S&P Affirms AXIS Capital and Subs Ratings; Outlook Stable

May 22, 2013

Standard & Poor’s Ratings Services has affirmed its ‘A-‘ counterparty credit and senior debt ratings on AXIS Capital Holdings Ltd., as well as the ‘A+’ counterparty credit and financial strength ratings on its core operating subsidiaries (collectively, AXIS).

The outlook for all of the ratings is stable.

“The ratings reflect our view of AXIS’ very strong business risk profile and moderately strong financial risk profile built on very strong capital and earnings, and partially offset by its high risk position,” said S&P’s credit analyst Taoufik Gharib.

Under our criteria, these factors lead to a possible anchor of either ‘a’ or ‘a+’. We assigned the latter since we believe AXIS’ very strong business risk profile somewhat understates its contribution to its overall creditworthiness in light of its stronger operating performance relative to peers and broad diversification by product, geography, and through its dual platform that includes insurance and reinsurance. This diversification moderates some of our concerns regarding AXIS’ high risk position.

S&P said the “stable outlook reflects our belief that AXIS will maintain its prudent and opportunistic underwriting approach, which should help the group sustain its very strong competitive position. We expect the group to continue to expand its product offering, geographic footprint, and distribution channels. We believe this should be achievable even as the group maintains very strong and redundant capital adequacy at the ‘AA’ level in 2013 and 2014.

“It is unlikely that we would raise the ratings in the next 12-24 months because of elevated industry risk, including a challenging pricing in the global P/C reinsurance sector, a low interest rate environment with a tepid economic recovery in the developed markets, and potential earnings volatility arising from AXIS’ substantial exposure to severity risk (for example, property catastrophe and terrorism).

“Conversely, we could consider lowering the ratings if AXIS suffers significant property catastrophe losses outside our expectations and performs much worse than its peers, its underwriting performance lags that of its similarly rated peers, or it incurs material adverse reserve developments (in its professional liability lines, for instance).

Source: Standard & Poor’s

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