We invested in operations and expanded our geographic footprint
As has been our strategy, AXIS continued to maintain a diverse reinsurance portfolio while at the same time building relevance in our key specialty areas. This provided us with the nimbleness to respond to market developments, expand our products and services while, at the same time, managing down volatility in our book.
Large catastrophes and other losses
In 2017, the (re)insurance industry was challenged by a series of catastrophe events. Against this backdrop, the Reinsurance business remained dedicated to furthering strong client relationships, providing breadth of products, and demonstrating our value to clients and communities, all while advancing a wide range of key initiatives.
At AXIS, a core differentiator has long been to provide superior claims service to our clients and partners. During a challenging year of major catastrophe losses, we continued to prioritize client service while delivering fast claims payment in connection with the catastrophe events in order to serve the people suffering from these tragedies.
The year began with an unexpected decrease in the Ogden discount rate, set by the U.K. government, which added significant costs throughout the year to our motor reinsurance contracts. These losses were followed by a series of large catastrophe events, including Hurricanes Harvey, Irma and Maria, as well as two major earthquakes in Mexico, and then two wildfires in California in the fourth quarter.
These losses, although significant, fell within our expectations for such major events. Moreover, our ongoing strategy to reduce volatility in our portfolio, especially through judicious retrocessional coverage, proved effective as we reduced our losses against our market share.
Positive results in newer specialties, playing to our strengths
As part of our strategy to play to our strengths, we allocated resources to promising lines, including mortgage and marine, while scaling down our presence in less profitable sectors, and this included exiting our weather and commodities business.
As the year came to a close, there were some signs of pricing corrections in the market, and we are optimistic that this will continue.
Continued growth of our strategic capital partnerships
At AXIS, our strategic capital partnerships strategy centers around matching the right risks with the right capital. In 2017, we continued to harness third-party capital through these strategic partnerships, enabling us to provide enhanced capacity, innovation and tailored solutions to our clients and brokers.
A highlight of 2017 was the completion of the first full year of business for Harrington Re, a reinsurance company launched by AXIS with Blackstone Group in 2016, specializing in multiline medium- and long-tail risks. During the year, AXIS ceded $195 million to Harrington Re and received substantial fee income in return, and Harrington accreted book value. We have continued to work with Harrington to identify and create more opportunities to deliver value to our clients.
Investing in technology and systems
In 2017, we further invested in growing the sophistication of our technology and systems to strengthen our under-writing, portfolio management and sales practices.
This included increasing our technological capabilities to empower our underwriters with stronger tools and analytics to help inform modeling, risk selection and capital allocation. Additionally, we further invested in our sales and marketing capabilities, which included growing our customer relation management resources.
This effort is being further scaled up in 2018 through the launch of AXIS' Global Underwriting and Analytics unit, which will provide greater insights, resources and tools to all of AXIS' underwriting, claims and actuarial teams, advancing the Company's philosophy of coupling human ingenuity with powerful tools and insights (see sidebar article, "Growing a Data & Analytics Center of Excellence").
Improved industry relationships and geographic expansion
An organization that prides itself on client-centricity, AXIS continued to invest in growing our relationships with our reinsurance clients and partners while actively seeking opportunities to deliver more value.
This was illustrated by our continued geographic expansion, with a focus on providing more services and options to our clients.
The acquisition of Novae provided AXIS with a reinsurance team in London, accelerating our planned growth strategy in the market. As a result, AXIS will see new opportunities that flow into London and the Lloyd's market, which previously would not have been accessible. This complements our main reinsurance hubs in Zurich, New York, Bermuda and Singapore.
In 2018, under the leadership of our new CEO, Steve Arora, AXIS' Reinsurance team looks forward to tapping into the benefits of increased relevance in key markets, stronger technology and systems, an expanded geographic footprint, and the prospects of improved market conditions.