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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
☐        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-31721
AXIS CAPITAL HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)

Bermuda
(State or other jurisdiction of incorporation or organization)
98-0395986
(I.R.S. Employer Identification No.)
92 Pitts Bay Road, Pembroke, Bermuda HM 08
(Address of principal executive offices and zip code)
(441) 496-2600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares, par value $0.0125 per shareAXSNew York Stock Exchange
Depositary shares, each representing a 1/100th interest in a 5.50% Series E preferred shareAXS PRENew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
    Accelerated filer
☐
Non-accelerated filer☐
 Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐  No  ☒
At October 27, 2023, there were 85,241,668 common shares outstanding, $0.0125 par value per share, of the registrant.

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AXIS CAPITAL HOLDINGS LIMITED
INDEX TO FORM 10-Q


 
Page
 PART I 
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.


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PART I     FINANCIAL INFORMATION

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts included in this report, including statements regarding our estimates, beliefs, expectations, intentions, strategies or projections are forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in the United States ("U.S.") federal securities laws. In some cases, these statements can be identified by the use of forward-looking words such as "may", "should", "could", "anticipate", "estimate", "expect", "plan", "believe", "predict", "potential", "intend" or similar expressions. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond management's control.
Forward-looking statements contained in this report may include, but are not limited to, information regarding our estimates for catastrophes and other weather-related losses including losses related to the COVID-19 pandemic, measurements of potential losses in the fair market value of our investment portfolio and derivative contracts, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives including our exit from catastrophe and property reinsurance lines of business, our expectations regarding pricing, and other market and economic conditions including the liquidity of financial markets, developments in the commercial real estate market, inflation, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates.
Forward-looking statements only reflect our expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Accordingly, there are or will be important factors that could cause actual events or results to differ materially from those indicated in such statements.
We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
In this Form 10-Q, references to "AXIS Capital" refer to AXIS Capital Holdings Limited and references to "we", "us", "our", "AXIS", the "Group" or the "Company" refer to AXIS Capital Holdings Limited and its direct and indirect subsidiaries and branches.
Summary of Risk Factors
Investing in our common stock involves substantial risks, and our ability to successfully operate our business is subject to numerous risks, including those that are generally associated with operating in the insurance/reinsurance industry. Some of the more significant material challenges and risks include the following:

Insurance Risk
•the cyclical nature of the insurance and reinsurance business leading to periods with excess underwriting capacity and unfavorable premium rates;
•the occurrence and magnitude of natural and man-made disasters, including the potential increase of our exposure to natural catastrophe losses due to climate change and the potential for inherently unpredictable losses from man-made catastrophes, such as cyber-attacks;
•the effects of emerging claims, systemic risks, and coverage and regulatory issues, including increasing litigation and uncertainty related to coverage definitions, limits, terms and conditions;
•actual claims exceeding reserves for losses and loss expenses;
•losses related to the Israel-Hamas conflict, Russian invasion of Ukraine, terrorism and political unrest, or other unanticipated losses;
•the adverse impact of inflation;
•the failure of any of the loss limitation methods we employ;
•the failure of our cedants to adequately evaluate risks;

Strategic Risk
•underwriting and investment exposure in light of the recent disruption in the banking sector, which we expect to be within our risk appetite for an event of this nature;

3
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•changes in the political environment of certain countries in which we operate or underwrite business, including the United Kingdom's withdrawal from the European Union;
•the loss of business provided to us by major brokers;
•a decline in our ratings with rating agencies;
•the loss of one or more of our key executives;
•increasing scrutiny and evolving expectations from investors, customers, regulators, policymakers and other stakeholders regarding environmental, social and governance matters;
•the adverse impact of contagious diseases (including COVID-19) on our business, results of operations, financial condition, and liquidity;

Credit and Market Risk
•the inability to purchase reinsurance or collect amounts due to us from reinsurance we have purchased;
•the failure of our policyholders or intermediaries to pay premiums;
•general economic, capital and credit market conditions, including banking and commercial real estate sector instability, financial market illiquidity and fluctuations in interest rates, credit spreads, equity securities' prices, and/or foreign currency exchange rates;
•breaches by third parties in our program business of their obligations to us;

Liquidity Risk
•the inability to access sufficient cash to meet our obligations when they are due;

Operational Risk
•changes in accounting policies or practices;
•the use of industry models and changes to these models;
•difficulties with technology and/or data security;
•the failure of the processes, people or systems that we rely on to maintain our operations and manage the operational risks inherent to our business, including those outsourced to third parties;

Regulatory Risk
•changes in governmental regulations and potential government intervention in our industry;
•inadvertent failure to comply with certain laws and regulations relating to sanctions, foreign corrupt practices, data protection and privacy; and

Risks Related to Taxation
•changes in tax laws.

Readers should carefully consider the risks noted above together with other factors including but not limited to those described under Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"), as those factors may be updated from time to time in our periodic and other filings with the SEC, which are accessible on the SEC's website at www.sec.gov.

Website and Social Media Disclosure

We use our website (www.axiscapital.com) and our corporate LinkedIn (AXIS Capital) and X Corp. (@AXIS_Capital) accounts as channels of distribution of Company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, e-mail alerts and other information about AXIS Capital may be received by those enrolled in our "E-mail Alerts" program, which can be found in the Investor Information section of our website (www.axiscapital.com). The contents of our website and social media channels are not part of this Quarterly Report on Form 10-Q.

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ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

 Page 
Consolidated Balance Sheets at September 30, 2023 (Unaudited) and December 31, 2022
Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022 (Unaudited)
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022 (Unaudited)
Consolidated Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, 2023 and 2022 (Unaudited)
Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation and Significant Accounting Policies
Note 2 - Segment Information
Note 3 - Investments
Note 4 - Fair Value Measurements
Note 5 - Derivative Instruments
Note 6 - Reserve for Losses and Loss Expenses
Note 7 - Earnings Per Common Share
Note 8 - Share-Based Compensation
Note 9 - Shareholders' Equity
Note 10 - Debt and Financing Arrangements
Note 11 - Federal Home Loan Bank Advances
Note 12 - Commitments and Contingencies
Note 13 - Other Comprehensive Income (Loss)
Note 14 - Related Party Transactions
Note 15 - Reorganization Expenses























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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2023 (UNAUDITED) AND DECEMBER 31, 2022  
20232022
 (in thousands)
Assets
Investments:
Fixed maturities, available for sale, at fair value
    (Amortized cost 2023: $12,587,327; 2022: $12,176,473
    Allowance for expected credit losses 2023: $8,933; 2022: $11,733)
$11,723,368 $11,326,894 
Fixed maturities, held to maturity, at amortized cost
    (Fair value 2023: $696,639; 2022: $674,743
    Allowance for expected credit losses 2023: $nil; 2022: $nil)
712,840 698,351 
Equity securities, at fair value
    (Cost 2023: $561,558; 2022: $494,356)
556,262 485,253 
 Mortgage loans, held for investment, at fair value
     (Allowance for expected credit losses 2023: $4,179; 2022: $nil)
610,277 627,437 
Other investments, at fair value954,571 996,751 
Equity method investments162,412 148,288 
Short-term investments, at fair value115,959 70,310 
Total investments14,835,689 14,353,284 
Cash and cash equivalents889,574 751,415 
Restricted cash and cash equivalents377,741 423,238 
Accrued interest receivable99,978 94,418 
Insurance and reinsurance premium balances receivable
     (Allowance for expected credit losses 2023: $14,781; 2022: $9,521)
3,207,444 2,733,464 
Reinsurance recoverable on unpaid losses and loss expenses
     (Allowance for expected credit losses 2023: $34,724; 2022: $30,715)
6,031,527 5,831,172 
Reinsurance recoverable on paid losses and loss expenses594,375 539,676 
Deferred acquisition costs503,617 473,569 
Prepaid reinsurance premiums1,973,378 1,550,370 
Receivable for investments sold17,306 16,052 
Goodwill100,801 100,801 
Intangible assets189,612 197,800 
Operating lease right-of-use assets104,240 92,214 
Other assets547,242 438,338 
Total assets$29,472,524 $27,595,811 
Liabilities
Reserve for losses and loss expenses$15,555,256 $15,168,863 
Unearned premiums4,995,785 4,361,447 
Insurance and reinsurance balances payable1,900,188 1,522,764 
Debt1,313,358 1,312,314 
Federal Home Loan Bank advances85,790 81,388 
Payable for investments purchased87,992 19,693 
Operating lease liabilities116,547 102,577 
Other liabilities384,400 386,855 
Total liabilities24,439,316 22,955,901 
Shareholders’ equity
Preferred shares 550,000 550,000 
Common shares (shares issued 2023: 176,580; 2022: 176,580
    shares outstanding 2023: 85,228; 2022: 84,668)
2,206 2,206 
Additional paid-in capital2,375,678 2,366,253 
Accumulated other comprehensive income (loss)(775,439)(760,300)
Retained earnings6,628,179 6,247,022 
Treasury shares, at cost (2023: 91,352; 2022: 91,912)
(3,747,416)(3,765,271)
Total shareholders’ equity 5,033,208 4,639,910 
Total liabilities and shareholders’ equity$29,472,524 $27,595,811 
See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 Three months endedNine months ended
2023202220232022
 (in thousands, except per share amounts)
Revenues
Net premiums earned$1,322,564 $1,284,866 $3,818,508 $3,820,163 
Net investment income154,201 88,177 424,802 271,744 
Other insurance related income10,344 1,092 16,444 9,998 
Net investment gains (losses):
(Increase) decrease in allowance for expected credit losses
1,077 (3,210)(1,380)(10,191)
Impairment losses(41)(6,491)(9,124)(7,074)
Other realized and unrealized investment gains (losses)(54,150)(136,757)(87,167)(396,966)
Total net investment gains (losses)(53,114)(146,458)(97,671)(414,231)
Total revenues1,433,995 1,227,677 4,162,083 3,687,674 
Expenses
Net losses and loss expenses783,940 941,911 2,240,840 2,444,196 
Acquisition costs263,389 240,511 747,027 746,443 
General and administrative expenses179,283 158,245 514,596 492,872 
Foreign exchange gains(50,570)(135,660)(11,755)(236,934)
Interest expense and financing costs16,445 15,915 50,077 46,720 
Reorganization expenses28,997 6,213 28,997 21,941 
    Amortization of intangible assets2,729 2,729 8,188 8,188 
Total expenses1,224,213 1,229,864 3,577,970 3,523,426 
Income (loss) before income taxes and interest in income (loss) of equity method investments
209,782 (2,187)584,113 164,248 
Income tax (expense) benefit(24,624)363 (68,078)5,304 
Interest in income (loss) of equity method investments2,940 (7,560)2,835 5,040 
Net income (loss)188,098 (9,384)518,870 174,592 
Preferred share dividends7,563 7,563 22,688 22,688 
Net income (loss) available (attributable) to common shareholders$180,535 $(16,947)$496,182 $151,904 
Per share data
Earnings (loss) per common share:
Earnings (loss) per common share$2.12 $(0.20)$5.83 $1.79 
Earnings (loss) per diluted common share$2.10 $(0.20)$5.77 $1.77 
Weighted average common shares outstanding85,223 84,660 85,099 84,930 
Weighted average diluted common shares outstanding86,108 84,660 85,927 85,674 


See accompanying notes to Consolidated Financial Statements.

7
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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

 
 Three months endedNine months ended
 2023202220232022
 (in thousands)
Net income (loss) $188,098 $(9,384)$518,870 $174,592 
Other comprehensive income (loss), net of tax:
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized(156,051)(393,880)(109,595)(1,259,482)
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized(4,947)(10,684)(1,630)(53,308)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)23,018 98,779 100,388 229,773 
Unrealized gains (losses) arising during the period, net of reclassification adjustment(137,980)(305,785)(10,837)(1,083,017)
Foreign currency translation adjustment(6,950)(12,751)(4,302)(16,169)
Total other comprehensive income (loss), net of tax(144,930)(318,536)(15,139)(1,099,186)
Comprehensive income (loss)$43,168 $(327,920)$503,731 $(924,594)


See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

Three months endedNine months ended
2023202220232022
 (in thousands)
Preferred shares
Balance at beginning and end of period$550,000 $550,000 $550,000 $550,000 
Common shares (par value)
Balance at beginning and end of period2,206 2,206 2,206 2,206 
Additional paid-in capital
Balance at beginning of period2,361,185 2,341,507 2,366,253 2,346,179 
Treasury shares reissued(779)(694)(33,575)(30,844)
Share-based compensation expense15,272 14,082 43,000 39,560 
Balance at end of period2,375,678 2,354,895 2,375,678 2,354,895 
Accumulated other comprehensive income (loss)
Balance at beginning of period(630,509)(724,114)(760,300)56,536 
Unrealized gains (losses) on available for sale investments, net of tax:
Balance at beginning of period(616,552)(715,077)(743,695)62,155 
Unrealized gains (losses) arising during the period, net of reclassification adjustment(137,980)(305,785)(10,837)(1,083,017)
Balance at end of period(754,532)(1,020,862)(754,532)(1,020,862)
Cumulative foreign currency translation adjustments, net of tax:
Balance at beginning of period(13,957)(9,037)(16,605)(5,619)
Foreign currency translation adjustment(6,950)(12,751)(4,302)(16,169)
Balance at end of period(20,907)(21,788)(20,907)(21,788)
Balance at end of period(775,439)(1,042,650)(775,439)(1,042,650)
Retained earnings
Balance at beginning of period6,485,901 6,298,680 6,247,022 6,204,745 
Net income (loss)
188,098 (9,384)518,870 174,592 
Preferred share dividends (1)
(7,563)(7,563)(22,688)(22,688)
Common share dividends (1)
(38,257)(37,465)(115,025)(112,381)
Balance at end of period6,628,179 6,244,268 6,628,179 6,244,268 
Treasury shares, at cost
Balance at beginning of period(3,747,822)(3,765,648)(3,765,271)(3,749,010)
Shares repurchased(373)(342)(17,424)(48,675)
Shares reissued779 694 35,279 32,389 
Balance at end of period(3,747,416)(3,765,296)(3,747,416)(3,765,296)
Total shareholders’ equity $5,033,208 $4,343,423 $5,033,208 $4,343,423 

(1) Refer to Note 9 'Shareholders' Equity' for details on dividends declared and paid related to the Company's common and preferred shares.



See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022
Nine months ended
20232022
 (in thousands)
Cash flows from operating activities:
Net income$518,870 $174,592 
Adjustments to reconcile net income to net cash provided by operating activities:
Net investment (gains) losses97,671 414,231 
Net realized and unrealized (gains) losses on other investments4,923 (31,843)
Amortization of fixed maturities(11,655)24,918 
Interest in income (loss) of equity method investments(2,835)(5,040)
Other amortization and depreciation62,378 52,469 
Share-based compensation expense, net of cash payments39,911 36,097 
Changes in:
Accrued interest receivable(5,948)(13,796)
Reinsurance recoverable on unpaid losses and loss expenses(205,369)(239,482)
Reinsurance recoverable on paid losses and loss expenses(54,297)201,729 
Deferred acquisition costs(32,663)(79,994)
Prepaid reinsurance premiums(422,078)(222,235)
Reserve for losses and loss expenses400,725 29,151 
Unearned premiums639,441 577,490 
Insurance and reinsurance balances, net(103,589)72,655 
Other items23,818 (73,932)
Net cash provided by operating activities949,303 917,010 
Cash flows from investing activities:
Purchases of:
Fixed maturities, available for sale(5,166,446)(5,466,347)
Fixed maturities, held to maturity(25,000)(247,862)
Equity securities(87,388)(92,977)
Mortgage loans(22,318)(113,978)
Other investments(67,828)(122,628)
Equity method investments(11,289)— 
Short-term investments(221,618)(141,821)
Proceeds from the sale of:
Fixed maturities, available for sale4,038,436 4,730,523 
Equity securities29,171 111,148 
Other investments104,275 134,348 
Short-term investments132,421 71,435 
Proceeds from redemption of fixed maturities, available for sale680,637 850,954 
Proceeds from redemption of fixed maturities, held to maturity11,360 3,500 
Proceeds from redemption of short-term investments46,072 20,124 
Proceeds from the repayment of mortgage loans35,620 54,881 
Proceeds from the (purchase) sale of other assets, net(16,219)(25,041)
Loan advances made
(149,879)— 
Net cash used in investing activities(689,993)(233,741)
Cash flows from financing activities:
Repurchase of common shares - open market— (34,987)
Taxes paid on withholding shares(17,424)(13,688)
Dividends paid - common shares(115,569)(112,888)
Dividends paid - preferred shares(22,688)(22,688)
Federal Home Loan Bank advances, net5,250 78,950 
Net cash used in financing activities(150,431)(105,301)
See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

Effect of exchange rate changes on foreign currency cash, cash equivalents and restricted cash(16,217)(60,396)
Increase in cash, cash equivalents and restricted cash92,662 517,572 
Cash, cash equivalents and restricted cash - beginning of period1,174,653 1,317,690 
Cash, cash equivalents and restricted cash - end of period$1,267,315 $1,835,262 
Supplemental disclosures of cash flow information:
Income taxes paid$54,756 $36,431 
Interest paid$49,207 $45,963 

Supplemental disclosures of cash flow information:
In 2023, an amount of $29 million related to the loan advanced to Monarch Point Re (ISA 2023) Ltd. ("Monarch Point Re") was repaid, and an amount of $29 million related to reinsurance balances payables was settled and both were treated as a non-cash activity in the consolidated statement of cash flows. In addition, an amount of $7 million related to interest on the loan advanced to Monarch Point Re was received in advance and was treated as a non-cash activity in the consolidated statement of cash flows (refer to Note 14 'Related Party Transactions').





See accompanying notes to Consolidated Financial Statements.

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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation

These unaudited consolidated financial statements (the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the U.S. Securities and Exchange Commission's ("SEC") instructions to Form 10-Q and Article 10 of Regulation S-X and include AXIS Capital Holdings Limited ("AXIS Capital") and its subsidiaries (the "Company"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the financial statements and related notes included in AXIS Capital's Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC.

In the opinion of management, these financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company's financial position and results of operations for the periods presented.

The results of operations for any interim period are not necessarily indicative of the results for a full year. All inter-company accounts and transactions have been eliminated.

To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year's presentation.
Tabular dollar and share amounts are in thousands, with the exception of per share amounts. All amounts are reported in U.S. dollars.

Significant Accounting Policies

There were no notable changes to the Company's significant accounting policies subsequent to its Annual Report on Form 10-K for the year ended December 31, 2022.


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION
The Company's underwriting operations are organized around its global underwriting platforms, AXIS Insurance and AXIS Re. The Company has determined that it has two reportable segments, insurance and reinsurance. The Company does not allocate its assets by segment, with the exception of goodwill and intangible assets.

Insurance

The Company's insurance segment offers specialty insurance products to a variety of niche markets on a worldwide basis. The product lines in this segment are professional lines, property, liability, cyber, marine and aviation, accident and health, and credit and political risk.

Reinsurance

The Company's reinsurance segment provides treaty reinsurance to insurance companies on a worldwide basis. The product lines in this segment are liability, accident and health, professional lines, credit and surety, motor, agriculture, marine and aviation, catastrophe, property, and engineering.

