Good morning and welcome to the AXIS Capital First Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn conference over to Linda Ventresca of Investor Relations. Please go ahead.

Thank you, Alison, and good morning, ladies and gentlemen. I'm happy to welcome you to our conference call to discuss the financial results for AXIS Capital for the first quarter ended March 31, 2017. Our earnings press release and financial supplement were issued yesterday evening after the market close. If you would like copies, please visit the Investor Information section of our website, www.axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast through the Investor Information section of our website. A replay of the teleconference will be available by dialing 877-344-7529 in the United States, and through the international number 412-317-0088. The conference code for both replay dial-in numbers is 1010952. With me on today's call are Albert Benchimol, our President and CEO; and James O'Shaughnessy, our Group Control and Chief Accounting Officer. Before I turn the call over to Albert, I will remind everyone that the statements made during this call, including the question-and-answer session, which are not historical fact, may be forward-looking statements. Forward-looking statements involve risks, uncertainties, and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in AXIS's most recent report on Form 10-K filed with the SEC on February 27, 2017. We undertake no obligation to update or revise publicly any forward-looking statements. In addition, this presentation may contain non-GAAP financial measures. Reconciliations are included in our earnings press release and financial supplements, which can be found on the Investor Information section of our website. With that, I'd like to turn the call over to Albert.

Thank you, Linda, and good morning, ladies and gentlemen. Thank you for joining us today. Let me start by communicating Joe Henry's regrets, that not joining us today. He is recovering from knee replacement surgery, I didn't think it was a good idea to respond to questions while under the influence of pain medication. We do have James O'Shaughnessy our Group Controller and Chief Accounting Officer, standing in for Joe today. Let's start. Last night, AXIS reported first quarter operating income of $51 million, or $0.59 per diluted share. Adjusted for dividends diluted book value per common share increased by $1 or 2% for the quarter and 8% over the last 12 months. Our results for the quarter were under pressure from a number of unusual and one-time items, which had been previously disclosed, including the impact of the Ogden rate change in the UK, and executive severance costs, as well as an impairment of an equity method investments and higher catastrophe and weather losses in line with higher industry experience. Notwithstanding these items, which reflect the inherent volatility of our industry. Our longer term performance remains strong and the key metric of growth intangible book value per share adjusted for dividend, AXIS is in the top quintal of performance against the broader group of peers in the property and casualty marketplace both for the 5 and 10 year periods. We remained pleased with the ongoing progress to enhance our franchise and deliver consistent superior value creation well into the future. Indeed, our focus on risk selection and portfolio construction is delivering improved core results even against the backdrop of a challenging global P&C marketplace. We are continuing to increase our relevance and penetration in attractive market and sectors. For example, dedicating more resources to the U.S. wholesale E&S market and also recently closing our acquisition of Aviabel. A premier European insurer and reinsurer of aviation risks in the smaller general aviation arena, which supports better balance in that line. We are sustaining positive momentum in our strategic capital partnering activities, allowing us to expand solutions for clients, reduce our cost of capital and attractively rebalance the risk reward equation for our shareholders. Our third-party capital fees are growing healthily, and we are on track to have fees associated with these activities contribute over half a point to ROE in 2017 and more in the future. Our brand continues to improve and our ratings on various service evaluations keep rising. We are seeing very good deal flow, unfortunately not all business presented to us is adequately priced, so we continue to sip through opportunities to allocate our capital where risk adjusted returns continue to be at our standards. I'll report more on market conditions and our outlook for April 1 renewals after James covers the highlights of our financial performance. James?

Thank you, Albert and good morning, everyone. During the quarter we generated net income of $5 million. Our operating income for the quarter was $51 million and annualized operating return on equity was 4%. Our operating income this quarter was adversely impacted by a number of items including $59 million related to the impact of the recent Ogden rate change, including the previously announced increase in prior year reserves of $50 million. And also an increase in estimated current accident year losses of $9 million in the quarter. $9 million of negative other insurance income associated with our weather and commodities market business due to exceptionally warm weather in both Europe and United States. $7 million attributable to an impairment loss on an investment accounted for using the equity method. And finally $8 million of one-time general and administrative expenses related to executives severance. Absent these factors underwriting income would have been in line with last year, even with higher catastrophe and weather related losses incurred this quarter. In addition, we had strong performance from our investment portfolio. The growth in book value per share in the quarter to $58.89 was driven by an increase in unrealized gains on our available for sale investment portfolio, which primarily reflected the timing of credit spreads and the strengthening of the pound, sterling and euro against the U.S. dollar. So now let's move into the details of our income statement. Our first quarter gross premiums written decreased by 2% with an increase in our insurance segment, offset by a decrease in our reinsurance segment. Our insurance segment reported an increase in gross premiums written of $41 million or 6% in the first quarter compared to the same period in 2016. This increase was largely driven by our accident and health and professional lines.…

