AXIS Capital outlines potential for double-digit insurance growth in 2026 through new initiatives and RAC Re partnership

Earnings Call Insights: AXIS Capital Holdings Limited (AXS) Q3 2025

MANAGEMENT VIEW

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CEO Vincent Tizzio highlighted "excellent results as the momentum in our performance further accelerated" and pointed to a "14% year-over-year increase in diluted book value per common share at $73.82, 18% annualized operating return on equity, 20% increase in operating earnings per share over the prior year quarter at $3.25" and "premiums of $2.1 billion, our highest third quarter ever, up nearly 10% over the prior year, including $670 million in new business." Tizzio emphasized strong premium adequacy and active cycle management in the current environment, with an ongoing transformation supported by investments in people, products, and platforms.

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The CEO announced the launch of AXIS Capacity Solutions, which "transacted its first deal, a partnership with Ryan Specialty" in the quarter. Tizzio also noted continued focus on operational modernization, AI-driven efficiency, and the implementation of a new underwriting platform in North America. He confirmed the appointment of Matt Kirk as the future CFO, succeeding Pete Vogt.

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CFO Peter Vogt stated, "Our net income available to common shareholders was $294 million or $3.74 per diluted common share. And our operating income was $255 million or $3.25 per diluted common share, producing a 17.8% annualized operating return on common equity." Vogt further reported a combined ratio of 89.4% and highlighted that "gross premiums written of $2.1 billion were up 9.7% over the prior year quarter, driven by accelerating growth initiatives in insurance." He reiterated confidence in achieving the full year 2026 target of an 11% G&A ratio.

OUTLOOK

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CFO Vogt explained that "going into next year, we will be able to construct a portfolio that remains premium adequate and that can grow at a mid- to high single-digit growth rate, excluding any impact from new sidecars such as RAC Re." He added that the RAC Re agreement "could actually put us into double digits for next year," contingent on underlying market conditions.

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Management described the ramp-up of RAC Re as gradual, with earned premium expected over a four-year period from 2026 to 2029, and initial fee impacts on the G&A ratio as "pretty de minimis in that very first year."

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The company expects to use capital primarily for profitable growth and investment in the business, with opportunistic share repurchases supported by a new $400 million authorization.

FINANCIAL RESULTS

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AXIS Capital reported "net income available to common shareholders was $294 million or $3.74 per diluted common share" and "operating income was $255 million or $3.25 per diluted common share." Book value per diluted common share rose to $73.82.

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Gross premiums written reached $2.1 billion, up 9.7% over the prior year quarter, and net written premiums increased by 9.5%.

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The combined ratio was 89.4%, with an accident year loss ratio ex-cat and weather of 56.3%. Cat losses totaled $44 million, representing a 3% cat loss ratio.

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Insurance segment premiums were $1.7 billion, up 11% year-over-year, and the insurance combined ratio was 85.9%. Reinsurance gross premiums grew 6%, with specialty short-tail lines representing 91% of new business premiums and a reinsurance combined ratio of 92.2%.

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Investment income was $185 million, and operating cash flow for the quarter was $674 million.

Q&A

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Andrew Kligerman, TD Cowen: Asked about property growth and loss ratios in a changing pricing environment. Tizzio responded that "it's important to play some context around this growth" and detailed portfolio construction, while Vogt noted "the mix of business has changed such that, that's kind of offsetting the pressure we've seen."

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Kligerman: Inquired about the potential pipeline for additional AXIS Capacity Solutions deals. Tizzio confirmed, "this transaction has no doubt spawned increasing interest from a variety of partners around the world. And yes, there is a pipeline."

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Elyse Greenspan, Wells Fargo: Sought clarification on insurance growth guidance and RAC Re impact. Vogt stated, "with RAC Re...we could be into double digits next year."

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Joshua Shanker, BofA: Questioned paid to incurred ratios amid rapid growth. Tizzio and Vogt both expressed comfort with the current figures, attributing changes to portfolio mix, claims process improvements, and timing of large claims.

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Further analyst questions covered reserve releases (Vogt: "all coming from the short-tail lines"), G&A expense trajectory, technology investment benefits, and the margin profile of new partnerships.

SENTIMENT ANALYSIS

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Analysts frequently pressed for clarification on growth sustainability, paid-to-incurred ratios, and the impact of new initiatives, with a neutral to slightly positive tone as they sought detailed explanations but did not express skepticism or concern.

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Management maintained a confident tone throughout, frequently referencing disciplined underwriting, robust pipeline, and operational modernization. Tizzio affirmed, "we feel great confidence in the integrated approach that we're taking," and Vogt reiterated cost discipline and growth targets.

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Compared to the previous quarter, management's tone remained consistently optimistic, with analysts' questions focused more on execution details than on risk or downside.

QUARTER-OVER-QUARTER COMPARISON

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The current quarter saw an uptick in premium growth rates, higher new business volumes, and the completion of cyber book reshaping.

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Growth guidance for insurance was refined to mid- to high single-digit, with the new RAC Re partnership potentially pushing growth into double digits for 2026, compared to general mid-single-digit guidance in the previous quarter.

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The technology and operational modernization agenda was emphasized as delivering tangible productivity benefits, building on prior quarter investments.

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The tone from both management and analysts remained positive and focused on growth, with continued emphasis on underwriting discipline and efficiency gains.

RISKS AND CONCERNS

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Management cited ongoing pricing pressure in certain lines, particularly cyber, and noted increased competition from MGAs and surplus capacity affecting pricing dynamics.

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The evolving risk environment, especially in property and liability, was highlighted as requiring vigilance in cycle management.

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Analysts probed paid-to-incurred ratios and reserve adequacy, with management emphasizing comfort in reserve strength and claims process improvements.

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Technology spend was noted as elevated, but management expects this to yield ongoing efficiency gains.

FINAL TAKEAWAY

AXIS Capital delivered strong top and bottom-line performance driven by robust premium growth, disciplined underwriting, and operational investments. The company outlined a pathway to mid- to high single-digit insurance growth, with the RAC Re partnership providing potential for double-digit expansion in 2026. Management remains confident in the company's capital strength, reserve adequacy, and ability to leverage technology for scalable, profitable growth amid a dynamic risk landscape.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/axs/earnings/transcripts]

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