Axis Capital Delivers Record Results, Stays Disciplined

Axis Capital Holdings ((AXS)) has held its Q4 earnings call. Read on for the main highlights of the call.

Axis Capital Earnings Call Highlights Record Year Amid Strategic Caution

Axis Capital’s latest earnings call painted a distinctly upbeat picture, with management leaning into a narrative of record profitability, robust capital strength and clear progress on long-term strategic initiatives. Executives highlighted double‑digit gains in book value, an 18% operating return on equity, and the best combined ratio in more than a decade, while acknowledging areas that warrant vigilance, including cyber, a more competitive reinsurance market, and near-term expense and loss-ratio pressures linked to growth and investment. Overall, the tone was confident: management argued that the company is well positioned for 2026, even as it stays disciplined on underwriting and capital deployment.

Record Financial and Shareholder Metrics

Axis reported a standout year on core financial metrics, underscoring the strength of its underwriting and capital management. Diluted book value per share jumped 18% year over year to $77.20, reflecting both retained earnings and the impact of share repurchases. Full‑year net income available to common shareholders reached $978 million, or $12.35 per diluted share, with $282 million ($3.67 per share) generated in the fourth quarter alone. The company delivered an operating return on equity of roughly 18% for the year, a level that places it among the better performers in specialty insurance and reinsurance and suggests the firm is monetizing its underwriting and investment strategy effectively for shareholders.

Premium Growth Sets New Records

Top-line momentum was another clear highlight. Axis posted a company record $9.6 billion in gross written premiums (GWP) for 2025, up 7% from the prior year. Growth accelerated in the fourth quarter, with GWP rising 12% to $2.2 billion, while net premiums written climbed 13%, indicating the company retained more of the risks it wrote. Management framed this expansion as disciplined, with growth tilted toward lines and segments where pricing and terms remain attractive, reinforcing that the company is not chasing volume at the expense of profitability.

Insurance Segment Drives Outperformance

The insurance segment was the engine of the group’s performance. Insurance GWP climbed to a record $7.2 billion, up 9% year over year, supported by record new business premiums of $2.4 billion as the franchise broadened its presence, notably in the lower middle market. Underwriting income in insurance surged 40% to $597 million, and the insurance combined ratio improved by three percentage points to an impressive 86%, signaling strong margins. Management pointed to targeted growth, improved risk selection and benefits from operational initiatives as key drivers of this outperformance.

Consolidated Profitability and Loss Ratios Reach Best Levels in Years

At the group level, profitability metrics reflected disciplined underwriting and stable underlying loss trends. The full‑year consolidated combined ratio improved to 89.8%, the best result since 2010, while the fourth-quarter combined ratio stood at 90.4%. Ex‑catastrophe accident year loss ratios remained stable, with the insurance ex‑cat accident year loss ratio around 52.4%, suggesting that underlying claims experience remains well controlled. These figures highlight that improvements are not solely driven by benign catastrophe activity but also by structural enhancements in portfolio quality and pricing.

Reinsurance: Profits First, Growth Second

Despite a more competitive market backdrop, AXIS Re remained solidly profitable. The reinsurance division generated $128 million in underwriting income and posted a 92.6% combined ratio for 2025, underscoring a clear focus on bottom-line results. Gross written premiums in reinsurance rose only in the low single digits to $2.5 billion, but management stressed that the priority is premium adequacy rather than scale. The unit has now delivered eight consecutive quarters of positive bottom-line contribution, reinforcing its repositioning as a more disciplined, specialty‑focused reinsurer.

Capital Strength and Shareholder Returns

Axis used its strong earnings power to return substantial capital while still funding growth. In 2025, the company paid $139 million in dividends and executed $888 million in share repurchases, helping drive the significant increase in book value per share. An additional $112 million remains authorized for buybacks. Management reiterated that capital allocation priorities start with supporting organic growth and strategic initiatives; buybacks are positioned as opportunistic and responsive to valuation and market conditions, rather than a rigid commitment to a fixed repurchase pace.

Operational, Technology and AI Investments to Drive Efficiency

A central strategic theme was the acceleration of Axis’s “How We Work” program, which aims to modernize the company’s operating platform. Management has committed around $100 million, with increased spending in 2025, to scale new product lines, integrate AI‑enabled tools at the front end and enhance underwriting and operational efficiency. These investments are expected to weigh on near-term expenses but to pay off as they scale in 2026, with management explicitly targeting a lower G&A ratio and more efficient growth. The company framed AI as a practical enabler of better risk selection and faster decision-making rather than a speculative bet.

New Business Initiatives and Growing Fee Income Streams

Axis also highlighted new, fee-like revenue sources that diversify earnings. The AXIS Capacity Solutions (ACS) platform showed early traction, generating roughly $20 million of GWP in the quarter despite being in its infancy. Alongside this, insurance-linked securities and underwriting fee income totaled $54 million for the year, including $14 million in the fourth quarter. Management views these capital‑light, fee-based activities as complementary to the core underwriting business, offering more stable income streams that can support returns through the insurance cycle.

