This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk00: Good day and welcome to the Access Capital first quarter 2021 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 also note this event is being recorded. I would now like to turn the conference over to Matt Rohrman, Investor Relations. Please go ahead.
spk08: Thank you, Carrie. 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 ended March 31, 2021. Our next 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 found in the 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 additional risks identified in the cautionary note regarding forward-looking statements in our earnings press release issued yesterday evening. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, this presentation may contain non-GAAP financial measures. Reconciliations are included in our earnings press release and financial supplements. With that, I'll turn the call over to Albert.
spk06: Thank you, Matt. Good morning, everyone, and thank you for joining our call. Notwithstanding a record first quarter for U.S. weather events, for Axis, 2021 is off to a promising start. Our consolidated current year XCAT loss ratio of 55, XCAT combined ratio of 89, and sub-99 all-in combined ratio all provide solid additional data points indicating that our work to reposition our business is delivering a portfolio that is both more profitable and more resilient than that of prior years. And it appears that our momentum is only accelerating. This represents the seventh quarter in the last nine that we've delivered improvements in our core and reading performance, highlighting a clear positive trend in our results. Our insurance business is firing on all cylinders, taking advantage of attractive market conditions to grow gross premiums written by 17%, delivering an ex-CAT combined ratio of 88 with a two-point reduction in each of the attritional loss and expense ratios. Even the CAT loss ratio showed good progress at less than six points to bring our all-in insurance combined ratio to below 94. In addition, our reinsurance team is contributing equally to our progress with continued underwriting discipline and portfolio management emphasizing enhanced profitability and managing volatility. Our reinsurance current year ex-CAT combined ratio improved again to 85, allowing us to absorb the U.S. winter storm losses and still reported a 100 all-in combined ratio. I'm confident that our continuing improvements to the portfolio will lead to increased profitability and further reduce our vulnerability to CAT events. We've added and continued to hire strong underwriting talent to bolster our efforts to drive profitable growth, and we feel very good about our team, our culture, and our consistent ability to attract top-caliber talent. We've worked very hard to get to this point. There's a strong sense of optimism throughout the organization, and we're excited about the future. I'll pass the floor to Pete, who will walk us through the first quarter financials. Then I'll come back to discuss market trends, and we'll have our Q&A. Pete?
spk07: Thank you, Albert, and good morning, everyone. During the quarter, we generated strong results featuring net income available to common shareholders of $116 million. and an annualized ROE of 9.9%. Operating income was $83 million, and an annualized operating ROE of 7.1%. As Albert noted, core underwriting results continued to show improvement as the company produced a current accident year combined ratio, ex-CAT and weather, of 89.2%, or over four points better than the prior year quarter. As previously announced, The quarter pre-tax CAT and weather-related losses, net of reinstatement premiums, were 110 million, or 10.1 points. The CATs in the quarter were primarily attributable to the Texas area winter storms, as those events contributed 88 million of CAT weather-related losses to the quarter. The consolidated current accident year loss ratio, ex-CAT and weather, was 55.1%, a decrease of two points over prior year, with the decrease attributable to both segments. The consolidated acquisition cost ratio was 19.8%, also a decrease of two points, and again, the decrease was attributable to both segments. The consolidated G&A expense ratio of 14.3% was a slight decline to the first quarter of 2020. Overall, operating efficiency and expense control remain important goals for us, and we continue to target a G&A ratio in the low 14s for 2021. Fee income from strategic capital partners was $12 million this quarter, compared to $16 million in the prior year quarter. We'll now discuss the segments. I'll start in insurance, where we had some impressive performance across a number of metrics this quarter. The gross premiums written increased 17% to $1.1 billion this quarter. The increase primarily came from new business and favorable rate changes in the professional lines, property, marine, and liability lines. Net premiums written growth was higher, and I'd note that reinstatement premiums paid last year was a contributing factor to that growth. During the quarter, the insurance current accident year combined ratio XCAT and weather decreased by four points from last year, as the repositioning of the portfolio continued to earn through. The current accident year loss ratio XCAT and weather decreased by 1.9 points in the quarter. principally due to favorable pricing over loss trends across