Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 1.88M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 26K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 26K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
11: R1 Cover HTML 79K
12: R2 Consolidated Balance Sheets HTML 139K
13: R3 Consolidated Balance Sheets (Parenthetical) HTML 49K
14: R4 Consolidated Statements of Operations (Unaudited) HTML 122K
15: R5 Consolidated Statements of Comprehensive Income HTML 61K
(Unaudited)
16: R6 Consolidated Statements of Changes in HTML 69K
Shareholders' Equity (Unaudited)
17: R7 Consolidated Statements of Cash Flows (Unaudited) HTML 144K
18: R8 Consolidated Statements of Cash Flows (Unaudited) HTML 23K
(Parenthetical)
19: R9 Basis of Presentation and Significant Accounting HTML 27K
Policies
20: R10 Segment Information HTML 94K
21: R11 Investments HTML 418K
22: R12 Fair Value Measurements HTML 438K
23: R13 Derivative Instruments HTML 87K
24: R14 Reserve for Losses and Loss Expenses HTML 132K
25: R15 Earnings Per Common Share HTML 51K
26: R16 Share-Based Compensation HTML 71K
27: R17 Shareholders' Equity HTML 89K
28: R18 Debt and Financing Arrangements HTML 28K
29: R19 Commitments and Contingencies HTML 26K
30: R20 Other Comprehensive Income (Loss) HTML 77K
31: R21 Related Party Transactions HTML 24K
32: R22 Basis of Presentation and Significant Accounting HTML 25K
Policies (Policies)
33: R23 Segment Information (Tables) HTML 89K
34: R24 Investments (Tables) HTML 417K
35: R25 Fair Value Measurements (Tables) HTML 568K
36: R26 Derivative Instruments (Tables) HTML 102K
37: R27 Reserve for Losses and Loss Expenses (Tables) HTML 127K
38: R28 Earnings Per Common Share (Tables) HTML 51K
39: R29 Share-Based Compensation (Tables) HTML 68K
40: R30 Shareholders' Equity (Tables) HTML 88K
41: R31 Other Comprehensive Income (Loss) (Tables) HTML 79K
42: R32 Segment Information (Details) HTML 124K
43: R33 INVESTMENTS - Fixed Maturities Available For Sale HTML 69K
(Details)
44: R34 INVESTMENTS - Fixed Maturities Held To Maturity HTML 46K
(Details)
45: R35 INVESTMENTS - Narrative (Details) HTML 35K
46: R36 INVESTMENTS - Equity Securities (Details) HTML 46K
47: R37 INVESTMENTS - Contractual Maturities (Details) HTML 107K
48: R38 INVESTMENTS - Gross Unrealized Losses (Details) HTML 86K
49: R39 INVESTMENTS - Mortgage Loans (Details) HTML 37K
50: R40 INVESTMENTS - Other Investments (Details) HTML 92K
51: R41 INVESTMENTS - Equity Method Investments (Details) HTML 30K
52: R42 INVESTMENTS - Net Investment Income (Details) HTML 41K
53: R43 INVESTMENTS - Net Investment Gains (Losses) HTML 47K
(Details)
54: R44 INVESTMENTS - Credit Losses on AFS (Details) HTML 35K
55: R45 INVESTMENTS - Reverse Repurchase Agreements HTML 25K
(Details)
56: R46 FAIR VALUE MEASUREMENTS - Financial Instruments HTML 164K
Measured at Fair Value (Details)
57: R47 FAIR VALUE MEASUREMENTS - Significant Unobservable HTML 80K
Inputs (Details)
58: R48 FAIR VALUE MEASUREMENTS - Changes in Level 3 for HTML 115K
Financial Instruments (Details)
59: R49 FAIR VALUE MEASUREMENTS - Narrative (Details) HTML 33K
60: R50 DERIVATIVE INSTRUMENTS - Schedule of Derivative HTML 50K
Instruments (Details)
61: R51 DERIVATIVE INSTRUMENTS - Offsetting Assets and HTML 42K
Liabilities (Details)
62: R52 DERIVATIVE INSTRUMENTS - Other HTML 36K
Underwriting-related Risks (Details)
63: R53 RESERVE FOR LOSSES AND LOSS EXPENSES - Reserve HTML 51K
Roll-Forward (Details)
64: R54 RESERVE FOR LOSSES AND LOSS EXPENSES - Narrative HTML 33K
(Details)
65: R55 RESERVE FOR LOSSES AND LOSS EXPENSES - Prior year HTML 29K
development (Details)
66: R56 RESERVE FOR LOSSES AND LOSS EXPENSES - Prior year HTML 50K
reserve development by segment, reserving class
and accident year (Details)
67: R57 Earnings Per Common Share (Details) HTML 67K
68: R58 SHARE-BASED COMPENSATION - Narrative (Details) HTML 35K
69: R59 SHARE-BASED COMPENSATION - Valuation Assumptions HTML 31K
(Details)
70: R60 SHARE-BASED COMPENSATION - Share/Cash Settled HTML 78K
Restricted Stock Units (Details)
71: R61 SHAREHOLDERS' EQUITY - Common Shares Issued and HTML 41K
Outstanding (Details)
72: R62 SHAREHOLDERS' EQUITY - Treasury Shares (Details) HTML 36K
73: R63 SHAREHOLDERS' EQUITY - Dividends (Details) HTML 35K
74: R64 Debt and Financing Arrangements (Details) HTML 30K
75: R65 Other Comprehensive Income (LOSS) - Tax Effects of HTML 74K
Other Comprehensive Income (Details)
76: R66 Other Comprehensive Income (LOSS) - HTML 51K
Reclassifications Out of AOCI Into Net Income
(Loss) (Details)
77: R67 Related Party Transactions (Details) HTML 29K
80: XML IDEA XML File -- Filing Summary XML 146K
78: XML XBRL Instance -- axs-20220331_htm XML 5.20M
79: EXCEL IDEA Workbook of Financial Reports XLSX 117K
7: EX-101.CAL XBRL Calculations -- axs-20220331_cal XML 279K
8: EX-101.DEF XBRL Definitions -- axs-20220331_def XML 853K
9: EX-101.LAB XBRL Labels -- axs-20220331_lab XML 2.01M
10: EX-101.PRE XBRL Presentations -- axs-20220331_pre XML 1.24M
6: EX-101.SCH XBRL Schema -- axs-20220331 XSD 171K
81: JSON XBRL Instance as JSON Data -- MetaLinks 473± 709K
82: ZIP XBRL Zipped Folder -- 0001214816-22-000020-xbrl Zip 441K
ifalsei2022iQ1iAXIS
CAPITAL HOLDINGS LTDi0001214816i--12-31iP4Y00012148162022-01-012022-03-310001214816us-gaap:CommonStockMember2022-01-012022-03-310001214816axs:SeriesEPreferredDepositaryShareMember2022-01-012022-03-3100012148162022-04-26xbrli:shares00012148162022-03-31iso4217:USD00012148162021-12-3100012148162021-01-012021-03-31iso4217:USDxbrli:shares0001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:AociGainLossDebtSecuritiesAvailableForSaleWithoutAllowanceForCreditLossParentMember2022-01-012022-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:AociGainLossDebtSecuritiesAvailableForSaleWithoutAllowanceForCreditLossParentMember2021-01-012021-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:AociGainLossDebtSecuritiesAvailableForSaleWithAllowanceForCreditLossParentMember2022-01-012022-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:AociGainLossDebtSecuritiesAvailableForSaleWithAllowanceForCreditLossParentMember2021-01-012021-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-01-012022-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-01-012021-03-310001214816us-gaap:PreferredStockMember2022-03-310001214816us-gaap:PreferredStockMember2021-12-310001214816us-gaap:PreferredStockMember2020-12-310001214816us-gaap:PreferredStockMember2021-03-310001214816us-gaap:CommonStockMember2021-12-310001214816us-gaap:CommonStockMember2022-03-310001214816us-gaap:CommonStockMember2021-03-310001214816us-gaap:CommonStockMember2020-12-310001214816us-gaap:AdditionalPaidInCapitalMember2021-12-310001214816us-gaap:AdditionalPaidInCapitalMember2020-12-310001214816us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001214816us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001214816us-gaap:AdditionalPaidInCapitalMember2022-03-310001214816us-gaap:AdditionalPaidInCapitalMember2021-03-310001214816us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001214816us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-12-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-12-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2022-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2021-03-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2021-12-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2020-12-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2022-01-012022-03-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2021-01-012021-03-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2022-03-310001214816us-gaap:AccumulatedTranslationAdjustmentMember2021-03-310001214816us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001214816us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001214816us-gaap:RetainedEarningsMember2021-12-310001214816us-gaap:RetainedEarningsMember2020-12-310001214816us-gaap:RetainedEarningsMember2022-01-012022-03-310001214816us-gaap:RetainedEarningsMember2021-01-012021-03-310001214816us-gaap:RetainedEarningsMember2022-03-310001214816us-gaap:RetainedEarningsMember2021-03-310001214816us-gaap:TreasuryStockCommonMember2021-12-310001214816us-gaap:TreasuryStockCommonMember2020-12-310001214816us-gaap:TreasuryStockCommonMember2022-01-012022-03-310001214816us-gaap:TreasuryStockCommonMember2021-01-012021-03-310001214816us-gaap:TreasuryStockCommonMember2022-03-310001214816us-gaap:TreasuryStockCommonMember2021-03-3100012148162021-03-3100012148162020-12-3100012148162021-01-012021-12-31axs:segment0001214816axs:InsuranceMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310001214816us-gaap:OperatingSegmentsMemberaxs:ReinsuranceMember2022-01-012022-03-310001214816us-gaap:OperatingSegmentsMember2022-01-012022-03-310001214816axs:InsuranceMemberus-gaap:OperatingSegmentsMember2021-01-012021-03-310001214816us-gaap:OperatingSegmentsMemberaxs:ReinsuranceMember2021-01-012021-03-310001214816us-gaap:OperatingSegmentsMember2021-01-012021-03-310001214816us-gaap:MaterialReconcilingItemsMember2022-01-012022-03-310001214816us-gaap:MaterialReconcilingItemsMember2021-01-012021-03-310001214816us-gaap:CorporateNonSegmentMember2022-01-012022-03-310001214816us-gaap:CorporateNonSegmentMember2021-01-012021-03-31xbrli:pure0001214816axs:InsuranceMemberus-gaap:OperatingSegmentsMember2022-03-310001214816us-gaap:OperatingSegmentsMemberaxs:ReinsuranceMember2022-03-310001214816us-gaap:OperatingSegmentsMember2022-03-310001214816axs:InsuranceMemberus-gaap:OperatingSegmentsMember2021-03-310001214816us-gaap:OperatingSegmentsMemberaxs:ReinsuranceMember2021-03-310001214816us-gaap:OperatingSegmentsMember2021-03-310001214816us-gaap:USTreasuryAndGovernmentMember2022-03-310001214816us-gaap:ForeignGovernmentDebtSecuritiesMember2022-03-310001214816us-gaap:CorporateDebtSecuritiesMember2022-03-310001214816us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001214816us-gaap:CommercialMortgageBackedSecuritiesMember2022-03-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMember2022-03-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMember2022-03-310001214816us-gaap:USTreasuryAndGovernmentMember2021-12-310001214816us-gaap:ForeignGovernmentDebtSecuritiesMember2021-12-310001214816us-gaap:CorporateDebtSecuritiesMember2021-12-310001214816us-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001214816us-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMember2021-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMember2021-12-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMember2021-12-3100012148162021-03-012021-03-010001214816us-gaap:CommonStockMember2022-03-310001214816us-gaap:CommonStockMember2022-01-012022-03-310001214816us-gaap:PreferredStockMember2022-03-310001214816us-gaap:PreferredStockMember2022-01-012022-03-310001214816us-gaap:ExchangeTradedFundsMember2022-03-310001214816us-gaap:ExchangeTradedFundsMember2022-01-012022-03-310001214816axs:NonUnitedStatesBondMutualFundMember2022-03-310001214816axs:NonUnitedStatesBondMutualFundMember2022-01-012022-03-310001214816us-gaap:CommonStockMember2021-12-310001214816us-gaap:CommonStockMember2021-01-012021-12-310001214816us-gaap:PreferredStockMember2021-12-310001214816us-gaap:PreferredStockMember2021-01-012021-12-310001214816us-gaap:ExchangeTradedFundsMember2021-12-310001214816us-gaap:ExchangeTradedFundsMember2021-01-012021-12-310001214816axs:NonUnitedStatesBondMutualFundMember2021-12-310001214816axs:NonUnitedStatesBondMutualFundMember2021-01-012021-12-310001214816us-gaap:LimitedPartnerMember2022-03-310001214816us-gaap:FixedMaturitiesMember2022-03-310001214816us-gaap:FixedMaturitiesMember2021-12-31axs:security0001214816us-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2022-03-310001214816us-gaap:ExternalCreditRatingNonInvestmentGradeMemberus-gaap:FixedMaturitiesMember2021-12-310001214816us-gaap:HedgeFundsEquityLongShortMember2022-03-310001214816us-gaap:HedgeFundsEquityLongShortMember2022-01-012022-03-310001214816us-gaap:HedgeFundsMultistrategyMember2022-03-310001214816us-gaap:HedgeFundsMultistrategyMembersrt:MinimumMember2022-01-012022-03-310001214816us-gaap:HedgeFundsMultistrategyMembersrt:MaximumMember2022-01-012022-03-310001214816axs:DirectLendingFundsMember2022-03-310001214816axs:DirectLendingFundsMember2022-01-012022-03-310001214816us-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:RealEstateFundsMember2022-03-310001214816us-gaap:RealEstateFundsMembersrt:MinimumMember2022-01-012022-03-310001214816srt:MaximumMemberus-gaap:RealEstateFundsMember2022-01-012022-03-310001214816us-gaap:CollateralizedLoanObligationsMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816us-gaap:HedgeFundsEquityLongShortMember2021-12-310001214816us-gaap:HedgeFundsEquityLongShortMember2021-01-012021-12-310001214816us-gaap:HedgeFundsMultistrategyMember2021-12-310001214816us-gaap:HedgeFundsMultistrategyMembersrt:MinimumMember2021-01-012021-12-310001214816us-gaap:HedgeFundsMultistrategyMembersrt:MaximumMember2021-01-012021-12-310001214816axs:DirectLendingFundsMember2021-12-310001214816axs:DirectLendingFundsMember2021-01-012021-12-310001214816us-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:RealEstateFundsMember2021-12-310001214816us-gaap:RealEstateFundsMember2021-01-012021-12-310001214816us-gaap:CollateralizedLoanObligationsMember2021-12-310001214816axs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816axs:DirectLendingFundsMemberaxs:QuarterlyRedemptionMember2022-03-31axs:fund0001214816axs:DirectLendingFundsMemberaxs:QuarterlyRedemptionMember2021-03-310001214816us-gaap:RealEstateFundsMemberaxs:QuarterlyOrAnnualRedemptionMember2022-03-310001214816us-gaap:RealEstateFundsMemberaxs:QuarterlyOrAnnualRedemptionMember2021-03-310001214816us-gaap:HedgeFundsMemberaxs:LockupRedemptionRestrictionMember2022-03-310001214816us-gaap:HedgeFundsMemberaxs:LockupRedemptionRestrictionMember2021-03-310001214816axs:DirectLendingFundsMemberaxs:OtherRedemptionRestrictionMember2022-03-310001214816axs:DirectLendingFundsMemberaxs:OtherRedemptionRestrictionMember2021-03-310001214816axs:DirectLendingFundsMemberaxs:OtherRedemptionRestrictionMembersrt:MinimumMember2022-01-012022-03-310001214816axs:DirectLendingFundsMembersrt:MaximumMemberaxs:OtherRedemptionRestrictionMember2022-01-012022-03-310001214816axs:DirectLendingFundsMemberaxs:OtherRedemptionRestrictionMember2022-01-012022-03-310001214816us-gaap:HedgeFundsMultistrategyMemberaxs:OtherRedemptionRestrictionMember2022-03-310001214816us-gaap:HedgeFundsMultistrategyMemberaxs:OtherRedemptionRestrictionMember2021-03-310001214816us-gaap:HedgeFundsMultistrategyMemberaxs:OtherRedemptionRestrictionMembersrt:MinimumMember2022-01-012022-03-310001214816us-gaap:RealEstateFundsMemberaxs:OtherRedemptionRestrictionMember2022-03-310001214816us-gaap:RealEstateFundsMemberaxs:OtherRedemptionRestrictionMember2021-12-310001214816us-gaap:RealEstateFundsMemberaxs:OtherRedemptionRestrictionMembersrt:MinimumMember2022-01-012022-03-310001214816us-gaap:PrivateEquityFundsMemberaxs:OtherRedemptionRestrictionMember2022-03-310001214816us-gaap:PrivateEquityFundsMemberaxs:OtherRedemptionRestrictionMember2021-12-310001214816us-gaap:PrivateEquityFundsMemberaxs:OtherRedemptionRestrictionMember2022-01-012022-03-310001214816axs:BankRevolverOpportunityFundsMember2015-12-310001214816axs:BankRevolverOpportunityFundsMember2022-01-012022-03-310001214816axs:HarringtonReinsuranceHoldingsLimitedMember2016-01-012016-12-310001214816axs:HarringtonReinsuranceHoldingsLimitedMember2016-12-310001214816us-gaap:FixedMaturitiesMember2022-01-012022-03-310001214816us-gaap:FixedMaturitiesMember2021-01-012021-03-310001214816axs:AlternativeInvestmentsMember2022-01-012022-03-310001214816axs:AlternativeInvestmentsMember2021-01-012021-03-310001214816us-gaap:EquitySecuritiesMember2022-01-012022-03-310001214816us-gaap:EquitySecuritiesMember2021-01-012021-03-310001214816us-gaap:MortgagesMember2022-01-012022-03-310001214816us-gaap:MortgagesMember2021-01-012021-03-310001214816us-gaap:CashAndCashEquivalentsMember2022-01-012022-03-310001214816us-gaap:CashAndCashEquivalentsMember2021-01-012021-03-310001214816us-gaap:ShortTermInvestmentsMember2022-01-012022-03-310001214816us-gaap:ShortTermInvestmentsMember2021-01-012021-03-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2022-03-310001214816us-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialMortgageBackedSecuritiesMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialMortgageBackedSecuritiesMember2022-03-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CommonStockMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CommonStockMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CommonStockMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:PreferredStockMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:PreferredStockMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:PreferredStockMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:ExchangeTradedFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:ExchangeTradedFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:ExchangeTradedFundsMember2022-03-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2022-03-310001214816us-gaap:HedgeFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberaxs:DirectLendingFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberaxs:DirectLendingFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberaxs:DirectLendingFundsMember2022-03-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMemberaxs:DirectLendingFundsMember2022-03-310001214816axs:DirectLendingFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMemberus-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:PrivateEquityFundsMember2022-03-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel2Member2022-03-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel3Member2022-03-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2022-03-310001214816us-gaap:RealEstateFundsMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CollateralizedLoanObligationsMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CollateralizedLoanObligationsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMember2022-03-310001214816us-gaap:CollateralizedLoanObligationsMember2022-03-310001214816us-gaap:FairValueInputsLevel1Memberaxs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816us-gaap:FairValueInputsLevel2Memberaxs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberaxs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2022-03-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:USTreasuryAndGovernmentMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:ForeignGovernmentDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CorporateDebtSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MortgageBackedSecuritiesIssuedByUSGovernmentSponsoredEnterprisesMember2021-12-310001214816us-gaap:CommercialMortgageBackedSecuritiesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:MortgageBackedSecuritiesIssuedByPrivateEnterprisesMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:USStatesAndPoliticalSubdivisionsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CommonStockMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CommonStockMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CommonStockMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:PreferredStockMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:PreferredStockMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:PreferredStockMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:ExchangeTradedFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:ExchangeTradedFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:ExchangeTradedFundsMember2021-12-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816axs:NonUnitedStatesBondMutualFundMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:HedgeFundsMemberus-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2021-12-310001214816us-gaap:HedgeFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberaxs:DirectLendingFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberaxs:DirectLendingFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberaxs:DirectLendingFundsMember2021-12-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMemberaxs:DirectLendingFundsMember2021-12-310001214816axs:DirectLendingFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMemberus-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:PrivateEquityFundsMember2021-12-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel2Member2021-12-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueInputsLevel3Member2021-12-310001214816us-gaap:RealEstateFundsMemberus-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2021-12-310001214816us-gaap:RealEstateFundsMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberus-gaap:CollateralizedLoanObligationsMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberus-gaap:CollateralizedLoanObligationsMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMember2021-12-310001214816us-gaap:CollateralizedLoanObligationsMember2021-12-310001214816us-gaap:FairValueInputsLevel1Memberaxs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816us-gaap:FairValueInputsLevel2Memberaxs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberaxs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816axs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816us-gaap:FairValueMeasuredAtNetAssetValuePerShareMember2021-12-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDefaultRateMemberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDefaultRateMembersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:CollateralizedLoanObligationsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:MeasurementInputLossSeverityMember2022-03-310001214816us-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:CollateralizedLoanObligationsMemberus-gaap:MeasurementInputLossSeverityMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberaxs:MeasurementInputCollateralSpreadsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMemberus-gaap:CollateralizedLoanObligationsMemberaxs:MeasurementInputCollateralSpreadsMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-03-310001214816us-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMemberus-gaap:CollateralizedLoanObligationsMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMembersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDefaultRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDefaultRateMembersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberaxs:MeasurementInputLossAbsorptionYieldMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberaxs:MeasurementInputLossAbsorptionYieldMemberus-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMembersrt:MinimumMember2022-01-012022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Membersrt:MaximumMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Membersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-01-012022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816us-gaap:FairValueInputsLevel3Memberus-gaap:MeasurementInputDiscountRateMembersrt:WeightedAverageMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2022-03-310001214816axs:OtherPrivatelyHeldInvestmentsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:MarketApproachValuationTechniqueMember2022-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2021-12-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2022-01-012022-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2022-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2021-12-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2022-01-012022-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2021-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2022-01-012022-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2022-03-310001214816us-gaap:FixedMaturitiesMember2021-12-310001214816us-gaap:FixedMaturitiesMember2022-01-012022-03-310001214816us-gaap:FixedMaturitiesMember2022-03-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2021-12-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2022-01-012022-03-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2022-03-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2021-12-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2022-01-012022-03-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2022-03-310001214816axs:AlternativeInvestmentsMember2021-12-310001214816axs:AlternativeInvestmentsMember2022-01-012022-03-310001214816axs:AlternativeInvestmentsMember2022-03-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2021-12-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2022-01-012022-03-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2022-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2020-12-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2021-01-012021-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CorporateDebtSecuritiesMember2021-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-12-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2021-01-012021-03-310001214816us-gaap:FixedMaturitiesMemberus-gaap:CommercialMortgageBackedSecuritiesMember2021-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2020-12-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2021-01-012021-03-310001214816us-gaap:AssetBackedSecuritiesSecuritizedLoansAndReceivablesMemberus-gaap:FixedMaturitiesMember2021-03-310001214816us-gaap:FixedMaturitiesMember2020-12-310001214816us-gaap:FixedMaturitiesMember2021-01-012021-03-310001214816us-gaap:FixedMaturitiesMember2021-03-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2020-12-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2021-01-012021-03-310001214816axs:AlternativeInvestmentsMemberus-gaap:CollateralizedLoanObligationsMember2021-03-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2020-12-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2021-01-012021-03-310001214816axs:AlternativeInvestmentsMemberaxs:OtherPrivatelyHeldInvestmentsMember2021-03-310001214816axs:AlternativeInvestmentsMember2020-12-310001214816axs:AlternativeInvestmentsMember2021-01-012021-03-310001214816axs:AlternativeInvestmentsMember2021-03-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2020-12-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2021-01-012021-03-310001214816us-gaap:DerivativeMemberus-gaap:OtherLiabilitiesMember2021-03-310001214816us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-03-310001214816us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-12-310001214816us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-03-310001214816us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-12-310001214816axs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherAssetsMemberaxs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherLiabilitiesMemberaxs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2022-03-310001214816axs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherAssetsMemberaxs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherLiabilitiesMemberaxs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherAssetsMemberus-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherAssetsMemberus-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherLiabilitiesMemberus-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816axs:OtherUnderwritingRelatedDerivativesMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