AXIS Capital Holdings Limited (AXS) Q2 2026 Earnings Report, Transcript and Summary

Good day, and welcome to the Second Quarter AXIS Capital Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cliff Gallant, Head of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to our second quarter 2026 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 Matt Kirk, our CFO. 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 supplement. With that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. Before sharing my prepared remarks, I want to first acknowledge the incredible efforts expended by my colleagues around the world in delivering strong first half results that are aligned to our strategic focus and ambition. This was a solid quarter where AXIS continued its track record of delivering consistent profitable growth, and our results included 14.3% annualized operating return on equity, a 15% year-over-year growth in diluted book value per share, our 15th consecutive quarter in doing so. Our performance was generated against the backdrop of a market impacted by several trends. As has been widely reported in the industry, market conditions are softening, and we are observing increasing competition and pricing pressure more broadly across the micro markets I've described in past calls. However, terms and conditions and limits have remained largely intact, and AXIS continues to lean into attractive specialty markets where we see premium adequacy and risk-adjusted returns that meet our standards. Second, the Iran conflict has generated year-to-date industry losses that is believed to be in the range of $2.5 billion to $3 billion. In the quarter, AXIS reported $31 million in losses from this conflict, which is classified as a cat and driven primarily by coverages within our terrorism and marine war businesses. Both are specialist classes, where AXIS participates as a lead market with a strong and long established reputation. Thus far, the business remains premium adequate, and I'll note that our underwriting controls are among the most conservative in the market, and that our team is very closely monitoring the situation on the ground. Lastly, this was a quarter with some $21 billion in industry catastrophe losses, which were lower year-over-year, but the composition continues to shift. $18 billion of the industry cat losses in the quarter came from severe convective storms. These perils are becoming more frequent, more geographically dispersed and more costly per event. And during the quarter, AXIS absorbed $49 million in losses from SCS activity, which was well within our expectations. Let's now unpack the quarter. AXIS generated a 93% combined ratio, 89% current accident year ex-cat combined ratio, 10.9% GA ratio, which is in line with our expectations. And we produced gross written premiums of $2.7 billion, up 6% over the prior year. Our growth was disciplined and targeted towards specialty short lines, predominantly within our insurance segment. In the quarter, short-tail represented 57% of our premiums, including 59% in insurance and 51% in reinsurance. Moreover, the growth was achieved even as we cycle-managed within our reinsurance portfolio, reducing our premiums by 25% as we continue to practice vigilance in liability and professional. Our growth in the quarter was aligned with our strategic focus and supported by the investments that we've made in recent years to broaden our capabilities. Our expanded classes, which are largely in short-tail lines, continued to deliver profitable growth as we further expanded our share in markets where AXIS has historically been underrepresented. Second, as discussed in previous calls, our AXIS capacity solutions capability is continuing to match our underwriting expertise and third-party capital appetite to meet our customers' needs. ACS is enabling greater gross lines on selected classes that are premium adequate while maintaining our net underwriting appetite. Fee income from ACS was close to $4 million in the quarter, and we expect this to grow to about $17 million for the full year. Let's now move on to our segment results, and we'll begin with insurance. It was a strong quarter for our insurance business, highlighted by premium generation of $2.2 billion, which was up 15% over the prior year, underwriting income of $119 million, a 90% combined ratio and a current accident year ex-cat combined ratio of 84.5%. Unpacking our insurance results further, our core insurance portfolio generated about 2% of the growth in the quarter. ACS contributed about 8%, and we drove about 5% of our insurance growth from our expanded classes. Our progress within insurance is achieved as we further lean into our multivariate channels of distribution. Indeed, we've developed and introduced propositions that give us greater and more diversified access to targeted specialty lines in our key markets. In North America, within the wholesale channel, our reputation and brand recognition and wallet share is substantial. And in the quarter, 68% of our North American insurance premiums came from wholesale. Submission flow remains healthy at 20%. We are pursuing a number of attractive opportunities within the North American retail segment that are not in conflict with our wholesale business, and nearly 19% of our North American insurance premiums in the quarter came from retail, and we see continued upside potential. Our delegated business was flat year-over-year, representing about 13% of premiums. And finally, in our London market business, we are a top syndicate with lead propositions in a number of lines and maintain a largely short-tail portfolio with highly specialized capabilities. Let's now step back and look more deeply at insurance market conditions and AXIS' posture. In my outset comments, I noted the softening market conditions that we are observing are now broadly across most of the market. For AXIS, we are leaning into our diversification of