AXIS Capital is the Bermuda-based holding company for the AXIS group of companies
(the "Group") and was incorporated on December 9, 2002. AXIS Specialty
Bermuda commenced operations on November 20, 2001. AXIS Specialty Bermuda and
its subsidiaries became wholly owned subsidiaries of AXIS Capital pursuant to
an exchange offer consummated on December 31, 2002. We provide a broad range
of specialty (re)insurance on a worldwide basis, through operating subsidiaries
and branch networks based in Bermuda, the United States, Canada, Europe, Australia
and Singapore. We also maintain marketing offices in Brazil, France, Spain and
Dubai. Our business consists of two distinct global underwriting platforms,
AXIS Insurance and AXIS Re.
The markets in which we operate have historically been cyclical. During periods
of excess underwriting capacity, as defined by availability of capital, competition
can result in lower pricing and less favorable policy terms and conditions for
(re)insurers. During periods of reduced underwriting capacity, pricing and policy
terms and conditions are generally more favorable for (re)insurers. Historically,
underwriting capacity has been impacted by several factors, including industry
losses, catastrophes, changes in legal and regulatory guidelines, investment
results and the ratings and financial strength of competitors.
We are a global insurer and reinsurer, with our mission being to provide our
clients and distribution partners with a broad range of risk transfer products
and services and meaningful capacity, backed by excellent financial strength.
We manage our portfolio holistically, aiming to construct the optimum consolidated
portfolio of funded and unfunded risks, consistent with our risk appetite and
the development of our franchise. We nurture an ethical, entrepreneurial and
disciplined culture that promotes outstanding client service, intelligent risk
taking and the achievement of superior risk-adjusted returns for our shareholders.
We believe that the achievement of our objectives will position us as a global
leader in specialty risks.
We aim to execute on the following six-point strategy:
We offer a diversified range of products and services across market segments
and geographies: Our position as a well-balanced hybrid insurance and reinsurance
company gives us insight into the opportunities and challenges in a variety
of markets. With our origins in Bermuda, today we have locations across the
U.S. and in Canada, while in Europe we have offices in Dublin, London, Zurich,
Barcelona, Madrid and Paris. We are addressing opportunities throughout Latin
America and have a reinsurance office in Sao Paulo while our Singapore branch
serves as a gateway to Asia. We have also recently opened an office in Dubai
to focus on marketing accident and health specialty reinsurance to our clients
in the Middle East and Africa.
We underwrite a balanced portfolio of risks, including complex and volatile
lines, moderating overall volatility with risk limits, diversification and risk
management: Risk management is a strategic priority embedded in our organizational
structure and we are continuously monitoring, reviewing and refining our enterprise
risk management practices. We combine judgment and experience with data-driven
analysis, enhancing our overall risk selection process.
We modulate our risk appetite and deployment of capital across the underwriting
cycle, commensurate with available market opportunities and returns: Closely
attuned to market dynamics, we recognize opportunities as they develop and react
quickly as new trends emerge. Our risk analytics provide important and continuous
feedback, further assisting with the ongoing assessment of our risk appetite
and strategic capital deployment. We have been successful in extending our product
lines, finding new distribution channels and entering new geographies. When
we do not find sufficiently attractive uses for our capital, we return excess
capital back to our shareholders through share repurchases or dividends.
We develop and maintain deep and trustful relationships with clients and distribution
partners, offering high-levels of service and effective solutions for risk management
needs: Our management team has extensive industry experience, deep product knowledge
and long-standing market relationships. We primarily transact in specialty markets,
where risks are complex. Our intellectual capital and proven client-service
capability attract clients and distribution partners looking for solutions.
We attract, develop, retain and motivate an excellent team: We aim to attract
and retain the best people in the industry and to motivate our employees to
make decisions that are in the best interest of both our customers and shareholders.
We nurture an ethical, risk-aware, achievement-oriented culture that promotes
professionalism, responsibility, integrity, discipline and entrepreneurialism.
