Axis Capital Holdings Limited

Hello, and welcome to the third quarter 2023 Access Capital earnings call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to hand the conference over to your first speaker today, Ms. Miranda Hunter, head of investor relations with Access Capital. Please go ahead, ma'am.

Thanks, Jack. Good morning, and welcome to the Access Capital third quarter 2023 conference call. Our earnings press release and financial supplement were issued yesterday evening after the market closed. If you would like copies, please visit the investor information section of our website at accesscapital.com. Joining me on today's call are Vince Tizio, our President and CEO, and Pete Vogt, our CFO. Before we begin, I would like to remind everyone that the statements made during this call, including the question and answer section, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks, uncertainties, and assumptions. Actual events or results may differ materially from those projected in the forward-looking statement 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 the Form 10-Q and other reports the company files with the SEC. This includes the additional risks identified in the cautionary note regarding forward-looking statements and our earnings press release issued last night. 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 supplement. And with that, I turn the call over to Vince.

Thank you, Miranda. Good morning, and thank you for joining us. In the third quarter, Access delivered strong results. During the quarter, we produced record performance, double-digit premium growth, improvements to our operating infrastructure, made investments in talent that complement our team, and enhanced our ability to bring new and existing specialty product capabilities to the market. Key indicators during the quarter include our highest ever quarterly operating earnings per share at 234, year-to-date operating earnings per share of 690, which is the strongest nine-month performance in our company's history. Our annualized operating return on equity was 18% for the quarter and 18.4% for the first nine months of the year. On the underwriting side, record third quarter overall gross premiums written of $1.9 billion, including $557 million in new business premiums, which was an increase of 21% over the prior year quarter. We produced a healthy combined ratio of 92.7 as we delivered both strong top and bottom line results, even as the industry faced an active quarter for global weather events with industry-wide losses estimated to exceed $25 billion for the quarter. And this results in a quarterly accident year underwriting income of $144 million. Turning now to our segments. First, within our insurance business, We produced close to $1.5 billion in gross premiums written, or 11% over the prior year quarter. New business premiums for the quarter were $467 million, also a record for the third quarter and the second highest of any quarter. On the combined ratio, we delivered a very strong result of 88.2 and an ex-CAT current accident year combined ratio of 84. We generated underwriting income of $105 million an improvement of $89 million. We produced overall rate increases of 6%, remaining ahead of lost costs, while our portfolio continues to benefit from high double-digit compounded rates over the past few years. Indeed, in all but professional and cyber, we delivered double-digit premium increases. I'll speak more on both of those lines shortly. Looking deeper within our insurance businesses, Our London-based international business, which includes our Lloyd Syndicate, once again had a strong quarter, delivering premium growth of nearly 18%, driven by a 22% increase in new business. In North America, premiums increased by 12%, with the key driver being our wholesale business, which delivered robust growth of 39%, with rate increases of 15%, and new business up 53%. Now, looking at a product view across our insurance business. With respect to property, Axis continues to see favorable market conditions in each of our platforms. We believe positive conditions will be sustained into 2024 across all of our property lines. We see continued dislocation from standard line markets, as well as the effect of changing reinsurance terms and conditions impacting the competitive landscape that's creating increased opportunities on the primary side. For the quarter, across our property lines, we generated premium increases of 33% with rate increases of 16%. Looking at our individual property businesses, our wholesale E&S business grew by 87% while achieving rate increases of nearly 25%. Our London open market property book delivered premium growth of 26% with rate increases of 17%. We generated excellent growth within our onshore renewable portfolio with premium increases of 59% and rate improvement of 5%. And in construction, we produced premium growth of 45% with rate improvement of 8%. In marine, we continue to leverage our broad product capabilities and our position as a recognized market leader. In the quarter, we increased premiums by 20% with low single-digit rate increases. Key growth drivers included renewable energy offshore, marine liability including war, as well as specie and fine art. In the quarter, we also added capabilities to our already solid platform, as we set up new marine cargo and inland marine units in North America, servicing our dual channels of distribution. In our overall renewable energy portfolio, where we are a top five global player and recognized as an industry thought leader, we see tremendous potential over the medium term. In the quarter, premiums grew by 61%, with rate improvements of 4%. In professional lines, premium production was down 10%, with average rate decreases of 5%, as we continue to navigate a moderating environment. Consistent with my comments in past calls, a key driver was the reduction of our U.S. public D&O business, where pricing remains, in our view, unfavorable, as well as the reduction of transactional liability opportunities. At the same time, we are managing diversification across our professional lines book and are pursuing targeted growth opportunities through our lower middle market private D&O business, and we're encouraged by the growth that we are seeing. In our cyber business, premiums were down 19%, largely due to timing, and rate increases were about 2% in the quarter. The cyber market remains dynamic, and as mentioned in the second quarter, we continue to make adjustments to our small to mid-sized facilities while pursuing our open market cyber business, which grew 7% in North America. A word about liability. Liability is the class where we are most particularly seeing the impact of social inflation. Thus, across our liability lines, we've taken a vigilant approach, emphasizing a select underwriting appetite, including terms, limits, and other underwriting tools that we employ. In the quarter, we produced growth of 19% and rate increases of 10%. This was driven by targeted growth within our U.S. excess casualty business, where premiums increased 36%, with rate increases of 9%. In our primary casualty business, we continued to maintain our targeted underwriting strategy, achieving rate increases of 16%, with premiums remaining broadly flat. In summary, we're confident that Access is well positioned to capitalize on the favorable market conditions we see both in the immediate and near to midterm as we lean into our chosen specialty markets worldwide. Let's now turn to reinsurance. During the quarter, we continue to demonstrate that our repositioning of