product, customer segments and deep specialty expertise to drive disciplined and targeted growth while cycle-managing where needed. I'll now provide observations across several lines of business. Within property, in the quarter, gross premiums were up 21%, fueled in substantial part from our ACS capability. On a net basis, our book has shrunk by 15% in the quarter as we increased our reinsurance cessions on our property treaty. Within our property portfolio, rates were down 17% in the quarter. As this market now transitions more rapidly into a softer environment requiring deepen cycle management, we take confidence in our starting point. We've built a portfolio with premium adequacy and an average net limit that remains in low single-digit millions that is well balanced in peril and geographic mix and also backed by a cat XOL protection that attaches at $100 million per event. In liability, we grew 8% in the quarter, primarily through rate increases of 7%. Our premium dispersion was spread across U.S. Excess Casualty, a substantial business. It shrunk 4% and delivered rate change of 8%. This book remains premium adequate. Our dedicated U.S. excess casualty lower-middle-market unit delivered 22% growth and is also premium adequate. In our previously announced RAC Re transaction, liability lines contributed $21 million and delivered a rate change of 10%. I'll note that our primary casualty business, an area where we've maintained a cautious stance, has shrunk by 8% on a year-to-date basis and has yielded a 9% rate increase. In Professional, Growth in the quarter was 16% with a rate increase of 2%. A key driver was E&O, where we continue to lean into our expanded classes, including Allied Health and Design Pro, to name two. Our growth in Professional was also supported through the RAC Re partnership. Within cyber, in the quarter, we reduced premiums by 5%. Rate reductions in cyber continued and were 7%, adding pressure to premium adequacy. At a group level, we've reduced our premiums by 30%. Let's now move to our Reinsurance segment. In the quarter, we executed against the targeted specialist reinsurance strategy that we've been discussing with you over the last several years. In the second quarter, AXIS Re generated its 10th consecutive quarter of profitability. We produced $400 million -- $440 million in premiums and more than half, 51% of our production came from specialty short-tail lines. We generated $90 million in new business with 94% coming from short-tail lines, and we produced a 94.5% combined ratio. We're enjoying excellent premium adequacy across all of our specialty lines with the exception of our A&H employer stop-loss business, where we are seeing continued pressure and competition. This quarter, approximately 22% of our reinsurance premiums for the year were up for renewal. As noted earlier, we shrunk our reinsurance book by 25% in the quarter. Nearly all the reduction came from lines that we've previously pointed to as being cycle-managed. Professional lines contributed 58% of the reduction in premiums and liability contributed 42%. Our reinsurance strategy and value proposition remains consistent. As we look to the future, our focus continues to be on specialist classes, supported by highly selective and disciplined liability and professional appetites. Stepping back, across the company, we continue to add talent to complement our team and support our ambition. I'll share just two recent examples. Tony Izzo joined AXIS as our Chief Commercial Officer and is helping us even further elevate an already strong global distribution platform. Within our operations team, we have added Rahil Jagani as our Head of AI and Technology Strategy, serving in a new leadership role that will be the bridge between strategy, business value and execution of AI and emerging technologies across our enterprise. I'll add that for three years through our How We Work program, we have strengthened AXIS' operating foundation, simplifying processes, embedding agile ways of working and piloting AI across underwriting, claims and operations. By creating the group COO role announced last quarter, we took a deliberate and strategic step to bringing together the functions that shape enterprise execution as an integrated team under a single leader. This is a structural response to how our industry and the risk environment within specialty is evolving, and it is enabling us to scale AI, protect underwriting discipline and translate transformation investments into measurable financial outcome. In the third quarter, we will celebrate the 25th anniversary of AXIS. Our company was born in the aftermath of September 11, when our founders answered the call within the market for specialized products during a time of global uncertainty. Just as we did then, today, AXIS stands apart for its specialist capabilities, its talent and its expertise in helping our customers navigate a volatile world. In the last several years, AXIS has made tremendous strides propelled by our discipline and consistency in execution, its straight-spoken style of management, its strong caliber of talent, excellent customer service and our relentless focus on delivering value to our shareholders over time. We covet the trust that we've earned, and we will endeavor to further advance our strategy and realize our ambition of being the best specialist underwriter in the world. In closing, this was a solid quarter for AXIS. We acknowledge the market has become softer, and we have a strong and resilient portfolio that is built for the market ahead. We continue to see attractive risk-adjusted return business to target and maintain within our portfolio. We also expect to continue to realize the benefits from the investments we're making in products, distribution, technology and talent. Finally, our strategy is predicated on generating long-term value creation for our shareholders. With that, I'll now pass the floor to Matt for his comments.