816axs:OtherUnderwritingRelatedDerivativesMemberus-gaap:OtherAssetsMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816axs:OtherUnderwritingRelatedDerivativesMemberus-gaap:OtherLiabilitiesMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2022-03-310001214816axs:OtherUnderwritingRelatedDerivativesMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816axs:OtherUnderwritingRelatedDerivativesMemberus-gaap:OtherAssetsMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816axs:OtherUnderwritingRelatedDerivativesMemberus-gaap:OtherLiabilitiesMemberaxs:UnderwritingPortfolioMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherAssetsMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherLiabilitiesMemberus-gaap:NondesignatedMember2022-03-310001214816us-gaap:OtherAssetsMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:OtherLiabilitiesMemberus-gaap:NondesignatedMember2021-12-310001214816us-gaap:GainLossOnInvestmentsMember1axs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMember2022-01-012022-03-310001214816us-gaap:GainLossOnInvestmentsMember1axs:InvestmentPortfolioMemberus-gaap:ForeignExchangeForwardMember2021-01-012021-03-310001214816us-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:ForeignCurrencyGainLossMember2022-01-012022-03-310001214816us-gaap:ForeignExchangeForwardMemberaxs:UnderwritingPortfolioMemberus-gaap:ForeignCurrencyGainLossMember2021-01-012021-03-310001214816axs:OtherUnderwritingRelatedDerivativesMemberaxs:UnderwritingPortfolioMemberus-gaap:OtherOperatingIncomeExpenseMember2022-01-012022-03-310001214816axs:OtherUnderwritingRelatedDerivativesMemberaxs:UnderwritingPortfolioMemberus-gaap:OtherOperatingIncomeExpenseMember2021-01-012021-03-310001214816us-gaap:CatastropheMember2022-01-012022-03-310001214816us-gaap:CatastropheMember2021-01-012021-03-310001214816axs:UkraineRussiaWarMember2022-01-012022-03-310001214816axs:NovaeSyndicate2007Member2021-01-012021-03-310001214816axs:InsuranceMember2022-01-012022-03-310001214816axs:InsuranceMember2021-01-012021-03-310001214816axs:ReinsuranceMember2022-01-012022-03-310001214816axs:ReinsuranceMember2021-01-012021-03-310001214816axs:InsuranceMemberaxs:PropertyandOtherReserveClassMember2022-01-012022-03-310001214816axs:InsuranceMemberaxs:PropertyandOtherReserveClassMember2021-01-012021-03-310001214816axs:InsuranceMemberaxs:MarineMember2022-01-012022-03-310001214816axs:InsuranceMemberaxs:MarineMember2021-01-012021-03-310001214816axs:InsuranceMemberaxs:AviationMember2022-01-012022-03-310001214816axs:InsuranceMemberaxs:AviationMember2021-01-012021-03-310001214816axs:InsuranceMemberaxs:CreditAndPoliticalRiskMember2022-01-012022-03-310001214816axs:InsuranceMemberaxs:CreditAndPoliticalRiskMember2021-01-012021-03-310001214816axs:ProfessionalLinesMemberaxs:InsuranceMember2022-01-012022-03-310001214816axs:ProfessionalLinesMemberaxs:InsuranceMember2021-01-012021-03-310001214816axs:InsuranceMemberaxs:LiabilityLineMember2022-01-012022-03-310001214816axs:InsuranceMemberaxs:LiabilityLineMember2021-01-012021-03-310001214816axs:ReinsuranceMemberaxs:PropertyandOtherReserveClassMember2022-01-012022-03-310001214816axs:ReinsuranceMemberaxs:PropertyandOtherReserveClassMember2021-01-012021-03-310001214816axs:ReinsuranceMemberaxs:CreditandSuretyBusinessMember2022-01-012022-03-310001214816axs:ReinsuranceMemberaxs:CreditandSuretyBusinessMember2021-01-012021-03-310001214816axs:ProfessionalLinesMemberaxs:ReinsuranceMember2022-01-012022-03-310001214816axs:ProfessionalLinesMemberaxs:ReinsuranceMember2021-01-012021-03-310001214816axs:MotorMemberaxs:ReinsuranceMember2022-01-012022-03-310001214816axs:MotorMemberaxs:ReinsuranceMember2021-01-012021-03-310001214816axs:ReinsuranceMemberaxs:LiabilityLineMember2022-01-012022-03-310001214816axs:ReinsuranceMemberaxs:LiabilityLineMember2021-01-012021-03-310001214816axs:PerformanceRestrictedStockUnitsGrantedIn2021Memberaxs:PerformanceRestrictedStockUnitsMember2022-01-012022-03-310001214816axs:PerformanceRestrictedStockUnitsGrantedIn2021Membersrt:MinimumMemberaxs:PerformanceRestrictedStockUnitsMember2022-01-012022-03-310001214816axs:PerformanceRestrictedStockUnitsGrantedIn2021Membersrt:MaximumMemberaxs:PerformanceRestrictedStockUnitsMember2022-01-012022-03-310001214816axs:PerformanceRestrictedStockUnitsMember2022-01-012022-03-310001214816axs:PerformanceRestrictedStockUnitsMember2021-01-012021-03-31axs:trading_day0001214816us-gaap:PerformanceSharesMemberaxs:ShareSettledMember2021-12-310001214816axs:ShareSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2021-12-310001214816us-gaap:PerformanceSharesMemberaxs:ShareSettledMember2022-01-012022-03-310001214816axs:ShareSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2022-01-012022-03-310001214816us-gaap:PerformanceSharesMemberaxs:ShareSettledMember2022-03-310001214816axs:ShareSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2022-03-310001214816axs:CashSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2021-12-310001214816axs:CashSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2022-01-012022-03-310001214816axs:CashSettledMemberaxs:ServiceBasedRestrictedStockAndRestrictedStockUnitsMember2022-03-310001214816us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-03-310001214816us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-03-310001214816us-gaap:RestrictedStockUnitsRSUMemberaxs:CashSettledMember2022-03-310001214816us-gaap:RestrictedStockUnitsRSUMemberaxs:CashSettledMember2021-03-310001214816us-gaap:RestrictedStockUnitsRSUMember2022-03-310001214816us-gaap:RestrictedStockUnitsRSUMember2021-03-310001214816us-gaap:CommonStockMember2021-12-310001214816us-gaap:CommonStockMember2020-12-310001214816us-gaap:CommonStockMember2021-01-012021-03-310001214816us-gaap:CommonStockMember2022-03-310001214816us-gaap:CommonStockMember2021-03-310001214816axs:OpenMarketMemberus-gaap:CommonStockMember2022-01-012022-03-310001214816axs:OpenMarketMemberus-gaap:CommonStockMember2021-01-012021-03-310001214816axs:EmployeesMemberus-gaap:CommonStockMember2022-01-012022-03-310001214816axs:EmployeesMemberus-gaap:CommonStockMember2021-01-012021-03-310001214816us-gaap:SeriesEPreferredStockMember2022-01-012022-03-310001214816us-gaap:SeriesEPreferredStockMember2021-01-012021-03-310001214816us-gaap:LetterOfCreditMember2021-03-310001214816axs:LOCFacilityTwoMemberus-gaap:LetterOfCreditMember2021-03-310001214816us-gaap:LetterOfCreditMemberaxs:LOCFacilityMember2021-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001214816us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMemberus-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001214816axs:CoInvestmentWithGordonBrothersMemberaxs:InvestmentInRelatedPartyMembersrt:DirectorMember2022-03-31
(Exact name of registrant as specified in its charter)
iBermuda
(State or other jurisdiction of incorporation or organization)
i98-0395986
(I.R.S. Employer Identification No.)
i92 Pitts Bay Road, iPembroke,
iBermudaiHM 08
(Address of principal executive offices and zip code)
(i441) i496-2600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iCommon shares, par
value $0.0125 per share
iAXS
iNew York Stock Exchange
iDepositary
shares, each representing a 1/100th interest in a 5.50% Series E preferred share
iAXS PRE
iNew York Stock Exchange
Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYes☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
iLarge accelerated filer
☒
Accelerated
filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i☐ No ☒
At
April 26, 2022, there were i85,285,821 common shares outstanding, $0.0125 par value per share, of the registrant.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this report, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking
statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States ("U.S.") federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential", "intend" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond management's control.
Forward-looking statements contained in this report may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses including losses related
to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements.
We believe that these factors include, but are not limited to, the following:
•the adverse impact of the ongoing COVID-19 pandemic on our business, results of operations, financial condition, and liquidity;
•the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;
•the occurrence and magnitude of natural and man-made disasters;
•the impact of global climate change on our business, including the possibility that we do not adequately assess or reserve for the increased frequency and severity of natural catastrophes;
•losses
from war including losses related to the Russian invasion of Ukraine, terrorism and political unrest, or other unanticipated losses;
•actual claims exceeding loss reserves;
•general economic, capital and credit market conditions, including fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency exchange rates;
•the failure of any of the loss limitation methods we employ;
•the effects of emerging claims, coverage and regulatory issues, including uncertainty related to coverage definitions, limits, terms and conditions;
•the inability to purchase reinsurance or collect amounts due to us from reinsurance
we have purchased;
•the loss of business provided to us by major brokers;
•breaches by third parties in our program business of their obligations to us;
•difficulties with technology and/or data security;
•the failure of our policyholders or intermediaries to pay premiums;
•the failure of our cedants to adequately evaluate risks;
•the inability to obtain additional capital on favorable terms, or at all;
•the loss of one or more of our key executives;
•a
decline in our ratings with rating agencies;
•changes in accounting policies or practices;
•the use of industry models and changes to these models;
•changes in governmental regulations and potential government intervention in our industry;
•inadvertent failure to comply with certain laws and regulations relating to sanctions and foreign corrupt practices;
•changes
in the political environment of certain countries in which we operate or underwrite business, including the United Kingdom's withdrawal from the European Union;
•changes in tax laws; and
•other factors including but not limited to those described under Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as those factors may be updated from time to time in our periodic and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Readers are urged to carefully consider all such factors as the COVID-19 pandemic may have the effect of heightening many of the other
risks and uncertainties described.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
We use our website (www.axiscapital.com) and our corporate LinkedIn (AXIS Capital) and Twitter (@AXIS_Capital)
accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received by those enrolled in our "E-mail Alerts" program, which can be found in the Investor Information section of our website. The contents of our website and social media channels are not part of this Quarterly Report on Form 10-Q.
Supplemental disclosures of cash flow information:
Income taxes paid
$
i346
$
i8,981
Interest
paid
$
i16,263
$
i22,700
Supplemental
disclosures of cash flow information: In 2021, the transfer of securities with a fair value of $i405 million from fixed maturities, available for sale to fixed maturities, held to maturity was treated as a non-cash activity in the consolidated statement of cash flows (refer to Note 3 'Investments').
See
accompanying notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
i
Basis
of Presentation
i
These unaudited consolidated financial statements (the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the U.S. Securities and Exchange Commission's ("SEC") instructions to Form 10-Q and Article 10 of Regulation S-X and include AXIS Capital Holdings Limited ("AXIS Capital") and its subsidiaries
(the "Company"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in AXIS Capital's Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC.
In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations for the periods presented.
The results of operations for any interim
period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated.
To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year's presentation.
Tabular dollar and share amounts are in thousands, with the exception of per share amounts. All amounts are reported in U.S. dollars.
Significant Accounting Policies
There were no notable changes to the Company's significant accounting policies
subsequent to its Annual Report on Form 10-K for the year ended December 31, 2021.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. SEGMENT
INFORMATION
i
The Company's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has itwo
reportable segments, insurance and reinsurance. The Company does not allocate its assets by segment, with the exception of goodwill and intangible assets.
Insurance
The Company's insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The product lines in this segment are property, marine, terrorism, aviation, credit and political risk, professional lines, liability, and accident and health.
Reinsurance
The
Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are catastrophe, property, credit and surety, professional lines, motor, liability, engineering, agriculture, marine and aviation, and accident and health.
iThe following tables present the underwriting results of the Company's
reportable segments, as well as the carrying amounts of allocated goodwill and intangible assets:
(1)Asset-backed
securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").
