Good day, and welcome to the AXIS Capital's First Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Rohrmann, Head of Investor Relations. Please go ahead.

Thank you, Shawn. 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 and period ended at March 31, 2019. Our earnings press release and financial supplement were issued yesterday evening after the market closed. If you would like copies, please visit the investor information section of our website at axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast to the investor information section of our website. A replay of the teleconference will be available by dialing 877-344-7529 in US, and the international number 412-317-0088. The conference code for both replay dial-in numbers is 10130161. With me today on today's call are Albert Benchimol our President and CEO; and Pete Vogt, our CFO. 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 facts, 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 factor set forth in AXIS' most recent report on Form 10-K, as well as the additional risk identified in the cautionary note regarding forward-looking statements in our earnings press release issued yesterday evening. 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 supplement, which can be found on the investor information section of our website located at axiscapital.com. With that, I'd like to turn the call over to Albert.

Thank you, Matt. Good morning, everyone. And thank you for joining our first quarter call. We brought our performance back to double digit operating ROE on EX-PGAAP basis this quarter. In line with the results we produced in the first nine months of 2018. The underlying results improved for all of our lines other than the two that were affected by large industry losses. This reflects disciplined actions we have taken in recent years to strengthen our market position, improve our portfolio profitability and reduce volatility. While catastrophe activity was lower this quarter, we did absorb meaningful market increases in loss estimates for the Japanese windstorms Jebi and Trami, all of which led to an EX-PGAAP operating ROE of 10.2 for the quarter. As we progressed further into 2019, we remain steadfast in sustaining our momentum. This explains the small reduction in gross written premiums in the quarter. Our new business production was more than offset by reductions from canceled or non-renewed business that is no longer in alignment with our profitability and volatility goals. Separately, we are also pushing forward on a number of exciting initiatives that will advance our leadership, put more tools in the hands of our underwriters and increase our responsiveness to our clients and partners in distribution. We are entering the final stages of integrating Novae into our business. In less than a tear and a half, we brought our organizations together and are operating as one company. The combined book was renewed into a single syndicate at January 1 and next Monday we are scheduled to move all of our London team into a single office. To the credit of our team and the very hard work done by many individuals within our combined organization, we successfully integrated our companies, pursued more than $60…

Thank you, Albert and good morning everyone. As Albert stated in the first quarter 2019, we brought our performance to be more in line with the progress that we've seen during most of 2018, and we continue to strengthen our market position. During the quarter, we generated net income of $98 million. On an ex-PGAAP basis our operating income was $112 million generating an ex-PGAAP annualized ROE of 10.2%. With regard to the acquisition of Novae, in the quarter we recognized amortization of intangible of $16 million including amortization go above $13 million. This expense affected the company's consolidated operating income which was not included in the segment results. Underwriting income in the quarter continue to include the earn-out of Novae's unearned premium as of the closing date. This was without the recognition of associated acquisition costs since the DAC asset was written off at closing. DAC would normally have been amortized into acquisition costs and we estimate that the consolidated acquisition costs on an ex-PGAAP basis would've been $6 million higher resulting in an ex-PGAAP acquisition cost ratio of 23.5% versus the reported 23%. We believe the best way to discuss results is on ex-PGAAP basis which is a better representation of the running rate performance of the business. In the quarter, a net drag on operating income from the VOBA DAC adjustments was $8 million after-tax or approximately $0.10 per share. As we previously disclosed, we expect the VOBA impact to be minimal beyond mid-2019. Some quick highlights for the quarter. Our current actually year loss ratio ex-cat and weather was modestly higher than the first quarter 2018, but significantly improved from the fourth quarter and improved from last year's full year results. Cat lost experienced in the quarter was minimal at $11 million compared to $35 million…

