AXIS Capital Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 2, 2023

There are 9 speakers on the call.

Operator

Good morning, and welcome to the Second Quarter 2023 Axis 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 turn the conference over to Miranda Hunter, Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thanks, Chad. Good morning, and welcome to the AXIS Capital Second 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 ataxiscapital.com. Joining me on today's call are Vince Tizio, our President and CEO and Pete 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 ks or a quarterly report on the Form 10 Q and other reports the company files with the SEC.

Speaker 1

This includes the additional risks identified in the cautionary note regarding forward looking statements in our earnings press release issued last 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 our financial supplement. And with that, I'll turn the call over to Vince.

Speaker 2

Thank you, Miranda, and good morning. Thank you for joining us. I'm now 90 days in the seat as AXIS' new CEO, and I'm excited to share our results and priorities as we look to the future, including generating consistent profitable results and growing book value per share. As reported, the Q2 was very strong across multiple measures. We grew gross premiums written to 2,300,000,000 A company record for the 2nd quarter and an 8% improvement year over year.

Speaker 2

This was driven by our specialty insurance business, Which produced 15% growth, its largest ever quarterly premium volume of 1,700,000,000 A record new business of $500,000,000 and a combined ratio of 86. Our group combined ratio also saw Improvement of nearly 2 points to 0.91.5. We produced operating earnings per share of 2.23 making 2023 our best first half operating EPS record on record, excuse me. And finally, our investment portfolio performed well, producing net investment income of $137,000,000 up more than 48%. Let's now discuss our 2nd quarter performance in more detail and within the context of the broader market environment.

Speaker 2

We produced these results in a market that we believe is vibrant and will continue To hold favorable conditions in the near and intermediate term, some of the key actions we led in advancing our business were Bringing more products to our North American market by leveraging our global specialty knowledge, continuing to make investments in our dedicated Lower middle market units in wholesale and retail within North America. And of course, attracting new talent In leadership roles to support our business, these actions are just a start. Across the organization, We are pursuing profitable growth and unlocking new opportunities to meet our brokers and customer needs. Let me now provide more color on the Insurance segment. We continue to see generally favorable market conditions across our specialty lines With rates holding at 9%, putting us ahead of loss cost trends, our wholesale business grew 35% and produce strong growth, particularly in property and excess casualty, while producing an average rate increase of 17%.

Speaker 2

Our international business, including our Lloyd's syndicate grew premiums by 23% with strong momentum evidenced in marine, Aviation and Renewable Energy, all the while yielding an overall rate increase of 7%. Within property, we continue to seize upon favorable market conditions. Across our North America And international businesses, we produced premium growth of 33% and an average rate increase of 22%, Unlocking property a bit further. Our wholesale and E and S property business grew 66 percent, while achieving an average rate increase of 28%. Our onshore renewable energy business Produced premium growth of 71% and rate increases of 11%.

Speaker 2

Our London open market property book Produced premium growth of 61% and rate increases of 26%. As respects cyber, we delivered premium growth of 5% with rates up 6%. I'll add that with rate increases slowing, we are repositioning our book to deemphasize The small commercial accounts that may no longer meet our risk or return thresholds. Moreover, Our underwriters are practicing discipline in the wake of increased price competition driven by new and existing companies in the market And the recent debate surrounding the LMA's war exclusion wordings. As respects professional lines, Premiums were down 9% or $29,000,000 with rates down just under 3%.

Speaker 2

As in prior quarters, A key driver was the repositioning and reduction of our U. S. Public D and O business, where pricing remains inadequate generally as well as the reduction of transactional liability opportunities. Looking across are the lines. Our Marine and Global A and H Businesses generated premium growth of around 30% With rates up in both lines in low single digits.

Speaker 2

For Aviation, we delivered premium increases of 59% With rates up 14%. In liability, we saw premium growth of 7% with rates up close to 9%. Now let's turn to our Reinsurance segment. We produced $600,000,000 in gross premiums written. This is 7% lower than the prior year.

