Q4 2023 AXIS Capital Holdings Limited Earnings Call
Hello, and welcome to the fourth quarter 2023 axis capital earnings call and webcast. All participants will be in listen only mode should you need assistance. Please signal a conference specialist 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 from the question queue. Please press Star then two.
I would now like to hand, the call to Cliff Galant Investor Relations. Please go ahead.
Clifford Gallant: Thank you good morning, everyone and welcome to our conference call to discuss the financial results of excess capital for the fourth quarter and year ended December 31, 2023, I'm Cliff gallant Investor relations at Axis, Our earnings press release and financial supplements were issued last night, if you'd like copies. Please visit the investor information section of our website to access cap.
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Cliff Galant: We set aside an hour for todays call, which is also available as an audio webcast on our website.
Cliff Galant: Before we begin I'd like to invite you all to attend our Investor day, which is being held the morning of May 30th in New York City.
Clifford Gallant: Joining me on today's call are Institute, our President and CEO and Pete Vogt our CFO.
Clifford Gallant: In addition, I would like to remind everyone that the statements made during the 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 forward looking statements due to a verb.
Clifford Gallant: D of factors, including the risk factors set forth in the company's most recent report on Form 10-K, or our quarterly report on Form 10-Q, and other reports the company files with the SEC.
Clifford Gallant: 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, non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement.
With that I'll turn the call over to Vince.
Cliff good morning, and thank you for joining US 2023 was a transformative year for our company in recent calls we've spoken to our aspiration to elevate axis as a specialty underwriting leader and our yearend results signal that we've taken important steps towards this ambition looking.
Vince: Looking at the year as a whole we advanced our targeted underwriting strategy further developed a diversified and resilient portfolio and strengthened our operating model to meet our financial objectives lets discuss some of the headline numbers for the year, which are inclusive of the reserve strengthening that we announced last.
Weak.
Vince: In 2023, we generated operating income of 486 million return on average common equity of seven 9% an operating return on equity of 11%.
Vince: Excluding the reserving strengthening our return on average common equity and operating return on equity were 15, four and 18 five respectively.
Vince: We achieved record performance in several areas, including our premium production, which was the highest in our company's history at $8 4 billion.
Vince: Our net investment income was 612 million.
Vince: Further we produced 15% year over year growth in diluted book value per share and delivered a current accident year combined ratio of 91 eight.
Vince: More than four point year over year improvement.
Vince: These results combined with the strength of our balance sheet.
Vince: And our capital position are very encouraging.
Vince: To deliver on our ambition and meet our financial commitments, we will continue to relentlessly execute against our strategy.
Vince: To briefly highlight three core elements first we continue to operate in attractive markets and are making decisive choices on where to compete allocate our capital while tapping new sources of revenue.
Vince: As a specialty underwriter that brings tailored solutions to its targeted markets and distribution channels to deliver consistent earnings generation.
Vince: We continue to lean into our insurance book, which as of the yearend makes up close to 75% of our gross premiums written.
Vince: In 2023, our insurance business generated record production every quarter and a calendar year combined ratio of 92 five on a current accident year basis, that's 87 four.
Insurance premiums were up 17% year over year, excluding professional lines and as we've discussed over the past several quarters. This is a class that we have been reducing giving the pricing environment, particularly in public D&O we've.
Vince: We remain well positioned to capitalize on favorable conditions in growing market segments. For instance, access is one of the leading players in the U S wholesale marketplace contributing five consecutive years of double digit growth, while yielding a 76 current accident year combined.
Vince: Ratio in 2023.
Vince: We're a global leader in renewable energy, where we see opportunity for further profitable growth as the world transitions to cleaner energy forms. Indeed, we've committed ourselves to the energy resilience and transaction transition spaced through the creation of the first ever Lloyds syndicates to exclusively underwrite these risks.
Vince: We're acting with agility and capitalizing on smart growth opportunities, including adjacent markets, where we have not previously played by example in the latter part of 2023 within North America, We launched it in inland Marine unit within weeks, they were actively quoting and writing new business.
Vince: Also in the past year, we've made strides in scaling our dedicated wholesale lower middle market unit generating 48% growth year over year.
Vince: In London, we were recognized by Lloyd's as a top 10 liter and outperforming syndicate, we're leveraging our global platform to introduce our London specialty products to North America. This includes launching to date U S Marine cargo and construction and we will continue to make more investments and product.
Vince: Launches.
Vince: As respects, our reinsurance business, we have effectively reshaped axis re as a targeted specialist reinsurer focused on delivering more consistent profitability and vol and reduced volatility in 2023, we produced a current accident your combined ratio.
Vince: <unk> 93, a six point improvement year over year.
Vince: Our momentum was sustained at the one one renewals were 45% of our business for the year is up for renewal during the one ones, we produced low double digit growth in our targeted specialist premium adequate lines.
Vince: <unk>.
Vince: We are investing and building best in class capabilities in underwriting claims and operations in 2023, we made clear progress across a number of fronts.
Vince: Our loss ratio for accident year, 2023 was 58, six which is 470 basis points better than accident year 2022.
Vince: As respects people, we've attracted strong talent to complement our existing team. By example, this includes additions to our underwriting associates in North America, and London and within our claims organization, we've deepened our bench both in the number of teammates and expansion of our skill sets, particularly in <unk>.
Vince: Liability lines.
Vince: And both claims and operations, we have repositioned the operating models to more closely align with our underwriting and business priorities, while improving efficiencies.
Vince: Claims were growing our data and analytic capabilities to bring insights to our underwriters to help them make continued informed risk selection.
Vince: Within operations, we're investing in digital and automation to increase our speed of submission intake and we're continuing to enhance our technology platform with a priority of driving transactional efficiency.
Vince: In addition, artificial intelligence is an area that we're investing in with a focus of harnessing its power to augment our company's overall effectiveness.
Vince: Third we are improving how we operate to become a more integrated and efficient company.
Vince: How we work program is at the core of this effort. We are implementing operating model improvements focused on enhancing organizational efficiency, making investments in empower our colleagues and optimize their effectiveness, while improving service quality accelerating growth and ensuring more.
Vince: Consistent profitable returns are delivered.
Vince: Our progress will be evidenced by our sustained underwriting results and an improving expense ratio.
Vince: Contemplated with engaged associates that are collectively focused on achieving our financial objectives.
Vince: Ultimately it is our expectation that access will deliver a consistent low ninety's combined ratio and expense ratio in the low thirties double digit Roe.
Vince: And book value per share growth.
Vince: Finally.
Vince: Just a few words on impressions for the 'twenty 'twenty four operating year.
Vince: We entered the year with confidence and momentum and we believe we are well positioned to take advantage of generally favorable markets.
Vince: As I've noted we have a number of investments that are underway investments in our people, our operating capabilities and our suite of specialty products and we're progressing our how we work program to enable the advancement of our ambitions in some we're supported by a team that's focused and excited to.
Continue bringing value to our brokers, our customers and stakeholders and we are United in the pursuit of our strategic objectives I'll now pass the Florida, P, who will detail our fourth quarter and full year 2023 results.
Florida P: Thank you Vince and good morning, everyone as you heard from Vince and so on our pre release last week access had a very strong performance in 2023.
Florida, P: Inclusive of the reserve actions, our operating income for the year was $486 million for $5 65.