Thank you, Pete. Let's discuss market trends in our positioning and then we'll open the call for questions. We've now experienced five successive quarters of rate increases in our portfolio and I am optimistic that the market will continue to head in the right direction. Within insurance, we generated average rate increases of 4% across the entire book. In our US division, average rate increases were nearly 9% for the quarter. Rate was led by US casualty in both primary and excess which both delivered increases of about 12%. E&S property was up 8% and we produced rate increases of close to 5% within our US program business. Overall, 89% of the US book renewed flat to up in the quarter. Within our North American professional lines division, rate change was higher than it's been in recent quarters at nearly 2%. DNO was up over 4 points while ENO lines were flat on average. In our London based international insurance division, the average rate increase was in excess of 3% for the quarter, but with a very wide range. Professional and casualty lines were up 9% while US property and aviation and renewable energy averaged at about 5%. 96% of the International Book renewed flat or up with the exceptions of terrorism and political risks both of which experienced strong results in recent years. Overall, there's renewed discipline in the London market driven largely by recent actions by Lloyds including the Decile 10 program. We expect this better environment to extend into the rest of 2019 and into the next year. Given our company's increased presence in London and at Lloyds following the Novae acquisition, we believe AXIS is very well positioned to benefit from these improvements. In summary, about 93% of the total insurance book renewed flatter up; importantly…

[Operator Instructions] Our first question comes from Amit Kumar with Buckingham Research. Please go ahead.

Good morning. Maybe just starting with the discussion on G&A, in the last conference call you had mentioned a 13.5% number and today that number is being pegged at mid 14%, I just wanted to better understand what changed from Q4 to Q1?

Yes, Amit, I would say that 13.5% is more about long-term expectation that as I think about the calendar year '19 mid 14s is more where we'll where we expect to come out.

I think we did last year indicate that we were a little bit ahead of our-- and we know we are - on the savings and we indicated that it would go up a little bit this year as we would start to invest

Yes. And then we knew this year that our net premiums are down a little bit this year, and that would actually affect the ratio a bit.

Got it. That's helpful. The other question I had was the discussion on the aviation loss, I guess the BI loss, how should we think about that number as that issue drags on and is there-- could there be any possibility as the number involves of loss creep or is it pretty capped at this point?

Amit, we generally don't like to speak about individual accounts or treaties, but what I can tell you is that we're confident that the number that we have out there on a net basis is quite firm. We have a significant amount of reinsurance in that line of business.

Okay, and final question and I will re-queue. There has been a lot of discussion on late planting or delayed planting, could you remind us-- I know you are right on and quota share in excess of loss, NPCI book and other stuff, the size of your book and any thoughts how should we think about any potential impact from later delayed planting on AXIS results going forward? Thanks.

I think it's - I think it's too early to give a lot of precision on that one, but I would say that generally the reinsurance comes in when the planting happens. So, the delayed planting generally does not have a significant impact on those results.

And could you remind us the size of your book?

It's some - I'll come back to you, I think it's a little under 100, but we'll come back to you on that.

Okay. I'll stop here and let other's ask. Thanks for the answers.

You're welcome. How much was that?

26 in a quarter. 126 in a quarter.

Our next question comes from Elyse Greenspan with Wells Fargo. Please go ahead.

Good morning. My first question on-- just looking at your underlying loss ratio was 58.9 on an overall basis in the quarter, you guys pointed to about two points of a one-off kind of larger losses within your reinsurance book, so that's about one point overall, so is the right way to think about it is that underlying loss ratio is running kind of net of those losses that's just under a 58, and we should think about improvement from there over the balance of the year as you earn in some of the initiatives that you've been working on?

So, Elyse, this is Pete. I'll take that. Actually I think I mentioned that the large losses in the insurance segment by just over two points in the quarter. We did have some aviation losses also in reinsurance and I think the aviation losses and reinsurance, as well as aviation and marine losses in the insurance for the company in the quarter was just over two points, and so we do expect to get these large losses through the-year; we let them run through this year --this quarter because it was early in the year. We didn't want to absorb them, but I would say that on a normalized run rate, if I'm thinking overall company, this would be a higher than normal quarter when it comes to large losses because we really-- we are early in the year we had nothing to absorb it. So, if I was thinking about it at least, I'd take it down by at least half of that two point overall for the company.

Okay and then the assumption would be that we would see sequential improvement every quarter of 2019?

Yes. Oh, absolutely. We would expect to see that happen through the quarter. I guess I would also point out that we did talk a lot about the program business which hurt us on the insurance side in the fourth quarter. That behaved itself I'll call it in the first quarter, but it was still higher than our normal insurance attritional loss ratio or non-cat-- non-cat and weather loss ratio, and that added about a 0.5 point to the insurance non-cat loss ratio in the quarter, and again, as that business runs up at the end of the year we expect to continue to see the insurance book improve.