As a result, we believe that our staff is well-positioned to make the best underwriting
and strategic decisions for the Company.
Our key metrics for performance measurement include return on average common
equity ("ROACE") and diluted book value per common share adjusted
for dividends. Our goal is to achieve top-quintile industry ROACE and growth
in book value per share adjusted for dividends, with volatility consistent with
the industry average.
Our underwriting operations are organized around two global underwriting platforms,
AXIS Insurance and AXIS Re. Therefore we have two reportable segments, insurance
and reinsurance. We do not allocate our assets by segment, with the exception
of goodwill and intangible assets, as we evaluate the underwriting results of
each segment separately from the results of our investment portfolio.
Our capital management strategy is to maximize long-term shareholder value
by, among other things, optimizing capital allocation and minimizing our cost
of capital. We also manage our capital in accordance with our desired financial
strength rating, as well as regulatory and solvency requirements.
We monitor the capital positions of the Group and operating entity level and
apply stress tests based on adverse scenarios. This allows us to take appropriate
measures to ensure the continued strength of capital and solvency positions,
and also enables us to take advantage of growth opportunities as they arise.
Such measures are performed as and when required and include traditional capital
management tools (e.g. dividends, share buy-backs, issuances of shares or debt)
or through changes to our risk exposure (e.g. recalibration of our investment
portfolio or changes to our reinsurance purchasing strategy).
Internal risk capital
We use our internal capital model to assess the capital consumption of our business,
measuring and monitoring the potential aggregation of risk at extreme return
periods.
Regulatory capital requirements
In each country in which we operate, the local regulator specifies the minimum
amount and type of capital that each of the regulated entities must hold in
support of their liabilities. We target to hold, in addition to the minimum
capital required to comply with the solvency requirements, an adequate buffer
to ensure that each of our operating entities meets its local capital requirements.
Rating agency capital requirements
Rating agencies apply their own models to evaluate the relationship between
the required risk capital of a company and its available capital resources.
The assessment of capital adequacy is usually an integral part of the rating
agency process. Meeting rating agency capital requirements and maintaining strong
credit ratings are strategic business objectives of the AXIS Group.
Market risk is the risk that our financial instruments may be negatively impacted
by movements in financial market prices or rates such as equity prices, interest
rates, credit spreads and foreign exchange rates. Fluctuations in market rates
primarily affect our investment portfolio.
Through asset and liability management, we aim to ensure that market risks influence
the economic value of our investments and that of our loss reserves and other
liabilities in the same way, thus mitigating the effect of market fluctuations.
For example, we reflect important features of our liabilities, such as maturity
patterns and currency structures, on the assets side of the balance sheet by
acquiring investments with similar characteristics.
We supplement our asset-liability management with various internal policies
and limits. As part of our strategic asset allocation process, different asset
strategies are simulated and stressed in order to evaluate the ‘best’
portfolio (given return objectives and risk constraints) at both the group and
operating entity level. We centralize the management of asset classes to control
aggregation of risk, and provide a consistent approach to constructing portfolios
as well as the selection process of external asset managers. We have limits
on the concentration of investments by single issuers and certain asset classes,
and we limit the level of illiquid investments (see Liquidity Risk below).
Further, our investment guidelines do not permit the use of leverage in any
of our fixed maturity portfolios.
We stress test our investment portfolios using historical and hypothetical scenarios
to analyze the impact of unusual market conditions and to ensure potential investment
losses remain within our risk appetite. At an annual aggregated level, we manage
the total risk exposure to our investment portfolio so that the ‘total
return’ investment loss in any one year is unlikely to exceed a defined
percentage of our common equity at a defined return period.
We mitigate foreign currency risk by seeking to match our estimated (re)insurance
liabilities payable in foreign currencies with assets, including cash and investments
that are also denominated in such currencies. Where necessary, we use derivative
financial instruments for economic hedging purposes. For example, in certain
circumstances, we use forward contracts and currency options, to economically
hedge portions of our un-matched foreign currency exposures.
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