Q4 2024 AXIS Capital Holdings Ltd Earnings Call
Good morning, and welcome to the Axis capital fourth quarter 2024 conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press Star then one on your telephone keypad and Swift. All your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Cliff Gallant head of Investor Relations. Please go ahead Sir.
Cliff Gallant: Thank you good morning, and welcome to our fourth quarter 2024 Conference call. Our earnings press release and financial supplement were issued last night, if you'd like copies. Please visit the investor information section of our website and access capital Dot com.
Speaker Change: Set aside an hour for todays call, which is also available as an audio webcast on our website. Joining me on today's call are Vince <unk>, our president and CEO and Pete Vogt, our CFO and.
Speaker Change: In addition, I would like to remind everyone that the statements made during this call, including the question and answer session, which are not historical facts may be forward looking statements forward looking statements involve risks uncertainties and assumptions actual events or results may differ materially from those projected in the forward looking statements due to a variety of factors, including the risk factors set forth in the company's most re.
Speaker Change: He said 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. In addition.
Speaker Change: On a non-GAAP financial measures may be discussed during this conference call. Reconciliations are included in our earnings press release and financial supplement.
Vince: With that I'll turn the call over to Vince.
Vince: Thank you Cliff good morning, and thank you for joining our call before we begin please allow me to take a moment to acknowledge the tragic wildfires in Los Angeles.
Vince: And on behalf of all of Axis, We show our heartfelt support for the impacted individuals families and communities. We also express our gratitude to the firefighters and relief workers, who are doing outstanding work.
Vince: Moving to our 2024 results 2024 was a great year of progress for axis, culminating as one of the best years for our company.
Vince: Sure. We unpack. These result, I'll just take a moment to thank my access colleagues throughout the world for their excellent work and commitment to our customers broker partners as well as to one another and looking at both the fourth quarter and full year access produced strong results across all its key indices.
Vince: Advancing our company strategy outlined at our Investor day in May.
Vince: The year was highlighted by a number of strategic accomplishments, including the expansion of our underwriting and product capabilities investments and enhancements to our operating model and the recruitment of new and complementary talent. The changes we have implemented will allow access to continue operating with pace clarity as perp.
Vince: And strong execution, we believe axis is well positioned to drive sustained profitable growth and value creation in 'twenty five and beyond.
Vince: Let's now review our full year financial results, we delivered operating return on equity of 18, 6% a year end book value of $65 27, representing 27% growth as compared to the prior year, we generated record operating earnings per share of $11 18.
Vince: 98% increase over the prior year and 75% higher than our previous best in 2007, I'll note that our top four quarters of operating earnings per share were all in 2024.
Vince: We delivered a combined ratio of 92 three for the year, a seven six point improvement over the prior year on an ex cat basis, we produced a current accident year combined ratio of 88, 5% for the year consistent with our prior year results full year premiums were a record $9 billion.
Vince: Or seven 8% over the prior year, including $2 6 billion in new business as we delivered on the full year expectations that we shared with you during our second quarter call. We generated year over year expense improvement of 90 basis points to our <unk> ratio and are on track to hit our long term.
Vince: <unk> of 11% by 2026.
Vince: There were some notable items in the expense ratio, which Pete will speak to in his comments and lastly, net investment income was a record $759 million for the year.
Speaker Change: Taken together this was an excellent year for axis, and one where we took important steps to build a stronger and more resilient company.
Speaker Change: From an improved position of financial strength, we view repurchasing shares as an attractive use of our capital and we utilize our stock repurchase program in the order of magnitude of $200 million over the course of the year and in December we completed an important step in further aligning our balance sheet with the front end of our.
Speaker Change: Business with the execution of an LPT will then star, let's now move to our operating segments and we'll begin with insurance in 2024, our insurance business performed exceedingly well we produced an overall combined ratio of 89, one and our current accident year ex cat of 84.
Speaker Change: Moreover, we generated $6 6 billion in premium up seven 7% over the prior year with respect to new and expanded products that we had mentioned at our Investor day, we generated $560 million in new premiums and we are very encouraged that the seeds that we planted are showing growth.
Speaker Change: The potential <unk>.
Speaker Change: Turning to our core insurance divisions in North America strong growth of 8% for the year, even while reshaping our primary casualty book and eliminating $140 million of written premiums across North America submission flow was up 25% year over year with our wholesale channel generating a 27%.
Speaker Change: Improvement in submissions led by E&S property and excess casualty moving to global markets, we generated seven 6% growth over the prior year, which included the non renewal of some $60 million in written premiums from our delegated cyber portfolio and we concluded 2024.
Speaker Change: Maintaining our outperform status from Lloyd's.
Speaker Change: As I've commented previously we are evidenced in increasing competition in global markets, particularly within our property Marine and aviation units. Our underwriters continue to maintain discipline as we drive selective growth, particularly in A&H property renewable energy and certain of our credit products.