Okay, great. And then on the acquisition side you guys pointed I think you said 23% ex-PGAAP for the remainder of the year I guess, can you just confirm that's what-- that's the acquisition cost ratio guide and then I guess that contemplates that you could continue to see earned premium decline just as you reposition and you know some-- your premiums might continue to go down?

Yes, that would - we're going see that Elyse on the acquisition side, I think - one of the things that affects that acquisition cost which is just happens in each quarter some loss sensitive features on the reinsurance side, but that is a net-net positive to us if the acquisition cost goes up. It means that the loss ratio was down for one of our clients, but I think it was just up in this quarter slightly because there was some profit commissions booked as well as the impact of some cede commissions, that we do think that-- that high 22s, 23 is where we'll see the overall company track for the rest of the year. Absent, any of these one-off things which really should especially the loss sensitive features you'll see offset in the loss ratio.

Okay, great. And then one last question, Albert, can you give us on some of your initial views as you think about the upcoming Florida renewals, just expectation for price increases, charter any change in terms and conditions and kind of can you peg the rate increases we might see there relative to how the loss impacted accounts moved at both January 1 and April 1?

Right. Well, Elyse, it's still a moving target as we say, I mean there's still a lot of talk going back and forth, I think basically you've read and heard the usual stuff which is some of the loss affected accounts and layers are going up to 30% or more, but the non-loss affected accounts are closer to flat, maybe very modest increase. So that's kind of where we're seeing it now. As I said there's a lot of stock going back and forth on it. I think there's a couple of things that are potentially positive. A number of things that are potentially negatives. You've read about the AOB improvements. The legislature just passed AOB reform in Florida which has been a major driver of growth and loss adjustment expense. So that's positive, that's possibly going to be reflected in some of the pricing conversations. But we're also looking at the fact that there's huge concentrations in certain parts of Florida that need to be priced for. So what I can tell you is it's still a moving situation. Loss affected up to 30 or more, non-loss affected closer to flat low single digits. That's the current to talk, but it's moving.

Our next question comes from Yaron Kinar with Goldman Sachs. Please go ahead.

Hi, good morning. First question is on favorable development in the insurance segment. It seemed a little light relative to where it's been. Can you maybe talk about the moving parts there?

Yes. I mean when I think about that especially when you compared to last year in the first quarter, last year in the first quarter we had a fair amount of prior period development actually coming out of HIM. And so if you adjust for HIM, the insurance PYD was in the single digits. So when you compare year-over-year that is one impact. The other thing I'd say is in this particular quarter while we had good positive prior period development, all the business units and insurance except for property, where property we had some losses come in at the end of 2018. That didn't get into the 2018 year, so we had some property shop losses as well as some attritional come in into the first quarter of 2019 that affected the PYD for insurance.

Okay, that's helpful. And then I guess my second question is on the increase in the Japan wind PML. So I understand that this is an opportunity here with rates being up as much as they are. At the same time, you are also talking about still lowering your overall exposures. So how do you --how do you I guess square the push and pull here between the interest in going after opportunistic, attractive opportunities and lowering your overall PMLs? And I'm asking that also as we look at June, July renewals in the US.

That's a very good question, and thank you for asking it. What really matters here is what are we doing with our overall loss curves, and make sure that overall loss curves come down as a percentage of our overall equity. And which you'll notice is that the peak zones which is really what drives those loss curves are continue to come down. Japan is not a peak zone but it does not drive the curves in the PML for us. But importantly, it's about providing more balance to the portfolio. So shaving off the peaks, filling in the troughs so that there's more balance, more premium, more diversification in the portfolio which ultimately results in a better loss curve, and ultimately better ROEs on that line of business.

Okay. So I look at the peaks and I think it's still southeast US and as we head into June, July renewal I did expect there to be maybe a few better opportunities there. So even with that in mind you still expect that peak zone to be lower year-over-year?

Yes. I think what happens is every year there's always some situational volatility around what happens, but by and large it would be our expectation that those PMLs will be coming down at the peak areas, yes.

Thank you.

And as you can see, we've been doing that for several years now. So it's a trend that you should continue to see.

Our next question comes from Jay Cohen with Bank of America Merrill Lynch. Please go ahead.