virtually all lines of business and improved loss experience in property lines associated with the repositioning of that portfolio. These positives were partially offset by a large marine cargo loss. The acquisition cost ratio decreased by a point in the first quarter compared to 2020, mainly attributable to the increase in seating commissions associated with the growth in professional lines. The underwriting-related G&A expense ratio decreased by slightly over a point in the quarter, largely attributable to an increase in net premiums earned. Let's now move over to the reinsurance segment. The reinsurance segment's gross premiums written of $1.4 billion for the first quarter was $58 million, or 4% lower than the prior year. Gross premiums written decreased in motor, engineering, and catastrophe lines as we looked to better balance the portfolios. This decrease was partially offset by selective increases in liability lines where terms were attractive. During the quarter, the reinsurance current accident year combined ratio, ex-cat and weather, decreased by over four points from 2020, as the repositioning of this portfolio continued to earn through. The current accident year loss ratio, ex-cat and weather, decreased by 1.6 points in the first quarter, principally due to favorable pricing over loss trends in most lines of business and benefits associated with the repositioning of the portfolio. This was partially offset by an increase in loss experience in non-CAT property lines. The acquisition cost ratio decreased by over three points in the quarter due to changes in business mix driven by reductions in proportional business, including trade credit and non-CAT property. The underwriting-related G&A expense ratio increased by half a point in the quarter, attributable to the decrease in net premiums earned. Net investment income for the quarter was $114 million, and this was $21 million higher than the first quarter of 2020, primarily due to an increase in returns from alternative investments. This increase was principally related to private equity funds and hedge funds, which are reported on a one-quarter lag so that performance is indicative of the fourth quarter of 2020. It was also helped by a gain of $17 million associated with the sale of a venture capital investment. This was partially offset by a decrease in income from fixed maturities attributable to decreased yields on the portfolio. At quarter end, the fixed income portfolio had a book yield of 2.1% and a duration of 3.3 years, and our new money yield was 1.5%. For the quarter, you'll note there was a higher-than-usual effective tax rate, This was driven by earnings and capital gains realized in the U.S. and Europe, while the losses from the winter storms mostly impacted the Bermuda balance sheet. Diluted book value per share decreased by $2.06 in the quarter to $53.03. This was principally driven by the decrease in net unrealized gains reported in other comprehensive income due to the rise in interest rates. Overall, the continued improvement in most operating metrics and momentum in the core underwriting book, notwithstanding notable CAT and weather events, this was a good quarter for Axis. With that, I'll turn the call back over to Albert.
spk06: Thank you, Pete. Let's do a brief overview of market conditions and outlook, and then we'll open the call for questions. Across both our insurance and reinsurance segments, we saw positive rate action continue during the first quarter. This represents the 14th consecutive quarter in which we've seen overall rate increases in our insurance book and the fifth consecutive quarter of double-digit average rate hikes. This quarter, the average insurance rate increase was up about 13%. This is more than three points higher than the first quarter of 2020, but sequentially down from last year's fourth quarter reported level of 18%. In most lines we monitor, sequential rate of change in pricing has increased, while it has remained flat or crested in others. Looking at our insurance segment by region, the U.S. is strongest with average rate increases of close to 15%, while the London market is up nearly 10%. By overall line in insurance, liability is strongest with increases at close to 18%, with the best conditions in U.S. excess casualty space at plus 25%, while primary casualties in the mid-teens. European rates are up in the mid to high single digits. Professional lines are close behind with average rate increases at 17%. Strongest is our London book, where we're seeing great increases in the mid to high 20s. Canada, US, DNO, and financial institutions are all strong with increases in the 19% to 20% range, but with sub-sub lines over 30%. Cyber is accelerating rapidly, with increases anywhere from the mid-teens to the high 20s. Property averaged up about 10%, with U.S. E&S property and global property strongest in the 13% to 14% range, while other lines were more in the high single digits. Our portfolio specialty lines, including marine, political risk, and A&H, saw increases that averaged in the high single digits, although here again, many sub-lines are in the double-digit range. For example, marine cargo and facilities are up 15% and 16%, while aviation was strong at 18%. Overall, virtually all of the insurance portfolio renewed flat to up, with more than 50% of the book achieving renewal rate increases above 10%. New