A.M. Best Co. upgraded the issuer credit ratings (:ICR) of AXIS Capital Holdings Limited (AXS) to “a-” from “bbb+”. The debt ratings were also upgraded. Concurrently, the rating agency upgraded the financial strength rating (:FSR) to A+ (Superior) from A (Excellent) and ICR to “aa-” from “a+” of AXIS Specialty Limited and its operating affiliates. AXIS Specialty Limited is the subsidiary of AXIS Capital Holdings.
Subsequently, the outlook for the ratings was revised to stable from positive.
The rating upgradation came on the back of AXIS Specialty’s sturdy risk adjusted capitalization, and sustained solid operational performances based on solid enterprise risk management controls. At the same time, exposure to catastrophe losses and soft casualty market conditions dwarf the positives. Nevertheless, riding on the strength of diversified product portfolio and global footprint, the company is well positioned to navigate soft casualty market conditions.
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence in the stock and in maintaining credit worthiness in the market. Rating downgrades, therefore, adversely affect the business, apart from increasing the costs of future debt issuances. We believe that strong ratings will help AXIS Capital retain investor confidence and enable it to write more businesses going forward, thereby boosting results.
In this regard, A.M. Best stated that the rating can be further upgraded if the company successfully maintains the trend of delivering operating profitability as well as strong risk-adjusted capital.
However, the rating agency can revise the ratings downward or change the outlook on the ratings following several factors. These include deterioration in operating profitability, suffering of significant catastrophe or investment losses, an adverse loss reserve development, and erosion in risk-adjusted capital.
Recently, A.M. Best affirmed the ICRs of Donegal Group Inc. (DGICA), Argo Group International Holdings, Ltd. (AGII) and RLI Corp. (RLI), among other property and casualty insurers. While Donegal Group and Argo Group retains the ICR of “bbb”, RLI Corp. retains the ICR of ‘a’.
AXIS Capital Holdings presently carries a Zacks Rank #3 (Hold).