/
On March 1, 2021, the Company transferred ABS with total fair value of $i405 million
from fixed maturities, available for sale to fixed maturities, held to maturity. These securities, which the Company has the intent and ability to hold to maturity, were transferred in order to better align the accounting classification with their management strategy. The net unrealized gain at the date of the transfer, March 1, 2021, continues to be reported in the carrying value of the transferred securities and is amortized over the remaining life of the securities using the effective yield method.
At March 31, 2022, fixed maturities, held to maturity of $i494
million (2021: $i446 million) were presented net of an allowance for expected credit losses of $inil
(2021: $inil).
The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses
of the underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to have a credit loss. At March 31, 2022, the allowance for credit losses expected to be recognized over the life of the Company's ABS, held to maturity was $inil.
To
estimate expected credit losses for corporate debt securities, held to maturity, the Company's projected cash flows are primarily driven by assumptions regarding the severity of loss, which is a function of the probability of default and projected recovery rates. The Company's default and recovery rates are based on credit ratings, credit analysis and macroeconomic forecasts. At March 31, 2022, the allowance for credit losses expected to be recognized over the life of the Company's corporate debt, held to maturity was $inil.
In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.
The Company also invests in limited partnerships which represent i69%
of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds and CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(c) 'Other Investments').
The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs. The maximum exposure to loss on these interests is limited to the amount of commitment made by the
Company. The Company has not provided financial or other support to these structured securities other than the original investment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
Contractual Maturities of Fixed Maturities
Expected
maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
i
The table below provides the contractual maturities of fixed maturities classified as available for sale:
ABS
classified as held to maturity with a net carrying value of $i438 million (2021: $i408 million)
do not have a single maturity date and cannot be allocated over several maturity groupings.
Corporate debt classified as held to maturity with a net carrying value of $i51 million (2021: $i34 million)
is due between 3 years and 10 years and corporate debt classified as held to maturity with a net carrying value of $i4 million (2021: $i4 million)
is due after ten years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
Gross Unrealized Losses
i
The
following table summarizes fixed maturities, available for sale in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
At March 31, 2022, i3,956 fixed maturities (2021: i2,333)
were in an unrealized loss position of $i410 million (2021: $i94
million), of which $i33 million (2021: $i8
million) was related to securities below investment grade or not rated.
At March 31, 2022, i502 fixed maturities (2021: i344)
had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $i574 million (2021: $i390
million).
The unrealized losses of $i410 million (2021: $i94
million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.
At March 31, 2022, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.
The
primary credit quality indicators for commercial mortgage loans are the debt service coverage ratio which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan, (generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio which compares the unpaid principal balance of the loan to the estimated fair value of the underlying collateral (generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated annually, on a rolling basis.
The Company has a high quality mortgage loan portfolio with a weighted average
debt service coverage ratio of i2.6x (2021: i2.5x) and a weighted average loan-to-value ratio of i60%
(2021: i60%). At March 31, 2022, there are ino credit losses or past due amounts associated with the commercial mortgage loans held
by the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
c) Other Investments
i
The
following table provides a summary of the Company's other investments, together with additional information relating to the liquidity of each category:
(1) Applies to ione fund with a fair value of $i48 million (2021: $i47
million).
(2) Applies to itwo funds with a fair value of $i76 million (2021: $i73
million).
/
Two common redemption restrictions which may impact the Company's ability to redeem hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund's net assets which may otherwise hinder the general partner or investment manager's ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily
large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During the three months ended March 31, 2022 and 2021, neither of these restrictions impacted the Company's redemption requests. At March 31, 2022, there were ino
hedge fund holdings (2021: $i3 million) where the Company is still within the lockup period.
At March 31, 2022, the Company
had $i203 million (2021: $i224
million) of unfunded commitments as a limited partner in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from four to iten years and the General Partners of certain funds have the option to extend the term by up to ithree
years.
At March 31, 2022, the Company had $i26 million (2021: $i23
million) of unfunded commitments as a limited partner in multi-strategy hedge funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until after the completion of the funds' investment term. These funds have investment terms ranging from itwo years to the dissolution of the underlying fund.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
3. INVESTMENTS (CONTINUED)
At March 31, 2022, the Company had $i198
million (2021: $i173 million) of unfunded commitments as a limited partner in funds which invest in real estate and real estate securities and businesses. These funds include an open-ended fund and funds with investment terms ranging from itwo
years to the dissolution of the underlying fund.
At March 31, 2022, the Company had $i187 million (2021: $i178
million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over ifive years.
During 2015, the
Company made a $i50 million commitment as a limited partner of a bank revolver opportunity fund. The fund has an investment term of iseven
years and the General Partners have the option to extend the term by up to itwo years. At March 31, 2022, this commitment remains unfunded. It is not anticipated that the full amount of this fund will be drawn.
d) Equity Method Investments
During
2016, the Company paid $i108 million including direct transaction costs to acquire i19%
of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by AXIS Capital and The Blackstone Group L.P. ("Blackstone"). Through long-term service agreements, AXIS Capital will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will
be shared equally. Harrington is not a VIE that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $i5 million
which represents initial transactions costs.
e) Net Investment Income
iNet investment income was derived from the following sources:
Net
unrealized gains (losses) on equity securities
(i43,622)
(i3,475)
Net
investment gains
$
(i94,508)
$
i29,645
(1)
Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.
(2) Refer to Note 5 'Derivative Instruments'.
/
iThe
following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:
Expected
credit losses on securities where credit losses were not previously recognized
i9
i63
Additions
(reductions) for expected credit losses on securities where credit losses were previously recognized
i78
(i105)
Impairments
of securities which the Company intends to sell or more likely than not will be required to sell
i—
i—
Securities
sold/redeemed/matured
(i17)
(i47)
Balance
at end of period
$
i383
$
i234
/
g) Reverse
Repurchase Agreements
At March 31, 2022, the Company held $i24 million (2021: $inil)
of reverse repurchase agreements. These loans are fully collateralized, are generally outstanding for a short period of time and are presented on a gross basis as part of cash and cash equivalents in the Company's consolidated balance sheets. The required collateral for these loans is either cash or U.S. Treasuries at a minimum rate of i102% of the loan principal. Upon maturity, the
Company receives principal and interest income. The Company monitors the estimated fair value of the securities loaned and borrowed on a daily basis with additional collateral obtained as necessary throughout the duration of the transaction.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. FAIR VALUE MEASUREMENTS
i
Fair Value Hierarchy
Fair value is defined as the price to sell an asset or transfer a liability (i.e. the "exit price") in an orderly transaction between market participants. U.S. GAAP prescribes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to quoted prices in active
markets and the lowest priority to unobservable data. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement. The hierarchy is broken down into three levels as follows:
•Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
•Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves,
prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's judgments about assumptions that market participants might use.
The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation
is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.
Accordingly, the degree of judgment exercised by management in determining fair value is greatest for financial instruments categorized as Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead the Company to change the selection of valuation technique (from market to cash flow approach) or may cause the Company to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels
within the fair value hierarchy.
Valuation Techniques
The valuation techniques, including significant inputs and assumptions generally used to determine the fair values of the Company's financial instruments as well as the classification of the fair values of its financial instruments in the fair value hierarchy are described in detail below.
Fixed Maturities
At each valuation date, the Company uses the market approach valuation technique to estimate the fair value
of its fixed maturities portfolio, where possible. The market approach includes, but is not limited to, prices obtained from third-party pricing services for identical or comparable securities and the use of "pricing matrix models" using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third-party pricing services is sourced from multiple vendors, where available, and the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Where prices are unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers who are active in the corresponding markets. The valuation techniques including significant inputs and assumptions generally
used to determine the fair values of the Company's fixed maturities by asset class as well as the classifications of the fair values of these securities in the fair value hierarchy are described in detail below.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
U.S.
Government and Agency
U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of U.S. Treasury securities are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. The fair values of U.S. government agency securities are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2.
Non-U.S. Government
Non-U.S.
government securities include bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair values of these securities are based on prices obtained from international indices or valuation models that include inputs such as interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs used to price these securities are observable market inputs, the fair values of non-U.S. government securities are classified as Level 2.
Corporate Debt
Corporate debt securities consist primarily of investment-grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are
generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of corporate debt securities are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
Agency RMBS
Agency RMBS consist of bonds issued by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs used to price these securities are observable market inputs, the fair values of Agency RMBS are classified as Level 2.
CMBS
CMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the
fair values of CMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Non-agency RMBS
Non-agency RMBS mainly include investment-grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs used to price these securities are observable market inputs, the fair values of non-agency RMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the
Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
ABS
ABS mainly include investment-grade bonds backed by pools of loans with a variety of underlying collateral, including auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs"), originated by a variety of financial institutions. The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, the fair
values of ABS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.
Municipals
Municipals comprise revenue bonds and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair values of these securities are determined using spreads obtained from the new issue market, trade prices and broker-dealers quotes. As the significant
inputs used to price these securities are observable market inputs, the fair values of municipals are classified as Level 2.
Equity Securities
Equity securities include common stocks, preferred stocks, exchange-traded funds and bond mutual funds. As the fair values of common stocks, preferred stocks and exchange-traded funds are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. As bond mutual funds have daily liquidity, the fair values of these securities are classified as Level 2.
Other Investments
The fair value of an indirect investment in CLO-Equities is estimated using an income approach valuation technique, specifically an
externally developed discounted cash flow model due to the lack of observable and relevant trades in secondary markets. As the significant inputs used to price this security are unobservable, the fair value of the indirect investment in CLO-Equities is classified as Level 3.
Other privately held investments include convertible preferred shares, common shares, convertible notes, investments in limited partnerships and a variable yield security. These investments are initially valued at cost, which approximates fair value. In subsequent measurement periods, the fair values of these investments is derived from one or a combination of valuation methodologies which consider factors including recent capital raises by the investee companies, comparable precedent transaction multiples, comparable publicly traded multiples, third-party valuations, discounted cash-flow models, and other techniques
that account for the industry and development stage of each investee company. The fair value of the variable yield security is determined using an externally developed discounted cash flow model. In order to assess the reasonableness of the information received from investee companies, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact the results of operations, financial condition or liquidity of these companies. In addition, the Company engages in regular communication with management at investee companies. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Short-term Investments
Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are typically not actively traded due to their approaching maturity, therefore their amortized cost approximates fair value. The fair values of short-term investments are classified as Level 2.
Derivative Instruments
Derivative
instruments include foreign exchange forward contracts that are customized to the Company's economic hedging strategies and trade in the over-the-counter derivative market. The fair values of these derivatives are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used to price these derivatives are observable market inputs, the fair values of these derivatives are classified as Level 2.
Other underwriting-related derivatives include insurance and reinsurance contracts
that are accounted for as derivatives. These derivative contracts are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3.
Cash-Settled Awards
Cash-settled awards comprise restricted stock units that form part of the Company's compensation program. Although the fair values of these awards
are determined using observable quoted market prices in active markets, the restricted stock units are not actively traded. As the significant inputs used to price these securities are observable market inputs, the fair values of these liabilities are classified as Level 2.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
i
The
following table quantifies the significant unobservable inputs used in estimating fair values at March 31, 2022 of investments classified as Level 3 in the fair value hierarchy:
Fair value
Valuation technique
Unobservable
input
Amount / Range
Weighted
average
Other investments - CLO-Equities
$
i4,881
Discounted
cash flow
Default rate
i4.5%
i4.5%
Loss
severity rate
i50.0%
i50.0%
Collateral
spread
i3.0%
i3.0%
Estimated maturity date
i6
years
i6 years
Other investments - Other privately held investments
$
i20,867
Discounted
cash flow
Discount rate
i2.5%
i2.5%
Default
rate
i0.5%
i0.5%
Loss
absorption yield
i1.0%
i1.0%
Estimated
maturity date
i2-i4 years
i3
years
Derivatives - Other underwriting-related derivatives
$
(i5,074)
Discounted
cash flow
Discount rate
i2.5%
i2.5%
Note:
Fixed maturities of $i61 million that are classified as Level 3 are excluded from the above table as these securities are priced using broker-dealer quotes. In addition, other privately held investments of $i95 million
that are classified as Level 3 are excluded from the above table as these investments are priced using capital statements received from investee companies.
/
Other Investments - CLO-Equities
The CLO-Equities market continues to be relatively inactive with only a small number of transactions being observed, particularly related to transactions involving CLO-Equities held by the Company. Accordingly, the fair value of the Company's indirect investment in CLO-Equities
is determined using a discounted cash flow model prepared by an external investment manager.
