We continued to improve the efficiency of our platforms to respond to evolving industry needs and to improve our underwriters’ productivity
Our Insurance business was guided by four main strategic principles: continuing to optimize our portfolio; increasing our expertise and insight in specialty risks; enhancing our strategic relationships with our most important distribution and business partners; and continuing to improve the efficiency of our operating platforms. We made good progress on all four fronts.
Although large catastrophes impacted the year's results, AXIS' insurance business registered excellent performance in several other individual businesses and advanced major initiatives while achieving significant ongoing operational improvements as it progressed toward its long-term goal of becoming a global leader in specialty insurance.
In 2017, gross premiums written increased to $3.1 billion, an increase of 15% compared to $2.7 billion in 2016. The 2017 gross premiums written include the partial-year results from the acquisitions of Aviabel in April and Novae in October. Net premiums earned increased by 19% compared to 2016. Excluding the impact of the increase in net premiums earned associated with our acquisition of Novae, net premiums earned increased by 9%. The insurance segment reported an under-writing loss of $228 million in 2017, compared to underwriting income of $38 million in 2016. The decrease in underwriting income was principally driven by pre-tax catastrophe and weather-related losses reported in 2017 of $412 million, or 19.6 points, primarily attributable to Hurricanes Harvey, Irma and Maria, the two earthquakes in Mexico, the wildfires in Northern and Southern California, and other U.S. weather events, compared to $121 million, or 6.8 points, of catastrophe and weather-related losses reported during 2016.
Guiding Strategic Principles
Throughout the year, our Insurance business was guided by four main strategic principles: continuing to optimize our portfolio; increasing our expertise and insight in specialty risks; enhancing our strategic relationships with our most important distribution and business partners; and continuing to improve the efficiency of our operating platforms. We made good progress on all four fronts.
Optimizing our portfolio
In optimizing our portfolio, AXIS prioritized resources to target markets where we see the greatest growth potential and rebalanced the portfolio based on the return on risk-adjusted capital for each line of business, which weighs profits against volatility. We emphasized lines where we have built significant relevance and scale or expect to be able to do so.
Among other successes, our Insurance business recorded gratifying growth in our primary casualty business and in our casualty excess and surplus lines, which performed well following our prior-year decision to exit the retail end of that business and reallocate resources to wholesale distribution. We saw good growth in our U.S. program business, which serves smaller and mid-size businesses largely through managing general agents. This balances nicely against our core of larger account business.
We experienced momentum in renewable energy, where AXIS' recognized expertise continued to attract brokers and clients seeking our insights and solutions. We had a strong year in our capital risk solutions business and in the rapidly growing field of cyber risk.
Through our acquisition of Novae, we found an ideal opportunity to accelerate our strategic ambition to grow in international specialty lines. Completed in October, the acquisition makes AXIS a $2 billion player in London, a top-10 player at Lloyd's, and an established leader in the London specialty market.
Aviabel, our other noteworthy acquisition in 2017, gave AXIS strength in the aviation market and an operational platform on the European continent, expanding our geographic footprint into the Benelux region. Additionally, our newly launched office in Miami, which enables us to better capture Lloyd's-related business in the Latin American market, got off to a positive start and saw a good flow of submissions.
As part of our strategy to concentrate our resources and play to our strengths, we exited or reduced our emphasis on businesses that did not promise an adequate return. Along with U.S. retail property and casualty lines, AXIS exited the onshore energy business and shed certain underperforming catastrophe accounts.
Increasing expertise and insight
To improve our accuracy and decision-making in underwriting, actuarial, claims and other key functions across the value chain, we intensified our commitment to grow our data & analytics capabilities. Our aim is to better capture and utilize our own internally generated data, as well as to acquire the most useful data available from a wide range of external sources.
We recruited a respected data scientist to outline a comprehensive data and analytics strategy for AXIS, and created a Data & Analytics Center of Excellence (see sidebar article "Growing a Data & Analytics Center of Excellence") to coordinate and leverage advances across the organization.
AXIS' Insurance business also continued its track record of attracting top-caliber talent to enhance our capabilities in areas such as property and casualty, professional lines, renewable energy, and programs. The acquisition of Novae brought us valuable additional expertise in new and established AXIS specialties, including those we had targeted for growth and investment.
Enhancing strategic relationships
"Fewer and deeper" remained our mantra in building and strengthening relationships with our most productive and strategic distribution partners."
We continued to work closely with the Big Three retail brokers, and a strategy to develop closer relationships with wholesale brokers yielded impressive gains, particularly in the U.S.
We also launched a program to identify and build relationships with some of the early career, rising star brokers, which generated incremental business.
Improving operating efficiency
We continued to improve the efficiency of our platforms to respond to evolving industry needs and, in particular, to improve our underwriters' productivity, giving them more time to interact with customers and distributors.
As scheduled, we completed the third year of our five-year, $50 million Future Insurance Platform (FIP) rollout, a phased program to unify our operations onto a common system. Steadily expanding it to additional product lines, we expect to bring the policy administration suite to our U.S. excess casualty, CMS, financial institutions and professional firms lines, and introduce the new underwriting desktop to international operations during 2018.
We also introduced our Global Property Pricing Platform (G3P) project, which brings our U.S. and international property underwriters onto a common platform for pricing and risk evaluation. We expect to complete installation during 2018.
Additionally, we are customizing products to perform predictive modeling around submissions and policy issuance, and building technology and capabilities to facilitate efficient distribution to small commercial business.
Despite facing the challenges that came from a historic catastrophe season, we are very optimistic. We have honed our portfolio to areas we wish to focus on and have become more balanced and disciplined. With a slowly improving pricing environment, our outlook for the future is bright.