Investment Income and a Slightly Higher Risk Profile

On the asset side, investment income reached $767 million for the year, up 1%, reflecting a higher-yield environment and cautious repositioning of the portfolio. Axis modestly increased its allocation to below‑BBB bonds to 19% of the portfolio, landing near the top of its stated 15%–20% target range. This shift indicates a willingness to take on slightly more credit risk in pursuit of higher returns, which could enhance earnings but also introduces more sensitivity to potential credit stress in a downturn. Management framed the move as controlled and consistent with its risk appetite.

Reserve Position Reinforced by Third‑Party Validation

Reserving remained a point of emphasis, with the company underscoring its confidence in the adequacy of its booked reserves. Axis recorded a $30 million reserve release in the quarter—$23 million from insurance and $7 million from reinsurance—suggesting prior‑year loss estimates were conservative. An independent, third‑party actuarial review at year-end further reinforced management’s conviction in the strength of the reserve position. This combination of reserve releases and external validation supports the claim that recent profitability is not being artificially boosted by aggressive reserve cuts.

Cautious Stance in Cyber Amid Rising Threats

While many parts of the portfolio are growing, cyber is a notable exception. Management described the cyber market as increasingly challenging, with escalating ransomware and AI‑enabled threats and rising competition from managing general agents pressuring pricing and terms. Axis is intentionally maintaining a cautious and selective stance in this segment and does not expect cyber to be a significant growth driver in the near term. This restraint underscores the company’s broader messaging around underwriting discipline and risk awareness, even in high-profile growth areas.

Reinsurance Volume Risks and Market Competition

The call also highlighted volume risks in reinsurance as market competition intensifies. AXIS Re saw a more competitive environment during the key January 1 renewals, and management signaled that gross written premiums in reinsurance could decline in 2026, potentially by double digits, if pricing does not meet its adequacy thresholds. The company is prepared to sacrifice top‑line growth to preserve margins, reinforcing its “profits over volume” stance. Investors should therefore expect reinsurance growth to be more volatile and driven by pricing conditions rather than steady expansion.

Attritional Loss Ratio and Rate vs. Trend Pressure

Management acknowledged some pressure on underlying, or attritional, loss ratios as rate increases and claims trends do not fully offset mix changes in the portfolio. They suggested there could be roughly a one‑point increase in the insurance attritional loss ratio into 2026. While this is modest, it indicates that pricing tailwinds are tempering and that careful risk selection will be critical to maintaining margins. The company’s guidance for stable combined ratios around 90% assumes this pressure can be managed through discipline and continued operational improvements.

Elevated G&A and Compensation-Driven Variability

Operating expenses were another area of scrutiny, with the consolidated G&A ratio coming in at 13.9% for the quarter (versus 13.7% a year ago) and 12.4% for the full year (slightly better than 12.6% in 2024). The company attributed the uptick primarily to higher variable compensation tied to strong results and to headcount additions associated with its accelerated investment programs. While management is targeting an underwriting G&A ratio of around 11% in 2026, they cautioned that near-term G&A may be volatile as investments are ramped up before efficiency gains fully materialize.

Higher Credit Risk and One‑off Reinsurance Growth Drivers

Beyond the increased allocation to below‑BBB bonds, management also flagged concentration and non‑recurrence risks in quarterly reinsurance growth. The latest quarter’s reinsurance expansion benefited from a single large quota share transaction in U.K. motor, in what is seasonally a smaller quarter. This deal renews in early 2027 and will not recur in the fourth quarter of 2026, creating some lumpiness in reported growth. Investors should therefore be cautious about extrapolating the most recent quarterly growth rates in reinsurance, as they include one-off elements.

Guidance and Outlook: Steady Margins, Selective Growth

Looking ahead to 2026, Axis guided to continued growth in its insurance franchise and disciplined retrenchment where needed in reinsurance. Insurance GWP is expected to grow in the mid‑ to high‑single digits while maintaining premium adequacy, reflecting ongoing demand and the company’s expanding presence in targeted markets. In contrast, AXIS Re’s gross premiums could decline, potentially by double digits, as the firm holds the line on pricing and terms in a more competitive environment. Management expects consolidated combined ratios to hover around 90%, assuming normalized catastrophe losses of roughly 4%–5% of premiums. The company is targeting an underwriting G&A ratio of about 11% (down from roughly 12.4% in 2025), and an effective tax rate around 19%–20%. Investment risk has been modestly increased through higher below‑BBB exposure at 19% of the portfolio, still within the stated 15%–20% band. Capital will continue to be directed first to organic growth, with share repurchases executed opportunistically under the remaining authorization of about $112 million.

In summary, Axis Capital’s earnings call showcased a company delivering record results while investing aggressively in its future and holding firm on underwriting discipline. Strong top- and bottom-line performance, improved combined ratios and solid reserve validation all underpin a constructive outlook, even as management remains frank about challenges in cyber, reinsurance competition and near-term expense and loss-ratio headwinds. For investors, the message was one of confidence tempered by prudence: Axis is prepared to trade some growth for quality, while betting that its operational upgrades and strategic initiatives will sustain attractive returns through the next phase of the cycle.