The default and loss severity rates are the most judgmental unobservable market inputs to the discounted cash flow model to which the valuation of the Company's indirect investment in CLO-Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in a lower (higher) fair value estimate for the investment in CLO-Equities and, in general, a change in default rate assumptions would be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying
portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in a higher (lower) fair value estimate for the investment in CLO-Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.
On a quarterly basis, the Company's valuation process for its indirect investment in CLO-Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. The above significant unobservable inputs are reviewed and updated based on information obtained from secondary markets, including information received from the managers of the Company's CLO-Equities
investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact future cash flows. In addition, the assumptions the Company uses in its models are updated through regular communication with industry participants and ongoing monitoring of the deals in which the Company participates.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Other Investments - Other Privately Held Securities
Other privately held securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of the variable yield security was determined using an externally developed discounted cash flow model. This model includes inputs that are specific to that investment. The inputs used in the fair value measurement include an appropriate discount rate, default rate, loss absorption rate and estimated maturity
date. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this investment. A significant increase (decrease) in this input in isolation could result in significantly lower (higher) fair value measurement for this investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as investee specific information that may impact future cash flows.
Derivatives - Other Underwriting-related Derivatives
Other underwriting-related
derivatives are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models which use appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of these derivatives. A significant increase (decrease) in this input in isolation could result in a significantly lower (higher) fair value measurement for the derivative contracts. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current
market conditions, historical results, as well as contract specific information that may impact future cash flows.
(1) Realized
gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.
(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").
(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Transfers into Level 3 from Level 2
There were no transfers into Level 3 from Level 2 during the three months ended March 31, 2022. The transfers into Level 3 from Level 2 during the three months ended March 31, 2021 were primarily due to the lack of observable market inputs and multiple quotes from pricing vendors and broker-dealers for certain fixed maturities.
Transfers
out of Level 3 into Level 2
There were no transfers out of Level 3 into Level 2 during the three months ended March 31, 2022. The transfers out of Level 3 into Level 2 during the three months ended March 31, 2021 were primarily due to the availability of observable market inputs and multiple quotes from pricing vendors for certain fixed maturities.
Measuring the Fair Value of Other Investments Using Net Asset Valuations
The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are estimated using net asset valuations ("NAVs") as advised by external fund managers or third-party administrators. For these funds, NAVs are
based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP.
For hedge funds, direct lending funds, private equity funds and real estate funds, valuation statements are typically released on a reporting lag, therefore, the Company estimates the fair value of these funds by starting with the most recent fund valuations and adjusting for capital calls, redemptions, drawdowns and distributions. Return estimates are not available from the relevant fund managers for these funds, therefore the Company typically has a reporting lag in its fair value measurements of these funds. At March
31, 2022 and December 31, 2021 all funds measured at fair value using NAVs are reported on a lag.
The Company often does not have access to financial information relating to the underlying securities held within the funds, therefore, management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by fund managers or fund administrators. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by fund managers and fund administrators. These procedures include, but are not limited to, regular
review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of the Company's fair value estimates against subsequently received NAVs. Backtesting involves comparing the Company's previously reported fair values for each fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).
The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are measured using the NAV practical expedient, therefore the fair values of these funds have not been categorized within the fair value hierarchy.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
Financial Instruments Disclosed, But Not Carried, at Fair Value
The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments, including insurance contracts.
At March 31, 2022,
the carrying values of cash and cash equivalents including restricted amounts, accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated fair values due to their short maturities. As these financial instruments are not actively traded, their fair values are classified as Level 2.
At March 31, 2022, the Company's fixed maturities held to maturity, were recorded at amortized cost with a carrying value of $i494
million (2021: $i446 million) and a fair value of $i486 million (2021: $i445 million).
The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, their fair values are classified as Level 2.
At March 31, 2022, the carrying value of mortgage loans, held for investment, approximated fair value. The fair values of mortgage loans are primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk or are determined from pricing for similar loans. As mortgage loans are not actively traded, their fair values are classified as Level 3.
At March
31, 2022, the Company's debt was recorded at amortized cost with a carrying value of $i1,311 million (2021: $i1,311
million) and a fair value of $i1,339 million (2021: $i1,453 million). The fair value of the
Company's debt is based on prices obtained from a third-party pricing service and is determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair value of the Company's debt is classified as Level 2.
5. DERIVATIVE INSTRUMENTS
ii
The
following table provides the balance sheet classifications of derivatives recorded at fair value:
(1)Derivative
assets and derivative liabilities are classified within other assets and other liabilities in the consolidated balance sheets.
/
The notional amounts of derivative contracts represent the basis on which amounts paid or received are calculated and are presented in the above table to quantify the volume of the Company's derivative activities. Notional amounts are not reflective of credit risk.
None of the
Company's derivative instruments are designated as hedges under current accounting guidance.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. DERIVATIVE INSTRUMENTS (CONTINUED)
Offsetting
Assets and Liabilities
The Company's derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure.
ii
The
following table provides a reconciliation of gross derivative assets and liabilities to the net amounts presented in the consolidated
balance sheets, with the difference being attributable to the impact of master netting agreements:
(1)Net
asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.
//
Refer to Note 3 'Investments' for information on reverse repurchase agreements.
a) Relating to Investment Portfolio
Foreign Currency Risk
The
Company's investment portfolio is exposed to foreign currency risk therefore the fair values of its investments are partially influenced by changes in foreign exchange rates. The Company may enter into foreign exchange forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.
Interest Rate Risk
The Company's investment portfolio includes a large percentage of fixed maturities which exposes it to significant interest
rate risk. As part of overall management of this risk, the Company may use interest rate swaps.
b) Relating to Underwriting Portfolio
Foreign Currency Risk
The Company's insurance and reinsurance subsidiaries and branches operate in various countries. Some of its business is written in currencies other than the U.S. dollar, therefore the underwriting portfolio is exposed to significant foreign currency risk. The
Company manages foreign currency risk by seeking to match its foreign-denominated net liabilities under insurance and reinsurance contracts with cash and investments that are denominated in the same currencies. The Company uses derivative instruments, specifically, forward contracts to economically hedge foreign currency exposures.
Other Underwriting-related Risks
The Company enters into insurance and reinsurance contracts
that are accounted for as derivatives. These insurance or reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations.
The
following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserves for unpaid losses and loss expenses:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the three months ended March 31, 2022, the Company recognized catastrophe and weather-related losses, net of reinsurance, of $i60
million (2021: $i110 million), including $i30 million
attributable to the Russia-Ukraine war.
At March 31, 2021, foreign exchange and other included a reduction in reinsurance recoverable on unpaid losses of $i49 million related to the Reinsurance to Close of the 2018 year of account of Syndicate 2007.
Estimates for Significant Catastrophe Events
At March 31,
2022, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include the Russia-Ukraine war in 2022, Hurricane Ida, U.S. Winter Storms Uri and Viola and July European Floods in 2021, the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020, Japanese Typhoons Hagibis, Faxai and Tapah, Hurricane Dorian and the Australia Wildfires in 2019 and Hurricanes Michael and Florence, California Wildfires and Typhoon Jebi in 2018. As a result, actual losses for these events may ultimately differ materially from current estimates.
Prior
Year Reserve Development
i
The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:
For
the three months ended March 31, 2022, the Company recognized $i7 million of net favorable prior year reserve development, the principal components of which were:
•$i12
million of net favorable prior year reserve development on property and other business primarily due to decreases in loss estimates attributable to specific large claims related to the 2017 accident year, and better than expected loss emergence attributable to 2018 catastrophe events, and the accident and health book of business mainly related to the 2020 and 2021 accident years.
•$i12
million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to the cargo and offshore energy books of business mainly related to the 2018 and 2021 accident years.
•$i14 million of net adverse prior year reserve development on liability business primarily
due to reserve strengthening within the program book of business mainly related to the 2016 and 2018 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2017 accident year.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
6. RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$i7
million of net adverse prior year reserve development on professional lines business primarily due to increases in loss estimates attributable to specific large claims related to the 2015 and 2017 accident years, and reserve strengthening within runoff lines of business mainly related to the 2016 and 2018 accident years.
For the three months ended March 31, 2021, the Company recognized $i2
million of net favorable prior year reserve development, the principal components of which were:
•$i15 million of net favorable prior year reserve development on property and other business primarily due to better than expected loss emergence attributable to 2017, 2019 and 2020 catastrophe events.
•$i12
million of net favorable prior year reserve development on marine business primarily due to better than expected loss emergence attributable to cargo and energy offshore books of business mainly related to the 2017 and 2020 accident years.
•$i15 million of net adverse prior year reserve development on professional lines business primarily
due to reserve strengthening within the U.S. commercial management solutions, European program and European management liability solutions books of business mainly related to the 2018 accident year.
•$i7 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the program
book of business mainly related to the 2018 accident year.
Reinsurance Segment:
The following table maps lines of business to reserve classes and the expected claim tails:
For
the three months ended March 31, 2022, the Company recognized $i2 million of net favorable prior year reserve development, the principal components of which were:
•$i25
million of net favorable prior year development on property and other business primarily due to better than expected loss emergence attributable to 2018, 2019 and 2021 catastrophe events, and an aggregate excess of loss treaty.
•$i7 million of net favorable prior year reserve development on credit and surety business
primarily due to better than expected loss emergence related to recent accidents years.
•$i25 million of net adverse prior year development on professional linesbusinessprimarily due to an increase in loss estimates attributable to one
cedant related to the 2016 to 2018 accident years and a specific large claim related to the 2017 accident year.
•$i4 million of net adverse prior year development on liability business primarily due to an increase in loss estimates attributable to a specific large claim related to the 2018 accident year.
For
the three months ended March 31, 2021, the Company recognized $i4 million of net favorable prior year reserve development, the principal components of which were:
•$i17
million of net favorable prior year reserve development on motor business primarily due to non-proportional treaty business related to several accident years.
•$i7 million of net adverse prior year reserve development on liability business primarily due to an increase in the loss estimate attributable to a specific large claim related
to the 2017 accident year.
•$i5 million of net adverse prior year reserve development on credit and surety business primarily due to an increase in the loss estimate attributable to a specific large claim related to the 2020 accident year.
Weighted
average diluted common shares outstanding
i85,808
i84,965
Earnings
per diluted common share
$
i1.65
$
i1.36
Weighted
average anti-dilutive shares excluded from the dilutive computation
i989
i1,697
//
8. SHARE-BASED
COMPENSATION
i
Performance Restricted Stock Units
Performance Restricted Stock Units granted in 2022
Performance restricted stock units granted in 2022 include a market condition which is the
Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a ithree-year performance period within a range of i0%
to i200% of target. Performance restricted stock units granted in 2022 were share-settled awards.
Valuation assumptions
The fair value of performance restricted stock units granted in 2022 was measured on the grant date using a Monte Carlo simulation model.
iThe
following table provides details of the significant inputs used in the Monte Carlo simulation model:
Beginning
share price: The beginning share price was based on the average closing share price over the i10 trading days preceding and including the start of the performance period.
Ending share price: The ending share price was based on the average projected closing share price over the i10
trading days preceding and including the end of the performance period.
Expected volatility: The expected volatility is estimated based on the Company's historical share price volatility.
Expected dividend yield: The expected dividend
yield is not applicable to the performance restricted stock units as dividends are paid at the end of the vesting period and do not affect the value of the performance restricted stock units.
Risk-free interest rate: The risk free rate is estimated based on the yield on a U.S. treasury zero-coupon bond issued with a remaining term equal to the vesting period of the performance restricted stock units.
Compensation expense associated with performance restricted stock units granted in 2022 and 2021 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model, and is recognized on a straight-line basis over the requisite service period.
(2) Shares are repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.
/
Dividends
i
The following table presents dividends declared and paid related to the
Company's common and preferred shares:
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
10. DEBT AND FINANCING ARRANGEMENTS
a)iLetters of Credit
Effective March 31, 2022,
certain of AXIS Capital’s operating subsidiaries (the "Participating Subsidiaries") amended their existing $i650 million secured letter of credit facility to extend the expiration date of the $i150 million
secured letter of credit facility to March 31, 2023, with each letter of credit provided pursuant to such credit facility having a tenor not to extend beyond March 31, 2024. The terms and conditions of the $i500 million secured letter of credit facility remain unchanged.