Thank you, Vince, and good morning, everyone. I'm happy to have my first full quarter as AXIS CFO under my belt. AXIS is ambitious, and we have a lot of positive momentum today, and I see my role as making certain that AXIS remains on sound financial footing to have the flexibility to execute upon our operating goals. The second quarter was strong. Our net income available to common shareholders was $251 million or $3.38 per diluted common share, resulting in an annualized ROE of 17%. Our operating income was $211 million or $2.84 per diluted common share, which resulted in an annualized operating ROE of 14%. Starting with our group underwriting highlights. Our gross written premiums of $2.7 billion were up 6% over the prior year quarter, driven by ongoing strength in insurance, partially offset by expected declines in reinsurance. The combined ratio was 93.1%. Cat losses were $80 million, resulting in a cat loss ratio of 5.3%. These losses were primarily driven by severe convective storms in the U.S., which totaled $49 million, with the remainder related to the Middle East conflict. Both quarter and year-to-date weather-related cat losses are in line with our modeled expectations. Losses from the Middle East conflict currently appear modestly below our market share. However, the situation remains highly fluid, and we are actively monitoring our exposures and importantly, we are standing by to support our clients. Over time, these lines have been highly profitable for AXIS. We are a leader in the market, often setting terms and conditions. And on occasion, we are one of the few markets available to our clients. In many ways, these lines define the company as a true specialist. Turning to reserves. We remain confident in our company's overall position. In the quarter, we recorded a reserve release of $15 million with a $12 million in insurance and $3 million in reinsurance. Our releases continue to be from short-tail lines. Our acquisition expense ratio of 20.8% is up against 19.8% in the prior year quarter as we continue to emphasize growth in shorter tail lines, which carry higher commission costs. In insurance, this largely relates to pet, surety and ACS sourced businesses, while in specialty reinsurance, it would be credit. This trend will continue for the foreseeable future as we emphasize growth in shorter tail lines. Our fee income was $22 million, including both insurance-related and other income and offsets to G&A, stemming from our ILS investments and a growing contribution from ACS. Our consolidated G&A ratio for the quarter, including corporate, was 10.9% versus 11.6% as dollar spend on G&A was essentially flat year-over-year. We're pleased to have achieved the target level we presented to you two years ago. For the full year, we are still targeting 11%, although as we have said previously, we will continue to make attractive investments in the best interest of shareholders when opportunities arise to hire new teams, invest in the business, reward high performers and build long-term shareholder value. Moving to our segment results. Insurance had gross written premiums of $2.2 billion, up 15%. Our underlying insurance book grew at low single digits, while expanded products and initiatives accounted for growth in the mid-single-digit range and additional growth came from our ACS innovations, including the Ryan RAC Re deal. We've grown strongly as we've made the most of the current environment. And as Vince alluded to, in line where we're seeing particularly rapid rate declines, such as property, we're exercising increased prudence and selectivity. Our insurance net written premium growth was 6%, below that of our gross premium growth, partially reflecting the normalization of 1Q's net faster than growth that I discussed on our Q1 call. In addition, at midyear renewals, we increased our cessions in property from 30% to 37%, while we maintained our $100 million cat XOL attachment. Our underlying insurance loss ratio was 54%, 1.7 points higher than the prior year quarter. We previously indicated that we expected approximately 1 point of year-over-year deterioration driven by business mix changes and loss trend. During the quarter, we took measures to reflect evolving market conditions and maintain a high degree of confidence in our loss picks. Specifically, we are incorporating accelerating softening in property and recognizing a more competitive environment in the casualty lines. We expect these pressures to be ongoing. We will continue to be transparent about what we are seeing across the market and the actions we are taking in response. Turning to reinsurance. In line with our forecast of double-digit declines for the full year, gross written premiums were down 25%, reflecting our decision to cycle-manage our casualty lines. The reinsurance combined ratio was 94.5% for the quarter. The current accident year loss ratio was 68.3% versus 67.9% in the prior year quarter as we recognized increased competitive pressures in A&H employer stop-loss business. In addition, we reported 0.8% this quarter for war-related cat losses. When we look at our business as a whole at the halfway point of the year, you can observe that we are managing through a changing marketplace. Company-wide gross premium growth is coming in at expectations, and we're bringing in new fee income associated with ACS. On a net premium basis, we are actively managing our writings and exposures, including increased property cessions at renewals and a continued pullback in casualty writings in our reinsurance book. These actions, coupled with what we see as prudent action in our loss picks, shows our emphasis on continued protection of the balance sheet and shareholder returns. Turning to investments and capital. Investment income was $182 million, largely in line with $187 million in the year ago quarter. Net investment income from fixed maturities performed well, up 9% over the prior year quarter, driven by strong cash flow and a higher book yield, partially offset by capital return to investors through dividends and buybacks. Returns from our alternative portfolio were modest but within our expected range. Overall, our investment portfolio remains well positioned, supported by growing fixed income base, attractive market yields, continued operating cash generation. Our effective tax rate in the quarter was 19.2%, and we would expect it to run in this range for the foreseeable future based upon our expectations of where we will report profits. We remain in a very strong financial position, allowing us to return capital to our shareholders through dividends and share repurchases while prioritizing organic growth opportunities. During the quarter, we returned $122 million to our shareholders through dividends of $33 million and share repurchases of $89 million, up from $60 million in Q1. At quarter's end, $263 million remained on our current authorization. We believe we are creating shareholder value, which is not fully recognized in our current valuation and thus, we expect to continue to be active in repurchases in the second half of the year. With that, we'd be happy to answer your questions.

