Axis Capital Holdings Limited

Good day and welcome to the Q1 2020 Axis Capital Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Matt Rorman of Investor Relations. Please proceed, sir.

Thank you, Eric. 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 March 31, 2020. Our earnings press release and financial supplement were issued yesterday evening after the market closed. If you'd 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. This is also available through our investor information section of our website. With me today are Albert Benchimol, our president and CEO, and Pete Vogt, our CFO. Before I turn the call over to Albert, I'll 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 Form 10-K and other reports the company files with the SEC. This includes the company's Form 10-Q for the quarter ended March 31, 2020, which will be filed after the date of this call, as well as the additional risks identified in the cautionary note regarding forward-looking statements and our earnings press release issued yesterday evening. We are going to take no obligation to update or revise publicly any forward-looking statements. In addition, this presentation may contain non-GAAP financial measures. For the purposes of this call, we believe the best way to discuss our operating results is on an ex-PGAAP basis, which is a better representation of the run rate performance of our business. Reconciliations are included in our earnings press release and financial supplement, which can be found on the investor information of our website. With that, I'll turn the call over to Albert.

Thank you, Matt, and good morning, everyone. Thank you for joining our earnings call. On behalf of Axis, I'd like to begin by expressing our heartfelt sympathy to the families and loved ones of all those whose lives and livelihood have been tragically cut short by the pandemic. Over the past few months, the world as we know it has been upended, and we must now work together to navigate the unprecedented challenges brought on by COVID-19. And yet, heroes have arisen everywhere, and we at Axis feel immense gratitude for the brave individuals who are on the front lines fighting the pandemic and putting both their own and their families' lives in peril. Within Axis, our foremost concern has been with the health and safety of our colleagues. We also believe very deeply that our industry fulfills a vital social purpose to help people when they're down and to help individuals, businesses, and organizations rebuild in times of crisis. We proudly stand by our promise to our customers, partners in distribution, and our communities. We're reviewing each claim on an individual basis, and where our policies do provide coverage, we're already making payments to help our insurers overcome financial setbacks. I'm proud to say that we've seen the best of Axis in these last few weeks. We've sustained a high level of responsiveness to our producers as we've partnered with them to help our common clients manage risk in these highly uncertain times. The investments we've made over the past year to update our technology platform and implement our digital transformation have allowed us to shift seamlessly to remote work protocols. And by all accounts, we've maintained a high level of service that our producers have come to expect of us. And separately, we're also continuing to support the relief efforts underway in our local communities. I'm most thankful to our team who have met the challenge with resilience, grit, and grace. We're convinced that we've enhanced the Axis brand with our service over the past six weeks. We'll spend a large part of this call discussing our exposure to COVID-19, its impact on our results and our plans for managing through the global crisis. But an essential component of this discussion is the state of our company at the start of the pandemic. We entered 2020 strongly positioned along four key attributes. We have the strongest capital adequacy we've had since 2016. We had a prudently constructed investment portfolio with over 84% of assets in investment-grade bonds. And while our portfolio experienced a negative return in the first quarter, given the recovery of markets, we are now in positive return territory for the year to date in our portfolio. We also have an outstanding team and a technology platform that allows us to operate remotely without any reduction in our capabilities. And we have the best balanced book of business in the history of our company, the result of many years of portfolio repositioning and reduction in CAD volatilities. Now, while in the last couple of years, our progress in demonstrating the benefits of this repositioning has been slower than we had wished, we believe that our results this quarter provide tangible proof that we're now delivering on our goals. We use as our key metric to monitor our progress in underwriting the XPGAP, XCAP, current year loss, acquisition, and G&A ratios, and we deliver strong progress along each of these metrics. Our consolidated PGAP-XCATs term-of-year combined ratio was 93.6% this quarter, four points lower than the prior year, not only sustaining but accelerating the progress that we've achieved in prior quarters. This attritional underwriting result, along with much lower peak zone PMLs and CAT loss curves over recent years, positions us well for continued improved performance. I hate to add that like with any carrier, there will always be some quarterly volatility in our results, but we're now working on a much better base. Let's now discuss the financial impact of COVID-19. As shared in our pre-release, we're projecting $300 million in cap losses, with $235 million coming from COVID-19. Access was among the first to provide a more comprehensive estimate of COVID losses this quarter. we saw no reason to wait. We conducted deep reviews of our policies and programs within our insurance segment and found that the vast majority of our business does not respond to the current situation. While we do have some contracts to provide the cover, the majority of our business includes physical damage requirements for business interruptions, clear virus or pandemic exclusions, and sublimits in terms of coverage. Where we do have exposures, We believe that we have a good understanding of our potential losses for our first-party business. For the reinsurance segment, we used various approaches to determine the company's next client's provision. We reviewed our various property, catastrophe, and A&H contracts and made a number of judgment calls based on the nature of our client's business. We supplemented these with conversations and loss indications we see from clients. We further sense-checked our estimates using a variety of industry-insured loss estimates, market share analyses, and catastrophe modeling analyses. While our loss provision of 235 is, of course, subject to change, given the uncertainty of the situation, we believe it appropriately reflects potential losses that have been incurred, assuming the shelter in place remains through July 31st. I would like to credit our team for the tremendous effort required and gone into to prepare this estimate. We did not take a provision for third-party business. Frankly, we haven't seen anything yet there, and we expect that it will take several quarters, if not years, for the full impact of COVID-19 to be realized. That's another reason we expect that market pricing will continue to remain strong, to allow the industry to absorb the higher losses that are expected to emerge from this pandemic over time. To conclude my introduction, it was a tough quarter as the pandemic took its toll on our underwriting and investment results. We're not alone in facing the challenges of the pandemic, but I'm confident that we outperformed in many ways, The access team continues to make progress in its underwriting, grew in attractive lines, and sustained high service to its customers and producers throughout the pandemic. I'm very proud of our performance this quarter. Pete will now walk us through the financials, and I'll come back to talk more about pricing and have our Q&A.