Thank you. Most of my questions have been answered, it was very helpful. So one question, share repurchase, should we basically take that off the table for the balance of this year?

Hey, Jay. This is Pete Vogt. Yes, right now I would take that off for the balance of the year given where we were in the fourth quarter with the California wildfires. We are looking to build up the balance sheet through 2019.

Our next question comes from Meyer Shields with KBW. Please go ahead.

Thanks. The two small questions and one may be bigger one. Albert, Can you talk about the increase in corporate expenses on a year-over-year basis?

Yes. I mean we --there are a number of items that are kind of first quarter items that come through, but Pete want go to the detail.

Yes, Meyer. If you're just looking at the dollars year-over-year last year in the first quarter, there were some unusual good guys that came through. The biggest being some takedowns of some bonus accruals and all that ran through the first quarter. That's probably the most significant thing that actually drove the corporate year-over-year increase.

Okay. So that then implies that this is a good run rate going forward.

Yes. Well, I mean I wouldn't take first quarter and necessarily use it as a run rate, Meyer, because as I mentioned in my comments, we do tend to expense a number of things in the first quarter. So our first quarter tends to be a little bit higher on the corporate side as well. So I would bring that down by a couple points, if you're looking at dollars, I bring it down a bit but overall we'd really do think the overall G&A ratio is going to come in the mid-14 range for the year.

Okay, no, that's helpful, thank you. Does the PML calculation for Japanese wind, did that include maybe more conserving, conservative modeling following the loss increases that we've seen on last year's storms?

It - look, the truth is that every quarter there's some improvements to some models. So hopefully we're getting better every quarter whether it's southeast wind or quake or Japanese wind, but the real change that you've seen in the PML is really driven by the growth in our business in Japan.

Okay, no, that's helpful. Bigger picture question, I'm not sure I'm thinking about this right, but when people talk about reinsurance pricing, there's always a split between loss impacted accounts and loss free accounts. I'm wondering whether that's not a really weak way of reflecting changes in loss propensity. It seems more reactive than predictive.

Well, that's my --that was my point, right, which is that even loss free accounts should have an increase because if we believe that the curve is moving up then everybody should share in that curve. But that's not what's happening right now. Those are the market conditions. So I think you and I are probably on the same page. The curve moves up, everybody should --we're mutualizing risk, so everybody should pay a little bit more. But market conditions being the way they are, that's how it's ultimately coming through.

Right. Is there an opportunity to sort of like going loss impacted accounts and say that their exposure hasn't changed just because they had a bad year. I guess that's really what I'm arriving at.

That would be fine if everybody was going to share in the increased loss, right. But right now what's happening is since those who haven't had a loss are not paying for it, it comes down to those who've had the loss to contribute to that adjustment in price.

Okay, understood.

I think what you're talking about is the difference between the theory of the pricing and the market reality of the pricing. I think everybody would agree with you, but it's very difficult to get an account that has not delivered a loss to pay for one that has.

Our next question comes from Brian Meredith with UBS. Please go ahead.

Yes, thank. A couple quick questions here for you. First, I'm just curious as we think about the insurance business and we think about that the property down as much as it was given some of the nominals. What's the kind of headwind I should expect kind of going forward on the premiums from those non-renewed accounts?

So I think we've talked about the impact on a gross basis, yes, and we've gone through it. I think that's already embedding first quarter numbers.

Yes. It is. It is. And we will see some more through the year, but right now we're also seeing good growth in some areas we do like, Brian, including on a professional line side and good rate and a hardening market we see on the US casualty both excess and primary. And we've seen some good growth even in renewable energy. So if we see property come down a bit, we do expect that top line to not necessarily drop as much just because of property in itself.

And I don't know if we got into enough time but the truth is that a big chunk of the drop in the first quarter had to do with a number of contracts that really were a 1/1 contract and so we've already done and we've discussed this I believe throughout last year, progressively canceling a number of businesses when they were coming up. Some we couldn't touch before 1/1/ January and therefore that's a big impact that you're seeing in the first quarter. There's less of those big contracts coming through for renewal in the rest of the year. So you should have less of an impact from the contract cancellations that would be the first thing I would say. The second thing that I would say is that if the trends in the market are continuing as we see them, it is likely that we will find more of that business to be attractive to us and so it could well be that we would be quoting more or winning more towards the end of the year if the market improves. Of course, all of those things are market dependent, if the terms are good there'll be more opportunities; if not, we will have no problem shrinking some more.