Thank you, James. As usual I'll provide a brief overview of market conditions and recent reinsurance in the world, before opening up the call to questions. Generally, we're observing size of the market that is increasing recognizing the insufficiency of its pricing. We're seeing either small increases, flat pricing or more moderate pricing reduction than we have in the recent past. Unfortunately, this is not yet consistent across the board. I'm particularly disappointed by ongoing price reductions in the phase of increasing loss trends in certain lines. Odyssey [ph] incumbent wisely reducing their exposures only to have new entrance jumping into fill the void at inadequate prices. The overall trend however is moving in the right direction, albeit more gradually than we would like. And our insurance book, the overall rate change was minus 1% in the quarter, which has slowed from the minus 2% in the fourth quarter of last year and the minus 3% seen in the first quarter of 2016. Larger accounts remain more competitive the smaller risk. Our U.S. property and casualty division achieved the price increase of 1% in the quarter, but there is still a lot of volatility around that. Property is down about 2%, while casualty is up about 4%. Both are better than last year's trends, but still not enough. For example, we believe challenging lines such as low attaching auto and heavy trucking should see meaningful increases, but there are still many offering reduced pricing in this difficult -- reduce pricing. In this difficult market place risk selection and underwriting discipline become the only differentiator between profits and losses. We have a long track record in the space and feel we are well equipped to navigate through the challengers. And now our international insurance division, overall rate change was minus 5%…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question will come from Amit Kumar of Macquarie. Please go ahead.

Thanks and good morning. Just a couple of quick questions and I'll requeue. The first question goes back to the discussion on I guess the underlying AYLR ex-cat and you talked about rate and trend. Based on your commentary, is it fair to say that a mid-60s for reinsurance and a low-60s is the way to think for the full year or how should I think about the outlook for the segments based on your comments? Thanks.

I think that's a fair way of looking at it Amit. I mean if you look at each of areas as James pointed out, we started off with a number of that absent mix improvements and changes in the underwriting would have grown. But in fact in our insurance division notwithstanding close to 1.5 points of rate and trends, we still were able to reduce the overall loss ratio down to about 60. And I think there is nothing unusual in the experience that we saw in the first quarter that would give us any reason to give different guidance not that we give guidance but to give you any caution for the rest of the year. I think with regards to the reinsurance book as James mentioned, the impact of Ogden was about $9 million this quarter, it will be a little bit less in future quarters. But in terms of the mix and rate change I think where we are in this quarter again is not an unreasonable indicator of current performance. And again I hasten to add that from my perspective the Ogden is something that has to run through, but ignoring the Ogden the rest of the book continues to perform.

Got it. The other question I had and then I'll re-queue, just going back to I guess the broader capital management discussion and it seem that the buyback was more than relative to the net income it was higher proportionately should we think about that slowing down going forward or am I over thinking this metric?

As you know we've been committed to returning capital to our shareholders, we will continue to repurchase we don't view this as unusually high or unusually low. We expect that originally we were looking at a number that was at least our operating -- our planned operating income obviously we weren't planning initially for Ogden, but we won't let that to get in the way of our stock repurchase activity.

Got it, I'll stop here and re-queue. Thanks for the answers.

Our next question will come from Elyse Greenspan of Wells Fargo. Please go ahead.

Hi, good morning. I was hoping to get a little bit of color on the reserve releases in the quarter if you back out the Ogden charge your reserve releases actually would have been up year-over-year. Can you just give some color on what lines in accident year's favorable development is stemming from the quarter?