Good morning. Really looked like a solid quarter. I'm looking -- I want to zero in a little bit on the loss picks because in insurance, where you kind of were up about 2 points on the accident year loss ratio at 54%. Should I assume that the higher loss pick was all generated by property? Because when I -- Vince, when I look at the rates that you mentioned on the call, they seem like they're kind of in line with what Chubb was saying where general liability was up 6% to 7% and excess casualty loss costs were up 9.5% to 12%. Are you kind of on the casualty side, seeing keeping your rate up in line with the loss cost? Or are you a little behind there?

Andrew, good morning and thank you for your question. The rate -- excuse me, the loss ratio change that we actioned in the quarter is driven in large part by property, but also our continued cautiousness and stance within casualty lines. And just as you know, over the last several quarters, we've continued to rightsize that business. In this quarter, we produced a 7% rate change, which was behind trend. And we've reflected the apportioning of where we were tolerating growth. You'll note from my opening remarks, we pointed to lower-middle-market and ACS, where we found acceptable pricing in terms and trend assumptions. But in the larger business of excess casualty, we shrunk that business. And equally, on the year-to-date basis, our primary casualty business has shrunk. Maybe more broadly, the actions we took with respect to our attritional loss ratio change are really a combination of two substantial factors. You highlighted the line of business that's driving it. But let's not forget the mix component at AXIS. Now more than 50% of the mix is short tail. We're being responsive to the change in landscape around pricing, and we're observant to preserving and protecting our premium adequacy in order to sustain delivering ex-cat combined ratios of 84.5% in our insurance business. And so we're going to remain highly agile, focused on the long term and be responsive to the trends that we're seeing and not merely observe them in written expression. We will action within our portfolio, changes in our underwriting appetite, course corrections in our loss ratio and build in sustainability and predictability in our results.

