Good morning, and welcome to the AXIS Capital Fourth Quarter 2024 Conference Call. All participants will be in a 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 Mr. Cliff Gallant, Head of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to our fourth 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 Vince Tizzio, our President and CEO; and Pete Vogt, our CFO. In addition, I would like to 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 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 supplements. 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, please allow me to take a moment to acknowledge the tragic wildfires in Los Angeles. And on behalf of all of AXIS, we share our heartfelt support for the impacted individuals, families and communities. We also express our gratitude to the firefighters and relief workers who are doing outstanding work. Moving to our 2024 results. 2024 was a great year of progress for AXIS, culminating as one of the best years for our company. Before we unpack these results, I'll just take a moment to thank my AXIS colleagues throughout the world for their excellent work and commitment to our customers, broker partners, as well as to one another. In looking at both the fourth quarter and full year, AXIS produced strong results across all its key indices while advancing our company strategy outlined at our Investor Day in May. The year was highlighted by a number of strategic accomplishments including the expansion of our underwriting and product capabilities, investment and enhancements to our operating model, and the recruitment of new and complementary talent. The changes we have implemented will allow AXIS to continue operating with pace, clarity of purpose and strong execution. We believe AXIS is well-positioned to drive sustained, profitable growth and value creation in '25 and beyond. Let's now review our full-year financial results. We delivered operating return on equity of 18.6% and a year-end book value of $65.27, representing 20.7% growth as compared to the prior year. We generated record operating earnings per share of $11.18, a 98% increase over the prior year and 75% higher than our previous best in 2007. I'll note that our top four quarters of operating earnings per share were all in 2024. We delivered a…

Thank you, Vince, and good morning, everyone. AXIS had a very strong performance in the quarter and for the full-year 2024. In the quarter, our net income available to common shareholders was $286 million or $3.38 per diluted common share and for the full-year $1.05 billion or $12.35 per diluted common share, producing a 20.5% return on common equity. This drove our book value per diluted common share to $65.27 at year-end, an increase of 20.7%. Our operating income was $252 million or $2.97 per diluted common share for the quarter and $952 million or $11.18 per diluted common share for the full-year, resulting in an 18.6% operating ROE for full-year 2024. Looking at our consolidated results, our company-wide quarterly gross premiums written grew 11% to nearly $2 billion, our highest production fourth quarter ever as we continue to see attractive opportunities across most lines of business. For the full-year, gross premiums exceeded $9 billion for 8% growth, an outstanding result. Our quarterly combined ratio was an excellent 94.2% despite Hurricane Milton, and for the full year, it was 92.3% with improvements in both loss and expense ratios. For both the quarter and the full year, our accident year loss ratio ex-CAT and weather was a superb 55.7%. For each quarter in 2024, we were consistently in the mid-50s range. We were vigilant in implementing our learnings from our 2023 fourth quarter in depth reserve review while also reflecting the growth of attractively priced short-tail lines. In the quarter, we adhered to our philosophy of wanting to see sustained positive momentum before releasing reserves and we recorded a release of $16 million from short-tail lines of business with $12 million in insurance and $4 million in reinsurance. As we mentioned on our third quarter call, our normal practice is to…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Andrew Kligerman with TD Securities. Please go ahead.

Hey, good morning. So first question is a little multifaceted. Vince, I think I heard you say that US casualty rates in the fourth quarter in Insurance were up 29%. Did I hear that right? And what's your outlook for 2025? Should we see similar rate increases? And with that, another part to this question, I'm hearing that there's some softness in Reinsurance casualty pricing. Could you talk a little bit about that and what you're seeing there and why the disconnect?

Yes. So, Andrew, good morning. You did hear the 29% correctly. And as we previously discussed, we believe we have to remain in excess of double-digit rate change in that business. Our team has reshaped that portfolio in a very substantial manner. I indicated in my opening remarks the quantum too quite a bit of reshaping and eliminating a premium that was not meeting our risk-adjusted return expectations. So we do expect double-digit rates to persist in '25 and liability. In respect to reinsurance liability, we've been indicating since '23 Monte Carlo, a caution in respect to liability-re. We continue to price that business with a resurgence of rate in liability-re double-digit in the quarter, about 9.7% for the full-year. We'll maintain a cautious underwriting appetite in that line until circumstances change.

Got it. So there is some softness, but what you're doing, you're not allowing for that. Am I reading that properly?

Well, we did not grow liability re in the year and that was purposeful. We took strengthening actions on a number of cedents in a variety of ways, but mostly relating to either the structure of the program, ceding commissions we were tolerating, or in fact, we non-renewed a number of cedents that did not meet our underwriting standards.