The following tables present the underwriting results of the Company's reportable segments, as well as the carrying amounts of allocated goodwill and intangible assets:
























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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION (CONTINUED)
  20232022
Three months ended and at September 30,InsuranceReinsuranceTotalInsuranceReinsuranceTotal
Gross premiums written$1,457,624$448,254$1,905,878$1,317,890$389,918$1,707,808
Net premiums written885,25290,105975,357777,789258,9951,036,784
Net premiums earned885,714436,8501,322,564782,101502,7651,284,866
Other insurance related income (loss)(22)10,36610,3441519411,092
Net losses and loss expenses(491,368)(292,572)(783,940)(519,006)(422,905)(941,911)
Acquisition costs(169,384)(94,005)(263,389)(139,436)(101,075)(240,511)
Underwriting-related general and administrative expenses(120,330)(18,271)(138,601)(108,072)(24,498)(132,570)
Underwriting income (loss)$104,610$42,368146,978$15,738$(44,772)(29,034)
Net investment income154,20188,177
Net investment gains (losses)(53,114)(146,458)
Corporate expenses(40,682)(25,675)
Foreign exchange gains50,570135,660
Interest expense and financing costs(16,445)(15,915)
Reorganization expenses(28,997)(6,213)
Amortization of intangible assets(2,729)(2,729)
Income (loss) before income taxes and interest in income (loss) of equity method investments
209,782(2,187)
Income tax (expense) benefit(24,624)363
Interest in income (loss) of equity method investments2,940(7,560)
Net income (loss)188,098(9,384)
Preferred share dividends7,5637,563
Net income (loss) available (attributable) to common shareholders$180,535$(16,947)
Net losses and loss expenses ratio55.5 %67.0 %59.3 %66.4 %84.1 %73.3 %
Acquisition cost ratio19.1 %21.5 %19.9 %17.8 %20.1 %18.7 %
General and administrative expense ratio13.6 %4.2 %13.5 %13.8 %4.9 %12.3 %
Combined ratio88.2 %92.7 %92.7 %98.0 %109.1 %104.3 %
Goodwill and intangible assets$290,413$—$290,413$301,330$—$301,330



14
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2.    SEGMENT INFORMATION (CONTINUED)
20232022
Nine months ended September 30,InsuranceReinsuranceTotalInsuranceReinsuranceTotal
Gross premiums written$4,557,386$2,014,846$6,572,232$4,114,776$2,341,123$6,455,899
Net premiums written2,788,8491,241,2214,030,0702,491,1201,675,3824,166,502
Net premiums earned2,544,9201,273,5883,818,5082,303,6401,516,5233,820,163
Other insurance related income9016,35416,4444709,5289,998
Net losses and loss expenses(1,398,486)(842,354)(2,240,840)(1,346,585)(1,097,611)(2,444,196)
Acquisition costs(473,413)(273,614)(747,027)(422,979)(323,464)(746,443)
Underwriting-related general and administrative expenses(350,494)(61,757)(412,251)(330,598)(82,471)(413,069)
Underwriting income$322,617$112,217434,834$203,948$22,505226,453
Net investment income424,802271,744
Net investment gains (losses)(97,671)(414,231)
Corporate expenses(102,345)(79,803)
Foreign exchange gains
11,755236,934
Interest expense and financing costs(50,077)(46,720)
Reorganization expenses(28,997)(21,941)
Amortization of intangible assets(8,188)(8,188)
Income before income taxes and interest in income of equity method investments
584,113164,248
Income tax (expense) benefit(68,078)5,304
Interest in income of equity method investments
2,8355,040
Net income518,870174,592
Preferred share dividends22,68822,688
Net income available to common shareholders$496,182$151,904
Net losses and loss expenses ratio55.0 %66.1 %58.7 %58.5 %72.4 %64.0 %
Acquisition cost ratio18.6 %21.5 %19.6 %18.4 %21.3 %19.5 %
General and administrative expense ratio13.7 %4.9 %13.4 %14.3 %5.4 %12.9 %
Combined ratio87.3 %92.5 %91.7 %91.2 %99.1 %96.4 %
Goodwill and intangible assets$290,413$—$290,413$301,330$—$301,330



15
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS
a)     Fixed Maturities, Available for Sale

The following table provides the amortized cost and fair values of the Company's fixed maturities classified as available for sale:
Amortized
cost
Allowance for expected credit lossesGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2023
Available for sale
U.S. government and agency$2,976,548 $— $117 $(116,032)$2,860,633 
Non-U.S. government718,298 (17)854 (48,880)670,255 
Corporate debt4,610,179 (8,684)5,737 (377,369)4,229,863 
Agency RMBS(1)
1,707,603 — 44 (166,142)1,541,505 
CMBS(2)
947,370 — 36 (82,355)865,051 
Non-agency RMBS155,437 (133)123 (17,623)137,804 
ABS(3)
1,304,644 (38)711 (38,449)1,266,868 
Municipals(4)
167,248 (61)42 (15,840)151,389 
Total fixed maturities, available for sale$12,587,327 $(8,933)$7,664 $(862,690)$11,723,368 
At December 31, 2022    
Available for sale
U.S. government and agency$2,731,733 $— $5,386 $(97,789)$2,639,330 
Non-U.S. government612,546 — 2,395 (52,912)562,029 
Corporate debt4,680,798 (11,521)5,269 (418,990)4,255,556 
Agency RMBS(1)
1,297,423 — 4,663 (99,301)1,202,785 
CMBS(2)
1,029,863 — 60 (82,145)947,778 
Non-agency RMBS151,907 (123)275 (18,525)133,534 
ABS(3)
1,499,728 (35)555 (70,721)1,429,527 
Municipals(4)
172,475 (54)139 (16,205)156,355 
Total fixed maturities, available for sale$12,176,473 $(11,733)$18,742 $(856,588)$11,326,894 
(1)Residential mortgage-backed securities ("RMBS") originated by U.S. government-sponsored agencies.
(2)Commercial mortgage-backed securities ("CMBS").
(3)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs").
(4)Municipals include bonds issued by states, municipalities and political subdivisions.




16
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
Contractual Maturities

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The table below provides the contractual maturities of fixed maturities classified as available for sale:
Amortized
cost
Fair
value
% of Total
fair value
At September 30, 2023
Maturity
Due in one year or less$571,440 $553,369 4.8 %
Due after one year through five years5,607,949 5,335,096 45.5 %
Due after five years through ten years2,144,195 1,892,237 16.1 %
Due after ten years148,689 131,438 1.1 %
 8,472,273 7,912,140 67.5 %
Agency RMBS1,707,603 1,541,505 13.1 %
CMBS947,370 865,051 7.4 %
Non-agency RMBS155,437 137,804 1.2 %
ABS1,304,644 1,266,868 10.8 %
Total$12,587,327 $11,723,368 100.0 %
At December 31, 2022
Maturity
Due in one year or less$422,039 $409,972 3.7 %
Due after one year through five years5,349,123 5,078,273 44.8 %
Due after five years through ten years2,192,344 1,919,450 16.9 %
Due after ten years234,046 205,575 1.8 %
 8,197,552 7,613,270 67.2 %
Agency RMBS1,297,423 1,202,785 10.6 %
CMBS1,029,863 947,778 8.4 %
Non-agency RMBS151,907 133,534 1.2 %
ABS1,499,728 1,429,527 12.6 %
Total$12,176,473 $11,326,894 100.0 %



17
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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
Gross Unrealized Losses

The following table summarizes fixed maturities, available for sale in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
  12 months or greaterLess than 12 monthsTotal
  
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
Fair
value
Unrealized
losses
At September 30, 2023
Fixed maturities, available for sale
U.S. government and agency$933,401 $(68,216)$1,841,396 $(47,816)$2,774,797 $(116,032)
Non-U.S. government236,921 (31,958)400,356 (16,922)637,277 (48,880)
Corporate debt2,705,183 (333,349)1,207,859 (44,020)3,913,042 (377,369)
Agency RMBS751,020 (128,711)783,310 (37,431)1,534,330 (166,142)
CMBS732,637 (75,522)121,722 (6,833)854,359 (82,355)
Non-agency RMBS92,894 (16,856)37,539 (767)130,433 (17,623)
ABS975,560 (36,001)216,048 (2,448)1,191,608 (38,449)
Municipals128,209 (15,116)21,510 (724)149,719 (15,840)
Total fixed maturities, available for sale$6,555,825 $(705,729)$4,629,740 $(156,961)$11,185,565 $(862,690)
At December 31, 2022      
Fixed maturities, available for sale
U.S. government and agency$467,032 $(41,365)$1,414,181 $(56,424)$1,881,213 $(97,789)
Non-U.S. government207,637 (33,027)298,048 (19,885)505,685 (52,912)
Corporate debt1,562,355 (268,289)2,350,504 (150,701)3,912,859 (418,990)
Agency RMBS220,595 (40,469)771,191 (58,832)991,786 (99,301)
CMBS343,494 (40,888)599,877 (41,257)943,371 (82,145)
Non-agency RMBS75,137 (14,691)53,484 (3,834)128,621 (18,525)
ABS685,990 (48,913)686,190 (21,808)1,372,180 (70,721)
Municipals52,994 (10,120)96,003 (6,085)148,997 (16,205)
Total fixed maturities, available for sale$3,615,234 $(497,762)$6,269,478 $(358,826)$9,884,712 $(856,588)

At September 30, 2023, 4,856 fixed maturities (2022: 4,525) were in an unrealized loss position of $863 million (2022: $857 million), of which $39 million (2022: $64 million) was related to securities below investment grade or not rated.

At September 30, 2023, 3,386 fixed maturities (2022: 1,842) had been in a continuous unrealized loss position for twelve months or greater and had a fair value of $6,556 million (2022: $3,615 million).

The unrealized losses of $863 million (2022: $857 million) were due to non-credit factors and were expected to be recovered as the related securities approach maturity.

At September 30, 2023, the Company did not intend to sell the securities in an unrealized loss position and it is more likely than not that the Company will not be required to sell these securities before the anticipated recovery of their amortized costs.


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3.    INVESTMENTS (CONTINUED)
b)     Fixed Maturities, Held to Maturity
The following table provides the amortized cost and fair values of the Company's fixed maturities classified as held to maturity:
Amortized
cost
Allowance for expected credit lossesNet carrying valueGross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2023
Held to maturity
Corporate debt$90,200 $— $90,200 $— $(12,779)$77,421 
ABS(1)
622,640 — 622,640 41 (3,463)619,218 
Total fixed maturities, held to maturity$712,840 $— $712,840 $41 $(16,242)$696,639 
At December 31, 2022    
Held to maturity
Corporate debt$85,200 $— $85,200 $— $(11,428)$73,772 
ABS(1)
613,151 — 613,151 — (12,180)600,971 
Total fixed maturities, held to maturity$698,351 $— $698,351 $— $(23,608)$674,743 
(1)Asset-backed securities ("ABS") include debt tranched securities collateralized primarily by collateralized loan obligations ("CLOs").

At September 30, 2023, fixed maturities, held to maturity of $713 million (2022: $698 million) were presented net of an allowance for expected credit losses of $nil (2022: $nil).

The Company's ABS, held to maturity consist of CLO debt tranched securities. The Company uses a scenario-based approach to review its CLO debt portfolio and reviews subordination levels of these securities to determine their ability to absorb credit losses of the underlying collateral. If losses are forecast to be below the subordination level for a tranche held by the Company, the security is determined not to have a credit loss. At September 30, 2023, the allowance for credit losses expected to be recognized over the life of the Company's ABS, held to maturity was $nil.

To estimate expected credit losses for corporate debt securities, held to maturity, the Company's projected cash flows are primarily driven by assumptions regarding the severity of loss, which is a function of the probability of default and projected recovery rates. The Company's default and recovery rates are based on credit ratings, credit analysis and macroeconomic forecasts. At September 30, 2023, the allowance for credit losses expected to be recognized over the life of the Company's corporate debt, held to maturity was $nil.
Contractual Maturities
ABS classified as held to maturity with a net carrying value of $623 million (2022: $613 million) do not have a single maturity date and cannot be allocated over several maturity groupings.

Corporate debt classified as held to maturity with a net carrying value of $86 million (2022: $81 million) is due between 3 years and 10 years and corporate debt classified as held to maturity with a net carrying value of $4 million (2022: $4 million) is due after ten years.


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3.    INVESTMENTS (CONTINUED)
c)     Equity Securities
The following table provides the cost and fair values of the Company's equity securities:
Cost
Gross
unrealized
gains
Gross
unrealized
losses
Fair
value
At September 30, 2023
Equity securities
Common stocks$3,130 $327 $(407)$3,050 
Preferred stocks5,339 — (253)5,086 
Exchange-traded funds191,711 85,115 (3,032)273,794 
Bond mutual funds361,378 — (87,046)274,332 
Total equity securities$561,558 $85,442 $(90,738)$556,262 
At December 31, 2022   
Equity securities
Common stocks$7,279 $636 $(442)$7,473 
Preferred stocks115 — (43)72 
Exchange-traded funds207,505 68,058 (5,757)269,806 
Bond mutual funds279,457 — (71,555)207,902 
Total equity securities$494,356 $68,694 $(77,797)$485,253 


d)     Mortgage Loans

The following table provides details of the Company's mortgage loans, held for investment:
  
September 30, 2023December 31, 2022
  
Carrying value% of TotalCarrying value% of Total
Mortgage loans, held for investment:
Commercial$614,456 101 %$627,437 100 %
Allowance for expected credit losses (4,179)(1 %)— — %
Total mortgage loans, held for investment$610,277 100 %$627,437 100 %

The primary credit quality indicators for commercial mortgage loans are the debt service coverage ratio which compares a property’s net operating income to amounts needed to service the principal and interest due under the loan, (generally, the lower the debt service coverage ratio, the higher the risk of experiencing a credit loss) and the loan-to-value ratio which compares the unpaid principal balance of the loan to the estimated fair value of the underlying collateral (generally, the higher the loan-to-value ratio, the higher the risk of experiencing a credit loss). The debt service coverage ratio and loan-to-value ratio, as well as the values utilized in calculating these ratios, are updated quarterly.

The Company has a high quality mortgage loan portfolio with a weighted average debt service coverage ratio of 1.9x (2022: 2.3x) and a weighted average loan-to-value ratio of 68% (2022: 60%). At September 30, 2023, and 2022 there were no past due amounts associated with the commercial mortgage loans held by the Company.

On a quarterly basis, collateral dependent mortgage loans (e.g., when the borrower is experiencing financial difficulty, including when foreclosure is reasonably possible or probable) are evaluated individually for credit losses. The allowance for expected credit losses for a collateral dependent loan is established as the excess of amortized cost over the estimated fair value of the loan's underlying collateral, less selling cost when foreclosure is probable. Accordingly, the change in the estimated fair value of collateral dependent

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3.    INVESTMENTS (CONTINUED)
loans, which are evaluated individually for credit losses, is recognized as a change in the allowance for expected credit losses which is recorded in net investment gains (losses).

At September 30, 2023, there are two collateral dependent loans with estimated loan-to-value ratios in excess of 100%, resulting in an allowance for expected credit loss of $4 million.

e)     Other Investments

The following table provides a summary of the Company's other investments, together with additional information relating to the liquidity of each category:
Fair value% of Total
Redemption frequency
(if currently eligible)
  Redemption  
  notice period  
At September 30, 2023    
Multi-strategy funds$25,465 3 %Quarterly
60-90 days
Direct lending funds229,235 24 %
Quarterly(1)
90 days
Private equity funds283,838 30 %n/an/a
Real estate funds307,177 32 %
Quarterly(2), Annually(3)
45-90 days
CLO-Equities4,684 — %n/an/a
Other privately held investments104,172 11 %n/an/a
Total other investments$954,571 100 % 
At December 31, 2022    
Multi-strategy funds$32,616 3 %Quarterly
60-90 days
Direct lending funds258,626 26 %
Quarterly(1)
90 days
Private equity funds265,836 27 %n/an/a
Real estate funds298,499 30 %
Quarterly(2), Annually(3)
45-90 days
CLO-Equities5,016 — %n/an/a
Other privately held investments136,158 14 %n/an/a
Total other investments$996,751 100 %  
     
n/a - not applicable
(1) Applies to one fund with a fair value of $22 million (2022: $39 million).
(2) Applies to one fund with a fair value of $67 million (2022: $73 million).
(3) Applies to one fund with a fair value of $24 million (2022: $27 million).

Two common redemption restrictions which may impact the Company's ability to redeem hedge funds are gates and lockups. A gate is a suspension of redemptions which may be implemented by the general partner or investment manager of the fund in order to defer, in whole or in part, the redemption request in the event the aggregate amount of redemption requests exceeds a predetermined percentage of the fund's net assets which may otherwise hinder the general partner or investment manager's ability to liquidate holdings in an orderly fashion in order to generate the cash necessary to fund extraordinarily large redemption payouts. A lockup period is the initial amount of time an investor is contractually required to hold the security before having the ability to redeem. During the nine months ended September 30, 2023 and 2022, neither of these restrictions impacted the Company's redemption requests. At September 30, 2023, there were no hedge fund holdings (2022: $nil) where the Company is still within the lockup period. 

At September 30, 2023, the Company had $28 million (2022: $26 million) of unfunded commitments as a limited partner in multi-strategy hedge funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will not be fully returned until after the completion of the funds' investment term. These funds have investment terms ranging from two years to the dissolution of the underlying fund.

At September 30, 2023, the Company had $191 million (2022: $183 million) of unfunded commitments as a limited partner in direct lending funds. Once the full amount of committed capital has been called by the General Partner of each of these funds, the assets will

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3.    INVESTMENTS (CONTINUED)
not be fully returned until the completion of the fund's investment term. These funds have investment terms ranging from four to ten years and the General Partners of certain funds have the option to extend the term by up to three years.

At September 30, 2023, the Company had $153 million (2022: $158 million) of unfunded commitments as a limited partner in private equity funds. The life of the funds is subject to the dissolution of the underlying funds. The Company expects the overall holding period to be over six years.
At September 30, 2023, the Company had $119 million (2022: $141 million) of unfunded commitments as a limited partner in real estate funds. These funds include an open-ended fund and funds with investment terms ranging from two years to the dissolution of the underlying fund.
At September 30, 2023, the Company had $15 million (2022: $16 million) of unfunded commitments as a limited partner in two early-stage venture capital funds focusing on financial services technology with an emphasis on insurance technology. These funds have investment terms of 5 years.

f)     Equity Method Investments

During May 2023, the Company paid $11 million to acquire 18% of the common equity of Monarch Point Re (ISAC) Ltd. and Monarch Point Re (ISA 2023) Ltd., a collateralized reinsurance company formed under the laws of Bermuda as an incorporated segregated accounts company under the Incorporated Segregated Accounts Companies Act 2019, as amended (the “ISAC Act”). Monarch Point Re is an independent reinsurer jointly sponsored by the Company and Stone Point Credit, LLC ("Stone Point").

The Company will retrocede a diversified portfolio of casualty reinsurance business to Monarch Point Re and Stone Point will serve as its investment manager. The Company expects to benefit from underwriting fees generated by Monarch Point Re and the income and capital appreciation Stone Point seeks to deliver through its investment management services.

Monarch Point Re is not a Variable Interest Entity ("VIE") that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Monarch Point Re under the equity method of accounting.

During 2016, the Company paid $108 million including direct transaction costs to acquire 19% of the common equity of Harrington Reinsurance Holdings Limited ("Harrington"), the parent company of Harrington Re Ltd. ("Harrington Re"), an independent reinsurance company jointly sponsored by the Company and The Blackstone Group L.P. ("Blackstone").

Through long-term service agreements, the Company will serve as Harrington Re's reinsurance underwriting manager and Blackstone will serve as exclusive investment management service provider. As an investor, the Company expects to benefit from underwriting profit generated by Harrington Re and the income and capital appreciation Blackstone seeks to deliver through its investment management services. In addition, the Company has entered into an arrangement with Blackstone under which underwriting and investment related fees will be shared equally.

Harrington is not a Variable Interest Entity ("VIE") that is required to be included in the Company's consolidated financial statements. The Company accounts for its ownership interest in Harrington under the equity method of accounting. The Company's proportionate share of the underlying equity in net assets resulted in a basis difference of $5 million which represents initial transactions costs.

g)     Variable Interest Entities

In the normal course of investing activities, the Company actively manages allocations to non-controlling tranches of structured securities which are variable interests issued by Variable Interest Entities ("VIEs"). These structured securities include RMBS, CMBS and ABS.

The Company also invests in limited partnerships which represent 75% of the Company's other investments. The investments in limited partnerships include hedge funds, direct lending funds, private equity funds and real estate funds and CLO equity tranched securities, which are variable interests issued by VIEs (refer to Note 3(e) 'Other Investments').

The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs. Therefore, the Company is not the primary beneficiary of these VIEs. The maximum exposure to loss on these interests is limited to

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3.    INVESTMENTS (CONTINUED)
the amount of commitment made by the Company. The Company has not provided financial or other support to these structured securities other than the original investment.

h)     Net Investment Income

Net investment income was derived from the following sources:
  
Three months ended September 30,Nine months ended September 30,
  
2023202220232022
Fixed maturities$133,006 $87,364 $375,659 $224,780 
Other investments312 (7,576)(4,543)32,801 
Equity securities3,050 2,490 8,495 7,349 
Mortgage loans8,892 6,256 26,158 15,323 
Cash and cash equivalents14,465 5,350 35,638 10,147 
Short-term investments2,195 1,004 5,984 1,571 
Gross investment income
161,920 94,888 447,391 291,971 
Investment expenses(7,719)(6,711)(22,589)(20,227)
Net investment income$154,201 $88,177 $424,802 $271,744 

i)     Net Investment Gains (Losses)

The following table provides an analysis of net investment gains (losses):
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Gross realized investment gains
Fixed maturities and short-term investments$4,143 $1,095 $27,973 $11,390 
Equity securities8,433 6,997 9,968 6,997 
Gross realized investment gains12,576 8,092 37,941 18,387 
Gross realized investment losses
Fixed maturities and short-term investments(31,390)(100,021)(128,733)(249,514)
Equity securities(4)(178)(400)(403)
Gross realized investment losses(31,394)(100,199)(129,133)(249,917)
(Increase) decrease in allowance for expected credit losses, fixed maturities, available for sale1,618 (3,210)2,800 (10,191)
(Increase) decrease in allowance for expected credit losses, mortgage loans(541)— (4,179)— 
Impairment losses(1)
(41)(6,491)(9,124)(7,074)
Change in fair value of investment derivatives(2)
1,692 4,400 218 11,463 
Net unrealized gains (losses) on equity securities(37,024)(49,050)3,806 (176,899)
Net investment losses$(53,114)$(146,458)$(97,671)$(414,231)
(1) Related to instances where the Company intends to sell securities or it is more likely than not that the Company will be required to sell securities before their anticipated recovery.
(2) Refer to Note 5 'Derivative Instruments'.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3.    INVESTMENTS (CONTINUED)
The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Balance at beginning of period$10,551 $7,294 $11,733 $313 
Expected credit losses on securities where credit losses were not previously recognized
21 6,320 4,376 13,228 
Additions (reductions) for expected credit losses on securities where credit losses were previously recognized
708 (592)404 (500)
Impairments of securities which the Company intends to sell or more likely than not will be required to sell— — — — 
Securities sold/redeemed/matured(2,347)(2,518)(7,580)(2,537)
Balance at end of period$8,933 $10,504 $8,933 $10,504 




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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS
Fair Value Hierarchy

Fair value is defined as the price to sell an asset or transfer a liability (i.e., the "exit price") in an orderly transaction between market participants. U.S. GAAP prescribes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. The level in the hierarchy within which a given fair value measurement falls is determined based on the lowest level input that is significant to the measurement. The hierarchy is broken down into three levels as follows:

•Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

•Level 2 - Valuations based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect the Company's judgments about assumptions that market participants might use.

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety of factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment.

Accordingly, the degree of judgment exercised by management in determining fair value is greatest for financial instruments categorized as Level 3. In periods of market dislocation, the observability of prices and inputs may be reduced for many financial instruments. This may lead the Company to change the selection of valuation technique (from market to cash flow approach) or may cause the Company to use multiple valuation techniques to estimate the fair value of a financial instrument. This circumstance could cause an instrument to be reclassified between levels within the fair value hierarchy.

Valuation Techniques

The valuation techniques, including significant inputs and assumptions generally used to determine the fair values of the Company's financial instruments as well as the classification of the fair values of its financial instruments in the fair value hierarchy are described in detail below.

Fixed Maturities

At each valuation date, the Company uses the market approach valuation technique to estimate the fair value of its fixed maturities portfolio, where possible. The market approach includes, but is not limited to, prices obtained from third-party pricing services for identical or comparable securities and the use of "pricing matrix models" using observable market inputs such as yield curves, credit risks and spreads, measures of volatility, and prepayment speeds. Pricing from third-party pricing services is sourced from multiple vendors, where available, and the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Where prices are unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers who are active in the corresponding markets. The valuation techniques including significant inputs and assumptions generally used to determine the fair values of the Company's fixed maturities by asset class as well as the classifications of the fair values of these securities in the fair value hierarchy are described in detail below.