That makes a lot of sense, Vince. And it kind of carries through to reinsurance with gross written down 25%. And you mentioned that it was driven largely by the casualty nonrenewals. So I'm kind of curious, what are you seeing there on ceding commissions and rate -- reinsurance rate, that is not the underlying rate?

Yes. So the reinsurance strategy is being executed exactly as we had foretold in the fourth quarter. As you know, for the last several years, preceding Dan, who runs the segment today and has articulated a cautious posture in respect to professional and liability. That was largely off of what we found to be an unfair trade on ceding commissions, cautiousness in our view of risk outlook on loss development costs, and we've maintained that cautious posture. In this quarter, acutely, our growth was down 25%, and that was largely because of the composition of the North American portfolio, which had a large percentage of its professional and liability business expiring. And so we've maintained the discipline that we've been talking about, and we do expect to continue executing that strategy. And I think if you look at the 6-month mark of our results, I think you'll feel fairly comfortable that we're likely to end up around the range of where we are at the 6-month mark. Matt, would you like to come over the top there?

Yes, Vince, and Andrew, good talk to you again. Just the 25% feels like a big headline. And I just call everyone's attention that our Q1 decrease quarter-over-quarter was 2%. And so for the full year, six months, we're down 10% year-to-date, and that's broadly where we think we're going to end the year. So I just wanted to give the context of what's happening quarter-over-quarter in both periods, Q1 and Q2.

And just point of clarity, rate is down a little bit on the reinsurance casualty line as well?

In the second quarter, we delivered 8.4% in liability, which is down from 11.9% in 2Q '25.

I guess my first one is going back to the 170 basis point increase in the loss ratio in insurance. By how much did you increase the casualty picks there? And are these higher picks a function of higher loss experience that you're seeing or really more a function of being more prudent and maybe building in a greater uncertainty reserve?

Yaron, it's Matt, and good to speak to you again. This is not from trend. Let me just be specific. We're talking about 1.7. I want to go back. We signaled 1 point and change at year-end. In Q1, we said 1 point sounded about right, but we would come back to you if pricing changed beyond expectation. And that's exactly what has happened and seen in this quarter. in property, we're seeing pricing down 17%. That's beyond what we had anticipated, specifically E&S property down 22% in the quarter. That's really tilted us that we have to be more conservative with loss picks. So it's a combination of both property and casualty, and we remain cautious, and we wanted to show those results as we see them to the Street.

And do you have a number for the increased casualty loss pick?

Yes. We're not going to give guidance. I mean we're talking about splitting 0.7%, but we are saying we are seeing rate increases on casualty not where we think they need to be, and we're taking appropriate caution.

Okay. And then is it fair -- just by looking at the growth or even the small reduction in exposure in casualty, is it fair to say that you still see the casualty book as not just rate adequate, but attractive enough because we are seeing a better growth profile there than we are in reinsurance where you're clearly cutting the casualty exposure by a much more significant amount?

Yaron, this is Vince. It will be very selective and very targeted in the growth of any of the casualty businesses that we are putting our pens down on. It is revealed in part in our outset remarks, uncharacteristically in our excess casualty business, which is a franchise valued business for our company, we did not grow the business. We saw rate pressure, and we responded. In contrast, our lower-middle-market businesses are broadly performing well. And so we don't cast a brush in casualty that suggests all are adverse or becoming increasingly competitive. We're being highly selective and highly disciplined, and that will be our course here on out.

I wanted to start on the competitive environment. A lot of that competition has been attributed to MGAs. And I was just wondering if you could curtail any relationships there and how you manage MGA relationships in a more challenging pricing environment.