11. COMMITMENTS
AND CONTINGENCIES
i
Legal Proceedings
From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance
or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.
The Company is not party to any material legal proceedings arising outside the ordinary course of business.
Investments
Refer to Note 3 - 'Investments' for information on the Company's unfunded investment commitments related to the Company's other investment
portfolio.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operations for the three months ended March 31, 2022 and 2021 and our financial condition at March 31, 2022 and December 31, 2021. This should be read in conjunction with Item 1 'Consolidated Financial Statements' of this report and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included
in our Annual Report on Form 10-K for the year ended December 31, 2021. Tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.
First Quarter 2022 Consolidated Results of Operations
•Net income available to common shareholders of $142 million, or $1.67 per common share, and $1.65 per diluted common share
•Operating
income(1) of $180 million, or $2.09 per diluted common share(1)
•Gross premiums written of $2.6 billion
•Net premiums written of $1.8 billion
•Net premiums earned of $1.3 billion
•Pre-tax catastrophe and weather-related losses, net of reinsurance, of $60 million (Insurance: $33 million and Reinsurance: $27 million), or 4.7 points, including $30 million attributable to the Russia-Ukraine war. The remaining losses of $30 million were primarily attributable to Eastern Australia floods, and other weather-related events.
•Net favorable prior
year reserve development of $9 million
•Underwriting income(2) of $139 million and combined ratio of 91.4%
•Net investment income of $91 million
•Net investment losses of $95 million
•Foreign exchange gains of $44 million
First Quarter 2022 Consolidated Financial Condition
•Total cash and investments of $16.0 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 86% of total cash and investments and have an average credit rating of AA-
•Total
assets of $27.8 billion
•Reserve for losses and loss expenses of $14.5 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $5.6 billion
•Debt of $1.3 billion and debt to total capital ratio(3) of 20.4%
•Common shareholders’ equity of $4.6 billion; book value per diluted common share of $51.97
(1)Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations
to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to, the most comparable GAAP financial measure, net income (loss), is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations', and a discussion of the rationale for its presentation is provided in
'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(3)The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt.
AXIS Capital Holdings Limited ("AXIS Capital"), through its operating subsidiaries, is a global provider of specialty lines insurance and treaty reinsurance with operations in Bermuda, the U.S., Europe, Singapore and Canada. Our underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re.
We provide our clients and distribution partners with a broad range of risk transfer products and services, and meaningful capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service,
intelligent risk taking and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first three months of 2022 included the following:
•increasing our relevance in a select number of attractive specialty lines insurance and treaty reinsurance markets including U.S. excess and surplus lines, North America professional lines and Lloyd's specialty insurance business;
•re-balancing our portfolio towards less volatile lines of business that carry attractive returns while deploying capital with risk limits, diversification and risk management;
•continuing
the implementation of a focused distribution strategy while building mutually beneficial relationships with clients and partners;
•improving the effectiveness and efficiency of our operating platforms and processes;
•investing in data and technology capabilities, and tools to empower our underwriters and enhance the service that we provide to our customers;
•utilizing reinsurance markets and third party capital relationships;
•fostering a positive workplace environment that enables us to attract, retain and develop top talent; and
•growing
our corporate citizenship program to give back to our communities and help contribute to a more sustainable future.
We are committed to leadership
in specialty insurance and global reinsurance markets, where we have depth of talent and expertise. We believe our market positioning, underwriting expertise, best-in-class claims management capabilities and strong relationships with our distributors and clients will provide opportunities for increased profitability, with differences among our lines driven by our tactical response to market conditions.
Rates, and terms and conditions across virtually all insurance lines and geographies continued to be favorable through the first quarter of 2022. We expect many specialty segments will continue to experience further pricing improvements, as carriers assess pricing adequacy, portfolio construction, inflationary pressure and account preferences. In this market environment, we continue to focus on growth in lines of business and market segments that are adequately priced.
The
reinsurance market is also experiencing an improvement in rates, and terms and conditions. This is offset by market volatility and very strong industry capitalization, and more improvement is needed to achieve price adequacy. In light of 2021 marking the fifth consecutive year of challenging market loss events, carriers are aiming to reduce net volatility and increase profitability. Overall, we believe the reinsurance market will continue to gain momentum and there are opportunities to achieve the required risk adjusted rate increases while practicing disciplined underwriting and focused growth.
We are encouraged by the pricing improvements we are seeing across both the insurance and reinsurance segments, that we expect will carry into 2023 and beyond. Where prices deliver adequate profitability, we will look to grow within our risk and volatility guidelines. With a strengthened book
of business, and growing footprint in attractive markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.
Response to Russia-Ukraine War
Following the Russian invasion of Ukraine and the triggering of sanctions against the countries involved, organizations and named individuals, we established a task-force to coordinate our response to this situation.
The Russia-Ukraine war, and its related impacts, are an emerging and evolving risk to which we are exposed from an underwriting and reserving perspective.
Our team is tracking the situation closely,
including stress and scenario testing on existing underwriting exposures. A range of economic impacts and external pressures across individual product lines are being considered.
Underwriting
We are monitoring international sanctions which impact our global operations and were effective March 27, 2022. The impact on gross premiums written for the three months ended March 31, 2022 of the cancellation of policies with exposures to the Russia-Ukraine war was immaterial. We continue to evaluate opportunities to write business in the region, not including Russia or Ukraine risks, with terms as short as seven days.
We are also
closely monitoring cash due from our customers and reinsurers, giving due consideration to the Russia-Ukraine war and associated international sanctions. At March 31, 2022, we considered the potential financial impact of Russia-Ukraine war when determining allowances for expected credit losses for insurance and reinsurance premium balances receivable and reinsurance recoverable balances on unpaid losses and loss expenses. Based on facts and circumstances at that time, we did not adjust allowances for expected credit losses at March 31, 2022. We will continue to monitor the appropriateness of allowances for expected credit losses as new information comes to light. Adjustments to allowances for expected credit losses in subsequent periods could be material.
Reserving
At
March 31, 2022, we incurred pre-tax catastrophe and weather-related losses of $30 million attributable the Russia-Ukraine war.
The estimate of net reserves for losses and loss expenses related to the Russia-Ukraine war is subject to significant uncertainty. This uncertainty is driven by the inherent difficulty in making assumptions around the impact of the Russia-Ukraine war due to the lack of comparable events, the ongoing nature of the event, and its far-reaching impacts.
While we believe the overall estimate of net reserves for losses and loss expenses is adequate for losses and loss adjustment expenses that have been incurred at March 31, 2022, based on current facts and circumstances, we will continue
to monitor the appropriateness
of our assumptions as new information comes to light and will adjust the estimate of net reserves for losses and loss adjustment expenses, as appropriate.
Actual losses for this event may ultimately differ materially from current estimates.
Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'
for further information
Investments
At March 31, 2022, we had no direct exposures to Russia or Ukraine within our investments portfolio.
Refer to Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K for further information.
Underwriting-related
general and administrative expenses(1)
(145,096)
9%
(132,668)
Underwriting income(2)
138,792
40,246
Net
investment income
91,355
(20%)
114,165
Net investment gains (losses)
(94,508)
nm
29,645
Corporate
expenses(1)
(23,945)
(7%)
(25,740)
Foreign exchange (losses) gains
44,273
nm
(4,113)
Interest
expense and financing costs
(15,564)
—%
(15,571)
Amortization of value of business acquired
—
(100%)
(1,028)
Amortization
of intangible assets
(2,729)
1%
(2,690)
Income
before income taxes and interest in income of equity method investments
137,674
134,914
Income tax expense
(24)
(100%)
(20,776)
Interest
in income of equity method investments
11,550
26%
9,162
Net income
149,200
123,300
Preferred
share dividends
(7,563)
—%
(7,563)
Net
income available to common shareholders
$
141,637
$
115,737
nm
– not meaningful is defined as a variance greater than +/-100%
(1)Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $23,945 and $25,740 for the three months ended March 31, 2022 and 2021, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details on corporate expenses. Refer to 'Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented in the table above. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.
Refer
to 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further details on underwriting revenues.
Combined Ratio
The components of the combined ratio were as follows:
Current
accident year loss ratio, excluding catastrophe and weather-related losses
54.2
%
(0.9)
55.1
%
Catastrophe and weather-related losses ratio
4.7
%
(5.4)
10.1
%
Current
accident year loss ratio
58.9
%
(6.3)
65.2
%
Prior year reserve development ratio
(0.7
%)
(0.3)
(0.4
%)
Net
losses and loss expenses ratio
58.2
%
(6.6)
64.8
%
Acquisition cost ratio
19.7
%
(0.1)
19.8
%
General
and administrative expense ratio(1)
13.5
%
(0.8)
14.3
%
Combined ratio
91.4
%
(7.5)
98.9
%
(1) The
general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 1.9% and 2.3% for the three months ended March 31, 2022 and 2021, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details.
Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further details on underwriting expenses.
Gross
premiums written for the three months ended March 31, 2022increased by $224 million, or 20% ($228 million, or 21%, on a constant currency basis(1)), compared to the three months ended March 31, 2021. The increase was primarily attributable to professional lines, liability, and property lines driven by new business and favorable rate changes.
Ceded Premiums Written
Ceded premiums written for the three months endedMarch 31, 2022, was $483 million, or 36%, of gross premiums written, compared to $395 million, or 36%,
of gross premiums written for the three months ended March 31, 2021.
The increase in ceded premiums written of $88 million, or 22%, was primarily driven by increases in property, liability and professional lines.
The increase in property lines was attributable to the restructuring of significant quota share treaties. The increase in property lines also reflected the increase in gross premiums written for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.
The increases in liability and professional lines reflected the increase in gross premiums written for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.
(1) Amounts
presented on a constant currency basis are non-GAAP financial measures as defined in Item10 (e) of SEC Regulation S-K. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to the prior year balance.
Net
premiums earned for the three months ended March 31, 2022increased by $137 million, or 22%, compared to the three months ended March 31, 2021. The increase was primarily driven by increases in gross premiums earned in professional lines, liability, property and marine lines, partially offset by increases in ceded premiums earned in professional lines, liability and property lines.
The current accident year loss ratio decreased to 54.8% for the three months ended March 31, 2022, from 58.2% for the three months ended March 31, 2021.
The current accident year loss ratio for three months ended March 31, 2022, compared to the same period in 2021, was impacted by a slightly lower level of catastrophe and weather-related losses. During the three months ended March 31, 2022, catastrophe and weather-related losses, were $33 million, or 4.3 points, including $16 million attributable to the Russia-Ukraine war. The remaining losses of $17 million were primarily to Eastern Australia
floods, and other weather-related events. Comparatively, during the three months ended March 31, 2021, catastrophe and weather-related losses were $36 million, or 5.9 points.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 50.5% for the three months ended March 31, 2022, from 52.3% for the three months ended March 31, 2021.The decrease in the current accident year loss ratio, after adjusting for the impact of the catastrophe and weather-related losses was principally due to the impact of favorable pricing over loss trends in most lines of business, partially offset by changes in business mix associated with the
increase in professional lines and liability business written in recent periods.
Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.
Acquisition Cost Ratio
The
acquisition cost ratio decreased to 18.4% for the three months endedMarch 31, 2022, from 19.1% for the three months ended March 31, 2021, primarily related to a decrease in variable costs associated with property, marine, and accident and health lines, and an increase in ceding commissions in the property lines, partially offset by an increase in variable acquisition costs associated with professional lines.
Underwriting-Related General and Administrative Expense Ratio
The underwriting-related general and administrative expense ratio decreased to 15.2% for the three months ended March 31,
2022, from 16.8% for the three months ended March 31, 2021, mainly driven by an increase in net premiums earned, partially offset by an increase in performance-related compensation costs, personnel costs, and travel and entertainment costs.
Gross premiums written for the three months ended March 31, 2022, decreased by $125 million, or 9% ($94 million, or 7% on a constant currency basis), compared to the three months ended March 31, 2021. The decrease was primarily attributable to catastrophe, motor and property lines, partially offset by an increase in accident and health, credit and surety, marine and aviation, liability engineering, agriculture lines.