Got you. And then, Albert, I'm just curious looking what you just kind of talked about on rate here 4% across the entire book and insurance. It sounds like you think that's enough to actually get margin expansion. So loss trend is still running fairly benign, is that is that true?

Absolutely. And in some cases we're getting rate increases that are - when I think about the US casualty book that are multiples of what our loss trend is. So we certainly would expect to see more loss ratio impact in those lines. But, yes, across the book the average of 4% that we're getting is ahead of loss trend and when we've been talking about the improvement in our books of business over the next couple of years, certainly rate over trend was going to be --we were looking to that to drive at least a point of improvement year-over-year for the next couple of years.

Okay, excellent. And then you talked about maybe in terms and conditions improving, are we seeing anything on terms and conditions at this point?

Oh, yes. That's actually even more interesting. We're doing much more around exclusions around sub limits, higher deductibles, all of which have a meaningful impact on loss costs.

Got you. And so when we look at that 4% rate that's not including that, is it?

Right, it is not.

Our next question comes from Michael Phillips with Morgan Stanley. Please go ahead.

Thank you. Good morning, everybody. I guess first question on back on insurance acquisition expense. A couple of things there. I guess part A is, is there any change in your MGA appetite, and if so, is that driving any impact on the acquisition expense ratio?

So, Peter will go through the numbers but in terms of appetite per se, we tend to look at the business on a technical ratio. In some cases the acquisition expenses higher and loss ratios lower in some cases. It's vice-versa. So I think it's difficult to determine the adequacy or the attractiveness of a piece of business simply by the loss ratio alone or the expense ratio alone. So just wanted to put that point out there, Peter?

Yes. But what I would say is as we've mentioned in the fourth quarter call, here we have cancelled a number of relationships we had with MGAs. Many of those started last year but a number of them as Albert mentioned happened in this first quarter, as we actually was the first quarter - real first quarter we could action a combined excess in Novae book. And with that I would expect that the acquisition loss -the acquisition ratio for insurance to actually come down through the year as the earned premium in those MGA contracts kind of wanes, and therefore changes the book a little bit. And that's why I do think the acquisition ratio for the overall company will trend more to the 23, high 22s, but specifically for insurance, I would say it came in on an EX-PGAAP basis at 22.3 in the first quarter, that should come down by to the mid-21 by the end of the year.

Okay, yes, that's helpful, thank you. I guess on the same token on the acquisition, given the higher expense from Lloyds, is that going to be something that can be improved for you guys anytime the near term, or is that more, that's going to be there for a while?

Are you referring to acquisition or G&A or what exactly?

Yes, acquisition, yes.

Yes. So, generally I would say there's a Lloyd's market situation and there's an AXIS situation. Lloyd's as you know is looking very hard at their acquisition expense. And Bruce, Carnegie Brown and John Neal and the team are pushing towards that. And I want to use that as an opportunity to mention that there's a lot of good work being done in London to improve both the competitiveness of the London market, and the profitability of the London market. So I think we will all benefit from that, but with regard to our own book, we always knew when we were going to - when we acquired Novae. We always knew that there was a bunch of the business there that we would not renew. And some of it had to do with the renewal some holder arrangements that were not as necessary for our portfolio. And I'll give you a good example. We have a very strong US-based business. Novae was a Lloyds company, and so it accessed a lot of US business through US cover holders for which had paid cover holder acquisition costs. We believe that for much of that business we would rather write it locally where we are closer to the risks and therefore can ultimately deliver a better portfolio. That was always part of our plan. You're seeing some of that in the reduction of the January 1 renewals and the benefit of that I think is more than just on the acquisition cost. I believe that we will do a good job of delivering better premium locally than once we move through a cover holder.

Okay, no, great. Thank you very much for those details. I guess last one just talk about quick one. Your comments on rates are sound somewhat similar to what we've heard so far in the quarter from others. I think one that kind of stood out to me and maybe you can, if you can a little more detail on it, the US casualties. I think you said up 9 which little bit, stood little bit to me and anything you can add to kind of where that is specifically.

