Good day, and welcome to the AXIS Capital Third Quarter 2024 Earnings 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 the conference over to Clifford Gallant, Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to our Third Quarter 2024 Conference Call. Our earnings press release and financial supplement were issued last night. 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 on our website. Joining me on today's call are Vincent Tizzio, our President and CEO; and Peter Vogt, our CFO. In addition, I would like to remind everyone that the statements made during this call, including the question-and-answer section, 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 factors set forth in the company's most recent report on the Form 10-K or our quarterly report on Form 10-Q and other reports the company files with the SEC. This includes the additional risks identified in the cautionary note regarding the forward-looking statements in our earnings press release issued last night. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement. And with that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. Before we begin, I'll take a moment to comment on the recent storms and their human toll. Hurricane Helene and Milton. These catastrophes serve as a reminder of the value that our industry brings. I also express my gratitude to the AXIS claims team for the excellent work they are doing to support our customers. Let's now discuss some of the headline results from the third quarter. This was a strong quarter for AXIS as we continue to advance our underwriting strategy. The sustained progress in our performance evidences that the strategic principles that we shared at our investor day are gaining traction. Our third quarter results highlight our consistency in driving profitable growth, maintaining strong limits management, improved resiliency in our portfolio, continued focus on expense management and our ability to attract top talent, supported by a balanced investment portfolio and strong reserves. In the quarter, we posted a 5.8% group-level catastrophe ratio against a backdrop of a currently estimated $40 billion in industry losses reflective of our actions to reduce volatility in our portfolio. At present, we project $30 million in total losses from Hurricane Helene and we expect a similarly sized market share of losses from Hurricane Milton. It can be anticipated that the storm projections may marginally move as more information is gathered. Nonetheless, we believe these are prudent estimates on the impact to our portfolio and highlight the attractiveness of our overall loss ratio including the catastrophe losses. In the quarter, we delivered an annualized ROE of 17.3% and $64.65 in book value per share, a 26% growth over the prior-year quarter. We produced operating earnings per share of $2.71, a 16% increase over the prior year quarter. Our underwriting profitability continues to…

Thank you, Vince, and good morning, everyone. AXIS had a very strong performance in the quarter. Our net income available to common shareholders was $173 million or $2.04 per diluted common share, which resulted in an annualized ROE of 13%. This drove our book value per diluted common share to $64.65 at quarter end, an increase of nearly 20% year-to-date. Our operating income was $230 million or $2.71 per diluted common share, resulting in an annualized operating ROE of 17.3%. Looking at our consolidated results, our company-wide gross premiums written grew 1.6% to $1.9 billion, our highest production third quarter ever, and we continue to see attractive opportunities across most lines of business. Our quarterly combined ratio was an excellent 93.1% despite Hurricanes Helene and Beryl. Our current accident year loss ratio ex-CAT and weather was a superb 55.7%. Importantly, our loss picks continue to be consistent with the learnings from our in-depth reserve review conducted at the end of last year. Moreover, the underlying data and patterns we see in our quarterly reviews have continued to increase our confidence in our overall reserve position. In the quarter, as Vince noted, we continued to adhere to our philosophy of wanting to see sustained positive momentum before releasing reserves and we recorded a release of $8 million in the quarter. The current accident year CAT loss ratio was 5.8%. We experienced $78 million of CATs in the quarter with the largest portion generated by Hurricanes Helene and Beryl at $43 million. As a company, our 5-year and 10-year average historical third-quarter net CAT loss ratios are 13.6% and 15.8%, respectively, with approximately $40 billion in industry natural CATs this quarter. It affirms our current portfolio as being much less volatile than it used to be as we see our current CAT…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Andrew Kligerman with TD Cowen. Please go ahead.

Hi, Good morning. So just thinking about the reserving. It looked like you had some very nice releases. I think they were in the short tail lines and nothing occurred on the long tail casualty. So thinking about last year in the fourth quarter, you took a very sizable charge on those long tail casualty lines. I've heard some -- I think Pete just cited that you're being very selective in reinsurance and you've non-renewed several liability contracts. So the question for you is, as we go into the fourth quarter, I'm assuming maybe another study, what might give us some confidence that reserves are on track, particularly in the more recent accident years?

Andrew, good morning. It's Vince Tizzio. Thank you for your question. So I think the confidence that we can convey first is the first nine months of reported results. Secondly, the context against which we took the charge in the fourth quarter of 2023 and the specificity that we detailed on the underlying lines of business and the resulting actions that we took. Not only in trend assumptions, loss ratio picks and our view of risk. You've seen through the first nine months in our insurance business a willingness to reshape our primary casualty business at the expense of growth. Similarly, throughout the first nine months, we've commented strongly on our position in reinsurance liability. At the end of 2024, we will undertake our normal third-party independent review of our reserve position. We are working with confidence toward the year end and I'll turn it over to Pete for any additional color.