business, we feel, is priced at least as well as renewal business. In this environment, our insurance team did very well. Retentions are up versus last year's first quarter, and new business production set a new record. I would observe that with these recent changes in pricing, more of the opportunities that we're seeing are meeting our hurdles. Indeed, the past two quarters have been the largest insurance production quarters in our company's history. Let's move on to reinsurance. In the first quarter, we estimate overall reinsurance rate change was up about 11%. Rates were strongest in the U.S. and global specialty lines with increases in the 12% range, while EMEA, which for us is Europe, Middle East, Africa, and Latin America, was up about 10%. And Asia saw average increases in the low single digits. By line of business, professional lines saw increases that averaged in the mid-teens, with our EMEA region up 17% and U.S. up 12%. Liability averaged increases in the low teens globally, with rates up 14% in EMEA, 12% at Lloyds, and 10% in the U.S. Generally, we found other specialty reinsurance lines to be up in the double-digit range, while aviation was much higher, reaching up to 40%. In the first quarter, property CAT averaged about 16% in the U.S., while we saw increases in the 5% to 10% range in the rest of the world. We found these rates to be unimpressive, given recent property CAT losses, a fact of which we were again reminded with the U.S. winter storms. Non-CAT property changes were generally in the single digits. Given the property and CAT pricing we observed, our underwriting actions led to a reduction of approximately 5% in the gross writings and premiums of our property and CAT reinsurance in the first quarter. All in, our first quarter reinsurance gross written premiums were down about 4% as we focused on enhancing the profitability and reducing the volatility of our book all the while growing in the more attractive lines. Looking at April 1 reinsurance renewals, rate momentum was in line with our expectations. We're seeing evidence of a growing supply of capital and competition, which may, in the future, dampen the overall improvements that are needed across the sector. The largest part of our renewal was Japan, where we experienced property CAT and non-CAT rates increasing in the 5% to 10% range, but where loss-impacted risk and wind flood treaties were renewed rates were a bit higher than that. Elsewhere, U.S. professional lines saw increases of 11% and U.S. liability was up more than 20%. Overall, we booked a modest reduction to expiring premiums at the April 1 renewals. I'm not concerned about the premium reductions in reinsurance. One of the benefits of being a hybrid company is that we have access to business across lines in many markets and geographies. It gives us a wealth of choices from which to choose and create the best optimized portfolio under available circumstances. I'm just as proud of the strong growth delivered by our insurance team in an attractive market as I am by the disciplined response exhibited by our reinsurance team under more mixed market conditions. They both contribute to building the best portfolio for access in terms of balance, profitability, and lower volatility. Stepping back, as we look to the months ahead, we're anticipating that favorable market conditions will continue throughout the year and very likely into next year, even if, in some lines, rates of increase come off their peak levels. The many issues that our industry is facing right now, including low interest rates, ongoing uncertainty as to longer-term impacts of the COVID pandemic, lost cost inflation, and climate change should sustain pricing discipline. And if relative market conditions stay as they are currently, with the environment more favorable than insurance, we anticipate that much of our growth will continue to be focused there, particularly in non-CAT-exposed lines of business. As we continue to build our optimized One Access portfolio, we see the hybrid model as a competitive differentiator, providing us with flexibility to allocate capital to the areas of our business that are offering the best returns. And as I said earlier, we feel great about the future. We're in a good place right now and we believe the wind is at our backs. But while we're seeing exciting progress throughout our business, and we're actively taking advantage of all of the opportunities presented by the current market, we feel encouragement, we see our momentum, we're satisfied with this quarter results, but we're not satisfied with where we are overall, and we know there is much to do, and we remain focused on delivering additional progress towards the achievement of our goals and ambitions. Our action plan is very straightforward. to make the most of the current market to both enhance the balance of our portfolio and grow profitably, to invest in talent and technology, to accelerate growth in existing and new markets, and to leverage technology and growth to increase our capabilities, productivity, and efficiency while lowering our overall expense ratio. We believe that all of the years of hard work to reposition the business are now starting to be more fully reflected in our financial results, and we look forward to continuing to keep you updated with our progress. And with that, let's please open the line for questions. Operator?