Speaker Change: Our dedicated energy transition Syndicate launched just eight months ago at Lloyd's produced more than $30 million of business in 2024, and we remain optimistic about the value this syndicate and its product capabilities deliver to the market.
Speaker Change: Let's now move to reinsurance.
Speaker Change: Our reinsurance business performed well in 2024 consistently producing strong contributions to both the top and bottom line for the year access reproduce the combined ratio of 91, eight and generated $2 4 billion in premiums growing nearly 8% driven by a 16% year.
Speaker Change: Per year increase in our targeted short tail specialty lines. Moreover, during the year, we produced $493 million of new business, 63% of which came from our short tail specialty lines as respects, one one where we write 45% of our reinsurance business our team performed well.
Speaker Change: With the backdrop of a competitive market overall it was an orderly renewal with some nuanced by line, we saw a particularly favorable conditions and credit and surety we continue to see opportunities in fiber. Despite an increasingly competitive environment, we saw greater competition in the U K motor class driven by the reduction.
Speaker Change: <unk> in the Ogden rate, which of course has placed downward pressure on rate levels as respects marine we saw increasing capacity and pressure on rates and in liability. We saw a double digit rate increases in the U S. But the market was differentiated by loss experience and business mix.
Speaker Change: While the overall reinsurance market remains competitive we continue to leverage our specialty capabilities, where we see strong premium adequacy, while maintaining our selective appetite and professional and casualty lines.
Speaker Change: Stepping back, let's take a moment to discuss broader market conditions.
Speaker Change: The risk landscape remains highly complex and continues to rapidly evolve, reflecting a marketplace that will draw on many of the specialist capabilities that access brings to the market. There are a number of trends that we're observing and we are ensuring that our portfolio remains responsive and resilient I will outline several trends that we continue to.
Speaker Change: Monitor and respond to was our specialty product capabilities through our various distribution channels.
Speaker Change: First climate.
Speaker Change: With respect to climate risk there is no doubt that this was an active year globally, and we estimate more than $135 billion of industry losses at the same time, the dispersion apparel impacting the globe is wide ranging we saw most recently the effect of the wildfires in Los Angeles. The continued increase of severe convective storms in the U.
Speaker Change: And other impactful natural catastrophes.
Speaker Change: A consequence of this phenomenon is the continued shift of business into the E&S channel, where we believe we are we have the expertise and product knowhow to meet our clients' needs second the continued impact of social inflation on various lines of business, but most particularly on liability which continues to.
Draw great scrutiny as the increase in claims awards driving severity remains an industry challenge third the D&O market continues to show an imbalance with a growing delta between pricing and loss cost trends, even as conditions continue to deteriorate. Indeed security class action lawsuits are at their high.
Speaker Change: This level since 2020 and continued to grow year over year with filings up 5% and 24. Moreover, bankruptcy rate filings in the U S are also on the rise up 8% year over year.
Speaker Change: Fourth the cyber risk landscape is evolving in a variety of ways, whether it be the resurgence of ransomware third party privacy regulations, the impact of AI and driving more sophisticated cyber attacks or rising geopolitical tensions as a longtime leader in cyber with broad based product capabilities and.
Speaker Change: Deep subject matter expertise access is particularly well positioned to help our customers delivering tailored products risk advisory services, and our rapid triage and support resource known as the incident commander.
Speaker Change: Lastly, the energy marketplace will certainly evolve with a renewed focus on traditional energy in the United States and yet it is anticipated that they will continue to be global demand for clean energy.
Speaker Change: With leadership in both traditional energy and energy transition and deep subject matter knowhow with a broad and responsive portfolio of products access is well positioned to help our customers navigate emerging geopolitical developments changing regulatory and policy environment potential energy price volatility technology.
Speaker Change: Advances and supply chain disruption.
Speaker Change: It being back and looking at the shifts that are happening across the broader market.
Speaker Change: We believe the access underwriting capabilities are well suited to support the diverse needs of our customers in this dynamic risk landscape.
Speaker Change: Let's unpack. This further we continue to mix shift towards premium adequate short tail lines, which currently comprise 52% of our total gross premiums written up approximately 4% as compared to the prior year in property, we're seeing increased competition through both our principal property divisions globe.
Speaker Change: Property, and North America, E&S, which taken together make up 57% of our total property written premiums our property portfolio is well constructed well diversified and highly premium adequate following five years of rate increases where pricing has more than doubled.
Speaker Change: As previously noted pricing momentum and liability remains strong and is accelerating by way of example.
Speaker Change: And our U S excess casualty book, we generated rate increases of 14% for the year and 18% in the quarter as we grew our U S excess casualty business, 18% year over year and primary casualty rates were up 20% for the year and 29% for the quarter.
Speaker Change: <unk> liability premiums grew 24% in the year and 11% in the quarter as we are seeing increasing deal activity driving submission flow.
