For AXIS, 2021 was a milestone year – not only did it mark our 20th Anniversary, but it was also defined by meaningful progress in strengthening all aspects of our business and enhancing the value proposition that we deliver to our customers. We accomplished all this despite 2021’s ranking as one of the top five biggest natural catastrophe years that the (re)insurance industry has seen.
To the credit of our team in 2021, we advanced our efforts to reposition the portfolio, manage down volatility and drive profitable growth while capitalizing on a favorable market. Comparing our results to 2017, we’ve taken our attritional loss ratio down by nine points to 55.1% this year and brought our current year ex-cat combined ratio down by 10 points to 88.7%, the best since 2007. AXIS now has delivered nine consecutive quarters of year-over-year improvement in our current year ex-cat combined ratio.
All the while, we reduced our net PML by over 50% across the curve. The improvement in our performance is attributable to continued proactive reshaping of the portfolio, reduction of limits and modulation of attachment points, in addition to good growth in selected lines once they reached rate adequacy. Further, we continued to capitalize on favorable market conditions – building upon our well-established positions in some of the best performing areas within specialty insurance.
Both our Insurance and Reinsurance segments contributed to our solid performance. Our Insurance business produced excellent results, growing production by 21%, generating record new business and total premiums, all the while strengthening its overall portfolio. The segment achieved underwriting income of $224 million¹, delivered a combined ratio of 91.6%, the best since 2010, and a current year ex-cat combined ratio of 85.9%, the lowest since 2006.
AXIS Re also delivered improved performance and it is an encouraging sign of progress that in a very high cat year for the industry, it produced a combined ratio below 100%. In addition, the current year ex-cat combined ratio of 86.3% was the best since 2012. This demonstrates that the work our team has done to improve the quality and resilience of our Reinsurance portfolio is paying off.
2021 Financial Results
Our solid 2021 results are the product of a multi-year effort to optimize our portfolio mix, grow our most profitable lines of business, and reduce earnings volatility by lowering our net exposure to catastrophes. Net income available to common shareholders for 2021 was $588 million, or $6.90 per diluted common share, reversing a net loss attributable to common shareholders of ($151) million, or ($1.79) per diluted common share, for 2020.
Operating income was $436 million², in contrast to the 2020 operating loss of $174 million. Improved core underwriting results, manageable catastrophe exposure and strong investment performance all contributed to delivering an ROACE of 12.2% and operating ROACE of 9.1%.³
The 2021 results included pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $443 million (9.5 points of the combined ratio), a significant improvement from $774 million (17.7 points), including COVID-19, in 2020. Excluding COVID-19, industry cat losses were up about 40%, but our ex-COVID cat loss ratio stayed flat at 9.5%. We estimate our share of the industry-wide catastrophe and weather-related losses, which are estimated to be $120 billion, was 0.37% in 2021. This was down from 0.50% a year earlier.
Gross premiums written were $7.7 billion in 2021, up from $6.8 billion in 2020. This reflected a 21% increase in Insurance premiums and a 1% rise in Reinsurance premiums. Both segments focused on lines with lower cat exposure and stronger prospects for profitable growth, while also benefiting from a continued improvement in rates.
We continued to drive progress in optimizing operating efficiency and controlling expenses, and this will remain a priority in 2022.
Investing in Talent
We are proud to have made several key talent appointments in the last year. We bolstered the AXIS ILS (Insurance Linked Securities) team, the unit focused on providing partners with access to specialized (re)insurance products, by appointing Chris Caponigro, who was named Global Head of AXIS ILS in July 2021 and expanding the team.
After 15 years at AXIS, we announced Helen O’Sullivan’s promotion to Global Treasurer. At AXIS, Helen has held roles such as CEO AXIS Specialty Europe SE, CEO of AXIS Re SE and Deputy Global Tax Director. Helen has been an integral member of the team since she joined the Company and we are delighted to have her in this new role.
In January 2022, we announced leadership transitions within our Insurance segment and welcomed Vince Tizzio as Senior Advisor – Insurance Market Strategy, and future CEO of AXIS Insurance effective June 1.
On behalf of the entire AXIS team, we would like to extend our gratitude to Peter Wilson for his nine years of leadership at AXIS and the achievements made under his watch as AXIS Insurance CEO.
Strategic Investments
Over the last decade, we have invested in ventures that enhance our value proposition and leadership in key markets targeted for long-term profitable growth, deliver our specialty expertise where our customers are, and address major industry pain points in the complex ecosystem in which we operate. In 2021 alone, our strategic investment portfolio was associated with an underwriting income4 in excess of $10.6 million and contributed $45 million in net investment income.