spk00: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. First question will be from Brian Meredith of UBS. Please go ahead.
spk04: Hi, thanks. Yeah, a couple of them here. First, you talked a little bit about cyber and the prices going on. Can you talk about the kind of loss trends continuing in that line of business and just give us kind of a quick update after last quarter's kind of elevated loss specs in that area?
spk06: Good morning, Brian. We're continuing to see things kind of within our expectations. Obviously, we've made a number of changes in the portfolio during the year, it could do that. So we feel our actions are doing a good impact on our overall results. We think pricing is going to continue. But by and large, I would say that cyber in the first quarter met our expectations, combined ratio below 100. It's kind of doing what we expect it to do.
spk04: Great, great. And then my next question, but I'm just curious. So two of the lines of business you mentioned that you reduced in the reinsurance area were non-CAT exposed property and trade credits on the quota share basis. I'm just curious. I would have thought that those two lines of business are probably pretty attractive right now from an underlying kind of season's economics perspective. Why would you be reducing those lines? They're two different issues.
spk06: I think on the non-CAT side, on the non-CAT property side, Uh, we've been, I think pretty clear in telling you that, uh, reducing our volatility is a very important goal of ours. And there's no doubt that property cat had increasingly, especially the non, the non cat property actually has a very large amount of cat property in it. Uh, and so we found that it was contributing a lot to our volatility. And I go back to the point I made earlier. One of the great things as a hybrid is we can take property, property, cat volatility. Anywhere in the world, insurance, reinsurance, ENS standard, whatever. And right now, the best returns for us are in the E&S property space. And so for what property cat exposed volatility we're willing to take, we're getting better paid right now on the insurance property and E&S property side. And we think that's a smarter place to put our exposure. With regards to credit, and you'll notice we actually reduce credit both in insurance and in reinsurance. And I think, frankly, that's just a question of where the economy is and where the opportunities are. And, you know, again, that's just following where the market is. Now, we are writing a little bit less quarter share credit. And that's just because when you add the very high acquisition expense ratios to the large volatility there, we think a smaller amount of that business makes sense for us.
spk04: Makes sense. And that last question, I'm just curious, acquisition cost ratio continues to come down. I know you've talked a little bit about that. Should we continue to see that coming down during the course of the year, both in insurance and on the reinsurance side?
spk06: Well, again, we're not big on giving guidance, but what I will tell you is what drives these things. So part of the drivers of reducing the acquisition expense ratio on the insurance side is is that as we're repositioning our freight portfolio favoring certain lines versus others we're writing a little bit less uh cover holder business uh that cover holder business as you know has generally a higher acquisition ratio so as we write less of that cover holder business that will have a lower acquisition impact and the other thing is uh you know we've got a good girls book of business uh reinsurers are happy to participate in that book and we've been able to get the good seating commissions to offset our acquisition expense so Those kinds of things are moving in our favor. On the reinsurance side, it's also a question of, as I've just discussed, reducing some of the higher acquisition expense lines of business that we feel ultimately are not giving us the technical ratio we want. So the trend that you're seeing in Q1, I think it's consistent with what we're expecting. But Peter, I don't know if you want to add anything to that.
spk07: Yeah, the only thing I'd add, Brian, is I remember when we talked earlier about what our expectations were for 21, we said we thought the acquisition cost should come down by at least a point. I think we said improve a point in our discussions with folks. And this is that full year. Last year was 21-3. I said it should come down to around 20. We've got a little bit more action, so now it's in the 19s. I would say the first quarter is representative of what I expect for the rest of the year. Great. Thank you.
spk00: The next question is from Yaron Kinnar of Goldman Sachs.
spk03: Good morning, everybody. My first question goes back to reinsurance. I get that you have the hybrid capabilities here and allows you to pick and choose where you want to play. Nonetheless, what's the end play for the reinsurance segment? Is it going to be as dominant part of the business over time or is it something that really becomes a much smaller component of the overall business?
