Good morning and welcome to the Second Quarter 2023 AXIS Capital Earnings 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 Miranda Hunter, Head of Investor Relations. Please go ahead.

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 at axiscapital.com. Joining me on today's call are Vince Tizzio, our President and CEO; and Pete Vogt, our CFO. Before we begin, I would like to remind everyone 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 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 Federal 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 in 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 our financial supplement. And with that, I'll turn the call over to Vince.

Thank you, Miranda and good morning. Thank you for joining us. I'm now 90 days in to 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 second quarter was very strong across multiple measures. We grew gross premiums written to $2.3 billion, a company record for the second quarter and an 8% improvement year-over-year. This was driven by our specialty insurance business which produced 15% growth its largest ever quarterly premium volume of $1.7 billion, a record new business of $500 million and a combined ratio of 86%. Our group combined ratio also saw improvement of nearly two points to 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 million, up more than 48%. Let's now discuss our second quarter performance in more detail and within the context of the broader market environment. 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 and 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…

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 million and an annualized ROE of 12.9%. Operating income was $191 million and our annualized operating ROE was 17.2%. Diluted book value per share increased $0.67 or 1.3% 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 would be $58.01. 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 million or 2.6 points, primarily attributable to Cyclone Gabrielle and other weather related events. This compares to $67 million or 5.3 points in 2022. Given the high incidence of convective storms in the quarter, we were pleased with this outcome. I would also add that in the quarter, we renewed our outwards reinsurance coverage for our insurance property portfolio. We kept the attachment point on our excess of loss occurrence cover at $100 million and renewed the quota share treaties on our E&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…

Thank you, Pete. We're now ready to begin the question-and-answer session. [Operator Instructions] Chad over to you.

Thank you. [Operator Instructions] And the first question will be from Brian Meredith from UBS. Please go ahead.

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 or gross written premium growth kind of within expectations in the back half of the year. Could you just expand on your outlook there? And which lines do you expect to drive a majority of that growth?

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 and when you add those two numbers up it's about $36 million impact. The rest of our ongoing business in reinsurance actually did grow about 11.6%. 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 fourth quarter of 2022 we had some material premium adjustments coming through mostly our ag and our motor lines, and those are just hard things to predict. But as for an outlook for the actual business going forward, I think I'll turn it over to Vince.

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 first six 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.

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 and mix shift and some increases in liability. 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?

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.

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 that we do like the mix where it is today.

Great. And I might sneak in one more. Do you have a 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.

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.

Great. Thank you.

And the next question will be from Meyer Shields from KBW. Please go ahead.

Hi, everyone. It's Dina [ph] on for Meyer. Thank you for taking my question. My first question is on the property book. So property book in insurance segment looks pretty strong. Just wondering if you could provide some premium growth guidance for the second half of 2023?

I wouldn't provide guidance but I would tell you that we're very comfortable with the second quarter 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 are 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.

Okay. Got it. Thank you. My second question is on the cat losses. So since AXIS is growing primary property books other cat losses came in relatively better. So can you add some color on the drivers behind this?

Hi. Vince, I'll take this. This is Pete. I think what you're seeing in the property book is one this quarter very much was due to convective storms or 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. Our average net limit in our E&S book is now down below $2 million 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 an awful lot of rate. And the rate is what that book needed and we're seeing that come through on the property side and we consistently tend to do that.

Okay. Thank you so much.

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

Thanks. Good morning. Pete, I was hoping to go back to your comments on PML and we've seen the actions you've taken has 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 year, I was surprised to see what looks like little movement in certain areas. So like south the peak wind PML in the Southeast only dropped to 3.3% of equity from 3.5%. 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 that Gulf of Mexico is a bigger decline, Cal quakes a bigger decline, but I just would have thought the peak PML would have come down by a bit more.

Yes. Hi Matt, this is Pete. I'll take that. What we're seeing across, you're actually seeing pretty significant double-digit declines across just about all the PMLs. And I will say that is very much driven by the exiting of cat and property from the reinsurance business. You did point out, especially when you look year-over-year like Southeast Wind, Southeast hurricane and the one 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 three cap bonds we had. And so the cap bonds were 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. 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 -- event occurrence treaty that still attaches at $100 million. And so that was really good for us going forward, as well as the quota shares that we see on the other two on the E&S line of business and the global property. But I think what you're seeing in Southeast Wind has to do with those cat bonds and how they model and we switched from cat bonds to indemnity coverage, which quite frankly I feel better about because I have no basis risk.

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

Thanks, Matt.

And the next question is from Elyse Greenspan from Wells Fargo. Please go ahead.

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 million year-to-date and why are these lines like accident years covered by the LPT that you guys entered into late last year?

Hi Elyse, this is Pete. I'll take that. The LPT that we entered into 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've put those particular books of business behind us. 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 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 in the first quarter, 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 first quarter to the tune of about $30 million of adverse. We think we've got that now really quite right. But again, as new information comes in, as we learn more, we'll react quickly to what we see. I don't know, if you would like to add on to that?

Go ahead, Elyse.

So I was going to say Vince, I guess my follow-up goes to you, right? I mean, you're new 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 third or the fourth quarter?

Yes. So first, good morning to you, Elyse. Let me start by unpacking it this way. My reserve philosophy is to err on the side of prudence. And given the color that Pete provided around social inflation, the so-called soft years, there's 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. 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. Peter?

No. Please go ahead. Peter?

No, I'm good Elyse.

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

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 a clearer with added time where we're taking the company.

Thank you.

Welcome.

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

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 sector. 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?

So I'll take that Vince. Yes we actually -- in response to what we saw happened in the first quarter with SVB, we put a working group 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 have failed signature et cetera. 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. I think Vince...

You got that right yes.

Great. And then also just mentioned the build-out of middle market. It 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?

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&O, environmental, excess casualty. It's a customer segment with likely a $50,000 premium mark. This is not the SME or the BOP space to be sure. It is an 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 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 to.

Great. Thank you.

[Operator Instructions] And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Vince Tizzio for any closing remarks.

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. 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.

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