AXIS Capital(US:AXS)2019-10-30 18:36Financial Data and Key Metrics Changes - The company reported a net income of $28 million and an annualized ROE of 2.3% for the quarter [15] - On an ex-PGAAP basis, the operating loss was $28 million, resulting in an ex-PGAAP annualized operating ROE of negative 2.4% [15] - The consolidated ex-PGAAP combined ratio was 109.5%, an increase of over 9 points from the third quarter of 2018 [17] - The G&A expense ratio increased to 13.4%, up by 0.7 points compared to the third quarter of 2018 [18] Business Line Data and Key Metrics Changes Insurance Segment - The insurance segment reported a decrease in gross premiums written of $74 million, primarily due to reductions in property exposure [19] - The ex-PGAAP combined ratio for the insurance segment was 103.8%, which was 3.1 points lower than the same period last year [20] - The current accident year loss ratio, ex cat and weather, decreased by 1.5 points compared to the third quarter of 2018 [21] Reinsurance Segment - The reinsurance segment reported an increase in gross premiums written of $57 million, mainly from catastrophe, A&H, and liability lines [22] - The reinsurance combined ratio was 109.9%, which was 20.4 points higher than the same period last year [23] - The current accident year loss ratio, ex cat and weather, was 64.8%, 2.2 points higher compared to the third quarter of 2018 [23] Market Data and Key Metrics Changes - The average rate increase on renewed business across the insurance portfolio was 8% in the third quarter, up from 7% in the second quarter [26] - In the U.S. division, average rate increases were close to 11% for the quarter, with Excess Casualty rates up 17% [27] - The average rate increase in the London-based international insurance division was nearly 10% for the quarter [29] Company Strategy and Development Direction - The company is focused on improving profitability and volatility in its insurance portfolio by reducing premium writings in less attractive business lines [10] - There is a strategic shift towards more SME exposure, which tends to exhibit less volatility [11] - The company aims to achieve annual run rate net savings of $100 million compared to its 2017 run rate by the end of next year [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging quarter due to large catastrophes and higher midsize losses but expressed confidence in the company's strategy and market positioning [7][14] - The company expects ongoing improvements in pricing, terms, and conditions in the market, with rate increases likely to continue into 2020 [30] - Management is optimistic about growth in attractive lines, having grown more than 13% year-to-date in those areas [30] Other Important Information - The company experienced pretax cat and weather-related losses of $160 million, primarily driven by Hurricane Dorian and Japanese typhoons [15] - The diluted book value per share increased by 0.5% in the quarter to $56.26, driven by net income and net unrealized gains [25] Q&A Session Summary Question: Impact of midsize losses on results - Management explained that midsize losses are part of normal volatility, with half of the large loss experience attributed to credit lines, which historically perform well [36][37] Question: Confidence in liability side amidst loss cost inflation - Management expressed confidence in the Excess Casualty and casualty lines, highlighting significant changes made to reduce exposure and increase pricing [41][42] Question: Future expectations for loss ratios - Management is confident that loss ratios will improve, attributing any potential lack of improvement to higher-than-expected industry loss trends [54] Question: Performance of recent acquisitions - Management indicated that the Novae acquisition has positioned the company well in the London market, while the Aviabel acquisition is aimed at shifting focus to general aviation [56][58]