The decreases in catastrophe, motor and property lines were largely driven by non-renewals and decreased line sizes on several contracts associated
with repositioning the portfolio. In addition, the decrease in catastrophe lines was attributable to a decrease in reinstatement premiums due to lower catastrophe losses for the three months ended March 31, 2022, compared to reinstatement premiums associated with the U.S. Winter Storms for the three months ended March 31, 2021. The decrease in motor lines was also due to the timing of the renewals of significant contracts.
The increases in accident and health, credit and surety, liability and agriculture lines were due to new business. The increases in accident and health, and liability lines were also due to the timing of the renewals of significant contracts.
In addition, premium adjustments contributed to the increase in gross premiums written in accident and health lines.
The increase in engineering lines was also associated with premium adjustments related to significant contracts. The increase in marine and aviation lines was attributable to new marine business.
Ceded
premiums written for the three months ended March 31, 2022, was $338 million, or 26%, of gross premiums written, compared to $361 million, or 25%, of gross premiums written for the three months ended March 31, 2021.
The decrease in ceded premiums written of $23 million, or 6%, was primarily driven by decreases in catastrophe, and marine and aviation lines, partially offset by increases in motor and professional lines.
The decrease in catastrophe lines reflected the decrease in gross premiums written for the three months ended March 31, 2022, compared to the
three months ended March 31, 2021, partially offset by an increase in premiums ceded to strategic capital partners due to the restructuring of several quota share retrocessional treaties. The decrease in marine and aviation lines was attributable to the timing of the renewal of a significant excess of loss retrocessional treaty. The increases in motor and professional lines were attributable to the restructuring of significant quota share retrocessional treaties.
Net Premiums Earned
Net premiums earned by line of business were as follows:
Net premiums earned for the three months ended March 31, 2022, increased by $18 million, or 4%, compared to the three months ended March 31, 2021. The increase was primarily driven by increases in gross premiums earned in liability, credit and surety, and accident and health lines, and a decrease in ceded premiums earned in catastrophe lines. These increases were partially offset by decreases in gross premiums earned in catastrophe and property lines, and increases in ceded premiums earned in credit and surety, and liability lines.
Other insurance related income of $7 million for the three months ended March 31, 2022, compared to $2 million for the three months ended March 31, 2021, respectively, was primarily associated with fees related to arrangements with strategic capital partners.
The current accident year loss ratio decreased to 65.1% for the three months ended March 31, 2022, from 74.2% for the three months ended March 31, 2021.
The current accident year loss ratio for three months ended March 31, 2022, compared to the same period in 2021, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended March 31, 2022, catastrophe and weather-related losses, were $27 million, or 5.4 points, including $14 million attributable to the Russia-Ukraine war. The remaining losses of $13 million were attributable to weather-related events.
Comparatively, during the three months ended March 31, 2021, catastrophe and weather-related losses, net of reinstatement premiums were $74 million, or 15.6 points.
After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 59.7% for the three months ended March 31, 2022, from 58.6% for the three months ended March 31, 2021. The increase in the current accident year loss ratio after adjusting for the impact of catastrophe and weather-related losses was principally due changes in business mix driven by the decrease in catastrophe business written in recent periods, partially offset by the impact of favorable pricing over loss trends in most lines of business.
Prior
Year Reserve Development
Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the reserve classes, the expected claims tails and prior year development.
Acquisition Cost Ratio
The acquisition cost ratio increased to 21.7% for the three months ended March 31, 2022, from 20.8% for the three months ended March 31, 2021, primarily related to changes in business mix driven by the decrease in catastrophe business written in recent periods, partially offset by the impact of retrocessional contracts.
Underwriting-Related
General and Administrative Expense Ratio
The underwriting-related general and administrative expense increased to 6.1% for the three months endedMarch 31, 2022, from 6.0% for the three months endedMarch 31, 2021, mainly driven by an increase in performance-related compensation costs, largely offset by an increase of net premiums earned.
(1)
Pre-tax yield is calculated by dividing annualized net investment income by the average month-end amortized cost balances.
Fixed Maturities
Net investment income attributable to fixed maturities for the three months ended March 31, 2022, was $65 million, compared to net investment income of $69 million for the three months ended March 31, 2021. The decrease for the three months ended March 31, 2022, compared to the same period in 2021, was due to lower yields.
Other Investments
Net investment income
from other investments was as follows:
Hedge,
direct lending, private equity and real estate funds
$
22,803
$
22,773
Other privately held investments
2,025
18,478
CLO-Equities
1,222
582
Net
investment income from other investments
$
26,050
$
41,833
Pre-tax return on other investments(1)
2.8
%
5.3
%
(1)The
pre-tax return on other investments is calculated by dividing total net investment income from other investments (non-annualized) by the average month-end fair value balances held for the periods indicated.
Net investment income attributable to other investments for the three months ended March 31, 2022, was $26 million, compared to net investment income of $42 million for the three months ended March 31, 2021. The decrease for the three months ended March 31, 2022, compared to the same period in 2021, was due to lower gains from other privately held investments.
Net unrealized gains (losses) on equity securities
(43,622)
(3,475)
Net investment
gains (losses)
$
(94,508)
$
29,645
(1)Related to instances where we intend to sell securities, or it is more likely than not that we will be required to sell securities before their anticipated
recovery.
Net investment losses for the three months ended March 31, 2022 were $95 million, compared to net investment gains of $30 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, the net investment losses were primarily due to net realized losses on the sale of U.S government, Agency RMBS and corporate debt securities and net unrealized losses on equity securities. For the three months ended March 31, 2021, the net investment gains were primarily due to net realized gains on the sale of corporate debt and U.S. government securities, partially offset by net unrealized losses on equity securities.
On
Sale of Investments
Generally, sales of individual securities occur when there are changes in the relative value, credit quality or duration of a particular issue. We may also sell securities to re-balance our investment portfolio in order to change exposure to particular asset classes or sectors.
Impairment Losses
The impairment losses for the three months ended March 31, 2022 and 2021 were $nil.
Change in Fair Value of Investment Derivatives
From
time to time, we economically hedge foreign exchange exposure with derivative contracts.
For the three months ended March 31, 2022 and 2021, we recorded gains of $2 million related to foreign exchange contracts.
Change in net unrealized gains (losses) on fixed maturities (1)
(455,285)
(226,895)
Interest in income of equity method investments
11,550
9,162
Total
$
(446,888)
$
(73,923)
Average
cash and investments(2)
$
16,258,477
$
15,727,085
Total return on average cash and investments, pre-tax:
Including
investment related foreign exchange movements
(2.7
%)
(0.5
%)
Excluding investment related foreign exchange movements(3)
(2.6
%)
(0.4
%)
(1)Change
in net unrealized gains (losses) on fixed maturities is calculated by taking net unrealized gains (losses) at period end less net unrealized gains (losses) at the prior period end.
(2)The average cash and investments balance is calculated by taking the average of the period end fair value balances.
(3)Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, included foreign exchange (losses) gains of $(28) million and $(12) million for the three months ended March 31, 2022 and 2021,
respectively.
OTHER EXPENSES (REVENUES), NET
The following table provides a summary of other expenses (revenues), net:
Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As a percentage of net premiums earned, corporate expenses decreased to 1.9% for the three months endedMarch 31, 2022, compared to 2.3% for the three months endedMarch 31, 2021.
The decrease in corporate expenses for the three
months endedMarch 31, 2022 was primarily related to a decrease in professional and business fees, partially offset by an increase in information technology costs.
Some of our business is written in currencies other than the U.S. dollar.
Foreign
exchange gains of $44 million for the three months ended March 31, 2022were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.
Foreign exchange losses of $4 million for the three months ended March 31, 2021 were mainly driven by the impact of the weakening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and Canadian dollar, offset by the strengthening of the U.S. dollar on the remeasurement of net insurance related liabilities denominated in euro.
Interest Expense and Financing Costs
Interest
expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes") and the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019.
Interest expense and financing costs were $16 million for the three months ended March 31, 2022, and 2021.
Income Tax Expense (Benefit)
Income tax expense (benefit) primarily results from income (loss) generated by our operations
in the U.S. and Europe. Our effective tax rate is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments. This effective rate can vary between periods depending on the distribution of net income (loss) among tax jurisdictions, as well as other factors.
The tax expense of $nil for the three months ended March 31, 2022 was principally due to the generation of pre-tax income in our U.S. operations, offset by the generation of pre-tax losses in our U.K. and Europe operations.
The tax expense of $21 million for the three months ended March 31, 2021 was principally due to the generation of pre-tax income in our U.S., European,
and U.K. operations.
We
believe the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for common shareholders:
Annualized operating return on average common equity(2)
15.3
%
7.1
%
Book
value per diluted common share(3)
$
51.97
$
53.03
Cash dividends declared per common share
$
0.43
$
0.42
Increase
(decrease) in book value per diluted common share adjusted for dividends
$
(3.38)
$
(1.64)
(1)Annualized return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available
(attributable) to common shareholders for the period by the average common shareholders' equity determined using the common shareholders' equity balances at the beginning and end of the period.
(2)Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, and a discussion of the rationale for its presentation is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(3)Book value per diluted common share represents total common shareholders’ equity divided by the number of diluted common share outstanding, determined
using the treasury stock method. Cash-settled restricted stock units are excluded.
Return on Average Common Equity
Our objective is to generate superior returns on capital that appropriately reward common shareholders for the risks we assume and to grow revenue only when we expect the returns will meet or exceed our requirements. We recognize that the nature of underwriting cycles and the frequency or severity of large loss events in any one year may challenge the ability to achieve a profitability target in any specific period.
ROACE reflects the impact of net income (loss) available (attributable) to common shareholders including net investment gains (losses), foreign exchange losses (gains), and interest in income (loss) of equity
method investments.
The increase in ROACE for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was primarily driven by an increase in underwriting income, foreign exchange gains, and a decrease in income tax expense, partially offset by net investment losses and a decrease to in net investment income.
Operating ROACE excludes the impact of net investment gains (losses), foreign exchange losses (gains), and interest in income (loss) of equity method investments.
The increase in operating ROACE for the three months ended March 31, 2022,
compared to the three months ended March 31, 2021, was primarily driven by an increase in underwriting income and a decrease in income tax expense, partially offset by a decrease in net investment income.
Book Value per Diluted Common Share
We consider book value per diluted common share to be an appropriate measure of returns to common shareholders, as we believe growth in book value on a diluted basis will ultimately translate into appreciation of our stock price.
During the three months ended March 31, 2022, book value per diluted common share decreased by 6.8% due to net unrealized investment losses reported in other
comprehensive income (loss) and common dividends declared, partially offset by the net income generated.
During the three months ended March 31, 2021, book value per diluted common share decreased by 4% due to a decrease in net unrealized gains reported in accumulated other comprehensive income (loss) and common dividends declared, partially offset by the net income generated.
We
believe in returning excess capital to shareholders by way of dividends and share repurchases. Accordingly, dividend policy is an integral part of the value we create for shareholders. Our cumulative strong earnings have permitted our Board of Directors to approve eighteen successive annual increases in quarterly common share dividends.
Book Value per Diluted Common Share Adjusted for Dividends
Taken together, we believe that growth in book value per diluted common share and common share dividends declared represent the total value created for common shareholders. As companies in the insurance industry have differing dividend payout policies, we believe investors use the book value per diluted common share adjusted for dividends metric to measure comparable performance across the industry.
During
the three months ended March 31, 2022, the decrease in total value of $3.38, or 6.1%, was driven by net unrealized losses reported in accumulated other comprehensive income (income), partially offset by the net income generated.
During the three months ended March 31, 2021, the decrease in total value of $1.64, or 3%, was driven by a decrease in unrealized investment gains reported in accumulated other comprehensive income (loss), partially offset by the net income generated.
Interest
in income of equity method investments(3)
(11,550)
(9,162)
Income tax expense (benefit)
(497)
1,694
Operating income
$
179,825
$
82,737
Earnings
per diluted common share
$
1.65
$
1.36
Net investment (gains) losses
1.10
(0.35)
Foreign exchange losses (gains)
(0.52)
0.05
Interest
in income of equity method investments
(0.13)
(0.11)
Income tax expense (benefit)
(0.01)
0.02
Operating income per diluted common share
$
2.09
$
0.97
Weighted
average diluted common shares outstanding(4)
85,808
84,965
Average common shareholders' equity
$
4,715,599
$
4,686,042
Annualized
return on average common equity
12.0
%
9.9
%
Annualized
operating return on average common equity(5)
15.3
%
7.1
%
(1)Tax
expense (benefit) of ($13,313) and $1,484 for the three months ended March 31, 2022 and 2021, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses.