Speaker 2

However, when excluding exited lines, we grew 4%. The Q2 gave us further evidence that our repositioning efforts to shape Axis Re into a more focused Specialist reinsurers are taking hold. Our premium growth within reinsurance was driven by new business writings of 100 and $69,000,000 a 47% increase over the prior year. We continue to lean into targeted specialist reinsurance markets, including credit and surety and cyber to name 2. Our operating margins are performing As expected, in particular, our attritional loss ratio increased, but this was more than offset by our market improved CAT loss ratio.

Speaker 2

On the pricing front, across our specialty reinsurance book, we saw average rate increases Just over 5%. During the July 1 renewals, which make up about 12% of our reinsurance portfolio, We continue to demonstrate strong retention and new business generation across our targeted specialist lines. Now when stepping back and looking across all of our businesses during the Q2 and indeed the first half of twenty twenty three, We have demonstrated that we are delivering on our strategy to elevate AXIS as a specialty leader in the specialty underwriting arena. Let me now tell you about how I see our future and why I believe there is ample opportunity to Further, enhance our business. Key to our success will be to continue advancing underwriting and performance oriented mindsets within AXIS and a structure designed to take advantage of the marketplace dynamics.

Speaker 2

Let me be clear, we see plenty of opportunity to grow our business in the specialty markets where we have deep expertise and existing leadership positions. How will we get there? Our approach will include leveraging Existing product capabilities across more of the geographies that we compete and accessing new customer segments We'll deepen our distribution relationships and build upon the strong partnerships that we have in place, enabling our partners to leverage the full breadth of our product capabilities. As noted earlier, we will continue to add talent wherever it is necessary to bolster our and enhance our operating infrastructure and execution so that we can further take advantage of the opportunities in our chosen target markets, while benefiting from pricing that again is generally ahead of loss trends. By example, we recently launched an internal program called How WeWork.

Speaker 2

The program is focused on enhancing how we operate and how we go to market. Through this initiative, We are increasing our agility and speed to market so that we can better pivot and adapt to shifts in the market Addressing changing customer needs. This includes simplifying our operating structure, leveraging our data and digital capabilities, enabling quicker decision taking and enhanced collaboration across the company. Further, We are focused on improving efficiencies and monetizing our productivity gains. Internally, our colleagues across Axis are Energized by the positive momentum in our business evidenced through the first half year mark, the progress that we're making toward our strategy And the future that stands before us.

Speaker 2

Our team is focused on optimizing AXIS' strength to realize its full potential, And I believe the measure of our success for our shareholders lies in our ability to consistently deliver profitable results and exhibit outstanding cycle management acumen and produce increased book value. In summary, there's a lot to be excited about at Axis. We look forward to sharing our progress as we further on being a leader in specialty underwriting. I'll now turn the call over to Pete for more color on the financial results.

Speaker 3

Thank you, Vince, and good morning, everyone. This was another strong quarter for AXIS, rounding out a very good first half of the year. As Vince noted, it was our best first half operating income per diluted common share in the company's history. During the quarter, we generated net income available to common shareholders of $143,000,000 and an annualized ROE of 12.9%. Operating income was $191,000,000 and our annualized operating ROE was 17.2%.

Speaker 3

Diluted book value per share increased $0.67 or 1.3 percent to $50.98 This was principally driven by net income, partially offset by net unrealized investment losses and common share dividends declared. As noted in our press release, adjusted for net unrealized losses on available for sale fixed maturities, the book value per diluted common share The company produced a combined ratio of 91.5%, an improvement of 1.9 points over the prior year quarter. This quarter's pre tax cat and weather related losses, Net of reinsurance were $32,000,000 or 2.6 points, primarily attributable to Cyclone Gabriel and other weather related events. This compares to $67,000,000 or 5.3 points in 2022. Given the high incidence of convective storms in the quarter, We were pleased with this outcome.

Speaker 3

I would also add that in the quarter, we renewed our outwards reinsurance coverage and renewed the quota share treaties on our E and S and Global Property books at consistent levels. The July 1, 2023 PMLs in the financial supplement reflect the new outwards protection for our insurance property book. To review the change in our PMLs, please compare this year's values to the July 1, 2022 values. I'll note that the April 1 PMLs from this year are benefiting from the erosion of the previous insurance aggregate treaty and therefore not an apples to apples comparison to the July 1, 2023 PML. Net favorable prior year reserve development was $6,000,000 compared to $4,000,000 in the Q2 of 2022.

Speaker 3

The favorable development was in both segments And I'll cover this a bit more in my segment comments. The consolidated acquisition cost ratio was 20%, which was a slight decrease from the prior year quarter. The consolidated G and A expense ratio was 13.3%, which was an increase of 0.4 points over the prior year quarter. This was driven by a slight increase in corporate expenses due to the CEO transition and the decrease in net earned premiums year over year. And lastly, on a consolidated basis, Fee income from Strategic Capital Partners was $15,000,000 compared to $12,000,000 in the prior year quarter.

Speaker 3

I would expect our normalized quarterly run rate on fee income to be in the $12,000,000 range on a go forward basis. Now let's turn on and move to discuss our segment results in more detail. I'll start with insurance, which once again had a strong quarter with good performance across a number of metrics, including a combined ratio of 86.4%, which was an improvement of 1.4 points over the prior period. As Vince mentioned earlier, the Insurance segment set a new record for gross premiums written In the quarter of $1,700,000,000 an increase of 15%. I would also note At the segments net premiums written and net premiums earned were also all time highs.

Speaker 3

Since Vince went through much of the details and gross premiums written, I'll just reiterate a few points. Notably, the increase in quarterly premiums was primarily related to Favorable rate change and new business in property, marine and aviation and liability lines, while accident and health lines Also increased due to new business. Partially offsetting the growth was a decrease in professional lines Due to reduction in U. S. Public D and O premiums, which year to date now represent approximately 5% of our professional lines portfolio, as well as a decrease in transactional liability due to a lack of opportunities.

Speaker 3

The current accident year loss ratio ex cat and weather Was comparable to the Q2 of 2022. Quarter over quarter, we had improvement in the ratio due to mix as we have a higher proportion of marine and aviation business, which carries a relatively lower loss ratio and a lower proportion of professional lines business, which has a relatively higher loss ratio. The improvement from mix was offset from the higher year over year book loss ratio and liability, which is consistent with the actions taken in the second half of last year. Insurance PYD was positive for the quarter, Favorable development from Credit and Political Risk Business as well as Marine and Aviation Lines was partially offset by negative development from both viability and professional lines, mainly related to the 2017 through 2019 accident years. As you've heard from others in their quarterly reporting, We are continuing to monitor those years.

Speaker 3

The underwriting related G and A expense ratio decreased by 0.6th of a point in the 2nd quarter. This was mainly driven by an increase in net premiums earned, partially offset by increases in information technology costs and personnel as we invest in our specialty businesses. Now let's move on to the Reinsurance segment. I'll start with gross premiums written, where approximately 75% of our business is written in the first half of the year. In the quarter, we had premiums of $600,000,000 which was a decrease of $44,000,000 or 7% compared to the prior year quarter.

Speaker 3

A decrease of $68,000,000 was The remaining specialty portfolio increased gross premiums written by 24,000,000 4%. This was principally driven by new business in our credit and surety lines and professional lines businesses and a higher level of premium adjustments. The new business in professional lines was driven by new cyber premiums, partially offset by reduction and other professional lines classes. Lastly, as we indicated during our Q1 call, our 2nd quarter liability business Negatively impacted by our exit from property, where $10,000,000 of regional multi line business was non renewed and our share on a significant account Adjusting for these impacts, the liability business grew by $5,000,000 or 3% in the quarter. The total current accident year net loss ratio is performing in line with our current reinsurance strategy.

Speaker 3

The current accident year loss ratio ex cat weather increased by 4.4 points, While the cat loss ratio decreased by 6.3 points, resulting in improvement of 1.9 points in the total accident year net loss ratio. Digging into the increase in the current accident year loss ratio ex cat weather, it is up 4.4 points as I noted. And this is due to the exit from cat and property lines as well as the impact from higher losses in the exited engineering line of business. Excluding these items, our specialty reinsurance loss ratio was relatively flat. The acquisition cost ratio increased by 0.6.

Speaker 3

This was primarily related to the changes in business mix associated with the exit Cat and property lines of business partially offset by the impact of retro contracts. Reinsurance PYD was $4,000,000 Positive due to the favorable development in our accident and health lines as well as the runoff catastrophe lines. This was partially offset by negative development primarily in our liability and professional lines due to reserve strengthening across the 2015 through 2019 Accident years. The underwriting related G and A expense ratio decreased by 0.7 of a point. This was mainly driven by the decrease in personnel costs associated with the exit from property and catastrophe lines of business.

Speaker 3

Let's move on to investments. Net investment income was $137,000,000 compared to net investment income of $92,000,000 for the Q2 of 2022. In the quarter, investment income from fixed maturities was $124,000,000 This was up 70% from $73,000,000 in the Q2 last year. As the yield on the portfolio has increased from 2.4% to 3.9% over the last 12 months. At quarter end, the fixed income portfolio had a book yield of 3.9% and a duration of 2.9 years.

Speaker 3

Our market yield is 5.9%, 200 basis points above the book yield. Given the duration of our portfolio In the current market yields, we expect net investment income from fixed maturities to be more than $150,000,000 greater in 2023 than we reported in 2022. With respect to commercial mortgage exposure in our investment portfolio, nothing material has changed Since my update in the Q1, I would note that we have slightly less CMBSs at June 30, as we sold some securities in the normal course of trading during the quarter. Regarding capital management, in the quarter we returned $38,000,000 to shareholders through common dividends and we still have 100,000,000 Remaining on our share repurchase authorization. Our top priority is to allocate capital to support profitable growth in our specialty businesses.

Speaker 3

In summary, this is a strong quarter for AXIS, one in which we advanced our strategic priorities to deliver consistent profitable results and to grow book value. To echo Vince, we are committed to building on our progress and we are optimistic for the future. With that, I'll turn the call back to Miranda.

Speaker 1

Thank you, Pete. We're now ready to begin the question and answer session. We ask that you kindly restrict your questions to one And if you have any further questions, please reply to the queue. Chad, over to you.

Operator

Thank you. We will now begin our question and answer session. And at this time, we'll pause momentarily to assemble our roster.

Speaker 4

Thanks. Good morning. This is Weston Bloomer on for Brian. I guess within reinsurance, the premium growth that you saw there was Pretty strong and in the double digit range. Is double digit premium growth on or gross written premium growth kind of within expectations in the back half Could you just expand on your outlook there and which lines you expect to drive a majority of that growth?

Speaker 3

Hey, Weston, this is Pete. I'll unpack a little bit of your double digit growth, because I want to make sure other folks see where you're coming from. I believe that When we exclude the exited lines of business, we were up 4%. But I believe what you've done, which I appreciate is when I exclude The multi line regional treaties and I exclude the one large quota share that we got signed down on both due to the fact that we exited property When you add those two numbers up, it's about $36,000,000 impact. The rest of our ongoing business in reinsurance Actually did grow about 11.6%.

Speaker 3

So I appreciate you noticing that the team actually underlying did a double digit growth. With that, I'd remind you that 75% of the book was actually renewed in the first half of the year. And so in the second half of the year, I don't think we're going to see the same type of double digit growth just because the opportunities aren't there, we'll see. But I'd also point out that in the Q4 of 2022, we had some premium adjustments coming through mostly our ag and our motor lines and those are just hard things to predict. But as for an outlook I think I'll turn it over to Vince.

Speaker 2

I think, Peter, you captured the explanation unpacking the business. I think the outlook remains Most of the business has already renewed. The second half of the year will be approximately The same as what we saw in the 1st 6 months, except I would say that new business will probably be lighter just given what comes to market in the remaining months of the year in the reinsurance market.

Speaker 4

Great. Thank you. And then as a follow-up, within insurance, accident year Loss ratio did improve sequentially and you gave a lot of good color on pricing versus loss trend in mix shift and some increase Is there a way to quantify the impacts that you're seeing either from the mix shift on the basis points or relative to mix shift. And is a low 50s accident year loss ratio within insurance kind of the right level to think about still going forward?

Speaker 2

I think the mid-50s to capture the end of what you said will be consistent. Low 50s is what you should expect from us. In terms of the continued mix, we liked the dispersion of our line of business writings in the quarter. We think it is in keeping with our targeted product strategies geographically and by line of business. And I'd leave it at that and give it to Pete.

Speaker 3

Yes, I think that's appropriate Vince. Again, I'd say low 50s is where we think that will be going on a go forward basis with reinsurance and I echo the sentiment We do like the mix where it is today.

Speaker 4

Great. And I may sneak in one more. Do you have what loss trend you gave loss trend on a consolidated basis around 8 Within insurance, do you have what that is for liability lines specifically? I may have missed that.

Speaker 2

We indicated loss trends mid to high single digits for the portfolio. I don't recall expressing a Specific trend on liability, but I would say that that would be in the upper single digits In our insurance business.

Speaker 4

Great. Thank you.

Operator

And the next question will be from Meyer Shields from

Speaker 5

My first question is on the property book. So property book within insurance segment looks pretty strong. Just wondering if you could provide some premium growth guidance for the second half of twenty twenty three?

Speaker 2

I wouldn't provide guidance, but I would tell you that we're very comfortable with the Q2 performance in property. We gave you color on the contributing components of our insurance business around the property market. I might take the opportunity just to simply add that we I'm particularly pleased through the half year mark with our management around our geographic spread of where we're writing the business, our average limit profile And our use of our PML, including an active posture with our brokers, who obviously have a tremendous opportunity That they're bringing to the marketplace.

Speaker 5

Okay, got it. Thank you. My second question is on the cat losses. So since Exaxe is growing primary property books, but the cat losses came in relatively better. So can you add some On the drivers behind this?

Speaker 3

Hi, Vince. I'll take this. This is Pete. I think what you're seeing in the property book is 1, This quarter very much was due to convective storms, so secondary storms. And in our portfolio, That's not the majority of our portfolio, but I would say, one, we've done a great job the last few years of getting down our limit profile.

Speaker 3

Our average net limit in our E and S book is now down below $2,000,000 and so any one particular Storm or tornado that hits us doesn't necessarily stick out like it used to. And I'd also point out that across the book we've got A lot of rate and rate is what that book needed and we're seeing that come through on the property side and we consistently tend to do that.

Speaker 5

Okay. Thank you so

Speaker 6

much. Thank you.

Operator

And the next question will be from Matthew Carletti with JMP Securities. Please go ahead.

Speaker 4

Hey, thanks. Good morning.

Speaker 2

Pete, I was hoping to go back to

Speaker 6

your comments on PML. And we've seen the actions you've taken. It's been pretty substantial, right, exiting the property reinsurance lines And results first half of the year certainly have shown it in terms of good bottom line. But when I look at like you suggested the PMLs July 1 this year versus July 1 last I was surprised to see what looks like little movement in certain areas. So like south the peak wind PML in the Southeast It only dropped to 3.3 percent of equity from 3.5%.

Speaker 6

It's similar at a 50 year return period. I was just hoping you could help us kind of Fill in the color there what might be going on. I mean, it is worth noting Gulf of Mexico is a bigger decline, Calquay is a bigger decline, but I just would have thought the peak PML would have come down by a bit more.

Speaker 3

Yes. Hi, Matt. This is Pete. I'll take that. What we're seeing across, you're actually seeing some pretty significant double digit Declines across just about all the P and Ls.

Speaker 3

I will say that is very much driven by the exiting of cat and property from the reinsurance You did point out especially when you look year over year like southeast wind, southeast hurricane in the 1 in 100 is actually up a little bit. One of the things we did in our renewal at July 1 is we did not renew 3 cat bonds we had. And so the cat bonds Really helping I'll call it the real tail risk that's there. Now we did get good indemnity coverage instead when we renewed our XOLs, But it's the working of the cat bond through the model, it's actually showing some of the noise there, mostly in southeast wind. If you look at all the other perils, They're down pretty substantially.

Speaker 3

And again I feel really good that now as we're going into wind season, what's more important is really what's our outwards Reinsurance property treaty look like and we're able to renew that with XOL occurrence The Vennakerurrence treaty that still attaches at $100,000,000 and so that was really good for us going forward as well as the quota shares that we see on the other 2 on the E and S line of business in the global property. But I think what you're seeing in Southeast Wind has to do with those cat bonds and how they model We switched from cat bonds to indemnity coverage, which quite frankly I feel better about because I have no basis risk.

Speaker 6

Perfect. Makes sense. That's exactly the color I was looking for. Thank you.

Speaker 3

Thanks, Matt.

Operator

And the next question is from Elyse Greenspan From Wells Fargo, please go ahead.

Speaker 7

Hi, thanks. Good morning. My first question, I was hoping to just get some additional color on what's driving the adverse Development within professional lines and liability, it's almost $100,000,000 year to date. And why weren't these lines like accident years covered By the LPT that you guys entered into late last year?

Speaker 3

Hi, Elyse. This is Pete. I'll take that. The LPT that we entered in Last year was specific to the insurance segment and it was specific to some lines of business that we had put into runoff. And we feel good about what went into that deal and we now know that we put those particular books of business behind us.

Speaker 3

As we continue to look at, I'll call it the soft market years of 2015 to 2019, we as well as others continue to monitor The situation and we do our reserve reviews on a quarterly basis, so we take new information into account. We see what's coming through in there And what I would say is those are the soft market years where we can see continue to see some social inflation impact those areas. And as we get new information, we react to it very quickly and move those reserves. And that's what you're seeing this year. I would note that The Q1, especially in reinsurance, as I mentioned, we did move up our assumption on financial inflation And that did have an impact on the reinsurance book this year in the Q1 to the tune of about $30,000,000 of adverse.

Speaker 3

We think we've gotten that now Really quite right, but again as new information comes in, as we learn more, we'll react quickly to what we see.

Speaker 7

Vince, would you like to add

Speaker 3

on to that?

Speaker 2

Go ahead, Elyse.

Speaker 7

No, I was going to say, Vince, I guess my follow-up goes To you, right, I mean, you're new as CEO, right? This is your first conference call in the role. Are you planning an in-depth Review of your reserves at some point this year and would that be something if you are considering that you would look to undertake in the 3rd or the 4th quarter?

Speaker 2

So first, good morning to you, Elyse. Let me start by unpacking it this way. My reserve philosophy is to on the side of prudence. And given the color that Pete provided around social inflation, the so called soft years, there is no doubt That as part of how we work, we are looking at all of our capabilities, our processes. And certainly, having onboarded a new claims executive, it's Certainly, our aspiration to make certain that we have the best set of processes.

Speaker 2

And so will we continue to examine our quarterly earnings In our reserve positions, certainly. We'll look at that as we continue to receive new information. But I think What our shareholders can take confidence in is that we will have an active posture at examining the development of our lines. And as you noted In your first question, you cited a number that will continue to be an active footing for us and we are going to examine each of our lines as we have historically. But there won't be some magical moment where we're coming back with some conclusion on a particular line other than looking at our book in total.

Speaker 2

Peter?

Speaker 7

No, Pete, go ahead.

Speaker 3

No, I'm good Elyse.

Speaker 7

And then, Vince, my last question, are you looking to lay out Financial targets, at some point to The Street, maybe it's more short to intermediate term that you're looking to Ford, your tenure as CEO?

