Michael A. Butt
Chairman of the Board
To grasp the very real progress that AXIS has made toward its strategic ambition of becoming a leader in specialty insurance and global reinsurance, it is worthwhile to revisit a major point that was articulated in our prior year’s annual report. In 2017, we stated that, “We focused our efforts on repositioning AXIS to become an increasingly relevant player in targeted markets while charting a course for long-term profitability and reducing the overall volatility of our book.”
I am pleased to report that AXIS made very good headway in 2018 in turning that objective into a reality. Our increased relevance is reflected in the number of Top 5 or Top 10 positions that we hold in lines that are critical to our long-term growth, including lines such as Cyber Risk and Renewable Energy. The successful integration of our Novae acquisition has made AXIS a more significant player in London’s international specialty market and at Lloyd’s. Concerted efforts have been made to execute the Company’s transformation program, as reflected in the new Global Underwriting and Analytics office, organizational improvements in Insurance, a stronger operating model and new client engagement model in Reinsurance, and numerous initiatives to bring the benefits of data, analytics and vital digital technologies to our underwriting, customer engagement and other processes. Together, these actions have the potential to deliver profitable growth, along with cost synergies that are estimated to reach $100 million annually.
The changes AXIS has made — and is pursuing — are positioning the Company well for an evolving (re)insurance business climate.
The past year was not without challenges, however. Along with the rest of our industry, AXIS endured significant catastrophe losses from global weather-related events and, for the second consecutive year, devastating California wildfires. Nonetheless, our underlying results reflected solid progress, including an improvement in full-year underwriting performance, which is evident on an ex-PGAAP basis and also on an ex-catastrophe and weather-related loss basis.
The changes AXIS has made — and is pursuing — are positioning the Company well for an evolving (re)insurance business climate. We have commented in the past on such issues as the regulatory and economic pressures including those created by Brexit, the disruptive aspects of innovative technologies and new competitors, the industry’s slow pace of pricing improvement, and the continued presence of excess capital. Add to that the fact that major economies are now in the later stages of the economic cycle, and the inherent uncertainty is amplified by potential geopolitical and trade issues.
In spite of these difficulties, we believe the changing industry conditions will bring new opportunities. The emergence of new risks, growing populations, and a more rational pricing environment should make the next few years an excellent time to be in the (re)insurance industry. It appears that markets are adjusting, albeit belatedly, to the realization that the pricing of risk must be reflective of the industry’s challenges. The coming years also will bring opportunities to employ data, analytics, artificial intelligence and technologies to better evaluate risk, connect with customers, and operate cost-effectively. Further, the need to address areas such as cyber risk, renewable energy and others, will underscore the vital role that (re)insurance plays in enabling clients to manage new and emerging risks.
That brings me to a most important point: The future of our industry is a positive and exciting one, because — more than ever — the world needs what we can provide. The global (re)insurance industry plays an essential role in helping individuals, businesses and governments to move forward on their plans, with the confidence that major risks can be planned for and properly managed. The vision that AXIS is pursuing will ensure that we are at the heart of the industry’s efforts to understand and mitigate risk — benefiting society and leading to profitable growth opportunities.
In particular, society as a whole is challenged to find solutions to the continuing massive growth of the global population and the related impact on climate risks and standards of living around the world. Our role at AXIS, and across the (re)insurance industry, is to contribute constructively to addressing these problems by helping clients understand and mitigate all their risks in a responsible manner.
The Board of Directors stands solidly behind the Company’s strategic plans to become a leading specialty insurer and global reinsurer, and we are encouraged by the advances AXIS has made along its transformation journey. The Company is steadfast in its vision, and consistently results-oriented in its implementation.
I would like to take this opportunity to express the Board’s gratitude to Cheryl-Ann Lister, who has retired as a Director after a decade of outstanding service. I also welcome Barbara Yastine, Elanor Hardwick, and Lizabeth Zlatkus, who joined the Board in the past nine months and bring deep financial and industry expertise, innovative thinking and strategic perspective to our enterprise. I thank AXIS’ shareholders for their ongoing confidence and support and, as always, I thank our employees for their hard work and dedication in a challenging environment.
It is gratifying to see AXIS move — with deliberate speed and thoughtful execution — toward a position as a globally recognized market of choice for clients, a preferred partner for brokers and other distributors, and a source of value for our shareholders.