Speaker Change: Premiums remain adequate in the slides and cyber we remain focused on growing our large account segment and we grew North America large cyber by 13% in the year.
Speaker Change: As part of our reshaping of our delegated cyber portfolio. We continue to be pleased with the expansion of our partnership with Alpha secure to address the lower middle market as I've commented in prior calls we continue to lean into our ability to to deploy cyber capacity through both of our underwriting businesses and reinsurance.
Speaker Change: We grew our portfolio to $166 million in written premium up 72% over the prior year, we remain confident in our strong premium adequacy prudent limit deployment and accumulation management between both insurance and reinsurance supporting this growth.
Speaker Change: Stepping back and looking at market conditions and the rate environment. While there are signs of continued moderation in rate achievement. The access portfolio remains premium adequate and is meeting our risk adjusted return expectations. We anticipate our profitable growth will continue in part by price increases but more.
Speaker Change: Shortly we will continue to leverage our diversified portfolio and further monetize the expansion of new customer segments, new geographies, and a rich and broadening arsenal of product capabilities.
Speaker Change: Let's now turn to our how we work transformation program. How we work continues to progress building a foundation for long term profitable growth in 2024, we took critical steps to strengthen and reshape our company's target operating model, while building new skills and capabilities across the enterprise.
Speaker Change: Including operations and claims in addition throughout the business, we've deepened our technical expertise as we've added strong talent to complement our existing team. This has enabled us to build out new business units with skills and tools to meet the emerging needs of our customers, while deepening our bench of teammates Mauro.
Speaker Change: We've made key investments in technology, AI, and we continue to improve our efficiency and enhance our value proposition through speed productivity and decision, making we also continued to invest in our workplace programming to create an environment, where our talent can thrive and just last week access was.
Speaker Change: Ignite by U S news on its 2025 list of the best companies to work for in closing, we look to the future with optimism and excitement. We believe that 2024 was a pivotal year in the access journey with the company delivered on its promises enhanced its value proposition continued to generate consistent.
Speaker Change: Profitable results and achieve new recognition in the marketplace as a competitive force in the specialty arena.
Speaker Change: We take pride in the progress that we've made and also have the humility to recognize that much work remains ahead throughout the company, we are committed to delivering value to our stakeholders and we're motivated by the privilege that we have and solving customers problems across the world and with that I'll pass it to Pete.
Pete: Thank you Vince and good morning, everyone actually had a very strong performance in the quarter and for the full year 2024.
Pete: In the quarter, our net income available to common shareholders was $286 million or $3 38 per diluted common share.
Pete: For the full year 1.05 billion or $12 35 per diluted common share.
Pete: Producing a 25% return on common equity.
Pete: This drove our book value per diluted common share to <unk> $65 27 at year end.
Pete: An increase of 27%.
Pete: Our operating income was $252 million or $2 97 per diluted common share for the quarter.
Pete: $952 million or $11 18 per diluted common share for the full year.
Pete: Resulting in an 18, 6% operating Roe.
Pete: For full year 2024.
Pete: Looking at our consolidated results our companywide quarterly gross premiums written grew 11% to nearly $2 billion, our highest production fourth quarter ever as we continue to see attractive opportunities across most lines of business.
Pete: For the full year gross premiums exceeded 9 billion four 8% growth and outstanding results.
Pete: Our quarterly combined ratio was an excellent 94, 2%.
Pete: Spite hurricane Milton and for the full year was 92, 3% with improvements in both loss and expense ratios.
Pete: For both the quarter and the full year, our accident year loss ratio ex cat and weather was a superb 55, 7% for.
Pete: For each quarter in 2024, we were consistently in the mid $50 range.
Pete: We are vigilant and implementing our learnings from our 2023 fourth quarter in depth Reserve review.
Pete: Also reflecting the growth of attractively priced short tail lines.
Pete: In the quarter, we adhere to our philosophy of wanting to see sustained positive momentum before releasing reserves and.
Pete: And we recorded a release of $16 million from short tail lines of business with $12 million in insurance and $4 million in reinsurance.
Pete: As we mentioned on our third quarter call. Our normal practice is to have an independent third party actuarial firm.
Pete: We view our reserves at year end that review is complete and we continue to see that the data and underlying claims patterns are consistent with the assumptions, we set a year ago.
Pete: They are very high natural catastrophe loss year for the industry. We're pleased to see the successful execution of our strategic efforts to reduce volatility.
Pete: The fourth quarter net cat loss ratio was five 9% as we experienced $81 million of Nat cats with the largest portion of generated by hurricane Milton at $53 million.
Pete: With an additional $15 million due to an increase for Helene.
Pete: For the full year, we had Nat cat loss ratio of just four 3% and.
Pete: An excellent result.
Pete: Our peak <unk> remain large U S natural catastrophes.
Pete: Including a California earthquake or southeast Hurricane.