Got it, Vince. And then the next question, which I'm sure you might have expected this to come, the wildfires. Could you…

Yes.

Could you give a little color on how you think you're going to be exposed?

Yes. First, just to iterate my opening remarks, our heartfelt concern goes to all those affected and sincere gratitude to the relief workers and the firefighters. For AXIS, this will not be a material event. Be reminded, please that we are a commercial underwriter in the state of California. We are not in the high net worth residential space in the state either. And I would approximate today some 10 basis points to 12 basis points and a market share for us at the end of the day. But again, very early. We have really a strong observation on our exposure in total. Our accounting of claims to date is fairly insubstantial. So that's our view.

That's very helpful. And then just one quick one if I could sneak it in. Pete, you talked about an expense ratio of 13.7%. That was a little higher than I would have accepted. But you talked about accrual or performance comp that drove it up, which sounds like a very good thing because it means that your underwriting was excellent. And so when you said that you're still on track for 11% in '26, could that number be a little higher in '26? If your underwriting is excellent again, but then I suspect it would still be a good thing because the underwriting is excellent. So just want to make sure I'm following that right.

So…

Go ahead, Pete.

Yes. First I'll start is, Andrew, I appreciate the underwriting is excellent. That's helping drive an operating ROE of 18.6% for the year. So really good underwriting going on, very premium adequate book. And we feel really good about what our teams are executing out there today in the marketplace. I would say it may help if I normalize the quarter for you. If we look at the expense ratio normalized in the quarter, the 13.7% would have been about 11.4%. So that should give you some view. As we enter 2025, we believe that we are on track to hit our 11% G&A goal in 2026. And Vince and I and the team are not coming off of that goal for 2026.

Super helpful. Thanks for taking my questions.

Thank you, Andrew.

The next question will come from Yaron Kinar with Jefferies. Please go ahead.

Thank you. Good morning. I want to start with the loss experience in U.S. casualty. And I think you said that the claims patterns are still consistent with the assumptions you set last year. Just want to confirm here, so you've not really eaten into any risk margin there?

I lost you at the end, Yaron. Would you say it again?

Yes. I just want to confirm that with claims patterns consistent with your expectations, the risk margin that you set last year is still fully intact?

Yes, I would say, Yaron, this is Pete, based upon the studies that we did last year and the reserves that we put up last year at the end of 2023, we still feel very confident in those reserves that we put up at that time. We feel very confident about the loss picks that we have for 2024 in our casualty lines of business. And in both those areas we have been updating those studies and the patterns and what we see coming through in the data has reinforced our confidence. You can never say never. But we feel really good about where we are with our casualty book.

Great. Consistent with what you've said in the past. Just want to confirm that. And against that kind of 29% rate increase you saw in primary casualty, also kind of mid-teen increases in excess casualty. Can you talk about what the loss trends in those lines are?

They're consistent with what we've observed to you in the past and others, Yaron. They're performing in line. The current accident year loss picks are sufficiently strong to contemplate both the portfolio construction which includes our limit profile and our sustained outbounds reinsurance. The prior years are not showing anything that would create noise for us against the assumption set that we put forward as part of our reserve charge. You'll have to recall please that in the primary casualty business, this is a business that was substantially underperforming. As you know from my opening remarks, we eliminated a meaningful percentage of those policyholders and we're being extremely vigilant about what we're willing to retain and we're charging what we think is an appropriate rate. And finally bear in mind that this business is underwritten through the E&S channel which permits us to be freedom of form and rate in that class.

Yes. That's a good point. If I could sneak one more on the wildfires. So I realize you're not really in residential and California, but I think you do have a large specie book in London. Do you see any exposures coming through that?

We do. But again, they're within the tolerance that I indicated. We are a meaningful market in species globally and we have a line of sight on our exposure in the state of California. But that is contemplated in the range I gave you.

Yes. And I guess the only thing I -- yes, the only thing I would add on top of that Yaron is we do fairly really good risk management. Again, like you know on our property book we got $100 million event deductible. Our specie book runs through our marine treaty and that has a $10 million event deductible. So depending upon what happens, we'll have to -- we'll look at it, but that's the deductible and obviously, there'd be some rips on top of that. But we feel good about the risk management parameters we put around that book.

Thank you very much and good luck in the year ahead.

Thank you.

Thank you.

The next question will come from Brian Meredith with UBS. Please go ahead.

Yes. Thanks. Pete, any update on the Bermuda DTA and what could potentially happen here in 2025?

