AXIS CAPITAL HOLDINGS LTDAXS

AXIS CAPITAL HOLDINGS LTD Leases Disclosure

10-KFiled Feb 27, 20263 min read
LEASES
In the ordinary course of business, the Company renews and enters into new leases for office property and equipment, which expire at various dates.

At the lease inception date, the Company assesses whether a contract is or contains a lease. At the commencement date, the Company determines the classification of each separate lease component as either a finance lease or an operating lease. The Company's leases are all currently classified as operating leases. For operating leases that have a lease term of more than 12 months, the Company recognizes a lease liability and a right-of-use asset in the Company's consolidated balance sheets at the present value of the lease payments at the lease commencement date.

At the commencement date, the Company determines lease terms by assuming the exercise of those renewal options that are deemed to be reasonably certain. The exercise of lease renewal options is at the sole discretion of the Company.

As the lease contracts generally do not provide an implicit discount rate, the Company uses its incremental borrowing rate based on information available at the commencement date to determine the present value of lease payments. The incremental borrowing rate is based on a borrowing with a term that is similar to the term of the associated lease. The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the commencement date.

The following table presents the Company’s total lease expense and the cash flows arising from lease transactions:
Year ended December 31,202520242023
Lease cost:
Operating lease expense$17,199$17,273$21,499 
Short-term lease expense(1)
1,4457812,291 
Sublease income(2)
(3,138)(4,554)(4,531)
Total lease expense$15,506$13,500$19,259 
Other information:
Operating cash outflows from operating leases$17,960$17,035 $20,190 
Right-of-use assets obtained in exchange for new operating lease liabilities(3)
$13,391$(3,209)$34,988 
Weighted-average remaining lease term - operating leases(4)
8.7 years9.3 years9.8 years
Weighted-average discount rate - operating lease(5)
5.0%4.9 %4.4 %
(1)    Short-term lease expense is recognized on a straight-line basis over the lease term.
(2)    Sublease income largely relates to office properties in Chicago, Alpharetta and London.
(3)    In 2024, the Company modified a lease agreement to reflect an increase in lease payments for its office property in London, terminated a lease agreement for its office property in Singapore and entered into a new lease agreement for an office property with a reduced floor in Singapore.
(4)    Weighted-average remaining lease term was calculated on the basis of the remaining lease term and the lease liability balance for each lease at the reporting date.
(5)    Weighted-average discount was calculated on the basis of the discount rate that was used to calculate the lease liability balance for each lease at the reporting date and the remaining balance of the lease payments for each lease at the reporting date.
The following table presents the scheduled maturity of the Company's operating lease liabilities at December 31, 2025:
Year ended December 31,Expected cash flows
2026
$16,937 
2027
15,735 
2028
14,984 
2029
14,986 
2030
14,964 
Later years58,714 
Discount(26,225)
Total discounted operating lease liabilities$110,095 

The following table presents the scheduled maturity of the Company's operating lease liabilities at December 31, 2024:
Year ended December 31,Expected cash flows
2025
$17,787 
2026
15,181 
2027
13,026 
2028
12,283 
2029
12,280 
Later years62,663 
Discount(26,606)
Total discounted operating lease liabilities $106,614 
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About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

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