Florida, P: Per diluted common share.
Florida, P: Which together with net unrealized gains drove diluted book value per share to $54.06 at year end.
Florida, P: Growth of 15, 1% over the prior year.
Florida, P: In underwriting key highlights from the year include on a consolidated basis, our current accident year loss ratio ex cat and weather of 55, 9% leased.
Florida, P: Similar to the prior year importantly, our 2023 loss picks were consistent with the learnings from our recent in depth Reserve review and did recognize higher loss trends in liability lines.
Florida, P: 2023, pre tax cat and weather related losses net of reinsurance totaled $138 million or two seven points we.
Florida, P: We would highlight that for the industry 2023 was another active natural cat year with annual estimates ranging from 95 billion to over 100 billion.
Florida, P: Importantly at Axis, our market share of these industry losses with the lowest they've been in over 10 years.
Florida, P: Our performance in 2023 was excellent.
Florida, P: And we would expect a typical natural catastrophe load to be in the 4% to five point range.
Florida, P: 2023 consolidated acquisition cost ratio was 19, 7%.
Florida, P: The consolidated G&A expense ratio of 13, 5% were consistent to the prior year.
Florida, P: <unk> said as we execute on how we work we're confident that we will see lower expenses in 2024.
Florida, P: And on a consolidated basis fee income from strategic capital partners was $53 million for the year.
Florida, P: This is very similar to what we saw in 2022, but with a change in mix as our property and catastrophe vehicles wound down and we launched a new vehicle monarch point right.
Florida, P: We expect quarterly fees from strategic capital partners to be in the low to mid teens on a go forward basis.
Florida, P: Now, let's move on and discuss our segment results in more detail.
Florida, P: Insurance had a strong underlying year and fourth quarter.
Florida, P: Gross premiums written were $1 6 billion for the quarter and $6 1 billion for the year, an increase of 10% compared to the prior year.
Florida, P: Reviewing the quarter, we grew gross premiums written by 8%.
Florida, P: Our growth was across all our lines of business with the exception of professional lines, where we continue to be cautious on public D&O.
Florida, P: Excluding professional we grew 14% in the quarter and 17% for the year.
Overall, we're growing where we want to in our chosen lines and markets.
Florida, P: The portfolio mix, we have at the end of the year is purposeful and attractive and.
Florida, P: In the fourth quarter, our short tail business lines represented 56% of our portfolio.
Florida, P: And these lines are highly price adequate and still achieving rate well in excess of trend.
Florida, P: We continue to experience price discipline in these lines, especially in the property lines, which saw a double digit rate increases of 15% in the quarter and in credit and political risk and A&H with both achieving mid single digit rate increases, which at least equal underlying loss cost trends.
Florida, P: And our long tail lines, we remain cautious on public market D&O.
Florida, P: Where we have cut our book in half from a year ago, and which again saw a double digit rate decreases of approximately 22% in the quarter.
Florida, P: And liability lines, we achieved rate in excess of trend with rates up 10, 5% in the quarter.
Florida, P: And we continue to emphasize the need for strong rate increases in this line in order to keep pace with loss trends.
Florida, P: Lastly, while ciber remains well priced the rate changed leveled off in the second half of 2023 after significant increases in the previous few years and in the fourth quarter rates were down slightly at minus one seven points.
Florida, P: In cyber we continue to see better opportunities in our large client market and have continued to deemphasize the small commercial market.
Florida, P: Overall, the insurance book has strong price adequacy as we enter 2024.
Florida, P: The insurance combined ratio for 2023 was 92.5%.
Florida, P: <unk> 5.1 points of net adverse reserve development, and three 2% of cat and weather related losses.
Florida, P: For the quarter was 106, 7%.
Florida, P: Including the 19 eight points of reserve strengthening.
Florida, P: The full year current accident year loss ratio ex cat and weather was 51.8, which compares to 51% in the prior year as we've discussed on prior calls we have a few moving pieces here.
Florida, P: We have recognized the higher loss trends in liability lines and somewhat offsetting this we have a change in business mix in favor of shorter tail lines like property and marine which carry a lower attritional loss ratio.
Florida, P: For the quarter the insurance accident year loss ratio was 52% in line with where we've been for the rest of 2023, although up from a very strong $49 three in the fourth quarter of 2022.
Florida, P: The acquisition cost ratio of 18, 7% for the year up slightly from the prior year. The increase was principally driven by lower ceding commissions of a point on our quota share treaties that renewed during 2023.
Florida, P: <unk> the ratio was 19, one in the fourth quarter up from the prior year's quarter of $18 six.
Florida, P: The underwriting related G&A expense ratio was 13, 6% for the year down from $14. Two in 2022, driven by increased net earned premiums. This also drove the fourth quarter improvement to 13, three from $13 seven a year ago quarter.
Florida, P: Now, let's move on to the reinsurance segment.
Florida, P: I'll remind everyone that the fourth quarter is the smallest quarter for gross premiums written for reinsurance representing under 10% of the segment's full year gross premiums written.
Florida, P: DWP for the quarter was down substantially from the prior year quarter.
Florida, P: But largely due to much lower premium adjustments.
Florida, P: And timing benefits associated with a few renewals in the fourth quarter of 2022.
Florida, P: In 2023, we repositioned our reinsurance portfolio and at year end, we're proud of the work that we've accomplished.
Florida, P: On a gross basis reinsurance is now a $2 $2 billion portfolio of attractively priced specialty reinsurance business.
Florida, P: In 2023, we saw a favorable pricing that is above trend in most lines of business.
Florida, P: The reinsurance combined ratio for the year was 107, six which includes $14 six points of net reserve strengthening for.
Florida, P: For the quarter was 162.8, which includes 69.8 points of reserve strengthening.
Florida, P: The 2023 current accident year loss ratio ex cat and weather was 64.8.
Florida, P: Up from 62 six in the prior year.
Florida, P: As we indicated at the catastrophe and property premiums ran off the book has transitioned to a more consistent and profitable book.
Florida, P: A higher attritional loss ratio offset by a significant drop in the catastrophe loss ratio, which has resulted in a lower and less volatile current accident year net loss ratio for.
Florida, P: For the quarter the current accident year loss ratio ex cat and weather was 64, and a half compared to <unk> 65, and a half a year ago.
Florida, P: On expenses the full year total expense ratio was $26 six down from 27 point to largely reflecting the change in business mix on the acquisition ratio and four tenths of a point decrease in the G&A ratio as we have created a more efficient organization.
Florida, P: Similarly for the quarter expense ratio was 27, 7% compared to 28 four in the prior year quarter.
Operator: Hello and welcome to the fourth quarter 2023 Access Capital Earnings Call and Webcast. All participants will be in listen-only mode.
Florida, P: Moving on to investments, we had a great year for net investment income.
Operator: Should you need assistance, please signal a conference specialist 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 the star key, then one, on your telephone keypad.
Florida, P: For the year, we had 100, we had $612 million of net investment income up substantially from the prior year.
Florida, P: I would note that the particularly strong fourth quarter result of $187 million was driven by returns on fixed income of $142 million and a very good quarter for alternatives, which produced 25 million of net investment income.
Operator: And to withdraw from the question queue, please press star, then two. I would now like to hand the call to Cliff Gallant, Investor Relations. Please go ahead.