ESG and Stakeholder Commitment
Central to our Corporate Citizenship initiative is building and strengthening organizational and societal resilience, while delivering long-term value to our shareholders, colleagues, clients and other stakeholders. Our Citizenship program, designed to address environmental, social and governance (ESG) issues, continues to focus on the areas where we believe we can make the greatest impact: protecting our planet; fostering inclusion; and investing in our communities.
As a signatory to the Principles for Sustainable Insurance and the United Nations Global Compact, AXIS published its first progress reports on advancing our ESG priorities in 2021 on our external website. This is a reflection of our commitment to transparency and accountability. For more information on our 2021 accomplishments, I encourage you to read these documents and the Corporate Citizenship section of this report.
Supporting Our People
It has now been more than two years since the onset of the COVID-19 pandemic. While hybrid working conditions have become commonplace, we will never take for granted the AXIS colleagues whose efforts enabled us to continue working seamlessly in a virtual environment – all the while serving our clients and partners and strengthening our business. The progress we made in the past year is largely a tribute to their dedication, talent and resourcefulness, and I offer them my heartfelt thanks.
I am proud of our efforts to help alleviate the impact of the pandemic on our colleagues’ lives, and to support the health and welfare of our team members throughout the globe. We further strengthened our support program which is focused on three pillars of wellbeing: mental, including wellness seminars and a mindfulness app; financial, covering topics such as retirement planning; and physical, promoting a healthy and active lifestyle. Many practices we started during the pandemic, including all-staff webcasts several times a month and quarterly wellbeing newsletters, will continue well beyond. In the past year, we were also proud to introduce back-up childcare, elder care, and enhanced parental resources.
AXIS was a leader in shifting to and supporting a work-from-home approach, and we aim to lead in the transition to the future of work. We see an opportunity to re-think the way our teams eventually use company offices. We have called our go-forward plan Flex for Your Day. This program, designed as a flexible approach to reflect each team’s needs, empowers business leaders and their teams to determine how each specific operation should use the office.
I also want to take this moment to thank our Business Technology Solutions (BTS) team for their skill and dedication that allowed AXIS to transition seamlessly and securely into a hybrid work environment. Our BTS team remained fully engaged in the effort to make our systems as robust and resilient as possible, ensuring that we can operate effectively, serve clients and brokers, and safeguard valuable information in case of a cyber-security event.
Accelerating Progress and Performance
Over the last several years, we invested time and energy on building and strengthening a foundation for the future – and today we are seeing the results of our efforts. We begin 2022 as a stronger company than we were just a year ago, committed to further increasing the value that we deliver to all of our stakeholders, and we’re confident that we’ll continue to accelerate on our progress in the year ahead. We will not be satisfied until AXIS consistently delivers top quintile performance.
Our goal is to position AXIS among the best-performing companies in our industry – and the past year shows further evidence we are on the right track. We have built solid global franchises in Insurance and Reinsurance, grounded in a culture of exceptional client service. In this market, we have terrific positioning and the ability to add value to our customers and partners in distribution while growing profitably. We remain disciplined in our capital allocation to those lines and markets that provide the best balance of short-term and longer-term opportunity – while working in partnership with brokers and clients to deliver risk management solutions that address their needs and deliver value to the sector. Most important, we have a great team committed to building on our progress, generating consistent and sustained profitability, and enhancing the value that we deliver to our shareholders and customers.
To be clear, more work remains ahead of us as we focus on delivering a consistent top tier return on capital. It is clear to us what we need to do to sustain this momentum:
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We will continue to grow a franchise that leverages our broad global capabilities to deliver value-added products and services that meet our customers’ needs;
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We will continue to intelligently grow our portfolio while reducing exposure to catastrophe events;
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We will focus on achieving a competitive expense ratio that can support continued investment in long-term profitable growth; and
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We will continue to invest in our culture, our people, and in making a positive impact in our communities, as well as in advancing our ESG objectives.
And, while doing so, we will continue to stay true to our Company’s DNA: leadership in complex risks, underwriting expertise, and great client service.
We see a bright future for AXIS. We are excited about the path ahead – and confident that AXIS is well-positioned for continued progress and consistent performance in the years to come.
Sincerely,
Albert A. Benchimol
President and Chief Executive Officer
1Underwriting 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), and a discussion of the rationale for the presentation of this item are provided later in this report.
2Operating 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) available (attributable) to common shareholders, and a discussion of the rationale for the presentation of this item are provided later in this report.
3Operating return on average common equity (“operating ROACE”), 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, return on average common equity (“ROACE”), and a discussion of the rationale for its presentation are provided later in this report.
4Denotes calendar year underwriting income excluding general and administrative expenses.