Access Re as a focused, more profitable specialist reinsurer is taking hold. In the quarter, We delivered $448 million in gross premiums written with our best ever third quarter production for reinsurance excluding property and catastrophe business. This included $58 million in premium growth, which is up about 15%. We continued the momentum from the prior quarter in achieving strong retention and healthy new business generation of $90 million. We produced a 92.7 combined ratio and nearly 17 percentage point improvement over the prior year quarter. We generated $42 million in underwriting income as compared to a $45 million loss in the prior year quarter. Rate increases were up 7 percent and in line with lost cost trends. As we've previously shared, following our repositioning of Access Re as a specialist reinsurer, there was approximately $20 million of expiring multi-line or so-called bouquet business at risk in the third quarter. I'm pleased to share that we were able to restructure these renewals and retain the business and growing it to some $30 million. We are encouraged by this result and view it as an additional proof point, illustrating the value that our brokers and clients see in our reinsurance franchise. Indeed, the recent launch of Monarch Point Re, a new collateralized reinsurer with StonePoint, evidences the confidence in the marketplace for our reinsurance business. Pete will speak further on Monarch Point Re during his remarks. Now, let me provide a few comments on our key contributors by line of business. In credit insurity, we produced premium growth of 31% with a 6% rate improvement. In accident and health, Gross written premiums grew 9%, with rate increases of 8%. In professional lines, we generated 56% growth, predominantly driven by cyber. Rate increases for professional lines approximated 5%. The growth of our cyber reinsurance business further demonstrates the versatility of our dual platforms. In liability, we delivered premium growth of 18%, Rate increases were 7.5%, excluding workers' comp. This growth was a result of increased lines, rate, and selective new business. Finally, looking ahead to the 1-1 renewal season, we expect the firming rates and improved terms and conditions will continue into 2024, with a particular need for further improvement in casualty and professional lines. Nonetheless, we feel our brokers and clients know our appetite and our deep service commitment, and therefore we feel confident that our value proposition is understood and will serve us and our partners well. Let's now shift gears and talk about the work that we are doing to enhance our operating model. As we shared during prior earnings calls, we've been taking a fresh look at all aspects of our business, and indeed we're making enhancements. You will recall about a new internal initiative called How We Work. The key objectives are straightforward. Increase our agility and speed to market. Simplify our operating structures and enhance our ability to leverage data and digital capabilities. And of course, deliver improving efficiencies and capitalize more on productivity gains. In the three months since launching How We Work, we have made advances in simplifying our organizational structures that have resulted in Axis taking several actions in the third quarter with an associated reorganization expense of $29 million. These actions advance our progress in reducing our annualized run rate expenses, and as Pete has indicated in prior quarters, we remain focused on bringing our expense ratio to the low 30s. A few examples. We're in the process of restructuring the operating models for our operations and claims functions. In both operations and claims, we are repositioning the operating models to more closely align with our underwriting and business priorities, and all the while improving efficiency. Within operations, this work includes deepening our digital and automation capabilities, streamlining the organization structure, and partnering ever more closely with our brokers to add speed to how we intake business submissions and the associated processes. In claims, this work includes further enhancing our data and analytics and loss trend identification capabilities while further strengthening the linkage between claims, operations, underwriting, and actuarial. We've also enhanced our target operating model within our chief underwriting office. This includes the integration of all actuarial functions into the CUO organization. And we are taking a new look at how to even further enhance our reserving, risk modeling, and pricing capabilities. In respect to reserves, our reserving philosophy remains to quickly acknowledge bad news while requiring favorable signals to be consistently demonstrated over an appropriate period before recognizing good news. As discussed during our second quarter earnings call and as part of the How We Work, Pete and I are working closely with our chief actuary and new chief claims officer to re-examine our claims and reserving processes. As part of this fresh look and augmenting our normal processes, we are reviewing our portfolio and testing our assumptions, especially in light of the development that we have seen from the soft market years and the continued impact from social and economic inflation, along with other emerging trends seen within the industry. We will complete these additional deep reviews in the fourth quarter, coinciding with our normal internal quarterly review and our annual independent review. Once this work is complete, we will respond in a manner consistent with our philosophy. In addition, we made a number of talent announcements. This includes both growing from within and adding to our team with new complementary talents. I'll now take a moment to express my gratitude to our longtime Chief People Officer, Noreen McMullen, and Access Wholesale CEO, Carlton Manor, who are both retiring at the end of the year, as well as to our former Chief Digital Officer, Linda Ventresca, who has left Access to start a new chapter. We are deeply appreciative to all of our colleagues for their significant contributions to our company. I'll note that today we are launching a brand refresh, a new brand campaign for Access called Specialty Solutions Elevated, which aligns with our ambition to elevate Access as a recognized leader in specialty with tailored products and solutions that directly deliver on our customers' needs. Indeed, Access helps our customers turn challenges into opportunities and opportunities into new possibility for their businesses. And this directly reflects the feedback that we've been hearing from our customers. Over the past 90 days, I've had the opportunity to attend multiple industry events and trade shows. And the consistent feedback I've heard from our customers is appreciation for our strong and mutually beneficial partnerships, excitement for our new specialty product offerings, and a desire to do more business together. In summary, there's a lot to be excited about at Access. The positive momentum in our performance is continuing to accelerate, and we are focused on producing consistent, profitable results, exhibiting excellent cycle management, and delivering growth in book value per share. And we are putting the right ingredients in place to take the business to the next level. We are in the right markets, investing in the right specialty product capabilities, and making the right operating decisions, and investing in our talent. The future looks bright at Axis. I'll now turn the call over to Pete for more color on the financial results.