With a distinguished career in insurance and Insurtech, Simon Glairy is a recognized expert known for his incisive analysis of risk management and financial performance in the property and casualty sector. His insights into AI-driven risk assessment have made him a leading voice in navigating the industry’s most complex challenges. Today, he delves into the nuances of a remarkable year for a major Bermuda-based carrier, exploring the delicate balance between record-breaking operational success and the headwinds of new tax legislation. The conversation will touch upon the divergence between operating and net income, the differing performance of insurance versus reinsurance segments, the strategic tension between aggressive growth and shareholder returns, and how recent catastrophe losses are reshaping underwriting philosophy.
Net income fell 7% to $979 million due to Bermuda’s new 15% corporate tax, yet operating income rose 8%. How do you explain this divergence to stakeholders, and what practical steps are you taking to manage this new tax liability moving forward?
It’s a classic case of the headline number not telling the whole story, and it’s a crucial distinction we’re making in all our stakeholder communications. When you look under the hood, the operational engine of the company is firing on all cylinders. We generated an incredible $1.0 billion in operating income, an 8% jump from the prior year, and our underwriting income surged by 27%. These figures reflect the fundamental health and profitability of our core business. The 7% drop in net income is almost entirely an accounting consequence of Bermuda’s new 15% corporate tax. It’s a structural change to the environment, not a sign of operational weakness. Moving forward, managing this is about sophisticated tax planning and ensuring our global structure is as efficient as possible to mitigate the impact without compromising our strategic goals.
Underwriting income grew an impressive 27%, but the reinsurance segment’s 92.6% combined ratio lagged the insurance segment’s 86.1%. Could you detail the key factors behind the insurance segment’s outperformance and your strategy for improving reinsurance profitability?
That’s a fantastic observation, and it really highlights the strength of our diversified model. The insurance segment was the star of the show this year. Achieving an 86.1% combined ratio in the current market is a testament to disciplined underwriting, smart risk selection, and capitalizing on favorable pricing in our chosen specialty lines. You can see its momentum in the 9% growth in gross premiums, which hit $7.2 billion. The reinsurance segment, while still profitable with a 92.6% combined ratio, faced a different set of market dynamics and loss experiences. The strategy for reinsurance isn’t a radical overhaul but a continued refinement. We’re focused on optimizing the portfolio, deploying capital to the most profitable lines, and ensuring our pricing adequately reflects the evolving risk landscape, especially concerning catastrophe exposures.
Gross premiums written reached a record $9.6 billion, while the company returned $1.0 billion to shareholders. How does the leadership team balance the aggressive pursuit of top-line growth with such significant capital returns through share repurchases and dividends?
This balance is at the very heart of our capital management philosophy. It signals immense confidence. On one hand, hitting a record $9.6 billion in premiums shows we are in a growth mindset, actively seeking and winning profitable business in our specialty markets. On the other hand, returning a full billion dollars to our shareholders—with $888 million in share repurchases alone—is a powerful statement about our financial strength and discipline. It says we are not growing for growth’s sake. We generate more than enough capital to fund our ambitious plans and still provide a substantial, direct return to our owners. This dual approach is what has powered our 13 consecutive quarters of book value per share growth.
The company faced $159 million in catastrophe losses from events like the California wildfires and the Middle East conflict. How has this experience reshaped your underwriting approach and risk appetite for both climate-related and geopolitical perils in the coming year?
Experiencing events like the California wildfires, which were truly historic in scale, forces you to constantly stress-test your models and assumptions. The $137 million in natural catastrophe losses and the additional $22 million from the Middle East conflict underscore the reality of our world: risks are becoming more volatile and interconnected. This doesn’t necessarily mean we retreat from these areas, but it absolutely sharpens our focus. Our underwriting approach has become even more data-driven, granular, and forward-looking. We are scrutinizing our aggregate exposures with a finer-toothed comb and adjusting our pricing models to better reflect the increased frequency and severity of these perils. It’s about being smarter and more selective in how we deploy our capacity in these high-risk zones.
Given the focus on operating as “One AXIS,” what does this integration strategy look like in practice? Can you provide an example of how capitalizing on opportunities across both the insurance and reinsurance markets has created tangible value for the company?
“One AXIS” has moved from a slogan to our daily operational reality. It’s about breaking down the traditional silos between our insurance and reinsurance teams to present a unified, more powerful front to the market. In practice, this means our experts in, say, cyber insurance are sharing their deep knowledge with our reinsurance underwriters who are covering cyber treaties. This cross-segment collaboration allows us to get a much richer, 360-degree view of risk. A tangible example is how we approach large, complex corporate clients. Instead of just offering them a standard insurance policy, we can now structure holistic risk solutions that might involve a primary layer from our insurance segment and a tailored reinsurance program to protect their captive, all designed in a seamless, integrated package. This creates stickier client relationships and allows us to capture a larger share of their risk management spend.
What is your forecast for the specialty insurance and reinsurance markets?
I foresee a market characterized by disciplined growth and a continued flight to quality. The pricing environment in many specialty lines remains attractive, and there’s still significant room to grow for carriers that have the expertise and balance sheet to handle complex risks. However, the days of chasing growth at any cost are over. Underwriters will remain highly focused on profitability, driven by concerns over inflation, climate change, and geopolitical instability. We’ll see continued investment in data and analytics to get a better handle on these evolving perils. For reinsurers, the focus will be squarely on portfolio optimization and achieving adequate returns on capital, which may keep capacity tight in certain catastrophe-exposed regions. Ultimately, the carriers that thrive will be those, like AXIS, that operate with discipline, leverage deep expertise, and manage capital with precision.