Florida, P: Due to timing of gains from alternatives I would not consider this quarter to be a normal run rate for that asset class.
Clifford Gallant: Thank you. Good morning, everyone, and welcome to our conference call to discuss the financial results of Axis Capital for the fourth quarter of the year and on December 31st, 2023. I'm Cliff Gallant, Investor Relations at Axis. 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.
Florida, P: As we look to 2020 for the overall outlook is positive as our average yield on fixed income securities was four 2% at year end.
Florida, P: And the new money you are more on the new money yield is five 4%.
And we continued to generate strong cash flow.
Florida, P: Our capital position has strengthened during the year.
Clifford Gallant: Before we begin, I'd like to invite you all to attend our Investor Day, which is being held on the morning of May 30th in New York City. Joining me on today's call are Vince Tizio, our President and CEO, and Pete Vogt, our CFO. In addition, I would like to remind everyone that the statements made during the call, including the question and answer section, which are not historical facts, may be forward-looking statements. Forward-looking statements involve risk, 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 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.
Florida, P: From a proved underwriting solid investment performance and management actions taken.
Florida, P: As you've all seen S&P recently took us to credit committee to remove access capital Holdings limited from negative credit watch.
<unk> reaffirmed its issuer credit rating.
Florida, P: They also reaffirmed the financial strength ratings of our operating entities.
Florida, P: The credit report highlights the fact that we had redundant capital at the extreme stress confidence level under their new model at.
Florida, P: At year end 2022.
Florida, P: And they forecast that we will remain redundant over their forecast period 2023 through 2025.
Florida, P: Yes.
Florida, P: Further in the quarter, we returned $38 million to shareholders through common dividends.
Florida, P: Which brings our total year to date capital returned to approximately $153 million.
Vince Tizio: In addition, non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplementary materials. And with that, I'll turn the call over to Cliff. Thank you, Cliff. Good morning and thank you for joining us.
Florida, P: As you know our board authorized a $100 million share buyback in December.
Florida, P: Given the substantial opportunities in our specialty markets, we continue to invest in our people.
Vince Tizio: 2023 was a transformative year for our company. In recent calls, we've spoken to our aspiration to elevate Access as a specialty underwriting leader, and our year-end results signal that we've taken important steps toward this ambition. Looking at the year as a whole, we advanced our targeted underwriting strategy, further developed a diversified and resilient portfolio, and strengthened our operating model to meet our financial objectives. Let's discuss some of the headline numbers for the year, which are inclusive of the reserve strengthening that we announced last week. In 2023, we generated operating income of $486 million, a return on average common equity of 7.9%, and an operating return on equity of 11%. Excluding the reserve strengthening, our return on average common equity and operating return on equity were 15.4 and 18.5 respectively.
Florida, P: Products and operating infrastructure.
Florida, P: We equally strong value creation ahead for our shareholders. So we are currently in the market repurchasing shares.
Florida, P: I also wanted to address the government of Bermuda is income tax act and the provision referred to as an economic transition adjustment.
Florida, P: We continue to evaluate the implementation of the rules and given the clarifications provided on January 16th we expect to make an assessment in the coming months.
Florida, P: In summary.
Florida, P: This quarter and throughout the year, we continued to advance our strategic priority to deliver growth in book value. We are committed to building on our progress and are optimistic for the future.
Florida, P: That summarizes our fourth quarter results and with that I'll turn it back to cliff.
Cliff: Thank you operator, we're ready to take questions.
Cliff: Wonderful. Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
Vince Tizio: We achieved record performance in several areas, including our premium production, which was the highest in our company's history at $8.4 billion, and our net investment income was $612 million. Additionally, we produced 15% year-over-year growth in diluted book value per share and delivered a current accident year combined ratio of 91.8, a more than 4-point year-over-year improvement. These results, combined with the strength of our balance sheet and our capital position, are very encouraging. To deliver on our ambition and meet our financial commitments, we will continue to relentlessly execute against our strategy. I'd like to briefly highlight three core elements.
Cliff: At this time, we will pause momentarily to assemble our roster.
Cliff: Yeah.
Cliff: Today's first question comes from Josh Shanker with Bank of America. Please go ahead.
Josh Shanker: Good morning, everybody.
Josh Shanker: You've probably been busy in the last 24 hours, but you may have seen that a couple of other insurance companies reported reserve charges in the in the after market yesterday, and one of them who tends to be a direct competitor in a lot of things that axis does.
Josh Shanker: And there are 10-Q, they said that they took a charge increasing the inflation assumption around all years from our 2016 through 2023.
Vince Tizio: First, we continue to operate in attractive markets and are making decisive choices on where to compete, allocate our capital, while tapping new sources of revenue. Access is a specialty underwriter that brings tailored solutions to its targeted markets and distribution channels to deliver consistent earnings generation. We continue to lean into our insurance book, which, as of the year-end, makes up close to 75% of our gross premiums written. In 2023, our insurance business generated record production every quarter and a calendar year combined ratio of 92.5. On a current accident year basis, that's 87.4. Insurance premiums were up 17% year-over-year, excluding professional lines.
Josh Shanker: I'm wondering when you talk about your reserve charge, what kind of inflation assumptions were changed and how that affected accident years, both pre COVID-19 and post COVID-19.
Josh Shanker: Hey, Josh This is Pete will go back to that we actually adjusted all of our inflation assumptions as we look back and again I would call would encompass social inflation to mean not only what we see for severity trends, but we see what we see for taking a longer development pattern.
Josh Shanker: In our underlying and as we look at that we've moved all of those trends up to where we believe they're going to be which would be high single digits.
Josh Shanker: And so as they want me to pick higher now post reserve charge than it was a year ago.
Josh Shanker: Just slightly as I mentioned last week, we did increase our liability reserves in insurance. It was specific to two books of business. It was our primary casualty book and some program business that program business is now in runoff Josh So that's not affecting the 2023 current accident year on the primary cash.
Vince Tizio: And as we've discussed over the past several quarters, this is a class that we have been reducing, given the pricing environment, particularly in public D&O. However, we remain well positioned to capitalize on favorable conditions in growing market segments. Access is one of the leading players in the U.S. wholesale market, contributing five consecutive years of double-digit growth while yielding a 76 current accident year combined ratio in 2023. We're a global leader in renewable energy, where we see opportunity for further profitable growth as the world transitions to cleaner energy. Indeed, we've committed ourselves to the energy resilience and transition space through the creation of the first ever Lloyd's Syndicate to exclusively underwrite these risks. We are acting with agility and capitalizing on smart growth opportunities, including adjacent markets where we have not previously played. By example, in the latter part of 2023, within North America, we launched an inland marine unit.
Josh Shanker: <unk>, where that was set for 'twenty two is equal to where it was set for 'twenty three so with the both both picks are very strong.
Speaker Change: And where do you stand in terms of Covid Europe, I guess COVID-19 related reserves have those been completely released at this point or is there still some reserves up for Cobra Cobot type claims.
Speaker Change: No we still have some reserves up for Covid type claims, especially in our reinsurance segment, where it's just taking longer to actually understand the impact of COVID-19 coming from some of our seating, especially in the European theater on the REIT on the insurance side, that's pretty low that's mostly all paid out by now and from our <unk>.