Rowland, this is Vince. Well, listen, we've had a number of actions extended within our delegated business ranging back from 2023 in terms of who would be within our portfolio of delegated. Recall the proposition of why we use delegated is to access different distribution channels, capture specialized lines with talent behind it and operational efficiencies that are present. We have a highly disciplined approach to delegated. In the U.S., we reported flat growth year-over-year. At the company level, our London market business is not outsized relative to the participants in the London market vis-a-vis delegated. We had a 5% increase in our delegated portfolio in 2Q over 2Q. That was largely driven by previously announced delegated partners in Pet and surety and yes, ACS, where we have continued strong confidence. And so we're going to continue to monitor these relationships. In the secondary part of your question, we have a lot of governance around it, involving claims, underwriting and actuarial. We have to maintain that vigilance, particularly as the pricing environment continues to worsen.

That's super helpful. And then I guess just turning to the Iran conflict losses. Are those stemming from policies written prior to the start of it? And should we see lower levels as time progresses even if it's a steady state?

We've been active in the conflict in support of war on land, so-called terrorism coverage and so-called marine war, covering vessels. And so we've actioned our policies, which, as we've described in the past with respect to marine on war. These are very short-term policies, highly specialized offerings. These losses and written premium are occurring real-time live, and we have been in support of many of our long-standing insurers, something that we're fairly proud of. We are providing coverage to insurers that, in many instances, are decade-old policyholders to our company in one form or another, and we're happy to support them while remembering that we've got to earn a fair return on the capital we deploy.

And if I could sneak just one more. Corporate expenses were up fairly significantly year-over-year. What's the driver of that?

Yes. I would look at just overall corporate expenses on a quarter-to-quarter basis are where we expect them to be. gross expenses year-over-year are relatively flat. I wouldn't look into quarter-over-quarter on specifically corporate and just focus your attention on the overall expense base, which frankly, we're quite happy about. We're in the 10.9% range, 10.8% range last year. We're committed to the 11%. And that 11% is inclusive of the corporates overall.

So Vince, I want to dial in on the MGA business a little bit. But actually, just first one quick question on the underlying loss ratio in insurance. Was any of that maybe kind of catch-up from hiring loss -- higher loss picks in the first quarter as well? Or is it simply just second quarter?

No, Brian, second quarter forward.

Okay. Perfect. On the MGA stuff, I guess just curious, are the loss picks of the results you're seeing on your MGA-produced business different or perhaps worse than maybe non-MGA produced business? Are you seeing more rate pressure there?

No, no. Remember, part of our assumption set as a result of the changes we took in our delegated business contemplate alignment on factors like pricing, loss picks, assumptions of trends, target customers, average limit grants. And so there's a careful eye. The direct answer to your question is no, not outsized. There are always puts and takes between and among portfolios, of course. But in the aggregate, the answer is no.

Great. And then one other just quick one here. If I think about RAC Re, I know when you put it all together, you provided some potential volume, which you could get from the program over the next several years. Given the competitive marketplace, one, are you evaluating the MGAs that you're actually going to participate in because I know you've got flexibility there. And two, do you think that potential volume that you thought you would get from the program could be lower?

Brian, thank you for recalling the terms associated with the RAC Re transaction and most particularly, the observation relating to our ability in year two to evaluate the continuance of the MGUs that we're supporting. And to your question, we are examining those that we will continue to participate in, course correct wherever we think is necessary. So I would intimate that volume may come down from that number. I'm not prepared to tell you what the deviation would be from the numbers that you have. but we will remain bottom line focused, and we are enjoying the structure of our contract with Ryan Specialty and a strong partnership generally there.

Just wanted to go back to Vince's comments in response to Andrew's question earlier on the impact of mix in the insurance loss picks. It felt like from your prepared remarks that professional lines and E&O is an area that's disproportionately growing on a net basis. It's hard for us to see because of the ACS impact. Is that fair? And should we expect professional lines to come in at a higher loss pick given you're shrinking in property and primary liability, if I understood you correctly.

Yes. I would just call out professional is higher in the first half of the year, and we will expect to see that to moderate in the back half of the year. And no, we're not indicating higher loss picks on the professional lines of business.

Okay. And then maybe just on the G&A ratio. You guys are showing that you're going to come in below the 11% that you guided to. I guess, how are you thinking about that ratio from here just with all the moving pieces?