Yes as you know there is no real predictability to the reserve releases or actuaries performed full ground up reserve releases they look at the A versus E and they ultimately come through, some quarters will be a little bit higher, some quarters will be a little bit lower. If you look at where we are today I would say two things one you're seeing some growth in the reserve releases for the insurance book. And fundamentally that reflects increased confidence in where we are given the changes that we've made to our book in the last three years. And so that's gone up more this year. On the reinsurance side we continue to see professional lines and liability lines driving the reserve releases. In insurance it's mostly professional lines and a little bit of marine lines. There's always of course some adverse development here and there, but these were only partial offsets. I think if you look at where the lines are coming from it's really depending on the mid tail lines those would go anywhere from 2008, 2012 and the shorter tail lines with company (Inaudible) recent years from that. And my guess is that there will be a few more detail once we issue them.

Okay. And then in terms of you guys pointed out on UK whether the derivative mark that went against you in the Q1 have those come back or what's the Q2 date there as we think about our models?

These were not simply UK this was -- the reason that we ended up with the losses that we had this unusual occurrence of having exceptionally worm weather in both the U.S. and Europe. So usually the diversification helps us, but in this case we had a relatively tail event with not only was it exceptionally warm, but it was exceptionally warm in all places. And as I say that I need to comment that of course we recognize there is global warming that's taken into consideration in our pricing and our structuring, but the changes that we saw this quarter were well above the trend lines that were estimated. Some of those unfortunately closed out so there isn't any reversal to be seen. There isn't any significant change to our marks so far in the quarter.

Okay, great. And then if I look at your G&A in the quarter and I kind of back out the $8 million severance cost, it still was probably some corporate cost maybe a little bit higher than I was modeling and I know there were some moving parts. Do you guys still as you think about the expenses that you outlined to the street is your assumption will still see the $50 million fall out of the expense base by the end of this year just in light of some higher personnel cost that you were speaking about?

That's right look from our perspective we will have achieved in excess of the $50 million in cut by the other '17. So we're confident that what we indicated to you is happening. Of course a lot of these savings have now been reinvested in other part of the business analytics and so on, but the progress continues. It's true that the expense in the G&A line grew up there were a few other season items we did not believe that it was worth identifying them as exceptional. And so we're happy to give you a little bit more detail on that. But there were some seasonal items that also included the growth of G&A.

Okay. And then one last question if I may, there was a tax benefit in the quarter, what was that?

Yes so Elyse this is James here. There was a new accounting rule came in Q1, 2017 and it was share based comp simplification. So the tax impacts of the share based comp are now included in the tax line. Prior to 2017 the tax benefits were booked to the shareholders' equity line. So due to the vesting schedule the majority of the tax impact is reflected in Q1 '17. And the amount of the tax benefit was also impacted by the increase in our share price. So you would expect maybe a bit of spike potentially in Q1 with divesting of the shares going forward. So that was an equity item before, but it's now booked to the income statement.

Okay.

Elyse fundamentally the way we would look at it and we talked about kind of core accident year loss, our number with Amit a few minutes ago, I think we would be looking at a core G&A number that's about 150 per quarter.

Okay, that's great. Thank you.

Thank you, Elyse.

Our next question will come from Christopher Campbell with KBW. Please go ahead.

Hi, good morning.

Good morning.

I was wondering if you could get a little bit of additional color on why AXIS is releasing the professional lines the current year reserve releases. Just kind of given the long-term nature potentially higher loss cost inflation and then some reports of an increasingly aggressive payments bar.

Christopher I'm happy you're asking the question because I was totally confused by your report last night. What we said is that the IELR [ph], the loss ratio that we're putting in '17 is reflecting the progress that we have achieved over a number of years. As those who followed us for a number of years know as we've made some very significant changes to our approach to the DNO, ENO book. However, we have been reserving that book very prudently without giving any credit to the impact of those changes that we have made over the last three four years. And '14, '15, '16 are emerging much more in line with what we would have expected when we wrote that book, but of course, we did not reserve it at those levels. So we reserved those years in professional lines with a conservatism that did not fully reflect the improvements. What we are doing in 2017 is now readjusting the starting point for the '13, '14, '15, '16 years. And therefore granting some credit for the changes in the portfolio. We of course have not changed our indications for 2017, which as is our practice continues to assume a prudent amount of rates and trends. And we will not revisit the 2017 loss number for a number of years just as we have not revisited the professional lines loss numbers for '14, '15 and '16. Does that help you understand the wording that we used?