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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
U.S. Government and Agency

U.S. government and agency securities consist primarily of bonds issued by the U.S. Treasury and mortgage pass-through agencies such as the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. As the fair values of U.S. Treasury securities are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. The fair values of U.S. government agency securities are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of U.S. government agency securities are classified as Level 2.

Non-U.S. Government

Non-U.S. government securities include bonds issued by non-U.S. governments and their agencies along with supranational organizations (collectively also known as sovereign debt securities). The fair values of these securities are based on prices obtained from international indices or valuation models that include inputs such as interest rate yield curves, cross-currency basis index spreads, and country credit spreads for structures similar to the sovereign bond in terms of issuer, maturity and seniority. As the significant inputs used to price these securities are observable market inputs, the fair values of non-U.S. government securities are classified as Level 2.

Corporate Debt

Corporate debt securities consist primarily of investment grade debt of a wide variety of corporate issuers and industries. The fair values of these securities are generally determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair values of corporate debt securities are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Agency RMBS

Agency RMBS consist of bonds issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The fair values of these securities are priced using a mortgage pool specific model which uses daily inputs from the active to be announced market and the spread associated with each mortgage pool based on vintage. As the significant inputs used to price these securities are observable market inputs, the fair values of Agency RMBS are classified as Level 2.

CMBS

CMBS mainly include investment grade bonds originated by non-agencies. The fair values of these securities are determined using a pricing model which uses dealer quotes and other available trade information along with security level characteristics to determine deal specific spreads. As the significant inputs used to price these securities are observable market inputs, the fair values of CMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.



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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Non-agency RMBS

Non-agency RMBS mainly include investment grade bonds originated by non-agencies. The fair values of these securities are determined using an option adjusted spread model or other relevant models, which use inputs including available trade information or broker quotes, prepayment and default projections based on historical statistics of the underlying collateral and current market data. As the significant inputs used to price these securities are observable market inputs, the fair values of non-agency RMBS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

ABS

ABS mainly include investment grade bonds backed by pools of loans with a variety of underlying collateral, including auto loans, student loans, credit card receivables and collateralized loan obligations ("CLOs"), originated by a variety of financial institutions. The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, the fair values of ABS are generally classified as Level 2. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker-dealers to estimate fair value. This is generally the case when there is a low volume of trading activity and current transactions are not orderly. In this event, the fair values of these securities are classified as Level 3.

Municipals

Municipals comprise revenue bonds and general obligation bonds issued by U.S. domiciled state and municipal entities. The fair values of these securities are determined using spreads obtained from the new issue market, trade prices and broker-dealers quotes. As the significant inputs used to price these securities are observable market inputs, the fair values of municipals are classified as Level 2.

Equity Securities

Equity securities include common stocks, preferred stocks, exchange-traded funds and bond mutual funds. As the fair values of common stocks and exchange-traded funds are based on unadjusted quoted market prices in active markets, the fair values of these securities are classified as Level 1. As the significant inputs used to price preferred stocks are observable market inputs, the fair value of these securities are classified as Level 2. As bond mutual funds have daily liquidity, the fair values of these securities are classified as Level 2.

Other Investments

The fair value of an indirect investment in CLO-Equities is estimated using an income approach valuation technique, specifically an externally developed discounted cash flow model due to the lack of observable and relevant trades in secondary markets. As the significant inputs used to price this security are unobservable, the fair value of the indirect investment in CLO-Equities is classified as Level 3.

Other privately held investments include convertible preferred shares, preferred shares, common shares, convertible notes, investments in limited partnerships and a variable yield security. These investments are initially valued at cost, which approximates fair value. In subsequent measurement periods, the fair values of these investments are derived from one or a combination of valuation methodologies which consider factors including recent capital raises by the investee companies, comparable precedent transaction multiples, comparable publicly traded multiples, third-party valuations, discounted cash-flow models, and other techniques that consider the industry and development stage of each investee company. The fair value of the variable yield security is determined using an externally developed discounted cash flow model. In order to assess the reasonableness of the information received from investee companies, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact the results of operations, financial condition or liquidity of these companies. In addition, the Company engages in regular communication with management at investee companies. As the significant inputs used to price these investments are unobservable, the fair values of other privately held investments are classified as Level 3.

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4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Short-term Investments

Short-term investments primarily comprise highly liquid securities with maturities greater than three months but less than one year from the date of purchase. These securities are typically not actively traded due to their approaching maturity, therefore their amortized cost approximates fair value. The fair values of short-term investments are classified as Level 2.

Derivative Instruments

Derivative instruments include foreign exchange forward contracts that are customized to the Company's economic hedging strategies and trade in the over-the-counter derivative market. The fair values of these derivatives are determined using a market approach valuation technique based on significant observable market inputs from third-party pricing vendors, non-binding broker-dealer quotes and/or recent trading activity. As the significant inputs used to price these derivatives are observable market inputs, the fair values of these derivatives are classified as Level 2.

Other underwriting-related derivatives include insurance and reinsurance contracts that are accounted for as derivatives. These derivative contracts are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3.

Cash-Settled Awards

Cash-settled awards comprise restricted stock units that form part of the Company's compensation program. Although the fair values of these awards are determined using observable quoted market prices in active markets, the restricted stock units are not actively traded. As the significant inputs used to price these securities are observable market inputs, the fair values of these liabilities are classified as Level 2.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The tables below present the financial instruments measured at fair value on a recurring basis for the periods indicated:
Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At September 30, 2023
Assets
Fixed maturities, available for sale
U.S. government and agency$2,829,541 $31,092 $— $— $2,860,633 
Non-U.S. government— 670,255 — — 670,255 
Corporate debt— 4,096,395 133,468 — 4,229,863 
Agency RMBS— 1,541,505 — — 1,541,505 
CMBS— 865,051 — — 865,051 
Non-agency RMBS— 137,804 — — 137,804 
ABS— 1,266,868 — — 1,266,868 
Municipals— 151,389 — — 151,389 
 2,829,541 8,760,359 133,468 — 11,723,368 
Equity securities
Common stocks3,050 — — — 3,050 
Preferred stocks3 5,083 — — 5,086 
Exchange-traded funds273,794 — — — 273,794 
Bond mutual funds— 274,332 — — 274,332 
 276,847 279,415 — — 556,262 
Other investments
Multi-strategy funds— — — 25,465 25,465 
Direct lending funds— — — 229,235 229,235 
Private equity funds— — — 283,838 283,838 
Real estate funds— — — 307,177 307,177 
CLO-Equities— — 4,684 — 4,684 
Other privately held investments— — 89,951 14,221 104,172 
— — 94,635 859,936 954,571 
Short-term investments— 115,959 — — 115,959 
Other assets
Derivative instruments (refer to Note 5)— 4,466 — — 4,466 
Total Assets$3,106,388 $9,160,199 $228,103 $859,936 $13,354,626 
Liabilities
Derivative instruments (refer to Note 5)$— $9,666 $— $— $9,666 
Cash-settled awards (refer to Note 8)— — — — — 
 Total Liabilities$— $9,666 $— $— $9,666 




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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)

Quoted prices in active markets for identical assets (Level 1)Significant other observable inputs (Level 2)Significant unobservable inputs (Level 3)Fair value based on NAV practical expedientTotal fair value
At December 31, 2022
Assets
Fixed maturities, available for sale
U.S. government and agency$2,600,636 $38,694 $— $— $2,639,330 
Non-U.S. government— 562,029 — — 562,029 
Corporate debt— 4,136,452 119,104 — 4,255,556 
Agency RMBS— 1,202,785 — — 1,202,785 
CMBS— 947,778 — — 947,778 
Non-agency RMBS— 133,534 — — 133,534 
ABS— 1,429,527 — — 1,429,527 
Municipals— 156,355 — — 156,355 
 2,600,636 8,607,154 119,104 — 11,326,894 
Equity securities
Common stocks7,473 — — — 7,473 
Preferred stocks72 — — — 72 
Exchange-traded funds269,806 — — — 269,806 
Bond mutual funds— 207,902 — — 207,902 
 277,351 207,902 — — 485,253 
Other investments
Multi-strategy funds— — — 32,616 32,616 
Direct lending funds— — — 258,626 258,626 
Private equity funds— — — 265,836 265,836 
Real estate funds— — — 298,499 298,499 
CLO-Equities— — 5,016 — 5,016 
Other privately held investments— — 136,158 — 136,158 
— — 141,174 855,577 996,751 
Short-term investments— 70,310 — — 70,310 
Other assets
Derivative instruments (refer to Note 5)— 37,682 — — 37,682 
Total Assets$2,877,987 $8,923,048 $260,278 $855,577 $12,916,890 
Liabilities
Derivative instruments (refer to Note 5)$— $703 $— $— $703 
Cash-settled awards (refer to Note 8)— 4,792 — — 4,792 
Total Liabilities$— $5,495 $— $— $5,495 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The following table quantifies the significant unobservable inputs used in estimating fair values at September 30, 2023 of investments classified as Level 3 in the fair value hierarchy:
Asset fair valueValuation techniqueUnobservable inputAmount / Range
Weighted
average
Other investments - CLO-Equities$4,684 Discounted cash flowDefault rate4.5%4.5%
  Loss severity rate50.0%50.0%
  Collateral spread3.0%3.0%
Estimated maturity date5 years5 years
Other investments - Other privately held investments
$17,097 Discounted cash flowDiscount rate7.9%7.9%
Default rate0.5%0.5%
Loss absorption yield1.0%1.0%
Estimated maturity date
1-2 years
2 years
Note: Fixed maturities of $133 million that are classified as Level 3 are excluded from the above table as these securities are priced using broker-dealer quotes. In addition, other privately held investments of $73 million that are classified as Level 3 are excluded from the above table as these investments are priced using capital statements received from investee companies.

Other Investments - CLO-Equities

The CLO-Equities market continues to be relatively inactive with only a small number of transactions being observed, particularly related to transactions involving CLO-Equities held by the Company. Accordingly, the fair value of the Company's indirect investment in CLO-Equities is determined using a discounted cash flow model prepared by an external investment manager.

The default and loss severity rates are the most judgmental unobservable market inputs to the discounted cash flow model to which the valuation of the Company's indirect investment in CLO-Equities is most sensitive. A significant increase (decrease) in either of these significant inputs in isolation would result in a lower (higher) fair value estimate for the investment in CLO-Equities and, in general, a change in default rate assumptions would be accompanied by a directionally similar change in loss severity rate assumptions. Collateral spreads and estimated maturity dates are less judgmental inputs as they are based on the historical average of actual spreads and the weighted average life of the current underlying portfolios, respectively. A significant increase (decrease) in either of these significant inputs in isolation would result in a higher (lower) fair value estimate for the investment in CLO-Equities. In general, these inputs have no significant interrelationship with each other or with default and loss severity rates.

On a quarterly basis, the Company's valuation process for its indirect investment in CLO-Equities includes a review of the underlying cash flows and key assumptions used in the discounted cash flow model. The above significant unobservable inputs are reviewed and updated based on information obtained from secondary markets, including information received from the managers of the Company's CLO-Equities investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, and emerging trends that may impact future cash flows. In addition, the assumptions the Company uses in its models are updated through regular communication with industry participants and ongoing monitoring of the deals in which the Company participates.

Other Investments - Other Privately Held Securities

Other privately held securities are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of the variable yield security was determined using an externally developed discounted cash flow model. This model includes inputs that are specific to that investment. The inputs used in the fair value measurement include an appropriate discount rate, default rate, loss absorption rate and estimated maturity date. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this investment. A significant increase (decrease) in this input in isolation could result in significantly lower (higher) fair value measurement for this investment. In order to assess the reasonableness of the inputs the Company uses in the discounted cash flow model, the Company maintains an understanding of current market conditions, historical results, as well as investee specific information that may impact future cash flows.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
The following table presents changes in Level 3 for financial instruments measured at fair value on a recurring basis:
Opening
balance
Transfers
into
Level 3
Transfers
out of
Level 3
Included 
in net income(1)
Included
in OCI (2)
PurchasesSales
Settlements/
distributions
Closing
balance
Change in
unrealized
gains/(losses) (3)
Three months ended September 30, 2023
Fixed maturities, available for sale         
Corporate debt$129,046 $— $— $(733)$(1,243)$9,717 $— $(3,319)$133,468 $— 
 129,046 — — (733)(1,243)9,717 — (3,319)133,468 — 
Other investments
CLO-Equities4,877 — — 333 — — — (526)4,684 333 
Other privately held investments
115,048 — (25,510)(1,348)— 1,761 — — 89,951 (1,348)
 119,925 — (25,510)(1,015)— 1,761 — (526)94,635 (1,015)
Total assets$248,971 $— $(25,510)$(1,748)$(1,243)$11,478 $— $(3,845)$228,103 $(1,015)
Other liabilities
Derivative instruments$— $— $— $— $— $— $— $— $— $— 
Total liabilities$— $— $— $— $— $— $— $— $— $— 
Nine months ended September 30, 2023
Fixed maturities, available for sale         
Corporate debt$119,104 $— $— $(4,043)$(1,414)$34,178 $— $(14,357)$133,468 $— 
 119,104 — — (4,043)(1,414)34,178 — (14,357)133,468 — 
Other investments
CLO-Equities5,016 — — 1,236 — — — (1,568)4,684 1,236 
Other privately held investments
136,158 — (25,510)(7,242)— 21,077 (34,532)— 89,951 (15,324)
 141,174 — (25,510)(6,006)— 21,077 (34,532)(1,568)94,635 (14,088)
Total assets$260,278 $— $(25,510)$(10,049)$(1,414)$55,255 $(34,532)$(15,925)$228,103 $(14,088)
Other liabilities
Derivative instruments$— $— $— $— $— $— $— $— $— $— 
Total liabilities$— $— $— $— $— $— $— $— $— $— 
(1) Realized gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.
(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").
(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.

















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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Opening
balance		Transfers
into
Level 3		Transfers
out of
Level 3
Included 
in net income(1)
Included
in OCI(2)
PurchasesSalesSettlements/
distributions		Closing
balance
Change in
unrealized
gains/(losses)(3)
Three months ended September 30, 2022
Fixed maturities, available for sale
Corporate debt$72,830 $— $— $(34)$(3,977)$27,600 $— $(468)$95,951 $— 
72,830 — — (34)(3,977)27,600 — (468)95,951 — 
Other investments
CLO-Equities4,808 — — 890 — — — (531)5,167 890 
 Other privately held investments115,970 — — 1,249 — 2,700 — — 119,919 1,249 
120,778 — — 2,139 — 2,700 — (531)125,086 2,139 
Total assets$193,608 $— $— $2,105 $(3,977)$30,300 $— $(999)$221,037 $2,139 
Other liabilities
Derivative instruments$4,708 $— $— $(422)$— $— $— $— $4,286 $(422)
Total liabilities$4,708 $— $— $(422)$— $— $— $— $4,286 $(422)
Nine months ended September 30, 2022
Fixed maturities, available for sale
Corporate debt$42,894 $— $— $(34)$(10,600)$64,832 $— $(1,141)$95,951 $— 
42,894 — — (34)(10,600)64,832 — (1,141)95,951 — 
Other investments
CLO-Equities5,910 — — 2,566 — — — (3,309)5,167 2,566 
 Other privately held investments104,521 — — (2,242)— 19,640 — (2,000)119,919 (2,242)
110,431 — — 324 — 19,640 — (5,309)125,086 324 
Total assets$153,325 $— $— $290 $(10,600)$84,472 $— $(6,450)$221,037 $324 
Other liabilities
Derivative instruments$5,630 $— $— $(1,344)$— $— $— $— $4,286 $(1,344)
Total liabilities$5,630 $— $— $(1,344)$— $— $— $— $4,286 $(1,344)
(1) Realized gains (losses) on fixed maturities and realized and unrealized gains (losses) on other assets and other liabilities included in net income are included in net investment gains (losses). Realized and unrealized gains (losses) on other investments included in net income are included in net investment income.
(2) Unrealized gains (losses) on fixed maturities are included in other comprehensive income ("OCI").
(3) Change in unrealized gains (losses) relating to assets and liabilities held at the reporting date.

The transfers into and out of fair value hierarchy levels reflect the fair values of the securities at the end of the reporting period.

Transfers into Level 3 from Level 2

There were no transfers into Level 3 from Level 2 during the three and nine months ended September 30, 2023 and 2022.

Transfers out of Level 3 into Level 2

There were no transfers out of Level 3 into Level 2 during the three and nine months ended September 30, 2023 and 2022.

Other Transfers out of Level 3

During the three months ended September 30, 2023, two early-stage venture capital funds included in other privately held investments in the consolidated balance sheets were transferred from Level 3 to the NAV practical expedient. In addition, the Company's investment in Monarch Point Re was transferred from Level 3 to Equity method investments (refer to Note 3(f) 'Equity Method Investments', Note 6 'Reserve for Losses and Loss Expenses' and Note 14 'Related Party Transactions').

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Measuring the Fair Value of Other Investments Using Net Asset Valuations

The fair values of hedge funds, direct lending funds, private equity funds, real estate funds and two early-stage venture capital funds are estimated using net asset valuations ("NAVs") as advised by external fund managers or third-party administrators. For these funds, NAVs are based on the manager's or administrator's valuation of the underlying holdings in accordance with the fund's governing documents and in accordance with U.S. GAAP.

For hedge funds, direct lending funds, private equity funds, real estate funds and two early-stage venture capital funds, valuation statements are typically released on a reporting lag, therefore, the Company estimates the fair value of these funds by starting with the most recent fund valuations and adjusting for capital calls, redemptions, drawdowns and distributions. Return estimates are not available from the relevant fund managers for these funds, therefore the Company typically has a reporting lag in its fair value measurements of these funds. At September 30, 2023 and December 31, 2022 all funds measured at fair value using NAVs are reported generally on a one quarter lag.

The Company often does not have access to financial information relating to the underlying securities held within the funds, therefore, management is unable to corroborate the fair values placed on the securities underlying the asset valuations provided by fund managers or fund administrators. In order to assess the reasonableness of the NAVs, the Company performs a number of monitoring procedures on a quarterly basis, to assess the quality of the information provided by fund managers and fund administrators. These procedures include, but are not limited to, regular review and discussion of each fund's performance with its manager, regular evaluation of fund performance against applicable benchmarks and the backtesting of the Company's fair value estimates against subsequently received NAVs. Backtesting involves comparing the Company's previously reported fair values for each fund against NAVs per audited financial statements (for year-end values) and final NAVs from fund managers and fund administrators (for interim values).

The fair values of hedge funds, direct lending funds, private equity funds, real estate funds and two early-stage venture capital funds are measured using the NAV practical expedient, therefore the fair values of these funds have not been categorized within the fair value hierarchy.



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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

4.    FAIR VALUE MEASUREMENTS (CONTINUED)
Financial Instruments Disclosed, But Not Carried, at Fair Value

The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments, including insurance contracts.
At September 30, 2023, the carrying values of cash and cash equivalents including restricted amounts, accrued investment income, receivable for investments sold, certain other assets, payable for investments purchased and certain other liabilities approximated fair values due to their short maturities. As these financial instruments are not actively traded, their fair values are classified as Level 2.

At September 30, 2023, the Company's fixed maturities, held to maturity, were recorded at amortized cost with a carrying value of $713 million (2022: $698 million) and a fair value of $697 million (2022: $675 million). The fair values of these securities are determined using a model which uses prepayment speeds and spreads sourced primarily from the new issue market. As the significant inputs used to price these securities are observable market inputs, their fair values are classified as Level 2.

At September 30, 2023, the carrying value of mortgage loans, held for investment, approximated fair value. The fair values of mortgage loans are primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar mortgage loans with similar credit risk or are determined from pricing for similar loans. As mortgage loans are not actively traded, their fair values are classified as Level 3.

At September 30, 2023, the Company's debt was recorded at amortized cost with a carrying value of $1,313 million (2022: $1,312 million) and a fair value of $1,143 million (2022: $1,160 million). The fair value of the Company's debt is based on prices obtained from a third-party pricing service and is determined using the spread above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. As the yields for the risk-free yield curve and the spreads are observable market inputs, the fair value of this debt is classified as Level 2.

At September 30, 2023, Federal Home Loan Bank advances were recorded at amortized cost with a carrying value of $86 million (2022: $81 million) and a fair value of $86 million (2022: $81 million). As these advances are not actively traded, their fair values are classified as Level 2.
























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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    DERIVATIVE INSTRUMENTS


The following table provides the balance sheet classifications of derivatives recorded at fair value:
  September 30, 2023December 31, 2022
  
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Derivative
notional
amount
Derivative
asset
fair
value(1)
Derivative
liability
fair
value(1)
Relating to investment portfolio:
Foreign exchange forward contracts$132,246 $1,144 $32 $54,076 $81 $559 
Relating to underwriting portfolio:
Foreign exchange forward contracts1,218,702 3,322 9,634 1,441,273 37,601 144 
Total derivatives$4,466 $9,666 $37,682 $703 
(1)Derivative assets and derivative liabilities are classified within other assets and other liabilities in the consolidated balance sheets.

The notional amounts of derivative contracts represent the basis on which amounts paid or received are calculated and are presented in the above table to quantify the volume of the Company's derivative activities. Notional amounts are not reflective of credit risk.

None of the Company's derivative instruments are designated as hedges.

Offsetting Assets and Liabilities

The Company's derivative instruments are generally traded under International Swaps and Derivatives Association master netting agreements which establish terms that apply to all transactions. In the event of a bankruptcy or other stipulated event, master netting agreements provide that individual positions be replaced with a new amount, usually referred to as the termination amount, determined by taking into account market prices and converting into a single currency. Effectively, this contractual close-out netting reduces credit exposure from gross to net exposure.

