AXIS Capital Holdings’ money-losing insurance segment has drawn the attention of A.M. Best, which revised its outlooks for the Bermuda-based carrier to negative from stable, based largely on its performance.

“The revised outlooks are based on unfavorable trends in the group’s operating performance, particularly from AXIS’ insurance segment,” A.M. Best said in its update.

Specifically, the ratings agency revised its outlook to negative from stable for both AXIS and its subsidiaries. At the same time, it affirmed the financial strength rating of “A+” (Superior) for the AXIS subsidiaries, as well as their long-term issuer credit ratings of “aa-.” As well, A.M. Best revised the outlook to negative from stable and affirmed the long-term ICR of “a-” and the existing long-term issuer credit ratings for AXIS Capital Holdings.

A.M. Best said the revised outlooks also reflect a broader decline in AXIS’ operating performance over time.

“Historically, AXIS’ operating performance ranks among the top of its peer group; however, in recent years these results have trended toward the middle of its cohort,” A.M. Best said. “The group’s combined ratio run rate has trended higher, giving AXIS a smaller cushion to absorb shock-losses.”

AXIS booked a more than $1.6 billion loss for its insurance arm in 2017 and about the same for its reinsurance division, with combined ratios of 111 and 108.8, respectively. Its underwriting income reflected a nearly $228 million loss for insurance and a $185 million loss for reinsurance.

In 2016, AXIS’ insurance arm lost $1.1 billion overall and produced $37.5 million in underwriting income. Its reinsurance division was $1 billion in the red, but underwriting income nearly hit $241.6 million.

AXIS President and CEO Albert Benchimol, in the wake of the company’s 2017 fourth-quarter results, blamed a catastrophe loss surge, heavy competition and ongoing effects from the Ogden rate change in the U.K. for much of the problem.

Benchimol said that AXIS is trying to reduce earnings volatility. Steps taken included its $611.5 million cash purchase of Novae Group plc, which created a $2 billion insurer in London and a top 10 insurer/reinsurer at Lloyd’s.

Source: A.M. Best.