Great. And yes, I mean, look, it's been a focal point for the past two years since we put that out there. I wouldn't get caught up on a 10.9% versus an 11% versus 11.1%. I think the key message here is we rightsized our expense base to our book. And so we're not going to give guidance on next year, but we're going to continue to moderate our expense base to mirror what our writings are. So we're comfortable with where we are right now. We're comfortable with our target of 11%. And if that changes in the future, we'll come back to you.

I would just add a couple of sentences there. As we entered in the first quarter, if we see an opportunity to extract the team, make investments that accelerate our journey of profitable growth, we will make those investments. We believe that we will achieve our commitment of 11%, but we also are going to remain highly active in the market. There's a number of talent dislocations arising, and our teams are talking to any number of people. So we're going to be balanced in the interest of our shareholders and think long term.

If I could just ask one more. Maybe just on the -- going back to the insurance reserves. Has there been any change to the IBNR ratios in that segment?

No, we haven't made any significant changes to our reserves. We're confident in our overall strength and adequacy of our overall reserve position.

My first question is on the insurance accident year loss ratio. So going back to that, I guess if you kind of embed these higher picks, what are you assuming in terms of the second half or even into '27 in terms of pricing? Are you expecting property and casualty pricing to get worse from here to stay stable? Like how should we think about that?

Yes. And look, I would say what we've reported in our attritional loss ratio in the quarter is not a bad barometer of what we expect to see for the rest of the year. We're not going to give guidance in 2027. But as you've seen, when we see things changing and they are changing fast, we're going to react. But that's a good starting point to try to model out for the rest of your year.

Got it. And then my other question is on the reinsurance segment. I guess as you aggressively continue to pull back, particularly in liability and you've had some recent headcount cuts, like how do you kind of envision the business performing as you kind of cycle-manage and how low of a mix of the total portfolio can we see that go? And then just sticking with that, like any challenges with employee retention, just given like the significant pullback in the business?

Well, firstly, we have an established range between our insurance revenue from reinsurance. We've been saying over the last several years, an apportionment of 75-25 would look approximate to what we would look like in the intermediate term. This quarter on a gross basis, 83-16 year-to-date, we're in keeping with our historical range. In respect to the execution of the strategy, we acknowledge there can be people pressures. But we're confident in our ability to retain the colleagues that we wish to retain, attract the colleagues with the value proposition that we have and continue to deliver on the commitments that we've made since 2023 with respect to the strategic purpose of this business, the financial contribution we expect from this business and the stability of the performance of this business. And so we acknowledge that we're operating in a challenging environment there. We have a very particular view on long-tail lines. we're going to continue to execute against that. And with reference to the insurance business and just adding a couple of comments to your question. The loss ratio that we adjusted, which is about 0.7 point up from what we had referenced back in the fourth quarter with the available information we had at that time is, as Matt says, something that you should contemplate at the year-end being in this vicinity, but we're going to be responsive to the trends that we see in the market. And so I want to make certain that the full year view for you is at least modeled to where we are now, give or take, but that's where we'll be in both underwriting platforms from a loss ratio perspective.

If we think back to a year like, let's say, late 2007, 2008, ultimately, pricing was headed down, margins were deteriorating. But the truth is if you go back in time, you would have written as much business as you possibly could. It was great for a number of years more. The fact that not just you, but everyone is worried about markets right now, how do you know that you're not leaving great opportunity on the table and just got a little greedy with the great loss ratios in the past few years? And shouldn't you be willing to tolerate a decent amount of loss ratio deterioration from here and still have a nice business in your underwriting?

Josh, I agree with the premise and the question, and I think we're reflecting that to you. On a comparative basis, AXIS' insurance business is growing fairly healthy. We're very clear about where it's growing. We're posting an 84.5% ex-cat combined ratio. We've raised our attritional loss ratio 7/10 beyond what was modeled and understood from us to be a target. I think we're doing exactly what you say. We keep referencing premium adequacy. Our eyes are on the right prize. We're trying to build long-term value creation. We're willing to toggle and mix between all the ratios to optimize an outcome for our shareholders. So respectfully, I think we're doing exactly what you say. We are tolerating growth. We see a very disciplined display of where that growth is coming from, and you see us toggle quarter-to-quarter to optimize the opportunity.