Speaker Change: Regional estimate that we put up I'd say reserves are down to 10% from where the original estimates worried about 90% paid.
And if I can sneak one more in can we take the $4 25 and break into two parts. The gross increases in reserves for inflationary and severity assumptions around social inflation and whatnot and the.
Vince Tizio: Within weeks, they were actively quoting and writing new business. Also, in the past year, we've made strides in scaling our dedicated wholesale lower middle market unit, generating 48% growth year over year. In London, where we're recognized by Lloyd's as a top 10 leader and an outperforming syndicate, we're leveraging our global platform to introduce our London specialty products to North America. This includes launching to date U.S. Marine cargo and construction, and we'll continue to make more investments and product launches. As regards our reinsurance... We have effectively reshaped Access Re as a targeted specialist reinsurer focused on delivering more consistent profitability and reduced volatility. In 2023, we produced a current action-at-your-combined ratio of 93, a six-point improvement year-over-year. Our momentum was sustained at the 1-1 renewals, where 45% of our business for the year is up for renewal. During the one-one renewals, we produced low double-digit growth in our targeted specialist premium adequate line, second.
Speaker Change: Improvement impact from getting the frequency and the incidence rate in the numbers.
Speaker Change: Josh that we look at that in total with all the assumptions and we did not break down the 425 into those kind of micro pieces like that so I wouldn't say right now I have those numbers at hand to be able to provide to you, but I would say overall, we've actually extended the development patterns in our reserves and we've.
Speaker Change: The trend in our reserves.
Speaker Change: Thank you for taking all my questions.
Speaker Change: Thanks, Josh.
Speaker Change: The next question is from Yaron <unk> with Jefferies. Please go ahead.
Yaron: Thank you good morning, everybody.
Yaron: Just wanted to start with a question on the insurance loss ratio with the underlying loss ratio. So.
Yaron: I understand that a year ago, you had some one off favorable items, but when I look at the 52% you posted this quarter. It still seems like it crept up a little bit relative to the play.
Yaron: For the second quarter and third quarter of this year.
Yaron: I'd just like to better understand if there any one offs there just given the fact that you're still talking about rate.
Vince Tizio: We are investing in building best-in-class capabilities in underwriting, claims, and operations. In 2023, we made clear progress across a number of fronts. Our loss ratio for accident year 2023 was 58-6, which is 470 basis points better than accident year 2022. As Respects People, we've attracted strong talent to complement our existing... For example, this includes additions to our underwriting associates in North America and London. And within our claims organization, we've deepened our bench, both in the number of teammates and the expansion of our skill sets, particularly in liability lines.
Yaron: Better than loss trend and a mix shift towards the lower attritional loss ratio property lines.
Yaron: Yeah, Hi, your own this is Pete yeah. The last underlying loss ratio just we got our numbers right and insurance was 52 for the quarter that makes it 51 eight for the entire year 2023.
Peter J. Vogt: There was not anything in the quarter that I would call one off either way it was a pretty consistent quarter overall meat being up by about two tenths of a point.
Peter J. Vogt: It was really just some noise in the quarter I, particularly would tell you I still think our loss ratio in insurance will be in that low $50 range for.
Peter J. Vogt: For the year and actually even for going forward and Pete over the last six or eight quarters. It's been in this facility as well you're on yeah.
Vince Tizio: In both claims and operations, we have repositioned the operating models to more closely align with our underwriting and business priorities while improving efficiency. Claims We're growing our data and analytic capabilities to bring insights to our underwriters to help them make continued informed risk selection. Within operations, we're investing in digital and automation to increase our speed of submission intake, and we're continuing to enhance our technology platform, with a priority of driving transactional efficiency. In addition, artificial intelligence is an area that we're investing in with a focus on harnessing its power to augment our company's overall effectiveness. Third, we are improving how we operate to become a more integrated and efficient company. Our How We Work program is at the core of this effort.
Peter J. Vogt: When I look over the last eight quarters, its really been an episode 80, the only mix change would be again increased liability trend.
Peter J. Vogt: Loss picks in 2023, offset by the mix shift into marine and property.
Peter J. Vogt: So.
Speaker Change: Maybe just a follow up on there I just want to make sure I'm thinking about this correctly.
Speaker Change: Because ultimately youre, saying, yeah, we took the philosophy.
Speaker Change: The trend up.
But were still clearing that trend and then some with the rate. We're achieving we are moving our mix more in the direction of lower Attritional loss ratios. So why would the loss.
Speaker Change: Ratio that you expect for the coming year or not.
Speaker Change: Not improve with that because it's just a matter of conservatism.
Speaker Change: So I'd say as I think about it looking backwards your own 22 to 23, we've got about our portfolios moved by about five points more towards the short tail lines and that has a lower attritional loss ratio. So what we saw was higher loss picks on the longer tail lines and then with the mixed.
Vince Tizio: We're implementing operating model improvement, focused on enhancing organizational efficiency, making investments that empower our colleagues and optimize their effectiveness while improving service quality, accelerating growth, and ensuring more consistent, profitable returns are delivered. Our progress will be evident through our sustained underwriting results and an improving expense ratio, coupled with engaged associates that are collectively focused on achieving our financial objectives. Ultimately, it is our expectation that AXIS will deliver a consistent low 90s combined ratio and an expense ratio in the low 30s, double-digit ROE, and book value per share growth. Finally, just a few words on impressions for the 2024 operating year. We enter the year with confidence and momentum, and we believe we're well-positioned to take advantage of generally favorable markets. As I've noted, we have a number of investments that are underway, investments in our people, our operating capabilities, and our suite of specialty products. And we're progressing our How We Work program to enable the advancement of our ambition.
Speaker Change: <unk> that actually offset so that's why the loss ratio is pretty consistent from 'twenty two to 'twenty three on a full year basis as we look forward to 2024, what I would tell you is I do expect the loss ratio to be in those low <unk> and.
Speaker Change: And right now I'd say the mix. We're sorting you actually saw in 2023 is what we're looking for in 2024 also but that may change based upon market conditions as we enter 2024.
Speaker Change: Okay.
Speaker Change: And then my second question.
Speaker Change: I think you'd mentioned that you are in the market.
Speaker Change: Repurchase shares here can you help us think about the prioritization here of capital towards.
Speaker Change: Backs dividends or.
Speaker Change: As opposed to organic growth when it seems like the market dynamic market environments, So pretty positive.
For growth why not lean as much as you can into those organic growth opportunities and maybe set aside the buybacks for the time being.
Speaker Change: Thanks for the question your own what I would say first and foremost we feel we're in a very strong capital position so being in that strong capital position we equally.
Peter J. Vogt: In sum, we're supported by a team that's focused and excited to continue bringing value to our brokers, our customers, and stakeholders, and we're united in the pursuit of our strategic objectives. I'll now pass the floor to Pete, who will detail our fourth quarter and full year 2023 results. Thank you, Vince, and good morning, everyone.
Speaker Change: Really believe we want to grow our business and first and first priority of capital is to continue to grow into these attractive markets, where we see them, but we also equally believe that right now our shares are a quarter at a value price and with a $100 million authorization were out buying some shares back because we think that they are attractive.
Speaker Change: We price for us.
Speaker Change: Overall, we're doing both and I do think that as we look to 2024 will continue to grow in insurance and we have enough capital to do so and you're right. This is Vince we've pointed to the specific areas of investment.