Pete: Each of these events remains well below 5% of shareholder equity at the one and $2 50 year payroll Mark.
Pete: While we are taking advantage of market opportunities and growing our insurance property book or <unk> have remained steady.
Pete: For the quarter, our consolidated G&A expense ratio, including corporate was 13, 7%.
Pete: Up from 13, 4% a year ago.
Pete: 2024 was an all around excellent year for axis. So there was an accrual for variable compensation, which impacted the ratio in the quarter for the full year. The G&A ratio was 12, 6% down from 13, 5% a year ago with actual dollar spend down two 7% inclusive.
Pete: The higher variable comp.
Pete: We remain on track to achieve the 11% target for 2026 as we shared with you on Investor Day.
Pete: I would add that we continue to achieve benefits of the how we work program.
Pete: These benefits more than simply cost reductions, but also improvements in processing and all around productivity.
Pete: I would also like to mention here that for a full year or other insurance related income was $30 7 million, which along with over $54 million of expense reimbursement reflects an attractive stream of fee like earnings derived from our third party.
Pete: Partners, including monarch long tail and Harrington re.
Pete: Now, let's move on and discuss our segment results in more detail.
Pete: Insurance had a strong quarter gross premiums written were $1 7 billion, an increase of seven 4% compared to the prior year quarter, and our highest volume fourth quarter ever for insurance ending.
Pete: Ending the year with a strong quarter, which will sustain momentum into 2025.
Pete: Full year DWP was $6 6 billion up seven 7% in line with the guidance, we shared with you back in the spring.
Pete: Across our book pricing remains highly adequate and we continue to see opportunity to put capital to work at attractive returns above our long term targets.
Pete: The fourth quarter insurance combined ratio was an outstanding 91, 2%, including seven 8% of cats and weather related losses.
Pete: And 1.2 points of reserve releases, resulting in $90 million of underwriting income.
Pete: For the full year, the combined ratio was $89 one with five five points of cats, and four tenths of a point of reserve releases.
Pete: The acquisition cost ratio of $19 five was up over the prior year's $18 seven reflecting mix of business change as we favorite short tail lines over pro lines and cyber.
Pete: Now, let's move on to the reinsurance segment.
Pete: Gross premiums were up 37% in the quarter.
Pete: The fourth quarter is our seasonally lowest volume quarter.
Pete: But we're pleased that about half the quarters growth came from new business with the balance mostly driven by positive premium adjustments.
The biggest driver of growth was A&H, where we closed a couple of new larger quota share contracts.
Pete: Reported growth in motor and pro lines was essentially due to premium adjustments in.
Pete: In liability lines, we're maintaining a tough stance and being highly selective.
Pete: For the full year GW P was up 8% ahead of the mid single digit guidance. We gave you back at our Investor day.
Pete: The reinsurance team remains focused on the bottom line and we are pleased with the consistency of the results 2024 was the first year in many years that reinsurance made a profit in each quarter a track record we expect will continue.
Pete: The quarter's combined ratio was 99% with an ex cat and weather loss ratio of 66% with cats of just three tenths of a point at 1.2 points of benefit from the reserve releases for the full year. The combined ratio was 91, eight with an ex cat and weather loss ratio of 66% and just seven tenths of a point of <unk>.
Pete: Cats, and a half a point benefit from reserve releases.
Pete: Our reinsurance G&A ratio was just 4% in the quarter and three 6% for the full year the improvement in G&A ratios driven from lower spending.
Pete: Some higher third party capital fees, which increased to $54 million for the year.
Pete: Up from $38 million a year ago.
Pete: We had a strong quarter and year for investment income.
Pete: In the quarter investment income was $196 million up 5% over the prior year quarter and for the full year investment income was $759 million up 24%. The increases were driven mainly by higher yield on a larger fixed income portfolio.
Pete: With increasing stability in our underwriting results, we've moved up marginally in our investment risk appetite with a slightly increased exposure to below triple B rated bonds at year end.
Pete: We remain on the lower end of our stated range of 15% to 20% of the portfolio designated as high risk.
Pete: The overall outlook remains positive as our book yield on fixed income Securities was four 5% at year end, while the new money yield was five 3% and we continue to generate excellent operating cash flow.
Pete: Our negative reported tax rate in the quarter had some unusual items, including a true up to the Bermuda ETE.
Pete: Excluding these onetime items the effective tax rate was five 4%, reflecting the geographic distribution of profits and losses.
Pete: Looking at the full year, the effective tax rate, excluding the Bermuda ETE and unusual items was 13, 8% consistent.
Pete: Consistent with the 14% range, we discussed early in the year.
Pete: Looking ahead to 2025 and considering our expectations for the geographic spread of profits, we would expect our reported tax rate in the high teens.
Pete: The priority for capital is to advance our strategic goals.