Yes, Brian, thanks for the question. The OECD did put out a guidance memo, we'll call it, about two weeks ago. Our expectation is that looking at that there will need to be some adjustments in time. The way we read that is our expectations is Bermuda or other tax authorities will probably do something before 2027. It looks like the guidance that's out there right now would suggest that what's been put up for the Bermuda ETA would be acceptable. I'll use that term to the OECD for the first two years of it. So that would be '25 and '26. Thereafter I think we'll see '27 and outwards actually not come to fruition when I think about it.

So maybe you can walk through how accounting-wise, does that mean you're going to have to do something about that remaining DTA that was supposed to be booked post-'27, kind of reverse that you think it'll happen?

Yes, I think something will happen with we put up for full year, we actually added a little bit more. We're at $177 million at the end of the year. But then after that, sometime before then, we will actually see that have to get adjusted. Now again, that's going to impact really cash, Brian. So the corporate tax rate in Bermuda is 15% now in 2026 -- in 2025. But that DTA, we'll make an adjustment to it probably sometime before the end of '26 when we see what the new tax laws are.

Makes sense. Thank you. And then second question. I'm curious, Vince, given the reshaping of the portfolio that you've been doing anything happened at 1/1 on your ceded reinsurance or anything contemplated in 2025 on ceded reinsurance?

Well, Brian, good morning. We had about five placements at the 1/1. I think of note would be our Cyber Outbounds Reinsurance, which was frankly a very successful outcome. We bought a bit more tail cover. We improved our cede by about three -- excuse me, 4 points. And we felt very good about the recognition of the reinsurance panel that supports that business. Other lines that we placed included construction and marine and renewable energy. Some big placements for us. There again, we had a mix of change of positive changes either relating to the Cede Commission or our participation rate. I did fail to mention in cyber, we actually assumed an additional percentage of some 4 percentage points at this renewal as well.

Got you. That's great. And then -- so does that mean that perhaps as we look into 2025, that we'll see in the Insurance segment maybe a reversal of the decline in premium we're seeing? Is that reshaping kind of done at this point?

Brian, in the third quarter, we mentioned that we would probably extend into the 25-year delegated component of the reshaping effort. That quantum of premium is less than $100 million and it's predominantly in the first-half of the year. So I would suggest to you that that growth rate will be ameliorated, but it's not going to happen in the first half of the year. You'll continue to hear Pete and myself target very specific customer segments geographically and by size of customer. We gave direction of that in our opening remarks. We grew the large North American customer base about 13%.

Great. That's very helpful. Thank you.

You're welcome.

Next question comes from Josh Shanker, Bank of America.

Yes. Thank you very much for taking my question. And obviously the wildfires are a sad and tragic situation. We've had another sad and tragic situation happen this morning in aviation and you're still a player in that market. It's been a long time since a commercial airline has gone down on American soil. Obviously, we don't know all the details yet, but I have a number of questions to understand. If the federal government were responsible for a crash midair, is the private market responsible for that loss? And regardless, would the claims be paid in advance and later found out culpability and whatnot? Can you talk a little about what might happen? I realize we don't have the details, but can we learn a little bit about the market?

Josh, this is Vince. Sorry for the pause. I honestly don't have enough of the facts or information to even respond to your fact pattern. What I can tell you is that with some degree of qualification, we don't believe we're on the American plane. And to your more direct point, it is tragic. As respects the liability and the government, I'd have to look at it in totality to give you an informed point of view.

Okay, and that's perfectly reasonable. Pete, can you talk about the goodwill adjustment in the quarter?

Yes. Thanks, Josh. You'll see we made an adjustment to goodwill in the quarter that actually goes back to the Novae transaction we did in 2017. We looked back then, we evaluated the situation. We had a deferred tax asset that should have been put up in 2017. And so we actually made the adjustment in the balance sheet this quarter. And when we put that deferred tax asset up, that actually reduced then the goodwill, just by a straight calculation. So it was true-up from deferred taxes back to that 2017 transaction. We think that actually closes out basically all the views we have of the transaction. So good news, it's not anything to do with an impairment or anything like that. It was just straight change in a deferred tax asset that should have been put up back in 2017.

All right. And one more quick one and Cliff mostly set me straight, but I'd just -- maybe it's good to get it on the transcript here. The closure of the LPT sometime in the first-half of the year. I mean, I have it in 2Q. Is there any more precision we can get around that?

Josh, this is Pete again. We're going through really two regulators. I think your middle of 2Q is as best a guess as we have also. Obviously, as soon as we get the approvals, we'll be able to move forward with the deal and we'll let you know. But I will tell you, everything's been filed and it's with the regulators and we're just waiting to hear.

Thank you.

The next question will come from Charlie Lederer with BMO [Indiscernible]. Please go ahead.

Hi. Thanks. Just on that last question, I think I had heard you guys say in the past that the investment income on the LPT would begin to impact in 1Q. I just want to make sure that's the case.