The following table provides a reconciliation of gross derivative assets and liabilities to the net amounts presented in the consolidated balance sheets, with the difference being attributable to the impact of master netting agreements:
September 30, 2023December 31, 2022
Gross amountsGross amounts offset
Net
amounts(1)
Gross amountsGross amounts offset
Net
amounts(1)
Derivative assets$12,534 $(8,068)$4,466 $41,762 $(4,080)$37,682 
Derivative liabilities$17,734 $(8,068)$9,666 $4,783 $(4,080)$703 
(1)Net asset and liability derivatives are classified within other assets and other liabilities in the consolidated balance sheets.

Refer to Note 3 'Investments' for information on reverse repurchase agreements.

a) Relating to Investment Portfolio

Foreign Currency Risk

The Company's investment portfolio is exposed to foreign currency risk. Therefore, the fair values of its investments are partially influenced by changes in foreign exchange rates. The Company may enter into foreign exchange forward contracts to manage the effect of this foreign currency risk. These foreign currency hedging activities are not designated as specific hedges for financial reporting purposes.


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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

5.    DERIVATIVE INSTRUMENTS (CONTINUED)
b) Relating to Underwriting Portfolio

Foreign Currency Risk

The Company's insurance and reinsurance subsidiaries and branches operate in various countries. Some of its business is written in currencies other than the U.S. dollar, therefore the underwriting portfolio is exposed to significant foreign currency risk. The Company manages foreign currency risk by seeking to match its foreign-denominated net liabilities under insurance and reinsurance contracts with cash and investments that are denominated in the same currencies. The Company uses derivative instruments, specifically, forward contracts to economically hedge foreign currency exposures.

Other Underwriting-related Risks

The Company enters into insurance and reinsurance contracts that are accounted for as derivatives. These insurance or reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations.


The following table provides the total unrealized and realized gains (losses) recognized in net income (loss) for derivatives not designated as hedges:
  Consolidated statement of operations line item that includes gain (loss) recognized in net income (loss)Three months ended September 30,Nine months ended September 30,
  2023202220232022
Relating to investment portfolio:
Foreign exchange forward contractsNet investment gains (losses)$1,692 $4,400 $218 $11,463 
Relating to underwriting portfolio:
Foreign exchange forward contractsForeign exchange (losses) gains(7,208)(36,577)1,030 (95,700)
Other underwriting-related contractsOther insurance related income (loss)— 421 — 1,343 
Total$(5,516)$(31,756)$1,248 $(82,894)
























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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

6.    RESERVE FOR LOSSES AND LOSS EXPENSES
Reserve Roll-Forward

The following table presents a reconciliation of the Company's beginning and ending gross reserve for losses and loss expenses and net reserve for unpaid losses and loss expenses:
Nine months ended September 30,
20232022
Gross reserve for losses and loss expenses, beginning of period$15,168,863 $14,653,094 
Less reinsurance recoverable on unpaid losses and loss expenses, beginning of period(5,831,172)(5,017,611)
Net reserve for unpaid losses and loss expenses, beginning of period9,337,691 9,635,483 
Net incurred losses and loss expenses related to:
Current year2,253,958 2,461,828 
Prior years(13,118)(17,632)
 2,240,840 2,444,196 
Net paid losses and loss expenses related to:
Current year(272,260)(269,466)
Prior years(1,730,640)(1,900,366)
 (2,002,900)(2,169,832)
Foreign exchange and other(51,902)(501,914)
Net reserve for unpaid losses and loss expenses, end of period9,523,729 9,407,933 
Reinsurance recoverable on unpaid losses and loss expenses, end of period6,031,527 5,244,263 
Gross reserve for losses and loss expenses, end of period$15,555,256 $14,652,196 

The Company writes business with loss experience generally characterized as low frequency and high severity in nature, which can result in volatility in its financial results. During the nine months ended September 30, 2023, the Company recognized catastrophe and weather-related losses, net of reinstatement premiums, of $112 million (2022: $339 million).

On September 22, 2023, the Company entered into a retrocession reinsurance agreement with a third-party reinsurer which was deemed to have met the established criteria for retroactive reinsurance accounting. At September 30, 2023, foreign exchange and other included an increase in reinsurance recoverable on unpaid losses of $76 million related to this transaction (refer to Note 3(f) 'Equity Method Investments', Note 4 'Fair Value Measurements' and Note 14 'Related Party Transactions').

Estimates for Significant Catastrophe Events

At September 30, 2023, net reserves for losses and loss expenses included estimated amounts for numerous catastrophe events. The magnitude and complexity of losses arising from certain of these events inherently increase the level of uncertainty and, therefore, the level of management judgment involved in arriving at estimated net reserves for losses and loss expenses. These events include Cyclone Gabrielle, Earthquake in Turkey, Maui wildfires, New Zealand floods and Hurricane Idalia in 2023, Hurricane Ian, Winter Storm Elliot, June European Convective Storms, the Russia-Ukraine war and COVID-19 in 2022, Hurricane Ida, U.S. Winter Storms Uri and Viola and July European Floods in 2021, and the COVID-19 pandemic, Hurricanes Laura, Sally, Zeta and Delta, the Midwest derecho and wildfires across the West Coast of the United States in 2020. As a result, actual losses for these events may ultimately differ materially from current estimates.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
Prior Year Reserve Development

The Company's net favorable prior year reserve development arises from changes to estimates of losses and loss expenses related to loss events that occurred in previous calendar years. The following table presents net prior year reserve development by segment:
  Three months ended September 30,Nine months ended September 30,
2023202220232022
Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)
Insurance$1,609 $2,558 $5,433 $12,396 
Reinsurance1,153 2,177 7,685 5,236 
Total$2,762 $4,735 $13,118 $17,632 

The following sections provide further details on net prior year reserve development by segment, line of business and accident year:

Insurance Segment:

Prior year reserve development by line of business was as follows:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)Favorable (Adverse)
Property$(10,068)$12,888 $(4,376)$23,668 
Accident and health(5,213)(7,677)(5,765)(5,379)
Marine and aviation19,472 20,550 35,374 38,128 
Cyber10,869 (712)19,997 6,385 
Professional lines(4,383)(2,036)(20,475)(10,322)
Credit and political risk3,374 8,106 16,323 13,288 
Liability(12,442)(28,561)(35,645)(53,372)
Total$1,609 $2,558 $5,433 $12,396 

For the three months ended September 30, 2023, net favorable prior year reserve development of $2 million was recognized, the principal components of which were: 
•$19 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine liability and marine cargo books of business mainly related to recent accident years.
•$11 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence mainly related to the 2021 and 2022 accident years, partially offset by increases in loss estimates attributable to specific large claims related to the 2020 accident year.
•$12 million of net adverse prior year reserve development on liability business primarily due to increases in loss estimates attributable to specific large claims within the U.S. excess casualty general liability book of business related to the 2018 through 2021 accident years, and U.S. programs books of business mainly related to recent accident years.
•$10 million of net adverse prior year reserve development on property business primarily due to increases in loss estimates attributable to two specific large claims within the E&S property book of business related to the 2016 and 2022 accident years.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$5 million of net adverse prior year reserve development on accident and health business primarily due to reserve strengthening within the international book of business mainly related to the 2021 and 2022 accident years.
For the three months ended September 30, 2022, net favorable prior year reserve development of $3 million was recognized, the principal components of which were: 
•$21 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo and specie, marine liability, and marine offshore energy books of business mainly related to the 2020 and 2021 accident years.
•$13 million of net favorable prior year reserve development on property business primarily due to better than expected loss emergence attributable to 2020 catastrophe events, partially offset by reserve strengthening within the U.S. programs book of business mainly related to the 2021 accident year.
•$8 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2016 through 2020 accident years.
•$29 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. programs book of business mainly related to the 2018 and 2019 accident years, and the U.S. primary casualty and U.S. excess casualty books of business mainly related to the 2017 through 2021 accident years.
•$8 million of net adverse prior year reserve development on accident and health business primarily due to reserve strengthening mainly related to the 2020 and 2021 accident years.
For the nine months ended September 30, 2023, net favorable prior year reserve development of $5 million was recognized, the principal components of which were:
•$35 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo and aviation books of business related to recent accident years.
•$20 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence related to most accident years, partially offset by increases in loss estimates attributable to specific large claims related to the 2020 accident year.
•$16 million of net favorable prior year reserve development on credit and political risk business primarily due to a decrease in the loss estimate attributable to a specific large claim related to the 2020 accident year and better than expected loss emergence related to recent accident years.
•$36 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S. primary casualty book of business mainly related to the 2017 through 2019 accident years, and increases in loss estimates attributable to specific large claims within the U.S. excess casualty general liability book of business mainly related to the 2017 through 2021 accident years and U.S. programs book of business mainly related to recent accident years.
•$20 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. financial institutions book of business mainly related to the 2009 and 2018 accident years, U.S. commercial management solutions book of business mainly related the 2017 through 2019 accident years, and U.S. design professional and environmental book of business mainly related to the 2019 accident year.
•$6 million of net adverse prior year reserve development on accident and health business primarily due to reserve strengthening within the international book of business mainly related to the 2021 and 2022 accident years.
For the nine months ended September 30, 2022, net favorable prior year reserve development of $12 million was recognized, the principal components of which were: 
•$38 million of net favorable prior year reserve development on marine and aviation business primarily due to better than expected loss emergence attributable to the marine cargo and specie, and marine offshore energy books of business mainly related to the 2018, 2020 and 2021 accident years, and aviation business mainly related to the 2021 accident year.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$24 million of net favorable prior year reserve development on property business primarily due to better than expected loss emergence attributable to 2018 and 2020 catastrophe events, and decreases in loss estimates attributable to specific large claims related to the 2017 accident year.
•$13 million of net favorable prior year reserve development on credit and political risk business primarily due to better than expected loss emergence mainly related to the 2017, 2018 and 2020 accident years.
•$6 million of net favorable prior year reserve development on cyber business primarily due to better than expected loss emergence mainly related to several accident years, partially offset by an increase in the loss estimate attributable to a specific large claim related to the 2021 accident year.
•$53 million of net adverse prior year reserve development on liability business primarily due to reserve strengthening within the U.S programs book of business mainly related to the 2017 through 2021 accident years and an increase in the loss estimate attributable to a specific large claim related to the 2017 accident year.
•$10 million of net adverse prior year reserve development on professional lines business primarily due to increases in loss estimates attributable to specific large claims related to the 2015 and 2019 accident years, and reserve strengthening within run-off lines of business mainly related to the 2018 accident year.
•$5 million of net adverse prior year reserve development on accident and health business primarily due to reserve strengthening mainly related to the 2019 and 2020 accident years.
Reinsurance Segment:

Prior year reserve development by line of business was as follows:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Favorable
(Adverse)		Favorable
(Adverse)		Favorable
(Adverse)		Favorable
(Adverse)
Accident and health$5,842 $6,799 $20,115 $8,486 
Agriculture729 855 14,741 9,228 
Marine and aviation3,576 (785)8,523 (1,185)
Professional lines(9,044)(11,431)(22,772)(41,954)
Credit and surety9,625 5,905 8,498 16,953 
Motor(1,302)6,849 (23,248)8,979 
Liability(15,222)(11,940)(55,092)(22,868)
Total(5,796)(3,748)(49,235)(22,361)
Run-off lines
Catastrophe1,436 (1,452)39,982 (2,391)
Property3,421 9,145 12,568 33,738 
Engineering2,092 (1,768)4,370 (3,750)
Total run-off lines6,949 5,925 56,920 27,597 
Total$1,153 $2,177 $7,685 $5,236 

For the three months ended September 30, 2023, net favorable prior year reserve development of $1 million was recognized, the principal components of which were:
•$10 million of net favorable development on credit and surety business primarily due to better than expected loss emergence attributable to the international credit and mortgage books of business mainly related to recent accident years.
•$6 million of net favorable development on accident and health business primarily due to better than expected loss emergence mainly related to the 2022 accident year.

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
•$15 million of net adverse development on liability business primarily due to reserve strengthening within the U.S. books of business related to several accident years, partially offset by a decrease in the loss estimate attributable to a specific large claim within the international book of business related to the 2010 accident year.
•$9 million of net adverse development on professional lines business primarily due to reserve strengthening within the U.S. proportional book of business mainly related to the 2017 through 2019 accident years, and reserve strengthening attributable to two cedants within the U.S. proportional book of business related to 2019 and older accident years.
For the three months ended September 30, 2022, net favorable prior year reserve development of $2 million was recognized, the principal components of which were:
•$7 million of net favorable prior year reserve development on motor business primarily due to better than expected loss emergence mainly related to the 2017 and 2018 accident years.
•$7 million of net favorable prior year reserve development on accident and health business primarily due to better than expected loss emergence mainly related to the 2019 through 2021 accident years.
•$6 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related to the 2015, 2018 and 2019 accident years.
•$12 million of net adverse prior year development on liability business primarily due to reserve strengthening within the U.S. multiline and U.S. casualty books of business mainly related to 2016 and older accident years.
•$11 million of net adverse prior year development on professional lines business primarily due to reserve strengthening within the U.S. public D&O and U.S. proportional books of business mainly related to 2017 and older accident years.
Run-off lines
•$9 million of net favorable prior year development on property business primarily due to better than expected loss emergence attributable to 2018 catastrophe events and decreases in loss estimates attributable to specific large claims related to the 2019 through 2021 accident years.
For the nine months ended September 30, 2023, net favorable prior year reserve development of $8 million was recognized, the principal components of which were:
•$20 million of net favorable prior year development on accident and health business primarily due to better than expected loss emergence mainly related to the 2022 accident year.
•$15 million of net favorable prior year development on agriculture business primarily due to better than expected loss emergence mainly related to the 2022 accident year.
•$9 million of net favorable prior year development on marine and aviation business primarily due to better than expected loss emergence mainly related to the 2021 and 2022 accident years.
•$8 million of net favorable prior year development on credit and surety business primarily due to better than expected loss emergence attributable to international credit and mortgage books of business mainly related to the 2021 and 2022 accident years.
•$55 million of net adverse prior year development on liability business primarily due to reserve strengthening within the U.S. proportional, non-proportional and multiline books of business related to several accident years, partially offset by a decrease in the loss estimate attributable to a specific large claim within the international book of business related to the 2010 accident year.
•$23 million of net adverse prior year development on motor business primarily due to reserve strengthening to reflect increased estimates of future loss trend due to inflation and reserve strengthening attributable to the proportional book of business mainly related to the 2018 through 2022 accident years.
•$23 million of net adverse prior year reserve development on professional lines business primarily due to reserve strengthening within the U.S. proportional book of business mainly related to the 2015 through 2018 accident years, and

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6.    RESERVE FOR LOSSES AND LOSS EXPENSES (CONTINUED)
reserve strengthening attributable to two cedants within the U.S. proportional book of business related to 2019 and older accident years.
Run-off lines
•$40 million of net favorable prior year development on catastrophe business primarily due to better than expected loss emergence.
•$13 million of net favorable prior year development on property business primarily due to better than expected loss emergence mainly related to catastrophe events.
For the nine months ended September 30, 2022, net favorable prior year reserve development of $5 million was recognized, the principal components of which were:
•$17 million of net favorable prior year reserve development on credit and surety business primarily due to better than expected loss emergence mainly related to the 2015, 2016, 2018 and 2019 accidents years.
•$9 million of net favorable prior year reserve development on agriculture business primarily due to better than expected loss emergence mainly related to the 2021 accident year.
•$9 million of net favorable prior year reserve development on motor business primarily due to better than expected loss emergence mainly related to the 2018 and 2019 accident years.
•$8 million of net favorable prior year reserve development on accident and health business primarily due to better than expected loss emergence mainly related to the 2019 through 2021 accident years.
•$42 million of net adverse prior year development on professional lines business primarily due to increases in loss estimates attributable to one cedant related to the 2016 to 2018 accident years, and a specific large claim related to the 2017 accident year, and reserve strengthening within the U.S. public D&O and U.S. proportional books of business related to 2017 and older accident years.
•$23 million of net adverse prior year development on liability business primarily due to worse than expected loss emergence within the U.S. book of business related to the 2016 and older accident years, and increases in loss estimates attributable to specific large claims related to the 2003, 2015, 2018 and 2021 accident years.
Run-off lines
•$34 million of net favorable prior year development on property business primarily due to better than expected loss emergence attributable to 2018 through 2021 catastrophe events.

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7.    EARNINGS PER COMMON SHARE
The following table presents a comparison of earnings per common share and earnings per diluted common share:
Three months ended September 30,Nine months ended September 30,
  2023202220232022
Earnings (loss) per common share
Net income (loss)$188,098 $(9,384)$518,870 $174,592 
Less: Preferred share dividends7,563 7,563 22,688 22,688 
Net income (loss) available (attributable) to common shareholders$180,535 $(16,947)$496,182 $151,904 
Weighted average common shares outstanding85,223 84,660 85,099 84,930 
Earnings (loss) per common share$2.12 $(0.20)$5.83 $1.79 
Earnings (loss) per diluted common share
Net income (loss) available (attributable) to common shareholders$180,535 $(16,947)$496,182 $151,904 
Weighted average common shares outstanding 85,223 84,660 85,099 84,930 
    Share-based compensation plans885 — 828 744 
Weighted average diluted common shares outstanding86,108 84,660 85,927 85,674 
Earnings (loss) per diluted common share$2.10 $(0.20)$5.77 $1.77 
Weighted average anti-dilutive shares excluded from the dilutive computation58 160 533 432 
(1) Due to the net loss attributable to common shareholders recognized for the three months ended September 30, 2022, the share equivalents were anti-dilutive.
    
8.    SHARE-BASED COMPENSATION

Performance Restricted Stock Units

Performance Restricted Stock Units granted in 2023

Share-settled performance restricted stock units granted in 2023 include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 0% to 200% of target.

Performance Restricted Stock Units granted in the three months ended March 31, 2023 in relation to senior leadership transition

Share-settled performance restricted stock units granted in the three months ended March 31, 2023 to one senior leader include a market condition which is the Company’s total shareholder return relative to its peer group ("Relative TSR") over the performance period. Relative TSR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, fifty percent of these awards will vest at the end of a one-year performance period, and the remaining fifty percent of these awards will vest at the end of a three-year vest period within a range of 0% to 200% of target.

Performance Restricted Stock Units granted in the three months ended June 30, 3023 in relation to senior leadership transition

Share-settled performance restricted stock units granted in the three months ended June 30, 2023 to one senior leader include a market condition which is the Company’s total shareholder return's compound annual growth rate ("TSR CAGR") over the performance period. TSR CAGR is calculated in accordance with the terms of the applicable award agreement. If performance goals are achieved, these awards will cliff vest at the end of a three-year performance period within a range of 0% to 200% of target.

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8.    SHARE-BASED COMPENSATION (CONTINUED)
Valuation assumptions

The fair value of performance restricted stock units granted in 2023 was measured on the grant date using a Monte Carlo simulation model.

The following table provides details of the significant inputs used in the Monte Carlo simulation model:
Nine months ended September 30,
2023 (1)
2023 (2)
2023 (3)
2022
Expected volatility 36.24%29.30%30.05%33.44%
Expected term (in years)3.01.03.03.0
Expected dividend yieldn/an/an/an/a
Risk-free interest rate3.79%4.61%3.39%1.26%
n/a - not applicable
(1) Performance restricted stock units granted in the ordinary course of business
(2) Performance restricted stock units granted in the three months ended March 31, 2023 in relation to senior leadership transition
(3) Performance restricted stock units granted in the three months ended June 30, 2023 in relation to senior leadership transition

Beginning share price: The beginning share price was based on the average closing share price over the 10 trading days preceding and including the start of the performance period. The beginning share price of the awards granted in the three months ended June 30, 2023 to one senior leader was based on the average closing share price over the 30 trading days preceding and including the start of the performance period.

Ending share price: The ending share price was based on the average projected closing share price over the 10 trading days preceding and including the end of the performance period. The ending share price of the awards granted in the three months ended June 30, 2023 to one senior leader was based on the average closing share price over the 30 trading days preceding and including the end of the performance period.

Expected volatility: The expected volatility is estimated based on the Company's historical share price volatility.

Expected term: Performance for awards granted in 2023 is generally measured from January 1, 2023 to December 31, 2025, with performance for awards granted to one senior leader in the three months ended March 31, 2023 being measured from January 1, 2023 to December 31, 2023, and performance for awards granted to one senior leader in the three months ended June 30, 2023 being measured from May 4, 2023 to May 4, 2026. Performance for awards granted in 2022 is measured from January 1, 2022 to December 31, 2024.

Expected dividend yield: The expected dividend yield is not applicable to the performance restricted stock units as dividends are paid at the end of the vesting period and do not affect the value of the performance restricted stock units.

Risk-free interest rate: The risk-free rate is estimated based on the yield on a U.S. treasury zero-coupon bond issued with a remaining term equal to the vesting period of the performance restricted stock units.

Compensation expense associated with performance restricted stock units granted in 2023 and 2022 is determined on the grant date based on the fair value calculated by the Monte Carlo simulation model, and is recognized on a straight-line basis over the requisite service period. During the three months ended March 31, 2023, the transition in our senior leadership resulted in a modification of the previously existing vesting terms of the outstanding restricted stock units and performance restricted stock units granted in 2022 and earlier of one senior leader, and a modification of the performance period of that leader's performance restricted stock units granted in 2022. The modifications did not result in incremental compensation expense.