Pete: Other it would be growth opportunities, including organic growth and the hiring of new teams or investing in our capabilities such as at scale adoption of digital and analytical capabilities.
Pete: However, despite our share price hitting new highs in the quarter, we view repurchasing our shares as an attractive option for utilizing our capital.
Pete: In the quarter, we returned $97 million to shareholders through $37 million of common share dividends and $60 million of share repurchases, we have $200 million remaining on our repurchase authorization.
Pete: 2024 was a remarkable year for axis one.
Pete: We began to realize our potential as a specialty underwriter.
Pete: With a strong balance sheet improved operating efficiency significantly reduced underwriting volatility and a committed team driving profitability. We already have clear line of sight to a strong 2025.
Pete: With that we'd be happy to take your questions.
Pete: Thank you we will now begin the question and answer session.
Pete: To ask a question you May press Star then one on your telephone keypad.
Pete: Youre using a speakerphone please pick up your handset before pressing the keys.
Pete: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Andrew Coleman with TD Securities. Please go ahead.
Andrew Coleman: Hey, good morning, So first question.
Speaker Change: It's a little multifaceted.
Speaker Change: Vince I think I heard you say that U S casualty rates in the fourth quarter in insurance were up 29% did I did I hear that right and what's your outlook for 2025 should we see similar rates.
Speaker Change: Rate increases and with that.
Speaker Change: Another part to this question I'm hearing that there's some softness in reinsurance casualty pricing could you talk a little bit about that and what youre seeing there and why the disconnect.
Speaker Change: Yeah. So Andrew Good morning, you did hear the 29% correctly and as we've previously discussed we believe.
Speaker Change: We have to remain in excess of double digit rate change in that business. Our team has reshaped that portfolio in a very substantial manner I indicated in my opening remarks, the quantum two <unk>.
Speaker Change: A bit of reshaping and eliminating a premium that was not meeting our risk adjusted return expectations. So we do expect a double digit rate to persist in 2005 and liability in respect to reinsurance liability.
Speaker Change: We've been indicating since 23 Monte Carlo.
Speaker Change: Caution in respect to liability re.
Speaker Change: We continued to price that business with a resurgence of rate in liability re double digit in the quarter about nine 7% for the full year, we will maintain our cautious underwriting appetite in that line until circumstances change.
Speaker Change: Got it.
Speaker Change: So there is some softness, but what youre doing youre, not allowing for that and Mike.
Speaker Change: Reading that properly.
Speaker Change: Well, we did not grow.
Speaker Change: Liability re in the year and that was purposeful we took strengthening actions on a number of seasons in a variety of ways, but mostly relating to either the structure of the programs ceding commissions, we were tolerating or in fact, we non renewed a number of seasons that did not meet our underwriting standards.
Speaker Change: Got it and then the next question, which.
Speaker Change: I'm sure you might have expected this to come the wildfires.
Speaker Change: Could you give a little color on.
Speaker Change: How do you think youre going to be exposed.
Speaker Change: Yes, first just to iterate my opening remarks, our heartfelt concern goes to all those affected and sincere gratitude to the relief workers and the firefighters for access this will not be a material event be reminded pleased that we are a commercial underwriter in the state of California, we are not in the high <unk>.
Speaker Change: Worth residential space in the state either and I would approximate today.
Speaker Change: Some 10 to 12 basis points and our market share for us at the end of the day, but again very early.
Speaker Change: We have really.
Speaker Change: Strong observation on our exposure in total our accounting of claims to date is fairly insubstantial.
Speaker Change: So that's our view.
Speaker Change: That's very helpful. And then just one quick one if I could sneak it in.
Speaker Change: You talked about an expense ratio of 13, seven that was a little higher than I would've expected, but you talked about accrual or performance comp that drove it up which sounds like a very good thing because it means that you are underwriting was was excellent.
Speaker Change: And so when you said.
Speaker Change: You.
Speaker Change: Youre still on track for 11% and 26 could that number be a little higher.
Speaker Change: In 2006, if you're underwriting is is excellent again, but then I suspect it would still be a good thing because the underwriting is excellent.
Speaker Change: Want to make sure I'm following that right.
Speaker Change: Yeah.
Speaker Change: So.
Andrew: First I'll start as Andrew I appreciate the underwriting is excellent that is helping drive on.
Andrew: Operating ROE of 18, 6% for the year, so really good underwriting going on very premium adequate book and we feel really good about what our teams are executing out.
Andrew: Out there today in the marketplace I would say it may help if I normalize the quarter for you. If we look at the expense ratio normalized in the quarter to $13 seven would have been about 11, four so that should give you some view as to as we enter 2025, we believe that we are on track to hit our 11% G&A.
Vince: In 2026, and Vince and I and the team are not coming off of that goal for 2026.
Vince: Super helpful. Thanks for taking my questions.
Andrew: Thank you Andrew.
Speaker Change: The next question will come from your on Qunar with Jefferies. Please go ahead.