Peter J. Vogt: As you heard from Vince and saw in our pre-release last week, AXIS had a very strong performance in 2023, inclusive of the Reserve Act. Our operating income for the year was $486 million, or $5.65 per diluted common share, which, together with net unrealized gains, drove diluted book value per share to $54.06 at year end, growth of 15.1% over the prior year. In underwriting, key highlights from the year include, on a consolidated basis, our current accident year loss ratio, XCAT and weather, of 55.9%, similar to the prior year. Importantly, our 2023 loss picks were consistent with the learnings from our recent in-depth reserve review and did recognize higher loss trends in liability lines. 2023 pre-tax CAT and weather-related losses, net of reinsurance, totaled $138 million, or 2.7 points. We would highlight that for the industry, 2023 was another active natural catastrophe year, with annual estimates ranging from $95 billion to over $100 billion. Importantly, at Axis, our market share of these industry losses was the lowest it's been in over 10 years.
Speaker Change: US confidence in our continued growth within our core business of insurance and have equally recognize where we're trading and the valuation attached to our organization and the belief we have and further developing value creation and we think it's a good time to do it.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Speaker Change: Thank you. The next question comes from Brian Meredith with UBS. Please go ahead.
Brian Meredith: Yes. Thanks, a couple of them here for you first I'm just curious do you expect it to reserve charge you took in some of the higher <unk> that you're talking about on liability.
Brian Meredith: Recent years to have an impact on your ceded reinsurance program than in 2024 can do we can we potentially see acquisition cost ratio actually increasing again in 'twenty four.
Brian Meredith: Brian This is Vince over the recent years the portfolio has been materially reshaped and so as we go to market in the current period.
Speaker Change: While we will be prepared for modest changes.
Vince: In our secured reinsurance we don't expect at this point for it to be material.
Peter J. Vogt: Our performance in 2023 was exceptional, and we would expect a typical natural catastrophe load to be in the four to five point range. The 2023 Consolidated Acquisition Cost Ratio was 19.7%, and the Consolidated G&A Expense Ratio of 13.5% were consistent to the prior year. As Vince said, as we execute on how we work, we're confident that we will see lower expenses in 2024. And on a consolidated basis, the income from strategic capital partners was $53 million for the year.
Speaker Change: And just to give you more color and more color on comp.
Speaker Change: Again, the right posture since 2019, and a liability classes has been well over 50 odd percent the portfolio and its composition of limits class.
Speaker Change: Retention has been materially as well change and I think the recent results and the accident year point to that confidence.
Speaker Change: Got it that's helpful. And then I guess my second question Pete I think you mentioned that you expect I guess total Joey can be.
Peter J. Vogt: This is very similar to what we saw in 2022, but with a change in mix as our property and catastrophe vehicles wound down, and we launched a new vehicle, Monarch Point Race. We expect quarterly fees from strategic capital partners to be in the low to mid-teens on a go-forward basis. Now let's move on and discuss our segment results in more detail. Insurance had a strong underlying year and fourth quarter. Gross premiums written were $1.6 billion for the quarter and $6.1 billion for the year, an increase of 10% compared to the prior year. In reviewing the quarter, we grew gross premiums written by 8%. Our growth was across all our lines of business, with the exception of professional lines, where we continue to be cautious on public D&O.
Peter J. Vogt: Down in 24 versus 23, I just wanted to clarify that and also on that topic I noticed corporate overhead was was down pretty meaningfully year over year and I know there were some unusual items in the fourth quarter 2022, but just wondering if that's a good run rate or little bit low.
Speaker Change: Yeah, I would say, Brian that you hit the nail on the head there there were some unusual items in the fourth quarter of 2022, when we look at where we are in our corporate I'd say the fourth quarters.
<unk> run rate and I do think as we look forward to 2024 with the actions we've been taking while this year. We ended up with the G&A ratio overall for the group for the full year of about mid Thirteen's I would expect it to go into the <unk> as we get through 2024.
Speaker Change: Great and then just one last one I think you mentioned some timing stuff in the reinsurance.
Peter J. Vogt: Excluding professional services, we grew 14% in the quarter and 17% for the year. Overall, we're growing where we want to, in our chosen lines and markets. The portfolio mix we have at the end of the year is purposeful and attractive. In the fourth quarter, our short-tailed business lines represented 56% of our portfolio.
And her premium any way you can kind of quantify what happened.
Speaker Change: With the two component parts there were adjustments.
Speaker Change: And there were renewals that had moved out of the quarter in combination I think adjustments were up about a difference of $39 $5 million in the quarter as compared to negative $9 million in the fourth quarter of 2003 was also a couple of transactions one in motor in one.
Peter J. Vogt: And these lines are highly price adequate and still achieving rates well in excess of trend. We continue to experience price discipline in these lines, especially in the property lines, which saw double-digit rate increases of 15 percent in the quarter, and in credit and political risk and A&H, with both achieving mid-single-digit rate increases, which at least equal underlying loss-cost trends. In our long tail lines, we remain cautious on public market DNO, where we have cut our book in half from a year ago and which again saw double-digit rate decreases of approximately 22 percent in the quarter. In liability lines, we achieved rates in excess of trend, with rates up 10.5% in the quarter, and we continue to emphasize the need for strong rate increases in this line in order to keep pace with lost trends. Lastly, while cyber remains well-priced, the rate change leveled off in the second half of 2023 after significant increases in the previous few years. And in the fourth quarter, rates were down slightly at minus 1.7 points. At Cyber, we continue to see better opportunities in the large client market and have continued to de-emphasize the small commercial market.
Speaker Change: <unk> credit.
<unk> renewed in a different time period and that in consequence is.
Speaker Change: The shortfall.
Speaker Change: Having said that we grew new business, though it's a very Ah.
Speaker Change: Small degree of what comes to market in the fourth quarter.
Speaker Change: But I think about $79 million in the quarter.
Yes, I think as I look at it Brian if I adjust for the premium adjustments, where we had a lot last year and the timing and I pull those out the two of them add up to actually over $80 million. The rest of the book on a on a I'll call. It a normalized basis grew at just over 5%.
Brian Meredith: Great. Thank you.
Brian Meredith: Thank you. The next question comes from Elyse Greenspan with Wells Fargo Securities. Please go ahead.
Elyse Greenspan: Hi. Thanks. My first question is on the buyback. So I think you guys have a 100 million authorization out there and I know you said you've just started.
Elyse Greenspan: Repurchasing your stock.
Elyse Greenspan: Is the 100 million like what you would expect to buyback this year or is it that you're just going to kind of.
Elyse Greenspan: Judge new business opportunities and things like that and then.
Elyse Greenspan: And then we will see where the capital return shakes out.
Peter J. Vogt: Overall, the insurance book has strong price adequacy as we enter 2024. The insurance combined ratio for 2023 was 92.5 percent, including 5.1 points of net adverse reserve development and 3.2 percent of CAT and weather-related losses. For the quarter, it was 106.7%, including 19.8 points of reserve strength.
Elyse Greenspan: So at least this is Pete I'll take that yes, our number one priority for capital is profitable growth and we do see real good market opportunities. There right now we have the $100 million authorization from the board, we will use that opportunistically as I've said in the past based upon where we see market opportunities.