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8.    SHARE-BASED COMPENSATION (CONTINUED)
Share-Settled Awards

The following table provides an activity summary of the Company's share-settled restricted stock units for the nine months ended September 30, 2023:
Share-Settled Performance
Restricted Stock Units		Share-Settled Service
Restricted Stock Units
Number of
restricted
stock units
Weighted 
average
grant date
fair value
Number of
restricted
stock units
Weighted  average
grant date
fair value
Non-vested restricted stock units - beginning of period330 $60.01 2,117 $53.16 
     Granted122 66.13 874 57.59 
     Vested(72)62.26 (778)53.62 
     Forfeited— — (202)54.27 
Non-vested restricted stock units - end of period380 $61.55 2,011 $54.80 

Cash-Settled awards

The following table provides an activity summary of the Company's cash-settled restricted stock units for the nine months ended September 30, 2023:
Cash-Settled Service
Restricted Stock Units
Number of
restricted stock units
Non-vested restricted stock units - beginning of period60 
     Granted— 
     Vested(59)
     Forfeited(1)
Non-vested restricted stock units - end of period— 

The following table provides additional information related to share-based compensation:
Nine months ended September 30,20232022
Share-based compensation expense(1)
$43,516 $43,595 
Tax benefits associated with share-based compensation expense
$6,640 $7,468 
Liability for cash-settled restricted stock units(2)
$— $4,084 
Fair value of restricted stock units vested(3)
$54,654 $49,239 
Unrecognized share-based compensation expense$76,871 $91,810 
Expected weighted average period associated with the recognition of unrecognized share-based compensation expense2.5 years2.5 years
(1) Related to share-settled restricted stock units and cash-settled restricted stock units.
(2) Included in other liabilities in the consolidated balance sheets.
(3) Fair value is based on the closing price of the Company's common shares on the vest date.

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9.    SHAREHOLDERS' EQUITY
The following table presents changes in common shares issued and outstanding:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Shares issued, balance at beginning of period176,580 176,580 176,580 176,580 
Shares issued— — — — 
Total shares issued at end of period176,580 176,580 176,580 176,580 
Treasury shares, balance at beginning of period(91,364)(91,925)(91,912)(91,806)
Shares repurchased(7)(6)(289)(891)
Shares reissued 19 17 849 783 
Total treasury shares at end of period(91,352)(91,914)(91,352)(91,914)
Total shares outstanding85,228 84,666 85,228 84,666 
Treasury Shares
The following table presents common shares repurchased from shares held in Treasury:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
In the open market:
Total shares— — — 634 
Total cost$— $— $— $34,987 
Average price per share(1)
$— $— $— $55.22 
From employees:(2)
Total shares7 6 289 257 
Total cost$373 $342 $17,424 $13,688 
Average price per share(1)
$54.80 $53.78 $60.19 $53.12 
Total shares repurchased:
Total shares7 6 289 891 
Total cost$373 $342 $17,424 $48,675 
Average price per share(1)
$54.80 $53.78 $60.19 $54.61 
(1) Calculated using whole numbers.
(2)  Shares are repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.

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9.    SHAREHOLDERS' EQUITY (CONTINUED)
Dividends
The following table presents dividends declared and paid related to the Company's common and preferred shares:
Per share data
Dividends declaredDividends paid in period of declarationDividends paid in period following declaration
Three months ended September 30, 2023
   Common shares$0.44 $— $0.44 
   Series E preferred shares$34.38 $— $34.38 
Three months ended September 30, 2022
   Common shares$0.43 $— $0.43 
   Series E preferred shares$34.38 $— $34.38 
Nine months ended September 30, 2023
   Common shares$1.32 $0.88 $0.44 
   Series E preferred shares
$103.13 $68.75 $34.38 
Nine months ended September 30, 2022
   Common shares$1.29 $0.86 $0.43 
   Series E preferred shares$103.13 $68.75 $34.38 

10.    DEBT AND FINANCING ARRANGEMENTS
Letter of Credit Facility

On March 31, 2023, the $150 million secured letter of credit facility expired. The terms and conditions of the $500 million secured letter of credit facility remain unchanged.

11.     FEDERAL HOME LOAN BANK ADVANCES

The Company's subsidiaries, AXIS Insurance Company and AXIS Surplus Insurance Company are members of the Federal Home Loan Bank of Chicago ("FHLB").

At September 30, 2023, the companies had admitted assets of approximately $3 billion which provides borrowing capacity of up to approximately $744 million.

At September 30, 2023, the Company had $86 million of borrowings under the FHLB program, with maturities in 2024 and interest payable at interest rates between 5.5% and 5.7%. The Company incurred interest expense of $1 million and $3 million for the three and nine months ended September 30, 2023, and $0.6 million for the three and nine months ended September 30, 2022, The borrowings under the FHLB program are secured by investments with a fair value of $90 million.


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12.    COMMITMENTS AND CONTINGENCIES
Legal Proceedings

From time to time, the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of its insurance or reinsurance operations. Estimated amounts payable related to these proceedings are included in the reserve for losses and loss expenses in the Company's financial statements.

The Company is not party to any material legal proceedings arising outside the ordinary course of business.

Investments

Refer to Note 3 - 'Investments' for information on the Company's unfunded investment commitments related to the Company's other investment portfolio.


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13.    OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the tax effects allocated to each component of other comprehensive income (loss):
20232022
Before tax amountIncome tax (expense) benefitNet of tax amountBefore tax amountIncome tax (expense) benefitNet of tax amount
Three months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized $(178,537)$22,486 $(156,051)$(393,848)$(32)$(393,880)
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized (5,647)700 (4,947)(10,990)306 (10,684)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)
26,241 (3,223)23,018 108,351 (9,572)98,779 
Unrealized gains (losses) arising during the period, net of reclassification adjustment
(157,943)19,963 (137,980)(296,487)(9,298)(305,785)
Foreign currency translation adjustment(6,950)— (6,950)(12,751)— (12,751)
Total other comprehensive income (loss), net of tax
$(164,893)$19,963 $(144,930)$(309,238)$(9,298)$(318,536)
Nine months ended September 30,
Available for sale investments:
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has not been recognized$(126,805)$17,210 $(109,595)$(1,340,927)$81,445 $(1,259,482)
Unrealized gains (losses) arising during the period for which an allowance for expected credit losses has been recognized(1,622)(8)(1,630)(56,577)3,269 (53,308)
Adjustment for reclassification of net realized (gains) losses and impairment losses recognized in net income (loss)
110,518 (10,130)100,388 255,081 (25,308)229,773 
Unrealized gains (losses) arising during the period, net of reclassification adjustment
(17,909)7,072 (10,837)(1,142,423)59,406 (1,083,017)
Foreign currency translation adjustment(4,302)— (4,302)(16,169)— (16,169)
Total other comprehensive income (loss), net of tax$(22,211)$7,072 $(15,139)$(1,158,592)$59,406 $(1,099,186)

The following table presents details of amounts reclassified from accumulated other comprehensive income (loss) ("AOCI") to net income (loss):
Amount reclassified from AOCI(1)
AOCI ComponentsConsolidated statement of operations line item that includes reclassification adjustmentThree months ended September 30,Nine months ended September 30,
2023202220232022
Unrealized gains (losses) on available for sale investments
Other realized gains (losses)
$(26,200)$(101,860)$(101,394)$(248,007)
Impairment losses(41)(6,491)(9,124)(7,074)
Total before tax(26,241)(108,351)(110,518)(255,081)
Income tax (expense) benefit3,223 9,572 10,130 25,308 
Net of tax$(23,018)$(98,779)$(100,388)$(229,773)
(1)     Amounts in parentheses are charges to net income (loss).





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14.    RELATED PARTY TRANSACTIONS

At September 30, 2023, the Company had invested $6 million in a loan to Eagle Point Credit Management LLC, which is majority-owned by Trident IX L.P., a Stone Point private equity fund.

At September 30, 2023, the Company had invested $5 million in cumulative preferred shares of Aspida Holdings Ltd. The $5 million investment was syndicated to the Company by Stone Point.

At September 30, 2023, the Company had invested $11 million in Monarch Point Re (refer to Note 3 'Investments'), a newly created collateralized reinsurer which is jointly sponsored by the Company and Stone Point.

Retrocession Agreement with Monarch Point Re

On September 22, 2023 (the "closing date"), the Company entered into an agreement, with an effective date of January 1, 2023, to retrocede a diversified portfolio of casualty reinsurance business to Monarch Point Re.

The agreement covers losses both on a prospective basis and on a retroactive basis therefore, the Company has bifurcated the prospective and retroactive elements of the agreement and is accounting for each element separately.

Retroactive element

Reinsurance premiums of $119 million were allocated to the retroactive element of the agreement which was deemed to have met the established criteria for retroactive reinsurance accounting. At the closing date, the Company recognized acquisition costs of $33 million and a loss expense of $7 million in the consolidated statement of operations associated with the retroactive element of the agreement. In addition, the Company recognized reinsurance recoverable on unpaid losses of $76 million and reinsurance recoverable on paid losses of $4 million in the consolidated balance sheets associated with the retroactive element of the agreement (refer to Note 6 'Reserve for Losses and Loss Expenses').

Prospective element

For the nine months ended September 30, 2023, the Company ceded reinsurance premiums of $244 million to Monarch Point Re. At September 30, 2023, the amount of ceded reinsurance payable included in insurance and reinsurance balances payable was $195 million in the consolidated balance sheets.
This transaction was conducted at market rates consistent with negotiated arms-length contracts.

Loan to Monarch Point Re

On September 25, 2023, the Company advanced an amount of $156 million to Monarch Point Re. This loan will be repaid in a manner consistent with the timing of amounts due to Monarch Point Re under the retrocession agreement. At September 30, 2023, an amount of $29 million was repaid and was treated as a non-cash activity in the consolidated statement of cash flows. The loan is expected to be repaid in full by November 15, 2025. The loan balance receivable at September 30, 2023 of $127 million is included in other assets in the consolidated balance sheets.

Interest on this loan is payable for this period at a rate of 5.7%. Interest related to this loan was received in advance and is included in other liabilities in the consolidated balance sheets.




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AXIS CAPITAL HOLDINGS LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15.    REORGANIZATION EXPENSES

For the three and nine months ended September 30, 2023, reorganization expenses were $29 million attributable to impairments of computer software assets and severance costs associated with the departures of certain employees mainly related to the Company's "How We Work" program which focuses on simplifying the Company’s operating structure.

For the three and nine months ended September 30, 2022, reorganization expenses were $6 million and $22 million, respectively, attributable to severance costs and impairments of computer software assets associated with the Company's exit from catastrophe and property reinsurance lines of business which was part of an overall approach to reduce the Company's exposure to volatile catastrophe risk.


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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our results of operations for the three and nine months ended September 30, 2023 and 2022 and our financial condition at September 30, 2023 and December 31, 2022. This should be read in conjunction with Item 1 'Consolidated Financial Statements' of this report and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022. Unless otherwise noted, tabular dollars are in thousands, except per share amounts. Amounts in tables may not reconcile due to rounding differences.
 
 Page  
Third Quarter 2023 Financial Highlights
Overview
Consolidated Results of Operations
Results by Segment:
i) Insurance Segment
ii) Reinsurance Segment
Net Investment Income and Net Investment Gains (Losses)
Other Expenses (Revenues), Net
Financial Measures
Non-GAAP Financial Measures Reconciliation
Cash and Investments
Liquidity and Capital Resources
Critical Accounting Estimates
Recent Accounting Pronouncements


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THIRD QUARTER 2023 FINANCIAL HIGHLIGHTS

Third Quarter 2023 Consolidated Results of Operations
 
•Net income available to common shareholders of $181 million, or $2.12 per common share, and $2.10 per diluted common share
•Operating income(1) of $202 million, or $2.34 per diluted common share(1)
•Gross premiums written of $1.9 billion
•Net premiums written of $1.0 billion
•Net premiums earned of $1.3 billion
•Pre-tax catastrophe and weather-related losses, net of reinsurance, of $42 million ($36 million, after-tax), (Insurance: $37 million; Reinsurance: $5 million), or 3.2 points on the current accident year loss ratio, primarily attributable to Maui wildfires, Hurricane Idalia, and other weather-related events
•Loss expense of $7 million related to a quota share retrocession agreement entered into with Monarch Point Re (ISA 2023) Ltd. ("Monarch Point Re") on September 22, 2023 with an effective date of January 1, 2023. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview – Recent Developments – Retrocession Agreement with Monarch Point Re for further information.
•Net favorable prior year reserve development of $3 million
•Underwriting income(2) of $147 million and combined ratio of 92.7%
•Net investment income of $154 million
•Net investment losses of $53 million
•Foreign exchange gains of $51 million
•Reorganization expenses of $29 million
Third Quarter 2023 Consolidated Financial Condition 
•Total cash and investments of $16.1 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 86% of total cash and investments and have an average credit rating of AA-
•Total assets of $29.5 billion
•Reserve for losses and loss expenses of $15.6 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $6.6 billion
•Debt of $1.3 billion and debt to total capital ratio(3) of 20.7%
•Common shareholders’ equity of $4.5 billion; book value per diluted common share of $51.17

(1)Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliations to the most comparable GAAP financial measures, net income (loss) available (attributable) to common shareholders and earnings (loss) per diluted common share, respectively, and a discussion of the rationale for the presentation of these items are provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to, the most comparable GAAP financial measure, net income (loss), is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations', and a discussion of the rationale for its presentation is provided in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.    
(3)The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt.

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OVERVIEW

Business Overview
AXIS Capital, through its operating subsidiaries, is a global specialty underwriter and provider of insurance and reinsurance solutions with operations in Bermuda, the U.S., Europe, Singapore and Canada. Our underwriting operations are organized around our global underwriting platforms, AXIS Insurance and AXIS Re.
We provide our clients and distribution partners with a broad range of risk transfer products and services, and strong capacity, backed by excellent financial strength. We manage our portfolio holistically, aiming to construct the optimum portfolio of risks, consistent with our risk appetite and the development of our franchise. We nurture an ethical, entrepreneurial, disciplined and diverse culture that promotes outstanding client service, intelligent risk taking, operating efficiency, corporate citizenship and the achievement of superior risk-adjusted returns for our shareholders. We believe that the achievement of our objectives will position us as a global leader in specialty risks. The execution of our business strategy for the first nine months of 2023 included the following:

•increasing our relevance in a select number of attractive specialty lines insurance and reinsurance markets including U.S. excess and surplus lines, North America professional lines and Lloyd's specialty insurance business;

•re-balancing our portfolio towards less volatile lines of business that carry attractive returns while deploying capital within risk limits, diversification and risk management;

•investing in attractive growth markets and advancing capabilities to address more transactional specialist business (small to mid-sized customers) with our key distribution partners;

•continuing the implementation of a more focused distribution strategy while building mutually beneficial relationships with clients and partners;

•improving the effectiveness and efficiency of our operating platforms and processes;

•investing in data and technology capabilities, and tools to empower our underwriters and enhance the service that we provide to our customers;

•utilizing reinsurance markets and third-party capital relationships; and

•fostering a positive workplace environment that enables us to attract, retain and develop top talent.











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Outlook

We are committed to leadership in specialty insurance and reinsurance. We believe our market positioning, specialty underwriting acumen, global platform, claims management capabilities and deep relationships with our distributors and clients, supported by a conservative and well performing investment portfolio, will provide opportunities for increased profitability, with differences among our lines of business driven by our tactical response to market conditions.

We expect rate to continue to improve but moderate across most lines as carriers assess the impact of heightened catastrophe loss activity, financial and social inflation, and geopolitical uncertainty, among other factors across their portfolios. Following multiple years of rate increases outpacing loss trend, pricing in most lines is now above loss cost trends and we continue to pursue growth.

Rates, terms and conditions across the majority of insurance lines continued to be favorable as pricing generally continues to rise, albeit at varying levels based on market dynamics relative to the individual lines. Market dislocations continue to drive more risks into the Wholesale channel, and we anticipate this to sustain throughout the remainder of 2023 with the strongest market opportunities occurring in Specialty and E&S lines. We are continuing to pursue a highly targeted and disciplined underwriting strategy across every line we write and all our channels of distribution.

Pricing momentum in non-proportional reinsurance continues to be strong while our proportional reinsurance business is benefiting from rate increases in the underlying business. We expect these market conditions to persist in the near term. We continue to focus on underwriting discipline and driving targeted profitable growth among the specialty and casualty reinsurance lines that we offer.

We are encouraged by the pricing improvements we are seeing across most markets, which we expect will carry through the rest of 2023, and that rate will continue to keep pace with loss cost trends in the majority of our lines. Where prices continue to deliver adequate profitability, we will look to grow within our risk and volatility guidelines. With a strengthened book of business, and a growing footprint in the specialty markets that are seeing the most favorable conditions, we believe AXIS is well positioned to drive profitable growth within the current environment.

Recent Developments

Retrocession Agreement with Monarch Point Re

On September 22, 2023 (the "closing date"), we entered into an agreement, with an effective date of January 1, 2023, to retrocede a diversified portfolio of casualty reinsurance business to Monarch Point Re.

The agreement covers losses both on a prospective basis and on a retroactive basis therefore, we have bifurcated the prospective and retroactive elements of the agreement and are accounting for each element separately.

Retroactive element

Reinsurance premiums of $119 million were allocated to the retroactive element of the agreement which was deemed to have met the established criteria for retroactive reinsurance accounting.

At the closing date, we recognized acquisition costs of $33 million and a loss expense of $7 million in the consolidated statement of operations associated with the retroactive element of the agreement. In addition, we recognized reinsurance recoverable on unpaid losses of $76 million and reinsurance recoverable on paid losses of $4 million in the consolidated balance sheets associated with the retroactive element of the agreement.

Refer to Item 2, Note 6 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses' and Note 14 to the Consolidated Financial Statements 'Related Party Transactions' for further details.

Prospective element

For the nine months ended September 30, 2023, we ceded reinsurance premiums of $244 million to Monarch Point Re. At September 30, 2023, the amount of ceded reinsurance payable included in insurance and reinsurance balances payable was $195 million in the consolidated balance sheets.

This transaction was conducted at market rates consistent with negotiated arms-length contracts.



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Loan to Monarch Point Re

On September 25, 2023, we advanced an amount of $156 million to Monarch Point Re. This loan will be repaid in a manner consistent with the timing of amounts due to Monarch Point Re under the retrocession agreement. At September 30, 2023, an amount of $29 million was repaid and was treated as a non-cash activity in the consolidated statement of cash flows. The loan is expected to be repaid in full by November 15, 2025. The loan balance receivable at September 30, 2023 of $127 million is included in other assets in the consolidated balance sheets.

Interest on this loan is payable for this period at a rate of 5.7%. Interest related to this loan was received in advance and is included in other liabilities in the consolidated balance sheets. We will recognize interest income in other insurance related income in the consolidated statement of operations in future periods.

How We Work Program

Reorganization expenses of $29 million include impairments of computer software assets and severance costs associated with the departures of certain employees mainly attributable to our "How We Work" program which focuses on simplifying the Company’s operating structure.

Response to Russia-Ukraine War

Following the Russian invasion of Ukraine and the triggering of sanctions against the countries involved, organizations and named individuals, we established a task-force to coordinate our response to this situation.

The Russia-Ukraine war, and its related impacts, are an evolving risk to which we are exposed from an underwriting and reserving perspective.

Our team continues to track the situation closely, to perform stress and scenario testing on underwriting exposures and to consider a range of economic impacts and external pressures across individual product lines.

Underwriting

We continue to monitor international sanctions which impact our global operations that were effective since March 27, 2022. The impact on gross premiums written for the nine months ended September 30, 2023 of the cancellation of policies with exposures to the Russia-Ukraine war was immaterial. We continue to evaluate opportunities to write business in the region, not including Russia or Ukraine risks.

We are also continuing to closely monitor cash due from our customers and reinsurers, giving due consideration to the Russia-Ukraine war and associated international sanctions. At September 30, 2023, we considered the potential financial impact of the Russia-Ukraine war when determining allowances for expected credit losses for insurance and reinsurance premium balances receivable and reinsurance recoverable balances on unpaid losses and loss expenses. Based on facts and circumstances at that time, we did not adjust allowances for expected credit losses at September 30, 2023. We will continue to monitor the appropriateness of allowances for expected credit losses as new information comes to light. Adjustments to allowances for expected credit losses in subsequent periods could be material.

Reserving

At September 30, 2023, estimated pre-tax net losses attributable to the Russia-Ukraine war were $47 million.

The estimate of net reserves for losses and loss expenses related to the Russia-Ukraine war is subject to significant uncertainty. This uncertainty is driven by the difficulty in performing on-site evaluations, and by the inherent difficulty in making assumptions due to the lack of comparable events, the ongoing nature of the event, and its far-reaching impacts.

While we believe the overall estimate of net reserves for losses and loss expenses is adequate for losses and loss expenses that have been incurred at September 30, 2023, based on current facts and circumstances, we will continue to monitor the appropriateness of our assumptions as new information comes to light and will adjust the estimate of net reserves for losses and loss expenses, as appropriate.

Actual losses for this event may ultimately differ materially from current estimates.


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Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further information.

Investments

At September 30, 2023, we had no direct exposures to Russia or Ukraine within our investments portfolio.

Refer to Item 1A, 'Risk Factors' in our most recent Annual Report on Form 10-K for further information.


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CONSOLIDATED RESULTS OF OPERATIONS

  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Underwriting revenues:
Gross premiums written$1,905,878 12%$1,707,808 $6,572,232 2%$6,455,899 
Net premiums written975,357 (6%)1,036,784 4,030,070 (3%)4,166,502 
Net premiums earned1,322,564 3%1,284,866 3,818,508 —%3,820,163 
Other insurance related income10,344 nm1,092 16,444 64%9,998 
Underwriting expenses:
Net losses and loss expenses(783,940)(17%)(941,911)(2,240,840)(8%)(2,444,196)
Acquisition costs(263,389)10%(240,511)(747,027)—%(746,443)
Underwriting-related general and administrative expenses(1)
(138,601)5%(132,570)(412,251)—%(413,069)
Underwriting income (loss)(2)
146,978 (29,034)434,834 226,453 
Net investment income154,201 75%88,177 424,802 56%271,744 
Net investment gains (losses)(53,114)(64%)(146,458)(97,671)(76%)(414,231)
Corporate expenses(1)
(40,682)58%(25,675)(102,345)28%(79,803)
Foreign exchange gains
50,570 (63%)135,660 11,755 (95%)236,934 
Interest expense and financing costs(16,445)3%(15,915)(50,077)7%(46,720)
Reorganization expenses(28,997)nm(6,213)(28,997)32%(21,941)
Amortization of intangible assets(2,729)—%(2,729)(8,188)—%(8,188)
Income (loss) before income taxes and interest in income (loss) of equity method investments
209,782 (2,187)584,113 164,248 
Income tax (expense) benefit(24,624)nm363 (68,078)nm5,304 
Interest in income (loss) of equity method investments2,940 nm(7,560)2,835 (44%)5,040 
Net income (loss)188,098 (9,384)518,870 174,592 
Preferred share dividends(7,563)—%(7,563)(22,688)—%(22,688)
Net income (loss) available (attributable) to common shareholders$180,535 $(16,947)$496,182 $151,904 
nm – not meaningful is defined as a variance greater than +/-100%
(1)Underwriting-related general and administrative expenses is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $40,682 and $25,675 for the three months ended September 30, 2023 and 2022, respectively, and $102,345 and $79,803 for the nine months ended September 30, 2023 and 2022, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details on corporate expenses. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.
(2)Consolidated underwriting income (loss) is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to net income (loss), the most comparable GAAP financial measure, is presented above. Refer also to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation' for further details.