It's going to be further up. It's up 12

Okay.

The reason for that is we focus on the ENS market. In the US, we only write E&S casualty primary and excess and some of that is driven by the auto liability where we're seeing literally 18% increases in those lines. So this is - these are definitely tougher risks. That's why are in the excess market and what happens is as the standard lines markets are starting to restrict their appetite, you're getting a lot more of those risks coming to the E&S market. And that's driving price. We're very pleased with the price that we're saying. As I mentioned earlier, it's well above our loss cost trends. And this is an area that we're looking to grow.

Our next question comes from Josh Shanker with Deutsche Bank. Please go ahead.

Yes, thank you. I just want to get a few notes on Jebi. Obviously, change in loss I think is much higher than the initial pick. Did you trigger into an excess contract or what's going on there?

No. This has a lot to do with the way we chose to participate in wind risks in Japan. And we do this for every zone. We look at the towers. We determine where it is that we would prefer to play in the towers. Sometimes it makes more sense to be in the lower layers. Sometimes it makes more sense to be in the upper layers. We've historically been underway to wind in Japan because we felt it was not as well priced as the quake. So we had lower participation in the lower layers and then increased our participation in the upper layers. So as Jebi in particular started to deteriorate, we started to take a larger share of every yen of loss at the upper layers than we did at the lower layers. And-- but I want to be clear, we do that with every account. We look at every the --price of every layer and we try to position ourselves where we think we're getting the best risk adjusted returns. In Japan last year, we thought the mid layers of the towers were the better place to be.

And so the shape of the portfolio has changed with April 1 renewal?

Yes. There is a little , both a little bit more on the bottom but also both a little more top of the accounts, as the Japanese accounts but more cover.

Okay, okay. And in this pricing commentary, a lot of commenting how good pricing is here. It's - how is the competitive environment feel? I mean I tend to think that the market is efficient and it gets increasingly efficient over time. Do you think that this is an invitation for competition to increase or you see your competitors backing away and giving you that opportunity?

I think the competitors that we have are by and large the same. Without getting into some news, you're very well aware that a number of leading players in the E&S market have announced significant reductions in their appetite. You also know that Lloyd's is reducing their participation in the US E&S market. And so right now I think there is significantly less capacity and more demand in that market than there's been in a while. But I do want to take you back to my comment that I made earlier which is, it's great to see five quarters of mid-single digits increases, but let's recognize that we've been seeing significant price declines since 2011. What we have today is better than what it was, but it's still not time to back up the truck. So you stop to be selective.

Our next question is a follow-up from Amit Kumar with Buckingham Research. Please go ahead.

And just very quickly. I know we're coming up at the top of the hour here. In terms of going back to the discussion on Jebi and Trami, I know in the opening remarks, you mentioned Jebi is now at $12 billion to $13 billion. I guess two parts. One, can you remind us, are you using sort of a $3 billion to $4 billion for Trami? And what was the previous loss estimate you are using for Jebi because that number moved from I guess 5 to 9 to 10 to 13. So maybe just help me with those pieces. Thanks.

Hi, Amit. This is Pete. With regard to Trami, we are currently using a loss estimate of about $3 billion. And with regard to Jebi, I mean our - we ended the year last year at about $8 billion and actually in the fourth quarter we had actually moved up our estimate 4 to 8 and actually took a little bit. But now we're up to 12.5.

Our next question is a follow-up from Elyse Greenspan with Wells Fargo. Please go ahead.

Hi, thank you. So I just had a quick, couple quick questions. The first was in response to an earlier question about weight over trend. You guys said that your drive about one point of improvement for the next couple years. Was that in insurance or overall comment? And then can you peg where your loss costs are sitting in your insurance and reinsurance segment, so we can just get a sense of how much way it needs to be to continue to drive margin improvement.

Right. So what we said is that at least a point I think there'll be some places where it's more, some places where it's less. Obviously, some of that will be offset by a little bit of mixed impact, but we're certainly confident with - at least points in the next couple of years. I think if you look at the average, I think that we go from some loss trends in the 5% range all the way down to some that are flat. But I would say that at the 4% range right now just to give you a sense of it, and I believe Peter spoke to it, rate over trend was a little over a point already in our earned this quarter. So that basically tells you that at a 4% rate that's a one point benefit to us.