Speaker Change: Thank you good morning.
Speaker Change: I wanted to start with.
Speaker Change: The loss experienced in U S. Casualty I think you said that the claims patterns are still consistent with the assumption that you set last year.
Speaker Change: Just wanted to confirm here, so you've not really immune to any risk margin.
Speaker Change: I lost you at the end Juran would you.
Speaker Change: But again I just wanted to I just wanted to confirm that with claims patterns consistent with your expectations.
Speaker Change: The risk margin that you set last year is still fully intact.
Speaker Change: Yes, I would say you are on this is Pete based upon the studies that we did last year and the reserves that we put up last year at the end of 2023, we still feel very confident in those reserves that we put up at that time, we feel very confident about the loss picks that we have for 2024 in our casualty lines of business and in both those.
Speaker Change: Areas, we have been updating those studies and the patterns and what we see coming through in the data has reinforced our confidence and you can never say never but we feel really good about.
Speaker Change: Where we are with our casualty book.
Speaker Change: Great consistent with what you've said in the past just wanted to confirm that and against that kind of 29% rate increase you saw in primary casualty also.
Speaker Change: Mid teen increases in excess casualty can you talk about what the loss trends in both lines are.
Speaker Change: They are consistent with what we've observed to you in the past and others, Iran.
Speaker Change: Theyre performing in line.
Speaker Change: <unk>.
Speaker Change: Current accident year loss picks are sufficiently strong to contemplate both the portfolio construction, which includes our limit profile and our sustained outbound reinsurance. The prior years are not showing anything that would.
Speaker Change: Create noise for us against the assumption set that we put forward as part of our reserve charge Youll have to recall pleased that in the primary casualty business. This is a business that was substantially underperforming.
Speaker Change: As you know from my opening remarks, we eliminated a meaningful percentage of those policy holders and we're being extremely vigilant about what we're willing to retain and we're charging what we think is an appropriate rate and finally bear in mind that this business is underwritten through the E&S channel, which permits us to be freedom of forming right.
Speaker Change: In that class.
Speaker Change: Yeah, it's a good point.
Speaker Change: If I could sneak one more on the wildfires. So I realize you are not really in residential and in California.
Speaker Change: I think you do have a.
Speaker Change: Large specie book in London, and do you see any exposures coming through that.
Speaker Change: We do but again they are within the tolerance that I indicated we are a <unk>.
Speaker Change: Meaningful market in species globally, and we have a line of sight on our exposure in the state of California, but that is contemplated in the range I gave you.
Speaker Change: And I guess, the only thing the only thing I would add on top of that your own as we do fairly really good risk management again like you know on our property book, We've got $100 million event deductible are specie book runs through our Marine Treaty and that has a $10 million of event deductible. So depending upon what happens we'll have to we'll look at it but thats the deductible.
Speaker Change: Obviously there'll be some reps on top of that but we feel good about the risk management parameters, we've put around their book.
Speaker Change: Thank you very much and good luck in the year ahead.
Speaker Change: Thank you. Thank you.
Brian Meredith: The next question will come from Brian Meredith with UBS. Please go ahead.
Brian Meredith: Yes, thanks, Pete any update on the Bermuda, DTA and what could potentially happen here in 2025.
Brian Meredith: Yes, Brian Thanks for the question.
Speaker Change: <unk> did put out a guidance memo, we'll call it about two weeks ago.
Brian Meredith: Our expectation is that looking at that there will need to be some adjustments in time.
Brian Meredith: We read that is our expectations is Bermuda or other tax authorities would probably do something before 2027. It looks like the guidance. That's out there right now would suggest that what's been put up for the Bermuda ETE would be acceptable I'll use that term to the OECD for the first.
Brian Meredith: Two years of it so that would be 25% to 26 thereafter, I think we'll see 2007 and outwards actually not come to fruition when I think about it.
Brian Meredith: So.
Brian Meredith: Maybe you can walk through how accounting wise does that mean youre going to have to do something about that remaining DTA that was supposed to be booked post 'twenty seven kind of reverse that do you think it will happen.
Brian Meredith: I think something will happen with we put up for full year, we actually added a little bit more we're at $177 million at the end of the year, but then after that sometime before then we will actually see.
Brian Meredith: That has to get adjusted and again, that's going to impact really cash Brian. So the corporate tax rate in Bermuda is 15% now in 2026, and 2025, but that DTA will make an adjustment to it probably sometime before the end of 2006, when we see what the new tax laws are.
Brian Meredith: Makes sense. Thank you and then the second question I'm curious Vince.
Speaker Change: Given the reshaping of the portfolio have you been doing anything happened at one one on your ceded reinsurance or anything contemplated in 2025 on ceded reinsurance.
Speaker Change: Well, Brian Good morning, we had about five.
Speaker Change: Placements at the one one I think of note would be our cyber.