Elyse Greenspan: And then I think you guys know some of your peers right have elected to set up a DTA around Bermuda tax changes I don't think you guys have done that yet.
Peter J. Vogt: The full year, current accident year loss ratio, XCAT, and weather was 51.8, which compares to 51% in the prior year. As we've discussed on prior calls, we have a few moving pieces here. We have recognized higher loss trends in liability lines.
Elyse Greenspan: Do you have a sense of how impactful that could be because.
Elyse Greenspan: My understanding why it is then that would be helpful to your capital position.
Elyse Greenspan: If you did choose to similarly set something up like that.
Peter J. Vogt: Somewhat offsetting this, we have a change in business mix in favor of shorter tail lines like property and marine, which carry a lower attritional loss ratio. For the quarter, the insurance accident-year loss ratio was 52 percent, in line with where we've been for the rest of 2023, although up from a very strong 49.3 in the fourth quarter of 2022. The acquisition cost ratio of 18.7% for the year, up slightly from the prior year. The increase is principally driven by lower seating commissions of a point on our quota share treaties that were renewed during 2023.
Elyse Greenspan: So we're going to look at it this quarter, especially after the clarifications. We got on January 16th lease if we do elect to do something my expectation is it would be beneficial.
Elyse Greenspan: We have to let the tax guys go through all their work, but we will have more to talk about that at the end of the first quarter on the first quarter call.
Elyse Greenspan: And then on insurance.
Elyse Greenspan: I know it came up earlier you guys are you know from an underlying loss ratio right running.
Elyse Greenspan: Just around 52% slightly below.
Peter J. Vogt: Similarly, the ratio was 19.1 in the fourth quarter, up from the prior year's quarter of 18.6. The underwriting-related G&A expense ratio was 13.6 for the year, down from 14.2 in 2022, driven by increased net earned premium. This also drove the fourth quarter improvement to 13-3 from 13.7 in the year-ago quarter. Now, let's move on to the reinsurance segment. I'll remind everyone that the fourth quarter is the smallest quarter for gross premiums written for reinsurance, representing under 10 percent of the segment's full-year gross premiums written. GWP for the quarter was down substantially from the prior year quarter, largely due to much lower premium adjustments and timing benefits associated with a few renewals in the fourth quarter of 2022.
Elyse Greenspan: And you know.
Elyse Greenspan: It sounds like you guys are comfortable at that level. So based on your view of pricing and loss trend and then I guess, there could be an impact of mix right as property, perhaps a greater concentration where would you within your overall view of 2024, what do you think the underlying loss ratio in insurance shakes out does it stay within range of that 50.
Elyse Greenspan: <unk>.
Elyse Greenspan: Elyse I'd agree it does stay within that range of 52 like I said I think it'll be in the low fifties and as we said, we think theres plenty of market opportunity available to us in 2024, but we will see it as we go through the year and see how the markets evolve.
Elyse Greenspan: Yes.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question is from Meyer Shields with <unk>. Please go ahead.
Meyer Shields: Oh, great thanks, but number of questions all over the place.
Peter J. Vogt: In 2023, we repositioned our reinsurance portfolio, and at year end, we're proud of the work that we've accomplished. On a gross basis, reinsurance is now a $2.2 billion portfolio of attractively priced specialty reinsurance businesses. In 2023, we saw favorable pricing that was above trend in most lines of business. The reinsurance combined ratio for the year was 107.6, which included 14.6 points of net reserve strength. And for the quarter, it was 162.8, which included 69.8 points of reserves.
Meyer Shields: But one that are being urged to ask is whether there's any risk that establishing a DTA in 2024 will be taxable in a way that it wasn't in 2023.
Meyer Shields: That's a great question Meyer I think right now what we know if we set up the DTA, we followed the guidance by the EPA.
Meyer Shields: It should not be but.
Meyer Shields: I do think that as a as tax evolves through the course of the year as Bermuda continues to give out clarifications through the rest of the year and as the OECD kind of sees what Bermuda is doing we're going to get more clarity as the year progresses.
Peter J. Vogt: 2023 current accident year loss ratio for XCAT and weather was 64.8, up from 62.6 in the prior year. As we indicated, as the catastrophe and property premiums ran off, the book has transitioned to a more consistent and profitable book. A higher attrition loss ratio was offset by a significant drop in the catastrophe loss ratio, which has resulted in a lower and less volatile current accident year net loss ratio. For the quarter, the current accident year loss ratio, excluding XCAT and weather, was 64.5 compared to 65.5 a year ago, on expense. The full year total expense ratio is 26.6, down from 27.2, largely reflecting the change in business mix on the acquisition ratio and 4 tenths of a point decrease in the G&A ratio as we have created a more efficient organization. Similarly, for the quarter, the expense ratio is 27.7 compared to 28.4 in the prior year quarter.
Speaker Change: Okay, No that's perfectly fair I certainly have no clue.
Speaker Change: When we talk about the reserve strengthening for the fourth quarter. So you talked about a lot in the context of lines of business, but I'm wondering because we're hearing a lot from competitors and there was some strengthening.
Speaker Change: Tibbets construction I was hoping you could talk through how you evaluated the reserves.
For Atkins, our construction related.
Speaker Change: Specific to the line of business construction what.
Speaker Change: What I would say we've only been good.
Speaker Change: Go ahead.
Speaker Change: No no that's what I meant I guess the industry.
Speaker Change: Yes.
Speaker Change: Yes, I would say, we've only started leaning into construction as a growth out of our specialty London operation in the last few years. So we don't have dramatically large reserves when I think about that in our property book as I go back to 19 and prior so I'd say overall, we're very comfortable with our construction reserves, but it's not the same.
Peter J. Vogt: Moving on to investment, we had a great year for net investment. For the year, we had $612 million of net investment income, up substantially from the prior year.
Speaker Change: Tim I'll call it depth of timing as you actually have in some other people.
Speaker Change: And the construction segment Meyer fell under the same scrutiny that we outlined.
Peter J. Vogt: I would note that the particularly strong fourth-quarter result of $187 million was driven by returns on fixed income of $142 million and a very good quarter for alternatives, which produced $25 million of net investment income. Due to the timing of gains from alternatives, I would not consider this quarter to be a normal run rate for that asset class. As we look to 2024, the overall outlook is positive, as our average yield on fixed income securities was 4.2% at year-end, and the new money yield is 5.4%, and we continue to generate strong cash. Our capital position is strengthened during the year due to Improved Underwriting, Solid Investment Performance, and Management Actions Taken. As you've all seen, S&P recently took us to the credit committee to remove Axis Capital Holdings Limited from negative credit wise and reaffirmed its issuer credit rate.
Speaker Change: In our call a week ago in terms of the process we undertook.
Speaker Change: Okay Perfect and then one last question if I can can you talk about shifting towards larger fiber accounts that because the pricing trends are different or is it that the expected profitability is better with similar pricing.
Speaker Change: We think that the margin potential is strong we think that there's a strong opportunity for us internationally and the large cyber segment and in the fourth quarter, you saw or you will see to our supplement.
Speaker Change: Leaning toward the larger segments and consistent with what we've been reporting in prior quarters shifting away from the smaller <unk>.
Speaker Change: <unk> enterprises, where we see it very competitive.
