Axis Capital Holdings Limited

Good morning and welcome to the Access Capital fourth quarter 2024 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 telephone keypad. And to withdraw your question, please press star then two. Please note this event is being recorded I would now like to turn the conference over to Mr. Cliff Gallant, head of investor relations. Please go ahead, sir.

Thank you. Good morning, and welcome to our fourth quarter 2024 conference call. Our earnings press release and financial supplement were issued last night. If you'd like copies, please visit the investor information section of our website at accesscapital.com. We have set aside an hour for today's call, which is also available as an audio webcast on our website. Joining me on today's call are Vince Tizzio, our President and CEO, and Pete Vogt, our CFO. In addition, I would like to remind everyone that the statements made during this call, including the question and answer session, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risks, uncertainties, and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company's most recent report on the Form 10-K, or our quarterly report on the Form 10-Q and other reports the company files with the SEC. This includes the additional risks identified in the cautionary note regarding the forward-looking statements in our earnings press release issued last night. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, our non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplements. And with that, I'll turn the call over to Vince.

Thank you, Cliff. Good morning, and thank you for joining our call. Before we begin, please allow me to take a moment to acknowledge the tragic wildfires in Los Angeles. And on behalf of all of AXIS, we share our heartfelt support for the impacted individuals, families, and communities. We also express our gratitude to the firefighters and relief workers who are doing outstanding work. Moving to our 2024 results. 2024 was a great year of progress for Axis, culminating as one of the best years for our company. Before we unpack these results, I'll just take a moment to thank my Axis colleagues throughout the world for their excellent work and commitment to our customers, broker partners, as well as to one another. In looking at both the fourth quarter and full year, Axis produced strong results across all its key indices while advancing our company strategy outlined at our investor day in May. The year was highlighted by a number of strategic accomplishments, including the expansion of our underwriting and product capabilities, investment, and enhancements to our operating model, and the recruitment of new and complementary talent. The changes we have implemented will allow Access to continue operating with pace, clarity of purpose, and strong execution. We believe Access is well positioned to drive sustained, profitable growth and value creation in 25 and beyond. Let's now review our full-year financial results. We delivered operating return on equity of 18.6% and a year-end book value of 6527, representing 20.7% growth as compared to the prior year. We generated record operating earnings per share of 1118, a 98% increase over the prior year, and 75% higher than our previous best in 2007. I'll note that our top four quarters of operating earnings per share were all in 2024. We delivered a combined ratio of 92.3 for the year, a 7.6 point improvement over the prior year. On an XCAT basis, we produced a current accident year combined ratio of 88.5 for the year, consistent with our prior year results. Full-year premiums were a record $9 billion or 7.8% over the prior year, including $2.6 billion in new business as we delivered on the full-year expectations that we shared with you during our second quarter call. We generated year-over-year expense improvement of 90 basis points to our GA ratio and are on track to hit our long-term target of 11% by 2026. There were some notable items in the expense ratio, which Pete will speak to in his comments. And lastly, net investment income was a record $759 million for the year. Taken together, this was an excellent year for Axis and one where we took important steps to build a stronger and more resilient company. From an improved position of financial strength, we view repurchasing shares as an attractive use of our capital. and we utilized our stock repurchase program in the order of magnitude of 200 million over the course of the year. And in December, we completed an important step in further aligning our balance sheet with the front end of our business with the execution of an LPT with NSTAR. Let's now move to our operating segments and we'll begin with insurance. In 2024, our insurance business performed exceedingly well. We produced an overall combined ratio of 89.1 and a current accident year ex-cat of 84. Moreover, we generated $6.6 billion in premium, up 7.7% over the prior year. With respect to new and expanded products that we had mentioned at our investment day, we generated $560 million in new premiums, and we are very encouraged that the seeds that we've planted are showing growth potential. Turning to our core insurance divisions, In North America, strong growth of 8% for the year, even while reshaping our primary casualty book and eliminating 140 million of written premiums. Across North America, submission flow was up 25% year over year, with our wholesale channel generating a 27% improvement in submissions, led by E&S property and excess casualty. Moving to global markets, we generated 7.6% growth over the prior year, which included the non-renewal of some $60 million in written premiums from our delegated cyber portfolio. And we concluded 2024 maintaining our outperform status from Lloyd's. As I've commented previously, we are evidencing increasing competition in global markets, particularly within our property, marine, and aviation units. Our underwriters continue to maintain discipline as we drive selective growth, particularly in A&H, property, renewable energy, and certain of our credit products. Our dedicated energy transition syndicate, launched just eight months ago at Lloyd's, produced more than 30 million of business in 2024, and we remain optimistic about the value this syndicate and its product capabilities deliver to the market. Let's now move to reinsurance. Our reinsurance business performed well in 2024, consistently producing strong contributions to both the top and bottom line. For the year, Access Free produced a combined ratio of 91.8 and generated $2.4 billion in premiums, growing nearly 8%, driven by a 16% year-over-year increase in our targeted short-tail specialty lines. Moreover, during the year, we produced $493 million of new business, 63% of which came from our short-tail specialty lines. As respects 1.1, where we write 45% of our reinsurance business, our team performed well with the backdrop of a competitive market. Overall, it was an orderly renewal with some nuance by line. We saw particularly favorable conditions in credit and surety. We continue to see opportunities in cyber despite an increasingly competitive environment. We saw greater competition in the UK motor class driven by the reduction in the Ogden rate which of course has placed downward pressure on rate levels. As respects marine, we saw increasing capacity and pressure on rates. And in liability, we saw double-digit rate increases in