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Underwriting Revenues

Underwriting revenues by segment were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Gross premiums written:
Insurance$1,457,62411%$1,317,890$4,557,38611%$4,114,776
Reinsurance448,25415%389,9182,014,846(14%)2,341,123
Total gross premiums written$1,905,87812%$1,707,808$6,572,2322%$6,455,899
Percent of gross premiums written ceded
Insurance39 %(2 pts)41 %39 %(1 pt)40 %
Reinsurance80 %46 pts34 %39 %11 pts28 %
Total percent of gross premiums written ceded49 %10 pts39 %39 %3 pts36 %
Net premiums written:
Insurance$885,25214%$777,789$2,788,84912%$2,491,120
Reinsurance90,105(65%)258,9951,241,221(26%)1,675,382
Total net premiums written$975,357(6%)$1,036,784$4,030,070(3%)$4,166,502
Net premiums earned:
Insurance$885,71413%$782,101$2,544,92010%$2,303,640
Reinsurance436,850(13%)502,7651,273,588(16%)1,516,523
Total net premiums earned$1,322,5643%$1,284,866$3,818,508—%$3,820,163

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further details on underwriting revenues.

Combined Ratio

The components of the combined ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023
% Point
Change
20222023
% Point
Change
2022
Current accident year loss ratio, excluding catastrophe and weather-related losses56.3 %(0.8)57.1 %56.1 %0.655.5 %
Catastrophe and weather-related losses ratio3.2 %(13.4)16.6 %2.9 %(6.0)8.9 %
Current accident year loss ratio59.5 %(14.2)73.7 %59.0 %(5.4)64.4 %
Prior year reserve development ratio(0.2 %)0.2(0.4 %)(0.3 %)0.1(0.4 %)
Net losses and loss expenses ratio59.3 %(14.0)73.3 %58.7 %(5.3)64.0 %
Acquisition cost ratio19.9 %1.218.7 %19.6 %0.119.5 %
General and administrative expense ratio(1)
13.5 %1.212.3 %13.4 %0.512.9 %
Combined ratio92.7 %(11.6)104.3 %91.7 %(4.7)96.4 %
(1) The general and administrative expense ratio included corporate expenses not allocated to underwriting segments of 3.1% and 2.0% for the three months ended September 30, 2023 and 2022, respectively, and 2.7% and 2.1% for the nine months ended September 30, 2023 and 2022, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net' for further details.

Refer to 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' for further details on underwriting expenses.

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RESULTS BY SEGMENT

Insurance Segment

Results for the insurance segment were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Revenues:
Gross premiums written$1,457,62411%$1,317,890$4,557,38611%$4,114,776
Net premiums written885,25214%777,7892,788,84912%2,491,120
Net premiums earned885,71413%782,1012,544,92010%2,303,640
Other insurance related income (loss)
(22)nm15190(81%)470
Expenses:
Current accident year net losses and loss expenses(492,977)(521,564)(1,403,919)(1,358,981)
Prior year reserve development1,6092,5585,43312,396 
Acquisition costs(169,384)(139,436)(473,413)(422,979)
Underwriting-related general and administrative expenses(120,330)(108,072)(350,494)(330,598)
Underwriting income$104,610$15,738$322,617 $203,948 
Ratios:
% Point
Change
% Point
Change
Current accident year loss ratio, excluding catastrophe and weather-related losses51.5 %(1.1)52.6 %51.7 %0.151.6 %
Catastrophe and weather-related losses ratio4.2 %(9.9)14.1 %3.5 %(3.9)7.4 %
Current accident year loss ratio55.7 %(11.0)66.7 %55.2 %(3.8)59.0 %
Prior year reserve development ratio(0.2 %)0.1(0.3 %)(0.2 %)0.3(0.5 %)
Net losses and loss expenses ratio55.5 %(10.9)66.4 %55.0 %(3.5)58.5 %
Acquisition cost ratio19.1 %1.317.8 %18.6 %0.218.4 %
Underwriting-related general and administrative expense ratio13.6 %(0.2)13.8 %13.7 %(0.6)14.3 %
Combined ratio88.2 %(9.8)98.0 %87.3 %(3.9)91.2 %
nm – not meaningful

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Gross Premiums Written

Gross premiums written by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  20232022% Change20232022%
Change
Professional lines$285,739 20 %$317,074 24 %(10%)$801,757 18 %$944,629 23 %(15%)
Property395,269 26 %297,537 22 %33%1,310,086 28 %1,005,986 24 %30%
Liability316,433 22 %266,615 20 %19%929,228 20 %826,318 20 %12%
Cyber148,011 10 %182,367 14 %(19%)482,847 11 %486,952 12 %(1%)
Marine and aviation169,819 12 %140,661 11 %21%608,396 13 %518,974 13 %17%
Accident and health88,742 6 %66,153 5 %34%253,963 6 %189,849 5 %34%
Credit and political risk53,611 4 %47,483 4 %13%171,109 4 %142,068 3 %20%
Total$1,457,624 100 %$1,317,890 100 %11%$4,557,386 100 %$4,114,776 100 %11%

Gross premiums written for the three months ended September 30, 2023 increased by $140 million, or 11%, compared to the three months ended September 30, 2022. The increase was attributable to property, liability, marine and aviation, accident and health, and credit and political risk lines, partially offset by decreases in cyber, and professional lines.

The increases in property, liability, and marine and aviation lines were due to favorable rate changes and new business. The increases in accident and health, and credit and political risk lines were mainly due to new business.

The decrease in cyber lines was driven by the timing differences, premium adjustments associated with favorable market conditions in the three months ended September 30, 2022, and underwriting actions taken in recent periods to reposition the portfolio and reduced business opportunities associated with challenging market conditions. The decrease in professional lines reflected the unattractive pricing environment for U.S. public Directors and Officers ("D&O") business, together with a lower level of activity in transactional liability business.

Gross premiums written for the nine months ended September 30, 2023, increased by $443 million, or 11%, compared to the nine months ended September 30, 2022. The increase was primarily attributable to property, liability, marine and aviation, accident and health, and credit and political risk lines, partially offset by a decrease in professional lines.

The increases in property, liability, marine and aviation, and credit and political risk lines were due to favorable rate changes and new business. The increase in accident and health lines was due to new business.

The decrease in professional lines reflected the unattractive pricing environment for U.S. public D&O business, together with a lower level of activity in transactional liability business.

Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2023, was $572 million, or 39%, of gross premiums written, compared to $540 million, or 41%, of gross premiums written for the three months ended September 30, 2022. The increase in ceded premiums written of $32 million, or 6%, was primarily driven by increases in liability, property, and marine and aviation lines, partially offset by decreases in professional lines and cyber lines.

The increases in liability, property, and marine and aviation lines reflected the increase in gross premiums written for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.


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The decreases in professional lines and cyber lines reflected the decrease in gross premiums written for the three months ended September 30, 2023, compared to the three months ended September 30, 2022. The decrease in professional lines was also due to the restructuring of a significant existing quota share treaty.

Ceded premiums written for the nine months ended September 30, 2023, was $1,769 million, or 39%, of gross premiums written, compared to $1,624 million, or 40%, of gross premiums written for the nine months ended September 30, 2022. The increase in ceded premiums written of $145 million, or 9%, was primarily driven by increases in property, liability, and marine and aviation lines, partially offset by a decrease in professional lines.

The increases in property, liability, and marine and aviation lines reflected the increase in gross premiums written for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The increase in property lines was also attributable to the restructuring of two significant existing quota share treaties.

The decrease in professional lines reflected the decrease in gross premiums written for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022. The decrease in professional lines was also due to the restructuring of a significant existing quota share treaty.

Net Premiums Earned

Net premiums earned by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  20232022
%
Change
20232022
%
Change
Professional lines$192,443 22 %$201,110 26 %(4%)$569,358 22 %$618,787 27 %(8%)
Property228,900 26 %187,140 24 %22%636,056 24 %558,014 25 %14%
Liability124,442 14 %114,525 15 %9%370,180 15 %333,433 14 %11%
Cyber80,383 9 %85,877 11 %(6%)243,925 10 %226,699 10 %8%
Marine and aviation146,600 17 %119,119 15 %23%413,334 16 %350,538 15 %18%
Credit and political risk29,621 3 %26,186 3 %13%92,146 4 %75,678 3 %22%
Accident and health83,325 9 %48,144 6 %73%219,921 9 %140,491 6 %57%
Total$885,714 100 %$782,101 100 %13%$2,544,920 100 %$2,303,640 100 %10%

Net premiums earned for the three months ended September 30, 2023 increased by $104 million, or 13% ($113 million, or 14%, on a constant currency basis(1)), compared to the three months ended September 30, 2022.

The increase was primarily driven by increases in gross premiums earned in property, liability, marine and aviation, and accident and health lines, together with a decrease in ceded premiums earned in professional lines. These amounts were partially offset by increases in ceded premiums earned in property, and liability lines together with decreases in gross premiums earned in professional lines and cyber lines.

Net premiums earned for the nine months ended September 30, 2023 increased by $241 million, or 10% ($271 million, or 12%, on a constant currency basis), compared to the nine months ended September 30, 2022.

The increase was primarily driven by increases in gross premiums earned in property, liability, accident and health, marine and aviation, credit and political risk, and cyber lines, together with a decrease in ceded premiums earned in professional lines. These amounts were partially offset by increases in ceded premiums earned in property, liability, and marine and aviation lines together with a decrease in gross premiums earned in professional lines.


(1) Amounts presented on a constant currency basis are non-GAAP financial measures as defined in Item 10 (e) of SEC Regulation S-K. The constant currency basis is calculated by applying the average foreign exchange rate from the current year to the prior year balance.



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Loss Ratio

The components of the loss ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
2023% Point
Change		20222023% Point
Change		2022
Current accident year loss ratio55.7 %(11.0)66.7 %55.2 %(3.8)59.0 %
Prior year reserve development ratio(0.2 %)0.1(0.3 %)(0.2 %)0.3(0.5 %)
Loss ratio55.5 %(10.9)66.4 %55.0 %(3.5)58.5 %

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 55.7% for the three months ended September 30, 2023, from 66.7% for the three months ended September 30, 2022.

The decrease in the current accident year loss ratio for three months ended September 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended September 30, 2023, catastrophe and weather-related losses, were $37 million, or 4.2 points, primarily attributable to Maui wildfires, Hurricane Idalia, and other weather-related events. Comparatively, during the three months ended September 30, 2022, catastrophe and weather-related losses, were $113 million, or 14.1 points, primarily attributable to Hurricane Ian and other events.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio decreased to 51.5% for the three months ended September 30, 2023, from 52.6% for the three months ended September 30, 2022. The decrease was principally due to changes in business mix associated with the increase in property lines and the decrease in professional lines business written in recent periods, together with improved loss experience in property lines.

The current accident year loss ratio decreased to 55.2% for the nine months ended September 30, 2023, from 59.0% for the nine months ended September 30, 2022.

The decrease in current accident year loss ratio for nine months ended September 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the nine months ended September 30, 2023, catastrophe and weather-related losses, were $88 million, or 3.5 points, primarily attributable to the Earthquake in Turkey, Maui wildfires, Cyclone Gabrielle, New Zealand floods, Hurricane Idalia, and other weather-related events. Comparatively, during the nine months ended September 30, 2022, catastrophe and weather-related losses, were $174 million, or 7.4 points, including natural catastrophe and weather-related losses of $154 million, or 6.6 points, primarily attributable to Hurricane Ian, Eastern Australia floods, South Africa floods, and other weather-related events. The remaining losses of $20 million, or 0.9 points, were attributable to the Russia-Ukraine war.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio of 51.7% for the nine months ended September 30, 2023, was comparable to the current accident year loss ratio of 51.6% for the nine months ended September 30, 2022, principally due to heightened loss trends in liability lines consistent with changes in loss assumptions reflected in recent periods, largely offset by changes in business mix associated with the increase in property lines and decrease in professional lines business written in recent periods.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the lines of business and prior year reserve development.



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Acquisition Cost Ratio

The acquisition cost ratio increased to 19.1% for the three months ended September 30, 2023, from 17.8% for the three months ended September 30, 2022, primarily related to a decrease in ceding commissions largely associated with changes in business mix driven by an increase in property lines of business written in recent periods which are associated with relatively lower ceding commissions and a decrease in professional lines of business written in recent periods which are associated with relatively higher ceding commissions together with an increase in profit commissions, partially offset by a decrease in variable commissions in property lines.

The acquisition cost ratio increased to 18.6% for the nine months ended September 30, 2023, from 18.4% for the nine months ended September 30, 2022, primarily related to a decrease in ceding commissions largely associated with changes in business mix driven by an increase in property lines of business written in recent periods which are associated with a relatively lower ceding commissions and a decrease in professional lines of business written in recent periods which are associated with relatively higher ceding commissions.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense ratio decreased to 13.6% for the three months ended September 30, 2023, from 13.8% for the three months ended September 30, 2022, mainly driven by an increase in net premiums earned, largely offset by an increase in performance-related compensation costs.

The underwriting-related general and administrative expense ratio decreased to 13.7% for the nine months ended September 30, 2023, from 14.3% for the nine months ended September 30, 2022, mainly driven by an increase in net premiums earned, partially offset by increases in performance-related compensation costs.

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Reinsurance Segment

Results from the reinsurance segment were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Revenues:
Gross premiums written$448,25415%$389,918$2,014,846(14%)$2,341,123
Net premiums written90,105(65%)258,9951,241,221(26%)1,675,382
Net premiums earned436,850(13%)502,7651,273,588(16%)1,516,523
Other insurance related income10,366nm94116,35472%9,528
Expenses:
Current accident year net losses and loss expenses(293,725)(425,082)(850,039)(1,102,847)
Prior year reserve development1,1532,1777,6855,236 
Acquisition costs(94,005)(101,075)(273,614)(323,464)
Underwriting-related general and administrative expenses(18,271)(24,498)(61,757)(82,471)
Underwriting income (loss)
$42,368$(44,772)$112,217$22,505 
Ratios:
% Point
Change
% Point
Change
Current accident year loss ratio, excluding catastrophe and weather-related losses66.2 %2.064.2 %64.9 %3.361.6 %
Catastrophe and weather-related losses ratio1.0 %(19.3)20.3 %1.8 %(9.3)11.1 %
Current accident year loss ratio67.2 %(17.3)84.5 %66.7 %(6.0)72.7 %
Prior year reserve development ratio(0.2 %)0.2(0.4 %)(0.6 %)(0.3)(0.3 %)
Net losses and loss expenses ratio67.0 %(17.1)84.1 %66.1 %(6.3)72.4 %
Acquisition cost ratio21.5 %1.420.1 %21.5 %0.221.3 %
Underwriting-related general and administrative expense ratio4.2 %(0.7)4.9 %4.9 %(0.5)5.4 %
Combined ratio92.7 %(16.4)109.1 %92.5 %(6.6)99.1 %
nm – not meaningful

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Gross Premiums Written

Gross premiums written by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  20232022
% 
Change
20232022
% 
Change
Liability$184,665 41 %$156,500 40 %18%$542,760 27 %$630,921 27 %(14%)
Accident and health64,463 14 %59,313 15 %9%381,144 19 %400,016 17 %(5%)
Professional lines42,950 10 %27,575 7 %56%365,384 18 %334,210 14 %9%
Credit and surety70,486 16 %53,944 14 %31%289,153 14 %234,692 10 %23%
Motor27,113 6 %22,035 6 %23%194,194 10 %209,563 9 %(7%)
Agriculture37,846 8 %39,312 10 %(4%)127,231 6 %117,108 5 %9%
Marine and aviation6,954 2 %8,823 2 %(21%)59,518 3 %84,506 4 %(30%)
Total434,477 97 %367,502 94 %18%1,959,384 97 %2,011,016 86 %(3%)
Run-off lines
Catastrophe6,415 2 %21,227 5 %(70%)33,590 2 %221,700 10 %(85%)
Property5,271 1 %2,173 1 %nm18,718 1 %98,882 4 %(81%)
Engineering2,091 — %(984)— %nm3,154 — %9,525 — %(67%)
Total run-off lines13,777 3 %22,416 6 %(39%)55,462 3 %330,107 14 %(83%)
Total$448,254 100 %$389,918 100 %15%$2,014,846 100 %$2,341,123 100 %(14%)
nm – not meaningful

Gross premiums written for the three months ended September 30, 2023, increased by $58 million, or 15%, compared to the three months ended September 30, 2022. The increase was primarily attributable to liability, credit and surety, professional lines, accident and health, and motor lines, partially offset by a decrease in catastrophe lines.

The increase in liability was related to new business, an increased line size on a significant U.S. regional multi-line contract, timing of the renewal of significant contracts, partially offset by a lower level of premium adjustments associated with favorable market conditions in the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

The increase in credit and surety lines was driven by increased line sizes on surety contracts and new mortgage business.

The increase in professional lines was attributable to new business and the timing of renewals, partially offset by a lower level of premium adjustments associated with favorable market conditions in the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

The increase in accident and health lines was related to new business.

The increase in motor lines was due to positive premium adjustments in the three months ended September 30, 2023 attributable to several contracts compared to negative premium adjustments in the three months ended September 30, 2022 associated with unfavorable market conditions.

The decrease in catastrophe lines was associated with the exit from this line of business in June 2022.

Gross premiums written for the nine months ended September 30, 2023, decreased by $326 million, or 14% ($281 million, or 12%, on a constant currency basis), compared to the nine months ended September 30, 2022. The decrease was attributable to catastrophe, liability, property, marine and aviation, accident and health, motor, and engineering lines, partially offset by increases in credit and surety, professional lines, and agriculture lines.

The decreases in catastrophe and property lines were associated with the exit from these lines of business in June 2022.

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The decrease in liability lines was related to non-renewals of U.S. regional multi-line business that included a high proportion of property exposures and a decreased line size on a significant contract following the exit from catastrophe and property lines of business, together with non-renewals and decreased line sizes associated with repositioning the portfolio, partially offset by new business.

The decrease in marine and aviation lines was driven by non-renewals of marine business and the exit from aviation business effective January 1, 2023.

The decrease in accident and health lines was related to lower premium adjustments in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, together with the timing of renewals of two significant contracts.

The decrease in motor lines was due to non-renewals and decreased line sizes associated with repositioning the portfolio, partially offset by new business and premium adjustments attributable to a significant contract and favorable market conditions.

The decrease in engineering lines was attributable to premium adjustments related to a significant contract in the nine months ended September 30, 2022.

The increase in credit and surety lines was driven by new business, including mortgage business.

The increase in professional lines was attributable to new business and increased line sizes, partially offset by a lower level of premium adjustments associated with favorable market conditions in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

The increase in agriculture lines was due to new business and an increased line size on a significant contract, partially offset by the non-renewals.

Ceded Premiums Written

Ceded premiums written for the three months ended September 30, 2023, was $358 million, or 80%, of gross premiums written, compared to $131 million, or 34%, of gross premiums written for the three months ended September 30, 2022. The increase in ceded premiums written of $227 million, or 174%, was primarily driven by increases in liability, professional lines, credit and surety, accident and health, and motor lines, partially offset by a decrease in catastrophe lines.

The increases in liability, professional lines, credit and surety, accident and health, and motor lines were primarily attributable to premiums ceded to a quota share retrocession agreement entered into with Monarch Point Re on September 22, 2023 with an effective date of January 1, 2023. Refer to Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview – Recent Developments – Retrocession Agreement with Monarch Point Re for further information.

The decrease in catastrophe lines was due to lower costs associated with catastrophe bond protection, together with the decrease in gross premiums written in the three months ended September 30, 2023, compared to the three months ended September 30, 2022 following the exit from this line of business in June 2022.

Ceded premiums written for the nine months ended September 30, 2023, was $774 million, or 39%, of gross premiums written, compared to $666 million, or 28%, of gross premiums written for the nine months ended September 30, 2022. The increase in ceded premiums written of $108 million, or 16%, was primarily driven by increases in professional lines, liability, accident and health, credit and surety, motor, and agriculture lines, partially offset by a decrease in catastrophe lines.

The increases in professional lines, liability, accident and health, credit and surety, and motor lines were primarily attributable to premiums ceded to a quota share retrocession agreement entered into with Monarch Point Re on September 22, 2023 with an effective date of January 1, 2023. Refer to Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview – Recent Developments – Retrocession Agreement with Monarch Point Re for further information.

The increase in professional lines was also due to the restructuring of a significant quota share retrocessional treaty with a strategic capital partner, partially offset by the non-renewal of a significant retrocessional treaty with a strategic capital partner.

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The increase in liability lines was partially offset by the decrease in gross premiums written in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, the restructuring of a significant quota share retrocessional treaty, and the non-renewal of a significant retrocessional treaty with a strategic capital partner.

The increase in accident and health lines was also attributable to the restructuring of a significant quota share retrocessional treaty with a strategic capital partner.

The increase in credit and surety lines was partially offset by the restructuring of a significant quota share retrocessional treaty and the non-renewal of a fronting arrangement.

The increase in motor lines was partially offset by the decrease in gross premiums written in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

The increase in agriculture lines was attributable to premiums ceded to a new quota share retrocessional treaty.

The decrease in catastrophe lines was due to lower costs associated with catastrophe bond protection, together with the decrease in gross premiums written in the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 following the exit from this line of business in June 2022.

