Fitch Ratings reiterated the Issuer Default Rating ("IDR") of
'A' and senior debt rating of 'A-' of
AXIS Capital Holdings Limited
), according to Reuters. Concurrently, the rating agency reiterated
the Insurer Financial Strength ("IFS") of 'A+' of the operating
subsidiaries. The ratings carry a stable outlook.
The rating affirmations came on the back of the history of
continued solid underwriting performance, sturdy capitalization and
conservative investment portfolio and reserving practices.
AXIS Capital's combined ratio - the percentage of premiums paid out
as claims and expenses, a measure of underwriting profitability -
was 85.3% (10-year average). Further, combined ratio improved
significantly year over year to 93.6% in the first half of 2012.
However, considerable exposure to catastrophes somewhat dwarfs the
positives. Nevertheless, the company is striving to lower it by
The rating agency stated that though favorable reserve development
has aided earnings, maintaining the level will be difficult amidst
the weak macro environment. However, it believes that a diverse
range of premium generating avenues will not only shield the
company from the adversities of a singular market space but will
also allow it to compete in different markets. Also, AXIS Capital
has increased its shareholders' equity over the last decade.
Rating affirmations or upgrades from credit rating agencies play an
important part in retaining investor confidence in the stock as
well as maintaining creditworthiness in the market. We believe the
company's strong score with the credit rating agencies will help it
write more business going forward.
Fitch stated the ratings might be revised upward provided there is
considerable increase in surplus and catastrophe exposure reduces
Ratings might be subject to downgrade if capital erodes due to
worse-than-expected catastrophe losses, failure in raising capital
subsequent to losses, considerable damage to underwriting results,
operating earnings coverage stays below 7.0x for a longer term,
operating leverage moves ahead of 1.0x net written
premiums-to-equity ratio, reserves plummets or financial leverage
moves ahead of 25%.
We retain our Neutral recommendation on AXIS Capital. The company
currently carries a Zacks Rank #2, reflecting a short-term Buy
), which closely competes with AXIS Capital, shares the same Zacks
ACE LIMITED (ACE): Free Stock Analysis Report
AXIS CAP HLDGS (AXS): Free Stock Analysis
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