AXIS Capital Holdings Limited Q2 FY2026 earnings call

• Overall Company Financial Performance

  • Achieved an overall 93% combined ratio and 89% current accident year ex-cat combined ratio for the quarter
  • Annualized operating return on equity hit 14.3%, and diluted book value per share grew 15% year-over-year (the 15th consecutive quarter of growth)
  • Gross written premiums company-wide totaled $2.7 billion, up 6% year-over-year; short tail lines represent 57% of total company premiums
  • Net income available to common shareholders was $251 million ($3.38 per diluted share), with an annualized ROE of 17%
  • $22 million in total fee income, including ~$4 million from ACS; full year ACS fee income is expected to reach ~$17 million
  • Returned $122 million to shareholders in the quarter ($33 million in dividends, $89 million in share repurchases), with $263 million remaining under the current repurchase authorization

• Business Line Strategy

  • Leaning into attractive specialty short-tail markets that meet risk-adjusted return standards while actively cycle managing long-tail liability and professional lines that do not meet premium adequacy requirements
  • Property: Gross premiums grew 21% driven by ACS, but net premiums shrank 15% after increased reinsurance retention; rates fell 17% quarter-over-quarter, with a conservative portfolio structure (low single-digit million average net limits, $100 million per event CAT excess of loss attachment)
  • Casualty/Liability: Overall grew 8% driven by 7% rate increases; large excess casualty shrank 4% while the lower middle market unit grew 22%; primary casualty shrunk 8% year-to-date on a cautious stance
  • Professional lines: Grew 16% with 2% rate increases, driven by expanded classes including Allied Health and Design Pro
  • Cyber: Reduced overall premiums by 5%, with a 30% cumulative group reduction due to ongoing 7% rate declines that pressure premium adequacy
  • Reinsurance: 58% of the 25% premium reduction came from professional lines, 42% from liability; continued pressure is seen only in A&H employer stop-loss business

• Operational and Strategic Updates

  • Added key new leadership roles: Tony Izzo as Chief Commercial Officer to elevate global distribution, and Raheel Jagani as Head of AI and Technology Strategy to scale AI across the enterprise
  • Continued multi-year How We Work transformation program to simplify processes, embed agile workflows, and pilot AI across underwriting, claims, and operations; the new group COO role unifies execution to translate transformation investments into measurable financial results
  • Distribution diversification in North American insurance: 68% of premiums from wholesale, 19% from growing retail, 13% from flat delegated (MGA) business, with strong governance for delegated relationships

Insurance Segment: Gross written premiums hit $2.2 billion, up 15% year-over-year. It generated $119 million in underwriting income, with a 90% overall combined ratio and an 84.5% current accident year ex-catastrophe combined ratio. Core organic portfolio growth was 2%, expanded classes contributed 5%, and Access Capital Solutions (ACS) added 8% growth. This segment represents 81.5% of total company gross written premiums. Short tail lines make up 59% of the segment's total premiums.

Reinsurance Segment: Gross written premiums were $440 million, down 25% year-over-year due to intentional cycle management of underperforming long-tail lines. The segment posted a 94.5% combined ratio, marking its 10th consecutive quarter of profitability. 51% of the segment's production comes from specialty short-tail lines, and 94% of new written premium is from short-tail lines. This segment represents 16.3% of total company gross written premiums.

• Full year consolidated G&A ratio is maintained at 11%, with flat year-over-year dollar spending; management will make opportunistic investments in talent and growth that could modestly change the outcome, but remains committed to the target
• Full year reinsurance gross written premium is expected to decline 10% year-over-year, in line with prior guidance, after the 25% Q2 drop reflected the timing of renewal cycles (Q1 only saw a 2% decline)
• The updated insurance underlying accident year loss ratio is expected to remain near the Q2 54% level for the full year, after a 170 basis point year-over-year increase driven by faster-than-expected pricing softening in property
• Management expects to continue active share repurchases in the second half of 2026, given the current market valuation does not reflect the company's created shareholder value
• The effective tax rate is expected to remain in the 19.2% range for the foreseeable future

• Broad industry market softening is underway, with increasing competition and broad pricing pressure across most lines, requiring active cycle management to preserve premium adequacy
• Severe convective storms are becoming more frequent, geographically dispersed, and costly per event; Q2 2026 industry catastrophe losses totaled $21 billion, $18 billion of which came from severe convective storms
• The ongoing Iran conflict has generated $2.5 to $3 billion in total industry losses year-to-date; Access Capital recorded $31 million in Q2 losses from the conflict, and the situation remains highly fluid
• Cyber pricing continues to decline 7% per quarter, pressuring premium adequacy and leading to a 30% cumulative reduction in the company's cyber portfolio
• A&H employer stop-loss reinsurance continues to face significant pricing pressure and competitive strain that weighs on profitability
• Casualty rate increases are not keeping up with loss cost trends, requiring more cautious underwriting and selective growth only in attractive sub-segments

Q: The insurance accident-year loss ratio rose 170 basis points year-over-year, driven largely by faster-than-expected property price declines. How much of the increase came from casualty, and is the increase from actual loss experience or precautionary reserving?

A: Management stated the 170 basis point increase included 100 basis points from property pricing softening that exceeded earlier forecasts, and 70 basis points from casualty, where rate increases are still not matching loss cost trends. The adjustment is a precautionary, proactive step to preserve premium adequacy amid a rapidly changing market, not driven by unexpected current loss experience.

Q: With growing competition linked to MGAs, how does Access Capital manage delegated MGA relationships in this softening pricing environment? Are MGA loss results worse than non-MGA business?

A: The company maintains a highly disciplined governance process for delegated relationships, with ongoing review of performance, and cut unprofitable relationships starting in 2023. Current MGA growth is flat year-over-year in the U.S., with marginal growth driven by pre-vetted partners in specialty lines like pet insurance and surety. Aggregate loss results for MGA business are not worse than non-MGA business, aligned with the company's underwriting standards.

Q: For the RAC RE partnership with MGAs, do you expect the total program volume to come in lower than the initial projected target given current competitive conditions?

A: The contract gives Access Capital flexibility to re-evaluate participating MGAs in year two of the program, and the company is currently conducting that review and will make adjustments to exit underperforming partners. Management confirmed that total program volume will likely come in below the original projection, and remains focused on bottom-line profitability rather than hitting a specific volume target, while the overall partnership with Ryan Specialty remains strong.

Q: In a softening market cycle, how do you balance caution against leaving attractive long-term growth opportunity on the table? Are you taking proactive steps to avoid the large margin deterioration seen in past soft cycles?

A: Management noted the company is already growing insurance healthily while maintaining an 84.5% ex-cat combined ratio, so it is already tolerating appropriate growth aligned with the question's premise. The company is leveraging data, claims insights, and actuarial analysis to make proactive, timely adjustments to underwriting appetite rather than waiting for losses to materialize, and is shifting portfolio mix to attractive expanded specialty classes to offset pressure from softer lines.