Speaker Change: Bounds reinsurance, which was frankly, a very successful outcome.
Speaker Change: We bought a bit more tail cover we improved our seed by about three excuse me four points and.
Speaker Change: We felt very good about the recognition of the reinsurance panel that supports that business.
Speaker Change: Other lie.
Speaker Change: The lines that we place included construction and marine and renewable energy some big placements for US there again, we had a mix of change of positive changes either relating to the cede commission or our participation rate I did fail to mentioned in cyber we actually assumed an additional percentage of some 4%.
Speaker Change: <unk> points at this renewal as well.
Speaker Change: Got you that's great and then if so does that mean that perhaps as we look into 2025 that we will see in the insurance segment, maybe a reversal of the decline in premium we're seeing is that reshaping kind of kind of done at this point.
Brian Meredith: Brian in the third quarter, we mentioned that we would probably extend into the 25 year. The delegated component of the reshaping effort that quantum of premium is less than $100 million and it's predominantly in the first half of the year. So I would I would suggest to you that that growth rate.
Speaker Change: We'll be ameliorated, but it's not going to happen in the first half of the year Youll continue to hear Pete and myself target very specific customer segments geographically and by size of customer we gave direction of that.
Speaker Change: In our opening remarks, we grew the large north American customer base about 13%.
Speaker Change: Great. That's very helpful. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Next question comes from Josh Shanker with Bank of America.
Yes.
Josh Shanker: Yes. Thank you very much for taking my question.
Josh Shanker: Obviously, the wildfires are sad and tragic situation.
Josh Shanker: Another sad and tragic situation happened this morning in aviation.
Josh Shanker: And you're still a player in that market, it's been a long time.
Josh Shanker: Commercial airline has gone down on American soil.
Josh Shanker: Obviously, we don't know all the details yet.
Josh Shanker: But I have a number of questions to understand it.
Speaker Change: The federal government were responsible for a crash mid air.
Speaker Change: As the private market responsible for that loss.
Speaker Change: And regardless would be with the claims to be paid.
Speaker Change:
Speaker Change: In advanced and later found out culpability and whatnot can you talk a little about what might happen I really we don't have the details, but we are going to work.
Speaker Change: A bit about the market.
Speaker Change: Yes.
Speaker Change: Josh Josh This is Vince sorry for the pause.
Speaker Change: I honestly don't have enough of the faster information to even respond to your fat pattern on what I can tell you is that.
Speaker Change: With some degree of qualification we don't believe we are on.
Speaker Change: The American.
Speaker Change: Plain.
Speaker Change: And to your more direct point it is tragic.
Speaker Change: As respects the liability and the government I'd have to look at it in totality to give you an informed point of view.
Speaker Change: Okay, that's perfectly reasonable.
Speaker Change: Pete can you talk about the goodwill adjustment in the quarter.
Pete: Yeah. Thanks, Josh you'll see we made an adjustment to goodwill in the quarter that actually goes back to the Novi transaction, we did in 2017.
Speaker Change: Look back then.
Speaker Change: We evaluated the situation we had a deferred tax asset that should have been put up in 2017, and so we actually made the adjustment in the balance sheet this quarter and when we put that deferred tax asset up that actually reduce then the goodwill just by a straight calculation. So it was a true up from deferred taxes back to that 2017 transaction.
Speaker Change: And we think that actually closes out basically all the views we have of the transaction. So good news, it's not anything to do with an impairment or anything like that was just straight change and a deferred tax asset that should have been put up back in 2017.
Speaker Change: Alright, and one more quick one mostly semi straight, but maybe it's good to get it on the.
Speaker Change: Transcript here.
Speaker Change: The closure of the LPT sometime in the first half of the year.
Speaker Change: <unk> is there any more precision when you get around that.
Speaker Change: Josh This is Pete again, we're going through really two regulators.
Speaker Change: Thank you our middle of <unk> is best guesses. We have also obviously as soon as we get the approvals will be able to move forward with the deal and we'll let you know, but I will tell you everything's been filed and as with the regulators and we're just waiting to hear.
Speaker Change: Thank you.
Speaker Change: The next question will come from Charlie linear with BMO row. Please go ahead.
Charlie linear: Hi, Thanks.
Speaker Change: On that last question I think I heard you guys say in the past that.
Speaker Change: The investment income on the LPT would begin to impact more in Q I just want to make sure that.
Speaker Change: Okay.
Speaker Change: The investment income on the LPT. Charlie This is Pete will actually start to impact us after the close of the transaction. So if it actually hits in <unk> it won't affect <unk> net investment income.
Speaker Change: Okay got it.
Speaker Change: And you guys provided some helpful color on that.
Speaker Change: The fee income tailwind as you guys have had.
Speaker Change: Can you talk about the sustainability of that growth and how we should expect that to impact your expense ratio and 25.
Speaker Change: I would say that what we actually talk to you about in 'twenty four would be consistent in 'twenty five.
