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AXIS Capital, the Bermuda based specialty insurance and reinsurance company, reported a significant 39% increase in fee income generated from its work with third-party investors for full-year 2024.
The company has a number of initiatives that see it entering into risk-sharing relationships with so-called Strategic Capital Partners, sharing in its underwriting risks while managing investor capital and earning fee income from that management and when the subject business performs.
AXIS Capital had previously reported that it earned $26 million in fee income from its Strategic Capital Partner relationships for the first-half of 2024, which was an almost 53% increase from the $17 million it earned for H1 2023.
Now, for the full-year 2024, AXIS Capital has reported increased fees from its capital partner relationship activities.
Fee income from these arrangements reached $85 million for the full-year, representing a 39% increase from the $61 million earned in 2023.
Third-party capital related fee income has been rising at AXIS ever since its launch of the Monarch Point Re casualty insurance-linked securities (ILS) vehicle during the third-quarter of 2023.
Monarch Point Re is a Bermuda-based collateralized reinsurer that was capitalised by a more than $400 million raise.
The structure operates as a kind of third-party capitalised casualty reinsurance sidecar structure for AXIS and the investors behind it, while this initiative had been helping to drive premiums ceded by AXIS to its strategic capital partner investors higher.
As the Monarch Re casualty ILS strategy continues to build, AXIS is passing on premiums to the structure, helping the re/insurer shape its own book while ceding a portion of its casualty risks to investors that appreciate the returns of this business.
For the full-year 2024, AXIS said that across the business a decrease in its general and administrative expense ratio was partly due to the increase in fees related to arrangements with strategic capital partners.
While for its reinsurance segment, “The underwriting-related general and administrative expense ratio decreased by 1.3 points, mainly driven by an increase in fees related to arrangements with strategic capital partners.”
Across the AXIS Capital business, the company reported growth for 2024.
Vince Tizzio, President and CEO, commented, “2024 was an excellent year for AXIS. We delivered on the financial and operational guideposts that we shared at our Investor Day this past May, highlighted by an operating return-on-equity of 18.6% and 20.7% growth in diluted book value per share.
“As a global leader in specialty underwriting, we continued to find attractive opportunities for growth. In our Insurance business, profitability was highlighted by an 89.1% combined ratio for the full year and we grew 7.7%, to reach $6.6 billion in premiums. Our Reinsurance business is producing strong, consistent profits with a 91.8% combined ratio for the full year while growing 7.9% to $2.4 billion in premiums.”
While gross premiums written were up across both the AXIS Capital insurance and reinsurance businesses, ceded premiums written were actually slightly lower in insurance for 2024 and only a slight increase was seen for reinsurance premiums ceded during the year.
Which makes the increase in third-party capital partner fees earned all the more notable, as AXIS has achieved this without ceding significantly more of its risk, meaning it has generated more retained business for itself over the course of the year while the business it has ceded to capital partners has clearly proved profitable, which will have benefited the investors backing structures as well.
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