And then what about on the reinsurance side?

As I said, most of the book that we have on the reinsurance side is quarter share. So you kind of get the same --you get the same trends. And the number that I gave you is across the entire portfolio.

Okay. That's great. One --and another question that I had just going back to the Florida discussion. We hear about some companies potentially electing changes to how much business the CAT fund has within their towers. Also there's some additional alternative capital that could potentially come into the market. Do you think the dollar of premium that goes to traditional reinsurers is flat, up or down compared to last year? At this coming renewal.

Yes. This goes back to the issue that it's - we're right in the middle of the action and there's no question that some buyers are looking to put more into the CAT fund as way of rebalancing the supply-demand equation in their favor. So I think we just have to let that play out.

Okay. And then one last quick numbers question. The DAC benefit to your expense ratio in millions, how much do you have left and should that all come in the second quarter when we think about modeling?

Yes. That's pretty small, Elyse. When I actually think about the VOBA impact for the rest of the year, and again DAC is less than VOBA, but I do know that the VOBA is about $7 million in this second quarter and then 4.5 in the third and 2 in the fourth. So it runs off pretty quickly. And then DAC is a subset of that.

Okay, thank you very much.

That's why we continue to talk about PGAAP because I think ultimately those are really the numbers that will eliminate all of that PGAAP adjustment volatility.

Our next question comes from Cliff Gallant with Philadelphia Financial. Please go ahead.

Hey, good morning. How are you doing? There's been a couple outside analysis done of your reserves indicating that there's weakness, but I know you've got a strong track record for setting your reserves. And so I was curious if you could comment - when you look at things from the inside, what are some of the things that you can see that perhaps an outside observer of your public data might miss.

Well, we won't want to go for that one. Peter, you go for it.

I'll go first. I'll let Albert add the color. I'll give just --I'll give a little bit more of a technical answer. But I guess what I'd say is inside our own actuaries and our own reserve committee feels good about where our reserves are. Our auditors have looked through our reserve and reserving practices and opine favorably on those, as well as we do have, we do hire an independent third party actuarial firm to review all our reserves and give a separate independent confirmation to our audit committee about where our reserves reside. And in all of that internally, we feel very good about where our reserves are. With regard to the external reports, I think one of the things that I would just mention is some of these reports were using the new SEC 10-K triangles which are really just paid triangles. And so there's a lot of shortcomings of those triangles. And I think trying to do analysis just off of them. When you're trying to use one consolidated triangles is very difficult. What I would ask and what I would point our investors to is we do publish a very comprehensive transparent view of our triangles with our global loss triangles that we publish usually at every May or June. And those are I think are good triangles for you to get your own read and do your own work and what you think about our reserves. And right now there is, I know there is one positive report out there that actually looked at our triangles, our global loss triangles from last year, and did a fair amount of work on that. And that was a positive report. So I think part of it is unfortunately with the SEC triangles they're not the best ones to use to make personally actuarial background conclusions on someone's reserves. And with that I'll let Albert add anything.

I can just keep it at technical. As I mentioned during the call, we've made a lot of changes to our portfolio, right. We got out of certain lines of business. We got into others, some of faster payout rate patterns and others. It's-- you need to go and look at it on a very micro portfolio approach which is what our actuaries do. To just take a look at a single triangle, you just can't capture all of that. So our confidence in our reserves is unfazed by these recent reports. End of Q&A

This concludes today's question-and-answer session. I would like to turn the conference back over to Albert Benchimol for any closing remarks.

Thank you and thank you all for your time this morning. As I've said at the beginning of the call, we were pleased to be back in double-digit operating ROE. And that's certainly something that we want to build on in the future. And our actions to strengthen our market positioning, improve our book, enhance our operations, and invest in our future that will continue. We're 100% committed to that. And to that point, I do want to take a moment to express my appreciation to our team at AXIS. I'm really grateful for the hard work and commitment that I see from our people every day. It's a challenging market out there. They're doing great work, serving our customers and delivering better returns to our shareholders. And we're going to continue doing that. So thank you to everyone who dialed in today. And we look forward to reporting to you on our further progress.

The conference has now concluded. Thank you for attending today's presentation. And you may now disconnect.