Net premiums earned by line of business were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023  2022  % Change2023  2022  % Change
Liability$106,489 24 %$126,858 25 %(16%)$317,006 25 %$361,540 24 %(12%)
Accident and health93,585 21 %98,156 20 %(5%)265,689 21 %286,085 19 %(7%)
Professional lines54,590 12 %62,472 12 %(13%)169,601 13 %181,540 12 %(7%)
Credit and surety61,717 14 %45,126 9 %37%176,092 14 %138,326 9 %27%
Motor40,373 9 %46,619 9 %(13%)124,166 10 %147,246 10 %(16%)
Agriculture39,428 9 %40,106 8 %(2%)91,520 7 %84,058 6 %9%
Marine and aviation17,310 4 %19,266 4 %(10%)49,436 4 %57,332 4 %(14%)
Total413,492 93 %438,603 87 %(6%)1,193,510 94 %1,256,127 84 %(5%)
Run-off lines
Catastrophe8,923 4 %31,710 6 %(72%)31,236 2 %130,889 7 %(76%)
Property10,020 2 %28,323 6 %(65%)37,327 3 %104,964 7 %(64%)
Engineering4,415 1 %4,129 1 %7%11,515 1 %24,543 2 %(53%)
Total run-off lines23,358 7 %64,162 13 %(64%)80,078 6 %260,396 16 %(69%)
Total$436,850 100 %$502,765 100 %(13%)$1,273,588 100 %$1,516,523 100 %(16%)

Net premiums earned for the three months ended September 30, 2023, decreased by $66 million, or 13% ($51 million, or 10%, on a constant currency basis), compared to the three months ended September 30, 2022.

The decrease was primarily driven by decreases in gross premiums earned in catastrophe, liability, property, professional lines and motor lines. These amounts were partially offset by a decrease in ceded premiums earned in catastrophe lines and an increase in gross premiums earned in credit and surety lines.

Net premiums earned for the nine months ended September 30, 2023, decreased by $243 million, or 16% ($196 million, or 13%, on a constant currency basis), compared to the nine months ended September 30, 2022.

The decrease was primarily driven by decreases in gross premiums earned in catastrophe, property, liability, accident and health, motor, engineering, and marine and aviation lines, together with increases in ceded premiums earned in motor, professional lines, and accident and health lines. These amounts were partially offset by decreases in ceded premiums earned in catastrophe, and liability lines and increases in gross premiums earned in credit and surety, and agriculture lines.



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Other Insurance Related Income (Loss)

Other insurance related income increased by $9 million to $10 million for the three months ended September 30, 2023, compared to other insurance related income of $1 million for the three months ended September 30, 2022, primarily associated with an increase in fees related to arrangements with strategic capital partners.

Other insurance related income increased by $7 million to $16 million for the nine months ended September 30, 2023, compared to other insurance related income of $10 million for the nine months ended September 30, 2022, primarily associated with an increase in fees related to arrangements with strategic capital partners.

Loss Ratio

The components of the loss ratio were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023% Point
Change		20222023% Point
Change		2022
Current accident year loss ratio67.2 %(17.3)84.5 %66.7 %(6.0)72.7 %
Prior year reserve development ratio(0.2 %)0.2(0.4 %)(0.6 %)(0.3)(0.3 %)
Loss ratio67.0 %(17.1)84.1 %66.1 %(6.3)72.4 %

Current Accident Year Loss Ratio

The current accident year loss ratio decreased to 67.2% for the three months ended September 30, 2023 from 84.5% for the three months ended September 30, 2022.

The current accident year loss ratio for three months ended September 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the three months ended September 30, 2023, catastrophe and weather-related losses, were $5 million, or 1.0 point, primarily attributable to weather-related events. Comparatively, during the three months ended September 30, 2022, catastrophe and weather-related losses, were $99 million, or 20.3 points, primarily attributable to Hurricane Ian, an increase of $23 million in the net loss estimate attributable to June European Convective Storms consistent with an updated industry insured loss estimate, and other weather-related events.

After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 66.2% for the three months ended September 30, 2023, from 64.2% for the three months ended September 30, 2022. The increase was principally due to changes in business mix associated with the exit from catastrophe and property lines of business, the impact of the loss expense related to the retrocession agreement entered into with Monarch Point Re, partially offset by changes in business mix due to the increase in credit and surety lines of business written in the recent periods which carry a relatively lower loss ratio.

The current accident year loss ratio decreased to 66.7% for the nine months ended September 30, 2023 from 72.7% for the nine months ended September 30, 2022.

The current accident year loss ratio for nine months ended September 30, 2023, compared to the same period in 2022, was impacted by a lower level of catastrophe and weather-related losses. During the nine months ended September 30, 2023, catastrophe and weather-related losses, were $24 million, or 1.8 points, primarily attributable to Cyclone Gabrielle, and other weather-related events. Comparatively, during the nine months ended September 30, 2022, catastrophe and weather-related losses, were $166 million, or 11.1 points, including natural catastrophe and weather-related losses of $153 million, or 10.2 points, primarily attributable to Hurricane Ian, June European Convective Storms, South Africa floods, Eastern Australia floods and other weather-related events. The remaining losses of $13 million, or 0.9 points, were attributable to the Russia-Ukraine war.


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After adjusting for the impact of the catastrophe and weather-related losses, the current accident year loss ratio increased to 64.9% for the nine months ended September 30, 2023, from 61.6% for the nine months ended September 30, 2022. The increase was principally due to changes in business mix associated with the exit from catastrophe and property lines of business, elevated experience in engineering lines, and the impact of the loss expense related to the retrocession agreement entered into with Monarch Point Re, partially offset by changes in business mix due to the increase in credit and surety lines of business written in the recent periods which carry a relatively lower loss ratio.

Prior Year Reserve Development

Refer to Item 1, Note 6 to the Consolidated Financial Statements 'Reserve for losses and loss expenses' for details on the lines of business and prior year reserve development.

Acquisition Cost Ratio

The acquisition cost ratio increased to 21.5% for the three months ended September 30, 2023, from 20.1% for the three months ended September 30, 2022, principally related to adjustments attributable to loss-sensitive features driven by improved loss performance mainly in credit and surety, and accident and health lines, and higher costs associated with changes in business mix driven by increases in credit and surety, professional lines, and accident and health lines of business written in recent periods together with decreases in catastrophe and property lines of business written in recent periods, partially offset by the impact of retrocessional contracts on professional lines, and liability lines.

The acquisition cost ratio increased to 21.5% for the nine months ended September 30, 2023, from 21.3% for the nine months ended September 30, 2022, principally related to changes in business mix driven by increases in professional lines, credit and surety, and liability lines of business written in recent periods together with decreases in catastrophe and property lines of business written in recent periods, largely offset by the impact of retrocessional contracts on professional lines, credit and surety, liability, and motor lines.

Underwriting-Related General and Administrative Expense Ratio

The underwriting-related general and administrative expense decreased to 4.2% for the three months ended September 30, 2023, from 4.9% for the three months ended September 30, 2022, mainly driven by a decrease in personnel costs associated with the exit from catastrophe and property lines of business, partially offset by a decrease in net premiums earned, an increase in performance-related compensation costs and a decrease in fees related to arrangements with strategic capital partners.

The underwriting-related general and administrative expense ratio decreased to 4.9% for the nine months ended September 30, 2023, from 5.4% for the nine months ended September 30, 2022, mainly driven by a decrease in personnel costs associated with the exit from catastrophe and property lines of business, partially offset by decreases in net premiums earned and fees related to arrangements with strategic capital partners.



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NET INVESTMENT INCOME AND NET INVESTMENT GAINS (LOSSES)

Net Investment Income

Net investment income from our cash and investment portfolio by major asset class was as follows:
  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Fixed maturities$133,00652%$87,364$375,65967%$224,780
Other investments312nm(7,576)(4,543)nm32,801
Equity securities3,05022%2,4908,49516%7,349
Mortgage loans8,89242%6,25626,15871%15,323
Cash and cash equivalents14,465nm5,35035,638nm10,147
Short-term investments2,195nm1,0045,984nm1,571
Gross investment income161,92071%94,888447,39153%291,971
Investment expense(7,719)15%(6,711)(22,589)12%(20,227)
Net investment income$154,20175%$88,177$424,80256%$271,744
Pre-tax yield:(1)
Fixed maturities4.0 %2.7 %3.8 %2.4 %
nm - not meaningful
(1) Pre-tax yield is calculated by dividing annualized net investment income by the average month-end amortized cost balances.

Fixed Maturities

Net investment income attributable to fixed maturities for the three and nine months ended September 30, 2023, was $133 million and $376 million, respectively, compared to net investment income of $87 million and $225 million, respectively, for the three and nine months ended September 30, 2022. The increase for the three and nine months ended September 30, 2023, compared to the same period in 2022, was due to an increase in yields.

Other Investments
Net investment income (loss) from other investments was as follows:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Hedge, direct lending, private equity and real estate funds$1,327$(7,565)$1,058$31,170
Other privately held investments(1,348)(901)(6,861)(1,285)
CLO-Equities3338901,2602,916
Total net investment income (loss) from other investments$312$(7,576)$(4,543)$32,801
Pre-tax return on other investments(1)
— %(0.8 %)(0.5 %)3.4 %
(1)The pre-tax return on other investments is calculated by dividing total net investment income from other investments (non-annualized) by the average month-end fair value balances held for the periods indicated.


Net investment income (loss) attributable to other investments for the three and nine months ended September 30, 2023, was $0.3 million and $(5) million, respectively, compared to net investment income (loss) of $(8) million and $33 million, respectively, for the three and nine months ended September 30, 2022. The increase for the three months ended September 30, 2023, compared to the same period in 2022, was primarily related to higher returns from private equity funds and direct lending funds. The decrease for the nine months ended September 30, 2023, compared to the same period in 2022, was primarily related to lower returns from real estate funds and private equity funds.


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Net Investment Gains (Losses)

Net investment gains (losses) were as follows:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
On sale of investments:
Fixed maturities and short-term investments$(27,247)$(98,926)$(100,760)$(238,124)
Equity securities8,429 6,819 9,568 6,594 
 (18,818)(92,107)(91,192)(231,530)
(Increase) decrease in allowance for expected credit losses, fixed maturities, available for sale
1,618 (3,210)2,800 (10,191)
(Increase) decrease in allowance for expected credit losses, mortgage loans
(541)— (4,179)— 
Impairment losses (1)
(41)(6,491)(9,124)(7,074)
Change in fair value of investment derivatives
1,692 4,400 218 11,463 
Net unrealized gains (losses) on equity securities(37,024)(49,050)3,806 (176,899)
Net investment gains (losses)$(53,114)$(146,458)$(97,671)$(414,231)
(1)Related to instances where we intend to sell securities, or it is more likely than not that we will be required to sell securities before their anticipated recovery.

On Sale of Investments and Net Unrealized Gains (Losses) on Equity Securities

Generally, sales of individual securities occur when there are changes in the relative value, credit quality or duration of a particular issue. We may also sell securities to re-balance our investment portfolio in order to change exposure to particular asset classes or sectors.

Net investment losses for the three and nine months ended September 30, 2023 were $53 million and $98 million, respectively, compared to net investment losses of $146 million and $414 million, respectively, for the three and nine months ended September 30, 2022.

For the three months ended September 30, 2023, the net investment losses were primarily due to net realized losses on the sale of U.S. government and corporate debt securities, and net unrealized losses on equity securities. For the three months ended September 30, 2022, the net investment losses were primarily due to net realized losses on the sale of corporate debt, U.S government and Agency RMBS, and net unrealized losses on equity securities.

For the nine months ended September 30, 2023, the net investment losses were primarily due to net realized losses on the sale of corporate debt and U.S government securities. For the nine months ended September 30, 2022, the net investment losses were primarily due to net realized losses on the sale of corporate debt, U.S government and Agency RMBS, and net unrealized losses on equity securities.

(Increase) decrease in allowance for expected credit losses, mortgage loans

For the three and nine months ended September 30, 2023, the allowance for expected credit losses increased by $1 million and $4 million, respectively, primarily related to two collateral dependent mortgage loans. Refer to Note 3(d) to the Consolidated Financial Statements 'Investments'.

Impairment Losses

The impairment losses for the three and nine months ended September 30, 2023 were $nil and $9 million, respectively, compared to impairment losses of $6 million and $7 million, respectively, for the three and nine months ended September 30, 2022. The increase in impairment losses related to a small number of securities that we intend to sell before their anticipated recovery.



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Change in Fair Value of Investment Derivatives

We economically hedge foreign exchange exposure with derivative contracts.

For the three and nine months ended September 30, 2023, foreign exchange hedges resulted in net gains of $2 million and $nil, respectively, primarily attributable to securities denominated in euro and pound sterling.

For the three and nine months ended September 30, 2022, foreign exchange hedges resulted in net gains of $4 million and $11 million, respectively, primarily attributable to securities denominated in euro and pound sterling.

Total Return
Total return on cash and investments was as follows:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Net investment income$154,201$88,177$424,802$271,744
Net investments gains (losses)(53,114)(146,458)(97,671)(414,231)
Change in net unrealized gains (losses) on fixed maturities (1)
(157,943)(296,487)(17,909)(1,142,423)
Interest in income (loss) of equity method investments2,940(7,560)2,8355,040
Total$(53,916)$(362,328)$312,057$(1,279,870)
Average cash and investments(2)
$16,281,540$15,824,697$16,057,260$16,003,712
Total return on average cash and investments, pre-tax:
Including investment related foreign exchange movements(0.3 %)(2.3 %)1.9 %(8.0 %)
Excluding investment related foreign exchange movements(3)
— %(1.8 %)2.0 %(6.8 %)
(1)Change in net unrealized gains (losses) on fixed maturities is calculated by taking net unrealized gains (losses) at period end less net unrealized gains (losses) at the prior period end.
(2)The average cash and investments balance is calculated by taking the average of the period end fair value balances.
(3)Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to pre-tax total return on cash and investments, the most comparable GAAP financial measure, included foreign exchange (losses) gains of $(49) million and $(83) million for the three months ended September 30, 2023 and 2022, respectively and foreign exchange (losses) gains of $(9) million and $(189) million for the nine months ended September 30, 2023 and 2022, respectively.



























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OTHER EXPENSES (REVENUES), NET

The following table provides a summary of other expenses (revenues), net:
  Three months ended September 30,Nine months ended September 30,
  2023% Change20222023% Change2022
Corporate expenses$40,682 58%$25,675 $102,345 28%$79,803 
Foreign exchange gains(50,570)(63%)(135,660)(11,755)(95%)(236,934)
Interest expense and financing costs16,445 3%15,915 50,077 7%46,720 
Income tax expense (benefit)24,624 nm(363)68,078 nm(5,304)
Total$31,181 $(94,433)$208,745 $(115,715)
nm – not meaningful

Corporate Expenses

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company.

As a percentage of net premiums earned, corporate expenses were 3.1% for the three months ended September 30, 2023, compared to 2.0% for the three months ended September 30, 2022 due to increases in performance-related compensation costs, executive-related compensation costs associated with the transition in our senior leadership.

As a percentage of net premiums earned, corporate expenses were 2.7% for the nine months ended September 30, 2023, compared to 2.1% for the nine months ended September 30, 2022 due to increases in performance-related compensation costs, executive-related compensation costs associated with the transition in our senior leadership and professional fees.

Foreign Exchange Losses (Gains)

Some of our business is written in currencies other than the U.S. dollar.

Foreign exchange gains of $51 million for the three months ended September 30, 2023 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling, euro and Canadian dollar.

Foreign exchange gains of $12 million for the nine months ended September 30, 2023 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and the Turkish lira.

Foreign exchange gains of $136 million for the three months ended September 30, 2022 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Foreign exchange gains of $237 million for the nine months ended September 30, 2022 were mainly driven by the impact of the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in pound sterling and euro.

Interest Expense and Financing Costs

Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes"), the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019, and the Federal Home Loan advances ("FHLB advances") received in the 2022 and 2023.

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Interest expense and financing costs were $16 million and $50 million for the three and nine months ended September 30, 2023, respectively, and $16 million and $47 million for the three and nine months ended September 30, 2022, respectively.

Income Tax Expense (Benefit)

Income tax expense (benefit) primarily results from income (loss) generated by our foreign operations in the U.S., U.K., and Europe. Our effective tax rate which is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments was 11.6% for the three and nine months ended September 30, 2023, and 3.7% and (3.1)% for the three and nine months ended September 30, 2022, respectively. This effective rate can vary between periods depending on the distribution of net income (loss) among tax jurisdictions, as well as other factors.

The tax expense of $25 million for the three months ended September 30, 2023 was principally due to the generation of pre-tax income in our U.S., U.K. and European operations.

The tax expense of $68 million for the nine months ended September 30, 2023 was principally due to the generation of pre-tax income in our U.S., U.K. and European operations.

The tax expense (benefit) of $nil for the three months ended September 30, 2022 was principally due to the generation of pre-tax losses in our U.S. and U.K. operations, and the revaluation of the net deferred tax liability associated with the increase in the U.K. tax rate to 25% from 19%, effective April 1, 2023, partially offset by an increase in the valuation allowance on deferred tax assets in Europe.

The tax benefit of $5 million for the nine months ended September 30, 2022 was principally due to the revaluation of net operating loss deferred tax assets associated with the increase in the U.K. tax rate to 25% from 19%, effective April 1, 2023, and the generation of pre-tax losses in our U.S. operations, partially offset by an increase in the valuation allowance on deferred tax assets in Europe.

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FINANCIAL MEASURES

We believe the following financial indicators are important in evaluating performance and measuring the overall growth in value generated for common shareholders:
  Three months ended September 30,Nine months ended September 30,
  2023202220232022
Annualized return on average common equity(1)
16.1 %(1.7 %)15.4 %4.7 %
Annualized operating return on average common equity(2)
18.0 %0.3 %18.4 %10.2 %
Book value per diluted common share(3)
$51.17$43.50$51.17$43.50
Cash dividends declared per common share$0.44$0.43$1.32$1.29
Increase (decrease) in book value per diluted common share adjusted for dividends$0.63$(3.69)$9.43$(10.99)
(1)Annualized return on average common equity ("ROACE") is calculated by dividing annualized net income (loss) available (attributable) to common shareholders for the period by the average common shareholders' equity determined using the common shareholders' equity balances at the beginning and end of the period.
(2)Annualized operating return on average common equity ("operating ROACE") is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, and a discussion of the rationale for its presentation is provided in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation'.
(3)Book value per diluted common share represents total common shareholders’ equity divided by the number of diluted common share outstanding, determined using the treasury stock method. Cash-settled restricted stock units are excluded.

Return on Average Common Equity

Our objective is to generate superior returns on capital that appropriately reward common shareholders for the risks we assume and to grow revenue only when we expect the returns will meet or exceed our requirements. We recognize that the nature of underwriting cycles and the frequency or severity of large loss events in any one year may challenge the ability to achieve a profitability target in any specific period.

ROACE reflects the impact of net income (loss) available (attributable) to common shareholders including net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in ROACE for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily driven by underwriting income, a decrease in net investment losses, an increase in net investment income, and an increase in interest in income of equity method investments, partially offset by a decrease in foreign exchange gains, income tax expense, and increases in reorganization expenses, average common shareholders' equity and corporate expenses.

The increase in ROACE for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily driven by a decrease in net investment losses, increase in underwriting income and net investment income, and a decrease in average common shareholders' equity, partially offset by a decrease in foreign exchange gains, income tax expense, and increases in corporate expenses and reorganization expenses.

Operating ROACE excludes the impact of net investment gains (losses), foreign exchange losses (gains), reorganization expenses, and interest in income (loss) of equity method investments.

The increase in operating ROACE for the three months ended September 30, 2023, compared to the three months ended September 30, 2022, was primarily driven by underwriting income, an increase in net investment income, partially offset by income tax expense and increases in average common shareholders' equity and corporate expenses.

The increase in operating ROACE for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, was primarily driven by an increase in underwriting income and net investment income and a decrease in average common shareholder's equity, partially offset by income tax expense and an increase in corporate expenses.



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Book Value per Diluted Common Share

We consider book value per diluted common share to be an appropriate measure of returns to common shareholders, as we believe growth in book value on a diluted basis will ultimately translate into appreciation of our stock price.

During the three months ended September 30, 2023, book value per diluted common share increased by 0.4% due to net income for the period, partially offset by net unrealized investment losses reported in accumulated other comprehensive income (loss), and common dividends declared.

During the nine months ended September 30, 2023, book value per diluted common share increased by 9% due to net income for the period, partially offset by common dividends declared.

Cash Dividends Declared per Common Share

We believe in returning excess capital to shareholders by way of dividends and share repurchases. Accordingly, dividend policy is an integral part of the value we create for shareholders. Our cumulative strong earnings have permitted our Board of Directors to approve nineteen successive annual increases in quarterly common share dividends.

Book Value per Diluted Common Share Adjusted for Dividends

Taken together, we believe that growth in book value per diluted common share and common share dividends declared represent the total value created for common shareholders. As companies in the insurance industry have differing dividend payout policies, we believe investors use the book value per diluted common share adjusted for dividends metric to measure comparable performance across the industry.

During the three months ended September 30, 2023, the increase in total value of $0.63, or 1%, was driven by net income for the period, partially offset by net unrealized investment losses recognized in accumulated other comprehensive income (loss).

During the nine months ended September 30, 2023, the increase in total value of $5.54, or 12%, was driven by net income for the period.

During the three months ended September 30, 2022, the decrease in total value of $3.69, or 8%, was driven by net unrealized losses reported in accumulated other comprehensive income (income), and the net loss generated.

During the nine months ended September 30, 2022, the decrease in total value of 10.99, or 20%, was driven by net unrealized losses reported in accumulated other comprehensive income (income), partially offset by the net income generated.