Speaker Change: Okay perfect. Thank you so much.
Speaker Change: Okay.
Speaker Change: Thank you. This concludes our question and answer session I would now like to turn the call back to management for closing remarks.
Peter J. Vogt: They also reaffirmed the financial strength ratings of our operating entities. Their credit report highlights the fact that we had redundant capital at the extreme stress confidence level under their new model at year-end 2022 and a forecast that we will remain redundant over their forecast period 2023 through 2025. Further, in the quarter, we returned $38 million to shareholders through common dividends.
Speaker Change: Okay.
Speaker Change: Thank you and thank you for joining today's call. We look forward to reporting on our continued progress in future calls as well as during our upcoming Investor day in May I will take a moment now to extend great appreciation and gratitude to all of my colleagues across the globe, who performed exceedingly well this past year. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Peter J. Vogt: This brings our total year-to-date capital return to approximately $153 million. As you know, our board authorized a $100 million share buyback in December. Given the substantial opportunities in our specialty markets, we continue to invest in our people, products, and operating infrastructure. We also see strong value creation ahead for our shareholders. So we are currently in the market repurchasing shares. I also wanted to address the Government of Bermuda's Income Tax Act and the provision referred to as the Economic Transition Adjustment Act.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Peter J. Vogt: We continue to evaluate the implementation of the rules, and given the clarifications provided on January 16th, we expect to make an assessment in the coming months. In summary... This quarter and throughout the year, we continue to advance our strategic priority to deliver growth in book value. We are committed to building on our progress and are optimistic about the future. That summarizes our fourth quarter results, and with that, I'll turn it back to Cliff. Thank you. Operator, we're ready to take questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys.
Operator: To withdraw your question, please press star, then 2. At this time, we'll pause momentarily to assemble our roster. Today's first question comes from Josh Shanker with Bank of America. Please go ahead. Good morning, everybody.
Josh Shanker: You've probably been busy in the last 24 hours, but you may have seen that a couple of other insurance companies reported reserve charges in the aftermarket yesterday. One of them, who tends to be a direct competitor in a lot of things that... In their 10-Q, they said that they took a charge increasing the inflation assumption around all years from 2016 through 2023. I'm wondering when you talk about your reserve charge, what kind of inflation assumptions were changed, and how that affected accident years both pre-COVID and post-COVID? Hey Josh, this is Pete.
Peter J. Vogt: We'll go back to that. We actually adjusted all of our inflation assumptions as we looked back. And again, I would encompass social inflation to mean not only what we see for severity trends, but we see what we see for taking a longer development patterns in our underlying.
Peter J. Vogt: And as we look at that, we've moved all those trends up to where we believe they're going to be, which would be high single digits. And so is the 22-pick higher now, post-reserve charge, than it was a year ago? Just slightly, as I mentioned last week, we did increase our liability reserves in insurance. It was specific to two books of business. It was our primary casualty book and some program books.
Peter J. Vogt: That program business is now in runoff, Josh, so that's not affecting the 2023 current accident year. On the primary casualty, where that was set for 22 is equal to where it was set for 23, so both picks are very strong. And where do you stand in terms of COVID-era, I guess, COVID-related reserves? Have those been completely released at this point, or are there still some reserves up for COVID-
Peter J. Vogt: No, we still have some reserves up for COVID-type claims, especially in our reinsurance segment, where it's just taking longer to actually understand the impact of COVID coming from some of our students, especially in the European theater. On the reinsurance side, that's pretty low; that's mostly all paid out by now. And from our original estimate that we put up, I'd say reserves are down to 10% from where the original estimates were at about 90%. And if I can sneak one more in, can we take the 425 and break it into two parts, the gross increases in reserves for inflationary and severity assumptions around social inflation and what not, and the improvement impact from getting the frequency and the incidence right in the numbers? Josh, we look at that in total with all the assumptions, and we did not break down the 425 into those kind of micro pieces like that.
Peter J. Vogt: So I wouldn't say right now I have those numbers at hand to be able to provide them to you. But I would say overall, we've actually extended the development patterns in our reserves, and we've increased the trend in our reserves. Thank you for taking all my questions.
Josh Shanker: Thanks, Josh. Thank you. The next question is from Yaron Kinar with Jefferies. Please go ahead. Thank you. Good morning, everybody.
Yaron Kinar: I just want to start with a question on the insurance loss ratio and the underlying loss ratio. So, I understand that a year ago, you had some one-off favorable items. But when I look at the 52 percent you posted this quarter, it still seems like it crept up a little bit relative to the, let's say, second and third quarter of this year. I'd just like to better understand if there are any one-offs there, just given the fact that you're still talking about REIT being better than loss trend and a mixed shift towards the lower traditional loss ratio property lines. Yeah, hi Yaron. This is Pete.
Peter J. Vogt: Yeah, the lost underlying loss ratio just means we got our numbers right in insurance was 52 for the quarter. That makes it 51.8 for the entire year 2023. There was not anything in the quarter that I would call one-off either way. It was a pretty consistent quarter overall. You know, me being up by about two-tenths of a point is really just some noise in the quarter.
Peter J. Vogt: I would particularly tell you I still think our loss ratio in insurance will be in that low 50s range for the year and actually even going forward. And Pete, over the last six or eight quarters, it's been in that vicinity as well. Yeah. You know, when I look over the last eight quarters, it's really been in that vicinity.
Peter J. Vogt: The only mixed change would be, again, increased liability and loss picks in 2023 offset by the mixed shift into marine and property. So just to follow up on that, I just want to make sure I'm thinking about this correctly. Because ultimately, you're saying, yeah, we took the trend up, but we're still clearing that trend and then some with the rate we're achieving. We are moving our mix more in the direction of lower attritional loss ratios. So why would the loss ratio that you expect for the coming year or years not improve with that? Is it just a matter of conservatism?
Yaron Kinar: So I'd say, as I think about it, looking backwards, your own 22 to 23, we've got about, our portfolio has moved by about five points more towards the short tail lines. And that has a lower attritional loss ratio. So what we saw was higher loss picks on the longer tail lines. And then with the mixed shift, that actually offset.
Peter J. Vogt: So that's why the loss ratio is pretty consistent at 22 to 23 on a full year basis. As we look forward to 2024, what I would tell you is I do expect the loss ratio to be in those low 50s, and right now, I'd say the mix we're sorting that we actually saw in 2023 is what we're looking for in 2024 also, but that may change based upon market conditions as we enter 2024. Okay.
Peter J. Vogt: And then my second question, I think you mentioned that you are in the market to repurchase shares here. Can you help us think about the prioritization of capital towards buybacks and dividends as opposed to organic growth when it seems like the market dynamic or market environment is still pretty positive for growth? Why not lean as much as you can into those organic growth opportunities and maybe set aside buybacks for the time being? Thanks for the question, Yaron. What I'd say first and foremost is that we feel we're in a very strong capital position. So being in that strong capital position, we equally, really believe we want to grow our business. And the first priority of capital is to continue to grow into these attractive markets where we see them.
Peter J. Vogt: But we also equally believe that right now, our shares are, I call them, at a value price. And with a $100 million authorization, we're buying some shares back because we think that they are attractively priced for us. Overall, we're doing both. And I do think that as we look to 2024, we'll continue to grow in insurance, and we have enough capital to do so. And Yaron, this is Vince.
