AXIS Capital Holdings Limited announced it will wind down its retail insurance operations in Australia and continue to operate in the market via its international wholesale insurance and global reinsurance platforms.
As a result of this move, the company anticipates a workforce reduction of approximately 100 positions, primarily in its corporate and select insurance operations, which will create a “pre-tax reorganization charge of approximately $51 million” during the third quarter. This cost includes staff severance, the write-off of certain information technology assets, and lease cancellation costs, said AXIS in a statement.
The company said the staff cuts will create an anticipated annual run-rate, pre-tax cost savings of approximately $30 million to be substantially realized in 2016.
“These reductions are consistent with the company’s previously announced effort to reduce its expense level and position itself to more effectively deliver greater value for its customers, brokers, and shareholders,” said the company, which describes itself as a hybrid specialty insurer with three businesses in specialty insurance, specialty reinsurance and accident & health.
AXIS said a review of its operations has determined areas where it can accelerate profitable and sustainable growth, while identifying markets it could not generate “appropriate and sustainable returns,” which is why the retail insurance operations in Australia are being wound down.
“We are fully committed to the hybrid model under which insurance groups have both primary insurance and reinsurance activities because this approach provides flexibility, balance and diversification in opportunities and risks, leading to more stable growth and profitability,” said Albert Benchimol, president and CEO of AXIS Capital.
In 2014, the company announced several initiatives designed to enhance profitability and drive its future growth, which include investments in improved data and analytics, said Benchimol, pointing to improvements made in professional lines and property insurance. “We have also established significant strategic IT sourcing relationships, which have and will continue to increase productivity and efficiency across our businesses over time.”
“Integral to creating shareholder value is a 21st century capital management strategy. We intend to match risk with the most appropriate form of capital, and access a broad range of capital to complement our own balance sheet,” Benchimol continued.
“The refinements announced today are about strengthening the company’s focus, and moving resources to where they can provide the greatest value to brokers and clients – ultimately driving profitable book value per share growth over the longer term,” he said.
Source: AXIS Capital Holdings