the US, but the market was differentiated by loss experience and business mix. While the overall reinsurance market remains competitive, we continue to leverage our specialty capabilities where we see strong premium adequacy while maintaining a selective appetite in professional and casualty lines. Stepping back, let's take a moment to discuss broader market conditions. The risk landscape remains highly complex and continues to rapidly evolve, reflecting a marketplace that will draw on many of the specialist capabilities that access brings to the market. There are a number of trends that we are observing, and we are ensuring that our portfolio remains responsive and resilient. I will outline several trends that we continue to monitor and respond to with our specialty product capabilities through our various distribution channels. First, climate. As respects climate risk, there is no doubt that this was an active year globally, and we estimate more than 135 billion of industry losses. At the same time, the dispersion of perils impacting the globe is wide-ranging. We saw most recently the effect of the wildfires in Los Angeles, the continued increase of severe convective storms in the U.S., and other impactful natural catastrophes. A consequence of this phenomenon is the continued shift of business into the E&S channel, where we believe we have the expertise and product know-how to meet our clients' needs. Second, the continued impact of social inflation on various lines of business, but most particularly on liability, which continues to draw great scrutiny as the increase in claims awards Driving severity remains an industry challenge. Third, the D&O market continues to show an imbalance with a growing delta between pricing and lost cost trends, even as conditions continue to deteriorate. Indeed, security class action lawsuits are at their highest level since 2020 and continue to grow year over year with filings up 5% in 24. Moreover, bankruptcy rate filings in the U.S. are also on the rise, up 8% year over year. Fourth, the cyber risk landscape is evolving in a variety of ways, whether it be the resurgence of ransomware, third-party privacy regulations, the impact of AI in driving more sophisticated cyber attacks, or rising geopolitical tensions. As a longtime leader in cyber, with broad-based product capabilities and deep subject matter expertise, Access is particularly well-positioned to help our customers delivering tailored products, risk advisory services, and our rapid triage and support resource known as the Incident Commander. Lastly, the energy marketplace will certainly evolve with a renewed focus on traditional energy in the United States, and yet it is anticipated that there will continue to be global demand for clean energy. With leadership in both traditional energy and energy transition and deep subject matter know-how with a broad and responsive portfolio of products, Access is well positioned to help our customers navigate emerging geopolitical developments, changing regulatory and policy environments, potential energy price volatility, technology advances, and supply chain disruption. Stepping back and looking at the shifts that are happening across the broader market, we believe the access underwriting capabilities are well suited to support the diverse needs of our customers in this dynamic risk landscape. Let's unpack this further. We continue to mix shift toward premium adequate short tail lines, which currently comprise 52% of our total gross premiums written, up approximately 4% as compared to the prior year. In property, we're seeing increased competition through both our principal property divisions, Global Property and North America E&S, which taken together make up 57% of our total property written premiums. Our property portfolio is well-constructed, well-diversified, and highly premium adequate, following five years of rate increases where pricing has more than doubled. As previously noted, pricing momentum and liability remain strong and is accelerating. By way of example, in our US excess casualty book, we generated rate increases of 14% for the year and 18% in the quarter as we grew our US excess casualty business 18% year-over-year. In primary casualty, rates were up 20% for the year and 29% for the quarter. Transactional liability premiums grew 24% in the year and 11% in the quarter, as we are seeing increasing deal activity driving submission flows. Premiums remain adequate in this line. In cyber, we remain focused on growing our large account segment, and we grew North America large cyber by 13%. in the year. As part of our reshaping of our delegated cyber portfolio, we continue to be pleased with the expansion of our partnership with Alpha Secure to address the lower middle market. As I've commented in prior calls, we continue to lean into our ability to deploy cyber capacity through both of our underwriting businesses. In reinsurance, we grew our portfolio to $166 million and written premium up 72% over the prior year. We remain confident in our strong premium adequacy, prudent limit deployment, and accumulation management between both insurance and reinsurance supporting this growth. Stepping back and looking at market conditions and the rate environment, while there are signs of continued moderation in rate achievement, the access portfolio remains premium adequate and is meeting our risk-adjusted return expectations. We anticipate Our profitable growth will continue in part by price increases, but more importantly, we will continue to leverage our diversified portfolio and further monetize the expansion of new customer segments, new geographies, and a rich and broadening arsenal of product capabilities. Let's now turn to our How We Work transformation program. How We Work continues to progress, building a foundation for long-term profitable growth. In 2024, We took critical steps to strengthen and reshape our company's target operating model while building new skills and capabilities across the enterprise, including operations and claims. In addition, throughout the business, we've deepened our technical expertise as we've added strong talent to complement our existing team. This has enabled us to build out new business units with skills and tools to meet the emerging needs of our customers while deepening our bench of teammates. Moreover, we've made key investments in technology, AI, and we continue to improve our efficiency and enhance our value proposition through speed, productivity, and decision-making. We also continue to invest in our workplace programming to create an environment where our talent can thrive. And just last week, Access was recognized by US News on its 2025 list of the best companies to work for. In closing, We look to the future with optimism and excitement. We believe that 2024 was a pivotal year in the Axis journey, where the company delivered on its promises, enhanced its value proposition, continued to generate consistent, profitable results, and achieved new recognition in the marketplace as a competitive force in the specialty arena. We take pride in the progress that we've made and also have the humility to recognize that much work remains ahead. Throughout the company, we're committed to delivering value to our stakeholders, and we're motivated by the privilege that we have in solving customers' problems across the world. And with that, I'll pass to Pete.