13 percent in the year,” he said. “As part of our reshaping of our delegated cyber portfolio, we continue to be pleased with the expansion of our partnership with Elpha Secure to address the lower middle market. We continue to lean into our ability to deploy cyber capacity through both of our underwriting businesses.”

In reinsurance, Axis grew the cyber portfolio to $166mn in 2024, with written premium up 72 percent over the prior year.

“We remain confident in our strong premium adequacy, prudent limit deployment and accumulation management between both insurance and reinsurance supporting this growth,” Tizzio said.

Reinsurance business “performed well” at 1.1

Tizzio said that Axis’s reinsurance business overall “performed well in 2024, consistently producing strong contributions to both the top and bottom line”.

It produced a combined ratio of 91.8 percent and generated $2.4bn in premiums for the year, growing nearly 8 percent driven by a 16 percent year-over-year increase in targeted short-tail specialty lines.

“Moreover, during the year, we produced $493mn of new business, 63 percent of which came from our short-tail specialty lines,” he said.

Tizzio said that Axis “performed well with the backdrop of a competitive market” at the 1.1 renewals, writing 45 percent of its reinsurance business in the period.

“Overall, it was an orderly renewal with some nuance by line. We saw particularly favourable conditions in credit and surety. We continue to see opportunities in cyber despite an increasingly competitive environment. We saw greater competition in the UK motor class driven by the reduction in the Ogden rate, which, of course, has placed downward pressure on rate levels,” Tizzio said.

“With respect to marine, we saw increasing capacity and pressure on rates, and in liability we saw double-digit rate increases in the US, but the market was differentiated by loss experience and business mix.”

Tizzio added: “While the overall reinsurance market remains competitive, we continue to leverage our specialty capabilities where we see strong premium adequacy while maintaining a selective appetite in professional and casualty lines.”

The executive also provided some details on Axis’s reinsurance purchasing at 1.1, when it had five placements renewing.

“I think of note would be our cyber outbound reinsurance, which was, frankly, a very successful outcome,” Tizzio said. “We bought a bit more tail cover. We improved our cede by about 4 points. And we felt very good about the recognition of the reinsurance panel that supports that business.

“Other lines that we place included construction and marine and renewable energy, some big placements for us there. We had a mix of positive changes either relating to the cede commission or our participation rate.”