The investment income on the LPT -- Charlie, this is Pete, will actually start to impact us after the close of the transaction. So if it actually hits in 2Q, it won't affect 1Q net investment income.

Okay. Got it. And you guys provided some helpful color on the fee income tailwinds you guys have had. Can you talk about the sustainability of that growth and how we should expect that to impact your expense ratio in '25?

I would say that what we actually talked to you about in '24 would be consistent in '25. It is a great partnership we have with really three of our ILS partners. We were on the forefront a number of years ago at using ILS and having great investment partners to handle reinsurance long-tail liabilities. We've really leaned into that. Really great for our underwriters on the front side because they actually get, I'll call it, bigger limits and more capacity to put out there. And we have great partnerships on the back end and our expectation is you're going to see consistency as we go into 2025. I don't know, Vince, if you want to add to that.

I just would add one comment, Charlie. I think it's also testimony of the confidence in the underwriting of our team as viewed by these independent investors. So we take pride in that as well.

Thanks. That's helpful. And maybe just going back to the expense ratio conversation. I guess, as the underwriting durability continues to prove itself out, should we think about embedding more variable comp in a quarterly run rate or is it really more of a 4Q true-up type of item going forward? Thanks.

Hey, Charlie, this is Pete. It's really more of a 4Q true-up item given that we are still even in the CAT business and anything can happen in the year to start thinking about variable comp in 1Q. While I'll be excited to receive report solid results to the street in the first quarter '25 -- 2025, that would be a little -- that'd be a little forward of us to start to accrue variable comp in 1Q and 2Q.

Thank you.

The next question will come from [Harsen Getzoff] (ph) with Wells Fargo. Please go ahead.

Hi, good morning. I had a question on the premium growth trends for 2025. You talked about kind of the new business initiatives that you laid out at the Investor Day and you gave some quantification kind of around the uptick in 2024. But how should we think about those initiatives impacting 2025 premium?

Harsen, good morning. 2024 was a pivotal year in laying foundation for the sustainability of our profitable growth ambition. As you know, we brought a number of our product capabilities from global markets within our Insurance business to North America. They were successfully integrated into our operations. We brought additional new capabilities and they're off to a really good start. We have confidence in the sustainability of those investments, including the commentary that Pete offered with respect to our How We Work transformation program, which has done a very good job at making certain that we have the operating infrastructure to support the growth. So I think it's reasonable to see sustained mid- to high-single-digit growth in 2025 from our insurance operation. Moreover, I would say that the sustained success of our Reinsurance business growing its specialty lines, focused classes, should sustain itself as well. They had a very good year in 2024, a lot of foundational work and I'm frankly encouraged and look forward to speaking about 1Q on the pipeline that they've generated, which is quite distinct from prior periods in the specialty classes. So net-net, we still view ourselves as a growth-orientated company. We have sufficient premium adequacy to guide that profitability journey and we look forward to executing it in the market.

Got you. Thank you. And then how should we think about the use of the capital that's freed from the LPT? Is kind of the Q4 buyback a good run rate kind of moving forward or how should we think about like the allocation of capital?

Harsen, Pete laid out at our Investor Day the uses of capital that range from the continuation of investing in our business, attracting new talent, investing back inside our company as part of our How We Work initiative to certainly maintain opportunistic posture relative to buying back our stock and certainly a very, very high bar on an inorganic. But those are the principal uses and we're going to continue to execute on that playbook. Pete, I don't know if you want to come over the top.

No, I think Vince hit everything that I spoke about last May and have continued to reiterate since then. I would remind you with the transaction's not closed yet. So we are looking forward here with that kind of commentary. But we do see really good opportunities in the market still today and we do think our shares are undervalued as we sit here today.

Got you. And one more if I may. On the California wildfires, I guess what do you guys -- I know it's very early on and no one knows the losses yet, but what do you think about like implications kind of for the later renewals? You kind of have some nationwide programs and some other stuff that renews a little later on. And I don't know if you have a view on 2026, it might be too early, but how do you view that event impacting pricing for propcat specifically -- or sorry, property?

Yes, I think you mean in the balance of '25?

Yes.

I think it remains to be seen. Look, it was $136-odd billion year in catastrophes and so we'll see how the marketplace responds. I don't think we have enough time elapsed to give you an informed view.

Okay. Thank you.

Yes.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Vince Tizzio, CEO, for any closing remarks. Please go ahead, sir.

Thank you, all, for joining today's call. Thank you once again to our AXIS colleagues worldwide, as well as to our valued strategic brokers for their partnership in 2024. This completes today's call, and we look forward to reporting our continued progress in future calls. Thank you.

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