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NON-GAAP FINANCIAL MEASURES RECONCILIATION

Three months ended September 30,Nine months ended September 30,
2023202220232022
Net income (loss) available (attributable) to common shareholders$180,535$(16,947)$496,182$151,904
Net investment (gains) losses(1)
53,114146,45897,671414,231
Foreign exchange gains(2)
(50,570)(135,660)(11,755)(236,934)
Reorganization expenses(3)
28,9976,21328,99721,941
Interest in (income) loss of equity method investments(4)
(2,940)7,560(2,835)(5,040)
Income tax benefit(7,245)(5,117)(15,138)(14,779)
Operating income$201,891$2,507$593,122$331,323
Earnings (loss) per diluted common share$2.10$(0.20)$5.77$1.77
Net investment (gains) losses
0.621.721.144.83
Foreign exchange gains
(0.59)(1.59)(0.14)(2.77)
Reorganization expenses0.340.070.340.26
Interest in (income) loss of equity method investments(0.03)0.09(0.03)(0.06)
Income tax benefit(0.10)(0.06)(0.18)(0.17)
Operating income per diluted common share$2.34$0.03$6.90$3.86
Weighted average diluted common shares outstanding(5)
86,10885,37685,92785,674
Average common shareholders' equity$4,477,086$3,973,027$4,286,559$4,327,040
Annualized return on average common equity16.1 %(1.7 %)15.4 %4.7 %
Annualized operating return on average common equity(6)
18.0 %0.3 %18.4 %10.2 %
(1)Tax expense (benefit) of $(4,318) and $(608) for the three months ended September 30, 2023 and 2022, respectively, and $(8,198) and $(33,519) for the nine months ended September 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses.
(2)Tax expense (benefit) of $2,318 and $(3,757) for the three months ended September 30, 2023 and 2022, respectively, and $(1,695) and $21,191 for the nine months ended September 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions.
(3)Tax expense (benefit) of $(5,245) and $(752) for the three months ended September 30, 2023 and 2022, respectively, and $(5,245) and $(2,451) for the nine months ended September 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(4)Tax expense (benefit) of $nil for the three and nine months ended September 30, 2023 and 2022, respectively. Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
(5)Refer to Item 1, Note 7 to our Consolidated Financial Statements 'Earnings per Common Share' for further details.
(6)Annualized operating ROACE is a non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. The reconciliation to the most comparable GAAP financial measure, annualized ROACE, is presented above, and a discussion of the rationale for its presentation is provided below.

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Rationale for the Use of Non-GAAP Financial Measures

We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance. Some of the measurements we use are considered non-GAAP financial measures under SEC rules and regulations. In this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we present underwriting-related general and administrative expenses, consolidated underwriting income (loss), operating income (loss) (in total and on a per share basis), annualized operating return on average common equity ("operating ROACE"), amounts presented on a constant currency basis and pre-tax total return on cash and investments excluding foreign exchange movements which are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K. We believe that these non-GAAP financial measures, which may be defined and calculated differently by other companies, help explain and enhance the understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

Underwriting-Related General and Administrative Expenses

Underwriting-related general and administrative expenses include those general and administrative expenses that are incremental and/or directly attributable to our underwriting operations. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

Corporate expenses include holding company costs necessary to support our worldwide insurance and reinsurance operations and costs associated with operating as a publicly-traded company. As these costs are not incremental and/or directly attributable to our underwriting operations, these costs are excluded from underwriting-related general and administrative expenses, and therefore, consolidated underwriting income (loss). General and administrative expenses, the most comparable GAAP financial measure to underwriting-related general and administrative expenses, also includes corporate expenses.

The reconciliation of underwriting-related general and administrative expenses to general and administrative expenses, the most comparable GAAP financial measure, is presented in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Consolidated Underwriting Income (Loss)

Consolidated underwriting income (loss) is a pre-tax measure of underwriting profitability that takes into account net premiums earned and other insurance related income (loss) as revenues and net losses and loss expenses, acquisition costs and underwriting-related general and administrative expenses as expenses. While this measure is presented in Item 1, Note 2 to the Consolidated Financial Statements 'Segment Information', it is considered a non-GAAP financial measure when presented elsewhere on a consolidated basis.

We evaluate our underwriting results separately from the performance of our investment portfolio. As a result, we believe it is appropriate to exclude net investment income and net investment gains (losses) from our underwriting profitability measure.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on our net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio, including unrealized foreign exchange losses (gains) on our equity securities, and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities recognized in net investment gains (losses), and unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to our underwriting performance. Therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss).

Interest expense and financing costs primarily relate to interest payable on our debt and Federal Home Loan Bank advances. As these expenses are not incremental and/or directly attributable to our underwriting operations, these expenses are excluded from underwriting-related general and administrative expenses and, therefore, consolidated underwriting income (loss).

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Reorganization expenses in 2023 include impairments of computer software assets and severance costs associated with the departures of certain employees mainly attributable to our "How We Work" program which focuses on simplifying our operating structure. Reorganization expenses in 2022 included severance costs and impairments of computer software assets mainly attributable to our exit from catastrophe and property reinsurance lines of business which was part of an overall approach to reduce our exposure to volatile catastrophe risk. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process. Therefore, these expenses are excluded from consolidated underwriting income (loss).

Amortization of intangible assets arose from business decisions, the nature and timing of which are not related to the underwriting process. Therefore, these expenses are excluded from consolidated underwriting income (loss).

We believe that the presentation of underwriting-related general and administrative expenses and consolidated underwriting income (loss) provides investors with an enhanced understanding of our results of operations, by highlighting the underlying pre-tax profitability of our underwriting activities. The reconciliation of consolidated underwriting income (loss) to net income (loss), the most comparable GAAP financial measure, is presented in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Consolidated Results of Operations'.

Operating Income (Loss)

Operating income (loss) represents after-tax operational results exclusive of net investment gains (losses), foreign exchange losses (gains), reorganization expenses and interest in income (loss) of equity method investments.

Although the investment of premiums to generate income and investment gains (losses) is an integral part of our operations, the determination to realize investment gains (losses) is independent of the underwriting process and is heavily influenced by the availability of market opportunities. Furthermore, many users believe that the timing of the realization of investment gains (losses) is somewhat opportunistic for many companies.

Foreign exchange losses (gains) in our consolidated statements of operations primarily relate to the impact of foreign exchange rate movements on net insurance-related liabilities. However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio, including unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities recognized in net investment gains (losses) and unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity. As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business. Therefore, foreign exchange losses (gains) are excluded from operating income (loss).

Reorganization expenses in 2023 include impairments of computer software assets and severance costs associated with the departures of certain employees mainly attributable to our "How We Work" program which focuses on simplifying our operating structure. Reorganization expenses in 2022 included severance costs and impairments of computer software assets mainly attributable to our exit from catastrophe and property reinsurance lines of business which was part of an overall approach to reduce our exposure to volatile catastrophe risk. Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process. Therefore, these expenses are excluded from consolidated operating income (loss).

Interest in income (loss) of equity method investments is primarily driven by business decisions, the nature and timing of which are not related to the underwriting process. Therefore, this income (loss) is excluded from operating income (loss).

Certain users of our financial statements evaluate performance exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses and interest in income (loss) of equity method investments in order to understand the profitability of recurring sources of income.


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We believe that showing net income (loss) available (attributable) to common shareholders exclusive of after-tax net investment gains (losses), foreign exchange losses (gains), reorganization expenses and interest in income (loss) of equity method investments reflects the underlying fundamentals of our business. In addition, we believe that this presentation enables investors and other users of our financial information to analyze performance in a manner similar to how our management analyzes the underlying business performance. We also believe this measure follows industry practice and, therefore, facilitates comparison of our performance with our peer group. We believe that equity analysts and certain rating agencies that follow us, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above.

We also present operating income (loss) per diluted common share and annualized operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and annualized return on average common equity ("ROACE"), respectively.

Constant Currency Basis

We present gross premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts. We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written and net premiums earned on a constant basis. The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in 'Management's Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment'.

Pre-Tax Total Return on Cash and Investments excluding Foreign Exchange Movements

Pre-tax total return on cash and investments excluding foreign exchange movements measures net investment income (loss), net investments gains (losses), interest in income (loss) of equity method investments, and change in unrealized gains (losses) generated by average cash and investment balances. We believe this presentation enables investors and other users of our financial information to analyze the performance of our investment portfolio. The reconciliation of pre-tax total return on cash and investments excluding foreign exchange movements to pre-tax total return on cash and investments, the most comparable GAAP financial measure, is presented in 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Net Investment Income and Net Investment Gains (Losses)'.


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CASH AND INVESTMENTS

Details of cash and investments are as follows:
  September 30, 2023December 31, 2022
  Fair ValueFair Value
Fixed maturities, available for sale$11,723,368 $11,326,894 
Fixed maturities, held to maturity(1)
696,639 674,743 
Equity securities556,262 485,253 
Mortgage loans610,277 627,437 
Other investments954,571 996,751 
Equity method investments162,412 148,288 
Short-term investments115,959 70,310 
Total investments$14,819,488 $14,329,676 
Cash and cash equivalents(2)
$1,267,315 $1,174,653 
(1)Presented at net carrying value of $713 million (2022: $698 million) in the consolidated balance sheets.
(2)Includes restricted cash and cash equivalents of $378 million and $423 million at September 30, 2023 and at December 31, 2022, respectively.




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Overview

The fair value of total investments increased by $490 million in the nine months ended September 30, 2023, driven by the reinvestment of interest income and cashflows from operations.

An analysis of our investment portfolio by asset class is detailed below:

Fixed Maturities

Details of our fixed maturities portfolio are as follows:
  September 30, 2023December 31, 2022
  Fair Value% of TotalFair Value% of Total
Fixed maturities:
U.S. government and agency$2,860,633 23 %$2,639,330 22 %
Non-U.S. government670,255 5 %562,029 5 %
Corporate debt4,307,284 36 %4,329,328 36 %
Agency RMBS1,541,505 12 %1,202,785 10 %
CMBS865,051 7 %947,778 8 %
Non-agency RMBS137,804 1 %133,534 1 %
ABS1,886,086 15 %2,030,498 17 %
Municipals(1)
151,389 1 %156,355 1 %
Total$12,420,007 100 %$12,001,637 100 %
Credit ratings:
U.S. government and agency$2,860,633 23 %$2,639,330 22 %
AAA(2)
2,784,990 22 %4,189,661 36 %
AA(2)
2,533,358 21 %871,966 7 %
A1,875,948 15 %1,835,746 15 %
BBB1,327,344 11 %1,377,638 11 %
Below BBB(3)
1,037,734 8 %1,087,296 9 %
Total$12,420,007 100 %$12,001,637 100 %
(1)Includes bonds issued by states, municipalities, and political subdivisions.
(2)Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS") and reflect the downgrade of the U.S. government on August 1, 2023.
(3)Non-investment grade and non-rated securities.

At September 30, 2023, fixed maturities had a weighted average credit rating of AA- (2022: AA-), a book yield of 4.1% (2022: 3.5%) and an average duration of 3.0 years (2022: 3.0 years). At September 30, 2023, fixed maturities together with short-term investments, and cash and cash equivalents (i.e. total investments of $13.8 billion), had an average credit rating of AA- (2022: AA-) and an average duration of 2.8 years (2022: 2.8 years).

At September 30, 2023, net unrealized losses on fixed maturities were $864 million, compared to net unrealized losses of $850 million at December 31, 2022, an increase of $14 million due to a decline in market values, partially offset by a realization of losses associated with sales in the period.

Equity Securities

At September 30, 2023, net unrealized losses on equity securities were $5 million, compared to $9 million at December 31, 2022, a decrease of $4 million driven by the decline in market value of bond mutual funds.

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Mortgage Loans

At September 30, 2023, our investment in commercial mortgage loans was $610 million, compared to $627 million at December 31, 2022, a decrease of $17 million. The commercial mortgage loans are high quality, first lien and are collateralized by a variety of commercial properties which are diversified geographically throughout the U.S. and by property type to reduce the risk of concentration. At September 30, 2023, there are two collateral dependent loans with estimated loan-to-value ratios in excess of 100%, resulting in an allowance for credit losses of $4 million.

Other Investments

Details of our other investments portfolio are as follows:
September 30, 2023December 31, 2022
  Fair Value% of TotalFair Value% of Total
Hedge funds
Multi-strategy funds$25,465 3 %$32,616 3 %
Total hedge funds25,465 3 %32,616 3 %
Direct lending funds229,235 24 %258,626 26 %
Private equity funds283,838 30 %265,836 27 %
Real estate funds307,177 32 %298,499 30 %
Total hedge, direct lending, private equity and real estate funds845,715 89 %855,577 86 %
CLO-Equities4,684 — %5,016 — %
Other privately held investments104,172 11 %136,158 14 %
Total other investments$954,571 100 %$996,751 100 %

Refer to Note 3(e) to the Consolidated Financial Statements 'Investments'.

Equity Method Investments

Our ownership interest in Harrington is reported in interest in income (loss) of equity method investments.

Interest in income (loss) of equity method investments of $3 million for the three months ended September 30, 2023, compared to $(8) million for the three months ended September 30, 2022, an increase of $11 million attributable to investment gains and underwriting income realized by Harrington in the current year compared to investment losses and an underwriting loss realized by Harrington in the prior year.

Interest in income (loss) of equity method investments of $3 million, for the nine months ended September 30, 2023, compared to $5 million for the nine months ended September 30, 2022, a decrease of $2 million attributable to higher underwriting losses, partially offset by higher investment income realized by Harrington in the current year compared to prior year.



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LIQUIDITY AND CAPITAL RESOURCES

Refer to the ‘Liquidity and Capital Resources’ section included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for a general discussion of liquidity and capital resources.

The following table summarizes consolidated capital:
September 30, 2023December 31, 2022
Debt$1,313,358 $1,312,314 
Preferred shares550,000 550,000 
Common equity4,483,208 4,089,910 
Shareholders’ equity5,033,208 4,639,910 
Total capital$6,346,566 $5,952,224 
Ratio of debt to total capital20.7 %22.0 %

We finance operations with a combination of debt and equity capital. The debt to total capital ratio provides an indication of our capital structure, along with some insight into our financial strength. While the impact of unrealized investment losses recognized in accumulated other comprehensive income (loss), following a decrease in market value of our fixed maturities in 2022, has reduced common shareholders' equity, we believe that our financial flexibility remains strong and adjustments are made, if there are developments that differ from previous expectations.
Federal Home Loan Bank Advances

The Company's subsidiaries, AXIS Insurance Company and AXIS Surplus Insurance Company are members of the Federal Home Loan Bank of Chicago ("FHLB").

At September 30, 2023, the Company had $86 million of borrowings under the FHLB program, with maturities in 2024 and interest payable at interest rates between 5.5% and 5.7%. The Company incurred interest expense of $1 million and $3 million for the three and nine months ended September 30, 2023, and $0.6 million for the three and nine months ended September 30, 2022. The borrowings under the FHLB program are secured by investments with a fair value of $90 million.

Line of credit

On March 31, 2023, the $150 million secured letter of credit facility expired as we determined that the $500 million secured letter of credit facility would be sufficient to meet future obligations.


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Common Equity
During the nine months ended September 30, 2023, common equity increased by $393 million. The following table reconciles opening and closing common equity positions:
Nine months ended September 30,2023
Common equity - opening$4,089,910 
Share-based compensation expense43,000 
Change in unrealized gains (losses) on available for sale investments, net of tax(10,837)
Foreign currency translation adjustment(4,302)
Net income (loss)518,870 
Preferred share dividends(22,688)
Common share dividends(115,025)
Treasury shares repurchased(17,424)
Treasury shares reissued1,704 
Common equity - closing$4,483,208 

During the nine months ended September 30, 2023, we repurchased 289,000 common shares from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units granted under our 2017 Long-Term Equity Compensation Plan for a total cost of $17 million.
At November 1, 2023, we had $100 million of remaining authorization under our Board-authorized share repurchase program for common share repurchases through December 31, 2023 (refer to Part II, Item 2 'Unregistered Sales of Equity Securities and Use of Proceeds' for further details).
We expect cash flows generated from operations, combined with liquidity provided by our investment portfolio, will be sufficient to cover cash outflows and other contractual commitments through the foreseeable future.


CRITICAL ACCOUNTING ESTIMATES

The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values. We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.

We believe the material items requiring such subjective and complex estimates are:

•reserves for losses and loss expenses;

•reinsurance recoverable on unpaid losses and loss expenses, including the allowance for expected credit losses;

•gross premiums written and net premiums earned;

•fair value measurements of financial assets and liabilities; and

•the allowance for expected credit losses associated with fixed maturities, available for sale.

We believe that the critical accounting estimates discussion in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022, continues to describe the significant estimates and judgments included in the preparation of the consolidated financial statements.

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RECENT ACCOUNTING PRONOUNCEMENTS

At September 30, 2023, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.


ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Refer to Item 7A included in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to this item since December 31, 2022, with the exception of the changes in exposure to foreign currency risk presented below.

Foreign Currency Risk
The table below provides a sensitivity analysis of total net foreign currency exposures:
AUDCADEURGBPJPYOtherTotal
At September 30, 2023
Net managed assets (liabilities), excluding derivatives
$21,577 $390,916 $(346,971)$(105,713)$(26,180)$106,849 $40,478 
Foreign currency derivatives, net
8,373 (376,892)336,471 165,507 26,739 (94,294)65,904 
Net managed foreign currency exposure
29,950 14,024 (10,500)59,794 559 12,555 106,382 
Other net foreign currency exposure— 159 (225)(549)— — (615)
Total net foreign currency exposure$29,950 $14,183 $(10,725)$59,245 $559 $12,555 $105,767 
Net foreign currency exposure as a percentage of total shareholders’ equity
0.6 %0.3 %(0.2 %)1.2 %— %0.2 %2.1 %
Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement(1)
$2,995 $1,418 $(1,073)$5,925 $56 $1,256 $10,577 
(1)Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.

Total Net Foreign Currency Exposure

At September 30, 2023, total net foreign currency assets were $106 million primarily driven by exposures to the pound sterling, Australian dollar, Canadian dollar, and other non-core currencies, primarily the Indian rupee. During the nine months ended September 30, 2023, the change in total net foreign currency exposure was primarily due to new business written in the period.












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ITEM 4.     CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act")) at September 30, 2023. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2023, the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is accumulated and communicated to management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

The Company’s management has performed an evaluation, with the participation of the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2023.

Based upon that evaluation, there were no changes in the Company's internal control over financial reporting that occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


PART II     OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations. Estimated amounts payable related to these proceedings are included in the reserve for losses and loss expenses in the Company's financial statements.

We are not party to any material legal proceedings arising outside the ordinary course of business.


ITEM 1A.     RISK FACTORS

There were no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

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ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table shows information regarding the number of common shares repurchased in the quarter ended September 30, 2023:
Period
Total number
of shares
purchased (a) (b)
Average
price paid
per share
Total number of shares purchased as part of
publicly announced
programs (a)
Maximum number (or approximate
dollar value) of shares that may yet be
purchased under the announced programs (c)
July 1-31, 20233 $53.45 —$100 million
August 1-31, 2023— — — $100 million
September 1-30, 20234 $55.82 — $100 million
Total  
7  — $100 million
(a) In thousands.
(b) Includes shares repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units.
(c) On December 8, 2022, our Board of Directors authorized a share repurchase program for up to $100 million of our common shares, effective January 1, 2023 through to December 31, 2023. Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions.



ITEM 5.     OTHER INFORMATION

Disclosure of Certain Activities Under Section 13(r) of the Securities Exchange Act of 1934

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose in their annual and quarterly reports whether they or any of their affiliates knowingly engaged in certain activities with Iran or with individuals or entities that are subject to certain sanctions under U.S. law. Issuers are required to provide this disclosure even where the activities, transactions or dealings are conducted outside of the U.S. in compliance with applicable law.

As and when allowed by the applicable law and regulations, certain of our non-U.S. subsidiaries provide treaty reinsurance coverage to non-U.S. insurers on a worldwide basis, including insurers of liability, marine, aviation and energy risks, and as a result, these underlying insurance and reinsurance portfolios may have some exposure to Iran. In addition, we provide insurance and facultative reinsurance on a global basis to non-U.S. insureds and insurers, including for liability, marine, aviation and energy risks. Coverage provided to non-Iranian business may indirectly cover an exposure in Iran. For example, certain of our operations underwrite global marine hull war and cargo policies that provide coverage for vessels navigating into and out of ports worldwide, including Iran. For the quarter ended September 30, 2023, there has been no material amount of premium allocated or apportioned to activities relating to Iran. We intend for our non-U.S. subsidiaries to continue to provide such coverage only to the extent permitted by applicable law.

Insider Trading Arrangements and Policies
During the three months ended September 30, 2023, no director or officer of the Company adopted, terminated or is currently party to a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6.     EXHIBITS
Rule 2.7 Announcement, dated July 5, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on July 6, 2017).
Rule 2.7 Announcement, dated August 24, 2017 in connection with acquisition of Novae Group plc (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 25, 2017).
Certificate of Incorporation and Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1(Amendment No. 1) (No. 333-103620) filed on April 16, 2003).
Amended and Restated Bye-Laws (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed on May 15, 2009).
Specimen Common Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 3) (No. 333-103620) filed on June 10, 2003).
Certificate of Designations establishing the specific rights, preferences, limitations and other terms of the Series E Preferred Shares (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 7, 2016).
Amendment No. 3 to Employment Agreement dated October 6, 2023 by and between Peter Vogt and AXIS Specialty U.S. Services, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on October 10, 2023).
*†10.2
Amended and Restated AXIS Executive RSU Retirement Plan.
†31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101The following financial information from AXIS Capital Holdings Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 formatted in Inline XBRL: (i) Consolidated Balance Sheets at September 30, 2023 and December 31, 2022; (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2023 and 2022; (iv) Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2023 and 2022; (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022; and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
†104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
* Exhibit 10.1 represents a management contract, compensatory plan or arrangement in which directors and/or executive officers are eligible to participate.
† Filed herewith.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 1, 2023
 
AXIS CAPITAL HOLDINGS LIMITED
By:
/S/ VINCENT TIZZIO
Vincent Tizzio
President and Chief Executive Officer
(Principal Executive Officer)
/S/ PETER VOGT
Peter Vogt
Chief Financial Officer
(Principal Financial Officer)


































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