Speaker Change: It is a great partnership we have with really three of our ILS partners. We were on the forefront a number of years ago at using iOS and having great investment partners to handle reinsurance long tail liabilities, we've really leaned into that.
Speaker Change: Really great for our underwriters on the front side, because they actually get I'll call it bigger limits and more capacity to put out there and we have great partnerships on the backend and our expectation is youre going to see consistency as we go into 2025 I don't know Vince do you want to add to that I just would add one comment Charlie I think it's also a testimony of the confidence in the underwriting of our team as viewed by.
Vince: These independent investors, so we take pride in that as well.
Speaker Change: Thanks, that's helpful.
Speaker Change: And maybe just going back to the expense ratio conversation.
Speaker Change: I guess as the <unk>.
Speaker Change: Underwriting durability continues to prove itself out should we think about embedding more variable comp.
Speaker Change: Quarterly run rate or is it really more of a <unk> true up.
Speaker Change: Type of item going forward.
Speaker Change: Hey, Charlie Charlie This is Pete its really more of a <unk> true up item.
Speaker Change: Given that we are still even in the cat business and anything can happen in the year to start thinking about variable comp and <unk>, while I'll be excited to report solid results to the street in the first quarter 2012 2025.
Speaker Change: That would be a little.
Speaker Change: There'll be a little for that would be a little forward of us to start to accrue variable comp and one in <unk>.
Speaker Change: Thank you.
Speaker Change: The next question will come from Hasan <unk> with Wells Fargo. Please go ahead.
Hasan: Hi, good morning.
Hasan: A question on the premium growth trends for 2025, you talked about kind of the new business initiatives that you laid out at the Investor Day, and you gave some quantification kind of around the uptick in 2024, but how should we think about those initiatives impacting 2025 premium.
Hasan: Good morning, 2024 was a.
Hasan: A pivotal year in laying foundation for the sustainability of our profitable growth ambition as you know we brought a number of our product capabilities from global markets within our insurance business to North America. They were successfully integrated into our operations, we brought additional new capabilities and they're off to a really good.
Hasan: Start we have confidence in the sustainability of those investments, including the commentary that Pete offered with respect to our how we work transformation program, which has done a very good job of making certain that we have the operating infrastructure to support the growth. So I think it's reasonable to see sustained.
Hasan: Mid to high single digit growth in 2025 from our insurance operation. Moreover, I would say that the the sustained success of our reinsurance business growing its specialty lines focused classes should sustain itself as well they had a very good year in 2020 for a lot of five.
Speaker Change: <unk> work and I'm, frankly encouraged and look forward to speaking about <unk> on the pipeline that they've generated which is quite distinct from prior periods in the specialty classes. So net net we still view ourselves as a growth oriented company, we have sufficient premium adequacy to guide that profitability.
Hasan: <unk> journey, and we look forward to executing it in the market.
Speaker Change: Got you. Thank you and then how should we think about the use of the capital. That's freed from the LPT is kind of the Q4 buyback a good run rate kind of moving forward or how should we think about like the allocation of that capital.
Speaker Change: Carson Pete laid out at our Investor day, the uses of capital that range from the continuation of investing in our business, attracting new talent investing back inside our company as part of our how we work initiative to certainly maintain opportunistic posture relative to <unk>.
Speaker Change: Buying back our stock and certainly a very very high bar on an inorganic but those are the principal uses and.
Speaker Change: We're going to continue to execute on that playbook, Peter I don't know if you want to come over the top I think Vince hit everything that I spoke about last may and have continued to reiterate since then I would remind you im with the transaction has not closed yet. So we are looking at looking forward here with that kind of commentary but.
Speaker Change: But we do see really good opportunities in the market still today.
Speaker Change: And we do think our shares are undervalued as we sit here today.
Speaker Change: Got you and one more if I may on the California wildfires I guess, what are you guys. I know, it's very early on and no one knows the losses, yet, but what do you think about like implications kind of for the later renewals you know you kind of have some nationwide programs and some other stuff that renews a little later on and I don't know if you have a view on 2026 it might be too early but how do you view that event impacting.
Speaker Change: Pricing for prop cat, specifically or sorry property.
Speaker Change: Yes, I think you mean in the balance of 25, I think it remains to be seen.
Speaker Change: Look it was 136 odd billion dollars a year in.
Speaker Change: And catastrophes and so we'll see how the marketplace responds.
Speaker Change: I don't think we have enough time elapsed to give you an informed view.
Speaker Change: Okay. Thank you.
Speaker Change: Yes.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Vincent <unk> CEO for any closing remarks. Please go ahead Sir.
Speaker Change: Thank you all for joining today's call. Thank you once again to our axis colleagues worldwide as well as to our valued strategic brokers for their partnership in 2024. This completes today's call and we look forward to reporting our continued progress in future calls. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Okay.