The only color I'd add a little bit of specificity is, Andrew, if We go back to what we did at year-end 2023, I'd remind everyone we did take a sizable charge in our liability lines in total liability was $407 million out of the $425 million. And of that $407 million, $177 million was associated with years '20 to '22. So we were not ignoring those years as we did our study at year-end '23 and actually took some significant action. And then as I think about '24, since we knew what we were looking at in the underlying, our expected loss picks for 2024 were representative of all those learnings. And actually in that fourth quarter, as we were ending '23, that's when we put the plan in place to remediate and reshape our primary casualty book. So, all those actions were taken into account and were forethought for us coming into '24. So having said that, I'd also say we do a full reserve every quarter. We sit down with the actuaries and we actually sit down with the claims team, the actuarial team and the underwriting team and have a very full drains up process. And the patterns that we're seeing as a team reinforce what we did at year-end 2023. And we feel good about that as we sit here today.

Very helpful. And my follow-up is around the property markets and insurance. We're just hearing on a lot of these conference calls buzz about, wholesaling being more competitive, large global accounts, London market. Vince, you alluded to it earlier. And you're growing your property business. I think net written premium, you decided 10% and 18% in E&S. So what's giving you the confidence there to kind of keep pushing that growth in insurance?

Andrew, there's a number of factors that give us continued underwriting confidence. Firstly, it's the portfolio construction. It's certain of the sightings I shared in my opening remarks. It is the spread of risk, geographically, by construction type, the average net limits, it is our PMLs, it is our distribution of Peril combined with the fact that, in the quarter, 36% of our written premium came from non-CATs. Moreover, it's a global business and we're able to weave between the different marketplaces. The principal property component of the access organization comes out of our E&S business where as you know, we have freedom of form rate. We continue to see exceptional submission activity. I would acknowledge that there is a moderating of price changes, of course, in the property market, but we continue to remain exceedingly premium adequate and meeting our risk-adjusted return expectations. I'll leave it there. Pete, if you want to add, that's fine.

No, the only thing, I'd add to reinforce Vince's point that as we look at property today after multiple years of rate increases that we are looking at really solid premium adequacy across our property book.

Thanks so much.

Thank you, Andrew.

And the next question comes from Dean Criscitiello with KBW. Please go ahead.

Hi. I wanted to start with the core loss ratio in insurance. I know it ticked up a bit year-over-year and sequentially. I was just wondering if that higher pick contemplates an updated view of loss trends or is just additional conservatism based into those numbers.

This is Vince. Good morning. So I would just tell you that the eight tenths of a point that you're referring to in our insurance business is really just a continued result of our prudence. There was nothing just positive or changing in the underlying. I would draw your attention to our financial supplement and Page 10 where you would see over the last several quarters, our loss ratio ranges between 51.5% and as high as 52.6%. There really isn't anything else to report. There's some mix shift in that. And Pete, if you want to say anything else?

Yes, I'd say it's very consistent with what we've seen this year, Dean, where we did increase the liability picks over 2023 based on what we saw at year-end '23 and that's still consistent this year. And then that's actually being somewhat offset by the mix change on more shorter tail lines business. So any -- what we've seen sort of sequentially is just some noise?

Got it. I appreciate that. And then in your prepared remarks, you sort of talked about cyber insurance. I was wondering sort of what you need to see in the market to sort of return to growth when there and take less of a defensive stance within the insurance line.

Okay. This is Vince. Let me say first that we have a substantial cyber business. We are schooled, we are well-trained, and strong underwriters. What we've done in 2024 is reshape the delegated component and that has resulted in an impact on growth. What we've done is focus more from a hygiene perspective on the larger concerns, making certain that we can bring to bear our technical acumen and make certain that these entities have the wherewithal to underwrite through the cycle with us. Additionally, we chose a partner in Elpha Secure to help us address what is indisputably a very large customer segment, the upper end of small, lower end of middle, and we have exceeding trust based on the risk analytics of that partnership. Importantly, in the quarter, our U.S. cyber business grew about 8.3%. And we continue to see plenty of opportunity. But frankly, as we've said after CrowdStrike, we are working with humility in the class. We're making certain that our limit profile, our risk selection criteria is maintained. And I would give a shout-out to our Incident Commander team that was launched back in June, really providing some services to our primary insurers demonstrating being available to them for inquiry, but also in the event of a loss. So we feel really good about the momentum that we're gaining. We acknowledge that we're taking a short-term hit on the written premium side, but we're a long-term participant in the market.