(2)Tax expense (benefit) of $12,816 and $210 for the three months ended March 31, 2022 and 2021, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions.
(3)Tax expense (benefit) of $nil for the three
and three months ended March 31, 2022 and 2021, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(4)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.
(5)Annualized operating ROACE is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, is presented in the table above, and a discussion of the rationale for its presentation is provided below.
Rationale for the Use of Non-GAAP Financial Measures
We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. Some of the measurements we use are considered non-GAAP financial measures under SEC rules and regulations. In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we present underwriting-related general and administrative expenses, consolidated underwriting income (loss), operating income (loss) (in total and on a per share basis), annualized operating return on average common equity ("operating ROACE"), amounts presented on a constant currency
basis and pre-tax total return on cash and investments excluding foreign exchange movements which are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. We believe that these non-GAAP financial measures, which may be defined and calculated differently by other companies, help explain and enhance the understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
Underwriting-Related General and Administrative Expenses
Underwriting-related general and administrative expenses include those general and administrative expenses that are incremental and/or directly attributable to our underwriting operations. While this measure is presented
in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.
Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.
The
reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.
Consolidated Underwriting Income (Loss)
Consolidated underwriting income (loss) is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative expenses as expenses. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is
considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.
We evaluate our underwriting results separately from the performance of our investment portfolio. As a result, we believe it is appropriate to exclude net investment income and net investment gains (losses) from our underwriting profitability measure.
Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on our net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio. As a result, we believe that
foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to our underwriting performance, therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).
Interest expense and financing costs primarily relate to interest payable on our debt. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss).
Amortization of intangible assets including value of business acquired ("VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process, therefore, these expenses are
excluded from consolidated underwriting income (loss).
We believe that the presentation of underwriting-related general and administrative expenses and consolidated underwriting income (loss) provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax
profitability of our underwriting activities. The reconciliation of consolidated underwriting income (loss) to net income (loss), the most comparable GAAP financial measure, is presented in 'Management's
Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.
Operating Income (Loss)
Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), and interest in income (loss) of equity method investments.
Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment
gains (losses) is somewhat opportunistic for many companies.
Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. In addition, we recognize unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities in net investment gains (losses). We also recognize unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss). These unrealized foreign exchange losses (gains) generally offset a large portion of the foreign exchange losses (gains) reported in net income (loss), thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that
foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business, therefore, foreign exchange losses (gains) are excluded from consolidated operating income (loss).
Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process, therefore, this income (loss) is excluded from operating income (loss).
Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), and interest in income (loss) of equity method investments to understand the profitability of recurring sources of income.
We
believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure,
is presented above.
We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively.
We present gross premiums written,
net premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written, net premiums written and net premiums earned on a constant basis. The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'.
Pre-Tax Total Return on Cash and Investments excluding Foreign Exchange Movements
Pre-tax
total return on cash and investments excluding foreign exchange movements measures net investment income, net investments gains (losses), interest in income (loss) of equity method investments, and change in unrealized gains (losses) generated by average cash and investment balances. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. The reconciliation of pre-tax total return on cash and investments excluding foreign exchange movements to pre-tax total return on cash and investments, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Investment Income and Net Investment Gains (Losses)'.
The fair value of total investments decreased by $817 million in the three months ended March
31, 2022, driven by the decrease in market value of fixed maturities due to the increase in yields and a larger allocation of the portfolio to cash and cash equivalents.
An analysis of our investment portfolio by asset class is detailed below:
Fixed Maturities
Details of our fixed maturities portfolio are as follows:
(1)Includes
bonds issued by states, municipalities, and political subdivisions.
(2)Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS").
(3)Non-investment grade and non-rated securities.
At March 31, 2022, fixed maturities had a weighted average credit rating of AA- (2021: AA-), a book yield of 2.1% (2021: 1.9%) and an average duration of 3.1 years (2021: 3.0 years). At March 31, 2022, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $13.7
billion), had an average credit rating of AA- (2021: AA-) and an average duration of 2.8 years (2021: 2.8 years).
At March 31, 2022, net unrealized losses on fixed maturities were $384 million, compared to net unrealized gains of $71 million at December 31, 2021, a decrease of $455 million due to the increase in yields.
Equity Securities
At March 31, 2022, net unrealized gains on equity securities were $83 million, compared to net unrealized gains of $127 million at December 31,
2021, a decrease of $44 million driven by the decline in market value of bond mutual funds and the decline in equity markets.
At March 31, 2022, our investment in commercial mortgage loans was $627 million, compared to $594 million at December 31, 2021, an increase of $33 million. The commercial mortgage loans are high quality and collateralized by a variety of commercial properties and are diversified
both geographically throughout the U.S. and by property type to reduce the risk of concentration. At March 31, 2022, there were no credit losses or past due amounts associated with our commercial mortgage loans portfolio.
Other Investments
Details of our other investments portfolio are as follows:
Total
hedge, direct lending, private equity and real estate funds
834,247
87
%
837,551
88
%
CLO-Equities
4,881
1
%
5,910
1
%
Other
privately held investments
115,474
12
%
104,521
11
%
Total other investments
$
954,602
100
%
$
947,982
100
%
Refer
to Note 3(c) to the Consolidated Financial Statements 'Investments'.
Equity Method Investments
In our consolidated results, our ownership interest in Harrington is reported in interest in income of equity method investments. Interest in income of equity method investments of $12 million, for the three months endedMarch 31, 2022, compared to $9 million for the three months ended March 31, 2021, respectively, was attributable to positive investment returns realized by Harrington.
Refer to the ‘Liquidity and Capital Resources’ section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for a general discussion of liquidity and capital resources.
The following table summarizes consolidated capital:
Ratio
of debt and preferred equity to total capital
28.9
%
27.7
%
We finance operations with a combination of debt and equity capital. Debt to total capital, and debt and preferred equity to total capital ratios, provide an indication of our capital structure, along with some insight into our financial strength. While the impact of unrealized losses recognized in other comprehensive income (loss), following a decrease
in market value of our fixed maturities, has reduced common shareholders' equity, we believe that our financial flexibility remains strong.
Common Equity
During the three months ended March 31, 2022, common equity decreased by $290 million. The following table reconciles opening and closing common equity positions:
Change in unrealized gains (losses) on available for sale investments, net of tax
(397,611)
Foreign currency translation adjustment
2,775
Net income (loss)
149,200
Preferred share dividends
(7,563)
Common
share dividends
(37,670)
Treasury shares repurchased
(12,977)
Common equity - closing
$
4,570,540
During
the three months ended March 31, 2022, we repurchased 245,000 common shares from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units granted under our 2017 Long-Term Equity Compensation Plans for a total cost of $13 million.
At April 27, 2022, we had $100 million of remaining authorization under our Board-authorized share repurchase program for common share repurchases through December 31, 2022 (refer to Part II, Item 2 'Unregistered Sales of Equity Securities and Use of Proceeds' for further details).
We
expect cash flows generated from operations, combined with liquidity provided by our investment portfolio, will be sufficient to cover cash outflows and other contractual commitments through the foreseeable future.
The
consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values. We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.
We believe the material items requiring such subjective and complex estimates are:
•reserves for losses and loss expenses;
•reinsurance recoverable on unpaid losses and loss expenses, including
the allowance for expected credit losses;
•gross premiums written and net premiums earned;
•fair value measurements of financial assets and liabilities; and
•the allowance for expected credit losses associated with fixed maturities, available for sale.
We believe that the critical accounting estimates discussion in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, continues to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.
RECENT
ACCOUNTING PRONOUNCEMENTS
At March 31, 2022, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Refer to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to this item since December 31, 2021, with the exception of the changes in exposure to foreign currency risk presented below.
Foreign
Currency Risk
The table below provides a sensitivity analysis of total net foreign currency exposures:
Net managed assets (liabilities), excluding derivatives
$
54,934
$
7,446
$
354,705
$
(418,109)
$
(264,087)
$
(72,821)
$
56,413
$
(281,519)
Foreign
currency derivatives, net
(41,979)
(1,733)
(316,856)
389,671
193,798
72,104
(20,256)
274,749
Net managed foreign currency exposure
12,955
5,713
37,849
(28,438)
(70,289)
(717)
36,157
(6,770)
Other
net foreign currency exposure
1
—
114
(1,537)
(1,360)
—
31,261
28,479
Total net foreign currency exposure
$
12,956
$
5,713
$
37,963
$
(29,975)
$
(71,649)
$
(717)
$
67,418
$
21,709
Net
foreign currency exposure as a percentage of total shareholders’ equity
0.3
%
0.1
%
0.7
%
(0.6
%)
(1.4
%)
—
%
1.3
%
0.4
%
Pre-tax
impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1)
$
1,296
$
571
$
3,796
$
(2,998)
$
(7,165)
$
(72)
$
6,742
$
2,171
(1)Assumes
10% appreciation in underlying currencies relative to the U.S. dollar.
Total Net Foreign Currency Exposure
At March 31, 2022, total net foreign currency assets were $22 million primarily driven by increases in exposures to the euro, canadian dollar and other non-core currencies primarily due to new business written during the three months ended March 31, 2022. Other net foreign currency exposures includes $31 million related to assets managed by specific investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy. An emerging market debt portfolio is the primary contributor to this group of assets.
The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) at March 31, 2022. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at March 31, 2022, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the
Company’s internal control over financial reporting that occurred during the three months ended March 31, 2022.
Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company has not experienced any material impact to its internal control over financial reporting resulting from
the introduction of a hybrid work model.
PART II OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations. Estimated amounts payable under such proceedings are included in the reserve for losses and loss expenses in the consolidated balance sheets.
We are not party to any material legal proceedings arising outside the ordinary course of business.
ITEM
1A. RISK FACTORS
There were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
Common Shares
The following table shows information regarding the number of common shares repurchased:
Period
Total number
of
shares
purchased(a) (b)
Average
price paid
per share
Total number of shares purchased as part of
publicly announced
plans or programs
Maximum number (or approximate
dollar value) of shares that may yet be
purchased under the plans
or programs (c)
January
1-31, 2022
—
$57.00
—
$100 million
February 1-28, 2022
—
$57.34
—
$100 million
March 1-31, 2022
245
$52.92
—
$100 million
Total
245
—
$100 million
(a) In
thousands.
(b) Shares are repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.
(c) On December 2, 2021, our Board of Directors authorized a share repurchase plan to repurchase up to $100 million of our common shares, effective January 1, 2022 through to December 31, 2022. Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions.
ITEM
5. OTHER INFORMATION
Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934
Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose in their annual and quarterly reports whether they or any of their affiliates knowingly engaged in certain activities with Iran or with individuals or entities that are subject to certain sanctions under U.S. law. Issuers are required to provide this disclosure even where the activities, transactions or dealings are conducted outside of the U.S. in compliance with applicable law.
As
and when allowed by the applicable law and regulations, certain of our non-U.S. subsidiaries provide treaty reinsurance coverage to non-U.S. insurers on a worldwide basis, including insurers of liability, marine, aviation and energy risks, and as a result, these underlying insurance and reinsurance portfolios may have some exposure to Iran. In addition, we provide insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull war and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended March 31, 2022, there has been
no material amount of premium allocated or apportioned to activities relating to Iran. We intend for our non-U.S. subsidiaries to continue to provide such coverage only to the extent permitted by applicable law.
Certificate
of Designations establishing the specific rights, preferences, limitations and other terms of the Series E Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 7, 2016).
Deed of Amendment dated March 31, 2022 to Committed Letter of Credit Facility Number 2 dated March 27, 2017, as amended, by and among, AXIS
Specialty Limited, AXIS Re SE, AXIS Specialty Europe SE, AXIS Insurance Company, AXIS Reinsurance Company, AXIS Surplus Insurance Company and Citibank Europe plc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 31, 2022).
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101
The
following financial information from AXIS Capital Holdings Limited’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline XBRL: (i) Consolidated Balance Sheets at March 31, 2022 and December 31, 2021; (ii) Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021; (iii) Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021; (iv) Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2022 and 2021;
(v) Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
†104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to
the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