spk06: I think what you've seen over the history of this company is that we've kind of gone up and down growth rates of each of the segments based on the opportunities there. I don't want to say right now that reinsurance is always going to go down. I don't want to say that reinsurance is always going to go up. I don't want to say it's the same. I think it really depends on where the opportunities are. What I will say is is that over the last two, three years, we've been spending more and more time running not two portfolios, one insurance portfolio, one reinsurance portfolio, but increasingly running one portfolio. And when you run one portfolio, you really have the opportunity to choose. And in some cases, we're going to make the call on the insurance side. In some cases, we're going to make the call on the reinsurance side. And we will focus very much on how we build that best portfolio. There are some lines of business right now, for example, where we prefer to allocate our capacity much more on the insurance side. A good example of that would be on cyber. We write some reinsurance cyber, but most of it we write on the insurance side. We think that's the better way to play it. Certainly, I will tell you that I'm very, very grateful for all of the contributions that reinsurance makes to the lines of business that we do not write in insurance. We're a very strong ENS player. We're very strong in the wholesale markets in the U.S. and in the London market. But that in and of itself tends to be a book of business that is very focused, that has generally a little bit of volatility to it. And we can add with our reinsurance book, we can add some very good international business that we don't have access to, very good standard lines business we don't have access to, So I think that the two of them will always be, you know, at every planning session, at every quarterly review, you know, all of the opportunities come up from the bottom. They get explored. We look at what contributes to the best portfolio, and we move in that direction.
spk03: Got it. That's helpful. Thank you. And my second question, looking at the underlying loss ratio in insurance, I think if we adjust for the runoff losses that you had in 1Q20, you get to about a point of improvement year over year. Is that all coming from rate over trend, or do you see that maybe some impact from kind of the slowdown in the economy and maybe courts being closed is also benefiting the loss ratio?
spk06: Peter, you can follow up on that, but what I would tell you is we're not, I can tell you that as a general part of our reserving philosophy is we are reserving kind of our expectations or, you know, God forbid, they're worse, a higher number. We recognize absolutely, as you say, that right now there may be short-term factors. And so we're not letting favorable A versus E impact what we're booking as loss ratios. We're taking a more prudent view than that. Peter, you want to add to this?
spk07: Yeah, I'd say that, you know, We have been seeing, as you noted, some favorable 80s, but we're not letting that flow through to the bottom line. You know, there is an expectation that when the courts open up that there will be claims that will go into those courts, and so we'll wait and see what happens in the future. And I think you're about right if I look at the adjustments with the book that has run off, which was running poorly. That's about eight-tenths of the 1.9, and the rest of it really is coming from good rate overtrend. as well as some other underwriting actions in obviously the property portfolio.
spk03: Got it. And the runoff is essentially done here?
spk07: Yeah, it's pretty much done, yep. Okay.
spk03: Thank you. Congrats on a good quarter. Thank you.
spk00: The next question is from Derek Hahn of KBW.
spk05: Good morning. Thanks for taking my question, Derek. I really wanted to touch on how we were thinking about capital deployment opportunities for the balance of the year. On the reinsurance side, you've obviously had significant underwriting actions and pullback in CAD-exposed businesses. But is that something that could potentially change this year, given the severe dislocations that we're seeing in the Florida market?
spk06: Well, the Florida market is to come. I think it'll be interesting to see. ultimately where it goes. I think we've told you already, we found that most of the renewals to date have been, you know, lukewarm to us at least. But I think Florida could be dislocated. We'll take a look at there. I think there will be some natural reductions in as much as a few of the clients that we've supported in the past have been acquired or are writing less. There is a, I would take a look at Florida on its own merits, but it doesn't change the fact that when we look at our portfolio, we are being very careful about managing our volatility. The Southeast remains our largest zone, so we're not going to want to go crazy in terms of having a peak zone compared to the rest of our zones. I'm not looking for any massive increase in cat pricing if the relative trends stay the way they've been for the last six months.
spk05: Okay, thanks. And then my second question is more qualitative. Is there any way to assess the conservatism of your accident year 2021 loss picks?