And if we're looking at history as an indicator, if we go five years to the future from late '07 by 2012, broadly across the industry, underwriting margins have deteriorated by several hundred basis points, 500 plus more for the best underwriters. Realistically, do you -- does AXIS is it doing things to try and prevent that from happening this time? Or will the cycle ultimately play out like it already does as you plan for long-term strategy in this industry?

I can't predict five years out. What I can tell you today is AXIS is expending every reasonable ability and measure to see tomorrow today in all of the information management that we get integrate that information within our integrated underwriting model and take decisions that are for the long term and to be smart as we possibly can be, including our claims insights, our actuarial insights. And by way of example, you saw AXIS in the last few years, introduce a number of new and expanded propositions. Those propositions and products have served us well, and I think they point directly to your observation about making sure that we see opportunities and equally that we pull back when we see information that is adverse to the long-term value creation of our company. And so we're doing both. We're going to continue to try and do them exemplary, and we're going to continue to focus on the investments we've taken to inform our decisions.

Matt, I think you mentioned for full year insurance underlying loss ratio up 1.7 points. That would kind of imply greater deterioration in second half. Could you maybe unpack what would drive the incremental deterioration for the back half?

Yes. I think it's continuing to see what we've seen in the second quarter. It's mix. And if we continue to see an acceleration of price decreases, that would allow that to drift a little bit higher. So those are the two factors that we're focused on.

Okay. And as you look at the casualty portfolio each quarter, are you seeing anything in observed claim severity or litigation activity, settlement behavior that's kind of different than what is contemplated in your reserve assumptions today?

I would say, overall, look, our reserve position remains strong. We have a lot of focus and robust reserving procedures. We're always analyzing A versus C. You saw we took reserve savings on our short-tail business. And we have and continue to look at long tail. We have continued caution there. We're not seeing anything that we can say would tip us one way or the other at this point. We're monitoring it very closely.

So one quick question on reserves. I know you've emphasized that it's short tail lines. How many accident years back do the reserve redundancies stem from?

So if the question is what are we seeing in where the short-tail reserve releases were through six months, most of those, I would say half of them came from 2023 property. And then the balance of it was spread across a number of the more recent years.

Okay. Perfect. That's helpful. I want to ask sort of the opposite question of Rowland asked before. Is there any way of quantifying the premium upside from the Middle East conflict compared to what you were expecting before?

Yes. I'll take that first. And we are active. And as Vince said, we're supporting our clients. We are seeing additional premium. You look at our year-over-year in marine, that is up, and that is reflecting new premium written from the conflict. A lot of these are 7-day policies and pricing is dynamic depending upon where we are in the conflict. But there is some upside of premium that we are now reflecting. And frankly, we're comfortable ensuring that we make the right return profile on the risk we're taking there.

Okay. No, that's helpful. And then I guess a bigger picture question. I was hoping, Vince, you could let us know the level of available talent. Is it -- how is it evolving? Does market softening have an impact on people being available? Are there other trends that we should be keeping an eye on besides, I guess, M&A, which is the typical big dog there?

It's Vince Tizzio. Good morning. The profile of people being attracted to AXIS really is unrelated to the soft market. I do agree with you that in soft markets, underwriting talent sometimes becomes vulnerable where they are. They don't like the culture shift that sometimes happens when softer markets set in. So of course, we see some opportunistic people calling and looking for a place to call home. But we're going to remain steadfast by placing first priority on the culture of the organization that we want to attract people with specialized skills, have a collaborative disposition and spirit to work with one another, are ambitious for the long term and have underwriting skills where we're hiring underwriters. And in all other functions, we have no shortage of people applying for our roles. We're going to remain opportunistic, certainly. And within North America, we've had a demonstrated ability to do that in the last few years convincingly. And in claims, of course, we've added a number of resources. And so there's quite a bit of work going on, of course, in the talent component. And we've promoted a number of our own inside access persons, and we remain very proud with a strong engagement score. And I think that will appeal directly to your question of attracting people.

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

Thank you for joining us today. We appreciate your time and look forward to continuing to report on our progress as we continue to relentlessly pursue our specialty leadership ambition.

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