Thank you.

Thank you.

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

Hi, thanks. Good morning. My first question on -- you were mentioning light on the insurance margin, right, that you guys did adjust your picks right at the end of last year, start of this year with last year's review. So I'm just trying to get a sense, is there any movement that you saw during the year or anything that you have in mind as we go into just the annual review this year? And then I think you guys had mentioned, right, you obviously did a real big deep dive last year that it would still be an in-depth review, but I think not as much of a deep dive. Can you just update us on like this year's process relative to years past?

Hey, Elyse, this is Pete. I'll handle that. As we look at the data that we have this year, as I mentioned in my prepared remarks, especially when we look at a lot of the keys we changed, where we changed our trend assumptions and we changed our development patterns, those were really important. And you've actually heard others in the industry now talking about that in 2024. Based upon the changes we made at the end of last year, we still feel very confident about those changes and what we did in our reserves. And so that gets to my comments about as we look at the data and we look at the patterns we're seeing, we still feel very positive about the changes that we did last year. As we think about as going into year-end, we will actually have once again outside actuarial firm give us an independent opinion and that will bring us to us. So we'll get another pair of outside eyes looking at our results. We will not do the same, I'll call it in-depth review we did with the claims department last year, but I would say this, that the interaction that we now have between our new claims head, our new AXIS Head of Actuarial Reserving, and Vince and I and Dan Draper, our COO in the quarter, highly interactive. That process is solid and happens every quarter. So we feel really good about where we go as we're heading into year-end.

Thanks. And then on just property pricing, and I think my question is both primary and from the reinsurance side. I know you guys don't write the business, but probably just can kind of see what's going on there. We've heard like mixed commentary so far this earnings season just in terms of what could come out of the two Helene and Milton. So what are your expectations for primary and then if you have a view on reinsurance property rates and just the impacts of the recent storms?

Well, I think Elyse, good morning. It's Vince Tizzio. I think we sized for you in our prepared remarks what we think the impact would be to our organization. And you saw, I think convincingly the 5.8 catastrophe ratio. I think that the property market remains dynamic. I think that there is across the globe receding rate certainly occurring. I think that there is a lot of risk profile changes that are going on. If you look at our portfolio, 35% is non-CAT. It's a competitive market. But bear in mind, we're predominantly through the wholesale channel here in the United States. I don't really have a view of property reinsurance other than to share the sort of comments that came out of the Monte Carlo conference. But for AXIS, its vehicle for property remains on our insurance business. It's a global business. We've got about eight different businesses providing one form or another of property. Our onshore and our E&S property units in the quarter performed well and they're performing well against a very strong premium adequate portfolio with very good construction on underlying risk selection criteria, including limit deployment.

Thanks. And then my last question, premium growth, right, is did slow in the quarter on both segments, but there was some timing and business mix initiatives that drove that. How do you -- based on your view of underlying market conditions, how do you think premium growth will trend in both businesses in '25? I recognize it's a dynamic market. But based on how you see things today, what's kind of growth expectations for next year?

Elyse, it's Vince again. What I would say is, firstly, we're not done with our plan of 2025. But I think the expectation our shareholders should have is, one, we're not going to grow at the expense of profitability. We've shown courage in 2024 to sacrifice top-line in certain businesses. We've commented on them in the past public D&O, primary casualty, delegated cyber to just name three. And in reinsurance, our team is doing a bang-up job at leaning into the specialty lines. Having said that, look, we're a growth company. We still see opportunity to grow our business and we do see green shoots. And I would really point importantly to the very good work of our North American team. You may recall, Elyse, at the Investor Day, we commented on some $600 million of new initiatives. And we felt pretty good about the sizing of those opportunities. They are new and expanded initiatives. But in a discrete way in the third quarter, almost 40% of the growth of our insurance business, that $69 million year-over-year came from new and expanded initiatives. So I feel very good about the team's readiness to profitably grow in '25. I'm not going to give you order or size at this point, but I think the bumper sticker is we're going to put profits over premium growth and we do feel that there's plenty of markets to grow our premium adequate portfolio.

Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Vince Tizzio for any closing remarks.

Thank you. Thank you for joining today's call. In summary, it's been a strong quarter for AXIS, and we're very proud of the financial results that we delivered. They are aligned with our Investor Day expectations. Finally, thank you to my colleagues at AXIS worldwide for the great work that they're doing, their focus on our customers, our brokers, and exceeding the service expectations. Thank you very much. This completes today's call.

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