spk06: That's always a difficult subject, but what I would recommend is is that you do what probably you've done with other companies such as ours, which is how do you reconcile average growth rate increases last year of 14% with loss ratios going down only a couple of points. And I think what that speaks to is the fact that we believe there's a lot of uncertainty in the current environment, and we're reflecting by definition in our loss picks much higher loss ratios than you would anticipate simply by doing rate minus trend. And the reason for that is We feel there's a lot of uncertainty right now. We'd rather take a more prudent approach. And I'd like to believe that when these lines of business start to mature, we'll be able to bring them down to a better loss ratio. But we'd rather start high and finish low than the other way around. But if you look at rate over trend, you would a priori have expected a greater reduction in the loss ratio. You're not seeing that because I think we're showing appropriate prudence. Peter, I don't know if you want to add to that.
spk07: No, I think you pretty much covered it there, Albert. That's exactly what I would say. I mean, I do believe we're being appropriate in our loss picks. There is risk and uncertainty around lost cost inflation, and I think we're being appropriately prudent. And I would remind folks that our standard reserve philosophy is, you know, we put up bad news early, and we take good news later. So we'll see how these reserves develop over the next couple of years.
spk09: Thank you.
spk00: The next question is from Elise Greenstan of Wells Fargo. Please go ahead.
spk01: Hi, thanks. Good morning. My first question is probably, I think, building upon the last question. So in the outlook that you guys also relayed for the year, you pointed to two to three points of underlying loss ratio improvement for the full year. You guys came in at 2% in the Q1. You know, tying some things together, it sounds like still good, healthy rate increases, but some slow down, and you guys are being conservative with loss trends. So given those two forces, would you expect the underlying improvement to pick up as we go through the year and get you closer to the high end of that range, or is the 2% and the Q1 kind of a good barometer for the next three quarters?
spk07: I guess at least, you know, this is Pete. I'll take that. I mean, the full year XCAT loss ratio consolidated last year was 57.7. We came in at 55.1. You know, so that's about two and a half points. That's like at least when I go full year to first quarter, that's like spot on in the middle of the two to three. I'd say the first quarter is pretty indicative. We'll see how much more rate we get. But I would say the first quarter is fairly indicative of where we think things will play out for the rest of the year.
spk01: That's helpful. And then one quick number is you pointed to a large marine and cargo loss in the quarter. Just trying to get a sense of the magnitude of that in terms of the impact within the insurance segment.
spk07: Yeah, we had one big Japanese cargo loss in the quarter. That ran through. Don't like to point out the large losses per se, but if I'm looking overall, that probably hit the insurance loss ratio by about, you know, I'd call it, let's see if I do maybe a little less than a point in the quarter.
spk06: Yeah, I wouldn't want to make too much of that. I wouldn't want to make too much of that.
spk02: You know, we have, we've talked about large losses before.
spk06: We're going to have large losses, right? The issue is we're going to absorb them. And, you know, generally we have a couple of them, one or two, a quarter, no big deal. Uh, we've talked to you in the past. Sometimes we've had a, an unusual quarter with more than that, but you know, I don't want to, uh, I don't want to assume that we're not going to have, you know, you know, 10, $50 million losses here or there. That's part of our business. And as long as we can absorb it, uh, you know, I consider those part of the attritional loss ratio. And I, I really wouldn't want to make anything exceptional out of that.
spk01: Okay. That's helpful. And then on the cat side, um, You know, you guys, I think, alluded to, right, you've locked down your PMLs and lowered your CAT exposure. You also, I think, alluded to a CAT ratio, you know, about two to three points better than your five-year average, excluding COVID. So that would, I think, imply something, you know, just around 7.3% to 8.3% for the full year. Given that the Q1 was elevated, and I did see, you know, some of your PMLs did come down at April 1st, Is that still a good rule of thumb for the full year, even with a slightly higher cat loss to start the year?
spk06: Yeah. Go Pete.