Yes, that's very helpful. And then just kind of over to broader results, core loss ratio is up about 200 bps, how much of that is the mix shift versus just deteriorating market conditions?

So I'm sorry could you repeat that question?

Yes, I'm just looking overall like at the overall core loss ratio, which is about 200 bps higher year-over-year, and I just kind of wondering about the breakdown would be I know the book is shifting in certain segments like maybe accident and health and insurance. So how much is of that deterioration is just riding higher the core loss ratio business versus overall market conditions?

So if we look at the group number, and you start with the Q1 '16 number of 61.5. And you add the impact of Ogden which as we said is we think of as a cat which will run through over the next few quarters, that's 0.9 points. And the rate in trend on average for the book is about 1.4, 1.5. That gives you a total of approximately 63.8, 63.9. We actually delivered of 63.6, which means that our mix and underwriting has actually given us progress against the market conditions. I think however it is much more impressive when you split it up between insurance and reinsurance. On the insurance side, the accident year ex-cat loss number was 60.8 last year and we've got rate and trend of approximately 1.4, which means that if we would have nothing to the book, the loss ratio would have been 62.2. As Amit pointed earlier that number came it at 60.1. So the ongoing improvement in our book of business underwriting and portfolio constructions actually led to a 2 point over 2 points of improvement in the insurance book. And this is what I was referring to in my prepared remarks that no matter what's happening in the market, we will continue to make progress in our underwriting results. Reinsurance is a little bit more complicated where of course we have not only the impact of Ogden and the rate change, but in that area it has been a more difficult market and we've been absorbing tougher conditions there and the mid-60s loss ratio that we discussed earlier really reflects more of the market conditions unless of the mix shift. The mix shift we have essentially done as I said before the macro shift that we wanted to make. What we are doing today are more tactical based on the opportunities available to us.

Great. Well, thanks for answers and that's a lot.

Thank you.

Our next question will come from Brian Meredith of UBS. Please go ahead.

Yes, thanks. Good morning. Albert, I wondered could you talk just a little bit more about the growth in the catastrophe and reinsurance area, what's behind that given where market conditions have been?

I appreciate that. You are seeing growth in the gross number, in a net number actually it's lower and we have as we've discussed with you in prior quarters, we've been increasing our strategic capital partnerships. But we have strategic capital partners who have an interest in cat business. And as we've said before, this is a great opportunity for us to do more for our customers provide risk that our strategic capital partners want and earn fees in the process. But what you are seeing is an increase in the gross, and you will be seeing the reduction in the net. And in fact, you'll notice in the PML, there really have been much change in the PMLs.

Got you, that makes a lot of sense. So just bigger line size that you're getting on treaty stuff?

Yes, what matters to us is to be a full service value added partner to our customers. And we're very happy to do more for them. As I mentioned in my prepared remarks, we are unlikely to be increasing our net exposures in this market, but there is demands in the investment world for cat risk and we're happy to work in conjunction with our strategic capital partners and satisfy both their appetite and our customers need.

Great. And then a quick question I know on the policy acquisition cost in the insurance segment it was mentioned the mix shift with respect to A&H, is it there is more reinsurance or what's happening in that area?

That's exactly right, there is -- as James mentioned there is growth in that the Middle East reinsurance business and that comes with higher acquisition expense.

Got you, got you. And then just last question for you, curious your thoughts lot of talk recently about intermediary competition kind of what are your thoughts on that?

We are not a direct insurer and reinsurer, so by definition what we right is going to have commission. What I can say is that commission changes it depends by line, if you are writing program business or stuff like that by definition, you are going to pay more. Some lines in the large accounts are with net. So, there is going to be some change around that. What I will say to you is when we look at the profitability of a proposal whether it's a treaty or individual risk, we look at it on a technical ratio basis, which is both the loss ratio and the commission. If we find that together the loss ratio and the commission are unattractive for whatever reason whether it's a loss part of commission part we will pass on it. If we find that the technical ratio is acceptable to us and we want to write it, at that point we're a little bit less concerned whether that comes from lower commission or lower loss ratio as long as all in the risk was attractive to us. So my answer to that is it's up to us as evaluators of risk and return to determine which technical ratios are attractive and which are not.

Got you, excellent. Thank you very much.

[Operator Instructions] Our next question will come from Ian Gutterman of Balyasny. Please go ahead.

