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Axis swings to loss as catastrophes weigh

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Axis Capital Holdings Ltd. on Wednesday reported a 2017 fourth-quarter loss of $38.1 million compared with net income of $131.0 million for the fourth quarter of 2016 as it felt the effects of ‘near-record’ catastrophe losses.

Estimated pretax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, totaled $133.0 million, compared to $59.0 million a year ago, the Bermuda-based insurer and reinsurance said in its earnings statement.

Net premiums written increased by 57.1% to $729.4 million over the year-ago period, while net investment income increased 5.8% to $101.0 million.

The fourth-quarter combined ratio deteriorated to 100.7% from 96.7% in the fourth quarter of 2016.

On the company’s Thursday morning earnings call with analysts, Albert Benchimol, president and CEO of Axis Capital, said challenges included a “near-record catastrophe year for the insurance industry including record wildfires in the fourth quarter,” as well as higher noncatastrophe property losses.

He also said the company in the fourth quarter wrote down by $42.0 million the value of its deferred tax asset as a result of U.S. tax reform late last year.

He did, however, have positive news.

“As we expected, the market responded positively to the substantial catastrophe losses and deteriorating profitability in other lines,” Mr. Benchimol said.

Pricing started picking up in October and accelerated through December, he said, with the average rate increase for the fourth quarter approaching 3.0%.

In January, Axis renewed over $600 million of insurance premium at an average rate increase of 4.1%, Mr. Benchimol said.

Increases were strongest in the company’s U.S division, which saw average increases of 6.9% overall, “with solid double-digit increases in excess and surplus property and increases approaching 6% in casualty,” Mr. Benchimol said.

The international division saw a fourth-quarter average rate increase of 3.3% ranging from double-digit increases in catastrophe exposed property and offshore renewable energy down to modest declines in aviation and terrorism, Mr. Benchimol said.

On average, London specialty lines achieved rate increases of 4.3% with professional lines up 2.2%, he said.

Reinsurance renewals also saw a range of results, with loss-affected accounts flat to up 5.0% while loss-affected businesses generally saw increases of 5% to 15%, Mr. Benchimol said.

For full year 2017, Axis had a loss of $415.8 million compared with net income of $465.4 million in 2016. Estimated pretax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, totaled $835 million, compared with $204 million in 2016.

Net premiums written for the year increased by 7.5% to $4.03 billion compared with 2016, while net investment income increased 13.4% to $400.8 million.

The 2017 combined ratio deteriorated to 113.1% from 95.9% in 2016.