spk07: I would say, I would say so at least mostly because when we talked about the cat loss ratio and we said we were bringing it down, I think a couple of you folks thought that we should bring it down even further. So I would say our expectations were to be even better than that. And you know, this, this Texas storm just put some pressure on it. So I'd say that's still a pretty good ballpark.
spk06: Yeah, what I would just say is we always loathe to kind of create patterns on CAD. I mean, CAD, by definition, is unpredictable and volatile, and so you don't know where things are. What we do know is that we've got less exposure than we've had in the past, that we're building our portfolio better and smarter than we have in the past, that we have less exposures at lower layers which would give us, you know, less, again, just on a frequency basis. So we think that we're building a more intelligent CAD-exposed portfolio. But I think, you know, I've been in this business a long time. I don't make projections on CAD ratios.
spk01: Okay, that's helpful.
spk00: Thanks for the color.
spk07: You're welcome.
spk00: The next question will be from Josh Shanker of Bank of America. Please go ahead.
spk02: Yeah, good morning, everyone. Good morning. Good morning. So if I look at some of your competitors, not many, but some, you see a few outliers, maybe a few more than that, growing top line, you know, 15%, 20% rates here. And some of them are even buying back shares at the same time. Obviously, the access growth is not necessarily at this point as robust as it might be in the future, but the share repurchase activity isn't as strong. Can we talk a little bit about... How much capital is being consumed by business mix slash growth changes? And given the stock trades at one time book, how are you doing the math between canceling shares versus investing in the business?
spk06: I can tell you that right now, if the market opportunities are the way they are, we anticipate using all of our capital to fund growth of attractive business and to build our positioning in our chosen markets, you know, for the foreseeable future.
spk02: Has your activities consumed capital over the past three months? You lowered cat exposure. I assume that frees up capital and we're just not really, I guess we're not seeing it so greatly on the top line side. Is there more capital consumption going on in the book than there was three months ago?
spk06: I think it's just different kinds of consumption. I mean, you've got cats, you've got cat, which is takes, up short term consumption, but then in rebalancing our book to bring our property down, you know, again, from over 30% of the overall book down closer to the 20% range, you're by definition going to be writing lines of business like liability and professional lines that have a longer reserve tail, which requires you to keep capital longer to support those reserves. So, you know, again, we, what we're looking to do is to allocate our capital to those areas that will deliver the best portfolio, delivering the best profitability at acceptable volatility. So, you know, you know as well as I do, liability can use up a lot of cash in the same way as cat can use up a lot of cash. They just do so differently.
spk02: Do you have less excess capital now than you did one year ago or about the same?
spk06: I would say that certainly when we look at our rating agency models, when we look at where we are, we feel very good. I mean, I think you can read the various rating agencies tell you that we have a very strong capital position. We continue to believe that to be the case. We're growing more now than we did last year. So by definition, we're going to start to use a little more of the capital, but we still feel very comfortable with our capital position. I don't know if you want to add anything to that, Peter.
spk07: No, I think we're using the capital well. And the only other thing right now we just had is obviously last year at the end of the first quarter where interest rates went, you know, the capital was pressured just because interest rates rose so much. So, you know, right now we're just keeping our eye on interest rates too. We did have about two to – most of the drop in the book value was because of interest rates going through OCI. So we just keep our eye on that too, Josh.
spk02: Thank you very much for the answers, and good luck as the year goes on. Thank you. Thank you.
spk00: This concludes our question and answer session. I would now like to turn the conference back over to Albert Benchimol for any closing remarks.
spk06: Thank you, operator, and thank you all for your time this morning. Obviously, it was a pleasure for us to be able to discuss with you a good quarter for Axis and a continuation of our momentum. But before we complete the call, I just want to thank my team for their continued hard work, their passion, everything they do every day to support our clients and partners in distribution. to make Axis a stronger company. I really do believe and we feel strongly that our standing in the market continues to strengthen. Our relationship with our brokers are very strong. And as I said, we feel good about our progress. We know there's more to do, but we've got the wind at our backs and we've got a great team doing it. So we look forward to sharing our progress. Operator, this ends our conference call. Goodbye, everybody. Talk to you soon.
spk00: Thank you. The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.
Disclaimer