Alright, thank you. Good morning, Albert. I guess start with the simple one, the credit business in the reinsurance look like it shrunk about in half anything interesting going on there?

No, that's we discussed earlier that part of the reduction in net written premium -- in the gross written premiums was multiyear treaties we had a multiyear treaty last year. And obviously we did not renew that. We are just writing less multiyear trees now.

That makes sense. Okay. You mentioned in your earlier remarks that the strategic partners is adding about half a point to ROE. If I want to track that in the income statement is that just that $11 million of fee income from partners you reported or is there a way different way to analyze that?

That's right. Obviously there is a little bit of expense associated with that, but by and large that's the driver.

That's why I was going to ask, is the expense is there a way I can pick that up or a guesstimate of margins on that or?

They are not huge. The real margin is in our third-party capital units, which is a small unit, but the rest of it is just normal G&A, we would be incurring the underwriting expense and the rent expense weather we were taking $20 million line or a $25 million line. So, it's high margin business.

Got it, thank you. And then on the professional lines, can you just remind me a little bit of maybe both on the insurance and reinsurance side, sort of where you play just by lines of D&O, E&O, EPL et cetera and just kind of what type of customer you are doing mostly in your Fortune 5s or you doing regional's, you are doing not for profits. Just sense of the spread of your book?

Well it is in fact a very widely spread book, but I would say that where we have changed our book over the last four years is the following; Number one, we are writing less D&O and more E&O than we have in the past. You will recall 2013 we discussed the D&O market with you and we decided at that time that we were going to write less, where we are writing D&O. We have significantly changed the distribution by industry, we had been overly represented in the technology and healthcare world, we have significantly reduced those. We have reduced our primary exposure, we have increased our attachment points and we have reduced our line size. And all of those have been key drivers to our improvement. And as I mentioned in the last call, our participation in the existing class action law suit is the lowest that it's ever been. So we feel very positive about what we have done on the D&O side. E&O is both a more attractive market right now than D&O is and where we have been growing and there we have a significant amount of management liability experience and expertise in multiple professional lines, architecture and engineers, we do cyber, we do healthcare, we do a number of areas, we have been growing in Europe in professional lines. Mostly I would say in the mid-market area we do write some large accounts, but we are mostly in the middle market and if you look at our average customer and average policy size those have been coming down in size. So we have been moving away from the large accounts and more into the mid-market than small. And our line size has reduced over the last three four years and we like where it is right now.

And on the reinsurance side, is it mostly a quarter share?

Yes it's quarter share and there it's really about underwriting the customer making sure that there is a good book of business there and making sure that the ceding commissions that we pay is commensurate with the profitability of the underlying book of business. And there as you know there has been some real pressure over last two three years at increased ceding commissions and frankly we have reached the limit on that. And so we are happy to renew flat where the underlying is booked, but we have not been -- we have haven't been encouraging people to speak about higher ceding commissions.

Okay. And what you're [indiscernible] therapy sort of the major players that I would get off the top of my head or is there a lot of regional clients or maybe a high professional lines…

No it's active players, recognized players, because of course it's really important that our customers have expertise and relevance in that marketplace. So we want to make sure that we deal with people who have got the right book, the right distribution.

Okay. And then just last thing on the topic, with elevated losses we are seeing in the M&A and some of the other things, are those things that are mostly still at the primary or maybe low access where it's largely defense and sort of a modest settlement or are we seeing pressure on the excess layers with claims as well?

That's our experience. So as you know, first of all start with the fact that we are now writing a lot less of that business and smaller accounts. But it's true that most of what we are seeing, we are seeing elevated activity, but most of what is happening is staying in the primary layers, which is why as I indicated earlier we are seeing price increases in the primary layers and more pressure on the excess, because the excess to-date has been able to avoid the frequency that you had on the primary.

Got it, thank you so much.

You welcome.

[Operator Instructions] Having no further questions, this will conclude our question-and-answer session. I would like to turn the conference back over to CEO, Albert Benchimol for any closing remarks.

Thank you and thank you all for participating in the quarter. And if there is a message that I hope you will take away from this, is that this was a noisy quarter. However we do believe that the events that affected our results in this quarter are unusual in their nature and the journey continues and we are very pleased with our progress. And you have our commitment that we will continue down that path. Thank you all.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines.