Hello and welcome to the AXIS Capital Second Quarter 2015 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Linda Ventresca. Ms. Ventresca, please go ahead.

Thank you, Keith and good morning ladies and gentlemen. I am happy to welcome you to our conference call to discuss the financial results for AXIS Capital for the second quarter ended June 30, 2015. 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 www.axiscapital.com. We set aside an hour for today's call, which is also available as an audio webcast through the Investor Information section of our website. A replay of the telephone conference will be available by dialing 877-344-7529 in the United States and the international number is 412-317-0088. The conference code for both replay dial-in numbers is 10068213. With me on today's call are Albert Benchimol, our President and CEO; and Joe Henry, our CFO. Before I turn the call over to Albert, I will 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 within the meaning of the U.S. Federal Securities laws. Forward-looking statements contained in this presentation include, but are not limited to information regarding our estimate of losses related to catastrophes, policies and other loss events, general economic, capital and credit market conditions, future growth prospects, financial results and capital management initiatives, evaluation of losses and loss reserves, investment strategies, investment portfolio and market performance, impact to the marketplace with respect to changes in pricing models, our expectations regarding pricing and other market conditions, and any merger related statements. There are important factors that could cause actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by forward-looking statements as are further described in the risk factors set…

Thanks, Linda, and good morning everyone. Thank you for joining us today. Last night AXIS reported second quarter 2015 operating income of $94 million or $0.93 per diluted share representing annualized operating ROE for the quarter of 7%. These results are consistent with our preannouncement of July 13. We ended the quarter with diluted book value per share of $51.81, an increase of 4.3% over the last year. Adjusted for dividends diluted book value grew 0.3% during the quarter and 6.6% over the last 12 months. Book value growth was held back in the quarter due to the increase in unrealized losses on investments given a higher government bond yields and the widening of credit spreads. Joe will go through the numbers, but I'd like to provide some context for this quarter's and half year results. Excluding the impact of multiyear treaties and FX our gross premiums are essentially flat for the quarter and year-to-date with growth in insurance and A&H offsetting declines in reinsurance. In a transitioning market we continue to focus more on consolidating our positions optimizing portfolio mix under available conditions and improving portfolio construction and underwriting profitability rather than pursuing aggressive growth in larger markets that offer fewer attractive opportunities. Still we continued to achieve good growth within certain business areas that continue to show promise and where we can differentiate ourselves including casualty and professional lines in our insurance segment and motor and reinsurance. We reported a respectable underwriting result for the quarter with a combined ratio of 96.9. Excluding the impact of differences in prior year development and cat losses which can vary significantly quarter-over-quarter our current year loss ratio increased by about 2.9 points. This increase in our loss ratio is attributable to rate weakness and loss trends across many of our lines,…

Thank you, Albert, and good morning everyone. During the quarter we generated positive results which included an operating income of $94 million and an annualized operating ROE of 7%. Our quarterly diluted book value per common share was $51.81 slightly lower compared to last quarter but representing a 4.3% increase over the last 12 months. Adjusting for common dividends declared the increase in book value per share was 6.6% over the last 12 months. Our quarterly results benefited from continued favorable prior year development in loss reserves, a decrease in our general and administrative expenses and positive results from our weather and commodity markets unit. These factors were offset by a decrease in net earned premiums and an increase in our current accident year loss ratio which was impacted by an increase in the loss experience in our Marine lines as well as other factors that I will explain shortly. Our positive operating results were offset by an increase in unrealized losses, our available for sale investment portfolio following the increase in government bond yields and the widening of credit spreads in nongovernment bonds resulting in the small decrease in our diluted book value per share this quarter. Moving into the details of the income statement, our second quarter gross premiums written decreased by 3% to $1.2 billion. After adjusting for the impacts of movements in foreign exchange rates the quarter-on-quarter decrease was 1% with a decrease in our reinsurance segment partially offset by an increase in our insurance segment. During the second quarter our reinsurance segment topline was down $50 million or 10%, 9% on a constant currency basis compared to the same period in 2014. This decrease was impacted by treaties written on a multiyear basis during the second quarter of 2014 which reduced premium available for renewal…

Thanks Joe. Moving to market conditions, the environment continues to remain challenging. While overall rates are still falling there are a few pockets of pricing stability and there remain some good opportunities for profitable growth in many insurance lines of business. Across our insurance lines our average price decline in the quarter remained at the same 3% level we experienced in the first quarter of the year and not much different from the minus 2% we recorded in the second quarter of last year. In many lines pricing is responding to carriers facing still attractive business where pricing remains adequate following three years of increases. However, we are now reaching levels of certain lines including global property and some cat exposed property lines in the U.S. where the industry has given back almost all the pricing gains achieved since 2011. As a result, our production is down meaningfully in a number of larger property related lines. Many London market specialty lines including international property, onshore and offshore energy are continuing the double-digit declines we observed in the first quarter. We would hope that the recent spate of large losses in offshore energy would dampen the decline in that line, but that is yet to be seen. Certainly, the aviation markets' response post the terrible results of the prior year was quite anemic. Professional lines rates overall are reasonably stable although competition seems to have picked up a bit recently with an average price decline in the 1% range over the past quarter. Rate pressures in our D&O lines have increased a bit in the second quarter with renewal rates down approximately 3% to 4%. Rates on primary layer stabilized in the quarter to flat pricing versus an increase of 4% in the prior quarter. Aggregate E&O rates were up 1%…

Yes, thank you. [Operator Instructions] And the first question comes from Ryan Byrnes with Janney.

Good morning everybody. Just wanted to talk a little bit about the reinsurance tree for the professional lines book. Last year you've noted you ceded about 40% of that business, now it's kind of an uptick from the year before, just want to see how you are protecting that book going forward?

Well, currently the renewal of that book of business we continue to aim for a quota share protection of that book of business and that's in the market right now.

Got you, okay, and then just moving, I guess quickly over to capital management. I guess regardless of the vote outcome is it possible to start repurchase after the vote or is it actually after that closing, I just want to make sure I understand the timing of when that could resume?

I think that the plan that we had with regards to the merger was that we would be repurchasing immediately after the close, because they would be, you'd have different shares of two different companies and we wanted to make sure that the combined shareholder base of both companies benefited from the repurchase program. So it would be after the close.

Okay, thanks for that and then just my last one. I know that you guys cited business mix and kind of pricing as a pressure in the underlying loss ratio in the reinsurance segment, but were there any kind of one-timers there, was there any marine pressure there or I guess again I hate to ask for kind of run rate answers, but again it was fairly elevated from year-over-year and sequentially, but just wanted to see if was there anything else in there or is that something that I would imagine those pressures should persist going forward?

No, Ryan, it's Joe. There wasn't any one-timers in terms of marine losses impacting the reinsurance portfolio. We had a slight uptick in loss activity in the property lines of business. We have actually increased expected loss ratios in some lines of business to actually be more conservative and we will probably continue with that until we see something that tells us differently, but the answer to your question is, there's nothing really unusual in the reinsurance loss ratio.

Yes, if I could add to that. We mentioned to you in the first quarter that unlike in prior years we were going to book the agro line at 100% through the first three quarters rather than estimate profitability. You know, last year I think we were probably in the low 90s at this stage last year and we're not doing that. Certainly as we have more visibility in the third quarter we may respond at that point or starts to respond at that point. The second issue that we discussed with you is that in our credits and surety line we also wanted to take a more prudent approach in booking that business in anticipation of more difficult, potentially more difficult economic conditions. So in both those areas I would say that there was a choice on our part to book more conservatively ahead of any potential losses. But I think if you go back to the five-ish point increase in the quarter and somewhere a little under four points for the year-to-date, when you think about rate and trends which is somewhere between one and two points and mix which is close to three points that basically explains the entire amount of the increase in the loss ratio. We continue to feel good about the way the book is developing, but obviously it is appropriate to reflect the changes in rate and trends and as cat with a very low loss ratio comprises a small percentage of the overall portfolio by definition the loss ratio comes up.

Ryan it is Joe. Let me just add to what Albert said there on the agriculture side our experience to date has indicated that basically the tact we're taking is actually prudent.

Okay, great. Thanks for that guys.

Thank you. And the next question comes from Charles Sebaski with BMO Capital Markets.

Good morning. Thanks for taking my call. First question is on the A&H business, I know this is one of the growth initiatives for your guys, but didn’t seem to be a lot of growth in it at this quarter. I am just kind of wondering where you see that business and if it is at a breakeven or profitable place at this stage in time?

Charles, it's Joe. You know, you are right. Agriculture hasn't shown a lot, I am sorry, accident and health hasn’t shown a lot of growth through six months of the year, but remember we had a large quota share reinsurance treaty which was terminated in 2014, so that impacts the comparison. We've actually had some very good experience with new treaties on the 1st of July. So, in short, in answer to both of your questions in terms of performance, the technical ratio is performing very well. Overall it's hitting the objectives that we had for profitability and we expect that by the end of this year we will have seen significant growth in the A&H line for the year.

Okay, then on the large loss that you had, the marine loss, I am just curious, are you guys having any higher retentions now in these lines of business and maybe years back, I guess if we look back over the last couple of years kind of here and there you have a large non-cat event come through. I am just wondering I know you've rebalanced some on the RI side for cat exposure. I guess how do you view that on the primary side?

Charles, several years ago we had a lower retention in some of those lines of the marine lines that increased a few years ago and we've actually brought that down a bit since then. So I don’t know if that gives you a picture, but again we had lower retentions many years back, but due to market conditions we have actually increased retentions. But I just want to point to the fact that if you look at the last five years itself, we've actually had a combined ratio in marine below 80% and actually offshore energy even better than that.

Okay, and then just finally on the reinsurance book on the liability business seems to be a pretty stark year-over-year contraction. Was this one of the multi-year programs, I guess I see it at $58 million versus $83 million last year, I'm just wondering any thoughts on that?

There's always lumpiness in some of these treaties. In fact when you look through as we mentioned earlier, there was some reduction in the first half. There is a big increase in the July 1 renewal. So there is some lumpiness in some of these contracts.

Okay, I appreciate the answers.

Thank you. [Operator Instructions] We do have a question from Christopher Campbell with Keefe Bruyette & Woods.

Yes, hi good morning.

Good morning.

I do have a question on rates and loss cost trend; for standalone AXIS, how would the current delta between rates and loss trend compare to underwriting margin benefit expected from internal underwriting and expense initiatives?

Let me start with that. As I mentioned to you earlier, notwithstanding the fact that we had significantly higher marine losses and the fact that again loss trends and rates, let's start with the basis that in a more difficult market reductions in average rates by definition is going to increase your loss ratio and likewise we continue to assume ongoing loss trends. So the at priori impact of rate and trend is somewhere between one and two points in any year. You try to offset that with mix, better underwriting and so on, but you start with one to two points of rate and trend. We also mentioned the fact that we had close to $40 million worth of marine losses. So under normal circumstances you would actually expect the book to report a loss ratio which is somewhere and I'm just going to use a range for example between two and four points. The point is that the actual reported loss ratio was only up by half a point and the reason for that is that we've been achieving the targeted underwriting improvements that we've been discussing with you, in particular with regards to the professional lines book you'll recall the CMS portfolio where we're booking I believe now at least a couple more points improvement. And with regards to our property book where we've made some significant improvement in terms of the sizing of our exposures that have the concentrations that we have in terms of micro zonal concentrations. So we've been seeing the improvements that we've expected to see in both professional lines and the property lines. And as I mentioned to you we are rolling out this data and analytics to all parts of our book. So we are very pleased to see that the benefit that we were counting on have in fact occurred and that's what's allowed the loss ratio, the ex-cat current accident year loss ratio, it's what's allowed that loss ratio to increase by only 0.5 points, when in fact under normal circumstances you would expect that increase to be north of three points because of the marine and pricing and loss trends.

Great, thank you, that's very helpful. And just a secondary question kind of still standalone AXIS, with the shift away from property cat lines and say your P&Ls are coming down and then you are shifting more to shorter tail lines such as motor. How would we view this in terms of a standalone ASR and increasing capacity? You had mentioned earlier that there was a $750 million ASR that was announced in January before the amalgamation agreement, how much additional capacity would that free up in AXIS' book on a standalone basis?

Christopher, if I may I'll just establish the premise for the question. We had originally announced a $750 million authorization from our board, which is a requirement of course to initiate any share repurchase programs and it had been our intention prior to the announcement of the merger that we would return to our shareholders essentially all of our operating profits for the year in the form of dividends and share repurchases. And that continues to be our goal subject to the close of the merger where we would in fact reinitiate share repurchase programs. You are absolutely correct that what we have done in the last several months is reposition our portfolio in the face of market conditions to reduce volatility and improve stability of the earnings. As a result of that, certainly we've as you can seen in our financial supplements, we've made meaningful reductions in our PML as a percentage of equity. We've reduced the amount of cat exposed to highly capital intense lines, which certainly means that our capital efficiency has increased. So both the accumulated earnings and the improved efficiency of our capital would promote ongoing share repurchases as soon as we restart the program.

Perfect. Thank you very much. That's all I had and best of luck this quarter.

Thank you very much.

Thank you.

Thank you. And the next question comes from the Amit Kumar with Macquarie.

Good morning and thanks. Two quick questions. The first question relates to, I guess the energy losses. I tried asking this question on another call. Hopefully you can educate me. Can you talk about what the typical rate on line might be on this business or what the typical ROEs are in a typical year for these lines of businesses?

Well, certainly if you look at the energy book and our marine book it's had very good double-digit ROEs on average, certainly not this quarter. And as I mentioned, as Joe mentioned, if you look back over the last five years we've got a combined ratio under 80% for the overall marine book. So that's done very well. Amit, the reason you may have difficulty in getting a standard answer is it really depends on the type of coverage that you are providing, whether you're providing a big primary layer, whether you're going on the excess layers and so on. So I think it is difficult to specify an individual price. Different marine lines have different exposures to cat and so that would also increase the pricing based on the expected exposure to cat or the location of some of these offshore platforms. So it's very difficult to give you an average number that actually applies to the book in general.

Okay. I guess the only other question I had was, Joe mentioned some modest adverse development in liability and I didn’t quite catch that. Can you just expand on that comment?

There is really not much to tell there, it is just a couple of claims from older accident years that just developed adversely, nothing big. We just took the adverse development rather than taking it out of existing reserves.

And what is the dollar amount?

It is about $6 million.

On the front end okay, that's all I had. Thank you for the answers.

Yes, thank you.

Thank you. And the next question comes from Mike Ramski [ph] with [indiscernible].

Hey good morning. Numbers question, I'm sorry if I missed it, the corporate segment if I strip out the $8 million of amalgamation ran sub $20 million for the quarter which is pretty low, anything unusual going there or should we think about that as a run rate?

No, we did have a reversal of a share based compensation accrual in the second quarter which was about $8 million, so that is unusual.

Got it, and thank you very much.

Yep.

Thank you. [Operator Instructions] All right, there are no more questions at the present time, so I would like to turn the call back over to management for any closing comments.

Thank you operator and thank you all for participating in our call and we look forward to catching up with you soon. Have a great day, bye-bye.

Thank you. Your conference has now concluded. Thank you for attending today's presentation. You may now disconnect.