Vince Tizio: We've pointed to the specific areas of investment that give us confidence in our continued growth within our core business of insurance and have equally recognized where we're trading and the valuation attached to our organization and the belief we have in further developing value creation. And we think it's a good time to do it. Thank you. Thank you. The next question comes from Brian Meredith with UBS. Please go ahead. Yes, thanks. I have a couple of them here for you.
Brian Meredith: First, I'm just curious, do you expect that the reserve charge you took and some of the higher picks that you're talking about on liability in recent years to have an impact on your seeded reinsurance program? And in 2024, could we potentially see, you know, the acquisition cost ratio actually increasing again in 24? Brian, this is Vince.
Vince Tizio: Over the recent years, the portfolio has been materially reshaped, and so as we go to market in the current period, we will be prepared for modest change. In our secured reinsurance, we don't expect at this point for it to be material. And just to give you more color and confidence, you know, again, the rape posture since 2019, and our liability classes have been well over 50-odd percent. The portfolio and its composition of limits, clap, and attention has been materially changed as well, and I think the recent results in the accident year point to that. That's helpful.
Peter J. Vogt: And then my second question, Pete, I think you mentioned that you expect, I guess, total GOE to be down in 24 versus 23. I just want to clarify that. And also on that topic, you know, I noticed corporate overhead was down pretty meaningfully year over year, and I know there were some unusual items in the fourth quarter of 2022. But I was just wondering if that's a good run rate or a little bit low. I would say, Brian, that you hit the nail on the head there. There were some unusual items in the fourth quarter of 2022.
Peter J. Vogt: When we look at where we are in our corporate, I'd say the fourth quarter is a decent run rate. And I do think as we look forward to 2024, with the actions we've been taking, you know, while this year we ended up with a G&A ratio overall for the group for the full year of about mid-13s, I would expect it to go into the 12s as we get through 2024. Great, and then just one last one. I think you mentioned some timing stuff in the reinsurance business, you know, business has hurt premiums. Any way you can kind of quantify what happened?
Vince Tizio: It had two component parts; there were adjustments, and there were renewals that had moved out of the quarter. In combination, I think adjustments were about a difference of 39 million dollars in the quarter as compared to negative nine million in the fourth quarter of 23. It was also a couple of transactions, one in motor vehicles and one in credit, that renewed at a different time period and that, in consequence, contributed to the shortfall.
Vince Tizio: Having said that, we grew New Business, though it's a very small degree of what comes to market in the fourth quarter, by I think about seven-odd million dollars in the quarter. Yeah, I think, as I look at it, Brian, if I adjust for the premium adjustments, where we had a lot last year, and the timing, and I pull those out, the two of them add up to actually over 80 million dollars. The rest of the book, on a, I'll call it a normalized basis, grew at just over 5%.
Peter J. Vogt: Great, thank you. Thank you. The next question comes from Elyse Greenspan with Wells Fargo Securities. Please go ahead.
Elyse Greenspan: Hi, thanks. My first question is on the buyback. So I think you guys have 100 million authorization out there.
Peter J. Vogt: And I know you said you've just started repurchasing your stock. So is the 100 million like what you would expect to buy back this year? Or is it that you're just going to kind of, you know, judge new business opportunities and things like that? And then, and then we'll see where the capital return shakes out. So Elyse, this is Pete. I'll take that.
Peter J. Vogt: Yeah, our number one priority for capital is profitable growth, and we do see really good market opportunities there. Right now, we have the $100 million authorization from the board. We'll use that opportunistically, as I've said in the past, based upon where we see the market. And then I think, John, you guys, some of your peers, right, have elected to set up a DTA around the Bermuda tax changes. I don't think you guys have done that yet. Do you have a sense of how impactful that could be?
Peter J. Vogt: Because my understanding, right, is that that would be helpful to your capital position, you know, if you did choose to similarly set something up like that. So we're going to look at it this quarter, especially after the clarifications we got on January 16th, Elyse. If we do elect to do something, my expectation is it will be beneficial.
Elyse Greenspan: We have to let the tax guys do all their work, but we'll have more to talk about that at the end of the first quarter on the first quarter call. And then on insurance, I know it came up earlier, so you guys are, you know, from an underlying loss ratio, right, running, you know, just around 52%, slightly below. And, you know, it sounds like you guys are comfortable at that level. So, based on your view of the pricing and loss trend, and then I guess there could be an impact of mix, right, as property, perhaps as a greater concentration. Where would you, within your overall view of 2024, think the underlying loss ratio in insurance shakes out? Does it stay within the range of that 52?
Peter J. Vogt: Elyse, I'd agree. It does stay within that range of 52. But, like I said, I think it'll be in the low 50s.
Peter J. Vogt: And as we said, we think there's plenty of market opportunity available to us in 2024, but we'll see how that plays out as we go through the year and see how the markets evolve. Thank you. Thank you. The next question is from Meyer Shields with KBW. Please go ahead. Great, thanks. I've got a number of questions all over the place, but one that I'm being urged to ask is whether there's any risk that establishing a DTA in 2024 will be taxable in a way that it wasn't taxable in 2023.
Meyer Shields: That's a great question, Meyer. I think right now with what we know, if we set up the DTA and we follow the guidance of the ETA, it should not be. But I do think that as tax evolves through the course of the year, as Bermuda continues to give out clarifications through the rest of the year, and as the OECD kind of sees what Bermuda is doing, we're going to get more clarity as the year progresses. Okay, no, that's perfectly fair. I certainly have no clue why.
Peter J. Vogt: Um, um, when we talk about the reserve strengthening for the fourth quarter, we talked about it a lot in the context of lines of business, but I'm wondering, because we're hearing a lot from competitors about their reserve strengthening, specifically construction, I was hoping you could talk through how you evaluated the reserves that are for access are construction related, specific to the line of business construction. What I would say is that we've only been, go ahead. No, no; that's what I meant. I understand the industry rather than the line of business. Yeah, I would say we've only started leaning into construction as a growth out of our specialty London operation in the last few years, so we don't have dramatically large reserves when I think about that in our property book, as I go back to 19 and prior.
Peter J. Vogt: So I'd say overall, we're very comfortable with our construction reserves, but it's not the same, I'll call it, depth of timing, as you actually have in some other, and the construction segment, Meier, fell under the same scrutiny that we outlined in our call a week ago in terms of the process we undertook. Okay, perfect. And then one last question, if I can. So you talked about shifting towards, I guess, larger cyber accounts. Is that because the pricing trends are different? Or is it that the expected profitability is better at a similar price?
Vince Tizio: We think that the margin potential is strong. We think that there's a strong opportunity for us internationally in the large cyber segment, and in the fourth quarter, you saw, or you will see through our supplement, a leaning toward the larger segment, and consistent with what we've been reporting in prior quarters, shifting away from the smaller sized enterprises where we see it as very competitive. Okay, perfect. Thank you so much. Thank you. This concludes our question and answer session. I would now like to turn the call back to management for closing remarks. Thank you. And thank you for joining today's call. We look forward to reporting on our continued progress on future calls, as well as during our upcoming Investor Day in May. I'll take a moment now to extend great appreciation and gratitude to all of my colleagues across the globe who have performed exceedingly well this past year. Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line. Music