Speaker 2

No, but we do expect in the New Year To have an Investor Day and talk further about our exciting strategies, the advancements that we're making and to lay out And a clearer with added time where we're taking the company.

Speaker 5

Thank you. Welcome.

Operator

And the next question will come from Yaron Kinar from Jefferies. Please go ahead.

Speaker 8

Hey, good morning. This is Andrew on for Yaron. You mentioned in the 10 Q that you established a working group to look at exposure to the banking I was hoping you could kind of touch on what you discovered and also discuss net limits to banks and perhaps what were year to date losses to any banks that failed?

Speaker 3

So I'll take that Vince. Yes, we actually in response to what we saw happen in the Q1 with SVB, we put a working together to make sure that we reviewed our portfolio on the underwriting side with exposure to banks and how we feel about that. The conclusions were, I believe that we our conclusions were that one, we had no exposure to SVB or to any of the other banks that failed, Signature, etcetera. So we had no exposure there and we've had a real, I'll call it positive, we've had a real management of Our limit profiles in our FI book for quite a while. So that review was a solid review, but it didn't make us change any of our underwriting stances on a go forward basis.

Speaker 3

I think, Vince, I'd say You

Speaker 2

got that right, Peter. Yes.

Speaker 8

Great. And then, also just mentioned the build out of middle market, Feels like an area of competition, but perhaps you can talk about the opportunity set there, where you are in the build out and perhaps average premium size?

Speaker 2

Yes. Thank you. So, the lower middle market is a vast universe in specialty. This really is a concentration on select products out of our wholesale business, including things such as private company D and O, Environmental excess casualty. It's a customer segment with likely a $50,000 premium mark.

Speaker 2

This is not the SME or The BOP space to be sure, it is a underserved market that we are pursuing through our wholesale channel. And I would say that we're in the early innings in putting the structure and the process together, but we are already yielding fruit. It's It's important to note that we go to market historically with the products I've mentioned across all customer segments. This is one that we're putting more emphasis and focus on bringing a stronger value proposition too.

Speaker 8

Great. Thank

Operator

And ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Vince Tizio for any closing remarks.

Speaker 2

Thank you for your time today. This was a strong quarter for AXIS and we're focused on growing the company to become a specialty underwriting leader that delivers consistent profitable growth and growth in book value for our shareholders. We have the specialty underwriting acumen, Product capabilities, customer relationships and a global platform to take the business to the next level. For AXIS, it's all about further enhancing our execution And this is the focus of our leadership team. I look forward to providing updates on our progress in future calls.

Speaker 2

Finally, I want to thank all of our teammates across the world for their continued hard work and commitment to the company and thank you very much. Have a good day.

Operator

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

Powered by Quartr

Key Takeaways

  • Record Q2 GWP and profitability: Axis Capital achieved a Q2 record gross premiums written of $2.3 billion (up 8% YoY), reported insurance GWP of $1.7 billion (up 15%), improved its combined ratio to 91.5%, and delivered operating EPS of $2.23 (best first half on record).
  • Specialty insurance lines drove strong growth—wholesale GWP was up 35% with average rate increases of 17%, property GWP rose 33% (rates +22%), aviation GWP +59% (rates +14%), while cyber rates increased 6% despite modest premium growth.
  • Reinsurance segment GWP was $600 million (down 7%), but excluding exited lines grew 4%, with new business writings up 47% and average rate increases just over 5%, reflecting ongoing repositioning toward specialist reinsurer status.
  • Investment income surged 48% to $137 million, driven by a fixed income portfolio yield increase to 3.9% (from 2.4%), and the company now expects over $150 million more net investment income from fixed maturities in 2023 versus 2022.
  • Capital management remains a priority: Axis returned $38 million in common dividends, retains $100 million of share repurchase authority, and continues to focus capital allocation on supporting profitable growth in its specialty businesses.
AI Generated. May Contain Errors.
Earnings Conference Call
AXIS Capital Q2 2023
00:00 / 00:00